- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISER
- --------------------------------------------------------------------------------
December 14, 1995
Dear Shareholder,
Since the inception of The BlackRock Broad Investment Grade 2009 Term Trust
Inc. in 1993, the market for investments in fixed income securities has
witnessed an unprecedented amount of interest rate volatility, which has changed
the landscape for fixed income investors. 1995 has been a great year for
investments in the bond market following the disappointments of 1994, as yields
have declined and the value of fixed income securities has increased
dramatically.
Looking forward, we maintain a positive outlook for the market's performance
in 1996. The economy currently appears to be growing at a steady rate and
inflation appears to be under control. Market participants are beginning to
agree that the Federal Reserve has achieved the "soft landing" that they set out
to accomplish through a series of interest rate increases last year, and are
optimistic for a further ease in the Fed's monetary policy should a budget
accord emphasizing fiscal restraint be reached in Washington.
BlackRock Financial Management is completing its first year as part of PNC
Bank Corporation, becoming an essential part of PNC's Asset Management Group by
taking a leadership role in their fixed income management operations. We have
witnessed consistent growth of our assets under management, which now stand at
approximately $34 billion, as both retail and institutional fixed income
investors continue to recognize the value of our risk management capabilities
and long term investment philosophy.
We look forward to maintaining your respect and confidence and to serving
your financial needs in the coming year.
Sincerely,
Laurence D. Fink Ralph L. Schlosstein
Chairman President
1
<PAGE>
December 14, 1995
Dear Shareholder:
We are pleased to present the annual report for The BlackRock Broad
Investment Grade 2009 Term Trust Inc. ("BCT" or "the Trust") for the fiscal year
ended October 31, 1995. We would like to take this opportunity to review the
Trust's strong performance over its fiscal year, from both a stock price and net
asset value (NAV) perspective, as well as to review the Trust's portfolio
strategy and the opportunities available to the Trust in the current lower
interest rate environment.
The Trust is a diversified, actively managed closed-end bond fund whose
investment objective is to return $15 per share (its initial public offering
price) to shareholders on or about December 31, 2009 while providing high
current income. Although it is not a guarantee, BlackRock believes the Trust can
achieve its investment objectives. The Trust seeks to achieve these objectives
by managing a portfolio of investment grade fixed income securities, including
corporate debt securities, mortgage-backed securities backed by U.S. Government
agencies (such as Fannie Mae, Freddie Mac or Ginnie Mae) and commercial
mortgage-backed securities. Historically, the Trust has been primarily invested
in corporate debt securities and collateralized mortgage obligations (CMOs). All
of the Trust's assets must be rated at least "BBB" by Standard & Poor's or "Baa"
by Moody's at time of purchase or be issued or guaranteed by the U.S. government
or its agencies.
The Trust's shares are traded on the American Stock Exchange under the
symbol BCT. The table below summarizes the performance of the Trust's stock
price and NAV over the fiscal year:
----------------------------------------------------
10/31/95 10/31/94 Change High Low
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Stock Price $11.125 $10.00 11.25% $11.625 $9.875
- --------------------------------------------------------------------------------
Net Asset Value (NAV) $13.40 $11.94 12.23% $13.42 $11.72
- --------------------------------------------------------------------------------
Premium/(Discount) to NAV (16.98%) (16.25%) (0.73%) (6.62%) (17.66%)
- --------------------------------------------------------------------------------
The Fixed Income Markets
The dramatic rally in the capital markets, which caused interest rates to
fall and prices of fixed income securities to increase throughout late 1994 and
1995, has changed the market landscape for fixed income investors. The rally in
the Treasury market, sparked by a slowdown in economic growth and modest
inflation data, began during the fourth quarter of 1994 and accelerated through
the first, second and third quarters of 1995. The perceived threat of inflation
diminished as economic reports became increasingly pessimistic during the second
quarter. With investor confidence in the value of fixed income securities
renewed, market demand increasingly accelerated.
Over the past twelve months, interest rates have fallen substantially across
the yield curve. Yield levels on the intermediate portion of the Treasury curve
have fallen over 150 basis points (1.50%) as the 10-year Treasury closed at
6.02% on October 31, 1995. During July and the beginning of August, the rally
was temporarily halted as strong economic data dampened expectations for a
follow-up reduction in the Fed funds target rate after the July 6th ease. As the
fourth quarter began, interest rates returned to their 1995 lows due to a return
to sluggish growth, low inflation and a perceived Fed bias toward easing
interest rates near year-end.
Corporate debt securities outperformed other fixed income sectors throughout
the first and second quarters of 1995, as strong corporate profits and a
rallying stock market helped sustain investor demand. This outperformance
occurred in an environment of increased corporate debt supply, as corporations
took advantage of the declining interest rates by issuing new debt at lower
rates. Despite appreciating in value, mortgage-backed securities (MBS)
underperformed corporates and Treasuries, as the sharp decline in interest rates
caused investors to fear accelerated prepayments on mortgages. As a result,
dollar prices on mortgage-backed securities underperformed, causing relative
yields to increase to near historically wide spreads relative to Treasuries.
2
<PAGE>
The Trust's Portfolio and Investment Strategy
The Trust's portfolio holdings have been actively managed consistent with
BlackRock's overall market outlook and the Trust's investment objectives. The
chart below compares the Trust's portfolio compositions as of October 31, 1995
and October 31, 1994.
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Composition October 31, 1995 October 31, 1994
- --------------------------------------------------------------------------------
Agency Multiple Class Mortgage Pass-Throughs 45% 35%
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Commercial Mortgage-Backed Securities 11% 2%
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Corporate Bonds-Finance & Banking 10% 14%
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Mortgage Pass-Throughs 6% 11%
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Corporate Bonds-Industrial 6% 9%
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Corporate Bonds-Sovereign & Provincial 6% 12%
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FHA Project Loans 4% 6%
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Municipal Bonds 4% 2%
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Non-Agency Multiple Class Mortgage Pass-Throughs 3% -
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U.S. Gov't Securities 3% -
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Corporate Bonds-Utilities 2% 1%
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Asset Backed Securities - 4%
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Zero Coupon Bonds - 4%
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The Trust reduced its overall corporate debt holdings by approximately
one-third over 1995, benefiting from the rich levels that resulted from the
sector's strong performance. The prices of corporate bonds could decrease as
year-end approaches and the Trust may look to re-enter the market if yields
become attractive once again. In contrast, the Trust increased its exposure to
MBS over the year, focusing primarily on mortgage securities which offer
attractive yield spreads relative to Treasuries. Within the MBS sector, cash
flow predictability was favored through the purchase of seasoned mortgages
(which have been through at least one refinancing cycle) and lower coupons with
less threat of refinancing.
Over the fiscal year, the Trust substantially increased its holdings in
commercial mortgage-backed securities (CMBS), which differ from traditional MBS
in that CMBS collateral is commercial property as opposed to residential
property. CMBS offer excellent prepayment protection, as many deals contain call
protection provisions such as prepayment lockouts or yield maintenance penalties
which discourage early payments to CMBS holders. The portfolio also maintained
its stake in well-structured agency backed PAC (Planned Amortization Class) and
sequential pay (or vanilla) collateralized mortgage obligations (CMOs).
