- --------------------------------------------------------------------------------
THE BLACKROCK ADVANTAGE TERM TRUST INC.
SEMI-ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISER
- --------------------------------------------------------------------------------
July 14, 1995
Dear Shareholder:
The fixed income markets benefitted from extremely bullish sentiment and
rallied during the semi-annual period between January 1, 1995 and June 30, 1995.
The U.S. economy appears to have responded to the Fed's vigilance toward
inflation with low absolute levels of inflation and moderate rates of growth.
This scenario is suggestive of a "soft landing" for the economy, which has
sparked a significant Treasury market rally and resulted in overall strength in
most fixed income markets. Closed-end bond funds responded to the broader
markets by staging a significant rebound during the first six months of 1995
from their all-time low stock prices during the fourth quarter of 1994.
BlackRock Financial Management, Inc. your Trust's investment adviser, is
pleased to report that its acquisition by PNC Bank, N.A. ("PNC") was officially
completed on February 28, 1995. PNC is a commercial bank whose principal office
is in Pittsburgh, Pennsylvania and is wholly-owned by PNC Bank Corp., a bank
holding company. The merger was structured to assure continuity of performance
and service through stability of our organization. BlackRock retains its name
and continues to operate out of its New York office. All members of BlackRock's
management team have signed long-term employment contracts and will continue to
be responsible for managing BlackRock's business so that shareholders will
notice no changes in the management of the Trust.
You will note several enhancements to the Trust's semi-annual report
designed to improve the report's usefulness to you. The letter to shareholders
which reviews the markets and the Trust's investment strategy over the
semi-annual period is provided by the Trust's portfolio managers. In addition,
we have included an investment summary section which provides a synopsis of the
Trust's investment objectives and guidelines and reviews its investment
strategy. We appreciate your investment in The BlackRock Advantage Term Trust
Inc. and look forward to continuing to serve your financial needs.
Sincerely,
Laurence D. Fink Ralph L. Schlosstein
Chairman President
1
<PAGE>
July 14, 1995
Dear Shareholder:
The dramatic rally in the capital markets changed the market landscape for
fixed income investors over the six month period ended June 30, 1995. As we
present this semi-annual report for The BlackRock Advantage Term Trust (BAT or
"the Trust"), we are pleased to review the strong performance of the Trust, from
both a net asset value (NAV) and stock price perspective as well as to discuss
the opportunities available to the Trust in the current market environment.
The Trust's shares are traded on the New York Stock Exchange under the
symbol BAT. BAT is a diversified closed-end bond fund whose investment objective
is to manage a portfolio of investment grade fixed income securities that will
return $10 per share (the initial offering price) to investors on or about
December 31, 2005 while providing high monthly income. As of the last
period-end, the Trust's NAV has appreciated in price by 11.44%, having ranged
from $9.00 to $10.03. Over the same time period, the stock price of the Trust
has risen 11.29%, having ranged from $7.75 to $8.875. BlackRock believes that
the Trust is well positioned to meet its targeted termination value.
It is important to evaluate the performance of the Trust in the context of
the closed-end fund marketplace. Investors who endured the market slump of 1994
and opted to "Hold" or acquire more shares of the Trust during the tumultuous
last months of the year witnessed a substantial increase in both NAV and share
price during the first half of 1995 as the market environment for fixed income
securities improved. As the closed-end bond market continues to lag the overall
market rally, many bond funds continue to trade at discounts despite the
appreciation of both NAV and stock price since the lows of last year. As the NAV
of the Trust draws closer to its termination value, a narrowing of its stock
price discount to NAV is expected to reflect such NAV growth.
The Fixed Income Markets
As the economy showed signs of a slowdown early this year, market
participants endlessly debated the direction of monetary policy and hotly
contested the likelihood that a "soft landing" for the economy had been
achieved. As economic reports grew increasingly pessimistic, the specter of
inflation diminished. With investor confidence in the value of fixed income
securities renewed, market demand increasingly accelerated.
While attuned to the possibility of a rejuvenated economy during the third
and fourth quarters of 1995, and the possibility of accompanying inflationary
pressure, BlackRock believes that the fixed income markets offer many pockets of
value to investors in the coming months. We believe that the Federal Reserve
will remain biased toward ease, which was echoed by Mr. Greenspan when he
acknowledged a better inflation environment by commenting in June that the
forces driving inflation "are very clearly easing". As such, BlackRock expects
continued solid performance of fixed income securities and continued decline in
interest rates, albeit modestly, over the balance of the year.
