- --------------------------------------------------------------------------------
THE BLACKROCK INVESTMENT QUALITY TERM TRUST INC.
ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISER
- --------------------------------------------------------------------------------
January 31, 1996
Dear Shareholder,
Since the inception of The BlackRock Investment Quality Term Trust Inc. in
1992, 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 Investment
Quality Term Trust Inc. (NYSE symbol: "BQT") 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, 2004, 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 pass-through 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:
<TABLE>
<CAPTION>
-----------------------------------------------------------
12/31/95 12/31/94 Change High Low
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
Stock Price $7.875 $7.00 12.50% $8.25 $7.00
- --------------------------------------------------------------------------------------
Net Asset Value (NAV) $9.50 $8.21 15.71% $9.50 $8.19
- --------------------------------------------------------------------------------------
Premium/(Discount) to NAV (17.11%) (14.74%) (2.37%) (15.08%) (18.66%)
- --------------------------------------------------------------------------------------
</TABLE>
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.
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.
2
<PAGE>
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.
Over the fiscal year, the Trust has slightly decreased its exposure to the
corporate debt sector from 43% to 37% and increased its allocation to mortgage
pass-through securities. The Trust may 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. BlackRock Financial
Management remains confident in the Trust's ability to return $10 per share to
shareholders at its slated termination date in 2004.
- --------------------------------------------------------------------------------
The BlackRock Investment Quality Term Trust Inc.
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Composition December 31, 1995 December 31, 1994
- --------------------------------------------------------------------------------
Corporate Bonds 37% 43%
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Mortgage Pass-Throughs 25% 15%
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FHA Project Loans 10% 11%
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Agency Multiple Class Mortgage Pass-Throughs 9% 6%
- --------------------------------------------------------------------------------
Asset-Backed Securities 7% 2%
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Commercial Mortgage Backed Securities 6% 4%
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Municipal Bonds 3% 1%
- --------------------------------------------------------------------------------
Taxable Zero-Coupon Bonds 2% 2%
- --------------------------------------------------------------------------------
Strip Mortgage Backed Securities 1% 0%
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U.S. Government Securities 0% 16%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Rating % of Corporates
--------------------------------------------------
Credit Rating December 31, 1995 December 31, 1994
- --------------------------------------------------------------------------------
AA or equivalent 15% 11%
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A or equivalent 50% 47%
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BBB or equivalent 34% 42%
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BB or equivalent 1% 0%
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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 Investment Quality 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 Investment Quality Term Trust Inc.
- --------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BQT
- --------------------------------------------------------------------------------
Initial Offering Date: April 21, 1992
- --------------------------------------------------------------------------------
Closing Stock Price as of 12/31/95: $7.875
- --------------------------------------------------------------------------------
Net Asset Value as of 12/31/95: $9.50
- --------------------------------------------------------------------------------
Yield on Closing Stock Price as of 12/31/95 ($7.875)1: 7.62%
- --------------------------------------------------------------------------------
Current Monthly Distribution per Share2: $0.05000
- --------------------------------------------------------------------------------
Current Annualized Distribution per Share2: $0.60000
- --------------------------------------------------------------------------------
1Yield on Closing Stock Price is calculated by dividing the current annualized
distribution per share by the closing stock price per share.
2The dividend is not constant and is subject to change.
4
<PAGE>
Left Col.
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The BlackRock Investment Quality Term Trust Inc.
Portfolio of Investments
December 31, 1995
- --------------------------------------------------------------------------------
Principal
Rating* Amount Value
(Unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
LONG-TERM INVESTMENTS-146.4%
Mortgage Pass-Throughs-50.8%
Federal Home Loan Mortgage
Corporation,
$21,496+ 6.50%, 8/01/25 - 11/01/25 ........... $ 21,260,699
Federal Housing Administration,
2,568 Alliance, 7.35%, 4/01/19 ............ 2,626,077
2,178 Colonial, Series 37,
7.40%, 12/01/22 ..................... 2,279,776
1,559 Elkton Care Center,
7.30%, 6/01/35 ...................... 1,559,983
10,190 GMAC,Series 51,
7.43%, 2/01/21 ...................... 10,588,173
1,261 Middlesex, 8.625%, 9/01/34 .......... 1,307,587
1,690 Overlook Green South,
7.50%, 9/01/34 ...................... 1,702,826
1,921 Providence Apartments,
7.25%, 12/01/34 ..................... 1,918,584
2,122 Rosewood, 7.875%, 12/01/34 .......... 2,159,066
1,525 Senaca Hills, 8.525%, 8/01/34 ....... 1,578,149
1,437 St. Camillus Nursing,
7.875%, 9/01/33 ..................... 1,451,837
2,890 Tuttle Grove, 7.25%, 10/01/35 ....... 2,857,596
1,789 USGI, Series 99,
7.43%, 10/01/23 ..................... 1,879,137
8,398 USGl, Series 885,
7.43%, 3/01/22 ...................... 8,809,640
9,401 USGI, Series 2081,
7.43%, 5/01/23 ...................... 9,858,993
1,419 Whitehall, 8.25%, 5/25/35 ........... 1,454,822
Federal National Mortgage Association,
9,811++ Multi-family, 6.35%, 10 Year,
1/01/04 ............................. 9,998,797
2,862++ Multi-family, 8.26%, 10 Year,
2/01/04 ............................. 3,142,176
2,374++ Multi-family, 8.78%, 10 Year,
4/01/04 ............................. 2,564,704
1,587+ Multi-family, 8.89%, 10 Year,
4/01/04 ............................. 1,780,493
51,000 7.00%, 7 Year, 1/01/99 .............. 51,924,120
Government National Mortgage
Association,
4,636++ 6.50%, 4/20/25, 1 Year
CMT (ARM) ........................... 4,708,474
17,213++ 6.50%, 5/20/25, 1 Year
CMT (ARM) ........................... 17,600,105
5,433 7.00%, 4/15/23 - 4/15/24 ............ 5,498,015
7,000 7.00%, 30 Year, 1/15/99 ............. 7,083,090
------------
177,592,919
------------
Right Col.
