--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISOR
--------------------------------------------------------------------------------
November 30, 2001
Dear Shareholder:
Economic activity slowed significantly during the annual period ended
October 31, 2001, continuing the downturn that began in March 2000. The
September 11 attacks on the World Trade Center and the Pentagon accelerated this
decline. Inflation adjusted Gross Domestic Product (GDP) fell at a 0.4% annual
rate during the third quarter, reaffirming that the economy is officially headed
towards recession, which is defined as two consecutive quarters of negative
growth as measured by GDP. In response to the dramatic slowdown in the U.S.
economy, The Federal Reserve Board aggressively lowered interest rates over the
period. In stark contrast to its three interest rate increases in February,
March, and May of 2000, the Federal Open Market Committee (FOMC) has cut
interest rates ten times in 2001. Year-to-date, the FOMC has reduced interest
rates by 4.50%, bringing the current Federal Funds rate to 2.00%, its lowest
level since September 1961.
The weakening U.S. economic environment and the accompanying Federal
Reserve activity have had a positive effect on the fixed income markets.
Virtually all sectors of the fixed income market, with the exception of high
yield, posted double-digit returns over the annual period ended October 31,
2001. As short-term interest rates declined faster than long-term interest rates
over the period, the yield curve reached historically steep levels, making it a
very attractive time for leveraged bond funds. Because these funds borrow at
short-term rates and invest in long-term securities, the amount they earn grows
as the difference between short-term and long-term rates increases. Furthermore,
inflation is anticipated to decline to multi-decade lows, which should support
high-quality fixed income securities, especially those with longer maturities.
The rallies in the fixed income markets have barely offset the adverse
impact of the deteriorating equity market. For the year ending October 31, 2001,
the S&P 500 and Nasdaq fell 25.49% and 49.39%, respectively, and, while we
believe that aggressive monetary and fiscal stimulus will help stabilize the
economy, we expect growth to remain below potential for a more prolonged period.
Consumption is unlikely to pick up significantly in the face of sizable job
cuts, the likelihood that flexible compensation (bonus, profit sharing, options)
will be sharply lower, and that state and local government spending may be
significantly curtailed next year. In this environment, we expect a period of
prolonged lower interest rates. Although somewhat discouraging for the American
consumer, this low inflation/low interest rate environment should continue to
benefit fixed income securities. We expect spread products like high quality
corporates and mortgages to perform well relative to U.S. Treasuries.
This annual report contains a summary of market conditions during the
annual period and a review of portfolio strategy by your Trust's managers in
addition to the Trust's audited financial statements and a listing of the
portfolio's holdings at October 31, 2001. Continued thanks for your confidence
in BlackRock. We appreciate the opportunity to help you achieve your long-term
investment goals.
Sincerely,
/s/ Laurence D. Fink /s/ Ralph L. Schlosstein
Laurence D. Fink Ralph L. Schlosstein
Chairman President
1
November 30, 2001
Dear Shareholder:
We are pleased to present the first audited annual report for The BlackRock
California Municipal Income Trust. (the "Trust") for the period ended October
31, 2001. We would like to take this opportunity to review the Trust's stock
price and net asset value (NAV) performance, summarize market developments and
discuss recent portfolio management activity.
The Trust is a 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 State 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 since inception:
--------------------------------------------
10/31/01 HIGH LOW
--------------------------------------------------------------------------------
STOCK PRICE $14.75 $15.42 $14.67
--------------------------------------------------------------------------------
NET ASSET VALUE (NAV) $14.50 $14.75 $14.30
--------------------------------------------------------------------------------
THE FIXED INCOME MARKETS
Investors' hopes for a soft landing quickly turned to fears of a recession
as the U.S. economy rapidly deteriorated over the year. Prior to the events of
September 11, our economic outlook envisioned an extended period of sluggish
growth, with the risk of a more severe deterioration if consumer confidence and
spending declined by any considerable degree. Economic data prior to the attacks
suggests that the scenario of a more severe contraction may have been in the
works. Year-over-year industrial production was down, 4.8% in August, the
largest yearly decline since 1982. The unemployment rate had drifted up to 4.9%
from a low of 3.9% in October of last year, and the four-week average of initial
jobless claims rose to its highest level in nearly a decade. Consumer confidence
was starting to wane, and consumer credit outstanding had begun to decline. The
events of September 11 undoubtedly further weakened consumer sentiment. The
Conference Board's consumer confidence index posted its biggest one-month
decline since 1990. According to the minutes of the October 2, 2001, Federal
Open Market Committee meeting, "The terrorist attacks have significantly
heightened uncertainty in an economy that was already weak. Business and
household spending as a consequence are being further damped. Nonetheless, the
long-term prospects for productivity growth and the economy remain favorable and
should become evident once the unusual forces restraining demand abate." During
the fiscal year ended October 31, 2001, the Federal Reserve Board aggressively
lowered the Federal Funds rate by a total of 4.00% to bring it to 2.50%. On
November 6, 2001, the Federal Reserve Board announced another interest rate cut,
bringing the current Federal Funds rate to 2.00%.
Over the course of the year, the U.S. Treasury yield curve steepened
significantly as the bond market rallied in response to the slowing U.S. economy
and the aggressive interest rate cuts by the Federal Reserve. U.S. Treasury
yields on the short-end of the yield curve fell sharply from a 5.91% yield on
2-year U.S. Treasuries as of October 31, 2000, to a 2.42% yield on October 31,
2001, in reaction to the Federal Reserve Board cutting short-term rates by 4%.
