UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-10543
BlackRock Core Bond Trust
--------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
100 Bellevue Parkway, Wilmington, DE 19809
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(Address of principal executive offices) (Zip code)
Robert S. Kapito, President, BlackRock Core Bond Trust
40 East 52nd Street, New York, NY 10022
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(Name and address of agent for service)
Registrant's telephone number, including area code: 302-797-2449
Date of fiscal year end: 10-31-2003
Date of reporting period: 04-30-2003
ITEM 1. REPORTS TO STOCKHOLDERS.
The Trust's semi-annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
BlackRock
Closed-End Funds
Semi-Annual Report
APRIL 30, 2003 (UNAUDITED)
BlackRock Broad Investment Grade 2009 Term Trust (BCT)
BlackRock Core Bond Trust (BHK)
BlackRock High Yield Trust (BHY)
BlackRock Income Opportunity Trust (BNA)
BlackRock Income Trust (BKT)
BlackRock Strategic Bond Trust (BHD)
[BLACKROCK LOGO]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
TABLE OF CONTENTS
Letter to Shareholders .................................................... 1
Trust Summaries ........................................................... 2
Portfolios of Investments ................................................. 8
Financial Statements
Statements of Assets and Liabilities ................................... 33
Statements of Operations ............................................... 35
Statements of Cash Flows ............................................... 37
Statements of Changes in Net Assets .................................... 39
Financial Highlights ...................................................... 42
Notes to Financial Statements ............................................. 48
Dividend Reinvestment Plans ............................................... 56
Additional Information .................................................... 56
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PRIVACY PRINCIPLES OF THE TRUSTS
The Trusts are committed to maintaining the privacy of shareholders and to
safeguarding their non-public personal information. The following information is
provided to help you understand what personal information the Trusts collect,
how we protect that information and why, in certain cases, we may share
information with select other parties.
Generally, the Trusts do not receive any non-public personal information
relating to their shareholders, although certain non-public personal information
of shareholders may become available to the Trusts. The Trusts do not disclose
any non-public personal information about their 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 Trusts restrict access to non-public personal information about their
shareholders to BlackRock employees with a legitimate business need for the
information. The Trusts maintain physical, electronic and procedural safeguards
designed to protect the non-public personal information of their shareholders.
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
May 31, 2003
Dear Shareholder:
We are pleased to report that during the semi-annual period, the Trusts
continued to provide monthly income, as well as the opportunity to invest in
various portfolios of fixed income securities. This report contains the Trusts'
unaudited financial statements and a listing of the portfolios' holdings.
The portfolio management team continuously monitors the fixed income
markets and adjusts the portfolios in order to gain exposure to various issuers
and security types. This strategy enables the Trusts to move among different
sectors, credits and coupons to capitalize on changing market conditions.
The following table shows the Trusts' yields, closing market prices per
share and net asset values ("NAV") per share as of April 30, 2003.
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TRUST YIELD(1) MARKET PRICE NAV
-------------------------------------------------------------------------------------------------
BlackRock Broad Investment Grade 2009 Term Trust (BCT) 5.49% $16.40 $16.98
-------------------------------------------------------------------------------------------------
BlackRock Core Bond Trust (BHK) 8.06 14.88 15.31
-------------------------------------------------------------------------------------------------
BlackRock High Yield Trust (BHY) 11.30 10.29 6.55
-------------------------------------------------------------------------------------------------
BlackRock Income Opportunity Trust (BNA) 7.52 11.17 12.27
-------------------------------------------------------------------------------------------------
BlackRock Income Trust (BKT) 7.59 8.07 7.55
-------------------------------------------------------------------------------------------------
BlackRock Strategic Bond Trust (BHD) 9.83 14.65 14.27
-------------------------------------------------------------------------------------------------
(1) Yield is based on market price.
BlackRock, Inc. ("BlackRock"), a world leader in asset management, has
a proven commitment to fixed income. As of March 31, 2003, BlackRock managed
$187 billion in bonds, including 16 open-end and 44 closed-end bond funds.
BlackRock is recognized for its emphasis on risk management and proprietary
analytics and for its reputation managing money for the world's largest
institutional investors. BlackRock Advisors, Inc., which manages the Trusts, is
a wholly owned subsidiary of BlackRock, Inc.
On behalf of BlackRock, we thank you for your continued trust and
assure you that we remain committed to excellence in managing your assets.
Sincerely,
/s/ Laurence D. Fink /s/ Ralph L. Schlosstein
Laurence D. Fink Ralph L. Schlosstein
Chief Executive Officer President
BlackRock Advisors, Inc. BlackRock Advisors, Inc.
1
TRUST SUMMARIES (unaudited)
APRIL 30, 2003
------------------------------------------------
BlackRock Broad Investment Grade 2009 Term Trust
------------------------------------------------
TRUST INFORMATION
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Symbol on American Stock Exchange: BCT
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Initial Offering Date: June 17, 1993
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Closing Market Price as of 4/30/03: $16.40
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Net Asset Value as of 4/30/03: $16.98
--------------------------------------------------------------------------------
Yield on Closing Market Price as of 4/30/03 ($16.40):(1) 5.49%
--------------------------------------------------------------------------------
Current Monthly Distribution per Share:(2) $ 0.075
--------------------------------------------------------------------------------
Current Annualized Distribution per Share:(2) $ 0.900
--------------------------------------------------------------------------------
(1) Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
(2) The distribution is not constant and is subject to change.
The table below summarizes the changes in the Trust's market price and NAV:
-----------------------------------------------------------------
4/30/03 10/31/02 CHANGE HIGH LOW
--------------------------------------------------------------------------------
MARKET PRICE $16.40 $16.18 1.36% $16.55 $15.84
-------------------------------------------------------------------------------
NAV $16.98 $17.33 (2.02)% $17.38 $16.86
--------------------------------------------------------------------------------
The following charts show the Trust's asset composition and credit quality
allocations:
--------------------------------------------------------------------------------
SECTOR BREAKDOWN
--------------------------------------------------------------------------------
COMPOSITION APRIL 30, 2003 OCTOBER 31, 2002
--------------------------------------------------------------------------------
U.S. Government and Agency Securities 49% 36%
--------------------------------------------------------------------------------
Agency Multiple Class Mortgage Pass-Throughs 14 18
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Inverse Floating Rate Mortgages 13 18
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Corporate Bonds 9 10
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Interest Only Mortgage-Backed Securities 7 8
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Taxable Municipal Bonds 5 5
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Mortgage Pass-Throughs 2 2
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Commercial Mortgage-Backed Securities 1 1
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Asset-Backed Securities -- 2
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--------------------------------------------------------------------------------
RATING % OF CORPORATES*
--------------------------------------------------------------------------------
CREDIT RATING APRIL 30, 2003 OCTOBER 31, 2002
--------------------------------------------------------------------------------
AAA/Aaa 10% 8%
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AA/Aa 22 19
--------------------------------------------------------------------------------
A 40 42
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BBB/Baa 28 30
--------------------------------------------------------------------------------
BB/Ba -- 1
--------------------------------------------------------------------------------
----------
* Using the higher of Standard & Poor's ("S&P"), Moody's Investors Service
("Moody's") or Fitch Ratings ("Fitch") rating. Corporate bonds represented
approximately 11.4% and 13.3% of net assets on April 30, 2003 and October
31, 2002, respectively.
2
TRUST SUMMARIES (unaudited)
APRIL 30, 2003
-------------------------
BlackRock Core Bond Trust
-------------------------
TRUST INFORMATION
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Symbol on New York Stock Exchange: BHK
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Initial Offering Date: November 27, 2001
--------------------------------------------------------------------------------
Closing Market Price as of 4/30/03: $14.88
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Net Asset Value as of 4/30/03: $15.31
--------------------------------------------------------------------------------
Yield on Closing Market Price as of 4/30/03 ($14.88):(1) 8.06%
--------------------------------------------------------------------------------
Current Monthly Distribution per Share:(2) $ 0.10
--------------------------------------------------------------------------------
Current Annualized Distribution per Share:(2) $ 1.20
--------------------------------------------------------------------------------
(1) Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
(2) The distribution is not constant and is subject to change.
The table below summarizes the changes in the Trust's market price and NAV:
---------------------------------------------------------------
4/30/03 10/31/02 CHANGE HIGH LOW
--------------------------------------------------------------------------------
MARKET PRICE $14.88 $13.82 7.67% $14.95 $13.45
--------------------------------------------------------------------------------
NAV $15.31 $14.33 6.84% $15.31 $14.36
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The following charts show the Trust's asset composition and credit quality
allocations:
--------------------------------------------------------------------------------
SECTOR BREAKDOWN
--------------------------------------------------------------------------------
COMPOSITION APRIL 30, 2003 OCTOBER 31, 2002
--------------------------------------------------------------------------------
Corporate Bonds 48% 44%
--------------------------------------------------------------------------------
Mortgage Pass-Throughs 26 28
--------------------------------------------------------------------------------
U.S. Government and Agency Securities 12 17
--------------------------------------------------------------------------------
Foreign Government Bonds 8 3
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Commercial Mortgage-Backed Securities 3 6
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Interest Only Mortgage-Backed Securities 2 2
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Taxable Municipal Bonds 1 --
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--------------------------------------------------------------------------------
RATING % OF CORPORATES*
--------------------------------------------------------------------------------
CREDIT RATING APRIL 30, 2003 OCTOBER 31, 2002
--------------------------------------------------------------------------------
AAA/Aaa 11% 14%
--------------------------------------------------------------------------------
AA/Aa 6 6
--------------------------------------------------------------------------------
A 23 20
--------------------------------------------------------------------------------
BBB/Baa 18 18
--------------------------------------------------------------------------------
BB/Ba 12 10
--------------------------------------------------------------------------------
B 27 29
--------------------------------------------------------------------------------
CCC/Caa 3 1
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Not Rated -- 2
--------------------------------------------------------------------------------
----------
* Using the higher of S&P's, Moody's or Fitch's rating. Corporate bonds
represented approximately 67.8% and 62.1% of net assets on April 30, 2003
and October 31, 2002, respectively.
3
TRUST SUMMARIES (unaudited)
APRIL 30, 2003
--------------------------
BlackRock High Yield Trust
--------------------------
TRUST INFORMATION
--------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BHY
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Initial Offering Date: December 23, 1998
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Closing Market Price as of 4/30/03: $10.29
--------------------------------------------------------------------------------
Net Asset Value as of 4/30/03: $ 6.55
--------------------------------------------------------------------------------
Yield on Closing Market Price as of 4/30/03 ($10.29):(1) 11.30%
--------------------------------------------------------------------------------
Current Monthly Distribution per Share:(2) $ 0.096875
--------------------------------------------------------------------------------
Current Annualized Distribution per Share:(2) $ 1.162500
--------------------------------------------------------------------------------
(1) Yield on closing market price is calculated by dividing the annualized
distribution per share as of April 30, 2003 by the closing market price.
(2) Effective June 2, 2003, the monthly distribution per share has been changed
to $0.0905. The distribution is not constant and is subject to change.
The table below summarizes the changes in the Trust's market price and NAV:
---------------------------------------------------------------
4/30/03 10/31/02 CHANGE HIGH LOW
--------------------------------------------------------------------------------
MARKET PRICE $10.29 $8.68 18.55% $10.50 $7.91
--------------------------------------------------------------------------------
NAV $ 6.55 $6.13 6.85% $ 6.55 $6.02
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The following chart shows the Trust's credit quality allocations:
--------------------------------------------------------------------------------
RATING % OF CORPORATES*
--------------------------------------------------------------------------------
CREDIT RATING APRIL 30, 2003 OCTOBER 31, 2002
--------------------------------------------------------------------------------
BBB/Baa --% 4%
--------------------------------------------------------------------------------
BB/Ba 16 18
--------------------------------------------------------------------------------
B 60 62
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CCC/Caa 18 10
--------------------------------------------------------------------------------
CC/Ca 1 3
--------------------------------------------------------------------------------
C 1 --
--------------------------------------------------------------------------------
Not Rated 4 3
--------------------------------------------------------------------------------
----------
* Using the higher of S&P's, Moody's or Fitch's rating. Corporate bonds
represented approximately 140.9% and 144.5% of net assets on April 30, 2003
and October 31, 2002, respectively.
4
TRUST SUMMARIES (unaudited)
APRIL 30, 2003
----------------------------------
BlackRock Income Opportunity Trust
----------------------------------
TRUST INFORMATION
--------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BNA
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Initial Offering Date: December 20, 1991
--------------------------------------------------------------------------------
Closing Market Price as of 4/30/03: $11.17
--------------------------------------------------------------------------------
Net Asset Value as of 4/30/03: $12.27
--------------------------------------------------------------------------------
Yield on Closing Market Price as of 4/30/03 ($11.17):(1) 7.52%
--------------------------------------------------------------------------------
Current Monthly Distribution per Share:(2) $ 0.07
--------------------------------------------------------------------------------
Current Annualized Distribution per Share:(2) $ 0.84
--------------------------------------------------------------------------------
(1) Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
(2) The distribution is not constant and is subject to change.
The table below summarizes the changes in the Trust's market price and NAV:
---------------------------------------------------------------
4/30/03 10/31/02 CHANGE HIGH LOW
--------------------------------------------------------------------------------
MARKET PRICE $11.17 $10.50 6.38% $11.20 $10.37
--------------------------------------------------------------------------------
NAV $12.27 $11.83 3.72% $12.27 $11.65
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The following charts show the Trust's asset composition and credit quality
allocations:
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SECTOR BREAKDOWN
--------------------------------------------------------------------------------
COMPOSITION APRIL 30, 2003 OCTOBER 31, 2002
--------------------------------------------------------------------------------
Corporate Bonds 52% 30%
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Mortgage Pass-Throughs 37 55
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U.S. Government and Agency Securities 5 7
--------------------------------------------------------------------------------
Federal Housing Administration 3 4
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Interest Only Mortgage-Backed Securities 1 1
--------------------------------------------------------------------------------
Inverse Floating Rate Mortgages 1 1
--------------------------------------------------------------------------------
Principal Only Mortgage-Backed Securities 1 2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RATING % OF CORPORATES*
--------------------------------------------------------------------------------
CREDIT RATING APRIL 30, 2003 OCTOBER 31, 2002
--------------------------------------------------------------------------------
AAA/Aaa 9% 14%
--------------------------------------------------------------------------------
AA/Aa 12 8
--------------------------------------------------------------------------------
A 21 21
--------------------------------------------------------------------------------
BBB/Baa 21 13
--------------------------------------------------------------------------------
BB/Ba 16 24
--------------------------------------------------------------------------------
B 20 20
--------------------------------------------------------------------------------
CCC/Caa 1 --
--------------------------------------------------------------------------------
----------
* Using the higher of S&P's, Moody's or Fitch's rating. Corporate bonds
represented approximately 73.4% and 40.9% of net assets on April 30, 2003
and October 31, 2002, respectively.
5
TRUST SUMMARIES (unaudited)
APRIL 30, 2003
----------------------
BlackRock Income Trust
----------------------
TRUST INFORMATION
--------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BKT
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Initial Offering Date: July 22, 1988
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Closing Market Price as of 4/30/03: $8.07
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Net Asset Value as of 4/30/03: $7.55
--------------------------------------------------------------------------------
Yield on Closing Market Price as of 4/30/03 ($8.07):(1) 7.59%
--------------------------------------------------------------------------------
Current Monthly Distribution per Share:(2) $0.051042
--------------------------------------------------------------------------------
Current Annualized Distribution per Share:(2) $0.612504
--------------------------------------------------------------------------------
(1) Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
(2) The distribution is not constant and is subject to change.
The table below summarizes the changes in the Trust's market price and NAV:
----------------------------------------------------------------
4/30/03 10/31/02 CHANGE HIGH LOW
--------------------------------------------------------------------------------
MARKET PRICE $8.07 $8.07 -- $8.17 $7.80
--------------------------------------------------------------------------------
NAV $7.55 $8.13 (7.13)% $8.09 $7.48
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The following chart shows the Trust's asset composition:
SECTOR BREAKDOWN
--------------------------------------------------------------------------------
COMPOSITION APRIL 30, 2003 OCTOBER 31, 2002
--------------------------------------------------------------------------------
Mortgage Pass-Throughs 43% 48%
--------------------------------------------------------------------------------
U.S. Government and Agency Securities 20 16
--------------------------------------------------------------------------------
Principal Only Mortgage-Backed Securities 11 8
--------------------------------------------------------------------------------
Inverse Floating Rate Mortgages 8 9
--------------------------------------------------------------------------------
Interest Only Mortgage-Backed Securities 8 8
--------------------------------------------------------------------------------
FHA Project Loans 4 5
--------------------------------------------------------------------------------
Agency Multiple Class Mortgage Pass-Throughs 2 2
--------------------------------------------------------------------------------
Commercial Mortgage-Backed Securities 2 2
--------------------------------------------------------------------------------
Non-Agency Multiple Class Mortgage Pass-Throughs 1 1
--------------------------------------------------------------------------------
Adjustable Rate Mortgage Securities -- 1
--------------------------------------------------------------------------------
Other 1 --
--------------------------------------------------------------------------------
6
TRUST SUMMARIES (unaudited)
APRIL 30, 2003
------------------------------
BlackRock Strategic Bond Trust
------------------------------
TRUST INFORMATION
--------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BHD
--------------------------------------------------------------------------------
Initial Offering Date: February 26, 2002
--------------------------------------------------------------------------------
Closing Market Price as of 4/30/03: $14.65
--------------------------------------------------------------------------------
Net Asset Value as of 4/30/03: $14.27
--------------------------------------------------------------------------------
Yield on Closing Market Price as of 4/30/03 ($14.65):(1) 9.83%
--------------------------------------------------------------------------------
Current Monthly Distribution per Share:(2) $ 0.12
--------------------------------------------------------------------------------
Current Annualized Distribution per Share:(2) $ 1.44
--------------------------------------------------------------------------------
(1) Yield on closing market price is calculated by dividing the annualized
distribution per share as of April 30, 2003 by the closing market price.
(2) Effective June 2, 2003, the monthly distribution per share has been changed
to $0.13. The distribution is not constant and is subject to change.
The table below summarizes the changes in the Trust's market price and NAV:
----------------------------------------------------------------
4/30/03 10/31/02 CHANGE HIGH LOW
--------------------------------------------------------------------------------
MARKET PRICE $14.65 $12.35 18.62% $14.70 $12.41
--------------------------------------------------------------------------------
NAV $14.27 $12.63 12.98% $14.27 $12.91
--------------------------------------------------------------------------------
The following chart shows the Trust's credit quality allocations:
--------------------------------------------------------------------------------
RATING % OF CORPORATES*
--------------------------------------------------------------------------------
CREDIT RATING APRIL 30, 2003 OCTOBER 31, 2002
--------------------------------------------------------------------------------
AAA/Aaa 1% 1%
--------------------------------------------------------------------------------
AA/Aa 4 6
--------------------------------------------------------------------------------
A 11 10
--------------------------------------------------------------------------------
BBB/Baa 10 12
--------------------------------------------------------------------------------
BB/Ba 27 29
--------------------------------------------------------------------------------
B 44 41
--------------------------------------------------------------------------------
CCC/Caa 2 --
--------------------------------------------------------------------------------
Not Rated 1 1
--------------------------------------------------------------------------------
----------
* Using the higher of S&P's, Moody's or Fitch's rating. Corporate bonds
represented approximately 142.0% and 143.4% of net assets on April 30, 2003
and October 31, 2002, respectively.
7
CONSOLIDATED PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 2003
------------------------------------------------
BlackRock Broad Investment Grade 2009 Term Trust
------------------------------------------------
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--130.8%
MORTGAGE PASS-THROUGHS--2.5%
Federal National Mortgage Assoc.,
$1,085 5.50%, 1/01/17 - 2/01/17 ................................................................ $ 1,129,219
108 6.50%, 7/01/29 .......................................................................... 112,965
------------
Total Mortgage Pass-Throughs .............................................................. 1,242,184
------------
AGENCY MULTIPLE CLASS MORTGAGE PASS-THROUGHS--17.6%
Federal Home Loan Mortgage Corp.,
2,168 Ser. 1510, Class G, 5/15/13 ............................................................. 2,438,068
400 Ser. 1534, Class IG, 2/15/10 ............................................................ 417,860
253 Ser. 1601, Class SD, 10/15/08 ........................................................... 258,403
Federal National Mortgage Assoc.,
405 Ser. 13, Class SJ, 2/25/09 .............................................................. 420,193
180 Ser. 43, Class E, 4/25/22 ............................................................... 192,767
1,000 Ser. 49, Class H, 4/25/13 ............................................................... 1,137,290
30 Ser. 69, Class Z, 1/25/22 ............................................................... 30,506
3,146 Ser. 87, Class J, 4/25/22 ............................................................... 3,222,794
629 Ser. 214, Class SK, 12/25/08 ............................................................ 721,506
------------
Total Agency Multilple Class Mortgage Pass-Throughs ....................................... 8,839,387
------------
INVERSE FLOATING RATE MORTGAGES--17.2%
AAA 462 Citicorp Mortgage Securities, Inc., Ser. 14, Class A-4, 11/25/23 .......................... 549,245
AAA 550 Countrywide Funding Corp., Ser. 2, Class A-12S, 2/25/09 ................................... 574,923
AAA 723 Countrywide Mortgage-Backed Securities, Inc., Ser. D, Class A-15, 1/25/09 ................. 733,815
Federal Home Loan Mortgage Corp.,
336 Ser. 1425, Class SB, 12/15/07 ........................................................... 430,945
193 Ser. 1506, Class S, 5/15/08 ............................................................. 221,905
255 Ser. 1515, Class S, 5/15/08 ............................................................. 273,866
37 Ser. 1580, Class SD, 9/15/08 ............................................................ 37,712
232 Ser. 1618, Class SA, 11/15/08 ........................................................... 240,370
395 Ser. 1621, Class SH, 11/15/22 ........................................................... 422,538
445 Ser. 1626, Class SA, 12/15/08 ........................................................... 447,634
329 Ser. 1661, Class SB, 1/15/09 ............................................................ 355,204
481 Ser. 1688, Class S, 12/15/13 ............................................................ 512,700
Federal National Mortgage Assoc.,
8 Ser. 156, Class SE, 10/25/19 ............................................................ 7,683
528 Ser. 187, Class SB, 10/25/07 ............................................................ 627,376
381 Ser. 190, Class S, 11/25/07 ............................................................. 483,462
433 Ser. 191, Class SD, 10/25/08 ............................................................ 515,306
354 Ser. 202, Class VB, 11/25/23 ............................................................ 396,146
453 Ser. 214, Class SH, 12/25/08 ............................................................ 502,420
AAA 600 PaineWebber Mortgage Acceptance Corp., Ser. 6, Class A-9, 4/25/09 ......................... 624,750
Residential Funding Mortgage Securities I, Inc.,
AAA 323 Ser. S23, Class A-12, 6/25/08 ........................................................... 330,300
AAA 334 Ser. S23, Class A-16, 6/25/08 ........................................................... 342,810
------------
Total Inverse Floating Rate Mortgages ..................................................... 8,631,110
------------
INTEREST ONLY MORTGAGE-BACKED SECURITIES--9.2%
Federal Home Loan Mortgage Corp.,
3 Ser. 65, Class I, 8/15/20 ............................................................... 54,947
1 Ser. 141, Class H, 5/15/21 .............................................................. 2,384
4 Ser. 1114, Class J, 7/15/06 ............................................................. 42,797
3 Ser. 1285, Class M, 5/15/07 ............................................................. 31,441
1,321 Ser. 1645, Class IB, 9/15/08 ............................................................ 121,814
1,465 Ser. 2063, Class PU, 10/15/26 ........................................................... 37,081
3,177 Ser. 2081, Class S, 5/15/25 ............................................................. 45,674
1,889 Ser. 2306, Class PM, 5/15/26 ............................................................ 47,232
3,224 Ser. 2370, Class EI, 2/15/21 ............................................................ 26,197
5,308 Ser. 2376, Class MI, 7/15/11 ............................................................ 106,168
2,137 Ser. 2417, Class EI, 3/15/12 ............................................................ 34,916
1,728 Ser. 2462, Class NI, 8/15/21 ............................................................ 196,608
3,235 Ser. 2513, Class BI, 12/15/15 ........................................................... 256,747
3,100 Ser. 2542, Class IY, 5/15/16 ............................................................ 232,500
See Notes to Financial Statements.
