- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISER
- --------------------------------------------------------------------------------
November 30, 1998
Dear Shareholders:
Over the past twelve months, U.S. Treasury securities have experienced a
strong rally, as investors sought a safe haven from global market turmoil and
the Federal Reserve continued to cut interest rates. Other segments of the
fixed income market have lagged behind Treasuries, but still produced positive
returns since our last report. We anticipate that the Federal Reserve will
remain prepared to combat any signs of a credit crunch through interest rate
cuts, and given the unstable economic situation in Brazil, the Fed likely will
retain a loosening bias.
Despite previous worries of a second half slowdown in 1998, the U.S.
economy continues to expand rapidly. Third quarter GDP registered a 3.3%
annualized growth rate, supported by strong consumer spending. This momentum,
however, may not continue as briskly into the new year, based on weaker
corporate profits and a loosening of the labor markets. Already, major
corporations have warned of slower profit growth and announced major layoffs.
This report contains detailed market and portfolio strategy by your
Trust's managers in addition to the Trust's audited financial statements and a
detailed portfolio list of the portfolio's holdings. We thank you for your
continued investment in the Trust and look forward to serving your investment
needs in the future.
Sincerely,
/s/ LAURENCE D. FINK /s/ RALPH L. SCHLOSSTEIN
- -------------------- -------------------------
Laurence D. Fink Ralph L. Schlosstein
Chairman President
1
<PAGE>
November 30, 1998
Dear Shareholder:
We are pleased to present the annual report for The BlackRock Broad
Investment Grade 2009 Term Trust Inc. ("the Trust") for the fiscal year ended
October 31, 1998. 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"
Moody's at 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>
10/31/98 10/31/97 CHANGE HIGH LOW
<S> <C> <C> <C> <C> <C>
STOCK PRICE $ 13.25 $ 12.125 9.28% $ 14.00 $ 12.1875
NET ASSET VALUE (NAV) $ 15.01 $ 14.48 3.66% $ 15.30 $ 14.41
10-YEAR U.S. TREASURY NOTE 4.61% 5.83% (20.93)% 5.95% 4.16%
</TABLE>
THE FIXED INCOME MARKETS
The first half of the Trust's fiscal year was characterized by the
positive momentum and bull market trend that brought Treasury yields towards
historic lows. The low Treasury yields were due to budget surplus projections
as well as the Fed's decision to move from a tightening to a neutral policy.
The positive economic momentum throughout the first half of the fiscal year was
strengthened by unseasonably warm weather that led to increased consumer
spending and job gains, and a less than expected impact on trade from the Asian
financial crisis.
GDP growth measured at a very strong 5% for the first quarter of 1998;
however, signs of a slowdown became evident when economic data for April and
May began to lag.
The second half of the trust's fiscal year witnessed virtually
unparalleled market turbulence. During the second quarter of 1998, GDP growth
faltered to a 1.8% rate due to slower output and an increasing trade deficit
created by a strong U.S. dollar. Although consumers continued their spending
domestically, demand for U.S. goods abroad faltered, as the strong dollar and
weakness overseas, especially Asia, drove prices for U.S. goods higher relative
to foreign goods.
In the Trust's final quarter, U.S. GDP growth rebounded to a 3.3% pace;
however, the instability in global financial markets began to rattle investor
confidence. The devaluation of the Russian ruble and the fear of a possible
devaluation of the Brazilian currency caused a flight-to-quality to U.S.
Treasuries. Spread sectors widened dramatically as a result of the sell-off. In
addition, the global financial markets witnessed a credit crunch where even
higher-grade securities were affected. This dramatic shift of investor
sentiment culminated in the near collapse of a prominent hedge fund.
2
<PAGE>
The Treasury market rally pushed Treasury yields to historic levels below
the 5% barrier. In response to the financial fragility in the third quarter
1998, the Fed eased interest rates on September 29, 1998 by 25bps and again on
October 15, in an unusual between-meetings move. On November 17, the Fed eased
interest rates again by 25bps.
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, 1997 asset
composition:
SECTOR BREAKDOWN
<TABLE>
<CAPTION>
COMPOSITION OCTOBER 31, 1998 OCTOBER 31, 1997
<S> <C> <C>
Agency Multiple Class Mortgage Pass-Throughs 20% 26%
Corporate Bonds 18% 19%
Commercial Mortgage-Backed Securities 16% 15%
Interest Only Mortgage-Backed Securities 15% 3%
Inverse-Floating Rate Mortgages 14% 17%
Municipal Bonds 5% 5%
U.S. Gov't Securities 5% 7%
Asset Backed Securities 4% 3%
Principal Only Mortgage-Backed Securities 3% 2%
Mortgage Pass-Throughs -- 2%
Non-Agency Multiple Class Mortgage Pass-Throughs -- 1%
</TABLE>
Global instability has caused a flight to quality to US Treasuries causing
mortgages to severely underperform Treasuries as well as the broad bond market.