During the period, the yield on the 10-year U.S. Treasury fell from 5.75% on
October 31, 2000, to 4.23% on October 31, 2001. U.S. Treasury yields continue to
fall due to further Federal Reserve easing and an anticipation of increased
supply in order to raise capital to support programs implemented as a result of
the tragic events that occurred on September 11, 2001. On October 31, 2001, the
U.S. Treasury announced plans to stop selling 30-year U.S. Treasuries
maintaining that the government "does not need the 30-year bond to meet its
current financing needs." On the news that the U.S. Treasury would discontinue a
program that issued a total of $600 billion in debt since its official inception
in 1977, the 30-year bond price increased by more than 5% and yields, which
react inversely to changes in price, fell over 36 basis points. As a result, the
on-the-run curve, which measures yields on newly issued U.S. Treasuries,
flattened 32 basis points.
For the annual period ended October 31, 2001, municipal bonds outperformed
the taxable domestic bond market on a tax-adjusted basis, returning 17.12% (as
measured by the LEHMAN MUNICIPAL INDEX at a tax bracket of 38.6%) versus the
LEHMAN AGGREGATE INDEX'S 14.56%. Cash inflows over the period increased
significantly from the previous year due to turmoil in the equity markets and
diversification into fixed income securities. While municipals performed in line
with spread products (i.e. corporates, mortgages, etc.) and U.S. Treasuries
throughout the first half of the period, the municipal yield curve steepened
over
2
the latter half of the year, and showed significant outperformance versus U.S.
Treasuries. Refinancing opportunities, which are expected to reach historic
levels due to falling interest rates, continue to drive the pace of new issues
in the municipal market.
California's economy turned sluggish this past summer. During July 2001,
employment growth actually stopped and through October 2001, the State's
employment is actually 40,000 jobs lower than June's 2001, peak. Unemployment is
beginning to rise which is now reflected in October's 2001, 5.7% jobless rate
was 0.6% higher than last June's 2001 level.
Four months into the fiscal year ended October 31, 2001, California's
General Fund revenues reflected the slower economy and are 6.4% below July's
budgeted numbers. The lower than expected tax receipts reflect the slowdown in
manufacturing, construction, technology, international trade, home sales and the
weakness in the financial markets. If the economic slowdown continues at this
rate, California's General Fund will have a deficit in excess of $4 billion at
the end of its' fiscal year (6/30/02). This prospect will pressure the
Legislature to further reduce appropriations and limit expenditures in order to
close the fiscal gap. The State's General Fund is under additional stress as the
State loaned the Department of Water Resources $6.2 billion in 2001 to pay for
power purchases. The State expected to be reimbursed in 2001, however the
proposed bond issue, which will raise the funds for repayment, is stalled and
there is a question if the repayment will be made in this fiscal year.
Within California, the San Francisco to San Jose Corridor is experiencing
the greatest economic decline. The concentration of high technology industries
combined with the City of San Francisco's dependence on tourism, which has
experienced significant weakness since September 11, have severely impacted this
area.
California's unresolved energy issues continue to negatively influence its
economy and directly impact the fiscal position. During November 2001, Moody's
lowered the State's rating to A1 from Aa3 citing the General Fund's weakened
position. California is rated A+ by Standard and Poor's; both agencies maintain
a negative outlook on this rating.
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 via auction rate preferred shares
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 monthly income. At the period ended October 31, 2001, the Trust's leverage
amount was approximately 35% of total assets.
Municipals outperformed most spread products on a tax-adjusted basis during
the period, except on the short-end of the yield curve. The curve steepened over
most of the period and the 5 to 15-year part of the curve remains very steep on
a historical basis. We remain overweight in premium coupon securities in an
effort to avoid potential market discount problems. Premium coupon securities
offer better price performance during periods of falling interest rates, and
similar performance to discounts when interest rates rise. Retail demand has
been robust throughout the period, with record inflows into municipal bond funds
of $2.92 billion during the month of August 2001, the largest monthly increase
since 1994. Year-to-date, net inflows into municipal bond funds is $7.98
billion.
The following charts show the Trust's asset composition and credit quality
allocations:
--------------------------------------------------------------------------------
SECTOR BREAKDOWN
--------------------------------------------------------------------------------
SECTOR OCTOBER 31, 2001
--------------------------------------------------------------------------------
School 34%
--------------------------------------------------------------------------------
Water & Sewer 18%
--------------------------------------------------------------------------------
Lease Revenues 13%
--------------------------------------------------------------------------------
Transportation 9%
--------------------------------------------------------------------------------
Housing 7%
--------------------------------------------------------------------------------
Special Tax 6%
--------------------------------------------------------------------------------
City, County & State 4%
--------------------------------------------------------------------------------
Other 4%
--------------------------------------------------------------------------------
Power 3%
--------------------------------------------------------------------------------
Hospital 2%
--------------------------------------------------------------------------------
3
--------------------------------------------------------------------------------
CREDIT RATING* OCTOBER 31, 2001
--------------------------------------------------------------------------------
AAA/Aaa 57%
--------------------------------------------------------------------------------
AA/Aa 12%
--------------------------------------------------------------------------------
A/A 19%
--------------------------------------------------------------------------------
BBB/Baa 5%
--------------------------------------------------------------------------------
Not Rated 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
--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
--------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BFZ
--------------------------------------------------------------------------------
Initial Offering Date: July 27, 2001
--------------------------------------------------------------------------------
Closing Stock Price as of 10/31/01: $14.75
--------------------------------------------------------------------------------
Net Asset Value as of 10/31/01: $14.50
--------------------------------------------------------------------------------
Yield on Closing Stock Price as of 10/31/01 ($14.75)(1): 5.90%
--------------------------------------------------------------------------------
Current Monthly Distribution per Share(2): $0.0725
--------------------------------------------------------------------------------
Current Annualized Distribution per Share(2): $0.8700
--------------------------------------------------------------------------------
(1) Yield on Closing Stock Price is calculated by dividing the current
annualized distribution per share by the closing stock price per share.