8
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
INTEREST ONLY MORTGAGE-BACKED SECURITIES--(CONT'D)
$ 2,688 Ser. 2543, Class IJ, 10/15/12 ........................................................... $ 284,802
4,000 Ser. 2543, Class IM, 9/15/12 ............................................................ 425,792
5,419 Ser. 2572, Class IT, 5/15/19 ............................................................ 614,666
Federal National Mortgage Assoc.,
1 Ser. G-21, Class L, 7/25/21 ............................................................. 21,967
9 Ser. 8, Class HA, 1/25/08 ............................................................... 130,225
1,357 Ser. 9, Class IB, 5/25/27 ............................................................... 15,266
2,117 Ser. 14, Class PI, 4/25/12 .............................................................. 23,822
918 Ser. 20, Class SL, 9/25/08 .............................................................. 168,121
5,007 Ser. 22, Class SE, 11/25/23 ............................................................. 9,261
517 Ser. 29, Class BE, 5/25/28 .............................................................. 4,771
597 Ser. 30, Class QG, 12/18/25 ............................................................. 7,278
243 Ser. 39, Class PE, 1/25/23 .............................................................. 20,641
898 Ser. 42, Class SO, 3/25/23 .............................................................. 56,756
23 Ser. 49, Class L, 4/25/13 ............................................................... 197,653
23 Ser. 51, Class K, 4/25/07 ............................................................... 290,760
3 Ser. 72, Class H, 7/25/06 ............................................................... 37,991
4,272 Ser. 80, Class PI, 9/25/23 .............................................................. 202,898
2,000 Ser. 82, Class IR, 9/25/12 .............................................................. 231,250
1,463 Ser. 90, Class M, 1/25/28 ............................................................... 242,557
15 Ser. 174, Class S, 9/25/22 .............................................................. 43,900
458 Ser. 194, Class PV, 6/25/08 ............................................................. 34,603
3,334 Ser. 208, Class S, 2/25/23 .............................................................. 162,512
508 Ser. 223, Class PT, 10/25/23 ............................................................ 50,150
267 PNC Mortgage Securities Corp., Ser. 8, Class 4-X, 10/25/13 ................................ 9,934
446 Residential Funding Mortgage Securities I, Inc., Ser. S44, Class A-4, 11/25/23 ............ 3,412
9,549 Structured Asset Securities Corp., Ser. ALS1, Class 3AX, 5/25/29 .......................... 25,364
30,900 Vendee Mortgage Trust, Ser. 1, Class 1IO, 10/15/31 ........................................ 62,766
------------
Total Interest Only Mortgage-Backed Securities ............................................ 4,615,624
------------
PRINCIPAL ONLY MORTGAGE-BACKED SECURITIES--0.1%
Aaa 66 Salomon Brothers Mortgage Securities Inc. VI, Ser. 3, Class A, 10/23/17 ................... 66,045
------------
COMMERCIAL MORTGAGE-BACKED SECURITIES--1.7%
AAA 750 New York City Mortgage Loan Trust, Multifamily, Ser. 1996, Class A-2, 6.75%, 6/25/11(2).... 853,693
------------
ASSET-BACKED SECURITIES--0.1%
NR 239 Global Rated Eligible Asset Trust, Ser. A, Class 1, 7.33%, 3/15/06(2,4,5) ................. 10,745
Structured Mortgage Asset Residential Trust,(4,5,6)
NR 578 Ser. 2, 8.24%, 3/15/06 .................................................................. 17,331
NR 640 Ser. 3, 8.724%, 4/15/06 ................................................................. 19,212
------------
Total Asset-Backed Securities ............................................................. 47,288
------------
U.S. GOVERNMENT AND AGENCY SECURITIES--64.0%
240 Small Business Investment Companies, Ser. P10A-1, 6.12%, 2/01/08 .......................... 253,549
27,0003 U.S. Treasury Bond, Zero Coupon, 11/15/09 ................................................. 21,190,248
U.S. Treasury Notes,
1,450 3.50%, 11/15/06 ......................................................................... 1,511,512
5,4253 4.375%, 8/15/12 ......................................................................... 5,664,253
500 5.00%, 8/15/11 .......................................................................... 547,500
1,700 5.75%, 11/15/05 ......................................................................... 1,868,339
550 6.00%, 8/15/09 .......................................................................... 636,668
385 6.625%, 5/15/07 ......................................................................... 446,299
------------
Total U.S. Government and Agency Securities ............................................... 32,118,368
------------
CORPORATE BONDS--11.4%
CHEMICAL--2.4%
A- 1,000 Dow Capital BV, 9.20%, 6/01/10 ............................................................ 1,223,950
------------
CONSUMER PRODUCTS--1.1%
BBB+ 500 Ralcorp Holdings, Inc., 8.75%, 9/15/04 .................................................... 545,715
------------
ENERGY--2.2%
A 500 Alltel Corp., 7.50%, 3/01/06 .............................................................. 565,540
BBB+ 500 Israel Electric Corp., Ltd., 7.25%, 12/15/06 (Israel)(2)................................... 538,965
------------
1,104,505
------------
FINANCE & BANKING--4.6%
A+ 500 Metropolitan Life Insurance Co., 6.30%, 11/01/03(2)........................................ 512,111
AA- 1,0003 Morgan Stanley Group, Inc., 10.00%, 6/15/08 ............................................... 1,257,350
AAA 500 UBS PaineWebber Group, Inc., 8.875%, 3/15/05 .............................................. 560,000
------------
2,329,461
------------
See Notes to Financial Statements.
9
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--0.1%
Caa2 $ 100 American Airlines, Inc., 10.44%, 3/04/07 .................................................. $ 31,500
------------
UTILITIES--1.0%
BBB+ 500 Ohio Edison Co., 8.625%, 9/15/03 .......................................................... 512,769
------------
Total Corporate Bonds ..................................................................... 5,747,900
------------
TAXABLE MUNICIPAL BONDS--7.0%
AAA 500 Fresno California Pension Obligation, 7.80%, 6/01/14 ...................................... 619,075
AAA 500 Kern County California Pension Obligation, 6.98%, 8/15/09 ................................. 584,340
Los Angeles County California Pension Obligation,
AAA 1,000 Ser. A, 8.62%, 6/30/06 .................................................................. 1,176,380
AAA 500 Ser. D, 6.97%, 6/30/08 .................................................................. 582,185
AAA 500 Orleans Parish Louisiana School Board, Ser. A, 6.60%, 2/01/08 ............................. 562,600
------------
Total Taxable Municipal Bonds ............................................................. 3,524,580
------------
Total Long-Term Investments (cost $64,689,325) ............................................ 65,686,179
------------
SHORT-TERM INVESTMENT--3.6%
DISCOUNT NOTE--3.6%
1,800 Federal Home Loan Bank, 1.25%, 5/01/03 (cost $1,800,000) .................................. 1,800,000
------------
TOTAL INVESTMENTS--134.4% (cost $66,489,325) .............................................. 67,486,179
LIABILITIES IN EXCESS OF OTHER ASSETS--(34.4)%
(17,288,606)
NET ASSETS--100% .......................................................................... $ 50,197,573
------------
----------
(1) Using the higher of S&P's, Moody's or Fitch's rating.
(2) Security is not registered under the Securities Act of 1933. These
securities may be resold in transactions in accordance with Rule 144A under
that Act, to qualified institutional buyers. As of April 30, 2003, the Trust
held 3.8% of its net assets, with a current market value of $1,915,514, in
securities restricted as to resale.
(3) Entire or partial principal amount pledged as collateral for reverse
repurchase agreements or financial futures contracts.
(4) Security is fair valued.
(5) Illiquid securities representing 0.09% of net assets.
(6) Security is restricted as to public resale. The security was acquired in
1997 and has a current cost of $105,042.
See Notes to Financial Statements.
10
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 2003
-------------------------
BlackRock Core Bond Trust
-------------------------
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--142.6%
MORTGAGE PASS-THROUGHS--37.1%
Federal Home Loan Mortgage Corp.,
$ 252 7.00%, 9/01/31 .......................................................................... $ 266,404
7,500 5.50%, TBA .............................................................................. 7,710,352
44,000 6.00%, TBA .............................................................................. 46,021,250
57,800 6.50%, TBA .............................................................................. 60,355,847
Federal National Mortgage Assoc., TBA
8,000 5.00% ................................................................................... 8,245,000
12,600 5.50% ................................................................................... 13,039,625
5,900 6.00% ................................................................................... 6,141,578
2,000 7.00% ................................................................................... 2,113,750
9,200 Government National Mortgage Assoc., 5.50%, TBA ........................................... 9,496,125
------------
Total Mortgage Pass-Throughs .............................................................. 153,389,931
------------
INTEREST ONLY MORTGAGE-BACKED SECURITIES--2.8%
Federal Home Loan Mortgage Corp.,
10,167 Ser. 2471, Class UI, 1/15/26 ............................................................ 767,078
33,102 Ser. 2496, Class ID, 9/15/26 ............................................................ 2,953,277
8,918 Ser. 2553, Class IT, 10/15/22 ........................................................... 1,323,741
6,467 Ser. 2579, Class HI, 8/15/17 ............................................................ 824,586
Federal National Mortgage Assoc.,
9,700 Ser. 16, Class IW, 11/25/12 ............................................................. 982,125
6,100 Ser. 70, Class IN, 5/25/15 .............................................................. 808,250
3,685 Residential Funding Mortgage Securities I, Inc., Ser. S6, Class A6, 4/25/17 ............... 3,758,700
------------
Total Interest Only Mortgage-Backed Securities ............................................ 11,417,757
------------
COMMERCIAL MORTGAGE-BACKED SECURITIES--4.7%
AAA 2,560 Capco America Securitization Corp., Ser. D7, Class A1B, 6.26%, 10/15/30 ................... 2,875,878
Caa1 1,099 Citicorp Mortgage Securities, Inc., Ser. 8, Class B1, 6.50%, 7/25/08 ...................... 1,044,335
AAA 1,900 GMAC Commercial Mortgage Securities, Inc., Ser. C2, Class A2, 6.945%, 9/15/33 ............. 2,185,000
AAA 1,677 Heller Financial Commercial Mortgage Asset Co., Ser. PH1, Class A2, 6.847%, 5/15/31 ....... 1,929,858
Morgan Stanley Capital I, Inc.,
AAA 2,125 Ser. FNV1, Class A2, 6.53%, 3/15/31 ....................................................... 2,413,702
AAA 1,470 Ser. HF2, Class A2, 6.48%, 11/15/30 ..................................................... 1,651,264
Residential Funding Mortgage Securities I, Inc.,
AAA 1,843 Ser. S6, Class A7, 6.00%, 4/25/17 ....................................................... 1,885,669
AAA 4,621 Ser. S29, Class A6, 6.50%, 12/26/31 ..................................................... 306,139
AAA 3,500 Salomon Brothers Mortgage Securities VII, Ser. C1, Class A2, 7.52%, 12/18/09 .............. 4,145,859
AAA 1,043 Washington Mutual Mortgage Securitization Corp., Ser. 12, Class A, 6.50%, 5/25/32 ......... 1,070,715
------------
Total Commercial Mortgage-Backed Securities ............................................... 19,508,419
------------
U.S. GOVERNMENT AND AGENCY SECURITIES--17.1%
1,050 Resolution Funding Corp., Zero Coupon, 7/15/18 - 10/15/18 ................................. 472,008
9,950(2) U.S. Treasury Bond, Zero Coupon, 11/15/21 ................................................. 3,820,760
U.S. Treasury Bonds,
9,060(2) 3.875%, 2/15/13 ......................................................................... 9,072,032
10,390(2) 5.375%, 2/15/31 ......................................................................... 11,337,277
7,325(2) 6.00%, 2/15/26 .......................................................................... 8,461,518
5,215 6.75%, 8/15/26 .......................................................................... 6,572,527
6,865(2) 8.125%, 8/15/19 ......................................................................... 9,629,233
285 8.50%, 2/15/20 .......................................................................... 413,561
5,310(2) 10.375%, 11/15/12 ....................................................................... 7,035,750
3,330 12.00%, 8/15/13 ......................................................................... 4,800,401
U.S. Treasury Notes,
1,590(2) 1.625%, 1/31/05 ......................................................................... 1,596,025
2,005 3.00%, 2/15/08 .......................................................................... 2,025,676
1,515(2) 4.00%, 11/15/12 ......................................................................... 1,534,351
3,445(2) 5.00%, 8/15/11 .......................................................................... 3,772,275
------------
Total U.S. Government and Agency Securities ............................................... 70,543,394
------------
See Notes to Financial Statements.
11
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS--67.8%
AEROSPACE & DEFENSE--2.1%
B- $ 3,000 BE Aerospace, Inc., Ser. B, 8.00%, 3/01/08 ................................................ $ 1,950,000
Lockheed Martin Corp.,
BBB+ 1,485 7.20%, 5/01/36 .......................................................................... 1,741,255
BBB+ 1,000 7.25%, 5/15/06 .......................................................................... 1,126,750
BBB+ 1,275 7.75%, 5/01/26 .......................................................................... 1,560,588
BBB+ 475 8.50%, 12/01/29 ......................................................................... 621,211
Northrop Grumman Corp.,
BBB- 380 7.125%, 2/15/11 ......................................................................... 444,560
BBB- 250 7.75%, 2/15/31 .......................................................................... 311,572
BBB- 1,000 Raytheon Co., 6.55%, 3/15/10 .............................................................. 1,106,210
------------
8,862,146
------------
AUTOMOTIVE--2.7%
B1 3,000 Collins & Aikman Products Co., 10.75%, 12/31/11 ........................................... 3,135,000
B 2,000 CSK Auto, Inc., 12.00%, 6/15/06 ........................................................... 2,170,000
A3 940 DaimlerChrysler NA Holding Corp., 4.75%, 1/15/08 .......................................... 967,298
B3 3,000 Delco Remy Intl., Inc., 11.00%, 5/01/09 ................................................... 1,590,000
B+ 2,000 Sonic Automotive, Inc., Ser. D, 11.00%, 8/01/08 ........................................... 2,130,000
B+ 1,000 TRW Automotive, Inc., 9.375%, 2/15/13(3) .................................................. 1,090,000
------------
11,082,298
------------
BASIC MATERIAL--0.5%
B+ 2,000 Oregon Steel Mills, Inc., 10.00%, 7/15/09 ................................................. 1,980,000
------------
BUILDING & DEVELOPMENT--1.4%
B- 2,000 Ainsworth Lumber Co. Ltd., 12.50%, 7/15/07 (Canada) ....................................... 2,200,000
BB 3,000 Hovnanian Enterprises, Inc., 10.50%, 10/01/07 ............................................. 3,390,000
------------
5,590,000
------------
CHEMICAL--3.3%
B- 3,000 Avecia Group PLC, 11.00%, 7/01/09 (United Kingdom) ........................................ 2,670,000
Dow Chemical Co.,
A- 1,650 5.97%, 1/15/09 .......................................................................... 1,713,887
A- 1,460 7.375%, 11/01/29 ........................................................................ 1,624,443
A- 175 6.00%, 10/01/12 ......................................................................... 185,500
BB 4,000 Lyondell Chemical Co., Ser. B, 9.875%, 5/01/07 ............................................ 4,100,000
B- 3,000 Resolution Performance Products, Inc., 13.50%, 11/15/10 ................................... 3,210,000
------------
13,503,830
------------
CONGLOMERATES--1.3%
AAA 1,980 General Electric Co., 5.00%, 2/01/13 ...................................................... 2,045,777
A 225 Honeywell Intl., Inc., 6.875%, 10/03/05 ................................................... 244,040
Tyco Intl. Group SA, (Luxembourg)
BBB- 930 5.80%, 8/01/06 .......................................................................... 920,700
BBB- 2,239 6.375%, 2/15/06 ......................................................................... 2,227,805
------------
5,438,322
------------
CONSUMER PRODUCTS--5.6%
BB+ 3,000 American Greetings Corp., 11.75%, 7/15/08 ................................................. 3,435,000
A 1,025 Avery Dennison Corp., 4.875%, 1/15/13 ..................................................... 1,044,209
B 3,000 Elizabeth Arden, Inc., Ser. B, 11.75%, 2/01/11 ............................................ 3,300,000
General Mills, Inc.,
BBB+ 510 5.125%, 2/15/07 ......................................................................... 545,371
BBB+ 1,765 6.00%, 2/15/12 .......................................................................... 1,946,453
Kellogg Co., Ser. B,
BBB 725 6.00%, 4/01/06 .......................................................................... 792,227
BBB 690 6.60%, 4/01/11 .......................................................................... 785,458
Kraft Foods, Inc.,
A3 400 5.25%, 6/01/07 .......................................................................... 420,386
A3 3,050 5.625%, 11/01/11 ........................................................................ 3,195,136
A3 275 6.25%, 6/01/12 .......................................................................... 299,360
Kroger Co.,
BBB 650 6.80%, 4/01/11 .......................................................................... 724,672
BBB 550 Ser. B, 7.70%, 6/01/29 .................................................................. 627,754
BB- 3,000 Levi Strauss & Co., 12.25%, 12/15/12(3) ................................................... 2,520,000
B2 3,000 National Wine & Spirits, Inc., 10.125%, 1/15/09 ........................................... 2,730,000
B- 1,000 Pantry, Inc., The, 10.25%, 10/15/07 ....................................................... 995,000
------------
23,361,026
------------
See Notes to Financial Statements.
12
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & GLASS--0.6%
B $ 1,000 Crown European Holdings SA, 10.875%, 3/01/13 (France)(3) .................................. $ 1,050,000
BB 1,500 Owens-Brockway Glass Container, Inc., 8.75%, 11/15/12 ..................................... 1,575,000
------------
2,625,000
------------
ECOLOGICAL SERVICES & EQUIPMENT--1.3%
B+ 5,000 Allied Waste NA, Inc., Ser. B, 10.00%, 8/01/09 ............................................ 5,337,500
------------
ELECTRONICS--1.2%
B+ 2,000 FIMEP SA, 10.50%, 2/15/13 (France)(3) ..................................................... 2,190,000
CCC- 2,500 Knowles Electronics Holdings, Inc., 13.125%, 10/15/09 ..................................... 1,825,000
B 1,000 Stoneridge, Inc., 11.50%, 5/01/12 ......................................................... 1,090,000
------------
5,105,000
------------
ENERGY--7.8%
Amerada Hess Corp.,
BBB 625 7.125%, 3/15/33 ......................................................................... 673,530
BBB 350 7.30%, 8/15/31 .......................................................................... 389,405
BBB+ 765(2) Anadarko Petroleum Corp., 5.375%, 3/01/07 ................................................. 822,699
B2 3,500 Baytex Energy Ltd., 10.50%, 2/15/11 (Canada) .............................................. 3,832,500
B+ 1,000 Calpine Canada Energy Finance ULC, 8.50%, 5/01/08 (Canada) ................................ 740,000
BB- 1,250 Chesapeake Energy Corp., 9.00%, 8/15/12 ................................................... 1,393,750
BB 1,000 Compagnie Generale De Geophysique SA, 10.625%, 11/15/07 (France) .......................... 1,000,000
A- 1,000 Conoco Funding Co., 5.45%, 10/15/06 (Canada) .............................................. 1,092,175
A- 1,220 Conoco, Inc., 6.95%, 4/15/29 .............................................................. 1,419,776
A- 950 ConocoPhillips, 5.90%, 10/15/32 ........................................................... 971,005
BBB 550 Devon Energy, Corp., 7.95%, 4/15/32 ....................................................... 689,279
BBB 140 Devon Financing Corp. ULC, 7.875%, 9/30/31 ................................................ 173,785
BBB+ 1,500 Dominion Resources, Inc., Ser. E, 6.75%, 12/15/32 ......................................... 1,632,744
B 3,000 Dresser, Inc., 9.375%, 4/15/11 ............................................................ 3,120,000
DTE Energy Co.,
BBB 250 6.00%, 6/01/04 .......................................................................... 260,650
BBB 660 6.45%, 6/01/06 .......................................................................... 725,226
A- 1,165 Duke Energy Corp., 5.625%, 11/30/12 ....................................................... 1,219,198
B+ 265 El Paso Natural Gas Co., 8.375%, 6/15/32(3) ............................................... 238,500
BBB+ 805 Exelon Corp., 6.75%, 5/01/11 .............................................................. 914,420
Baa2 530 FirstEnergy Corp., Ser. C, 7.375%, 11/15/31 ............................................... 580,275
A1 1,520 Florida Power Corp., 4.80%, 3/01/13 ....................................................... 1,537,693
Kinder Morgan Energy Partners LP,
BBB+ 870 7.30%, 8/15/33 .......................................................................... 1,028,775
BBB+ 185 7.75%, 3/15/32 .......................................................................... 226,840
BBB 930 Kinder Morgan, Inc., 7.25%, 3/01/28 ....................................................... 992,874
BB- 2,000 Leviathan Gas Pipeline Partners LP, Ser. B, 10.375%, 6/01/09 .............................. 2,165,000
BBB+ 360 Occidental Petroleum Corp., 7.20%, 4/01/28 ................................................ 421,829
BBB+ 350 Oncor Electric Delivery Co., 7.25%, 1/15/33(3) ............................................ 392,711
Baa1 1,650 Petroleos Mexicanos, 9.375%, 12/02/08 (Mexico) ............................................ 1,963,500
BBB 110 Progress Energy, Inc., 5.85%, 10/30/08 .................................................... 119,735
A- 500 Texas Eastern Transmission LP, 7.00%, 7/15/32 ............................................. 560,952
A3 725 Virginia Electric & Power Co., Ser. A, 5.75%, 3/31/06 ..................................... 790,672
------------
32,089,498
------------
FINANCE & BANKING--14.3%
AA+ 1,000 2 American General Instl. Capital A, 7.57%, 12/01/45(3) ..................................... 1,234,965
AAA 1,550 2 Asif Global Financing XVIII, 3.85%, 11/26/07(3) ........................................... 1,576,118
Bank of America Corp.,
Aa3 150 7.40%, 1/15/11 .......................................................................... 177,702
Aa3 640 7.80%, 2/15/10 .......................................................................... 770,536
Aa2 325 Bank One NA, 3.70%, 1/15/08 ............................................................... 331,991
Aa3 800 Barclays Bank PLC, 6.86%, 9/29/49 (United Kingdom)(3) ..................................... 884,608
Citigroup, Inc.,
AA+ 1,060 5.75%, 5/10/06 .......................................................................... 1,157,711
AA 1,700 5.875%, 2/22/33 ......................................................................... 1,747,194
AA 2,465 7.25%, 10/01/10 ......................................................................... 2,916,963
Aa3 290 Credit Suisse First Boston USA, Inc., 6.125%, 11/15/11 .................................... 313,906
Federal Home Loan Mortgage Corp.,
AAA 1,875 3.50%, 4/01/08 .......................................................................... 1,889,887
AAA 3,370 4.875%, 3/15/07 ......................................................................... 3,651,159
AAA 3,515 7.00%, 3/15/10 .......................................................................... 4,229,986
See Notes to Financial Statements.
13
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
FINANCE & BANKING--(CONT'D)
Federal National Mortgage Assoc.,
AAA $ 1,450 5.00%, 1/15/07 .......................................................................... $ 1,576,237
AAA 6,630(2) 6.00%, 5/15/08 - 5/15/11 ................................................................ 7,554,626
AAA 635 7.25%, 1/15/10 .......................................................................... 771,385
A1 610 FleetBoston Financial Corp., Ser. T, 4.20%, 11/30/07 ...................................... 627,451
Ford Motor Credit Co.,
A3 3,355 7.375%, 10/28/09 - 2/01/11 .............................................................. 3,427,893
A3 505 7.875%, 6/15/10 ......................................................................... 520,760
General Electric Capital Corp., Ser. A,
AAA 620 5.875%, 2/15/12 ......................................................................... 680,591
AAA 2,775 6.00%, 6/15/12 .......................................................................... 3,052,347
AAA 580 6.125%, 2/22/11 ......................................................................... 647,396
General Motors Acceptance Corp.,
A2 2,969 6.875%, 9/15/11 ......................................................................... 3,001,011
A2 1,130 8.00%, 11/01/31 ......................................................................... 1,158,189
Goldman Sachs Group, Inc.,
Aa3 370 6.125%, 2/15/33 ......................................................................... 381,174
AA- 355 6.60%, 1/15/12 .......................................................................... 401,161
AA- 190 6.875%, 1/15/11 ......................................................................... 217,729
AA- 135 7.35%, 10/01/09 ......................................................................... 158,868
A 1,760 Household Finance Corp., 6.375%, 8/01/10 - 11/27/12 ....................................... 1,934,278
Aa2 1,750 ING Bank NV, 5.125%, 5/01/15 (Netherlands)(3) ............................................. 1,769,010
A- 550 John Deere Capital Corp., 5.10%, 1/15/13 .................................................. 564,485
A 1,155 JP Morgan Chase & Co., 6.75%, 2/01/11 ..................................................... 1,312,632
Lehman Brothers Holdings, Inc.,
A 295 4.00%, 1/22/08 .......................................................................... 300,962
A+ 810 6.25%, 5/15/06 .......................................................................... 887,502
MetLife, Inc.,
A 300 6.125%, 12/01/11 ........................................................................ 334,547
A 1,175 6.50%, 12/15/32 ......................................................................... 1,264,961
Morgan Stanley,
Aa3 130 5.30%, 3/01/13 .......................................................................... 133,609
AA- 285 6.75%, 4/15/11 .......................................................................... 323,756
A+ 1,000 Prudential Funding LLC, 6.60%, 5/15/08(3) ................................................. 1,104,853
Sears Roebuck Acceptance Corp.,
BBB+ 725 6.75%, 8/15/11 .......................................................................... 740,898
BBB+ 960 7.00%, 6/01/32 .......................................................................... 973,824
AAA 1,875 Tiaa Global Markets, Inc., 3.875%, 1/22/08(3) ............................................. 1,995,000
Aa3 610 U.S. Bancorp, Ser. N, 3.95%, 8/23/07 ...................................................... 627,932
------------
59,327,793
------------
FOREST PRODUCTS--1.9%
Ba2 3,425 Caraustar Industries, Inc., 9.875%, 4/01/11 ............................................... 3,527,750
BBB 725 International Paper Co., 5.30%, 4/01/15(3) ................................................ 729,207
Weyerhaeuser Co.,
BBB 160 6.00%, 8/01/06 .......................................................................... 170,826
BBB 400 6.125%, 3/15/07 ......................................................................... 436,237
BBB 900 6.875%, 12/15/33 ........................................................................ 964,908
BBB 1,060 6.95%, 10/01/27 ......................................................................... 1,104,637
BBB 745 7.375%, 3/15/32 ......................................................................... 841,180
------------
7,774,745
------------
HEALTH CARE--2.0%
AA 425 Bristol-Myers Squibb Co., 4.75%, 10/01/06 ................................................. 449,438
B- 3,000 Hanger Orthopedic Group, Inc., 11.25%, 6/15/09 ............................................ 3,247,500
Caa2 2,000 HealthSouth Corp., 7.625%, 6/01/12 ........................................................ 1,290,000
AAA 500 Pharmacia Corp., 6.50%, 12/01/18 .......................................................... 582,500
B- 2,000 United Surgical Partners Intl., Inc., 10.00%, 12/15/11 .................................... 2,120,000
A- 525 Wellpoint Health Networks, Inc., 6.375%, 6/15/06 .......................................... 576,337
------------
8,265,775
------------
HOTELS & CASINO--1.2%
B+ 1,000 Circus & Eldorado Joint Venture, 10.125%, 3/01/12 ......................................... 945,000
Ba3 3,000 HMH Properties, Inc., Ser. A, 7.875%, 8/01/05 ............................................. 3,030,000
B 1,000 Resorts Intl. Hotel & Casino, Inc., 11.50%, 3/15/09 ....................................... 870,000
------------
4,845,000
------------
See Notes to Financial Statements.
