- -------------------------------------------------------------------------------
THE BLACKROCK 1999 TERM TRUST INC.
ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISER
- -------------------------------------------------------------------------------
January 31, 1996
Dear Shareholder,
Since the inception of The BlackRock 1999 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 1999 Term
Trust Inc. (NYSE symbol: "BNN") 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, 1999, 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
- -------------------------------------------------------------------------------
Stock Price $8.125 $7.50 8.33% $9.00 $7.375
- -------------------------------------------------------------------------------
Net Asset Value (NAV) $9.27 $8.42 10.10% $9.28 $8.39
- -------------------------------------------------------------------------------
Premium/(Discount) to NAV (12.35%) (10.93%) (1.42%) (2.99%) (13.51%)
- -------------------------------------------------------------------------------
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 yields of both the 2- and 5-year Treasuries fell approximately
2.50% to end 1995 at 5.15% and 5.37%, respectively.
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
2
<PAGE>
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 an 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 1999 Term Trust Inc.
- -------------------------------------------------------------------------------
Composition December 31, 1995 December 31, 1994
- -------------------------------------------------------------------------------
Mortgage Pass-Throughs 24% 55%
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Corporate Bonds 22% 0%
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Adjustable Rate Mortgages 12% 2%
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Agency Multiple Class Mortgage Pass-Throughs 9% 12%
- -------------------------------------------------------------------------------
Stripped Mortgage-Backed Securities 9% 1%
- -------------------------------------------------------------------------------
Taxable Zero Coupon Bonds 8% 14%
- -------------------------------------------------------------------------------
Non Agency Multiple Class Mortgage Pass-Throughs 5% 1%
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Asset-Backed Securities 4% 2%
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Municipal Securities 4% 1%
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U.S. Government Securities 2% 8%
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CMO Residuals 1% 1%
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Commercial Mortgage-Backed Securities 0% 3%
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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 22% 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
3
<PAGE>
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 1999.
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 1999 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 1999 Term Trust Inc.
- -------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BNN
- -------------------------------------------------------------------------------
Initial Offering Date: December 23, 1992
- -------------------------------------------------------------------------------
Closing Stock Price as of 12/31/95: $8.125
- -------------------------------------------------------------------------------
Net Asset Value as of 12/31/95: $9.27
- -------------------------------------------------------------------------------
Yield on Closing Stock Price as of 12/31/95 ($8.125)1: 5.54%
- -------------------------------------------------------------------------------
Current Monthly Distribution per Share2: $0.0375
- -------------------------------------------------------------------------------
Current Annualized Distribution per Share2: $0.450
- -------------------------------------------------------------------------------
1Yield on Closing Stock Price is calculated by dividing the current annualized
distribution per share by the closing stock price per share.
2Dividend not constant and is subject to change.
4
<PAGE>
(left column)
- -------------------------------------------------------------------------------
The BlackRock 1999 Term Trust Inc.
Portfolio of Investments
December 31, 1995
- -------------------------------------------------------------------------------
Principal
Rating* Amount Value
(Unaudited)(000) Description (Note 1)
- -------------------------------------------------------------------------------
LONG-TERM INVESTMENTS-146.0%
Mortgage Pass-Throughs-49.4%
Federal Home Loan Mortgage
Corporation,
$ 6,507(d) 7.00%, 7/01/99 - 1/01/00,
5 Year ................................. $ 6,615,085
