- --------------------------------------------------------------------------------
THE BLACKROCK STRATEGIC TERM TRUST INC.
ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISER
- --------------------------------------------------------------------------------
January 31, 1996
Dear Shareholder,
Since the inception of The BlackRock Strategic Term Trust Inc. in 1990, the
market for investments in fixed income securities has witnessed an unprecedented
amount of interest rate volatility, which has changed the landscape for fixed
income investors. 1995 was a great year for investments in the bond market
following the disappointments of 1994, as yields declined and the value of fixed
income securities increased dramatically.
Looking forward, we maintain a positive outlook for the market's performance
in 1996. The economy currently appears to be growing at a steady rate and
inflation appears to be under control. Market participants are beginning to
agree that the Federal Reserve has achieved the "soft landing" that they set out
to accomplish through a series of interest rate increases last year, and are
optimistic for a further ease in the Fed's monetary policy should a budget
accord emphasizing fiscal restraint be reached in Washington.
BlackRock Financial Management, Inc. is completing its first year as part of
PNC Bank Corporation, becoming an essential part of PNC's Asset Management Group
by taking a leadership role in their fixed income management operations. We have
witnessed consistent growth of our assets under management, which now stand at
approximately $34 billion, as both retail and institutional fixed income
investors continue to recognize the value of our risk management capabilities
and long term investment philosophy.
We look forward to maintaining your respect and confidence and to serving
your financial needs in the coming year.
Sincerely,
Laurence D. Fink Ralph L. Schlosstein
Chairman President
1
<PAGE>
January 31, 1996
Dear Shareholder:
We are pleased to present the annual report for The BlackRock Strategic Term
Trust Inc. (NYSE symbol: "BGT") for the year ended December 31, 1995. The past
year has been an exciting and challenging time to be participating in the fixed
income markets, and we would like to take this opportunity to review the Trust's
strong performance from both a stock price and net asset value (NAV)
perspective, as well as to discuss the opportunities available to the Trust in
the current lower interest rate environment.
The Trust 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 (an amount equal to the Trust's initial public offering
price) to investors on or about December 31, 2002, while providing high current
income. The Trust seeks to meet this objective through investments in a broad
array of fixed income products including agency mortgage-backed securities
(Fannie Mae, Freddie Mac or Ginnie Mae), U.S. Treasury and agency securities,
asset-backed securities and investment grade corporate debt securities.
The table below summarizes the performance of the Trust's stock price and
net asset value (the market value of its portfolio holdings per share) over the
fiscal year:
------------------------------------------------------
12/31/95 12/31/94 Change High Low
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Stock Price $7.625 $7.125 7.02% $8.125 $7.125
- --------------------------------------------------------------------------------
Net Asset Value (NAV) $9.32 $8.12 14.78% $9.32 $8.09
- --------------------------------------------------------------------------------
Premium/(Discount) to NAV (18.19%) (12.25%) (5.94%) (8.19%) (19.18%)
- --------------------------------------------------------------------------------
The Fixed Income Markets
The dramatic rally in the fixed income markets, which caused interest rates
to fall and prices of fixed income securities to rise since late 1994 has
changed the market landscape for fixed income investors. A deceleration in
economic growth from the torrid pace of 1994 as well as continued signs of
subdued inflation led to a substantial decrease in interest rates across the
Treasury yield curve. At the end of December, the yield of the Treasury 30-year
bond fell below 6.00% for the first time since October 1993, closing the year at
5.95%, while the yield of the 10-year Treasury fell approximately 2.25% to end
1995 at 5.57%.
The Federal Reserve reversed its policy of "tight" monetary control for the
first time in almost two years by lowering the Fed funds target rate by 25 basis
points (0.25%) on July 7, in response to economic reports expressing moderate
but sustainable economic growth in the first half of the year. During July and
early August, the bond market rally temporarily halted as stronger economic data
dampened expectations for a follow-up reduction in short-term rates. However, as
the fourth quarter began, the economy again showed signs of sluggish growth and
interest rates returned to their 1995 lows in anticipation of another Fed ease
by year end. Indeed, the Fed made two quarter-point reductions in the Fed funds
rate on December 19 and January 31. These reductions could make the Trust's use
of leverage more profitable, as the Treasury yield curve is expected to steepen,
resulting in a wider differential (or "spread") between the Trust's borrowing
costs and the rates at which the Trust can invest the borrowed funds.
2
<PAGE>
Market participants remain attentive to the politically-charged debate
surrounding Federal budget proposals. Congressional and White House leaders have
been unable to fashion a credible 7-year balanced budget agreement, and appear
resigned to let the debate linger as we move into the election year. As such,
fixed income investors are concerned about a potential credit downgrade or
technical default on certain U.S. Treasury issues should policy-makers be unable
to reach agreement on extending the Federal debt-ceiling until a budget accord
is struck later in the year.
BlackRock Financial Management is attuned to these continuing political
issues, but we remain positive on the fixed income markets in early 1996 as
moderate economic and inflationary data have set the stage for continued strong
performance for fixed income securities.
The Trust's Portfolio and Investment Strategy
BlackRock has been actively managing the Trust's portfolio holdings
consistent with BlackRock's overall market outlook and the Trust's investment
objectives. The chart below illustrates the Trust's portfolio compositions as of
December 31, 1995 and December 31, 1994.
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The BlackRock Strategic Term Trust Inc.
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Composition December 31, 1995 December 31, 1994
- --------------------------------------------------------------------------------
Taxable Zero Coupon Bonds 24% 27%
- --------------------------------------------------------------------------------
Multiple Class Mortgage Pass-Throughs 22% 1%
- --------------------------------------------------------------------------------
Mortgage Pass-Throughs 18% 32%
- --------------------------------------------------------------------------------
Adjustable Rate Mortgages 9% 5%
- --------------------------------------------------------------------------------
U.S. Government Securities 7% 6%
- --------------------------------------------------------------------------------
Stripped Mortgage-Backed Securities 7% 1%
- --------------------------------------------------------------------------------
Corporate Bonds 5% -
- --------------------------------------------------------------------------------
Municipal Zero Coupon Bonds 2% 3%
- --------------------------------------------------------------------------------
CMO Residuals 2% 4%
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Commercial Mortgage-Backed Securities 2% 1%
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Asset-Backed Securities 1% 2%
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FNMA Project Loans 1% 1%
- --------------------------------------------------------------------------------
Agency Multiple Class Mortgage Pass-Throughs - 17%
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The most significant shift in the Trust's portfolio over the fiscal year has
been an increased exposure to the corporate debt sector and a corresponding
decrease in allocations to mortgage pass-through securities. Since first
obtaining the broadened investment authority from shareholders in May 1995 to
purchase and hold investment grade corporate debt, the Trust has increased its
holdings of these securities to 5% as of year end. The Trust may continue to
increase its allocation to corporate debt securities upon opportunity, as these
securities offer a higher degree of cash flow stability and call protection than
mortgage securities, and could provide the Trust with a more stable income over
time. BlackRock Financial Management remains confident in the Trust's ability to
return $10 per share to shareholders at its slated termination date in 2002.
3
<PAGE>
We look forward to managing the Trust in the coming year to benefit from the
opportunities available to investors in the fixed income markets as well as to
maintain the Trust's ability to meet its investment objectives. We thank you for
your investment in the BlackRock Strategic Term Trust Inc. and extend our
continued commitment to addressing your questions and concerns. Please feel free
to contact our marketing center at (800) 227-7BFM (7236) if you have questions
which were not addressed in this report.
Sincerely,
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 Strategic Term Trust Inc.
