- --------------------------------------------------------------------------------
THE BLACKROCK ADVANTAGE TERM TRUST INC.
CONSOLIDATED SEMI-ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISER
- --------------------------------------------------------------------------------
July 31, 1999
Dear Shareholder:
Since the Trust's last report, interest rates rose sharply as U.S economic
growth remained strong, labor markets tightened and international markets began
to recover. In light of these factors, the Federal Reserve's Federal Open Market
Committee increased short-term interest rates by 25 basis points in June, citing
a concern that inflation might start to accelerate.
In tandem with the Fed's recent rate tightening, BlackRock has taken a
defensive interest rate stance. With the Treasury curve currently pricing in the
possibility of another Fed tightening by year-end, we believe that interest
rates will trade in a relatively narrow range until the economy shows signs of
slowing.
This report contains comments from your Trust's managers regarding the
markets and portfolio in addition to the Trust's semi-annual financial
statements and a detailed portfolio listing. We thank you for your continued
investment in the Trust.
Sincerely,
/s/ Laurence D. Fink /s/ Ralph L. Schlosstein
- -------------------- ------------------------
Laurence D. Fink Ralph L. Schlosstein
Chairman President
1
<PAGE>
July 31, 1999
Dear Shareholder:
We are pleased to present the semi-annual report for The BlackRock
Advantage Term Trust Inc. ("the Trust") for the six months ended June 30, 1999.
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 "BAT". The
Trust's investment objective is to return $10 per share (its initial offering
price) to shareholders on or about December 31, 2005 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:
<TABLE>
<CAPTION>
-------------------------------------------------------------------
6/30/99 12/31/98 CHANGE HIGH LOW
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STOCK PRICE $ 9.6875 $9.8125 (1.27%) $ 9.875 $ 9.5625
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE (NAV) $10.50 $11.07 (5.15%) $11.12 $10.33
- ------------------------------------------------------------------------------------------------
10-YEAR TREASURY NOTE 5.78% 4.65% 24.30% 6.03% 4.61%
- ------------------------------------------------------------------------------------------------
</TABLE>
THE FIXED INCOME MARKETS
The past six months have witnessed continued rapid expansion of the U.S.
economy. GDP growth for the second quarter of 1999 is estimated at an annual
rate of 3.5%-4%, far exceeding the historical non-inflationary level of 2%.
While BlackRock believes that growth may slow down in the second half of 1999,
we anticipate GDP to remain above 3% for the year. In spite of strong domestic
economic growth, inflationary forces continue to remain contained; still, the
Federal Reserve chose to raise its target for the federal funds rate from 4.75%
to 5.00% at its June meeting. The Fed cited an easing of financial strain, tight
labor markets and a firming of foreign economies in the release accompanying the
move. The Fed dropped its tightening bias to a neutral bias, which should reduce
the likelihood of another hike at the August 24th meeting. However, an
additional 25-50 basis points of tightening by year end is possible, as the
combination of a very strong domestic economy and an improving situation in
Europe and Japan may allow for tighter monetary policy.
U.S. Treasury securities dramatically reversed their fourth quarter gains
in the first half of 1999. The yield of the 10-Year Treasury posted a net
decline of 113 basis points (1.13%), beginning 1999 at 4.65% and closing on June
30, 1999 at 5.78%. Strong economic numbers led the Federal Reserve to adopt a
tightening bias on May 18, 1999 and ultimately raised interest rates by 25 basis
points on June 30, 1999. The Federal Reserve eased rates by 0.75% in 1998
because of the global financial crisis but cited in their June 1999 meeting
"Since then much of the financial strain has eased, foreign economies have
firmed and economic activity in the U.S. has moved forward at a brisk pace." We
anticipate Treasuries will trade in a relatively narrow range for the balance of
1999 unless the Fed takes further action.
2
<PAGE>
As interest rates rose and alleviated prepayment fear, mortgage securities
outperformed the broader investment grade bond market. For the period ended June
30th the LEHMAN BROTHERS MORTGAGE INDEX posted a 0.53% total return versus
- -1.39% for the LEHMAN BROTHERS AGGREGATE INDEX. After significantly
underperforming Treasuries in 1998 mortgages experienced a significant rally
late in 1998 following through into the first quarter of 1999. Although yields
have tightened significantly from their crisis levels in 1998, mortgages remain
compelling as a record issuance has come to market and kept yields attractive.
Although higher mortgage rates have reduced prepayment fears, mortgage rates
still remain at historically low levels.
Investment grade corporate securities underperformed the broader investment
grade bond market, as corporates measured by the MERRILL LYNCH U.S. CORPORATE
MASTER INDEX returned -2.52%, as compared to the LEHMAN BROTHERS AGGREGATE
INDEX'S -1.39%. Corporate profitability continues to be the driving factor of
corporate bond performance and profit growth remains under pressure from
overseas markets and a strong labor market. Deteriorating fundamentals (four
times as many downgrades as upgrades in the first quarter according to S&P)
combined with weakening profit growth and increased issuance will continue to
pressure the corporate market. Investor appetite for credit and liquidity risk
remains suppressed after last year's volatility. We anticipate new supply to
start to taper off early in the fourth quarter and relieve some of the pressure
that investment grade corporates have been experiencing.
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 charts compare the Trust's current and December 31, 1998 asset
composition and credit rating.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
THE BLACKROCK ADVANTAGE TERM TRUST INC.
