N-30D 1 c21108_n-30d.txt SEMI-ANNUAL REPORT -------------------------------------------------------------------------------- THE BLACKROCK ADVANTAGE TERM TRUST INC. CONSOLIDATED SEMI-ANNUAL REPORT TO SHAREHOLDERS REPORT OF INVESTMENT ADVISOR -------------------------------------------------------------------------------- July 31, 2001 Dear Shareholder: The semi-annual period has been marked by the Federal Reserve's aggressive response to the dramatic U.S. led global economic slowdown. Year-to-date, the Federal Open Market Committee (FOMC) has cut interest rates six times, easing a total of 275 basis points. Currently, the overnight lending rate is at its lowest level since May 1994. Investors are beginning to turn their attention away from past interest rate cuts and are re-focusing on the potential actions of this year's accommodative Fed. In recent FOMC minutes, investors were somewhat surprised to see a degree of discord among committee members as to the severity and timing of the final 50 basis point ease on May 15th. Coupled with a more cautious 25 basis point cut in late June, it appears that the Fed will be adopting a less aggressive posture. Recently, released data has led some investors to conclude that the worst may be behind us. U.S. factory orders, a figure specifically cited by the Fed as a driver behind recent rate cuts, rebounded by 2.5% in May. Personal consumption, another important factor in the U. S. consumer-driven economy, rose by 0.5%, and both construction spending and manufacturing activity have been stronger than expected. Finally, despite aggressively lowering interest rates over the past six months, inflation concerns appear benign. Going forward, we look to employment data as a leading indicator of economic recovery. Corporations have been forced to layoff employees as demand for goods and services has lagged in the first two quarters of the year. While consumer activity has been reasonably resilient in the face of the weakness in employment, further deterioration on the jobs front will most likely derail an early recovery. The Treasury yield curve, which began the year inverted, with shorter maturity issues yielding more than longer maturities, steepened significantly over the semi-annual period. However, the yield curve flattened slightly in June in response to benign inflationary pressures and talks of a possible end to the Fed's rate reduction program. Disappointment caused by the Fed's election to dispense only 25 basis points of easing, coupled with stronger than expected economic data, caused yields on short and intermediate maturity Treasuries to rise. Short-term yields were especially hard-hit with yields on 2-year and 5-year maturities rising 25 and 21 basis points, respectively. This semi-annual report contains a summary of market conditions during the semi-annual period and a review of portfolio strategy by your Trust's managers in addition to the Trust's unaudited financial statements and a detailed list of the portfolio's holdings. Continued thanks for your confidence in BlackRock. We appreciate the opportunity to help you achieve your long-term investment goals. Sincerely, /s/ Laurence D. Fink /s/ Ralph L. Schlosstein -------------------- ------------------------ Laurence D. Fink Ralph L. Schlosstein Chairman President 1 July 31, 2001 Dear Shareholder: We are pleased to present the consolidated unaudited semi-annual report for The BlackRock Advantage Term Trust Inc. ("the Trust") for the six months ending June 30, 2001. We would like to take this opportunity to review the Trust's stock price and net asset value (NAV) performance, summarize market developments and discuss recent portfolio management activity. The Trust is a diversified, actively managed closed-end bond fund whose shares are traded on the New York Stock Exchange under the symbol "BAT". The Trust's investment objective is to return $10 per share (its initial offering price) to shareholders on or about December 31, 2005. Although there can be no guarantee, BlackRock is confident that the Trust can achieve its investment objectives. The Trust seeks these objectives by investing in investment grade fixed income securities, including corporate debt securities, mortgage-backed securities, U.S. Government and agency securities, asset-backed securities and commercial mortgage-backed securities. All of the Trust's assets must be rated at least "BBB" by Standard & Poor's or "Baa" by Moody's at time of purchase or be issued or guaranteed by the U.S. Government or its agencies. The table below summarizes the performance of the Trust's stock price and NAV over the period:
---------------------------------------------------------------- 6/30/01 12/31/00 CHANGE HIGH LOW ----------------------------------------------------------------------------------------------------- STOCK PRICE $10.63 $ 9.875 7.65% $10.63 $ 9.875 ----------------------------------------------------------------------------------------------------- NET ASSET VALUE (NAV) $11.27 $10.83 4.06% $11.34 $10.83 ----------------------------------------------------------------------------------------------------- 10-YEAR TREASURY NOTE 5.41% 5.11% 5.87% 5.51% 4.75% -----------------------------------------------------------------------------------------------------
THE FIXED INCOME MARKETS Economic performance continued to deteriorate in the U.S. and abroad through the second quarter as corporations continued to steadily unwind excess inventories and capacity. While there has been some decline in consumption, the bulk of the weakness has manifested itself in the business sector where capital spending continues to plunge. Consequently, year-over-year industrial production has turned negative for the first time since 1991. Weakness in the corporate sector has begun to spread to the labor market. The unemployment rate has drifted up to 4.5% from a low of 3.9% in October of last year, and the four-week average of initial jobless claims rose to its highest level in nearly a decade. Despite the weakness in the labor market and overall economy, the consumer remains relatively upbeat. While many economic indicators are at 1990-91 recessionary levels, consumer confidence remains well above its readings of the early nineties. The consumer seems buoyed by a faith in the Federal Reserve, which has lowered its funds target rate by 275 basis points during 2001. Sluggish growth combined with a benign inflationary environment should prompt the Federal Reserve to maintain a low interest rate environment well into next year. Over the semi-annual period, the level and shape of the Treasury yield curve were driven by expectations of Fed activity and the issuance of corporate debt. Treasury yields steepened significantly in 2001 with yields on longer maturity issues rising relative to yields on shorter maturities, but began to flatten slightly in June due to expectations that the Fed was nearing the end of its easing cycle. Yields on short and intermediate Treasuries rose with short-term yields increasing most dramatically. Yields on 2-year and 5-year maturities rose 25 and 21 basis points respectively for the second quarter. In addition, corporate issuance of long-term debt represented a net sale of more interest rate sensitive bonds. This further pressured longer dated securities and the market in general. As of June 30, 2001, the 10-year Treasury was yielding 5.41% versus 5.11% on December 31, 2000. For the period, the LEHMAN MORTGAGE INDEX returned 3.78% versus 3.62% for the LEHMAN AGGREGATE INDEX. Despite further Federal Reserve interest rate cuts in the second quarter, absolute yields on mortgage-backed securities rose in sympathy with other longer dated bonds as investors grew fearful of the inflationary potential of an economic recovery. Mortgage yields fell in the second quarter relative to Treasuries, however, as declining refinancing activity, combined with an increase in long-term Treasury rates relative to short-term Treasury rates, improved fundamentals for mortgages. In the second half of the period, refinancing activity, as measured by the MBAA REFINANCE INDEX, declined to 54% of the multi-year peak reached during March. However, refinancing remains well above the volume associated with similar mortgage rates during December 2000. Despite the decline in refinancing activity, prepayments on seasoned mortgage pools continued to surge. Due to the low mortgage rates during the first quarter and the continuing strength of refinancing activity, pass-through issuance has increased significantly 2 over the semi-annual period, especially in March and the second quarter. Year-to-date, the same number of 30-year fixed rate mortgages have been pooled as were issued in all of 2000. For the semi-annual period, the LEHMAN U.S. CREDIT INDEX returned 5.38% versus 3.62% for the LEHMAN AGGREGATE INDEX. The corporate sector was supported by a vigilant Fed, a continued appetite for risk by both domestic and foreign investors and by favorable technicals as the percentage of corporates in the LEHMAN AGGREGATE INDEX surpassed that of Treasuries. Cyclical sub-sectors such as autos and paper were strong performers for the period while technology and defense sectors continued to be among the worst performers. Year-to-date, new