14
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL EQUIPMENT--1.2%
B $ 3,000 Terex Corp., 9.25%, 7/15/11 ............................................................... $ 3,195,000
B+ 2,000 United Rentals, Inc., Ser. B, 9.25%, 1/15/09 .............................................. 1,910,000
------------
5,105,000
------------
LEISURE--0.7%
BB+ 3,000 Royal Caribbean Cruises Ltd., 8.125%, 7/28/04 (Liberia) ................................... 3,075,000
------------
MEDIA--5.8%
B1 4,000 Alliance Atlantis Communications, Inc., 13.00%, 12/15/09 (Canada) ......................... 4,560,000
AOL Time Warner, Inc.,
BBB+ 80 6.125%, 4/15/06 ......................................................................... 86,489
BBB+ 525 7.625%, 4/15/31 ......................................................................... 573,246
CCC- 4,000 Charter Communications Holdings LLC, 10.75%, 10/01/09 ..................................... 2,660,000
Comcast Cable Communications, Inc.,
BBB 450 6.75%, 1/30/11 .......................................................................... 482,203
BBB 1,050 6.875%, 6/15/09 ......................................................................... 1,160,250
BBB 4,175 Comcast Corp., 5.50%, 3/15/11 ............................................................. 4,303,173
BB- 4,000 EchoStar DBS Corp., 10.375%, 10/01/07 ..................................................... 4,480,000
Time Warner, Inc.,
BBB+ 90 6.625%, 5/15/29 ......................................................................... 88,566
BBB+ 260 6.875%, 6/15/18 ......................................................................... 278,284
BBB+ 4,380 7.57%, 2/01/24 .......................................................................... 4,710,658
BBB+ 360 Turner Broadcasting Systems, Inc., 8.375%, 7/01/13 ........................................ 419,850
------------
23,802,719
------------
REAL ESTATE--0.9%
BBB+ 775 AvalonBay Communities, Inc., 8.25%, 7/15/08 ............................................... 928,270
ERP Operating LP,
A- 1,950 5.20%, 4/01/13 .......................................................................... 1,976,715
A- 825 6.95%, 3/02/11 .......................................................................... 919,543
------------
3,824,528
------------
TELECOMMUNICATION--4.6%
AA- 170 Ameritech Capital Funding Corp., 6.45%, 1/15/18 ........................................... 176,038
BBB+ 1,320 AT&T Corp., 8.50%, 11/15/31 ............................................................... 1,438,800
A- 1,000 British Telecommunications PLC, 8.875%, 12/15/30 (United Kingdom) ......................... 1,321,947
BBB+ 1,060 Deutsche Telekom Intl. Finance BV, 8.50%, 6/15/10 (Netherlands) ........................... 1,294,472
Nextel Communications, Inc.,
B+ 2,000 9.375%, 11/15/09 ........................................................................ 2,150,000
B+ 3,000 9.50%, 2/01/11 .......................................................................... 3,255,000
CCC+ 3,000 Rural Cellular Corp., Ser. B, 9.625%, 5/15/08 ............................................. 2,550,000
AA- 2,030 SBC Communications, Inc., 6.25%, 3/15/11 .................................................. 2,277,115
A+ 805 Verizon Global Funding Corp., 7.75%, 12/01/30 - 6/15/32 ................................... 994,973
AA 375 Verizon Maryland, Inc., 6.125%, 3/01/12 ................................................... 408,143
AA 1,750 Verizon New Jersey, Inc., Ser. A, 5.875%, 1/17/12 ......................................... 1,899,800
Aa3 790 Verizon Pennsylvania, Inc., Ser. A, 5.65%, 11/15/11 ....................................... 827,953
A 350 Vodafone Group PLC, 6.25%, 11/30/32 (United Kingdom) ...................................... 371,000
------------
18,965,241
------------
TRANSPORTATION--2.0%
BBB- 362 American Airlines, Inc., Ser. 1, 6.855%, 10/15/10 ......................................... 300,184
BBB+ 1,400 Burlington Northern Santa Fe Corp., 5.90%, 7/01/12 ........................................ 1,522,080
BBB+ 1,410 Canadian National Railway Co., 6.90%, 7/15/28 (Canada) .................................... 1,626,717
BBB 1,450 Canadian Pacific Railway Ltd., 6.25%, 10/15/11 (Canada) ................................... 1,615,724
A- 636 Continental Airlines, Inc., Ser. A, 6.545%, 2/02/19 ....................................... 540,487
Baa1 375 Norfolk Southern Corp., 7.05%, 5/01/37 .................................................... 432,440
B 2,000 Pacer Intl., Inc., Ser. B, 11.75%, 6/01/07 ................................................ 2,120,000
------------
8,157,632
------------
OTHER--5.4%
A- 20,300 Traded Custody Receipts, Floating Coupon, 9/15/11(3) ...................................... 22,309,700
------------
TOTAL CORPORATE BONDS ..................................................................... 280,427,753
------------
TAXABLE MUNICIPAL BONDS--1.4%
California Dept. of Wtr. Res. Pwr. Sply.,
A- 5,000 3.585%, 5/01/04 ......................................................................... 5,070,800
A- 650 3.975%, 5/01/05 ......................................................................... 663,280
------------
Total Taxable Municipal Bonds ............................................................. 5,734,080
------------
See Notes to Financial Statements.
15
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT BONDS--11.8%
Aaa $19,503 Bundesobligation, 4.50%, 8/17/07 (Germany) ................................................ $ 22,956,677
Canada Government (Canada)
AAA 7,545 4.50%, 9/01/07 .......................................................................... 5,324,644
AAA 12,790 5.25%, 6/01/12 .......................................................................... 9,137,626
Kingdom of Sweden (Sweden)
Aaa 17,740 5.00%, 1/28/09 .......................................................................... 2,253,241
Aaa 22,455 8.00%, 8/15/07 .......................................................................... 3,174,419
United Mexican States (Mexico)
Baa2 350 4.625%, 10/08/08 ........................................................................ 354,725
Baa2 24,000 6.625%, 3/03/15 ......................................................................... 4,174,000
Baa2 1,225 8.30%, 8/15/31 .......................................................................... 1,386,081
------------
Total Foreign Government Bonds ............................................................ 48,761,413
------------
Total Long-Term Investments (cost $572,125,325) ........................................... 589,782,747
------------
SHORT-TERM INVESTMENTS--3.6%
U.S. GOVERNMENT SECURITIES--1.2%
U.S. Treasury Bills,
4,000 1.09%, 7/31/03 - 8/07/03 ................................................................ 3,988,470
200 1.115%, 5/22/03 ......................................................................... 199,870
500 1.155%, 5/01/03 ......................................................................... 500,000
------------
Total U.S. Government Securities .......................................................... 4,688,340
------------
DISCOUNT NOTES--2.4%
9,200 Federal Home Loan Bank, 1.25%, 5/01/03 .................................................... 9,200,000
800 Federal Home Loan Mortgage Corp., Ser. RB, 1.14%, 7/03/03 ................................. 798,404
------------
Total Discount Notes ...................................................................... 9,998,404
------------
Total Short-Term Investments (cost $14,686,744) ........................................... 14,686,744
------------
TOTAL INVESTMENTS--146.1% (cost $586,812,069) ............................................. 604,469,491
LIABILITIES IN EXCESS OF OTHER ASSETS--(46.1)% ............................................ (190,721,376)
------------
NET ASSETS--100% .......................................................................... $413,698,115
============
----------
(1) Using the higher of S&P's, Moody's or Fitch's rating.
(2) Entire or partial principal amount pledged as collateral for reverse
repurchase agreements or financial futures contracts.
(3) Security is not registered under the Securities Act of 1933. These
securities may be resold in transactions in accordance with Rule 144A under
that Act, to qualified institutional buyers. As of April 30, 2003, the Trust
held 9.4% of its net assets, with a current market value of $39,084,672, in
securities restricted as to resale.
See Notes to Financial Statements.
16
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 2003
--------------------------
BlackRock High Yield Trust
--------------------------
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--140.9%
CORPORATE BONDS--140.9%
AEROSPACE & DEFENSE--2.8%
B- $ 1,000 BE Aerospace, Inc., 9.50%, 11/01/08 ....................................................... $ 715,000
NR 1,500 Condor Systems Inc., Ser. B, 11.88%, 5/01/09(2) ........................................... 450,000
------------
1,165,000
------------
AUTOMOTIVE--6.4%
B 1,000 CSK Auto, Inc., 12.00%, 6/15/06 ........................................................... 1,085,000
B3 1,000 Delco Remy Intl., Inc., 11.00%, 5/01/09 ................................................... 530,000
B+ 1,000 Sonic Automotive, Inc., Ser. D, 11.00%, 8/01/08 ........................................... 1,065,000
------------
2,680,000
------------
BASIC MATERIALS--1.2%
NR 2,000 Golden Northwest Aluminum Inc., 12.00%, 12/15/06 .......................................... 120,000
NR 376 Republic Engineered Products LLC, 10.00%, 8/16/09(3) ...................................... 376,470
NR 2,000 Republic Technologies Intl. LLC, 13.75%, 7/15/092 ......................................... 20,000
------------
516,470
------------
BUILDING & DEVELOPMENT--11.2%
B- 1,500 Ainsworth Lumber Co. Ltd., 12.50%, 7/15/07 (Canada) ....................................... 1,650,000
Ba1 1,000 D.R. Horton, Inc., 10.50%, 4/01/05 ........................................................ 1,095,000
D 500 Encompass Services Corp., 10.50%, 5/01/09(2) .............................................. 10,000
BB 1,000 Hovnanian Enterprises, Inc., 10.50%, 10/01/07 ............................................. 1,130,000
B2 1,000 MMI Products Inc., Ser. B, 11.25%, 4/15/07 ................................................ 760,000
------------
4,645,000
------------
CHEMICAL--7.9%
B- 250 Avecia Group PLC, 11.00%, 7/01/09 (United Kingdom) ........................................ 222,500
Ba2 1,000 Hercules Inc., 11.13%, 11/15/07 ........................................................... 1,140,000
B+ 1,000 Lyondell Chemical Co., 10.88%, 5/01/09 .................................................... 1,000,000
CCC 1,750 Mississippi Chemical Corp., 7.25%, 11/15/17 ............................................... 175,000
Ba3 1,000 Solutia, Inc., 11.25%, 7/15/09 ............................................................ 760,000
------------
3,297,500
------------
CONGLOMERATES--2.3%
B- 500 MSX Intl., Inc., 11.38%, 1/15/08 .......................................................... 255,000
NR 1,200 Nebco Evans Holding Co., 12.375%, 7/15/07(2,3) ............................................ 0
B 1,000 Penhall Intl., Inc., 12.00%, 8/01/06 ...................................................... 700,000
------------
955,000
------------
CONSUMER PRODUCTS--26.7%
BB+ 1,000 American Greetings Corp., 11.75%, 7/15/08 ................................................. 1,145,000
B 1,000 Elizabeth Arden, Inc., Ser. B, 11.75%, 2/01/11 ............................................ 1,100,000
BB- 1,000 Levi Strauss & Co., 11.63%, 1/15/08 ....................................................... 850,000
NR 1,000 Mattress Discounters Corp., 12.63%, 7/15/07(2) ............................................ 180,000
B3 464 National Vision Inc., 12.00%, 3/30/09 ..................................................... 301,343
CCC+ 1,760 O'Sullivan Industries Inc., 13.38%, 10/15/09 .............................................. 1,548,800
B- 1,100 Pantry, Inc., The, 10.25%, 10/15/07 ....................................................... 1,094,500
Revlon Consumer Products Corp.,
CCC- 2,000 8.63%, 2/01/08 .......................................................................... 900,000
CCC+ 1,000 12.00%, 12/01/05 ........................................................................ 950,000
B 1,000 Salton, Inc., 12.25%, 4/15/08 ............................................................. 1,035,000
B+ 1,000 Sbarro, Inc., 11.00%, 9/15/09 ............................................................. 970,000
B- 1,000 St. John Knits Intl., Inc., 12.50%, 7/01/09 ............................................... 1,065,000
------------
11,139,643
------------
CONTAINERS & GLASS--4.7%
B 1,000 Radnor Holdings Inc., 11.00%, 3/15/10(4) .................................................. 1,000,000
CCC+ 1,500 U.S. Can Co., Ser. B, 12.38%, 10/01/10 .................................................... 960,000
------------
1,960,000
------------
ECOLOGICAL SERVICES & EQUIPMENT--2.5%
B+ 1,000 Allied Waste NA, Inc., Ser. B, 10.00%, 8/01/09 ............................................ 1,067,500
------------
See Notes to Financial Statements.
17
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
ELECTRONICS--12.3%
B $ 1,788 Asat Finance LLC, 12.50%, 11/01/06 ........................................................ $ 1,430,080
B3 1,000 Communications & Power Industry Inc., 12.00%, 8/01/05 ..................................... 1,000,000
CCC- 2,500 Knowles Electronics Holdings, Inc., 13.125%, 10/15/09 ..................................... 1,825,000
B 825 ON Semiconductor Corp., 12.00%, 3/15/104 .................................................. 891,000
------------
5,146,080
------------
ENERGY--8.4%
B- 1,000 AES Corp., 8.38%, 8/15/07 ................................................................. 900,000
B+ 1,000 Calpine Corp., 10.50%, 5/15/06 ............................................................ 845,000
B- 1,000 Mission Energy Holding Co., 13.50%, 7/15/08 ............................................... 660,000
B3 1,000 Orion Power Holdings Inc., 12.00%, 5/01/10 ................................................ 1,085,000
------------
3,490,000
------------
FARMING & AGRICULTURE--0.8%
NR 1,000 Precision Partners Inc., 12.00%, 3/15/09(2) ............................................... 330,000
------------
FINANCE & BANKING--12.9%
NR 500 Ameriserve Finance Capital Corp., 12.00%, 9/15/06(2,4) .................................... 25,000
Ba2 1,000 Capital Guardian High Yield, CBO, Ltd., Ser. 1A, 11.45%, 5/24/13(4) ....................... 622,200
BB 1,000 Fairfax Financial Holdings Ltd., 6.88%, 4/15/08 ........................................... 850,000
Ba3 2,500 First Dominion Funding II, Ser. 1A, 11.61%, 4/25/14(4) .................................... 1,037,500
CCC+ 1,000 Madison River Capital Corp., 13.25%, 3/01/10 .............................................. 850,000
B1 2,000 Zais Investment Grade Ltd., Class C, Pay-in-Kind, 9.95%, 9/23/14(4) ....................... 2,000,000
------------
5,384,700
------------
FOREST PRODUCTS--2.4%
B+ 1,000 FiberMark Inc., 10.75%, 4/15/11 ........................................................... 1,010,000
------------
HEALTH CARE--4.9%
B- 1,000 Concentra Operating Corp., Ser. B, 13.00%, 8/15/09 ........................................ 1,110,000
B- 1,000 Medquest Inc., Ser. B, 11.88%, 8/15/12 .................................................... 925,000
------------
2,035,000
------------
INDUSTRIAL EQUIPMENT--1.4%
CC 2,000 National Equipment Services Inc., Ser. D, 10.00%, 11/30/04 ................................ 600,000
------------
MEDIA--14.0%
B1 2,000 Alliance Atlantis Communications, Inc., 13.00%, 12/15/09 (Canada) ......................... 2,280,000
Charter Communications Holdings LLC,
CCC- 1,000 10.75%, 10/01/09 ........................................................................ 665,000
CCC- 1,000 11.13%, 1/15/11 ......................................................................... 665,000
B- 1,000 WRC Media Corp., 12.75%, 11/15/09 ......................................................... 1,025,000
Caa1 980 XM Satellite Radio Inc., 14.00%, 3/15/10 .................................................. 921,200
NR 607 Ziff Davis Media Inc., Ser. B, 13.00%, 8/12/09 ............................................ 303,525
------------
5,859,725
------------
TELECOMMUNICATION--6.2%
C 1,500 Allegiance Telecom Inc., 12.88%, 5/15/08 (Canada)(2) ...................................... 330,000
NR 2,000 Asia Global Crossing Ltd., 13.38%, 10/15/10 (United Kingdom)(2) ........................... 250,000
B+ 1,000 Nextel Communications Inc., 12.00%, 11/01/08 .............................................. 1,080,000
NR 1,000 Northeast Optic, 12.75%, 8/15/08(2) ....................................................... 70,000
NR 600 PF.Net Communications, Inc., 13.75%, 5/15/10(2) ........................................... 0
B3 1,000 Time Warner Telecom LLC, 9.75%, 7/15/08 ................................................... 840,000
------------
2,570,000
------------
TRANSPORTATION--11.9%
Amtran Inc.,
CCC 2,000 9.63%, 12/15/05 ......................................................................... 600,000
CCC 1,000 10.50%, 8/01/04 ......................................................................... 400,000
B 2,000 Pacer Intl., Inc., Ser. B, 11.75%, 6/01/07 ................................................ 2,120,000
B1 1,000 Sea Containers Ltd., Ser B, 10.75%, 10/15/06 (United Kingdom) ............................. 780,000
BB- 1,000 TFM SA de CV, 12.50%, 6/15/12 (Mexico) .................................................... 1,050,000
------------
4,950,000
------------
Total Corporate Bonds--140.9% (cost $77,043,025) .......................................... 58,801,618
------------
See Notes to Financial Statements.
18
RATING(1) SHARES DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK--0.0%
TELECOMMUNICATION--0.0%
NR 1,098 Adelphia Business Solutions, Inc., Ser. B, 12.88%, 10/15/07 (cost $925,576)2 .............. $ 0
------------
UNITS WARRANTS--0.0%
-----
1,000 Mattress Discounters Corp., Expires 7/15/072 .............................................. 0
600 PF.Net Communications, Inc., Expires 5/15/102 ............................................. 0
2,000 Republic Technologies Intl. Inc., Expires 7/15/092 ........................................ 0
------------
0
------------
TOTAL WARRANTS (cost $377,115) ............................................................ 0
------------
TOTAL INVESTMENTS--140.9% (cost $78,345,716) .............................................. 58,801,618
LIABILITIES IN EXCESS OF OTHER ASSETS--(40.9)% ............................................ (17,078,034)
------------
NET ASSETS--100% .......................................................................... $ 41,723,584
============
----------
(1) Using the higher of S&P's, Moody's or Fitch's rating.
(2) Issuer is technically in default.
(3) Security is fair valued.
(4) Security is not registered under the Securities Act of 1933. These
securities may be resold in transactions in accordance with Rule 144A under
that Act, to qualified institutional buyers. As of April 30, 2003, the Trust
held 13.4% of its net assets, with a current market value of $5,575,700, in
securities restricted as to resale.
See Notes to Financial Statements.
19
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 2003
----------------------------------
BlackRock Income Opportunity Trust
----------------------------------
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--140.2%
MORTGAGE PASS-THROUGHS--51.8%
$ 49,273(2) Federal Home Loan Mortgage Corp., 6.50%, 1/01/26 - 11/01/32 ............................... $ 51,450,965
Federal National Mortgage Assoc.,
109,469(2) 5.50%, 12/01/13 - 2/01/33 ............................................................... 113,025,632
50,321(2) 6.00%, 12/01/09 - 11/01/32 .............................................................. 52,599,725
1,173 7.00%, 2/01/24 - 1/01/29 ................................................................ 1,244,342
408 Government National Mortgage Assoc., 8.00%, 4/15/24 - 11/15/25 ............................ 446,820
------------
Total Mortgage Pass-Throughs .............................................................. 218,767,484
------------
FEDERAL HOUSING ADMINISTRATION--4.4%
GMAC Projects,
1,314 Ser. 37, 7.43%, 10/01/22 ................................................................ 1,419,271
631 Ser. 44, 7.43%, 8/01/22 ................................................................. 681,235
Merrill Projects,
1,044 Ser. 29, 7.43%, 6/01/22 ................................................................. 1,127,271
10,266 Ser. 42, 7.43%, 9/01/22 ................................................................. 11,089,000
2,017 Reilly Project, Series B-11, 7.40%, 4/01/21 ............................................... 2,175,867
2,051 Westmore Project 8240, 7.25%, 4/01/21 ..................................................... 2,203,103
------------
Total Federal Housing Administration ...................................................... 18,695,747
------------
NON-AGENCY MULTIPLE CLASS MORTGAGE PASS-THROUGH--0.1%
AAA 353 Summit Mortgage Trust, Ser. 1, Class B1, 12/28/12(3) ...................................... 356,696
------------
ADJUSTABLE RATE MORTGAGE SECURITIES--0.1%
280 Federal National Mortgage Assoc., Ser. 256, Class F, 11/25/23 ............................. 253,428
------------
INVERSE FLOATING RATE MORTGAGES--1.0%
Federal Home Loan Mortgage Corp.,
844 Ser. 1601, Class SE, 10/15/08 ........................................................... 855,276
1,000(2) Ser. 1611, Class JC, 8/15/23 ............................................................ 1,120,000
Federal National Mortgage Assoc.,
1,808(2) Ser. 23, Class PS, 4/25/23 .............................................................. 1,985,320
196 Ser. 87, Class S, 8/25/21 ............................................................... 246,165
101 Ser. 145, Class S, 10/25/06 ............................................................. 126,841
------------
Total Inverse Floating Rate Mortgages ..................................................... 4,333,602
------------
INTEREST ONLY MORTGAGE-BACKED SECURITIES--1.3%
BA Mortgage Securities, Inc.,
1,596 Ser. 1, Class A7, 3/25/29 ............................................................... 9,228
179 Ser. 1, Class X, 7/25/26 ................................................................ 954
264 Ser. 1, Class 2X, 5/28/13 ............................................................... 3,915
27,030 Countrywide Home Loans, Inc., Ser. 6, Class X, 6/25/13 .................................... 59,127
Federal Home Loan Mortgage Corp.,
1,192 Ser. 1223, Class H, 3/15/22 ............................................................. 224,958
856 Ser. 1254, Class Z, 4/15/22 ............................................................. 186,727
105 Ser. 1644, Class DA, 12/15/23 ........................................................... 362
6,975 Ser. 1809, Class SC, 12/15/23 ........................................................... 207,073
1,899 Ser. 1831, Class PG, 3/15/11 ............................................................ 235,509
1,957 Ser. 2080, Class PL, 1/15/27 ............................................................ 52,592
253 Ser. 2137, Class CI, 10/15/26 ........................................................... 3,644
Federal National Mortgage Assoc.,
15 Ser. G46, Class H, 12/25/09 ............................................................. 241,218
307 Ser. G92-5, Class H, 1/25/22 ............................................................ 61,279
1,681 Ser. 7, Class PH, 4/25/11 ............................................................... 139,747
10,300 Ser. 16, Class IW, 11/25/12 ............................................................. 1,042,875
1,727 Ser. 50, Class SI, 4/25/23 .............................................................. 42,638
6,400 Ser. 70, Class IN, 5/25/15 .............................................................. 848,000
10,546 G.E. Capital Mortgage Services, Inc., Ser. 11, Class A5, 7/25/29 .......................... 148,303
17,582 GMAC Commercial Mortgage Securities Inc., Ser. C2, Class X, 5/15/35 ....................... 540,199
14,434 Goldman Sachs Mortgage Securities Corp., Ser. 5, Class IO, 6/19/27(3) ..................... 322,513
See Notes to Financial Statements.