1,137 8.00%, 3/01/99, 7 Year ................. 1,168,647
13,470(d)(d) 8.00%, 7/01/08 ......................... 14,104,323
1,042 8.25%, 6/01/08 ......................... 1,089,801
10,844(d) 9.50%, 2/01/02 - 3/01/02,
15 Year .............................. 11,405,503
4,307 9.50%, 5/01/21 ......................... 4,602,606
Federal National Mortgage
Association,
1,260 7.516%, 7/01/99, Multifamily ........... 1,320,216
384 8.50%, 5/01/03 - 9/01/07,
15 Year .............................. 400,736
6,015(d) 8.775%, 8/01/99, Multifamily ........... 6,503,190
3,973(d) 9.00%, 6/01/22 ......................... 4,184,085
Government National Mortgage
Association,
12,827(d) 6.50%, 5/20/25,
1 Year CMT (ARM) ....................... 13,115,658
16,164(d) 7.00%, 12/20/23-7/20/25,
1 Year CMT (ARM) ....................... 16,469,869
16,871 9.00%, 11/15/17 ........................ 17,998,941
--------------
98,978,660
--------------
Multiple Class Mortgage
Pass-Throughs-24.1%
CBA Mortgage Corporation,
AAA 3,000 Series 1993-C1, Class A-2,
12/25/03 ........................... 3,114,942
BBB 3,000 Series 1993-C1, Class D,
12/25/03 ........................... 3,019,736
AAA 121 Chase Mortgage Finance
Corporation, Series 1992-B,
Class A-7, 8/25/23 ................. 121,092
Federal Home Loan Mortgage
Corporation, Multiclass
Mortgage Participation
Certificates,
4,837 Series 172, Class 172-H, 5/15/20 ..... 4,896,854
2,000 Series 1093, Class 1093-F, 6/15/06 ... 2,065,600
45 Series 1105, Class 1105-D, 3/15/16 ... 967,232
6,655 Series 1127, Class 1127-F, 3/15/06 ... 6,850,724
1,887 Series 1234, Class 1234-H,
5/15/99, (ARM) ..................... 1,958,725
70 Series 1293, Class 1293-I,
7/15/99, (I) ....................... 8,084
(Right Column)
- -------------------------------------------------------------------------------
Principal
Rating* Amount Value
(Unaudited)(000) Description (Note 1)
- -------------------------------------------------------------------------------
$ 9,079 Series 1473, Class 1473-JA,
2/15/05, (I) ....................... $ 700,914
3,000 Series 1505, Class 1505-ID,
9/15/15, (I) ....................... 492,188
Federal National Mortgage
Association, REMIC
Pass-Through Certificates,
8,410(d)(d) Trust 269, Class 1, 8/01/22 .......... 8,883,383
213 Trust 1989-91, Class 91-E,
6/25/15 ............................ 215,688
668 Trust 1991-146, Class 146-SB,
10/25/06, (ARM) .................... 665,535
2,301 Trust 1992-3, Class 3-S,
1/25/99, (ARM) ..................... 2,602,906
571 Trust 1992-106, Class 106-S,
6/25/99, (ARM) .................... 630,684
574 Trust 1993-193, Class 193-PC,
9/25/23 ........................... 519,260
34,027 Trust 1993-199, Class 199-SC,
10/25/14, (ARM) .................... 297,737
4,133 Trust 1994-44, Class T-44,
2/25/08, (I) ....................... 131,731
6,617 Government National Mortgage
Association, Trust 1994-1,
Class 1-PL, 6/16/24, (I) ............. 1,224,176
AAA 6,492 Merrill Lynch Trust, Trust XXXVI,
Class C, 10/01/17 .................... 6,739,507
AAA 2,191 Rural Housing Trust, Series
1987-1 Class D, 4/01/26 .............. 2,191,020
--------------
48,297,718
--------------
Corporate Bonds-32.1%
Finance & Banking-19.8%
A+ 3,000 American Express, 11.625%,
12/12/00 ............................. 3,369,300
A 3,000 Household Finance Corporation,
6.65%, 5/26/98 ....................... 3,062,640
A+ 4,000 International Lease Finance
Corporation,
6.30%, 11/01/99 ...................... 4,061,250
BBB- 2,000 Meditrust, 7.25%, 8/16/99 .............. 2,042,500
A+ 3,000 Merrill Lynch & Company
Incorporated, 7.75%, 3/01/99 ......... 3,164,370
Baa3 2,000 New American Capital
Incorporated, Series C,
7.3125%, 4/12/00 ..................... 2,000,000
AA- 3,000 Norwest Corporation,
7.70%, 11/15/97 ...................... 3,116,760
PaineWebber Group Incorporated,
BBB+ 3,500 6.31%, 7/22/99 ....................... 3,546,270
BBB+ 2,189 7.00%, 3/01/00 ....................... 2,245,156
See Notes to Financial Statements.
5
<PAGE>
(Left column)
- -------------------------------------------------------------------------------
Principal
Rating* Amount Value
(Unaudited)(000) Description (Note 1)
- -------------------------------------------------------------------------------
Finance & Banking-con't
BBB $ 2,000 Salomon Incorporated,
7.43%, 12/30/98 ...................... $ 2,042,056
BBB 3,000 Sears Overseas Finance,
Zero Coupon, 7/12/98 ................. 2,601,600
A 4,000 Security Pacific Corporation,
9.75%, 5/15/99 ....................... 4,474,600
A- 2,000 Smith Barney Holdings, Inc.,
6.00%, 3/15/97 ....................... 2,008,040
BBB- 2,000 Transport Financial Bank,
6.32%, 10/17/97 ...................... 2,012,480
--------------
39,747,022
--------------
Industrials-9.4%