- --------------------------------------------------------------------------------
Principal
Rating* Amount Value
(Unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
Multiple Class Mortgage
Pass-Throughs-14.1%
Federal Home Loan Mortgage
Corporation, Multiclass
Mortgage Participation
Certificates,
$ 5,000++ Series 1295, Class
1295-JB, 3/15/07 .................... $ 4,577,700
97 Series 1430, Class
1430-KA, 12/15/21, (I) .............. 3,104,000
1,732++ Series 1433, Class
1433-S, 11/15/22 .................... 1,175,766
79 Series 1459, Class
1459-JA, 8/15/20, (I) ............... 2,231,750
11,030++ Series 1751, Class
1751-PL, 10/15/23, (I) .............. 1,757,884
Federal National Mortgage
Association, REMIC Pass-
Through Certificates,
4,398++ Trust 269, Class 1, 8/01/22 ......... 4,645,373
6,348++ Trust 1990-33, Class 33-B,
10/25/16, (P) ...................... 4,507,201
106++ Trust 1990-108, Class 108-H,
9/25/20, (I) ........................ 1,994,087
85 Trust 1991-30, Class 30-M,
4/25/21, (I) ....................... 2,055,221
3,883+ Trust 1992-192 Class 192-SB,
11/25/07 ........................... 3,545,220
3,731+ Trust 1993-212, Class 212-SB,
11/25/08 ........................... 3,125,034
3,500+ Trust 1994-M1, Class B, 10/25/03 .... 3,572,188
950 Trust 1994-10 Class 94-010E,
1/25/24 ............................. 788,123
4,634 Trust 1994-22, Class 22-SA, 1/25/24.. 3,707,175
6,328+ Trust 1994-33, Class 33-SA,
2/25/08 ............................. 5,062,548
4,015 Trust 1994-42, Series 42-SO,
3/25/23 ............................. 550,205
3,000 Small Business Administration,
Participation Certificate, Series
1995-10, Class 10-C, 7.35%,
8/01/05 ............................. 3,184,687
------------
49,584,162
------------
Commercial Mortgage-Backed
Securities-9.4%
AAA 2,000 AETNA, Series 1995-C5 Class B,
6.74%, 1/25/26 ...................... 2,003,750
A 2,700 American Southwest Financial
Securities Corp., Series 1994-
C2, Class A4, 8.00%, 8/25/10 ........ 2,762,289
A 5,000 CS First Boston Corp., Series
1995-AEW I Class C, 7.458%,
11/25/27 ............................ 5,100,000
AA 4,000 Debartolo Capital Partnership,
Class B1, 7.61%, 5/01/04 ............ 4,261,740
See Notes to Financial Statements.
5
<PAGE>
Left Col.
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Principal
Rating* Amount Value
(Unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
Baa2 $ 4,000 DLJ Mortgage Acceptance Corp.,
Series 1992-MF3, Class B,
10.25%, 6/18/07 ..................... $ 4,262,552
BBB+ 6,485 FDIC REMIC Trust, Series 1994-C1,
Class 2-F, 8.70%, 9/25/25 ........... 6,874,513
BBB 2,000 FSA Finance, Inc., Series 1, Class C,
8.31%, 6/01/02 ...................... 2,095,220
A 2,000 LTC Commercial Mortgage Pass
Through Certificates, Series
1994-1, Class 1-D, 10.00%,
6/15/26, ............................ 2,288,361
BBB 2,600 Nomura Asset Capital Corp.,
Series 1993-M1, Class A3,
7.64%, 11/25/03 ..................... 2,624,405
BBB 500 PaineWebber Mortgage
Acceptance Corp., Series 1995-
M2, Class D, 7.20%, 12/01/03 ........ 503,708
------------
32,776,538
------------
Strip Mortgage-Backed
Securities-0.5%
6,880 Federal National Mortgage
Association,
Trust 63, Class 2, 6/01/18 (I/O) .... 1,758,587
------------
Corporate Bonds-54.7%
Finance & Banking-29.4%
A3 2,450 AmSouth Bancorp,
6.75%, 11/01/25 ..................... 2,586,710
Baa1 2,000 Bank of Boston Corp.,
6.625%, 2/01/04 ..................... 2,031,120
A2 2,000 Bank of Hawaii,
6.875%, 6/01/03 ..................... 2,064,180
A- 8,000 Bank of New York Co., Inc.
6.625%, 6/15/03 ..................... 8,221,760
A 3,000 BankAmerica Corp.,
7.875%, 12/01/02 .................... 3,296,463
A 2,000 Bear Stearns Cos., Inc.,
8.75%, 3/15/04 ...................... 2,285,660
A2 5,000 Chase Manhattan Corp.,
7.50%, 2/01/03 ...................... 5,370,200
Dean Witter Discover & Co.,
A 750 5.00%, 4/01/96 ...................... 749,092
A 2,000 6.875%, 3/01/03 ..................... 2,083,600
A2 3,000 Den Danske Bank,
7.25%, 6/15/05 ...................... 3,138,281
A 1,300 Equitable Life of America,
6.95%, 12/01/05 ..................... 1,319,706
AA- 5,000 Farmers Insurance,
8.50%, 8/01/04 ...................... 5,255,350
A- 5,000 First Bank System, Inc.,
8.00%, 7/02/04 ...................... 5,550,789
A 3,000 First Chicago Corp.,
6.875%, 6/15/03 ..................... 3,123,780
A+ 2,000 First Colony Corp.,
6.625%, 8/01/03 ..................... 2,029,600
A3 2,000 First Fidelity Bancorp,
6.80%, 6/15/03 ...................... 2,052,120
A3 5,000 First Interstate Bancorp,
9.125%, 2/01/04 ..................... 5,881,400
A- 2,000 First Union Corp.,
7.25%, 2/15/03 ...................... 2,115,080
Right Col.
- --------------------------------------------------------------------------------
Principal
Rating* Amount Value
(Unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
BBB $ 1,000 First USA Bank,
4.85%, 1/10/96 ...................... $ 1,000,000
A+ 2,070 Goldman Sachs Group,
7.875%, 1/15/03 ..................... 2,243,921
A2 2,000 Heller Financial, Inc.,
7.75%, 5/15/97 ...................... 2,055,260
AA 2,500 John Hancock Mutual Life
Insurance Co., 7.375%, 2/15/24 ...... 2,499,387
Metropolitan Life Insurance Co.,
AA 1,000 6.30%, 11/01/03 ..................... 986,734
AA- 2,300 7.00%, 11/01/05 ..................... 2,361,364
A- 2,000 NationsBank,
8.57%, 11/15/24 ..................... 2,430,680
AA- 1,000 Nationwide Mutual Life,
7.50%, 2/15/24 ...................... 950,000
Baa3 3,100 New American Capital, Inc.,
7.31%, Series C, 4/12/00 ............ 3,100,000
AA 1,300 New York Life Insurance Corp.,
7.50%, 12/15/23 ..................... 1,332,565
A+ 2,000 Norwest Corp.,
6.625%, 3/15/03 ..................... 2,051,500
A- 3,800 Old Kent Financial Corp.,
6.625%, 11/15/05 .................... 3,856,821
PaineWebber Group, Inc.,
BBB 500 6.90%, 2/09/05 ...................... 495,165
BBB+ 2,000 8.875%, 3/15/05 ..................... 2,276,400
BBB+ 3,100 Reliaster Financial Corp.,
6.625%, 9/15/03 ..................... 3,069,813
Baa1 2,000 Salomon Inc.,
6.75%, 1/15/06 ...................... 1,938,129
A- 2,000 Smith Barney Holdings, Inc.,
5.375%, 6/01/96 ..................... 1,996,360
BBB+ 2,000 Southtrust Corp.,
7.00%, 5/15/03 ...................... 2,031,380
A+ 2,000 Travelers, Inc.,
6.125%, 6/15/00 ..................... 2,007,040
BBB- 1,000 Union Planters Corp.,
6.25%, 11/01/03 ..................... 994,740
A+ 2,000 US Life Corp.,
6.375%, 6/15/00 ..................... 2,033,740
A+ 2,000 US West Capital Funding, Inc.,
6.75%, 10/01/05 ..................... 2,054,799
------------
102,920,689
------------
Corporate Bonds-
Industrials-12.6%
A3 400 American Airlines, Inc.,
10.44%, 3/04/07 ..................... 500,750
BBB- 3,000 Centex Corp.,
7.375%, 6/01/05 ..................... 3,081,630
AA- 2,000 Coca Cola Enterprises, Inc.,
7.875%, 2/01/02 ..................... 2,193,160
Baa2 2,000 Conagra, Inc.,
7.40%, 9/15/04 ...................... 2,126,621
A3 1,525 Eastman Chemical Co.,
7.25%, 1/15/24 ...................... 1,606,862
A+ 5,500 Ford Motor Credit Co.,
6.625%, 6/30/03 ..................... 5,631,560
BBB+ 5,000 Lukens, Inc.,
7.625%, 8/01/04 ..................... 5,390,700
BBB- 2,000 Lyondell Petrochemical Co.,
9.125%, 3/15/02 ..................... 2,280,557
BBB+ 5,000 Newmont Mining Corp.,
8.00%, 12/01/04 ..................... 5,574,200
See Notes to Financial Statements.