- -----------------------------------------------------------------------------------------
COMPOSITION JUNE 30, 1999 DECEMBER 31, 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Zero-Coupon Bonds 40% 42%
- -----------------------------------------------------------------------------------------
U.S. Government Securities 11% 9%
- -----------------------------------------------------------------------------------------
Corporate Bonds 11% 11%
- -----------------------------------------------------------------------------------------
Commercial Mortgage-Backed Securities 7% 8%
- -----------------------------------------------------------------------------------------
Interest-Only Commercial Mortgage-Backed Securities 5% 4%
- -----------------------------------------------------------------------------------------
Agency Multiple Class Mortgage Pass-Throughs 5% 6%
- -----------------------------------------------------------------------------------------
Inverse-Floating Rate Mortgages 4% 4%
- -----------------------------------------------------------------------------------------
Taxable Municipal Bonds 4% 4%
- -----------------------------------------------------------------------------------------
Interest-Only Mortgage-Backed Securities 4% 3%
- -----------------------------------------------------------------------------------------
Mortgage Pass-Throughs 4% 4%
- -----------------------------------------------------------------------------------------
Asset-Backed Securities 2% 1%
- -----------------------------------------------------------------------------------------
Non-Agency Multiple Class Mortgage Pass-Throughs 1% 1%
- -----------------------------------------------------------------------------------------
Principal-Only Mortgage-Backed Securities 1% 2%
- -----------------------------------------------------------------------------------------
CMO Residuals 1% 1%
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
RATING % OF CORPORATES
----------------------------------
CREDIT RATING JUNE 30, 1999 DECEMBER 31, 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C>
AA or equivalent 23% 15%
- -----------------------------------------------------------------------------------------
A or equivalent 42% 40%
- -----------------------------------------------------------------------------------------
BBB or equivalent 30% 40%
- -----------------------------------------------------------------------------------------
BB or equivalent 5% 5%
- -----------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
In accordance with the Trust's primary investment objective of returning
the initial offering price upon maturity, the Trust's portfolio management
activity focused on adding securities which offer attractive yield spreads over
Treasury securities and an emphasis on maturity dates approximating the Trust's
termination date of December 31, 2005. 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.
Consistent with the Trust's primary investment objective, the continual
reinvestment of cash flows into shorter maturity securities over time as the
Trust approaches its maturity date results in a natural reduction in the amount
of net investment income generated by the Trust. Therefore, after careful
evaluation of the current and anticipated level of the Trust's net investment
income, the Board of Directors voted to reduce the Trust's monthly dividend from
$0.0520833 ($0.6250 annualized) to $0.050 ($0.6000 annualized) effective with
the March 31, 1999 dividend payment.
During the reporting period, the most significant additions have been in
the asset-backed security (ABS) sector and Treasuries. Additionally, the Trust
maintained its significant weighting in investment grade corporate bonds and
well-structured mortgage securities such as commercial mortgage-backed
securities (CMBS). To finance these purchases, the Trust primarily sold
corporates and mortgages to add liquidity so that the portfolio could
participate in the new issue market for corporates and asset-backed securities,
which are offering attractive yields relative to existing bonds.
We look forward to managing the Trust to benefit from the opportunities
available in the fixed income markets and to meet its investment objectives. We
thank you for your investment in the BlackRock Advantage Term Trust Inc. Please
feel free to contact our marketing center at (800) 227-7BFM (7236) if you have
specific questions which were not addressed in this report.
Sincerely,
/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 ADVANTAGE TERM TRUST INC.
- --------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BAT
- --------------------------------------------------------------------------------
Initial Offering Date: April 27, 1990
- --------------------------------------------------------------------------------
Closing Stock Price as of 6/30/99: $9.6875
- --------------------------------------------------------------------------------
Net Asset Value as of 6/30/99: $10.50
- --------------------------------------------------------------------------------
Yield on Closing Stock Price as of 6/30/99 ($9.6875)1: 6.19%
- --------------------------------------------------------------------------------
Current Monthly Distribution per Share2: $0.05
- --------------------------------------------------------------------------------
Current Annualized Distribution per Share2: $0.60
- --------------------------------------------------------------------------------
1 Yield on Closing Stock Price is calculated by dividing the current annualized
distribution per share by the closing stock price per share.
2 Distribution not constant and is subject to change.
4
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK ADVANTAGE TERM TRUST INC.
CONSOLIDATED PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--143.5%
MORTGAGE PASS-THROUGHS--5.6%
Federal Home Loan Mortgage Corp.,
$ 976+ 6.50%, 8/1/25 - 10/1/25 ............. $ 942,328
1,962 9.50%, 1/1/05 ....................... 2,013,320
9 Federal National
Mortgage Association,
9.50%, 7/1/20 ....................... 9,132
Government National
Mortgage Association,
2,510+ 8.00%, 1/15/26 - 7/15/27 ............ 2,581,843
------------
5,546,623
------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS--15.6%
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage Participation
Certificates,
331 Ser. 1490, Class 1490-SE,
4/15/08, (ARM) .................... 303,692
125 Ser. 1541, Class 1541-TB,
7/15/23, (ARM) .................... 120,303
144 Ser. 1655, Class 1655-SB,
12/15/08, (ARM) ................... 140,146
