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 811-21457
BlackRock Bond Allocation Target Shares
(Exact name of registrant as specified in charter)
100 Bellevue Parkway
Wilmington, DE 19809
(Address of principal executive offices) (Zip code)
Brian Kindelan, Esq.
BlackRock Advisors, Inc.
100 Bellevue Parkway
Wilmington, Delaware 19809
(Name and address of agent for service)
Registrant’s telephone number, including area code: (800) 441-7762
Date of fiscal year end: September 30, 2005
Date of reporting period: September 30, 2005
Item 1. Reports to Stockholders.
The Registrant’s annual report to shareholders is as follows:
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES FIXED INCOME LIQUIDITY REAL ESTATE
BlackRock Bond Allocation Target Shares
Annual Report
September 30, 2005
[GRAPHIC APPEARS HERE]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE BlackRock
[THIS PAGE INTENTIONALLY LEFT BLANK.]
BlackRock Bond Allocation Target Shares
*BlackRock Bond Allocation Target Shares Series S
*BlackRock Bond Allocation Target Shares Series C
*BlackRock Bond Allocation Target Shares Series M
TABLE OF CONTENTS
Shareholder Letter .........................................................1
Portfolio Summaries
BlackRock Bond Allocation Target Shares Series S .........................2
BlackRock Bond Allocation Target Shares Series C .........................4
BlackRock Bond Allocation Target Shares Series M .........................6
Statements of Net Assets ................................................8-14
Portfolio Financial Statements
Statements of Operations ................................................15
Statements of Changes in Net Assets .....................................16
Financial Highlights ....................................................17
Notes to Financial Statements ..........................................18-21
Report of Independent Registered Public Accounting Firm ...................22
Fund Management ........................................................23-27
Additional Information ....................................................28
PRIVACY PRINCIPLES OF BLACKROCK BOND ALLOCATION TARGET SHARES
BlackRock Bond Allocation Target Shares is committed to maintaining the privacy
of shareholders and to safeguarding their nonpublic personal information. The
following information is provided to help you understand what personal
information BlackRock Bond Allocation Target Shares collects, how we protect
that information, and why in certain cases we may share such information with
select other parties.
BlackRock Bond Allocation Target Shares does not receive any nonpublic personal
information relating to its shareholders who purchase shares through programs
sponsored by broker-dealers. In the event a person becomes a shareholder of
BlackRock Bond Allocation Target Shares through another means, BlackRock Bond
Allocation Target Shares may receive nonpublic personal information regarding
such Investor on account documentation or other forms.
With respect to these shareholders, BlackRock Bond Allocation Target Shares may
also have access to specific information regarding their transactions in
BlackRock Bond Allocation Target Shares. BlackRock Bond Allocation Target
Shares does not disclose any nonpublic personal information about its
shareholders or former shareholders to anyone, except as permitted by law or as
is necessary in order to service our shareholder's account (for example, to a
transfer agent).
BlackRock Bond Allocation Target Shares restricts access to nonpublic personal
information about its shareholders to BlackRock employees with a legitimate
business need for the information. BlackRock Bond Allocation Target Shares
maintains physical, electronic and procedural safeguards designed to protect
the nonpublic personal information of our shareholders.
BlackRock Bond Allocation Target Shares
September 30, 2005
Dear Shareholder,
We are pleased to present the Annual Report of the BlackRock Bond
Allocation Target Shares (the "BATS") Portfolios for the year ended September
30, 2005. We at BlackRock would like to welcome all new shareholders to the
BlackRock Funds Family.
The Annual Report includes important information about each Portfolio:
.. Portfolio Summary - discusses recent portfolio management activity and
highlights total returns.
.. Fund Profile - displays characteristics of each Portfolio's holdings as of
September 30, 2005.
.. Expense Example - discusses costs in a shareholder account and provides
information for a shareholder to estimate his or her expenses and to compare
expenses to other funds.
.. Statement of Net Assets - lists portfolio holdings and includes each
holding's market value and par amount/number of shares as of September 30,
2005. The Statement of Net Assets also contains the net asset value for each
Portfolio.
.. Statement of Operations - displays the components of each Portfolio's
investment income and provides a detailed look at each Portfolio's expenses.
The Statement of Operations also lists the aggregate change in value of a
Portfolio's securities due to market fluctuations and security sales.
.. Statement of Changes in Net Assets - details shareholder distributions,
aggregate realized gains and losses, and the change in net assets from the
beginning of the year to the end of the year.
.. Financial Highlights - include each Portfolio's expense ratios, net asset
values, total returns, distributions per share, and turnover ratios for the
current year.
.. Notes to Financial Statements - provide additional information on fees, a
summary of significant accounting policies, a list of affiliated
transactions, and a summary of purchases and sales of securities.
.. Fund Management Table - lists information regarding the Portfolios' Trustees
and Officers.
At BlackRock, we maintain an unwavering commitment to placing our clients
first and we value the trust you have placed in us. Should you have questions
concerning this report, please contact the sponsor of your wrap-fee program or
other managed account.
Sincerely,
[GRAPHIC APPEARS HERE]
Anne Ackerley
Managing Director
BlackRock Advisors,Inc.
1
BlackRock Bond Allocation Target Shares Series S
Total Net Assets (9/30/05): $9.8 million
Performance Benchmark:
Merrill Lynch 1-3 Year Treasury Index
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management. The Portfolio will principally invest in the
following securities: commercial and residential mortgage-backed securities;
obligations of domestic and non-U.S. corporations; asset-backed securities;
collateralized mortgage obligations and U.S. Treasury and agency securities. The
Portfolio may only buy securities that are rated investment grade at the time of
purchase by a least one nationally recognized rating agency or, if unrated,
determined by the management team to be of similar quality.
Recent Portfolio Management Activity:
. The BlackRock Bond Allocation Target Shares Series S Portfolio
outperformed the benchmark for the annual period. The Series S Portfolio, a
non-diversified fund, is offered only as part of certain wrap fee programs or to
certain managed account clients of BlackRock. These clients typically have a
short duration fixed income account and utilize the Portfolio to gain exposure
to certain types of securities included in the overall account. Since the
Portfolio is one component of a broader account, the portfolio management team
does not utilize a benchmark to manage the Portfolio. The Merrill Lynch 1-3 Year
Treasury Index is the de facto benchmark used for fund reporting purposes.
Because the client's investment in the Portfolio represents only a portion of
the overall short duration account, comparisions of the Portfolio's performance
to that of the benchmark will not typically be meaningful.
. During the first half of the annual period, yields largely increased
as the Federal Reserve (Fed) continued to pursue its policy of interest rate
"normalization." The Fed Funds target rate began the fiscal year at 1.75%. The
Fed would largely stay on message for the next twelve months, emphasizing
sustainable economic growth, contained inflation, and accommodative monetary
conditions. In the beginning of the second half of the annual period, longer
maturity yields largely declined due to the perceived softening of the global
economy. Investor pessimism on future growth was driven primarily by the
dramatic upswing in oil prices. However, by the end of September, the evidence
of economic vitality was compelling enough to survive not only surging energy
costs, but also two highly destructive hurricanes. Longer maturity yields
increased as the Fed began to signal that its greater concern was gathering
inflation. During the annual period, the Federal Open Market Committee (FOMC)
voted a 0.25% tightening at each of its eight meetings. This lifted the Fed
Funds target rate by 2.00% to 3.75%. In contrast, longer interest rates, as
measured by the 10-year Treasury, increased by a modest 0.21%, ending the period
at 4.33%.
. The major domestic spread sectors - agencies, corporates, ABS, CMBS
and MBS - all posted positive excess returns over duration-weighted Treasuries
during the annual period. Investment grade corporates lagged behind the other
domestic spread sectors. Corporate bond performance was driven by both solid
credit fundamentals and strong investor demand in the beginning of the period.
However, with the downgrading of both General Motors and Ford, two of the
largest corporate bond issuers in the world, to below investment grade,
investors became noticeably more cautious. In spite of higher short-term
interest rates and flattening of the yield curve, which has dramatically reduced
the carry advantage of MBS, the sector was able to post a positive excess return
over Treasuries, mainly due to the lack of volatility in interest rate markets.
Most of this positive performance was attained during the fourth quarter of
2004. Valuations of ABS remained stable, and spreads remained near historically
tight levels despite robust supply. Led by home equity loan products, issuance
remains on track to meet 2004's record level. The net supply of agencies
continued to be negative as government sponsored enterprises were unable to grow
given unresolved accounting issues and intense political scrutiny. This lack of
supply has kept spreads tight. CMBS, the best performing domestic spread sector
during the annual period, has enjoyed strong demand due to the sector's
attractive relative value characteristics. Heavy issuance prevented valuations
from getting excessively expensive, and credit statistics indicated solid
fundamentals.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE BOND ALLOCATION
TARGET SHARES SERIES S PORTFOLIO AND THE MERRILL LYNCH 1-3 YEAR
TREASURY INDEX FROM INCEPTION.
[LINE CHART]
Series S Portfolio Merrill Lynch 1-3 Year Treasury Index
------------------ -------------------------------------
10/01/2004 $10,000 $10,000
12/31/2004 10,026 10,002
03/31/2005 10,038 9,976
06/30/2005 10,162 10,089
09/30/2005 10,200 10,098
For period ending September 30, 2005
Average Annual Total Return
1 Year From Inception
---------- ----------------
2.00% 2.00%
The performance information above includes information relating to the
portfolio since the commencement of operations of the portfolio on 10/1/04.
Past performance is not predictive of future results. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
2
BlackRock Bond Allocation Target Shares Series S
FUND PROFILE
Credit Quality (% of long-term investments)/1/
AAA 96.7%
AA 3.2
BBB 0.1
-----
Total 100.0%
=====
Portfolio Statistics
Average maturity (years) 1.6
Effective Duration/2/ 1.20
1 Using the higher of Standard & Poor's ("S&P's") or Moody's Investors
Service ("Moody's") rating.
2 Duration measures a Portfolio's price risk. Each year of duration
represents an expected 1% change in the net asset value of the Portfolio
for every 1% change in interest rates. Effective duration is typically
calculated for bonds with embedded options and assumes that expected cash
flows will fluctuate as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur ongoing costs and other Portfolio
expenses. However, BlackRock has agreed irrevocably to waive all fees and
reimburse all expenses, except extraordinary expenses, incurred by the
portfolio. This Example is intended to help you understand your ongoing costs
(in dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2005 to September 30,
2005.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your shares, in the row entitled "Expenses Incurred During Period", to estimate
the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. Participants in wrap-fee programs may pay a single
aggregate fee to the program sponsor for all costs and expenses of the wrap-fee
programs.
Hypothetical Expenses
Actual Expenses (5% return before expenses)
----------------- ----------------------------
Beginning Account Value (4/01/05) $1,000.00 $1,000.00
Ending Account Value (9/30/05) 1,016.10 1,025.00
Expenses Incurred During Period (4/01/05 - 9/30/05) - -
For shares of the Portfolio, expenses are equal to the annualized expense ratio
of 0.00%, multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period). BlackRock has agreed irrevocably
to waive all fees and reimburse all expenses, except extraordinary expenses,
incurred by the Portfolio.
3
BLackRock Bond Allocation Target Shares Series C
Total Net Assets (9/30/05): $9.9 million
Performance Benchmark:
Lehman Brothers U.S. Credit Index
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management. The Portfolio will principally invest in the
following securities: corporate bonds; notes and debentures; asset-backed
securities; commercial and residential mortgage-backed securities;
collateralized mortgage obligations; and U.S. Treasury and agency securities.