20
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
INTEREST ONLY MORTGAGE-BACKED SECURITIES--(CONT'D)
$ 580 Government National Mortgage Assoc., Ser. 3, Class E, 6/16/25 ............................. $ 98,530
9,339 Hanover Grantor Trust, Ser. A, Class 1IO, 8/28/27(3) ...................................... 70,044
4,162 Morgan Stanley Capital 1, Inc., Ser. HF1, Class X, 7/15/29(3) ............................. 175,809
13,285 Prudential Home Mortgage Securities Co., Ser. 5, Class A9, 2/25/24 ........................ 0
Residential Asset Securitization Trust,
14,022 Ser. A3, Class X, 5/25/29 ............................................................... 78,876
11,932 Ser. A5, Class A2, 9/25/30 .............................................................. 514,563
521 Residential Funding Mortgage Securities I Inc., Ser. S30, Class A7, 12/25/28 .............. 4,072
18,958 Salomon Brothers Mortgage Securities VII Inc., Ser. 1, Class IO, 3/25/22 .................. 29,622
33,031 Vendee Mortgage Trust, Ser. 1, Class IO, 2/15/27 .......................................... 216,764
------------
Total Interest Only Mortgage-Backed Securities ............................................ 5,559,141
------------
PRINCIPAL ONLY MORTGAGE-BACKED SECURITIES--0.8%
Federal Home Loan Mortgage Corp.,
426(2) Ser. 1739, Class B, 2/15/24 ............................................................. 400,989
130 Ser. 1857, Class PB, 12/15/08 ........................................................... 128,911
Federal National Mortgage Assoc.,
1,154(2) Ser. 26, Class L, 3/25/23 ............................................................... 1,134,189
285 Ser. 279, Class 1, 7/01/26 .............................................................. 255,008
AAA 5,490 Fund America Investors Corp., Ser. C, Class B, 4/29/30 .................................... 1,276,843
------------
Total Principal Only Mortgage-Backed Securities ........................................... 3,195,940
------------
U.S. GOVERNMENT AND AGENCY SECURITIES--6.5%
14,968 Overseas Private Investment Corp., 4.30% - 7.35%, 5/29/12 ................................. 16,260,093
2,366 Small Business Administration, Ser. 20K-1, 6.95%, 11/01/16 ................................ 2,634,080
U.S. Treasury Notes,
1,800 3.25%, 8/15/07 .......................................................................... 1,849,079
2,100 4.00%, 11/15/12 ......................................................................... 2,126,823
4,200(2) 4.875%, 2/15/12 ......................................................................... 4,553,392
------------
Total U.S. Government and Agency Securities ............................................... 27,423,467
------------
CORPORATE BONDS--73.4%
AEROSPACE & DEFENSE--1.6%
B- 1,235 BE Aerospace, Inc., 9.50%, 11/01/08 ....................................................... 815,100
BB- 1,500 L-3 Communications Corp., 7.625%, 6/15/12 ................................................. 1,653,750
BBB+ 1,250 Lockheed Martin Corp., 8.50%, 12/01/29 .................................................... 1,634,766
BBB- 1,000 Northrop Grumman Corp., 7.125%, 2/15/11 ................................................... 1,169,895
BBB- 1,200 Raytheon Co., 6.15%, 11/01/08 ............................................................. 1,324,648
------------
6,598,159
------------
AUTOMOTIVE--2.3%
B 2,000 Asbury Automotive Group, Inc., 9.00%, 6/15/12 ............................................. 1,880,000
BB+ 1,500 Autonation, Inc., 9.00%, 8/01/08 .......................................................... 1,627,500
BB+ 2,000 Briggs & Stratton Corp., 8.875%, 3/15/11 .................................................. 2,230,000
B+ 3,715 Dura Operating Corp., Ser. B, 8.625%, 4/15/12 ............................................. 3,826,450
------------
9,563,950
------------
BASIC MATERIAL--1.4%
BB 3,000 AK Steel Corp., 7.875%, 2/15/09 ........................................................... 2,662,500
A 2,000 Alcoa, Inc., 7.375%, 8/01/10 .............................................................. 2,353,913
B+ 1,000 Oregon Steel Mills, Inc., 10.00%, 7/15/09 990,000
------------
6,006,413
------------
BUILDING & DEVELOPMENT--0.9%
B- 1,000 Ainsworth Lumber Co. Ltd., 12.50%, 7/15/07 (Canada) ....................................... 1,100,000
Ba1 2,500 D.R. Horton, Inc., 10.50%, 4/01/05 ........................................................ 2,737,500
------------
3,837,500
------------
CHEMICAL--1.9%
B- 500 Avecia Group PLC, 11.00%, 7/01/09 (United Kingdom) ........................................ 445,000
Dow Chemical Co.,
A- 750 5.75%, 12/15/08 ......................................................................... 794,905
A- 1,400 6.00%, 10/01/12 ......................................................................... 1,484,000
BB 3,000 Lyondell Chemical Co., 11.125%, 7/15/12 ................................................... 3,225,000
B 1,750 Noveon, Inc., Ser. B, 11.00%, 2/28/11 ..................................................... 1,960,000
------------
7,908,905
------------
CONGLOMERATES--1.2%
AAA 3,650 General Electric Co., 5.00%, 2/01/13 ...................................................... 3,771,256
A 1,300 Honeywell, Inc., 6.125%, 11/01/11 ......................................................... 1,447,169
------------
5,218,425
------------
See Notes to Financial Statements.
21
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS--8.8%
B $ 1,875 American Seafoods Group LLC, 10.125%, 4/15/10 ............................................. $ 2,015,625
A 2,000 Avery Dennison Corp., 4.875%, 1/15/13 ..................................................... 2,037,480
B 2,000 Buffets, Inc., 11.25%, 7/15/10 ............................................................ 1,950,000
General Mills, Inc.,
BBB+ 550 5.125%, 2/15/07 ......................................................................... 588,145
BBB+ 1,700 6.00%, 2/15/12 .......................................................................... 1,874,771
Kellogg Co., Ser. B,
BBB 700 6.00%, 4/01/06 .......................................................................... 764,908
BBB 2,000 6.60%, 4/01/11 .......................................................................... 2,276,690
A- 3,000 Kohls Corp., 6.30%, 3/01/11 ............................................................... 3,374,647
A3 2,000 Kraft Foods, Inc., 5.625%, 11/01/11 ....................................................... 2,095,171
BBB- 1,000 Kroger Co., 5.50%, 2/01/13 ................................................................ 1,025,931
BB- 2,000 Levi Strauss & Co., 12.25%, 12/15/123 ..................................................... 1,680,000
AA- 3,000 Procter & Gamble Co., 6.875%, 9/15/09 ..................................................... 3,561,734
B 2,000 Roundys, Inc., Ser. B, 8.875%, 6/15/12 .................................................... 2,050,000
BBB 2,495 Safeway, Inc., 6.50%, 3/01/11 ............................................................. 2,742,903
A+ 2,000 Unilever Capital Corp., 7.125%, 11/01/10 .................................................. 2,376,297
AA 3,000 Wal-Mart Stores, Inc., 6.875%, 8/10/09 .................................................... 3,529,022
BB+ 3,000 Yum! Brands, Inc., 8.875%, 4/15/11 ........................................................ 3,487,500
------------
37,430,824
------------
CONTAINERS & GLASS--1.8%
B+ 1,500 Crown European Holdings SA, 9.50%, 3/01/11 (France)3 ...................................... 1,597,500
BB 2,250 Owens-Brockway Glass Container, Inc., 8.875%, 2/15/09 ..................................... 2,413,125
Plastipak Holdings, Inc.,
B+ 1,590 10.75%, 9/01/11 ......................................................................... 1,717,200
B+ 685 10.75%, 9/01/113 ........................................................................ 739,800
B 1,240 Stone Container Corp., 9.25%, 2/01/08 ..................................................... 1,370,200
------------
7,837,825
------------
ECOLOGICAL SERVICES & EQUIPMENT--1.3%
B+ 3,000 Allied Waste NA, Inc., Ser. B, 10.00%, 8/01/09 ............................................ 3,202,500
B 2,250 Casella Waste Systems, Inc., 9.75%, 2/01/133 .............................................. 2,430,000
------------
5,632,500
------------
ELECTRONICS--0.5%
B- 1,750 Chippac Int. Ltd., Ser. B, 12.75%, 8/01/09 ................................................ 1,960,000
------------
ENERGY--7.8%
BBB 2,000 Amerada Hess Corp., 6.65%, 8/15/11 ........................................................ 2,237,768
BBB+ 600 Anadarko Petroleum Corp., 5.375%, 3/01/07 ................................................. 645,254
B2 500 Baytex Energy Ltd., 10.50%, 2/15/11 (Canada) .............................................. 547,500
BB- 2,500 Chesapeake Energy Corp., 9.00%, 8/15/12 ................................................... 2,787,500
A- 3,000 Conoco Funding Co., 6.35%, 10/15/11 ....................................................... 3,399,647
BBB+ 2,000 Dominion Resources, Inc., 5.70%, 9/17/12 .................................................. 2,125,668
B 2,500 Dresser, Inc., 9.375%, 4/15/11 ............................................................ 2,600,000
BBB 1,500 DTE Energy Co., 7.05%, 6/01/11 ............................................................ 1,728,503
B 400 El Paso Corp., 7.875%, 6/15/123 ........................................................... 351,000
BBB+ 3,000 Exelon Corp., 6.75%, 5/01/11 .............................................................. 3,407,777
Baa2 1,500 FirstEnergy Corp., Ser. C, 7.375%, 11/15/31 ............................................... 1,642,286
BBB+ 1,250 Kinder Morgan Energy Partners LP, 7.30%, 8/15/33 .......................................... 1,478,125
BBB 1,000 Kinder Morgan, Inc., 6.50%, 9/01/12 ....................................................... 1,110,149
BB- 2,500 Leviathan Gas Pipeline Partners LP, Ser. B, 10.375%, 6/01/09 .............................. 2,706,250
BBB 1,800 Occidental Petroleum Corp., 6.75%, 1/15/12 ................................................ 2,056,077
Progress Energy, Inc.,
BBB 1,800 6.75%, 3/01/06 .......................................................................... 1,973,010
BBB 2,000 7.10%, 3/01/11 .......................................................................... 2,289,215
------------
33,085,729
------------
FINANCE & BANKING--18.0%
Aa3 2,450 Bank of America Corp., 7.80%, 2/15/10 ..................................................... 2,949,709
Aa3 1,400(2) Bank One Corp., 6.50%, 2/01/06 ............................................................ 1,552,991
Aa3 2,000 Barclays Bank PLC, 6.86%, 6/15/32 (United Kingdom)3 ....................................... 2,211,520
A 500 Bear Stearns Co., Inc., 6.50%, 5/01/06 .................................................... 555,239
Aa2 6,000 Citigroup, Inc., 5.625%, 8/27/12 .......................................................... 6,472,398
Credit Suisse First Boston USA, Inc.,
Aa3 700(2) 6.125%, 11/15/11 ........................................................................ 757,705
Aa3 1,000 7.125%, 7/15/32 ......................................................................... 1,164,829
See Notes to Financial Statements.
22
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
FINANCE & BANKING--(CONT'D)
Federal Home Loan Mortgage Corp.,
AAA $ 4,000(2) 4.875%, 3/15/07 ......................................................................... $ 4,333,720
AAA 4,000(2) 6.875%, 9/15/10 ......................................................................... 4,795,200
AAA 8,000(2) Federal National Mortgage Assoc., 4.375%, 10/15/06 - 9/15/12 .............................. 8,319,720
A3 3,000(2) Ford Motor Credit Co., 6.875%, 2/01/06 .................................................... 3,113,936
AAA 3,000 General Electric Capital Corp., Ser. A, 6.75%, 3/15/32 .................................... 3,472,642
General Motors Acceptance Corp.,
A2 700 6.75%, 1/15/06 .......................................................................... 732,984
A2 4,000 6.875%, 8/28/12 ......................................................................... 4,072,138
AA- 1,000 Goldman Sachs Group, Inc., 6.60%, 1/15/12 ................................................. 1,130,030
A 3,650 Household Finance Corp., 6.375%, 10/15/11 - 11/27/12 ...................................... 4,030,270
A- 2,000 John Deere Capital Corp., 5.10%, 1/15/13 .................................................. 2,052,672
JP Morgan Chase & Co.,
A+ 2,100 5.25%, 5/30/07 .......................................................................... 2,266,176
A 1,000 6.75%, 2/01/11 .......................................................................... 1,136,478
AAA 3,000 KFW Intl. Finance, Inc., 5.25%, 6/28/06 ................................................... 3,288,636
Ba1 1,000 Labranche & Co., Inc., 12.00%, 3/02/07 .................................................... 1,095,000
Lehman Brothers Holdings, Inc.,
A+ 850 6.25%, 5/15/06 .......................................................................... 931,330
A+ 1,500 6.625%, 1/18/12 ......................................................................... 1,707,022
A 2,000 MetLife, Inc., 5.375%, 12/15/12 ........................................................... 2,102,303
Morgan Stanley,
Aa3 600 5.80%, 4/01/07 .......................................................................... 658,781
AA- 1,600 6.75%, 4/15/11 .......................................................................... 1,817,575
AA 2,000 Northern Trust Co., 6.30%, 3/07/11 ........................................................ 2,256,534
BBB+ 2,000 Sears Roebuck Acceptance Corp., 6.75%, 8/15/11 ............................................ 2,043,857
AA- 2,000 UBS Preferred Funding Trust I, 8.622%, 10/29/49 ........................................... 2,524,200
Aa2 2,000 Wells Fargo Bank, 7.55%, 6/21/10 .......................................................... 2,415,320
------------
75,960,915
------------
FOREST PRODUCTS--1.8%
Ba2 2,000 Caraustar Industries, Inc., 9.875%, 4/01/11 ............................................... 2,060,000
BB+ 2,500 Tembec Industries, Inc., 8.50%, 2/01/11 (Canada) .......................................... 2,587,500
Weyerhaeuser Co.,
BBB 1,550 5.95%, 11/01/08 ......................................................................... 1,679,586
BBB 1,000 6.75%, 3/15/12 .......................................................................... 1,121,274
------------
7,448,360
------------
HEALTH CARE--1.4%
AA 1,000 Bristol Myers Squibb Co., 5.75%, 10/01/11 ................................................. 1,086,540
B- 1,200 Concentra Operating Corp., Ser. B, 13.00%, 8/15/09 ........................................ 1,332,000
Caa2 3,000 HealthSouth Corp., 7.00%, 6/15/084 ........................................................ 1,935,000
BB+ 1,500 Omnicare, Inc., Ser. B, 8.125%, 3/15/11 ................................................... 1,627,500
------------
5,981,040
------------
HOTELS & CASINO--4.8%
B+ 2,100 Argosy Gaming Co., 10.75%, 6/01/09 ........................................................ 2,310,000
B+ 2,000 Boyd Gaming Corp., 8.75%, 4/15/12 ......................................................... 2,140,000
B 2,000 Extended Stay America, Inc., 9.875%, 6/15/11 .............................................. 2,055,000
B 1,700 Hammons John Q. Hotels LP, Ser. B, 8.875%, 5/15/12 ........................................ 1,759,500
B 1,500 Herbst Gaming, Inc., Ser. B, 10.75%, 9/01/08 .............................................. 1,646,250
Ba3 1,500 HMH Properties, Inc., Ser. B, 7.875%, 8/01/08 ............................................. 1,485,000
BB+ 1,000 MGM Mirage, Inc., 9.75%, 6/01/07 .......................................................... 1,120,000
BB- 2,200 Mohegan Tribal Gaming Authority, 8.75%, 1/01/09 ........................................... 2,337,500
BB+ 2,000 Park Place Entertainment Corp., 8.875%, 9/15/08 ........................................... 2,160,000
BBB- 3,000 Starwood Hotels & Resorts, 7.875%, 5/01/12 ................................................ 3,157,500
------------
20,170,750
------------
INDUSTRIAL EQUIPMENT--1.0%
B+ 2,010 Manitowoc, Inc., 10.50%, 8/01/12 .......................................................... 2,130,600
BB- 2,000 United Rentals NA, Inc., 10.75%, 4/15/08(3) ............................................... 2,150,000
------------
4,280,600
------------
LEISURE--0.4%
B 1,500 Six Flags, Inc., 9.50%, 2/01/09 ........................................................... 1,543,125
------------
MEDIA--5.0%
B1 2,000 Alliance Atlantis Communications, Inc., 13.00%, 12/15/09 (Canada) ......................... 2,280,000
AOL Time Warner, Inc.,
BBB+ 2,000 7.70%, 5/01/32 .......................................................................... 2,224,467
BBB+ 3,000 9.125%, 1/15/13 ......................................................................... 3,669,000
See Notes to Financial Statements.
23
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
MEDIA--(CONT'D)
CCC- $ 3,000 Charter Communications Holdings LLC, 10.75%, 10/01/09 ...................................... $ 1,995,000
Comcast Cable Communications, Inc.,
BBB 1,000 6.75%, 1/30/11 ........................................................................... 1,071,563
BBB 1,800 8.875%, 5/01/17 .......................................................................... 2,288,359
BB- 3,000 EchoStar DBS Corp., 10.375%, 10/01/07 ...................................................... 3,360,000
B 1,000 Quebecor Media, Inc., 11.125%, 7/15/11 (Canada) ............................................ 1,130,000
B- 3,000 WRC Media Corp., 12.75%, 11/15/09 .......................................................... 3,075,000
------------
21,093,389
------------
REAL ESTATE--0.5%
BBB+ 1,000 Avalonbay Communities, Inc., 6.625%, 9/15/11 ............................................... 1,112,109
BBB+ 800 EOP Operating LP, 7.00%, 7/15/11 ........................................................... 896,099
------------
2,008,208
------------
TECHNOLOGY--0.5%
BB+ 2,000 Seagate Technology Holdings, 8.00%, 5/15/09 ................................................ 2,150,000
------------
TELECOMMUNICATION--3.9%
BBB+ 2,000 Deutsche Telekom Intl. Finance BV, 8.50%, 6/15/10 (Netherlands) ............................ 2,442,400
B3 1,340 Dobson Communications Corp., 10.875%, 7/01/10 .............................................. 1,407,000
B+ 2,000 Nextel Communications, Inc., 9.95%, 2/15/08 ................................................ 2,100,000
Ba3 3,000 PanAmSat Corp., 8.50%, 2/01/12 ............................................................. 3,240,000
SBC Communications, Inc.,
AA- 450 5.875%, 8/15/12 .......................................................................... 495,190
AA- 1,000 6.25%, 3/15/11 ........................................................................... 1,121,732
A+ 1,000 Verizon Global Funding Corp., 7.75%, 6/15/32 ............................................... 1,239,757
Aa3 3,000 Verizon Pennsylvania, Inc., Ser. A, 5.65%, 11/15/11 ........................................ 3,144,126
A 1,000 Vodafone Group PLC, 7.75%, 2/15/10 (United Kingdom) ........................................ 1,210,540
------------
16,400,745
------------
TRANSPORTATION--1.9%
BBB+ 1,000 Burlington Northern Santa Fe Corp., 5.90%, 7/01/12 ......................................... 1,087,200
BBB+ 1,000 Canadian National Railway Co., 6.375%, 10/15/11 (Canada) ................................... 1,126,363
BBB 1,475 Canadian Pacific Railway Ltd., 6.25%, 10/15/11 (Canada) .................................... 1,643,581
B 2,000 RailAmerica Transp. Corp., 12.875%, 8/15/10 ................................................ 2,180,000
BBB 2,000 Union Pacific Corp., 6.125%, 1/15/12 ....................................................... 2,204,988
------------
8,242,132
------------
OTHER--4.7%
A3 17,520 2 Targeted Return Index Securities Trust, Ser. 10-2002, Floating Coupon, 1/15/12(3) .......... 19,934,606
------------
Total Corporate Bonds ...................................................................... 310,294,100
------------
FOREIGN GOVERNMENT BONDS--0.8%
Baa2 3,000 United Mexican States, 8.00%, 9/24/22 (Mexico) ............................................. 3,315,000
------------
TOTAL LONG-TERM INVESTMENTS (cost $572,542,044) ............................................ 592,194,605
------------
SHORT-TERM INVESTMENT--1.8%
DISCOUNT NOTE--1.8%
7,800 Federal Home Loan Bank, 1.25%, 5/01/03 (cost $7,800,000) ................................... 7,800,000
------------
Total investments before outstanding option written (cost $580,342,044) ....................$599,994,605
------------
See Notes to Financial Statements.
24
NOTIONAL
AMOUNT
(000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
OUTSTANDING OPTION WRITTEN--(0.1)%
CALL OPTION--(0.1)%
$3,000 Interest Rate Swap, 5.50%, over 3 month LIBOR, expires 5/06/03 (premium received $56,660) $ (323,740)
-------------
TOTAL INVESTMENTS, NET OF OUTSTANDING OPTION WRITTEN--141.9% ............................. 599,670,865
OTHER LIABILITIES IN EXCESS OF OTHER ASSETS--(41.9)% ..................................... (177,142,546)
-------------
NET ASSETS--100% ......................................................................... $ 422,528,319
=============
----------
(1) Using the higher of S&P's, Moody's or Fitch's rating.
(2) Entire or partial principal amount pledged as collateral for reverse
repurchase agreements or financial futures contracts.
(3) Security is not registered under the Securities Act of 1933. These
securities may be resold in transactions in accordance with Rule 144A under
that Act, to qualified institutional buyers. As of April 30, 2003, the Trust
held 7.6% of its net assets, with a current market value of $32,019,488, in
securities restricted as to resale.
(4) Issuer is technically in default.
See Notes to Financial Statements.
25
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 2003
----------------------
BlackRock Income Trust
----------------------
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--121.9%
MORTGAGE PASS-THROUGHS--52.0%
Federal Home Loan Mortgage Corp.,
$40,470(2) 5.50%, 10/01/16 - 5/01/17 ............................................................... $ 42,080,683
271 6.50%, 5/01/29 - 5/01/30 ................................................................ 283,308
68 7.50%, 2/01/23 .......................................................................... 73,504
253 8.00%, 11/01/15 ......................................................................... 268,692
245 8.50%, 10/01/06 - 3/01/08 ............................................................... 261,324
554 9.00%, 9/01/20 .......................................................................... 618,550
Federal National Mortgage Assoc.,
97,777(2) 5.50%, 12/01/13 - 9/01/17 ............................................................... 101,678,868
32,338(2) 6.00%, 11/01/31 - 10/01/32 .............................................................. 33,646,603
24,324(2) 6.50%, 2/01/26 - 5/01/31 ................................................................ 25,407,794
31,002(2) 7.00%, 6/01/26 - 2/01/32 ................................................................ 32,767,532
5,336 7.50%, 11/01/14 - 9/01/23 ............................................................... 6,106,048
1,171 8.00%, 5/01/08 - 5/01/22 ................................................................ 1,267,112
16 9.50%, 1/01/19 - 6/01/20 ................................................................ 17,325
Government National Mortgage Assoc.,
250 7.00%, 10/15/17 ......................................................................... 267,135
1,974 7.50%, 8/15/21 - 12/15/23 ............................................................... 2,121,681
1,391 8.00%, 10/15/22 - 2/15/29 ............................................................... 1,511,782
127 9.00%, 6/15/18 - 9/15/21 ................................................................ 141,219
------------
Total Mortgage Pass-Throughs .............................................................. 248,519,160
------------
FEDERAL HOUSING ADMINISTRATION--5.4%
GMAC Projects,
2,002 Ser. 33, 7.43%, 9/01/21 ................................................................. 2,162,718
1,940 Ser. 46, 7.43%, 3/01/22 ................................................................. 2,095,487
1,093 Ser. 51, 7.43%, 2/01/23 ................................................................. 1,180,399
2,221 Ser. 56, 7.43%, 11/01/22 ................................................................ 2,399,082
490 Merrill Project, Ser. 54, 7.43%, 2/01/23 .................................................. 529,058
923 Reilly Project, Ser. 41, 8.767%, 12/01/18 ................................................. 966,930
USGI Projects,
466 Ser. 87, 7.43%, 12/01/22 ................................................................ 503,590
1,920 Ser. 99, 7.43%, 10/01/23 ................................................................ 2,074,162
2,482 Ser. 6302, 7.43%, 12/01/21 .............................................................. 2,682,452
3,894 Polaris, Ser. 982, 7.43%, 11/01/21 ...................................................... 4,206,094
6,307 Yorkville, Ser. 6094, 7.43%, 6/01/21 .................................................... 6,811,502
------------
Total Federal Housing Administration ...................................................... 25,611,474
------------
AGENCY MULTIPLE CLASS MORTGAGE PASS-THROUGHS--3.2%
Federal Home Loan Mortgage Corp.,
10,192 Ser. T11, Class A9, 3.068%, 1/25/28 ..................................................... 9,477,280
784 Ser. 19, Class F, 8.50%, 3/15/20 ........................................................ 828,513
Federal National Mortgage Assoc.,
977 Ser. 12, Class G, 4.50%, 2/25/20 ........................................................ 996,867
1,173 Ser. 43, Class E, 7.50%, 4/25/22 ........................................................ 1,254,914
2,500 Government National Mortgage Assoc., Ser. 33, Class PB, 6.50%, 7/20/31 .................... 2,649,686
------------
Total Agency Multiple Class Mortgage Pass-Throughs ........................................ 15,207,260
------------
NON-AGENCY MULTIPLE CLASS MORTGAGE PASS-THROUGHS--0.9%
AAA 2,822 Bank One, Ser. 1, Class 2A, 3/15/15 ....................................................... 2,878,668
AAA 561 Prudential Home Mortgage Securities Co., Ser. 35, Class A12, 6.75%, 9/25/08 ............... 559,474
AAA 1,158 Summit Mortgage Trust, Ser. 1, Class B1, 12/28/12(3) ...................................... 1,070,087
------------
Total Non-Agency Multiple Class Mortgage Pass-Throughs .................................... 4,508,229
------------
ADJUSTABLE RATE MORTGAGE SECURITIES--0.2%
Federal National Mortgage Assoc.,
430 Ser. 38, Class F, 8.325%, 4/25/21 ....................................................... 403,991
631 Ser. 256, Class F, 2.844%, 11/25/23 ..................................................... 570,213
------------
Total Adjustable Rate Mortgage Securities ................................................. 974,204
------------
See Notes to Financial Statements.