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Symbol on New York Stock Exchange: BGT
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Initial Offering Date: December 28, 1990
- --------------------------------------------------------------------------------
Closing Stock Price as of 12/31/95: $7.625
- --------------------------------------------------------------------------------
Net Asset Value as of 12/31/95: $9.32
- --------------------------------------------------------------------------------
Yield on Closing Stock Price as of 12/31/95 ($7.625)1: 6.56%
- --------------------------------------------------------------------------------
Current Monthly Distribution per Share2: $0.04167
- --------------------------------------------------------------------------------
Current Annualized Distribution per Share2: $0.50
- --------------------------------------------------------------------------------
- ------------
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 Col.
- --------------------------------------------------------------------------------
The BlackRock Strategic Term Trust Inc.
Portfolio of Investments
December 31, 1995
- --------------------------------------------------------------------------------
Principal
Ratings* Amount Value
(unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
LONG-TERM INVESTMENTS-146.8%
Mortgage Pass-Throughs-36.4%
Federal Home Loan Mortgage
Corporation,
$19,079 6.50%, 03/01/24 ...................... $ 18,869,973
1,017 7.50%, 11/01/10, 15 Year ............. 1,046,248
26 7.50%, 02/01/17 ...................... 26,155
11,765 8.00%, 09/01/23 ...................... 12,191,629
2,394 9.00% 11/01/05, 15 Year .............. 2,529,456
Federal National Mortgage
Association,
4,750 6.50%, Trust 1994-M1,
Class M1-B, 10/25/03,
Multifamily ........................ 4,847,969
20,000 7.00%, 01/01/99, 7 Year .............. 20,362,400
6,017 7.25%, 01/01/23,
Project 797 ........................ 6,255,186
11,274 7.50%, 06/01/01, 7 Year .............. 11,538,184
7,810 7.50%, 04/01/08, 15 Year ............. 8,032,355
3,287 8.00%, 08/01/17 ...................... 3,403,811
4,128 8.50%, 12/01/24 ...................... 4,308,505
3,719 10.50%, 06/01/04, 15 Year ............ 3,927,944
Government National
Mortgage Association,
21,821+ 6.50%, 04/20/25-05/20/25,
1 Year CMT (ARM) ................... 22,271,670
26,318++ 7.00%, 10/20/24-11/20/24,
1 Year CMT (ARM) ................... 26,762,506
1,797 7.00%, 10/15/22 ...................... 1,818,388
40,377 8.50%, 07/15/17 ...................... 42,440,917
3,686 9.00%, 10/15/17 ...................... 3,904,747
242 10.00%, 02/15/16 ..................... 266,026
------------
194,804,069
------------
Multiple Class Mortgage
Pass-Throughs-39.4%
AAA 2,600 Aetna Commercial Mortgage
Trust, Series 1995-CS,
Class B, 01/25/26 .................... 2,604,875
Right Col.
- --------------------------------------------------------------------------------
Principal
Ratings* Amount Value
(unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corporation, Multiclass
Mortgage Participation
Certificates,
$26,133+ Series 1, Class 1-Z,
04/15/19 ........................... $27,696,454
4,652 Series 39, Class 39-J
03/25/24 (I) ....................... 860,823
22,040+ Series 90, Class 90-G,
10/15/20 ........................... 23,416,398
14,144++ Series 1039, Class 1039-J,
02/15/21 ........................... 14,453,612
5,000 Series 1295, Class 1295-JB,
03/15/07 ........................... 4,577,700
1,500 Series 1321, Class 1321-E,
01/15/06 ........................... 1,531,905
148 Series 1403, Class 1403-MA,
12/15/21 (I) ....................... 5,121,300
1,883 Series 1488, Class 1488-F,
09/15/06 ........................... 1,864,283
1,625 Series 1488, Class 1488-PF,
09/15/06 ........................... 1,675,408
1,743 Series 1544, Class 1544-TM,
07/15/08 (ARM) ..................... 1,730,355
4,973 Series 1626, Class 1626-PV,
12/15/08 (I) ....................... 1,089,288
2,067 Series 1662, Class 1662-P,
11/15/07 (I) ....................... 563,212
1,908 Series 1704, Class 1704-S,
11/15/09 ........................... 1,682,301
4,075 Series 1747, Class 1747-G,
02/15/21 ........................... 4,252,426
Federal National Mortgage
Association, REMIC Pass-
Through Certificates,
2,005 Trust 1991-146, Class 146-S,
10/25/06 (ARM) ................... 1,996,605
10,000++ Trust 1992-43, Class 43-E,
04/25/22 ......................... 10,392,900
4,335 Trust 1992-129, Class 129-G,
06/25/18 ......................... 3,996,437
See Notes to Financial Statements.
5
<PAGE>
(Left column)
- --------------------------------------------------------------------------------
Principal
Ratings* Amount Value
(unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
Federal National
Mortgage Association,
REMIC Pass-through
Certificates,
$ 2,000 Trust 1992-155, Class 155-SB,
12/25/06 (ARM) ..................... $ 2,038,120
35,550+ Trust 1992-156, Class 156-H,
04/25/06 ........................... 32,713,110
40 Trust 1992-210, Class 210-KB,
10/25/20 (I) ....................... 2,101,308
3,520 Trust 1993-G22, Class G22-SA,
09/25/09 (ARM) ..................... 3,458,194
4,532 Trust 1993-26, Class 26-PT,
12/25/17 Trust 93G ................. 1,068,975
34,933 Trust 1993-G35, Class G35-S,
01/25/22 (ARM) ..................... 2,183,334
9,800 Trust 1993-124, Class 124-D,
08/25/22 (P) ....................... 8,158,500
536 Trust 1993-132, Class 132-CA,
10/25/22 (P) ....................... 290,739
7,202+ Trust 1993-170, Class 170-SA,
09/25/02 (ARM) ..................... 6,812,295
5,000 Trust 1993-245, Class 245-JA,
03/25/19 (I) ....................... 1,060,156
2,205 Trust 1994-40, Class 40-H,
10/25/20 ........................... 2,190,623
3,594 Trust 1994-42, Class 42-SO,
03/25/23 (ARM) ..................... 492,445
24,473++ Trust 1994-61, Class 61-DB,
03/25/24 ........................... 17,812,101
AAA 639 First Boston Securities
Mortgage Corporation
Series 1992-E, Class 2,
11/25/07 ........................... 550,982
BBB+ 4,000 Federal Deposit Insurance
Corporation, Trust 1994-C1,
Class C1-llF, 9/25/25 ................ 4,240,000
Paine Webber Mortgage
Acceptance Corp.,
A 2,000 Series 1995-M1 Class M1-C
01/15/02 ........................... 2,060,504
BBB 1,656 Series 1995-M1 Class M1-D
01/15/02 ........................... 1,665,588
A 2,290 Merrill Lynch Mtg Invs Co,
Trust 1995-1, Class C1,
05/25/13 ........................... 2,366,280
A 6,025 Resolution Trust Corp,
Series 1993-C3, Class C3-D
12/12/29 ........................... 6,031,390
A 4,500 Student Loan Markering
Assoc., Trust 1995-1 Class 1,
10/25/09 (ARM) ..................... 4,500,000
------------
211,300,926
------------
Right Col.