The Portfolio may only buy securities that are rated investment grade at the
time of purchase by a least one nationally recognized rating agency or, if
unrated, determined by the management team to be of similar quality.
Recent Portfolio Management Activity:
. The BlackRock Bond Allocation Target Shares Series C Portfolio
outperformed the benchmark for the annual period. The Series C Portfolio, a
non-diversified fund, is offered only as part of certain wrap fee programs or
to certain managed account clients of BlackRock. These clients typically have a
core or core plus fixed income account and utilize the Portfolio to gain
exposure to certain types of securities included in the overall account. Since
the Portfolio is one component of a broader account, the portfolio management
team does not utilize a benchmark to manage the Portfolio. The Lehman Brothers
U.S. Credit Index is the de facto benchmark used for fund reporting purposes.
Because the client's investment in the Portfolio represents only a portion of
the overall core or core plus account, comparisions of the Portfolio's
performance to that of the benchmark will not typically be meaningful.
. During the first half of the annual period, yields largely increased
as the Federal Reserve (Fed) continued to pursue its policy of interest rate
"normalization." The Fed Funds target rate began the fiscal year at 1.75%. The
Fed would largely stay on message for the next twelve months, emphasizing
sustainable economic growth, contained inflation, and accommodative monetary
conditions. In the beginning of the second half of the annual period, longer
maturity yields largely declined due to the perceived softening of the global
economy. Investor pessimism on future growth was driven primarily by the
dramatic upswing in oil prices. However, by the end of September, the evidence
of economic vitality was compelling enough to survive not only surging energy
costs, but also two highly destructive hurricanes. Longer maturity yields
increased as the Fed began to signal that its greater concern was gathering
inflation. During the annual period, the Federal Open Market Committee (FOMC)
voted a 0.25% tightening at each of its eight meetings. This lifted the Fed
Funds target rate by 2.00% to 3.75%. In contrast, longer interest rates, as
measured by the 10-year Treasury, increased by a modest 0.21%, ending the period
at 4.33%.
. The major domestic spread sectors - agencies, corporates, ABS, CMBS
and MBS - all posted positive excess returns over duration-weighted Treasuries
during the annual period. Investment grade corporates lagged behind the other
domestic spread sectors. Corporate bond performance was driven by both solid
credit fundamentals and strong investor demand in the beginning of the period.
However, with the downgrading of both General Motors and Ford, two of the
largest corporate bond issuers in the world, to below investment grade,
investors became noticeably more cautious. In spite of higher short-term
interest rates and flattening of the yield curve, which has dramatically reduced
the carry advantage of MBS, the sector was able to post a positive excess return
over Treasuries, mainly due to the lack of volatility in interest rate markets.
Most of this positive performance was attained during the fourth quarter of
2004. Valuations of ABS remained stable, and spreads remained near historically
tight levels despite robust supply. Led by home equity loan products, issuance
remains on track to meet 2004's record level. The net supply of agencies
continued to be negative as government sponsored enterprises were unable to grow
given unresolved accounting issues and intense political scrutiny. This lack of
supply has kept spreads tight. CMBS, the best performing domestic spread sector
during the annual period, has enjoyed strong demand due to the sector's
attractive relative value characteristics. Heavy issuance prevented valuations
from getting excessively expensive, and credit statistics indicated solid
fundamentals.
. During the annual period, the Portfolio was primarily invested in
investment grade corporate fixed income with a small allocation to taxable
municipals.
. Our overweight in financials has benefited the Portfolio as this
sector has continued to get sponsorship from overseas buyers and has avoided
negative headline news. Within the financial sector, we own mostly banks,
diversified finance, and life insurance and avoided owning re-insurance and
property and casualty names, which experienced widening spreads due to the
hurricanes.
. Our industrial holding mainly consists of cable/media, energy, and
defense sectors. Our holdings in cable, media, and retail were negative
contributors as LBO activity and shareholder activism in these sectors widened
spreads.
. Utilities make up a small portion of the Portfolio holdings. We own
mostly triple BBB rated utilities since the higher rated entities are extremely
costly. The long dated bonds have underperformed the short dated ones. Our
limited exposure to this sector has helped the Portfolio.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE BOND ALLOCATION
TARGET SHARES SERIES C PORTFOLIO AND THE LEHMAN BROTHERS
U.S. CREDIT INDEX FROM INCEPTION.
[LINE CHART]
Series C Portfolio Lehman Brothers U.S. Credit index
------------------ ---------------------------------
10/01/2004 $10,000 $10,000
12/31/2004 10,126 10,126
03/31/2005 10,057 10,020
06/30/2005 10,389 10,378
09/30/2005 10,334 10,274
For period ending September 30, 2005
Average Annual Total Return
1 Year From Inception
---------- ----------------
3.34% 3.34%
The performance information above includes information relating to the
Portfolio since the commencement of operations of the Portfolio on 10/1/04.
Past performance is not predictive of future results. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
4
BlackRock Bond Allocation Target Shares Series C
FUND PROFILE
Credit Quality (% of long-term investments)/1/
AAA 10.2%
AA 36.9
A 27.6
BBB 25.1
BB 0.2
-----
Total 100.0%
=====
Portfolio Statistics
Average maturity (years) 6.7
Effective Duration/2/ 4.19
1 Using the higher of Standard & Poor's ("S&P's") or Moody's Investors
Service ("Moody's") rating.
2 Duration measures a Portfolio's price risk. Each year of duration
represents an expected 1% change in the net asset value of the Portfolio
for every 1% change in interest rates. Effective duration is typically
calculated for bonds with embedded options and assumes that expected cash
flows will fluctuate as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur ongoing costs and other Portfolio
expenses. However, BlackRock has agreed irrevocably to waive all fees and
reimburse all expenses, except extraordinary expenses, incurred by the
portfolio. This Example is intended to help you understand your ongoing costs
(in dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2005 to September 30,
2005.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your shares, in the row entitled "Expenses Incurred During Period", to estimate
the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. Participants in wrap-fee programs may pay a single
aggregate fee to the program sponsor for all costs and expenses of the wrap-fee
programs.
Hypothetical Expenses
Actual Expenses (5% return before expenses)
----------------- ----------------------------
Beginning Account Value (4/01/05) $1,000.00 $1,000.00
Ending Account Value (9/30/05) 1,027.60 1,025.00
Expenses Incurred During Period (4/01/05 - 9/30/05) - -
For shares of the Portfolio, expenses are equal to the annualized expense ratio
of 0.00%, multiplied by the average account value over the period, multiplied
by 183/365 (to reflect the one-half year period). BlackRock has agreed
irrevocably to waive all fees and reimburse all expenses, except extraordinary
expenses, incurred by the Portfolio.
5
BlackRock Bond Allocation Target Shares Series M
Total Net Assets (9/30/05): $4.9 million
Performance Benchmark:
Lehman Brothers MBS Index
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management. The Portfolio will principally invest in the
following securities: commercial and residential mortgage-backed securities;
asset -backed securities; collateralized mortgage obligations; and U.S.
Treasury and agency securities. The Portfolio only buys securities rated
investment grade at the time of purchase by a least one nationally recognized
rating agency or, if unrated, determined by the management team to be of
similar quality.
Recent Portfolio Management Activity:
. The BlackRock Bond Allocation Target Shares Series M Portfolio
underperformed the benchmark for the annual period. The Series M Portfolio, a
non-diversified fund, is offered only as part of certain wrap fee programs or
to certain managed account clients of BlackRock. These clients typically have a
core or core plus fixed income account and utilize the Portfolio to gain
exposure to certain types of securities included in the overall account. Since
the Portfolio is one component of a broader account, the portfolio management
team does not utilize a benchmark to manage the Portfolio. The Lehman Brothers
MBS Index is the de facto benchmark used for fund reporting purposes. Because
the client's investment in the Portfolio represents only a portion of the
overall core or core plus account, comparisions of the Portfolio's performance
to that of the benchmark will not typically be meaningful.
. During the first half of the annual period, yields largely increased
as the Federal Reserve (Fed) continued to pursue its policy of interest rate
"normalization." The Fed Funds target rate began the fiscal year at 1.75%. The
Fed would largely stay on message for the next twelve months, emphasizing
sustainable economic growth, contained inflation, and accommodative monetary
conditions. In the beginning of the second half of the annual period, longer
maturity yields largely declined due to the perceived softening of the global
economy. Investor pessimism on future growth was driven primarily by the
dramatic upswing in oil prices. However, by the end of September, the evidence
of economic vitality was compelling enough to survive not only surging energy
costs but also two highly destructive hurricanes. Longer maturity yields
increased as the Fed began to signal that its greater concern was gathering
inflation. During the annual period, the Federal Open Market Committee (FOMC)
voted a 0.25% tightening at each of its eight meetings. This lifted the Fed
Funds target rate by 2.00% to 3.75%. In contrast, longer interest rates, as
measured by the 10-year Treasury, increased by a modest 0.21%, ending the period
at 4.33%.
. The major domestic spread sectors - agencies, corporates, ABS, CMBS
and MBS - all posted positive excess returns over duration-weighted Treasuries
during the annual period. Investment grade corporates lagged behind the other
domestic spread sectors. Corporate bond performance was driven by both solid
credit fundamentals and strong investor demand in the beginning of the period.
However, with the downgrading of both General Motors and Ford, two of the
largest corporate bond issuers in the world, to below investment grade,
investors became noticeably more cautious. In spite of higher short-term
interest rates and flattening of the yield curve, which has dramatically reduced
the carry advantage of MBS, the sector was able to post a positive excess return
over Treasuries, mainly due to the lack of volatility in interest rate markets.
Most of this positive performance was attained during the fourth quarter of
2004. Valuations of ABS remained stable, and spreads remained near historically
tight levels despite robust supply. Led by home equity loan products, issuance
remains on track to meet 2004's record level. The net supply of agencies
continued to be negative as government sponsored enterprises were unable to grow
given unresolved accounting issues and intense political scrutiny. This lack of
supply has kept spreads tight. CMBS, the best performing domestic spread sector
during the annual period, has enjoyed strong demand due to the sector's
attractive relative value characteristics. Heavy issuance prevented valuations
from getting excessively expensive, and credit statistics indicated solid
fundamentals.
. During the annual period, the Portfolio was primarily invested in high
quality residential and commercial mortgage and asset-backed securities. The
Portfolio's allocation to residential motrgages remains low due to reduced
carry and uncertain demand while the fund continues to maintain a core position
to AAA rated ABS. Roughly 40% of the Portfolio is invested in CMBS. The
Portfolio's CMBS holdings are mostly concentrated in shorter average life
bonds, which outperformed the general CMBS universe, as longer-dated CMBS were
more pressured by heavy supply throughout the year.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE BOND ALLOCATION
TARGET SHARES SERIES M PORTFOLIO AND THE LEHMAN BROTHERS MBS
INDEX FROM INCEPTION.
[LINE CHART]
Series M Portfolio Lehman Brothers MBS Index
------------------ -------------------------
10/01/2004 $10,000 $10,000
12/31/2004 10,097 10,126
03/31/2005 10,039 10,114
06/30/2005 10,259 10,344
09/30/2005 10,236 10,329
For period ending September 30, 2005
Average Annual Total Return
1 Year From Inception
---------- ----------------
2.37% 2.37%
The performance information above includes information relating to the
portfolio since the commencement of operations of the portfolio on 10/1/04.