AA 2,000 California Petroleum Transport
Corporation, 7.30%, 4/01/99 .......... 2,095,306
AA 5,000 General Motors Acceptance
Corporation, 6.125%, 9/18/98 ......... 5,049,500
BBB 4,000 RJR Nabisco Brands
Incorporated, 8.30%, 4/15/99 ......... 4,264,640
A 3,000 TTX Company, 6.28%, 6/28/99 ............ 3,040,114
BBB 2,500 Union Oil Company, 8.40%,
1/15/99 .............................. 2,681,250
AA- 2,000 Walt Disney Corporation, 7.125%,
10/20/99 ............................. 1,709,269
--------------
18,840,079
--------------
Utilities-2.9%
AA- 2,500 Duke Power Company, 8.00%,
11/01/99 ............................. 2,696,446
A- 3,040 Puget Sound Power & Light
Company, 7.875%, 10/01/97 ............ 3,152,340
--------------
5,848,786
--------------
Asset-Backed Securities-5.9%
AAA 4,998 Daimler Benz Auto Grantor Trust,
Series 1995-A, Class A,
5.85%, 5/15/02 ....................... 5,015,418
AAA 4,158 Ford Credit Grantor Trust, 1995-A,
Class A, 5.90%, 5/15/00 .............. 4,173,451
AAA 2,500 Sears Credit Master Trust, Series
1994-1, Class A, 7.00% 1/15/04 ....... 2,607,025
--------------
11,795,894
--------------
Stripped Mortgage-Backed
Securities-13.4%
Federal Home Loan Mortgage
Corporation, Multiclass
Mortgage Participation
Certificates,
65 Series G-2, Class M,
7/25/18 (I/O) ...................... 1,385,339
34 Series 201, Class 201-C,
2/15/23 (I/O) ...................... 708,552
2,991 Series 1359, Class 1359-C,
9/15/99 (P/O) ...................... 2,586,762
7,983 Series 1440, Class 1440-PK,
8/15/18 (I/O) ...................... 898,110
(right column)
- -------------------------------------------------------------------------------
Principal
Rating* Amount Value
(Unaudited)(000) Description (Note 1)
- -------------------------------------------------------------------------------
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
$ 3,235 Trust 6, Class 2, 1/01/17 (I/O) ...... $ 776,456
10,422 Trust 33, Class 2, 12/01/17 (I/O) .... 2,605,525
8,798 Trust 95, Class 2, 10/01/20 (I/O) .... 2,183,047
2,524 Trust 225, Class 1,
2/01/23 (P/O) ...................... 2,016,553
4,717 Series 1989-28, Class 28-B,
3/25/17 (P/O) ...................... 3,855,923
56 Trust 1990-119, Class 119-G,
10/25/20 (I/O) ..................... 754,088
80 Trust 1991-7, Class 7-K,
2/25/21 (I/O) ...................... 1,910,283
200 Trust 1992-31, Class 31-K,
10/25/20 (I/O) ..................... 1,047,874
12,730 Trust 1992-203, Class 203-JA,
6/25/05 (I/O) ...................... 680,283
3,241 Trust 1993-236, Class 236-C,
10/25/23 (P/O) ..................... 2,811,375
AAA 100 Merrill Lynch Trust, Trust XLIII,
Class F, 8/27/15 (I/O) ............... 2,260,250
AAA 47,010 Sears Mortgage Corporation,
Series 1992-7, Class X,
5/25/22 (I/O) ........................ 411,340
--------------
26,891,760
--------------
Collateralized Mortgage Obligation
Residual**-0.1%
18 Federal Home Loan Mortgage
Corporation, Series 1115,
Class 1115-R, 8/15/06 ................ 130,000
--------------
U.S Government Security-3.7%
6,500(d)(d) U.S. Treasury Bonds, 6.875%,
8/15/25 .............................. 7,330,765
--------------
Taxable Zero Coupon Bond-11.7%
28,725(d)(d) U.S. Treasury Strip, 11/15/99 .......... 23,414,322
--------------
Municipal Bonds-5.6%
AAA 1,500 Long Beach California Pension
Oblig., 6.26%, 9/01/99 ............... 1,524,765
AAA 2,655@ Massachusetts St. Hsg. Fin. Agcy.,
Series C, 6.85%, 4/01/19 ............. 2,635,751
BBB+ 3,000 New York, New York, Series G,
6.23% 2/01/99 ........................ 3,008,100
AAA 3,000 Ventura Cnty. California Pension
Oblig., 5.92%, 11/01/99 .............. 3,024,150
AAA 1,000 Western Minnesota Muni. Pwr.
Agcy. Supply, Series A,
6.05%, 1/01/99 ....................... 1,005,400
--------------
11,198,166
--------------
Total Long-Term Investments
(cost $292,669,832) .................. 292,473,172
See Notes to Financial Statements.
6
<PAGE>
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Principal
Rating* Amount Value
(Unaudited)(000) Description (Note 1)
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT-0.7%
Discount Note (a)
$ 1,465 Federal Home Loan Bank, 5.75%, 1/02/96
(cost $1,464, 766) .....................$ 1,464,766
--------------
Total investments before security sold
short-146.7%
(cost $294,134,598) .................... 293,937,938
SECURITY SOLD SHORT-(3.6%)
(6,000) U.S. Treasury Bond, 7.50%, 11/15/24
(proceeds $5,747,656) .................. (7,212,180)
--------------
Total investments net of security sold
short-143.1% ........................... 286,725,758
Liabilities in excess of other
assets-(43.1%) ......................... (86,412,953)
--------------
NET ASSETS-100% ..........................$200,312,805
==============
- ------------
*Using the higher of Standard & Poor's or Moody's rating.
