- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
SEMI-ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISER
- --------------------------------------------------------------------------------
May 30, 1997
Dear Trust Shareholder:
Domestic bond investors have experienced higher interest rates in the face
of a resilient stock market and stronger economic growth over the past six
months. However, as a pre-emptive strike at inflation, the Federal Reserve
raised the Federal funds target rate one-quarter of a point at their March
policy meeting.
BlackRock expects that both production and consumption will continue to be
strong in the coming months. However, the combined effects of higher interest
rates and already rising consumer debt should lead to more moderate economic
growth later in 1997. Despite inflation remaining relatively low, strong
consumer confidence and robust industrial activity suggest that the potential
for future inflation exists. Therefore, BlackRock currently maintains a cautious
fundamental outlook for bonds. While we believe that one or two additional
interest rate increases by the Fed may still be necessary to temper economic
growth, it does not appear that 1997 will be a repeat of the dramatic rise in
short term interest rates that the market witnessed in 1994.
This report provides the Trust's portfolio managers an opportunity to
provide you with detailed market commentary and review the major themes that
have occurred in the portfolio over the past six months. We hope that you find
this report informative and look forward to serving your financial needs in the
future.
Sincerely,
/s/ Laurence D. Fink /s/ Ralph L. Schlosstein
- -------------------- ------------------------
Laurence D. Fink Ralph L. Schlosstein
Chairman President
1
<PAGE>
May 30, 1997
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, 1997. 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 "BBB" by Standard & Poor's or "Baa" by
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 over the period:
<TABLE>
<CAPTION>
===================================================================================================
4/30/97 10/31/96 CHANGE HIGH LOW
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STOCK PRICE $11.00 $11.00 0.00% $11.50 $10.875
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE (NAV) $13.44 $13.46 (0.15%) $13.66 $13.20
- ---------------------------------------------------------------------------------------------------
10-YEAR U.S. TREASURY NOTE 6.71% 6.36% +35bp 6.97% 6.04%
===================================================================================================
</TABLE>
THE FIXED INCOME MARKETS
Stronger economic data and accompanying inflation fears caused U.S.
Treasury yields to rise for the majority of the six month period between
November 1, 1996 and April 30, 1997. After reaching their lowest levels since
March of 1996, Treasury yields began rising in December after Federal Reserve
Chairman Alan Greenspan's mention of "irrational exuberance" in the financial
markets. Data indicating continued economic strength characterized the first
four months of 1997. Although inflationary measures such as commodity, producer
and consumer prices remained relatively stable, labor markets continued to
strengthen. For example, over 700,000 new jobs were created in the first
quarter.
Therefore, although inflation was largely nonexistent, the combination of
a robust economy, tight labor markets and strong consumer confidence led the
Federal Reserve to raise the Federal funds rate by 25 basis points (1/4%) at
their March 25 monetary policy meeting to subdue this growth and pre-emptively
fight inflation. Hints of moderating economic growth during April proved to be a
more accommodating environment for bonds, as Treasury yields fell towards
month-end in response to a strong dollar, rising stock market and optimism for a
balanced-budget agreement.
For the six month period, the yield of the 10-year Treasury note rose
0.37% to end April at 6.71%. However, the 10-year's yield reached a high of
6.98% in mid-April before falling the last two weeks of the month as the
likelihood decreased for another interest rate hike by the Federal Reserve at
their May meeting.
2
<PAGE>
Over the six month period, spread product (bonds that offer yield spreads
over Treasuries) outperformed Treasuries. Mortgage-backed securities ("MBS")
posted good relative performance primarily due to low interest rate volatility
and subdued refinancing concerns. Over the period, the MBS market as measured by
the Lehman Mortgage Index returned 2.63% versus the Treasury market's return
(measured by the Merrill Lynch 7-10 year Treasury Index) of 0.76%. Corporate
bonds also outperformed Treasuries, as favorable fundamentals and strong
investor demand drove prices higher (and yield spreads to Treasuries narrower).
We maintain a moderately cautious outlook on the corporate market, as further
Federal Reserve tightenings will slow GDP and corporate earnings growth. The
Trust's total return performance of 3.31% over the six month period underscored
the significant outperformance of spread product versus the U.S. Treasury
market. 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, 1996 asset
composition.