While fixed income markets in general have performed exceptionally well over
the last six months, falling yields and sustained high levels of interest rate
volatility together have created a less favorable environment for investors in
many mortgage-backed securities relative to other fixed income sectors. Due to
the ability of mortgage holders to refinance their mortgage at any time, the
"optionality of mortgage-backed securities", and the experience of investors who
witnessed unprecedented levels of mortgage refinancing in 1992 and 1993, lower
levels of interest rates have ignited fears of a similar acceleration in
prepayments. In some cases mortgage-backed security prices built in fast
prepayment expectations far in excess of actual prepayment experience, which
remained slow for the first months of the year. This presented selected
purchasing opportunities in those sectors of the mortgage market that are less
vulnerable to prepayment risk and reduce the likelihood of reinvesting cash
proceeds at lower yields.
Selected areas of the mortgage market continue to hold good relative value
for investors, even in light of the less favorable environment as described
above. These sectors include issues that have more stable cash flows and are
therefore less exposed
2
<PAGE>
to high levels of interest rate volatility and accelerated prepayments. For
example, seasoned mortgage pass-throughs are fixed-rate issues which are
relatively older than other pools on the market. Because they have weathered
several refinancing cycles, prepayments on these securities are expected to be
more predictable and to accelerate less in a declining rate environment. In
addition, five and seven year "balloon" mortgages are attractive. While a
security backed by a balloon mortgage amortizes in the same way as a thirty-year
generic mortgage loan, the balloon mortgage pays down entirely on the balloon
date, e.g., five or seven years after issue. This shorter time horizon to
maturity significantly increases the predictability of its income stream.
As demand increased for fixed income securities which offered strong cash
flow stability, corporate securities outperformed their counterparts in the
mortgage sector over the last five months, although new issuance has increased
supply. In particular, corporates which do not give the issuer the right to
redeem such securities prior to their maturity dates (non-callable) benefited
from their reduced exposure to volatility and continued strong corporate profits
(as evidenced by the astounding strength of the stock market). While a slowdown
in earnings and the prospects of a slower economy may put pressure on the
corporate market, significant demand from investors who seek to avoid the
volatility of mortgage product is expected to continue. Therefore, relatively
defensive purchases in the finance and non-cyclical industrial (e.g. food and
chemical) sectors which offer high credit quality and reduced exposure to
slowing economic growth appear attractive at this time.
The Trust's Portfolio and Investment Strategy
The Trust is now utilizing its broadened investment authority to purchase
investment grade corporate bonds, capturing opportunities to invest in
securities with a higher degree of cash flow stability and call protection. As
such restructuring develops over the remaining life of the Trust, the Trust
expects to own securities that have more cash flow predictability in a wide
array of interest rate environments versus its existing portfolio of prepayment
sensitive securities.
The current investment strategy for the Trust emphasizes the following
themes:
* Continue to target securities consistent with the Trust's maturity date
- Increase allocation to securities which mature on or before the
termination date
* De-emphasize mortgage securities with highest exposure to accelerating
prepayments and interest rate volatility
- Maintain minimal exposure to mortgage derivatives which, although high
yielding, have very unpredictable cash flows and have very little
liquidity in the current market
- Continue to invest in the mortgage securities where yield advantage
provides adequate compensation for cash flow risk
- Focus investments on seasoned pass-throughs which have weathered
several refinancing cycles
- Increase allocation to multifamily mortgage securities with "balloon"
dates to mitigate cash flow variability
* Increase allocation to corporate bonds upon opportunity
Consistent with the above themes, BlackRock modified the Trust's allocation
adding to its corporate bond securities while decreasing its mortgage and agency
multiple class pass-through securities. The following chart compares the Trust's
portfolio composition as of June 30, 1995 and December 31, 1994.
3
<PAGE>
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The BlackRock Advantage Term Trust Inc.
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Composition June 30, 1995 December 31, 1994
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Taxable Zero-Coupon Bonds 36% 34%
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Mortgage Pass-Throughs 34% 39%
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Agency Multiple Class Pass-Throughs 13% 18%
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Corporate Bonds 6% 0%
- --------------------------------------------------------------------------------
CMO Residuals 6% 6%
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Stripped Mortgage-Backed Securities 2% 1%
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Municipal Zero Coupon Bond 1% 1%
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Asset-Backed Security 1% 0%
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Non-Agency Multiple Class Pass-Throughs 1% 1%
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We look forward to managing the Trust in the coming months to benefit from
the many opportunities available to investors in the investment grade fixed
income markets as well as to position the Trust such that its exposure to
interest rate volatility is reduced.
Robert S. Kapito Keith T. Anderson
Vice Chairman and Portfolio Manager Managing Director and Portfolio Manager
BlackRock Financial Management, Inc. BlackRock Financial Management, Inc.
- --------------------------------------------------------------------------------
The BlackRock Advantage Term Trust Inc.