**Illiquid securities representing 0.1% of portfolio assets.
(d)(Partial) principal amount pledged as collateral for reverse repurchase
agreements.
(d)(d)Entire principal amount pledged as collateral for reverse repurchase
agreements.
@Partial 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.
- ---------------------------------------------------------------------
Key to Abbreviations
ARM -Adjustable Rate Mortgage
CMO -Collateralized Mortgage Obligation
CMT -Constant Maturity Treasury
I -Denotes CMO with interest only characteristics
I/O -Interest Only
P -Denotes CMO with principal only characteristics
P/O -Principal Only
REMIC -Real Estate Mortgage Investment Conduit
- ---------------------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE>
(Left column)
- -------------------------------------------------------------------------------
The BlackRock 1999 Term Trust Inc.
Statement of Assets and Liabilities
December 31, 1995
- -------------------------------------------------------------------------------
Assets
Investments, at value (cost $294,134,598) (Note 1) ............... $293,937,938
Cash ............................................................. 4,444
Deposits with brokers for investments
sold short (Note 1) ............................................ 7,215,000
Interest receivable .............................................. 3,709,102
Due from broker-variation margin ................................. 116,955
Deferred organization expenses and other assets .................. 69,627
--------------
305,053,066
--------------
Liabilities
Reverse repurchase agreements (Note 4) ........................... 92,861,125
Investments sold short, at value
(proceeds $5,747,656) (Note 1) ................................. 7,212,180
Payable for investments purchased ................................ 3,000,000
Dividends payable ............................................. 810,397
Advisory fee payable (Note 2) .................................... 67,915
Interest payable ................................................. 458,573
Excise tax payable ............................................... 130,730
Administration fee payable (Note 2) .............................. 16,979
Other accrued expenses ........................................... 182,362
--------------
104,740,261
--------------
Net Assets $200,312,805
==============
Net assets were comprised of:
Common stock, at par (Note 5) .................................. $ 216,106
Paid-in capital in excess of par ............................... 203,028,542
--------------
203,244,648
Undistributed net investment income ............................ 4,997,850
Accumulated net realized losses ................................ (6,909,811)
Net unrealized depreciation .................................... (1,019,882)
--------------
Net assets, December 31, 1995 .................................. $200,312,805
==============
Net asset value per share:
($200,312,805 / 21,610,583 shares of
common stock issued and outstanding) ........................... $9.27
=====
See Notes to Financial Statements.
(Right Column)
- -------------------------------------------------------------------------------
The BlackRock 1999 Term Trust Inc.
Statement of Operations
Year Ended December 31, 1995
- -------------------------------------------------------------------------------
Net Investment Income
Income
Interest (net of premium amortization of
$2,927,575 and net of interest expense of
$7,047,552) .................................................. $15,282,859
--------------
Operating expenses
Investment advisory ............................................ 773,497
Administration ................................................. 193,374
Custodian ...................................................... 121,000
Directors ...................................................... 62,400
Reports to shareholders ........................................ 142,000
Transfer agent ................................................. 15,000
Audit .......................................................... 18,000
Miscellaneous .................................................. 104,200
--------------
Total operating expenses ..................................... 1,429,471
Net investment income before excise tax .......................... 13,853,388
Excise tax ..................................................... 130,730
--------------
Net investment income ............................................ 13,722,658
--------------
Realized and Unrealized Gain (Loss) on
Investments (Note 3)
Net realized gain (loss) on:
Investments .................................................... 4,190,242
Futures ........................................................ 186,698
Short sales .................................................... (4,534,974)
--------------
(158,034)
--------------
Net change in unrealized appreciation
(depreciation) on:
Investments .................................................... 16,797,131
Futures ........................................................ 732,424
Short sales .................................................... (814,214)
--------------
16,715,341
--------------
Net gain on investments ........................................ 16,557,307
--------------
Net Increase In Net Assets Resulting
from Operations ................................................ $30,279,965
==============
See Notes to Financial Statements.
8
<PAGE>
(Right Column)
- ------------------------------------------------------------------------------
The BlackRock 1999 Term Trust Inc.
