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THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
SEMI-ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISER
- --------------------------------------------------------------------------------
May 31, 1996
Dear Trust Shareholder:
After posting strong returns during 1995, the fixed income markets have
given back much of their gains in 1996 in response to a strengthening U.S.
economy. Accelerating economic growth has raised concerns about an increased
inflationary environment, which could erode the value of fixed income
investments. The stronger economy also has led some market participants to
consider the possibility that the Federal Reserve may increase interest rates to
thwart inflation threats after three interest rate reductions over the past
twelve months.
Despite the pick-up in economic growth, we believe that current inflationary
fears will subside. Commodity prices have risen but manufacturers will have
difficulty passing along the increased costs of raw materials to consumers,
whose debt levels as a percentage of disposable income are at the highest point
since the recessionary highs of 1990. We believe that the overleveraged consumer
will have to retrench, restricting future economic expansion and creating a
positive environment for bonds in the latter half of this year.
The following semi-annual report provides detailed market commentary and a
review of portfolio management activity. We believe that BlackRock's duration
controlled management style and risk management capabilities will allow each
of our Trusts to achieve its long-term investment objective.
We look forward to maintaining your respect and confidence and to serving
your financial needs in the coming years.
Sincerely,
Laurence D. Fink Ralph L. Schlosstein
Chairman President
1
<PAGE>
May 31, 1996
Dear Shareholder:
We are pleased to present the semi-annual report for The BlackRock Broad
Investment Grade 2009 Term Trust Inc. ("the Trust") for the six months ended
April 30, 1996. 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 diversified, actively managed closed-end bond fund whose
shares are traded on the American Stock Exchange under the symbol "BCT". The
Trust's investment objective is to return $15 per share (its initial offering
price) to shareholders on or about December 31, 2009 while providing high
current income. Although there can be no guarantee, BlackRock is confident that
the Trust can achieve its investment objectives. The Trust seeks these
objectives by investing in 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"
Moody's at the time of purchase or be issued or guaranteed by the U.S.
Government or its agencies.
The table below summarizes the performance of the Trust's stock price and
NAV (the market value of its bonds per share) over the period:
--------------------------------------------------
Six-Month Six-Month
4/30/96 10/31/95 Change High Low
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Stock Price $10.625 $11.125 (4.49%) $11.75 $10.375
- --------------------------------------------------------------------------------
Net Asset Value (NAV) $12.66 $13.40 (5.52%) $13.91 $12.500
- --------------------------------------------------------------------------------
Premium/(Discount) to NAV (16.07%) (16.98%) 5.36% (14.02%) (18.54%)
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The Fixed Income Markets
The domestic fixed income markets witnessed two profoundly different
environments during the six month period, presenting both challenges and
opportunities to the management of the Trust. The Treasury market rally of 1995
continued through the middle of February 1996, as market demand for fixed income
securities remained strong due to a combination of moderate economic growth, low
absolute levels of inflation and two reductions of the Fed funds target rate.
The rally halted during mid-February, however, as data indicating accelerating
economic growth, in conjunction with a sharp rise in commodity prices, rekindled
inflationary concerns. Positive news for the economy which may indicate
increased levels of inflation can cause bond yields to rise and prices to fall.
The March 8th release of the February employment report showed a surprisingly
strong gain of 705,000 new jobs (subsequently revised downward to 624,000) and
produced the largest one-day price decline in U.S. bond prices in the last seven
years. For the first quarter of 1996, economic growth as measured by GDP grew
2.8%, which represented a strong rebound from the 0.5% gain posted in the fourth
quarter of 1995.
Interest rate movements reflected the change in investor sentiment toward
fixed income securities. Interest rates across the Treasury yield curve fell
dramatically from November to mid-January, as evidenced by the decline in yield
levels on the ten-year Treasury, which declined 49 basis points (0.49%) from
6.01% on October 31, 1995 to a low of 5.52% on January 19. However, data
released during February suggesting renewed economic vigor placed pressure on
bond prices, as thoughts of a stronger economy dampened investor expectations
that interest rates would continue to fall. These fears translated into a sharp
rise in bond yields across the Treasury yield curve. The yield of the ten-year
Treasury ended the semi-annual period at 6.64%, an increase of 112 basis points
in three and one-half months and a net rise of 63 basis points from October 31,
1995.
2
<PAGE>
The mortgage-backed securities (MBS) market posted strong relative
performance during the first four months of 1996, as rising interest rates
resulted in a reduction in prepayment risk. Still, many investors remained on
the sidelines, convinced that even historically high mortgage yields relative to
Treasuries offered inadequate compensation for the perceived risks of owning
MBS. Due to such narrow participation, MBS performance in 1996 has been somewhat
short of expectations.