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Symbol on New York Stock Exchange: BAT
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Initial Offering Date: April 27, 1990
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Closing Stock Price as of 6/30/95: $8.625
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Net Asset Value as of 6/30/95: $10.03
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Yield on Closing Stock Price as of 6/30/95 ($8.625)1: 7.83%
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Current Monthly Distribution per Share2: $0.05625
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Current Annualized Distribution per Share2: $0.675
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- ---------------
1Yield on Closing Stock Price is calculated by dividing the current annualized
distribution per share by the closing stock price per share.
2Dividend not constant and is subject to change.
4
<PAGE>
(Left column)
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The BlackRock Advantage Term Trust Inc.
Portfolio of Investments
June 30, 1995
(Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
(000) Description (Note 1)
- --------------------------------------------------------------------------------
LONG-TERM INVESTMENTS-142.7%
Mortgage Pass-Throughs-49.3%
Federal Home Loan Mortgage
Corporation,
$12,145\d\d 9.50%, 3/01/01 - 12/01/01,
15 Year.................................... $ 12,607,481
Federal National Mortgage
Association,
828\d\d 8.50%, 7/01/22............................... 853,846
4,900\d 9.00%, 12/01/24.............................. 5,103,647
29 9.50%, 7/01/20............................... 30,664
2,317\d\d 10.00%, 3/15/18.............................. 2,514,462
Government National Mortgage
Association,
1,957\d 6.50%, 5/20/25, 1 Year CMT (ARM)............. 1,980,070
2,462\d 7.00%, 11/20/24, 1 Year CMT (ARM)............ 2,519,318
17,875\d 8.50%, 9/15/17 - 10/15/21.................... 18,677,766
1,373 9.50%, 5/15/18 - 5/15/20..................... 1,455,273
1,177 10.00%, 11/15/19............................. 1,280,568
------------
47,023,095
------------
Multiple Class Mortgage
Pass-Throughs-19.8%
1,989 Collateralized Mortgage Obligation,
Trust 26, Class A, 4/23/17 (P)............... 1,480,891
Federal Home Loan Mortgage
Corporation, Multiclass Mortgage
Participation Certificates,
6,500\d\d Series 1255, Class 1255-H,
4/15/22.................................... 6,965,140
3,200\d Series 1295, Class 1295-JB,
3/15/07.................................... 2,758,614
908 Series 1541, Class 1541-TB,
7/15/23.................................... 534,613
1,952 Series 1584, Class 1584-FB,
9/15/23.................................... 1,981,002
755 Series 1587, Class 1587-SJ,
10/15/08................................... 468,339
467 Series 1666, Class 1666-SB,
1/15/24.................................... 342,013
4,000\d Series 1700, Class 1700-B,
7/15/23 (P)................................ 3,140,000
(Right column)
- --------------------------------------------------------------------------------
Principal
Amount Value
(000) Description (Note 1)
- --------------------------------------------------------------------------------
Federal National Mortgage
Association, REMIC
Pass-Through Certificates,
$ 1,444 Trust 1993-193, Class E,
9/25/23 (P)................................ $ 384,465
435 Trust 1993-193, Class 193-PC,
9/25/23.................................... 383,173
1,406 Trust 1993-225, Class 225-ME,
11/25/23 (P)............................... 317,668
221 Trust 1993-243, Class 243-C,
11/25/23 (P)............................... 147,531
------------
18,903,449
------------
Corporate Bonds-8.9%
500 Centex Corp., Subordinated Note,
7.375%, BBB-*, 6/1/05........................ 485,380
1,400 Hydro Quebec,
8.05%, A+*, 7/7/24........................... 1,518,160
1,900 Paine Webber Group Incorporated,
7.875%, BBB+*, 2/15/03....................... 1,928,728
1,425 Smith Barney Holdings Inc.,
7.98%, A-*, 3/1/00........................... 1,498,994
2,985 Transamerica Finance Corporation,
Subordinated Note,
6.75%, A*, 6/1/00............................ 3,009,049
------------
8,440,311
------------
Asset-Backed Security-1.0%
1,000 MBNA Master Credit Card Trust II,
Series 1995 C, Class A,
6.45%, 2/15/08............................... 981,250
------------
Stripped Mortgage-Backed Securities-2.6%
Federal National Mortgage
Association,
919 Trust 3, Class 2, 9.00%,
2/1/17 (I/O)............................... 226,012
4,837 Trust 6, Class 29, 9.00%,
1/1/17 (I/O)............................... 1,160,994
516 Trust 9, Class 2, 9.00%,
2/15/17 (I/O).............................. 122,506
1,826 Trust 10, Class 2, 10.00%,
3/1/17 (I/O)............................... 598,128
See Notes to Financial Statements.
