-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WV91TntkYwJJBCS5CMgaYLD1M5ec/aNjLee/YyjGISYlKBFwEEVU9j63yK/JwPAZ JiPCBVtX+58Y3ZzqTO4jMg== 0000930413-02-002164.txt : 20020628 0000930413-02-002164.hdr.sgml : 20020628 20020628131809 ACCESSION NUMBER: 0000930413-02-002164 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020430 FILED AS OF DATE: 20020628 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLACKROCK CORE BOND TRUST CENTRAL INDEX KEY: 0001160864 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-10543 FILM NUMBER: 02690841 BUSINESS ADDRESS: STREET 1: 345 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10154 BUSINESS PHONE: 2127545300 N-30D 1 c23866_n30d-.txt SEMI-ANNUAL REPORT - -------------------------------------------------------------------------------- BLACKROCK CORE BOND TRUST SEMI-ANNUAL REPORT TO SHAREHOLDERS REPORT OF INVESTMENT ADVISOR - -------------------------------------------------------------------------------- May 31, 2002 Dear Shareholder: With an economy looking to find secure footing, volatility was widespread through the overall marketplace for the semi-annual period. After the events of September 11th, investors flocked to the bond market in search of stability. However, at the onset of the period, returns in the fixed income markets were depressed as strong consumer and military spending indicated the potential for an economic recovery. Fluctuations continued into 2002 as bonds posted strong returns during the first two months of the new year. In the closing days of March, fixed income securities reversed their positive trend only to once again rally during April. For the six months ended April 30, 2002, the LEHMAN BROTHERS AGGREGATE INDEX, a broad measure of the taxable bond market, finished relatively flat at -0.01%.* Much of the activity in the market can be attributed to the actions of the Federal Reserve Board (the "Fed"). After eleven rate reductions in 2001, the Fed ended its accommodative monetary policy in the first quarter to assess the impact of 4.75% of monetary stimulus on the economy. While this was an acknowledgement that the country is in the early stages of economic recovery, it also signaled that rates might rise on the belief that a comeback in inflation poses the same risk as further economic weakness. In March, fixed income markets suffered following the Fed's decision to leave rates unchanged, which led the investment community to anticipate an economy in the early stages of recovery. Looking broadly at the fixed income market, mortgage-backed securities provided strong returns as fears of rising interest rates reduced the volume of prepayments as the speed of mortgage refinancings decreased. Corporate bonds experienced mixed returns over the period as concerns surrounding corporate earnings and accounting practices increased the event risk within that sector and impeded returns. In the wake of Enron's collapse, many companies have now begun to reduce their debt and increase credit quality. Longer-term U.S. Government bond prices (which move in the opposite direction from yields) lagged during the period with more promising economic data emerging throughout the period. However, towards the latter part of the period, we believed Treasuries were attractively priced and that rates should fall, barring a robust economic recovery. Closing out the period, despite rising unemployment numbers in April, U.S. manufacturing, measured by the ISM (Institute for Supply Management) Index, remained at expansionary levels while retail sales continued to grow. Inflation levels remained relatively benign and low inventory levels should continue to support the manufacturing data. However, we are skeptical about the continued strength of consumer demand, which is essential to a sustained economic recovery. The fluctuations seen in the bond market over the last six months reemphasize the need for investors to develop a strategy that best suits their overall goals and risk tolerance. Working with a financial advisor is one of the best means of doing this and we encourage you to consult one when making an investment. The semi-annual report includes a summary of market conditions over the period, a review of the strategy employed by your Trust's portfolio managers, the Trust's unaudited financial statements and a listing of the portfolio's holdings. We encourage you to read the report and we thank you for making BlackRock part of your investment program. Sincerely, /s/ Laurence D. Fink /s/ Ralph L. Schlosstein Laurence D. Fink Ralph L. Schlosstein Chairman President - ---------- * The Lehman Brothers Aggregate Index is used to measure the performance of the U.S. investment grade fixed rate bond market. The Index is unmanaged and cannot be purchased directly. 1 May 31, 2002 Dear Shareholder: We are pleased to present the first unaudited semi-annual report for the BlackRock Core Bond Trust (the "Trust") for the period ended April 30, 2002. We would like to take this opportunity to review the Trust's stock price and net asset value (NAV) performance, summarize market developments and discuss recent portfolio management activity. The Trust is a diversified, actively managed closed-end bond fund whose shares are traded on the New York Stock Exchange under the symbol "BHK". The Trust's investment objective is to provide current income and capital appreciation. The Trust seeks this objective by investing primarily in a diversified portfolio of investment grade debt securities. The Trust's fixed income investments will include a broad range of debt securities, including corporate bonds, US government and agency securities and mortgage-related securities. The Trust will invest at least 75% of its total managed assets in debt securities that at the time of investment are investment grade quality. Investment grade quality bonds are bonds rated within the four highest grades (Baa or BBB or better by Moody's Investors Service, Inc. (Moody's), Standard & Poors Ratings Group (S&P), Fitch IBCA, Inc. (Fitch) or another nationally recognized rating agency, or bonds that are unrated but judged to be comparable quality by the Trust's investment advisor and/or sub-advisor. The Trust may invest its remaining assets in high yield debt securities that at the time of investment are rated Ba/BB or below by Moody's, S&P or Fitch or bonds that are unrated but judged to be of comparable quality by the Trust's investment advisor and sub-advisor. The Trust may invest up to 10% of its total managed assets in debt securities issued in foreign currencies. The table below summarizes the Trust's period ended and the high and low share prices and net asset value since inception: ----------------------------------- 4/30/02 HIGH LOW - ---------------------------------------------------------------- SHARE PRICE $13.96 $15.07 $13.00 - ---------------------------------------------------------------- NET ASSET VALUE (NAV) $14.19 $14.42 $13.78 - ---------------------------------------------------------------- 10-YEAR U.S. TREASURY NOTE 5.09% 5.43% 4.18% - ---------------------------------------------------------------- THE FIXED INCOME MARKETS Economic performance was mixed during the semi-annual period although increasingly positive economic data surfaced as time progressed. The U.S. economy showed signs of a rebound on the heels of strong consumer and military spending, which helped to overcome the devastation of September 11th. The Fed also provided further monetary stimulus by cutting interest rates two additional times prior to year-end, leaving the federal funds rate at 1.75%. This was in addition to nine previous interest rate reductions by the Fed during 2001. The Consumer Confidence Index initially reached its lowest level in eight years during November, but marked a steady climb during the remainder of the period as investors readily anticipated an economic recovery. The economy continued to see increasingly optimistic data emerge throughout the first quarter of 2002. Gross Domestic Product ("GDP") during the first quarter rose 5.6%, the fastest rate in two years, and the manufacturing sector saw substantial gains as the Purchasing Managers Index indicated expansion for the first time in 19 months. Although productivity increased 8.6% during the first quarter, unemployment in April reached 6.0%. However, the unexpectedly high unemployment number is believed to be a result of recent legislation prompting many to apply for extended benefits. After surprising growth in the first quarter of 2002, the fixed income markets came under pressure following the March 19th announcement by the Federal Open Market Committee ("FOMC") to leave rates steady, citing a bias shift from "potential weakness" to "neutral." The equity markets did not significantly benefit from the emergence of the strong growth indicators as they were challenged by several high profile bankruptcies. Closing out the period, April saw the largest advancement in retail sales in six months and inflationary pressures remain relatively in check. However, concerns regarding the corporate environment and violence in the Middle East and Asia have left many investors apprehensive about the markets. Going forward, although low inventory levels should continue to provide support for manufacturing data, concerns exist surrounding the long-term strength of the highly leveraged consumer. Following a steepening of the yield curve throughout the majority of 2001, yields over the period trended higher causing the curve to flatten. Signs of a recovering economy caused yields to rise in sympathy with expectations of a higher fed funds rate by year-end. The 5- to 10-year portion of the yield curve came under the most pressure, rising 93 and 86 basis points, respectively, during the period. Yields on 2- and 30-year maturities also suffered during the period rising 80 and 72 basis points, respectively. After struggling following the FOMC's announcement of a bias shift in March, Treasuries bounced back in