Purchasing these types of CMOs allows the Trust to purchase seasoned mortgage
product at higher yields than offered by traditional pass-through mortgage
securities.
We look forward to managing the Trust in the coming fiscal year to benefit
from the opportunities available to investors in the investment grade fixed
income market as well as to maintain the Trust's ability to meet its investment
objectives. We thank you for your investment in the BlackRock Broad Investment
Grade 2009 Term Trust Inc. Please feel free to call our marketing center at
(800) 227-7BFM (7236) if you have specific questions which were not addressed in
this report.
Sincerely,
Robert S. Kapito Keith T. Anderson
Vice Chairman and Portfolio Manager Managing Director and Portfolio Manager
BlackRock Financial Management, Inc. BlackRock Financial Management, Inc.
3
<PAGE>
================================================================================
The BlackRock Broad Investment Grade 2009 Term Trust Inc.
- --------------------------------------------------------------------------------
Symbol on American Stock Exchange: BCT
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Initial Offering Date: June 17, 1993
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Closing Stock Price as of 10/31/95: $11.125
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Net Asset Value as of 10/31/95: $13.40
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Yield on Closing Stock Price as of 10/31/95 ($11.125) 1: 8.09%
- --------------------------------------------------------------------------------
Current Monthly Distribution per Share 2: $0.0750 3
- --------------------------------------------------------------------------------
Current Annualized Distribution per Share 2: $0.9000 3
================================================================================
1Yield on closing stock price is calculated by dividing the current annualized
distribution per share by the closing stock price per share.
2The distribution is not constant and is subject to change.
3New dividend rate effective with January 1996 payment.
4
<PAGE>
(Left Column)
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The BlackRock Broad Investment
Grade 2009 Term Trust Inc.
Portfolio of Investments
October 31, 1995
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Principal
Amount Value
(000) Description (Note 1)
- --------------------------------------------------------------------------------
Long-Term Investments-145.6%
Mortgage Pass-Throughs-13.7%
Federal Housing Administration,
$ 27 CLC New Perspective, 9.25%,
4/25/34 ................................ $ 27,902
1,928 Non Put Reilly, 8.294%, 3/1/20 ......... 2,079,497
Government National Mortgage
Association,
245 6.50%, 4/20/25, 1 Year CMT (ARM) ....... 249,134
719++ 6.50%, 5/20/25, 1 Year CMT (ARM) ....... 731,055
1,867 7.00%, 1/15/24-2/15/24 ................. 1,853,686
481+ 8.00%, 6/15/24 ......................... 495,299
-----------
5,436,573
-----------
Multiple Class Mortgage
Pass-Throughs-70.9%
795@ Community Program Loan Trust,
Series 1987-A, Class A4, 4.50% ......... 679,228
Paine Webber Mortgage Acceptance
Corporation IV,
750 Series 1995 M1, Class D,
7.30%, 1/15/07 ......................... 740,993
500 Series 1995 M2 Class D,
7.20%, 12/1/03 ......................... 495,938
Federal Home Loan Mortgage Corporation,
Multiclass Mortgage Participation
Certificates (REIMC),
3,500++ Series 1255, Class 1255-H, 4/15/22 ..... 3,922,170
11 Series 1430, Class 1430-KA (I), 12/15/21 404,250
199 Series 1433, Class 1433-S, 11/15/22 .... 154,306
9 Series 1459, Class 1459-JA (I), 8/15/20 292,500
2,168++ Series 1510, Class 1510-G (P), 5/15/13 . 2,187,471
337 Series 1564, Class 1564-SA, 8/15/08 .... 270,863
3,000++ Series 1596, Class 1596-D, 10/15/13 .... 2,901,966
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
516 Series 1994-22, Class 22-SA,
1/25/24 ................................ 381,786
59 Trust 1991-30, Class 30-M (I), 4/25/21 . 1,012,131
(Right Column)
- --------------------------------------------------------------------------------
Principal
Ratings* Amount Value
(unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
$1,613+ Trust 1992-196, Class 196-SA,
11/25/07 ............................... $ 1,311,824
4,090+ Trust 1993-140, Class 140-K (P),
8/25/13 ................................ 4,242,066
1,500 Trust 1993-175, Class 175-SD,
9/25/08 ................................ 1,147,031
1,000++ Trust 1993-49, Class 49-H (P),
4/25/13 ................................ 998,550
3,053+ Trust 1993-79, Class 79-PK (P),
4/25/22 ................................ 3,057,462
2,646++ Trust 1993-87, Class 87-J (P),
4/25/22 ................................ 2,500,470
1,177++ Trust 1994-13, Class 13-SM,
2/25/09 ................................ 822,797
4,570 Trust 1994-42, Series 42-SO (I),
3/25/23 ................................ 589,816
-----------
28,113,618
-----------
Commercial Mortgage-
Backed Securities-15.8%
BBB 400 American Southwest Financial
Securities Corporation,
Series 1994-C2, Class A4, 8.00%,
8/25/10 ................................ 401,740
BBB 500 Citibank New York NA,
Multifamily Mortgage, Series
1994-1, Class M2, 8.00%, 1/25/19 ....... 498,113
Baa2 800 DLJ Mortgage Acceptance
Corporation, Series 1992-MF3,
Class B, 10.25%, 6/18/07 ............... 843,833
BBB+ 750 FDIC Remic Trust,
Mortgage Pass-Through
Certificates, Series 1994-C1, Class
II-F, 8.70%, 9/25/25 ................... 775,006
BBB 500 FSA Finance Incorporated,
Commercial Mortgage Note, Series
1, Class C, 8.31%, 6/01/02 ............. 515,860
Aaa 981 GE Capital Mortgage Services
Incorporated,
Series 1993-15, Class 15-A10,
3.39%, 11/25/08 ........................ 558,479
BBB 500 LTC Commercial Mortgage
Pass-Through Certificates,
Series 1994-1 Class 1-D, 10.00%,
6/15/26 ................................ 552,188
BBB 500 Merrill Lynch Mortgage Investors
Incorporated, Multiclass Mortgage
Pass-Through Certificates, Series
1995-C1, Class C, 7.90%, 5/25/13 ....... 502,713
See Notes to Financial Statements.