During the period, mortgage-backed securities (MBS), as measured by the Lehman
Mortgage Index, underperformed the broader investment grade domestic bond
market (Lehman Aggregate Index) on a total return basis by 7.30% vs. 9.33%.
We continued to focus on securities with final maturity dates (or "bullet"
maturities) that match the Trust's termination date. Accordingly, the Trust
modestly increased its exposure to U.S. Treasuries and Commercial Mortgage
Backed Securities over the period. Additionally, the Trust was a net seller of
mortgage-backed securities, whose cash flows and maturity dates can change in
response to interest rate movements. Mortgage bonds tend to prepay when
interest rates fall, which forces the bondholder to reinvest cash flows at
lower yields. Conversely, the average maturities of mortgage bonds can extend
when interest rates rise. Specifically, the Trust eliminated its positions in
mortgage pass-throughs and private label CMOs.
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 yours,
ROBERT S. KAPITO MICHAEL P. LUSTIG
/s/ Robert S. Kapito /s/ Michael P. Lustig
- ---------------------------------- ------------------------------------
Vice Chairman and Portfolio Manager Director 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 10/31/98: $ 13.25
Net Asset Value as of 10/31/98: $ 15.01
Yield on Closing Stock Price as of 10/31/98 ($13.25)1: 6.70%
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
OCTOBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------- -------------------- ---------------------------------- ----------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS-143.2%
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS-57.2%
Federal Home Loan Mortgage
Corp., Multiclass Mortgage
Participation Certificates,
$ 3,276 Series 1353, Class 1353-S,
8/15/07 (ARM) ................... $ 352,015
73 Series 1472, Class 1472-SA,
3/15/08 (ARM) ................... 72,664
584++ Series 1506, Class 1506-S,
5/15/08 (ARM) ................... 610,918
2,168++ Series 1510, Class 1510-G,
5/15/13 ......................... 2,485,959
400 Series 1534, Class 1534-IG,
2/15/10 (ARM) ................... 389,672
213 Series 1543, Class 1543-KB,
9/15/22 (ARM) ................... 213,729
303 Series 1584, Class 1584-SB,
9/15/23 (ARM) ................... 231,426
3,000+ Series 1596, Class 1596-D,
10/15/13 ........................ 3,259,350
481 Series 1619, Class 1619-SA,
2/15/22 (ARM) ................... 468,986
1,025 Series 1626, Class 1626-SA,
12/15/08 (ARM) .................. 924,437
331 Series 1637, Class 1637-LE,
12/15/23 (ARM) .................. 341,284
2,550 Series 1645, Class 1645-IB,
9/15/08 (I) ..................... 545,445
Federal National Mortgage
Association, REMIC Pass-Through
Certificates,
82 Trust 1992-174, Class 174-S,
9/25/22 (I) ..................... 182,046
858 Trust 1992-190, Class 190-S,
11/25/07 (ARM) .................. 957,934
47 Trust 1992-205, Class 205-SA,
8/25/21 (ARM) ................... 50,186
1,000++ Trust 1993-49, Class 49-H,
4/25/13 ......................... 1,026,360
3,053+ Trust 1993-79, Class 79-PK,
4/25/22 ......................... 3,108,656
2,646+ Trust 1993-87, Class 87-J,
4/25/22 ......................... 2,782,242
4,000 Trust 1993-138, Class 138-JK,
5/25/19 (I) ..................... 652,640
1,000 Trust 1993-156, Class 156-SE,
10/25/19 (ARM) .................. 1,084,160
73 Trust 1993-182, Class 182-J,
9/25/23 ......................... 72,684
12,000 Trust 1993-191, Class 191-S,
10/25/07 (I) .................... 112,500
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------- -------------------- ---------------------------------- ----------------
<S> <C> <C> <C>
$ 589 Trust 1993-191, Class 191-SD,
10/25/08 (ARM) .................. $ 517,449
791 Trust 1993-202, Class 202-VB,
11/25/23 (ARM) .................. 753,489
3,158 Trust 1993-223, Class 223-PT,
10/25/23 (I) .................... 476,601
1,177++ Trust 1994-13, Class 13-SM,
2/25/09 (ARM) ................... 1,252,646
620 Trust 1994-37, Class 37-SC,
3/25/24 (ARM) ................... 607,197
1,827 Trust 1994-39, Class 39-PE,
1/25/23 (I) ..................... 240,921
1,500++ Trust 1996-20, Class 20-SB,
10/25/08 (I) .................... 421,875
1,250 Trust 1997-50, Class 50-HK,
