--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
SEMI-ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISOR
--------------------------------------------------------------------------------
May 31, 2002
Dear Shareholder:
The semi-annual period ended April 30, 2002, saw general turmoil in the
equity markets. However, during this time bond markets, particularly municipal
securities, proved to be a shelter for investors seeking refuge from unstable
economic conditions. Over the period, municipal bonds outperformed Treasuries
returning 1.08% versus -1.88%, respectively, as measured by the LEHMAN BROTHERS
MUNICIPAL BOND INDEX* and LEHMAN BROTHERS TREASURY INDEX.**
During the six-month period, the bond market was not without volatility. In
the aftermath of the September 11th tragedy, the Federal Reserve Board (the
"Fed") lowered interest rates four times before the year ended. Since bond
prices generally move in the opposite direction from interest rates, this
aggressive action initially sent bond yields downward and prices (and returns)
markedly higher.
For the first quarter of 2002, issues of new municipal securities increased
by 10%, totaling $65 billion, setting a record for the largest first quarter
issuance in history. Due in part to budgetary pressures, a slowing economy, and
municipalities' ongoing need to finance infrastructure projects, the final month
of the period continued to see heightened levels of new issuance and
year-to-date volume has now reached $87 billion. In March, fixed income markets
suffered following the Fed's announcement of a bias shift from "potential
weakness" to "neutral," which led the investment community to anticipate an
economy in the early stages of recovery. Despite higher than expected
unemployment numbers during April, economic indicators generally concluded the
period on a more positive tone than they began. U.S. manufacturing, as measured
by the ISM (Institute for Supply Management) Index, remained at expansionary
levels in April and the Consumer Confidence Index has bounced from its November
low on increasing expectations. However, we remain cautious that the strong
consumer demand, which has created an increasingly optimistic stimulus, may
become exhausted and slow.
Interest rate fluctuations, such as we have seen recently can be difficult
for investors, especially those who depend on fixed income investments for
current income. We encourage you to consult with your financial advisor to help
you establish a strategy that best fits your overall goals and risk tolerance.
The semi-annual report includes a summary of market conditions over the
period, a review of the strategy employed by your Trust's portfolio managers,
the Trust's unaudited financial statements and a listing of the portfolio's
holdings. We encourage you to read the report and we thank you for making
BlackRock part of your investment program.
Sincerely,
/s/ Laurence D. Fink /s/ Ralph L. Schlosstein
-------------------- ------------------------
Laurence D. Fink Ralph L. Schlosstein
Chairman President
----------
* The Lehman Brothers Municipal Bond Index measures the performance of the
investment grade long-term tax-exempt bond market. The Index is unmanaged
and cannot be purchased directly.
** The Lehman Brothers Treasury Index measures the performance of the public
obligations of the U.S. Treasury. The Index is unmanaged and cannot be
purchased directly.
1
May 31, 2002
Dear Shareholder:
We are pleased to present the first unaudited semi-annual report for the
BlackRock California Municipal Income Trust (the "Trust") for the period ended
April 30, 2002. We would like to take this opportunity to review the Trust's
stock price, net asset value (NAV) performance, summarize market developments
and discuss recent portfolio management activity.
The Trust is a non-diversified, actively managed closed-end bond fund whose
shares are traded on the New York Stock Exchange under the symbol "BFZ". The
Trust's investment objective is to provide current income exempt from regular
Federal and California income taxes. The Trust seeks to achieve this objective
by investing in California tax-exempt general obligation and revenue bonds
issued by city, county and state municipalities. The Trust will invest at least
80% of its total assets in municipal bonds that at the time of investment are
investment grade quality (rated "AAA" to "BBB" by a major rating agency or of
equivalent quality). The Trust may invest up to 20% of its total assets in
municipal bonds that at the time of investment are non-investment grade quality
(rated "BB" or "B" by a major rating agency or of equivalent quality).
The table below summarizes the changes in the Trust's stock price and net
asset value:
-------------------------------------------------------
4/30/02 10/31/01 CHANGE HIGH LOW
--------------------------------------------------------------------------------
SHARE PRICE $13.54 $14.75 (8.20)% $14.96 $12.91
--------------------------------------------------------------------------------
NET ASSET VALUE (NAV) $13.59 $14.50 (6.28)% $14.75 $13.26
--------------------------------------------------------------------------------
THE FIXED INCOME MARKETS
Economic performance was mixed during the semi-annual period although
increasingly positive economic data surfaced as time progressed. The U.S.
economy showed signs of a rebound on the heels of strong consumer and military
spending, which helped to overcome the devastation of September 11th. The Fed
also provided further monetary stimulus by cutting interest rates two additional
times prior to year-end, leaving the federal funds rate at 1.75%. This was in
addition to nine previous interest rate reductions by the Fed during 2001. The
Consumer Confidence Index initially reached its lowest level in eight years
during November, but marked a steady climb during the remainder of the period as
investors readily anticipated an economic recovery. The economy continued to see
increasingly optimistic data emerge throughout the first quarter of 2002. Gross
Domestic Product ("GDP") during the first quarter rose 5.6%, the fastest rate in
two years, and the manufacturing sector saw substantial gains as the Purchasing
Managers Index indicated expansion for the first time in 19 months. Although
productivity increased 8.6% during the first quarter, unemployment in April
reached 6.0%. However, the unexpectedly high unemployment number is believed to
be a result of recent legislation prompting many to apply for extended benefits.
After surprising growth in the first quarter of 2002, the fixed income markets
came under pressure following the March 19th announcement by the Federal Open
Market Committee ("FOMC") to leave rates steady, citing a bias shift from
"potential weakness" to "neutral." The equity markets did not significantly
benefit from the emergence of the strong growth indicators as they were
challenged by several high profile bankruptcies. Closing out the period, April
saw the largest advancement in retail sales in six months and inflationary
pressures remain relatively in check. However, concerns regarding the corporate
environment and violence in the Middle East and Asia have left many investors
apprehensive about the markets. Going forward, although low inventory levels
should continue to provide support for manufacturing data, concerns exist
surrounding the long-term strength of the highly leveraged consumer.
Following a steepening of the yield curve throughout the majority of 2001,
yields over the period trended higher causing the curve to flatten. Signs of a
recovering economy caused yields to rise in sympathy with expectations of a
higher fed funds rate by year end. The 5- to 10-year portion of the yield curve
came under the most pressure, rising 93 and 86 basis points, respectively,
during the period. Yields on 2- and 30-year maturities also suffered during the
period rising 80 and 72 basis points, respectively. After struggling following
the FOMC's announcement of a bias shift in March, Treasuries bounced back in
April. April's performance was driven by economic pessimism, which surfaced as
enthusiasm for a rapid economic recovery waned amidst tensions in the Middle
East, cautious corporate earnings announcements and government reports of a
slower growth pattern.
2
Looking ahead, a budget surplus of only $78 billion and a 30% decline in tax
revenues for 2001 has caused Treasury finances to deteriorate sharply and should
result in larger auction sizes. However, the allowable debt limit set by
Congress will soon be reached, possibly leading the Treasury to pursue
additional methods of financing. As of April 30, 2002, the 10-year Treasury was
yielding 5.09% versus 4.23% on October 31, 2001.
On a tax-adjusted basis, municipal bonds outperformed the taxable domestic
bond market for the semi-annual period ended April 30, 2002, returning 1.76% (as
measured by the LEHMAN BROTHERS MUNICIPAL BOND INDEX at a tax bracket of 38.6%)
versus -0.01% for the LEHMAN BROTHERS AGGREGATE INDEX. Strong institutional and
retail demand for municipal bonds allowed the sector to show outperformance
versus Treasuries across the entire curve. Demand was driven primarily by two
factors: yields on municipal securities remain attractive versus alternative
fixed income investments, and continued volatility in the equity markets led
investors to seek diversification. Strong demand was met by significant new
issuance as the first quarter of 2002 posted a 10% increase over the same period
in 2001 and was the largest first quarter total on record. In April, new bond
issuance continued its strong trend with a 12% increase from a year earlier,
bringing total year-to-date issuance to $87 billion. Similar to Treasuries, the
municipal yield curve flattened over the period as yields on short to
intermediate maturities rose more quickly than long-term rates.