Despite a heavy new issuance calendar, corporate bond returns exceeded those
of all other taxable fixed income sectors during the fourth quarter of 1995 due
to strong investor demand spurred by the impressive gains posted by the equity
markets. The high level of new issuance was a result of refinancings at lower
interest rates as well as corporate mergers and restructurings. As the fixed
income markets reversed in February 1996, corporate new issuance waned in
response to higher interest rates and demand for corporate bonds decreased as it
appeared that corporate earnings had peaked.
The Trust's Portfolio and Investment Strategy
BlackRock actively manages the Trust's portfolio holdings consistent with
BlackRock's overall market outlook and the Trust's investment objectives. The
following chart compares the Trust's current and October 31, 1995 asset
composition.
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Composition April 30, 1996 October 31, 1995
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Agency Multiple Class Mortgage Pass-Throughs 23% 28%
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Adjustable Rate Mortgage Securities 17% 17%
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Commercial Mortgage-Backed Securities 15% 11%
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Corporate Bonds-Sovereign & Provincial 9% 6%
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Corporate Bonds-Finance & Banking 7% 10%
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Stripped Mortgage-Backed Securities 7% -
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Corporate Bonds-Industrial 6% 6%
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Municipal Bonds 6% 4%
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Corporate Bonds-Utilities 3% 2%
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Mortgage Pass-Throughs 3% 6%
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U.S. Gov't Securities 2% 3%
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FHA Project Loans 1% 4%
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Non-Agency Multiple Class Mortgage Pass-Throughs 1% 3%
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The Trust continued to emphasize securities offering both attractive yield
spreads over Treasury securities and a maturity date similar to the Trust's
termination date of December 31, 2009. The Trust maintained approximately one
quarter of its assets in investment grade corporate bonds, as these securities
have predictable cash flows and allow the Trust to closely match the maturity
dates of the bonds with the Trust's termination date. Within the corporate
sector, financial and banking corporate exposure was pared after posting strong
performance during much of the past year. The Trust's allocation to "Yankee"
bonds, which are bonds issued by foreign corporations in U.S. dollars, was
increased as much of the recent new issue supply in the U.S. corporate market
has come from foreign issuers. The Trust increased its allocation to commercial
mortgage-backed securities (CMBS) and maintained its corporate bond exposure
during the period. CMBS offer substantial yield spreads above comparable
maturity Treasury securities but differ from traditional mortgage-backed
pass-throughs and CMOs in that they provide investors with provisions (such as
yield maintenance penalties or prepayment lockouts), which reduce the likelihood
of early principal payments. CMOs remain a core portfolio holding despite the
Trust having reduced its overall CMO exposure from 54% on October 31, 1995 to
44% on April 30, 1996. The types of CMOs that the Trust has emphasized offer
both relatively predictable cash flows and more yield than traditional
pass-throughs.
We look forward to continuing to manage the Trust to benefit from the
opportunities available to investors in the fixed income markets as well as to
maintain the Trust's ability to meet its investment objectives. We thank you for
your investment in
3
<PAGE>
The BlackRock Broad Investment Grade 2009 Term Trust Inc. Please feel free to
contact our marketing center at (800) 227-7BFM (7236) if you have specific
questions which were not addressed in this report.
Sincerely,
Robert S. Kapito Keith T. Anderson
Vice Chairman and Portfolio Manager Managing Director and Portfolio Manager
BlackRock Financial Management, Inc. BlackRock Financial Management, Inc.
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The BlackRock Broad Investment Grade 2009 Term Trust Inc.
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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 4/30/96: $10.625
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Net Asset Value as of 4/30/96: $12.66
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Yield on Closing Stock Price as of 4/30/96 ($10.625)1: 8.47%
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Current Monthly Distribution per Share2: $0.0750
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Current Annualized Distribution per Share2: $0.9000
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- -------------
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.
4
<PAGE>
Left Col.
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The BlackRock Broad Investment
Grade 2009 Term Trust Inc.
Portfolio of Investments
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
S&P/ Principal
Moody's Amount Value
Ratings* (000) Description (Note 1)
- --------------------------------------------------------------------------------
LONG-TERM INVESTMENTS-147.8%
Mortgage Pass-Throughs-6.4%
Federal Housing Administration,
$ 27 CLC New Perspective,
9.25%, 4/25/34 ..................... $ 27,902
Government National Mortgage
Association,
222 6.50%, 4/20/25, 1 Year CMT
(ARM) .............................. 224,680
1,761+ 7.00%, 1/15/24 - 2/15/24 ........... 1,695,689
445 8.00%, 6/15/24 ..................... 450,919
-----------
2,399,190
-----------
Multiple Class Mortgage
Pass-Throughs-59.7%
AAA 795 Community Program Loan Trust,
Series 1987-A, Class A4,
4.50%, 10/01/18 .................... 660,844
Federal Home Loan Mortgage
Corporation, Multiclass Mortgage
Participation Certificates (REMIC),
1,247+ Series 1506, Class 1506-S,
5/15/08 (ARM) ..................... 990,999
2,168++ Series 1510, Class 1510-G,
5/15/13 ........................... 2,064,890
313 Series 1587, Class 1587-SJ,
10/15/08 (ARM) .................... 197,968
3,000++ Series 1596, Class 1596-D,
10/15/13 .......................... 2,733,000
331 Series 1637, Class 1637-LE,
12/15/23 (ARM) .................... 226,692
Federal National Mortgage
Association, REMIC Pass-Through
Certificates,
147 Trust 1992-174, Class 174-S,
9/25/22 (ARM) ..................... 282,602
536 Trust 1992-192, Class 192-SB,
11/25/07 (ARM) .................... 455,775
1,613+ Trust 1992-196, Class 196-SA,
11/25/07 (ARM) .................... 1,143,434
1,000++ Trust 1993-49, Class 49-H,
4/25/13 ........................... 946,480
3,053+ Trust 1993-79, Class 79-PK,
4/25/22 ........................... 2,829,639
Right Col.