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
1,580 Trust 1992-43, Class 43-E,
4/25/22 ........................... 1,594,244
3,683 Trust 1992-129, Class 129-J,
7/25/20 ........................... 3,517,265
2,000+ Trust 1992-190, Class 190-S,
11/25/07, (ARM) ................... 1,955,400
1,444 Trust 1993-193, Class 193-E,
9/25/23 ........................... 698,015
364 Trust 1993-193, Class 193-PC,
9/25/23 ........................... 358,932
870 Trust 1993-212, Class 212-SA,
11/25/08, (ARM) ................... 781,784
2,005+ Trust 1993-214, Class 214-SL,
12/25/08, (ARM) ................... 1,871,765
1,000 Trust 1994-13, Class 13-SM,
2/25/09, (ARM) .................... 931,250
329 Trust 1994-37, Class 37-SC,
3/25/24, (ARM) .................... 322,876
980 Trust 1994-72, Class 72-L,
4/25/24 ........................... 981,938
AAA 2,000 New York City Mortgage Loan Trust,**
Ser. 1996, Class A-2,
6/25/11 ......................... 1,945,000
------------
15,522,610
------------
INTEREST ONLY MORTGAGE-BACKED SECURITIES--13.5%
AAA 28,336 Credit Suisse First Boston
Mortgage Securities Corp.,**
Ser. 1997-C1, Class AX,
6/20/29 ........................... 2,573,541
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage Participation
Certificates,
2,974 Ser. G-25, Class 25-S,
8/25/06 ........................... 69,500
1,500 Ser. 1543, Class 1543-VU,
4/15/23 ........................... 394,327
469 Ser. 1946, Class 1946-SN,
10/15/08 .......................... 7,151
3,833 Ser. 2097, Class 2097-PY,
12/15/19 .......................... 625,293
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
2,500 Trust 1993-163, Class 163-PH,
3/25/22 ........................... 518,750
2,312 Trust 1993-223, Class 223-PT,
10/25/23 .......................... 310,847
2,500 Trust 1997-50, Class 50-HK,
8/25/27 ........................... 816,699
6,755 Trust 1997-84, Class 84-PJ,
1/25/08 ........................... 1,563,331
3,505 Trust 1998-44, Class 44-JI,
8/20/17 ........................... 396,461
3,423 Trust 1998-62, Class 62-EI,
11/25/28 .......................... 526,361
AAA 19,770 First Union-Lehman Brothers-Bank
of America,
Ser. 1998-C2, Class IO, 5/18/28 ..... 761,303
2,446 Government National Mortgage
Association,
Trust 1998-24, Class 24-IB,
5/20/23 ............................. 544,276
AAA 11,794 Merrill Lynch Mortgage Investors Inc.,
Ser. 1997-C2, Class IO,
12/10/29 .......................... 806,296
AAA 15,741 Morgan (J.P.) Commercial Mortgage
Finance Corp.,**
Ser. 1997-C5, Class X,
9/15/29 ........................... 1,184,376
AAA 3,494 Morgan Stanley Capital 1 Inc.,**
Ser. 1997-HF1, Class X,
6/15/17 ........................... 292,910
See Notes to Consolidated Financial Statements.
5
<PAGE>
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
INTEREST ONLY MORTGAGE-BACKED SECURITIES--(CONT'D)
AAA $135,000 Residential Funding Mortgage
Securities Inc.,
Ser. 1999-S14,
Class A5B, 7/25/29 ................ $ 2,109,375
------------
13,500,797
------------
PRINCIPAL ONLY MORTGAGE-BACKED
SECURITIES--1.6%
Collateralized Mortgage
Obligation Trust,
AAA 630 Trust 26, Class A, 4/23/17 .......... 525,219
AAA 50 Trust 29, Class A, 5/23/17 .......... 39,679
469 Federal Home Loan Mortgage Corp.,
Multiclass Mortgage Participation
Certificates,
Ser. 1946, Class 1946-N,
10/15/08 .......................... 368,040
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
1,406 Trust 1993-225, Class 225-ME,
11/25/23 .......................... 560,642
137 Trust 1997-85, Class 85-LE,
10/25/23 .......................... 120,223
------------
1,613,803
------------
COMMERCIAL MORTGAGE-BACKED
SECURITIES--10.0%
A+ 1,000 Credit Suisse First Boston
Mortgage Securities Corp.,
Ser. 1995-AEW 1, Class C,
7.46%, 11/25/27 ................... 998,365
AAA 1,000 Deutsche Mortgage and Asset
Receiving Corp.,
Ser. 1998-C1, Class A2,
6.54%, 2/15/08 .................... 965,838
BBB 1,000 DLJ Mortgage Acceptance Corp.,**
Ser. 1997-CF1, Class B1,
7.91%, 4/15/07 .................... 971,620
AAA 75 GMAC Commercial Mortgage
Securities Inc.,
Ser. 1998-C2, Class A2,
6.42%, 8/15/08 .................... 72,541
AAA 1,000 Goldman Sachs Mortgage
Securities Corp.,
Ser. 1996-PL, Class A2,
7.41%, 2/15/27 .................... 1,009,831
AAA 800 LTC Commercial Mortgage Corp.,**
Ser. 1996-1, Class A,
7.06%, 4/15/28 .................... 798,620
Merrill Lynch Mortgage Investors Inc.,
BBB 1,000 Ser. 1995-C1, Class D,
7.95%, 5/25/15 .................... 982,881
BBB 500 Ser. 1996-C1, Class D,
7.42%, 4/25/28 .................... 481,600
AAA 350 Mortgage Capital Funding Inc.,
Ser. 1998-MC2, Class A2,
6.42%, 5/18/08 .................... 336,838
AA 431 Salomon Brothers Mortgage
Securities Corp.,**
Ser. 1997-TZH, Class A1,
7.15%, 3/25/25 .................... 438,362
AA 2,635 Sears Mortgage Securities Corp.,
Ser. 1993-7, Class S3,
10.47%, 4/25/08, (ARM) ............ 2,453,007
AAA 500 Structured Asset Securities Corp.,
Ser. 1996-CFL, Class B,
6.30%, 2/25/28 503,279
------------
10,012,782
------------
CORPORATE BONDS--15.3%
FINANCE & BANKING--9.7%
A3 1,000 American Savings Bank,**
6.63%, 2/15/06 ...................... 971,360
A 1,452 Equitable Life Assurance
Society USA,**
Zero Coupon, 12/1/99 - 12/1/05 .... 998,039
A 1,000 Lehman Brothers Holdings Inc.,
6.75%, 9/24/01 ...................... 998,370
BB+ 1,000 Macsaver Financial Services Inc.,
7.88%, 8/1/03 ....................... 830,000
BBB+ 1,900 PaineWebber Group Inc.,
7.88%, 2/15/03 ...................... 1,957,494
Salomon Smith Barney Holdings Inc.,
Aa3 1,000 6.75%, 1/15/06 ...................... 980,670
Aa3 1,425 7.98%, 3/1/00 ....................... 1,445,463
A- 1,485 Transamerica Finance Corp.,
6.75%, 6/1/00 ....................... 1,489,381
------------
9,670,777
------------
INDUSTRIALS--2.5%
AA- 1,000 TCI Communications Inc.,
8.25%, 1/15/03 ...................... 1,054,270
Baa2 2,038 Union Pacific Corp.,**
Zero Coupon, 11/1/99 - 5/1/05 ....... 1,455,254
------------
2,509,524
------------
UTILITIES--1.0%
A 1,000 Alltel Corp.,
7.50%, 3/1/06 ....................... 1,025,980
------------
YANKEE--2.1%
BBB- 1,000 Empresa Electric Guacolda SA,**
7.95%, 4/30/03 ...................... 908,551
BBB+ 200 Empresa Electric Pehuhuenche,
7.30%, 5/1/03 ....................... 193,219
A- 1,000 Israel Electric Corp. Ltd.,**
7.25%, 12/15/06 ..................... 958,610
------------
2,060,380
------------
Total Corporate Bonds ................. 15,266,661
------------
ASSET-BACKED SECURITIES--2.4%
AAA 800 Chase Credit Card Master Trust,
Ser. 1997-5, Class A,
6.19%, 8/15/05 ...................... 791,732
See Notes to Consolidated Financial Statements.