- --------------------------------------------------------------------------------
Principal
Ratings* Amount Value
(unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
Collateralized Mortagage
Obilgatlon Residuals**-3.1%
AAA $ 1,400 American Housing Trust 8,
Senior Mortgage Pass-
Through Certificates, Series 8,
Class R (REMIC)
01/25/21 # ......................... $ 1,695,190
Federal Home Loan Mortgage
Corporation, REMIC
Multi-class Mortgage
Participation Certificates,
616 Series 87, Class 87-R,
11/15/20 ........................... 310,878
3 Series 88, Class 88-R,
10/15/20 ........................... 368,498
10 Series 1016, Class 1016-R,
11/15/20 ........................... 106,000
100 Series 1033, Class 1033-R,
01/15/06 ........................... 1,025,000
1,692 Series 1060, Class 1060-R,
03/15/21 ........................... 1,300,000
2 Series 1060, Class 1060-RS,
03/15/21 ........................... 1,000
1,587 Series 1064, Class 1064-R,
04/15/21 ........................... 1,200,000
2 Series 1064, Class 1064-RS,
04/15/21 ........................... 1,000
2 Series 1068, Class 1068-R,
04/15/21 ........................... 1,750,000
2 Series 1068, Class 1068-RS,
04/15/21 ........................... 1,000
2 Series 1073, Class 1073-R,
05/15/21 ........................... 1,200,000
2 Series 1073, Class 1073-RS,
05/15/21 ........................... 1,000
2 Series 1075, Class 1075-R,
05/15/21 ........................... 1,800,000
100 Series 1102, Class 1102-R,
06/15/21 ........................... 910,000
Federal National Mortgage
Association, Guaranteed
REMIC Pass-Through
Certficates,
10 Trust 1989-64, Class 64-R,
10/25/19 ........................... 816,056
1 Trust 1991-9, Class 9-R,
02/25/06 ........................... 825,000
1 Trust 1991 -9, Class 9-RL,
02/25/06 ........................... 1,000
2 Trust 1991-48, Class 48-R,
05/25/06 ........................... 2,500,000
3 Trust 1991-48, Class 48-RL,
05/25/06 ........................... 1,000
See Notes to Financial Statements.
6
<PAGE>
(Left Column)
- --------------------------------------------------------------------------------
Principal
Ratings* Amount Value
(unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
Federal National Mortgage
Association, Guaranteed
REMIC Pass-Through
Certficates,
$ 25 Trust 1991-50, Class 50-R,
05/25/06 ........................... $ 681,884
AAA 1,096 Ryland Acceptance Corp,
Collateralized Mortgage
Obligation Series 1983-R,
Class R, 10/01/18# ................... 175,000
AAA 12 Shearson Lehman Collateralized
Mortgage Obligation,
Series U, Class U-6
12/27/18# .......................... 223,033
------------
16,892,539
------------
Taxable Zero Coupon
Bonds-39.4%
Financing Corp (FICO Strips),
6,339 02/08/02 ............................. 4,493,780
18,000+ 03/07/02 ............................. 12,744,720
6,754 03/26/02 ............................. 4,752,114
12,950+ 04/06/02 ............................. 9,116,800
3,667 05/02/02 ............................. 2,571,117
9,425 06/27/02 ............................. 6,576,859
5,311 08/08/02 ............................. 3,658,004
5,400 09/07/02 ............................. 3,716,820
4,472 09/26/02 ............................. 3,057,014
2,992 10/06/02 ............................. 2,036,744
3,667 11/O2/02 ............................. 2,486,006
4,535 11/11/02 ............................. 3,082,303
3,616 12/06/02 ............................. 2,448,104
29,300 12/27/02 ............................. 19,771,640
6,848 02/03/03 ............................. 4,553,342
6,311 02/08/03 ............................. 4,183,452
10,117 03/07/03 ............................. 6,698,567
11,647 04/05/03 ............................. 7,663,726
9,632 05/02/03 ............................. 6,283,820
2,500 06/06/03 ............................. 1,629,000
5,000 06/27/03 ............................. 3,247,050
5,311 08/08/03 ............................. 3,405,148
7,545 11/02/03 ............................. 4,764,668
3,214 12/06/03 ............................. 2,027,616
4,100 03/26/04 ............................. 2,525,026
7,545 11/02/06 ............................. 3,893,899
Aid to Israel,
2,932 02/15/02 ............................. 2,037,605
2,932 08/15/02 ............................. 2,021,959
Right Col.
- --------------------------------------------------------------------------------
Principal
Ratings* Amount Value
(unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
Government Trust Certificates,
$ 5,880 11/15/01 ............................. $ 4,253,298
15,350 05/15/02 ............................. 10,794,274
25,000 11/15/02 ............................. 17,003,750
Certificates on Government
Receipts,
7,505 05/15/03, Series 1 ................... 4,961,405
7,600 05/15/03, Series 2 ................... 5,024,208
15,425 Tennessee Valley Authority,
04/15/02 ............................. 10,574,393
U.S. Treasury Strip,
33,000++ 08/15/02 ............................. 23,050,170
280 05/15/04 ............................. 175,658
------------
211,284,059
------------
United Sates Government
Securities-6.1%
United States Treasury Notes,
2,000 5.50%, 12/31/00 ...................... 2,010,320
7,400+ 6.375%, 08/15/02 ..................... 7,759,566
10,700+ 7.25% 08/15/04 ....................... 11,898,721
3,000 6.50% 08/15/05 ....................... 3,195,930
United States Treasury Bonds,
3,525 7.625%, 02/15/25 ..................... 4,310,405
3,000++ 6.875%, 08/15/25 ..................... 3,383,430
------------
32,558,372
------------
Stripped Mortgage-Backed
Securities-9.6%
AAA@ 4,365 Collateralized Mortgage
Obligation Trust 26,
Class A, 04/23/17 (P/O) .............. 3,338,960
Federal National Mortgage
Association, REMIC
Pass-Through Certificates,
4,569 Trust 11, Class 2,
02/01/17 (I/O) ..................... 1,100,877
15,361 Trust 19, Class 2,
06/01/17 (I/O) ..................... 3,936,210
10,769 Trust 22, Class 2,
11/01/16 (I/O) ..................... 2,883,977
9,052 Trust 63, Class 2,
06/01/18 (I/O) ..................... 2,313,931
1,884 Trust 225, Class I,
02/01/23 (P/O) ..................... 1,505,189
77 Trust 1991-79, Class 79-B,
07/25/98 (P/O) ..................... 67,158
4,089 Trust 1992-82, Class 82-IO,
05/25/22 (I/O) ..................... 828,113
52 Trust 1992-156, Class 156-HA,
04/25/06 (I/O) ..................... 1,378,000
2,227 Trust 1993-17, Class 17-N,
10/25/22 (I/O) ..................... 460,370
See Notes to Financial Statements.
7
<PAGE>
(Left Column)
- --------------------------------------------------------------------------------
Principal
Ratings* Amount Value
(unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
Federal National Mortgage
Association, REMIC Pass-
Through Certificates,
$ 3,624 Trust 1993-23, Class 23-PN,
04/25/02 (I/O) ..................... $ 1,453,094
2,617 Trust 1993-92, Class 92- G,
05/25/23 (P/O) ..................... 1,424,462
2,077 Trust 1993-G35, Class G35-N,
11/25/23 (P/O) ..................... 887,961
550 Trust 1994-54, Class 54-B,
11/25/23 (P/O) ..................... 297,728
8,566 Trust 1994-87, Class 87-CL E,
03/25/09 (P/O) ..................... 6,868,726
Federal Home Loan Mortgage
Corporation, Multiclass
Mortgage Participation
Certificates:
153 Series G2, Class M
07/25/18 (I/O) ..................... 3,232,458
161++ Series 1262, Class 1262-J,
03/15/22 (I/O) ..................... 7,302,960
23 Series 1375, Class 1375-H,
12/15/05 (I/O) ..................... 376,165
254 Series 1443, Class 1443-J,
12/15/22 (I/O) ..................... 4,452,000
2,269 Series 1597, Class 1597-H,
07/15/23 (P/O) ..................... 1,225,477
4,298 Series 1662, Class 1662-PO,
11/15/09 (P/O) ..................... 3,216,988
AAA 3,250 Prudential Bache Commercial
Mortgage Obligation
Trust 10, Class H
04/01/19 (P/O) ..................... 2,449,688
AAA 1,351 Salomon Brothers Mortgage
Securities, Series 873,
Class B, 10/23/17 (I/O) .............. 446,635
------------
51,447,127
------------
Asset-Backed Securities-2.5%
AAA 2,889 Fleetwood Credit Corp.,
Series 1991, Class A,
8.75%, 03/15/06 ...................... 2,948,172
AAA 5,000 Prime Credit Card Master
Trust, Series 1995-1, Class A,
6.75%, 11/15/05 ...................... 5,216,406
AAA 5,000 Sears Credit Account Master
Trust 11, Series 1995-5,
Class A, 6.050%, 01/15/08 ............ 5,032,813
------------
13,197,391
------------
Right Col.