26
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
INVERSE FLOATING RATE MORTGAGES--10.0%
AAA $ 6,460 Countrywide Mortgage-Backed Securities, Inc., Ser. D, Class A15, 1/25/09 .................. $ 6,552,896
Federal Home Loan Mortgage Corp.,
157 Ser. 1160, Class F, 10/15/21 ............................................................ 198,967
294 Ser. 1580, Class SD, 9/15/08 ............................................................ 297,857
915 Ser. 1601, Class SE, 10/15/08 ........................................................... 927,510
517 Ser. 1608, Class SC, 11/15/23 ........................................................... 520,674
1,457(2) Ser. 1616, Class SB, 11/15/08 ........................................................... 1,544,584
4,328 Ser. 1688, Class S, 12/15/13 ............................................................ 4,614,302
10,536 Ser. 2575, Class QS, 9/15/31 ............................................................ 10,671,077
Federal National Mortgage Assoc.,
102 Ser. 19, Class SB, 1/25/24 .............................................................. 102,341
436 Ser. 38, Class SA, 4/25/21 .............................................................. 458,805
3,109 Ser. 79, Class SE, 1/25/22 .............................................................. 3,184,279
428 Ser. 87, Class S, 8/25/21 ............................................................... 537,870
1,920 Ser. 93, Class S, 5/25/08 ............................................................... 2,035,472
204 Ser. 129, Class SE, 8/25/08 ............................................................. 214,046
206 Ser. 145, Class S, 10/25/06 ............................................................. 258,158
1,651 Ser. 170, Class SC, 9/25/08 ............................................................. 1,695,385
4,327 Ser. 196, Class SC, 10/25/08 ............................................................ 4,575,732
2,173 Ser. 214, Class S, 12/25/08 ............................................................. 2,278,190
1,358 Ser. 214, Class SH, 12/25/08 ............................................................ 1,507,259
2,562 Ser. 247, Class SN, 12/25/23 ............................................................ 2,851,265
AAA 1,911 Kidder Peabody Acceptance Corp., Ser. 1, Class A6, 8/25/23 ................................ 1,927,602
AAA 649 Residential Funding Mortgage Securities Inc., Ser. S36, Class A13, 10/25/08 ............... 681,383
------------
Total Inverse Floating Rate Mortgages ..................................................... 47,635,654
------------
INTEREST ONLY MORTGAGE-BACKED SECURITIES--10.0%
American Housing Trust,
489 Ser. III, Class 4, 3/25/19 .............................................................. 9,999
115 Ser. VII, Class 2, 11/25/20 ............................................................. 340,000
BA Mortgage Securities, Inc.,
405 Ser. 1, Class X, 7/25/26 ................................................................ 2,150
300 Ser. 1, Class 2X, 5/28/13 ............................................................... 4,457
104,801 Commercial Mortgage Acceptance Corp., Ser. ML1, Class IO, 12/15/30 ........................ 2,489,033
38,360 Credit Suisse First Boston Mortgage Securities Corp. Trust, Ser. C1, Class AX, 6/20/29(3) . 2,140,039
Federal Home Loan Mortgage Corp.,
1,387 Ser. G-13, Class PP, 5/25/21 ............................................................ 50,778
41,587 Ser. G-60, Class HS, 4/25/24 ............................................................ 2,339,260
11,543 Ser. 204, Class IO, 5/01/29 ............................................................. 1,460,651
22 Ser. 1494, Class PL, 3/15/22 ............................................................ 37,301
2,384 Ser. 1706, Class IA, 10/15/23 ........................................................... 254,786
622 Ser. 1720, Class PK, 1/15/24 ............................................................ 88,587
18,484 Ser. 1809, Class SC, 12/15/23 ........................................................... 548,743
20,310 Ser. 1914, Class PC, 12/15/11 ........................................................... 258,751
22,106 Ser. 2002, Class HJ, 10/15/08 ........................................................... 951,772
763 Ser. 2037, Class IB, 12/15/26 ........................................................... 21,660
3,042 Ser. 2050, Class PI, 12/15/11 ........................................................... 132,043
1,708 Ser. 2063, Class PI, 4/15/12 ............................................................ 52,292
5,434 Ser. 2080, Class PL, 1/15/27 ............................................................ 146,046
27 Ser. 2099, Class JB, 9/15/22 ............................................................ 359,527
2,029 Ser. 2138, Class PI, 3/15/11 ............................................................ 36,885
8,630 Ser. 2289, Class S, 2/15/31 ............................................................. 1,159,665
457 Ser. 2296, Class IO, 8/15/27 ............................................................ 594
6,762 Ser. 2296, Class SA, 3/15/16 ............................................................ 458,578
7,359 Ser. 2358, Class IB, 7/15/21 ............................................................ 55,191
6,240 Ser. 2444, Class ST, 9/15/29 ............................................................ 438,732
9,078 Ser. 2512, Class QS, 10/15/22 ........................................................... 453,911
5,101 Ser. 2513, Class BI, 12/15/15 ........................................................... 404,883
4,545 Ser. 2542, Class MX, 5/15/22 ............................................................ 721,182
5,028 Ser. 2543, Class IM, 9/15/12 ............................................................ 535,200
11,648 Ser. 2545, Class NI, 3/15/22 ............................................................ 1,565,167
See Notes to Financial Statements.
27
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
INTEREST ONLY MORTGAGE-BACKED SECURITIES--(CONT'D)
Federal National Mortgage Assoc.,
$ 3 Ser. G-50, Class G, 12/25/21 ............................................................ $ 49,796
790 Ser. G92-5, Class H, 1/25/22 ............................................................ 157,575
2 Ser. G92-12, Class C, 2/25/22 ........................................................... 41,409
2,679 Ser. G92-60, Class SB, 10/25/22 ......................................................... 61,061
3,050 Ser. W4, Class IO, 12/25/28 ............................................................. 304,968
12,851 Ser. 2, Class ID, 3/25/23 ............................................................... 16,063
28,816 Ser. 16, Class PI, 11/25/12 ............................................................. 2,845,549
2,898 Ser. 19, Class PI, 8/25/12 .............................................................. 48,903
48,277 Ser. 23, Class ES, 10/25/22 ............................................................. 5,124,842
11,048 Ser. 33, Class SG, 3/25/09 .............................................................. 975,359
13,508 Ser. 37, Class SE, 10/25/22 ............................................................. 171,147
3,454 Ser. 50, Class SI, 4/25/23 .............................................................. 85,275
3,955 Ser. 62, Class IC, 7/25/15 .............................................................. 475,781
5,597 Ser. 62, Class IL, 3/25/24 .............................................................. 574,563
12,371 Ser. 68, Class SC, 1/25/24 .............................................................. 1,136,575
7,989 Ser. 82, Class IR, 9/25/12 .............................................................. 923,679
49,725 Ser. 90, Class M, 1/25/28 ............................................................... 8,246,945
8,070 Ser. 199, Class SB, 10/25/23 ............................................................ 791,874
6,157 Ser. 301, Class 2, 4/01/29 .............................................................. 758,048
11,935 Ser. 302, Class 2, 6/01/29 .............................................................. 1,564,555
249 First Boston Mortgage Securities Corp., Ser. C, Class IO, 4/25/17 ......................... 46,701
37,916 GMAC Commercial Mortgage Securities, Inc., Ser. C1, Class X, 7/15/29 ...................... 2,400,132
28,694 Goldman Sachs Mortgage Securities Corp., Ser. 5, Class IO, 6/19/27(3) ..................... 641,131
1,632 Government National Mortgage Assoc., Ser. 7, Class PS, 1/20/28 ............................ 182,016
17,779 Hanover Grantor Trust, Ser. A, Class 1IO, 8/28/27(3) ...................................... 133,344
305 Kidder Peabody Acceptance Corp., Ser. B, Class A2, 4/22/18 ................................ 81,944
7,874 Merrill Lynch Mortgage Investors, Inc., Ser. C2, Class IO, 6/15/21 ........................ 182,089
13,005 Morgan Stanley Capital 1, Inc., Ser. HF1, Class X, 7/15/293 ............................... 549,361
24,675 Prudential Home Mortgage Securities Co., Ser. 5, Class A9, 2/25/24 ........................ 0
65 Prudential Securities Inc., Ser. 15, Class 1G, 5/20/21 .................................... 26,302
4,500 Residential Accredit Loans, Inc., Ser. QS7, Class A1, 4/25/33 ............................. 736,875
30,340 Small Business Administration, Ser. 1, Class IO, 4/01/15 .................................. 360,289
285,951 Vendee Mortgage Trust, Ser. 2, Class 1IO, 5/15/29 ......................................... 357,439
------------
Total Interest Only Mortgage-Backed Securities ............................................ 47,569,453
------------
PRINCIPAL ONLY MORTGAGE-BACKED SECURITIES--13.3%
AAA 342 Chase Mortgage Finance Corp., Ser. A, Class AP, 1/25/10 ................................... 284,121
AAA 235 Collateralized Mortgage Obligation Trust, Ser. 29, Class A, 5/23/17 ....................... 214,693
Countrywide Home Loan Mortgage Certificates,
AAA 1,585 Ser. J2, Class A30, 4/25/33 ............................................................. 1,394,800
AAA 1,322 Ser. 11, Class A14, 5/25/33 ............................................................. 1,209,756
AAA 4,199 Ser. 11, Class A28, 5/25/33 ............................................................. 3,842,303
Drexel Burnham Lambert, Inc.,
AAA 90 Ser. K, Class 1, 9/23/17 ................................................................ 81,411
AAA 1,005 Ser. V, Class 1, 9/01/18 ................................................................ 934,973
Federal Home Loan Mortgage Corp.,
1,061 Ser. T-8, Class A10, 11/15/28 ........................................................... 817,273
634 Ser. 1418, Class M, 11/15/22 ............................................................ 526,202
3,077 Ser. 1571, Class G, 8/15/23 ............................................................. 2,480,152
7,271 Ser. 1691, Class B, 3/15/24 ............................................................. 6,606,564
955 Ser. 1739, Class B, 2/15/24 ............................................................. 898,608
288 Ser. 1750, Class PC, 3/15/24 ............................................................ 286,716
532 Ser. 1857, Class PB, 12/15/08 ........................................................... 526,874
1,506 Ser. 1896, Class PA, 11/15/23 ........................................................... 1,483,420
Federal National Mortgage Assoc.,
1,428 Ser. G93-2, Class KB, 1/25/23 ........................................................... 1,298,233
1,468 Ser. W4, Class PO, 2/25/29 .............................................................. 1,212,529
120 Ser. 5, Class PV, 11/25/23 .............................................................. 119,839
166 Ser. 7, Class J, 2/25/21 ................................................................ 150,037
6,137 Ser. 13, Class PR, 3/25/32 .............................................................. 5,705,686
3,148 Ser. 26, Class L, 3/25/23 ............................................................... 3,092,713
2,589 Ser. 82, Class PO, 12/25/32 ............................................................. 2,466,072
1,609 Ser. 273, Class 1, 7/01/26 .............................................................. 1,509,594
734 Ser. 279, Class 1, 7/01/26 .............................................................. 657,623
24,949 Ser. 328, Class1, 11/01/32 .............................................................. 22,110,564
See Notes to Financial Statements.
28
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL ONLY MORTGAGE-BACKED SECURITIES--(CONT'D)
AAA $ 467 First Union Residential Securitization Trust, Ser. A, Class 1-APO, 3/25/15 ................ $ 430,516
AAA 11,786 Fund America Investors Corp., Ser. C, Class B, 4/29/30 .................................... 2,741,364
AAA 150 Housing Security Inc., Ser. D, Class D8, 6/25/23 .......................................... 139,750
AAA 110 Structured Mortgage Asset Residential Trust, Ser. 3C, Class CX, 4/25/24 ................... 99,670
------------
Total Principal Only Mortgage-Backed Securities ........................................... 63,322,056
------------
COMMERCIAL MORTGAGE-BACKED SECURITIES--2.4%
AAA 10,250 New York City Mortgage Loan Trust, Ser. 1996, Class A2, 6.75%, 6/25/11(3) ................. 11,667,135
------------
U.S. GOVERNMENT AND AGENCY SECURITIES--24.4%
13,607 Overseas Private Investment Corp., 4.30% - 7.35%, 5/29/12 ................................. 14,781,903
Small Business Administration,
1,763 Ser. 20C-1, 7.15%, 3/01/17 .............................................................. 1,974,757
2,843 Ser. 20E-1, 7.60%, 5/01/16 .............................................................. 3,226,310
3,518 Ser. 20F-1, 7.55%, 6/01/16 .............................................................. 3,967,576
2,223 Ser. 20G-1, 7.70%, 7/01/16 .............................................................. 2,518,714
2,884 Ser. 20H-1, 7.25%, 8/01/16 .............................................................. 3,231,871
4,480 Ser. 20K-1, 6.95%, 11/01/16 ............................................................. 4,987,438
2,105 Small Business Investment Companies, Ser. P10A-1, 6.12%, 2/01/08 .......................... 2,227,169
U.S. Treasury Bonds,
155,700(2) Zero Coupon, 11/15/24 ................................................................... 50,674,901
8,325(2) 8.00%, 11/15/21 ......................................................................... 11,678,085
U.S. Treasury Notes,
3,000(2) 3.875%, 2/15/13 ......................................................................... 3,003,984
14,000(2) 4.00%, 11/15/12 ......................................................................... 14,178,822
------------
Total U.S. Government and Agency Securities ............................................... 116,451,530
------------
COLLATERALIZED MORTGAGE OBLIGATION RESIDUALS--0.1%
45 FBC Mortgage Securities Trust 16, CMO, Ser. A1, 7/01/17(4) ................................ 399,200
------------
Total Long-Term Investments (cost $578,980,223) ........................................... 581,865,355
------------
SHORT-TERM INVESTMENT--2.6%
DISCOUNT NOTE--2.6%
12,700 Federal Home Loan Bank, 1.25%, 5/01/03 (cost $12,700,000) ................................. 12,700,000
------------
Total investments before investment sold short and outstanding option written
(cost $591,680,223) ....................................................................... 594,565,355
------------
INVESTMENT SOLD SHORT--(3.5)%
15,750 U.S. Treasury Notes, 4.375%, 8/15/12 (proceeds $16,213,984) ............................... (16,444,606)
------------
NOTIONAL
AMOUNT
(000)
--------
OUTSTANDING OPTION WRITTEN--(0.2)%
CALL OPTION--(0.2)%
$11,000 Interest Rate Swap, 5.50%, over 3 month LIBOR, expires 5/06/03 (premium received $207,753) (1,187,046)
------------
Total investments, net of investment sold short and outstanding option written--120.8% .... 576,933,703
Other liabilities in excess of other assets--(20.8)% ...................................... (99,475,468)
------------
NET ASSETS--100% .......................................................................... $477,458,235
============
----------
(1) Using the higher of S&P's, Moody's or Fitch's rating.
(2) Entire or partial principal amount pledged as collateral for reverse
repurchase agreements or financial futures contracts.
(3) Security is not registered under the Securities Act of 1933. These
securities may be resold in transactions in accordance with Rule 144A under
that Act, to qualified institutional buyers. As of April 30, 2003, the Trust
held 3.4% of its net assets, with a current market value of $16,201,097, in
securities restricted as to resale.
(4) Illiquid security representing 0.1% of net assets.
See Notes to Financial Statements.
29
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 2003
------------------------------
BlackRock Strategic Bond Trust
------------------------------
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--144.0%
CORPORATE BONDS--142.0%
AEROSPACE & DEFENSE--4.4%
B- $ 2,000(2) BE Aerospace, Inc., 9.50%, 11/01/08 ....................................................... $ 1,320,000
BBB 1,000 Lockheed Martin Corp., 8.20%, 12/01/09 .................................................... 1,225,369
BBB- 650(2) Raytheon Co., 6.55%, 3/15/10 .............................................................. 719,036
A+ 1,000(2) United Technologies Corp., 6.35%, 3/01/11 ................................................. 1,130,995
------------
4,395,400
------------
AUTOMOTIVE--15.8%
BB+ 2,000(2) Autonation, Inc., 9.00%, 8/01/08 .......................................................... 2,170,000
B1 2,000(2) Collins & Aikman Products Co., 10.75%, 12/31/11 ........................................... 2,090,000
A3 1,000(2) Daimler Chrysler NA Holding Corp., 7.30%, 1/15/12 ......................................... 1,141,141
BB 2,000 Dana Corp., 10.125%, 3/15/10 .............................................................. 2,220,000
B3 2,000(2) Delco Remy Intl., Inc., 11.00%, 5/01/09 ................................................... 1,060,000
B 2,000 Dura Operating Corp., Ser. D, 9.00%, 5/01/09 .............................................. 1,840,000
B+ 2,000(2) Sonic Automotive, Inc., Ser. D, 11.00%, 8/01/08 ........................................... 2,130,000
B+ 1,000 TRW Automotive, Inc., 9.375%, 2/15/13(3) .................................................. 1,090,000
B 2,000 United Auto Group Inc., 9.625%, 3/15/12 ................................................... 2,095,000
------------
15,836,141
------------
BASIC MATERIAL--2.1%
BB- 2,000(2) Century Aluminum Co., 11.75%, 4/15/08 ..................................................... 2,055,000
------------
BUILDING & DEVELOPMENT--5.3%
BB 1,000(2) Beazer Homes USA, Inc., 8.625%, 5/15/11 ................................................... 1,080,000
B- 2,000 Great Lakes Dredge & Dock Corp., 11.25%, 8/15/08 .......................................... 2,120,000
Ba1 2,000 Schuler Homes, Inc., 9.375%, 7/15/09 ...................................................... 2,095,000
------------
5,295,000
------------
CHEMICAL--5.4%
BB 2,000 Lyondell Chemical Co., Ser. B, 9.875%, 5/01/07 ............................................ 2,050,000
B 1,796 Noveon, Inc., Ser. B, 11.00%, 2/28/11 ..................................................... 2,011,520
B- 1,250 Resolution Performance Products, Inc., 13.50%, 11/15/10 ................................... 1,337,500
------------
5,399,020
------------
CONGLOMERATES--4.5%
A 325 Honeywell Intl., Inc., 7.50%, 3/01/10 ..................................................... 389,409
B 1,500 MDP Acquisitions PLC, 9.625%, 10/01/12 (Ireland)(3) ....................................... 1,620,000
B 2,000 Penhall Intl., Inc., 12.00%, 8/01/06 ...................................................... 1,400,000
BBB- 1,132(2) Tyco Intl. Group SA, 6.375%, 2/15/06 (Luxembourg) ......................................... 1,126,340
------------
4,535,749
------------
CONSUMER PRODUCTS--7.8%
B- 2,000 Friendly Ice Cream Corp., 10.50%, 12/01/07 ................................................ 2,010,000
BBB+ 1,000(2) General Mills, Inc., 5.125%, 2/15/07 ...................................................... 1,069,354
BBB 575(2) Kellogg Co., Ser. B, 6.00%, 4/01/06 ....................................................... 628,318
BB- 2,000 Levi Strauss & Co., 12.25%, 12/15/12(3) ................................................... 1,680,000
B- 500 Pantry, Inc., The, 10.25%, 10/15/07 ....................................................... 497,500
B+ 2,000 Sbarro, Inc., 11.00%, 9/15/09 ............................................................. 1,940,000
------------
7,825,172
------------
CONTAINERS & GLASS--3.0%
B 1,000 Crown European Holdings SA, 10.875%, 3/01/13 (France)(3) .................................. 1,050,000
B+ 1,800 Plastipak Holdings, Inc., 10.75%, 9/01/11 ................................................. 1,944,000
------------
2,994,000
------------
ECOLOGICAL SERVICES & EQUIPMENT--3.8%
B+ 2,000(2) Allied Waste NA, Inc., Ser. B, 10.00%, 8/01/09 ............................................ 2,135,000
B 1,500 Casella Waste Systems, Inc., 9.75%, 2/01/13(3) ............................................ 1,620,000
------------
3,755,000
------------
ELECTRONICS--4.4%
B+ 2,000 FIMEP SA, 10.50%, 2/15/13 (France)(3) ..................................................... 2,190,000
Ba2 2,000(2) Flextronics Intl. Ltd., 9.875%, 7/01/10 (Singapore) ....................................... 2,220,000
------------
4,410,000
------------
See Notes to Financial Statements.
30
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
ENERGY--18.9%
BBB+ $ 1,000(2) Anadarko Petroleum Corp., 5.375%, 3/01/07 ................................................. $ 1,075,424
B+ 2,000(2) Calpine Corp., 10.50%, 5/15/06 ............................................................ 1,690,000
BB 2,000(2) Compagnie Generale De Geophysique SA, 10.625%, 11/15/07 (France) .......................... 2,000,000
A- 1,000(2) Conoco, Inc., 6.95%, 4/15/29 .............................................................. 1,163,751
B 2,000(2) Dresser, Inc., 9.375%, 4/15/11 ............................................................ 2,080,000
BBB 250(2) DTE Energy Co., 7.05%, 6/01/11 ............................................................ 288,084
El Paso Corp.,
B 165 7.75%, 1/15/32 .......................................................................... 127,050
B 85 7.80%, 8/01/31 .......................................................................... 65,450
BB- 1,000 GulfTerra Energy Partners L.P., Ser. B, 8.50%, 6/01/11 .................................... 1,070,000
BBB+ 250(2) Exelon Corp., 6.75%, 5/01/11 .............................................................. 283,981
Baa2 325(2) FirstEnergy Corp., Ser. C, 7.375%, 11/15/31 ............................................... 355,829
B+ 2,000 Hanover Equipment Trust, Ser. A, 8.50%, 9/01/08 ........................................... 2,040,000
BB- 1,000 Leviathan Gas Pipeline Partners LP, Ser. B, 10.375%, 6/01/09 .............................. 1,082,500
BBB 250 Occidental Petroleum Corp., 6.75%, 1/15/12 ................................................ 285,566
BBB 1,000(2) Progress Energy, Inc., 6.75%, 3/01/06 ..................................................... 1,096,117
B 2,000 Swift Energy Co., 10.25%, 8/01/09 ......................................................... 2,100,000
BB- 2,000 Western Gas Resources, Inc., 10.00%, 6/15/09 .............................................. 2,180,000
------------
18,983,752
------------
FINANCE & BANKING--16.9%
A+ 500(2) Allstate Corp., 7.875%, 5/01/05 ........................................................... 557,728
Aa3 1,000(2) Bank One Corp., 6.50%, 2/01/06 ............................................................ 1,109,280
Aa3 650(2) Barclays Bank PLC, 8.55%, 9/29/49 (United Kingdom)3 ....................................... 809,900
A 325(2) Bear Stearns Co., Inc., 6.50%, 5/01/06 .................................................... 360,906
B+ 2,000(2) Bluewater Finance Ltd., 10.25%, 2/15/12 (United Kingdom) .................................. 2,007,000
AA+ 3,000(2) Citigroup, Inc., 5.75%, 5/10/06 ........................................................... 3,276,540
Ford Motor Credit Co.,
A3 750(2) 5.80%, 1/12/09 .......................................................................... 709,781
A3 2,000(2) 6.875%, 2/01/06 ......................................................................... 2,075,957
General Motors Acceptance Corp.,
A2 250(2) 6.75%, 1/15/06 .......................................................................... 261,780
A2 900(2) 6.875%, 9/15/11 ......................................................................... 909,703
A2 300(2) 8.00%, 11/01/31 ......................................................................... 307,484
AAA 850(2) KFW Intl. Finance, Inc., 5.25%, 6/28/06 ................................................... 931,780
Ba1 1,000 Labranche & Co., Inc., 12.00%, 3/02/07 .................................................... 1,095,000
A+ 1,000(2) Lehman Brothers Holdings, Inc., 6.25%, 5/15/06 ............................................ 1,095,682
A 325(2) MetLife, Inc., 6.125%, 12/01/11 ........................................................... 362,426
BBB+ 1,000 Sears Roebuck Acceptance Corp., 6.75%, 8/15/11 ............................................ 1,021,929
------------
16,892,876
------------
FOREST PRODUCTS--3.1%
Ba2 2,000(2) Caraustar Industries, Inc., 9.875%, 4/01/11 ............................................... 2,060,000
BBB 1,000(2) Weyerhaeuser Co., 6.125%, 3/15/07 ......................................................... 1,090,593
------------
3,150,593
------------
HEALTH CARE--6.7%
D 2,000 HealthSouth Corp., 6.875%, 6/15/05 ........................................................ 1,300,000
B- 2,000 Insight Health Services Corp., Ser. B, 9.875%, 11/01/11 ................................... 1,860,000
B+ 2,000 Matria Healthcare, Inc., Ser. B, 11.00%, 5/01/08 .......................................... 1,960,000
B- 1,500 United Surgical Partners Intl., Inc., 10.00%, 12/15/11 .................................... 1,590,000
------------
6,710,000
------------
HOTELS & CASINO--2.9%
BB+ 2,000 Park Place Entertainment Corp., 7.875%, 3/15/10 ........................................... 2,065,000
B 1,000 Resorts Intl. Hotel & Casino, Inc., 11.50%, 3/15/09 ....................................... 870,000
------------
2,935,000
------------
INDUSTRIAL EQUIPMENT--4.0%
BB- 2,000 Mail Well I Corporation, 9.625%, 3/15/12 .................................................. 2,060,000
B+ 2,000(2) United Rentals, Inc., Ser. B, 9.25%, 1/15/09 .............................................. 1,910,000
------------
3,970,000
------------
See Notes to Financial Statements.