6
<PAGE>
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--(CONT'D)
NR $ 422 Global Rated Eligible Asset Trust,**/***
Ser. 1998-A, Class A1,
7.33%, 3/15/06 .................... $ 229,843
AA 962 Pegasus Aviation Lease
Securitization,**
Ser. 1999-1A, Class A1,
6.30%, 3/25/29 .................... 940,120
NR 899 Structured Mortgage Asset
Residential Trust,**/***
Ser. 1997-3,
8.57%, 4/15/06 .................... 400,000
------------
2,361,695
------------
U.S GOVERNMENT AND
AGENCY SECURITIES--15.9%
1,095 Small Business Administration,
Ser. 1998-P10, Class 10A,
6.12%, 2/1/08 ..................... 1,056,405
6,216 Tennessee Valley Authority,
Zero coupon, 11/1/05 ................ 4,193,811
United States Treasury Notes,
400 5.50%, 5/15/09 ...................... 390,748
10,000++ 6.63%, 3/31/02 ...................... 10,248,400
------------
15,889,364
------------
ZERO COUPON BONDS--57.1%
12,407 Aid to Israel,
2/15/05 - 8/15/05 8,675,663
Government Trust Certificates,
5,220 Class 2-F, 5/15/05 .................. 3,651,755
13,760 Class T-1, 5/15/05 .................. 9,377,578
22,926++ Resolution Trust Funding Corp.,
7/15/05 ............................. 15,989,280
18,000++ United States Treasury Strips,
11/15/05 ............................ 12,361,500
10,000 Vanguard Prime Money Market Strip,
12/31/04 ............................ 7,002,000
------------
57,057,776
------------
TAXABLE MUNICIPAL BONDS--6.0%
AAA 1,000 Alameda County California
Pension Obligation,
Zero coupon, 12/1/05 ................ 653,700
AAA 1,000 Alaska Energy Power
Authority Revenue,
Zero coupon, 7/1/05 ................. 755,090
AAA 1,433 Kern County California
Pension Obligation,
Zero coupon, 8/15/99 - 8/15/05 ...... 1,014,543
Long Beach California
Pension Obligation,
AAA 1,441 Zero coupon, 9/1/99 - 9/1/05 ........ 1,018,351
AAA 500 7.09%, 9/1/09 ....................... 508,720
Los Angeles County California
Pension Obligation,
AAA 406 Zero coupon, 12/31/99 - 6/30/05 ..... 327,609
AAA 1,000 6.77%, 6/30/05 ...................... 654,170
AAA 1,000 8.62%, 6/30/06 ...................... 1,107,950
------------
6,040,133
------------
COLLATERALIZED MORTGAGE
OBLIGATION RESIDUALS***--0.4%
10 Federal Home Loan Mortgage Corp.,
Multiclass Mortgage Participation
Certificates,
Ser. 1035, Class 1035-R,
1/15/21 ........................... 375,000
------------
NOTIONAL
AMOUNT
(000) CALL OPTION PURCHASED--0.1%
--------
15,000 Interest Rate Swap,
5.60% over 3 month LIBOR,
expires 8/07/00
(cost $206,250) 80,447
------------
Total Long-term investments
(cost $137,788,137) 143,267,691
PRINCIPAL
AMOUNT
(000) SHORT-TERM INVESTMENT--1.4%
---------
DISCOUNT NOTES
1,395 Federal Home Loan Mortgage Corp.,
4.60%, 7/1/99
(cost $1,395,000) ................... 1,395,000
------------
Total investments before outstanding
call options written
(cost $139,183,137) ................. 144,662,691
NOTIONAL
AMOUNT
(000) CALL OPTION WRITTEN--(0.0%)
---------
(24,000) Interest Rate Swap,
3 month LIBOR over 5.50%,
expires 8/10/99
(premium received $147,000) ......... (53)
------------
Total investments, net of outstanding
call options written--144.9%
(cost $139,036,137) ................. 144,662,638
Liabilities in excess of
other assets --(44.9)% .............. (44,811,687)
------------
Net Assets--100% ...................... $99,850,951
============
- -------------------------
* Using the higher of Standard & Poor's, Moody's or Fitch's rating.
** Securities restricted as to resale.
*** Illiquid securities representing 1.0% of portfolio assets.
+ (Partial) principal amount pledged as collateral for reverse repurchase
agreements.
++ Entire principal amount pledged as collateral for reverse repurchase
agreements.
- --------------------------------------------------------------------------------
KEY TO ABBREVIATIONS
ARM -- Adjustable Rate Mortgage.
LIBOR -- London InterBank Offer Rate.
REMIC -- Real Estate Mortgage Investment Conduit.
- --------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK ADVANTAGE TERM TRUST INC.