- --------------------------------------------------------------------------------
Principal
Ratings* Amount Value
(unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
Municipal Bond-3.4%
Los Angeles County California,
Pension, Series A,
AAA $ 1,750 8.30%, 06/30/02 .................. $ 1,950,375
BBB+ 6,250 7.60%, 06/30/98 ................ 6,450,313
Los Angeles County California,
Pension, Series D,
AAA 5,000 6.54%, 06/30/02 ................ 5,106,550
AAA 1,000 Kern County California,
Pensions, 6.39%, 08/15/02 ........... 1,011,920
AAA 3,510 Long Beach California
Pensions, 6.56%, 09/01/02 ........... 3,578,480
------------
18,097,638
------------
Corporate Bonds-6.9%
Banking & Finance-5.4%
BBB+ 4,960 Ahmanson H F Co,
8.25%, 10/01/02 ...................... 5,518,734
BBB+ 1,700 Amsouth Bancorporation,
6.75%, 11/01/25 ..................... 1,794,860
AA- 850 Metropolitan Life Insurance
Co, 7.00%, 11/01/05 ................. 872,678
BBB+ 2,190 Paine Webber Group Inc.,
7.875%, 02/15/03 ................... 2,334,430
Smith Barney Holdings Inc.,
A3 3,000 6.625%, 06/01/00 ................... 3,081,690
A- 4,500 7.98%, 03/01/00 .................... 4,824,405
A- 1,500 7.00%, 05/15/00 .................... 1,558,590
A- 8,500 Transamerica Finance
Corporation, 6.75%,
06/01/00 ............................. 8,767,790
------------
28,753,177
------------
Utility-1.0%
BBB 5,000 Columbia Gas Systems Inc
6.61%, 11/28/02 ...................... 5,090,550
Industrial-0.5%
BBB- 2,700 Royal Caribbean Cruises
7.125%, 09/18/02 ..................... 2,748,927
------------
Total Long-Term
Investments-146.8%
(cost $764,454,682) .................. 786,174,775
------------
Short-Term Investment-0.2%
Discount Note(a)-0.2%
1,320 Federal Home Loan Banks,
5.75%, 01/02/96
(cost $1,319,789) .................... 1,319,789
------------
Total Investments before
securities sold short-147.0%
(Cost $765,774,471) ......................... 787,494,564
------------
See Notes to Financial Statements.
8
<PAGE>
Left Col.
- --------------------------------------------------------------------------------
Principal
Amount Value
(000) Description (Note 1)
- --------------------------------------------------------------------------------
Security Sold Short-(14.0%)
$62,500 U.S. Treasury Bond
(proceeds $57,857,422) ......................... $(75,126,875)
------------
Total Investments net of
short sales-133.0%
(Cost $707,917,049) ............................ 712,367,689
Liabilities in excess of cash and
other assets-(33.0%) ........................... (176,626,621)
------------
NET ASSETS - 100% ................................. $535,741,068
============
Right Col.
- -------------
* Using the higher of Standard & Poor's or Moody's rating.
** Illiquid securities representing 2.1% of portfolio assets. See Note 3.
# Private placement restricted as to resale. See Note 3.
+ Partial principal amount pledged as collateral for reverse repurchase
agreements. See Note 4.
++ Entire principal amount pledged as collateral for reverse repurchase
agreements. See Note 4.
@ Amount pledged as collateral for Financial Futures.
(a) Security was purchased on a discount basis, the interest rate shown has been
adjusted to reflect a money market equivalent yield.
- --------------------------------------------------------------------------------
Key to Abbreviations
ARM -Adjustable Rate Mortgage
CMO -Collateralized Mortgage Obligation
CMT -Constant Maturity Treasury
I -Denotes a CMO with Interest Only Characteristics
I/O -Interest Only Class
P -Denotes a CMO with Principal Only Characteristics
P/O -Principal Only Class
REMIC -Real Estate Mortgage Investment Conduit
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
9
<PAGE>
Left Col.
- --------------------------------------------------------------------------------
The BlackRock Strategic Term Trust Inc.
Statement of Assets and Liabilities
December 31, 1995
- --------------------------------------------------------------------------------
Assets
Investments, at value
(cost $765,774,471) (Note 1) ................................. $787,494,564
Cash ........................................................... 5,410
Deposit with brokers as collateral for
investments sold short (Note 1) .............................. 75,156,250
Interest receivable ............................................ 5,279,522
Due from broker-variation margin ............................... 309,369
Receivable for investments sold ................................ 14,182
Deferred organization expenses and other
assets (Note 1) .............................................. 97
------------
868,259,394
------------
Liabilities
Reverse repurchase agreement (Note 4) .......................... 232,395,750
Investment sold short, at value
(proceeds $57,857,422) (Note 1) .............................. 75,126,875
Payable for investments purchased .............................. 22,377,464
Interest payable ............................................... 2,081,197
Advisory fee payable (Note 2) .................................. 163,116
Administration fee payable (Note 2) ............................ 83,219
Other accrued expenses and liabilities 290,705
------------
332,518,326
------------
Net Assets ..................................................... $535,741,068
============
Net assets were comprised of:
Common stock, at par (Note 5) ................................ $ 575,106
Paid-in capital in excess of par ............................. 535,942,670
------------
536,517,776
Undistributed net investment income .......................... 3,447,389
Accumulated net realized losses .............................. (10,106,837)
Net unrealized depreciation .................................. 5,882,740
------------
Net assets, December 31, 1995 ................................ $535,741,068
============
Net asset value per share:
.
($535,741,068 - 57,510,639 shares of
.
common stock issued and outstanding) ........................... $9.32
=====
Right Col.
- --------------------------------------------------------------------------------
The BlackRock Strategic Term Trust Inc.
Statement of Operations
Year Ended December 31, 1995
- --------------------------------------------------------------------------------
Net Investment Income
Income
Interest (including net accretion of discount
of $4,080,847 and net of interest expense
of $19,658,278) .............................................. $39,719,486
-----------
Expenses
Investment advisory ............................................ 2,202,830
Administration ................................................. 610,768
Reports to shareholders ........................................ 346,790
Custodian ...................................................... 285,417
Transfer agent ................................................. 131,759
Directors ...................................................... 77,862
Audit .......................................................... 69,662
Registration ................................................... 48,613
Legal .......................................................... 16,957
Miscellaneous .................................................. 131,705
-----------
Total expenses ........................................... 3,922,363
-----------
Net investment income ............................................ 35,797,123
-----------
Realized and Unrealized Gain (Loss) on
Investments (Note 3)
Net Realized gain (loss) on:
Investments .................................................... 6,251,082
Short Sales .................................................... (6,949,655)
Futures ........................................................ 1,512,893
-----------
814,320
-----------
Change in net unrealized depreciation on:
Investments .................................................... 77,095,103
Short Sales .................................................... (14,199,391)
Futures ........................................................ 1,458,684
-----------
64,354,396
-----------
Net gain on investments .......................................... 65,168,716
-----------
Net Increase in Net Assets Resulting
from Operations ................................................ $100,965,839
============
See Notes to Financial Statements.