issue corporate supply has been significantly higher than in 2000. Lower interest rates, strong investor demand, and a tightening of credit lending by banks brought many issuers into the capital markets. May 2001 was a heavy month for supply with $80.3 billion of bonds issued. Supply is expected to taper off from this pace partially due to higher interest rates, a precipitous drop in commercial paper levels as well as lower merger and acquisition activity. THE TRUST'S PORTFOLIO AND INVESTMENT STRATEGY BlackRock actively manages the Trust's portfolio holdings consistent with BlackRock's overall market outlook and the Trust's investment objectives. The following charts compare the Trust's current and December 31, 2000 asset composition and credit rating: THE BLACKROCK ADVANTAGE TERM TRUST INC. -------------------------------------------------------------------------------- COMPOSITION JUNE 30, 2001 DECEMBER 31, 2000 -------------------------------------------------------------------------------- Zero-Coupon Bonds 48% 47% -------------------------------------------------------------------------------- Interest-Only Mortgage-Backed Securities 14% 12% -------------------------------------------------------------------------------- Inverse Floating Rate Mortgages 9% 6% -------------------------------------------------------------------------------- Corporate Bonds 8% 9% -------------------------------------------------------------------------------- Stripped Money Market Instruments 6% 5% -------------------------------------------------------------------------------- Taxable Municipal Bonds 4% 4% -------------------------------------------------------------------------------- Agency Multiple Class Mortgage Pass-Throughs 3% 6% -------------------------------------------------------------------------------- Commercial Mortgage-Backed Securities 3% 3% -------------------------------------------------------------------------------- Mortgage Pass-Throughs 2% 2% -------------------------------------------------------------------------------- Adjustable Rate Securities -- 2% -------------------------------------------------------------------------------- Principal-Only Mortgage-Backed Securities 1% 2% -------------------------------------------------------------------------------- U. S. Government Securities 1% 1% -------------------------------------------------------------------------------- Asset-Backed Securities 1% 1% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- RATING % OF CORPORATES ------------------------------------------ CREDIT RATING JUNE 30, 2001 DECEMBER 31, 2000 -------------------------------------------------------------------------------- AA or equivalent 9% 16% -------------------------------------------------------------------------------- A or equivalent 53% 40% -------------------------------------------------------------------------------- BBB or equivalent 38% 44% -------------------------------------------------------------------------------- 3 In accordance with the Trust's primary investment objective of returning the initial offer price upon maturity, the Trust's portfolio management activity focused on adding securities which offer attractive yield spreads over Treasury securities and an emphasis on maturity dates approximating the Trust's termination date of December 31, 2005. Additionally, the Trust has been active in reducing positions in bonds with maturity dates or potential cash flows after the Trust's termination date. During the reporting period, the most significant addition has been in interest-only mortgage-backed securities. Additionally, the Trust maintained its significant weighting in zero coupon bonds. To finance these purchases, theTrust sold primarily agency multiple class mortgage pass-throughs. We look forward to managing the Trust to benefit from the opportunities available in the fixed income markets and to meet its investment objectives. We thank you for your investment in the BlackRock Advantage Term Trust Inc. Please feel free to contact our marketing center at (800) 227-7BFM (7236) if you have specific questions which were not addressed in this report. Sincerely, /s/ Robert S. Kapito /s/ Michael P. Lustig -------------------- --------------------- Robert S. Kapito Michael P. Lustig Vice Chairman and Portfolio Manager Managing Director and Portfolio Manager -------------------------------------------------------------------------------- THE BLACKROCK ADVANTAGE TERM TRUST INC. -------------------------------------------------------------------------------- Symbol on New York Stock Exchange: BAT -------------------------------------------------------------------------------- Initial Offering Date: April 27, 1990 -------------------------------------------------------------------------------- Closing Stock Price as of 6/30/01: $10.63 -------------------------------------------------------------------------------- Net Asset Value as of 6/30/01: $11.27 -------------------------------------------------------------------------------- Yield on Closing Stock Price as of 6/30/01 ($10.63)(1): 5.64% -------------------------------------------------------------------------------- Current Monthly Distribution per Share(2): $0.05 -------------------------------------------------------------------------------- Current Annualized Distribution per Share(2): $0.60 -------------------------------------------------------------------------------- (1) Yield on Closing Stock Price is calculated by dividing the current annualized distribution per share by the closing stock price per share. (2) Distribution not constant and is subject to change. 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 -------------------------------------------------------------------------------- THE BLACKROCK ADVANTAGE TERM TRUST INC. CONSOLIDATED PORTFOLIO OF INVESTMENTS JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE RATING* (000) DESCRIPTION (NOTE 1) -------------------------------------------------------------------------------- LONG-TERM INVESTMENTS--139.6% MORTGAGE PASS-THROUGHS--2.4% Federal Home Loan Mortgage Corp., $ 816@ 6.50%, 9/1/25 ............................. $ 803,587 135 9.50%, 1/01/05, 15 Year ................... 139,808 5 Federal National Mortgage Association, 9.50%, 7/01/20 ............................ 5,216 1,577@ Government National Mortgage Association, 8.00%, 12/15/26-7/15/27 ................... 1,633,199 ----------- 2,581,810 ----------- AGENCY MULTIPLE CLASS MORTGAGE PASS-THROUGHS--4.8% 1,671 Federal Home Loan Mortgage Corp., Multiclass Mortgage Participation Certificates, Series 1601, Class 1601-SD, 10/15/08 ................................. 1,680,486 Federal National Mortgage Association, REMIC Pass-Through Certificates, 982 Trust 1992-43, Class 43-E, 4/25/22 .................................. 1,019,224 1,642 Trust 1992-129, Class 129-J, 7/25/20 .................................. 1,632,057 1,444 Trust 1993-193, Class 193-E, 9/25/23 .................................. 735,175 101 Trust 1994-72, Class 72-L, 4/25/24 .................................. 100,967 ----------- 5,167,909 ----------- NON-AGENCY MULTIPLE CLASS MORTGAGE PASS-THROUGHS--0.5% AAA 514 Citicorp Mortgage Securities, Trust 1998-3, Class 3-A6, 5/25/28 .................................. 524,289 ----------- INVERSE FLOATING RATE MORTGAGES--13.8% Federal Home Loan Mortgage Corp., Multiclass Mortgage Participation Certificates, 298 Series 1490, Class 1490-SE, 4/15/08 .................................. 302,765 827 Series 1537, Class 1537-SB, 6/15/08 .................................. 833,052 68 Series 1541, Class 1541-TB, 7/15/23 .................................. 65,507 948 Series 1635, Class 1635-P, 12/15/08 ................................. 1,005,508 79 Series 1655, Class 1655-SB, 12/15/08 ................................. 76,539 584 Series 1727, Class 1727-LB, 5/15/24 .................................. 528,473 Federal National Mortgage Association, REMIC Pass-Through Certificates, 2,000@ Trust 1992-190, Class 190-S, 11/25/07 ................................. 2,198,620 218 Trust 1992-192, Class 192-SB, 11/25/07 ................................. 220,122 369 Trust 1993-179, Class 179-SP, 4/25/21 .................................. 352,669 2,132@ Trust 1993-209, Class 209-SG, 8/25/08 .................................. 2,070,559 393 Trust 1993-212, Class 212-SA, 11/25/08 ................................. 346,273 1,711 Trust 1993-214, Class 214-S, 12/25/08 ................................. 1,697,045 1,775 Trust 1993-214, Class 214-SL, 12/25/08 ................................. 1,637,885 593 Trust 1993-221, Class 221-SA, 3/25/08 .................................. 591,091 36 Trust 1994-37, Class 37-SC, 3/25/24 .................................. 36,163 AAA 2,766 Sears Mortgage Securities Corp., Series 1993-7, Class 7-S3, 4/25/08 .................................. 2,787,168 ----------- 14,749,439 ----------- INTEREST ONLY MORTGAGE-BACKED SECURITIES--19.0% 26,935 Credit Suisse First Boston Mortgage Securities Corp., Series 1997-C1, Class AX, 6/15/08** ................................ 1,988,098 Federal Home Loan Mortgage Corp., Multiclass Mortgage Participation Certificates, 597 Series G-25, Class 25-S, 8/25/06 .................................. 