- --------------------------------------------------------------------------------
S&P/ Principal
Moody's Amount Value
Ratings* (000) Description (Note 1)
- --------------------------------------------------------------------------------
$2,646++ Trust 1993-87, Class 87-J,
4/25/22 ............................ $2,402,727
4,000++ Trust 1993-138, Class 138-JK,
5/25/19 (I) ........................ 1,134,600
4,090+ Trust 1993-140, Class 140-K,
8/25/13 (ARM) ...................... 3,828,322
1,177 Trust 1994-13, Class 13-SM,
2/25/09 (ARM) ...................... 738,567
748+ Trust 1994-37, Class 37-SC,
3/25/24 (ARM) ...................... 535,840
4,326 Trust 1994-42, Series 42-SO,
3/25/23 (ARM) ...................... 567,812
119 Trust G93-25, Class 25-J,
12/25/19 (I) ....................... 481,548
246 Trust G93-27, Class 27-SE,
8/25/23 (ARM) ...................... 120,785
-----------
26,342,524
-----------
Commercial Mortgage-Backed
Securities-21.9%
A 400@ American Southwest Financial
Securities Corporation, Series
1994-C2, Class A4,
8.00%, 8/25/10 ...................... 398,210
BBB 500 Citibank New York NA,
Multifamily Mortgage, Series 1994-1,
Class M2, 8.00%, 1/25/19 ............ 478,105
Baa2 800 DLJ Mortgage Acceptance
Corporation, Series 1992-MF3,
Class B, 10.25%, 6/18/07 ............ 822,795
BBB+ 750 FDIC Remic Trust, Mortgage
Pass-Through Certificates,
Series 1994-C1, Class II-F,
8.70%, 9/25/25 ...................... 750,703
AAA 500 GS Mortgage Securities Corporation,
Series 1996-PL, Class A2,
7.41%, 2/15/27 ...................... 491,797
LTC Commercial Mortgage
Pass-Through Certificates,
A 500 Series 1994-1, Class 1-D,
10.00%, 6/15/26 ..................... 542,569
AAA 499 Series 1996-1 Class 1-A 144A,
7.06%, 4/15/28 ...................... 490,967
Merrill Lynch Mortgage Investors
Incorporated,
BBB 500 Series 1995-C1, Class C,
7.90%, 5/25/13 ...................... 486,70
See Notes to Financial Statements.
5
<PAGE>
(Left column)
- --------------------------------------------------------------------------------
S&P/ Principal
Moody's Amount Value
Ratings* (000) Description (Note 1)
- --------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors
Incorporated,
BBB $ 500 Series 1996-C1, Class C,
7.97%, 4/25/28 ....................... $ 473,906
BBB 500 Morgan Stanley Capital 1
Incorporated, Commercial
Mortgage Pass-Through,
Series 1995-GA 1, Class D,
8.25%, 8/15/27 ....................... 495,257
BBB 600 Nomura Asset Capital Corporation,
Series 1993-M1, Class A3,
7.64%, 11/25/03 ...................... 591,333
PaineWebber Mortgage
Acceptance Corporation IV,
BBB 750 Series 1995-M1, Class D,
7.30%, 1/15/07 ....................... 724,684
BBB 750 Series 95-M2 Class D,
7.20%, 12/1/03 ....................... 486,636
A 483 Resolution Trust Corporation,
Series 1994-C2, Class D,
8.00%, 4/25/25 ....................... 481,658
AAA 500 Structured Asset Securities
Corporation, Series
1996-CFL, Class B,
6.303%, 2/25/28 ...................... 475,776
-----------
8,191,096
-----------
Corporate Bonds-36.8%
Finance & Banking-10.0%
A3 500 Amsouth Bancorporation,
6.75%, 11/01/25 ...................... 481,551
A 600 Equitable Life Assured Society,
6.95%, 12/01/05 ...................... 574,712
A1 500 Metropolitan Life Insurance Co.,
6.30%, 11/01/03 ...................... 470,733
A+ 1,000 Morgan Stanley Group Incorporated,
10.00%, 6/15/08 ...................... 1,191,990
Baa3 500 New American Capital Incorporated,
Series C, 7.3125%, 4/12/00 ........... 501,250
BBB+ 500 PaineWebber Group Incorporated,
8.875%, 3/15/05 ...................... 537,115
-----------
3,757,351
-----------
Industrials-8.7%
A3 100 American Airlines Inc. Secured
Equipment Trust,
Series 1990-M,
10.44%, 3/04/07 ...................... 117,092
BBB- 500 Burlington Industries Incorporated,
7.25%, 9/15/05 ....................... 480,445