(2) The distribution is not constant and is subject to change.
PRIVACY PRINCIPLES OF THE TRUST
The Trust is committed to maintaining the privacy of shareholders and to
safeguarding its non-public personal information. The following information is
provided to help you understand what personal information the Trust collects,
how we protect that information and why, in certain cases, we may share
information with select other parties.
Generally, the Trust does not receive any non-public personal information
relating to its shareholders, although certain nonpublic personal information of
its shareholders may become available to the Trust. The Trust does not disclose
any non-public personal information about its shareholders or former
shareholders to anyone, except as permitted by law or as is necessary in order
to service shareholder accounts (for example, to a transfer agent or third party
administrator).
The Trust restricts access to non-public personal information about the
shareholders to BlackRock employees with a legitimate business need for the
information. The Trust maintains physical, electronic and procedural safeguards
designed to protect the non-public personal information of its shareholders.
4
-----------------------------------------------------------------------------------------------------------------------------------
BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2001
-----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPTION CALL
RATING* AMOUNT PROVISIONS+ VALUE
(UNAUDITED) (000) DESCRIPTION (UNAUDITED) (NOTE 1)
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--167.1%
CALIFORNIA--153.3%
AAA $12,700 California Edl. Facs. Auth. Rev., Stanford Univ., Ser. Q, 5.25%, 12/01/32 .... 6/11 @ 101 $ 13,185,267
A 4,890 California Hlth. Facs., Fin. Auth. Rev., Kaiser Proj.,
Ser. A, 5.40%, 5/01/28 ..................................................... 7/06 @ 102 5,003,155
California Hsg. Fin. Agcy. Rev.,
AAA 25,000 Ser. B, Zero Coupon, 8/01/31, FSA .......................................... 8/10 @ 31.194 4,849,750
AAA 30,000 Home Mtg., Zero Coupon, 2/01/33, AMBAC ..................................... 8/11 @ 29.558 5,183,397
A 22,500 California Infrastructure & Econ. Dev., J David Gladstone Inst. Proj.,
5.25%, 10/01/34 ............................................................ 10/11 @ 101 22,296,375
California St., G.O.,
Aa3 7,000 5.125%, 6/01/27 ............................................................ 6/11 @ 100 6,998,810
A+ 25,000 5.20%, 11/01/31, (WI) ...................................................... 11/11 @ 100 24,999,500
Charter Mac Equity Issuer Trust,
NR 7,000++ Ser. A, 6.30%, 6/30/49 ..................................................... No Opt. Call 7,000,000
NR 4,000++ Ser. B, 6.80%, 11/30/50 .................................................... No Opt. Call 4,000,000
AAA 5,900 Chino Valley Unified Sch. Dist., Ser. A, C.O.P., 5.00%, 9/01/26, FSA ......... 9/10 @ 102 5,975,992
AAA 9,060 East Bay Mun. Util. Dist. Wtr. Sys. Rev., 5.00%, 6/01/38, MBIA ............... 6/08 @ 101 9,111,098
AAA 6,000 El Monte, Sr. Dept. Pub. Svcs. Fac. Phase II, C.O.P., 5.25%, 1/01/34, AMBAC .. 1/11 @ 100 6,145,560
Foothill / Eastn. Transp. Corridor Agcy. Toll Road Rev.,
BBB- 5,000 Zero Coupon, 1/15/33 ....................................................... 1/10 @ 25.781 781,900
BBB- 5,000 Zero Coupon, 1/15/34 ....................................................... 1/10 @ 24.228 734,550
BBB- 13,445 Zero Coupon, 1/15/35 ....................................................... 1/10 @ 22.819 1,859,443
BBB- 1,000 Zero Coupon, 1/15/38 ....................................................... 1/10 @ 19.014 114,820
BBB- 13,370 5.75%, 1/15/40 ............................................................. 1/10 @ 101 13,783,267
AAA 4,000 Huntington Beach Pub. Fin. Auth. Rev., Lease Cap. Impvt., Ser. A,
5.00%, 9/01/31, AMBAC ...................................................... 9/11 @ 100 4,041,160
NR 5,000 Irvine Mobile Home Park Rev., Meadows Mobile Home Park, Ser. A, 5.70%,
3/01/28 .................................................................... 3/08 @ 102 4,900,100
Aaa 13,870 Long Beach Unified Sch. Dist., Election 1999, G.O., Ser. C, 5.125%,
8/01/31, MBIA .............................................................. 8/09 @ 101 14,120,631