10
<PAGE>
Left Col.
- --------------------------------------------------------------------------------
The BlackRock Strategic Term Trust Inc.
Statement of Cash Flows
December 31, 1995
- --------------------------------------------------------------------------------
Increase (Decrease) in Cash
Cash Flows used for operating activities:
Interest received (excluding net discount
amortization of $4,080,847) .............................. $ 54,342,544
Operating expenses paid .................................... (4,368,107)
Interest expenses paid ..................................... (19,454,210)
Proceeds from disposition of short-term
portfolio investments, net ............................... (564,789)
Variation margin on futures ................................ 2,709,389
Purchase of long term portfolio investments ................ (1,019,396,749)
Proceeds from disposition of long-term
portfolio investments .................................... 970,905,887
---------------
Net cash flows used for operating
activities ............................................... (15,826,035)
---------------
Cash flows provided by financing activities:
Net proceeds from issuance of reverse
repurchase agreements .................................... 47,724,037
Cash dividends paid ........................................ (32,349,734)
---------------
Net cash flows provided by financing
activities ................................................ 15,374,303
---------------
Net decrease in cash ......................................... (451,732)
Cash at beginning of period .................................. 457,142
---------------
Cash at end of period ........................................ $ 5,410
===============
Reconciliation of Net Increase in Net Assets
Resulting from Operations to Net Cash
Flows Used for Operating Activities
Net increase in net assets resulting
from operations .......................................... $100,965,839
---------------
Increase in investments ...................................... (47,277,002)
Net realized gain ............................................ (814,320)
Decrease in unrealized depreciation .......................... (64,354,396)
Decrease in receivable for investments sold .................. 13,403,247
Increase in receivable for variation margin .................. (262,185)
Increase in interest receivable .............................. (954,373)
Decrease in other assets ..................................... 124,391
Decrease in payable for investments purchased ................ (6,107,291)
Decrease in payable for dollar rolls ......................... (11,622,894)
Decrease in deposits with brokers
for short sales ............................................ 21,843,750
Decrease in payable for securities sold short ................ (20,529,125)
Increase in interest payable ................................. 204,068
Increase in accrued expenses and
other liabilities .......................................... (445,744)
---------------
Total adjustments ...................................... (116,791,874)
---------------
Net cash flows used for operating activities ................. $ (15,826,035)
===============
Right Col.
- --------------------------------------------------------------------------------
The BlackRock Strategic Term Trust Inc.
Statements of Changes
in Net Assets
- --------------------------------------------------------------------------------
For the Year For the Year
ended ended
December 31, December 31,
1995 1994
------------ ------------
Increase (Decrease) in
Net Assets
Operations:
Net investment income ....................... $ 35,797,123 $ 26,212,175
------------ ------------
Net realized gain on
investments, short sales
and futures ............................... 814,320 7,758,771
Net change in (net)
unrealized appreciation
(depreciation) on
investments, short sales
and futures ............................... 64,354,396 (69,246,889)
Net increase (decrease) in
net assets resulting from
operations ................................ 100,965,839 (35,275,943)
Dividends and distributions:
Dividends from net
investment income ......................... (32,349,734) (27,981,892)
Distribution in excess of net
investment income ......................... - (8,082,454)
Total increase
(decrease) ........................... 68,616,105 (71,340,289)
Net Assets
Beginning of year ............................. 467,124,963 538,465,252
End of year ................................... $535,741,068 $467,124,963
============ ============
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
The BlackRock Strategic Term Trust Inc.
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 28,
One Month 1990**
Year Ended December 31, Ended through
----------------------------------------- December 31, November 30,
1995 1994 1993 1992 1991 1991
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .................... $ 8.12 $ 9.36 $ 9.76 $10.13 $ 9.94 $ 9.40
------ ------ ------ ------ ------ ------
Net investment income (net interest expense of
$.34, $.19, $.12, $.17, $.02 and $.07, respectively). .62 .46 .82 .82 .09 .98
Net realized and unrealized gain (loss) on
investments ......................................... 1.14 (1.07) (.39) (.29) .26 .39
------ ------ ------ ------ ------ ------
Net increase (decrease) from investment operations ...... 1.76 (.61) .43 .53 .35 1.37
Dividends from net investment income .................. (.56) (.49) (.83) (.90) (.16) (.81)
Distribution in excess of net investment income ....... - (.14) - - - -
Capital charge with respect of issuance of shares ..... - - - - - (.02)
------ ------ ------ ------ ------ ------
Net asset value, end of period* ......................... $ 9.32 $ 8.12 $ 9.36 $ 9.76 $10.13 $ 9.94#
====== ====== ====== ====== ====== ======
Market value, end of period* ............................ $ 7.63 $ 7.13 $ 9.75 $ 9.88 $10.63 $10.38@
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN+: ............................... 14.68% (20.28%) 7.24% 1.29% 3.96% 19.30%
RATIOS TO AVERAGE NET ASSETS:
Operating Expenses*** ................................... .78% .98% .93% .89% 1.35%++ .92%++
Net Investment Income ................................... 7.13% 5.32% 8.40% 8.32% 11.06%++ 11.14%++
SUPPLEMENTAL DATA:
Average net assets (000) ................................ $501,869 $491,747 $560,543 $568,959 $575,792 $548,431
Portfolio turnover rate ................................. 135% 133% 94% 18% 0% 199%
Net assets, end of period (000) ......................... $535,741 $467,125 $538,465 $561,407 $582,514 $571,615
Reverse repurchase agreements outstanding,
end of period (000) ................................... $232,396 $184,672 $175,569 $249,768 $269,867 $273,788
Asset coverage+++........................................ $ 3,305 $ 3,529 $ 4,067 $ 3,248 $ 3,159 $ 3,088
<FN>
- -----------
* NAV and market value published in The Wall Street Journal each Monday.
** Commencement of investment operations.
*** The ratios of operating expenses, including excise tax, if applicable, to
average net assets, were 0.78%, 0.98%, 0.93%, 0.92%, 1.38% and 0.92% for the
periods indicated above, respectively.
# Net asset value immediately after the closing of the first public offering
was $9.38.
+ Total investment return is calculated assuming a purchase of common stock at
the current market value on the first day and a sale at the current market
value on the last day of each period reported. Dividends and distributions,
if any, are assumed for purposes of this calculation to be reinvested at
prices obtained under the Trust's dividend reinvestment plan. Total
investment return does not reflect brokerage commissions. Total investment
return for periods of less than one full year are not annualized.
++ Annualized.
+++ Per $1,000 of reverse repurchase agreements outstanding.
</FN>
</TABLE>
The information above represents the audited operating performance data for a
share of common stock outstanding, total investment return, ratios to average
net assets and other supplemental data for each of the 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 Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
The BlackRock Strategic Term Trust Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
Left Col.
Note 1. Accounting
Policies
The BlackRock Strategic 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 at least $10 per share to investors on or about
December 31, 2002, 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, municipal
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 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 market 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 Col.
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 agreement,
including accrued interest. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market on a
daily basis to ensure the adequacy of the collateral. If the seller defaults and
the value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of the collateral by the
Trust may be delayed or limited.
Option Selling/Purchasing: When the Trust sells or purchases an option, an
amount equal to the premium received or paid by the Trust is recorded as a
liability or an asset and is subsequently adjusted to the current market value
of the option written or purchased. Premiums received or paid from writing or
purchasing options which expire unexercised are treated by the Trust on the
expiration date as realized gains or losses. The difference between the premium
and the amount paid or received on effecting a closing purchase or sale
transaction, including brokerage commissions, is also treated as a realized gain
or loss. If an option is exercised, the premium paid or received is added to the
proceeds from the sale or cost of the purchase in determining whether the Trust
has realized a gain or a loss on investment transactions. The Trust, as a 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 or sell a financial instrument for a set price on a future date.