5
<PAGE>
(Left column)
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Principal
Amount Value
(000) Description (Note 1)
- --------------------------------------------------------------------------------
Stripped Mortgage-Backed Securities-(Con't)
Federal National Mortgage
Association,
$ 357 Trust 14, Class 2, 9.00%,
2/1/17 (I/O)............................... $ 84,856
217 Trust 34, Class 2, 9.00%,
5/25/18 (I/O).............................. 54,810
963 Trust 226, Class 2, 9.00%,
6/25/23 (I/O).............................. 223,552
------------
2,470,858
------------
Collateralized Mortgage Obligation
Residuals#-8.2%
452 American Housing Trust VII,
Senior Mortgage Pass-Through
Certificates, Series A,
Class R, 11/25/20**.......................... 2,412,608
Federal Home Loan Mortgage
Corporation, Multiclass Mortgage
Participation Certificates,
10 Series 114, Class 114-RS, 1/15/21............ 1,833,256
3 Series 1017, Class 1017-R,
11/15/20 (REMIC)........................... 574,962
1 Series 1035, Class 1035-R,
1/15/21 (REMIC)............................ 838,987
20 Federal National Mortgage
Association, REMIC
Pass-Through Certificates,
Trust 1990-26, Class 26-R,
3/25/20.................................... 1,338,188
50 Prudential Bache CMO Trust II,
Collateralized Mortgage Obligations,
6/1/18**..................................... 213,009
25 Ryland Acceptance Corporation Four,
Series 71, Class 71R,
6/01/18** (REMIC)............................ 565,000
------------
7,776,010
------------
Taxable Zero Coupon Bonds-52.3%
Aid to Israel,
7,716 2/15/05...................................... 4,118,016
6,203 8/15/05...................................... 3,987,798
7,171 Federal National Mortgage
Association, Ser. 1, 8/1/05.................. 3,823,649
Government Trust Certificates,
29,000 Class 2-F, 11/15/05.......................... 14,763,900
15,000\d\d Class T-1, 5/15/05........................... 7,904,400
13,677 Class T-1, 11/15/05.......................... 6,962,961
15,926\d\d Resolution Funding Corporation,
7/15/05...................................... 8,309,709
------------
49,870,433
------------
(Right column)
- --------------------------------------------------------------------------------
Principal
Amount Value
(000) Description (Note 1)
- --------------------------------------------------------------------------------
Municipal Zero Coupon Bond-0.6%
$ 1,000 Alaska Energy Power Authority,
Revenue Bond, First Series, 7/01/05.......... $ 569,960
------------
Total long-term investments
(cost $130,189,034).......................... 136,035,366
------------
SHORT-TERM INVESTMENT-0.9%
Repurchase Agreement
870 Lehman Brothers Inc., 6.15%, dated
6/30/95, due 7/3/95 in the amount
of $870,446 (cost $870,000;
collateralized by $760,000
U.S. Treasury Bond, 8.125%,
due 5/15/21, value including
accrued interest $900,333.................... 870,000
------------
Total investments before investments
sold short-143.6%
(cost $131,059,034).......................... 136,905,366
------------
INVESTMENTS SOLD SHORT-(32.0%)
U.S. Treasury Bonds,
16,000 7.50%, 11/15/24.............................. (17,702,560)
4,500 7.625%, 2/15/25.............................. (5,082,165)
7,500 U.S. Treasury Note,
6.50%, 5/15/05............................... (7,659,375)
------------
Total investments sold short
(proceeds $27,398,516)....................... (30,444,100)
------------
Total Investments, net of short
sales-111.6%................................. 106,461,266
Liabilities in excess of
other assets-(11.6%)......................... (11,103,020)
------------
NET ASSETS-100%................................ $ 95,358,246
============
* Using the higher of the Standard & Poor's or Moody's ratings
** Private placements restricted as to resale.
# Illiquid securities represent 5.7% of portfolio assets.
\d In aggregate, $22,008,000 of principal amount pledged as collateral for
reverse repurchase agreements.
\d\d Entire principal amount pledged as collateral for reverse repurchase
agreements.
- --------------------------------------------------------------------------------
Key to Abbreviations
ARM - Adjustable Rate Mortgage
CMO - Collateralized Mortgage Obligation
CMT - Constant Maturity Treasury
I/O - Interest Only
P - Denotes a CMO with principal only characteristics
REMIC - Real Estate Mortgage Investment Conduit
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See Notes to Financial Statements.
6
<PAGE>
(Left column)
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The BlackRock Advantage Term Trust Inc.