5
<PAGE>
(Left Column)
- --------------------------------------------------------------------------------
Principal
Ratings* Amount Value
(unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
BBB $ 500 Morgan Stanley Capital 1
Incorporated,
Commercial Mortgage Pass-
Through, Series 1995-GA 1, Class
D, 8.25%, 8/15/27 ...................... $ 512,340
BBB 600 Nomura Asset Capital Corporation,
Series 1993-M1, Class A3, 7.64%,
11/25/03 ............................... 596,470
BBB 490 Resolution Trust Corporation,
Series 1994-C2, Class D, 8.00%,
4/25/25 ................................ 495,833
-----------
6,252,575
-----------
Corporate Bonds-34.9%
Finance & Banking-14.5%
A 650 Bankers Trust N.Y. Corporation,
Subordinated Debenture,
9.40%, 3/01/01 ......................... 729,142
A- 500 First Union Corporation,
7.25%, 2/15/03 ......................... 516,335
A+ 500 Goldman Sachs Group,
7.875%, 1/15/03 ........................ 527,917
AA 500 Metropolitan Life Insurance Co.,
6.30%, 11/01/03 ........................ 480,748
A+ 1,000 Morgan Stanley Group Incorporated,
10.00%, 6/15/08 ........................ 1,218,540
A- 1,000 NCNB Corporation,
9.375%, 9/15/09 ........................ 1,203,870
Baa3 500 New American Capital Incorporated,
Series C, 7.3125%, 4/12/00 ............. 499,375
BBB+ 500 Paine Webber Group Incorporated,
8.875%, 3/15/05 ........................ 554,060
-----------
5,729,987
-----------
Industrial-8.9%
A3 100 American Airlines Inc. Secured
Equipment Trust,
Series 1990-M, 10.44%, 3/04/07 ......... 122,043
AA- 500 Anheuser Busch
Companies, Incorporated,
9.00%, 12/01/09 ........................ 600,670
BBB- 500 Burlington Industries
Incorporated, 7.25%, 9/15/05 ........... 504,324
BBB 500 Occidental Petroleum Corporation,
10.125%, 9/15/09 ....................... 629,955
BBB- 500 Ralcorp Holdings, Incorporated,
8.75%, 9/15/04 ......................... 546,250
A- 500 Ralston Purina Co., Debenture,
9.25%, 10/15/09 ........................ 597,555
A 500 Seagram Joseph E & Sons Inc.,
7.00%, 4/15/08 ......................... 503,120
-----------
3,503,917
-----------
(Right Column)
- --------------------------------------------------------------------------------
Principal
Ratings* Amount Value
(unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
Sovereign and Provincial-9.1%
A1 $1,000 Dow Capital B V, 9.20%, 6/01/10 ..... $ 1,192,600
BBB+ 1,000 Newfoundland Province,
11.625%, 10/15/07 ................. 1,358,030
A+ 525 Quebec Province,
7.50%, 7/15/02 .................... 551,368
A3 500 Saskatchewan Province,
7.125%, 3/15/08 ................... 510,693
-----------
3,612,691
-----------
Utilities-2.4%
BBB- 400 Mobile Energy Services
Company L. L. C.,
8.665%, 1/01/17 ................... 419,400
Baa2 500 Ohio Edison Co.,
8.625%, 9/15/03 ................... 547,827
-----------
967,227
-----------
U.S. Government
Securities-3.7%
380 U.S. Treasury Notes,
7.50%, 2/15/05 .................... 419,068
1,000 Small Business Administration,
Participation Certificate,
7.35%, Series 1995-10,
Class 10-C, 8/01/05 ............... 1,036,406
-----------
1,455,474
-----------
Municipal Bonds-6.6%
AA- 500 Fresno California Pension Obligation,
Series 1994, 7.80%, 6/01/14 ....... 529,705
BBB+ 495 Lake County Florida Resource
Recovery Revenue,
7.125%, 10/01/99 .................. 492,545
Los Angeles County California Pension,
AAA 1,000 Series A, 8.62%, 6/30/06 .......... 1,101,750
AAA 500 Taxable Series D, 6.97%, 6/30/08 .. 500,345
-----------
2,624,345
-----------
Total Long-Term Investments
(cost $56,456,828) ................ $57,696,407
SHORT-TERM INVESTMENTS-2.6%
Repurchase Agreement-2.6%
1,055 State Street Bank, 5.80% dated
10/31/95, due 11/1/95 in the
amount of $1,055,170 (cost
$1,055,000 collateralized by
$1,030,000 United States Treasury
Note, 7.25%, due 11/30/96, value
including accrued interest
$1,078,276) ....................... 1,055,000
-----------
See Notes to Financial Statements.
6
<PAGE>
(Left Column)
- --------------------------------------------------------------------------------
Principal
Ratings* Amount Value
(unaudited) (000) Description (Note 1)
- --------------------------------------------------------------------------------
Total Investments-148.2%
(cost $57,511,828) ................ $58,751,407
Liabilities in excess of other
assets-(48.2%) .................... (19,117,108)
-----------
NET ASSETS-100% ..................... $39,634,299
-----------
-----------
- --------------
* Using the higher of the Standard & Poor's or Moody's Ratings.
+ (Partial) principal amount pledged as collateral for reverse repurchase
agreements.
++Entire principal amount pledged as collateral for reverse repurchase
agreement.
@ (Partial) principal amount pledged as collateral for future transactions.
- --------------------------------------------------------------------------------
Key to Abbreviations
ARM -Adjustable Rate Mortgage.
CMT -Constant Maturity Treasury.
REMIC -Real Estate Mortgage Investment Conduit.
I -Denotes a CMO with Interest Only Characteristics.
P -Denotes a CMO with Principal Only Characteristics.
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(Right Column)
- -----------------------------------------------------------------
The BlackRock Broad Investment
Grade 2009 Term Trust Inc.
Statement of Assets and Liabilities
October 31, 1995
- -----------------------------------------------------------------
Assets
Investments, at value
(cost $57,511,828) (Note 1) ........................ $58,751,407
Cash ............................................... 25,511
Receivable for investments sold .................... 1,072,748
Interest receivable ................................ 571,736
Deferred organization expenses and other ........... 21,539
-----------
60,442,941
-----------
Liabilities
Reverse repurchase agreements (Note 4) ............. 18,489,000
Payable for investments purchased .................. 2,108,553
Interest payable ................................... 82,956
Dividends payable .................................. 48,845
Variation margin payable on open futures
contracts (Note 1) ............................... 24,938
Advisory fee payable (Note 2) ...................... 18,450
Administration fee payable (Note 2) ................ 5,032
Other accrued expenses ............................. 30,868
-----------
20,808,642
-----------
Net Assets ......................................... $39,634,299
Net assets were comprised of:
Common stock:
Par value (Note 5) ............................. $ 29,571
Paid-in capital in excess of par ............... 40,699,403
-----------
40,728,974
-----------
Accumulated net realized loss .................... (2,029,571)
Net unrealized appreciation ...................... 934,896
Net assets, October 31, 1995 ..................... $39,634,299
-----------
-----------
Net asset value per share:
($39,634,299 / 2,957,093 shares of
common stock issued and outstanding) ............. $13.40
------
------
See Notes to Financial Statements.
7
<PAGE>
Left Column
- -----------------------------------------------------------------
The BlackRock Broad Investment
Grade 2009 Term Trust Inc.