6
<PAGE>
Left Col.
- --------------------------------------------------------------------------------
Principal
Rating* Amount Value
(Unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
BBB $ 3,000 News America Holdings, Inc.,
8.50%, 2/15/05 ...................... $ 3,377,850
BBB 2,000 Pep Boys-Manny, Moe & Jack,
6.625%, 5/15/03 ..................... 2,021 ,617
A 5,020 Philip Morris Cos., Inc.,
8.25%, 10/15/03 ..................... 5,596,296
BBB- 2,000 Ralcorp Holdings, Inc.,
8.75%, 9/15/04 ...................... 2,254,682
BBB- 2,300 Telecommunications, Inc.,
8.25%, 1/15/03 ...................... 2,487,445
------------
44,123,930
------------
Corporate Bonds-
Sovereign & Provincial-5.7%
A- 2,000 Canadian Pacific Ltd.,
6.875%, 4/15/03 ..................... 2,059,703
AA- 3,250 Korea Electric Power Corp.,
6.375%, 12/01/03 .................... 3,257,389
AA- 2,000 Ontario Province,
7.75%, 6/04/02 ...................... 2,191,366
A+ 5,000 Petronas, Malaysia,
6.875%, 7/01/03 ..................... 5,158,688
A3 3,500 Phillips Electric,
7.75%, 4/15/04 ...................... 3,826,553
A+ 3,125 Quebec Province,
7.50%, 7/15/02 ...................... 3,347,277
------------
19,840,976
------------
Corporate Bonds-
Utilities-7.0%
BBB 3,000 Commonwealth Edison,
7.375%, 9/15/02 ..................... 3,171,960
AA- 3,000 GTE North, Inc.,
6.00%, 1/15/04 ...................... 2,982,150
BBB- 5,000 Gulf States Utilities Co.,
8.25%, 4/01/04 ...................... 5,391,250
Ba1 5,400 Niagara Mohawk Power Corp.,
7.375%, 8/01/03 ..................... 5,140,567
Baa2 2,000 Ohio Edison Co.,
8.625%, 9/15/03 ..................... 2,235,225
BBB+ 5,000@ Texas Utilities Electric Co.,
8.25%, 4/01/04 ...................... 5,627,350
------------
24,548,502
------------
Asset-Backed Securities-9.8%
AAA 10,000+ Community Program Loan Trust,
Series 1987-A,
Class A4, 4.50%, 10/1/18 ............ 8,850,000
AAA 4,000++ Discover Card Master Trust, Series
1993-3, Class A,
6.20%, 5/16/06 ...................... 4,028,720
AAA 3,000++ NationsBank Corp., Series 1993-2,
Class A, 6.00%, 12/15/05 ............ 2,999,040
AAA 5,000++ Standard Credit Card Master Trust,
Series 1993-2, Class A, 5.95%,
10/7/04 ............................. 4,959,350
AAA 8,250+ Series 1995-1, Class A, 8.25%,
1/7/07 .............................. 9,384,375
A 4,000 Student Loan Marketing
Associates, Series 1995-1
Class B, 6.19%, 10/25/09 ............ 4,000,000
------------
34,221,485
------------
Right Col.
- --------------------------------------------------------------------------------
Principal
Rating* Amount Value
(Unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
Municipal Bonds-4.2%
AA- $ 2,000 Fresno California Pension
Obligation, 7.15%, 6/01/04 .......... $ 2,070,160
BBB+ 4,375 Lake County Florida Resource
Recovery Rev., 7.125%, 10/01/99 ..... 4,394,906
AAA 4,000 Los Angeles County California
Pension, Taxable Series D,
6.77%, 6/30/05 ...................... 4,108,320
AAA 3,500 Los Angeles County California
Pension, Series A,
8.62%, 6/30/06 ...................... 4,063,640
------------
14,637,026
------------
Taxable Zero-Coupon Bonds-2.9%
9,806++ Financing Corp. (FICO Strip),
Series D, 3/26/04 ................... 6,039,123
6,893 U.S. Treasury Receipts,
5/15/04 ............................. 4,308,544
------------
10,347,667
------------
Total long-term investments
(cost $492,635,271) ................. 512,352,481
SHORT-TERM INVESTMENT-0.9%
Discount Note
3,200 Federal Home Loan Bank, (a)
5.75%, 1/02/96
(cost $3,199,489) ................... 3,199,489
------------
Total Investments-147.3%
(cost $495,834,760) ................. 515,551,970
Other liabilities in excess of
other assets-(47.3%) ................ (165,690,227)
------------
NET ASSETS-100% ....................... $349,861,743
============
* Using the higher of the Standard & Poor's or Moody's rating.
+ In aggregate, $49,286,245 of principal amount pledged as collateral for
reverse repurchase agreements.
++ Entire principal amount pledged as collateral for reverse repurchase
agreements.
@ Entire principal amount pledged as collateral for futures transactions.
(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.
P- Denotes a CMO with principal only characteristics.
REMIC- Real Estate Mortgage Investment Conduit.
- ----------------------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE>
Left Col.
- --------------------------------------------------------------------------------
The BlackRock Investment
Quality Term Trust Inc.