Statement of Assets and Liabilities
June 30, 1995
(Unaudited)
- --------------------------------------------------------------------------------
Assets
Investments, at value
(cost $131,059,034) (Note 1)................................. $136,905,366
Cash........................................................... 268,627
Deposits with brokers as collateral
for investments sold short (Note 1).......................... 31,040,625
Receivable for investments sold................................ 1,801,190
Interest receivable............................................ 917,466
Due from broker variation margin............................... 3,801
Other assets................................................... 2,480
------------
170,939,555
------------
Liabilities
Reverse repurchase agreements (Note 4)......................... 44,404,000
Investments sold short, at value (proceeds
$27,398,516) (Note 1)........................................ 30,444,100
Interest payable............................................... 344,432
Dividends payable.............................................. 77,760
Advisory fee payable (Note 2).................................. 46,789
Administration fee payable (Note 2)............................ 9,358
Other accrued expenses......................................... 254,870
------------
75,581,309
------------
Net Assets..................................................... $ 95,358,246
============
Net assets were comprised of:
Common stock, at par (Note 5)................................ $ 95,107
Paid-in capital in excess of par............................. 87,897,396
------------
87,992,503
Undistributed net investment income.......................... 3,466,794
Accumulated net realized gain................................ 1,106,511
Net unrealized appreciation.................................. 2,792,438
------------
Net assets, June 30, 1995.................................... $ 95,358,246
============
Net asset value per share:
($95,358,246 / 9,510,667 shares of
common stock issued and outstanding)......................... $10.03
======
(right column)
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The BlackRock Advantage Term Trust Inc.
Statement of Operations
Six Months Ended June 30, 1995
(Unaudited)
- --------------------------------------------------------------------------------
Net Investment Income
Income
Interest earned (including net accretion
of $1,507,134 and net of interest
expense of $2,343,809)..................................... $ 4,615,793
------------
Operating expenses
Investment advisory.......................................... 268,325
Administration............................................... 53,665
Reports to shareholders...................................... 40,000
Custodian.................................................... 25,000
Transfer agent............................................... 13,000
Directors.................................................... 11,000
Audit........................................................ 10,000
Miscellaneous................................................ 43,250
------------
Total operating expenses................................. 464,240
------------
Net investment income........................................ 4,151,553
------------
Realized and Unrealized Gain (Loss)
on Investments (Note 3)
Net realized gain (loss) on:
Investments.................................................. 3,328,370
Short sales.................................................. (122,031)
Futures...................................................... 216,031
------------
3,422,370
------------
Net change in unrealized appreciation
(depreciation) on:
Investments.................................................. 7,031,916
Short sales.................................................. (2,131,596)
Futures...................................................... (8,310)
------------
4,892,010
------------
Net gain on investments........................................ 8,314,380
------------
Net Increase In Net Assets
Resulting from Operations....................................... $ 12,465,933
============
See Notes to Financial Statements.
7
<PAGE>
(left column)
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The BlackRock Advantage Term Trust Inc.
Statement of Cash Flows
Six Months Ended June 30, 1995
(Unaudited)
- --------------------------------------------------------------------------------
Increase (Decrease) in Cash
Cash flows provided by operating activities:
Interest received............................................ $ 5,527,814
Operating expenses and excise taxes paid..................... (577,794)
Interest expense paid........................................ (2,291,504)
Proceeds from disposition of short-term
portfolio investments, net................................. 4,452,000
Purchase of long-term portfolio investments.................. (68,562,658)
Proceeds from disposition of long-term
portfolio investments...................................... 62,413,763
Variation margin on futures.................................. 203,920
Other........................................................ 6,503
-----------
Net cash flows provided by operating
activities ................................................ 1,172,044
-----------
Cash flows used for financing activities:
Increase in reverse repurchase agreements ................... 2,228,000
Cash dividends paid ......................................... (3,132,080)
-----------
Net cash flows used for financing activities ................ (904,080)
-----------
Net increase in cash .......................................... 267,964
Cash at beginning of period ................................... 663
-----------
Cash at end of period ......................................... $ 268,627
===========
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 ............................................. $12,465,933
-----------
Increase in investments ....................................... (1,003,328)
Net realized gain ............................................. (3,422,370)
Increase in unrealized appreciation ........................... (4,892,010)
Increase in deposits with brokers for
investments sold short ...................................... (1,940,625)
Increase in receivable for investments sold ................... (1,799,653)
Decrease in interest receivable ............................... 75,346
Increase in due to broker-variation margin .................... (3,801)
Decrease in other assets ...................................... 14,525
Increase in interest payable .................................. 52,305
Increase in payable for investments sold short ................ 1,747,300
Decrease in accrued expenses and other
liabilities ................................................. (121,578)
-----------
Total adjustments ........................................... (11,293,889)
-----------
Net cash flows provided by operating activities ............... $ 1,172,044
===========
(Right Column)
- --------------------------------------------------------------------------------
The BlackRock Advantage Term Trust Inc.