CONSOLIDATED STATEMENT OF
ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $139,183,137)
(Note 1) ............................................. $144,662,691
Interest receivable .................................... 1,045,826
Unrealized appreciation on interest rate swaps
(Notes 1 and 3) ...................................... 389
------------
145,708,906
------------
LIABILITIES
Reverse repurchase agreements (Note 4) ................. 45,374,875
Interest payable ....................................... 267,842
Other accrued expenses ................................. 138,383
Investment advisory fee payable (Note 2) ............... 40,947
Due to custodian ....................................... 27,666
Administration fee payable (Note 2) .................... 8,189
Call options written, at value (premium received
$147,000) (Notes 1 and 3) ............................ 53
------------
45,857,955
------------
NET ASSETS ............................................. $ 99,850,951
============
Net assets were comprised of:
Common stock, at par (Note 5) ........................ $ 95,107
Paid-in capital in excess of par ..................... 87,354,396
------------
....................................................... 87,449,503
Undistributed net investment income .................. 5,302,548
Accumulated net realized gain ........................ 1,472,010
Net unrealized appreciation .......................... 5,626,890
....................................................... ------------
Net assets, June 30, 1999 ............................ $ 99,850,951
============
Net asset value per share:
($99,850,951 / 9,510,667 shares of
common stock issued and outstanding) ................. $10.50
======
- --------------------------------------------------------------------------------
THE BLACKROCK ADVANTAGE TERM TRUST INC.
CONSOLIDATED STATEMENT
OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest earned (net of premium amortization
of $903,603 and
interest expense of $1,221,531) ...................... $ 3,640,633
-----------
Operating expenses
Investment advisory ..................................... 255,508
Administration .......................................... 51,102
Custodian ............................................... 29,000
Reports to shareholders ................................. 27,000
Audit ................................................... 15,000
Legal ................................................... 14,000
Transfer agent .......................................... 12,000
Directors ............................................... 11,000
Registration ............................................ 8,000
Miscellaneous ........................................... 8,676
-----------
Total operating expenses .............................. 431,286
-----------
Net investment income ..................................... 3,209,347
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 3)
Net realized gain (loss) on:
Investments ............................................. 303,836
Futures ................................................. 487,973
Short sales ............................................. 211,914
Interest rate swaps ..................................... (50,708)
-----------
953,015
-----------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................. (7,671,222)
Options written ......................................... 260,092
Futures ................................................. 7,136
Short sales ............................................. 333,514
Interest rateswaps ...................................... (81,267)
-----------
(7,151,747)
-----------
Net loss on investments .................................... (6,198,732)
-----------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................................ $(2,989,385)
===========
See Notes to Consolidated Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK ADVANTAGE TERM TRUST INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
RECONCILIATION OF NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS TO NET CASH
FLOWS PROVIDED BY OPERATING ACTIVITIES
Net decrease in net assets resulting
from operations ........................................ $ (2,989,385)
------------
Decrease in investments .................................. 4,964,497
Net realized gain ........................................ (953,015)
Decrease in unrealized appreciation ...................... 7,151,747
Increase in interest receivable .......................... (81,985)
Decrease in deposits with brokers for
investments sold short ................................. 9,203,750
Decrease in unrealized appreciation of
interest rate swap ..................................... 81,267
Decrease in due to broker-variation
margin ................................................. (6,593)
Decrease in payable for investments sold short ........... (9,044,960)
Decrease in call options written ......................... (532,843)
Increase in interest payable ............................. 31,181
Decrease in accrued expenses and other
liabilities ............................................ (307,769)
------------
Total adjustments ...................................... 10,505,277
------------
Net cash flows provided by operating activities .......... $ 7,515,892
============
INCREASE (DECREASE) IN CASH
Net cash flows provided by operating activities: ......... $ 7,515,892
Cash flows used for financing activities:
Decrease in reverse repurchase agreements .............. (4,676,585)
Cash dividends paid .................................... (2,892,663)
------------
Net cash flows used for financing activities ............. (7,569,248)
------------
Net decrease in cash ................................... (53,356)
Cash at beginning of period ............................ 53,356
------------
Cash at end of period .................................. $ --
============
- --------------------------------------------------------------------------------
THE BLACKROCK ADVANTAGE TERM TRUST INC.
CONSOLIDATED STATEMENTS OF
CHANGES IN NET ASSETS (UNAUDITED)
- --------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1999 1998
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income .................... $ 3,209,347 $6,466,933
Net realized gain
on investments ......................... 953,015 2,115,335
Net change in unrealized
appreciation
/(depreciation) on
investments .......................... (7,151,747) 1,766,310
------------ ------------
Net increase (decrease)
in net assets resulting from
operations ............................. (2,989,385) 10,348,578
Dividends from net investment
income ................................. (2,397,319) (5,943,827)
------------ ------------
Total increase (decrease) .............. (5,386,704) 4,404,751
NET ASSETS
Beginning of period ........................ 105,237,655 100,832,904
------------ ------------
End of period .............................. $ 99,850,951 $105,237,655
============ ============
See Notes to Consolidated Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK ADVANTAGE TERM TRUST INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -------------------------------------------------------
1999 1998 1997 1996 1995 1994
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ...................... $ 11.07 $ 10.60 $ 10.10 $ 10.49 $ 9.00 $ 10.73
------- -------- -------- -------- -------- --------
Net investment income (net of interest expense of $0.13,
$0.28, $0.26, $0.22, $0.47 and $0.25, respectively) ... 0.33 0.68 0.76 0.57 0.74 0.53
Net realized and unrealized gain (loss) ................. (0.65) 0.41 0.36 (0.33) 1.42 (1.53)
------- -------- -------- -------- -------- --------
Net increase (decrease) from investment operations ........ (0.32) 1.09 1.12 0.24 2.16 (1.00)
------- -------- -------- -------- -------- --------
Dividends from net investment income ...................... (0.25) (0.62) (0.62) (0.63) (0.67) (0.73)
------- -------- -------- -------- -------- --------
Net asset value, end of period* ........................... $ 10.50 $ 11.07 $ 10.60 $ 10.10 $ 10.49 $ 9.00
======= ======== ======== ======== ======== ========
Market value, end of period* .............................. $ 9.69 $ 9.81 $ 9.38 $ 8.63 $ 8.63 $ 7.75
======= ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN+ .................................. 1.30% 11.03% 15.79% 7.30% 20.31% (22.16%)
======= ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Operating expenses # ...................................... 0.85%+++ 0.91% 0.88% 0.91% 1.00% 1.06%
Net investment income ..................................... 6.30%+++ 6.23% 7.47% 5.80% 7.53% 5.38%
SUPPLEMENTALDATA:
Average net assets (in thousands) ......................... $102,743 $103,812 $ 97,493 $ 93,370 $ 93,044 $ 92,932
Portfolio turnover ........................................ 6% 11% 31% 76% 94% 142%
Net assets, end of period (in thousands) .................. $ 99,851 $105,238 $100,833 $ 96,028 $ 99,723 $ 85,567
Reverse repurchase agreements outstanding,
end of period (in thousands) ............................ $ 45,375 $ 50,051 $ 48,275 $ 26,933 $ 48,581 $ 42,176
Asset coverage++ .......................................... $ 3,201 $ 3,103 $ 3,089 $ 4,565 $ 3,053 $ 3,029
</TABLE>
- ----------------
* Net asset value and market value are published in BARRON'S each Saturday,
THE NEW YORK TIMES and THE WALL STREET JOURNAL each Monday.