Statement of Assets and Liabilities
December 31, 1995
- --------------------------------------------------------------------------------
Assets
Investments, at value (cost $495,834,760)
(Note 1) ..................................................... $515,551,970
Cash ........................................................... 191,568
Interest receivable ............................................ 6,440,833
Receivable for investments sold ................................ 122,864
Due from broker-variation margin ............................... 26,718
Deferred organization expenses and other
assets ....................................................... 18,675
------------
522,352,628
------------
Liabilities
Reverse repurchase agreements (Note 4) ......................... 112,006,742
Payable for investments purchased .............................. 59,232,778
Interest payable ............................................... 519,501
Dividends payable .............................................. 228,515
Advisory fee payable (Note 2) .................................. 176,714
Administration fee payable (Note 2) ............................ 35,343
Other accrued expenses ......................................... 291,292
------------
172,490,885
------------
Net Assets ..................................................... $349,861,743
============
Net assets were comprised of:
Common stock, at par (Note 5) ................................ $ 368,106
Paid-in capital in excess of par ............................. 344,473,944
------------
344,842,050
Accumulated net realized losses .............................. (14,297,583)
Net unrealized appreciation .................................. 19,317,276
------------
Net assets, December 31, 1995 ................................ $ 349,861,743
============
Net asset value per share:
.
($349,861,743 - 36,810,639 shares of
.
common stock issued and outstanding) ......................... $9.50
=====
Right Col.
- --------------------------------------------------------------------------------
The BlackRock Investment
Quality Term Trust Inc.
Statement of Operations
Year Ended December 31, 1995
- --------------------------------------------------------------------------------
Net Investment Income
Income
Interest earned (net of premium amortization
of $1,287,670 and interest expense of
$8,299,172) .................................................. $25,265,100
-----------
Expenses
Investment advisory ............................................ 1,978,719
Administration ................................................. 395,744
Reports to shareholders ........................................ 188,000
Custodian ...................................................... 186,400
Directors ...................................................... 72,000
Transfer agent ................................................. 36,000
Audit .......................................................... 34,000
Legal .......................................................... 5,000
Miscellaneous .................................................. 119,796
-----------
Total operating expenses ..................................... 3,015,659
-----------
Net investment income .......................................... 22,249,441
-----------
Realized and Unrealized Gain (Loss)
on Investments (Note 3)
Net realized gain (loss)
Investments .................................................... 3,718,472
Short Sales .................................................... (2,256,633)
Futures ........................................................ (4,620,007)
-----------
(3,158,168)
-----------
Net change in unrealized
appreciation (depreciation)
Investments .................................................... 51,617,455
Futures ........................................................ (338,361)
Short sales .................................................... 351,525
-----------
51,630,619
-----------
Net gain on investments ........................................ 48,472,451
-----------
Net Increase In Net Assets
Resulting from Operations ........................................ $70,721,892
===========
See Notes to Financial Statements.
8
<PAGE>
Left Col.
- --------------------------------------------------------------------------------
The BlackRock Investment
Quality Term Trust Inc.
Statement of Cash Flows
Year Ended December 31, 1995
- --------------------------------------------------------------------------------
Increase (Decrease) in Cash
Cash flows provided by operating activities:
Interest received ............................................. $36,778,441
Operating expenses and excise taxes paid ...................... (2,913,662)
Interest expense paid ......................................... (8,642,731)
Proceeds from disposition of short-term
portfolio investments, net .................................. 4,327,511
Purchase of long-term portfolio investments ................... (742,123,606)
Proceeds from disposition of long-term
portfolio investments ....................................... 778,451,781
Variation margin on futures ................................... (4,952,492)
Other ......................................................... 31,378
-----------
Net cash flows provided by operating
activities .................................................. 60,956,620
-----------
Cash flows used for financing activities:
Decrease in reverse repurchase agreements ..................... (37,793,076)
Cash dividends paid ........................................... (23,094,843)
-----------
Net cash flows used for financing activities .................. (60,887,919)
-----------
Net increase in cash ............................................ 68,701
Cash at beginning of year ....................................... 122,867
-----------
Cash at end of year ............................................. $ 191,568
===========
Reconciliation of Net Increase in Net
Assets Resulting from Operations to
Net Cash Flows Provided by Operating Activities
Net increase in net assets resulting from
operations .................................................... $70,721,892
-----------
Increase in investments ......................................... (17,883,077)
Net realized loss 3,158,168
Increase in unrealized appreciation ............................. (51,630,619)
Decrease in interest receivable ................................. 1,952,218
Decrease in variation margin receivable ......................... 5,876
Decrease in receivable for investments sold ..................... 3,260,762
Decrease in deposits with brokers
for investments sold short .................................... 14,515,500
Decrease in other assets ........................................ 45,378
Increase in payable for investments purchased ................... 51,414,484
Decrease in payable for investments sold short .................. (14,348,400)
Decrease in interest payable .................................... (343,559)
Increase in other accrued expenses .............................. 87,997
-----------
Total adjustments ............................................. (9,765,272)
-----------
Net cash flows provided by operating activities ................. $60,956,620
===========
Right Col
- --------------------------------------------------------------------------------
The BlackRock Investment
Quality Term Trust Inc.
Statements of Changes
in Net Assets
- --------------------------------------------------------------------------------
Years Ended December 31,
------------------------------
1995 1994
------------ ------------
Increase (Decrease) in
Net Assets
Operations:
Net investment income ........................ $ 22,249,441 $ 22,754,023
Net realized gain (loss) on
investments, short sales
and futures ................................ (3,158,168) (2,624,792)
Net change in unrealized
appreciation
(depreciation) on
investments, short sales
and futures ................................ 51,630,619 40,069,454)
------------ ------------
Net increase (decrease) in
net assets resulting from
operations ................................. 70,721,892 (19,940,223)
Dividends & Distributions:
Dividends from net
investment income .......................... (22,249,441) (25,122,697)
Distributions in excess of
net investment income ...................... (757,692) (1,318,324)
------------ ------------
Total dividends &
distributions .............................. (23,007,133) (26,441,021)
------------ ------------
Total increase (decrease) .................... 47,714,759 (46,381,244)
Net Assets
Beginning of year .............................. 302,146,984 348,528,228
------------ ------------
End of year .................................... $349,861,743 $302,146,984
============ ============
See Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
The BlackRock Investment Quality Term Trust Inc.