Initial margin deposits are made upon entering into futures contracts and can be
either cash or securities. During the period that the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Trust records a realized gain or loss
equal to the difference between the proceeds from (or cost of) the closing
transaction and the Trust's basis in the contract.
13
<PAGE>
Left Col.
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'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. 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.
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 year ended December 31, 1995.
Short Sales: The Trust may make short sales of securities as a method of hedging
potential price declines in similar
Right Col.
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 greater or less than the
proceeds originally received.
Securities Transactions and Investment Income: Security 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 meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
sufficient amounts of its taxable income to shareholders. Therefore, no federal
tax provision is required. As part of the tax planning strategy the Trust may
retain a portion of its taxable income and pay an excise tax on the
undistributed amount.
Dividends and Distributions: The Trust declares and pays dividends and
distributions monthly first from net investment income, then from 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.
Deferred Organization Expenses: A total of $67,520 was incurred in connection
with the organization of the Trust. These costs have been deferred and are being
amortized ratably over a period of sixty months from the date the Trust
commenced operations.
Note 2. Agreements
The Trust has an Investment Advisory Agreement with BlackRock Financial
Management, Inc., (the "Adviser") and an Administration Agreement with Dean
Witter InterCapital Inc. ("DWI").
The investment advisory fee paid to the Adviser is computed weekly and payable
monthly at an annual rate of 0.45% from January 1, 1995 through December 31,
1998 and 0.30% from January 1, 1999 to the termination or
14
<PAGE>
liquidation of the Trust. The administration fee paid to DWI is also computed
weekly and payable monthly at an annual rate of 0.125% from January 1, 1995
through December 31, 1998 and 0.10% from January 1, 1999 to the termination 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. DWI pays occupancy and certain clerical and
accounting costs of the Trust. The Trust bears all other costs and expenses.
On February 28, 1995, the Adviser was acquired by PNC Bank, N.A. Following the
acquisition, the Adviser has become a wholly-owned corporate subsidiary of PNC
Asset Management Group, Inc., the holding company for PNC's asset management
business.
Note 3. Portfolio
Securities
Purchases and sales of investment securities, other than short-term invest-
ments and dollar rolls, for the year ended December 31, 1995 aggregated
$995,541,845 and $960,582,906 respectively.
The Trust may invest up to 60% of its total assets in securities which are not
readily marketable, including those which are restricted as to disposition under
securities law ("restricted securities"). At December 31, 1995, the Trust held
2.1% of its portfolio assets in illiquid securities including 0.3% of its
portfolio assets in securities restricted as to resale.
The federal income tax basis of the Trust's investments at December 31, 1995
was substantially the same as the basis for financial reporting, and,
accordingly, net unrealized appreciation for federal income tax purposes was
$5,882,740 (gross unrealized appreciation-$51,819,433; gross unrealized
depreciation-$45,936,693).
For federal income tax purposes the Trust has a capital loss carryforward of
$8,674,737 which expires in 2002.
During the year ended December 31, 1995, the Trust entered into financial
futures contracts. Details of open contracts at December 31, 1995 are as
follows:
Right Col.
Value at Value at
Number of Expiration Trade Dec. 31, 1995 Unrealized
Contracts Type Date Date 1995 Appreciation
- --------- ---- ---------- --------- ------------- ------------
Long
positions:
30 Yr. March
900 T-Bond 1996 $107,889,775 $109,321,875 $1,432,100
----------
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 the
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 transaction, including accrued interest.
The average monthly balance of reverse repurchase agreements outstanding
during the year ended December 31, 1995 was $223,629,254 at a weighted average
interest rate of approximately 5.72%. The maximum amount of repurchase
agreements outstanding at any month-end during the year was $240,625,000 as of
December 31, 1995 which was 24.55% of total assets. The amount of reverse
repurchase agreements outstanding at December 31, 1995 was $232,395,750, which
was 25.76% 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 the lower repurchase price
at the future date.
The average monthly balance of dollar rolls outstanding during the year ended
December 31, 1995 was approximately $15,590,049. The maximum amount of dollar
rolls outstanding at any month end during the period was $20,362,400 as of
December 31, 1995 which was 2.26% of total assets.
Note 5. Capital
There are 200
million shares of $.01 par value common stock authorized. Of the 57,510,639
shares outstanding at December 31, 1995 the adviser owned 10,639 shares.
15
<PAGE>
Note 6.
Dividends
and Distributions
Subsequent to December 31, 1995, the Board of Directors of the Trust declared
dividends from undistributed earnings of $.04167 per share payable January 31,
1996 and February 29, 1996 to shareholders of record on January 16, 1996 and
February 15, 1996, respectively.
Note 7. Quarterly Data
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized
gains (losses) Net increase
on investments, (decrease)
short sales, in net assets Dividends Period
Net investment futures and resulting from and and
income options operations distributions net
Quarterly Total Per Per Per Per Share price asset
period Income Amount share Amount share Amount share Amount share High Low value
- ------ ---------- ---------- ----- ------------ ----- ---------- ----- ---------- ----- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 1, 1994
to March 31,
1994 .......... $ 7,559,790 $ 6,303,137 $ .11 $(36,882,912) $(.64) $(30,579,775) $(.53) $ 7,308,452 $.13 $93/4 $8 $8.68
April 1, 1994
to June 30,
1994 .......... 8,055,506 6,819,246 .12 (11,925,912) (.21) (5,106,666) (.09) 10,063,787 .17 85/8 73/4 8.44
July 1, 1994
to September 30,
1994 .......... 14,945,849 6,719,851 .12 (4,901,424) (.08) 1,818,427 .04 9,705,495 .17 81/8 71/8 8.30
October 1, 1994
to December 31,
1994 .......... 491,880 6,369,941 .11 (7,777,870) (.14) (1,407,929) (.03) 8,986,612 .16 73/8 65/8 8.12
January 1, 1995
to March 31,
1995 .......... 11,217,003 0,207,637 .18 25,752,043 .45 35,959,680 .63 8,985,462 .15 75/8 71/8 8.46
April 1, 1995
to June 30,
1995 .......... 9,182,551 8,009,072 .14 18,586,436 .33 26,595,508 .47 8,985,462 .15 81/8 79/16 8.90
July 1, 1995
to September 30,
1995 .......... 9,683,299 8,804,290 .15 (442,396) (.01) 8,361,894 .14 7,189,405 .13 73/4 71/4 8.92
October 1, 1995
to December 31,
1994 .......... 9,636,633 8,776,124 .15 21,272,633 .37 30,048,757 .52 7,189,405 .13 77/8 71/2 9.32
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK STRATEGIC TERM TRUST INC.
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
The BlackRock Strategic Term Trust Inc.:
We have audited the accompanying statement of assets and liabilities of The
BlackRock Strategic Term Trust Inc. including the portfolio of investments, as
of December 31, 1995, and the related statements of operations and of cash flows
for the year then ended, the statement of changes in net assets for the two
years in the period then ended, and the financial highlights for each of the
four years in the period then ended, the one month ended December 31, 1991 and
for the period December 28, 1990 (commencement of investment operations) to
November 30, 1991. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at December 31, 1995, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The BlackRock
Strategic Term Trust Inc. as of December 31, 1995, and the results of its
operations, its cash flow, the changes in its net assets and the financial
highlights for the respective stated periods, in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
New York, New York
February 9, 1996
17
<PAGE>
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THE BLACKROCK STRATEGIC TERM TRUST INC.
TAX INFORMATION
- --------------------------------------------------------------------------------
We wish to advise you as to the Federal Tax status of dividends and
distributions paid by the Trust during its fiscal year ended December 31, 1995.