8/25/27 (I). .................... 317,935
1,500++ Trust 1997-90, Class 90-M,
1/25/28 (I) ..................... 498,281
119 Trust G93-25, Class 25-J,
12/25/19 (I) .................... 390,320
----------
25,402,007
----------
COMMERCIAL MORTGAGE-BACKED
SECURITIES-31.5%
AAA 462 Citicorp Mortgage
Securities, Inc.,
Series 1993-14, Class A4,
4.227%, 11/25/23 (ARM) .......... 358,096
AAA 14,282++ CS First Boston Mortgage
Securities Corp.,
Series 1997-C1, Class AX,
4/20/22** (l/O) ................. 1,443,776
BBB 500 DLJ Mortgage Acceptance Corp.,
Series 1997-CF1, 7.91%,
4/15/07** ....................... 508,385
A 750 FDIC REMIC Trust, Mortgage
Pass-Through Certificates,
Series 1994-C1, Class II-F,
8.70%, 9/25/25 .................. 799,923
AAA 19,910 First Union-Lehman Brothers-
Bank of America,
Series 1998-C2, Class IO,
5/28/28 (I/O) ................... 816,762
GMAC Commercial Mortgage
Securities Inc.,
AAA 500++ Series 1998-C2, Class A2,
6.42%, 8/15/08 .................. 504,137
AAA 22,963 Series 1998-C2, Class X,
8/15/23 (I/O) ................... 998,181
AAA 500 GS Mortgage Securities Corp.,
Series 1996-PL, Class A2,
7.41%, 2/15/27 .................. 534,120
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------- -------------------- --------------------------------------- ----------------
<S> <C> <C> <C>
LTC Commercial Mortgage
Pass-Through Certificates,
A+ $ 500 Series 1994-1, Class 1-D,
10.00%, 6/15/26 ...................... $ 513,743
AAA 406 Series 1996-1, Class 1-A,
7.06%, 4/15/28** ..................... 414,856
Merrill Lynch Mortgage Investors Inc.,
BBB 500 Series 1995-C1, Class D,
8.021%, 5/25/15 ...................... 522,201
BBB 500 Series 1996-C1, Class D,
7.42%, 4/25/28 ....................... 510,645
AAA 5,945 Series 1997-C2, Class IO,
12/1/29 (l/O) ........................ 435,075
BBB 500 Morgan Stanley Capital 1 Inc.,
Series 1995-GAL1, Class D,
8.25%, 8/15/27** ..................... 511,651
AAA 750 New York City Mortgage Loan Trust,
Multifamily Mortgage Pass-Through,
Class A-2,
6.75%, 6/25/11** ..................... 767,813
BBB+ 600 Nomura Asset Capital Corp.,
Series 1993-M1, Class A3,
7.64%, 11/25/03** .................... 616,188
PaineWebber Mortgage
Acceptance Corp. IV,
BBB 750 Series 1995-M1, Class D,
7.30%, 1/15/07** ..................... 761,473
BBB 500 Series 1995-M2, Class D,
7.20%, 12/01/03** .................... 505,574
AAA 1,000 Prudential Securities Secured
Financing Corp.,
Series 1998-C1, Class A1B,
6.506%, 7/15/08 ...................... 1,016,927
A 458 Resolution Trust Corp.,
Series 1994-C2, Class D,
8.00%, 4/25/25 ....................... 462,502
Aa2 456 Salomon Brothers Mortgage
Securities VII,
Series 1997-TZH, Class A1,
7.15%, 3/25/25** ..................... 474,059
AA 500 Structured Asset Securities
Corp.,
Series 1996-CFL, Class B,
6.303%, 2/25/28 ...................... 512,504
----------
13,988,591
----------
CORPORATE BONDS-26.0%
FINANCE & BANKING-9.6%
A3 500 Amsouth Bancorporation,
6.75%, 11/01/25 ....................... 506,075
A 600++ Equitable Life Assured Society,
6.95%, 12/01/05** ..................... 622,630
A 400 Lehman Brothers Holding,
6.75%, 9/24/01 ........................ 396,726
BB+ 500 Macsaver Financial Services Inc.,
7.875%, 8/01/03 ....................... 400,000
A1 500 Metropolitan Life Insurance Co.,
6.30%, 11/01/03** ..................... 508,620
A+ 1,000++ Morgan Stanley Group, Inc.,
10.00%, 6/15/08 ....................... 1,258,280
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------- -------------------- --------------------------------------- ----------------
<S> <C> <C> <C> <C>
BBB+ $ 500 PaineWebber Group, Inc.,
8.875%, 3/15/05 ....................... $ 549,805
----------
4,242,136
----------
CORPORATE BONDS
INDUSTRIALS-8.0%
A2 100@ American Airlines Inc., Secured
Equipment Trust,
Series 1990-M,
10.44%, 3/04/07 ..................... 129,083
A1 1,000++ Dow Capital BV,
9.20%, 6/01/10 ........................ 1,203,770
A+ 500 Ralcorp Holdings, Inc.,
8.75%, 9/15/04 ........................ 576,700
A- 500 Ralston Purina Co.,
9.25%, 10/15/09 ....................... 612,900
BBB- 500 Seagram Joseph E. & Sons, Inc.,
7.00%, 4/15/08 ........................ 488,030
BBB- 500 Tele-Communications Inc.,
8.25%, 1/15/03 ........................ 552,105