9,045 9 Series 1543, Class 1543-VU, 4/15/23 .................................. 157,035 2,308 Series 1588, Class 1588-PM, 9/15/22 .................................. 187,336 946 Series 1880, Class 1880-DA, 3/15/08 .................................. 83,092 230 Series 1946, Class 1946-SN, 10/15/08 ................................. 6,898 8,524 Series 1989, Class 1989-SL, 5/15/08 .................................. 442,201 8,524 Series 1989, Class 1989-SM, 5/15/08 .................................. 793,831 6,480 Series 2018, Class 2018-PH, 12/15/20 ................................. 826,263 3,061 Series 2097, Class 2097-PY, 12/15/19 ................................. 278,884 See Notes to Consolidated Financial Statements. 5 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE RATING* (000) DESCRIPTION (NOTE 1) -------------------------------------------------------------------------------- INTEREST ONLY MORTGAGE-BACKED SECURITIES (CONT'D) Federal Home Loan Mortgage Corp., Multiclass Mortgage Participation Certificates, $ 4,124 Series 2115, Class 2115-IA, 11/15/10 ................................. $ 328,613 4,045 Series 2130, Class 2130-PF, 4/15/11 .................................. 477,755 3,892 Series 2154, Class 2154-PF, 4/15/21 .................................. 500,100 5,700 Series 2279, Class 2279-IO, 7/15/24 .................................. 1,009,969 4,503 Series 2301, Class 2301-IL, 11/15/20 ................................. 710,618 Federal National Mortgage Association, REMIC Pass-Through Certificates, 7,700 Trust 299, Class 2, 5/01/28 .................................. 1,956,304 2,038 Trust 1993-163, Class 163-PH, 3/25/22 .................................. 286,188 1,678 Trust 1993-188, Class 188-VA, 3/25/13 .................................. 141,598 2,592 Trust 1993-194, Class 194-PV, 6/25/08 .................................. 278,610 1,202 Trust 1993-223, Class 223-PT, 10/25/23 ................................. 130,121 4,538 Trust 1996-24, Class 24-SG, 3/25/08 .................................. 629,589 4,920 Trust 1997-80, Class 80-PD, 3/18/21 .................................. 385,947 6,755 Trust 1997-84, Class 84-PJ, 1/25/08 .................................. 1,034,925 2,238 Trust 1998-43, Class 43-YJ, 7/18/28 .................................. 208,387 1,310 Trust 1998-44, Class 44-JI, 8/20/17 .................................. 58,789 11,273 Trust 1998-51, Class 51-SP, 9/25/28 .................................. 450,931 11,392 Trust 1998-61, Class 61-S, 12/25/08 ................................. 405,824 16,166 Trust 1999-35, Class 35-LS, 2/25/22 .................................. 848,690 10,663 Trust 1999-52, Class 52-TS, 5/25/22 .................................. 526,501 3,043 Trust 1999-64, Class 64-IA, 5/25/21 .................................. 336,669 Government National Mortgage Association, 1,665 Trust 1998-24, Class 24-IB, 5/20/23 .................................. 193,777 2,974 Trust 1999-17, Class 17-PF, 10/16/25 ................................. 427,524 12,044 Trust 1999-25, Class 25-SL, 7/20/29 .................................. 752,734 656 Trust 2000-7, Class 7-IB, 6/16/25 .................................. 138,265 11,483 Merrill Lynch Mortgage Investors, Inc., Series 1997-C2, Class IO, 12/10/29 ................................. 671,962 16,594 Morgan (J.P.) Commercial Mortgage Finance Corp., Series 1997-C5, Class X, 9/15/29** ................................ 1,022,444 3,048 Morgan Stanley Capital 1, Inc., Series 1997-HF1, Class HF1-X, 6/15/17** ................................ 178,489 Residential Funding Mortgage Securities, Inc., 26,572 Series 1998-S19, Class A8, 8/25/28 .................................. 128,707 135,000 Series 1999-S14, Class A5B, 6/25/29 .................................. 1,350,000 ----------- 20,342,713 ----------- PRINCIPAL ONLY MORTGAGE-BACKED SECURITIES--1.2% AAA 31 Collateralized Mortgage Obligation Trust, Trust 29, Class A, 5/23/17 .................................. 25,549 230 Federal Home Loan Mortgage Corp., Multiclass Mortgage Participation Certificates, Series 1946, Class 1946-SN, 10/15/08 ................................. 215,344 Federal National Mortgage Association, REMIC Pass-Through Certificates, 1,406 Trust 1993-225, Class 225-ME, 11/25/23 ................................. 688,940 399 Trust 1994-25, Class 25-C, 11/25/23 ................................. 397,011 ----------- 1,326,844 ----------- COMMERCIAL MORTGAGE-BACKED SECURITIES--4.2% BBB 1,000 DLJ Mortgage Acceptance Corp., Series 1997-CF1, 7.91%, 5/15/30** ........................ 970,694 Merrill Lynch Mortgage Investors, Inc., A+ 1,000 Series 1995-C1, Class D, 7.913%, 5/25/15 ......................... 1,029,237 BBB 500 Series 1996-C1, Class D, 7.42%, 4/25/28 .......................... 509,180 AAA 2,000 New York City Mortgage Loan Trust, Multifamily, Series 1996, Class A-2, 6.75%, 6/25/11** ........................ 1,981,875 ----------- 4,490,986 ----------- ASSET-BACKED SECURITIES--0.9% AAA 800 Chase Credit Card Master Trust, Series 1997-5, Class A, 6.19%, 8/15/05 .......................... 817,125 NR 419+ Global Rated Eligible Asset Trust, Series 1998-A, Class A-1, 7.33%, 9/15/07**/*** .................... 75,424 See Notes to Consolidated Financial Statements. 6 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE RATING* (000) DESCRIPTION (NOTE 1) -------------------------------------------------------------------------------- ASSET-BACKED SECURITIES--(CONT'D) NR $ 899+ Structured Mortgage Asset Residential Trust, Series 1997-3, 8.57%, 4/15/06@@/*** ...................... $ 116,907 ----------- 1,009,456 ----------- U.S. GOVERNMENT AND AGENCY SECURITIES--0.7% 619 Small Business Administration, Series 1998-10, Class 10-A, 6.12%, 2/01/08 ............................ 606,262 190 United States Treasury Notes, 4.25%, 5/31/03 ............................ 189,941 ----------- 796,203 ----------- ZERO COUPON BONDS--67.5% 12,407 Aid to Israel, 2/15/05-8/15/05 ............................ 10,073,016 Government Trust Certificates, 5,220 Class 2-F, 5/15/05 ......................... 4,231,019 13,760 Class T-1, 5/15/05 ......................... 11,153,030 22,926@ Resolution Funding Corp., 7/15/05 .................................... 18,704,015 11,026@ Financing Corp., 12/06/05 ................................... 8,617,591 6,216@ Tennessee Valley Authority, 11/01/05 ................................... 4,928,231 18,000@ United States Treasury Strip, 8/15/05 .................................... 14,637,960 ----------- 72,344,862 ----------- TAXABLE MUNICIPAL BONDS--6.0% AAA 1,000 Alameda County California Pension Obligation, Zero Coupon, 12/01/05 ...................... 784,120 AAA 1,000 Alaska Energy Power Auth. Rev., Zero Coupon, 7/01/05 ....................... 853,200 AAA 1,300 Kern County California Pension Obligation, Zero Coupon, 8/15/01-8/15/05 ............... 1,056,771 Long Beach California Pension Obligation, AAA 1,306 Zero Coupon, 9/01/01-9/01/05 ............... 1,059,378 AAA 500 7.09%, 9/01/09 ............................ 523,585 Los Angeles County California Pension Obligation, AAA 271 Zero Coupon, 12/31/01-6/30/05 .............. 241,255 AAA 1,000 6.77%, 6/30/05 ............................ 794,970 AAA 1,000 8.62%, Series A, 6/30/06 ................... 1,116,710 ----------- 6,429,989 ----------- CORPORATE BONDS--10.9% FINANCE & BANKING--5.6% A3 1,000@ American Savings Bank, 6.625%, 2/15/06 ** ........................ 1,002,910 A+ 1,313 Equitable Life Assurance Society USA, Zero Coupon, 12/01/01-12/01/05 ** .......... 1,032,452 A 1,000 Lehman Brothers Holding, Inc., 6.75%, 9/24/01 ............................ 1,000,289 AA+ 1,900 PaineWebber Group, Inc., 7.88%, 2/15/03 ............................ 1,979,933 Aa3 1,000 Salomon Smith Barney Holding, Inc., 6.75%, 1/15/06 ............................ 1,023,430 ----------- 6,039,014 ----------- INDUSTRIALS--2.4% A 1,000@ TCI Communications, Inc., 8.25%, 1/15/03 ............................ 1,039,210 Baa2 1,826 Union Pacific Corp., Zero Coupon, 11/01/01-5/01/05** ............ 1,476,912 ----------- 2,516,122 ----------- UTILITIES--1.0% A 1,000 Alltel Corp., 7.50%, 3/01/06 ............................ 1,038,830 ----------- YANKEE--1.9% BBB- 1,000 Empresa Electric Guacolda SA, 7.95%, 4/30/03** .......................... 1,007,664 A- 1,000 Israel Electric Corp., Ltd., 7.25%, 12/15/06** ......................... 1,000,160 ----------- 2,007,824 ----------- Total corporate bonds ........................ 11,601,790 ----------- STRIPPED MONEY MARKET INSTRUMENTS--7.7% 10,000 Vanguard Prime Money Market Portfolio, 12/31/04 ................................... 8,235,000 ----------- COLLATERALIZED MORTGAGE OBLIGATION RESIDUALS***--0.0% 10 Federal Home Loan Mortgage Corp., Multiclass Mortgage Participation Certificates, Series 1035, Class 1035-R, 1/15/21 .................................. 42,500 ----------- Total long-term investments (cost $137,499,517) ........................ 149,643,790 ----------- See Notes to Consolidated Financial Statements. 7 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE RATING* (000) DESCRIPTION (NOTE 1) -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT--0.4% DISCOUNT NOTE $435 Federal Home Loan Bank, 3.94%, 7/02/01 (amortized cost $434,953) .................. $ 434,953 ------------ Total investments--140.0% (cost $137,934,470) ........................ 