April. April's performance was driven by economic pessimism, which surfaced as enthusiasm for a rapid economic recovery waned amidst tensions in the Middle East, cautious corporate earnings announcements and government reports of a slower growth pattern. Looking ahead, a budget surplus of only $78 billion and a 30% decline in tax revenues for 2001 has caused Treasury finances to deteriorate sharply and should result in larger auction sizes. However, the allowable debt limit set by 2 Congress will soon be reached, possibly leading the Treasury to pursue additional methods of financing. As of April 30, 2002, the 10-year Treasury was yielding 5.09% versus 4.23% on October 31, 2001. For the period, the LEHMAN BROTHERS MORTGAGE INDEX returned 1.57% versus - -0.01% for the LEHMAN BROTHERS AGGREGATE INDEX. Mortgages saw poor performance during the first two months of the period as prepayments increased dramatically and the volume of refinancing reached record levels. The first quarter of 2002 fared much better for mortgage-backed securities, which benefited from reduced volatility and increased demand. During the first three months of 2002, refinancing activity, as measured by the MBAA Refinance Index, declined 78% from the all-time high it reached in November, helping mortgages to outperform Treasuries by 1.14% on a duration adjusted basis. Although lower coupon mortgages outperformed during November and December, decreased volatility in 2002 allowed higher coupons to outperform lower coupon issues year-to-date. Prepayments are expected to remain elevated for several months as over 25% of the mortgage coupons outstanding have an incentive to refinance. Despite increasing discussions of reform initiatives that could potentially affect FNMA and FHLMC, there has been little impact on their performance. For the semi-annual period, the LEHMAN BROTHERS U.S. CREDIT INDEX returned - -0.45% versus -0.01% for the LEHMAN BROTHERS AGGREGATE INDEX. No clear pattern emerged in the corporate sector, as there was great disparity in returns among sub-sectors and individual names. The market suffered from accusations regarding accounting irregularities, earnings quality issues, off-balance sheet financing risks, and volatile equity and Treasury markets. For the period, higher quality intermediate maturity bonds outperformed lower quality investment grade issues. Following record gross new issuance of $587 billion in 2001, market expectations for supply in 2002 are lower due to reductions in capital expenditure, declining global mergers and acquisitions and a lower level of overall economic activity. Escalated accounting concerns have prompted rating agencies to consider harsher standards and have led to increasing downgrades relative to upgrades. Some firms, under widespread scrutiny, have begun to provide more transparency, which should gradually improve corporate fundamentals. Corporates suffered over the final month of the period as individual credit issues have caused some contagion, and many corporations have found they have little pricing power, which will pressure future profits. THE TRUST'S PORTFOLIO AND INVESTMENT STRATEGY BlackRock actively manages the Trust's portfolio holdings consistent with BlackRock's overall market outlook and the Trust's investment objectives. Additionally, the Trust employs leverage to enhance its income by borrowing at short-term rates and investing the proceeds in longer maturity issues that have higher yields. The degree to which the Trust can benefit from its use of leverage may affect its ability to pay monthly income. The Trust had a large overweight in AAA securities as the portfolio was very cautious on investment grade corporates. The portfolio focused on liquid, high quality corporates with strong credit fundamentals in response to a challenging corporate market filled with accusations of accounting irregularities, earnings quality issues and off-balance sheet financing risks. The portfolio did maintain some high yield exposure, but focused on the higher part of the credit spectrum in the high yield universe, investing in only credits rated CCC or higher. The following chart shows the Trust's current credit quality allocations: ------------------------------------------------------------------- BLACKROCK CORE BOND TRUST ------------------------------------------------------------------- CREDIT RATING* APRIL 30, 2002 ------------------------------------------------------------------- AAA/Aaa 63% ------------------------------------------------------------------- AA/Aa 1% ------------------------------------------------------------------- A/A 9% ------------------------------------------------------------------- BBB/Baa 7% ------------------------------------------------------------------- BB/Ba 5% ------------------------------------------------------------------- B/B 14% ------------------------------------------------------------------- CCC/Caa 1% ------------------------------------------------------------------- - ---------- * Using the higher of Standard &Poor's, Moody's or Fitch's rating. 3 We look forward to continuing to manage the Trust to benefit from the opportunities available to investors in the fixed income market. We thank you for your investment and continued interest in the BlackRock Core Bond Trust, Inc. Please feel free to call our marketing center at (800) 227-7BFM (7236) if you have any specific questions which were not addressed in this report. Sincerely, /s/ Robert S. Kapito /s/ Michael P. Lustig Robert S. Kapito Michael P. Lustig Vice Chairman and Portfolio Manager Managing Director and Portfolio Manager - -------------------------------------------------------------------------------- BLACKROCK CORE BOND TRUST - -------------------------------------------------------------------------------- Symbol on New York Stock Exchange: BHK - -------------------------------------------------------------------------------- Initial Offering Date: November 27, 2001 - -------------------------------------------------------------------------------- Closing Share Price as of 4/30/02: $13.96 - -------------------------------------------------------------------------------- Net Asset Value as of 4/30/02: $14.19 - -------------------------------------------------------------------------------- Yield on Closing Share Price as of 4/30/02 ($13.96)(1): 8.60% - -------------------------------------------------------------------------------- Current Monthly Distribution per Share(2): $ 0.100 - -------------------------------------------------------------------------------- Current Annualized Distribution per Share(2): $ 1.200 - -------------------------------------------------------------------------------- - ---------- (1) Yield on closing share price is calculated by dividing the current annualized distribution per share by the closing share price. (2) The distribution is not constant and is subject to change. PRIVACY PRINCIPLES OF THE TRUST The Trust is committed to maintaining the privacy of shareholders and to safeguarding its non-public personal information. The following information is provided to help you understand what personal information the Trust collects, how we protect that information and why, in certain cases, we may share information with select other parties. Generally, the Trust does not receive any non-public personal information relating to its shareholders, although certain nonpublic personal information of its shareholders may become available to the Trust. The Trust does not disclose any non-public personal information about its shareholders or former shareholders to anyone, except as permitted by law or as is necessary in order to service shareholder accounts (for example, to a transfer agent or third party administrator). The Trust restricts access to non-public personal information about the shareholders to BlackRock employees with a legitimate business need for the information. The Trust maintains physical, electronic and procedural safeguards designed to protect the non-public personal information of its shareholders. 4 - -------------------------------------------------------------------------------- BLACKROCK CORE BOND TRUST PORTFOLIO OF INVESTMENTS APRIL 30, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE RATING* (000) DESCRIPTION (NOTE 1) - -------------------------------------------------------------------------------- LONG-TERM INVESTMENTS--152.2% MORTGAGE PASS-THROUGHS--49.7% $ 2,900 Federal Home Loan Mortgage Corp., 5.25%, 1/15/06 ............................... $ 2,981,548 Federal National Mortgage Association, TBA, 96,000 6.00%, 5/16/17 ............................... 97,260,000 89,000 6.50%, 5/13/32 ............................... 90,056,875 ----------- 190,298,423 ----------- U.S GOVERNMENT AND AGENCY SECURITIES--40.0% U.S. Treasury Bonds, 13,630 8.00%, 11/15/21 .............................. 17,261,168 4,350 8.125%, 8/15/19 .............................. 5,503,446 1,905 8.50%, 2/15/20 ............................... 2,496,145 24,990 9.25%, 2/15/16 ............................... 33,794,977 3,730 10.375%, 11/15/12 ............................ 4,728,930 U.S. Treasury Notes, 19,905 3.375%, 4/30/04 .............................. 19,954,763 45,290+ 3.50%, 11/15/06 .............................. 43,605,665 3,715+ 4.875%, 2/15/12 .............................. 3,651,734 19,940 5.75%, 11/15/05 .............................. 21,024,138 1,360 6.125%, 8/15/07 .............................. 1,455,622 ----------- 153,476,588 ----------- CORPORATE BONDS--60.7% AERO & DEFENSE--2.3% B 3,000 Be Aerospace, Inc., Sr. Sub. Note, Ser. B, 8.00%, 3/01/08 ............................... 2,820,000 Lockheed Martin Corp., BBB 1,000 7.25%, 5/15/06 ............................... 1,066,003 BBB 2,250 8.20%, 12/01/09 .............................. 2,527,123 Northrop Grumman Corp., BBB- 380 7.125%, 2/15/11 .............................. 388,951 BBB- 250 7.75%, 2/15/31 ............................... 