BBB 500 Occidental Petroleum Corporation,
10.125%, 9/15/09 ..................... 595,050
(Right column)
- --------------------------------------------------------------------------------
S&P/ Principal
Moody's Amount Value
Ratings* (000) Description (Note 1)
- --------------------------------------------------------------------------------
BBB- $ 500 Ralcorp Holdings, Incorporated,
8.75%, 9/15/04 ....................... $ 521,805
A- 500 Ralston Purina Co., Debenture,
9.25%, 10/15/09 ...................... 565,460
A 500 Seagram Joseph E & Sons Inc.,
7.00%, 4/15/08 ....................... 484,315
BBB- 500 Tele-Communications Inc.,
8.25%, 1/15/03 ....................... 504,530
-----------
3,268,697
-----------
Utilities-5.0%
BBB- 500 360 Communications Co.,
7.50%, 3/01/06 ....................... 477,670
BBB- 400 Mobile Energy Services Co. L. L. C.,
8.665%, 1/01/17 ...................... 400,000
BBB- 500 NRG Energy Incorporated,
7.625%, 2/01/06 ...................... 451,614
Baa2 500 Ohio Edison Company,
8.625%, 9/15/03 ...................... 529,959
-----------
1,859,243
-----------
Sovereign & Provincial-13.1%
A 500 China Light & Power,
7.50%, 4/15/06 ....................... 492,646
A1 1,000 Dow Capital B V,
9.20%, 6/01/10 ....................... 1,127,510
BBB- 500 Empresa Electric Guacolda Sa,
7.95%, 4/30/03 ....................... 496,259
BBB+ 500 Empresa Electric Pehuhuenche,
7.30%, 5/01/03 ....................... 495,901
BBB+ 1,000 Newfoundland Province,
11.625%, 10/15/07 .................... 1,289,520
A+ 525 Quebec Province,
7.50%, 7/15/02 ....................... 535,235
A3 500 Siam Commercial Bank,
7.50%, 3/15/06 ....................... 483,249
-----------
4,920,320
-----------
Stripped Mortgage-Backed
Securities-11.0%
Federal Home Loan
Mortgage Corporation
33 Series 65, Class 65-I,
8/15/20 (I/O) ........................ 893,695
13 Series 141, Class 141-H,
5/15/21 (I/O) ........................ 413,202
11 Series 1430, Class 1430-KA,
12/15/21 (I/O) ....................... 386,100
9 Series 1459, Class 1459-JA,
8/15/20 (I/O) ........................ 302,850
Federal National Mortgage
Association,
1,447 Trust 2, Class 2,
2/01/17 (I/O) ........................ 447,596
11 Trust G21, Class 21-L,
7/25/21 (I/O) ........................ 286,580
4,621 Trust 226, Class 2,
6/01/23 (I/O) ........................ 1,367,738
-----------
4,097,761
-----------
See Notes to Financial Statements.
6
<PAGE>
(Left column)
- --------------------------------------------------------------------------------
S&P/ Principal
Moody's Amount Value
Ratings* (000) Description (Note 1)
- --------------------------------------------------------------------------------
U.S Government Security-2.6%
$1,000 Small Business Administration
Participation Certificate,
7.35%, Series 1995-10,
Class 10-C, 8/01/05 .................. $ 987,656
-----------
Municipal Bonds-9.4%
AA- 500 Fresno California Pension
Obligation, Series 1994,
7.80%, 6/01/14 ....................... 506,470
AAA 500 Kern County California
Pension Obligation, Taxable,
6.98%, 8/15/09 ....................... 477,445
BBB+ 495 Lake County Florida Resource
Recovery Revenue,
7.125%, 10/01/99 ..................... 486,550
Los Angeles County California
Pension, Taxable,
AAA 1,000 Series A, 8.62%, 6/30/06 ............. 1,092,370
AAA 500 Taxable Series D, 6.97%, 6/30/08 ..... 480,085
AAA 500 Orleans Parish Louisiana
School Board, Taxable,
Ref, Series A,
6.60%, 2/01/08 ....................... 473,685
-----------
3,516,605
-----------
Total Long-Term Investments-147.8%
(cost $56,583,485) ................... $55,340,443
Liabilities in excess of other
assets-(47.8%) ....................... (17,893,403)
-----------
NET ASSETS-100% ...................... $37,447,040
===========
(Right column)
- ----------------
* Using the higher of Standard & Poor's or Moody's Rating.
