--------------------------------------------------------------------------------
BLACKROCK MUNICIPAL 2018 TERMTRUST
SEMI-ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISOR
--------------------------------------------------------------------------------
July 31, 2002
Dear Shareholder:
The semi-annual period ended June 30, 2002, saw general turmoil in the
equity markets. Bond markets, particularly municipal securities, proved to be a
viable shelter from unstable economic conditions and experienced strong inflows
throughout the period. Municipal bonds outperformed Treasuries returning 4.64%
versus 3.61% respectively as measured by the Lehman Brothers Municipal Bond
Index* and the Lehman Brothers Treasury Index** for the six months ended June
30, 2002.
The first half of 2002 was markedly different from the last six months of
2001, as the Federal Reserve Board (the "Fed") left interest rates unchanged.
After a 225 basis point decline in interest rates during the latter half of
2001, and the uncertainty of the economic recovery in the first half of this
year, the Fed remained cautious about the state of the economy. Fears of
inflation remained subdued, allowing the Fed to remain on hold and maintain the
lowest interest rates in decades.
The past six months also saw a 20% increase in new municipal issuance
totaling $162 billion, as compared to the same time period last year. Both
retail and institutional investment in municipals remained high and continued to
drive performance as investors sought lower volatility alternatives with
attractive taxable equivalent yields. While economic indicators remained
positive during the period, the instability of the equity and capital
markets--as a result of corporate governance and accounting issues, fears of
renewed terrorist acts and geopolitical instability--weighed on investor
confidence, an integral component of economic recovery.
The volatility, which continues to be seen throughout all sectors of the
market, can be disconcerting for investors. We encourage you to consult with
your financial advisor to help establish a strategy that best fits your overall
goals and risk tolerance.
The semi-annual report includes a summary of market conditions over the
last six months, a review of the strategy employed by your Trust's portfolio
managers, the Trust's unaudited financial statements and a listing of the
portfolio's holdings. We thank you for your continued confidence in BlackRock
and the opportunity to help you achieve your long-term investment goals.
Sincerely,
/s/ Laurence D. Fink /s/ Ralph L. Schlosstein
Laurence D. Fink Ralph L. Schlosstein
Chief Executive Officer President
BlackRock Advisors, Inc. BlackRock Advisors, Inc.
* The Lehman Brothers Municipal Bond Index measures the performance of the
investment grade long-term tax-exempt bond market. The Index is unmanaged
and cannot be purchased directly.
** The Lehman Brothers Treasury Index measures the performance of the public
obligations of the U.S. Treasury. The Index is unmanaged and cannot be
purchased directly.
1
July 31, 2002
Dear Shareholder:
We are pleased to present the first unaudited semi-annual report for the
BlackRock Municipal 2018 Term Trust (the "Trust") for the six months ended June
30, 2002. We would like to take this opportunity to review the change in the
Trust's stock price and net asset value (NAV), summarize developments in the
fixed income markets and discuss recent portfolio management activity.
The Trust is a diversified closed-end bond fund whose shares are traded on
the New York Stock Exchange under the symbol "BPK." The Trust's investment
objectives are to provide current income that is exempt from regular Federal
income tax and to return $15 per share (an amount equal to the Trust's initial
public offering price) to investors on or about December 31, 2018. The Trust
will invest at least 80% of its total assets in municipal bonds that at the time
of investment are investment grade quality (rated "Baa" or "BBB" or better by a
major rating agency or of equivalent quality). The Trust may invest up to 20% of
its total assets in municipal bonds that at the time of investment are
non-investment grade (rated "Ba/BB" or "B" by a major rating agency or of
equivalent quality).
The table below summarizes the changes in the Trust's share price and NAV:
--------------------------------------------------------------------------------
06/30/02 12/31/01 CHANGE HIGH LOW
--------------------------------------------------------------------------------
Share Price $13.50 $13.06 3.37% $14.02 $12.98
--------------------------------------------------------------------------------
Net Asset Value (NAV) $14.39 $13.66 5.34% $14.43 $13.71
--------------------------------------------------------------------------------
THE FIXED INCOME MARKETS
Economic performance was mixed during the semi-annual period ended June 30,
2002, as volatility and instability were prevalent throughout all sectors of the
market. The U.S. economy showed signs of recovery, but mixed economic data and
dismal performance in the equity markets caused a massive unwinding of Fed
tightening expectations. Structural imbalances in the U.S. economy became
evident and the effects of the short-term stimulus post September 11th
diminished, causing the Fed to remain on hold and leave the Federal Funds rate
unchanged at 1.75%. Positive economic data included a rise in first quarter 2002
GDP of 6.1%, the fastest rate in two years, strong manufacturing data, an 8.4%
rise in first quarter 2002 productivity and the Consumer Confidence Index
advancing from year-end levels. Low inventory levels should support
manufacturing data, but we are skeptical about the continued strength of
consumer demand, which is essential to a sustained economic recovery. The
long-term sustainability of the highly leveraged consumer remains a pivotal
issue to the strength of the economic recovery. Although fundamentals support a
recovery, declining equities and a plummeting dollar continue to erode investor
confidence. We remain uncertain that a near-term business investment recovery
will materialize, as pricing power remains weak. While second quarter weakness
may be overstated, the likely outcome is one of several quarters of sub-par
growth in the 2.5%-3.0% range.
Year-to-date, rates have fallen across the yield curve. The Treasury market
returned 3.61% during the period, posting exceptionally strong months in April
and June as risk aversion dominated the markets. Over the course of the period,
the yield curve steepened in reaction to mixed economic data and a proliferation
of negative headlines in the corporate sector. Looking ahead, the budget surplus
of 2001 is unlikely to be sustained due to anemic tax revenues and a sharp rise
in defense spending, which should result in larger auction sizes. However, the
allowable debt limit set by Congress will soon be reached, possibly leading the
Treasury to pursue additional methods of financing until it can return to
regular auctions. As of June 30, 2002, the 10-year Treasury was yielding 4.80%
versus 5.05% on December 31, 2001.
On a tax-adjusted basis, municipal bonds outperformed the taxable domestic
bond market for the semi-annual period ended June 30, 2002, returning 7.55% (as
measured by the Lehman Municipal Bond Index at a tax bracket of 38.6%) versus
3.79% for the Lehman Aggregate Index. Retail investment has reached record
highs, as investors searched for a lower volatility asset class providing high
after-tax returns. Institutional demand has also remained strong and is being
fueled by increased profitability on the part of insurance companies, the search
for stable income and asset allocation trades away from segments of the market
experiencing higher volatility. Over the period, strong demand was met by
significant new issuance as the first quarter of 2002 posted a 10% increase over
the same period in 2001 and was the largest first quarter total on record.
Through June, new
2
bond issuance remained robust, bringing total year-to-date issuance to nearly
$170 billion, and is on pace to be the largest issuance year in history. The
municipal yield curve remains historically steep, as the short end of the curve
has outperformed Treasuries over the recent months while longer maturities
performed in line with their Treasury counterparts.
THE TRUST'S PORTFOLIO AND INVESTMENT STRATEGY
The Trust's portfolio is actively managed to diversify exposure to various
sectors, issuers, revenue sources and security types. BlackRock's investment
strategy emphasizes a relative value approach, which allows the Trust to
capitalize upon changing market conditions by rotating municipal sectors and
coupons. Additionally, the Trust emphasizes securities whose maturity dates
match the termination date of the Trust.
Additionally, the Trust employs leverage to enhance its income by borrowing
at short-term municipal rates and investing the proceeds in longer maturity
issues that have higher yields. The degree to which the Trust can benefit from
its use of leverage may affect its ability to pay high monthly income. At the
end of the period, the Trust's leverage amount was approximately 36% of total
assets.