- --------------------------------------------------------------------------------
COMPOSITION APRIL 30, 1997 OCTOBER 31, 1996
- --------------------------------------------------------------------------------
Agency Multiple Class Mortgage
Pass-Throughs 32% 30%
- --------------------------------------------------------------------------------
Adjustable Rate Mortgage Securities 15% 13%
- --------------------------------------------------------------------------------
Commercial Mortgage-Backed Securities 15% 16%
- --------------------------------------------------------------------------------
Corporate Bonds--Finance & Banking 6% 8%
- --------------------------------------------------------------------------------
Corporate Bonds--Sovereign & Provincial 5% 6%
- --------------------------------------------------------------------------------
Corporate Bonds--Industrial 5% 6%
- --------------------------------------------------------------------------------
Municipal Bonds 5% 5%
- --------------------------------------------------------------------------------
Stripped Mortgage-Backed Securities 4% 7%
- --------------------------------------------------------------------------------
Corporate Bonds--Utilities 3% 3%
- --------------------------------------------------------------------------------
Mortgage Pass-Throughs 3% 3%
- --------------------------------------------------------------------------------
U.S. Gov't Securities 2% 2%
- --------------------------------------------------------------------------------
FHA Project Loans 2% --
- --------------------------------------------------------------------------------
Asset Backed 2% --
- --------------------------------------------------------------------------------
Non-Agency Multiple Class Mortgage
Pass-Throughs 1% 1%
- --------------------------------------------------------------------------------
The main shift in the Trust's portfolio composition over the past six
months was a modest reduction in investment grade corporate bond holdings and an
increase in well-structured mortgage and asset-backed securities (ABS).
The Trust selectively sold corporate holdings in recognition of their
significant outperformance versus Treasuries, particularly during the first
quarter of 1997. The largest reduction was in the Yankee sector, which is
comprised of non-U.S. corporate issuers who issue bonds in U.S. dollars in the
U.S. market. In contrast to its excellent performance in 1996, Yankees weakened
in early 1997, prompting the Trust to lighten its exposure to the sector and
capture its excellent performance from 1996.
The sale of corporate bonds created an opportunity for the Trust to
initiate a position in asset-backed securities. ABS are securitized assets,
primarily automobile and credit card receivables and home equity loans, which
have pass-through structures similar to mortgage pass-throughs. In general, ABS
offer attractive yield spreads over Treasuries with less prepayment exposure
than mortgages. Additionally, the Trust seized the significant increase in
collateralized mortgage obligation (CMO) supply by slightly increasing its
exposure to the sector.
3
<PAGE>
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 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,
/s/ Robert S. Kapito /s/ Michael P. Lustig
- -------------------- ---------------------
Robert S. Kapito Michael P. Lustig
Vice Chairman and Portfolio Manager Principal and Portfolio Manager
BlackRock Financial Management, Inc. BlackRock Financial Management, Inc.
================================================================================
THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
- --------------------------------------------------------------------------------
Symbol on American Stock Exchange: BCT
- --------------------------------------------------------------------------------
Initial Offering Date: June 17, 1993
- --------------------------------------------------------------------------------
Closing Stock Price as of 4/30/97: $11.00
- --------------------------------------------------------------------------------
Net Asset Value as of 4/30/97: $13.44
- --------------------------------------------------------------------------------
Yield on Closing Stock Price as of 4/30/97 ($11.00)1: 8.18%
- --------------------------------------------------------------------------------
Current Monthly Distribution per Share2: $0.0750
- --------------------------------------------------------------------------------
Current Annualized Distribution per Share2: $0.9000
================================================================================
- -----------------
1 Yield on closing stock price is calculated by dividing the current annualized
distribution per share by the closing stock price per share.
2 The distribution is not constant and is subject to change.
4
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT
GRADE 2009 TERM TRUST INC.