Statement of Operations
Year Ended October 31, 1995
- -----------------------------------------------------------------
Net Investment Income
Income
Interest earned (including net amortization of
premium of $56,156 and net of interest
expense of $2,011,916) ......................... $2,883,587
Expenses
Investment advisory .............................. 196,926
Administration ................................... 53,707
Custodian ........................................ 16,193
Directors ........................................ 16,116
Reports to shareholders .......................... 15,587
Audit ............................................ 13,000
Transfer agent ................................... 10,140
Legal ............................................ 4,415
Miscellaneous .................................... 44,375
----------
Total expenses ................................... 370,459
----------
Net investment income .............................. 2,513,128
----------
Realized and Unrealized Gain (Loss) on
Investments (Note 3)
Net realized gain (loss) on:
Investments ...................................... 174,579
Short sales ...................................... (2,224,125)
Futures .......................................... 76,406
----------
(1,973,140)
----------
Net change in unrealized
appreciation (depreciation) on:
Investments .................................... 7,470,314
Short sales .................................... (422,490)
Futures ........................................ (353,889)
----------
6,693,935
----------
Net gain on investments ............................ 4,720,795
----------
Net Increase in Net Assets Resulting from
Operations ........................................ $7,233,923
----------
----------
Right Column
- -----------------------------------------------------------------
The BlackRock Broad Investment
Grade 2009 Term Trust Inc.
Statement of Cash Flows
Year Ended October 31, 1995
- -----------------------------------------------------------------
Increase (Decrease) in Cash
Cash flows provided by operating activities:
Interest purchased, net of interest received ..... $ 4,001,100
Operating expenses paid .......................... (517,158)
Interest expense paid ............................ (1,170,375)
Purchase of long-term portfolio investments ...... (49,091,412)
Proceeds from disposition of long-term portfolio
investments .................................... 50,222,929
Other ............................................ (2,978,355)
-----------
Net cash flows provided by operating activities .. 466,729
-----------
Cash flows used for financing activities:
Increase in reverse repurchase agreements ........ 2,486,237
Cash dividends paid .............................. (2,932,577)
-----------
Net cash flows used for financing activities ..... (446,340)
-----------
Net increase in cash ............................... 20,389
Cash at beginning of period ........................ 5,122
-----------
Cash at end of period .............................. $ 25,511
-----------
-----------
Reconciliation of Net Increase in
Net Assets Resulting from Operations
to Net Cash Flows Provided by
Operating Activities
Net increase in net assets resulting from operations $ 7,233,923
-----------
Increase in investments ............................ (3,357,724)
Net realized loss on investments ................... 1,973,140
Increase in unrealized appreciation ................ (6,693,935)
Decrease in interest receivable .................... 56,273
Decrease in deposits with brokers .................. 7,860,000
Decrease in payable for investment
sold short ....................................... (7,573,760)
Increase in receivable for investments sold ........ (806,319)
Decrease in deferred organization expenses
and other assets ................................. 1,436
Increase in payable for investments purchased ...... 2,030,965
Decrease in interest payable ....................... (109,135)
Decrease in accrued expenses and other liabilities . (148,135)
-----------
Total adjustments .................................. (6,767,194)
-----------
Net cash flows provided by for operating activities. $ 466,729
-----------
-----------
See Notes to Financial Statements.
8
<PAGE>
Left Column
- -----------------------------------------------------------------
The BlackRock Broad Investment
Grade 2009 Term Trust Inc.
Statements of Changes in
Net Assets
- -----------------------------------------------------------------
Year Ended Year Ended
Increase (Decrease) in October 31, October 31,
Net Assets 1995 1994
----------- -----------
Operations:
Net investment income ............. $ 2,513,128 $ 2,812,643
Net realized gain (loss) on
investments ..................... (1,973,140) (56,431)
Net unrealized appreciation
(depreciation) on
investments ..................... 6,693,935 (7,263,829)
----------- -----------
Net increase (decrease) in net
assets resulting from
operations ...................... 7,233,923 (4,507,617)
----------- -----------
Distributions to shareholders:
Dividends from
net investment income ........... (2,513,128) (2,813,817)
Distributions from
realized capital gains .......... - (51,279)
Distributions from
paid-in capital (406,938) (276,506)
----------- -----------
Total dividends and
distributions ..................... (2,920,066) (3,141,602)
----------- -----------
Capital share transactions:
Additional capital charge
with respect to initial
offering of shares .............. - (81,400)
----------- -----------
- (81,400)
----------- -----------
Total increase (decrease) ....... 4,313,857 (7,730,619)
Net Assets
Beginning of period ................. 35,320,442 43,051,061
----------- -----------
End of period ....................... $39,634,299 $35,320,442
----------- -----------
----------- -----------
Right Column
- --------------------------------------------------------------------------------
The BlackRock Broad Investment
Grade 2009 Term Trust Inc.
Financial Highlights
- --------------------------------------------------------------------------------
For the Period
June 25,
PER SHARE Year Ended Year Ended 1993* to
OPERATING October 31, October 31, October 31,
PERFORMANCE: 1995 1994 1993
---------- ---------- --------------
Net asset value, beginning
of the period .................... $ 11.94 $ 14.56 $ 14.10
------- ------- -------
Net investment income
(net of interest
expense of $.68, $.34
and $.02) ...................... 0.85 0.95 0.28
Net realized and
unrealized gain (loss)
on investments ................. 1.60 (2.48) 0.52
------- ------- -------
Net increase (decrease)
from investment
operations 2.45 (1.53) 0.80
------- ------- -------
Dividends from net
investment income (0.85) (0.95) (0.27)
Distributions from realized
capital gains - (0.02) -
Distributions from paid-in
capital (0.14) (0.09) -
------- ------- -------
Total dividends and
distributions (0.99) (1.06) (0.27)
------- ------- -------
Capital charge with respect
to issuance of shares - (0.03) (0.07)
------- ------- -------
Net asset value, end of
period** $ 13.40 $ 11.94 $ 14.56#
======= ======= =======
Per share market value,
end of period** $11.125 $ 10.00 $ 13.75
======= ======= =======
TOTAL INVESTMENT
RETURN+ 22.43% (20.41%) (0.60%)
RATIOS TO AVERAGE
NET ASSETS
Expenses 1.00% 1.04% 0.97%++
Net investment income 6.78% 7.31% 5.66%++
SUPPLEMENTAL DATA:
Average net assets
(in thousands) $37,080 $38,468 $41,195
Portfolio turnover 116% 41% 27%
Net assets, end of period
(in thousands) $39,634 $35,320 $43,051
Reverse repurchase
agreements outstanding,
end of period
(in thousands) $18,489 $16,003 $18,375
Asset coverage +++ $ 3,144 $ 3,207 $ 3,343
- -------------------
*Commencement of investment operations.
**Net Asset Value and market value are published in The Wall Street Journal
each Monday.
#Net asset value immediately after the closing of the first public offering
was $14.03.
+Total investment return is calculated assuming a purchase of common stock 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. This calculation does
not reflect brokerage commissions. Total investment returns for less than one
full year are not annualized.
++Annualized.