The following charts show the Trust's asset composition and credit quality
allocations:
--------------------------------------------------------------------------------
SECTOR BREAKDOWN
--------------------------------------------------------------------------------
SECTOR JUNE 30, 2002 DECEMBER 31, 2001
--------------------------------------------------------------------------------
Industrial & Pollution Control 24% 21%
--------------------------------------------------------------------------------
Hospitals 20% 14%
--------------------------------------------------------------------------------
Tobacco 12% 6%
--------------------------------------------------------------------------------
Housing 10% 14%
--------------------------------------------------------------------------------
City, County & State 6% 11%
--------------------------------------------------------------------------------
Power 6% 6%
--------------------------------------------------------------------------------
Education 5% 9%
--------------------------------------------------------------------------------
Lease Revenue 4% 8%
--------------------------------------------------------------------------------
Transportation 3% 7%
--------------------------------------------------------------------------------
Resource Recovery 3% 3
--------------------------------------------------------------------------------
District 1% --
--------------------------------------------------------------------------------
Tax 1% --
--------------------------------------------------------------------------------
Water & Sewer 1% 1%
--------------------------------------------------------------------------------
Other 4% --
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CREDIT RATING* JUNE 30, 2002 DECEMBER 31, 2001
--------------------------------------------------------------------------------
AAA/Aaa 24% 38%
--------------------------------------------------------------------------------
AA/Aa 6% 19%
--------------------------------------------------------------------------------
A/A 34% 24%
--------------------------------------------------------------------------------
BBB/Baa 24% 16%
--------------------------------------------------------------------------------
BB/Ba 7% 3%
--------------------------------------------------------------------------------
Not Rated 5% --
--------------------------------------------------------------------------------
-------------
* Using the higher of Standard & Poor's, Moody's or Fitch's rating.
3
We look forward to managing the Trust to benefit from the opportunities
available in the fixed income markets and to meet its investment objectives. We
thank you for your investment in the BlackRock Municipal 2018 Term Trust. Please
feel free to contact our marketing center at (800) 227-7BFM (7236) if you have
specific questions which were not addressed in this report.
Sincerely,
/s/ Robert S. Kapito /s/ Kevin M. Klingert
Robert S. Kapito Kevin M. Klingert
Vice Chairman and Portfolio Manager Managing Director and Portfolio Manager
BlackRock Advisors, Inc. BlackRock Advisors, Inc.
--------------------------------------------------------------------------------
BLACKROCK MUNICIPAL 2018 TERM TRUST
--------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BPK
--------------------------------------------------------------------------------
Initial Offering Date: October 26, 2001
--------------------------------------------------------------------------------
Closing Share Price as of 6/30/02: $13.50
--------------------------------------------------------------------------------
Net Asset Value as of 6/30/02: $14.39
--------------------------------------------------------------------------------
Yield on Closing Share Price as of 6/30/02 ($13.50)(1): 5.78%
--------------------------------------------------------------------------------
Current Monthly Distribution per Common Share(2): $ 0.065
--------------------------------------------------------------------------------
Current Annualized Distribution per Common Share(2): $ 0.780
--------------------------------------------------------------------------------
(1) Yield on closing share price is calculated by dividing the current
annualized distribution per share by the closing share price.
(2) The distribution is not constant and is subject to change.
PRIVACY PRINCIPLES OF THE TRUST
The Trust is committed to maintaining the privacy of shareholders and to
safeguarding its non-public personal information. The following information is
provided to help you understand what personal information the Trust collects,
how we protect that information and why, in certain cases, we may share
information with select other parties.
Generally, the Trust does not receive any non-public personal information
relating to its shareholders, although certain nonpublic personal information of
its shareholders may become available to the Trust. The Trust does not disclose
any non-public personal information about its shareholders or former
shareholders to anyone, except as permitted by law or as is necessary in order
to service shareholder accounts (for example, to a transfer agent or third party
administrator).
The Trust restricts access to non-public personal information about the
shareholders to BlackRock employees with a legitimate business need for the
information. The Trust maintains physical, electronic and procedural safeguards
designed to protect the non-public personal information of its shareholders.
4
--------------------------------------------------------------------------------
BLACKROCK MUNICIPAL 2018 TERM TRUST
PORTFOLIO OF INVESTMENTS JUNE 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPTION
AMOUNT CALL VALUE
RATING* (000) DESCRIPTION PROVISIONS+ (NOTE 1)
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--158.9%
Alabama--9.1%
Aa1 $ 8,925 Alabama 21st Century Auth. Tobacco Settlement
Rev., 5.75%, 12/01/18 .................................... 12/11 @ 101 $ 9,032,636
Baa2 5,000 Courtland Ind. Dev. Brd. PCR, Champion Intl.
Corp. Proj., 6.15%, 6/01/19 .............................. 6/05 @ 102 5,041,900
BBB 1,000 Courtland Sld.Wst. Disp., Champion Intl.
Corp. Proj., Proj. A, 5.90%, 2/01/17 ..................... 2/04 @ 102 1,008,260
A2 5,845 Huntsville Hlth. Care Auth. Rev.,
Ser. A, 5.625%, 6/01/22 .................................. 6/12 @ 100 5,778,250
-------------
20,861,046
-------------
CALIFORNIA--2.1%
BB 5,000 Los Angeles Regl. Arpt. Impvt. Corp. Lease
Rev., Amer. Airlines Inc., Ser. C,
7.50%, 12/01/24 .......................................... 12/12 @ 102 4,870,600
-------------
CONNECTICUT--3.1%
Baa3 3,750++ Mashantucket Western Pequot Tribe Spec.
Rev., Ser. B, 5.75%, 9/01/18 ............................. 9/07 @ 102 3,825,750
-------------
BBB- 3,150 Mohegan Tribe Indians Gaming Auth.
Rev., Pub. Impvt. Priority Distr., 6.00%, 1/01/16 ........ 1/11 @ 101 3,167,041
-------------
6,992,791
-------------
Florida--7.3%
Aaa 15,000 Escambia Cnty. Hlth. Facs. Auth. Hlth. Care. Fac.
Rev., 5.95%, 7/01/20, AMBAC No Opt. Call ................. 16,773,600
-------------
GEORGIA--2.4%
Gainesville & Hall Cnty. Georgia Hosp. Auth.
Rev. Antic. Cert., Northeast Georgia
Hlth. Sys. Inc. Proj., ...................................
A- 2,700 5.25%, 5/15/18 5/11 @ 100 2,641,815
A- 2,800 5.50%, 5/15/21 5/11 @ 100 2,741,256
-------------
5,383,071
-------------
ILLINOIS--16.5%
AAA 5,000 Chicago O'Hare Intl. Arpt. Rev.,
Ser. A, 5.75%, 1/01/18, MBIA ............................. 1/12 @ 100 5,228,250
A- 7,500 Illinois Dev. Fin. Auth. Hosp.
Rev., Adventist Hlth. Sys. Sunbelt Obl., 5.50%,
11/15/20 ................................................. 11/09 @ 101 7,236,675
A 10,000 Illinois Dev. Fin. Auth. PCR, Ser. C, 5.95%, 8/15/26 ...... 12/06 @ 101 10,094,000
Baa2 5,980 Illinois Edl. Facs. Auth. Student Hsg.
Rev., Edl. Advancement Fund, Univ. Ctr. Proj.,
6.00%, 5/01/22 ........................................... 5/12 @ 101 5,833,969
Illinois Sports Facs. Auth., St. Tax Supported
Rev., AMBAC,
AAA 1,885 Zero Coupon, 6/15/19 ..................................... 6/15 @ 101 1,261,310
AAA 1,985 Zero Coupon, 6/15/20 ..................................... 6/15 @ 101 1,321,375
AAA 2,090 Zero Coupon, 6/15/21 ..................................... 6/15 @ 101 1,384,102
Kane and Du Page Cntys. Cmnty. Unit Sch. Dist.