During its fiscal year ended December 31, 1995, the Trust paid aggregate
dividends and distributions totalling $0.5625 per share from net investment
income. For federal income tax purposes, the aggregate of any dividends and
short-term capital gains distributions you received are reportable in your 1995
federal income tax return as ordinary income. Further, we wish to advise you
that your income dividends do not qualify for the dividends received deduction.
For the purposes of preparing your 1995 federal income tax return, however,
you should report the amounts as reflected on the appropriate Form 1099 DIV
which will be mailed to you in January 1995.
- --------------------------------------------------------------------------------
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 Dean Witter Trust Company (the "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, for the participants' accounts. The Trust will not issue shares
under the Plan.
Participants in the Plan may withdraw from the Plan upon written notice to the
Plan Agent and will receive certificates for whole Trust shares and a cash
payment will be made for any fraction of a Trust share.
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust.
However, each participant will pay a pro rata share of brokerage commissions
incurred with respect to the Plan Agent's open market purchases in connection
with the reinvestment of dividends and distributions. The automatic reinvestment
of dividends and distributions will not relieve participants of any federal
income tax 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) 576-3143 or BlackRock Financial Management
at (800) 227-7BFM. The addresses are 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.
18
<PAGE>
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THE BLACKROCK STRATEGIC 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 at least $10 per share (the initial
public offering price per share) to investors on or shortly before December 31,
2002 while providing high monthly income.
Who Manages the Trust?
BlackRock Financial Management, Inc. (BlackRock or the Adviser) is the
investment adviser for the Trust. BlackRock is a registered investment adviser
specializing in fixed income securities. Currently, BlackRock manages
approximately $34 billion of assets across the government, mortgage, corporate
and municipal sectors. These assets are managed on behalf of institutional and
individual investors in 21 closed-end funds traded either on the New York Stock
Exchange or the American Stock Exchange, several open-end funds and separate
accounts for more than 80 clients in the U.S. and overseas. BlackRock is a
subsidiary of PNC Asset Management Group, Inc. which is a division of PNC Bank,
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 2002. 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
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
in the yield curve (i.e. if the Trust has three years left until its maturity,
the Adviser will attempt to maintain a yield at a spread over a 3-year
Treasury). It is important to note that the Trust will be managed so as to
preserve the integrity of the return of the initial offering price.
19
<PAGE>
How Are the Trust's Shares Purchased and Sold? Does the Trust Pay Dividends
Regularly?
The Trust's shares are traded on the New York Stock Exchange which provides
investors with liquidity on a daily basis. Orders to buy or sell shares of the
Trust must be placed through a registered broker or financial 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, Dean Witter
Trust Company. Investors who wish to hold shares in a brokerage account should
check with their financial advisor to determine whether their brokerage firm
offers dividend reinvestment services.
Leverage Considerations in a Term Trust
Under current market conditions, leverage increases the income earned by the
Trust. The Trust employs leverage primarily through the use of reverse
repurchase agreements and dollar rolls. Leverage permits the Trust to borrow
money at short-term rates and reinvest that money in longer-term assets which
typically offer higher interest rates. The difference between the cost of the
borrowed funds and the income earned on the proceeds that are invested in longer
term assets is the benefit to the Trust from leverage. In general, the portfolio
is typically leveraged at approximately 33-1/3% of total assets.
Leverage also increases the duration (or price volatility of the net assets) of
the Trust, which can improve the performance of the fund in a declining rate
environment, but can cause net assets to decline faster than the market in a
rising rate environment. BlackRock's portfolio managers continuously monitor and
regularly review the Trust's use of leverage and the Trust may reduce, or
unwind, the amount of leverage employed should BlackRock consider that reduction
to be in the best interests of the shareholders.
Special Considerations and Risk Factors Relevant to Term Trusts
The Trust is intended to be a long-term investment and is not a short-term
trading vehicle.
Return of Initial Investment. Although the objective of the Trust is to return
its initial offering price upon termination, there can be no assurance that this
objective will be achieved.
Dividend Considerations. The income and dividends paid by the Trust are likely
to decline to some extent over the term of the Trust due to the anticipated
shortening of the dollar-weighted average maturity of the Trust's assets.
Leverage. The Trust utilizes leverage through reverse repurchase agreements and
dollar rolls, which involves special risks. The Trust's net asset value and
market value may be more volatile due to its use of leverage.
Market Price of Shares. The shares of closed-end investment companies such as
the Trust trade on the New York Stock Exchange and as such are subject to supply
and demand influences. As a result, shares may trade at a discount or a premium
to their net asset value.
Mortgage-Backed and Asset-Backed Securities. The cash flow and yield
characteristics of these securities differ from traditional debt securities. The
major differences typically include more frequent payments and the possibility
of prepayments which will change the yield to maturity of the security.
Corporate Debt Securities. The value of corporate debt securities generally
varies inversely with changes in prevailing market interest rates. The Trust may
be subject to certain reinvestment risks in environments of declining interest
rates.
Zero Coupon Securities. Such securities receive no cash flows prior to maturity,
therefore interim price movements on these securities are generally more
sensitive to interest rate movements than securities that make periodic coupon
payments. These securities appreciate in value over time and can play an
important role in helping the Trust achieve its primary objective.
Illiquid Securities. The Trust may invest in securities that are illiquid,
although under current market conditions the Trust expects to do so to only a
limited extent. These securities involve special risks.
Non-U.S Securities. The Trust may invest less than 10% of its assets in non-U.S.
dollar-denominated securities which involve special risks such as currency,
political and economic risks, although under current market conditions does not
do so.
Antitakeover Provisions. Certain antitakeover provisions will make a change in
the Trust's business or management more difficult without the approval of the
Trust's Board of Directors and may have the effect of depriving shareholders of
an opportunity to sell their shares at a premium above the prevailing market
price.
20
<PAGE>
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THE BLACKROCK STRATEGIC TERM TRUST INC.
GLOSSARY
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Adjustable Rate Mortgage-
Backed Securities (ARMs): Mortgage instruments with interest rates that adjust at periodic intervals at a fixed amount
over the market levels of interest rates as reflected in specified indexes. ARMS are backed by
mortgage loans secured by real property.
Asset-Backed Securities: Securities backed by various types of receivables such as automobile and credit card receivables.
Closed-End Fund: Investment vehicle which initially offers a fixed number of shares and trades on a stock exchange.
The fund invests in a portfolio of securities in accordance with its stated investment objectives
and policies.
Collateralized Mortgage
Obligations (CMOs): Mortgage-backed securities which separate mortgage pools into short-, medium-, and long-term
securities with different priorities for receipt of principal and interest. Each class is paid a
fixed or floating rate of interest at regular intervals. Also known as multiple-class mortgage
pass-throughs.
Discount: When a fund's net asset value is greater than its stock price the fund is said to be trading at a
discount.
Dividend: This is income generated by securities in a portfolio and distributed to shareholders after the
deduction of expenses. This Trust declares and pays dividends on a monthly basis.
Dividend Reinvestment: Shareholders may elect to have all dividends and distributions of capital gains automatically
reinvested into additional shares of the Trust.
FHA: Federal Housing Administration, a government agency that facilitates a secondary mortgage market by
providing an agency that guarantees timely payment of interest and principal on mortgages.
FHLMC: Federal Home Loan Mortgage Corporation, a publicly owned, federally chartered corporation that
facilitates a secondary mortgage market by purchasing mortgages from lenders such as savings
institutions and reselling them to investors by means of mortgage-backed securities. Obligations of
FHLMC are not guaranteed by the U.S. government, however; they are backed by FHLMC's authority to
borrow from the U.S. government. Also known as Freddie Mac.