Past performance is not predictive of future results. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
6
BlackRock Bond Allocation Target Shares Series M
FUND PROFILE
Credit Quality (% of long-term investments)/1/
AAA 100.0%
-----
Total 100.0%
=====
Portfolio Statistics
Average maturity (years) 3.2
Effective Duration/2/ 2.48
1 Using the higher of Standard & Poor's ("S&P's") or Moody's Investors
Service ("Moody's") rating.
2 Duration measures a Portfolio's price risk. Each year of duration
represents an expected 1% change in the net asset value of the Portfolio
for every 1% change in interest rates. Effective duration is typically
calculated for bonds with embedded options and assumes that expected cash
flows will fluctuate as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur ongoing costs and other Portfolio
expenses. However, BlackRock has agreed irrevocably to waive all fees and
reimburse all expenses, except extraordinary expenses, incurred by the
portfolio. This Example is intended to help you understand your ongoing costs
(in dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2005 to September 30,
2005.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your shares, in the row entitled "Expenses Incurred During Period", to estimate
the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. Participants in wrap-fee programs may pay a single
aggregate fee to the program sponsor for all costs and expenses of the wrap-fee
program.
Hypothetical Expenses
Actual Expenses (5% return before expenses)
----------------- ----------------------------
Beginning Account Value (4/01/05) $1,000.00 $1,000.00
Ending Account Value (9/30/05) 1,019.70 1,025.00
Expenses Incurred During Period (4/01/05 - 9/30/05) - -
For shares of the Portfolio, expenses are equal to the annualized expense ratio
of 0.00%, multiplied by the average account value over the period, multiplied
by 183/365 (to reflect the one-half year period). BlackRock has agreed
irrevocably to waive all fees and reimburse all expenses, except extraordinary
expenses, incurred by the Portfolio.
7
BlackRock Bond Allocation Target Shares
STATEMENT OF NET ASSETS
BATS SERIES S PORTFOLIO
As of September 30, 2005
Par
Maturity (000) Value
-------- ---------- ------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 4.0%
Federal Home Loan Mortgage
Corp., Unsecured Notes
5.25% 01/15/06 $100 $ 100,329
1.88% 02/15/06 300 297,577
----------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $399,196) 397,906
----------
MORTGAGE PASS-THROUGHS -- 28.0%
Federal Home Loan Mortgage
Corp. ARM
3.54%(b) 05/01/34 340 330,004
3.57%(b) 07/01/34 328 324,474
4.78%(b) 04/01/35 190 189,433
Federal National Mortgage
Association ARM
4.83%(b) 07/01/34 165 165,044
4.87%(b) 06/01/35 381 384,690
4.65%(b) 07/01/35 356 353,888
5.33%(b)(c) 10/01/35 450 447,469
Government National Mortgage
Association II ARM
5.00%(b) 10/20/34 562 565,268
----------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $2,792,693) 2,760,270
----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 10.1%
Bank of America Funding Corp.,
Series 04-C, Class 4A1
4.13%(b) 11/25/34 86 86,496
Bear Stearns Mortgage Trust,
Series 04-13, Class A1
4.20%(b) 11/25/34 82 82,051
Countrywide Alternative Loan
Trust, Series 05-28CB, Class
1A5
5.50% 08/25/35 96 97,265
Federal Home Loan Mortgage
Corp., Series 04-2877, Class
PA
5.50% 07/15/33 284 286,413
Federal Home Loan Mortgage
Corp., Series 04-SF5, Class
GB
1.77% 12/15/07 196 192,841
Goldman Sachs Mortgage
Securities Corp., Series 04-11,
Class 2A2
4.15%(b) 12/25/34 71 70,749
Wells Fargo Mortgage Backed
Securities Trust, Series 04-EE,
Class 2A1
3.99%(b) 01/25/35 176 174,131
----------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $1,000,810) 989,946
----------
COMMERCIAL MORTGAGE BACKED SECURITIES -- 1.0%
Adjustable Rate Mortage Trust,
Series 05-9, Class 5A1
4.10%(b)
(Cost $96,872) 11/25/35 97 96,914
----------
ASSET BACKED SECURITIES -- 48.0%
Capital Auto Receivables Asset
Trust, Series 02-3, Class A3
3.58% 10/16/06 90 89,483
Capital Auto Receivables Asset
Trust, Series 02-4, Class A4
2.64% 03/17/08 64 63,484
Capital Auto Receivables Asset
Trust, Series 04-2, Class A2
3.35% 02/15/08 100 98,797
Citibank Credit Card Issuance
Trust, Series 02-A1, Class A1
4.95% 02/09/09 300 301,626
Citibank Credit Card Master
Trust, Series 99-5, Class A
6.10% 05/15/08 350 353,558
DaimlerChrysler Auto Trust,
Series 02-B, Class A4
3.53% 12/06/07 117 116,633
DaimlerChrysler Auto Trust,
Series 02-C, Class A4
3.09% 01/08/08 339 336,869
DaimlerChrysler Auto Trust,
Series 04-A, Class A3
2.00% 12/08/07 300 296,914
Ford Credit Auto Owner Trust,
Series 04-A, Class A3
2.93% 03/15/08 300 296,354
Ford Credit Auto Owner Trust,
Series 05-A, Class A3
3.48% 11/15/08 120 118,661
Honda Auto Receivables Owner
Trust, Series 03-2, Class A3
1.69% 02/21/07 105 104,065
Honda Auto Receivables Owner
Trust, Series 03-4, Class A3
2.19% 05/15/07 228 226,612
Honda Auto Receivables Owner
Trust, Series 04-3, Class A3
2.91% 10/20/08 300 294,789
MBNA Credit Card Master Note
Trust, Series 01-A1, Class A1
5.75% 10/15/08 350 352,945
MBNA Credit Card Master Note
Trust, Series 03-A6, Class A6
2.75% 10/15/10 300 286,849
MBNA Credit Card Master Note
Trust, Series 04-A4, Class A4
2.70% 09/15/09 350 341,141
Nissan Auto Receivables Owner
Trust, Series 03-C, Class A4
2.70% 12/17/07 350 345,748
Standard Credit Card Master
Trust I, Series 94-2, Class A
7.25% 04/07/06 350 355,084
See accompanying notes to financial statements.
8
BlackRock Bond Allocation Target Shares
STATEMENT OF NET ASSETS
BATS SERIES S PORTFOLIO (Concluded)
As of September 30, 2005
Par
Maturity (000) Value
-------- ---------- ------------
ASSET BACKED SECURITIES (Continued)
USAA Auto Owner Trust, Series
04-2, Class A3
3.03% 06/16/08 $350 $ 346,388
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $4,792,916) 4,726,000
-----------
CORPORATE BONDS -- 3.1%
Aerospace -- 0.1%
Northrop Grumman Corp.,
Unsecured Notes
7.00% 03/01/06 10 10,109
-----------
Insurance -- 3.0%
ASIF Global Financing,
Unsecured Notes
3.90%(d) 10/22/08 300 292,128
-----------
TOTAL CORPORATE BONDS
(Cost $311,432) 302,237
-----------
Par/Shares
(000)
----------
SHORT TERM INVESTMENTS -- 10.5%
Federal National Mortgage
Association, Discount Notes
3.50%(e) 10/03/05 600 599,883
Galileo Money Market Fund 428 428,230
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $1,028,113) 1,028,113
-----------
TOTAL INVESTMENTS IN SECURITIES -- 104.7%
(Cost $10,422,032(a)) 10,301,386
LIABILITIES IN EXCESS OF
OTHER ASSETS -- (4.7)% (458,263)
-----------
NET ASSETS -- 100.0%
(Applicable to 1,000,000 shares
outstanding) $ 9,843,123
===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE
($9,843,123/1,000,000) $ 9.84
===========
- ----------
(a) Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 2,627
Gross unrealized depreciation (123,273)
-----------
$ (120,646)
===========
(b) Rates shown are the rates as of September 30, 2005.
(c) When-issued security.
(d) Security 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 investors. As of September 30,
2005, the Portfolio held 3.0% of its net assets, with a current market
value of $292,128, in securities restricted as to resale.
(e) The rate shown is the effective yield on the discount notes at the time of
purchase.
See accompanying notes to financial statements.
9
BlackRock Bond Allocation Target Shares
STATEMENT OF NET ASSETS
BATS SERIES C PORTFOLIO
As of September 30, 2005
Par
Maturity (000) Value
-------- ---------- ------------
CORPORATE BONDS -- 79.6%
Aerospace -- 2.3%
Lockheed Martin Corp., Senior
Debentures
8.50% 12/01/29 $ 85 $ 117,046
Northrop Grumman Corp., Senior
Debentures
7.75% 02/15/31 50 64,573
Raytheon Co., Unsecured Notes
5.38% 04/01/13 50 51,096
----------
232,715
----------
Banks -- 17.2%
Bank of America Corp.,
Subordinated Notes
7.40% 01/15/11 165 184,266
Bank One N.A., Senior
Unsecured Notes
3.70% 01/15/08 125 122,555
BankBoston N.A., Subordinated
Notes
7.38% 09/15/06 25 25,633
Citigroup, Inc., Senior Unsecured
Notes
5.75% 05/10/06 225 226,837
Citigroup, Inc., Subordinated
Notes
6.00% 10/31/33 20 21,214
Citigroup, Inc., Unsecured Notes
5.85% 12/11/34 60 62,760
FleetBoston Financial Corp.,
Senior Unsecured Notes
4.20% 11/30/07 80 79,256
HSBC Bank USA, Subordinated
Notes
4.62% 04/01/14 100 97,243
J.P. Morgan Chase & Co., Senior
Unsecured Notes
5.25% 05/30/07 300 303,527
J.P. Morgan Chase & Co.,
Subordinated Notes
5.75% 01/02/13 35 36,397
National City Bank of Indiana,
Senior Bank Notes
2.38% 08/15/06 75 73,568
Northern Trust Corp.,
Subordinated Notes
4.60% 02/01/13 25 24,635
State Street Corp., Subordinated
Notes
7.65% 06/15/10 50 56,485
U.S. Central Credit Union,
Unsecured Notes
2.75% 05/30/08 50 47,663
Wachovia Corp., Subordinated
Notes
5.25% 08/01/14 60 60,841
Wells Fargo & Co. Holdings
Corp., Subordinated Notes
6.25% 04/15/08 270 280,394
----------
1,703,274
----------
Broadcasting -- 0.6%
News America, Inc., Senior
Debentures
7.28% 06/30/28 50 55,434
----------
Chemicals -- 0.5%
E. I. Dupont de Nemours & Co.,
Senior Debentures
6.50% 01/15/28 40 46,634
----------
Energy & Utilities -- 5.3%
Dominion Resources, Inc.,
Senior Unsecured Notes
8.12% 06/15/10 65 73,271
Duke Energy Corp., First
Mortgage Bonds
4.50% 04/01/10 50 49,512
FirstEnergy Corp., Senior
Unsecured Notes
7.38% 11/15/31 15 17,658
Florida Power & Light Co., First
Mortgage Bonds
6.00% 06/01/08 60 62,105
5.85% 02/01/33 70 73,549
Kiowa Power Partners LLC,
Senior Secured Notes
4.81%(b) 12/30/13 24 22,975
Metropolitan Edison Co., First
Mortgage Bonds
4.95% 03/15/13 15 14,882
NiSource Finance Corp., Senior
Unsecured Notes
5.40% 07/15/14 25 25,169
NiSource Finance Corp.,
Unsecured Notes
4.39%(c) 11/23/09 25 25,057
Oncor Electric Delivery Co.,
Senior Secured Notes
6.38% 01/15/15 15 16,193
Progress Energy, Inc., Senior
Unsecured Notes
7.75% 03/01/31 75 89,554
7.00% 10/30/31 50 55,560
----------
525,485
----------
Entertainment & Leisure -- 2.7%
Comcast Cable Communications,
Inc., Senior Unsecured Notes
6.75% 01/30/11 90 96,773
Comcast Cable Holdings LLC,
Senior Debentures
7.88% 02/15/26 50 59,671
Time Warner Cos., Inc., Senior
Debentures
7.57% 02/01/24 70 79,913
Turner Broadcasting Corp.,
Senior Notes
8.38% 07/01/13 25 29,463
----------
265,820
----------
Finance -- 12.3%
Allstate Life Global Funding
Trust, Secured Notes
4.50% 05/29/09 25 24,807
American Express Co., Senior
Unsecured Notes
4.75% 06/17/09 75 75,189
Berkshire Hathaway Finance
Corp., Senior Unsecured
Notes
4.12% 01/15/10 125 122,351
See accompanying notes to financial statements.