Statements of Changes
in Net Assets
(Unaudited)
- --------------------------------------------------------------------------------
Six Months Year Ended
Ended December 31,
June 30, 1955 1994
------------- -----------
Increase (Decrease)
in Net Assets
Operations:
Net investment income ......................... $ 4,151,553 $ 4,998,024
Net realized gain (loss) on
investments, short sales
and futures ................................. 3,422,370 1,437,198
Net change in unrealized
appreciation (depreciation)
on investments, short
sales and futures ........................... 4,892,010 (16,026,817)
------------ ------------
Net increase (decrease)
in net assets
resulting from operations ................... 12,465,933 (9,591,595)
Dividends from net investment
income ........................................ (2,674,865) (6,934,967)
------------ ------------
Total increase (decrease) ................... 9,791,068 (16,526,562)
Net Assets
Beginning of period ............................. 85,567,178 102,093,740
------------ ------------
End of period ................................... $ 95,358,246 $ 85,567,178
============ ============
See Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
The BlackRock Advantage Term Trust Inc.
Financial Highlights
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 27,
Six Months 1990*
Ended Year Ended December 31, through
June 30, --------------------------------------------- December 31,
1995 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................. $ 9.00 $10.73 $10.43 $10.96 $ 9.89 $ 9.38
------ ------ ------ ------ ------ ------
Net investment income (net of $.25, $.25, $.16,
$.18, $.13 and $.03, respectively, of
interest expense)................................. .44 .53 .56 1.38 1.19 .51
Net realized and unrealized gain (loss) on
securities........................................ .87 (1.53) .57 (1.01) .94 .63
------ ------ ------ ------ ------ ------
Net increase (decrease) from investment
operations.......................................... 1.31 (1.00) 1.13 .37 2.13 1.14
------ ------ ------ ------ ------ ------
Dividends from net investment income.................. (.28) (.73) (.83) (.90) (1.06) (.51)
Distributions from short-term capital gains........... - - - - - (.06)
------ ------ ------ ------ ------ ------
Total dividends and distributions................... (.28) (.73) (.83) (.90) (1.06) (.57)
------ ------ ------ ------ ------ ------
Capital charge with respect to issuance of
shares.............................................. - - - - - (.06)
------ ------ ------ ------ ------ ------
Net asset value, end of period**...................... $10.03 $ 9.00 $10.73 $10.43 $10.96 $ 9.89#
====== ====== ====== ======= ====== ======
Market value, end of period**......................... $8.625 $ 7.75 $10.75 $10.625 $11.25 $10.00
====== ====== ====== ======= ====== ======
TOTAL INVESTMENT RETURN\d:............................ 15.02% (22.16%) 9.33% 2.52% 24.10% 12.99%
RATIOS TO AVERAGE NET ASSETS:
Operating expenses##.................................. 1.04%\d\d 1.06% 1.07% 1.08% 1.24% 1.17%\d\d
Net investment income................................. 9.30%\d\d 5.38% 5.09% 13.09% 11.79% 7.84%\d\d
SUPPLEMENTAL DATA:
Average net assets (in thousands)..................... $90,028 $92,932 $102,302 $99,967 $ 96,225 $90,769
Portfolio turnover.................................... 62% 142% 18% 3% 254% 180%
Net assets, end of period (in thousands).............. $95,358 $85,567 $102,094 $99,149 $104,210 $94,043
Reverse repurchase agreements outstanding,
end of period (in thousands)........................ $44,404 $42,176 $ 50,000 $43,823 $ 50,015 $46,420
Asset coverage\d\d\d.................................. $ 3,148 $ 3,029 $ 3,039 $ 3,263 $ 3,084 $ 3,026
<FN>
- -------------------
* Commencement of investment operations.
** NAV and market value are published in The Wall Street Journal each
Monday.
# Net asset value immediately after closing of first public offering was
$9.32.
## The ratios of expenses, including excise tax, to average net assets were
1.04%, 1.13%, 1.23%, 1.37%, 1.30% and 1.17% for the periods indicated
above, respectively.
\d 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 and
distributions are assumed, for purposes of this calculation, to be
reinvested at prices obtained under the Trust's dividend reinvestment
plan. This calculation does not reflect brokerage commissions. Total
investment returns for periods of less than one full year are not
annualized.
\d\d Annualized.
\d\d\d 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.
9
<PAGE>
(Left column)
- --------------------------------------------------------------------------------
The BlackRock Advantage Term Trust Inc.
Notes to Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
Note 1. Accounting
Policies
The BlackRock Advantage 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 to investors on or about December 31,
2005 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
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.
(Right column)
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
cost of the purchase or proceeds from the sale 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.