260,445 BBB- 2,000 Raytheon Co., 6.55%, 3/15/10 ............................... 1,985,120 ------------ 9,047,642 ------------ AUTOMOTIVE--1.9% B1 3,000 Collins & Aikman Prods Co., Sr. Note, 10.75%, 12/31/11** ........................... 3,127,500 A3 1,350 Daimler Chrysler North America Corp., 7.375%, 9/15/06 .............................. 1,417,327 B 3,000 Delco Remy International, Inc., Sr. Sub. Note, 11.00%, 5/01/09 ............... 2,760,000 ------------ 7,304,827 ------------ BEVERAGE & TOBACCO--0.8% B 3,000 National Wine & Spirits, Inc., Sr. Note, 10.125%, 1/15/09 ............................. 3,105,000 ------------ CABLE TV--2.1% B3 3,000 Adelphia Communications Corp., Sr. Note, Ser. B, 9.875%, 3/01/07 .............................. 2,565,000 B+ 4,000 Charter Communications Holdings, Sr. Note, 0.75%, 10/01/09 .............................. 3,980,000 BBB 1,500 Comcast Cable Communications, Inc., Sr. Note, 6.875%, 6/15/09 .............................. 1,499,252 ------------ 8,044,252 ------------ CHEMICAL--2.9% B2 3,000 Avecia Group PLC, 11.00%, 7/01/09 .............................. 3,135,000 Dow Chemical Co., A 600 5.75%, 12/15/08 .............................. 586,763 A 20 7.375%, 11/01/29 ............................. 20,671 BB 4,000 Lyondell Chemical Co., Sr. Secured Note, 9.50%, 12/15/08** ............................ 3,920,000 B 3,000 Resolution Performance Products, Inc., Sr. Sub. Note, 13.50%, 11/15/10 ............................. 3,386,250 ------------ 11,048,684 ------------ CLOTHING & TEXTILES--0.7% BB- 3,000 Levi Strauss & Co., 6.80%, 11/01/03 .............................. 2,940,000 ------------ CONGLOMERATES--0.9% A 550 Honeywell International, Inc., 7.50%, 3/01/10 ............................... 597,585 Tyco International Group SA, BBB 260 6.125%, 1/15/09 .............................. 208,000 BBB 430 6.375%, 2/15/06 .............................. 361,200 BBB 1,050 6.75%, 2/15/11 ............................... 813,750 A+ 1,250 United Technologies Corp., 56.35%, 3/01/11 .............................. 1,280,142 ------------ 3,260,677 ------------ CONSUMER PRODUCTS--1.6% BB+ 3,000 American Greetings Corp., Sr. Sub. Note, 11.75%, 7/15/08 .............................. 3,225,000 B+ 3,000 Elizabeth Arden, Inc., Sr. Secured Note, Ser. B, 11.75%, 2/01/11 ...................... 3,000,000 ------------ 6,225,000 ------------ ECOLOGICAL SERVICES & EQUIP.--1.3% B+ 5,000 Allied Waste North America, Inc., Ser. B, 10.00%, 8/01/09 .............................. 5,150,000 ------------ See Notes to Financial Statements. 5 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE RATING* (000) DESCRIPTION (NOTE 1) - -------------------------------------------------------------------------------- ELECTRONICS--0.6% CCC+ $ 2,500 Knowles Electronics Holdings, Inc., Sr. Sub. Note, 13.125%, 10/15/09 ............................ $ 2,162,500 ------------ ENERGY--3.1% BBB 1,475 Amerada Hess Corp., 5.90%, 8/15/06 ............................... 1,493,827 BBB+ 765 Anadarko Petroleum Corp., 5.375%, 3/01/07 .............................. 758,064 B2 3,500 Baytex Energy Ltd., 10.50%, 2/15/11 .............................. 3,605,000 BBB+ 1,125 Conoco Funding Co., 5.45%, 10/15/06 .............................. 1,132,080 B- 2,000 Denbury Resources, Inc., 9.00%, 3/01/08 ............................... 1,940,000 B+ 910 Newpark Resources, Inc., Ser. B, 8.625%, 12/15/07 ............................. 859,950 BBB 575 Occidental Petroleum Corp., Sr. Note, 6.75%, 1/15/12 ............................... 590,813 A3 825 Tosco Corp., 8.125%, 2/15/30 .............................. 951,357 BBB 560 Valero Energy Corp., 7.50%, 4/15/32 ............................... 563,360 ------------ 11,894,451 ------------ ENTERTAINMENT--1.7% AOL Time Warner, Inc., BBB+ 1,075 5.625%, 5/01/05 .............................. 1,075,430 BBB+ 200 6.875%, 5/01/12 .............................. 188,740 BBB+ 2,050 7.70%, 5/01/32 ............................... 1,942,375 BBB+ 570 7.625%, 4/15/31 .............................. 526,497 BBB+ 1,040 TIME WARNER, INC., 9.125%, 1/15/13 .............................. 1,131,249 A- 1,500 Viacom, Inc., Sr. Note, 7.70%, 7/30/10 ............................... 1,614,016 ------------ 6,478,307 ------------ FINANCE & BANKING--2.6% Aa3 1,320 Bank One Corp., 6.50%, 2/01/06 ............................... 1,382,769 Aa3 1,700 Barclays Bank PLC, 8.55%, 12/29/01** ............................ 1,915,475 A 355 Bear Stearns Co., Inc., 6.50%, 5/01/06 ............................... 367,741 Citigroup, Inc., Aa1 1,060 5.75%, 5/10/06 ............................... 1,090,255 Aa2 2,050 7.25%, 10/01/10 .............................. 2,197,306 Aa3 130 Credit Suisse First Boston USA, 5.75%, 4/15/07 ............................... 130,894 A2 760 First Union Corp., Sub. Note, 6.30%, 4/15/28 ............................... 771,400 A 810 Lehman Brothers Holdings, Inc., 6.25%, 5/15/06 ............................... 833,523 Morgan Stanley Dean Witter, AA- 185 6.60%, 4/01/12 ............................... 184,510 AA- 985 5.80%, 4/01/07 ............................... 992,052 ----------- 9,865,925 ------------ FINANCIAL INTERMEDIARIES--6.4% A 285 Deere John Capital Corp., 7.00%, 3/15/12 ............................... 292,433 Federal Home Loan Mortgage Corp., 7,845 6.875%, 9/15/10 .............................. 8,535,125 1,700 7.00%, 3/15/10 ............................... 1,864,203 Ford Motor Credit Co., A3 2,100 6.875%, 2/01/06 .............................. 2,127,027 A3 1,365 7.875%, 6/15/10 .............................. 1,411,424 General Electric Capital Corp., AAA 1,725 5.35%, 3/30/06 ............................... 1,749,278 AAA 610 6.75%, 3/15/32 ............................... 607,682 General Motors Acceptance Corp., A2 630 6.75%, 1/15/06 ............................... 649,451 A2 590 6.875%, 9/15/11 .............................. 591,227 A2 510 7.25%, 3/02/11 ............................... 521,835 A2 780 7.75%, 1/19/10 ............................... 819,376 A2 1,980 8.00%, 11/01/31 .............................. 2,076,036 KFW International Finance, Inc., AAA 1,425 5.25%, 6/28/06 ............................... 1,453,500 Guaranteed Global Note, AAA 1,200 4.75%, 1/24/07 ............................... 1,197,955 A- 545 Sears Roebuck Acceptance Corp., 7.00%, 2/01/11 ............................... 560,226 ------------ 24,456,778 ------------ FOOD PRODUCTS--1.4% B+ 2,000 Fleming Co., Inc., Sr. Sub. Note, Ser. B, 10.625%, 7/31/07 ............................. 2,055,000 General Mills, Inc., BBB+ 510 5.125%, 2/15/07 .............................. 504,742 BBB+ 640 6.00%, 2/15/12 ............................... 620,000 Kellogg Co., Ser. B, BBB 625 6.00%, 4/01/06 ............................... 638,962 BBB 550 6.60%, 4/01/11 ............................... 564,371 A2 895 Kraft Foods, Inc., 5.625%, 11/01/11 ............................. 866,368 ------------ 5,249,443 ------------ FOREST PRODUCTS--1.7% B- 1,000 AINSWORTH LUMBER CO. LTD., SR. NOTE, 12.50%, 7/15/07 .............................. 1,080,000 Ba2 3,425 Caraustar Industries., Inc., 9.875%, 4/01/11 .............................. 3,681,875 Weyerhaeuser Co., BBB 400 6.00%, 8/01/06 ............................... 405,080 BBB 575 5.95%, 11/01/08** ............................ 565,926 BBB 725 6.125%, 3/15/07** ............................ 734,490 ----------- 6,467,371 ----------- HEALTH CARE--1.3% B3 3,000 Hanger Orthopedic Group, Sr. Sub. Note, 11.25%, 6/15/09 .............................. 3,090,000 See Notes to Financial Statements. 6 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE RATING* (000) DESCRIPTION (NOTE 1) - -------------------------------------------------------------------------------- HEALTH CARE (CONT'D) B- $ 2,000 United Surgical Partners International, Inc., 10.00%, 12/15/11 ............................. $ 2,070,000 ------------ 5,160,000 ------------ HOME CONSTRUCTION--0.9% BB- 3,000 Hovnanian Enterprises, Inc., 10.50%, 10/01/07 ............................. 3,270,000 ------------ HOTELS & CASINO--2.1% B+ 1,000 Circus & Eldorado Joint Venture, 1st Mortgage, 10.125%, 3/01/12** ........................... 1,040,000 BB- 3,000+ HMH Properties, Inc., Sr. Note, Ser. A, 7.875%, 8/01/05 .............................. 2,981,250 B 1,000 Resorts International Hotel & Casino, 1st Mortgage Note, 11.50%, 3/15/09** ............................ 963,125 BB+ 3,000 Royal Caribbean Cruises Ltd., Sr. Note, 8.125%, 7/28/04 .............................. 2,955,000 ------------ 7,939,375 ------------ INDUSTRIAL EQUIPMENT--1.4% B 3,000 Terex Corp., 9.25%, 7/15/11 ............................... 3,135,000 BB- 2,000 United Rentals, Inc., 9.50%, 6/01/08 ............................... 2,060,000 ------------ 5,195,000 ------------ INDUSTRIALS--0.5% BBB+ 1,700 Dominion Resources, Inc., Sr. Note, 8.125%, 6/15/10 .............................. 1,867,215 A 225 Honeywell International, Inc., 6.875%, 10/03/05 ............................. 236,249 ------------ 2,103,464 ------------ INSURANCE--1.1% A+ 1,250 Allstate Corp., 5.375%, 12/01/06 ............................. 1,259,322 A1 1,000 Metlife, Inc., Sr. Note, 6.125%, 12/01/11 ............................. 997,210 A+ 1,250 Prudential Funding LLC, 6.60%, 5/15/08 ............................... 1,286,096 A- 500 Prudential Insurance Company of America, 8.30%, 7/01/25** ............................. 541,471 ------------ 4,084,099 ------------ MEDIA--2.3% B1 4,000 Alliance Atlantis Communications, Inc., Sr. Sub. Note, 13.00%, 12/15/09 ............................. 4,480,000 B1 4,000 Echostar Broadband Corp., Sr. Note, 10.375%, 10/01/07 ............................ 4,240,000 ------------ 8,720,000 ------------ OIL & GAS SERVICES--1.4% BBB 480 Coastal Corp., 7.75%, 6/15/10 ............................... 498,864 1,000 Compagnie Generale De Geophysique, Sr. Note, 10.625%, 11/15/07** .......................... 1,045,000 B 3,000 Dresser, Inc., 9.375%, 4/15/11 .............................. 3,135,000 BBB 530 El Paso Energy Corp., Sr. Note, 6.75%, 5/15/09 ............................... 