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--148.1%
MORTGAGE PASS-THROUGHS--6.6%
Federal Housing Administration,
$1,006 CLC Alzheimer Care Center,
8.25%, 12/25/37 ....................... $1,024,933
Government National Mortgage
Association,
1,648++ 7.00%, 1/15/24-2/15/24 ................ 1,595,322
---------
2,620,255
---------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS--69.7%
AAA 763 Community Program Loan Trust,
Series 1987-A, Class A4,
4.50%, 10/01/18 ....................... 646,945
Federal Home Loan Mortgage
Corporation, Multiclass Mortgage
Participation Certificates (REMIC),
4,804 Series 1353, Class 1353-S,
8/15/07 (ARM) ........................ 552,409
1,116++ Series 1506, Class 1506-S,
5/15/08 (ARM) ........................ 959,043
2,168++ Series 1510, Class 1510-G,
5/15/13 .............................. 2,130,017
3,000++ Series 1596, Class 1596-D,
10/15/13 ............................. 2,825,130
481+ Series 1619, Class 1619-SA,
2/15/22 (ARM) ........................ 426,534
331 Series 1637, Class 1637-LE,
12/15/23 (ARM) ....................... 225,782
948+ Series 1669, Class 1669-MB,
2/15/24 .............................. 647,651
Federal National Mortgage
Association, REMIC Pass-Through
Certificates,
130 Trust 1992-174, Class 174-S,
9/25/22 (ARM) ........................ 256,675
1,613++ Trust 1992-196, Class 196-SA,
11/25/07 (ARM) ....................... 1,365,769
714 Trust 1993-2, Class 2-SA,
1/25/23 (ARM) ........................ 703,555
1,000++ Trust 1993-49, Class 49-H,
4/25/13 .............................. 976,730
3,053+ Trust 1993-79, Class 79-PK,
4/25/22 .............................. 2,906,537
2,646 Trust 1993-87, Class 87-J,
4/25/22 .............................. 2,414,898
4,000 Trust 1993-138, Class 138-JK,
5/25/19 (l) .......................... 991,640
4,090+ Trust 1993-140, Class 140-K,
8/25/13 (ARM) ........................ 3,966,605
1,000+ Trust 1993-156, Class 156-SE,
10/25/19 (ARM) ....................... 975,000
296 Trust 1993-182, Class 182-J,
9/25/23 .............................. 254,867
614 Trust 1993-183, Class 183-SE,
10/25/23 (ARM) ....................... 425,865
589+ Trust 1993-191, Class 191-SD,
10/25/08 (ARM) ....................... 418,343
449++ Trust 1993-202, Class 202-VB,
11/25/23 (ARM) ....................... 385,076
1,177++ Trust 1994-13, Class 13-SM,
2/25/09 (ARM) ........................ 869,509
748++ Trust 1994-37, Class 37-SC,
3/25/24 (ARM) ........................ 563,899
1,500 Trust 1996-20, Class 20-SB,
10/25/08 (ARM) ....................... 496,406
2,500 Trust 1997-30, Class 30-I,
1/25/23 (I) .......................... 771,875
119 Trust G93-25, Class 25-J,
12/25/19 (I) ......................... 446,799
246 Trust G93-27, Class 27-SE,
8/25/23 (ARM) ........................ 107,023
----------
27,710,582
----------
COMMERCIAL MORTGAGE-BACKED
SECURITIES--20.9%
BBB+ 500 Citibank New York NA, 144A
Multifamily Mortgage, Series
1994-1, Class M2, 8.00%, 1/25/19 ...... 505,673
BBB 500 DLJ Mortgage Acceptance
Corporation, Series 1997-CF1,
8.82%, 11/25/07 ....................... 511,875
BBB+ 750 FDIC Remic Trust, Mortgage
Pass-Through Certificates,
Series 1994-C1, Class II-F,
8.70%, 9/25/25 ........................ 772,266
AAA 500 GS Mortgage Securities Corporation,
Series 1996-PL, Class A2,
7.41%, 2/15/27 ........................ 503,516
LTC Commercial Mortgage
Pass-Through Certificates,
A 500 Series 1994-1, Class 1-D,
10.00%, 6/15/26 ...................... 548,155
AAA 460 Series 1996-1, Class 1-A, 144A,
7.06%, 4/15/28 ....................... 457,739
See Notes to Financial Statements
5
<PAGE>
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors
Incorporated,
BBB $500 Series 1995-C1, Class D,
7.9765%, 5/25/15 ...................... $ 505,811
BBB 500 Series 1996-C1, Class D,
7.42%, 4/25/28 ........................ 491,451
BBB 500 Morgan Stanley Capital 1
Incorporated, Commercial
Mortgage Pass-Through,
Series 1995-GA 1, Class D, 144A,
8.25%, 8/15/27 ........................ 515,369
AAA 750 New York City Mortgage Loan Trust,
Multifamily Mortgage Pass-Through
Class A-2, 144A,
6.75%, 6/25/11 ........................ 708,398
BBB 600 Nomura Asset Capital Corporation,
Series 1993-M1, Class A3, 144A,
7.64%, 11/25/03 ....................... 604,402
PaineWebber Mortgage
Acceptance Corporation IV,
BBB 750 Series 1995-M1, Class D, 144A,
7.30%, 1/15/07 ........................ 743,172
BBB 500 Series 1995-M2 Class D, 144A,
7.20%, 12/1/03 ........................ 497,051
A 470 Resolution Trust Corporation,
Series 1994-C2, Class D,
8.00%, 4/25/25 ........................ 474,618