----------
3,562,588
----------
CORPORATE BONDS
SOVEREIGN & PROVINCIAL-4.6%
BBB- 500 Empresa Electric Guacolda SA,
7.95%, 4/30/03** ...................... 469,934
BBB+ 170 Empresa Electric Pehuhuenche,
7.30%, 5/01/03 ........................ 153,804
A3 500++ Israel Electric Corp. LTD.,
7.25%, 12/15/06** ..................... 498,275
Baa2 1,000 Petrozuata Finance Inc.,
7.63%, 4/01/09** ...................... 900,000
----------
2,022,013
----------
CORPORATE BONDS
UTILITIES-3.8%
A 500 360 Communications Co.,
7.50%, 3/01/06 ........................ 551,185
CCC 367 Mobile Energy Services Co. L.L.C.,
8.665%, 1/01/17 ....................... 73,397
BBB- 500 NRG Energy Inc.,
7.625%, 2/01/06** ..................... 514,229
Baa2 500 Ohio Edison Co.,
8.625%, 9/15/03 ....................... 562,180
----------
1,700,991
----------
ASSET BACKED SECURITIES-6.0%
AAA 1,230 Chase Credit Card Master Trust,
Series 1997-5, Class A,
6.194%, 8/15/05 ...................... 1,264,917
NR 262 Global Rated Eligible Asset Trust,**/@@
Series 1998-A, Class A-1,
7.33%, 9/15/07 ....................... 222,837
Structured Mortgage Asset
Residential Trust,**/@@
NR 620 Series 1997-2,
8.24%, 3/15/06 ....................... 564,708
NR 676 Series 1997-3,
8.57%, 4/15/06 ....................... 615,767
----------
2,668,229
----------
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- ------------- ------------ -------------------------------------- ------------
<S> <C> <C> <C>
STRIPPED MORTGAGE-BACKED
SECURITIES-8.3%
Federal Home Loan
Mortgage Corp.,
$ 1,572 Series 65, Class 65-I,
8/15/20 (I/O) ....................... $ 389,502
676 Series 141, Class 141-H,
5/15/21 (I/O) ....................... 194,115
205 Series 1700, Class 1700-GA,
2/15/24 (P/O) ....................... 144,683
2,571 Series 1900, Class 1900-SV,
8/15/08 (I/O) ....................... 529,761
48,963 Series 1995, Class 1995-SB,
10/15/27 (I/O) ...................... 100,373
Federal National Mortgage Association,
49 Trust G-21, Class 21-L,
7/25/21 (I/O) ....................... 124,842
3,009 Trust 1994-42, Class 42-SO,
3/25/23 (I/O) ....................... 483,979
1,341+ Trust 1994-46, Class 46-D,
11/25/23 (P/O) ...................... 962,597
489++ Trust 1997-85, Class 85-LE,
10/25/23 (P/O) ...................... 469,463
58,356 Trust 1997-81, Class 81-SD,
12/18/27 (I/O) ...................... 42,273
Salomon Brothers Mortgage
Securities Inc. VI,
206 Series 1987-3, CIass A,
10/23/17 (P/O) ...................... 178,304
206 Series 1987-3, Class B,
10/23/17 (I/O) ...................... 56,686
---------
3,676,578
---------
U.S. GOVERNMENT AND
AGENCY SECURITIES-6.6%
625 Small Business Administration
Participation Certificate,
Series 1998-10, Class 10-A,
6.12%, 2/01/08 ...................... 638,375
U.S. Treasury Bonds,
1,500++ 6.375%, 8/15/27 ..................... 1,728,510
U.S. Treasury Notes,
105++ 5.50%, 2/15/08 ...................... 112,186
385++ 6.625%, 5/15/07 ..................... 437,156
---------
2,916,227
---------
TAXABLE MUNICIPAL BONDS-7.6%
A+ 500 Fresno California Pension
Obligation, Series 1994,
7.80%, 6/01/14 ...................... 589,605
AAA 500 Kern County California
Pension Obligation,
6.98%, 8/15/09 ...................... 546,960
Los Angeles County California
Pension Obligation,
AAA 1,000 Series A, 8.62%, 6/30/06 ............. 1,185,250
AAA 500 Series D, 6.97%, 6/30/08 ............. 544,425
AAA 500 Orleans Parish Louisiana
School Board, Series A,
6.60%, 2/01/08 ...................... 529,825
---------
3,396,065
---------
</TABLE>
<TABLE>
<CAPTION>
NOTIONAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- ------------- --------------------- ----------------------------------------- ---------------
<S> <C> <C> <C>
PURCHASED OPTIONS-0.3%
CALL OPTIONS PURCHASED-0.3%
$ 5,000 Interest Rate Swap,
3 month LIBOR over 5.60%
expires 8/07/00 (cost $68,750) .......... $ 143,053
-----------
Total investments before outstanding
call options written and
investments sold short
(cost $60,036,130)....................... 63,718,478
-----------
CALL OPTIONS WRITTEN-(0.8%)
Interest Rate Swap,
(25,000) 3 month LIBOR over 5.25%
expires 12/01/98 ........................ (160,775)
(8,000) 3 month LIBOR over 5.50%
expires 8/10/99 ......................... (210,912)