AAA 6,815 Los Angeles Cmnty. Coll. Dist., G.O., Ser. A, 5.00%, 6/01/26, MBIA ........... 8/11 @ 100 6,895,144
Los Angeles Dept. Wtr. & Pwr., Wtr. Wks. Rev., Ser. A,
AA 30,960 5.125%, 7/01/41 ............................................................ 7/11 @ 100 31,331,210
AAA 2,975 5.125%, 7/01/41, FGIC ...................................................... 7/11 @ 100 3,021,172
AA 4,000 Met. Wtr. Dist. So. California, Wtr. Wks. Rev., Ser. A, 5.00%, 7/01/37 ....... 1/08 @ 101 4,021,360
Aaa 10,000 Monterey Cnty. Master Plan Fin., C.O.P., 5.00%, 8/01/32, MBIA ................ 8/11 @ 100 10,099,000
Munimae TE Bond Subsidiary, LLC,
NR 7,000++ Ser. A, 6.30%, 6/30/49 ..................................................... No Opt. Call 7,000,000
NR 3,000++ Ser. B, 6.80%, 6/30/50 ..................................................... No Opt. Call 3,000,000
AAA 2,945 Palm Springs Fin. Lease Rev., Conv. Ctr. Proj., Ser. A, 5.00%,
11/01/25, MBIA ............................................................. 11/11 @ 101 2,983,786
AAA 15,500 Rancho Cucamonga Redev. Agcy. Tax Alloc. Rev., Rancho Redev. Proj., 5.125%,
9/01/30, MBIA .............................................................. 9/11 @ 100 15,809,535
AAA 1,905 Richmond Wst. Wtr. Rev., Zero Coupon, 8/01/31, FGIC .......................... No Opt. Call 392,849
AAA 10,000 Sacramento Mun. Util. Dist. Elec. Rev., Ser. N, 5.00%, 8/15/28, MBIA ......... 8/11 @ 100 10,110,200
AAA 7,500 San Francisco Bay Area Rapid Trans., Dist. Sales Tax Rev., 5.125%,
7/01/36, AMBAC ............................................................. 7/11 @ 100 7,647,675
AAA 6,500 San Francisco City & Cnty. Arpts. Comn. Intl. Arpt. Rev., Second Ser-27A,
5.25%, 5/01/31, MBIA ....................................................... 5/11 @ 100 6,564,480
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 1,795,555
San Jose Mlt. Fam. Hsg. Rev.,
AAA 2,880 Lenzen Hsg., Ser. B, 5.45%, 2/20/43, GNMA .................................. 8/11 @ 102 2,904,682
AAA 4,225 Vlgs. Pkway. Sr. Apts., Ser. D, 5.50%, 4/01/34 ............................. No Opt. Call 4,271,137
See Notes to Financial Statements.
5
-----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPTION CALL
RATING* AMOUNT PROVISIONS+ VALUE
(UNAUDITED) (000) DESCRIPTION (UNAUDITED) (NOTE 1)
------------------------------------------------------------------------------------------------------------------------------------
Santa Clara Cnty. Hsg. Auth., Mlt. Fam. Hsg. Rev., Ser. A,
A3 $ 1,715 John Burns Gardens Apts. Proj., 5.85%, 8/01/31 ............................. 2/12 @ 101 $ 1,726,062
A3 1,235 River Town Apts. Proj., 6.00%, 8/01/41 ..................................... 2/12 @ 100 1,242,891
AAA 10,000 Santa Clara Valley Wtr. Dist., Wtr. Util. Sys. Rev., Ser. A, 5.125%,
6/01/31, FGIC .............................................................. 6/10 @ 100 10,178,100
A1 14,345 Tobacco Securitization Auth., No. California Tobacco Settlement Rev., Ser. A,
5.375%, 6/01/41 ............................................................ 6/11 @ 100 14,513,841
AAA 25,720 Univ. California Rev., Mult. Purp. Projs., Ser. M, 5.125%, 9/01/30, FGIC ..... 9/09 @ 101 26,233,628
AAA 2,000 Upland California Unified Sch. Dist., Election of 2000, G.O., Ser. B, 5.125%,
8/01/25, FSA ............................................................... 8/11 @ 100 1,822,080
AAA 3,805 Yucaipa Calimesa Jt. Unified Sch. Dist., C.O.P., Ser. A, 5.00%,
10/01/31, MBIA ............................................................. 10/11 @ 100 3,829,352
------------
332,478,514
------------
PUERTO RICO--13.8%
AAA 11,000 Puerto Rico Comnwlth. Pub. Impvt., G.O., 5.125%, 7/01/30, FSA ................ 7/11 @ 100 11,199,540
AAA 18,500 Puerto Rico Pub. Fin. Corp. Rev., Ser. A, 5.00%, 8/01/29, MBIA ............... 8/11 @ 100 18,674,640
------------
29,874,180
------------
TOTAL INVESTMENTS--167.1% (COST $357,638,408) ................................ 362,352,694
Liabilities in excess of other assets--(6.3%) ................................ (13,574,074)
Liquidation value of preferred stock (60.8%) ................................. (131,950,000)
------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS--100% ........................... $216,828,620
==========
----------
* Using the higher of Standard & Poor's, Moody's or Fitch's rating.