+ Partial principal amount pledged as collateral for reverse repurchase
agreements.
++ Entire principal amount pledged as collateral for reverse repurchase
agreements.
@ Entire principal amount pledged as collateral for futures transactions.
- --------------------------------------------------------------------------------
Key to Abbreviations
ARM - Adjustable Rate Mortgage.
CMT - Constant Maturity Treasury.
I - Denotes a CMO with Interest only characteristics.
I/O - Interest Only.
REMIC - Real Estate Mortgage Investment Conduit.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE>
(Left column)
- --------------------------------------------------------------------------------
The BlackRock Broad Investment
Grade 2009 Term Trust Inc.
Statement of Assets and Liabilities
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investments, at value
(cost $56,583,485) (Note 1) ................................... $55,340,443
Cash ............................................................ 64,490
Receivable for investments sold ................................. 521
Interest receivable ............................................. 712,919
Deferred organization expenses and other ........................ 16,291
-----------
56,134,664
-----------
Liabilities
Reverse repurchase agreements (Note 4) .......................... 18,042,000
Payable for investments purchased ............................... 528,323
Dividends payable ............................................... 38,929
Interest payable ................................................ 31,777
Advisory fee payable (Note 2) ................................... 11,112
Administration fee payable (Note 2) ............................. 5,112
Variation margin payable on open futures contracts (Note 1) ..... 1,375
Other accrued expenses .......................................... 28,996
-----------
18,687,624
-----------
Net Assets ...................................................... $37,447,040
===========
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
Undistributed net investment income ........................... 54,661
Accumulated net realized loss ................................. (2,087,856)
Net unrealized depreciation ................................... (1,248,739)
-----------
Net assets, April 30, 1996 .................................... $37,447,040
===========
Net asset value per share:
($37,447,040 / 2,957,093 shares of
common stock issued and outstanding) .......................... $12.66
======
(Right column)
- --------------------------------------------------------------------------------
The BlackRock Broad Investment
Grade 2009 Term Trust Inc.
Statement of Operations
Six Months Ended April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
Net Investment Income
Income
Interest earned (including net amortization of
premium of $432,423 and net of interest
expense of $541,344) ......................................... $1,626,309
----------
Operating Expenses
Investment advisory ............................................ 110,128
Administration ................................................. 30,035
Reports to shareholders ........................................ 17,674
Custodian ...................................................... 8,368
Directors ...................................................... 5,797
Audit .......................................................... 5,789
Transfer agent ................................................. 4,576
Legal .......................................................... 4,425
Miscellaneous .................................................. 17,250
----------
Total operating expenses ....................................... 204,042
----------
Net investment income ............................................ 1,422,267
----------
Realized and Unrealized Gain (Loss) on
Investments (Note 3)
Net realized gain (loss) on:
Investments .................................................... 562,679
Short sales .................................................... (16,935)
Futures ........................................................ (604,029)
----------
(58,285)
----------
Net change in unrealized
appreciation (depreciation) on:
Investments .................................................... (2,482,621)
Futures ........................................................ 298,986
----------
(2,183,635)
----------
Net loss on investments .......................................... (2,241,920)
----------
Net Decrease in Net Assets Resulting from
Operations ..................................................... $ (819,653)
==========
See Notes to Financial Statements.
8
<PAGE>
(Left column)
- --------------------------------------------------------------------------------
The BlackRock Broad Investment
Grade 2009 Term Trust Inc.
Statement of Cash Flows
Six Months Ended April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
Increase (Decrease) in Cash
Cash flows provided by operating activities:
Interest received, net of interest purchased .................. $ 2,026,470
Operating expense paid ........................................ (207,924)
Interest expense paid ......................................... (592,523)
Purchase of long-term portfolio investments ................... (28,545,785)
Proceeds from disposition of long-term portfolio
investments ................................................. 27,519,297
Other ......................................................... 1,663,966
-----------
Net cash flows provided by operating activities ............... 1,863,501
-----------
Cash flows used for financing activities:
Decrease in reverse repurchase agreements ..................... (447,000)
Cash dividends paid ........................................... (1,377,522)
-----------
Net cash flows used for financing activities .................. (1,824,522)
-----------
Net increase in cash ............................................ 38,979
Cash at beginning of period ..................................... 25,511
-----------
Cash at end of period ........................................... $ 64,490
===========
Reconciliation of Net Decrease in
Net Assets Resulting from Operations
to Net Cash Flows Provided by
Operating Activities
Net decrease in net assets resulting from operations ............ $ (819,653)
-----------
Decrease in investments ......................................... 1,169,044
Net realized loss on investments ................................ 58,285
Decrease in unrealized appreciation ............................. 2,183,635
Increase in interest receivable ................................. (141,183)
Decrease in receivable for investment sold ...................... 1,072,227
Decrease in deferred organization expenses
and other assets .............................................. 5,248
Decrease in payable for investments purchased ................... (1,580,230)
Decrease in variation margin payable ............................ (23,563)
Decrease in interest payable .................................... (51,179)
Decrease in accrued expenses and other liabilities .............. (9,130)
-----------
Total adjustments ............................................. 2,683,154
-----------
Net cash flows provided by operating activities ................. $ 1,863,501
===========
(Right column)
- --------------------------------------------------------------------------------
The BlackRock Broad Investment
Grade 2009 Term Trust Inc.