No. 303, GO, Ser. B, FSA,
Aaa 4,625 Zero Coupon, 1/01/18 ..................................... 1/12 @ 72.424 2,053,731
Aaa 4,100 Zero Coupon, 1/01/19 ..................................... 1/12 @ 67.935 1,700,106
Aaa 2,950 Zero Coupon, 1/01/21 ..................................... 1/12 @ 60.037 1,075,865
Aaa 1,700 Zero Coupon, 1/01/22 ..................................... 1/12 @ 56.453 580,414
-------------
37,769,797
-------------
INDIANA--9.6%
Aa3 13,970 Indiana Hlth. Fac. Fin. Auth.
Rev., Sisters of St. Francis, 5.75%, 11/01/21 ............ 11/11 @ 101 14,395,247
BBB 3,500 Indianapolis Arpt. Auth. Rev.,
Fed. Express Corp. Proj., 7.10%, 1/15/17 ................. 7/04 @ 102 3,737,405
A3 4,000 Petersburg PCR, Indiana Pwr. & Lt. Conv.,
5.75%, 8/01/21 ........................................... 8/11 @ 102 3,755,960
-------------
21,888,612
-------------
LOUISIANA--10.2%
NR 4,000 Louisiana Pub. Facs. Auth. Rev., Dept. Pub.
Safety Fire Term. Bond, 5.875%,
6/15/14 .................................................. 6/10 @ 100 4,015,560
BBB 10,000 Morehouse Parish PCR, Intl. Paper Co. Proj.,
Ser. A, 5.25%, 11/15/13 .................................. No Opt. Call 10,171,800
A1 10,000 Tobacco Settlement Fin. Corp. Rev.,
Ser. 2001 B, 5.875%, 5/15/39 5/11@ 101 9,116,000
-------------
23,303,360
-------------
See Notes to Financial Statements.
5
-------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPTION
AMOUNT CALL VALUE
RATING* (000) DESCRIPTION PROVISIONS+ (NOTE 1)
-------------------------------------------------------------------------------------------------------------------
MICHIGAN--14.4%
BBB $ 5,000 Dickinson Cnty. Econ. Dev. Corp. PCR, Champion Intl. Corp.
Proj., 5.85%, 10/01/18 ........................................ 10/03 @ 102 $ 4,981,800
Aaa 11,300 Forest Hills Pub. Schs., GO, 5.25%, 5/01/20, FGIC .............. 5/10 @ 100 11,547,018
A1 5,450 Michigan St. Hosp. Fin. Auth. Rev., Henry Ford Hlth. Sys.,
Ser. A, 6.00%, 11/15/19 ....................................... 11/09 @ 101 5,620,585
BB+ 9,000 Midland Cnty. Econ. Dev. Rev., Ser. A, 6.875%, 7/23/09 ......... 7/07 @ 101 9,165,600
Pontiac Tax Increment Fin. Auth. Rev., ACA,
A 1,000 Tax Increment Dev. Area 3, 5.375%, 6/01/17 .................... 6/12 @ 101 1,002,390
A 700 Tax Increment Dev. Area 2, 5.625%, 6/01/22 .................... 6/12 @ 101 696,178
-------------
33,013,571
-------------
MISSISSIPI--4.7%
BBB 9,800 Lowndes Cnty. Sld. Wst. Disp. & PCR, Weyerhaeuser Co. Proj.,
Ser. A, 6.80%, 4/01/22 ....................................... No Opt. Call 10,758,538
-------------
NEW HAMPSHIRE--6.3%
A+ 2,025 New Hampshire Hlth. & Ed. Facs., Exeter
Proj., 6.00%, 10/01/24 . ...................................... 10/11 @ 101 2,078,116
AAA 12,000 New Hampshire St. Bus. Fin. Auth. PCR, Pub. Svc. Co. Proj.,
Ser. C, 5.45%, 5/01/21, MBIA .................................. 5/12 @ 101 12,421,200
-------------
14,499,316
-------------
NEW JERSEY--8.5%
New Jersey Econ. Dev. Auth.,
Baa3 8,410 Econ. Dev. Rev., Kapkowski Road Landfill Proj.,
5.50%, 4/01/16 ........................................... No. Opt. Call 8,268,712
BB- 6,750 Econ. Dev. Rev., Continental Airlines Inc. Proj.,
7.20%, 11/15/30 .......................................... 11/10 @ 100 6,337,980
BB- 5,250 Spec. Facs. Rev., Continental Airlines Inc. Proj.,
7.00%, 11/15/30 .......................................... 11/10 @ 101 4,865,962
-------------
19,472,654
-------------
NEW YORK--6.1%
NR 14,000 ++ Charter Mac Equity Issuer Trust, Ser. A-3, 6.80%, 10/01/52 10/14 @ 100 14,009,800
-------------
NORTH CAROLINA--1.8%
A3 4,000 Wake Cnty. Ind. Facs. & Poll. Ctrl. Fin. Auth. Rev.,
Carolina Pwr. & Lt. Co. Proj.,
5.375%, 2/01/17 .......................................... 2/12 @ 101 4,043,200
-------------
OHIO--2.3%
A3 5,000 Ohio St. PCR, Gen. Motors Corp. Proj., 5.625%, 3/01/15 No Opt. Call 5,144,900
-------------
PENNSYLVANIA--6.9%
Philadelphia Auth. For Ind. Dev. Lease Rev., Ser. B, FSA,
AAA 5,000 5.50%, 10/01/18 10/11 @ 101 5,328,200
AAA 5,000 5.50%, 10/01/19 10/11 @ 101 5,286,450
West Cornwall Twnshp. Mun. Auth. Coll.
Rev., Elizabethtown Coll. Proj.,
BBB+ 2,500 5.90%, 12/15/18 .......................................... 12/11 @ 100 2,569,725
BBB+ 2,650 6.00%, 12/15/22 .......................................... 12/11 @ 100 2,690,518
-------------
15,874,893
-------------
SOUTH CAROLINA--4.7%
A1 10,960 Tobacco Settlement Rev. Mgmt. Auth. So. Carolina,
Ser. B, 6.00%, 5/15/22 ................................... 5/11 @ 101 10,817,630
TEXAS--22.7%
BBB 2,000 Alliance Arpt. Auth. Inc. Spec. Facs.
Rev., Fed. Express Corp. Proj., 6.375%,
4/01/21 .................................................. 4/06 @ 102 2,044,400
Birdville Indpt. Sch. Dist., GO,
AAA 1,615 Zero Coupon, 2/15/18 ..................................... No Opt. Call 713,652
AAA 1,815 Zero Coupon, 2/15/19 ..................................... No Opt. Call 750,158
AAA 2,625 Zero Coupon, 2/15/20 ..................................... No Opt. Call 1,009,470
AAA 2,500 Zero Coupon, 2/15/21 ..................................... No Opt. Call 904,050
BBB+ 13,625 Brazos River Auth. PCR, TXU Elec. Co. Proj.,
Ser. C, Zero Coupon, 5/01/36 ............................. No Opt. Call 13,885,510
Dallas Ft. Worth Intl. Arpt. Rev., Ser. A, FGIC,
AAA 5,000 5.875%, 11/01/17 ......................................... 11/11 @ 100 5,293,400
AAA 5,000 5.875%, 11/01/18 ......................................... 11/11 @ 100 5,281,950
See Notes to Financial Statements.