-----------
Total call options written
(premium received $130,250).............. (371,687)
-----------
PRINCIPAL
AMOUNT
(000)
----------------
INVESTMENT SOLD SHORT-(12.7%)
(5,000) U. S. Treasury Bonds,
6.125%, 11/15/27
(proceeds $5,623,438).................... (5,626,550)
-----------
Total investments, net of outstanding
call options written and
investments sold short-130.0%
(cost $54,282,442) ...................... 57,720,241
Liabilities in excess of other
assets-(30.0%) .......................... (13,325,371)
-----------
NET ASSETS-100% ......................... $44,394,870
===========
</TABLE>
- ---------------------
* Using the higher of Standard & Poor's or Moody's rating.
** Private placements restricted as to resale.
+ 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.
@@ Illiquid securities representing 2.2% of portfolio assets.
<TABLE>
<S> <C>
KEY TO ABBREVIATIONS
ARM - Adjustable Rate Mortgage.
I - Denotes a CMO with Interest only characteristics.
I/O - Interest only.
LIBOR - London InterBank Offer Rate.
P - Denotes a CMO with Principal only characteristics.
P/O - Principal only.
REMIC - Real Estate Mortgage Investment Conduit.
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT
GRADE 2009 TERM TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
ASSETS
Investments, at value
(cost $60,036,130) (Note 1) ..................... $63,718,478
Cash .............................................. 94,987
Deposit with broker as collateral for investment
sold short (Note 1) ............................. 5,818,750
Interest receivable ............................... 754,412
Interest rate cap, at value
(amortized cost $106,466) (Notes 1 & 3) ......... 24,675
Unrealized appreciation on interest rate swaps
(Note 1 and 3) .................................. 7,443
Receivables from broker-variation margin
(Notes 1 & 3) ................................... 1,700
Other assets (Note 1) ............................. 6,197
------------
70,426,642
------------
LIABILITIES
Reverse repurchase agreements (Note 4) ............ 19,770,086
Investment sold short, at value
(proceeds $5,623,438) (Note 1)................... 5,626,550
Call options written, at value
(premium received $130,250) (Note 1) ............ 371,687
Interest payable .................................. 193,164
Investment advisory fee payable (Note 2) .......... 20,914
Administration fee payable (Note 2) ............... 5,704
Other accrued expenses ............................ 43,667
------------
26,031,772
------------
NET ASSETS ........................................ $44,394,870
============
Net assets were comprised of:
Common stock:
Par value (Note 5) ............................. $ 29,571
Paid-in capital in excess of par ................. 40,680,858
------------
40,710,429
------------
Undistributed net investment income .............. 1,734,672
Accumulated net realized loss .................... (1,387,140)
Net unrealized appreciation ...................... 3,336,909
------------
Net assets, October 31, 1998 ..................... $44,394,870
============
Net asset value per share:
($44,394,870 [div] 2,957,093 shares of
common stock issued and outstanding) ............ $ 15.01
============
- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT
GRADE 2009 TERM TRUST INC.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1998
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest earned (including net amortization of
premium of $786,608 and net of interest
expense of $1,055,612) ....................... $4,006,378
----------
Operating Expenses
Investment advisory ........................... 244,803
Administration ................................ 65,555
Reports to shareholders ....................... 32,000
Audit ......................................... 21,000
Custodian ..................................... 19,000
Directors ..................................... 17,000
Transfer agent ................................ 9,500
Legal ......................................... 2,000
Miscellaneous ................................. 28,954
----------
Total operating expenses ..................... 439,812
----------
Net investment income before excise tax ......... 3,566,566
Excise tax ...................................... 32,632