523,375 ------------ 5,202,239 ------------ OTHER--5.4% A3 21,000 Targeted Return Index Securities Trust, Ser. 5-2002, 5.97%, 1/25/07** ............................. 20,597,850 ------------ PHARMACEUTICALS--1.0% AAA 300 Bristol Myers Squibb Co., 4.75%, 10/01/06 .............................. 299,344 B 3,500 Physician Sales & Service, Inc., Sr. Sub. Note, 8.50%, 10/01/07 .............................. 3,500,000 ------------ 3,799,344 ------------ RAIL INDUSTRIES--0.5% BBB+ 1,000 Burlington Northern Santa Fe Corp., Deb., 7.95%, 8/15/30 ......................... 1,110,950 BBB+ 350 Canadian National Railway Co., 6.90%, 7/15/28 ............................... 347,855 Baa1 375 Norfolk Southern Corp., 7.05%, 5/01/37 ............................... 394,500 ------------ 1,853,305 ------------ REAL ESTATE INVESTMENT TRUST--0.4% BBB+ 775 Avalonbay Communities, Inc., 8.25%, 7/15/08 ............................... 854,266 BBB+ 825 ERP Operating LP, 6.95%, 3/02/11 ............................... 846,613 ------------ 1,700,879 ------------ RETAILERS--1.3% B 2,000 CSK Auto, Inc., Sr. Note, 12.00%, 6/15/06** ............................ 2,120,000 B- 1,000 Pantry, Inc., 10.25%, 10/15/07 ............................. 885,000 B+ 2,000 Sonic Automotive, Inc., Ser. D, 11.00%, 8/01/08 .............................. 2,140,000 ------------ 5,145,000 ------------ SOVEREIGN & PROVINCIAL--0.8% Baa2 1,100 Mexico Government Intl. Bond, 8.375%, 1/14/11 .............................. 1,174,250 Baa2 1,650 Petroleos Mexicanos, 9.375%, 12/02/08 ............................. 1,794,936 ------------ 2,969,186 ------------ See Notes to Financial Statements. 7 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE RATING* (000) DESCRIPTION (NOTE 1) - -------------------------------------------------------------------------------- SURFACE TRANSPORT--0.5% B- $ 2,000 Pacer International, Inc., Ser. B, 11.75%, 6/01/07 .............................. $ 1,960,000 ------------- TECHNOLOGY--1.2% B1 1,170 Filtronic PLC, Sr. Note, 10.00%, 12/01/05 ............................. 1,178,775 Ba3 3,000 Seagate Technology, Inc., 13.50%, 11/15/07** ........................... 3,600,000 ------------- 4,778,775 ------------- TELECOMMUNICATION--4.4% B- 2,500 AMERICAN TOWER CORP., SR. NOTE, 9.375%, 2/01/09 .............................. 1,750,000 AT&T Corp., Sr. Note, A3 3,000 7.30%, 11/15/11** ............................ 2,723,532 A3 810 8.00%, 11/15/31** ............................ 725,416 BBB 120 Citizens Communications Co., Sr. Note, 9.00%, 8/15/31 ............................... 125,700 BBB+ 175 Deutsche Telekom International, 8.00%, 6/15/10 ............................... 183,211 B1 5,000 Nextel Communications, Sr. Note, 9.50%, 2/01/11 ............................... 3,425,000 BBB- 1,125 Qwest Capital Funding, Inc., 7.00%, 8/03/09 ............................... 810,000 B- 3,000 Rural Cellular Corp., Sr. Sub. Note, 9.75%, 1/15/10** ............................. 2,445,000 A+ 1,385 Verizon Global Funding Corp., 7.25%, 12/01/10 .............................. 1,398,681 Aa2 790 Verizon Pennsylvania, Inc., Ser. A, 5.65%, 11/15/11 .............................. 714,441 A 1,400 Vodafone Airtouch PLC, 7.75%, 2/15/10 ............................... 1,492,875 Worldcom, Inc., BBB 265 7.50%, 5/15/11 ............................... 121,900 BBB 2,395 8.25%, 5/15/10 - 5/15/31 ..................... 1,135,324 ------------- 17,051,080 ------------- UTILITIES--2.2% AES Corp., Sr. Note, Ba1 3,000 8.75%, 12/15/02 - 6/15/08 .................... 2,630,000 B+ 1,000 Calpine Corp., Sr. Note, 10.50%, 5/15/06 .............................. 940,000 DTE Energy Co., Sr. Note, BBB 250 6.00%, 6/01/04 ............................... 255,000 BBB 1,050 6.45%, 6/01/06 ............................... 1,077,935 BBB+ 805 Exelon Corp., Sr. Note, 6.75%, 5/01/11 ............................... 810,764 Baa2 850 First Energy Corp., Ser. C, 7.375%, 11/15/31 ............................. 790,451 Progress Energy, Inc., Sr. Note, Baa1 1,675 6.75%, 3/01/06 ............................... 1,734,143 Baa1 380 6.85%, 4/15/12 ............................... 386,988 ------------- 8,625,281 ------------- Total Corporate Bonds .......................... 232,855,734 ------------- COMMERCIAL MORTGAGE BACKED SECURITIES--1.8% AAA 2,560 Capco America Securitization Corp., 6.26%, 9/15/08 ............................... 2,658,571 AAA 3,957 Chase Commercial Mortgage Securities Corp., 7.37%, 2/19/07 ............................... 4,253,367 ------------- 6,911,938 ------------- Total Long-Term Investments (cost $583,534,072) .......................... 583,542,683 ------------- SHORT-TERM INVESTMENTS--0.6% REPURCHASE AGREEMENT 2,300 Federal Home Loan Bank, 1.79%, 5/01/02 ............................... 2,300,000 ------------- Total investments--152.8% (cost $585,834,072) .......................... 585,842,683 Liabilities in excess of other assets--(52.8)% .............................. (202,419,710) ------------- NET ASSETS--100% ............................... $ 383,422,973 ============= - ---------- * Using the higher of Standard & Poor's, Moody's or Fitch's rating. ** Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration to qualified institutional buyers. As of April 30, 2002, the Trust held 12.0% of its net assets in securities restricted as to sale. + Entire or partial principal amount pledged as collateral for reverse repurchase agreements or financial futures contracts. See Notes to Financial Statements. 8 - -------------------------------------------------------------------------------- BLACKROCK CORE BOND TRUST STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investments, at value (cost $585,834,072) (Note 1) .................................................... $585,842,683 Cash .......................................................... 20,488 Receivable from investments sold .............................. 13,993,104 Interest and other receivables ................................ 9,387,727 Other assets .................................................. 2,322 ------------ 609,246,324 ------------ Liabilities Reverse repurchase agreement .................................. 10,270,250 Payable for investments purchased ............................. 215,247,098 Interest payable .............................................. 10,982 Investment advisory fee payable (Note 2) ...................... 201,987 Other accrued expenses ........................................ 93,034 ------------ 225,823,351 ------------ NET ASSETS .................................................... $383,422,973 ============ Net investment assets were comprised of: Common shares of beneficial interest: Par value (Note 4) ...................................... $ 27,019 Paid-in capital in excess of par . ...................... 386,241,969 ------------ 386,268,988 Undistributed net investment income ........................... 2,078,589 Accumulated net realized loss ................................. (4,933,215) Net unrealized appreciation ................................... 8,611 ------------ Net assets, April 30, 2002 .................................... $383,422,973 ============ NET ASSET VALUE PER SHARE OF ($383,422,973 / 27,018,774 common shares of beneficial interest issued and outstanding) ........................................... $14.19 ====== - -------------------------------------------------------------------------------- BLACKROCK CORE BOND TRUST STATEMENT OF OPERATIONS FOR THE PERIOD NOVEMBER 30, 2001(1) THROUGH APRIL 30, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- NET INVESTMENT INCOME Income Interest (net of interest expense of $53,208) .............................................. $14,452,645 ----------- Expenses Investment advisory ........................................ 1,291,327 Reports to shareholders .................................... 52,913 Custodian .................................................. 52,598 Organization ............................................... 35,000 Trustees ................................................... 30,899 Independent accountants .................................... 25,778 Legal ...................................................... 21,017 Transfer agent ............................................. 18,914 Registration ............................................... 15,609 Miscellaneous .............................................. 23,428 ----------- Total expenses ............................................. 1,567,483 ----------- Net investment income ......................................... 12,885,162 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized loss on investments .............................. (4,933,215) Net change in unrealized appreciation on investments ............................................. 8,611 ---------- Net loss on investments ....................................... (4,924,604) ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................................. $ 7,960,558 =========== (1) Commencement of investment operations (Note 1). See Notes to Financial Statements. 9 - ----------------------------------------------------------------------------- BLACKROCK CORE BOND TRUST STATEMENT OF CASH FLOWS FOR THE PERIOD NOVEMBER 20, 2001(1) THROUGH APRIL 30, 2002 (UNAUDITED) - ----------------------------------------------------------------------------- RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS TO NET CASH FLOWS USED FOR OPERATING ACTIVITIES Net increase in net assets resulting from operations ........................................... $ 7,960,558 ------------- Increase in investments ...................................... (590,767,287) Net realized loss ............................................ 4,933,215 Increase in unrealized appreciation .......................... (8,611) Increase in receivable for investments sold .................. (13,993,104) Increase in interest receivable .............................. (9,387,727) Increase in other assets ..................................... (2,322) Increase in payable for investments purchased ................ 