6
-------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPTION
AMOUNT CALL VALUE
RATING* (000) DESCRIPTION PROVISIONS+ (NOTE 1)
-------------------------------------------------------------------------------------------------------------------
TEXAS--(CONTINUED)
Texas St. Affordable Hsg. Corp. Mult. Fam. Hsg.
Rev., Arborstone/Baybrook Oaks, Ser. A,
A3 $12,695 5.55%, 11/01/18 .......................................... 11/11 @ 102 $ 12,480,074
A3 9,800 5.75%, 11/01/22 .......................................... 11/11 @ 102 9,637,712
-------------
52,000,376
-------------
UTAH--2.3%
AAA 5,000 Salt Lake City Mun. Bldg. Auth. Lease Rev.,
Ser. A, 5.40%, 10/15/19, AMBAC ........................... 10/09 @ 101 5,175,650
-------------
WASHINGTON--4.8%
Energy Northwest Wind Proj. Rev.,
Baa1 5,000 Ser. A, 6.00%, 7/01/23 1/07 @ 103 4,952,500
Baa1 6,175 Ser. B, 5.875%, 7/01/20 1/07 @ 103 6,109,792
-------------
11,062,292
-------------
WISCONSIN--13.1%
A1 15,000 Badger Tobacco Asset Sec. Corp. Rev., 6.375%, 6/01/32 ..... 6/12 @ 100 14,678,100
Wisconsin St. Hlth. & Edl. Facs. Auth. Rev.,
A 10,000 Wheaton Franciscan Svcs., 6.25%, 8/15/22 ................. 2/12 @ 101 10,481,000
A+ 5,000 Froedert & Cmnty. Hlth. Oblig., 5.375%, 10/01/21 ......... 10/11 @ 101 4,855,550
-------------
30,014,650
-------------
TOTAL LONG-TERM INVESTMENTS (COST $360,857,434) ........... 363,730,347
-------------
SHORT-TERM INVESTMENTS**--0.5%
CALIFORNIA--0.4%
A1+ 1,000 Met. Wtr. Dist., So. California Waterwks. Rev.,
Ser. C-1, 1.95%, 7/01/02, FRDD ........................... N/A 1,000,000
-------------
INDIANA--0.1%
A1+ 200 Indiana St. Dev. Fin. Auth. Environ. Rev., PSI
Energy Inc. Proj, 1.95%, 7/01/02,
FRDD ..................................................... N/A 200,000
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $1,200,000) 1,200,000
-------------
TOTAL INVESTMENTS--159.4% (COST $362,057,434) ............. $364,930,347
Other assets in excess of liabilities--0.7% ............... 1,572,699
Preferred shares at redemption value,
including dividends payable--(60.1)% ...................... (137,620,075)
-------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS--100% $228,882,971
=============
* Using the higher of Standard & Poor's, Moody's or Fitch's rating.
** For purposes of amortized cost valuation, the maturity dates of these
instruments are considered to be the earlier of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
+ Date (month/year) and price of the earliest optional call or redemption.
There may be other call provisions at varying prices at later dates.
++ Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified institutional buyers. As of June 30, 2002, the
Trust held 7.8% of its net assets in securities restricted as to resale.
KEY TO ABBREVIATIONS
------------------------------------------------------------------------------------------------------------------
ACA -- American Capital Access FSA -- Financial Security Assurance
AMBAC -- American Municipal Bond Assurance Corporation GO -- General Obligation
FGIC -- Financial Guaranty Insurance Company MBIA -- Municipal Bond Insurance Association
FRDD -- Floating Rate Daily Demand PCR -- Pollution Control Revenue
------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
7
--------------------------------------------------------------------------------
BLACKROCK MUNICIPAL 2018 TERM TRUST
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $362,057,434) (Note 1) ........... $ 364,930,347
Cash ......................................................... 433,681
Receivable from investments sold ............................. 7,107,169
Interest receivable .......................................... 4,737,012
Other assets ................................................. 2,849
-------------
377,211,058
-------------
LIABILITIES
Payable for investments purchased ............................ 9,461,381
Dividends payable--common shares ............................. 1,034,022
Investment advisory fee payable (Note 2) ..................... 131,731
Deferred Trustees fees ....................................... 2,849
Other accrued expenses ....................................... 78,029
-------------
10,708,012
-------------
PREFERRED SHARES AT REDEMPTION VALUE
$.01 par value per share and $25,000 liquidation
value per share applicable to 5,504 shares,
including dividends payable (Note 1 & 4) ................. 137,620,075
-------------
NET ASSETS APPLICABLE
TO COMMON SHAREHOLDERS ..................................... $ 228,882,971
=============
Composition of Net Assets Applicable
to Common Shareholders:
Par value (Note 4) ....................................... $ 15,908
Paid-in capital in excess of par ......................... 225,681,850
Undistributed net investment income (Note 1) ............. 2,326,552
Accumulated net realized loss (Note 1) ................... (2,014,252)
Net unrealized appreciation (Note 1) ..................... (2,872,913)
-------------
Net assets applicable to common shareholders,
June 30, 2002 ............................................ $ 228,882,971
=============
Net asset value per common share of
beneficial interest:
($228,882,971 / 15,908,028 common shares
of beneficial interest issued and outstanding) ........... $14.39
======
--------------------------------------------------------------------------------
BLACKROCK MUNICIPAL 2018 TERM TRUST
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest (Note 1) ..................................... $ 10,095,554
------------
Expenses
Investment advisory ................................... 716,331
Auction Agent ......................................... 194,352
Registration .......................................... 33,777
Reports to shareholders ............................... 22,415
Independent accountants ............................... 20,381
Custodian ............................................. 19,682
Transfer agent ........................................ 14,265
Trustees .............................................. 13,910
Legal ................................................. 6,112
Miscellaneous ......................................... 21,750
------------
Total expenses ...................................... 1,062,975
Less fees paid indirectly (Note 2) .................... (19,682)
------------
Net expenses .......................................... 1,043,293
------------
Net investment income ................................... 9,052,261
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized loss on investments ............................... (2,014,252)
Net change in unrealized depreciation on investments 11,786,961
------------
Net gain on investments ........................................ 9,772,709
------------
DIVIDENDS TO PREFERRED SHAREHOLDERS
FROM NET INVESTMENT INCOME ..................................... (967,335)
------------
NET INCREASE IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS
RESULTING FROM OPERATIONS ...................................... $ 17,857,635
============
See Notes to Financial Statements.
8
--------------------------------------------------------------------------------
BLACKROCK MUNICIPAL 2018 TERM TRUST
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
--------------------------------------------------------------------------------
FOR THE PERIOD
SIX MONTHS OCTOBER 30, 2001(1)
ENDED THROUGH
JUNE 30, 2002 DECEMBER 31, 2001(2)
------------- ------------------
INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
OPERATIONS:
Net investment income $9,052,261 $ 1,563,176
Net realized loss on investments (2,014,252) --
Net change in unrealized appreciation (depreciation) on investments 11,786,961 (8,914,048)
Dividends to preferred shareholders from net investment income (967,335) (98,393)
------------ ------------
Net increase (decrease) in net assets resulting from operations 17,857,635 (7,449,265)
------------ ------------
DIVIDENDS TO COMMON SHAREHOLDERS FROM NET INVESTMENT INCOME (6,204,135) (1,034,022)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the issuance of common shares -- 208,558,758
Net proceeds from underwriter's over-allotment option exercised -- 17,154,000
------------ ------------
Net proceeds from capital share transactions -- 225,712,758
------------ ------------
Total increase 11,653,500 217,229,471
------------ ------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
Beginning of period 217,229,471 --
------------ ------------
End of period (including undistributed net investment income
of $2,326,552 and $445,761, respectively) $228,882,971 $217,229,471
============ ============
----------
(1) Commencement of investment operations. This information includes the
initial investment by BlackRock Advisors, Inc. (Note 1).