# The ratios of operating expenses, including interest expense, to average net
assets were 3.24%+++, 3.52%, 3.39%, 3.06%, 5.86% and 3.59% for the periods
indicated above, respectively. The ratios of operating expenses, including
interest expense and excise tax, to average net assets were 3.24%+++, 3.71%,
3.52%, 3.52%, 5.97% and 3.66%, for the periods indicated above,
respectively.
+ Total investment return is calculated assuming a purchase of common stock
at the current market price on the first day and a sale at the current
market price on the last day of the period reported. Dividends 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 less than a full year
are not annualized.
++ Per $1,000 of reverse repurchase agreements outstanding.
+++ Annualized.
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.
See Notes to Consolidated Financial Statements.
10
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK ADVANTAGE TERM TRUST INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION & POLICIES
The BlackRock Advantage ACCOUNTING Term Trust Inc. (the "Trust"), a Maryland
corporation, is a diversified, closed-end management investment company. The
Trust's investment objective is to manage a portfolio of investment grade fixed
income securities that will return $10 per share to investors on or shortly
before 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.
On October 31, 1998, the Trust transferred a substantial portion of its total
assets to a 100% owned regulated investment company subsidiary called BAT
Subsidiary, Inc.These consolidated financial statements include the operations
of both the Trust and its wholly-owned subsidiary after eliminattion of all
intercompany transactions and balances.
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, interest rate swaps, caps, floors and non-exchange traded
options 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 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 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.
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, or collections of positions, so that changes in interest rates do not
change the duration of the
11
<PAGE>
portfolio unexpectedly. In general, the Trust uses options to hedge a long or
short position or an overall portfolio that is longer or shorter than the
benchmark security. A call option gives the purchaser of the option the right
(but not obligation) to buy, and obligates the seller to sell (when the option
is exercised), the underlying position at the exercise price at anytime 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 a simple 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. Interest 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 expires 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 in a manner similar to more generic options described above.
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. 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
12
<PAGE>
securities the Trust intends to purchase against fluctuations in value caused by
changes in prevailing market interest rates. Should interest rates move
unexpectedly, the Trust may not achieve the anticipated benefits of the
financial futures contracts and may realize a loss. The use of futures
transactions involves the risk of imperfect correlation in movements in the
price of futures contracts, interest rates and the underlying hedged assets. The
Trust is also at risk of not being able to enter into a closing transaction for
the futures contract because of an illiquid secondary market. In addition, since
futures are used to shorten or lengthen a portfolio's duration, there is a risk
that the portfolio may have temporarily performed better without the hedge or
that the Trust may lose the opportunity to realize appreciation in the market
price of the underlying positions.
SHORT SALES: The Trust may make short sales of securities as a method of hedging
potential price declines in similar securities owned. When the Trust makes a
short sale, it may borrow the security sold short and deliver it to the
broker-dealer through which it made the short sale as collateral for its
obligation to deliver the security upon conclusion of the sale. The Trust may
have to pay a fee to borrow the particular securities and may be obligated to
pay over any payments 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.
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 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, 1999.
INTEREST RATE CAPS: Interest rate caps are similar to interest rate swaps,
except that one party agrees to pay a fee, while the other party pays the
excess, if any, of a floating rate over a specified fixed or floating rate.
Interest rate caps are intended to both manage the duration of the Trust's
portfolio and its exposure to changes in short term rates. Owning interest rate
caps reduces the portfolio's duration, making it less sensitive to changes in
interest rates from a market value perspective. The effect on income involves
protection from rising short term rates, which the Trust experiences primarily
in the form of leverage.
The Trust is exposed to credit loss in the event of non-performance by the
other party to the interest rate cap. However, the Trust does not anticipate
non-performance by any counterparty.
Transactions fees paid or received by the Trust are recognized as assets or
liabilities and amortized or accreted into interest expense or income over the
life of the interest rate cap. the asset or liability is subsequentlyadjusted to
the current market value of the interest rate cap purchased or sold. Changes in
the value of the interest rate cap are recognized as unrealized gains or losses.
INTEREST RATE FLOORS: Interest rate floors are similar to interest rate
swaps, except that one party agrees to pay a fee, while the other party pays the
deficiency, if any, of a floating rate under a specified fixed or floating rate.
Interest rate floors are used by the Trust to both manage the duration of the
portfolio and its exposure to changes in short-term interest rates. Selling
interest rate floors reduces the portfolio's duration, making it less sensitive
to changes in interest rates from a market value perspective. The Trust's
leverage provides extra income in a period of falling rates. Selling floors
reduces some of the advantage by partially monetizing it as an up front payment
which the Trust receives.