Statements of Changes in
Net Assets (Unaudited)
- --------------------------------------------------------------------------------
Six Months
Ended Year Ended
Increase (Decrease) in April 30, October 31,
Net Assets 1996 1995
---- ----
Operations:
Net investment income ....................... $ 1,422,267 $ 2,513,128
Net realized loss on
investments, short sales and futures....... (58,285) (1,973,140)
Net unrealized appreciation
(depreciation) on
investments and futures.................... (2,183,635) 6,693,935
----------- -----------
Net increase (decrease) in net
assets resulting from
operations ................................ (819,653) 7,233,923
----------- -----------
Dividends & Distributions to shareholders:
Dividends from
net investment income ..................... (1,367,606) (2,513,128)
Distributions from
paid-in capital ........................... - (406,938)
----------- -----------
Total dividends and
distributions ............................... (1,367,606) (2,920,066)
----------- -----------
Total (decrease) increase ................... (2,187,259) 4,313,857
Net Assets
Beginning of period ........................... 39,634,299 35,320,442
----------- -----------
End of period ................................. $37,447,040 $39,634,299
=========== ===========
See Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
The BlackRock Broad Investment
Grade 2009 Term Trust Inc.
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six For the Period
Months June 25,
Ended Year Ended October 31, 1993* to
April 30, -------------------------- October 31,
PER SHARE OPERATING PERFORMANCE: 1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net asset value, beginning of period ........................ $ 13.40 $ 11.94 $ 14.56 $ 14.10
------- ------- ------- -------
Net investment income
(net of interest expense of $.18, $.68, $.34 and $.02) .. 0.48 0.85 0.95 0.28
Net realized and unrealized gain (loss) on investments .... (0.76) 1.60 (2.48 0.52
------- ------- ------- -------
Net increase (decrease) from investment operations .......... (0.28) 2.45 (1.53) 0.80
------- ------- ------- -------
Dividends from net investment income ........................ (0.46) (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 ........................... (0.46) (0.99) (1.06) (0.27)
------- ------- ------- -------
Capital charge with respect to issuance of shares ........... - - (0.03) (0.07)
------- ------- ------- -------
Net asset value, end of period** ............................ $ 12.66 $ 13.40 $ 11.94 $ 14.56#
======= ======= ======= =======
Mmarket value, end of period** .............................. $10.625 $11.125 $ 10.00 $ 13.75
======= ======= ======= =======
TOTAL INVESTMENT RETURN+ (1.22%) 22.43% (20.41%) (0.60%)
RATIOS TO AVERAGE NET ASSETS:
Operating Expenses @ ........................................ 1.04%++ 1.00% 1.04% 0.97%++
Net investment income ....................................... 7.22%++ 6.78% 7.31% 5.66%++
SUPPLEMENTAL DATA:
Average net assets (in thousands) ........................... $39,600 $37,080 $38,468 $41,195
Portfolio turnover .......................................... 41% 116% 41% 27%
Net assets, end of period (in thousands) .................... $37,447 $39,634 $35,320 $43,051
Reverse repurchase agreements outstanding,
end of period (in thousands) .............................. $18,042 $18,489 $16,003 $18,375
Asset coverage+++ ........................................... $ 3,076 $ 3,144 $ 3,207 $ 3,343
<FN>
* 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.
@ The ratios of operating expenses including interest expense to average net
assets were 3.79%, 6.42%, 3.65%, 1.31% for the periods indicated above,
respectively.
+ 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. Total
investment return 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 unaudited 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.
</FN>
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
(Left column)
- --------------------------------------------------------------------------------
The BlackRock Broad Investment
Grade 2009 Term Trust Inc.
Notes to Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
Note 1. Accounting The BlackRock Broad Investment Grade 2009 Term Trust Inc.
Policies (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, Inc. 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
(Right column)
cost, if their term to maturity from date of purchase is 60 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
11
<PAGE>
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. When the Trust makes a
short sale, it may borrow the security sold short and deliver it to the
broker-dealer through which it made the short sale as collateral for its
obligation to deliver the security upon conclusion of the sale. The Trust may
have to pay a fee to borrow the particular securities and may be obligated to
pay over any payments received on such borrowed securities. 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 six months ended April 30, 1996.