(2) Prior period amounts have been restated to conform to the current period's
presentation under the provisions of EITF D-98 (Note 1).
See Notes to Financial Statements.
9
--------------------------------------------------------------------------------
BLACKROCK MUNICIPAL 2018 TERM TRUST
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
FOR THE PERIOD
OCTOBER 30, 2001(1)
SIX MONTHS ENDED THROUGH
JUNE 30, 2002 DECEMBER 31, 2001(2,3)
---------------- ---------------------
PER COMMON SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period(4) ....................................... $ 13.66 $ 14.33
--------- --------
Investment operations:
Net investment income ....................................................... 0.57 0.10
Net realized and unrealized gain (loss) on investments ...................... (0.61) (0.55)
Dividends to preferred shareholders from net investment income .............. (0.06) (0.01)
--------- --------
Net increase (decrease) from investment operations ............................ 1.12 (0.46)
--------- --------
Dividends to common shareholders from net investment income ................... (0.39) (0.07)
--------- --------
Capital charge with respect to issuance of:
Common shares ............................................................... -- (0.03)
Preferred shares ............................................................ -- (0.11)
--------- --------
Total capital charges ......................................................... -- (0.14)
--------- --------
Net asset value, end of period(4) ............................................. $ 14.39) $ 13.66
========= ========
Market value, end of period(4) ................................................ $ 13.50) $ 13.06
========= ========
TOTAL INVESTMENT RETURN5 ...................................................... 6.36%% (12.15)%
========= ========
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS(6,7):
Expenses after fees paid indirectly ........................................... 0.94% 0.93%
Expenses before fees paid indirectly .......................................... 0.96% 0.93%
Net investment income before preferred share dividends ........................ 8.17% 4.39%
Preferred share dividends ..................................................... 0.87% 0.28%
Net investment income available to common shareholders ........................ 7.30% 4.11%
SUPPLEMENTAL DATA:
Average net assets of common shareholders (000) ............................... $223,534 $206,486
Portfolio turnover ............................................................ 39% 0%
Net assets of common shareholders, end of period (000) ........................ $228,883 $217,229
Preferred shares value outstanding (000) ...................................... $137,600 $137,600
Asset coverage per preferred shares, end of period ............................ $ 66,588 $ 64,485
----------
(1) Commencement of investment operations. This information includes the initial
investment by BlackRock Advisors, Inc. (Note 1). Net asset value immediately
after the closing of the public offering was $14.30.
(2) Prior year amounts have been restated to conform to the current period's
presentation under the provisions of EITF D-98 (Note 1).
(3) Calculated using the average shares method.
(4) Net asset value and market value are published in Barron's on Saturday and
The Wall Street Journal on Monday.
(5) Total investment return is calculated assuming a purchase of a common 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.
(6) Ratios are calculated on the basis of income and expenses applicable to both
the common and preferred shares relative to the average net assets of the
common shareholders.
(7) Annualized
The information above represents the unaudited operating performance for a
common share outstanding, total investment return, ratios to average net assets
and other supplemental data for 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 common shares.
See Notes to Financial Statements.
10
--------------------------------------------------------------------------------
BLACKROCK MUNICIPAL 2018 TERM TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
NOTE 1: ORGANIZATION & ACCOUNTING POLICIES
The BlackRock Municipal 2018 Term Trust (the "Trust") was organized as a
Delaware business trust on September 7, 2001 as a diversified closed-end
management investment company under the Investment Company Act of 1940. The
Trust had no transactions until October 18, 2001 when it sold 8,028 common
shares for $115,001 to BlackRock Advisors, Inc. Investment operations commenced
on October 30, 2001. The Trust's investment objectives are to provide current
income that is exempt from regular Federal income tax and to return $15 per
common share to holders of common shares on or about December 31, 2018. The
ability of issuers of debt securities held by the Trust to meet their
obligations may be affected by economic developments in certain states, a
specific industry or region. No assurance can be given that the Trust's
investment objectives will be achieved.
The following is a summary of significant accounting policies followed by the
Trust.
SECURITIES VALUATION: Municipal securities (including commitments to purchase
such securities on a "when-issued" basis) are valued on the basis of prices
provided by dealers or pricing services selected under the supervision of the
Trust's Trustees. In determining the value of a particular security, pricing
services may use certain information with respect to transactions in such
securities, quotations from bond dealers, market transactions in comparable
securities and various relationships between securities. Short-term investments
may be valued at amortized cost. Any securities or other assets for which such
current market quotations are not readily available are valued at fair value as
determined in good faith under procedures established by and under the general
supervision and responsibility of the Trust's Board of Trustees.
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. The Trust also records interest income on an
accrual basis and amortizes premium and accretes discount to interest income on
securities purchased using the interest method.
SEGREGATION: In cases in which the Investment Company Act of 1940, as amended
and the interpretive positions of the Securities and Exchange Commission ("SEC")
require that the Trust segregate assets in connection with certain Trust
investments (e.g., when issued securities, reverse repurchase agree
ments or futures contracts), the Trust will, consistent with certain
interpretive letters issued by the SEC, designate on its books and records cash
or other liquid debt securities having a market value at least equal to the
amount that would otherwise be required to be physically segregated.
FEDERAL INCOME TAXES: It is the Trust's intention to elect to be treated as a
regular investment company under the Internal Revenue Code and to distribute
sufficient net income to shareholders. For this reason and because substantially
all of the Trust's gross income consists of tax-exempt interest, no Federal
income tax provision is required.
DIVIDENDS AND DISTRIBUTIONS: The 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.
Dividends and distributions to preferred shareholders are accrued and determined
as described in Note 4.
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 a deferred compensation plan approved by the
Board of Trustees on September 24, 2001, non-interested Trustees may elect to
defer receipt of all or a portion of their annual compensation.
Deferred amounts earn a return as though equivalent dollar amounts had been
invested in common shares of other BlackRock Trusts selected by the Trustees.
This has the same economic effect for the Trustees as if the Trustees had
invested the deferred amounts in such other BlackRock Trusts.
The deferred compensation plan is not funded and obligations thereunder
represent general unsecured claims against the general assets of the Trust. The
Trust may, however, elect to invest in common shares of those Trusts selected by
the Trustees in order to match its deferred compensation obligations.
CHANGE IN FINANCIAL STATEMENT CLASSIFICATION FOR AMPS: In accordance with the
provisions of EITF D-98, "Classification and Measurement of Redeemable
Securities," effective for the current period, the Trust has reclassified its
Auction Market Preferred Shares ("AMPS") outside of permanent equity in the net
assets section of the Statement of Assets and Liabilities. In addition,
distributions to AMPS shareholders are now classified as a
11
component of net assets resulting from operations on the Statement of Operations
and Changes in Net Assets and as a component of the investment operations in the
Financial Highlights. Prior period amounts presented have been restated to
conform to this period's presentation. This change has no impact on the net
assets applicable to common shares of the Trust.
NOTE 2: AGREEMENTS
The Trust has an Investment Advisory Agreement with BlackRock Advisors, Inc.
(the "Advisor"), a wholly owned subsidiary of BlackRock, Inc. BlackRock
Financial Management, Inc., a wholly owned subsidiary of BlackRock, Inc., serves
as sub-advisor to the Trust. BlackRock, Inc. is an indirect majority owned
subsidiary of PNC Financial Services Group, Inc. The investment management
agreement covers both investment advisory and administration services.