The Trust is exposed to credit loss in the event of non-performance by the
other party to the interest rate floor. However, the Trust does not anticipate
non-performance by any counterparty.
Transactions fees paid or received by the Trust are recognized as assets or
liabilities and amortized or accreted into interest expense or income over the
life of the interest rate floor. The asset or liability is subsequently adjusted
to the current market value of the interest rate floor purchased or sold.
Changes in the value of the interest rate floor are recognized as unrealized
gains and losses.
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
13
<PAGE>
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 substantially all taxable income to shareholders. Therefore, no
federal income tax provision is required. As part of its 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.
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.
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 0.50% 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 Trust's average weekly net assets
through 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. PIFM pays occupancy and certain clerical
and accounting costs of the Trust. The Trust bears all other costs and expenses.
NOTE 3. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term investments
and dollar rolls, for the six months ended June 30, 1999 aggregated $15,113,061
and $9,328,525, 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, 1999, the Trust held
1.0% of its portfolio assets in 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 June 30, 1999 was
$139,183,137 and, accordingly, net unrealized appreciation for federal income
tax purposes was $5,479,554 (gross unrealized appreciation--$8,078,842; gross
unrealized depreciation--$2,599,288).
For federal income tax purposes, the Trust had a capital loss carryforward at
December 31, 1998 of approximately $2,735,000, of which $2,519,000 expires in
2004 and $216,000 expires in 2005. 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 June 30, 1999 are as follows:
NOTIONAL FIXED/
AMOUNT FLOATING FLOATING TERMINATION UNREALIZED
(000) TYPE RATE RATE DATE APPRECIATION
- -------- ------ ----- -------- ---------- --------------
$5,000 Floating Rate 3 Mo. T-Bill 3 Mo. LIBOR 9/10/03 $209
+80.25 bps
5,000 Floating Rate 3 Mo. T-Bill 3 Mo. LIBOR 9/10/03 180
+81.75 bps
-----
$389
=====
14
<PAGE>
NOTE 4. BORROWINGS
REVERSE REPURCHASE AGREEMENTS: The Trust may enter into reverse repurchase
agreements with qualified, third party broker-dealers as determined by and under
the direction of the Trust's Board of Directors. Interest on the value of
reverse repurchase agreements issued and outstanding will be based upon
competitive market rates at the time of issuance. At the time the Trust enters
into a reverse repurchase agreement, it will establish and maintain a segregated
account with the lender, the value of which at least equals the principal amount
of the reverse repurchase transactions including accrued interest.
The average daily balance of reverse repurchase agreements outstanding during
the six months ended June 30, 1999 was approximately $46,929,418 at a weighted
average interest rate of approximately 4.92%. The maximum amount of reverse
repurchase agreements outstanding at any month-end during the year ended June
30, 1999 was $51,006,335 as of January 31, 1999 which was 37.2% of total assets.
DOLLAR ROLLS: The Trust may enter into dollar rolls in which the Trust sells
securities for delivery in the current month and 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, 1999.
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, 1999, the Adviser owned 10,667 shares.
NOTE 6. DIVIDENDS
Since June 30, 1999, the Board of Directors of the Trust declared dividends from
undistributed earnings of $0.05 per share payable July 30, 1999 to shareholders
of record on July 15, 1999.
15
<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
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 under the Plan below net asset value.
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 fee 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.
16
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THE BLACKROCK ADVANTAGE TERM TRUST INC.
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
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 has communicated 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, the Adviser has 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.
ANNUAL MEETING OF TRUST SHAREHOLDERS. 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.
The Annual Meeting of Trust Shareholders was held May 19, 1999 to vote on
the following matters:
(1) To elect three Directors as follows:
<TABLE>
<CAPTION>
DIRECTOR CLASS TERM EXPIRING
-------- ------ ----- -------
<S> <C> <C> <C>
Frank J. Fabozzi I 3 years 2002
Walter F. Mondale I 3 years 2002
Ralph L. Schlosstein I 3 years 2002
</TABLE>
Directors whose term of office continues beyond this meeting are Andrew
F. Brimmer, Richard E. Cavanagh, Kent Dixon, Laurence D. Fink, James
Grosfeld and James Clayburn La Force, Jr.
(2) To ratify the selection of Deloitte & Touche LLP as independent public
accountants of the Trust for the fiscal year ending December 31, 1999.
Shareholders elected the three Directors and ratified the selection of
Deloitte & Touche LLP. The results of the voting was as follows:
<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST ABSTENTIONS
---------- --------------- -------------
<S> <C> <C> <C>
Frank J. Fabozzi 7,426,786 -- 147,640
Walter F. Mondale 7,409,405 -- 165,021
Ralph L. Schlosstein 7,429,875 -- 144,551
Ratification of Deloitte & Touche LLP 7,421,699 67,973 84,754
</TABLE>
17
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THE BLACKROCK ADVANTAGE TERM TRUST INC.
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
THE TRUST'S INVESTMENT OBJECTIVE
The BlackRock Advantage 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, 2005 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 $141
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 $25 billion family of open-end funds. BlackRock manages
over 470 accounts, 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 Adviser 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 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 total assets) to enhance the income of the portfolio. In order to
maintain competitive yields as the Trust approaches maturity and depending on
market conditions, the Adviser will attempt to purchase securities with call
protection or maturities as close to the Trust's maturity date as possible.
Securities with call protection should provide the portfolio with some degree of
protection against reinvestment risk during times of lower prevailing interest
rates. Since the Trust's primary goal is to return the initial offering price at
maturity, any cash that the Trust receives prior to its maturity date (i.e. cash
from early and regularly scheduled payments of principal on mortgage-backed
securities) will be reinvested in securities with maturities which coincide with
the remaining term of the Trust. Since shorter-term securities typically yield
less than longer-term securities, this strategy will likely result in a decline
in the Trust's income over time. However, the Adviser will attempt to maintain a
yield which is competitive with a comparable maturity Treasury at the same point
on the yield curve (i.e. if the Trust has three years left until its maturity,
the Adviser will attempt to maintain a yield at a spread over a 3-year
Treasury). It is important to note that the Trust will be managed so as to
preserve the integrity of the return of the initial offering price.