California's economy turned sluggish a year ago. Employment growth actually
stopped in July 2001 and through November 2002, the State lost jobs. Since then
employment is experiencing small gains. However, the unemployment rate is still
rising. April 2002's jobless rate was 6.1%, significantly higher than April
2001's 5%, indicating that even more people are seeking employment.
California's General Fund revenues reflect the slower economy. Year to date
(April) revenues are 2.5% ($1.14 billion) below revised expectations. In May the
Governor acknowledged and addressed a projected FY2003 $23 billion budget gap
(approximately 30% of revenues); his remedies include tobacco tax increases and
motor vehicle registration fee hikes, tobacco securitization bond proceeds and
expenditure cuts. These proposals are currently being discussed in the
Legislature. The State's General Fund is under additional stress due to the $6.2
billion loan to the Department of Water Resources in 2001 to pay for power
purchases. The State had expected to be reimbursed in FY 2002 through a bond
sale that remains stalled.
California's unresolved energy issues combined with the slowing economy
continue to negatively impact the State's fiscal position. The State's ratings
were lowered to A1/A+ citing the General Fund's weakened position; both rating
agencies maintain a negative outlook.
THE TRUST'S PORTFOLIO AND INVESTMENT STRATEGY
The Trust's portfolio is actively managed to diversify exposure to various
sectors, issuers, revenue sources and security types. BlackRock's investment
strategy emphasizes a relative value approach, which allows the Trust to
capitalize upon changing market conditions by rotating municipal sectors,
credits and coupons.
Additionally, the Trust employs leverage to enhance its income by borrowing
at short-term municipal rates and investing the proceeds in longer maturity
issues that have higher yields. The degree to which the Trust can benefit from
its use of leverage may affect its ability to pay high monthly income. At the
end of the semi-annual period, the Trust's leverage amount was approximately 39%
of total assets.
Municipals outperformed Treasuries for the period due to strong retail
demand despite record issuance. The curve flattened over the period as rates at
the short end of the curve rose rapidly in anticipation of the Fed raising rates
in an economic recovery. Rates at the long end of the curve rose moderately and
the curve remains steep on a historical basis. We continue to focus on bonds
with higher coupons as they provide the most attractive income stream and also
tend to have superior performance in a rising rate environment.
3
The following charts show the Trust's asset composition and credit quality
allocations:
--------------------------------------------------------------------------------
SECTOR BREAKDOWN
--------------------------------------------------------------------------------
SECTOR APRIL 30, 2002 OCTOBER 31, 2001
--------------------------------------------------------------------------------
City, County & State 14% 9%
--------------------------------------------------------------------------------
School 13% 24%
--------------------------------------------------------------------------------
Housing 12% 7%
--------------------------------------------------------------------------------
Lease Revenue 11% 12%
--------------------------------------------------------------------------------
Tobacco 9% 4%
--------------------------------------------------------------------------------
Transportation 9% 9%
--------------------------------------------------------------------------------
Water & Sewer 7% 16%
--------------------------------------------------------------------------------
Other 6% 6%
--------------------------------------------------------------------------------
District 6% 8%
--------------------------------------------------------------------------------
Power 6% 3%
--------------------------------------------------------------------------------
Hospital 6% 1%
--------------------------------------------------------------------------------
Special Tax 1% 1%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CREDIT RATING* APRIL 30, 2002 OCTOBER 31, 2001
--------------------------------------------------------------------------------
AAA/Aaa 39% 57%
--------------------------------------------------------------------------------
AA/Aa 3% 12%
--------------------------------------------------------------------------------
A/A 43% 19%
--------------------------------------------------------------------------------
BBB/Baa 5% 5%
--------------------------------------------------------------------------------
Not Rated 10% 7%
--------------------------------------------------------------------------------
----------
* Using the higher of Standard & Poor's, Moody's or Fitch's rating.
We look forward to continuing to manage the Trust to benefit from the
opportunities available to investors in the investment grade municipal market.
We thank you for your investment and continued interest in the BlackRock
California Municipal Income Trust. Please feel free to call our marketing center
at (800) 227-7BFM (7236) if you have any specific questions that were not
addressed in this report.
Sincerely,
/s/ Robert S. Kapito /s/ Kevin M. Klingert
-------------------- ---------------------
Robert S. Kapito Kevin M. Klingert
Vice Chairman and Portfolio Manager Managing Director and Portfolio Manager
4
--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
--------------------------------------------------------------------------------
Symbol on New York Exchange: BFZ
--------------------------------------------------------------------------------
Initial Offering Date: July 27, 2001
--------------------------------------------------------------------------------
Closing Share Price as of 4/30/02: $13.54
--------------------------------------------------------------------------------
Net Asset Value as of 4/30/02: $13.59
--------------------------------------------------------------------------------
Yield on Closing Share Price as of 4/30/02 ($13.54)(1): 6.43%
--------------------------------------------------------------------------------
Current Monthly Distribution per Share(2): $0.0725
--------------------------------------------------------------------------------
Current Annualized Distribution per Share(2): $0.8700
--------------------------------------------------------------------------------
(1) Yield on closing share price is calculated by dividing the current
annualized distribution per share by the closing share price.
(2) The distribution is not constant and is subject to change.
PRIVACY PRINCIPLES OF THE TRUST
The Trust is committed to maintaining the privacy of shareholders and to
safeguarding its non-public personal information. The following information is
provided to help you understand what personal information the Trust collects,
how we protect that information and why, in certain cases, we may share
information with select other parties.
Generally, the Trust does not receive any non-public personal information
relating to its shareholders, although certain nonpublic personal information of
its shareholders may become available to the Trust. The Trust does not disclose
any non-public personal information about its shareholders or former
shareholders to anyone, except as permitted by law or as is necessary in order
to service shareholder accounts (for example, to a transfer agent or third party
administrator).
The Trust restricts access to non-public personal information about the
shareholders to BlackRock employees with a legitimate business need for the
information. The Trust maintains physical, electronic and procedural safeguards
designed to protect the non-public personal information of its shareholders.