10
BlackRock Bond Allocation Target Shares
STATEMENT OF NET ASSETS
BATS SERIES C PORTFOLIO (Continued)
As of September 30, 2005
Par
Maturity (000) Value
-------- ---------- ------------
CORPORATE BONDS (Continued)
Finance (Continued)
Boeing Capital Corp., Senior
Unsecured Notes
6.50% 02/15/12 $ 25 $ 27,243
Credit Suisse First Boston USA,
Inc., Senior Unsecured Notes
5.75% 04/15/07 15 15,263
General Electric Capital Corp.,
Senior Unsecured Notes
6.75% 03/15/32 90 105,865
General Electric Capital Corp.,
Unsecured Notes
3.45%(c) 01/15/08 300 300,648
3.60% 10/15/08 95 92,360
Golden West Financial Corp.,
Senior Unsecured Notes
4.12% 08/15/07 50 49,640
Goldman Sachs Group, Inc.,
Senior Unsecured Notes
5.12% 01/15/15 110 109,659
Lehman Brothers Holdings, Inc.,
Senior Unsecured Notes
7.00% 02/01/08 30 31,494
Morgan Stanley, Senior
Unsecured Notes
3.88% 01/15/09 175 170,586
PSEG Funding Trust I, Capital
Securities
5.38% 11/16/07 25 25,195
SLM Corp., Senior Unsecured
Notes
3.50% 09/30/06 75 74,050
----------
1,224,350
----------
Food & Agriculture -- 1.6%
Kellogg Co., Senior Debentures
7.45% 04/01/31 40 50,365
Kraft Foods, Inc., Senior
Unsecured Notes
5.62% 11/01/11 15 15,498
Sysco International Co., Senior
Unsecured Notes
6.10% 06/01/12 25 26,841
Unilever Capital Corp., Senior
Unsecured Notes
5.90% 11/15/32 60 63,279
----------
155,983
----------
Insurance -- 4.8%
American General Corp., Senior
Unsecured Notes
7.50% 08/11/10 80 88,583
The Bear Stearns Cos., Inc.,
Unsecured Notes
4.00% 01/31/08 75 73,962
CHUBB Corp., Senior Unsecured
Notes
4.93% 11/16/07 25 25,115
John Hancock Financial
Services, Inc., Senior
Unsecured Notes
5.62% 12/01/08 25 25,693
Metropolitan Life Global Funding,
Inc., Senior Secured Notes
4.75%(b) 06/20/07 100 100,189
Metropolitan Life Global Funding,
Inc., Unsecured Notes
2.60%(b) 06/19/08 50 47,261
TIAA Global Markets, Senior
Unsecured Notes
3.88%(b) 01/22/08 50 49,152
Wellpoint, Inc., Unsecured Notes
5.95% 12/15/34 60 62,554
----------
472,509
----------
Manufacturing -- 1.9%
Honeywell International, Inc.,
Senior Unsecured Notes
5.12% 11/01/06 190 191,147
----------
Medical & Medical Services -- 0.5%
Genentech, Inc., Senior
Unsecured Notes
5.25%(b) 07/18/35 50 48,391
----------
Medical Instruments & Supplies -- 0.3%
Bristol-Myers Squibb Co., Senior
Unsecured Notes
5.75% 10/01/11 25 26,223
----------
Metal & Mining -- 0.2%
Noranda, Inc., Unsecured Notes
5.50% 06/15/17 20 19,279
----------
Motor Vehicles -- 1.8%
DaimlerChrysler N.A. Holding
Corp., Notes
4.75% 01/15/08 35 34,877
Ford Motor Credit Co., Senior
Notes
5.80% 01/12/09 125 116,635
Nissan Motor Acceptance Corp.,
Unsecured Notes
4.62%(b) 03/08/10 25 24,729
----------
176,241
----------
Oil & Gas -- 3.9%
Amerada Hess Corp., Senior
Unsecured Notes
7.12% 03/15/33 25 28,688
Conoco Funding Co., Senior
Unsecured Notes
6.35% 10/15/11 100 108,802
Consolidated Natural Gas Co.,
Senior Unsecured Notes
6.85% 04/15/11 50 54,600
Devon Financing Corp., Senior
Unsecured Notes
6.88% 09/30/11 65 71,449
Enterprise Products Operating
LP, Senior Unsecured Notes
5.75% 03/01/35 30 27,429
Halliburton Co., Debentures
7.60% 08/15/46 10 12,017
Noble Energy, Inc., Senior
Unsecured Notes
5.25% 04/15/14 25 25,068
Union Oil Co. of California,
Senior Unsecured Notes
5.05% 10/01/12 15 15,247
See accompanying notes to financial statements.
11
BlackRock Bond Allocation Target Shares
STATEMENT OF NET ASSETS
BATS SERIES C PORTFOLIO (Continued)
As of September 30, 2005
Par
Maturity (000) Value
-------- ---------- ------------
CORPORATE BONDS (Continued)
Oil & Gas (Continued)
XTO Energy, Inc., Senior
Unsecured Notes
5.00% 01/31/15 $ 50 $ 49,012
----------
392,312
----------
Paper & Forest Products -- 0.4%
Weyerhaeuser Co., Senior
Unsecured Notes
6.12% 03/15/07 44 44,839
----------
Pharmaceuticals -- 1.5%
Merck & Co., Inc., Senior
Unsecured Notes
4.38% 02/15/13 125 119,135
Wyeth, Unsecured Notes
6.50% 02/01/34 25 28,022
----------
147,157
----------
Real Estate -- 1.0%
EOP Operating LP, Senior
Unsecured Notes
7.00% 07/15/11 15 16,368
EOP Operating LP, Unsecured
Notes
4.65% 10/01/10 60 59,093
The Rouse Co., Unsecured
Notes
5.38% 11/26/13 25 23,802
----------
99,263
----------
Retail Merchandising -- 2.8%
Federated Department Stores,
Inc., Senior Unsecured Notes
6.62% 09/01/08 50 52,348
The Kroger Co., Senior Notes
7.45% 03/01/08 70 73,802
Wal-Mart Stores, Inc., Unsecured
Notes
4.12% 07/01/10 160 156,581
----------
282,731
----------
Telecommunications -- 5.8%
BellSouth Capital Funding Corp.,
Senior Unsecured Notes
7.75% 02/15/10 130 144,842
SBC Communications, Inc.,
Unsecured Notes
6.45% 06/15/34 60 63,330
Sprint Capital Corp., Senior
Notes
6.88% 11/15/28 35 38,664
Verizon Pennsylvania, Inc.,
Debentures
5.65% 11/15/11 320 328,335
----------
575,171
----------
Yankee -- 12.2%
Alcan, Inc. (Canada), Unsecured
Notes
6.13%(d) 12/15/33 25 25,836
Burlington Resources Finance
Co. (Canada), Senior
Unsecured Notes
5.60%(d) 12/01/06 20 20,228
Cadbury Schweppes PLC
(United Kingdom), Unsecured
Notes
3.88%(b)(d) 10/01/08 40 38,968
Canadian National Railway Co.
(Canada), Senior Unsecured
Notes
6.38%(d) 10/15/11 50 53,973
Eksportfinans ASA (Norway),
Unsecured Notes
4.38%(d) 07/15/09 100 99,682
Encana Holdings Finance Corp.
(Canada), Senior Unsecured
Notes
5.80%(d) 05/01/14 50 52,659
Nationwide Building Society
(United Kingdom), Unsecured
Notes
2.62%(b)(d) 01/30/07 100 97,546
Rio Tinto Finance (USA) Ltd.
(Australia), Unsecured Notes
2.62%(d) 09/30/08 50 47,102
Royal Bank of Scotland Group
PLC (United Kingdom),
Subordinated Notes
7.38%(d) 04/29/49 150 152,092
Scottish Power PLC (United
Kingdom), Unsecured Notes
4.90%(d) 03/15/10 50 49,971
Suncor Energy, Inc. (Canada)
5.95%(d) 12/01/34 25 26,548
Teck Cominco Ltd. (Canada),
Senior Unsecured Notes
5.38%(d) 10/01/15 25 24,861
Telefonica Europe BV
(Netherlands), Senior
Unsecured Notes
7.75%(d) 09/15/10 60 67,639
Tyco International Group SA
(Luxembourg), Senior
Unsecured Notes
6.12%(d) 01/15/09 100 103,760
United Mexican States (Mexico),
Senior Unsecured Notes
8.00%(d) 09/24/22 150 182,250
Vodafone Group PLC (United
Kingdom), Senior Unsecured
Notes
7.75%(d) 02/15/10 150 167,313
----------
1,210,428
----------
TOTAL CORPORATE BONDS
(Cost $7,974,788)
7,895,386
----------
See accompanying notes to financial statements.
12
BlackRock Bond Allocation Target Shares
STATEMENT OF NET ASSETS
BATS SERIES C PORTFOLIO (Concluded)
As of September 30, 2005
Par/Shares
Maturity (000) Value
-------- ---------- ------------
TAXABLE MUNICIPAL BONDS -- 1.3%
Illinois State Pension Funding General Obligation
Bonds, Series 03
5.10%
(Cost $118,900) 06/01/33 $ 125 $ 123,803
----------
SHORT TERM INVESTMENTS -- 18.8%
Federal National Mortgage
Association, Discount Notes
3.50%(e) 10/03/05 1,400 1,399,728
Galileo Money Market Fund 464 464,375
----------
TOTAL SHORT TERM INVESTMENTS
(Cost $1,864,103) 1,864,103
----------
TOTAL INVESTMENTS IN SECURITIES -- 99.7%
(Cost $9,957,791(a)) 9,883,292
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.3% 33,375
----------
NET ASSETS -- 100.0%
(Applicable to 1,000,000 shares
outstanding) $9,916,667
==========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE
($9,916,667/1,000,000) $ 9.92
==========
- ----------
(a) Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 57,231
Gross unrealized depreciation (131,730)
-----------
$ (74,499)
===========
(b) Security 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 investors. As of September 30,
2005, the Portfolio held 4.3% of its net assets, with a current market
value of $429,211, in securities restricted as to resale.
(c) Rates shown are the rates as of September 30, 2005.
(d) Security is a foreign domiciled issuer which is registered with the
Securities and Exchange Commission.
(e) The rate shown is the effective yield on the discount notes at the time of
purchase.
See accompanying notes to financial statements.