31
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------------------------------------
LEISURE--1.5%
BB+ $ 1,500 Royal Caribbean Cruises Ltd., 8.75%, 2/02/11 (Liberia) .................................... $ 1,522,500
------------
MEDIA--13.4%
NR 2,000(2) Adelphia Communications Corporation, Ser. B, 10.50%, 7/15/04(4) ........................... 990,000
B1 1,500(2) Alliance Atlantis Communications, Inc., 13.00%, 12/15/09 (Canada) ......................... 1,710,000
BBB+ 1,000(2) AOL Time Warner, Inc., 7.70%, 5/01/32 ..................................................... 1,112,233
CCC- 2,000 Charter Communications Holdings LLC, 11.125%, 1/15/11 ..................................... 1,330,000
BBB 1,000 Comcast Cable Communications, Inc., 6.875%, 6/15/09 ....................................... 1,105,000
BB- 2,000 EchoStar DBS Corp., 10.375%, 10/01/07 ..................................................... 2,240,000
B- 2,000 Nextmedia Operating, Inc., 10.75%, 7/01/11 ................................................ 2,215,000
A- 1,000(2) Viacom, Inc., 6.625%, 5/15/11 ............................................................. 1,145,111
B- 1,500 WRC Media Corp., 12.75%, 11/15/09 ......................................................... 1,537,500
------------
13,384,844
------------
REAL ESTATE--2.5%
A- 500(2) ERP Operating LP, 6.95%, 3/02/11 .......................................................... 557,298
Felcore Lodging LP,
Ba3 1,000 8.50%, 6/01/11 .......................................................................... 967,500
Ba3 1,000 9.50%, 9/15/08 .......................................................................... 997,500
------------
2,522,298
------------
TECHNOLOGY--2.1%
BB+ 2,000 Unisys Corp., 8.125%, 6/01/06 ............................................................. 2,145,000
------------
TELECOMMUNICATION--8.2%
BBB+ 900(2) AT&T Corp., 6.50%, 11/15/06 ............................................................... 964,676
B3 1,000 Crown Castle Int'l. Corp., 10.75%, 8/01/11 ................................................ 1,035,000
Ba3 2,000 PanAmSat Corp., 8.50%, 2/01/12 ............................................................ 2,160,000
CCC+ 450 Qwest Capital Funding, Inc., 5.875%, 8/03/04 .............................................. 418,500
Aa3 2,000(2) Verizon New England, Inc., 6.50%, 9/15/11 ................................................. 2,261,075
A 1,000(2) Vodafone Group PLC, 7.75%, 2/15/10 (United Kingdom) ....................................... 1,210,540
Worldcom, Inc.,
NR 400 7.375%, 1/15/06(3,4) .................................................................... 112,000
NR 200 8.00%, 5/15/06(4) ....................................................................... 56,000
------------
8,217,791
------------
TRANSPORTATION--5.3%
BBB+ 500 Canadian National Railway Co., 6.90%, 7/15/28 (Canada) .................................... 576,850
Baa1 400 Norfolk Southern Corp., 7.05%, 5/01/37 .................................................... 461,269
B 2,000 Pacer Intl., Inc., Ser. B, 11.75%, 6/01/07 ................................................ 2,120,000
B 2,000 RailAmerica Transp. Corp., 12.875%, 8/15/10 ............................................... 2,180,000
------------
5,338,119
------------
Total Corporate Bonds ..................................................................... 142,273,255
------------
FOREIGN GOVENMENT BONDS--1.1%
Baa2 1,000 United Mexican States, 8.125%, 12/30/19 (Mexico) .......................................... 1,130,000
------------
SUPRANATIONAL--0.9%
AAA 850(2) European Investment Bank, 4.875%, 9/06/06 ................................................. 919,861
------------
TOTAL INVESTMENTS--144.0% (COST $143,798,660) ............................................. 144,323,116
LIABILITIES IN EXCESS OF OTHER ASSETS--(44.0)% ............................................ (44,098,269)
------------
NET ASSETS--100% .......................................................................... $100,224,847
------------
----------
(1) Using the higher of S&P's, Moody's or Fitch's rating.
(2) Entire or partial principal amount pledged as collateral for reverse
repurchase agreements or financial futures contracts.
(3) Security is not registered under the Securities Act of 1933. These
securities may be resold in transactions in accordance with Rule 144A under
that Act, to qualified institutional buyers. As of April 30, 2003, the Trust
held 10.0% of its net assets, with a current market value of $10,071,100, in
securities restricted as to resale.
(4) Issuer is technically in default.
See Notes to Financial Statements.
32
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2003
--------------------------------------------------------------------------------
Broad Investment
Grade 2009 Core
Assets Term Trust(1) Bond Trust
---------------- -------------
Investments at value(2) .............................................. $ 67,486,179 $ 604,469,491
Cash ................................................................. 75,072 267,764
Receivable from investments sold ..................................... 142,795 33,363,149
Variation margin receivable .......................................... 39,188 499,366
Collateral deposited with brokers .................................... -- --
Receivable for closed forward foreign currency contracts, net ........ -- 102,514
Interest receivable .................................................. 825,961 9,556,326
Unrealized appreciation on interest rate swaps ....................... -- --
Other assets ......................................................... 10,547 20,603
------------- -------------
68,579,742 648,279,213
------------- -------------
Liabilities
Reverse repurchase agreements ........................................ 18,166,250 52,728,594
Payable to custodian ................................................. -- --
Payable for investments purchased .................................... -- 181,314,682
Loan payable ......................................................... -- --
Investments sold short at value(3) ................................... -- --
Outstanding options written at value(4) .............................. -- --
Interest payable ..................................................... 4,348 100
Interest rate floors at value ........................................ -- --
Payable for open forward foreign currency contracts .................. -- 232,302
Unrealized depreciation on interest rate swaps and purchase commitment -- --
Variation margin payable ............................................. -- --
Investment advisory fee payable ...................................... 22,668 216,107
Administration fee payable ........................................... 6,182 --
Deferred Directors/Trustees fees ..................................... 9,500 13,524
Other accrued expenses ............................................... 173,221 75,789
------------- -------------
18,382,169 234,581,098
------------- -------------
Net Assets ........................................................... $ 50,197,573 $ 413,698,115
============= =============
Composition of Net Assets:
Par value .......................................................... $ 29,571 $ 27,019
Paid-in capital in excess of par ................................... 40,240,039 386,206,969
Cost of shares held in treasury(5) ................................. -- --
Undistributed (distributions in excess of) net investment income ... 7,769,200 (3,746,782)
Accumulated net realized gain (loss) ............................... 1,208,563 13,661,944
Net unrealized appreciation (depreciation) ......................... 950,200 17,073,033
Accumulated net realized and unrealized foreign currency loss ...... -- 475,932
------------- -------------
Net assets, April 30, 2003 ........................................... $ 50,197,573 $ 413,698,115
============= =============
Net asset value per common share(6) .................................. $16.98 $15.31
====== ======
(1)Consolidated Statement of Assets and Liabilities
(2)Investments at cost $ 66,489,325 $ 586,812,069
(3)Proceeds received -- --
(4)Premium received -- --
(5)Shares held in treasury -- --
(6)Common shares issued and outstanding 2,957,093 27,018,774
See Notes to Financial Statements.
33
--------------------------------------------------------------------------------
INCOME
HIGH OPPORTUNITY INCOME STRATEGIC
YIELD TRUST TRUST TRUST BOND TRUST
------------ ------------ ------------ ------------
$ 58,801,618 $599,994,605 $594,565,355 $144,323,116
-- 103,912 349,511 58,472
-- 2,974,659 1,278,602 --
-- 1,445,063 -- --
-- 1,180,000 16,464,688 --
-- -- -- --
2,420,967 7,652,624 5,454,311 3,834,357
-- 1,146,903 -- --
51,781 76,914 85,796 2,933
------------ ------------ ------------ ------------
61,274,366 614,574,680 618,198,263 148,218,878
------------ ------------ ------------ ------------
-- 187,816,125 110,819,750 47,747,000
130,057 -- -- --
-- 2,946,894 -- --
19,250,000 -- -- --
-- -- 16,444,606 --
-- 323,740 1,187,046 --
28,690 536,147 1,523,155 --
-- -- 1,626,107 --
-- -- -- --
-- 11,220 8,474,732 --
-- 38 103,380 --
51,575 204,004 253,933 65,021
4,912 34,001 78,133 --
14,185 69,232 84,681 2,933
71,363 104,960 144,505 179,077
------------ ------------ ------------ ------------
19,550,782 192,046,361 140,740,028 47,994,031
------------ ------------ ------------ ------------
$ 41,723,584 $422,528,319 $477,458,235 $100,224,847
------------ ------------ ------------ ------------
$ 6,367 $ 344,497 $ 632,471 $ 7,026
93,758,505 406,532,068 563,097,029 100,127,403
-- (17,377,850) -- --
(70,114) 5,340,133 8,842,687 1,377,247
(32,427,076) 9,827,500 (86,680,931) (1,811,285)
(19,544,098) 18,057,969 (8,433,021) 524,456
-- (195,998) -- --
------------ ------------ ------------ ------------
$ 41,723,584 $422,528,319 $477,458,235 $100,224,847
------------ ------------ ------------ ------------
$6.55 $12.27 $7.55 $14.27
===== ====== ===== ======
$ 78,345,716 $580,342,044 $591,680,223 $143,798,660
-- -- 16,810,234 --
-- 56,660 207,753 --
-- 1,757,400 -- --
6,367,294 34,449,693 63,247,058 7,025,735
34
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 2003
--------------------------------------------------------------------------------
BROAD INVESTMENT
GRADE 2009 CORE
INVESTMENT INCOME TERM TRUST(1) BOND TRUST
---------------- ------------
Interest income .............................................. $ 2,267,041 $ 14,561,365
------------ ------------
EXPENSES
Investment advisory .......................................... 138,035 1,519,509
Administration ............................................... 37,646 --
Transfer agent ............................................... 5,380 8,305
Custodian .................................................... 33,703 71,335
Reports to shareholders ...................................... 28,287 47,965
Directors/Trustees fees ...................................... 7,109 23,542
Registration ................................................. 1,175 15,620
Independent accountants ...................................... 24,697 21,502
Interest expense ............................................. 131,598 180,954
Excise tax ................................................... 219,172 --
Legal ........................................................ 9,663 13,885
Miscellaneous ................................................ 11,751 54,133
------------ ------------
Total expenses ............................................. 648,216 1,956,750
Less fees waived by Advisor ................................ -- --
Less fees paid indirectly .................................. -- (4,390)
------------ ------------
Net expenses ............................................... 648,216 1,952,360
------------ ------------
Net investment income .......................................... 1,618,825 12,609,005
------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on:
Investments ................................................ (127,696) 8,567,737
Foreign currency ........................................... -- 573,241
Futures .................................................... 322,209 5,078,583
Interest rate caps ......................................... -- --
Interest rate swaps ........................................ -- --
Options written ............................................ -- --
Short sales ................................................ -- --
------------ ------------
194,513 14,219,561
------------ ------------
Net change in unrealized appreciation/depreciation on:
Investments ................................................ (1,409,314) 15,838,819
Foreign currency ........................................... -- (49,074)
Futures .................................................... (119,548) (81,596)
Interest rate caps ......................................... -- --
Interest rate floors ....................................... -- --
Interest rate swaps ........................................ -- --
Options written ............................................ -- 134,580
Short sales ................................................ -- --
------------ ------------
(1,528,862) 15,842,729
------------ ------------
Net gain (loss) on investments ................................. (1,334,349) 30,062,290
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $ 284,476 $ 42,671,295
============ ============
----------
(1) Consolidated Statement of Operations.
See Notes to Financial Statements.
35
INCOME
HIGH OPPORTUNITY INCOME STRATEGIC
YIELD TRUST TRUST TRUST BOND TRUST
------------ ------------ ------------ ------------
$ 4,262,804 $ 16,474,347 $ 21,284,662 $ 6,268,135
------------ ------------ ------------ ------------
308,225 1,218,930 1,560,470 515,550
29,355 203,155 480,145 --
10,909 17,035 43,141 7,831
15,762 102,040 86,904 25,055
29,753 67,383 61,985 14,828
5,950 26,633 32,351 6,229
11,157 15,620 24,049 11,157
17,209 54,465 54,103 20,426
186,714 849,627 857,092 366,074
-- -- -- --
12,397 44,902 21,660 6,089
10,916 76,704 87,481 13,577
------------ ------------ ------------ ------------
638,347 2,676,494 3,309,381 986,816
-- -- -- (137,480)
(1,382) (2,863) (6,094) (6,112)
------------ ------------ ------------ ------------
636,965 2,673,631 3,303,287 843,224
------------ ------------ ------------ ------------
3,625,839 13,800,716 17,981,375 5,424,911
------------ ------------ ------------ ------------
(2,083,995) (1,268,598) 920,149 (1,494,577)
-- (195,998) -- --
-- 10,871,248 (65,475) --
-- -- (1,317) --
-- 5,570 (882,431) --
-- 64,050 234,850 --
-- (27,844) (162,481) --
------------ ------------ ------------ ------------
(2,083,995) 9,448,428 43,295 (1,494,577)
------------ ------------ ------------ ------------
4,784,614 16,220,556 (8,646,770) 12,621,690
-- 168,091 -- --
-- (2,262,090) (1,162,947) --
-- -- 354,083 --
-- -- 381,599 --
-- (969,381) (439,203) --
-- (157,822) (578,680) --
-- 599,240 (230,622) --
------------ ------------ ------------ ------------
4,784,614 13,598,594 (10,322,540) 12,621,690
------------ ------------ ------------ ------------
2,700,619 23,047,022 (10,279,245) 11,127,113
------------ ------------ ------------ ------------
$ 6,326,458 $ 36,847,738 $ 7,702,130 $ 16,552,024
============ ============ ============ ============
36
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 2003
--------------------------------------------------------------------------------
RECONCILIATION OF NET INCREASE (DECREASE) BROAD INVESTMENT
IN NET ASSETS RESULTING FROM OPERATIONS TO GRADE 2009 CORE
NET CASH FLOWS PROVIDED BY (USED FOR) TERM TRUST(1) BOND TRUST
OPERATING ACTIVITIES ---------------- ------------
Net increase in net assets resulting from operations ................ $ 284,476 $ 42,671,295
------------ ------------
Decrease (increase) in investments .................................. 5,505,802 (5,899,816)
Net realized loss (gain) ............................................ (194,513) (14,219,561)
Decrease (increase) in unrealized appreciation/depreciation ......... 1,528,862 (15,842,729)
Decrease in interest rate caps ...................................... -- --
Increase in interest rate floors .................................... -- --
Decrease in interest rate swaps and purchase commitments ............ -- --
Decrease (increase) in receivable for investments sold .............. (142,795) (2,055,612)
Increase in receivable for forward foreign currency contracts ....... -- (102,514)
Decrease (increase) in variation margin receivable .................. (15,626) (89,091)
Decrease (increase) in collateral deposited with brokers ............ -- --
Decrease (increase) in interest receivable .......................... 39,201 (1,672,899)
Decrease (increase) in other assets ................................. (1,384) (8,094)
Decrease in payable for investments purchased ....................... -- (3,196,129)
Increase (decrease) in payable for forward foreign currency contracts -- 103,042
Decrease in variation margin payable ................................ -- --
Increase (decrease) in interest payable ............................. (12,975) (48)
Increase (decrease) in outstanding options written .................. -- (334,219)
Increase (decrease) in investments sold short ....................... -- --
Increase (decrease) in investment advisory fee payable .............. (1,361) (4,694)
Decrease in administration fee payable .............................. (371) --
Increase in deferred Directors/Trustees fees ........................ 1,823 4,428
Increase (decrease) in other accrued expenses ....................... (158,318) (35,753)
------------ ------------
Total adjustments ................................................. 6,548,345 (43,353,689)
------------ ------------
Net cash flows provided by (used for) operating activities .......... $ 6,832,821 $ (682,394)
============ ============
INCREASE (DECREASE) IN CASH AND FOREIGN CURRENCY
Net cash flows provided by (used for) operating activities .......... $ 6,832,821 $ (682,394)
------------ ------------
Cash flows provided by (used for) financing activities:
Increase (decrease) in reverse repurchase agreements .............. (5,502,937) 17,326,094
Cash dividends paid ............................................... (1,330,536) (16,211,242)
------------ ------------
Net cash flows provided by (used for) financing activities .......... (6,833,473) 1,114,852
------------ ------------
Effect of changes in exchange rate .................................. -- --
------------ ------------
Net increase (decrease) in cash ................................... (652) 432,458
Cash at beginning of period ....................................... 75,724 (164,694)
------------ ------------
Cash at end of period ............................................. $ 75,072 $ 267,764
============ ============
----------
(1) Consolidated Statement of Cash Flows.
See Notes to Financial Statements.
37
--------------------------------------------------------------------------------
INCOME
HIGH OPPORTUNITY INCOME STRATEGIC
YIELD TRUST TRUST TRUST BOND TRUST
------------- ------------ ------------ ------------
$ 6,326,458 $ 36,847,738 $ 7,702,130 $ 16,552,024
------------ ------------ ------------ ------------
175,007 (18,213,420) 83,353,851 (3,797,110)
2,083,995 (9,448,428) (43,295) 1,494,577
(4,784,614) (13,598,594) 10,322,540 (12,621,690)
-- -- 20 --
-- -- (560,474) --
-- 980,601 449,403 --
-- 98,916,946 18,402,695 --
-- -- -- --
-- (756,221) 296,214 --
-- (1,180,000) 769,687 --
(108,956) (1,857,398) 1,368,150 (149,088)
488 16,537 (5,500) (476)
-- (98,621,183) (1,460,612) --
-- -- -- --
-- 38 103,380 --
(11,874) 256,256 (763,696) (35,552)
-- 90,022 330,080 --
-- (73,551,740) 16,444,606 --
(2,379) (2,181) (25,901) 1,787
(226) (363) (7,476) --
1,593 8,037 11,006 1,182
8,101 (190,923) (103,353) 17,978
------------ ------------ ------------ ------------
(2,638,865) (117,152,014) 128,881,325 (15,088,392)
------------ ------------ ------------ ------------
$ 3,687,593 $(80,304,276) $136,583,455 $ 1,463,632
============ ============ ============ ============
$ 3,687,593 $(80,304,276) $136,583,455 $ 1,463,632
------------ ------------ ------------ ------------
-- 102,112,338 (94,972,514) 3,523,625
(3,555,578) (21,799,162) (41,629,035) (4,921,483)
------------ ------------ ------------ ------------
(3,555,578) 80,313,176 (136,601,549) 1,397,858
------------ ------------ ------------ ------------
-- 3,681 -- --
------------ ------------ ------------ ------------
132,015 12,581 (18,094) 65,774
(262,072) 91,331 367,605 (7,302)
------------ ------------ ------------ ------------
$ (130,057) $ 103,912 $ 349,511 $ 58,472
============ ============ ============ ============
38
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED) AND FOR THE PERIOD(1) ENDED
OCTOBER 31, 2002
--------------------------------------------------------------------------------
BROAD INVESTMENT GRADE
2009 TERM TRUST(2) CORE BOND TRUST
----------------------------- ------------------------------
2003 2002 2003 2002
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income ............................ $ 1,618,825 $ 5,953,008 $ 12,609,005 $ 26,838,280
Net realized gain (loss) ......................... 194,513 2,180,535 14,219,561 78,567
Net change in unrealized appreciation/depreciation (1,528,862) (2,064,590) 15,842,729 1,070,052
------------- ------------- ------------- -------------
Net increase in net assets resulting
from operations .................................. 284,476 6,068,953 42,671,295 27,986,899
------------- ------------- ------------- -------------
DIVIDENDS AND DISTRIBUTIONS:
From net investment income ....................... (1,330,536) (2,291,473) (16,211,242) (26,838,280)
From net realized gains .......................... -- -- -- --
Tax return of capital distributions .............. -- -- -- --
In excess of net investment income ............... -- -- -- (179,545)
------------- ------------- ------------- -------------
Total dividends and distributions .............. (1,330,536) (2,291,473) (16,211,242) (27,017,825)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the issuance of common shares .. -- -- -- 357,484,731
Net proceeds from the underwriters'
overallotment option exercised ................. -- -- -- 28,650,000
Trust shares issued in conjunction with
reinvestment of dividends ...................... -- -- -- 134,257
Cost of Trust shares reacquired .................. -- -- -- --
------------- ------------- ------------- -------------
Net proceeds from capital share transactions ... -- -- -- 386,268,988
------------- ------------- ------------- -------------
Total increase (decrease) .................... (1,046,060) 3,777,480 26,460,053 387,238,062
------------- ------------- ------------- -------------
NET ASSETS
Beginning of period ................................ 51,243,633 47,466,153 387,238,062 --
------------- ------------- ------------- -------------
End of period ...................................... $ 50,197,573 $ 51,243,633 $ 413,698,115 $ 387,238,062
============= ============= ============= =============
End of period undistributed (distributions in
excess of) net investment income ................. $ 7,769,200 $ 7,480,911 $ (3,746,782) $ (144,545)
----------
(1) Commencement of investment operations for Core Bond was November 30, 2001.
This information includes the initial investment by BlackRock Funding, Inc.
The other Trusts' statements are for a full year.
(2) Consolidated Statement of Changes in Net Assets.
See Notes to Financial Statements.