Financial Futures Contracts: A futures contract is an agreement between two
parties to buy and 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 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" means that a portfolio or a security's price would be
10
<PAGE>
(Left column)
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. To complete a
short sale, the Trust may arrange through a broker to borrow the securities to
be delivered to the buyer. The proceeds received by the Trust from the short
sale are retained by the broker until the Trust replaces the borrowed
securities. In borrowing the securities to be delivered to the buyer, the Trust
becomes obligated to replace the securities borrowed at their market price at
the time of the replacement, whatever that price may be. 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.
Securities 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
(Right 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, 1995.
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 and 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 taxable income to shareholders. Therefore, no federal
income tax provision is required. As part of a tax planning strategy, the Trust
intends to 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.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
Deferred Organization Expenses: A total of $125,000 was incurred in connection
with the organization of the Trust. These costs have been deferred and were
amortized ratably over a period of sixty months from the date the Trust
commenced investment operations through April 1995.
Note 2. Agreements
The Trust has an Investment Advisory Agreement with BlackRock Financial
Management, Inc., (the "Adviser") 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 0.60% of the Trust's average weekly net assets
through December 31, 1995, 0.50% from January 1, 1996 to
11
<PAGE>
(Left column)
December 31, 2000 and 0.40% from January 1, 2001 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 0.12% of the Trust's average
weekly net assets until December 31, 1995, 0.10% from January 1, 1996 to
December 31, 2000 and 0.08% from January 1, 2001 to the termination or
liquidation of the Trust.
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.
On February 28, 1995, the Advisor was acquired by PNC Bank, N.A. Following the
acquisition, the Advisor has become a wholly-owned corporate subsidiary of PNC
Asset Management Group, Inc., the holding company for PNC's asset management
businesses.
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, 1995 aggregated $68,562,658
and $64,294,548, respectively.
The Trust may invest up to 85% 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, 1995, the Trust held 5.7%
of its portfolio assets in illiquid securities including 2.3% in securities
restricted as to resale.
The federal income tax basis of the Trust's investments at June 30, 1995 was
substantially the same as the basis for financial reporting and, accordingly,
net unrealized appreciation for federal income tax purposes was $5,846,332
(gross unrealized appreciation-$10,686,031; gross unrealized
depreciation-$4,839,699).
For federal income tax purposes, the Trust had a capital loss carryforward at
December 31, 1994 of approximately $4,165,000 of which approximately $102,900
will expire in 2000, and approximately $4,062,100 will expire in 2001.
Accordingly, no capital gains distribution is expected to be paid to
shareholders until net gains have been realized in excess of such amounts.
During the six months ended June 30, 1995, the Trust entered into financial
futures contracts. Details of the open contracts at June 30, 1995 are as
follows:
(Right column)
Value at Value at
Number of Expiration Trade June 30, Unrealized
Contracts Type Date Date 1995 Depreciation
- --------- ---- ---- ---- ---- ------------
Long
Position:
8 30 yr-T-Bond Sept 1995 $916,560 $908,250 $(8,310)
======== ======== ========
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 containing liquid high grade securities
having a value not less than the repurchase price, including accrued interest,
of the reverse repurchase agreement.
The average daily balance of reverse repurchase agreements outstanding during
the six months ended June 30, 1995 was approximately $42,600,000 at a weighted
average interest rate of approximately 6.15%. The maximum amount of reverse
repurchase agreements outstanding at any month-end during the six months ended
June 30, 1995 was $45,671,000 as of May 31, 1995 which was 30.5% of total
assets. The amount of reverse repurchase agreements outstanding at June 30, 1995
was $44,404,000, which was 26.0% 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 did not enter into dollar rolls during the
six months ended June 30, 1995.
Note 5. Capital
There are 200 million shares of $.01 par value common stock authorized. Of the
9,510,667 shares outstanding at June 30, 1995, the Adviser owned 10,667 shares.
12
<PAGE>
Note 6. Dividends
Subsequent to June 30, 1995, the Board of Directors of the Trust declared a
dividend from undistributed earnings of $0.05625 per share payable July 31, 1995
to shareholders of record on July 14, 1995.