13
BlackRock Bond Allocation Target Shares
STATEMENT OF NET ASSETS
BATS SERIES M PORTFOLIO
As of September 30, 2005
Par
Maturity (000) Value
-------- ---------- ------------
MORTGAGE PASS-THROUGHS -- 17.3%
Federal National Mortgage
Association
5.00%
(Cost $864,492) 08/01/19 $853 $ 850,969
----------
COMMERCIAL MORTGAGE BACKED SECURITIES -- 42.6%
General Motors Acceptance
Corp. Commercial Mortgage
Securities, Inc., Series 00-C2,
Class A2
7.46% 08/16/33 430 472,031
General Motors Acceptance
Corp. Commercial Mortgage
Securities, Inc., Series 00-C3,
Class A2
6.96% 09/15/35 400 436,251
Greenwich Capital Commercial
Funding Corp., Series
05-GG3, Class A3
4.57% 08/10/42 70 69,079
J.P. Morgan Commercial
Mortgage Finance Corp.,
Series 00-C10, Class A2
7.37% 08/15/32 200 217,681
Lehman Brothers-UBS
Commercial Mortgage Trust,
Series 00-C4, Class A2
7.37% 08/15/26 500 549,717
Salomon Brothers Mortgage
Securities VII, Series 00-C3,
Class A2
6.59% 12/18/33 170 181,439
Salomon Brothers Mortgage
Securities VII, Series 01-C2,
Class A3
6.50% 10/13/11 156 167,991
----------
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $2,145,320) 2,094,189
----------
ASSET BACKED SECURITIES -- 37.8%
Capital Auto Receivables Asset
Trust, Series 04-1, Class A3
2.00% 11/15/07 181 178,843
Citibank Credit Card Issuance
Trust, Series 02-A1, Class A1
4.95% 02/09/09 200 201,084
Citibank Credit Card Master
Trust I, Series 99-2, Class A
5.88% 03/10/11 200 208,039
DaimlerChrysler Auto Trust,
Series 02-C, Class A4
3.09% 01/08/08 194 192,497
Discover Card Master Trust I,
Class 00-9, Class A
6.35% 07/15/08 200 201,230
Ford Credit Auto Owner Trust,
Series 05-A, Class A3
3.48% 11/15/08 200 197,768
Honda Auto Receivables Owner
Trust, Series 03-2, Class A3
1.69% 02/21/07 82 81,766
Nissan Auto Receivables Owner
Trust, Series 03-C, Class A4
2.70% 12/17/07 200 197,570
Standard Credit Card Master
Trust I, Series 94-2, Class A
7.25% 04/07/06 200 202,905
USAA Auto Owner Trust, Series
04-2, Class A3
3.03% 06/16/08 200 197,936
----------
TOTAL ASSET BACKED SECURITIES
(Cost $1,878,632) 1,859,638
----------
NUMBER OF
SHARES
----------
SHORT TERM INVESTMENTS -- 3.0%
Galileo Money Market Fund
(Cost $147,163) 147,163 147,163
----------
TOTAL INVESTMENTS IN SECURITIES -- 100.7%
(Cost $5,035,607(a)) 4,951,959
LIABILITIES IN EXCESS OF
OTHER ASSETS -- (0.7)% (35,623)
----------
NET ASSETS -- 100.0%
(Applicable to 500,000 shares
outstanding) $4,916,336
==========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE
($4,916,336/500,000) $ 9.83
==========
- ----------
(a) Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 127
Gross unrealized depreciation (83,775)
----------
$ (83,648)
==========
KEY TO INVESTMENT ABBREVIATIONS
ARM Adjustable Rate Mortgage
LLC Limited Liability Company
LP Limited Partnership
PLC Public Limited Company
See accompanying notes to financial statements.
14
BlackRock Bond Allocation Target Shares
STATEMENTS OF OPERATIONS
For the year ended September 30, 2005
BATS Series S BATS Series C BATS Series M
------------------- ------------------- -------------------
Investment income:
Interest ...................................................... $ 348,739 $ 409,280 $ 198,998
---------- ---------- ----------
Expenses:
Administration fees ........................................... 492 496 247
Custodian fees ................................................ 6,400 12,001 4,593
Accounting fees ............................................... 20,842 35,361 17,642
Transfer agent fees ........................................... 23,114 22,711 19,362
Legal and audit fees .......................................... 151,142 152,445 91,510
Printing fees ................................................. 34,752 34,752 34,752
Registration fees and expenses ................................ 22,590 22,590 22,058
Trustees' fees ................................................ 362 362 362
Other ......................................................... 8,078 19,154 3,449
---------- ---------- ----------
Total expenses ............................................... 267,772 299,872 193,975
---------- ---------- ----------
Less expenses reimbursed by advisor ......................... (267,772) (299,872) (193,975)
---------- ---------- ----------
Net expenses ................................................. -- -- --
---------- ---------- ----------
Net investment income .......................................... 348,739 409,280 198,998
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) from investment transactions ......... (29,112) (8,834) 2,295
Change in unrealized depreciation from investments ............ (120,646) (74,499) (83,648)
---------- ---------- ----------
Net loss on investments ........................................ (149,758) (83,333) (81,353)
---------- ---------- ----------
Net increase in net assets resulting from operations ........... $ 198,981 $ 325,947 $ 117,645
========== ========== ==========
See accompanying notes to financial statements.
15
BlackRock Bond Allocation Target Shares
STATEMENTS OF CHANGES IN NET ASSETS
BATS Series S BATS Series C BATS Series M
------------------- ------------------- -------------------
For the For the For the
Year Year Year
10/1/04 /1/-9/30/05 10/1/04 /1/-9/30/05 10/1/04 /1/-9/30/05
------------------- -------------------- -------------------
Increase in net assets:
Operations:
Net investment income ........................................ $ 348,739 $ 409,280 $ 198,998
Net realized gain (loss) on investments ...................... (29,112) (8,834) 2,295
Net unrealized depreciation on investments ................... (120,646) (74,499) (83,648)
----------- ----------- -----------
Net increase in net assets resulting from operations ......... 198,981 325,947 117,645
----------- ----------- -----------
Distributions to shareholders from:
Net investment income ........................................ (355,858) (409,280) (201,309)
----------- ----------- -----------
Capital share transactions:
Shares sold .................................................. 10,000,000 10,000,000 5,000,000
----------- ----------- -----------
Total increase in net assets ................................. 9,843,123 9,916,667 4,916,336
----------- ----------- -----------
Net assets:
Beginning of year ............................................ -- -- --
----------- ----------- -----------
End of year .................................................. $ 9,843,123 $ 9,916,667 $ 4,916,336
=========== =========== ===========
End of year undistributed net investment income ................ $ -- $ -- $ --
- ----------
/1/ Commencement of operations.
See accompanying notes to financial statements.
16
BlackRock Bond Allocation Target Shares
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
BATS Series S BATS Series C BATS Series M
------------------- ------------------- -------------------
For the For the For the
Year Year Year
10/1/04 /1/-9/30/05 10/1/04 /1/-9/30/05 10/1/04 /1/-9/30/05
------------------- ------------------- --------------------
Per share operating performance:
Net asset value, beginning of period ........................... $10.00 $10.00 $10.00
------ ------ ------
Net investment income ......................................... 0.35/2/ 0.41/2/ 0.40/2/
Net realized and unrealized loss on investments ............... (0.16) (0.08) (0.17)
Distributions from net investment income ...................... (0.35) (0.41) (0.40)
------ ------ ------
Net asset value, end of period ................................ $ 9.84 $ 9.92 $ 9.83
====== ====== ======
Total Return ................................................... 2.00% 3.34% 2.37%
Ratios / Supplemental data
Net assets, end of period (in thousands) ....................... $9,843 $9,917 $4,916
Ratio of net expenses to average net assets .................... -- -- --
Ratio of total net expenses to average net assets (excluding
reimbursements) ............................................... 2.72% 3.02% 3.93%
Ratio of net investment income to average net assets ........... 3.54% 4.12% 4.03%
Ratio of net investment income to average net assets (excluding
reimbursements) ............................................... 0.82% 1.10% 0.10%
Portfolio turnover ............................................. 17% 50% 36%
- ---------
/1/ Commencement of operations.
/2/ Calculated using the average shares outstanding method.
See accompanying notes to financial statements.
17
BlackRock Bond Allocation Target Shares
NOTES TO FINANCIAL STATEMENTS
(A) Organization
The BlackRock Bond Allocation Target Shares ("BATS" or the "Fund") was
organized as a Delaware statutory trust on March 5, 2003 and is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-ended management investment company. Pursuant to this authority, the
Trustees have authorized the issuance of an unlimited number of shares in five
investment portfolios, three of which, Series S, Series C and Series M (the
"Portfolios"), commenced operations on October 1, 2004.
Investors may only purchase shares in the five investment portfolios
described herein by entering into a wrap-fee program or other managed account.
Participants in wrap-fee programs pay a single aggregate fee to the program
sponsor for all costs and expenses of the wrap-fee programs including investment
advice and portfolio execution.
Under the Fund's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, in the normal course of business, the Fund
enters into contracts with its vendors and others that provide for general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund.
However, based on experience, the Fund considers the risk of loss from such
claims to be remote.
(B) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Fund in the preparation of the Portfolios' financial statements.
Investment Valuation -- Valuation of investments held by each Portfolio is
as follows: fixed income investments are valued by using market quotations or
prices provided by market makers; a portion of the fixed income investments are
valued utilizing one or more pricing services approved by the Board of Trustees
(the "Board"); the amortized cost method of valuation will be used with respect
to debt obligations with sixty days or less remaining to maturity unless the
investment advisor under the supervision of the Board determines that such
method does not represent fair value. In the event that application of these
methods of valuation results in a price for an investment which is deemed not to
be representative of the market value of such investment, the investment will be
valued by, under the direction of or in accordance with a method approved by the
Board as reflecting fair value ("Fair Value Assets"). The investment adviser
will submit its recommendations regarding the valuation and/or valuation
methodologies for Fair Value Assets to a valuation committee. Such valuation
committee may accept, modify or reject any recommendations. The pricing of all
Fair Value Assets shall be subsequently reported to and ratified by the Board.
When determining the price for a Fair Value Asset, the investment adviser
shall seek to determine the price that the Portfolio might reasonably expect to
receive from the current sale of that asset in an arm's-length transaction. Fair
value determinations shall be based upon all available factors that the advisor
deems relevant.
Dividends to Shareholders -- Dividends from net investment income are
declared by the Portfolios each day on "settled" shares (i.e. shares for which
the Portfolio has received payment) and are paid monthly. Over the course of a
year, substantially all of the Portfolio's net investment income will be
declared as dividends. Net realized capital gains, if any, are distributed at
least annually.
Investment Transactions and Investment Income -- Investment transactions
are accounted for on the trade date. The cost of investments sold and the
related gain or loss is determined by use of specific identification method,
generally first in first out, for both financial reporting and federal income
purposes. Interest income is recorded on the accrual basis. Discounts and
premiums on debt securities are amortized for book and tax purposes using the
effective yield-to-maturity method over the term of the instrument. Paydown
gains and losses on mortgage and asset-backed securities are presented as an
adjustment to interest income.