+ Option call provisions: 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.
--------------------------------------------------------------------------------
KEY TO ABBREVIATIONS:
AMBAC -- American Municipal Bond Assurance Corporation
C.O.P. -- Certificate of Participation
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Security Assurance
G.O. -- General Obligation
MBIA -- Municipal Bond Insurance Association
WI -- When issued
--------------------------------------------------------------------------------
See Notes to Financial Statements.
6
--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA
MUNICIPAL INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2001
--------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $357,638,408)
(Note 1) ..................................................... $362,352,694
Cash ........................................................... 282,365
Receivable for investments sold ................................ 8,110,996
Interest receivable ............................................ 4,533,413
Other assets ................................................... 16,163
------------
375,295,631
------------
LIABILITIES
Payable for investments purchased .............................. 25,021,167
Dividends payable--common shares ............................... 1,084,457
Dividends payable--preferred shares ............................ 21,742
Organization and offering costs payable ........................ 229,906
Investment advisory fee payable (Note 2) ....................... 97,266
Other accrued expenses ......................................... 62,473
------------
26,517,011
------------
NET INVESTMENT ASSETS .......................................... $348,778,620
============
Net investment assets were comprised of:
Common shares of beneficial interest:
Par value (Note 4) ......................................... $ 14,959
Paid-in capital in excess of par ........................... 212,283,052
Preferred shares of beneficial interest (Note 4) ............. 131,950,000
------------
344,248,011
Distributions in excess of net
investment income (Note 1) ................................. (213,798)
Accumulated net realized gain (Note 1) ....................... 30,121
Net unrealized appreciation (Note 1) ......................... 4,714,286
------------
Net investment assets, October 31, 2001 ........................ $348,778,620
============
Net assets applicable to common shareholders ................... $216,828,620
============
Net asset value per common share of
beneficial interest:
($216,828,620 / 14,958,526 common shares
of beneficial interest issued and outstanding) ............... $14.50
======
--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA
MUNICIPAL INCOME TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD JULY 27, 2001
(COMMENCEMENT OF INVESTMENT OPERATIONS)
TO OCTOBER 31, 2001
--------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest (Note 1) .............................................. $ 2,531,187
-----------
Expenses
Investment advisory ............................................ 372,015
Independent accountants ........................................ 38,500
Auction agent .................................................. 25,363
Reports to shareholders ........................................ 24,500
Custodian ...................................................... 22,011
Organization expenses .......................................... 15,000
Trustees ....................................................... 11,918
Transfer agent ................................................. 7,500
Legal .......................................................... 4,058
Miscellaneous .................................................. 19,471
-----------
Total expenses ................................................. 540,336
Less fees waived by advisor (Note 2) ........................... (155,006)
Less fees paid indirectly (Note 2) ............................. (10,321)
-----------
Net expenses ................................................... 375,009
-----------
Net investment income ............................................ 2,156,178
-----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on investments ................................. 30,121
Net change in unrealized appreciation
on investments ................................................. 4,714,286
-----------
Net gain on investments .......................................... 4,744,407
-----------
NET INCREASE IN NET INVESTMENT
ASSETS RESULTING FROM OPERATIONS ................................. $ 6,900,585
===========
See Notes to Financial Statements.
7
--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
STATEMENT OF CHANGES IN NET INVESTMENT ASSETS
--------------------------------------------------------------------------------
FOR THE PERIOD
JULY 27, 2001*
THROUGH
OCTOBER 31, 2001
---------------
INCREASE (DECREASE) IN NET INVESTMENT ASSETS
OPERATIONS:
Net investment income ........................................ $ 2,156,178
Net realized gain on investments ............................. 30,121
Net change in unrealized appreciation on investments ......... 4,714,286
-------------
Net increase in net investment assets
resulting from operations ................................ 6,900,585
-------------
DIVIDENDS:
To common shareholders from net investment income ............ (1,973,254)
To common shareholders in excess of net investment income .... (195,660)
To preferred shareholders from net investment income ......... (182,924)
To preferred shareholders in excess of net
investment income .......................................... (18,138)
-------------
Total dividends ............................................ (2,369,976)
-------------
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 ........................... 7,166
Net proceeds from underwriters' over-allotment
option exercised ........................................... 27,933,750
Gross proceeds from the issuance of preferred shares ......... 131,950,000
-------------
Net proceeds from capital share transactions ............... 344,248,011
-------------
Total Increase ........................................... 348,778,620
-------------
NET INVESTMENT ASSETS
Beginning of period ............................................ --
-------------
End of period (including distributions in excess
of net investment income of $213,798) ........................ $ 348,778,620
=============
----------
*Commencement of investment operations (Note 1).
See Notes to Financial Statements.