5
--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS APRIL 30, 2002 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT OPTION CALL VALUE
RATING* (000) DESCRIPTION PROVISIONS+ (NOTE 1)
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--161.3%
CALIFORNIA--146.3%
Anaheim Pub. Fin. Auth. Lease Rev., Sub. Pub. Impts Proj., Ser. C, FSA,
AAA $24,500 Zero Coupon, 9/01/31 .......................................................... No Opt. Call $ 4,606,978
AAA 6,070 Zero Coupon, 9/01/32 .......................................................... No Opt. Call 1,078,153
A1 5,000 California Cnty. California Tobacco Sec., Asset Bkd. Stanislaus Fdg., Ser. A,
5.875%, 6/01/43 ............................................................... 6/12 @ 100 4,911,950
AAA 11,700 California Edl. Facs. Auth. Rev., Stanford Univ., Ser. Q, 5.25%, 12/01/32 ....... 6/11 @ 101 11,721,177
A 4,890 California Hlth. Facs. Fin. Auth. Rev., Kaiser Proj., Ser. A, 5.40%, 5/01/28 .... 7/06 @ 102 4,770,880
California Hsg. Fin. Agcy. Rev.,
AAA 24,020 Ser. B, Zero Coupon, 8/01/31, FSA ............................................. 8/10 @ 31.194 4,411,033
AAA 30,000 Home Mtge., Zero Coupon, 2/01/33, AMBAC ....................................... 8/11 @ 29.558 4,872,897
AAA 19,185 Home Mtge., Ser. T, Zero Coupon, 8/01/21, MBIA ................................ 8/11 @ 57.562 6,324,719
California Infrastructure & Econ. Dev. Rev.,
A- 22,500 J David Gladstone Inst. Proj., 5.25%, 10/01/34 ................................ 10/11 @ 101 21,267,225
A 13,500 Kaiser Hosp. Asst. LLC, Ser. A, 5.55%, 8/01/31 ................................ 8/11 @ 102 13,272,795
California St., G.O.,
A+ 7,000 5.125%, 6/01/27 ............................................................... 6/11 @ 100 6,774,880
A+ 25,000 5.20%, 11/01/31 ............................................................... 11/11 @ 100 24,271,000
AAA 5,500 SER. BZ, 5.35%, 12/01/21, MBIA ................................................ 6/07 @ 101 5,395,115
AAA 5,000 Ser. BZ, 5.375%, 12/01/24, MBIA ............................................... 6/07 @ 101 4,897,350
Charter Mac Equity Issuer Trust,
NR 7,000++ Ser. A, 6.30%, 6/30/49 ........................................................ 6/09 @ 100 6,963,530
NR 4,000++ Ser. B, 6.80%, 11/30/50 ....................................................... 11/10 @ 100 3,974,120
A- 5,000 Daly City Hsg. Dev. Fin. Agncy. Rev., Sr. Franciscan Acquisition Proj., Ser. A,
5.85%, 12/15/32 ............................................................... 12/13 @ 102 4,929,550
AAA 7,060 East Bay Mun. Util. Dist. Wtr. Sys. Rev., 5.00%, 6/01/38, MBIA .................. 6/08 @ 101 6,755,502
AAA 6,000 El Monte, Sr. Dept. Pub. Svcs. Fac. Phase II, C.O.P., 5.25%, 1/01/34, AMBAC ..... 1/11 @ 100 6,008,640
Elk Grove Unified Sch. Dist. Spec. Tax, Cap. Appr. Cmnty. Facs. Dist. 1, AMBAC,
AAA 7,485 Zero Coupon, 12/01/29 ......................................................... 12/11 @ 37.373 1,477,838
AAA 7,485 Zero Coupon, 12/01/30 ......................................................... 12/11 @ 35.365 1,389,590
AAA 7,485 Zero Coupon, 12/01/31 ......................................................... 12/11 @ 33.465 1,310,100
Foothill / Eastn. Transp. Corridor Agcy. Toll Road Rev.,
BBB- 5,000 Zero Coupon, 1/15/33 .......................................................... 1/10 @ 25.781 703,800
BBB- 5,000 Zero Coupon, 1/15/34 .......................................................... 1/10 @ 24.228 660,050
BBB- 13,445 Zero Coupon, 1/15/35 .......................................................... 1/10 @ 22.819 1,664,491
BBB- 1,000 Zero Coupon, 1/15/38 .......................................................... 1/10 @ 19.014 102,090
BBB- 13,370 5.75%, 1/15/40 ................................................................ 1/10 @ 101 13,253,681
NR 5,000 Irvine Mobile Home Park Rev., Meadows Mobile Home Park, Ser. A, 5.70%, 3/01/28 .. 3/08 @ 102 4,868,250
Los Angeles Dept. Wtr. & Pwr., Wtr. Wks. Rev., Ser. A,
AA 10,000 5.125%, 7/01/41 ............................................................... 7/11 @ 100 9,635,300
AAA 2,975 5.125%, 7/01/41, FGIC ......................................................... 7/11 @ 100 2,890,272
Aaa 10,000 Monterey Cnty. Master Plan Fin., C.O.P., 5.00%, 8/01/32, MBIA ................... 8/11 @ 100 9,668,700
Munimae TE Bond Subsidiary, LLC,
NR 7,000++ Ser. A, 6.30%, 6/30/49 ........................................................ 11/09 @ 100 6,962,200
NR 3,000++ Ser. B, 6.80%, 6/30/50 ........................................................ 11/10 @ 100 2,980,590
AAA 15,500 Rancho Cucamonga Redev. Agcy. Tax Alloc. Rev., Rancho Redev. Proj., 5.125%,
9/01/30, MBIA ................................................................. 9/11 @ 100 15,285,480
AAA 1,905 Richmond Wst. Wtr. Rev., Zero Coupon, 8/01/31, FGIC ............................. No Opt. Call 359,912
AAA 10,000 Sacramento Mun. Util. Dist. Elec. Rev., Ser. N, 5.00%, 8/15/28, MBIA ............ 8/11 @ 100 9,715,800
AAA 7,500 San Francisco Bay Area Rapid Trans., Dist. Sales Tax Rev., 5.125%,
7/01/36, AMBAC ................................................................ 7/11 @ 100 7,388,850
AAA 6,500 San Francisco City & Cnty. Arpts. Comn. Intl. Arpt. Rev., Second Ser-27A, 5.25%,
5/01/31, MBIA ................................................................. 5/11 @ 100 6,340,490
See Notes to Financial Statements.
6
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT OPTION CALL VALUE
RATING* (000) DESCRIPTION PROVISIONS+ (NOTE 1)
------------------------------------------------------------------------------------------------------------------------------------
NR $ 1,775 San Francisco City & Cnty. Redev. Agcy. Rev., Cmnty. Facs. Dist. No. 6-Mission B,
6.125%, 8/01/31 ............................................................... 8/09 @ 102$ $ 1,755,741
San Jose Mult. Fam. Hsg. Rev.,
AAA 2,880 Lenzen Hsg., Ser. B, 5.45%, 2/20/43, GNMA ..................................... 8/11 @ 102 2,806,186
AAA 4,225 Vlgs. Pkwy. Sr. Apts., Ser. D, 5.50%, 4/01/34 ................................. 4/11 @ 100 4,156,090
Santa Clara Cnty. Hsg. Auth., Mult. Fam. Hsg. Rev., Ser. A,
A3 1,715 John Burns Gardens Apts. Proj., 5.85%, 8/01/31 ................................ 2/12 @ 101 1,672,622
A3 1,235 River Town Apts. Proj., 6.00%, 8/01/41 ........................................ 2/12 @ 101 1,202,186
NR 6,250 Blossom River Apts., 6.50%, 9/01/39 ........................................... 3/8 @ 102 5,884,000
A1 14,345 Tobacco Sec. Auth. No. California, Tobacco Settlement Rev., Ser. A, 5.375%,
6/1/41 ........................................................................ 6/11 @ 100 13,181,477
Tobacco Sec. Auth. So. California, Tobacco Settlement Rev., Ser. A,
A 7,000 5.50%, 6/01/36 ................................................................ 6/12 @ 100 6,730,640
A 11,500 5.625%, 6/01/43 ............................................................... 6/12 @ 100 10,940,410
AAA 2,000 Upland Unified Sch. Dist., Election of 2000, G.O., Ser. B, 5.125%, 8/01/25, FSA . 8/13 @ 100 1,724,180
AAA 3,805 Yucaipa Calimesa Jt. Unified Sch. Dist., C.O.P., Ser. A, 5.00%, 10/01/31, MBIA .. 10/11 @ 100 3,679,930
------------
297,598,440
------------
PUERTO RICO--15.0%
AAA 4,500 Puerto Rico Comnwlth. Pub. Impvt., G.O., 5.125%, 7/01/30, FSA ................... 7/11 @ 100 4,505,490
A- 10,000 Puerto Rico Elec. Pwr. Auth. Pwr. Rev., Ser. II, 5.25%, 7/01/31 ................. 7/12 @ 101 9,927,600
Puerto Rico Pub. Fin. Corp. Rev., Comnwlth. Approp., Ser. E,
A- 10,000 5.70%, 8/01/25 ................................................................ 2/10 @ 100 10,314,900
A- 5,750 5.75%, 8/01/30 ................................................................ 2/07 @ 100 5,854,420
------------
30,602,410
------------
TOTAL LONG-TERM INVESTMENTS (COST $336,577,772) ................................. 328,200,850
------------
SHORT-TERM INVESTMENTS**--1.6%
A1+ 3,135 Irvine Ranch Wtr. Dist., Ser. A, 1.50%, 5/01/02, FRDD (cost $3,135,000) ......... N/A 3,135,000
------------
TOTAL INVESTMENTS--162.9% (COST $339,712,772) ................................... 331,335,850
Other assets in excess of liabilities--2.0% ..................................... 4,089,211
Preferred stock at redemption value, including dividends payable--(64.9)% ....... (131,985,152)
------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS--100% .............................. $203,439,909
============
----------
* Using the higher of Standard & Poor's, Moody's or Fitch's rating.