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 29, 1992*
Year Ended December 31, through
----------------------------------- December 31,
1995 1994 1993 1992
-------- -------- -------- --------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .................... $ 8.21 $ 9.47 $ 9.57 $ 9.40
-------- -------- -------- --------
Net investment income (net of interest expense of
$.23, $.17, $.15 and $.08, respectively) ........... .60 .62 .80 .54
Net realized and unrealized gain (loss) on investments 1.31 (1.16) (.16) .19
-------- -------- -------- --------
Net increase (decrease) from investment operations ...... 1.91 (.54) .64 .73
-------- -------- -------- --------
Dividends from net investment income .................... (.60) (.68) (.74) (.54)
-------- -------- -------- --------
Distributions in excess of net investment income ........ (.02) (.04) - -
-------- -------- -------- --------
Capital charge with respect to issuance of shares ....... - - - (.02)
-------- -------- -------- --------
Net asset value, end of period** ........................ $ 9.50 $ 8.21 $ 9.47 $ 9.57#
======== ======== ======== ========
Market value, end of period** ........................... $ 7.875 $ 7.00 $ 9.375 $ 9.375
======== ======== ======== ========
TOTAL INVESTMENT RETURN+ ................................ 21.91% (18.10%) 7.96% 5.24%
RATIOS TO AVERAGE NET ASSETS:
Operating expenses## .................................... 0.92% 0.93% 0.89% 0.91%++
Net investment income ................................... 6.76% 7.10% 8.19% 8.45%++
SUPPLEMENTAL DATA:
Average net assets (in thousands) ....................... $328,950 $320,366 $358,623 $348,471
Portfolio turnover ...................................... 160% 111% 77% 26%
Net assets, end of period (in thousands) ................ $349,862 $302,147 $348,528 $352,417
Reverse repurchase agreements outstanding, end of period
(in thousands) ........................................ $112,007 $149,800 $156,558 $172,195
Asset coverage+++ ....................................... $ 4,124 $ 3,017 $ 3,226 $ 3,047
<FN>
- ----------------
* Commencement of investment operations.
** NAV and market value are published in The Wall Street Journal each Monday.
# Net asset value immediately after the closing of the first public offering
was $9.38.
## The ratios of expenses, including excise tax, to average net assets were
0.92%, 0.94%, 0.92% and, 0.97% 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 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.
10
<PAGE>
Left Col.
- --------------------------------------------------------------------------------
The BlackRock Investment Quality Term Trust Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 1. Accounting
Policies
The BlackRock Investment Quality 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 fixed income securities
that will return $10 per share to investors on or about December 31, 2004 while
providing high monthly income. The ability of issuers of debt securities held by
the Trust to meet their obligations may be affected by economic developments in
a specific industry or region. No assurance can be given that the Trust's
investment objective will be achieved.
The following is a summary of significant accounting policies followed by the
Trust.
Securities Valuation: The Trust values mortgage-backed, asset-backed and other
debt securities on the basis of current market quotations provided by dealers or
pricing services approved by the Trust's Board of Directors. In determining the
value of a particular security, pricing services may use certain information
with respect to transactions in such securities, quotations from dealers, market
transactions in comparable securities, various relationships observed in the
market between securities, and calculated yield measures based on valuation
technology commonly employed in the market for such securities. Exchange-traded
options are valued at their last sales price as of the close of options trading
on the applicable exchanges. In the absence of a last sale, options are valued
at the average of the quoted bid and asked prices as of the close of business. A
futures contract is valued at the last sale price as of the close of the
commodities exchange on which it trades unless the Trust's Board of Directors
determines that such price does not reflect its fair value, in which case it
will be valued at its fair value as determined by the Trust's Board of
Directors. Any securities or other assets for which such current market
quotations are not readily available are valued at fair value as determined in
good faith under procedures established by and under the general supervision and
responsibility of the Trust's Board of Directors.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost, if their term to maturity from date of purchase was 60
days or less, or by amortizing their value on the 61st day
Right Col.
prior to maturity, if their original term to maturity from date of purchase
exceeded 60 days.
In connection with transactions in repurchase agreements, the Trust's
custodian takes possession of the underlying collateral securities, the value of
which at least equals the principal amount of the repurchase transaction,
including accrued interest. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market on a
daily basis to ensure the adequacy of the collateral. If the seller defaults and
the value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of the collateral by the
Trust may be delayed or limited.
Option Selling/Purchasing: When the Trust sells or purchases an option, an
amount equal to the premium received or paid by the Trust is recorded as a
liability or an asset and is subsequently adjusted to the current market value
of the option written or purchased. Premiums received or paid from writing or
purchasing options which expire unexercised are treated by the Trust on the
expiration date as realized gains or losses. The difference between the premium
and the amount paid or received on effecting a closing purchase or sale
transaction, including brokerage commissions, is also treated as a realized gain
or loss. If an option is exercised, the premium paid or received is added to the
proceeds from the sale or cost of the purchase in determining whether the Trust
has realized a gain or a loss on investment transactions. The Trust, as writer
of an option, may have no control over whether the underlying securities may be
sold (call) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security underlying the written option.
Financial Futures Contracts: A futures contract is an agreement between two
parties to buy and sell a financial instrument for a set price on a future date.
Initial margin deposits are made upon entering into futures contracts and can be
either cash or securities. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Trust records a realized gain or loss
equal to the difference between the proceeds from (or cost of) the closing
transaction and the Trust's basis in the contract.
Financial futures contracts, when used by the Trust, help in maintaining a
targeted duration. Duration is a measure of
11
<PAGE>
Left Col.
the price sensitivity of a security or a portfolio to relative changes in
interest rates. For instance, a duration of "one" means that a portfolio or a
security's price would be expected to change by approximately one percent with a
one percent change in interest rates, while a duration of "five" would imply
that the price would move approximately five percent in relation to a one
percent change in interest rates. Futures contracts can be sold to effectively
shorten an otherwise longer duration portfolio. In the same sense, futures
contracts can be purchased to lengthen a portfolio that is shorter than its
duration target. Thus, by buying or selling futures contracts, the Trust can
effectively "hedge" more volatile positions so that changes in interest rates do
not change the duration of the portfolio unexpectedly.
The Trust may invest in financial futures contracts primarily for the purpose
of hedging its existing portfolio securities or securities the Trust intends to
purchase against fluctuations in value caused by changes in prevailing market
interest rates. Should interest rates move unexpectedly, the Trust may not
achieve the anticipated benefits of the financial futures contracts and may
realize a loss. The use of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts, interest rates and
the underlying hedged assets. The Trust is also at risk of not being able to
enter into a closing transaction for the futures contract because of an illiquid
secondary market. In addition, since futures are used to shorten or lengthen a
portfolio's duration, there is a risk that the portfolio may have temporarily
performed better without the hedge or that the Trust may lose the opportunity to
realize appreciation in the market price of the underlying positions.
Short Sales: The Trust may make short sales of securities as a method of hedging
potential price declines in similar securities owned. When the Trust makes a
short sale, it may borrow the security sold short and deliver it to the
broker-dealer through which it made the short sale as collateral for its
obligation to deliver the security upon conclusion of the sale. The Trust may
have to pay a fee to borrow the particular securities and may be obligated to
pay over any 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 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
Right Col.
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.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized and unrealized gains and losses are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis, and the Trust accretes discount and amortizes premium on
securities purchased using the interest method.
Taxes: It is the Trust's intention to continue to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to shareholders. Therefore,
no federal income tax provision is required. As part of a tax planning strategy,
the Trust intends to retain a portion of its taxable income and pay an excise
tax on the undistributed amounts.