215,247,098 Increase in interest payable ................................. 10,982 Increase in accrued expenses ................................. 295,021 ------------- Total adjustments ......................................... (393,672,735) ------------- Net cash flows used for operating activities ................. $(385,712,177) ============= INCREASE IN CASH Net cash flows used for operating activities ................. $(385,712,177) ------------- Cash flows provided by financing activities: Capital Contributions ..................................... 386,268,988 Increase in reverse repurchase agreements ................. 10,270,250 Cash dividends paid ....................................... (10,806,573) ------------- Net cash flows provided by financing activities .............. 385,732,665 ------------- Net increase in cash ...................................... 20,488 ------------- Cash at beginning of period ............................... -- ------------- Cash at end of period ..................................... $ 20,488 ============= - -------------------------------------------------------------------------------- BLACKROCK CORE BOND TRUST STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED) - -------------------------------------------------------------------------------- FOR THE PERIOD NOVEMBER 30, 2001(1) THROUGH APRIL 30, 2002 -------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income ........................................ $ 12,885,162 Net realized loss on investments ............................. (4,933,215) Net change in unrealized appreciation on investments ............................... 8,611 ------------ Net increase in net investment assets resulting from operations ................................. 7,960,558 ------------ DIVIDENDS: From net investment income ................................... (10,806,573) ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from the issuance of common shares .......................................... 357,484,731 Common shares issued in connection with the reinvestment of common dividends ...................... 134,257 Net proceeds from underwriters' over-allotment option exercised ........................... 28,650,000 ------------ Net proceeds from capital share transactions .............. 386,268,988 ------------ Total increase ......................................... 383,422,973 ------------ NET ASSETS Beginning of period .......................................... -- ------------ End of period (including undistributed net investment income of $2,078,589) ...................... $383,422,973 ============ - ---------- (1) Commencement of investment operations. This information includes the initial investment by BlackRock Advisors, Inc. (Note 1) See Notes to Financial Statements. 10 - -------------------------------------------------------------------------------- BLACKROCK CORE BOND TRUST FINANCIAL HIGHLIGHTS (UNAUDITED) - -------------------------------------------------------------------------------- FOR THE PERIOD NOVEMBER 30, 2001(1) THROUGH APRIL 30, 2002 --------------- PER COMMON SHARE OPERATING PERFORMANCE: Net asset value, beginning of period(2) ...................... $ 14.33 -------- Investment operations: Net investment income ..................................... 0.48 Net realized and unrealized loss on investments ......................................... (0.19) -------- Net increase from investment operations ...................... 0.29 -------- Dividends from net investment income ......................... (0.40) -------- Capital changes with respect to issuance of shares: .......... (0.03) -------- Net asset value, end of period(2) ............................ $ 14.19 ======== Market value, end of period(2) ............................... $ 13.96 ======== TOTAL INVESTMENT RETURN(3) ................................... (4.23)% ======== RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS(4): Operating expenses ........................................... 1.00% Operating expenses and interest expense ...................... 1.03% Net investment income ........................................ 8.24% SUPPLEMENTAL DATA: Average net assets (000) ..................................... $375,650 Portfolio turnover ........................................... 163% Net assets, end of period (000) .............................. $383,423 Borrowing outstanding, end of period (000) ................... $ 10,270 Asset coverage(5) ............................................ $ 38,333 - ---------- (1) Commencement of investment operations. This information includes the initial investments by BlackRock Advisors, Inc. Net assets value immediately after the closing of the public offering was $14.30. (Note 1) (2) Net asset value and market value are published in BARRON'S on Saturday and THE WALL STREET JOURNAL on Monday. (3) 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 and distributions, if any, are assumed for purposes of this calculation, to be reinvested at prices obtained under the Trust's dividend reinvestment plan. Total investment return does not reflect brokerage commissions. Total investment return for less than a full year is not annualized. Past performance is not a guarantee of future results. (4) Annualized. (5) Per $1,000 of borrowings outstanding. The information above represents the unaudited operating performance for a common share outstanding, total investment return, ratios to average net assets and other supplemental data for the period 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. 11 - -------------------------------------------------------------------------------- BLACKROCK CORE BOND TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- NOTE 1. ORGANIZATION & ACCOUNTING POLICIES The BlackRock Core Bond Trust (the "Trust") was organized as a Delaware business trust on October 12, 2001, and is registered as a diversified, closed-end management investment company under the Investment Company Act of 1940. The Trust had no transactions until October 15, 2001, when it sold 9,425 common shares for $135,014 to BlackRock Advisors, Inc. Investment operations commenced on November 30, 2001. The Trust's investment objective is to provide current income and capital appreciation. 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 Trustees. In determining the value of a particular security, pricing services may use certain information with respect to transactions in such securities, quotations from dealers, market transactions in comparable securities, various relationships observed in the market between securities, and calculated yield measures based on valuation technology commonly employed in the market for such securities. Exchange-traded options are valued at their last sales price as of the close of options trading on applicable exchanges. In the absence of a last sale, options are valued at the average of the quoted bid and asked prices as of the close of business. A futures contract is valued at the last sale price as of the close of the commodities exchange on which it trades. Short-term investments may be valued at amortized cost. 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 Trustees. REPURCHASE AGREEMENT: 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. FINANCIAL FUTURES CONTRACTS: A futures contract is an agreement between two parties to buy or sell a financial instrument for a set price on a future date. Initial margin deposits are made upon entering into futures contracts and can be either cash or securities. During the period that the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by marking-to-market on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments are made or received, depending upon whether unrealized gains or losses are incurred. When the contract is closed, the Trust records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Trust's basis in the contract. Financial futures contracts, when used by the Trust, help in maintaining a targeted duration. Futures contracts can be sold to effectively shorten an otherwise longer duration portfolio. In the same sense, futures contracts can be purchased to lengthen a portfolio that is shorter than its duration target. Thus, by buying or selling futures contracts, the Trust can effectively hedge 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 the 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. 12 Details of open financial futures contracts at April 30, 2002 are as follows: VALUE AT UNREALIZED NUMBER OF EXPIRATION VALUE AT APRIL 30, APPRECIATION CONTRACTS TYPE DATE TRADE DATE 2002 (DEPRECIATION) - --------- ---- -------- -------- ------- ------------ LONG POSITION: 375 5 yr. U.S. T-Bond Jun. 02 $39,121,524 $39,767,578 $646,054 165 10 yr. U.S. T-Bond Jun. 02 24,782,857 24,759,625 (23,232) 242 30 yr. U.S. T-Bond Jun. 02 17,292,619 17,417,813 125,194 -------- $748,016 ======== SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on 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. SEGREGATION: In cases in which the Investment Company Act of 1940, as amended and the interpretive positions of the Securities and Exchange Commission ("SEC") require that the Trust segregate assets in connection with certain Trust investments (e.g., when issued securities, reverse repurchase agreements or futures contracts), the Trust will, consistent with certain interpretive letters issued by the SEC, designate on its books and records cash or other liquid debt securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. FEDERAL INCOME TAXES: It is the Trust's intention to elect to be treated as a regulated investment company under the Internal Revenue Code and to distribute sufficient amounts of its taxable income to shareholders. Therefore, no federal income tax provision is required. DIVIDENDS AND DISTRIBUTIONS: The Trust declares and pays dividends and distributions monthly, first from net investment income, then from realized short-term capital gains and other sources, if necessary. Net long-term capital gains, if any, in excess of loss carryforwards, are distributed at least annually. Dividends and distributions are recorded on the ex-dividend date. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. DEFERRED COMPENSATION PLAN: Under a deferred compensation plan approved by the Board of Trustees on October 15, 2001, non-interested Trustees may elect to defer receipt of all or a portion of their annual compensation. Deferred amounts earn a return as though equivalent dollar amounts had been invested in common shares of other BlackRock funds selected by the Trustees. This has the same economic effect as if the Trustees had invested the deferred amounts in such other BlackRock funds. The deferred compensation plan is not funded and obligations there under represent general unsecured claims against the general assets of the Trust. The Trust may, however, elect to invest in common shares of those funds selected by the Trustees in order to match its deferred compensation obligations. NOTE 2. AGREEMENTS The Trust has an Investment Advisory Agreement with BlackRock Advisors Inc. (the "Advisor"), a wholly-owned subsidiary of BlackRock, Inc. BlackRock Financial Management, Inc., a wholly-owned subsidiary of BlackRock, Inc., serves as sub-advisor to the Trust. BlackRock Inc. is an indirect majority-owned subsidiary of PNC Financial Services Group, Inc. The investment management agreement covers both investment advisory and administrative services. The investment advisory fee paid to the Advisor is computed weekly and payable monthly at an annual rate of 0.55% of the Trust's average weekly managed assets. The total dollar amounts paid to the Advisor by the Trust under the Investment Advisory Agreement for the period ended April 30, 2002 was $1,291,327. Pursuant to the agreements, the Advisor provides continuous supervision of the investment portfolio and pays the compensation of officers of the Trust who are affiliated persons of the Advisor, occupancy and certain clerical and accounting costs of the Trust. The Trust bears all other costs and expenses, which include reimbursements to the Advisor for certain operational support services provided to the Trust. NOTE 3. PORTFOLIO SECURITIES Purchases and sales of investments, other than short-term investments, for the period ended April 30, 2002, aggregated $1,513,567,888 and $918,941,157, respectively. The Trust may from time to time purchase in the secondary market certain mortgage pass-through securities packaged or master serviced by affiliates or mortgage related securities containing loans or mortgages originated by PNC Bank or its 13 affiliates, including Midland Loan Services, Inc. It is possible under certain circumstances, PNC or one of its affiliates, including Midland Loan Services, Inc. could have interests that are in conflict with the holders of these mortgage-backed securities, and such holders could have rights against PNC or one of its affiliates, including Midland Loan Services, Inc. The federal income tax basis of the Trust's investments at April 30, 2002 was the same as the basis for financial reporting and, accordingly, net unrealized appreciation for federal income tax purposes was $8,611 (gross un- realized appreciation--$11,337,955; gross unrealized depreciation--$11,329,344). NOTE 4. BORROWINGS REVERSE REPURCHASE AGREEMENTS: The Trust may enter into reverse repurchase agreements with qualified, thirdparty broker-dealers as determined by and under the direction of the Trust's Trustees. Interest on the value of reverse repurchase agreements issued and outstanding is based upon competitive market rates at the time of issuance. At the time the Trust enters into a reverse repurchase agreement, it will establish and maintain a segregated account with the lender, containing liquid investment grade securities having a value not less than the repurchase price, including accrued interest of the reverse repurchase agreement. The average daily balance of reverse repurchase agreements outstanding during the period ended April 30, 2002 was approximately $11,197,595 at a weighted average interest rate of approximately 1.52%. The maximum amount of reverse repurchase agreements outstanding at any month-end during the period was $12,255,000 as of January 31, 2001 which was 1.7% 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 period November 30, 2001 (commencement of operations) to April 30, 2002 was approximately $154,300,000. The maximum amount of dollar rolls outstanding at any month-end during the period was $194,591,052 as of February 28, 2002, which was 32.4% of the total assets. NOTE 5. CAPITAL There are an unlimited number of $.001 par value common shares of beneficial interest authorized. Of the 27,018,774 common shares of beneficial interest outstanding at April 30, 2002, the Advisor owned 9,425 shares. Transactions in common shares of beneficial interest for the period November 30, 2001 (commencement of investment operations) to April 30, 2002, were as follows: Shares issued in connection with initial public offering* 27,009,425 Common shares issued in connection with the reinvestment of common dividends 9,349 ---------- Net shares outstanding 27,018,774 ========== *This information includes the initial investment by BlackRock Advisors, Inc. Offering costs of $775,283 incurred in connection with the Trust's offering of common shares have been charged to paid-in capital in excess of par of the common shares. NOTE 6. DIVIDENDS Subsequent to April 30, 2002, the Board of Trustees of the Trust declared dividends from undistributed earnings of $0.10 per share payable May 31, 2002, to shareholders of record on May 15, 2002. 14 - -------------------------------------------------------------------------------- BLACKROCK CORE BOND TRUST DIVIDEND REINVESTMENT PLAN - -------------------------------------------------------------------------------- Pursuant to the Trust's Dividend Reinvestment Plan (the "Plan"), common shareholders are automatically enrolled to have all distributions of dividends and capital gains reinvested by EquiServe Trust Company, N.A. (the "Plan Agent") in Trust shares pursuant to the Plan. Shareholders who elect not to participate in the Plan will receive all distributions in cash paid by check and 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 Plan 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 acquire shares for the participants' accounts, depending upon the circumstances described below, either (i) through receipt of unissued but authorized shares from the Trust ("newly issued shares") or (ii) by purchase of outstanding shares on the open market, on the New York Stock Exchange or elsewhere ("open-market purchases"). If, on the dividend payment date, the net asset value per share ("NAV") is equal to or less than the market price per share plus estimated brokerage commissions (such condition being referred to herein as "market premium"), the Plan Agent will invest the dividend amount in newly issued shares on behalf of the participants. The number of newly issued shares to be credited to each participant's account will be determined by dividing the dollar amount of the dividend by the NAV on the date the shares are issued. However, if the NAV is less than 95% of the market price on the payment date, the dollar amount of the dividend will be divided by 95% of the market price on the payment date. If, on the dividend payment date, the NAV is greater than the market value per share plus estimated brokerage commissions (such condition being referred to herein as "market discount"), the Plan Agent will invest the dividend amount in shares acquired on behalf of the participants in open-market purchases. 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 for any fraction of a Trust share. The Plan Agent's fees for the handling of the reinvestment of dividends and distributions will be paid by the Trust. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of dividends and distributions. The automatic reinvestment of dividends and distributions will not relieve participants of any Federal income tax that may be payable on such dividends or distributions. The Trust reserves the right to amend or terminate the Plan. There is no direct service charge to participants in the Plan; however, the Trust reserves the right to amend the Plan to include a service charge payable by the participants. All correspondence concerning the Plan should be directed to the Plan Agent at (800) 699-1BFM or 150 Royall Street, Canton, MA 02021. 15 - -------------------------------------------------------------------------------- BLACKROCK CORE BOND TRUST ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- There have been no material changes in the Trust's investment objectives or policies that have not been approved by the shareholders or to its charter or by-laws or in the principal risk factors associated with investment in the Trust. There have been no changes in the persons who are primarily responsible for the day-to-day management of the Trust's portfolio. Quarterly performance and other information regarding the Trust may be found on BlackRock's website, which can be accessed at http://www.blackrock.com/funds/cefunds.html. This reference to BlackRock's website is intended to allow investors public access to quarterly information regarding the Trust and is not intended to incorporate BlackRock's website into this report.A The Annual Meeting of Shareholders was held May 23, 2002 to vote on the following matter: To elect two Trustees as follows: TRUSTEE: CLASS TERM EXPIRING - ------- ----- ----- ------- Richard E. Cavanagh I 3 years 2005 James Clayburn La Force, Jr. I 3 years 2005 Trustees whose term of office continues beyond this meeting are Andrew F. Brimmer, Kent Dixon, Frank J. Fabozzi, Laurence D. Fink, Walter F. Mondale and Ralph L. Schlosstein. Shareholders elected the two Trustees. The results of the voting were as follows: VOTES FOR VOTES AGAINST ABSTENTIONS -------- ------------ ---------- Richard E. Cavanagh 25,710,910 -- 166,111 James Clayburn La Force, Jr. 25,697,184 -- 179,837 Laurence D. Fink, Chairman of the Trust's Board of Trustees, and certain of the officers of the Trust listed on the cover of this Report to Shareholders, are also officers of the Advisor or Sub-Advisor. They serve in the following capacities for the Advisor or Sub-Advisor: Laurence D. Fink--Chief Executive Officer of the Advisor and Chairman and CEO of the Sub-Advisor, Ralph L. Schlosstein--Director and President of the Advisor and the Sub-advisor, Robert S. Kapito--Director and Vice Chairman of the Advisor and Vice Chairman of the Sub-Advisor, Kevin M. Klingert--Director and Managing Director of the Advisor and Managing Director of the Sub-Advisor, Henry Gabbay--Managing Director of the Advisor and the Sub-Advisor, Anne Ackerley--Managing Director of the advisor and the Sub-Advisor, Dennis Schaney, Richard M. Shea and James Kong--Managing Directors of the Sub-Advisor. 