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 Princeton 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 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
12
<PAGE>
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 Purchases and sales of investment securities, other than
Securities short-term investments and dollar rolls, for the six months
ended April 30, 1996 aggregated $26,965,555 and
$26,701,245, 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 April 30, 1996, the Trust held no illiquid or
restricted securities.
The federal income tax basis of the Trust's investments at April 30, 1996
was substantially the same as the basis for financial reporting and,
accordingly, net unrealized depreciation for federal income tax purposes was
$1,248,739 (gross unrealized appreciation-$960,438, gross unrealized
depreciation-$2,209,177).
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 realized in excess of such amount.
At April 30, 1996 the Trust entered into financial futures contracts.
Details of open contracts at April 30, 1996 are as follows:
Value at
Number of Expiration Value at April 30, Unrealized
Contracts Type Date Trade Date 1996 Depreciation
- --------- ---- ---- ---------- ---- ------------
Long Position:
30 yr. U.S.
2 T-Bond June '96 $224,010 $218,313 $(5,697)
Note 4. Borrowings Reverse Repurchase Agreements: The Trust may enter 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 will establish and maintain a segregated account with
the lender, the value of which at least equals the principal amount of the
reverse repurchase transactions including accrued interest.
The average daily balance of reverse repurchase agreements outstanding
during the six months ended April 30, 1996 was approximately $19,068,000 at a
weighted average interest rate of approximately 5.65%. The maximum amount of
reverse repurchase agreements outstanding at any month-end during the period was
$21,063,399 as of November 30, 1995 which was 34.74% 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 six months ended April 30, 1996.
Note 5. Capital There are 200 million shares of $.01 par value common stock
authorized. Of the 2,957,093 shares outstanding at April
30, 1996, 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 April 30, 1996, the Board of Directors of the
Trust declared a dividend from undistributed earnings of
$0.075 per share payable May 31, 1996 and June 28, 1996 to shareholders of
record on May 15, 1996 and June 14, 1996, respectively.
13
<PAGE>
Note 7. Quarterly Data
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized
gain (loss) on
investments, Net increase
short sales, (decrease)
futures and in net assets Dividends
Net investment options resulting from and
income written operations distributions Period end
Quarterly Total Per Per Per Per Share price net asset
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 49,082 685,632 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 704,154 612,259 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 773,028 667,449 0.23 1,788,713 0.60 2,456,162 0.83 720,754 0.24 11.375 10.625 13.40
November 1, 1995
to January 31, 1996 767,322 663,112 0.22 1,299,170 0.44 1,962,282 0.66 702,286 0.24 11.750 11.125 13.83
February 1, 1996
to April 30, 1996 858,987 759,155 0.26(3,541,090) (1.20)(2,781,935) (0.94) 665,320 0.22 11.750 10.375 12.66
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
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 Boston EquiServe L.P. (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 any new shares under the Plan.
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent and will receive certificates for whole Trust shares and a cash
payment 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.
The Annual Meeting of Trust Shareholders was held May 8, 1996 to vote on the
following matters:
(1) To elect two Directors as follows:
Director Class Term Expiring
-------- ----- ---- --------
Frank J. Fabozzi ........... II 3 years 1999
Ralph L. Schlosstein ....... II 3 years 1999
Directors whose term of office continues beyond this meeting are Andrew
F. Brimmer, Richard E. Cavanagh, Kent Dixon, Laurence D. Fink, James
Grosfeld and James Clayburn LaForce, Jr.
(2) To ratify the selection of Deloitte & Touche LLP as independent public
accountants of the Trust for the fiscal year ending October 31, 1996.
(3) To modify the investment restriction prohibiting investing for the
purpose of exercising control over the management of a company.
Shareholders elected the three Directors, ratified the selection of Deloitte &
Touche LLP and approved the modification of the investment restriction
prohibiting investing for the purpose of exercising control over the management
of a company. The results of the voting was as follows:
Votes for Votes Against Abstentions
--------- ------------- -----------
Frank J. Fabozzi ....................... 1,787,003 0 71,843
Ralph L. Schlosstein ................... 1,787,003 0 71,843
Ratification of Deloitte & Touche LLP .. 1,780,095 38,946 39,805
Modification of the
Investment restriction ............... 1,251,542 69,787 119,693
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" or the "Adviser") is the
investment adviser for the Trust. BlackRock is a registered investment adviser
specializing in fixed income securities. Currently, BlackRock manages over $41
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, Inc. which is a division of PNC Bank N.A., one of the nation's
largest banking organizations.