Note 7. Quarterly Data
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized
gains (losses) Net increase
on investments, (decrease)
short sales, in net assets Dividends
Net investment futures and resulting from and Period end
Quarterly Total income options 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,
1993 to
March 31,
1993....... $3,841,368 $3,562,828 $.37 $(870,034) $(.09) $2,692,794 $.28 $1,307,717 $.14 $11 $ 9-7/8 $10.57
April 1,
1993 to
June 30,
1993....... 2,408,800 2,117,330 .23 1,904,811 .20 4,022,141 .42 1,961,575 .21 10-3/4 10-1/8 10.79
July 1,
1993 to
September
30, 1993... 68,852 (350,159) (.04) 5,954,220 .62 5,604,061 .59 1,961,575 .21 10-3/4 10-3/8 11.17
October 1,
1993 to
December
31, 1993... 283,483 9,697 - (1,538,034) (.16) (1,528,337) (.16) 2,615,386 .27 10-3/4 10-1/4 10.73
January 1,
1994 to
March 31,
1994....... 784,706 514,935 .05 (7,292,590) (.76) (6,777,655) (.71) 1,228,492 .13 10-3/4 8-7/8 9.89
April 1,
1994 to
June 30,
1994....... 946,382 714,715 .08 (2,337,450) (.25) (1,622,735) (.17) 1,723,904 .18 9-1/2 8-1/2 9.54
July 1,
1994 to
September
30, 1994... 1,967,044 1,713,249 .18 (1,313,325) (.14) 399,924 .04 1,723,739 .18 9-1/4 8 9.40
October 1,
1994 to
December
31, 1994... 2,345,644 2,055,125 .22 (3,646,254) (.38) (1,591,129) (.16) 2,258,832 .24 8-3/8 7-3/8 9.00
January 1,
1995 to
March 31,
1995....... 2,386,839 1,719,323 .18 3,284,792 .35 5,004,115 .53 1,069,951 .11 8-3/8 7-3/4 9.41
April 1,
1995 to
June 30,
1995....... 2,228,954 2,432,230 .26 5,029,588 .52 7,461,818 .78 1,604,914 .17 8-7/8 8 10.03
</TABLE>
13
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK ADVANTAGE 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 custodian, 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 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 and 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 address is on the front of this
report.
- --------------------------------------------------------------------------------
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.
At a Special Meeting of Trust shareholders held on February 15, 1995, the
shareholders approved the advisory agreement with BlackRock Financial
Management, Inc. The result of the voting was as follows:
Votes For 7,999,682 Votes Against 175,007 Votes Withheld 280,164
The Annual Meeting of Trust shareholders was held May 16, 1995 to vote on
the following matters:
(1) To broaden the Trust's investment objective to permit investments in
investment grade securities while continuing to maintain the investment
objectives of returning the intitial offering price per share on or
about the termination date of the Trust and providing high monthly
income.
(2) To elect three Directors to serve as follows:
Director Class Term Expiring
-------- ----- ---- --------
James Grosfeld..................... I 3 years 1998
James Clayburn La Force, Jr. ...... I 3 years 1998
Richard E. Cavanagh................ I 1 years 1996
Directors whose term of office continues beyond this meeting are Kent
Dixon, Andrew F. Brimmer, Frank J. Fabozzi, Ralph L. Schlosstein and
Laurence D. Fink.
(3) To ratify the selection of Deloitte & Touche LLP as independent public
accountants for the Trust for the fiscal year ending December 31, 1995.
Shareholders approved the broadening of the investment objectives, elected
the three Directors and ratified the selection of Deloitte & Touche LLP. The
results of the voting were as follows:
Votes Votes Votes
For Against Withheld
----- ------- --------
(1) Broadening of Investment Objectives.... 4,421,650 112,100 77,739
(2) James Grosfeld......................... 4,759,831 - 172,671
James Clayburn La Force, Jr. .......... 4,759,831 - 172,671
Richard E. Cavanagh.................... 4,759,831 - 172,671
(3) Ratification of Deloitte & Touche LLP.. 4,755,926 104,619 71,957
14
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK ADVANTAGE 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 about December 31, 2005 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 over $32
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, 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, N.A., the
nation's eleventh largest banking organization.
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 2005. 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 and the value of securities that
are purchased, if any, 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
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.
15
<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, Boston
Financial Data Services. 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
rapidly 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 movement 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 a portion 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.
16
<PAGE>
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THE BLACKROCK ADVANTAGE TERM TRUST, INC.
GLOSSARY
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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 Administration, 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 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.
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).
17
<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.
Strips: 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.
18
<PAGE>
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BlackRock Financial Management Inc.
Summary of Closed-End Funds
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Taxable Trusts
- ----------------------------------------------------------------------------------------------
Termination
Perpetual Trust Stock Symbol Date
------------ ----
<S> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
Tax-Exempt Trusts
- ----------------------------------------------------------------------------------------------
Termination
Perpetual Trust Stock Symbol Date
------------ ----
<S> <C> <C>
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
</TABLE>
If you would like further information please call BlackRock at (800) 227-7BFM
or consult with your financial advisor
19
<PAGE>
(Left column)
BlackRock
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
Kevin J. Mahoney, 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, 1995 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 Advantage Term Trust Inc.
c/o Prudential Mutual Fund Management, Inc.
32nd floor
One Seaport Plaza
New York, NY 10292
(800) 227-7BFM
09247 A10 1
(Right column)
The BlackRock
Advantage
Term Trust Inc.
- --------------------------
Semi-Annual Report
June 30, 1995