16 - -------------------------------------------------------------------------------- BLACKROCK CORE BOND TRUST INVESTMENT SUMMARY - -------------------------------------------------------------------------------- THE TRUST'S INVESTMENT OBJECTIVE BlackRock Core Bond Trust's investment objective is to provide current income and capital appreciation. WHO MANAGES THE TRUST? BlackRock Advisors, Inc. (the "Advisor") manages the Trust. The Advisor is a wholly-owned subsidiary of BlackRock, Inc. ("BlackRock"), which is one of the largest publicly traded investment management firms in the United States with $238 billion of assets under management as of March 31, 2002. BlackRock manages assets on behalf of institutional and individual investors worldwide through a variety of equity, fixed income, liquidity and alternative investment products, including the BLACKROCK FUNDS and BLACKROCK PROVIDENT INSTITUTIONAL FUNDS. In addition, BlackRock provides risk management advice and investment system services to a growing number of institutional investors under the BLACKROCK SOLUTIONS name. Clients are served from the Company's headquarters in New York City, as well as offices in Boston, Edinburgh, Hong Kong, San Francisco, Tokyo and Wilmington. BlackRock is a member of The PNC Financial Services Group (NYSE:PNC), and is majority-owned by PNC and by BlackRock employees. WHAT CAN THE TRUST INVEST IN? Under normal market conditions, the Trust expects to be fully invested in debt securities. The Trust invests at least 75% of its total managed assets in debt securities that at the time of investment are investment grade quality. Investment grade quality bonds are bonds rated within the four highest grades ("Baa" or "BBB" or better by Moody's Investors Service, Inc. (Moody's), Standard &Poors Ratings Group (S&P), Fitch IBCA, Inv. (Fitch) or another nationally recognized rating agency or bonds that are unrated but judged to be of comparable quality by the Trust's investment advisor and/or sub-advisor. The Trust may invest its remaining assets in high yield bonds that at the time of investment are rated "C" or above by Moody's, S&P or Fitch or bonds that are unrated but judged to be of comparable quality by the Trust's investment advisor and sub-advisor. The Trust's fixed income investments include a broad range of debt securities, including corporate bonds, U.S. government and agency securities and mortgage-related securities. The Trust may invest up to 10% of its total managed assets in bonds issued in foreign currencies. WHAT IS THE ADVISOR'S INVESTMENT STRATEGY? The Advisor seeks to meet the Trust's investment objective by managing the assets of the Trust so as to provide current income and capital appreciation. Under current market conditions, the duration of the Trust is expected to be within +/- 20% of the duration of the ten-year Treasury note. In seeking the investment objective, the Advisor may actively manage among various types of securities in different interest rate environments. The Advisor anticipates investing in corporate bonds the investment return of which reflects interest on the security and changes in the market value of the security. The Advisor's approach to credit risk incorporates a combination of sector-based, top-down macro-analysis of industry sectors to determine relative weightings with a name-specific, bottom-up detailed credit analysis of issuers and structures. The sector-based approach focuses on rotating into sectors that are undervalued and exiting sectors when fundamentals or technicals become unattractive. The name-specific approach focuses on identifying special opportunities where the market undervalues a credit, and devoting concentrated resources to research the credit trends before market recognition. The Trust also invests in bonds that are believed by the Advisor to be underrated or undervalued or have the potential for above-average current income and capital appreciation. The Trust's investment in underrated or undervalued bonds is based on the Advisor's belief that their yield is higher than that available on bonds bearing equivalent levels of interest rate risk, credit risk and other forms of risk, and that their prices will ultimately rise, relative to the market, to reflect their true value. 17 The lowest rated bonds in which the Trust may invest are securities rated in the category "C" or determined by the Advisor to be of comparable quality at the time of purchase. The Trust may also invest in mortgage-related securities. Traditional residential mortgage pass-through securities make interest and principal payments on a monthly basis and can be a source of attractive levels of income to the Trust. Mortgage-backed securities typically offer a yield spread over Treasuries due to the uncertainty of the timing of their cash flows as they are subject to prepayment exposure when interest rates change and mortgage holders refinance their mortgages or move. While mortgage-backed securities do offer the opportunity for attractive yields, they subject a portfolio to interest rate risk and prepayment exposure which result in reinvestment risk when prepaid principal must be reinvested. The Trust may also invest in debt securities issued in foreign currencies and emerging market countries. With respect to debt securities of foreign issuers, the Trust intends to invest primarily in securities of governments or established companies based in developed countries, the value of which may be adversely affected by risks not usually associated with owning securities of U.S. issuers. These risks can include fluctuations in foreign currencies, foreign currency exchange controls, political and economic instability, differences in financial reporting, differences in securities regulation and trading, and foreign taxation issues. Investment in debt securities of issuers based in underdeveloped emerging markets entails heightened risks of investing in foreign securities. 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, EquiServe Trust Company, N.A. 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 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. Leverage increases the duration (or price sensitivity of the net assets with respect to changes in interest rates) of the Trust, which can improve the performance of the Trust in a declining rate environment, but can cause net assets to decline faster in a rapidly rising environment. The Advisor'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 the Advisor consider that reduction to be in the best interests of the shareholders. SPECIAL CONSIDERATIONS AND RISK FACTORS RELEVANT TO THE TRUSTS The Trust is intended to be a long-term investment and is not a short-term trading vehicle. INVESTMENT OBJECTIVE. Although the investment objective of the Trust is to provide current income and capital appreciation, 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 (NYSE symbol: BHK) 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. 18 MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The cash flow and yield characteristics of these securities differ from traditional debt securities. The major differences typically include more frequent payments and the possibility of prepayments which will change the yield to maturity of the security. CORPORATE DEBT SECURITIES. The value of corporate debt securities generally varies inversely with changes in prevailing market interest rates. The Trust may be subject to certain reinvestment risks in environments of declining interest rates. ZERO COUPON SECURITIES. Such securities receive no cash flows prior to maturity, therefore interim price movements on these securities are generally more sensitive to interest rate movements than securities that make periodic coupon payments. These securities appreciate in value over time and can play an important role in helping the Trust achieve its primary objective. ILLIQUID SECURITIES. The Trust may invest in securities that are illiquid, although under current market conditions the Trust expects to do so to only a limited extent. These securities involve special risks. NON-U.S. SECURITIES. The Trust may invest up to 10% of its total managed 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. INTEREST-ONLY SECURITIES (IO). The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying Mortgage Assets, and a rapid rate of principal payments may have a material adverse effect on such security's yield to maturity. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, the Trust may fail to recoup fully its initial investment in these securities even if the securities are rated AAAby S&P or Aaa by Moody's. INVERSE FLOATING RATE MORTGAGE-BACKED SECURITIES. ARMs with interest rates that adjust at periodic intervals in the opposite direction from the market rate of interest to which they are indexed. An inverse floater may be considered to be leveraged to the extent that its interest rate may vary by a magnitude that exceeds the magnitude of the change in the index rate of interest. 