AAA 500 Structured Asset Securities
Corporation, Series
1996 CFL, Class B,
6.303%, 2/25/28 ....................... 485,808
---------
8,325,303
---------
CORPORATE BONDS--28.8%
FINANCE & BANKING--9.4%
A3 500 Amsouth Bancorporation,
6.75%, 11/01/25 ....................... 483,079
A 600 Equitable Life Assured Society, 144A,
6.95%, 12/01/05 ....................... 579,658
BBB- 500 Macsaver Financial Services
Incorporated,
7.875%, 8/01/03 ....................... 497,189
A1 500 Metropolitan Life Insurance Co., 144A,
6.30%, 11/01/03 ....................... 475,044
A+ 1,000 Morgan Stanley Group Incorporated,
10.00%, 6/15/08 ....................... 1,184,990
BBB+ 500 PaineWebber Group Incorporated,
8.875%, 3/15/05 ....................... 532,315
---------
3,752,275
---------
CORPORATE BONDS (CONT'D)
INDUSTRIALS--6.8%
A3 100 American Airlines Inc. Secured
Equipment Trust,
Series 1990-M,
10.44%, 3/04/07 ....................... 118,185
BBB- 500@Burlington Industries Incorporated,
7.25%, 9/15/05 ........................ 477,039
A+ 500 Ralcorp Holdings, Incorporated,
8.75%, 9/15/04 ........................
545,135
A- 500 Ralston Purina Co., Debenture,
9.25%, 10/15/09 ....................... 567,210
A 500 Seagram Joseph E & Sons Inc.,
7.00%, 4/15/08 ........................ 484,835
BBB- 500 Tele-Communications Inc.,
8.25%, 1/15/03 ........................ 506,685
---------
2,699,089
---------
CORPORATE BONDS (CONT'D)
UTILITIES--4.7%
BBB- 500 360 Communications Co.,
7.50%, 3/01/06 ........................ 493,100
BBB- 385 Mobile Energy Services Co. L.L.C.,
8.665%, 1/01/17 ....................... 388,871
BBB- 500 NRG Energy Incorporated, 144A,
7.625%, 2/01/06 ....................... 470,020
Baa2 500 Ohio Edison Company,
8.625%, 9/15/03 ....................... 523,215
---------
1,875,206
---------
CORPORATE BONDS (CONT'D)
SOVEREIGN & PROVINCIAL--7.9%
A1 1,000 Dow Capital BV,
9.20%, 6/01/10 ........................ 1,135,710
BBB- 500 Empresa Electric Guacolda Sa, 144A,
7.95%, 4/30/03 ........................ 504,988
BBB+ 500 Empresa Electric Pehuhuenche,
7.30%, 5/01/03 ........................ 497,157
A3 500 Israel Electric Corp. LTD, 144A,
7.25%, 12/15/06 ....................... 489,280
A+ 525 Quebec Province,
7.50%, 7/15/02 ........................ 535,274
---------
3,162,409
---------
ASSET BACKED SECURITIES--3.8%
AAA 750 Structured Mortgage Asset
Residential Trust Series 1997-2,
8.24%, 3/15/06 ........................ 737,813
AAA 750 Structured Mortgage Asset
Residential Trust, Series 1997-3,
8.724%, 4/15/06 ....................... 756,563
---------
1,494,376
---------
STRIPPED MORTGAGE-BACKED
SECURITIES--6.8%
Federal Home Loan
Mortgage Corporation,
2,617 Series 65, Class 65-I,
8/15/20 (I/O) ........................ 688,739
1,050 Series 141, Class 141-H,
5/15/21 (I/O) ........................ 315,486
See Notes to Financial Statements
6
<PAGE>
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES (CONT'D)
Federal National Mortgage
Association,
$8,300 Trust G-21, Class 21-L,
7/25/21 (I/O) ........................ $ 218,170
3,832++ Trust 1994-42, Series 42-SO,
3/25/23 (I/O) ........................ 550,308
1,341+ Trust 1994-46, Class 46-D,
11/25/23 (P/O) ....................... 571,346
Salomon Brothers Mortgage
Securities Inc. VI,
329 Series 1987-3, Class B,
10/23/17 (I/O) ....................... 129,173
324 Series 1987-3, Class A,
10/23/17 (P/O) ....................... 234,747
---------
2,707,969
---------
U.S. GOVERNMENT SECURITIES--3.8%
994 Small Business Administration
Participation Certificate,
7.35%, Series 1995-10,
Class 10-C, 8/12/05 ................... 990,918
500++U.S. Treasury Notes,
6.625%, 3/31/02 ....................... 500,935
---------
1,491,853
---------
MUNICIPAL BONDS--7.7%
AA- 500 Fresno California Pension
Obligation, Taxable, Series 1994,
7.80%, 6/01/14 ........................ 506,260
AAA 500 Kern County California
Pension Obligation, Taxable,
6.98%, 8/15/09 ........................ 479,200
Los Angeles County California
Pension, Taxable,
AAA 1,000 Series A, 8.62%, 6/30/06 .............. 1,096,250
AAA 500 Series D, 6.97%, 6/30/08 .............. 485,865
AAA 500 Orleans Parish Louisiana
School Board, Taxable,
Ref, Series A,
6.60%, 2/01/08 ........................ 473,995
---------
3,041,570
---------
Total Long-Term Investments
--148.1% (cost $59,159,138) ........... 58,880,888
Liabilities in excess of other
assets--(48.1%) ....................... (19,124,742)
-----------
NET ASSETS--100% ........................ $39,756,146
===========
- ----------------
* 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.