The investment advisory fee paid to the Advisor is computed weekly and
payable monthly at an annual rate of 0.40% of the Trust's average weekly managed
assets. "Managed assets" means the total assets of the Trust (including any
assets attributable to any preferred shares that may be outstanding) minus the
sum of accrued liabilities (other than debt representing financial leverage).
The total dollar amounts paid to the Advisor by the Trust under the Investment
Advisory Agreement for the six months ended June 30, 2002 and the period ended
December 31, 2001, were $716,331 and $179,716, respectively.
Pursuant to the agreements, the Advisor provides continuous supervision of
the investment portfolio, pays the compensation of officers of the Trust who are
affiliated persons of the Advisor, occupancy and certain clerical and accounting
costs of the Trust. The Trust bears all other costs and expenses, which include
reimbursements to the Advisor for certain operational support services provided
to the Trust.
Pursuant to the terms of the custody agreement, the Trust receives earnings
credits from its custodian when positive cash balances are maintained, which are
used to offset custody fees. The earnings credits for the six months ended June
30, 2002, were approximately $19,682.
NOTE 3: PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term investments,
for the six months ended June 30, 2002, aggregated $140,828,196 and
$138,771,717, respectively.
The Federal income tax basis of the Trust's investments at June 30, 2002 was
$362,049,708, and accordingly, net unrealized appreciation was $2,880,639 (gross
unrealized appreciation--$5,747,092, gross unrealized depreciation--$2,866,453).
NOTE 4: CAPITAL
There are an unlimited number of $.001 par value common shares of beneficial
interest authorized. The Trust may classify or reclassify any unissued common
shares into one or more series of preferred shares. Of the 15,908,028 common
shares outstanding at June 30, 2002, the Advisor owned 8,028 shares.
Transactions in common shares of beneficial interest for the period ending
December 31, 2001 were as follows:
Shares issued in connection with
initial public offering 14,708,028
Shares issued in connection with
the exercise of the underwriters'
over-allotment option 1,200,000
----------
Net increase in shares outstanding 15,908,028
==========
Offering costs of $462,000 incurred in connection with the Trust's offering
of common shares have been charged to paid-in capital in excess of par of the
common shares.
On December 14, 2001, the Trust reclassified 5,504 common shares of
beneficial interest and issued two series of Auction Market Preferred Shares
("preferred shares") Series W7--2,752 and Series R7--2,752. The preferred shares
have a liquidation value of $25,000 per share plus any accumulated unpaid
dividends. Underwriting discounts of $1,376,000 and offering costs of $331,743
incurred in connection with the preferred share offering have been charged to
paid-in capital in excess of par of the common shares.
Dividends on Series W7 and Series R7 are cumulative at a rate which is reset
every 7 days based on the results of an auction. Dividend rates ranged from
1.25% to 1.60% during the six months ended June 30, 2002.
The Trust may not declare dividends or make other distributions on common
shares or purchase any such shares if, at the time of the declaration,
distribution or purchase, asset coverage with respect to the outstanding
preferred shares would be less than 200%.
The preferred shares are redeemable at the option of the Trust, in whole or
in part, on any dividend payment date at $25,000 per share plus any accumulated
or unpaid dividends whether or not declared. The preferred shares are also
subject to mandatory redemption at $25,000 per share plus any accumulated or
unpaid dividends, whether or not declared, if certain requirements relating to
the composition of the assets and liabilities of the Trust as set forth in the
Declaration of Trust are not satisfied.
The holders of preferred shares have voting rights equal to the holders of
common shares (one vote per share) and will vote together with holders of common
shares as a single class.
12
However, holders of preferred shares are also entitled to elect two of the
Trust's Trustees. In addition, the Investment Company Act of 1940 requires that
along with approval by shareholders that might otherwise be required, the
approval of the holders of a majority of any outstanding preferred shares,
voting separately as a class would be required to (a) adopt any plan of
reorganization that would adversely affect the preferred shares and (b) take any
action requiring a vote of security holders, including, among other things,
changes in the Trust's subclassification as a closed-end investment company or
changes in its fundamental investment restrictions.
NOTE 5: DIVIDENDS
Subsequent to June 30, 2002, the Board of Trustees of the Trust declared a
dividend of $0.065 per common share payable August 1, 2002 to shareholders of
record on July 15, 2002. For the period July 1, 2002 to July 31, 2002, dividends
declared on preferred shares totaled $151,525, in aggregate for the two
outstanding preferred share series.
13
--------------------------------------------------------------------------------
BLACKROCK MUNICIPAL 2018 TERM TRUST
DIVIDEND REINVESTMENT PLAN
--------------------------------------------------------------------------------
Pursuant to the Trust's Dividend Reinvestment Plan (the "Plan"), common
shareholders are automatically enrolled to have all distributions of dividends
and capital gains reinvested by EquiServe Trust Company, N.A. (the "Plan Agent")
in Trust shares pursuant to the Plan. Shareholders who elect not to participate
in the Plan will receive all distributions in cash paid by check and mailed
directly to the shareholders of record (or if the shares are held in street or
nominee name, then to the nominee) by the Plan Agent.
The Plan Agent serves as agent for the shareholders in administering the
Plan. After the Trust declares a dividend or determines to make a capital gain
distribution, the Plan Agent will acquire shares for the participants' accounts,
by the purchase of outstanding shares on the open market ("open market
purchases"), on the New York Stock Exchange or elsewhere. The Trust will not
issue any new shares under the Plan.
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent and will receive certificates for whole Trust shares and a cash
payment for any fraction of a Trust share.
The Plan Agent's fees for handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases. The automatic reinvestment of dividends and
distributions will not relieve participants of any Federal income tax that may
be payable on such dividends or distributions.
The Trust reserves the right to amend or terminate the Plan. There is no
direct service charge to participants in the Plan; however, the Trust reserves
the right to amend the Plan to include a service charge payable by the
participants. All correspondence concerning the Plan should be directed to the
Plan Agent at (800) 699-1BFM or 150 Royall Street, Canton, MA 02021.
14
--------------------------------------------------------------------------------
BLACKROCK MUNICIPAL 2018 TERM TRUST
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
There have been no material changes in the Trust's investment objectives
or policies that have not been approved by the shareholders or to its charter or
by-laws or in the principal risk factors associated with investment in the
Trust. There have been no changes in the persons who are primarily responsible
for the day-to-day management of the Trust's portfolio.
Quarterly performance and other information regarding the Trust may be
found on BlackRock's website, which can be accessed at
http://www.blackrock.com/funds/cefunds.html. This reference to BlackRock's
website is intended to allow investors public access to quarterly information
regarding the Trust and is not intended to incorporate BlackRock's website into
this report.
The Annual Meeting of Trust Shareholders was held May 23, 2002 to vote on the
following matter:
To elect two Trustees as follows:
TRUSTEES: CLASS TERM EXPIRING
------- ------ ----- --------
Richard E. Cavanagh ........... I 3 years 2005
James Clayburn La Force, Jr.... I 3 years 2005
Trustees whose term of office continues beyond this meeting are Andrew F.
Brimmer, Kent Dixon, Frank J. Fabozzi, Laurence D. Fink*, Walter F. Mondale and
Ralph L. Schlosstein.
Shareholders elected the two Trustees. The results of the voting were as
follows:
VOTES FOR** VOTES AGAINST** ABSTENTIONS**
--------- ------------- -----------
Richard E. Cavanagh .......... 5,409 -- 90
James Clayburn La Force, Jr. . 15,659,585 -- 166,627
----------
* Laurence D. Fink has resigned his positions as Trustee and Chairman of the
Board effective August 22, 2002. The Board of Trustees elected Ralph L.
Schlosstein as the new Chairman of the Board, elected Robert S. Kapito as the
new President of the Trust and appointed Robert S. Kapito as a new Trustee of
the Board effective August 22, 2002.