----------
Net investment income ........................... 3,533,934
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 3)
Net realized gain (loss) on:
Investments ................................... 501,258
Futures ....................................... (120,221)
Swaps ......................................... 26,650
Written options ............................... 91,250
----------
498,937
----------
Net change in unrealized
appreciation (depreciation) on:
Investments ................................... 405,553
Interest rate cap ............................. (45,352)
Futures ....................................... 85,204
Swaps ......................................... 11,870
Short sales ................................... (3,112)
Written options ............................... (241,437)
----------
212,726
----------
Net gain on investments ......................... 711,663
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS .................................... $4,245,597
==========
See Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT
GRADE 2009 TERM TRUST INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED OCTOBER 31, 1998
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH
Cash flows provided by operating activities:
Interest received ........................................... $ 5,801,906
Operating expenses and excise taxes paid .................... (470,791)
Interest expense paid ....................................... (916,408)
Proceeds from disposition of short-term portfolio
investments-net ........................................... 137,147
Purchases of long-term portfolio investments ................ (22,564,004)
Proceeds from disposition of long-term portfolio
investments ............................................... 15,526,779
Proceeds from short sale transactions ....................... 5,623,438
Other ....................................................... 197,592
-----------
Net cash flows provided by operating activities .............. 3,335,659
-----------
Cash flows used for financing activities:
Decrease in reverse repurchase agreements .................. (592,914)
Cash dividends paid ......................................... (2,686,458)
-----------
Net cash flows used for financing activities ................. (3,279,372)
-----------
Net increase in cash ......................................... 56,287
Cash at beginning of year .................................... 38,700
-----------
Cash at end of year .......................................... $ 94,987
===========
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 ......... $ 4,245,597
-----------
Increase in investments ...................................... (163,644)
Net realized gain on investments, options and
futures .................................................... (498,937)
Increase in net unrealized appreciation ...................... (212,727)
Decrease in interest rate cap ................................ (32,223)
Increase in interest receivable .............................. (46,691)
Increase due to broker-variation margin ...................... (3,476)
Increase in deposits with brokers for investments
sold short ................................................. (5,818,750)
Increase in other assets ..................................... (919)
Decrease in payable for investments purchased ................ (119,285)
Increase in payable for investments sold short ............... 5,623,438
Increase in written options .................................. 221,500
Increase in interest payable ................................. 139,204
Increase in accrued expenses and other liablilities .......... 2,572
-----------
Total adjustments ........................................... (909,938)
-----------
Net cash flows provided by operating activities .............. $ 3,335,659
===========
- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT
GRADE 2009 TERM TRUST INC.
STATEMENTS OF CHANGES IN
NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------
1998 1997
INCREASE (DECREASE) IN
NET ASSETS
Operations:
Net investment income ............ $ 3,533,934 $ 3,244,398
Net realized gain on investments,
options and futures ............. 498,937 69,840
Net change in unrealized .........