+++Per $1,000 of reverse repurchase agreements outstanding. The information
above represents the audited operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each of 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 shares.
See Notes to Financial Statements.
9
<PAGE>
Left Column
- --------------------------------------------------------------------------------
The BlackRock Broad Investment
Grade 2009 Term Trust Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 1. Accounting
Policies
The BlackRock Broad Investment Grade 2009 Term Trust Inc. (the "Trust"), a
Maryland corporation, is a diversified, closed-end management investment
company. The Trust had no transactions until June 16, 1993, when it sold 7,093
shares of common stock for $100,012 to BlackRock Financial Management, L.P..
Investment operations commenced on June 25, 1993. The investment objective of
the Trust is to manage a portfolio of fixed income securities that will return
$15 per share to investors on or shortly before December 31, 2009 while
providing high monthly income. The ability of issuers of debt securities held by
the Trust to meet their obligations may be affected by economic developments in
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: The Trust values mortgage-backed, asset-backed securities
and other debt securities on the basis of current market quotations provided by
dealers or pricing services approved by the Trust's Board of Directors. In
determining the value of a particular security, pricing services may use certain
information with respect to transactions in such securities, quotations from
dealers, market transactions in comparable securities, various relationships
observed in the market between securities, and calculated yield measures based
on valuation technology commonly employed in the market for such securities.
Exchange-traded options are valued at their last sales price as of the close of
options trading on the applicable exchanges. In the absence of a last sale,
options are valued at the average of the quoted bid and asked prices as of the
close of business. A futures contract is valued at the last sale price as of the
close of the commodities exchange on which it trades unless the Trust's Board of
Directors determines that such price does not reflect its fair value, in which
case it will be valued at its fair value as determined by the Trust's Board of
Directors. Any securities or other assets for which such current market
quotations are not readily available are valued at fair value as determined in
good faith under procedures established by and under the general supervision and
responsibility of the Trust's Board of Directors.
Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days or less
are valued at amortized cost, if their term to maturity from date of purchase is
60
Right Column
days or less, or by amortizing their value on the 61st day prior to maturity, if
their original term to maturity from date of purchase exceeded 60 days.
In connection with transactions in repurchase agreements, the Trust's
custodian takes possession of the underlying collateral securities, the value of
which at least equals the principal amount of the repurchase transaction,
including accrued interest. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market on a
daily basis to ensure the adequacy of the collateral. If the seller defaults and
the value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of the collateral by the
Trust may be delayed or limited.
Option Selling/Purchasing: When the Trust sells or purchases an option, an
amount equal to the premium received or paid by the Trust is recorded as a
liability or an asset and is subsequently adjusted to the current market value
of the option written or purchased. Premiums received or paid from writing or
purchasing options which expire unexercised are treated by the Trust on the
expiration date as realized gains or losses. The difference between the premium
and the amount paid or received on effecting a closing purchase or sale
transaction, including brokerage commissions, is also treated as a realized gain
or loss. If an option is exercised, the premium paid or received is added to the
proceeds from the sale or cost of the purchase in determining whether the Trust
has realized a gain or a loss on investment transactions. The Trust, as writer
of an option, may have no control over whether the underlying securities may be
sold (call) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security underlying the written option.
Financial Futures Contracts: A futures contract is an agreement between two
parties to buy and sell a financial instrument for a set price on a future date.
Initial margin deposits are made upon entering into futures contracts and can be
either cash or securities. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Trust records a realized gain or loss
equal to the difference between the proceeds from (or cost of) the closing
transaction and the Trust's basis in the contract.
Financial futures contracts, when used by the Trust, help in maintaining a
targeted duration. Duration is a measure of the price sensitivity of a security
or a portfolio to relative
10
<PAGE>
Left Column
changes in interest rates. For instance, a duration of "one" means that a
portfolio or a security's price would be expected to change by approximately one
percent with a one percent change in interest rates, while a duration of "five"
would imply that the price would move approximately five percent in relation to
a one percent change in interest rates. Futures contracts can be sold to
effectively shorten an otherwise longer duration portfolio. In the same sense,
futures contracts can be purchased to lengthen a portfolio that is shorter than
its duration target. Thus, by buying or selling futures contracts, the Trust can
effectively "hedge" more volatile positions so that changes in interest rates do
not change the duration of the portfolio unexpectedly.
The Trust may invest in financial futures contracts primarily for the
purpose of hedging its existing portfolio securities or securities the Trust
intends to purchase against fluctuations in value caused by changes in
prevailing market interest rates. Should interest rates move unexpectedly, the
Trust may not achieve the anticipated benefits of the financial futures
contracts and may realize a loss. The use of futures transactions involves the
risk of imperfect correlation in movements in the price of futures contracts,
interest rates and the underlying hedged assets. The Trust is also at risk of
not being able to enter into a closing transaction for the futures contract
because of an illiquid secondary market. In addition, since futures are used to
shorten or lengthen a portfolio's duration, there is a risk that the portfolio
may have temporarily performed better without the hedge or that the Trust may
lose the opportunity to realize appreciation in the market price of the
underlying positions.
Short Sales: The Trust may make short sales of securities as a method of hedging
potential price declines in similar securities owned. To complete a short sale,
the Trust may arrange through a broker to borrow the securities to be delivered
to the buyer. The proceeds received by the Trust from the short sale are
retained by the broker until the Trust replaces the borrowed securities. In
borrowing the securities to be delivered to the buyer, the Trust becomes
obligated to replace the securities borrowed at their market price at the time
of the replacement, whatever that price may be. A gain, limited to the price at
which the Trust sold the security short, or a loss, unlimited as to dollar
amount, will be recognized upon the termination of a short sale if the market
price is greater or less than the proceeds originally received.
Securities Lending: The Trust may lend its portfolio securities to qualified
institutions. The loans are secured by collateral at least equal, at all times,
to the market value of the securities loaned. The Trust may bear the risk of
delay in recovery of, or even loss of rights in, the securities loaned
Right Column
should the borrower of the securities fail financially. The Trust receives
compensation for lending its securities in the form of interest on the loan. The
Trust also continues to receive interest on the securities loaned, and any gain
or loss in the market price of the securities loaned that may occur during the
term of the loan will be for the account of the Trust. The Trust did not engage
in securities lending during the year ended October 31, 1995.
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. Interest income is recorded on the
accrual basis and the Trust accretes discount or amortizes premium on securities
purchased using the interest method.
Taxes: It is the Trust's intention to continue to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute sufficient amounts of its taxable income to shareholders. Therefore,
no Federal income tax provision is required. As part of a tax planning strategy,
the Trust intends to retain a portion of its taxable income and pay an excise
tax on the undistributed amounts.
Dividends and Distributions: The Trust declares and pays dividends and
distributions monthly first from net investment income, then from 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.
Deferred Organization Expenses: A total of $30,000 was incurred in connection
with the organization of the Trust. These costs have been deferred and are being
amortized ratably over a period of sixty months from the date the Trust
commenced investment operations.