Investing in Government Sponsored Enterprises -- The Portfolios invest in
securities issued by the Federal Home Loan Mortgage Corporation ("Freddie Mac")
and similar United States Government sponsored entities such as the Federal
National Mortgage Association ("Fannie Mae") and the Federal Home Loan Banks
("FHLB's"). Freddie Mac, Fannie Mae, and FHLB's, although chartered and
sponsored by Congress, are not funded by Congressional appropriations and the
debt and mortgage-backed securities issued by Freddie Mac, Fannie Mae and
FHLB's are neither guaranteed nor insured by the United States Government.
Forward Commitments, When-Issued and Delayed Delivery Securities -- These
Portfolios may purchase securities on a when-issued basis and may purchase or
sell securities on a forward commitment basis. Settlement of such transactions
18
BlackRock Bond Allocation Target Shares
NOTES TO FINANCIAL STATEMENTS (Continued)
normally occurs within a month or more after the purchase or sale commitment is
made. A portfolio may purchase securities under such conditions only with the
intention of actually acquiring them, but may enter into a separate agreement to
sell the securities before the settlement date. Since the value of securities
purchased may fluctuate prior to settlement, the Portfolio may be required to
pay more at settlement than the security is worth. In addition, the purchaser is
not entitled to any of the interest earned prior to settlement. Upon making a
commitment to purchase a security on a when-issued forward commitment basis, the
Portfolio will hold liquid assets worth at least the equivalent of the amount
due.
TBA Purchase Commitments -- The Portfolios may enter into "TBA" (to be
announced) purchases or sell securities for a fixed price at a future date. TBA
commitments are considered securities in themselves, and involve a risk of loss
if the value of the security to be purchased/sold declines/increases prior to
settlement date, which is in addition to the risk of decline in the value of a
Portfolios' other assets. Unsettled TBA commitments are valued at the current
market value of the underlying securities, according to the procedures described
under "Security Valuation".
Estimates -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
("generally accepted accounting principles") requires the use of management
estimates. Actual results could differ from the estimates.
Other -- Expenses that are directly related to one of the Portfolios are
charged directly to that Portfolio. Other operating expenses are prorated to the
Portfolios on the basis of relative net assets.
(C) Transactions with Affiliates and Related Parties
Pursuant to an Investment Management Agreement, BlackRock Advisors, Inc.
("BlackRock"), a wholly-owned subsidiary of BlackRock, Inc., serves as
investment adviser to the Fund. BlackRock does not receive direct compensation
for its advisory services. BlackRock benefits from the Fund being an investment
option in a wrap program for which BlackRock affiliates receive fees. BlackRock
is contractually obligated to pay expenses it incurs in providing advisory
services to the Fund and will reimburse the Fund for all of its expenses, except
extraordinary expenses. For the year ended September 30, 2005, BlackRock
reimbursed expenses of $267,772, $299,872, and $193,975, respectively, to Series
S, Series C, and Series M.
PFPC Inc. ("PFPC"), an indirect subsidiary of The PNC Financial Services
Group, Inc., acts as adminstrator for the Fund. For these services, PFPC
receives administration and accounting services fees computed daily and payable
monthly, at the following annual rates: (a) for accounting services, (i) $12,000
for each Portfolio's first $250 million in average net assest, $12,000 for each
Portfolio's next $500 million in average net assets and 0.0025% for each
Portfolio's average net assets in excess of $750 million, and (ii) $200 per
Portfolio per month, plus $0.65 per CUSIP per day; (b) for administration
services, 0.005% of each Portfolio's average net assets; and (c) out-of-pocket
expenses.
In addition, PFPC Trust Co., an indirect wholly-owned subsidiary of The PNC
Financial Services Group, Inc., serves as custodian for the Fund. For its
services, PFPC Trust Co. receives 0.01% of each Portfolio's first $10 billion of
total net assets and 0.0075% of each Portfolio's total net assets over $10
billion, as well as out-of-pocket expenses and certain transaction charges.
Pursuant to the Transfer Agent Agreement, PFPC serves as the transfer and
dividend disbursing agent for the Fund. For its services, PFPC receives an
annual fee of $15,000 per Portfolio, plus transaction fees, per account fees and
disbursements.
As mentioned above, BlackRock will reimburse the Fund for all such
administration, custodian and transfer agent services.
As of September 30, 2005, affiliated payables were as follows:
BATS Series S BATS Series C BATS Series M
--------------- --------------- --------------
PFPC/(1)/ ......... $4,067 $5,069 $3,080
(1) -- payables to PFPC are for Accounting, Administration, Custody and Transfer
Agent services.
19
BlackRock Bond Allocation Target Shares
NOTES TO FINANCIAL STATEMENTS (Continued)
(D) Purchase and Sales of Securities
For the year ended September 30, 2005, purchases and sales of investment
securities, other than short-term investments and government securities, were as
follows:
Purchases Sales
-------------- -------------
BATS Series S ..................... $13,297,473 $1,558,237
BATS Series C ..................... 12,127,109 3,950,574
BATS Series M ..................... 6,984,586 1,745,938
For the year ended September 30, 2005, purchases and sales of U.S.
government securities were as follows:
Purchases Sales
-------------- ------------
BATS Series S ..................... $7,898,690 $399,721
BATS Series C ..................... 6,003,396 905,153
BATS Series M ..................... 2,999,853 --
(E) Capital Shares:
Transactions in capital shares for the year ended September 30, 2005 were
as follows:
BATS Series S BATS Series C BATS Series M
--------------------------- --------------------------- ------------------------
Shares Value Shares Value Shares Value
----------- --------------- ----------- --------------- --------- --------------
Shares sold .......... 1,000,000 $10,000,000 1,000,000 $10,000,000 500,000 $5,000,000
--------- ----------- --------- ----------- ------- ----------
Net increase ......... 1,000,000 $10,000,000 1,000,000 $10,000,000 500,000 $5,000,000
========= =========== ========= =========== ======= ==========
(F) At September 30, 2005, net assets consisted of:
BATS Series S BATS Series C BATS Series M
--------------- --------------- --------------
Capital paid-in ............................................ $10,000,000 $10,000,000 $5,000,000
Accumulated net realized loss on investment transactions ... (36,231) (8,834) (16)
Net unrealized depreciation on investment transactions ..... (120,646) (74,499) (83,648)
----------- ----------- ----------
$ 9,843,123 $ 9,916,667 $4,916,336
=========== =========== ==========
(G) Federal Tax Information
No provision is made for Federal taxes as it is the Fund's intention to
have the Fund continue to qualify for and elect the tax treatment applicable to
regulated investment companies under Subchapter M of the Internal Revenue Code
of 1986, as amended, and to make the requisite distributions to its shareholders
which will be sufficient to relieve it from federal income and excise taxes.
Short-term capital distributions that are reported in the Statement of Changes
in Net Assets are reported as ordinary income for Federal tax purposes. There
were no short-term or long-term capital gain distributions for the year ended
September 30, 2005.
20
BlackRock Bond Allocation Target Shares
NOTES TO FINANCIAL STATEMENTS (Concluded)
Dividends from net investment income and distributions from net realized
capital gains are determined in accordance with U.S. Federal income tax
regulations, which may differ from those amounts determined under accounting
principles generally accepted in the United States. These book/tax differences
are either temporary or permanent in nature. To the extent these differences
are permanent, they are charged or credited to paid-in-capital or accumulated
net realized gain, as appropriate, in the period that the differences arise.
The following permanent differences as of September 30, 2005, attributable to
paydown adjustments were reclassified to the following accounts:
Increase/ Increase/
(Decrease) (Decrease)
Accumulated Undistributed
Net Realized Net Investment
Gain Income
-------------- ---------------
BATS Series S ....................... $(7,119) $7,119
BATS Series M ....................... (2,311) 2,311
The tax character of distributions paid during the year ended September
30, 2005 were as follows:
Ordinary
Income
------------
BATS Series S
9/30/05 .................................... $355,858
BATS Series C
9/30/05 .................................... 409,280
BATS Series M
9/30/05 .................................... 201,309
As of September 30, 2005, the tax components of distributable
earnings/(accumulated losses) were as follows:
Undistributed Accumulated Post-
Ordinary Capital October
Income Losses Losses
--------------- ------------- --------------
BATS Series S .................. $32,002 $(167) $(36,064)
BATS Series C .................. 35,424 -- (9,465)
BATS Series M .................. 18,151 -- (16)
The estimated Post-October losses represent losses realized on investment
transactions from November 1, 2004 through September 30, 2005 that, in
accordance with Federal income tax regulations, the Portfolios may defer and
treat as having arisen in the following fiscal year. For Federal income tax
purposes, capital loss carryforwards may be carried forward and applied against
future capital gains.
As of September 30, 2005, the Series S Portfolio had capital loss
carryforwards available to offset future realized capital gains through the
indicated expiration dates:
Expiring September 30
----------------------
2013 Total
-------- --------
BATS Series S .................... $167 $167
21
BlackRock Bond Allocation Target Shares
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of
the BlackRock Bond Allocation Target Shares:
We have audited the accompanying statements of net assets of the Series S,
Series C, and Series M Portfolios [three of the five portfolios constituting
the BlackRock Bond Allocation Target Shares (the "Fund"), collectively the
"Portfolios"] as of September 30, 2005 and the related statements of
operations, the statements of changes in net assets and the financial
highlights for the year then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. The Portfolios are not required to have, nor were we engaged to
perform, an audit of their internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Portfolios' internal control over financial reporting. Accordingly, we express
no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of September 30, 2005, by
correspondence with the custodians and brokers; where replies were not received
from brokers, we performed other auditing procedures. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of the
Portfolios as of September 30, 2005, the results of their operations, the
changes in their net assets and their financial highlights for the year then
ended, in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
November 25, 2005
22
BlackRock Funds
FUND MANAGEMENT (Unaudited)
Information pertaining to the Trustees and officers of the Fund is set forth
below. The statement of additional information (SAI) includes additional
information about the Trustees and is available without charge, upon request,
by calling (888) 825-2257. Institutional and service share class investors
should call (800) 441-7450.
- ------------------------------------------------------------------------------------------------------------------------------------
Number of
Term of Portfolios Total Fund
Office/(1)/ in Fund Other Compensation
Position(s) and Length Complex/(2)/ Directorships for the
Name, Address and Held with of Time Principal Occupation(s) Overseen Held by Year Ending
Age Fund Served During Past Five Years by Trustee Trustee 9/30/05
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
Richard S. Davis/(3)/ Trustee Since 2005 Managing Director, BlackRock, Inc. 55 None N/A
BlackRock, Inc. (since 2005); Chief Executive Officer, (includes 5
40 E. 52nd Street State Street Research & Portfolios
New York, NY 10022 Management Company (2000-2005); of the Fund
Age: 59 Chairman of the Board of Trustees, and 50
State Street Research mutual funds Portfolios
("SSR Funds") (2000-2005); Senior of
Vice President, Metropolitan Life BlackRock
Insurance Company (1999-2000); Funds)
Chairman, SSR Realty (2000-2004).
- ------------------------------------------------------------------------------------------------------------------------------------
Laurence D. Fink/(4)/ Trustee Since 2000 Director, Chairman and Chief 55 Director, N/A
BlackRock, Inc. Executive Officer of BlackRock, Inc. (includes 5 BlackRock,
40 E. 52nd Street since its formation in 1998 and of Portfolios Inc.
New York, NY 10022 BlackRock, Inc.'s predecessor of the Fund
Age: 52 entities since 1988; Chairman of the and 50
Management Committee; formerly, Portfolios
Managing Director of the First of
Boston Corporation, Member of its BlackRock
Management Committee, Co-head of Funds)
its Taxable Fixed Income Division
and Head of its Mortgage and Real
Estate Products Group; Chairman of
the Board of Nomura BlackRock
Asset Management and several of
BlackRock's alternative investment
vehicles; Director of several of
BlackRock's offshore funds;
Co-Chairman of the Board of
Trustees of Mount Sinai-NYU;
Co-Chairman of the Board of
Trustees of NYU Hospitals Center;
member of the Board of Trustees of
NYU; member of the Board of
Executives of the New York Stock
Exchange, and Trustee of the
American Folk Art Museum.