** The votes represent common and preferred shareholders voting as a single
class except for Richard E. Cavanagh who was voted on and elected by the
preferred shareholders only.
Certain of the officers of the Trust listed on the back cover of this
Report to Shareholders, are also officers of the Advisor or Sub-Advisor. They
serve in the following capacities for the Advisor or Sub-Advisor: Robert S.
Kapito--Director and Vice Chairman of the Advisor and Vice Chairman of the
Sub-Advisor, Kevin M. Klingert--Director and Managing Director of the Advisor
and Managing Director of the Sub-Advisor, Henry Gabbay--Managing Director of the
Advisor and the Sub-Advisor, Anne Ackerley--Managing Director of the Advisor and
the Sub-Advisor and Richard M. Shea and James Kong--Managing Directors of the
Sub-Advisor.
15
--------------------------------------------------------------------------------
BLACKROCK MUNICIPAL 2018 TERM TRUST
INVESTMENT SUMMARY
--------------------------------------------------------------------------------
THE TRUST'S INVESTMENT OBJECTIVES
The BlackRock Municipal 2018 Term Trust's investment objectives are to provide
current income that is exempt from regular Federal income tax and to return $15
per common share to holders of common shares on or about December 31, 2018.
WHO MANAGES THE TRUST?
BlackRock Advisors, Inc. (the "Advisor") manages the Trust. The Advisor is a
wholly owned subsidiary of BlackRock, Inc. ("BlackRock"), which is one of the
largest publicly traded investment management firms in the United States with
$250 billion of assets under management as of June 30, 2002. BlackRock manages
assets on behalf of institutional and individual investors worldwide through a
variety of equity, fixed income, liquidity and alternative investment products,
including the BlackRock Funds and BlackRock Provident Institutional Funds. In
addition, BlackRock provides risk management and investment system services to a
growing number of institutional investors under the BlackRock Solutions name.
Clients are served from the Company's headquarters in New York City, as well as
offices in Boston, Edinburgh, Hong Kong, San Francisco, Tokyo and Wilmington.
BlackRock is a member of The PNC Financial Services Group (NYSE: PNC), and is
majority-owned by PNC and by BlackRock employees.
WHAT CAN THE TRUST INVEST IN?
Under normal conditions, the Trust expects to continue to manage its assets so
that at least 80% of its investments are rated at least investment grade ("BBB"
by Standard & Poor's or "Baa" by Moody's Investor Services) and up to 20% of its
assets are rated below investment grade ("Ba/BB" or "B") or that are unrated but
deemed to be of comparable quality by the Advisor.
WHAT IS THE ADVISOR'S INVESTMENT STRATEGY?
The Advisor will seek to meet the Trust's investment objective by managing the
assets of the Trust so as to return the initial offering price of ($15 per
share) on or about December 31, 2018. The Advisor will implement a strategy that
will seek to closely match the maturity or call provisions of the assets of the
portfolio with the future return of the initial investment at the end of 2018.
At the Trust's termination, BlackRock expects that the value of the securities
which have matured, combined with the value of the securities that are sold or
are called, if any, will be sufficient to return the initial offering price to
investors. On a continuous basis, the Trust will seek its objective by actively
managing its portfolio of municipal obligations and retaining a portion of its
income each year.
In addition to seeking the return of the initial offering price, the Advisor
also seeks to provide current income exempt from regular Federal income tax to
investors. The portfolio managers will attempt to achieve this objective by
investing in securities that provide competitive tax-exempt income. In addition,
leverage will be used to enhance the income of the portfolio. In order to
maintain competitive yields as the Trust approaches maturity and depending on
market conditions, the Advisor will attempt to purchase securities with call
protection or maturities as close to the Trust's maturity date as possible.
Securities with call protection should provide the portfolio with some degree of
protection against reinvestment risk during times of lower prevailing interest
rates. Since the Trust's primary goal is to return the initial offering price at
maturity, any cash that the Trust receives prior to its maturity date may be
reinvested in securities with maturities which coincide with the remaining term
of the Trust. It is important to note that the Trust will be managed so as to
preserve the integrity of the return of the initial offering price. If market
conditions, such as high interest rate volatility, force a choice between
current income and risking the return of the initial offering price, it is
likely that the return of the initial offering price will be emphasized.
16
HOWARE THE TRUST'S SHARES PURCHASED AND SOLD? DOES THE TRUST PAY DIVIDENDS
REGULARLY?
The Trust's common shares are traded on the New York Stock Exchange which
provides investors with liquidity on a daily basis. Orders to buy or sell shares
of the Trust must be placed through a registered broker or financial advisor.
The Trust pays monthly dividends which are typically paid on the first business
day of the month. For shares held in the shareholder's name, dividends may be
reinvested in additional shares of the Trust through its transfer agent,
EquiServe Trust Company, N.A. Investors who wish to hold shares in a brokerage
account should check with their financial advisor to determine whether their
brokerage firm offers dividend reinvestment services.
LEVERAGE CONSIDERATIONS IN THE TRUST
The Trust employs leverage primarily through the issuance of preferred shares.
Leverage permits the Trust to borrow money at short-term rates and reinvest that
money in longer-term assets, which typically offer higher interest rates. The
difference between the cost of the borrowed funds and the income earned on the
proceeds that are invested in longer-term assets is the benefit to the Trust
from leverage.
Leverage increases the duration (or price sensitivity of the net assets with
respect to changes in interest rates) of the Trust, which can improve the
performance of the Trust in a declining interest rate environment, but can cause
net assets to decline faster in a rapidly rising interest rate environment. The
Advisor's portfolio managers continuously monitor and regularly review the
Trust's use of leverage and the Trust may reduce, or unwind, the amount of
leverage employed should the Advisor consider that reduction to be in the best
interests of the shareholders.
SPECIAL CONSIDERATIONS AND RISK FACTORS RELEVANT TO THE TRUST
THE TRUST IS INTENDED TO BE A LONG-TERM INVESTMENT AND IS NOT A SHORT-TERM
TRADING VEHICLE.
INVESTMENT OBJECTIVES. Although the objectives of the Trust are to provide
current income that is exempt from regular Federal income tax and to return $15
per common share to holders of common shares on or about December 31, 2018,
there can be no assurance that these objectives will be achieved.
DIVIDEND CONSIDERATIONS. The income and dividends paid by the Trust are likely
to decline to some extent over the term of the Trust due to the anticipated
shortening of the dollar-weighted average maturity of the Trust's assets.
LEVERAGE. The Trust utilizes leverage through the issuance of preferred shares,
which involves special risks. The Trust's net asset value and market value may
be more volatile due to its use of leverage.
MARKET PRICE OF SHARES. The shares of closed-end investment companies such as
the Trust trade on the New York Stock Exchange (NYSE symbol: BPK) and as such
are subject to supply and demand influences. As a result, shares may trade at a
discount or a premium to their net asset value.
MUNICIPAL OBLIGATIONS. The value of municipal debt securities generally varies
inversely with changes in prevailing market interest rates. Depending on the
amount of call protection that the securities in the Trust have, the Trust may
be subject to certain reinvestment risks in environments of declining interest
rates.
HIGH YIELD RISK. The Trust may invest in high yield bonds, which involves
additional risks, including credit risk. The value of high yield, lower quality
bonds is affected by the creditworthiness of the issuers of the securities and
by general economic and specific industry conditions. Issuers of high yield
bonds are not as strong financially as those with higher credit ratings. The
Trust's investment in lower grade securities will expose the Trust to greater
risk than if the Trust owned only higher grade securities.