** For purposes of amortized cost valuation, the maturity date of these
instruments is considered to be the earlier of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
+ Date (month/year) and price of the earliest call or redemption. There may
be other call provisions at varying prices at later dates.
++ Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified institutional buyers. As of April 30, 2002, the
Trust held 10.3% of its net assets in securities restricted as to sale.
------------------------------------------------------------------------------------------------------------------------------------
KEY TO ABBREVIATIONS:
------------------------------------------------------------------------------------------------------------------------------------
AMBAC -- American Municipal Bond Assurance Corporation FSA -- Financial Security Assurance
C.O.P. -- Certificate of Participation GNMA -- Government National Mortgage Association
FGIC -- Financial Guaranty Insurance Company G.O. -- General Obligation
FRDD -- Floating Rate Daily Demand MBIA -- Municipal Bond Insurance Association
------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
7
--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA
MUNICIPAL INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $339,712,772)
(Note 1) ...................................................... $331,335,850
Cash ............................................................ 423,538
Receivable from investments sold ................................ 4,955,430
Interest receivable ............................................. 4,973,710
Other assets .................................................... 12,562
------------
341,701,090
------------
LIABILITIES
Payable for investments purchased ............................... 4,959,054
Dividends payable--common shares ................................ 1,085,507
Investment advisory fee payable (Note 2) ........................ 96,041
Deferred Trustees fees (Note 1) ................................. 3,771
Other accrued expenses .......................................... 131,656
------------
6,276,029
------------
PREFERRED STOCK AT REDEMPTION VALUE
$.001 par value per share and $25,000
liquidation value per share applicable
to 5,278 shares, including dividends
payable (Note 1 & 4) .......................................... 131,985,152
------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS .................................................... $203,439,909
============
Composition of Net Assets Applicable to
Common Shareholders:
Par value (Note 4) .......................................... $ 14,975
Paid-in capital in excess of par ............................ 212,518,492
Undistributed net investment income (Note 1) .................. 611,432
Accumulated net realized loss ................................. (1,328,068)
Net unrealized depreciation (Note 1) .......................... (8,376,922)
------------
Net assets applicable to common shareholders,
April 30, 2002 ................................................ $203,439,909
============
Net asset value per common share of beneficial interest:
($203,439,909 / 14,974,881 common shares
of beneficial interest issued and outstanding) ................ $13.59
======
--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA
MUNICIPAL INCOME TRUST
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest (Note 1) ............................................. $ 9,197,574
-----------
Expenses
Investment advisory ........................................... 1,013,030
Auction agent ................................................. 180,401
Registration .................................................. 42,461
Custodian ..................................................... 39,639
Reports to shareholders ....................................... 25,338
Independent accountants ....................................... 20,746
Trustees ...................................................... 18,939
Transfer agent ................................................ 12,891
Legal ......................................................... 5,124
Miscellaneous ................................................. 27,835
-----------
Total expenses ................................................ 1,386,404
Less fees waived by advisor (Note 2) .......................... (422,096)
Less fees paid indirectly (Note 2) ............................ (35,083)
-----------
Net expenses .................................................. 929,225
-----------
Net investment income ........................................... 8,268,349
-----------
REALIZED AND UNREALIZED LOSS
ON INVESTMENTS
Net realized loss on investments ................................ (1,358,189)
Net change in unrealized appreciation
on investments ................................................ (13,091,208)
-----------
Net loss on investments ......................................... (14,449,397)
-----------
DIVIDENDS TO PREFERRED SHAREHOLDERS
FROM NET INVESTMENT INCOME ...................................... (930,594)
-----------
NET DECREASE IN NET ASSETS APPLICABLE
TO COMMON SHAREHOLDERS RESULTING
FROM OPERATIONS ................................................. $(7,111,642)
===========
See Notes to Financial Statements.
8
--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
--------------------------------------------------------------------------------
FOR THE PERIOD
SIX MONTHS JULY 27, 2001*
ENDED THROUGH
APRIL 30, OCTOBER 31,
2002 2001(1)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS APPLICABLE
TO COMMON SHAREHOLDERS
OPERATIONS:
Net investment income .......................... $ 8,268,349 $ 2,156,178
Net realized gain (loss) on investments ........ (1,358,189) 30,121
Net change in unrealized appreciation
on investments ............................... (13,091,208) 4,714,286
Dividends to preferred shareholders from
net investment income ........................ (930,594) (182,924)
Dividends to preferred shareholders in
excess of net investment income .............. -- (18,138)
------------ ------------
Net increase (decrease) in net assets
resulting from operations .................. (7,111,642) 6,699,523
------------ ------------
DIVIDENDS TO COMMON SHAREHOLDERS:
From net investment income ..................... (6,512,525) (1,973,254)
In excess of net investment income ............. -- (195,660)
------------ ------------
Total dividends .............................. (6,512,525) (2,168,914)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the issuance of common shares -- 184,357,095
Common shares issued in connection with the
reinvestment of common dividends ............. 235,456 7,166
Net proceeds from underwriters' over-allotment
option exercised ............................. -- 27,933,750
------------ ------------
Net proceeds from capital share transactions . 235,456 212,298,011
------------ ------------
Total increase (decrease) ................... (13,388,711) 216,828,620
------------ ------------
NET ASSETS
Beginning of period .............................. 216,828,620 --
------------ ------------
End of period (including undistributed and
distributions in excess of net investment
income of $611,432 and $213,798, respectively) . $203,439,909 $216,828,620
============ ============
----------
* Commencement of investment operations (Note 1).
(1) Prior year amounts have been restated to conform to the current period's
presentation under the provisions of EITF D-98 (Note 1).
See Notes to Financial Statements.