Statement of Cash Flows
Year Ended December 31, 1995
- ------------------------------------------------------------------------------
Increase (Decrease) in Cash
Cash flows provided by operating activities:
Interest received .............................................. $23,959,646
Operating expenses paid and excise taxes ....................... (1,558,709)
Interest expense paid .......................................... (7,327,093)
Purchase of short-term portfolio
investments, net ............................................. (1,464,766)
Purchase of long-term portfolio investments .................... (542,266,819)
Proceeds from disposition of long-term
portfolio investments ........................................ 525,369,452
Variation margin on futures .................................... 842,965
Other .......................................................... 68,317
--------------
Net cash flows provided by operating activities ................ (2,377,007)
--------------
Cash flows used for financing activities:
Increase in reverse repurchase agreements ................... 13,417,752
Cash dividends paid ............................................ (11,314,572)
--------------
Net cash flows used for financing activities ................. 2,103,180
--------------
Net decrease in cash ............................................ (273,827)
Cash at beginning of year ....................................... 278,271
--------------
Cash at end of year .............................................. $ 4,444
==============
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 ............................................... $30,279,965
--------------
Increase in investments .......................................... (10,890,203)
Net realized loss ................................................ 158,034
Increase in unrealized appreciation .......................... (16,715,341)
Increase in interest receivable ................................ (1,300,956)
Decrease in receivable for investments sold ..................... 24,146,888
Decrease in deposits with brokers for short sales ................ 24,292,750
Increase in variation margin ................................... (76,157)
Decrease in other assets ....................................... 44,836
Decrease in securities sold short .............................. (23,876,020)
Decrease in payable for investments purchased ................ (28,186,235)
Decrease in interest payable ................................... (279,541)
Increase in accrued expenses and other liabilities ............... 24,973
--------------
Total adjustments ............................................... (32,656,972)
--------------
Net cash flows provided by operating activities .................. (2,377,007)
--------------
(Right column
- -------------------------------------------------------------------------------
The BlackRock 1999 Term Trust Inc.
Statements of Changes
in Net Assets
- -------------------------------------------------------------------------------
Year Ended December 31,
----------------------------
1995 1994
Increase (Decrease)
in Net Assets
Operations:
Net investment income ............................$ 13,722,658 $ 15,507,187
Net realized loss on
investments, futures and
short sales .................................... (158,034) (1,893,949)
Net change in unrealized
appreciation (depreciation)
on investments, futures and
short sales .................................... 16,715,341 (18,203,510)
------------- -----------
Net increase (decrease) in
net assets resulting from
operations ..................................... 30,279,965 (4,590,272)
Dividends from net investment
income ......................................... (11,886,169) (13,616,371)
------------- -----------
Total increase (decrease) ........................ 18,393,796 (18,206,643)
Net Assets
Beginning of year ................................ 181,919,009 200,125,652
------------- -----------
End of year ...................................... $200,312,805 $181,919,009
============= ===========
See Notes to Financial Statements.
9
<PAGE>
- -------------------------------------------------------------------------------
The BlackRock 1999 Term Trust Inc.
Financial Highlights
- -------------------------------------------------------------------------------
December 23,
*1992*
Through
December 31,
1995 1994 1993 1992
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of period ......... $ 8.42 $ 9.26 $ 9.40 $ 9.45
Net investment income
(net of $.33, $.15, $.01
and $.00, respectively, of
interest expense) ........... .63 .72 .73 .01
Net realized and unrealized
gain (loss) on investments .. .77 (.93) (.19) (.02)
Net increase (decrease)
from investment
operations .................. 1.40 (.21) .54 (.01)
Dividends from net
investment income ........... (.55) (.63) (.68) -
Capital charge with respect
to issuance of shares ....... - - - (.04)
Net asset value,
end of period** ............. $ 9.27 $ 8.42 $ 9.26 $ 9.40#
Market value, end of period** . $ 8.13 $ 7.50 $ 9.50 $ 10.00
TOTAL INVESTMENT RETURN+ ...... 15.25% (14.88%) 1.74% 5.82%
RATIOS TO AVERAGE NET ASSETS:
Operating expenses@ ........... .74% 0.71% 0.79% 0.91%(d)(d)
Net investment income ......... 7.12% 8.17% 7.74% 3.35%(d)(d)
SUPPLEMENTAL DATA:
Average net assets
(in thousand ................ $192,717 $189,828 $202,158 $178,963
Portfolio turnover ............ 165% 109% 62% 0%
Net assets, end of period
(in thousands) .............. $200,313 $181,919 $200,126 $178,629
Reverse repurchase
agreements outstanding,
end of period
(in thousands) .............. $ 92,861 $ 79,443 $ 47,100 -
Asset coverage(d)(d)(d) ....... $ 3,157 $ 3,290 $ 5,249 -
- -------------
*Commencement of investment operations.
**Net asset value and market value published in The Wall Street Journal
each Monday.
#Net asset value immediately after the closing of the first public
offering was $9.41.
@The ratios of expenses, including excise tax, to average net assets
were 0.81%, 0.74%, 0.79%, and 0.91% 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 each 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 return for periods of less than one full year are not
annualized.
++Annualized.
+++Per $1,000 of reverse repurchase agreement outstanding.
The information above represents the audited operating performance data
for a share of common stock outstanding, total investment return,
ratios to average net assets and other supplemental data for each
of the 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 Column)
- ------------------------------------------------------------------------------
The BlackRock 1999 Term Trust Inc.