150,078,743 Liabilities in excess of other assets--(40.0)% ............................ (42,868,113) ------------ NET ASSETS--100% ............................. $107,210,630 ============ -------------- * 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. *** Illiquid securities representing 0.22% of net assets. @ Entire or partial principal amount pledged as collateral for reverse repurchase agreements or financial futures contracts. @@ Security is restricted as to public resale. The security was acquired in 1997 and has a current cost of $116,906. + Security is fair valued. (Note 1) ----------------------------------------------------------------- KEY TO ABBREVIATION: REMIC -- Real Estate Mortgage Investment Conduit ----------------------------------------------------------------- See Notes to Consolidated Financial Statements. 8 -------------------------------------------------------------------------------- THE BLACKROCK ADVANTAGE TERM TRUST INC. CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- ASSETS Investments, at value (cost $137,934,470) (Note 1) ......................................... $150,078,743 Interest receivable ................................ 1,157,244 Receivable for investments sold .................... 33,850 Other assets ....................................... 7,452 ------------ 151,277,289 ------------ LIABILITIES Reverse repurchase agreements (Note 4) ............. 43,749,625 Interest payable ................................... 50,158 Investment advisory fee payable (Note 2) ........... 44,211 Due to custodian ................................... 23,886 Deferred directors fees (Note 1) ................... 7,452 Administration fee payable (Note 2) ................ 7,074 Other accrued expenses ............................. 184,253 ------------ 44,066,659 ------------ NET ASSETS ......................................... $107,210,630 ============ Net assets were comprised of: Common stock, at par (Note 5) .................... $ 95,107 Paid-in capital in excess of par ................. 86,975,272 ------------ 87,070,379 Undistributed net investment income .............. 6,572,129 Accumulated net realized gain .................... 1,884,579 Net unrealized appreciation ...................... 11,683,543 ------------ Net assets, June 30, 2001 .......................... $107,210,630 ============ NET ASSET VALUE PER SHARE: ($107,210,630 / 9,510,667 shares of common stock issued and outstanding) ............. $11.27 ====== -------------------------------------------------------------------------------- THE BLACKROCK ADVANTAGE TERM TRUST INC. CONSOLIDATED STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- NET INVESTMENT INCOME Income Interest (net of discount/premium accretion/amortization of $336,171 and interest expense of $1,183,210) .................... $ 4,766,050 ----------- Operating expenses Investment advisory .................................. 278,694 Administration ....................................... 42,177 Reports to shareholders .............................. 39,000 Custodian ............................................ 31,000 Independent accountants .............................. 18,000 Directors ............................................ 12,000 Registration ......................................... 12,000 Transfer agent ....................................... 11,000 Legal ................................................ 10,000 Miscellaneous ........................................ 37,345 ----------- Total operating expenses ........................... 491,216 ----------- Net investment income .................................. 4,274,834 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on: Investments .......................................... 652,987 Swaps ................................................ 11,601 Foreign currency ..................................... (13,991) ----------- 650,597 ----------- Net change in unrealized appreciation (depreciation) on: Investments .......................................... 1,838,933 Swaps ................................................ (11,601) Futures .............................................. (174,487) ----------- 1,652,845 ----------- Net gain on investments ................................ 2,303,442 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................ $ 6,578,276 =========== See Notes to Consolidated Financial Statements. 9 -------------------------------------------------------------------------------- THE BLACKROCK ADVANTAGE TERM TRUST INC. CONSOLIDATED STATEMENT OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- 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 ........................................ $ 6,578,276 ----------- Decrease in investments .................................. 3,610,649 Decrease in other accrued expenses ....................... (198,126) Increase in due to custodian ............................. 23,886 Decrease in due to broker-variation margin ............... (16,937) Increase in interest receivable .......................... (141,946) Decrease in interest payable ............................. (294,391) Decrease in dividends payable ............................ (475,562) Net realized gain ........................................ (650,597) Increase in unrealized appreciation ...................... (1,652,845) ----------- Total adjustments ...................................... 204,131 ----------- Net cash flows provided by operating activities .......... $ 6,782,407 =========== INCREASE (DECREASE) IN CASH Net cash flows provided by operating activities .......... $ 6,782,407 ----------- Cash flows used for financing activities: Decrease in reverse repurchase agreements .............. (4,512,036) Cash dividends paid .................................... (2,377,220) ----------- Net cash flows used for financing activities ............. (6,889,256) ----------- Net decrease in cash ..................................... (106,849) Cash at beginning of period .............................. 106,849 ----------- Cash at end of period .................................... $ -- =========== -------------------------------------------------------------------------------- THE BLACKROCK ADVANTAGE TERM TRUST INC. CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) -------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2001 2000 ------------ ----------- INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income ................ $ 4,274,834 $ 5,631,279 Net realized gain (loss) ............. 650,597 (240,333) Net change in unrealized appreciation (depreciation) ........ 1,652,845 7,881,662 ------------- ------------- Net increase in net assets resulting from operations .......... 6,578,276 13,272,608 Dividends from net investment income .................. (2,377,220) (5,706,095) ------------- ------------- Total increase ......................... 4,201,056 7,566,513 NET ASSETS Beginning of period .................... 103,009,574 95,443,061 ------------- ------------- End of period (including undistributed net investment income of $6,572,129 and $4,674,515, respectively) ........ $ 107,210,630 $ 103,009,574 ============= ============= See Notes to Consolidated Financial Statements. 10 -------------------------------------------------------------------------------- THE BLACKROCK ADVANTAGE TERM TRUST INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (UNAUDITED) --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED --------------------------------------------------- JUNE 30, 2001 2000 1999 1998 1997 1996 ---------------- -------- --------- -------- -------- ------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period ............. $ 10.83 $ 10.04 $ 11.07 $ 10.60 $ 10.10 $ 10.49 -------- -------- -------- -------- -------- ------- Net investment income (net of interest expense of $0.12, $0.31, $0.26, $0.28, $0.26 and $0.22, respectively) ........................... .45 .59 .59 .68 .76 .57 Net realized and unrealized gain (loss) on investments ............................... .24 .80 (1.02) .41 .36 (.33) -------- -------- -------- -------- -------- ------- Net increase (decrease) from investment operations .69 1.39 (.43) 1.09 1.12 .24 -------- -------- -------- -------- -------- ------- Dividends from net investment income ............. (.25) (.60) (.60) (.62) (.62) (.63) -------- -------- -------- -------- -------- ------- Net asset value, end of period* .................. $ 11.27 $ 10.83 $ 10.04 $ 11.07 $ 10.60 $ 10.10 ======== ======== ======== ======== ======== ======= Market value, end of period* ..................... $ 10.63 $ 9.88 $ 9.06 $ 9.81 $ 9.38 $ 8.63 ======== ======== ======== ======== ======== ======= TOTAL INVESTMENT RETURN+ ......................... 10.27% 16.28% (1.58)% 11.03% 15.79% 7.30% ======== ======== ======== ======== ======== ======= RATIOS TO AVERAGE NET ASSETS: Operating expenses ............................... .93%+++ .88% .91% .91% .88% .91% Operating expenses and interest expense .......... 3.19%+++ 3.90% 3.37% 3.52% 3.39% 3.06% Operating expenses, interest expense and excise taxes ................................... 3.19%+++ 4.06% 3.60% 3.71% 3.52% 3.52% Net investment income ............................ 7.19%+++ 5.72% 5.58% 6.23% 7.47% 5.80% SUPPLEMENTAL DATA: Average net assets (000) ......................... $106,013 $ 98,368 $100,534 $103,812 $ 97,493 $93,370 Portfolio turnover ............................... 17% 17% 9% 11% 31% 76% Net assets, end of period (000) .................. $107,211 $103,010 $ 95,443 $105,238 $100,833 $96,028 Reverse repurchase agreements outstanding, end of period (000) ............................ $ 43,750 $ 48,262 $ 47,039 $ 50,051 $ 48,275 $26,933 Asset coverage++ ................................. $ 3,451 $ 3,134 $ 3,029 $ 3,103 $ 3,089 $ 4,565