9
--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
FINANCIAL HIGHLIGHTS (UNAUDITED)
--------------------------------------------------------------------------------
FOR THE
PERIOD
JULY 27,
SIX MONTHS 2001(1)
ENDED THROUGH
APRIL 30, OCTOBER 31,
2002 2001(2,3)
-------- --------
PER COMMON SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period(4) ............... $ 14.50 $ 14.33
-------- --------
Investment operations:
Net investment income ............................... 0.55 0.16
Net realized and unrealized gain (loss)
on investments .................................... (0.97) 0.32
Dividends and distributions to preferred
shareholders from:
Net investment income ............................. (0.06) (0.01)
In excess of net investment income ................ -- (0.00)(5)
-------- --------
Net increase (decrease) from investment operations .... (0.48) 0.47
-------- --------
Dividends and distributions to common shareholders
from:
Net investment income ............................. (0.43) (0.15)
In excess of net investment income ................ -- (0.01)
-------- --------
Total dividends and distributions ................... (0.43) (0.16)
-------- --------
Capital charges with respect to issuance of:
Common shares ....................................... -- (0.03)
Preferred shares .................................... -- (0.11)
-------- --------
Total capital charges ................................. -- (0.14)
-------- --------
NET ASSET VALUE, END OF PERIOD(4) ..................... $ 13.59 $ 14.50
======== ========
Market value, end of period(4) ........................ $ 13.54 $ 14.75
======== ========
TOTAL INVESTMENT RETURN(6) ............................ (5.29)% (1.17)%
======== ========
RATIOS TO AVERAGE NET ASSETS OF
COMMON SHAREHOLDERS:(7,8)
Expenses after fee waiver and fees paid indirectly .... 0.90% 0.72%
Expenses before fee waiver and fees paid indirectly ... 1.34% 1.02%
Net investment income after fee waiver, fees paid
indirectly and before preferred share dividends ..... 8.00% 4.06%
Preferred share dividends ............................. 0.90% 0.38%
Net investment income available to common shareholders 7.10% 3.68%
SUPPLEMENTAL DATA:
Average net assets of common shareholders (000) ....... $208,525 $199,356
Portfolio turnover .................................... 31% 16%
Net assets of common shareholders, end of period (000). $203,440 $216,829
Preferred shares outstanding (000) .................... $131,950 $131,950
Asset coverage per preferred share, end of period ..... $ 63,553 $ 66,086
----------
(1) Commencement of investment operations. This information includes the
initial investment by BlackRock Advisors, Inc. Net asset value immediately
after the closing of the first public offering was $14.30 (Note 1).
(2) Calculated using the average shares outstanding method.
(3) Prior year amounts have been restated to conform to the current period's
presentation under the provisions of EITF D-98.
(4) Net asset value and market value are published in BARRON'S on Saturday and
THE WALL STREET JOURNAL on Monday.
(5) Amount is less than $0.005 per share.
(6) Total investment return is calculated assuming a purchase of a common share
at the current market price on the first day and a sale at the current
market price on the last day of the period reported. Dividends and
distributions, if any, are assumed for purposes of this calculation, to be
reinvested at prices obtained under the Trust's dividend reinvestment plan.
Total investment return does not reflect brokerage commissions. Total
investment return for less than a full year is not annualized. Past
performance is not a guarantee of future results.
(7) Ratios are calculated on the basis of income and expenses applicable to
both the common and preferred shares relative to the average net assets of
common shareholders.
(8) Annualized
The information above represents the unaudited operating performance for a
common share outstanding, total investment return, ratios to average net assets
and other supplemental data for the periods indicated. This information has been
determined based upon financial information provided in the financial statements
and market value data for the Trust's common shares.
See Notes to Financial Statements.
10
--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA
MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
NOTE 1. ORGANIZATION & ACCOUNTING POLICIES
The BlackRock California Municipal Income Trust (the "Trust") was organized as a
Delaware business trust on March 30, 2001, and is registered as a
non-diversified, closed-end management investment company under the Investment
Company Act of 1940. The Trust had no transactions until July 16, 2001, when it
sold 8,028 common shares for $115,001 to BlackRock Advisors, Inc. Investment
operations commenced on July 27, 2001. The Trust's investment objective is to
provide current income exempt from regular Federal and California income taxes.
The ability of issuers of debt securities held by the Trust to meet their
obligations may be affected by economic developments in the state, a specific
industry or region. No assurance can be given that the Trust's investment
objective will be achieved.
The following is a summary of significant accounting policies followed by
the Trust.
SECURITIES VALUATION: Municipal securities (including commitments to purchase
such securities on a "when-issued" basis) are valued on the basis of prices
provided by dealers or pricing services approved by the Trustees. In determining
the value of a particular security, pricing services may use certain information
with respect to transactions in such securities, quotations from bond dealers,
market transactions in comparable securities and various relationships between
securities. Short-term investments may be valued at amortized cost. Any
securities or other assets for which such current market quotations are not
readily available are valued at fair value as determined in good faith under
procedures established by and under the general supervision and responsibility
of the Trustees.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on trade date. Realized and unrealized gains and losses are calculated
on the identified cost basis. The Trust also records interest income on an
accrual basis and amortizes premium and accretes discount to interest income on
securities purchased using the interest method.
SEGREGATION: In cases in which the Investment Company Act of 1940, as amended
and the interpretive positions of the Securities and Exchange Commission ("SEC")
require that the Trust segregate assets in connection with certain Trust
investments (e.g., when issued securities, reverse repurchase agreements or
futures contracts), the Trust will, consistent with certain interpretive letters
issued by the SEC, designate on its books and records cash or other liquid debt
securities having a market value at least equal to the amount that would
otherwise be required to be physically segregated.
FEDERAL INCOME TAXES: It is the Trust's intention to elect to be treated as a
regulated investment company under the Internal Revenue Code and to distribute
sufficient net income to shareholders. For this reason and because substantially
all of the Trust's gross income consists of tax-exempt interest, no Federal
income tax provision is required.
DIVIDENDS AND DISTRIBUTIONS: The Trust declares and pays dividends and
distributions to common shareholders monthly from net investment income, net
realized short-term capital gains and other sources, if necessary. Net long-term
capital gains, if any, in excess of loss carryforwards may be distributed
annually. Dividends and distributions are recorded on the ex-dividend date.
Dividends and distributions to preferred shareholders are accrued and determined
as described in Note 4.
ESTIMATES: The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
DEFERRED COMPENSATION PLAN: Under a deferred compensation plan approved by the
Board of Trustees on May 24, 2001, non-interested Trustees may elect to defer
receipt of all or a portion of their annual compensation.
Deferred amounts earn a return as though equivalent dollar amounts had been
invested in common shares of other BlackRock funds selected by the Trustees.
This has the same economic effect as if the Trustees had invested the deferred
amounts in such other BlackRock funds.
The deferred compensation plan is not funded and obligations thereunder
represent general unsecured claims against the general assets of the Trust. The
Trust may, however, elect to invest in common shares of those funds selected by
the Trustees in order to match its deferred compensation obligations.
CHANGE IN FINANCIAL STATEMENT CLASSIFICATION FOR AMPS: In accordance with the
provisions of EITF D-98, "Classification and Measurement of Redeemable
Securities," effective for the current period, the Trust has reclassified its
Auction Market Preferred Shares ("AMPS") outside of permanent equity in the Net
Assets section of the Statement of Assets and Liabilities. In addition,
distributions to AMPS shareholders are now classified as a component of net
assets resulting from operations
11
on the statement of operations and changes in net assets and as a component of
the investment operations in the financial highlights. Prior year amounts
presented have been restated to conform to this period's presentation. This
change has no impact on the net assets applicable to common shares of the Trust.
NOTE 2. AGREEMENTS
The Trust has an Investment Advisory Agreement with BlackRock Advisors, Inc.
(the "Advisor"), a wholly owned subsidiary of BlackRock, Inc. BlackRock
Financial Management, Inc., a wholly owned subsidiary of BlackRock, Inc., serves
as sub-advisor to the Trust. BlackRock, Inc. is an indirect majority-owned
subsidiary of PNC Financial Services Group, Inc. The investment management
agreement covers both investment advisory and administration services.
The investment advisory fee paid to the Advisor is computed weekly and
payable monthly at an annual rate of 0.60% of the Trust's average weekly managed
assets. "Managed assets" means the total assets of the Trust (including any
assets attributable to any preferred shares that may be outstanding) minus the
sum of accrued liabilities (other than debt representing financial leverage).The
liquidation preference of the preferred shares is not a liability. The total
dollar amounts paid to the Advisor by the Trust under the Investment Advisory
Agreement for the six months ended April 30, 2002 and for the period ended
October 31, 2001 were $590,934 and $217,009, respectively. The Advisor has
voluntarily agreed to waive receipt of a portion of the investment management
fee or other expenses of the Trust in the amount of 0.25% of average weekly
managed assets for the first 5 years of the Trust's operations, 0.20% in year 6,
0.15% in year 7, 0.10% in year 8 and 0.05% in year 9. Pursuant to the agreement,
the Advisor waived fees of $422,096 during the six months ended April 30, 2002.