Note 2. Agreements
The Trust has an Investment Advisory Agreement with BlackRock Financial
Management, Inc. (the "Adviser") and an Administration Agreement with Middlesex
Administrators L.P. (the "Administrator"), an indirect wholly-owned subsidiary
of Merrill Lynch & Co., Inc.
The investment fee paid to the Adviser is computed weekly and payable
monthly at an annual rate of 0.55% of the Trust's average weekly net investment
assets. The administration fee paid to the Administrator is also computed weekly
and payable monthly at an annual rate of 0.15% of the Trust's average weekly net
assets.
Pursuant to the agreements, the Adviser provides continuous supervision of
the investment portfolio and pays the
11
<PAGE>
Left Column
compensation of officers of the Trust. The Administrator pays occupancy and
certain clerical and accounting costs of the Trust. The Trust bears all other
costs and expenses.
On February 28, 1995, the Adviser was acquired by PNC Bank, NA. Following the
acquisition, the Adviser has become a wholly-owned corporate subsidiary of PNC
Asset Management Group, Inc., the holding company for PNC's asset management
businesses.
Note 3. Portfolio
Securities
Purchases and sales of investment securities, other than short-term investments
and dollar rolls, for the year ended October 31, 1995 aggregated $51,122,377 and
$51,275,185, respectively.
The Trust may invest in securities which are not readily marketable, including
those which are restricted as to disposition under securities law ("restricted
securities"). At October 31, 1995, the Trust held no illiquid or restricted
securities.
The federal income tax basis of the Trust's investments at October 31, 1995
was $57,511,881 and, accordingly, net unrealized appreciation for federal income
tax purposes was $934,896 (gross unrealized appreciation-$1,561,422, gross
unrealized depreciation-$626,526).
For Federal income tax purposes, the Trust had a capital loss carryforward at
October 31, 1995 of approximately $2,300,000 which will expire in 2003.
Accordingly, no capital gain distribution is expected to be paid to shareholders
until net gains have been realzied in excess of such amount.
At October 31, 1995 the Trust entered into financial futures contracts.
Details of open contracts at October 31, 1995 are as follows:
Value at
Number of Expiration Value at October 31, Unrealized
Contracts Type Date Trade Date 1995 Depreciation
- --------- ----------- ---------- ---------- ----------- ------------
Short Position:
10 yr. U.S.
5 T-Bond Dec. 95 $ 549,970 $ 557,656 $ (7,686)
30 yr. U.S.
87 T-Bond Dec. 95 9,887,441 10,184,438 (296,997)
---------
$(304,683)
=========
Note 4. Borrowings
Reverse Repurchase Agreements: The Trust enters into reverse repurchase
agreements with qualified, third party broker-dealers as determined by and under
the
Right Column
direction of the Trust's Board of Directors. Interest on the value of reverse
repurchase agreements issued and outstanding is based upon competitive market
rates at the time of issuance. At the time the Trust enters into a reverse
repurchase agreement, it establishes and maintains a segregated account with the
lender containing liquid high grade securities having a value not less than the
repurchase price, including accrued interest, of the reverse repurchase
agreement.
The average daily balance of reverse repurchase agreements outstanding during
the year ended October 31, 1995 was approximately $17,683,000 at a weighted
average interest rate of approximately 5.87%. The maximum amount of reverse
repurchase agreements outstanding at any month-end during the period was
$18,489,000 as of October 31, 1995 which was 30.59% of total assets.
Dollar Rolls: The Trust may enter into dollar rolls in which the Trust sells
securities for delivery in the current month and simultaneously contracts to
repurchase substantially similar (same type, coupon and maturity) securities on
a specified future date. During the roll period the Trust forgoes principal and
interest paid on the securities. The Trust will be compensated by the interest
earned on the cash proceeds of the initial sale and by the lower repurchase
price at the future date. The Trust did not enter into any dollar roll
transactions during the year ended October 31, 1995.
Note 5. Capital
There are 200 million shares of $.01 par value common stock authorized. Of the
2,957,093 shares outstanding at October 31, 1995, the Adviser owned 7,093
shares.
Offering costs ($280,662) incurred in connection with the underwriting of the
Trust's shares have been charged to paid-in capital in excess of par.
Note 6. Dividends
Subsequent to October 31, 1995, the Board of Directors of the Trust declared
a dividend from undistributed earnings of $0.08125 per share payable November
30, 1995 and December 29, 1995 to shareholders of record on November 15, 1995
and December 15, 1995, respectively and $0.0750 per share payable January 31,
1996 to shareholders of record on January 16 1996.
12
<PAGE>
Note 7. Quarterly Data
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase
Net realized and (decrease) in
unrealized net assets
Net investment gains (losses) on resulting Dividends and
income investments, short from operations distributions
sales and futures Period end
Total Per Per Per Per net asset
Quarterly period income Amount share Amount share Amount share Amount share High Low value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
November 1, 1993
to January 31, 1994 $750,669 $699,944 $0.24 $ (686,532) $(0.23) $ 13,412 $0.00 $803,738 $0.27 $14.250 $13.000 $14.29
February 1, 1994
to April 30, 1994 762,203 759,779 0.25 (4,994,640) (1.69) (4,234,861) (1.43) 785,401 0.27 13.125 11.000 12.57
May 1, 1994
to July 31, 1994 849,082 685,632 0.23 (87,558) (0.03) 598,074 0.20 776,233 0.26 11.75 11.000 12.53
August 1, 1994
to October 31, 1994 851,883 667,288 0.23 (1,551,530) (0.53) (884,242) (0.30) 776,230 0.26 11.75 10.000 11.94
November 1, 1994
to January 31, 1995 664,982 585,925 0.20 141,533 0.05 727,458 0.25 757,742 0.26 11.000 9.875 11.93
February 1, 1995
to April 30, 1995 704,155 612,259 0.20 1,490,730 0.51 2,102,989 0.71 720,778 0.24 10.750 10.250 12.40
May 1, 1995
to July 31, 1995 741,423 647,495 0.22 1,299,819 0.44 1,947,314 0.66 720,792 0.25 11.625 10.500 12.82
August 1, 1995
to October 31, 1995 773,027 667,449 0.23 1,788,713 0.60 2,456,162 0.83 720,754 0.24 11.375 10.625 13.40
- ------------------------------------------------------------------------------------------------------------------------------------
*Commencement of Investment Operations.
</TABLE>
13
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
The BlackRock Broad Investment Grade 2009 Term Trust Inc.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of The BlackRock Broad Investment Grade
2009 Term Trust Inc. as of October 31, 1995 and the related statements of
operations and of cash flows for the year then ended and of changes in net
assets for each of the two years in the period then ended and the financial
highlights for each of the two years in the period then ended and for the period
June 25, 1993 (commencement of investment operations) to October 31, 1993. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 at October
31, 1995 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 audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The BlackRock Broad
Investment Grade 2009 Term Trust Inc. at October 31, 1995 and the results of its
operations, its cash flows, the changes in its net assets and the financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
New York, New York
December 8, 1995
14
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
TAX INFORMATION
- --------------------------------------------------------------------------------
We wish to advise you as to the federal tax status of dividends and
distributions paid by the Trust during its fiscal year ended October 31, 1995.