I -- Denotes a CMO with Interest Only Characteristics.
I/O -- Interest Only.
P/O -- Principal Only.
REMIC -- Real Estate Mortgage Investment Conduit.
- ------------------------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT
GRADE 2009 TERM TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value
(cost $59,159,138) (Note 1) .............................. $ 58,880,888
Receivable for investments sold ............................ 884,855
Interest receivable ........................................ 818,384
Unrealized appreciation on interest rate cap
(Notes 1 and 3) .......................................... 47,981
Deferred organization expenses and other assets ............ 8,216
------------
60,640,324
------------
LIABILITIES
Reverse repurchase agreements (Note 4) ..................... 18,838,000
Payable for investments purchased .......................... 1,876,249
Dividends payable .......................................... 28,158
Due to custodian ........................................... 10,243
Interest payable ........................................... 53,712
Advisory fee payable (Note 2) .............................. 17,746
Administration fee payable (Note 2) ........................ 4,840
Variation margin payable on open futures
contracts (Notes 1 and 3) ................................ 37,032
Other accrued expenses ..................................... 18,198
------------
20,884,178
------------
NET ASSETS ................................................. $ 39,756,146
============
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 ...................... 615,552
Accumulated net realized loss ............................ (1,325,863)
Net unrealized depreciation .............................. (262,517)
------------
NET ASSETS, APRIL 30, 1997 .............................. $ 39,756,146
==============
Net asset value per share:
($39,756,146 / 2,957,093 shares of
common stock issued and outstanding) .................. $13.44
=======
- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT
GRADE 2009 TERM TRUST INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest earned (including net amortization of
premium of $371,247 and net of
interest expense of $496,879) ............................. $ 1,898,228
-----------
Operating Expenses
Investment advisory ......................................... 108,623
Administration .............................................. 29,624
Reports to shareholders ..................................... 13,562
Audit ....................................................... 8,102
Custodian ................................................... 8,787
Directors ................................................... 6,244
Transfer agent .............................................. 3,819
Legal ....................................................... 1,924
Miscellaneous ............................................... 15,549
-----------
Total operating expenses .................................... 196,234
-----------
Net investment income ......................................... 1,701,994
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 3)
Net realized gain (loss)on:
Investments ................................................. 812,221
Short sales ................................................. 172
Futures ..................................................... (198,366)
-----------
614,027
-----------
Net change in unrealized appreciation (depreciation)on:
Investments ................................................. (1,243,778)
Futures ..................................................... 209,424
-----------
(1,034,354)
-----------
Net loss on investments ....................................... (420,327)
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ..................................... $ 1,281,667
===========
See Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT
GRADE 2009 TERM TRUST INC.