19 - -------------------------------------------------------------------------------- BLACKROCK CORE BOND TRUST GLOSSARY - -------------------------------------------------------------------------------- ADJUSTABLE RATE MORTGAGE- Mortgage instruments with interest rates that BACKED SECURITIES (ARMS): 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 Trust invests in a portfolio of securities in accordance with its stated investment objectives and policies. DISCOUNT: When a Trust's net asset value is greater than its market price, the Trust is said to be trading at a discount. DIVIDEND: Income generated by securities in a portfolio and distributed to shareholders after the deduction of expenses. This Trust declares and pays dividends on a monthly basis. DIVIDEND REINVESTMENT: Shareholders may elect to have all dividends and distributions of capital gains automatically reinvested into additional shares of the Trust. 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. GOVERNMENT SECURITIES: Securities issued or guaranteed by the U.S. government, or one of its agencies or instrumentalities, such as GNMA and FHLMC. INTEREST-ONLY SECURITIES: Mortgage securities including CMBS that receive only the interest cash flows from an underlying pool of mortgage loans or underlying pass-through securities. Also known as a strip. INVERSE-FLOATING RATE MORTGAGE: Mortgage instruments with coupons that adjust at periodic intervals according to a formula which sets inversely with a market level interest rate index. 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 Trust trades on the stock exchange. If you were to buy or sell shares, you would pay or receive the market price. 20 NET ASSET VALUE (NAV): Net asset value is the total market value of all securities and other assets held by the Trust, including 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: 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. REVERSE In a reverse repurchase agreement, the Trust REPURCHASE AGREEMENTS: 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 Arrangements in which a pool of assets is SECURITIES: separated into two classes that receive different proportions of the interest and principal distributions from underlying mortgage-backed securities. IO's and PO's are examples of strips. 21 - -------------------------------------------------------------------------------- BLACKROCK ADVISORS, INC. SUMMARY OF CLOSED-END FUNDS - --------------------------------------------------------------------------------
TAXABLE TRUSTS - ------------------------------------------------------------------------------------------- STOCK MATURITY PERPETUAL TRUSTS SYMBOL DATE ------ -------- The BlackRock Income Trust Inc. BKT N/A The BlackRock North American Government Income Trust Inc. BNA N/A The BlackRock High Yield Trust BHY N/A BlackRock Core Bond Trust BHK N/A BlackRock Strategic Bond Trust BHD N/A TERM TRUSTS The BlackRock Strategic Term Trust Inc. BGT 12/02 The BlackRock Investment Quality Term Trust Inc. BQT 12/04 The BlackRock Advantage Term Trust Inc. BAT 12/05 The BlackRock Broad Investment Grade 2009 Term Trust Inc. BCT 12/09 TAX-EXEMPT TRUSTS - ------------------------------------------------------------------------------------------- STOCK MATURITY PERPETUAL TRUSTS SYMBOL DATE ------ -------- The BlackRock Investment Quality Municipal Trust Inc. BKN N/A The BlackRock California Investment Quality Municipal Trust Inc. RAA N/A The BlackRock Florida Investment Quality Municipal Trust RFA N/A The BlackRock New Jersey Investment Quality Municipal Trust Inc. RNJ N/A The BlackRock New York Investment Quality Municipal Trust Inc. RNY N/A The BlackRock Pennsylvania Strategic Municipal Trust BPS N/A The BlackRock Strategic Municipal Trust BSD N/A BlackRock California Municipal Income Trust BFZ N/A BlackRock Municipal Income Trust BFK N/A BlackRock New York Municipal Income Trust BNY N/A BlackRock New Jersey Municipal Income Trust BNJ N/A BlackRock Florida Municipal Income Trust BBF N/A BlackRock New York Municipal Bond Trust BQH N/A BlackRock Virginia Municipal Bond Trust BHV N/A BlackRock Florida Municipal Bond Trust BIE N/A BlackRock Municipal Bond Trust BBK N/A BlackRock Maryland Municipal Bond Trust BZM N/A BlackRock New Jersey Municipal Bond Trust BLJ N/A BlackRock California Municipal Bond Trust BZA 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 BlackRock California Municipal 2018 Term Trust BJZ 12/18 BlackRock New York Municipal 2018 Term Trust BLH 12/18 BlackRock Municipal 2018 Term Trust BPK 12/18
IF YOU WOULD LIKE FURTHER INFORMATION PLEASE DO NOT HESITATE TO CALL BLACKROCK AT (800) 227-7BFM (7236) OR CONSULT WITH YOUR FINANCIAL ADVISOR. 22 - -------------------------------------------------------------------------------- BLACKROCK ADVISORS, INC. AN OVERVIEW - -------------------------------------------------------------------------------- BlackRock Advisors, Inc. (the "Advisor") manages the Trust. The Advisor is a wholly-owned subsidary of BlackRock, Inc. ("BlackRock"), which is one of the largest publicly traded investment management firms in the United States with $238 billion of assets under management as of March 31, 2002. BlackRock manages assets on behalf of institutional and individual investors worldwide through a variety of equity, fixed income, liquidity and alternative investment products, including the BLACKROCK FUNDS and BLACKROCK PROVIDENT INSTITUTIONAL FUNDS. In addition, BlackRock provides risk management advice and investment system services to a growing number of institutional investors under the BLACKROCK SOLUTIONS name. Clients are served from the Company's headquarters in New York City, as well as offices in Boston, Edinburgh, Hong Kong, San Francisco, Tokyo and Wilmington. BlackRock is a member of The PNC Financial Services Group (NYSE: PNC), and is majority-owned by PNC and by BlackRock employees. BlackRock's fixed income product was introduced in 1988 by a team of highly seasoned fixed income professionals. These professionals had extensive experience creating, analyzing and trading a variety of fixed income instruments, including the most complex structured securities. In fact, several individuals at BlackRock were responsible for developing many of the major innovations in the mortgage-backed and asset-backed securities markets, including the creation of the first CMO, the floating rate CMO, the senior/subordinated pass-through and the multi-class asset-backed security. BlackRock is unique among asset management and advisory firms in the emphasis it places on the development of proprietary analytical capabilities. Over one quarter of the firm's professionals are dedicated to the design, maintenance and use of these systems, which are not otherwise available to investors. BlackRock's proprietary analytical tools are used for evaluating, and designing fixed income investment strategies for client portfolios. Securities purchased include mortgages, corporate bonds, municipal bonds and a variety of hedging instruments. BlackRock has developed investment products that respond to investors' needs and has been responsible for several major innovations in closed-end funds. In fact, BlackRock introduced the first closed-end mortgage fund, the first taxable and tax-exempt closed-end funds to offer a finite term, the first closed-end fund to achieve a AAA rating by Standard & Poor's, and the first closed-end fund to invest primarily in North American Government securities. Currently, BlackRock's closed-end funds have dividend reinvestment plans, some of which are designed to provide ongoing demand for the stock in the secondary market. BlackRock manages a wide range of investment vehicles, each having specific investment objectives and policies. In view of our continued desire to provide a high level of service to all our shareholders, BlackRock maintains a toll-free number for your questions. The number is (800) 227-7BFM (7236). We encourage you to call us with any questions that you may have about your BlackRock funds and we thank you for the continued trust that you place in our abilities. 23 [LOGO] BLACKROCK TRUSTEES Laurence D. Fink, CHAIRMAN Andrew F. Brimmer Richard E. Cavanagh Kent Dixon Frank J. Fabozzi James Clayburn La Force, Jr. Walter F. Mondale Ralph L. Schlosstein OFFICERS Ralph L. Schlosstein, PRESIDENT Robert S. Kapito, VICE PRESIDENT Richard M. Shea, VICE PRESIDENT/TAX Dennis Schaney, VICE PRESIDENT Henry Gabbay, TREASURER James Kong, ASSISTANT TREASURER Anne Ackerley, SECRETARY INVESTMENT ADVISOR BlackRock Advisors, Inc. 100 Bellevue Parkway Wilmington, DE 19809 (800) 227-7BFM SUB ADVISOR BlackRock Financial Management, Inc. 40 East 52nd Street New York, NY 10022 CUSTODIAN State Street Bank and Trust Company 1 Heritage Drive North Quincy, MA 02171 INDEPENDENT AUDITORS Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116 TRANSFER AGENT EquiServe Trust Company, N.A. 150 Royall Street Canton, MA 02021 (800) 699-1BFM LEGAL COUNSEL Skadden, Arps, Slate, Meagher & Flom LLP 4 Times Square New York, NY 10036 LEGAL COUNSEL - INDEPENDENT TRUSTEES Debevoise & Plimpton 919 Third Avenue New York, NY 10022 The accompanying financial statements as of April 30, 2002 were not audited and accordingly, no opinion is expressed on them. This report is for shareholder information. This is not a prospectus intended for use in the purchase or sale of any Trust shares. Statements and other information contained in this report are as dated and are subject to change. BLACKROCK CORE BOND TRUST c/o BlackRock Advisors Inc. 100 Bellevue Parkway Wilmington, DE 19809 (800) 227-7BFM [LOGO] Printed on recycled paper 09249E-10-1 [LOGO] BLACKROCK CORE BOND TRUST - -------------------------------------------------------------------------------- SEMI-ANNUAL REPORT APRIL 30, 2002 [LOGO](SM) BLACKROCK -----END PRIVACY-ENHANCED MESSAGE-----