8
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BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
FOR THE PERIOD
JULY 27, 2001(1)
THROUGH
OCTOBER 31, 2001
----------------
PER COMMON SHARE OPERATING PERFORMANCE:(2)
Net asset value, beginning of period(3) ......................... $ 14.33
--------
Net Investment Income ......................................... 0.16
Net realized and unrealized gain on investments ............... 0.32
--------
Net increase from investment operations ......................... 0.48
--------
Dividends and distributions:
Dividends from net investment income to:
Common shareholders ......................................... (0.15)
Preferred shareholders ...................................... (0.01)
Distributions in excess of net investment income to:
Common shareholders ......................................... (0.01)
Preferred shareholders ...................................... (0.00)(4)
--------
Total dividends and distributions ............................. (0.17)
--------
CAPITAL CHARGES:
Capital charge with respect to issuance of common shares ...... (0.03)
Capital charge with respect to issuance of preferred shares ... (0.11)
--------
Total capital charges ........................................... (0.14)
--------
Net asset value, end of period(3) ............................... $ 14.50
========
Market value, end of period(3) .................................. $ 14.75
========
TOTAL INVESTMENT RETURN(5) ...................................... (1.17)%
========
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:(6)
Expenses after fee waiver ....................................... 0.72%(7)
Expenses before fee waiver ...................................... 1.02%(7)
Net investment income after fee waiver and before
preferred share dividends ..................................... 4.06%(7)
Preferred share dividends ....................................... 0.38%(7)
Net investment income available to common shareholders .......... 3.68%(7)
SUPPLEMENTAL DATA:
Average net assets of common shareholders (000)................. $199,356
Portfolio turnover............................................... 16%
Net assets of common shareholders, end of period (000) .......... $216,829
Preferred stock outstanding (000) ............................... $131,950
Asset coverage per preferred share, end of period ............... $ 66,086
----------
(1) Commencement of investment operations. 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) Net asset value and market value are published in BARRON'S on Saturday and
THE WALL STREET JOURNAL on Monday.
(4) Amount is less than $0.005 per share.
(5) Total investment return is calculated assuming a purchase of a common share
at the current market price on the first day and a sale at the current
market price on the last day of the period reported. Dividends and
distributions, 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.
(6) Ratios are calculated on the basis of income and expenses applicable to
both the common and preferred shares relative to the average net assets of
common shareholders.
(7) Annualized
The information above represents the unaudited operating performance for a
common share outstanding, total investment return, ratios to average net assets
and other supplemental data for 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.
9
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BLACKROCK CALIFORNIA
MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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 objectives are to
provide current income exempt from regular Federal and California State income
taxes and to invest in municipal bonds that over time will perform better than
the broader California municipal bond market. 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 in determining values. Short-term investments are valued at amortized
cost. Any securities or other assets for which such current market quotations
are not readily available are valued at fair value as determined in good faith
under procedures established by and under the general supervision and
responsibility of the Trustees.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized and unrealized gains and losses are
calculated on the identified cost basis. The Trust also records interest income
on an accrual basis and amortizes premium and accretes discount, respectively,
to interest income on securities purchased using the interest method.
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.
NOTE 2. AGREEMENTS
The Fund 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. 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
10
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 $155,006
during the period ended October 31, 2001.
Pursuant to the agreements, the Advisor provides continuous supervision of
the investment portfolio, pays the compensation of officers of the Trust who are
affiliated persons of the Advisor and pays occupancy and certain clerical and
accounting costs. The Trust bears all other costs and expenses.
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 period ended October
31, 2001 were approximately $10,321.
NOTE 3. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term investments,
for the period ended October 31, 2001, aggregated $402,370,035 and $44,923,490,
respectively.
The Federal income tax basis of the Trust's investments at October 31, 2001
was $357,638,100 and accordingly, net unrealized appreciation was $4,714,594
(gross unrealized appreciation--$4,722,563, gross unrealized depreciation--
$7,969).
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 14,958,526 common shares of beneficial interest outstanding at October 31,
2001, the Advisor owned 8,109 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
==========
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 1.70% to
2.30% during the period ended October 31, 2001.
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 directors. 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 October 31, 2001, the Board of Trustees of the Trust declared a
dividend of $0.0725 per common share payable December 3, 2001, to shareholders
of record on November 15, 2001.
For the period November 1, 2001 through November 30, 2001, dividends
declared on preferred stock totaled $166,533 in aggregate for the outstanding
preferred stock.
11
--------------------------------------------------------------------------------
BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
REPORT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
BlackRock California Municipal Income Trust
We have audited the accompanying statement of assets and liabilities of
BlackRock California Municipal Income Trust (the "Trust"), including the
portfolio of investments, as of October 31, 2001, and the related statement of
operations, statement of changes in net investment assets and financial
highlights for the period from July 27, 2001 (commencement of investment
operations) to October 31, 2001. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2001, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides 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 position of
BlackRock California Municipal Income Trust as of October 31, 2001, the results
of its operations, changes in its net investment assets and financial highlights
for the period from July 27, 2001 (commencement of investment operations) to
October 31, 2001, in conformity with accounting principles generally accepted in
the United States of America.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
December 7, 2001
12
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BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
TAXINFORMATION
--------------------------------------------------------------------------------
We are required by the Internal Revenue Code to advise you within 60 days
of the Trust's tax year end as to the federally exempt interest dividends
received by you during such fiscal year. Accordingly, during the year the Trust
paid Federal tax-exempt dividends of $0.0725 to common shareholders and $33.97
to preferred shareholders.
For purposes of preparing your annual Federal income tax return, you should
report the amounts as reflected on the appropriate Form 1099-DIV or substitute
1099 DIV.
--------------------------------------------------------------------------------
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 in United
States dollars mailed directly to the shareholders of record (or if the shares
are held in street or other nominee name, then to the nominee) by the transfer
agent, as dividend disbursing agent.