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH
Cash flows provided by operating activities:
Interest received, net of interest purchased .................. $ 2,406,154
Operating expense paid ........................................ (211,075)
Interest expense paid ......................................... (479,263)
Purchase of long-term portfolio investments ................... (9,444,670)
Proceeds from disposition of long-term portfolio
investments ................................................. 8,279,923
Received from custodian ....................................... 10,243
Other ......................................................... (1,807)
-----------
Net cash flows provided by operating activities ............... 559,505
-----------
Cash flows used for financing activities:
Increase in reverse repurchase agreements ..................... 757,000
Cash dividends paid ........................................... (1,336,763)
-----------
Net cash flows used for financing activities .................. (579,763)
-----------
Net decrease in cash .......................................... (20,258)
Cash at beginning of period ................................... 20,258
-----------
Cash at end of period ......................................... $ 0
===========
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 $ 1,281,667
-----------
Increase in investments ....................................... (2,179,198)
Net realized gain on investments .............................. (614,027)
Decrease in unrealized appreciation ........................... 1,034,354
Decrease in interest receivable ............................... 11,047
Increase in receivable for investment sold .................... (884,855)
Decrease in deferred organization expenses
and other assets ............................................ 3,430
Increase in payable for investments purchased ................. 1,876,249
Increase in interest payable .................................. 17,616
Increase in accrued expenses and other liabilities ............ 13,222
-----------
Total adjustments ........................................... (722,162)
-----------
Net cash flows provided by operating activities ............... $ 559,505
===========
- --------------------------------------------------------------------------------
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 ................................... 1997 1996
------------ ------------
Operations:
Net investment income ....................... $ 1,701,994 $ 2,942,432
Net realized gain on
investments, short sales
and futures ............................... 614,027 89,681
Net unrealized appreciation
(depreciation) on
investments and futures ................... (1,034,354) (163,059)
------------ ------------
Net increase in net assets
resulting from operations .................. 1,281,667 2,869,054
------------ ------------
Dividends & Distributions to shareholders:
Dividends from net investment
income ..................................... (1,330,634) (2,698,240)
------------ ------------
Total increase (decrease) ................... (48,967) 170,814
NET ASSETS
Beginning of period ............................ 39,805,113 39,634,299
------------
End of period .................................. $ 39,756,146 $ 39,805,113
============ ============
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: 1997 1996 1995 1994 1993
------ ----- ----- ------ --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................... $ 13.46 $ 13.40 $ 11.94 $ 14.56 $ 14.10
------- ------- ------- ------- -------
Net investment income (net of interest expense of
$.17, $.35, $.68, $.34 and $.02) ................... 0.57 1.00 0.85 0.95 0.28
Net realized and unrealized gain (loss) on investments (0.14) (0.03) 1.60 (2.48) 0.52
------- ------- ------- ------- -------
Net increase (decrease) from investment operations ..... 0.43 0.97 2.45 (1.53) 0.80
------- ------- ------- ------- -------
Dividends from net investment income ................... (0.45) (0.91) (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 ...................... (0.45) (0.91) (0.99) (1.06) (0.27)
------- ------- ------- ------- -------
Capital charge with respect to issuance of shares ...... -- -- -- (0.03) (0.07)
------- ------- ------- ------- -------
Net asset value, end of period** ....................... $ 13.44 $ 13.46 $ 13.40 $ 11.94 $ 14.56#
======= ======== ======= ======= =======
Per share market value, end of period** ................ $ 11.00 $ 11.00 $11.125 $ 10.00 $ 13.75
======= ======== ======= ======= =======
TOTAL INVESTMENT RETURN+ ............................... 4.05% 6.67% 22.43% (20.41%) (0.60%)
RATIOS TO AVERAGE NET ASSETS:
Operating Expenses@ .................................... 1.00%++ 1.12% 1.00% 1.04% 0.97%++
Net investment income .................................. 8.64%++ 7.59% 6.78% 7.31% 5.66%++
SUPPLEMENTAL DATA:
Average net assets (in thousands) ...................... $39,735 $38,786 $37,080 $38,468 $41,195
Portfolio turnover ..................................... 16% 58% 116% 41% 27%
Net assets, end of period (in thousands) ............... $39,756 $39,805 $39,634 $35,320 $43,051
Reverse repurchase agreements outstanding,
end of period (in thousands) ......................... $18,838 $18,081 $18,489 $16,003 $18,375
Asset coverage+++ ...................................... $ 3,110 $ 3,209 $ 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.
@ The ratios of operating expenses, including interest expense, to average
net assets were 3.52%, 3.81%, 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 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.
10
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT
GRADE 2009 TERM TRUST INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1. ACCOUNTING The BlackRock Broad Investment Grade 2009 management
POLICIES Term Trust Inc. (the "Trust"), a Maryland
corporation, is a diversified, closed-end 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 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.
Options, 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 changes in interest rates. For instance, a duration of "one" means that
a portfolio's 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.