ILLIQUID SECURITIES. The Trust may invest in securities that are illiquid,
although under current market conditions the Trust expects to do so to only a
limited extent. These securities involve special risks.
ANTITAKEOVER PROVISIONS. Certain antitakeover provisions will make a change in
the Trust's business or management more difficult without the approval of the
Trust's Board of Trustees and may have the effect of depriving shareholders of
an opportunity to sell their shares at a premium above the prevailing market
price.
ALTERNATIVE MINIMUM TAX (AMT). The Trust may invest in securities subject to
alternative minimum tax.
17
--------------------------------------------------------------------------------
BLACKROCK MUNICIPAL 2018 TERM TRUST
GLOSSARY
--------------------------------------------------------------------------------
CLOSED-END FUND: Investment vehicle which initially offers a
fixed number of shares and trades on a stock
exchange. The Trust invests in a portfolio of
securities in accordance with its stated
investment objectives and policies.
DISCOUNT: When a Trust's net asset value is greater
than its market price, the Trust is said to
be trading at a discount.
DIVIDEND: Income generated by securities in a portfolio
and distributed to shareholders after the
deduction of expenses. This Trust declares
and pays dividends to common shareholders on
a monthly basis.
DIVIDEND REINVESTMENT: Common shareholders may have all dividends
and distributions of capital gains
automatically reinvested into additional
shares of the Trust.
MARKET PRICE: Price per share of a security trading in the
secondary market. For a closed-end Trust,
this is the price at which one share of the
Trust trades on the stock exchange. If you
were to buy or sell shares, you would pay or
receive the market price.
NET ASSET VALUE (NAV): Net asset value is the total market value of
all securities and other assets held by the
Trust, including income accrued on its
investments, minus any liabilities including
accrued expenses, divided by the total number
of outstanding common shares. It is the
underlying value of a single common share on
a given day. Net asset value for the Trust is
calculated weekly and published in Barron's
on Saturday and The Wall Street Journal on
Monday.
PREMIUM: When a Trust's market price is greater than
its net asset value, the Trust is said to be
trading at a premium.
PREREFUNDED BONDS: These securities are collateralized by U.S.
Government securities which are held in
escrow and are used to pay principal and
interest on the tax-exempt issue and to
retire the bond in full at the date
indicated, typically at a premium to par.
18
--------------------------------------------------------------------------------
BLACKROCK ADVISORS, INC.
SUMMARY OF CLOSED-END FUNDS
--------------------------------------------------------------------------------
TAXABLE TRUSTS
---------------------------------------------------------------------------------------------------------------------
STOCK MATURITY
PERPETUAL TRUSTS SYMBOL DATE
------ --------
The BlackRock Income Trust Inc. BKT N/A
The BlackRock North American Government Income Trust Inc. BNA N/A
The BlackRock High Yield Trust BHY N/A
BlackRock Core Bond Trust BHK N/A
BlackRock Strategic Bond Trust BHD N/A
TERM TRUSTS
The BlackRock Strategic Term Trust Inc. BGT 12/02
The BlackRock Investment Quality Term Trust Inc. BQT 12/04
The BlackRock Advantage Term Trust Inc. BAT 12/05
The BlackRock Broad Investment Grade 2009 Term Trust Inc. BCT 12/09
TAX-EXEMPT TRUSTS
---------------------------------------------------------------------------------------------------------------------
STOCK MATURITY
PERPETUAL TRUSTS SYMBOL DATE
------ --------
The BlackRock Investment Quality Municipal Trust Inc. BKN N/A
The BlackRock California Investment Quality Municipal Trust Inc. RAA N/A
The BlackRock Florida Investment Quality Municipal Trust RFA N/A
The BlackRock New Jersey Investment Quality Municipal Trust Inc. RNJ N/A
The BlackRock New York Investment Quality Municipal Trust Inc. RNY N/A
The BlackRock Pennsylvania Strategic Municipal Trust BPS N/A
The BlackRock Strategic Municipal Trust BSD N/A
BlackRock California Municipal Income Trust BFZ N/A
BlackRock Municipal Income Trust BFK N/A
BlackRock New York Municipal Income Trust BNY N/A
BlackRock New Jersey Municipal Income Trust BNJ N/A
BlackRock Florida Municipal Income Trust BBF N/A
BlackRock New York Municipal Bond Trust BQH N/A
BlackRock Virginia Municipal Bond Trust BHV N/A
BlackRock Florida Municipal Bond Trust BIE N/A
BlackRock Municipal Bond Trust BBK N/A
BlackRock Maryland Municipal Bond Trust BZM N/A
BlackRock New Jersey Municipal Bond Trust BLJ N/A
BlackRock California Municipal Bond Trust BZA N/A
BlackRock California Municipal Income Trust II BCL N/A
BlackRock New York Municipal Income Trust II BFY N/A
BlackRock Municipal Income Trust II BLE N/A
TERM TRUSTS
The BlackRock Municipal Target Term Trust Inc. BMN 12/06
The BlackRock Insured Municipal 2008 Term Trust Inc. BRM 12/08
The BlackRock California Insured Municipal 2008 Term Trust Inc. BFC 12/08
The BlackRock Florida Insured Municipal 2008 Term Trust BRF 12/08
The BlackRock New York Insured Municipal 2008 Term Trust Inc. BLN 12/08
The BlackRock Insured Municipal Term Trust Inc. BMT 12/10
BlackRock California Municipal 2018 Term Trust BJZ 12/18
BlackRock New York Municipal 2018 Term Trust BLH 12/18
BlackRock Municipal 2018 Term Trust BPK 12/18
IF YOU WOULD LIKE FURTHER INFORMATION PLEASE DO
NOT HESITATE TO CALL BLACKROCK AT (800)
227-7BFM (7236) OR CONSULT WITH YOUR
FINANCIAL ADVISOR.
19
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BLACKROCK
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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*
Kevin M. Klingert, Vice President
Richard M. Shea, Vice President/Tax
Henry Gabbay, Treasurer
James Kong, Assistant Treasurer
Anne Ackerley, Secretary
INVESTMENT ADVISOR
BlackRock Advisors, Inc.
100 Bellevue Parkway
Wilmington, DE 19809
(800) 227-7BFM
SUB-ADVISOR
BlackRock Financial Management, Inc.
40 East 52nd Street
New York, NY 10022
CUSTODIAN
State Street Bank and Trust Company
1 Heritage Drive
North Quincy, MA 02171
TRANSFER AGENT
EquiServe Trust Company, N.A.
150 Royall Street
Canton, MA 02021
(800) 699-1BFM
AUCTION AGENT
The Bank of New York
5 Penn Plaza, 13th Floor
New York, NY 10001
INDEPENDENT AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square
New York, NY 10036
LEGAL COUNSEL - INDEPENDENT TRUSTEES
Debevoise & Plimpton
919 Third Avenue
New York, NY 10022
The accompanying financial statements as of June 30, 2002 were not audited
and accordingly, no opinion is expressed on them.
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Trust shares.
Statements and other information contained in this report are as dated and
are subject to change.
* Laurence D. Fink has resigned his positions as Trustee and Chairman of the
Board effective August 22, 2002. The Board of Trustees elected Ralph L.
Schlosstein as the new Chairman of the Board, elected Robert S. Kapito as the
new President of the Trust and appointed Robert S. Kapito as a new Trustee of
the Board effective August 22, 2002.
BLACKROCK MUNICIPAL 2018 TERM TRUST
c/o BlackRock Advisors, Inc.
100 Bellevue Parkway
Wilmington, DE 19809
(800) 227-7BFM
[Logo] Printed on recycled paper. 09248C-10-6
09248C-20-5
09248C-30-4
MUNICIPAL
2018 TERM TRUST
--------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
JUNE 30, 2002
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