Notes to Financial Statements
- ------------------------------------------------------------------------------
Note 1. Accounting Policies
The BlackRock 1999 Term Trust Inc. (the "Trust"), a Maryland corporation is a
diversified closed-end management investment company.
The investment objective of the Trust is to manage a portfolio of investment
grade fixed income securities that will return $10 per share (the initial public
offering price per share) to investors on or about December 31, 1999 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 determine 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
(Right Column)
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.
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
11
<PAGE>
(Right Column)
from (or cost of) the closing transaction and the Trust's basis in the contract.
Financial futures contracts, when used by the Trust, help in maintaining a
targeted duration. Duration is a measure of the price sensitivity of a security
or a portfolio to relative changes in interest rates. For instance, a duration
of "one" means that a portfolio'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 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
(Right Column)
termination of a short sale if the market price is greater or less than the
proceeds originally received.
Securities Lending: The Trust may lend its portfolio securities to qualified
institutions. The loans are secured by collateral at least equal, at all times,
to the market value of the securities loaned. The Trust may bear the risk of
delay in recovery of, or even loss of rights in, the securities loaned should
the borrower of the securities fail financially. The Trust receives compensation
for lending its securities in the 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 its tax planning
strategy, the Trust may retain a portion of its taxable income and pay an excise
tax on the undistributed amounts.
Dividends and Distributions: The Trust declares and pays dividends and
distributions monthly, first from net investment income then from net realized
short-term capital gains and other sources, if necessary. Net long-term capital
gains, if any, in excess of loss carryforwards are distributed at least
annually. Dividends and distributions are recorded on the ex-dividend date.
Reclassification of Capital Accounts: The Trust accounts for and reports
distributions to shareholders in accordance with the A.I.C.P.A.'s Statement of
Position 93-2: Determination, Disclosure, and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distributions by Investment
Companies. The effect caused by applying this statement was to decrease paid-in
capital and increase undistributed net investment income by $130,730 due to
certain expenses not being deducted for tax purposes. Net investment income, net
realized gains and net assets were not affected by this change.
12
<PAGE>
(Left Column)
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 the Adviser and an
Administration Agreement with Prudential Mutual Fund Management, Inc. ("PMF"),
an indirect, wholly-owned subsidiary of The Prudential Insurance Co. of America.
The investment advisory fee paid to the Adviser is computed weekly and
payable monthly at an annual rate of 0.40% of the Trust's average weekly net
assets. The administration fee paid to PMF is also computed weekly and payable
monthly at an annual rate of 0.10% of the Trust's average weekly net assets.
Pursuant to the agreements, the Adviser provides continuous supervision of
the investment portfolio and pays the compensation of officers of the Trust who
are affiliated persons of the Adviser. PMF pays occupancy and certain clerical
and accounting costs of the Trust. The Trust bears all other costs and expenses.
On February 28, 1995, the 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 investments
and dollar rolls, for the year ended December 31, 1995 aggregated $514,080,584
and $487,698,160, respectively.
The Trust may invest up to 40% of its total assets in securities which are
not readily marketable, including those which are restricted as to disposition
under securities law ("restricted securities"). At December 31, 1995, the Trust
held 0.1% of its portfolio in illiquid securities.
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 depreciation for federal income tax purposes was
$196,660 (gross unrealized appreciation-$4,873,244; gross unrealized
depreciation-$5,069,904).
(Right Column)
For federal income tax purposes, the Trust had a capital loss carryforward
at December 31, 1995 of approximately $6,269,000 of which $4,284,000 expires in
2001 and $1,985,000 expires in 2002. Such carryforward amount is after
realization of approximately $574,000 in taxable gains recognized during the
year ended December 31, 1995. Accordingly, no capital gains distribution is
expected to be paid to shareholders until net gains have been realized in excess
of such amounts.
During the year ended December 31, 1995, the Trust entered into financial
futures contracts. Details of open futures at December 31, 1995 are as follows:
Value at Value at
Number of Expiration Trade December 31, Unrealized
Contracts Type Date Date 1995 Appreciation
- --------- ---- ---------- -------- ------------ ------------
Long
positions:
30 yr. Mar.
340 T-Bond 1996 $40,658,073 $41,299,375 $641,302
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 transaction, including accrued interest.
The average daily balance of reverse repurchase agreements outstanding
during the year ended December 31, 1995 was approximately $91,019,000 at a
weighted average interest rate of approximately 5.85%. The maximum amount of
reverse repurchase agreements outstanding at any month-end during the year ended
December 31, 1995 was $100,769,063 as of October 31, 1995 which was 30% of total
assets. The amount of reverse repurchase agreements outstanding at December 31,
1995 was $92,861,125, which was 30% 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
13
<PAGE>
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 $1,037,903. The maximum amount of
dollar rolls outstanding at any month-end during the year ended December 31,
1995 was $4,176,117 as of January 31, 1995 which was 1.3% of total assets.