Option selling and purchasing is used by the Trust to effectively hedge
positions so that changes in interest rates do not change the duration of the
portfolio unexpectedly. In general, the Trust uses options to hedge a long or
short position or an overall portfolio that is longer or shorter than the
benchmark security. A call option gives the purchaser of the option the right
(but not obligation) to buy, and obligates the seller to sell (when the option
is exercised), the underlying position at the exercise price at any time or at a
specified time during the option period. A put option gives the holder the right
to sell and obligates the writer to buy the underlying position at the exercise
price at any time or at a specified time during the option period. Put options
can be purchased to effectively hedge a position or a portfolio against price
declines if a portfolio is long. In the same sense, call options can be
purchased to hedge a portfolio that is shorter than its benchmark against price
changes. The trust can also sell (or write) covered call options and put options
to hedge portfolio positions.
11
<PAGE>
The main risk that is associated with purchasing options is that the option
expires without being exercised. In this case, the option expires worthless and
the premium paid for the option is considered the loss. The risk associated with
writing call options is that the Trust may forego the opportunity for a profit
if the market value of the underlying position increases and the option is
exercised. The risk in writing put options is that the Trust may incur a loss if
the market value of the underlying position decreases and the option is
exercised. In addition, as with futures contracts, the Trust risks not being
able to enter into a closing transaction for the written option as the result of
an illiquid market.
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. 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 with-out 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 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, 1997.
INTEREST RATE CAPS: Interest rate caps are similar to interest rate swaps,
except that one party agrees to pay a fee, while the other party pays the
excess, if any, of a floating rate over a specified fixed rate.
Interest rate caps are intended to both manage the duration of the Trust's
portfolio and its exposure to changes in short term rates. Owning interest rate
caps reduces the portfolio's duration, making it less sensitive to changes in
interest rates from a market value perspective. The effect on income involves
protection from rising short term rates, which the Trust experiences primarily
in the form of leverage.
12
<PAGE>
The Trust is exposed to credit loss in the event of non-performance by the
other party in the interest rate cap. However, the Trust does not anticipate
non-performance by any counterparty.
INTEREST RATE FLOORS:Interest rate floors are similar to interest rate swaps,
except that one party agrees to pay a fee, while the other party pays the
excess, if any, of a floating rate under a specified fixed rate.
Interest rate floors are used by the Trust to both manage the duration of the
portfolio and its exposure to changes in short-term interest rates. Owning
interest rate floors reduces the portfolio's duration, making it less sensitive
to changes in interest rates from a market value perspective. The effect on
income involves protection from falling short term rates, which the Trust
experiences primarily in the form of leverage.
The Trust is exposed to credit loss in the event of non-performance by the
other party to the interest rate floor. However, the Trust does not anticipate
non-performance by any counterparty.
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.
ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 2. AGREEMENTS The Trust has an Investment Advisory Agreement with
BlackRock Financial Management, Inc.(the"Adviser"),
a wholly-owned corporate subsidiary of PNCAsset Management Group, Inc., the
holding company for PNC's asset management business, 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 contin- uous supervision of
the investment portfolio and pays the 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.
NOTE 3. PORTFOLIO Purchases and sales of investment securities, other
SECURITIES than short-term investments and dollar rolls, for
the six months ended April 30, 1997 aggregated $11,482,119 and $9,119,994,
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, 1997, the Trust held 11.1% of its
portfolio assets in securities restricted as to resale.
The Trust may from time to time purchase in the secondary market certain
mortgage pass-through securities packaged or master serviced byPNC Mortgage
Securities Corp. (or Sears Mortgage if PNC Mortgage Securities Corp. succeeded
to rights and duties of Sears) or mortgage related securities containing loans
or mortgages originated by PNCBank or its affiliates.It is possible under
certain circumstances, PNC Mortgage Securities Corp. or its affiliates could
have interests that are in conflict with the holders of these mortgage backed
securities, and such holders could have rights against PNC Mortgage Securities
Corp. or its affiliates.
13
<PAGE>
The federal income tax basis of the Trust's investments at April 30, 1997 was
substantially the same as the basis for financial reporting and, accordingly,
net unrealized depreciation for federal income tax purposes was $278,250 (gross
unrealized appreciation--$1,064,867, gross unrealized depreciation--$1,343,117).