FNMA: Federal National Mortgage Association, a publicly owned, federally chartered corporation that
facilitates a secondary mortgage market by purchasing mortgages from lenders such as savings
institutions and reselling them to investors by means of mortgage-backed securities. Obligations of
FNMA are not guaranteed by the U.S. government, however; they are backed by FNMA's authority to
borrow from the U.S. government. Also known as Fannie Mae.
GNMA: Government National Mortgage Association, a U.S. government agency that facilitates a secondary
mortgage market by providing an agency that guarantees timely payments of interest and principal on
mortgages. GNMA's obligations are supported by the full faith and credit of the U.S. Treasury. Also
known as Ginnie Mae.
Government Securities: Securities issued or guaranteed by the U.S. government, or one of its agencies or instrumentalities,
such as GNMA (Government National Mortgage Association), FNMA (Federal National Mortgage
Association) and FHLMC (Federal Home Loan Mortgage Corporation).
</TABLE>
21
<PAGE>
<TABLE>
<S> <C>
Interest-Only Securities (I/O): Mortgage securities that receive only the interest cash flows from an underlying pool of mortgage
loans or underlying pass-through securities. Also known as a strip.
Market Price: Price per share of a security trading in the secondary market. For a closed-end fund, this is the
price at which one share of the fund trades on the stock exchange. If you were to buy or sell
shares, you would pay or receive the market price.
Mortgage Dollar Rolls: A mortgage dollar roll is a transaction in which the Trust sells mortgage-backed securities for
delivery in the current month and simultaneously contracts to repurchase substantially similar
(although not the same) securities on a specified future date. During the "roll" period, the Trust
does not receive principal and interest payments on the securities, but is compensated for giving up
these payments by the difference in the current sales price (for which the security is sold) and
lower price that the Trust pays for the similar security at the end date as well as the interest
earned on the cash proceeds of the initial sale.
Mortgage Pass-Throughs: Mortgage-backed securities issued by Fannie Mae, Freddie Mac or Ginnie Mae.
Multiple-Class Pass-Throughs: Collateralized Mortgage Obligations.
Net Asset Value (NAV): Net asset value is the total market value of all securities and other assets held by the Trust,
plus income accrued on its investments, minus any liabilities including accrued expenses, divided by
the total number of outstanding shares. It is the underlying value of a single share on a given day.
Net asset value for the Trust is calculated weekly and published in Barron's on Saturday and The New
York Times or The Wall Street Journal each Monday.
Principal-Only Securities(P/O): Mortgage securities that receive only the principal cash flows from an underlying pool of mortgage
loans or underlying pass-through securities. Also known as a strip.
Project Loans: Mortgages for multi-family, low- to middle-income housing.
Premium: When a fund's stock price is greater than its net asset value, the fund is said to be trading at a
premium.
REMIC: A real estate mortgage investment conduit is a multiple-class security backed by mortgage-backed
securities or whole mortgage loans and formed as a trust, corporation, partnership, or segregated
pool of assets that elects to be treated as a REMIC for federal tax purposes. Generally, Fannie Mae
REMICs are formed as trusts and are backed by mortgage-backed securities.
Residuals: Securities issued in connection with collateralized mortgage obligations that generally represent
the excess cash flow from the mortgage assets underlying the CMO after payment of principal and
interest on the other CMO securities and related administrative expenses.
Reverse Repurchase
Agreements: In a reverse repurchase agreement, the Trust sells securities and agrees to repurchase them at a
mutually agreed date and price. During this time, the Trust continues to receive the principal and
interest payments from that security. At the end of the term, the Trust receives the same securities
that were sold for the same initial dollar amount plus interest on the cash proceeds of the initial
sale.
Stripped Mortgage-Backed
Securities: Arrangements in which a pool of assets is separated into two classes that receive different
proportions of the interest and principal distributions from underlying mortgage-backed securities.
IO's and PO's are examples of strips.
</TABLE>
22
<PAGE>
- --------------------------------------------------------------------------------
BlackRock Financial Management, Inc.
Summary of Closed-End Funds
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Taxable Trusts
- --------------------------------------------------------------------------------------------------------
Termination
Perpetual Trusts 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
Tax-Exempt Trusts
</TABLE>
<TABLE>
<CAPTION>
Tax-Exempt Trusts
- --------------------------------------------------------------------------------------------------------
Termination
Perpetual Trusts 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.
23
<PAGE>
- --------------------------------------------------------------------------------
BlackRock Financial Management, Inc.
An Overview
- --------------------------------------------------------------------------------
BlackRock Financial Management Inc. (BlackRock) is a registered investment
adviser which specializes in managing high quality fixed income securities, both
taxable and tax exempt. BlackRock currently manages approximately $34 billion of
assets across the government, mortgage, corporate and municipal sectors. These
assets are managed on behalf of institutional and individual investors in 21
closed-end funds traded on either the New York Stock Exchange or American Stock
Exchange, several open-end funds and over 80 institutional clients in the United
States and overseas. BlackRock's institutional investor base includes Chrysler
Corporation Master Retirement Trust, General Retirement System of the City of
Detroit, State Treasurer of Florida, Ford Motor Company Pension Plan, General
Electric Pension Trust and Unisys Corporation Master Trust.
BlackRock was formed in April 1988 by fixed income professionals who sought
to create an asset management firm specializing in managing fixed income
securities for individuals and institutional investors. The professionals at
BlackRock have extensive experience creating, analyzing and trading a variety of
fixed income instruments, including the most complex structured securities. In
fact, individuals at BlackRock are responsible for many of the major innovations
in the mortgage-backed and asset-backed securities market, including the
creation of the CMO, the floating rate CMO, the senior/subordinated pass-through
and the multi-class asset-backed security.
BlackRock is unique among asset management and advisory firms in the
significant emphasis it places on the development of propriety analytical
capabilities. A quarter of the professionals at BlackRock work full-time in the
design, maintenance and use of such systems which are otherwise not generally
available to investors. BlackRock's propriety analytical tools are used for
evaluating, investing in and designing investment strategies and portfolio of
fixed income securities, including mortgage securities, corporate debt
securities or tax-exempt securities and a variety of hedging instruments.
BlackRock has developed investment products which respond to investors'
needs and has been responsible for several major innovations in closed-end
funds. BlackRock introduced the first closed-end mortgage fund, the first
taxable and tax-exempt closed-end funds to offer a finite term, the first
closed-end fund to achieve a AAA Rating by S&P and the first closed fund to
invest primarily in North American Government securities. BlackRock's closed-end
funds currently have dividend reinvestment plans which are designed to provide
an ongoing source of demand for the stock in the secondary market. BlackRock
manages a ladder of alternative investment vehicles, with each fund having
specific investment objectives and policies.
In view of our continued desire to provide a high level of service to all of
our shareholders, BlackRock maintains a toll-free number for your questions. The
number is (800) 227-7BFM (7236). We encourage you to call us with any questions
you may have about your BlackRock funds and thank you for the continued trust
you place in our abilities.
24
<PAGE>
Left Col.
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
Keith T. Anderson, Vice President
Michael C. Huebsch, Vice President
Scott Amero, 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
Dean Witter InterCapital Inc.
Two World Trade Center
New York, NY 10048
(800) 729-8855
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
(800) 699-1BFM
Transfer Agent
Dean Witter Trust Company
Harborside Financial Center-Plaza Two
Jersey City, New Jersey 07311-3977
(800) 526-3143
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
This report is for shareholder information.
This is not a prospectus intended for use in the
purchase or sale of any securities.
The BlackRock Strategic Term Trust Inc.
c/o Dean Witter InterCapital, Inc.
71st Floor
Two World Trade Center
New York, NY 10048
Call toll free (800) 227-7BFM
09247P-10-8
Right Col.
The BlackRock
Strategic
Term Trust Inc.
- -----------------------------
Annual Report
December 31, 1995