Pursuant to the agreements, the Advisor provides continuous supervision of
the investment portfolio and pays the compensation of officers of the Trust who
are affiliated persons of the Advisor, occupancy and certain clerical and
accounting costs. The Trust bears all other costs and expenses, which include
reimbursements to the Advisor for certain operational support services provided
to the Trust.
Pursuant to the terms of the custody agreement, the Trust receives earnings
credits from its custodian when positive cash balances are maintained, which are
used to offset custody fees. The earnings credits for the six months ended April
30, 2002, were approximately $35,083.
NOTE 3. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term investments,
for the six months ended April 30, 2002, aggregated $106,830,016 and
$128,451,409, respectively.
The Federal income tax basis of the Trust's investments at April 30, 2002,
was $339,711,936 and accordingly, net unrealized appreciation was $8,378,086
(gross unrealized appreciation--$604,993, gross unrealized
depreciation--$8,981,079).
NOTE 4. CAPITAL
There are an unlimited number of $.001 par value common shares of beneficial
interest authorized. The Trust may classify or reclassify any unissued common
shares of beneficial interest into one or more series of preferred shares. Of
the 14,974,881 common shares of beneficial interest outstanding at April 30,
2002, the Advisor owned 8,192 shares.
Transactions in common shares of beneficial interest for the period July
27, 2001 (commencement of investment operations) to October 31, 2001, were as
follows:
Shares issued in connection with initial public offering ..... 13,008,028
Shares issued in connection with the exercise of the
underwriters' over-allotment option ........................ 1,950,000
Shares issued in connection with the reinvestment of
common dividends ........................................... 498
----------
Net increase in shares outstanding ........................... 14,958,526
==========
During the six months ended April 30, 2002, the Trust issued 16,355 common
shares of beneficial interest under its Dividend Reinvestment Plan.
Offering costs of $433,500 incurred in connection with the Trust's offering
of common shares have been charged to paid-in capital in excess of par of the
common shares.
On October 5, 2001, the Trust reclassified 5,278 common shares of
beneficial interest and issued two series of Auction Market Preferred Shares
("preferred shares") Series T7--2,639 and Series R7--2,639. The preferred shares
have a liquidation value of $25,000 per share plus any accumulated unpaid
dividends. Underwriting discounts of $1,319,500 and offering costs of $229,906
incurred in connection with the preferred share offering have been charged to
paid-in capital in excess of par of the common shares.
Dividends on Series T7 and R7 are cumulative at a rate which is reset every
7 days based on the results of an auction. Dividend rates ranged from 0.80% to
2.00% during the six months ended April 30, 2002.
12
The Trust may not declare dividends or make other distributions to common
shares or purchase any such shares if, at the time of the declaration,
distribution or purchase, asset coverage with respect to the outstanding
preferred shares would be less than 200%.
The preferred shares are redeemable at the option of the Trust, in whole or
in part, on any dividend payment date at $25,000 per share plus any accumulated
or unpaid dividends whether or not declared. The preferred shares are also
subject to mandatory redemption at $25,000 per share plus any accumulated or
unpaid dividends, whether or not declared, if certain requirements relating to
the composition of the assets and liabilities of the Trust as set forth in the
Declaration of Trust are not satisfied.
The holders of preferred shares have voting rights equal to the holders of
common shares (one vote per share) and will vote together with holders of common
shares as a single class. However, holders of preferred shares are also entitled
to elect two of the Trust's Trustees. In addition, the Investment Company Act of
1940 requires that, along with approval by shareholders that might otherwise be
required, the approval of the holders of a majority of any outstanding preferred
shares, voting separately as a class would be required to (a) adopt any plan of
reorganization that would adversely affect the preferred shares, and (b) take
any action requiring a vote of security holders, including, among other things,
changes in the Trust's subclassification as a closed-end investment company or
changes in its fundamental investment restrictions.
NOTE 5. DIVIDENDS
Subsequent to April 30, 2002, the Board of Trustees of the Trust declared a
dividend of $0.0725 per common share payable June 3, 2002, to shareholders of
record on May 15, 2002.
For the period May 1, 2002 through May 31, 2002, dividends declared on
preferred shares totaled $170,136 in aggregate for the outstanding preferred
shares.
13
--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
DIVIDEND REINVESTMENT PLAN
--------------------------------------------------------------------------------
Pursuant to the Trust's Dividend Reinvestment Plan (the "Plan"), common
shareholders are automatically enrolled to have all distributions of dividends
and capital gains reinvested by EquiServe Trust Company, N.A. (the "Plan Agent")
in Trust shares pursuant to the Plan. Shareholders who elect not to participate
in the Plan will receive all distributions in cash paid by check and mailed
directly to the shareholders of record (or if the shares are held in street or
other nominee name, then to the nominee) by the Plan Agent.
The Plan Agent serves as agent for the shareholders in administering the
Plan. After the Trust declares a dividend or determines to make a capital gain
distribution, the Plan Agent will acquire shares for the participants' accounts,
depending upon the circumstances described below, either (i) through receipt of
unissued but authorized shares from the Trust ("newly issued shares") or (ii) by
purchase of outstanding shares on the open market, on the New York Stock
Exchange or elsewhere ("open-market purchases"). If, on the dividend payment
date, the net asset value per share ("NAV") is equal to or less than the market
price per share plus estimated brokerage commissions (such condition being
referred to herein as "market premium"), the Plan Agent will invest the dividend
amount in newly issued shares on behalf of the participants. The number of newly
issued shares to be credited to each participant's account will be determined by
dividing the dollar amount of the dividend by the NAV on the date the shares are
issued. However, if the NAV is less than 95% of the market price on the payment
date, the dollar amount of the dividend will be divided by 95% of the market
price on the payment date. If, on the dividend payment date, the NAV is greater
than the market value per share plus estimated brokerage commissions (such
condition being referred to herein as "market discount"), the Plan Agent will
invest the dividend amount in shares acquired on behalf of the participants in
open-market purchases.
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent and will receive certificates for whole Trust shares and a cash
payment for any fraction of a Trust share.
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. The automatic reinvestment of dividends and distributions
will not relieve participants of any Federal income tax that may be payable on
such dividends or distributions.
The Trust reserves the right to amend or terminate the Plan. There is no
direct service charge to participants in the Plan; however, the Trust reserves
the right to amend the Plan to include a service charge payable by the
participants. All correspondence concerning the Plan should be directed to the
Plan Agent at (800) 699-1BFM or 150 Royall Street, Canton, MA 02021.
14
--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
There have been no material changes in the Trust's investment objectives or
policies that have not been approved by the shareholders or to its charter or
by-laws or in the principal risk factors associated with investment in the
Trust. There have been no changes in the persons who are primarily responsible
for the day-to-day management of the Trust's portfolio.
Quarterly performance and other information regarding the Trust may be
found on BlackRock's website, which can be accessed at
http://www.blackrock.com/funds/cefunds.html. This reference to BlackRock's
website is intended to allow investors public access to quarterly information
regarding the Trust and is not intended to incorporate BlackRock's website into
this report.
The Annual Meeting of Shareholders was held May 23, 2002 to vote on the
following matter:
To elect two Trustees as follows:
TRUSTEE: CLASS TERM EXPIRING
-------- ----- ---- --------
Richard E. Cavanagh I 3 years 2005
James Clayburn La Force, Jr. I 3 years 2005
Trustees whose term of office continues beyond this meeting are Andrew F.
Brimmer, Kent Dixon, Frank J. Fabozzi, Laurence D. Fink, Walter F. Mondale and
Ralph L. Schlosstein.