39
HIGH YIELD TRUST INCOME OPPORTUNITY TRUST INCOME TRUST
--------------------------------- --------------------------------- ---------------------------------
2003 2002 2003 2002 2003 2002
------------ ------------ ------------ ------------ ------------ ------------
$ 3,625,839 $ 7,613,863 $ 13,800,716 $ 39,603,548 $ 17,981,375 $ 62,183,766
(2,083,995) (8,468,860) 9,448,428 (6,747,774) 43,295 28,398,002
4,784,614 2,224,397 13,598,594 5,135,503 (10,322,540) (50,286,165)
------------ ------------ ------------ ------------ ------------ ------------
6,326,458 1,369,400 36,847,738 37,991,277 7,702,130 40,295,603
------------ ------------ ------------ ------------ ------------ ------------
(3,625,839) (7,613,863) (13,434,708) (25,885,698) (44,475,823) (35,876,922)
-- -- (8,364,454) -- -- --
-- (584,069) -- -- -- --
(70,114) -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
(3,695,953) (8,197,932) (21,799,162) (25,885,698) (44,475,823) (35,876,922)
------------ ------------ ------------ ------------ ------------ ------------
-- -- -- -- -- --
-- -- -- -- -- --
140,375 261,647 -- -- 2,846,788 202,011
-- -- -- (2,381,796) -- --
------------ ------------ ------------ ------------ ------------ ------------
140,375 261,647 -- (2,381,796) 2,846,788 202,011
------------ ------------ ------------ ------------ ------------ ------------
2,770,880 (6,566,885) 15,048,576 9,723,783 (33,926,905) 4,620,692
------------ ------------ ------------ ------------ ------------ ------------
38,952,704 45,519,589 407,479,743 397,755,960 511,385,140 506,764,448
------------ ------------ ------------ ------------ ------------ ------------
$ 41,723,584 $ 38,952,704 $422,528,319 $407,479,743 $477,458,235 $511,385,140
============ ============ ============ ============ ============ ============
$ (70,114) $ -- $ 5,340,133 $ 4,974,125 $ 8,842,687 $ 35,337,135
40
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED) AND FOR THE PERIOD(1) ENDED
OCTOBER 31, 2002
--------------------------------------------------------------------------------
STRATEGIC BOND TRUST
------------------------------
2003 2002
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income .............................. $ 5,424,911 $ 6,886,556
Net realized loss .................................. (1,494,577) (316,708)
Net change in unrealized appreciation/depreciation . 12,621,690 (12,097,234)
------------- -------------
Net increase (decrease) in net assets resulting
from operations .................................... 16,552,024 (5,527,386)
------------- -------------
DIVIDENDS FROM NET INVESTMENT INCOME ................. (5,053,253) (5,890,967)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the issuance of common shares .... -- 99,920,015
Trust shares issued in conjunction with reinvestment
of dividends ..................................... 131,770 92,644
------------- -------------
Net proceeds from capital share transactions ..... 131,770 100,012,659
------------- -------------
Total increase ................................. 11,630,541 88,594,306
------------- -------------
NET ASSETS
Beginning of period .................................. 88,594,306 --
------------- -------------
End of period ........................................ $ 100,224,847 $ 88,594,306
============= =============
End of period undistributed net investment income .... $ 1,377,247 $ 1,005,589
----------
(1) Commencement of investment operations for Strategic Bond was February 28,
2002. This information includes the initial investment by BlackRock Funding,
Inc.
See Notes to Financial Statements.
41
CONSOLIDATED FINANCIAL HIGHLIGHTS
------------------------------------------------
BlackRock Broad Investment Grade 2009 Term Trust
------------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2003 ----------------------------------------------------------------------
(UNAUDITED) 2002 2001 2000 1999 1998
---------------- ---------- ---------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period(1) . $ 17.33 $ 16.05 $ 13.64 $ 13.64 $ 15.01 $ 14.48
-------- -------- -------- -------- -------- --------
Investment operations:
Net investment income ................. 0.55 2.01 1.17 0.91 0.93 1.20
Net realized and unrealized gain (loss) (0.45) 0.04 2.01 (0.09) (1.45) 0.23
-------- -------- -------- -------- -------- --------
Net increase (decrease) from
investment operations ................. 0.10 2.05 3.18 0.82 (0.52) 1.43
-------- -------- -------- -------- -------- --------
Dividends from net investment income .... (0.45) (0.77) (0.77) (0.82) (0.85) (0.90)
-------- -------- -------- -------- -------- --------
Net asset value, end of period(1) ....... $ 16.98 $ 17.33 $ 16.05 $ 13.64 $ 13.64 $ 15.01
======== ======== ======== ======== ======== ========
Market value, end of period(1) .......... $ 16.40 $ 16.18 $ 14.39 $ 11.94 $ 11.44 $ 13.25
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN(2) .............. 4.18% 18.34% 27.66% 12.11% (7.68)% 17.15%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Total expenses .......................... 2.58%(3) 2.50% 3.52% 4.36% 3.49% 3.51%
Net expenses ............................ 2.58%(3) 2.50% 3.52% 4.36% 3.49% 3.51%
Net expenses excluding interest expense
and excise tax ........................ 1.19%(3) 1.16% 1.16% 1.31% 1.03% 1.01%
Net investment income ................... 6.45%(3) 12.22% 7.93% 6.83% 6.58% 8.13%
SUPPLEMENTALDATA:
Average net assets (000) ................ $ 50,611 $ 48,731 $ 43,701 $ 39,425 $ 41,909 $ 43,482
Portfolio turnover ...................... 12% 35% 19% 36% 25% 25%
Net assets, end of period (000) ......... $ 50,198 $ 51,244 $ 47,466 $ 40,321 $ 40,345 $ 44,395
Reverse repurchase agreements
outstanding, end of period (000) ...... $ 18,166 $ 23,669 $ 13,373 $ 18,850 $ 16,304 $ 19,770
Asset coverage(4) ....................... $ 3,763 $ 3,165 $ 4,550 $ 3,139 $ 3,475 $ 3,246
----------
(1) Net asset value and market value are published in BARRON'S on Saturday and
THE WALL STREET JOURNAL on Monday.
(2) Total investment return is calculated assuming a purchase of a share 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 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
returns do not reflect brokerage commissions. Total investment returns for
less than a full year are not annualized. Past performance is not a
guarantee of future results.
(3) Annualized.
(4) Per $1,000 of reverse repurchase agreements outstanding.
The information above represents the unaudited operating performance for a share
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each 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.
42
FINANCIAL HIGHLIGHTS
-------------------------
BlackRock Core Bond Trust
-------------------------
SIX MONTHS FOR THE PERIOD
ENDED NOVEMBER 30, 2001(1)
APRIL 30, 2003 THROUGH
(UNAUDITED) OCTOBER 31, 2002
-------------- -------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period(2) ...................... $ 14.33 $ 14.33
--------- ---------
Investment operations:
Net investment income ..................................... 0.47 0.99
Net realized and unrealized gain .......................... 1.11 0.04
--------- ---------
Net increase from investment operations ...................... 1.58 1.03
--------- ---------
Dividends and distributions from net investment income ....... (0.60) (1.00)
--------- ---------
Capital charges with respect to issuance of shares ........... (0.60) (0.03)
--------- ---------
Net asset value, end of period(2) ............................ $ 15.31 $ 14.33
========= =========
Market value, end of period(2) ............................... $ 14.88 $ 13.82
========= =========
TOTAL INVESTMENT RETURN(3) ................................... 12.23% (1.02)%
========= =========
RATIOS TO AVERAGE NET ASSETS:(4)
Total expenses ............................................... 0.99% 1.04%
Net expenses ................................................. 0.99% 1.04%
Net expenses excluding interest expense ...................... 0.90% 0.93%
Net investment income ........................................ 6.40% 7.67%
SUPPLEMENTAL DATA:
Average net assets (000) ..................................... $ 397,596 $ 380,277
Portfolio turnover ........................................... 208% 419%
Net assets, end of period (000) .............................. $ 413,698 $ 387,238
Reverse repurchase agreements outstanding, end of period (000) $ 52,729 $ 165,215
Asset coverage(5) ............................................ $ 8,846 $ 3,342
----------
(1) Commencement of investment operations. This information includes the initial
investments by BlackRock Funding, Inc. Net asset value immediately after the
closing of the public offering was $14.30.
(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 a share 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 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
returns do not reflect brokerage commissions. Total investment returns for
less than a full year are not annualized. Past performance is not a
guarantee of future results.
(4) Annualized.
(5) Per $1,000 of reverse repurchase agreements outstanding.
The information above represents the unaudited operating performance for a share
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each 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.
43
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
FOR THE PERIOD
DECEMBER 23, 1998(1)
SIX MONTHS ENDED YEAR ENDED OCTOBER 31, THROUGH
APRIL 30, 2003 ---------------------------------------- OCTOBER 31,
(UNAUDITED) 2002 2001 2000 1999
---------- ---------- ---------- ---------- ------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period(2) .......... $ 6.13 $ 7.20 $ 10.60 $ 13.58 $ 15.00
-------- -------- -------- -------- --------
Investment operations:
Net investment income ......................... 0.57 1.20 1.32 1.66 1.29
Net realized and unrealized gain (loss) ....... 0.43 (0.98) (3.13) (3.02) (1.52)
-------- -------- -------- -------- --------
Net increase (decrease) from investment operations 1.00 0.22 (1.81) (1.36) (0.23)
-------- -------- -------- -------- --------
Dividends and distributions:
From net investment income .................... (0.58) (1.20) (1.48) (1.62) (1.17)
Tax return of capital ......................... -- (0.09) (0.11) -- --
-------- -------- -------- -------- --------
Total dividends and distributions ................ (0.58) (1.29) (1.59) (1.62) (1.17)
-------- -------- -------- -------- --------
Capital charge with respect to issuance of shares -- -- -- -- (0.02)
-------- -------- -------- -------- --------
Net asset value, end of period(2) ................ $ 6.55 $ 6.13 $ 7.20 $ 10.60 $ 13.58
======== ======== ======== ======== ========
Market value, end of period(2) ................... $ 10.29 $ 8.68 $ 9.18 $ 11.88 $ 12.50
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN(3) ....................... 26.28% 7.97% (11.31)% 8.23% (9.68)%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Total expenses ................................... 3.22%(4) 3.47% 4.90% 5.29% 4.16%(4)
Net expenses ..................................... 3.22%(4) 3.47% 4.90% 5.29% 4.08%(4)
Net expenses excluding interest expense .......... 2.27%(4) 2.20% 2.03% 1.99% 1.98%(4)
Net investment income ............................ 18.32%(4) 16.29% 14.23% 13.12% 10.34%(4)
SUPPLEMENTAL DATA:
Average net assets (000) ......................... $ 39,917 $ 46,751 $ 58,553 $ 79,602 $ 92,116
Portfolio turnover ............................... 22% 147% 71% 92% 121%
Net assets, end of period (000) .................. $ 41,724 $ 38,953 $ 45,520 $ 66,867 $ 85,652
Loan outstanding, end of period (000) ............ $ 19,250 $ 19,250 $ 23,000 $ 33,000 $ 41,000
Asset coverage(5) ................................ $ 3,167 $ 3,024 $ 2,983 $ 3,032 $ 3,094
----------
(1) Commencement of investment operations. This information includes the initial
investment by BlackRock Financial Management, Inc.
(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 a share 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 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
returns for less than a full year are not annualized. Past performance is
not a guarantee of future results.
(4) Annualized.
(5) Per $1,000 of loan outstanding.
The information above represents the unaudited operating performance for a share
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each 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.
44
FINANCIAL HIGHLIGHTS
----------------------------------
BlackRock Income Opportunity Trust
----------------------------------
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2003 ---------------------------------------------------------
(UNAUDITED) 2002 2001 2000 1999 1998
---------------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period(1) .. $ 11.83 $ 11.47 $ 11.03 $ 11.45 $ 11.88 $ 12.47
-------- -------- -------- -------- -------- --------
Investment operations:
Net investment income ................. 0.40 1.15 0.87 0.70 0.84 0.78
Net realized and unrealized gain (loss) 0.67 (0.05) 0.34 (0.31) (0.46) (0.53)
-------- -------- -------- -------- -------- --------
Net increase from investment operations .. 1.07 1.10 1.21 0.39 0.38 0.25
-------- -------- -------- -------- -------- --------
Dividends and distributions:
From net investment income ............ (0.39) (0.75) (0.23) (0.39) (0.84) (0.84)
From net realized gains ............... (0.24) -- -- (0.04) -- --
Tax return of capital ................. -- -- (0.54) (0.41) -- --
-------- -------- -------- -------- -------- --------
Total dividends and distributions ........ (0.63) (0.75) (0.77) (0.84) (0.84) (0.84)
-------- -------- -------- -------- -------- --------
Increase resulting from Trust shares
repurchased ........................... -- 0.01 0.002 0.03 0.03 --
-------- -------- -------- -------- -------- --------
Net asset value, end of period(1) ........ $ 12.27 $ 11.83 $ 11.47 $ 11.03 $ 11.45 $ 11.88
======== ======== ======== ======== ======== ========
Market value, end of period(1) ........... $ 11.17 $ 10.50 $ 10.41 $ 9.75 $ 9.69 $ 9.88
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN(3) ............... 12.68% 8.44% 15.09% 9.82% 6.70% 1.34%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Total expenses ........................... 1.32%(4) 1.40% 3.62% 3.76% 3.18% 3.01%
Net expenses ............................. 1.32%(4) 1.40% 3.62% 3.76% 3.18% 3.01%
Net expenses excluding interest expense .. 0.90%(4) 0.93% 1.01% 0.88% 0.85% 0.88%
Net investment income .................... 6.79%(4) 10.04% 7.76% 6.14% 7.14% 6.39%
SUPPLEMENTAL DATA:
Average net assets (000) ................. $409,677 $394,495 $388,478 $396,157 $426,283 $444,051
Portfolio turnover ....................... 36% 153% 83% 82% 186% 153%
Net assets, end of period (000) .......... $422,528 $407,480 $397,756 $383,651 $406,178 $430,107
Reverse repurchase agreements outstanding,
end of period (000) ................... $187,816 $ 85,704 $136,385 $178,033 $149,346 $173,520
Asset coverage(5) ........................ $ 3,250 $ 5,755 $ 3,916 $ 3,155 $ 3,720 $ 3,479
----------
(1) Net asset value and market value published in BARRON'S on Saturday and THE
WALL STREET JOURNAL on Monday.
(2) Less than $0.005 per share.
(3) Total investment return is calculated assuming a purchase of a share 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 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 returns for
less than a full year are not annualized. Past performance is not a
guarantee of future results.
(4) Annualized.
(5) Per $1,000 of reverse repurchase agreements outstanding.
The information above represents the unaudited operating performance for a share
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each 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.
45
FINANCIAL HIGHLIGHTS
----------------------
BlackRock Income Trust
----------------------
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2003 ------------------------------------------------------------
(UNAUDITED) 2002 2001 2000 1999 1998
---------------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period(1) .. $ 8.13 $ 8.06 $ 7.23 $ 7.31 $ 7.94 $ 8.12
-------- -------- -------- -------- -------- --------
Investment operations:
Net investment income ................. 0.28 0.99 0.56 0.50 0.73 0.62
Net realized and unrealized gain (loss) (0.15) (0.35) 0.83 (0.02) (0.80) (0.24)
-------- -------- -------- -------- -------- --------
Net increase (decrease) from
investment operations ................. 0.13 0.64 1.39 0.48 (0.07) 0.38
-------- -------- -------- -------- -------- --------
Dividends from net investment income ..... (0.71) (0.57) (0.56) (0.56) (0.56) (0.56)
-------- -------- -------- -------- -------- --------
Net asset value, end of period(1) ........ $ 7.55 $ 8.13 $ 8.06 $ 7.23 $ 7.31 $ 7.94
======== ======== ======== ======== ======== ========
Market value, end of period(1) ........... $ 8.07 $ 8.07 $ 7.26 $ 6.38 $ 6.13 $ 6.94
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN(2) ............... 9.47% 15.35% 23.23% 14.01% (4.04)% 9.29%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Total expense ............................ 1.38%(3) 2.05% 2.54% 2.78% 3.03% 3.33%
Net expenses ............................. 1.38%(3) 2.05% 2.54% 2.78% 3.03% 3.33%
Net expenses excluding interest expense .. 1.02%(3) 1.03% 1.03% 1.05% 1.01% 1.01%
Net investment income .................... 7.49%(3) 12.28% 7.43% 7.11% 9.54% 7.74%
SUPPLEMENTAL DATA:
Average net assets (000) ................. $484,124 $506,533 $470,185 $448,027 $482,685 $506,858
Portfolio turnover ....................... 32% 125% 32% 114% 144% 214%
Net assets, end of period (000) .......... $477,458 $511,385 $506,764 $454,510 $459,399 $499,075
Reverse repurchase agreements outstanding,
end of period (000) ................... $110,820 $205,792 $118,634 $ 64,460 $186,451 $198,336
Asset coverage(4) ........................ $ 5,308 $ 3,485 $ 5,272 $ 8,095 $ 3,478 $ 3,520
----------
(1) Net asset value and market value are published in BARRON'S on Saturday and
THE WALL STREET JOURNAL on Monday.
(2) Total investment return is calculated assuming a purchase of a share 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 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
returns do not reflect brokerage commissions. Total investment returns for
less than a full year are not annualized. Past performance is not a
guarantee of future results.
(3) Annualized.
(4) Per $1,000 of reverse repurchase agreements outstanding.
The information above represents the unaudited operating performance for a share
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each 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.
46
FINANCIAL HIGHLIGHTS
------------------------------
BlackRock Strategic Bond Trust
------------------------------
FOR THE PERIOD
SIX MONTHS ENDED FEBRUARY 28, 2002(1)
APRIL 30, 2003 THROUGH
(UNAUDITED) OCTOBER 31, 2002
---------------- -------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period(2) ...................... $ 12.63 $ 14.33
-------- --------
Investment operations:
Net investment income ..................................... 0.77 0.98
Net realized and unrealized loss .......................... 1.59 (1.77)
-------- --------
Net increase from investment operations ...................... 2.36 (0.79)
-------- --------
Dividends from net investment income ......................... -- (0.84)
-------- --------
Capital charges with respect to issuance of shares ........... (0.72) (0.07)
-------- --------
Net asset value, end of period(2) ............................ $ 14.27 $ 12.63
======== ========
Market value, end of period(2) ............................... $ 14.65 $ 12.35
======== ========
TOTAL INVESTMENT RETURN(3) ................................... 25.05% (12.34)%
======== ========
RATIOS TO AVERAGE NET ASSETS:(4)
Total expenses ............................................... 2.11% 2.57%
Net expenses ................................................. 1.80% 2.26%
Net expenses excluding interest expense ...................... 1.02% 1.25%
Net investment income ........................................ 11.60% 10.68%
SUPPLEMENTAL DATA:
Average net assets (000) ..................................... $ 94,271 $ 95,675
Portfolio turnover ........................................... 19% 22%
Net assets, end of period (000) .............................. $100,225 $ 88,594
Reverse repurchase agreements outstanding, end of period (000) $ 47,747 $ 44,223
Asset coverage(5) ............................................ $ 3,099 $ 3,003
----------
(1) Commencement of investment operations. This information includes the initial
investments by BlackRock Funding, Inc. Net asset value immediately after the
closing of the public offering was $14.25.
(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 a share 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 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
returns do not reflect brokerage commissions. Total investment returns for
less than a full year are not annualized. Past performance is not a
guarantee of future results.
(4) Annualized.
(5) Per $1,000 of reverse repurchase agreements outstanding.
The information above represents the unaudited operating performance for a share
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each 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.
47
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
NOTE 1. ORGANIZATION & ACCOUNTING POLICIES
The BlackRock Broad Investment Grade 2009 Term Trust Inc. ("Broad Investment
Grade"), BlackRock Core Bond Trust ("Core Bond"), The BlackRock High Yield Trust
("High Yield"), BlackRock Income Opportunity Trust ("Income Opportunity"), The
BlackRock Income Trust Inc. ("Income Trust") and BlackRock Strategic Bond Trust
("Strategic Bond") are registered as diversified, closed-end management
investment companies under the Investment Company Act of 1940, as amended. Broad
Investment Grade, Income Opportunity and Income Trust are Maryland corporations.
Core Bond, High Yield and Strategic Bond are organized as Delaware statutory
trusts.
On December 3, 1999, Broad Investment Grade transferred a substantial portion
of its total assets to a 100% owned regulated investment company subsidiary
called BCT Subsidiary, Inc. The financial statements and these notes to the
financial statements for Broad Investment Grade are consolidated and include the
operations of both Broad Investment Grade 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
Trusts.
SECURITIES VALUATION: The Trusts value most of their securities on the basis of
current market quotations provided by dealers or pricing services selected under
the supervision of each Trust's Board of Directors/Trustees (the "Board"). 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 securities may be valued
at amortized cost. 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, each Trust's Board.
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. Each Trust also records interest income on an
accrual basis and amortizes premium and/or accretes discount on securities
purchased using the interest method.
REPURCHASE AGREEMENTS: In connection with transactions in repurchase agreements,
a 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 a Trust may be delayed or limited.
OPTION SELLING/PURCHASING: When a Trust sells or purchases an option, an amount
equal to the premium received or paid by the Trust is recorded as a liability or
an asset and is subsequently adjusted to the current market value of the option
written or purchased. Premiums received or paid from writing or purchasing
options which expire unexercised are treated by the Trust on the expiration date
as realized gains or losses. The difference between the premium and the amount
paid or received on effecting a closing purchase or sale transaction, including
brokerage commissions, is also treated as a realized gain or loss. If an option
is exercised, the premium paid or received is added to the proceeds from the
sale or cost of the purchase in determining whether a Trust has realized a gain
or a loss on investment transactions. A 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 Trusts, 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 may be used by the Trusts as an attempt to
manage the duration of positions, or collections of positions, so that changes
in interest rates do not adversely affect the targeted duration of the portfolio
unexpectedly. 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 any time 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 underlying position at the exercise
price at any time or at a specified time during the option period. Put or call
options can be purchased or sold to effectively help manage the targeted
duration of the portfolio.
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 a Trust may forgo 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 a 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: In an 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
48
and receive a floating rate. Interest rate swaps are efficient as
asset/liability management tools. In more complex swaps, the notional principal
amount may decline (or amortize) over time.
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, a 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 Trusts are exposed to credit loss in the event of non-performance by the
other party to the swap. However, the Trusts closely monitor swaps and do 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 a 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 a 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 Trusts to manage the duration of the Trusts'
portfolios in a manner similar to more generic options described above.
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 Trusts'
portfolios and their exposure to changes in short-term interest rates. Owning
interest rate caps reduces a portfolio's duration, making them less sensitive to
changes in interest rates from a market value perspective. The effect on income
involves protection from rising short-term interest rates, which the Trusts
experience primarily in the form of leverage.
The Trusts are exposed to credit loss in the event of non-performance by the
other party to the interest rate cap. However, the Trusts do not anticipate
non-performance by any counterparty.
Transactions fees paid or received by the Trusts 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 and
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 Trusts to both manage the duration of
the portfolios and their exposure to changes in short-term interest rates.
Selling interest rate floors reduces a portfolios duration, making it less
sensitive to changes in interest rates from a market value perspective. The
Trusts' leverage provides extra income in a period of falling rates. Selling
floors reduces some of that advantage by partially monetizing it as an up front
payment which the Trusts receive.
The Trusts are exposed to credit loss in the event of non-performance by the
other party to the interest rate floor. However, the Trusts do not anticipate
non-performance by any counterparty.
Transactions fees paid or received by the Trusts 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.
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, a 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 Trusts, 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 Trusts may attempt to manage
the duration of positions so that changes in interest rates do not change the
duration of the portfolio unexpectedly.
FORWARD CURRENCY CONTRACTS: The Trusts enter into forward currency contracts
primarily to facilitate settlement of purchases and sales of foreign securities
and to help manage the overall exposure to foreign currency. A forward contract
is a commitment to purchase or sell a foreign currency at a future date (usually
the security transaction settlement date) at a negotiated forward rate. In the
event that a secu-
49
rity fails to settle within the normal settlement period, the forward currency
contract is renegotiated at a new rate. The gain or loss arising from the
difference between the settlement value of the original and renegotiated forward
contracts is isolated and is included in net realized gains (losses) from
foreign currency transactions. Risks may arise as a result of the potential
inability of the counterparties to meet the terms of their contract.
Forward currency contracts, when used by the Trusts, help to manage the
overall exposure to the foreign currency backing some of the investments held by
the Trusts. Forward currency contracts are not meant to be used to eliminate all
of the exposure to the foreign currency, rather they allow the Trusts to limit
their exposure to foreign currency within a narrow band to the objectives of the
Trusts.
FOREIGN CURRENCY TRANSLATION: Foreign currency amounts are translated into
United States dollars on the following basis:
(i) market value of investment securities, other assets and liabilities--at
the New York City noon rates of exchange.
(ii) purchases and sales of investment securities, income and expenses--at
the rates of exchange prevailing on the respective dates of such
transactions.
The Trusts isolate that portion of the results of operations arising as a
result of changes in the foreign exchange rates from the fluctuations arising
from changes in the market prices of securities held at period end. Similarly,
the Trusts isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of portfolio securities
sold during the period.
Net realized and unrealized foreign exchange gains and losses including
realized foreign exchange gains and losses from sales and maturities of foreign
portfolio securities, maturities of foreign reverse repurchase agreements, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the difference between the amounts
of interest and discount recorded on the Trusts' books and the U.S. dollar
equivalent amounts actually received or paid and changes in unrealized foreign
exchange gains and losses in the value of portfolio securities and other assets
and liabilities arising as a result of changes in the exchange rate.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin, including
unanticipated movements in the value of the foreign currency relative to the
U.S. dollar.
SHORT SALES: The Trusts may make short sales of securities as a method of
managing potential price declines in similar securities owned. When a 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 Trusts may
have to pay a fee to borrow the particular securities and may be obligated to
pay over any payments received on such borrowed securities. A gain, limited to
the price at which the Trust sold the security short, or a loss, unlimited as to
dollar amount, will be recognized upon the termination of a short sale if the
market price is greater or less than the proceeds originally received.
SECURITY LENDING: The Trusts may lend their 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 Trusts 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 Trusts receive compensation
for lending their securities in the form of interest on the loan. The Trusts
also continue 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 accounts of the Trusts. The Trusts did not enter into
any security lending transactions during the six months ended April 30, 2003.