- ------------------------------------------------------------------------------------------------------------------------------------
23
BlackRock Funds
FUND MANAGEMENT (Unaudited) (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number of
Term of Portfolios Total Fund
Office/(1)/ in Fund Other Compensation
Position(s) and Length Complex/(2)/ Directorships for the
Name, Address and Held with of Time Principal Occupation(s) Overseen Held by Year Ending
Age Fund Served During Past Five Years by Trustee Trustee 9/30/05
- ------------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
Bruce R. Bond Trustee Since 2005 Retired; Trustee and member of the 55 Director, $ 84,600
c/o BlackRock Funds Governance Committee, SSR Funds (includes 5 Avaya, Inc.
100 Bellevue Parkway (1997-2005). Portfolios (information
Wilmington, DE 19809 of the Fund technology).
Age: 59 and 50
Portfolios
of
BlackRock
Funds)
- ------------------------------------------------------------------------------------------------------------------------------------
Peter S. Drotch Trustee Since 2005 Retired; Trustee and member of the 55 Director, $ 84,600
c/o BlackRock Funds Audit Committee, SSR Funds (includes 5 First
100 Bellevue Parkway (2003-2005); Partner, Pricewater- Portfolios Marblehead
Wilmington, DE 19809 houseCoopers LLP (accounting firm) of the Fund Corp.
Age: 64 (1964-2000). and 50 (student
Portfolios loan
of processing
BlackRock and
Funds) securitization);
Trustee,
University of
Connecticut;
Trustee,
Huntington
Theatre.
- ------------------------------------------------------------------------------------------------------------------------------------
Honorable Stuart Trustee and Since 2001 Partner, Covington & Burling (law 55 Director, $130,100
E. Eizenstat Chairman of firm) (2001-Present); Deputy (includes 5 Mirant
Covington & Burling the Secretary of the Treasury Portfolios Corporation;
1201 Nominating (1999-2001); Under Secretary of of the Fund Advisory
Pennsylvania Avenue, Committee State for Economic, Business and and 50 Board member,
NW Agricultural Affairs (1997-1999); Portfolios The
Washington, DC 20004 Under Secretary of Commerce for of Coca-Cola
Age: 62 International Trade (1996-1997); BlackRock Company;
U.S. Ambassador to the European Funds) Advisory
Union (1993-1996); Chairman, Board member,
International Board of Governors, Group
Weizmann Institute of Science. Menatep;
Advisory
Board member, BT
Americas.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert M. Hernandez Trustee, Since 1996 Retired; Director (1991-2001), Vice 55 Lead Director, $140,100
c/o BlackRock Funds Vice Chairman and Chief Financial Officer (includes 5 ACE Limited
100 Bellevue Parkway Chairman (1994-2001), Executive Vice Portfolios (insurance
Wilmington, DE 19809 of President-Accounting and Finance of the Fund company);
Age: 61 the Board and Chief Financial Officer and 50 Director
and (1991-1994), USX Corporation (a Portfolios and Chairman
Chairman diversified company principally of of the Board,
of engaged in energy and steel BlackRock RTI
the Audit businesses). Funds) International
Committee Metals, Inc.:
Director,
Eastman
Chemical
Company.
- ------------------------------------------------------------------------------------------------------------------------------------
24
BlackRock Funds
FUND MANAGEMENT (Unaudited) (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number of
Term of Portfolios Total Fund
Office/(1)/ in Fund Other Compensation
Position(s) and Length Complex/(2)/ Directorships for the
Name, Address and Held with of Time Principal Occupation(s) Overseen Held by Year Ending
Age Fund Served During Past Five Years by Trustee Trustee 9/30/05
- ------------------------------------------------------------------------------------------------------------------------------------
Dr. Matina Horner Trustee and Since 2004 Retired; Executive Vice President of 55 Chair of the $104,550
c/o BlackRock Funds Chairperson Teachers Insurance and Annuity (includes 5 Board of the
100 Bellevue Parkway of Association and College Retirement Portfolios Massachusetts
Wilmington, DE 19809 the Equities Fund (TIAA-CREF) of the Fund General
Age: 66 Governance (1989-2003). and 50 Hospital
Committee Portfolios Institute of
of Health
BlackRock Professions;
Funds) Chair of
the Board of
the
Greenwall
Foundation;
Trustee,
Century
Foundation
(formerly
The Twentieth
Century
Fund);
Director,
N STAR
(formerly
called
Boston
Edison);
Director,
The Neiman
Marcus Group;
Honorary
Trustee,
Massachusetts
General
Hospital
Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
Toby Rosenblatt Trustee Since 2005 President, Founders Investment Ltd. 55 Director, $ 84,600
c/o BlackRock Funds (private investments) (since 1999); (includes 5 A.P. Pharma,
100 Bellevue Parkway Trustee, SSR Funds (1993-2003). Portfolios Inc.
Wilmington, DE 19809 of the Fund
Age: 67 and 50
Portfolios
of
BlackRock
Funds)
- ------------------------------------------------------------------------------------------------------------------------------------
David R. Trustee and Since 1996 Chairman, Wilmerding & Associates, 56 None $135,100
Wilmerding, Jr. Chairperson Inc. (investment advisers) (since (includes 5
c/o BlackRock Funds of 1989); Chairman, Coho Partners, Portfolios
100 Bellevue Parkway the Board Ltd. (investment advisers) (since of the Fund,
Wilmington, DE 19809 2003); Director, Beaver Management 50
Age: 70 Corporation (land management Portfolios
corporation); Managing General of
Partner, Chestnut Street Exchange BlackRock
Fund. Funds and
1 Portfolio
of Chestnut
Street
Exchange
Fund, which
is managed
by
BlackRock
Financial
Management
Inc. and
BlackRock
Institutional
Management
Corporation.)
- ------------------------------------------------------------------------------------------------------------------------------------
25
BlackRock Funds
FUND MANAGEMENT (Unaudited) (Continued)
- ------------------------------------------------------------------------------------------------------------------------
Term of Total Fund
Office/(5)/ Compensation
Position(s) and Length for the
Name, Address and Held with of Time Principal Occupation(s) Year Ending
Age Fund Served During Past Five Years 9/30/05
- ------------------------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------
Anne Ackerley Vice President Since 2003 Managing Director, BlackRock, Inc. (since May N/A
BlackRock, Inc. (previously 2000); First Vice President and Operating
40 E. 52nd Street served as Officer, Mergers and Acquisitions Group
New York, NY 10022 Assistant (1997-2000), First Vice President and Operating
Age: 43 Secretary Officer, Public Finance Group (1995-1997), and
since First Vice President, Emerging Markets Fixed
2000) Income Research (1994-1995), Merrill Lynch &
Co.
- ------------------------------------------------------------------------------------------------------------------------
Edward Baer Assistant Since 2005 Director and Senior Counsel of BlackRock, Inc. N/A
BlackRock, Inc. Secretary (since 2004); Associate, Willkie Farr &
40 E. 52nd Street Gallagher LLP (2000-2004); Associate, Morgan
New York, NY 10022 Lewis & Bockius LLP (1995-2000).
Age: 37
- ------------------------------------------------------------------------------------------------------------------------
Bart Battista Chief Since 2004 Chief Compliance Officer and Anti-Money $347
BlackRock, Inc. Compliance Laundering Compliance Officer of BlackRock,
40 E. 52nd Street Officer and Inc. (since 2004); Managing Director (since
New York, NY 10022 Anti-Money 2003), and Director (1998-2002) of BlackRock,
Age: 46 Laundering Inc.; Compliance Officer at Moore Capital
Compliance Management (1995-1998).
Officer
- ------------------------------------------------------------------------------------------------------------------------
Ellen L. Corson Assistant Since 1998 Senior Director and Vice President of Fund N/A
PFPC Inc. Treasurer Accounting and Administration, PFPC Inc.
103 Bellevue Parkway (since 2003); Vice President and Director of
Wilmington, DE 19809 Mutual Fund Accounting and Administration,
Age: 41 PFPC Inc. (since November 1997); Assistant
Vice President, PFPC Inc. (March
1997-November 1997); Senior Accounting
Officer, PFPC Inc. (March 1993-March 1997).
- ------------------------------------------------------------------------------------------------------------------------
Henry Gabbay President Since 2005 Managing Director, BlackRock, Inc. (since N/A
BlackRock, Inc. 1989).
40 E. 52nd Street
New York, NY 10022
Age: 57
- ------------------------------------------------------------------------------------------------------------------------
Brian P. Kindelan Secretary Since 1997 Managing Director and Senior Counsel (since N/A
BlackRock Advisors, Inc. January 2005), Director and Senior Counsel
100 Bellevue Parkway (2001-2004) and Vice President and Senior
Wilmington, DE 19809 Counsel (1998-2000), BlackRock Advisors,
Age: 46 Inc.; Senior Counsel, PNC Bank Corp. May
1995-April 1998).
- ------------------------------------------------------------------------------------------------------------------------
William McGinley Treasurer Since 2005 Managing Director of BlackRock, Inc. (since N/A
BlackRock, Inc. 2004); Partner, PricewaterhouseCoopers LLP
100 Bellevue Parkway (1990-2004).
Wilmington, DE 19809
Age: 38
- ------------------------------------------------------------------------------------------------------------------------
Vincent Tritto Assistant Since 2003 Managing Director and Senior Counsel (since N/A
BlackRock, Inc. Secretary January 2005) and Director and Senior Counsel
40 E. 52nd Street (2002-2004) of BlackRock, Inc. Executive
New York, NY 10022 Director (2000-2002) and Vice President
Age: 44 (1998-2000), Morgan Stanley & Co.
Incorporated and Morgan Stanley Asset
Management Inc. and officer of various Morgan
Stanley-sponsored investment vehicles:
Counsel (1998); Associate (1988-1997),
Rogers & Wells LLP, New York, NY.
- ------------------------------------------------------------------------------------------------------------------------
26
BlackRock Funds
FUND MANAGEMENT (Unaudited) (Concluded)
(1) Each Trustee holds office for an indefinite term until the earlier of (1)
the next meeting of shareholders at which Trustees are elected and until
his or her successor is elected and qualified and (2) such time as such
Trustee resigns or his or her term as a Trustee is terminated in accordance
with the Fund's code of regulations and Declaration of Trust.
(2) A Fund Complex means two or more registered investment companies that hold
themselves out to investors as related companies for purposes of investment
and investor services, that have a common investment adviser or that have
an investment adviser that is an affiliated person of the investment
adviser of any of the other registered investment companies.
(3) Mr. Davis is an interested person of the Fund due to his position at
BlackRock, Inc.
(4) Mr. Fink is an interested person of the Fund due to his position at
BlackRock, Inc.
(5) Each officer holds office for an indefinite term until the earlier of (1)
the next meeting of trustees at which his or her successor is appointed and
(2) such time as such officer resigns or his or her term as an officer is
terminated in accordance with the Fund's code of regulations and
Declaration of Trust.