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 seek to meet the Trust's investment objective by managing the
assets of the Trust so as to return the initial offering price ($15 per share)
at maturity. The Adviser will implement a conservative 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 will be sufficient
to return the initial offering price to investors. On a continuous basis, the
Trust will seek its objective by actively managing its assets 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
33-1/3% of the total assets) to enhance the income of the portfolio. In order to
maintain competitive yields as the Trust approaches maturity and depending on
market conditions, the Adviser will attempt to purchase securities with call
protection or maturities as close to the Trust's maturity date as possible.
Securities with call protection should provide the portfolio with some degree of
protection against reinvestment risk during times of lower prevailing interest
rates. Since the Trust's primary goal is to return the initial offering price at
maturity, any cash that the Trust receives prior to its maturity date (i.e. cash
from early and regularly scheduled payments of principal on mortgage-backed
securities) will be reinvested in securities with maturities which coincide with
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. However, the Adviser will attempt to maintain a
yield which is competitive with a comparable maturity Treasury at the same point
on the yield curve (i.e. if the Trust has three years left until its maturity,
the Adviser will attempt to maintain a yield at a spread over a 3-year
Treasury). It is important to note that the Trust will be managed so as to
preserve the integrity of the return of the initial offering price.
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
16
<PAGE>
shares of the Trust through the Trust's transfer agent, Boston EquiServe.
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 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 at approximately 33-1/3% 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 Trust 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 less than 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.
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THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
GLOSSARY
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Adjustable Rate Mortgage-Backed Mortgage instruments with interest rates that
Securities (ARMs): adjust at periodic intervals at a fixed amount
over 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.
Collateralized Mortgage-backed securities which separate
Mortgage Obligations (CMOs): mortgage pools into short-, medium-, and
long-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 Trust is said to be
trading at a discount.
Dividend: Income generated by securities in a portfolio
and distributed to shareholders after the
deduction of expenses. This Trust dec;ares
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
instrumentalities, 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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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 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 Trust's stock price is greater than its
net asset value, the Trust 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
Agreements: sells securities and agrees to repurchase them
at 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.
Stripped Mortgage-Backed Arrangements in which a pool of assets is
Securities: 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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BLACKROCK FINANCIAL MANAGEMENT, INC.
AN OVERVIEW
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BlackRock Financial Management (BlackRock) is a registered investment
adviser which specializes in managing high quality fixed income securities, both
taxable and tax exempt. BlackRock currently manages over $41 billion of assets
across the government, mortgage, corporate and municipal sectors. These assets
are managed on behalf of many individual investors in twenty-one closed-end
funds traded on either the New York or American stock exchanges, and several
open-end funds and on behalf of more than 80 institutional clients in the United
States and overseas. BlackRock's institutional investor base includes Chrysler
Corporation Master Retirement Trust, General Retirement System of the City of
Detroit, State Treasurer of Florida, Ford Motor Company Pension Plan, General
Electric Pension Trust and Unisys Corporation Master Trust.
BlackRock was formed in April 1988 by fixed income professionals who sought
to create an asset management firm specializing in managing fixed income
securities for individuals and institutional investors. The professionals at
BlackRock have extensive experience creating, analyzing and trading a variety of
fixed income instruments, including the most complex structured securities. In
fact, individuals at BlackRock are responsible for many of the major innovations
in the mortgage-backed and asset-backed securities markets, including the
creation of the 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
significant emphasis it places on the development of proprietary analytical
capabilities. A quarter of the professionals at BlackRock work full-time in the
design, maintenance and use of such systems which are otherwise not generally
available to investors. BlackRock's proprietary analytical tools are used for
evaluating, investing in and designing investment strategies and portfolios of
fixed income securities, including mortgage securities, corporate debt
securities or tax-exempt securities and a variety of hedging instruments.
BlackRock has developed investment products which respond to investors'
needs and has been responsible for several major innovations in closed-end
funds. 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 AAAf rating by Standard & Poor's, and the first
closed-end fund to invest primarily in North American Government securities.
BlackRock's closed-end funds currently have dividend reinvestment plans which
are designed to provide an ongoing source of demand for the stock in the
secondary market. BlackRock manages a ladder of alternative investment vehicles,
with each fund 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
you may have about your BlackRock funds and thank you for the continued trust
you place in our abilities.
If you would like further information
please do not hesitate to call BlackRock at (800) 227-7BFM
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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
Princeton Administrators L.P.
P.O. Box 9095
Princeton, NJ 08543-9095
(800) 688-0928
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Boston EquiServe L.P.
150 Royall Street
Canton, MA 02021
(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 accompanying financial statements
as of April 30, 1996 were not audited and,
accordingly, no opinion is expressed on them.
The BlackRock Broad Investment Grade 2009 Term Trust Inc.
c/o Princeton Administrators L.P.
P.O. Box 9095
Princeton, NJ 08543-9095
(800) 227-7BFM
092472-10-6
The BlackRock
Broad Investment
Grade 2009
Term Trust Inc.
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Semi-Annual Report
April 30, 1996