During the fiscal year ended October 31, 1995, the Trust paid dividends and
distributions totalling $0.9875 per share, of which $0.8499 is taxable as
ordinary income and $0.1376 is a non-taxable return of capital. For federal
income tax purposes, the aggregate of any dividends and short-term capital gains
distributions you received are reportable in your 1995 federal income tax return
as ordinary income. Further, we wish to advise you that your income dividends do
not qualify for the dividends received deduction.
For the purpose of preparing your 1995 annual federal income tax return,
however, you should report the amounts as reflected on the appropriate Form 1099
DIV which will be mailed to you in January 1996.
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
Pursuant to the Trust's Dividend Reinvestment Plan (the "Plan"),
shareholders may elect to have all distributions of dividends and capital gains
automatically reinvested by State Street Bank & Trust Company (the "Plan Agent")
in Trust shares pursuant to the Plan. Shareholders who do not 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 Custodian, 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 Plan Agent will, as agent for the participants, receive the
cash payment and use it to buy Trust shares in the open market, on the American
Stock Exchange or elsewhere, for the participants' accounts. The Trust will not
issue shares under the Plan below net asset value.
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 will be made 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, state and or local income taxes
that may be payable on such dividends or distributions.
Experience under the Plan may indicate that changes are desirable.
Accordingly, 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) 669-1BFM. 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.
15
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
The Trust's Investment Objective
The Trust's investment objective is to manage a portfolio of fixed income
securities that will return $15 per share (the initial public offering price per
share) to investors on or about December 31, 2009 while providing high monthly
income.
Who Manages the Trust?
BlackRock Financial Management, Inc. ("BlackRock") is the investment adviser for
the Trust. BlackRock is a registered investment adviser specializing in fixed
income securities. Currently, BlackRock manages over $34 billion of assets
across the government, mortgage, corporate and municipal sectors. These assets
are managed on behalf of institutional and individual investors in 21 closed-end
funds, which trade on either the New York Stock or American Stock exchanges,
several open-end funds and separate accounts for more than 80 clients in the
U.S. and overseas. BlackRock is a subsidiary of PNC Asset Management Group which
is a division of PNC Bank, the nation's eleventh largest banking organization.
What Can the Trust Invest In?
The Trust may invest in all fixed income securities rated investment grade or
higher ("AAA", "AA", "A" or "BBB"). Examples of securities in which the Trust
may invest include U.S. government and government agency securities, zero coupon
securities, mortgage-backed securities, corporate debt securities, asset-backed
securities, U.S. dollar-denominated foreign debt securities and municipal
securities. Under current market conditions, BlackRock expects that the primary
investments of the Trust will be U.S. government securities, securities backed
by government agencies (such as mortgage-backed securities), corporate debt
securities and privately issued mortgage-backed securities.
What is the Adviser's Investment Strategy?
The Adviser will manage the assets of the Trust in accordance with the Trust's
investment objective and policies to return the initial offering price ($15 per
share) at maturity. The Adviser applies an investment strategy that will seek to
closely match the maturity of the assets of the portfolio with the future return
of the initial investment on or about December 31, 2009. At the Trust's
termination, BlackRock expects that the value of the securities which have
matured, combined with the value of the securities that are sold and the value
of securities that are purchased through a small amount of retained income each
year will be sufficient to return the initial offering price to investors. The
Trust's portfolio is actively managed in relation to market conditions, interest
rate changes and, importantly, the remaining term to maturity of the Trust.
In addition to seeking the return of the initial offering price, the Trust also
seeks to provide high monthly income to investors. The portfolio managers will
attempt to achieve this objective by investing in securities that provide
competitive income. In addition, leverage will be used (in an amount up to 33%
of the portfolio assets) to seek to enhance the income of the portfolio. Since
the Trust's primary goal is to return the initial offering price at maturity,
any cash that the Trust receives prior to its maturity date (i.e. cash from
early and regularly scheduled payments of principal on mortgage-backed
securities) will be reinvested in securities with maturities which reflect the
remaining term of the Trust. Since shorter-term securities typically yield less
than longer-term securities, this strategy will likely result in a decline in
the Trust's income over time.
How Are the Trust's Shares Purchased and Sold? Does the Trust Pay Dividends
Regularly?
The Trust's shares are traded on the American 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 adviser. The Trust
pays monthly dividends which are typically paid on the last 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, Boston
Financial Data Services. Investors who wish to hold shares in a brokerage
account should check with their financial adviser to determine whether their
brokerage firm offers dividend reinvestment services.
Leverage Considerations in a Term Trust
Under current market conditions, leverage increases the income earned by the
Trust. The Trust employs leverage primarily through the use of reverse
repurchase agreements and dollar rolls. Leverage permits the Trust to borrow
money at short-term rates and reinvest that
16
<PAGE>
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. In general, the portfolio is typically leveraged between 20% and
33% of total assets.
Leverage also increases the duration (or price volatility of the net assets) of
the Trust, which can improve the performance of the fund in a declining rate
environment, but can cause net assets to decline faster than the market in a
rapidly rising rate environment. BlackRock'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 BlackRock consider
that reduction to be in the best interests of the shareholders.
Special Considerations and Risk Factors Relevant to Term Trusts
The Trust is intended to be a long-term investment and is not a short-term
trading vehicle.
Return of Initial Investment. Although the objective of the Trust is to return
its initial offering price upon termination, there can be no assurance that this
objective will be achieved.
Dividend Considerations. The income and dividends paid by the Trust are likely
to decline to some extent over the term of the Trust due to the anticipated
shortening of the dollar-weighted average maturity of the Trust's assets.
Leverage. The Trust utilizes leverage through reverse repurchase agreements and
dollar rolls, 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 American Stock Exchange (AMEX symbol: BCT) 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.
Mortgage-Backed and Asset-Backed Securities. The cash flow and yield
characteristics of these securities differ from traditional debt securities. The
major differences typically include more frequent payments and the possibility
of prepayments which will change the yield to maturity of the security.
Corporate Debt Securities. The value of corporate debt securities generally
varies inversely with changes in prevailing market interest rates. The Trust may
be subject to certain reinvestment risks in environments of declining interest
rates.
Zero Coupon Securities. Such securities receive no cash flows prior to maturity;
therefore, interim price movement on the securities are generally more sensitive
to interest rate movements then securities that make periodic coupon payments.
These securities appreciate in value over time and can play an important role in
helping the Trust achieve its primary objectives.
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.
Non-U.S Securities. The Trust may invest 10% of its total assets in non-U.S.
dollar-denominated securities which involve special risks such as currency,
political and economic risks, although under current market conditions the Trust
does not do so.