27
BlackRock Funds
ADDITIONAL INFORMATION (Unaudited)
(A) A written consent was sent to the sole shareholder of all portfolios of the
Fund asking it to consider and vote upon the election of nine trustees to
the Board of Trustees of the Fund (the "Board"). Five of the nine nominees
were already serving as trustees of the Fund and the additional nominees
had previously served as trustees of the State Street Research Funds. Due
to an increase in the responsibilities of boards of trustees of funds
generally, the Board believed it was in the best interest of the Fund to
increase the size of the Board. On April 29, 2005, the sole shareholder
executed the consent, thereby duly electing the following trustees to the
Board:
Bruce R. Bond
Richard S. Davis
Peter S. Drotch
Stuart E. Eizenstat
Laurence D. Fink
Robert M. Hernandez
Dr. Matina Horner
Toby Rosenblatt
David R. Wilmerding, Jr.
(B) As previously disclosed, BlackRock has received subpoenas from various
federal and state governmental and regulatory authorities and various
information requests from the Securities and Exchange Commission in
connection with ongoing industry-wide investigations of mutual fund
matters.
28
BlackRock Bond Allocation Target Shares
Investment Adviser
BlackRock Advisors, Inc.
Wilmington, Delaware 19809
Custodian
PFPC Trust Co.
Philadelphia, Pennsylvania 19153
Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware 19809
Distributor
BlackRock Distributors, Inc.
King of Prussia, Pennsylvania 19406
Counsel
Simpson Thacher & Bartlett LLP
New York, New York 10017
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Philadelphia, Pennsylvania 19103
The Fund will mail only one copy of shareholder documents, including
prospectuses, annual and semi-annual reports and proxy statements, to
shareholders with multiple accounts at the same address. This practice is
commonly called "householding" and it 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 Fund at (800)
441-7762.
The Fund has delegated proxy voting responsibilities to BlackRock and its
affiliates, subject to the general oversight of the Fund's Board of Trustees. A
description of the policies and procedures that BlackRock and its affiliates use
to determine how to vote proxies relating to portfolio securities is available
without charge, upon request, by calling (800) 441-7762, or on the website of
the Securities and Exchange Commission (the "Commission") at http://www.sec.gov.
Information on how proxies relating to the Fund's voting securities were voted
(if any) by BlackRock during the most recent 12-month period ended June 30th is
available, upon request and without charge, by calling (800) 441-7762 or on the
website of the Commission at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings for the first and
third quarters of its fiscal year with the Commission on Form N-Q. The Fund's
Form N-Q is available on the Commission's website at http://www.sec.gov and may
be reviewed and copied at the Commission's Public Reference Room in Washington,
D.C. Information regarding the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330. The Fund's Form N-Q may also be obtained
upon request, without charge, by calling (800) 441-7762.
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Fund shares.
For information about portfolio holdings and characteristics, BlackRock BATS
shareholders and prospective investors may call (888) 825-2257.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by PNC Bank, National Association or any other bank and shares are not
federally insured by, guaranteed by, obligations of or otherwise supported by
the U.S. Government, the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other governmental agency. Investments in shares of the
fund involve investment risks, including the possible loss of the principal
amount invested.
BlackRock
BATS-ANN 11/05
Item 2. Code of Ethics.
| | (a) | The Registrant has adopted a code of ethics (the “Code of Ethics”) that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. |
| | (c) | The Registrant has not amended its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto. |
| | (d) | The Registrant has not granted a waiver or an implicit waiver from a provision of its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto. |
| | (f) | The Registrant’s Code of Ethics is attached as an Exhibit hereto. |
Item 3. Audit Committee Financial Expert.
The Registrant’s Board of Trustees has determined that it has six audit committee financial experts serving on its audit committee, each of whom is an “independent” Trustee: Bruce R. Bond, Peter S. Drotch, Robert M. Hernandez, Dr. Matina Horner, Toby Rosenblatt and David R. Wilmerding Jr. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
Audit Fees
| | (a) | The aggregate fees billed for professional services rendered by the principal accountant for the audit of the Registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $89,800 for the fiscal year ended September 30, 2005. |
Audit-Related Fees
| | (b) | The aggregate fees billed for the fiscal year for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported above in Item 4(a) were $9,000 for the fiscal year ended September 30, 2005. The services were for security counts per Rule 17f-2 under the Investment Company Act of 1940 (the “1940 Act”). |
Tax Fees
| | (c) | The aggregate fees billed for the fiscal year for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $25,000 for the fiscal year ended September 30, 2005. The nature of these services was federal, state and local income and excise tax review and related advice and planning and miscellaneous tax advice. |
All Other Fees
| | (d) | There were no aggregate fees billed for the fiscal year for products and services provided by the principal accountant, other than the services reported above in Items 4(a) through (c). |
Audit Committee Pre-Approval Policies and Procedures
(e)(1) The Registrant has polices and procedures (the “Policy”) for the pre-approval by the Registrant’s Audit Committee of Audit, Audit-Related, Tax and Other Services (as each is defined in the Policy) provided by the Registrant’s independent auditor (the “Independent Auditor”) to the Registrant and other “Covered Entities” (as defined below). The term of any such pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically provides for a different period. The amount of any such pre-approval is set forth in the appendices to the Policy (the “Service Pre-Approval Documents”). At its November meeting of each year, the Audit Committee will approve or re-approve the Service Pre-Approval Documents for that year, together with any changes deemed necessary or desirable by the Audit Committee. The Audit Committee may, from time to time, modify the nature of the services pre-approved, the aggregate level of fees pre-approved or both.
For the purposes of the Policy, “Covered Services” means (A) all engagements for audit and non-audit services to be provided by the Independent Auditor to the Registrant and (B) all engagements for non-audit services that directly impact the operations and financial reporting or the Registrant to be provided by the Independent Auditor to any Covered Entity. “Covered Entities” means (1) BlackRock Advisors, Inc. (the “Advisor”) or (2) any entity controlling, controlled by or under common control with the Advisor that provides ongoing services to the Registrant.
In the intervals between the scheduled meetings of the Audit Committee, the Audit Committee delegates pre-approval authority under the Policy to the Chairman of the Audit Committee (the “Chairman”). The Chairman shall report any pre-approval decisions under the Policy to the Audit Committee at its next scheduled meeting. At each scheduled meeting, the Audit Committee will review with the Independent Auditor the Covered Services pre-approved by the Chairman pursuant to delegated authority, if any, and the fees related thereto. Based on these reviews, the Audit Committee can modify, at its discretion, the pre-approval originally granted by the Chairman pursuant to delegated authority. This modification can be to the nature of services pre-approved, the aggregate level of fees approved, or both. The Audit Committee may modify or withdraw this delegated authority at any time the Audit Committee determines that it is appropriate to do so.
Fee levels for all Covered Services to be provided by the Independent Auditor and pre-approved under this Policy will be established annually by the Audit Committee and set forth in the Service Pre-Approval Documents. Any increase in pre-approved fee levels will require specific pre-approval by the Audit Committee (or the Chairman pursuant to delegated authority).
The terms and fees of the annual Audit services engagement for the Registrant are subject to the specific pre-approval of the Audit Committee. The Audit Committee (or the Chairman pursuant to delegated authority) will approve, if necessary, any changes in terms, conditions or fees resulting from changes in audit scope, Registrant structure or other matters.
In addition to the annual Audit services engagement specifically approved by the Audit Committee, any other Audit services for the Registrant not listed in the Service Pre-Approval Document for the respective period must be specifically pre-approved by the Audit Committee (or the Chairman pursuant to delegated authority).
Audit-Related services are assurance and related services that are not required for the audit, but are reasonably related to the performance of the audit or review of the financial statements of the Registrant and, to the extent they are Covered Services, the other Covered Entities or that are traditionally performed by the Independent Auditor. Audit-Related services that are Covered Services and are not listed in the Service Pre-Approval Document for the respective period must be specifically pre-approved by the Audit Committee (or the Chairman pursuant to delegated authority).
The Audit Committee believes that the Independent Auditor can provide Tax services to the Registrant and Covered Entities such as tax compliance, tax planning and tax advice without impairing the auditor’s independence. However, the Audit Committee will not permit the retention of the Independent Auditor in connection with a transaction, the purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. Tax services that are Covered Services and are not listed in the Service Pre-Approval Document for the respective period must be specifically pre-approved by the Audit Committee (or the Chairman pursuant to delegated authority).
All Other services that are covered and are not listed in the Service Pre-Approval Document for the respective period must be specifically pre-approved by the Audit Committee (or the Chairman pursuant to delegated authority).
Requests or applications to provide Covered Services that require approval by the Audit Committee (or the Chairman pursuant to delegated authority) must be submitted to the Audit Committee or the Chairman, as the case may be, by both the Independent Auditor and the Chief Financial Officer of the Registrant or the respective Covered Entity, and must include a joint statement as to whether, in their view, (a) the request or application is consistent with the rules of the Securities and Exchange Commission (“SEC”) on auditor independence and (b) the requested service is or is not a non-audit service prohibited by the SEC. A request or application submitted to the Chairman between scheduled meetings of the Audit Committee should include a discussion as to why approval is being sought prior to the next regularly scheduled meeting of the Audit Committee.
| | (e)(2) | None of the services described in each of Items 4(b) through (d) were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. |
| | (g) | The aggregate non-audit fees billed by the Registrant’s accountant for services rendered to the Registrant, the Advisor (except for any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) or any entity controlling, controlled by, or under common control with the Advisor that provides ongoing services to the Registrant were $1,631,850 for the fiscal year ended September 30, 2005. |
| | (h) | The Registrant’s Audit Committee of the Board of Trustees has considered whether the provision of non-audit services that were rendered to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. |
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
The Registrant’s Schedule of Investments is included as part of the Report to Shareholders filed under Item 1 of this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The Registrant’s Nominating Committee will consider nominees to the Board of Trustees recommended by shareholders when a vacancy becomes available. Shareholders who wish to recommend a nominee should send nominations which include biographical information and sets forth the qualifications of the proposed nominee to the Registrant’s Secretary. There have been no material changes to these procedures.
Item 11. Controls and Procedures.
| | (a) | The Registrant’s principal executive officer and principal financial officer have evaluated the Registrant’s disclosure controls and procedures within 90 days of this filing and have concluded, as of that date, that the Registrant’s disclosure controls and procedures were reasonably designed to ensure that information required to be disclosed by the Registrant in this Form N-CSR was recorded, processed, summarized, and reported within the required time periods and that information required to be disclosed by the Registrant in this Form N-CSR was accumulated and communicated to the Registrant’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. |
| | (b) | There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the Registrant’s fourth fiscal quarter that have materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
Item 12. Exhibits.
| | (a)(1) | Code of ethics attached as EX-99.CODE ETH. |
| | (a)(2) | Certifications of Principal Executive and Financial Officers pursuant to Rule 30a-2(a) under the 1940 Act attached as EX-99.CERT. |
| | (b) | Certification of Principal Executive and Financial Officers pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 furnished as EX-99.906 CERT. |
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 BOND ALLOCATION TARGET SHARES |
| |
| By: (Signature and Title) | | /S/ HENRY GABBAY |
| | | Henry Gabbay, President and Principal Executive Officer |
Date December 8, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| | |
| |
| By: (Signature and Title) | | /S/ HENRY GABBAY |
| | | Henry Gabbay, President and Principal Executive Officer |
Date December 8, 2005
| | |
| |
| By:(Signature and Title) | | /S/ WILLIAM MCGINLEY |
| | | William McGinley, Treasurer and Principal Financial Officer |