-------------- * Net asset value and market value are published in BARRON'S each Saturday and THE WALL STREET JOURNAL each Monday. + 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. Total investment return does not reflect brokerage commissions. Total investment return for period of less than one year is not annualized. Past performance is not a guarantee of future results. ++ Per $1,000 of reverse repurchase agreements outstanding. +++ Annualized. The information above represents the unaudited operating performance data for a share of common stock outstanding, total investment return, ratios to average net assets and other supplemental data, for each of the periods indicated. This information has been determined based upon financial information provided in the financial statements and market value data for the Trust's shares. See Notes to Consolidated Financial Statements. 11 -------------------------------------------------------------------------------- THE BLACKROCK ADVANTAGE TERM TRUST INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -------------------------------------------------------------------------------- NOTE 1. ORGANIZATION The BlackRock Advantage Term Trust Inc. (the "Trust"), a & ACCOUNTING Maryland corporation, is a diversified, closed-end POLICIES management investment company. The Trust's primary investment objective is to return $10 per share to investors on or shortly before December 31, 2005. The ability of issuers of debt securities held by the Trust to meet their obligations may be affected by economic developments in a specific industry or region. No assurance can be given that the Trust's investment objective will be achieved. On October 31, 1998, the Trust transferred a substantial portion of its total assets to a 100% owned regulated investment company subsidiary called BAT Subsidiary, Inc. These consolidated financial statements include the operations of both the Trust and its wholly-owned subsidiary after elimination of all intercompany transactions and balances. The following is a summary of significant accounting policies followed by the Trust. SECURITIES VALUATION: The Trust values mortgage-backed, asset backed and other debt securities, interest rate swaps, caps, floors and non-exchange traded options on the basis of current market quotations provided by dealers or pricing services approved by the Trust's Board of Directors. In determining the value of a particular security, pricing services may use certain information with respect to transactions in such securities, quotations from dealers, market transactions in comparable securities, various relationships observed in the market between securities, and calculated yield measures based on valuation technology commonly employed in the market for such securities. Exchange-traded options are valued at their last sales price as of the close of options trading on the applicable exchanges. In the absence of a last sale, options are valued at the average of the quoted bid and asked prices as of the close of business. A futures contract is valued at the last sale price as of the close of the commodities exchange on which it trades. Short-term investments are 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 Board of Directors. At June 30, 2001 the Trust held two positions that were valued at fair value which is significantly lower than their purchase cost. REPURCHASE AGREEMENTS: In connection with transactions in repurchase agreements, the Trust's custodian takes possession of the underlying collateral securities, the value of which at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to ensure the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Trust may be delayed or limited. OPTION SELLING/PURCHASING: When the Trust sells or purchases an option, an amount equal to the premium received or paid by the Trust is recorded as a liability or an asset and is subsequently adjusted to the current market value of the option written or purchased. Premiums received or paid from writing or purchasing options which expire unexercised are treated by the Trust on the expiration date as realized gains or losses. The difference between the premium and the amount paid or received on effecting a closing purchase or sale transaction, including brokerage commissions, is also treated as a realized gain or loss. If an option is exercised, the premium paid or received is added to the cost of the purchase or proceeds from the sale in determining whether the Trust has realized a gain or a loss on investment transactions. The Trust, as writer of an option, may have no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option. Options, when used by the Trust, help in maintaining a targeted duration. Duration is a measure of the price sensitivity of a security or a portfolio to relative changes in interest rates. For instance, a duration of "one" means that a portfolio's or a security's price would be expected to change by approximately one percent with a one percent change in interest rates, while a duration of five would imply that the price would move approximately five percent in relation to a one percent change in interest rates. Option selling and purchasing is used by the Trust to effectively hedge positions, or collections of positions, so that changes in interest rates do not change the duration of the portfolio unexpectedly. In general, the Trust uses options to hedge a long or short position or an overall portfolio that is longer or shorter than the benchmark security. A call option gives the purchaser of the option the right (but not obligation) to buy, and obligates the seller to sell (when the option is exercised), the underlying position at the exercise price at anytime or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the 12 underlying position at the exercise price at any time or at a specified time during the option period. Put options can be purchased to effectively hedge a position or a portfolio against price declines if a portfolio is long. In the same sense, call options can be purchased to hedge a portfolio that is shorter than its benchmark against price changes. The Trust can also sell (or write) covered call options and put options to hedge portfolio positions. The main risk that is associated with purchasing options is that the option expires without being exercised. In this case, the option expires worthless and the premium paid for the option is considered the loss. The risk associated with writing call options is that the Trust may forego the opportunity for a profit if the market value of the underlying position increases and the option is exercised. The risk in writing put options is that the Trust may incur a loss if the market value of the underlying position decreases and the option is exercised. In addition, as with futures contracts, the Trust risks not being able to enter into a closing transaction for the written option as the result of an illiquid market. INTEREST RATE SWAPS: The trust may invest in swap agreements for the purpose of hedging against changes in interest rates or foreign currencies. In a simple interest rate swap, one investor pays a floating rate of interest on a notional principal amount and receives a fixed rate of interest on the same notional principal amount for a specified period of time. Alternatively, an investor may pay a fixed rate and receive a floating rate. Interest rate swaps were conceived as asset/liability management tools. In more complex swaps, the notional principal amount may decline (or amortize) over time or the notional amounts may differ. During the term of the swap, changes in the value of the swap are recognized as unrealized gains or losses by "marking-to-market" to reflect the market value of the swap. When the swap is terminated, the Trust will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Trust's basis in the contract, if any. The Trust is exposed to credit loss in the event of non-performance by the other party to the interest rate swap. However, the Trust does not anticipate non-performance by any counterparty. SWAP OPTIONS: Swap options are similar to options on securities except that instead of selling or purchasing the right to buy or sell a security, the writer or purchaser of the swap option is granting or buying the right to enter into a previously agreed upon interest rate swap agreement at any time before the expiration of the option. Premiums received or paid from writing or purchasing options are recorded as liabilities or assets and are subsequently adjusted to the current market value of the option written or purchased. Premiums received or paid from writing or purchasing options which 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 commission, is also treated as a realized gain or loss. If an option is exercised, the premium paid or received is added to the proceeds from the sale or cost of the purchase in determining whether the Trust has realized a gain or loss on investment transactions The main risk that is associated with purchasing swap options is that the swap option expires without being exercised. In this case, the option expires worthless and the premium paid for the swap option is considered the loss. The main risk that is associated with the writing of a swap option is the market risk of an unfavorable change in the value of the interest rate swap underlying the written swap option. Swap options may be used by the Trust to manage the duration of the Trust's portfolio in a manner similar to more generic options described above. FINANCIAL FUTURES CONTRACTS: A futures contract is an agreement between two parties to buy and sell a financial instrument for a set price on a future date. Initial margin deposits are made upon entering into futures contracts and can be either cash or securities. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by "marking-to-market" on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments are made or received, depending upon whether unrealized gains or losses are incurred. When the contract is closed, the Trust records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Trust's basis in the contract. Financial futures contracts, when used by the Trust, help in maintaining a targeted duration. Futures contracts can be sold to effectively shorten an otherwise longer duration portfolio. In the same sense, futures contracts can be purchased to lengthen a portfolio that is shorter than its duration target. Thus, by buying or selling futures contracts, the Trust can effectively "hedge" more volatile positions so that changes in interest rates do not change the duration of the portfolio unexpectedly. The Trust may invest in financial futures contracts primarily for the purpose of hedging its existing portfolio securities or 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 13 not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets. The Trust is also at risk of not being able to enter into a closing transaction for the futures contract because of an illiquid secondary market. In addition, since futures are used to shorten or lengthen a portfolio's duration, there is a risk that the portfolio may have temporarily performed better without the hedge or that the Trust may lose the opportunity to realize appreciation in the market price of the underlying positions. SHORT SALES: The Trust may make short sales of securities as a method of hedging potential price declines in similar securities owned. When the Trust makes a short sale, it may borrow the security sold short and deliver it to the broker-dealer through which it made the short sale as collateral for its obligation to deliver the security upon conclusion of the sale. The Trust may have to pay a fee to borrow the particular securities and may be obligated to pay over any payments received on such borrowed securities. A gain, limited to the price at which the Trust sold the security short, or a loss, unlimited as to dollar amount, will be recognized upon the termination of a short sale if the market price is less or greater than the proceeds originally received. SECURITIES LENDING: The Trust may lend its portfolio securities to qualified institutions. The loans are secured by collateral at least equal, at all times, to the market value of the securities loaned. The Trust may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower of the securities fail financially. The Trust receives compensation for lending its securities in the form of interest on the loan. The Trust also continues to receive interest on the securities loaned, and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Trust. The Trust did not engage in securities lending during the six months ended June 30, 2001. INTEREST RATE CAPS: Interest rate caps are similar to interest rate swaps, except that one party agrees to pay a fee, while the other party pays the excess, if any, of a floating rate over a specified fixed or floating rate. Interest rate caps are intended to both manage the duration of the Trust's portfolio and its exposure to changes in short term rates. Owning interest rate caps reduces the portfolio's duration, making it less sensitive to changes in interest rates from a market value perspective. The effect on income involves pro tection from rising short term rates, which the Trust experiences primarily in the form of leverage. The Trust is exposed to credit loss in the event of non-performance by the other party to the interest rate cap. However, the Trust does not anticipate non-performance by any counterparty. Transaction fees paid or received by the Trust are recognized as assets or liabilities and amortized or accreted into interest expense or income over the life of the interest rate cap. The asset or liability is subsequently adjusted to the current market value of the interest rate cap purchased or sold. Changes in the value of the interest rate cap are recognized as unrealized gains or losses. INTEREST RATE FLOORS: Interest rate floors are similar to interest rate swaps, except that one party agrees to pay a fee, while the other party pays the deficiency, if any, of a floating rate under a specified fixed or floating rate. Interest rate floors are used by the Trust to both manage the duration of the portfolio and its exposure to changes in short-term interest rates. Selling interest rate floors reduces the portfolio's duration, making it less sensitive to changes in interest rates from a market value perspective. The Trust's leverage provides extra income in a period of falling rates. Selling floors reduces some of the advantage by partially monetizing it as an up front payment which the Trust receives. The Trust is exposed to credit loss in the event of non-performance by the other party to the interest rate floor. However, the Trust does not anticipate non-performance by any counterparty. Transaction fees paid or received by the Trust are recognized as assets or liabilities and amortized or accreted into interest expense or income over the life of the interest rate floor. The asset or liability is subsequently adjusted to the current market value of the interest rate floor purchased or sold. Changes in the value of the interest rate floor are recognized as unrealized gains and losses. SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on the trade date. Realized and unrealized gains and losses are calculated on the identified cost basis. Interest income is recorded on the accrual basis and the Trust accretes discount and amortizes premium on securities purchased using the interest method. FEDERAL INCOME 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 sufficient taxable income to shareholders. Therefore, no federal income tax provision is required. As part of its tax planning strat- 14 egy, the Trust intends to retain a portion of its taxable income and pay an excise tax on the undistributed amounts. DIVIDENDS AND DISTRIBUTIONS: The Trust declares and pays dividends and distributions monthly, first from net investment income, then from net realized short-term capital gains and other sources, if necessary. Net long-term capital gains, if any, in excess of loss carryforwards may be distributed annually. Dividends and distributions are recorded on the ex-dividend date. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. ESTIMATES: The preparation of financial statements in conformity with 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 Directors on February 24, 2000, non-interested Directors 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 Directors. This has the same economic effect as if the Directors had invested the deferred amounts in such other BlackRock funds. The deferred compensation plan is not funded and obligations thereunder 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 Directors 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., which in turn is an indirect majority-owned subsidiary of PNC Financial Services Group, Inc. The Trust has an Administration Agreement with Prudential Investments Fund Management, LLC ("PIFM"), an indirect, wholly-owned subsidiary of The Prudential Insurance Co. of America. The investment advisory fee paid to the Advisor is computed weekly and payable monthly at an annual rate of 0.50% of the Trust's average weekly net assets. The administration fee paid to PIFM is also computed weekly and payable monthly at an annual rate of 0.08% of the Trust's average weekly net assets. 