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 each Trust segregate assets in connection with certain investments
(e.g., when issued securities, reverse repurchase agreements or futures
contracts), each 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 each Trust's (excluding Strategic Bond) intention to
continue, and Strategic Bond intends to elect, to be treated as a regulated
investment company under the Internal Revenue Code and to distribute sufficient
amounts of their taxable income to shareholders. Therefore, no Federal income
tax provisions are required. As part of a tax planning strategy, Broad
Investment Grade intends to retain a portion of its taxable income and pay an
excise tax on the undistributed amounts.
DIVIDENDS AND DISTRIBUTIONS: Each Trust declares and pays dividends and
distributions to common shareholders monthly from net investment income, 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 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 these
estimates.
DEFERRED COMPENSATION PLAN: Under the revised deferred compensation plan
approved by each Trust's Board, non-interested Trustees may elect to defer
receipt of all or a portion of their annual compensation. As of January 1, 2003,
the Board elected to require its members to defer a portion of their annual
complex compensation pursuant to the plan. Deferred amounts earn an approximate
return as though equivalent dollar amounts had been invested in common shares of
other BlackRock Trusts selected by the Directors/Trustees.
The deferred compensation plan is not funded and obligations thereunder
represent general unsecured claims against the general assets of the Trust. Each
Trust may, however, elect to invest in common shares of those Trusts selected by
the Directors/Trustees in order to match its deferred compensation obligations.
50
NOTE 2. AGREEMENTS
Each Trust has an Investment Management Agreement with BlackRock Advisors, Inc.
(the "Advisor"), which is a wholly owned subsidiary of BlackRock, Inc. BlackRock
Financial Management, Inc., a wholly owned subsidiary of BlackRock, Inc., serves
as sub-advisor to both Core Bond and Strategic Bond. BlackRock, Inc. is an
indirect, majority owned subsidiary of The PNC Financial Services Group, Inc.
The investment management agreement on Core Bond and Strategic Bond covers both
investment advisory and administration services. Broad Investment Grade has an
Administration Agreement with Princeton Administrators, L.P. ("Princeton"), an
indirect wholly owned affiliate of Merrill Lynch & Co., Inc. High Yield, Income
Opportunity and Income Trust have an Administration Agreement with Prudential
Investments LLC ("Prudential"), an indirect wholly owned subsidiary of
Prudential Financial, Inc.
Each Trust's investment advisory fee paid to the Advisor is computed weekly
and payable monthly based on an annual rate, 0.55% for Broad Investment Grade,
0.60% for Income Opportunity and 0.65% for Income Trust, of each Trust's average
net assets and 0.55% for Core Bond, 1.05% for High Yield and 0.75% for Strategic
Bond, of each Trust's average weekly managed assets. The Advisor has voluntarily
agreed to waive a portion of the investment advisory fees or other expenses on
Strategic Bond as a percentage of its average weekly managed assets as follows:
0.20% for the first 5 years of the Trust's operations, 0.15% in year 6, 0.10% in
year 7 and 0.05% in year 8.
The administration fee paid to each Trust's respective administrator, on
other than Core Bond and Strategic Bond, is computed weekly and payable monthly
based on an annual rate, 0.15% for Broad Investment Grade, 0.10% for Income
Opportunity and 0.20% of the first $500 million and 0.15% on any excess for
Income Trust, of each Trust's average net assets and 0.10% for High Yield based
on its average weekly managed assets.
Pursuant to the agreements, the Advisor provides continuous supervision of
the investment portfolio and pays the compensation of officers of each Trust who
are affiliated persons of the Advisor. The Advisor pays occupancy and certain
clerical and accounting costs for Core Bond and Strategic Bond. Each Trust's
respective administrator pays occupancy and certain clerical and accounting
costs of their respective Trust(s). Each Trust bears all other costs and
expenses, which include reimbursements to the Advisor for certain operational
support services provided to each Trust.
Pursuant to the terms of their custody agreements, Core Bond, High Yield,
Income Opportunity, Income Trust and Strategic Bond received earnings credits
from its custodian for positive cash balances maintained, which are used to
offset custody fees during the six months ended April 30, 2003, the amounts
earned were $4,390, $1,382, $2,863, $6,094 and $6,112, respectively.
NOTE 3. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term investments,
dollar rolls and U.S. government securities, for the six months ended April 30,
2003, aggregated as follows:
TRUST PURCHASES SALES
----- -------------- ---------------
Broad Investment Grade $ 2,793,709 $ 10,778,554
Core Bond 1,093,538,346 1,050,553,478
High Yield 12,358,553 12,848,350
Income Opportunity 244,183,901 184,572,814
Income Trust 65,856,647 83,410,882
Strategic Bond 25,405,635 23,286,165
Purchases and sales of U.S. government securities for the six months ended April
30, 2003, aggregated as follows:
TRUST PURCHASES SALES
----- -------------- ---------------
Broad Investment Grade $ 5,144,969 $ --
Core Bond 243,923,419 266,608,529
High Yield -- --
Income Opportunity 5,983,552 19,938,516
Income Trust 130,038,105 122,103,351
Strategic Bond 1,940,222 3,130,971
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 PNCBank
or its affiliates, including Midland Loan Services, Inc. It is possible under
certain circumstances, that 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.
At April 30, 2003, the total cost of securities for Federal income tax
purposes and the aggregate gross/net unrealized appreciation/depreciation for
securities held by each Trust were as follows:
TRUST COST APPRECIATION DEPRECIATION NET
----- ------------ ------------ ------------ ------------
Broad Investment Grade $ 66,508,995 $ 1,304,156 $ 326,972 $ 977,184
Core Bond 586,812,069 22,486,965 4,829,543 17,657,422
High Yield 78,346,743 3,566,520 23,111,645 (19,545,125)
Income Opportunity 580,342,044 25,157,150 5,504,589 19,652,561
Income Trust 591,719,044 31,266,170 28,419,859 2,846,311
Strategic Bond 143,798,660 5,946,949 5,422,493 524,456
51
For Federal income tax purposes, the following Trusts had capital loss
carryforwards at October 31, 2002:
CAPITAL LOSS CAPITAL LOSS
TRUST CARRYFORWARDS AMOUNT EXPIRES TRUST CARRYFORWARDS AMOUNT EXPIRES
----- -------------------- ------- -------------- -------------------- -------
Broad Investment Grade $ 472,280 2003 Income Trust $10,359,634 2003
85,817 2008 27,373,194 2004
-----------
$ 558,097 33,107,952 2007
===========
High Yield $ 3,443,603 2007 1,352,206 2008
3,270,311 2008 13,940,898 2009
-----------
15,159,280 2009 $86,133,884
===========
8,468,860 2010 Strategic Bond $ 316,708 2010
----------- ===========
$30,342,054
===========
Accordingly, no capital gain distributions are expected to be paid to
shareholders of a Trust until that Trust has net realized capital gains in
excess of its carryforward amounts.
Details of open financial futures contracts at April 30, 2003, were as
follows:
NUMBER OF EXPIRATION VALUE AT VALUE AT UNREALIZED
TRUST CONTRACTS TYPE DATE TRADE DATE APRIL 30, 2003 DEPRECIATION
----- --------- ------------------ ---------- ------------- -------------- ------------
LONG POSITION:
Broad Investment Grade 66 10 Yr. U.S. T-Note Jun. '03 $ 7,644,904 $ 7,598,250 $ (46,654)
-----------
Core Bond 27 10 Yr. U.S. T-Note Jun. '03 3,106,266 3,092,344 $ (13,922)
1,109 30 Yr. U.S. T-Bond Jun. '03 126,610,509 125,420,969 (1,189,540)
-----------
$(1,203,462)
===========
Income Opportunity 1,233 10 Yr. U.S. T-Note Jun. '03 142,711,378 141,949,125 $ (762,253)
1,261 30 Yr. U.S. T-Bond Jun. '03 144,436,146 143,793,407 (642,739)
-----------
$(1,404,992)
===========
Income Trust 296 10 Yr. U.S. T-Note Jun. '03 34,286,235 34,077,000 $ (209,235)
-----------
SHORT POSITION:
Core Bond 653 5 Yr. U.S. T-Note Jun. '03 73,837,578 73,972,656 $ (135,078)
----------
Income Opportunity 1,001 5 Yr. U.S. T-Note Jun. '03 112,794,327 113,863,750 $(1,069,423)
-----------
Income Trust 204 30 Yr. U.S. T-Bond Jun. '03 23,006,571 23,262,375 $ (255,804)
30 Eurodollar Jun. '04 7,346,137 7,367,625 (21,488)
30 Eurodollar Sep. '04 7,316,513 7,341,375 (24,862)
30 Eurodollar Dec. '04 7,289,138 7,312,125 (22,987)
30 Eurodollar Mar. '05 7,266,638 7,287,375 (20,737)
25 Eurodollar Jun. '05 6,036,781 6,053,125 (16,344)
25 Eurodollar Sep. '05 6,021,156 6,035,625 (14,469)
25 Eurodollar Dec. '05 6,006,156 6,019,063 (12,907)
25 Eurodollar Mar. '06 5,992,407 6,005,000 (12,593)
-----------
$ (402,191)
===========
Details of open forward currency contracts at April 30, 2003, were as
follows:
VALUE AT VALUE AT UNREALIZED
SETTLEMENT CONTRACT SETTLEMENT APRIL 30, APPRECIATION
TRUST AND FOREIGN CURRENCY DATE TO RECEIVE DATE 2003 (DEPRECIATION)
-------------------------- ---------- ------------- ----------- ----------- --------------
Core Bond
BOUGHT:
Euro 5/13/03 5,935,723e $ 6,291,865 $ 6,633,688 $ 341,823
Swedish Krona 5/14/03 7,088,380kr 855,051 866,445 11,394
--------
$ 353,217
========
SOLD:
Canadian Dollar 5/12/03 20,693,686$ $14,033,260 $14,420,700 $(387,440)
Swedish Krona 5/14/03 50,391,090kr 5,961,453 6,159,532 (198,079)
--------
$(585,519)
========
52
Income Trust held one interest rate cap. Under the agreement, Income Trust
receives the excess, if any, of a floating rate over a fixed rate. Income Trust
paid a transaction fee for each cap. Transaction fees are amortized through the
termination of the agreement. Details of the cap at April 30, 2003, were as
follows:
NOTIONAL VALUE AT
AMOUNT FIXED FLOATING TERMINATION AMORTIZED APRIL 30, UNREALIZED
(000) RATE RATE DATE COST 2003 DEPRECIATION
--------- ------ ------------- ----------- --------- --------- ------------
$100,000 7.75% 3-month LIBOR 5/4/03 $2,423 -- $(2,423)
====== ====== =======
Income Trust held one interest rate floor. Under the agreement, Income Trust
pays the excess, if any, of a fixed rate over a floating rate. Income Trust
received a transaction fee for the floor. Transaction fees are amortized through
the termination of the agreement. Details of the interest rate floor held at
April 30, 2003, were as follows:
NOTIONAL VALUE AT
AMOUNT FIXED FLOATING TERMINATION AMORTIZED APRIL 30, UNREALIZED
(000) RATE RATE DATE COST 2003 DEPRECIATION
--------- ------ ------------- ----------- --------- ---------- ------------
$35,000 6.00% 1-month LIBOR 1/25/05 $596,250 $1,626,107 $(1,029,857)
======== ========== ===========
Details of open interest rate swaps at April 30, 2003, were as follows:
NOTIONAL UNREALIZED
AMOUNT FIXED FLOATING TERMINATION APPRECIATION
TRUST (000) RATE RATE DATE (DEPRECIATION)
----- -------- --------- ------------- ----------- --------------
Income Opportunity $ 10,000 4.47% (a) 3-month LIBOR 11/04/12 $ (270,265)
7,000 5.23% (a) 3-month LIBOR 11/04/21 (295,267)
26,000 5.46% (a) 3-month LIBOR 10/28/22 (1,840,418)
9,000 5.71% (b) 3-month LIBOR 5/22/06 904,864
47,000 5.73% (b) 3-month LIBOR 5/04/06 2,647,989
-----------
$ 1,146,903
===========
Income Trust $ 24,000 3.55% (b) 3-month LIBOR 10/24/06 $841,526
162,000 4.22% (b) 3-month LIBOR 5/04/06 4,441,003
32,000 5.46% (a) 3-month LIBOR 10/17/12 (3,379,213)
24,000 6.04% (a) 3-month LIBOR 11/15/21 (3,468,213)
46,300 6.07% (a) 3-month LIBOR 8/28/22 (6,899,635)
-----------
$(8,464,532)
===========
----------
(a) Trust pays fixed interest rate and receives floating rate.
(b) Trust pays floating interest rate and receives fixed rate.
53
Transactions in options written during the six months ended April 30, 2003,
were as follows:
CONTRACTS/
NOTIONAL
AMOUNT PREMIUM
TRUST (000) RECEIVED
--------- ---------- ----------
CORE BOND
Options outstanding at October 31, 2002 138 $ 199,639
Options expired (138) (199,639)
-------- ---------
Options outstanding at April 30, 2003 -- $--
======== =========
INCOME OPPORTUNITY
Options outstanding at October 31, 2002 $ 6,000 $ 124,460
Options terminated in closing purchase transactions (3,000) (67,800)
-------- ---------
Options outstanding at April 30, 2003 $ 3,000 $ 56,660
======== =========
INCOME TRUST
Options outstanding at October 31, 2002 $ 22,000 $ 456,353
Options terminated in closing purchase transactions (11,000) (248,600)
-------- ---------
Options outstanding at April 30, 2003 $ 11,000 $ 207,753
======== =========
NOTE 4. BORROWINGS
REVERSE REPURCHASE AGREEMENTS: The Trusts may enter into reverse repurchase
agreements with qualified, third-party broker-dealers as determined by and under
the direction of the Trusts' Board. 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 a 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 and weighted average interest rate of reverse
repurchase agreements during the six months ended April 30, 2003, were as
follows:
AVERAGE DAILY WEIGHTED AVERAGE
TRUST BALANCE INTEREST RATE
----- -------------- -----------------
Broad Investment Grade $ 19,884,350 1.33%
Core Bond 36,555,171 1.00
Income Opportunity 129,194,462 1.33
Income Trust 131,038,100 1.32
Strategic Bond 44,339,122 1.66
DOLLAR ROLLS: The Trusts may enter into dollar rolls in which a 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 Trusts forgo principal and
interest paid on the securities. The Trusts will be compensated by the interest
earned on the cash proceeds of the initial sale and/or by the lower repurchase
price at the future date.
LOAN PAYABLE: High Yield has a $32 million committed credit facility (the
"facility"). Under the terms of the facility, the Trust borrows at the London
Interbank Offered Rate ("LIBOR") plus facility and administrative fees. In
addition, the Trust pays a liquidity fee on the unused portion of the facility.
The Trust may borrow up to 331/3% of its total assets up to the committed
amount. In accordance with the terms of the debt agreement, the Trust has
pledged its portfolio assets as collateral for the borrowing.
For the six months ended April 30, 2003, High Yield borrowed a daily weighted
average balance of $19,250,000 at a weighted average interest rate at 1.96%.
54
NOTE 5. CAPITAL
There are 200 million of $0.01 par value common shares authorized for Broad
Investment Grade, Income Opportunity and Income Trust. There are an unlimited
number of $0.001 par value common shares authorized for Core Bond, High Yield
and Strategic Bond. At April 30, 2003, the common shares outstanding and the
shares owned by affiliates of the Advisor of each Trust were:
COMMON SHARES COMMON SHARES
TRUST OUTSTANDING OWNED
------ ------------- -------------
Broad Investment Grade 2,957,093 7,093
Core Bond 27,018,774 9,425
High Yield 6,367,294 --
Income Opportunity 34,449,693 --
Income Trust 63,247,058 --
Strategic Bond 7,025,735 9,425
During the six months ended April 30, 2003, High Yield, Income Trust and
Strategic Bond issued 15,326, 372,241 and 9,581 shares, respectively, under the
terms of each Trust's Dividend Reinvestment Plan.
NOTE 6. DIVIDENDS
Subsequent to April 30, 2003, the Board of each of the Trusts declared dividends
from undistributed earnings per common share payable May 30, 2003, to
shareholders of record on May 15, 2003. The per share common dividends declared
were as follows:
COMMON DIVIDEND
TRUST PER SHARE
----- ---------------
Broad Investment Grade $0.075000
Core Bond 0.100000
High Yield 0.096875
Income Opportunity 0.070000
Income Trust 0.051042
Strategic Bond 0.120000
NOTE 7. COMMITMENT
On October 9, 1997, Income Opportunity and Income Trust each entered into a
commitment to purchase an aggregate of up to $22,000,000 and $20,000,000,
respectively, of Overseas Private Investment Corp. securities prior to the
commitment expiration on September 30, 2003. As of April 30, 2003, Income
Opportunity and Income Trust have purchased such securities with market values
of $16,260,093 and $14,781,903, respectively. As of April 30, 2003, the
remaining outstanding commitments of Income Opportunity and Income Trust were
$8,975,780 and $8,159,800, respectively.
NOTE 8. SUBSEQUENT EVENT
On May 22, 2003, the Boards of High Yield and Strategic Bond voted to change
each Trust's monthly distribution per share, effective with the distribution
declared on June 2, 2003, to $0.0905 and $0.13, respectively.
55
DIVIDEND REINVESTMENT PLANS
--------------------------------------------------------------------------------
Pursuant to each Trust's respective Dividend Reinvestment Plan (the "Plan"),
shareholders of Broad Investment Grade, Income Opportunity and Income Trust may
elect, while shareholders of Core Bond, High Yield and Strategic Bond are
automatically enrolled, to have all distributions of dividends and capital gains
reinvested by EquiServe Trust Company, N.A. (the "Plan Agent") in the respective
Trust's shares pursuant to the Plan. Shareholders who do not 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, which serves as agent for the
shareholders in administering the Plan.
After Broad Investment Grade and/or Income Opportunity Trust declares a
dividend or determines to make a capital gain distribution, the Plan Agent will
acquire shares for the participants' account, by the purchase of outstanding
shares on the open market, on the Trust's primary exchange or elsewhere ("open
market purchases"). The Trust will not issue any new shares under the Plan.
After Core Bond, High Yield, Income Trust and/or Strategic Bond declares a
dividend or determines to make a capital gain distribution, the Plan Agent will
acquire shares for the participants' account, depending upon the circumstances
described below, either (i) through receipt of unissued but authorized shares
from the Trust ("newly issued shares") or (ii) by open market purchases. If, on
the dividend payment date, the 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.
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by each 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.
Each Trust reserves the right to amend or terminate the Plan. There is no
direct service charge to participants in the Plan; however, each 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 150 Royall Street, Canton, MA 02021 or (800) 699-1BFM.
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
The Joint Annual Meeting of Shareholders was held on May 22, 2003, to
elect a certain number of Directors/Trustees for each of the following Trusts to
three year terms, unless otherwise indicated, expiring in 2006:
BROAD INVESTMENT GRADE
----------------------
Elected the Class III Directors and in accordance with Maryland law
elected Walter F. Mondale, for the remainder of his term, as follows:
DIRECTOR VOTES FOR VOTES WITHHELD
-------- --------- --------------
Andrew F. Brimmer 2,755,165 33,798
Kent Dixon 2,756,365 32,598
Robert S. Kapito 2,756,665 32,298
Walter F. Mondale(1) 2,741,445 47,518
CORE BOND
---------
Elected the Class II Trustees as follows:
TRUSTEE VOTES FOR VOTES WITHHELD
------- ---------- --------------
Frank J. Fabozzi 26,044,831 154,361
Walter F. Mondale 25,961,379 237,813
Ralph L. Schlosstein 26,047,238 151,954
----------
(1) Walter F. Mondale's term will expire in 2005.
56
HIGH YIELD
----------
Elected the Class I Trustees as follows:
TRUSTEE VOTES FOR VOTES WITHHELD
------- --------- --------------
Richard E. Cavanagh 6,052,239 57,124
James Clayburn La Force, Jr. 6,047,853 61,510
INCOME OPPORTUNITY
------------------
Elected the Class II Directors and in accordance with Maryland law elected
Robert S. Kapito, for the remainder of his term, as follows:
DIRECTOR VOTES FOR VOTES WITHHELD
-------- ---------- --------------
Frank J. Fabozzi 31,940,094 248,935
Robert S. Kapito(2) 31,945,672 243,357
Walter F. Mondale 31,855,311 333,718
Ralph L. Schlosstein 31,950,515 238,514
INCOME TRUST
------------
Elected the Class II Directors and in accordance with Maryland law elected
Robert S. Kapito, for the remainder of his term, as follows:
DIRECTOR VOTES FOR VOTES WITHHELD
-------- ---------- --------------
Frank J. Fabozzi 58,207,702 677,691
Robert S. Kapito2 58,219,376 666,017
Walter F. Mondale 57,970,768 914,625
Ralph L. Schlosstein 58,222,291 663,102
STRATEGIC BOND
--------------
Elected the Class II Trustees as follows:
TRUSTEE VOTES FOR VOTES WITHHELD
------- --------- --------------
Frank J. Fabozzi 6,752,233 52,587
Walter F. Mondale 6,726,221 78,599
Ralph L. Schlosstein 6,750,877 53,943
----------
(2) Robert S. Kapito's term will expire in 2004.
57
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[This page intentionally left blank.]
BlackRock Closed-End Funds
Directors/Trustees
Ralph L. Schlosstein, CHAIRMAN
Andrew F. Brimmer
Richard E. Cavanagh
Kent Dixon
Frank J. Fabozzi
Robert S. Kapito
James Clayburn La Force, Jr.
Walter F. Mondale
Officers
Robert S. Kapito, PRESIDENT
Henry Gabbay, TREASURER
Anne Ackerley, VICE PRESIDENT
Richard M. Shea, VICE PRESIDENT/TAX
James Kong, ASSISTANT TREASURER
Vincent B. Tritto, SECRETARY
Brian P. Kindelan, ASSISTANT SECRETARY
Investment Advisor
BlackRock Advisors, Inc.
100 Bellevue Parkway
Wilmington, DE 19809
(800) 227-7BFM
Sub-Advisor(1)
BlackRock Financial Management, Inc.
40 East 52nd Street
New York, NY 10022
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
EquiServe Trust Company, N.A.
150 Royall Street
Canton, MA 02021
(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/Trustees
Debevoise & Plimpton
919 Third Avenue
New York, NY 10022
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Trust shares. Statements and other
information contained in this report are as dated and are subject to change.
--------------------------------------------------------------------------------
BlackRockAdvisors, Inc.(2) Princeton Administrators, L.P.(2) Prudential Investments LLC(2)
100 Bellevue Parkway P.O. Box 9095 Gateway Center Three
Wilmington, DE 19809 Princeton, NJ 08543-9095 100 Mulberry Street
(800) 227-7BFM (800) 543-6217 Newark, NJ 07102-4077
BlackRock Core Bond Trust BlackRock Broad Investment Grade (800) 227-7BFM
BlackRock Strategic Bond Trust 2009 Term Trust BlackRock High Yield Trust
BlackRock Income Opportunity Trust
BlackRock Income Trust
----------
(1) For BlackRock Core Bond Trust and BlackRock Strategic Bond Trust only.
(2) Provides administrative services for the Trust(s) listed directly below its
name.
The Trusts will mail only one copy of shareholder documents, including annual
and semi-annual reports and proxy statements, to shareholders with multiple
accounts at the same address. This practice is commonly called "householding"
and is intended to reduce expenses and eliminate duplicate mailings of
shareholder documents. Mailings of your shareholder documents may be householded
indefinitely unless you instruct us otherwise. If you do not want the mailing of
these documents to be combined with those for other members of your household,
please contact the Trusts at (800) 227-7BFM.
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Trust shares. Statements and other
information contained in this report are as dated and are subject to change.
[BLACKROCK LOGO]
ITEM 2. CODE OF ETHICS.
Not applicable for semi-annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable for semi-annual reports.
ITEM 6. [RESERVED.]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for semi-annual reports.
ITEM 8. [RESERVED.]
ITEM 9. CONTROLS AND PROCEDURES.
The Trust's principal executive officer and principal financial officer have
concluded that the Trust's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Trust in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Trust's internal controls
or in other factors that could significantly affect the Trust's internal
controls subsequent to the date of their evaluation.
ITEM 10. EXHIBITS.
(a) Code of Ethics - Not applicable for semi-annual reports.
(b)(1) Certification of Principal Executive Officer.
(b)(2) Certification of Principal Financial Officer.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) BlackRock Core Bond Trust
By: /s/ Henry Gabbay
---------------------------
Name: Henry Gabbay
Title: Treasurer
Date: 6/30/03
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Robert S. Kapito
---------------------------
Name: Robert S. Kapito
Title: Principal Executive Officer
Date: 6/30/03
By: /s/ Henry, Gabbay
---------------------------
Name: Henry Gabbay
Title: Principal Financial Officer
Date: 6/30/03