appreciation .................... 212,726 2,352,346
----------- -----------
Net increase in net
assets resulting from
operations ...................... 4,245,597 5,666,584
Dividends from
net investment income ............ (2,661,192) (2,661,232)
----------- -----------
Total increase ................... 1,584,405 3,005,352
NET ASSETS
Beginning of year .................. 42,810,465 39,805,113
----------- -----------
End of year ........................ $44,394,870 $42,810,465
=========== ===========
See Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
1998 1997 1996 1995 1994
PER SHARE OPERATING PERFORMANCE ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ......................... $ 14.48 $ 13.46 $ 13.40 $ 11.94 $ 14.56
------- ------- ------- ------- --------
Net investment income (net of interest
expense of $0.36, $0.36, $0.35, $0.68, and $0.34).......... 1.20 1.10 1.00 0.85 0.95
Net realized and unrealized gain (loss)
on investments ............................................ 0.23 0.82 ( 0.03) 1.60 (2.48)
------- ------- ------- ------- --------
Net increase (decrease) from investment
operations ................................................ 1.43 1.92 0.97 2.45 (1.53)
------- ------- ------- ------- --------
Dividends and Distributions:
Dividends from net investment income ....................... (0.90) (0.90) (0.91) (0.85) (0.95)
Distributions from net realized gain on investments ........ -- -- -- -- (0.02)
Distributions from paid-in capital ......................... -- -- -- (0.14) (0.09)
------- ------- ------- ------- --------
Total dividends and distributions .......................... (0.90) (0.90) (0.91) (0.99) (1.06)
------- ------- ------- ------- --------
Capital charge with respect to issuance of shares .......... -- -- -- -- (0.03)
------- ------- ------- ------- --------
Net asset value, end of year* .............................. $ 15.01 $ 14.48 $ 13.46 $ 13.40 $ 11.94
======= ======= ======= ======= ========
Per share market value, end of year* ....................... $ 13.25 $ 12.13 $ 11.00 $ 11.13 $ 10.00
======= ======= ======= ======= ========
TOTAL INVESTMENT RETURN+ ................................... 17.15% 19.05% 6.67% 22.43% (20.41%)
RATIOS TO AVERAGE NET ASSETS:
Operating Expenses@ ........................................ 1.01% 1.02% 1.12% 1.00% 1.04%
Net investment income ...................................... 8.13% 8.03% 7.59% 6.78% 7.31%
SUPPLEMENTAL DATA:
Average net assets (in thousands) .......................... $43,482 $40,416 $38,786 $37,080 $ 38,468
Portfolio turnover ......................................... 25% 36% 58% 116% 41%
Net assets, end of year (in thousands) ..................... $44,395 $42,810 $39,805 $39,634 $ 35,320
Reverse repurchase agreements outstanding,
end of year (in thousands) ................................ $19,770 $20,363 $18,081 $18,489 $ 16,003
Asset coverage++ ........................................... $ 3,246 $ 3,102 $ 3,209 $ 3,144 $ 3,207
</TABLE>
- ----------
* Net asset value and market value are published in THE WALL STREET JOURNAL
each Monday.
@ The ratios of operating expenses, including interest expense and excise tax,
to average net assets were 3.51%, 3.65%, 3.81%, 6.42%, and 3.65%, 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 year 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.
++ Per $1,000 of reverse repurchase agreements outstanding.
The information above represents the audited operating performance for a share
of common stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each of the years 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
<PAGE>
- --------------------------------------------------------------------------------
5
THE BLACKROCK BROAD INVESTMENT
GRADE 2009 TERM TRUST INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION ACCOUNTING POLICIES
The BlackRock Broad Investment Grade 2009 Term Trust & Inc. (the "Trust"),
a Maryland corporation, is a diversified, closed-end management investment
company. The 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 and asset-backed
securities, interest rate swaps, caps, floors and non-exchange traded options
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 60 days or less are valued at
amortized cost, if their term to maturity from date of purchase is 60 days or
less. Short-term securities with a term to maturity greater than 60 days from
the date of purchase are valued at current market quotations until maturity.
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
more volatile 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
11
<PAGE>
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.
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.
INTEREST RATE SWAPS: In an interest rate swap, one investor pays a floating
rate of interest on a notional principal amount and receives a fixed rate of
interest on the same notional principal amount for a specified period of time.
Alternatively, an investor may pay a fixed rate and receive a floating rate.
Rate swaps were conceived as asset/liability management tools. In more complex
swaps, the notional principal amount may decline (or amortize) over time.
During the term of the swap, changes in the value of the swap are
recognized as unrealized gains or losses by "marking-to-market" to reflect the
market value of the swap. When the swap is terminated, the Trust will record 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, if any.
The Trust is exposed to credit loss in the event of non-performance by the
other party to the interest rate swap. However, the Trust does not anticipate
non-performance by any counterparty. Interest rate swaps may be used by the
Trust to manage the duration of the Trust's portfolio reflecting the view of the
Trust's management in the direction of interest rates.
SWAP OPTIONS: Swap options are similar to options on securities except that
instead of selling or purchasing the right to buy or sell a security, the
writer or purchaser of the swap option is granting or buying the right to enter
into a previously agreed upon interest rate swap agreement at any time before
the expiration of the option. Premiums received or paid from writing or
purchasing options are recorded as liabilities or assets and are 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
commission, 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
loss on investment transactions.