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. PIFM pays occupancy and certain clerical and accounting costs of the Trust. The Trust bears all other costs and expenses. NOTE 3. PORTFOLIO Purchases and sales of investment securities, other than SECURITIES short-term investments and dollar rolls, for the six months ended June 30, 2001 aggregated $30,740,063 and $13,437,022, respectively. The Trust may invest up to 85% of its total assets in securities which are not readily marketable, including those which are restricted as to disposition under securities law ("restricted securities"). At June 30, 2001, the Trust held 10% of its portfolio assets in restricted securities. The Trust may from time to time purchase in the secondary market certain mortgage pass-through securities packaged or master serviced by affiliates such as PNC Mortgage Securities Corp. (or Sears Mortgage if PNC Mortgage Securities Corp. succeeded to rights and duties of Sears) or mortgage related securities containing loans or mortgages originated by PNC Bank or its affiliates, including Midland Loan Services, Inc. It is possible under certain circumstances, PNC Mortgage Securities Corp. or its affiliates, including Midland Loan Services, Inc. could have interests that are in conflict with the holders of these mortgage-backed securities, and such holders could have rights against PNC Mortgage Securities Corp. or its affiliates, including Midland Loan Services, Inc. The federal income tax basis of the Trust's investments at June 30, 2001 was substantially the same as the basis for financial reporting purposes and, accordingly, net unrealized appreciation for federal income tax purposes was $12,144,273 (gross unrealized appreciation--$13,406,778, gross unrealized depreciation--$1,262,505). For federal income tax purposes, the Trust had a capital loss carryforward at December 31, 2000 of approximately $258,000, of which $177,000 expires in 2005 and $81,000 expires in 2008. Accordingly, no capital gains distribution is expected to be paid to shareholders until net gains have been realized in excess of such amount. 15 Details of open financial futures contracts at June 30, 2001 are as follows: VALUE AT NUMBER OF EXPIRATION VALUE AT JUNE 30, UNREALIZED CONTRACTS TYPE DATE TRADE DATE 2001 DEPRECIATION --------- ---- ---------- ---------- --------- ------------ Short positions: 100 Eurodollar March 2002 $9,420,340 $9,550,000 $129,660 100 Eurodollar Dec. 2001 9,425,590 9,581,000 155,410 100 Eurodollar Sept. 2001 9,442,840 9,618,500 175,660 -------- $460,730 ======== NOTE 4. BORROWINGS REVERSE REPURCHASE AGREEMENTS: The Trust may enter into reverse repurchase agreements with qualified, third party broker-dealers as determined by and under the direction of the Trust's Board of Directors. Interest on the value of reverse repurchase agreements issued and outstanding will be based upon competitive market rates at the time of issuance. At the time the Trust enters into a reverse repurchase agreement, it will establish and maintain a segregated account with the lender, the value of which at least equals the principal amount of the reverse repurchase transactions including accrued interest. The average daily balance of reverse repurchase agreements outstanding during the six months ended June 30, 2001 was approximately $45,435,582 at a weighted average interest rate of approximately 5.25%. The maximum amount of reverse repurchase agreements outstanding at any month-end during the six months ended June 30, 2001 was $43,749,625 as of June 30, 2001 which was 28.9% 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. NOTE 5. CAPITAL There are 200 million shares of $.01 par value common stock authorized. Of the 9,510,667 shares outstanding at June 30, 2001, the Advisor owned 10,667 shares. NOTE 6. DIVIDENDS Subsequent to June 30, 2001, the Board of Directors of the Trust declared dividends from undistributed earnings of $0.05 per share payable July 31, 2001 to shareholders of record on July 16, 2001. 16 -------------------------------------------------------------------------------- THE BLACKROCK ADVANTAGE TERM TRUST INC. DIVIDEND REINVESTMENT PLAN -------------------------------------------------------------------------------- Pursuant to the Trust's Dividend Reinvestment Plan (the "Plan"), shareholders may elect to have all distributions of dividends and capital gains reinvested by State Street Bank and Trust Company (the "Plan Agent") in Trust shares pursuant to the Plan. Shareholders who do not participate in the Plan will receive all distributions in cash paid by check in United States dollars mailed directly to the shareholders of record (or if the shares are held in street or other nominee name, then to the nominee) by the transfer agent, as dividend disbursing agent. The Plan Agent serves as agent for the shareholders in administering the Plan. After the Trust declares a dividend or determines to make a capital gain distribution, the Plan Agent will, as agent for the participants, receive the cash payment and use it to buy Trust shares in the open market on the New York Stock Exchange or elsewhere, for the participants' accounts. The Trust will not issue any new shares under the Plan below net asset value. Participants in the Plan may withdraw from the Plan upon written notice to the Plan Agent and will receive certificates for whole Trust shares and a cash payment will be made for any fraction of a Trust share. The Plan Agent's 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. 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. 17 -------------------------------------------------------------------------------- THE BLACKROCK ADVANTAGE TERM TRUST INC. ADDITIONAL INFORMATION -------------------------------------------------------------------------------- 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. 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. ANNUAL MEETING OF TRUST SHAREHOLDERS. The Annual Meeting of Trust Shareholders was held May 24, 2001 to vote on the following matter: To elect two Directors as follows:
DIRECTOR: CLASS TERM EXPIRING -------- ----- ----- -------- Richard E. Cavanagh ............................................ I 3 years 2004 James Clayburn La Force, Jr. ................................... I 3 years 2004
Directors 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 Directors. The results of the voting was as follows:
VOTES FOR VOTES AGAINST ABSTENTIONS --------- ------------- ----------- Richard E. Cavanagh ................................................ 8,354,747 -- 204,822 James Clayburn LaForce, Jr. ........................................ 8,336,274 -- 223,295
18 -------------------------------------------------------------------------------- THE BLACKROCK ADVANTAGE TERM TRUST INC. INVESTMENT SUMMARY -------------------------------------------------------------------------------- THE TRUST'S INVESTMENT OBJECTIVE The BlackRock Advantage Term Trust Inc.'s primary investment objective is to manage a portfolio of investment grade fixed income securities that will return $10 per share (the initial public offering price per share) to investors on or shortly before December 31, 2005. 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 $213 billion of assets under management as of June 30, 2001. BlackRock manages assets on behalf of more than 3,300 institutions and 200,000 individuals worldwide, including nine of the ten largest companies in the U.S. as determined by Fortune Magazine, through a variety of equity, fixed income, liquidity and alternative investment separate accounts and mutual funds, including the BLACKROCK FUNDS and BLACKROCK PROVIDENT INSTITUTIONAL FUNDS. In addition, BlackRock provides risk management and technology services to a growing number of institutional investors under the BLACKROCK SOLUTIONS name. Clients are served from BlackRock's headquarters in New York City, as well as offices in Wilmington, DE, Edinburgh, Scotland, Tokyo, Japan, and Hong Kong. BlackRock is a member of The PNC Financial Services Group, Inc. ("PNC"), one of the largest diversified financial services organizations in the United States, and is majority-owned by PNC and by BlackRock employees. 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 ADVISOR'S INVESTMENT STRATEGY? The Advisor 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 Advisor will implement a conservative strategy that will seek to closely match the expected maturity of the assets of the portfolio with the future return of the initial investment at the end of 2005. At the Trust's termination, the Advisor 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. As the Trust approaches maturity and depending on market conditions, the Advisor will attempt to purchase securities with call protection or expected 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 expected 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. 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 19 monthly dividends which are typically paid on the last business day of the month. For shares held in the shareholder's name, dividends may be reinvested in additional shares of the fund through the Trust's transfer agent, State Street Bank & Trust Company. Investors who wish to hold shares in a brokerage account should check with their financial advisor to determine whether their brokerage firm offers dividend reinvestment services. LEVERAGE CONSIDERATIONS IN A TERM TRUST Under current market conditions, leverage increases the income earned by the Trust. The Trust employs leverage primarily through the use of reverse repurchase agreements and dollar rolls. Leverage permits the Trust to borrow money at short-term rates and reinvest that money in longer-term assets which typically offer higher interest rates. The difference between the cost of the borrowed funds and the income earned on the proceeds that are invested in longer term assets is the benefit to the Trust from leverage. 