The Plan Agent serves as agent for the shareholders in administering the
Plan. After the Trust declares a dividend or determines to make a capital gain
distribution, the transfer 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 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 transfer 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 net asset value
per share on the date the shares are issued. If, on the dividend payment date,
the net asset value per share is greater than the market value per share (such
condition being referred to herein as "market discount"), the transfer 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 as applied to
any dividend or distribution paid subsequent to written notice of the change
sent to all shareholders of the Trust at least 90 days before the record date
for the dividend or distribution. The Plan also may be amended or terminated by
the Plan Agent upon at least 90 days written notice to all shareholders of the
Trust. All correspondence concerning the Plan should be directed to the Plan
Agent at (800) 699-1BFM. The address is on the front of this report.
--------------------------------------------------------------------------------
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.
13
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BLACKROCK CALIFORNIA MUNICIPAL INCOME TRUST
INVESTMENT SUMMARY
--------------------------------------------------------------------------------
THE TRUST'S INVESTMENT OBJECTIVES
The BlackRock California Municipal Income Trust's investment objectives are to
provide current income exempt from regular Federal and California state income
tax consistent with the preservation of capital and invest in municipal bonds
that will perform better than the California municipal bond market.
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
$226 billion of assets under management as of September 30, 2001. BlackRock
manages assets on behalf of more than 3,300 institutions and 200,000 individuals
worldwide through a variety of equity, fixed income, liquidity and alternative
investment separate accounts and mutual funds, including BLACKROCK FUNDS and
BLACKROCK PROVIDENT INSTITUTIONAL FUNDS. In addition, BlackRock provides risk
management and investment system services to institutional investors under the
BLACKROCK SOLUTIONS name. Clients are served from the Company's headquarters in
New York City, as well as offices in Wilmington, DE, San Francisco, Edinburgh,
Scotland, Tokyo, Japan, and Hong Kong. BlackRock is a member of The PNC
Financial Services Group, Inc. (NYSE: PNC), one of the largest diversified
financial services organizations in the United States, and is majority-owned by
PNC and by BlackRock employees.
WHAT CAN THE TRUST INVEST IN?
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
primarily in municipal bonds that pay interest that is exempt from regular
Federal and California State income taxes. 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 15 years or more, 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".
14
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 fund through the Trust's transfer agent,
EquiServe Trust Company, N.A. Investors who wish to hold shares in a brokerage
account should check with their financial advisor to determine whether their
brokerage firm offers dividend reinvestment services.
LEVERAGE CONSIDERATIONS IN THE TRUST
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
Trust may reduce, or unwind, the amount of leverage employed should the Advisor
consider that reduction to be in the best interests of the Trust. The Advisor's
portfolio managers continuously monitor and regularly review the Trust's use of
leverage and maintain the ability to unwind the leverage if that course is
chosen.
SPECIAL CONSIDERATIONS AND RISK FACTORS RELEVANT TO THE TRUST
THE TRUST IS INTENDED TO BE A LONG-TERM INVESTMENT AND IS NOT A SHORT-TERM
TRADING VEHICLE.
INVESTMENT OBJECTIVES. Although the objectives of the Trust are to provide
current income that is exempt from regular Federal and California State income
taxes and to invest in municipal bonds that over time will perform better than
the broader California Municipal bond market, 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 stock,
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.
ILLIQUID SECURITIES. The Trust may invest in securities that are illiquid,
although under current market conditions the Trust expects to do so to only a
limited extent. These securities involve special risks.
ANTITAKEOVER PROVISIONS. Certain antitakeover provisions will make a change in
the Trust's business or management more difficult without the approval of the
Trustees and may have the effect of depriving shareholders of an opportunity to
sell their shares at a premium above the prevailing market price.
15
--------------------------------------------------------------------------------
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
stock price the fund is said to be trading at a
discount.
DIVIDEND: Income generated by securities in a portfolio and
distributed to shareholders after the deduction of
expenses. This Trust declares and pays dividends to
common shareholders on a monthly basis.
DIVIDEND REINVESTMENT: Shareholders may have all dividends and distributions
of capital gains automatically reinvested into
additional shares of a Trust.
MARKET PRICE: Price per share of a security trading in the secondary
market. For a closed-end fund, this is the price at
which one share of the fund trades on the stock
exchange. If you were to buy or sell shares, you would
pay or receive the market price.
NET ASSET VALUE (NAV): Net asset value is the total market value of all
securities and other assets held by the Trust, plus
income accrued on its investments, minus any
liabilities including accrued expenses, divided by the
total number of outstanding 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 stock 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.
16
--------------------------------------------------------------------------------
BLACKROCK ADVISORS, INC.