Note 5. Capital
There are 200 million shares of $.01 par value common stock authorized. Of the
21,610,583 shares outstanding at December 31, 1995, the Adviser owned 10,583
shares.
Note 6. Dividends
Subsequent to December 31, 1995 the Board of Directors of the Trust declared a
dividend from undistributed earnings of $0.0375 per share payable February 29,
1996 to shareholders of record on February 15, 1996.
Note 7. Quarterly Data
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and Net Increase (decrease)
unrealized in net assets
Net investment gains (losses) resulting from Period end
Quarterly Total income on investments operations Dividends and Distributions Share prices 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> <C>
January 1,
1994 to
March 31,
1994 $5,061,149 $3,185,142 $0.15 $(8,872,649) $(0.41) $(5,687,507) $(0.26) $3,801,288 $0.17 $9-7/8 $8-1/8 $8.82
April 1,
1994 to
June 30,
1994 3,785,060 4,945,496 0.23 (5,482,576) (0.26) (537,080) (0.03) 3,403,668 0.16 9 8-1/8 8.64
July 1,
1994 to
September
30, 1994 3,461,494 3,131,396 0.14 (513,910) (0.02) 2,617,486 0.12 3,304,684 0.15 8-5/8 7-5/8 8.59
October 1,
1994 to
December
31, 1994 4,596,543 4,245,153 0.20 (5,228,324) (0.24) (983,171) (0.04) 3,106,731 0.15 8-1/8 7-1/8 8.42
January 1,
1995 to
March 31,
1995 3,703,131 2,529,371 0.12 7,632,725 0.35 10,162,096 0.47 3,106,725 0.14 8-3/8 7-3/8 8.74
April 1,
1995 to
June 30,
1995 3,230,192 3,702,625 0.17 4,453,014 0.21 8,155,639 0.38 3,106,738 0.15 9 7-7/8 8.98
July 1,
1995 to
September
30, 1995 3,679,565 3,368,830 0.15 1,661,736 0.08 5,030,566 0.23 2,431,144 0.11 8-1/4 7-3/4 9.10
October 1,
1995 to
December
31, 1995 4,669,971 4,121,832 0.19 2,809,832 0.13 6,931,664 0.32 3,241,562 0.15 8-3/8 8 9.27
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
- -------------------------------------------------------------------------------
THE BLACKROCK 1999 TERM TRUST, INC.
REPORT OF INDEPENDENT AUDITORS
- -------------------------------------------------------------------------------
The Shareholders and
Board of Directors of
The BlackRock 1999 Term Trust Inc.:
We have audited the accompanying statement of assets and liabilities of The
BlackRock 1999 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 in the statement 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 December 23, 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 financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 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 1999
Term Trust Inc. as of December 31, 1995, 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 1999 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 the fiscal year ended December 31, 1995, the Trust paid dividends of
$0.5500 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 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 will be 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 transfer agent, as
dividend disbursing agent.
The Plan Agent serves as agent for the shareholders in administering the Plan.
After the Trust declares a dividend or determines to make a capital gain
distribution, the Plan Agent will, as agent for the participants, receive the
cash payment and use it to buy Trust shares in the open market, on the New York
Stock Exchange or elsewhere, for the participants' accounts. The Trust will not
issue any new shares in connection with the Plan.
Participants in the Plan may withdraw from the Plan upon written notice to the
Plan Agent and will receive certificates for whole Trust shares and a cash
payment will be made for any fraction of a Trust share.
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. The automatic reinvestment of dividends and distributions
will not relieve participants of any federal, state or local income taxes that
may be payable on such dividends or distributions.
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 addresses are on the front of
this report.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------
There have been no material changes in the investment objectives 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.
16
<PAGE>
- -------------------------------------------------------------------------------
THE BLACKROCK 1999 TERM TRUST INC.
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
The Trust's Investment Objective
The Trust's investment objective is to manage a portfolio of investment grade
fixed income securities that will return $10 per share (the initial public
offering price per share) to investors on or about December 31, 1999 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 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 twelfth 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 1999. 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
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
17
<PAGE>
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.
How Are the Trust's Shares Purchased and Sold? Does the Trust Pay Dividends
Regularly?
The Trust's shares are traded on the New York Stock Exchange which provides
investors with liquidity on a daily basis. Orders to buy or sell shares of the
Trust must be placed through a registered broker or financial advisor. The Trust
pays monthly dividends which are typically paid on the last business day of the
month. For shares held in the shareholder's name, dividends may be reinvested in
additional shares of the fund through the Trust's transfer agent, Boston
Financial Data Services. Investors who wish to hold shares in a brokerage
account should check with their financial advisor to determine whether their
brokerage firm offers dividend reinvestment services.