Dividends and Distributions: The Trust declares and pays dividends and
distributions monthly, first from net invest- ment 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 are distributed at least
annually. Dividends and distributions are recorded on the ex-dividend date.
Deferred Organization Expenses: A total of $70,000 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 investment operations.
Note 2. Agreements
The Trust has an Investment Advisory Agreement with BlackRock Financial
Management Inc. (the "Adviser") and an Administration Agreement with Prudential
Mutual Fund Management, Inc. ("PMF"), an indirect, wholly-owned subsidiary of
The Prudential Insurance Co. of America.
12
<PAGE>
Left Col.
The investment advisory fee paid to the Adviser is computed weekly and payable
monthly at an annual rate of 0.60% of the Trust's average weekly net assets
until December 31, 1998, 0.50% from January 1, 1999 to December 31, 2002 and
0.40% from January 1, 2003 to the termination or liquidation of the Trust. The
administration fee paid to PMF is also computed weekly and payable monthly at an
annual rate of 0.12% of the Trust's average weekly net assets until December 31,
1998, 0.10% from January 1, 1999 to December 31, 2002, and 0.08% from January 1,
2003 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. PMF
pays occupancy and certain clerical and accounting costs of the Trust. The Trust
bears all other costs and expenses.
On February 28, 1995, the 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
businesses.
Note 3. Portfolio
Securities
Purchases and sales of investment securities, other than short-term investments
and dollar rolls, for the year ended December 31, 1995 aggregated $793,538,090
and $767,973,363, respectively.
The Trust may invest up to 30% 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
no illiquid or restricted securities.
The federal income tax basis of the Trust's investments at December 31, 1995
was substantially the same as for financial reporting purposes and, accordingly,
net unrealized appreciation for federal income tax purposes was $19,717,210
(gross unrealized appreciation- $22,185,949; gross unrealized
depreciation-$2,468,739).
For federal income tax purposes, the Trust has a capital loss carryforward at
December 31, 1995 of approximately $17,239,100, of which $10,957,800 expires in
2001, $2,436,800 expires in 2002 and $3,844,500 expires in 2003. Accordingly, no
capital gains distribution is expected to be paid to shareholders until net
gains have been realized in excess of such amounts.
Right Col.
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:
Value at Value at Unrealized
Number of Expiration Trade December 31, Appreciation/
Contracts Type Date Date 1995 (Depreciation)
- --------- ---- ---------- --------- ------------ --------------
Short
position:
180 30 yr. T-Bond Mar. 1996 $21,216,645 $21,864,375 $(647,730)
Long
position:
1,260 2 yr. T-Note Mar. 1996 131,865,173 132,112,969 247,796
---------
$(399,934)
=========
Note 4. Borrowings
Reverse Repurchase Agreements:
The Trust may enter into reverse repurchase agreements with qualified, third
party broker-dealers as determined by and under the direction of the Trust's
Board of Directors. Interest on the value of reverse repurchase agreements
issued and outstanding will be based upon competitive market rates at the time
of issuance. At the time the Trust enters into a reverse repurchase agreement,
it will establish and maintain a segregated account with the lender, the value
of which at least equals the principal amount of the reverse repurchase
transactions including accrued interest.
The average daily balance of reverse repurchase agreements outstanding during
the year ended December 31, 1995 was approximately $122,515,000 at a weighted
average interest rate of approximately 6.03%. The maximum amount of reverse
repurchase agreements outstanding at any month-end during the year was
$152,715,500 as of February 28, 1995 which was 30.8% 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 average monthly balance of dollar rolls outstanding during the year ended
December 31, 1995 was approximately $31,685,000. The maximum amount of dollar
rolls outstanding at any month-end during the year was $60,425,625 as of October
31, 1995, which was 11.52% of total assets.
13
<PAGE>
(Left Column)
Note 5. Capital
There are 200 million shares of $.01 par value common stock authorized. Of the
36,810,639 shares outstanding at December 31, 1995, the Adviser owned 10,639
shares.
(Right Column)
Note 6. Dividends
Subsequent to December 31, 1995, the Board of Directors of the Trust declared
dividends from undistributed earnings of $0.0500 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 Net increase (decrease)
unrealized in net assets Dividends
Net investment gain (loss) resulting from and Period end
Quarterly Total income on investments operations Distributions Share price net asset
period income Amount Per share Amount Per share Amount Per share Amount Per share High Low value
--------- ------ ---------------- ---------------- ----------------- ----------------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 1, 1994 to
March 31, 1994 .. $8,119,280 $6,254,974 $.17 $(21,103,607)$(.57) $(14,848,633)$(.40) $7,116,601 $.18 $9 3/8 $7 3/4 $8.87
April 1, 1994 to
June 30, 1994 ... 4,962,269 5,272,744 .15 (10,403,206) (.28) (5,130,462) (.14) 6,441,445 .18 8 1/4 7 3/8 8.56
July 1, 1994 to
September 30, 1994 6,586,341 5,589,671 .15 (4,247,936) (.12) 1,341,735 .04 6,441,481 .18 8 7 8.42
October 1, 1994 to
December 31, 1994 6,091,322 5,636,634 .15 (6,939,497) (.19) (1,302,863) (.04) 6,441,494 .18 7 3/8 6 5/8 8.21
January 1, 1995 to
March 31, 1995 .. 6,270,299 5,558,153 .15 15,629,817 .42 21,187,970 .57 5,982,026 .16 7 1/2 7 8.62
April 1, 1995 to
June 30, 1995 ... 6,338,180 5,581,999 .15 20,052,401 .55 25,634,400 .70 5,982,063 .16 8 7 3/8 9.16
July 1, 1995 to
September 30, 1995 6,114,704 5,340,237 .15 952,984 .02 6,293,221 .17 5,521,584 .15 8 7 3/8 9.18
October 1, 1995 to
December 31, 1995 6,541,917 5,769,052 .15 11,837,249 .32 17,606,301 .47 5,521,460 .15 8 1/4 7 1/2 9.50
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK INVESTMENT QUALITY TERM TRUST INC.
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
The BlackRock Investment Quality Term Trust Inc.:
We have audited the accompanying statement of assets and liabilities of The
BlackRock Investment Quality 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 statements of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the three years in the period then ended and for the
period April 29, 1992 (commencement of investment operations) to December 31,
1992. 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 finanical highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable asurance about whether the financial statements and financial
highlights are free of material misstatements. 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 persent
fairly, in all material respects, the financial position of The BlackRock
Investment Quality Term Trust Inc. as of December 31, 1995, and the results of
its operations, its cash flows, the changes in its net assets and the financial
highlights for the respective stated periods, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 9, 1996
15
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK INVESTMENT QUALITY TERM TRUST INC.
TAX INFORMATION
- --------------------------------------------------------------------------------
We wish to advise you as to the federal tax status of dividends and
distributions paid by the Trust during the fiscal year ended December 31, 1995.