Shareholders elected the two Trustees. The results of the voting were as
follows:
VOTES FOR* VOTES AGAINST* ABSTENTIONS
---------- -------------- -----------
Richard E. Cavanagh 5,215 -- --
James Clayburn La Force, Jr. 14,690,061 -- 182,759
----------
* The votes represent common and preferred shareholders voting as a single
class except for Richard E. Cavanagh who was voted on and elected by the
preferred shareholders only.
Laurence D. Fink, Chairman of the Trust's Board of Trustees, and certain of
the officers of the Trust listed on the cover of this Report to Shareholders,
are also officers of the Advisor or Sub-Advisor. They serve in the following
capacities for the Advisor or Sub-Advisor: Laurence D. Fink--Chief Executive
Officer of the Advisor and Chairman and CEO of the Sub-Advisor, Ralph L.
Schlosstein--Director and President of the Advisor and the Sub-Advisor, Robert
S. Kapito--Director and Vice Chairman of the Advisor and Vice Chairman of the
Sub-Advisor, Kevin M. Klingert--Director and Managing Director of the Advisor
and Managing Director of the Sub-Advisor, Henry Gabbay--Managing Director of the
Advisor and the Sub-Advisor, Anne Ackerley--Managing Director of the Advisor and
the Sub-Advisor, Richard M. Shea and James Kong--Managing Directors of the
Sub-Advisor.
15
--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
INVESTMENT SUMMARY
--------------------------------------------------------------------------------
THE TRUST'S INVESTMENT OBJECTIVES
The BlackRock California Municipal Income Trust's investment objective is to
provide current income exempt from regular Federal and California income taxes.
WHO MANAGES THE TRUST?
BlackRock Advisors, Inc. (the "Advisor") manages the Trust. The Advisor is a
wholly-owned subsidiary of BlackRock, Inc. ("BlackRock"), which is one of the
largest publicly traded investment management firms in the United States with
$238 billion of assets under management as of March 31, 2002. BlackRock manages
assets on behalf of institutional and individual investors worldwide through a
variety of equity, fixed income, liquidity and alternative investment products,
including the BLACKROCK FUNDS and BLACKROCK PROVIDENT INSTITUTIONAL FUNDS. In
addition, BlackRock provides risk management advice and investment system
services to a growing number of institutional investors under the BLACKROCK
SOLUTIONS name. Clients are served from the Company's headquarters in New York
City, as well as offices in Boston, Edinburgh, Hong Kong, San Francisco, Tokyo
and Wilmington. BlackRock is a member of The PNC Financial Services Group (NYSE:
PNC), and is majority-owned by PNC and by BlackRock employees.
WHAT CAN THE TRUST INVEST IN?
Under normal conditions, the Trust expects to continue to manage its assets so
that at least 80% of its investments are rated at least investment grade ("BBB"
by Standard & Poor's or "Baa" by Moody's Investor Services) and up to 20% of its
assets are rated below investment grade (Ba/BB or B) or that are unrated but
deemed to be of comparable quality by the Advisor. The Trust intends to invest
primarily all of the assets in a portfolio of California Municipal Obligations,
which include debt obligations issued by the State of California, its political
subdivisions, agencies and instrumentalities and by other qualifying issuers
that pay interest which, in the opinion of the bond counsel of the issuer, is
exempt from Federal and California income taxes.
WHAT IS THE ADVISOR'S INVESTMENT STRATEGY?
The Advisor will manage the assets of the Trust, in accordance with the Trust's
investment objective and policies, to seek to achieve its objective by investing
in investment gradeCalifornia Municipal Obligations or other municipal bonds. As
such, the Advisor actively manages the assets in relation to market conditions
and interest rate changes. Depending on yield and portfolio allocation
considerations, the Advisor may choose to invest a portion of the Trust's assets
in securities which pay interest that is subject to AMT (alternative minimum
tax). The Trust intends to invest primarily in long-term bonds and expects bonds
in its portfolio to maintain an average portfolio maturity of 10-15 years, but
the average maturity may be shortened or lengthened from time to time depending
on market conditions.
Under current market conditions the use of leverage increases the income earned
by the Trust. The Trust employs leverage primarily through the issuance of
preferred shares. Preferred shareholders will receive dividends based on
short-term rates in exchange for allowing the Trust to borrow additional assets.
These assets will be invested in longer-term assets which typically offer higher
interest rates and the difference between the cost of the dividends paid to
preferred shareholders and the interest earned on the longer-term securities
will provide higher income levels for common shareholders in most interest rate
environments. The Trust issued preferred Shares to leverage the portfolio. See
"Leverage Considerations in the Trust" below.
HOW ARE THE TRUST'S SHARES PURCHASED AND SOLD? DOES THE TRUST PAY DIVIDENDS
REGULARLY?
The Trust's common shares are traded on the New York Stock Exchange which
provides investors with liquidity on a daily basis. Orders to buy or sell shares
of the Trust must be placed through a registered broker or financial advisor.
The Trust pays monthly dividends which are typically paid on the first business
day of the month. For shares held in the shareholder's name, dividends may be
reinvested in additional shares of the Trust through its transfer agent,
EquiServe Trust Company, N.A. Investors who wish
16
to hold shares in a brokerage account should check with their financial advisor
to determine whether their brokerage firm offers dividend reinvestment services.
LEVERAGE CONSIDERATIONS IN THE TRUST
The Trust employs leverage primarily through the issuance of preferred shares.
Leverage permits the Trust to borrow money at short-term rates and reinvest that
money in longer-term assets, which typically offer higher interest rates. The
difference between the cost of the borrowed funds and the income earned on the
proceeds that are invested in longer-term assets is the benefit to the Trust
from leverage.
Leverage increases the duration (or price sensitivity of the net assets with
respect to changes in interest rates) of the Trust, which can improve the
performance of the Trust in a declining rate environment, but can cause net
assets to decline faster in a rapidly rising interest rate environment. The
Advisor's portfolio managers continuously monitor and regularly review the
Trust's use of leverage and the Trust may reduce, or unwind, the amount of
leverage employed should the Advisor consider that reduction to be in the best
interests of the shareholders.
SPECIAL CONSIDERATIONS AND RISK FACTORS RELEVANT TO THE TRUST
THE TRUST IS INTENDED TO BE A LONG-TERM INVESTMENT AND IS NOT A SHORT-TERM
TRADING VEHICLE.
INVESTMENT OBJECTIVES. Although the objective of the Trust is to provide current
income that is exempt from regular Federal and California income taxes, there
can be no assurance that this objective will be achieved.
DIVIDEND CONSIDERATIONS. The income and dividends paid by the Trust are likely
to vary over time as fixed income market conditions change. Future dividends may
be higher or lower than the dividend the Trust is currently paying.
LEVERAGE. The Trust utilizes leverage through the issuance of preferred shares,
which involves special risks. The Trust's net asset value and market value may
be more volatile due to its use of leverage.
MARKET PRICE OF SHARES. The shares of closed-end investment companies such as
the Trust trade on the New York Stock Exchange (NYSE symbol: BFZ) and as such
are subject to supply and demand influences. As a result, shares may trade at a
discount or a premium to their net asset value.
MUNICIPAL OBLIGATIONS. The value of municipal debt securities generally varies
inversely with changes in prevailing market interest rates. Depending on the
amount of call protection that the securities in the Trust have, the Trust may
be subject to certain reinvestment risks in environments of declining interest
rates.
HIGH YIELD RISK. The Trust may invest in high yield bonds, which involves
additional risks, including credit risk. The value of high yield, lower quality
bonds is affected by the creditworthiness of the issuers of the securities and
by general economic and specific industry conditions. Issuers of high yield
bonds are not as strong financially as those with higher credit ratings. The
Trust's investment in lower grade securities will expose the Trust to greater
risk than if the Trust owned only higher grade securities.