18
<PAGE>
HOW ARE THE TRUST'S SHARES PURCHASED AND SOLD?
DOES THE TRUST PAY DIVIDENDS REGULARLY?
The Trust's shares are traded on the New York Stock Exchange which provides
investors with liquidity on a daily basis. Orders to buy or sell shares of the
Trust must be placed through a registered broker or financial 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 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 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 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.
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 affect 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 (NYSEsymbol: BAT) and as such are
subject to supply and demand influences. As a result, shares may trade at a
discount or a premium to their net asset value.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The cash flow and yield
characteristics of these securities differ from traditional debt securities. The
major differences typically include more frequent payments and the possibility
of prepayments which will change the yield to maturity of the security.
CORPORATE DEBT SECURITIES. The value of corporate debt securities generally
varies inversely with changes in prevailing market interest rates. The Trust may
be subject to certain reinvestment risks in environments of declining interest
rates.
ZERO COUPON SECURITIES. Such securities receive no cash flows prior to maturity,
therefore interim price movements on these securities are generally more
sensitive to interest rate movements than securities that make periodic coupon
payments. These securities appreciate in value over time and can play an
important role in helping the Trust achieve its primary objective.
ILLIQUID SECURITIES. The Trust may invest in securities that are illiquid,
although under current market conditions the Trust expects to do so to only a
limited extent. These securities involve special risks.
NON-U.S SECURITIES. The Trust may invest less than 10% of its assets in non-U.S.
dollar-denominated securities which involve special risks such as currency,
political and economic risks, although under current market conditions does not
do so.
ANTITAKEOVER PROVISIONS. Certain antitakeover provisions will make a change in
the Trust's business or management more difficult without the approval of the
Trust's Board of Directors and may have the effect of depriving shareholders of
an opportunity to sell their shares at a premium above the prevailing market
price.
19
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THE BLACKROCK ADVANTAGE 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.
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 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).
20
<PAGE>
INVERSE-FLOATING RATE MORTGAGE: 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: 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, THE NEW
YORK TIMES and THE WALL STREET JOURNAL on
Monday.
PRINCIPAL-ONLY SECURITIES: 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.
AGREEMENTS:
REVERSE REPURCHASE 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.
STRIP MORTGAGE-BACKED
SECURITIES: Arrangements in which a pool of assets is
separated into two classes that receive
different proportions of the interest and
principal distributions from underlying
mortgage-backed securities. IO's and PO's are
examples of strips.
21
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BLACKROCK FINANCIAL MANAGEMENT, INC.
SUMMARY OF CLOSED-END FUNDS
- --------------------------------------------------------------------------------
TAXABLE TRUSTS
- --------------------------------------------------------------------------------
STOCK MATURITY
PERPETUAL TRUSTS SYMBOL DATE
------ ------
The BlackRock Income Trust Inc. BKT N/A
The BlackRock North American Government Income Trust Inc. BNA N/A
The BlackRock High Yield Trust BHY 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. BTM 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 DO NOT HESITATE TO CALL
BLACKROCK AT (800) 227-7BFM (7236)
22
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- --------------------------------------------------------------------------------
BLACKROCK FINANCIAL MANAGEMENT, INC.
AN OVERVIEW
- --------------------------------------------------------------------------------
BlackRock Financial Management, Inc. ("BlackRock") is an SEC-registered
investment adviser. BlackRock and its affiliates currently manage over $141
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. BlackRock manages twenty-one closed-end funds that are
traded on either the New York or American stock exchanges, and a $25 billion
family of open-end funds. BlackRock manages over 470 accounts, domiciled in the
United States and overseas.
BlackRock's fixed income product was introduced in 1988 by a team of
highly seasoned fixed income professionals. These professionals had extensive
experience creating, analyzing and trading a variety of fixed income
instruments, including the most complex structured securities. In fact, several
individuals at BlackRock were responsible for developing many of the major
innovations in the mortgage-backed and asset-backed securities markets,
including the creation of the first CMO, the floating rate CMO, the
senior/subordinated pass-through and the multi-class asset-backed security.
BlackRock is unique among asset management and advisory firms in the
emphasis it places on the development of proprietary analytical capabilities.
Over one quarter of the firm's professionals is dedicated to the design,
maintenance and use of these systems, which are not otherwise available to
investors. BlackRock's proprietary analytical tools are used for evaluating, and
designing fixed income investment strategies for client portfolios. Securities
purchased include mortgages, corporate bonds, municipal bonds and a variety of
hedging instruments.
BlackRock has developed investment products that respond to investors'
needs and has been responsible for several major innovations in closed-end
funds. In fact, BlackRock introduced the first closed-end mortgage fund, the
first taxable and tax-exempt closed-end funds to offer a finite term, the first
closed-end fund to achieve a AAA rating by Standard & Poor's, and the first
closed-end fund to invest primarily in North American Government securities.
Currently, BlackRock's closed-end funds have dividend reinvestment plans, which
are designed to provide ongoing demand for the stock in the secondary market.
BlackRock manages a wide range of investment vehicles, each having specific
investment objectives and policies.
In view of our continued desire to provide a high level of service to all
our shareholders, BlackRock maintains a toll-free number for your questions. The
number is (800) 227-7BFM (7236). We encourage you to call us with any questions
that you may have about your BlackRock funds and we thank you for the continued
trust that you place in our abilities.
IF YOU WOULD LIKE FURTHER INFORMATION
PLEASE DO NOT HESITATE TO CALL BLACKROCK AT (800) 227-7BFM
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
The accompanying financial statements as of June 30, 1999 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 Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 227-7BFM
[graphic omitted]Printed on recycled paper
-----------
THE BLACKROCK
-----------
ADVANTAGE
TERM TRUST INC.
=================================================
CONSOLIDATED
SEMI-ANNUAL REPORT
JUNE 30, 1999
[graphic omitted]