For Federal income tax purposes, the Trust had a capital loss carryforward at
October 31, 1996 of approximately $2,200,000 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, 1997 the Trust entered into financial futures contracts. Details
of open contracts at April 30, 1997 are
as follows:
<TABLE>
<CAPTION>
VALUE AT UNREALIZED
NUMBER OF EXPIRATION VALUE AT APRIL 30, APPRECIATION
CONTRACTS TYPE DATE TRADE DATE 1997 (DEPRECIATION)
- -------- ---- -------- ---------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Short Position:
10 yr. U.S.
30 T-Note June 97 $3,267,053 $3,209,063 $ 57,990
30 yr. U.S.
75 T-Bond June 97 8,105,856 8,196,094 (90,238)
---------
$ (32,248)
=========
</TABLE>
The Trust entered into an interest rate cap which settled on February 19,
1997 with a notional amount of $5 million. Under this agreement, the Trust
receives the excess, if any, of three-month LIBORover the fixed rate of 6.00%.
The agreement terminates on February 19, 2002. At April 30, 1997 unrealized
appreciation was $47,981.
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 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, 1997 was approximately $18,070,743 at a weighted
average interest rate of approximately 5.47%. The maximum amount of reverse
repurchase agreements outstanding at any month-end during the period was
$18,838,000 as of April 30, 1997 which was 31.06% 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, 1997.
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, 1997, 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, 1997, the Board of
Directors of the Trust declared a dividend from
6 undistributed earnings of $0.075 per share payable May 30,1997 to shareholders
of record on May 15, 1997.
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 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 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 April 15, 1997 to vote on
the following matters: (1) To elect four Directors as follows:
<TABLE>
<CAPTION>
DIRECTOR CLASS TERM EXPIRING
------- ----- ----- ------
<S> <C> <C> <C>
Walter F. Mondale ..................................... II 3 years 2000
Andrew F. Brimmer ..................................... III 3 years 2000
Kent Dixon ............................................ III 3 years 2000
Laurence D. Fink ...................................... III 3 years 2000
Directors whose term of office continues beyond this meeting are Frank
J. Fabozzi, Richard E. Cavanagh, James Grosfeld, James Clayburn LaForce,
Jr. and Ralph L. Schlosstein.
(2)To ratify the selection of Deloitte & Touche LLP as independent public
accountants of the Trust for the fiscal year ending October 31, 1997.
Shareholders elected the four Directors and ratified the selection of Deloitte &
Touche LLP. The results of the voting was as follows:
VOTES FOR VOTES AGAINST ABSTENTIONS
------- ----------- ----------
Andrew F. Brimmer ..................................... 2,086,162 0 27,321
Kent Dixon ............................................ 2,086,162 0 27,321
Laurence D. Fink ...................................... 2,086,162 0 27,321
Walter F. Mondale ..................................... 2,086,162 0 27,321
Ratification of Deloitte & Touche LLP 2,066,465 19,847 27,171
</TABLE>
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 $48
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 100 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 sold 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
331/3% 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 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 shares of the Trust through the Trust's transfer agent, State Street
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Bank & Trust Company. 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 331/3% 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
- --------------------------------------------------------------------------------
ADJUSTABLE RATE MORTGAGE-BACKED
SECURITIES (ARMS):
Mortgage instruments with interest rates that 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 OBLIGATIONS (CMOS):
Mortgage-backed securities which separate 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 Trust'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 declares and pays dividends on a
monthly basis.
DIVIDEND REINVESTMENT:
Shareholders may elect to have all dividends and distributions of 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
AGREEMENTS:
In a reverse repurchase agreement, the Trust 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
SECURITIES:
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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BlackRock
DIRECTORS
Laurence D. Fink, CHAIRMAN
Andrew F. Brimmer
Richard E. Cavanagh
Kent Dixon
Frank J. Fabozzi
James Grosfeld
James Clayburn La Force, Jr.
Walter F. Mondale
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
Frank Smith, ASSISTANT TREASURER
Karen H. Sabath, SECRETARY
INVESTMENT ADVISER
BlackRock Financial Management, Inc.
345 Park Avenue
New York, NY 10154
(800) 227-7BFM
ADMINISTRATOR
PrincetonAdministrators, L.P.
P.O.Box 9095
Princeton, NJ 08543-9095
(800) 688-0928
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
(800) 699-IBFM
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1434
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
The accompanying financial statements as of April 30, 1997 were not audited
and, accordingly no opinion is expressed on them.
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of any securities.
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
[LOGO] Printed on recycled paper 092472-10-6
THE BLACKROCK
BROAD INVESTMENT
GRADE 2009
TERM TRUST INC.
================================================================================
SEMI-ANNUAL REPORT
APRIL 30, 1997