Leverage Considerations in a Term Trust
Under current market conditions, leverage increases the income earned by the
Trust. The Trust employs leverage primarily through the use of reverse
repurchase agreements and dollar rolls. Leverage permits the Trust to borrow
money at short-term rates and reinvest that money in longer-term assets which
typically offer higher interest rates. The difference between the cost of the
borrowed funds and the income earned on the proceeds that are invested in longer
term assets is the benefit to the Trust from leverage. In general, the portfolio
is typically leveraged at approximately 33-1/3% of total assets.
Leverage also increases the duration (or price volatility of the net assets) of
the Trust, which can improve the performance of the fund in a declining rate
environment, but can cause net assets to decline faster than the market in a
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 cashflow 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 total 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
marketprice.
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THE BLACKROCK 1999 TERM TRUST INC.
GLOSSARY
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Adjustable Rate Mortgage-
Backed Securities (ARMs): Mortgage instruments with interest rates that adjust at periodic intervals at a fixed amount over
the market levels of interest rates as reflected in specified indexes. ARMS are backed by mortgage
loans secured by real property.
Asset-Backed Securities: Securities backed by various types of receivables such as automobile and credit card receivables.
Closed-End Fund: Investment vehicle which initially offers a fixed number of shares and trades on a stock exchange.
The fund invests in a portfolio of securities in accordance with its stated investment objectives
and policies.
Collateralized
Mortgage Obligations (CMOs): Mortgage-backed securities which separate mortgage pools into short-, medium-, and long-term
securities with different priorities for receipt of principal and interest. Each class is paid a
fixed or floating rate of interest at regular intervals. Also known as multiple-class mortgage
pass-throughs.
Discount: When a fund's net asset value is greater than its stock price the fund is said to be trading at a
discount.
Dividend: This is income generated by securities in a portfolio and distributed to shareholders after the
deduction of expenses. This Trust declares and pays dividends on a monthly basis.
Dividend Reinvestment: Shareholders may elect to have all distributions of dividends and capital gains automatically
reinvested into additional shares of the Trust.
FHA: Federal Housing Administration, a government agency that facilitates a secondary mortgage market by
providing an agency that guarantees timely payment of interest and principal on mortgages.
FHLMC: Federal Home Loan Mortgage Corporation, a publicly owned, federally chartered corporation that
facilitates a secondary mortgage market by purchasing mortgages from lenders such as savings
institutions and reselling them to investors by means of mortgage-backed securities. Obligations of
FHLMC are not guaranteed by the U.S. government, however; they are backed by FHLMC's authority to
borrow from the U.S. government. Also known as Freddie Mac.
FNMA: Federal National Mortgage Association, a publicly owned, federally chartered corporation that
facilitates a secondary mortgage market by purchasing mortgages from lenders such as savings
institutions and reselling them to investors by means of mortgage-backed securities. Obligations of
FNMA are not guaranteed by the U.S. government, however; they are backed by FNMA's authority to
borrow from the U.S. government. Also known as Fannie Mae.
GNMA: Government National Mortgage Association, a government agency that facilitates a secondary mortgage
market by providing an agency that guarantees timely payment of interest and principal on
mortgages. GNMA's obligations are supported by the full faith and credit of the U.S. Treasury. Also
known as Ginnie Mae.
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).
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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.
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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 Symbol Maturity
------------ --------
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 Symbol Maturity
------------ --------
The BlackRock Investment Quality
Municipal Trust Inc. BKN N/A
The BlackRock California Investment
Quality Municipal Trust Inc. RAA N/A
The BlackRock Florida Investment
Quality Municipal Trust RFA N/A
The BlackRock New Jersey Investment
Quality Municipal Trust Inc. RNJ N/A
The BlackRock New York Investment
Quality Municipal Trust Inc. RNY N/A
Term Trusts
The BlackRock Municipal Target Term Trust Inc. BMN 12/06
The BlackRock Insured Municipal
2008 Term Trust Inc. BRM 12/08
The BlackRock California Insured
Municipal 2008 Term Trust Inc. BFC 12/08
The BlackRock Florida Insured
Municipal 2008 Term Trust BRF 12/08
The BlackRock New York Insured
Municipal 2008 Term Trust Inc. BLN 12/08
The BlackRock Insured Municipal Term Trust Inc. BMT 12/10
If you would like further information,
please call BlackRock at (800) 227-7BFM (7236)
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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 traded either on 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 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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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 H. Sabath, Secretary
Investment Adviser
BlackRock Financial Management, Inc.
345 Park Avenue
New York, NY 10154
(800) 227-7BFM
Administrator
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Custodian and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
(800) 699-1BFM
Independent Auditors
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1434
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
This report is for shareholder information.
This is not a prospectus intended for use in the
purchase or sale of any securities.
The BlackRock 1999 Term Trust Inc.
c/o Prudential Mutual Fund Management, Inc.
32nd Floor
One Seaport Plaza
New York, NY 10292
(800) 227-7BFM
09247T-10-0
The BlackRock
1999 Term
Trust Inc.
- -----------------------------
Annual Report
December 31, 1995
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