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. 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 TERM TRUSTS THE TRUST IS INTENDED TO BE A LONG-TERM INVESTMENT AND IS NOT A SHORT-TERM TRADING VEHICLE. RETURN OF INITIAL INVESTMENT. Although the objective of the Trust is to return its initial offering price upon termination, there can be no assurance that this objective will be achieved. DIVIDEND CONSIDERATIONS. The income and dividends paid by the Trust are likely to decline to some extent over the term of the Trust due to the anticipated shortening of the dollar-weighted average maturity of the Trust's assets. INTEREST-ONLY SECURITIES (IO). The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse affect on such security's yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Trust may fail to recoup fully its initial investment in these securities even if the securities are rated AAA by S&P or Aaa by Moody's. 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. 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: BAT) and as such are subject to supply and demand influences. As a result, shares may trade at a discount or a premium to their net asset value. MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The cash flow and yield characteristics of these securities differ from traditional debt securities. The major differences typically include more frequent payments and the possibility of prepayments which will change the yield to maturity of the security. CORPORATE DEBT SECURITIES. The value of corporate debt securities generally varies inversely with changes in prevailing market interest rates. The Trust may be subject to certain reinvestment risks in environments of declining interest rates. ZERO COUPON SECURITIES. Such securities receive no cash flows prior to maturity, therefore interim price movements on these securities are generally more sensitive to interest rate movements than securities that make periodic coupon payments. These securities appreciate in value over time and can play an important role in helping the Trust achieve its primary objective. ILLIQUID SECURITIES. The Trust may invest in securities that are illiquid, although under current market conditions the Trust expects to do so to only a limited extent. These securities involve special risks. NON-U.S. SECURITIES. The Trust may invest up to 10% of its assets in non-U.S. dollar-denominated securities which involve special risks such as currency, political and economic risks, although under current market conditions does not do so. ANTITAKEOVER PROVISIONS. Certain antitakeover provisions will make a change in the Trust's business or management more difficult without the approval of the Trust's Board of Directors and may have the effect of depriving shareholders of an opportunity to sell their shares at a premium above the prevailing market price. 20 -------------------------------------------------------------------------------- THE BLACKROCK ADVANTAGE TERM TRUST INC. GLOSSARY -------------------------------------------------------------------------------- ADJUSTABLE RATE MORTGAGE- Mortgage instruments with interest rates BACKED SECURITIES (ARMS): 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 Mortgage-backed securities which separate OBLIGATIONS (CMOS): mortgage pools into short-, medium-, and long-term securities with different priorities for receipt of principal and interest. Each class is paid a fixed or floating rate of interest at regular intervals. Also known as multiple-class mortgage pass-throughs. COMMERCIAL MORTGAGE BACKED SECURITIES (CMBS): Mortgage-backed securities secured or backed by mortgage loans on commercial properties. 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: Income generated by securities in a portfolio and distributed to shareholders after the deduction of expenses. This Trust declares and pays dividends on a monthly basis. DIVIDEND REINVESTMENT: Shareholders may elect to have all dividends and distributions of capital gains automatically reinvested into additional shares of the Trust. FHA: Federal Housing Administration, a government agency that facilitates a secondary mortgage market by providing an agency that guarantees timely payment of interest and principal on mortgages. FHLMC: Federal Home Loan Mortgage Corporation, a publicly owned, federally chartered corporation that facilitates a secondary mortgage market by purchasing mortgages from lenders such as savings institutions and reselling them to investors by means of mortgage-backed securities. Obligations of FHLMC are not guaranteed by the U.S. government, however; they are backed by FHLMC's authority to borrow from the U.S. government. Also known as Freddie Mac. FNMA: Federal National Mortgage Administration, a publicly owned, federally chartered corporation that facilitates a secondary mortgage market by purchasing mortgages from lenders such as savings institutions and reselling them to investors by means of mortgage-backed securities. Obligations of FNMA are not guaranteed by the U.S. government, however; they are backed by FNMA's authority to borrow from the U.S. government. Also known as Fannie Mae. GNMA: Government National Mortgage Association, a U.S. government agency that facilitates a secondary mortgage market by providing an agency that guarantees timely payment of interest and principal on mortgages. GNMA's obligations are supported by the full faith and credit of the U.S. Treasury. Also known as Ginnie Mae. 21 GOVERNMENT SECURITIES: Securities issued or guaranteed by the U.S. government, or one of its agencies or instrumentalities, such as GNMA, FNMA 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. INVERSE-FLOATING Mortgage instruments with coupons that RATE MORTGAGE: 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 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 FNMA, FHLMC, GNMA or FHA. NET ASSET VALUE (NAV): Net asset value is the total market value of all securities and other assets held by the Trust, plus income accrued on its investments, minus any liabilities including accrued expenses, divided by the total number of outstanding shares. It is the underlying value of a single share on a given day. Net asset value for the Trust is calculated weekly and published in Barron's on Saturday and The Wall Street Journal on Monday. PRINCIPAL-ONLY SECURITIES: Mortgage securities that receive only the principal cash flows from an underlying pool of mortgage loans or underlying pass-through securities. 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, FNMA 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. 22 -------------------------------------------------------------------------------- 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 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 TERM TRUSTS The BlackRock Municipal Target Term Trust Inc. BMN 12/06 The BlackRock Insured Municipal 2008 Term Trust Inc. BRM 12/08 The BlackRock California Insured Municipal 2008 Term Trust Inc. BFC 12/08 The BlackRock Florida Insured Municipal 2008 Term Trust BRF 12/08 The BlackRock New York Insured Municipal 2008 Term Trust Inc. BLN 12/08 The BlackRock Insured Municipal Term Trust Inc. BMT 12/10
IF YOU WOULD LIKE FURTHER INFORMATION PLEASE DO NOT HESITATE TO CALL BLACKROCK AT (800) 227-7BFM (7236) OR CONSULT WITH YOUR FINANCIAL ADVISOR. 23 ----------- BLACKROCK ----------- DIRECTORS 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 THE BLACKROCK Scott Amero, VICE PRESIDENT ----------- Keith T. Anderson, VICE PRESIDENT ADVANTAGE Michael C. Huebsch, VICE PRESIDENT TERM TRUST INC. Robert S. Kapito, VICE PRESIDENT ===================== Richard M. Shea, VICE PRESIDENT/TAX CONSOLIDATED Henry Gabbay, TREASURER SEMI-ANNUAL REPORT James Kong, ASSISTANT TREASURER JUNE 30, 2001 Anne Ackerley, SECRETARY INVESTMENT ADVISORS BlackRock Advisors, Inc. 100 Bellevue Parkway Wilmington, DE 19809 (800) 227-7BFM ADMINISTRATOR Prudental Investments Fund Management LLC. Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 CUSTODIAN AND TRANSFER AGENT State Street Bank and Trust Company One Heritage Drive North Quincy, MA 02171 (800) 699-1BFM INDEPENDENT ACCOUNTANTS Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116 LEGAL COUNSEL Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, NY 10036 LEGAL COUNSEL - INDEPENDENT DIRECTORS Debevoise & Plimpton 919 Third Avenue New York, NY 10022 The accompanying financial statements as of June 30, 2001 were not audited and accordingly, no opinion is expressed on them. This report is for shareholder information. This is not a prospectus intended for use in the purchase or sale of any securities. Statements and other information contained in this report are as dated and are subject to change. THE BLACKROCK ADVANTAGE TERM TRUST INC. c/o Prudental Investments Fund Management LLC. Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 (800) 227-7BFM [RECYCLE LOGO] Printed on recycled paper 09247A-10001 [BLACKROCK LOGO]