Antitakeover Provisions. Certain antitakeover provisions will make a change in
the Trust's business or management more difficult without the approval of the
Trust's Board of Directors and may have the effect of depriving shareholders of
an opportunity to sell their shares at a premium above the prevailing market
price.
17
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
GLOSSARY
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Adjustable Rate Mortgage-Backed Mortgage instruments with interest rates that adjust at periodic intervals at a fixed amount over
Securities (ARMs): the market levels of interest rates as reflected in specified indexes. ARMS are backed by
mortgage loans secured by real property.
Asset-Backed Securities: Securities backed by various types of receivables such as automobile and credit card receivables.
Closed-End Fund: Investment vehicle which initially offers a fixed number of shares and trades on a stock
exchange. The fund invests in a portfolio of securities in accordance with its stated investment
objectives and policies. One of the advantages of a closed-end fund is the diversification it
provides through the multiple holdings.
Collateralized Mortgage-backed securities which separate mortgage pools into short-, medium-, and long-
Mortgage Obligations (CMOs): term securities with different priorities for receipt of principal and interest. Each class is
paid a fixed or floating rate of interest at regular intervals. Also known as multiple-class
mortgage pass-throughs.
Discount: When a fund's net asset value is greater than its stock price the fund is said to be trading at a
discount.
Dividend: This is income generated by securities in a portfolio and distributed to shareholders after the
deduction of expenses. This Trust declares and pays dividends on a monthly basis.
Dividend Reinvestment: Shareholders may elect to have all distributions of dividends and capital gains automatically
reinvested into additional shares of the Trust.
FHA: Federal Housing Association, a government agency that facilitates a secondary mortgage
market by providing an agency that guarantees timely payment of interest and principal on
mortgages.
FHLMC: Federal Home Loan Mortgage Corporation, a publicly owned, federally chartered corporation
that facilitates a secondary mortgage market by purchasing mortgages from lenders such as
savings institutions and reselling them to investors by means of mortgage-backed securities.
Obligations of FHLMC are not guaranteed by the U.S. government, however; they are backed by
FHLMC's authority to borrow from the U.S. government. Also known as Freddie Mac.
FNMA: Federal National Mortgage Association, a publicly owned, federally chartered corporation
that facilitates a secondary mortgage market by purchasing mortgages from lenders such as
savings institutions and reselling them to investors by means of mortgage-backed securities.
Obligations of FNMA are not guaranteed by the U.S. government, however; they are backed by
FNMA's authority to borrow from the U.S. government. Also known as Fannie Mae.
GNMA: Government National Mortgage Association, a U.S. government agency that facilitates a
secondary mortgage market by providing an agency that guarantees timely payment of interest
and principal on mortgages. GNMA's obligations are supported by the full faith and credit of the
U.S. Treasury. Also known as Ginnie Mae.
Government Securities: Securities issued or guaranteed by the U.S. government, or one of its agencies or instrumen-
talities, such as GNMA (Government National Mortgage Association), FNMA (Federal National
Mortgage Association) and FHLMC (Federal Home Loan Mortgage Corporation).
Interest-Only Securities (I/O): Mortgage securities that receive only the interest cash flows from an underlying pool of
mortgage loans or underlying pass-through securities. Also known as a strip.
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.
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<S> <C>
Mortgage Dollar Rolls: A mortgage dollar roll is a transaction in which the Trust sells mortgage-backed securities for
delivery in the current month and simultaneously contracts to repurchase substantially similar
(although not the same) securities on a specified future date. During the "roll" period, the
Trust does not receive principal and interest payments on the securities, but is compensated for
giving up these payments by the difference in the current sales price (for which the security is
sold) and lower price that the Trust pays for the similar security at the end date as well as the
interest earned on the cash proceeds of the initial sale.
Mortgage Pass-Throughs: Mortgage-backed securities issued by Fannie Mae, Freddie Mac or Ginnie Mae.
Multiple-Class Pass-Throughs: Collateralized Mortgage Obligations.
Net Asset Value (NAV): Net asset value is the total market value of all securities held by the Trust, plus income
accrued on its investments, minus any liabilities including accrued expenses, divided by the
total number of outstanding shares. It is the underlying value of a single share on a given day.
Net asset value for the Trust is calculated weekly and published in Barron's on Saturday and The
New York Times or The Wall Street Journal each Monday.
Principal-Only Securities (P/O): Mortgage securities that receive only the principal cash flows from an underlying pool of
mortgage loans or underlying pass-through securities. Also known as a strip.
Project Loans: Mortgages for multi-family, low- to middle-income housing.
Premium: When a fund's stock price is greater than its net asset value, the fund is said to be trading at
a premium.
REMIC: A real estate mortgage investment conduit is a multiple-class security backed by mortgage-
backed securities or whole mortgage loans and formed as a trust, corporation, partnership, or
segregated pool of assets that elects to be treated as a REMIC for federal tax purposes.
Generally, Fannie Mae REMICs are formed as trusts and are backed by mortgage-backed securities.
Residuals: Securities issued in connection with collateralized mortgage obligations that generally
represent the excess cash flow from the mortgage assets underlying the CMO after payment of
principal and interest on the other CMO securities and related administrative expenses.
Reverse Repurchase In a reverse repurchase agreement, the Trust sells securities and agrees to repurchase them at
Agreements: a mutually agreed date and price. During this time, the Trust continues to receive the principal
and interest payments from that security. At the end of the term, the Trust receives the same
securities that were sold for the same initial dollar amount plus interest on the cash proceeds
of the initial sale.
Strips: Arrangements in which a pool of assets is separated into two classes that receive different
proportions of the interest and principal distribution from underlying mortgage-backed
securities. IO's and PO's are examples of strips.
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Left Column
BlackRock
Directors
Laurence D. Fink, Chairman
Andrew F. Brimmer
Richard E. Cavanagh
Kent Dixon
Frank J. Fabozzi
James Grosfeld
James Clayburn La Force, Jr.
Ralph L. Schlosstein
Officers
Ralph L. Schlosstein, President
Scott Amero, Vice President
Keith T. Anderson, Vice President
Michael C. Huebsch, Vice President
Robert S. Kapito, Vice President
Richard M. Shea, Vice President/Tax
Henry Gabbay, Treasurer
James Kong, Assistant Treasurer
Kevin J. Mahoney, Assistant Treasurer
Karen H. Sabath, Secretary
Investment Adviser
BlackRock Financial Management, Inc.
345 Park Avenue
New York, NY 10154
(800) 227-7BFM
Administrator
Middlesex Administrators L.P.
800 Scudders Mill Road
Plainsboro, NJ 08536
Custodian and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
(800) 699-1BFM
Independent Auditors
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1434
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom
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 any securities.
The BlackRock Broad Investment Grade 2009 Term Trust Inc.
c/o Middlesex Administrators L.P.
800 Scudders Mill Road
Plainsboro, NJ 08536
(800) 227-7BFM
092472-10-6
Right Column
The BlackRock
Broad Investment
Grade 2009
Term Trust Inc.
- ----------------------------------
Annual Report
October 31, 1995