During the fiscal year ended December 31, 1995, the Trust paid dividends of
$0.6250 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 returns as ordinary
income. Further, we wish to advise you that your income dividends do not qualify
for the dividends received deduction.
For the purpose of preparing your 1995 annual federal income tax return,
however, you should report the amounts as reflected on the appropriate Form 1099
DIV which was mailed to you in January 1996.
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
Pursuant to the Trust's Dividend Reinvestment Plan (the "Plan"),
shareholders may elect to have all distributions of dividends and capital gains
automatically reinvested by State Street Bank & Trust Company (the "Plan Agent")
in Trust shares pursuant to the Plan. Shareholders who do not participate in the
Plan will receive all distributions in cash paid by check in United States
dollars mailed directly to the shareholders of record (or if the shares are held
in street or other nominee name, then to the nominee) by the custodian, as
dividend disbursing agent.
The Plan Agent serves as agent for the shareholders in administering the
Plan. After the Trust declares a dividend or determines to make a capital gain
distribution, the Plan Agent will, as agent for the participants, receive the
cash payment and use it to buy Trust shares in the open market on the New York
Stock Exchange or elsewhere, for the participants' accounts. The Trust will not
issue any new shares under the Plan.
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent and will receive certificates for whole Trust shares and a cash
payment will be made for any fraction of a Trust share.
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. The automatic reinvestment of dividends and distributions
will not relieve participants of any federal, state and local income taxes that
may be payable on such dividends or distributions.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
change sent to all shareholders of the Trust at least 90 days before the record
date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent upon at least 90 days' written notice to all
shareholders of the Trust. All correspondence concerning the Plan should be
directed to the Plan Agent at (800) 699-1BFM. The address is on the front of
this report.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
There have been no material changes in the Trusts investment objectives or
policies that have not been approved by the shareholders, or to its charter or
by-laws, or in the principal risk factors associated with investment in the
Trust. There have been no changes in the persons who are primarily responsible
for the day-to-day management of the Trust's portfolio.
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THE BLACKROCK INVESTMENT QUALITY TERM TRUST INC.
INVESTMENT SUMMARY
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The Trust's Investment Objective
The Trust's investment objective is to manage a portfolio of investment grade
fixed income securities that will return $10 per share (the initial public
offering price per share) to investors on or about December 31, 2004 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 which trade on either the New York
Stock or American Stock Exchanges, several open-end funds and separate accounts
for more than 80 clients in the U.S. and overseas. BlackRock is a subsidiary of
PNC Asset Management Group, Inc. which is a division of PNC Bank, N.A., the
nation's eleventh largest banking organization.
What Can the Trust Invest In?
The Trust may invest in all fixed income securities rated investment grade or
higher ("AAA", "AA", "A" or "BBB"). Examples of securities in which the Trust
may invest include U.S. government and government agency securities, zero coupon
securities, mortgage-backed securities, corporate debt securities, asset-backed
securities, U.S. dollar-denominated foreign debt securities and municipal
securities. Under current market conditions, BlackRock expects that the primary
investments of the Trust will be U.S. government securities, securities backed
by government agencies (such as mortgage-backed securities) and corporate debt
securities.
What is the Adviser's Investment Strategy?
The Adviser will seek to meet the Trust's investment objective by managing the
assets of the Trust so as to return the initial offering price ($10 per share)
at maturity. The Trust will implement a conservative strategy that will seek to
closely match the maturity of the assets of the portfolio with the future return
of the initial investment at the end of 2004. 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 the total assets) to enhance the income of the portfolio. In order to
maintain competitive yields as the Trust approaches maturity and depending on
market conditions, the Adviser will attempt to purchase securities with call
protection or maturities as close to the Trust's maturity date as possible.
Securities with call protection should provide the portfolio with some degree of
protection against reinvestment risk during times of lower prevailing interest
rates. Since the Trust's primary goal is to return the initial offering price at
maturity, any cash that the Trust receives prior to its maturity date (i.e. cash
from early and regularly scheduled payments of principal on mortgage-backed
securities) will be reinvested in securities with maturities which coincide with
the remaining term of the Trust. Since shorter-term securities typically yield
less than longer-term securities, this strategy will likely result in a decline
in the Trust's income over time. However, the Adviser will attempt to maintain a
yield which is competitive with a comparable maturity Treasury at the same point
on the yield curve (i.e. if the Trust has three years left until its maturity,
the Adviser will attempt to maintain a yield at a spread over a 3-year
Treasury). It is important to note that the Trust will be managed so as to
preserve the integrity of the return of the initial offering price.
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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, Boston
Financial Data Services. Investors who wish to hold shares in a brokerage
account should check with their financial adviser to determine whether their
brokerage firm offers dividend reinvestment services.
Leverage Considerations in a Term Trust
Under current market conditions, leverage increases the income earned by the
Trust. The Trust employs leverage primarily through the use of reverse
repurchase agreements and dollar rolls. Leverage permits the Trust to borrow
money at short-term rates and reinvest that money in longer-term assets which
typically offer higher interest rates. The difference between the cost of the
borrowed funds and the income earned on the proceeds that are invested in longer
term assets is the benefit to the Trust from leverage. In general, the portfolio
is typically leveraged at approximately 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 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 interestrates. 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.
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THE BLACKROCK INVESTMENT QUALITY TERM TRUST INC.
GLOSSARY
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<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 distributions of dividends and capital gains automatically
reinvested into additional shares of the Trust.
FHA: Federal Housing Administration, a government agency that facilitates a secondary mort-
gage 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 corpora-
tion that facilitates a secondary mortgage market by purchasing mortgages from lenders
such as savings institutions and reselling them to investors by means of mortgage-backed
securities. Obligations of FHLMC are not guaranteed by the U.S. government, however; they
are backed by FHLMC's authority to borrow from the U.S. government. Also known as
Freddie Mac.
FNMA: Federal National Mortgage Association, a publicly owned, federally chartered corporation
that facilitates a secondary mortgage market by purchasing mortgages from lenders such
as savings institutions and reselling them to investors by means of mortgage-backed
securities. Obligations of FNMA are not guaranteed by the U.S. government, however; they
are backed by FNMA's authority to borrow from the U.S. government. Also known as
Fannie Mae.
GNMA: Government National Mortgage Association, a government agency that facilitates a
secondary mortgage market by providing an agency that guarantees timely payment of
interest and principal on mortgages. GNMA's obligations are supported by the full faith and
credit of the U.S. Treasury. Also known as Ginnie Mae.
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>
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<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 Wall Street Journal on Monday.
Principal-Only Securities (P/O): Mortgage securities that receive only the principal cash flows from an underlying pool of
mortgage loans or underlying pass-through securities. Also known as STRIPS.
Project Loans: Mortgages for multi-family, low- to middle-income housing.