LLIQUID SECURITIES. The Trust may invest in securities that are illiquid,
although under current market conditions the Trust expects to do so to only a
limited extent. These securities involve special risks.
ANTITAKEOVER PROVISIONS. Certain antitakeover provisions will make a change in
the Trust's business or management more difficult without the approval of the
Trustees and may have the effect of depriving shareholders of an opportunity to
sell their shares at a premium above the prevailing market price.
ALTERNATIVE MINIMUM TAX (AMT). The Trust may invest in securities subject to
alternative minimum tax.
17
--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
GLOSSARY
--------------------------------------------------------------------------------
CLOSED-END FUND: Investment vehicle which initially offers a fixed number
of shares and trades on a stock exchange. The Trust
invests in a portfolio of securities in accordance with
its stated investment objectives and policies.
DISCOUNT: When a Trust's net asset value is greater than its
market price the Trust is said to be trading at a
discount.
DIVIDEND: Income generated by securities in a portfolio and
distributed to shareholders after the deduction of
expenses. This Trust declares and pays dividends to
common shareholders on a monthly basis.
DIVIDEND REINVESTMENT: Common shareholders may have all dividends and
distributions of capital gains automatically reinvested
into additional shares of the Trust.
Market Price: PRICE PER SHARE OF A SECURITY TRADING IN THE SECONDARY
MARKET. FOR A CLOSED-END TRUST, THIS IS THE PRICE AT
WHICH ONE SHARE OF THE TRUST TRADES ON THE STOCK
EXCHANGE. IF YOU WERE TO BUY OR SELL SHARES, YOU WOULD
PAY OR RECEIVE THE MARKET PRICE.
NET ASSET VALUE (NAV): Net asset value is the total market value of all
securities and other assets held by the Trust, including
income accrued on its investments, minus any liabilities
including accrued expenses, divided by the total number
of outstanding common shares. It is the underlying value
of a single common share on a given day. Net asset value
for the Trust is calculated weekly and published in
BARRON'S on Saturday and THE WALL STREET JOURNAL on
Monday.
PREMIUM: When a Trust's market price is greater than its net
asset value, the Trust is said to be trading at a
premium.
PREREFUNDED BONDS: These securities are collateralized by U.S. Government
securities which are held in escrow and are used to pay
principal and interest on the tax exempt issue and
retire the bond in full at the date indicated, typically
at a premium to par.
18
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BLACKROCK ADVISORS, INC.
SUMMARY OF CLOSED-END FUNDS
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TAXABLE TRUSTS
--------------------------------------------------------------------------------
STOCK MATURITY
PERPETUAL TRUSTS SYMBOL DATE
----- -----
The BlackRock Income Trust Inc. BKT N/A
The BlackRock North American Government Income Trust Inc. BNA N/A
The BlackRock High Yield Trust BHY N/A
BlackRock Core Bond Trust BHK N/A
BlackRock Strategic Bond Trust BHD N/A
TERM TRUSTS
The BlackRock Strategic Term Trust Inc. BGT 12/02
The BlackRock Investment Quality Term Trust Inc. BQT 12/04
The BlackRock Advantage Term Trust Inc. BAT 12/05
The BlackRock Broad Investment Grade 2009 Term Trust Inc. BCT 12/09
TAX-EXEMPT TRUSTS
--------------------------------------------------------------------------------
STOCK MATURITY
PERPETUAL TRUSTS SYMBOL DATE
----- -----
The BlackRock Investment Quality Municipal Trust Inc. BKN N/A
The BlackRock California Investment Quality Municipal
Trust Inc. RAA N/A
The BlackRock Florida Investment Quality Municipal Trust RFA N/A
The BlackRock New Jersey Investment Quality Municipal
Trust Inc. RNJ N/A
The BlackRock New York Investment Quality Municipal Trust Inc. RNY N/A
The BlackRock Pennsylvania Strategic Municipal Trust BPS N/A
The BlackRock Strategic Municipal Trust BSD N/A
BlackRock California Municipal Income Trust BFZ N/A
BlackRock Municipal Income Trust BFK N/A
BlackRock New York Municipal Income Trust BNY N/A
BlackRock New Jersey Municipal Income Trust BNJ N/A
BlackRock Florida Municipal Income Trust BBF N/A
BlackRock New York Municipal Bond Trust BQH N/A
BlackRock Virginia Municipal Bond Trust BHV N/A
BlackRock Florida Municipal Bond Trust BIE N/A
BlackRock Municipal Bond Trust BBK N/A
BlackRock Maryland Municipal Bond Trust BZM N/A
BlackRock New Jersey Municipal Bond Trust BLJ N/A
BlackRock California Municipal Bond Trust BZA N/A
TERM TRUSTS
The BlackRock Municipal Target Term Trust Inc. BMN 12/06
The BlackRock Insured Municipal 2008 Term Trust Inc. BRM 12/08
The BlackRock California Insured Municipal 2008 Term Trust Inc. BFC 12/08
The BlackRock Florida Insured Municipal 2008 Term Trust BRF 12/08
The BlackRock New York Insured Municipal 2008 Term Trust Inc. BLN 12/08
The BlackRock Insured Municipal Term Trust Inc. BMT 12/10
BlackRock California Municipal 2018 Term Trust BJZ 12/18
BlackRock New York Municipal 2018 Term Trust BLH 12/18
BlackRock Municipal 2018 Term Trust BPK 12/18
IF YOU WOULD LIKE FURTHER INFORMATION PLEASE DO NOT HESITATE TO CALL BLACKROCK
AT (800) 227-7BFM (7236) OR CONSULT WITH YOUR FINANCIAL ADVISOR.
19
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BlackRock
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DIRECTORS
Laurence D. Fink, CHAIRMAN
Andrew F. Brimmer
Richard E. Cavanagh
Kent Dixon
Frank J. Fabozzi
James Clayburn La Force, Jr.
Walter F. Mondale
Ralph L. Schlosstein
OFFICERS
Ralph L. Schlosstein, PRESIDENT
Robert S. Kapito, VICE PRESIDENT
Kevin M. Klingert, VICE PRESIDENT
Richard M. Shea, VICE PRESIDENT/TAX
Henry Gabbay, TREASURER
James Kong, ASSISTANT TREASURER
Anne Ackerley, SECRETARY
INVESTMENT ADVISOR
BlackRock Advisors, Inc.
100 Bellevue Parkway
Wilmington, DE 19809
(800) 227-7BFM
SUB ADVISOR
BlackRock Financial Management, Inc.
40 East 52nd Street
New York, NY 10022
CUSTODIAN
State Street Bank and Trust Company
1 Heritage Drive
North Quincy, MA 02171
TRANSFER AGENT
EquiServe Trust Company, N.A.
150 Royall Street
Canton, MA 02021
(800) 699-1BFM
AUCTION AGENT
Bank of New York
5 Penn Plaza, 13th Floor
New York, NY 10001
INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
200 Berkeley Street
Boston, MA 02116
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square
New York, NY 10036
LEGAL COUNSEL - INDEPENDENT TRUSTEES
Debevoise & Plimpton
919 Third Avenue
New York, NY 10022
The accompanying financial statements as of April 30, 2002 were not audited
and accordingly, no opinion is expressed on them.
This report is for shareholder information. This is not a prospectus
intended for use in the purchase or sale of Trust shares.
Statements and other information contained in this report are as dated and
are subject to change.
BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
c/o BlackRock Advisors, Inc.
100 Bellevue Parkway
Wilmington, DE 19809
(800) 227-7BFM
09 248E-10-2
09 248E-20-1
[RECYCLE LOGO] Printed on recycled paper 09 248E-30-0
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BlackRock
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CALIFORNIA
MUNICIPAL
INCOME TRUST
=======================
SEMI-ANNUAL REPORT
APRIL 30, 2002
[LOGO](SM) BlackRock