SUMMARY OF CLOSED-END FUNDS
--------------------------------------------------------------------------------
TAXABLE TRUSTS
--------------------------------------------------------------------------------
STOCK MATURITY
PERPETUAL TRUSTS SYMBOL DATE
----- -----
The BlackRock Income Trust Inc. BKT N/A
The BlackRock North American Government Income Trust Inc. BNA N/A
The BlackRock High Yield Trust BHY N/A
BlackRock Core Bond Trust BHK N/A
TERM TRUSTS
The BlackRock Strategic Term Trust Inc. BGT 12/02
The BlackRock Investment Quality Term Trust Inc. BQT 12/04
The BlackRock Advantage Term Trust Inc. BAT 12/05
The BlackRock Broad Investment Grade 2009 Term Trust Inc. BCT 12/09
TAX-EXEMPT TRUSTS
--------------------------------------------------------------------------------
STOCK MATURITY
PERPETUAL TRUSTS SYMBOL DATE
------ -----
The BlackRock Investment Quality Municipal Trust Inc. BKN N/A
The BlackRock California Investment Quality Municipal Trust Inc. RAA N/A
The BlackRock Florida Investment Quality Municipal Trust RFA N/A
The BlackRock New Jersey Investment Quality Municipal Trust Inc. RNJ N/A
The BlackRock New York Investment Quality Municipal Trust Inc. RNY N/A
The BlackRock Pennsylvania Strategic Municipal Trust BPS N/A
The BlackRock Strategic Municipal Trust BSD N/A
BlackRock California Municipal Income Trust BFZ N/A
BlackRock Municipal Income Trust BFK N/A
BlackRock New York Municipal Income Trust BNY N/A
BlackRock New Jersey Municipal Income Trust BNJ N/A
BlackRock Florida Municipal Income Trust BBF N/A
TERM TRUSTS
The BlackRock Municipal Target Term Trust Inc. BMN 12/06
The BlackRock Insured Municipal 2008 Term Trust Inc. BRM 12/08
The BlackRock California Insured Municipal 2008 Term Trust Inc. BFC 12/08
The BlackRock Florida Insured Municipal 2008 Term Trust BRF 12/08
The BlackRock New York Insured Municipal 2008 Term Trust Inc. BLN 12/08
The BlackRock Insured Municipal Term Trust Inc. BMT 12/10
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) 277-7BFM (7236) OR CONSULT WITH YOUR FINANCIAL ADVISOR.
17
--------------------------------------------------------------------------------
BLACKROCK ADVISORS, INC.
AN OVERVIEW
--------------------------------------------------------------------------------
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
$226 billion of assets under management as of September 30, 2001. BlackRock
manages assets on behalf of more than 3,300 institutions and 200,000 individuals
worldwide through a variety of equity, fixed income, liquidity and alternative
investment separate accounts and mutual funds, including BLACKROCK FUNDS and
BLACKROCK PROVIDENT INSTITUTIONAL FUNDS. In addition, BlackRock provides risk
management and investment system services to institutional investors under the
BLACKROCK SOLUTIONS name. Clients are served from the Company's headquarters in
New York City, as well as offices in Wilmington, DE, San Francisco, Edinburgh,
Scotland, Tokyo, Japan, and Hong Kong. BlackRock is a member of The PNC
Financial Services Group (NYSE: PNC), one of the largest diversified financial
services organizations in the United States, and is majority-owned by PNC and by
BlackRock employees.
BlackRock's fixed income product was introduced in 1988 by a team of highly
seasoned fixed income professionals. These professionals had extensive
experience creating, analyzing and trading a variety of fixed income
instruments, including the most complex structured securities. In fact, several
individuals at BlackRock were responsible for developing many of the major
innovations in the mortgage-backed and asset-backed securities markets,
including the creation of the first CMO, the floating rate CMO, the
senior/subordinated pass-through and the multi-class asset-backed security.
BlackRock is unique among asset management and advisory firms in the
emphasis it places on the development of proprietary analytical capabilities.
Over one quarter of the firm's professionals are dedicated to the design,
maintenance and use of these systems, which are not otherwise available to
investors. BlackRock's proprietary analytical tools are used for evaluating, and
designing fixed income investment strategies for client portfolios. Securities
purchased include mortgages, corporate bonds, municipal bonds and a variety of
hedging instruments.
BlackRock has developed investment products that respond to investors'
needs and has been responsible for several major innovations in closed-end
funds. In fact, BlackRock introduced the first closed-end mortgage fund, the
first taxable and tax-exempt closed-end funds to offer a finite term, the first
closed-end fund to achieve a AAA rating by Standard & Poor's, and the first
closed-end fund to invest primarily in North American Government securities.
Currently, BlackRock's closed-end funds have dividend reinvestment plans, which
are designed to provide ongoing demand for the stock in the secondary market.
BlackRock manages a wide range of investment vehicles, each having specific
investment objectives and policies.
In view of our continued desire to provide a high level of service to all
our shareholders, BlackRock maintains a toll-free number for your questions. The
number is (800) 227-7BFM (7236). We encourage you to call us with any questions
that you may have about your BlackRock funds and we thank you for the continued
trust that you place in our abilities.
18
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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.
345 Park Avenue
New York, NY 10154
CUSTODIAN
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
TRANSFER AGENT
EquiServe Trust Company, N.A.
150 Royall Street
Canton, MA 02021
(800) 699-1BFM
AUCTION AGENT
Bank of New York
Five 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
Four Times Square
New York, NY 10036
LEGAL COUNSEL - INDEPENDENT DIRECTORS
Debevoise & Plimpton
919 Third Avenue
New York, NY 10022
This report is for shareholder information. This is not a prospectus
intended for use in the purchase or sale of Trust shares.
Statements and other information contained in this report are as dated and
are subject to change.
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
=============================
ANNUAL REPORT
OCTOBER 31, 2001
[BLACKROCK LOGO]