Premium: When a fund's stock price is greater than its net asset value, the fund is said to be trading at a
premium.
REMIC: A real estate mortgage investment conduit is a multiple-class security backed by mortgage-
backed securities or whole mortgage loans and formed as a trust, corporation, partnership,
or segregated pool of assets that elects to be treated as a REMIC for federal tax purposes.
Generally, Fannie Mae REMICs are formed as trusts and are backed by mortgage-backed
securities.
Residuals: Securities issued in connection with collateralized mortgage obligations that generally
represent the excess cash flow from the mortgage assets underlying the CMO after payment
of principal and interest on the other CMO securities and related administrative expenses.
Reverse Repurchase Agreements: In a reverse repurchase agreement, the Trust sells securities and agrees to repurchase them
at a mutually agreed date and price. During this time, the Trust continues to receive the
principal and interest payments from that security. At the end of the term, the Trust receives
the same securities that were sold for the same initial dollar amount plus interest on the
cash proceeds of the initial sale.
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.
</TABLE>
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BlackRock Financial Management Inc.
Summary of Closed-End Funds
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Taxable Trusts
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Perpetual Trusts Stock Maturity
Symbol Date
------ --------
The BlackRock Income Trust Inc. ................................ BKT N/A
The BlackRock North American Government Income Trust Inc. ...... BNA N/A
Term Trusts
The BlackRock 1998 Term Trust Inc. ............................. BBT 12/98
The BlackRock 1999 Term Trust Inc. ............................. BNN 12/99
The BlackRock Target Term Trust Inc. ........................... BTT 12/00
The BlackRock 2001 Term Trust Inc. ............................. BLK 06/01
The BlackRock Strategic Term Trust Inc. ........................ BGT 12/02
The BlackRock Investment Quality Term Trust Inc. ............... BQT 12/04
The BlackRock Advantage Term Trust Inc. ........................ BAT 12/05
The BlackRock Broad Investment Grade 2009 Term Trust Inc. ...... BCT 12/09
Tax-Exempt Trusts
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Perpetual Trusts Stock Maturity
Symbol Date
------ --------
The BlackRock Investment Quality Municipal Trust Inc. .......... BKN N/A
The BlackRock California Investment Quality Municipal Trust Inc. RAA N/A
The BlackRock Florida Investment Quality Municipal Trust ....... RFA N/A
The BlackRock New Jersey Investment Quality Municipal Trust Inc. RNJ N/A
The BlackRock New York Investment Quality Municipal Trust Inc. . RNY N/A
Term Trusts
The BlackRock Municipal Target Term Trust Inc. ................. BMN 12/06
The BlackRock Insured Municipal 2008 Term Trust Inc. ........... BRM 12/08
The BlackRock California Insured Municipal 2008 Term Trust Inc.. BFC 12/08
The BlackRock Florida Insured Municipal 2008 Term Trust ........ BRF 12/08
The BlackRock New York Insured Municipal 2008 Term Trust Inc. .. BLN 12/08
The BlackRock Insured Municipal Term Trust Inc. ................ BMT 12/10
If you would like further information please call BlackRock at (800) 227-7BFM
or consult with your financial advisor.
21
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BlackRock Financial Management, Inc.
An Overview
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BlackRock Financial Management (BlackRock) is a registered investment
adviser which specializes in managing high quality fixed income securities, both
taxable and tax exempt. BlackRock currently manages 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 which trade on either the New York Stock or American Stock
Exchanges, several open-end funds and over 80 institutional clients in the
United States and overseas. BlackRock's institutional investor base includes
Chrysler Corporation Master Retirement Trust, General Retirement System of the
City of Detroit, State Treasurer of Florida, Ford Motor Company Pension Plan,
General Electric Pension Trust and Unisys Corporation Master Trust.
BlackRock was formed in April 1988 by fixed income professionals who sought
to create an asset management firm specializing in managing fixed income
securities for individuals and institutional investors. The professionals at
BlackRock have extensive experience creating, analyzing and trading a variety of
fixed income instruments, including the most complex structured securities. In
fact, individuals at BlackRock are responsible for many of the major innovations
in the mortgage-backed and asset-backed securities market, including the
creation of the CMO, the floating rate CMO, the senior/subordinated pass-through
and the multi-class asset-backed security.
BlackRock is unique among asset management and advisory firms in the
significant emphasis it places on the development of proprietary analytical
capabilities. A quarter of the professionals at BlackRock work full-time in the
design, maintenance and use of such systems which are otherwise not generally
available to investors. BlackRock's proprietary analytical tools are used for
evaluating, investing in and designing investment strategies and portfolios of
fixed income securities, including mortgage securities, corporate debt
securities or tax-exempt securities and a variety of hedging instruments.
BlackRock has developed investment products which respond to investors'
needs and has been responsible for several major innovations in closed-end
funds. BlackRock introduced the first closed-end mortgage fund, the first
taxable and tax-exempt closed-end funds to offer a finite term, the first
closed-end fund to achieve a AAAf rating by Standard & Poor's, and the first
closed-end fund to invest primarily in North American Government securities.
BlackRock's closed-end funds currently have dividend reinvestment plans which
are designed to provide an ongoing source of demand for the stock in the
secondary market. BlackRock manages a ladder of alternative investment vehicles,
with each fund having specific investment objectives and policies.
In view of our continued desire to provide a high level of service to all
our shareholders, BlackRock maintains a toll-free number for your questions. The
number is (800) 227-7BFM (7236). We encourage you to call us with any questions
you may have about your BlackRock funds and thank you for the continued trust
you place in our abilities.
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(Left Column)
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BlackRock
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Directors
Laurence D. Fink, Chairman
Andrew F. Brimmer
Richard E. Cavanagh
Kent Dixon
Frank J. Fabozzi
James Grosfeld
James Clayburn La Force, Jr.
Ralph L. Schlosstein
Officers
Ralph L. Schlosstein, President
Scott Amero, Vice President
Keith T. Anderson, Vice President
Michael C. Huebsch, Vice President
Robert S. Kapito, Vice President
Richard M. Shea, Vice President/Tax
Henry Gabbay, Treasurer
James Kong, Assistant Treasurer
Kevin J. Mahoney, Assistant Treasurer
Karen Sabath, Secretary
Investment Adviser
BlackRock Financial Management, Inc.
345 Park Avenue
New York, NY 10154
(800) 227-7BFM
Administrator
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Custodian and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
(800) 699-1BFM
Independent Auditors
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1434
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
This report is for shareholder information.
This is not a prospectus intended for use in the
purchase or sale of any securities.
The BlackRock Investment
Quality Term Trust Inc.
c/o Prudential Mutual Fund Management, Inc.
32nd Floor
One Seaport Plaza
New York, NY 10292
(800) 227-7BFM
Printed on recycled paper 09247J-10-2
(Right Column)
The BlackRock
Investment Quality
Term Trust Inc.
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Annual Report
December 31, 1995