The main risk that is associated with purchasing swap options is that the
swap option expires without being exercised. In this case, the option expires
worthless and the premium paid for the swap option is considered the loss. The
main risk that is associated with the writing of a swap option is the market
risk of an unfavorable change in the value of the interest rate swap underlying
the written swap option.
Swap options may be used by the Trust to manage the duration of the
Trust's portfolio reflecting the view of the Trust's management in the
direction of interest rates.
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
12
<PAGE>
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 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.
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 or floating 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.
The Trust is exposed to credit loss in the event of non-performance by the
other party to the interest rate cap. However, the Trust does not anticipate
non-performance by any counterparty.
Transactions fees paid or received by the Trust are recognized as assets
or liabilities and amortized or accreted into interest expense or income over
the life of the interest rate cap. The asset or liability is subsequently
adjusted to the current market value of the interest rate cap purchased or
sold. Changes in the value of the interest rate cap are recognized as
unrealized gains and losses.
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
deficiency, if any, of a floating rate under a specified fixed or floating
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. Selling
interest rate floors reduces the portfolio's duration, making it less sensitive
to changes in interest rates from a market value perspective. The Trust's
leverage provides extra income in a period of falling rates. Selling floors
reduces some of that advantage by partially monetizing it as an up front
payment which the Trust receives.
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.
Transactions fees paid or received by the Trust are recognized as assets
or liabilities and amortized or accreted into interest expense or income over
the life of the interest rate floor. The asset or liability is subsequently
adjusted to the current market value of the interest rate floor purchased or
sold. Changes in the value of the interest rate floor are recognized as
unrealized gains and losses.
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.
FEDERAL INCOME 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.
13
<PAGE>
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. All such costs have been amortized ratably
over a period of sixty months from the date the Trust commenced investment
operations.
RECLASSIFICATION OF CAPITAL ACCOUNTS: Effective January 1, 1994, the Trust
began accounting and reporting for permanent differences between financial and
tax reporting in accordance with the American Institute of Certified Public
Accountants' Statement of Position 93-2: Determination, Disclosure and
Financial Statement of Income, Capital Gain and Return of Capital Distributions
by Investment Companies. The effect of adopting the statement for the year
ended October 31, 1998 was to increase accumulated net realized loss by $16,027
and increase undistributed net investment income by $34,572, resulting in a
decrease to paid-in-capital in excess of par by $18,545. Net investment income,
net realized losses and net assets were not affected by this change.
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
BlackRock Advisors, Inc., which is an indirect majority-owned subsidiary of PNC
Bank, N.A., 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 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 SECURITIES
Purchases and sales of investment securities, other than short-term
investments and dollar rolls, for the year ended October 31, 1998 aggregated
$16,625,969 and $15,526,779, respectively.
The Trust may invest in securities which are not readily marketable,
including those which are restricted as to disposition under securities law
("restricted securities"). At October 31, 1998, the Trust held 17.1% 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 by PNC 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 PNC Bank or its affiliates, including Midland Loan
Services, Inc. It is possible under certain circumstances, PNC Mortgage
Securities Corp. or its affiliates, including Midland Loan Services, Inc. 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, including Midland Loan Services, Inc.
The federal income tax basis of the Trust's investments at October
31,1998 was $60,063,522, and accordingly, net unrealized appreciation for
federal income tax purposes was $3,654,956 (gross unrealized
appreciation-$4,913,748, gross unrealized depreciation-$1,258,792).
For Federal income tax purposes, the Trust had a capital loss
carryforward at October 31, 1998 of approximately $1,400,000 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.
Details of open financial futures contracts at October 31, 1998 are as
follows:
<TABLE>
<CAPTION>
VALUE AT
NUMBER OF EXPIRATION VALUE AT OCTOBER 31, UNREALIZED
CONTRACTS TYPE DATE TRADE DATE 1998 DEPRECIATION
- ---------------- ------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Short Position:
8 Eurodollar Dec. 98 $1,873,158 $1,899,700 $ (26,542)
=========
</TABLE>
14
<PAGE>
The Trust entered into an interest rate cap. Under this agreement, the
Trust receives the excess, if any, of three-month LIBOR over the fixed rate of
6.00%. The Trust paid a transaction fee for the agreement. Details of the cap
are as follows:
<TABLE>
<CAPTION>
NOTIONAL VALUE AT
AMOUNT FIXED FLOATING TERMINATION AMORTIZED OCTOBER 31, UNREALIZED
(000) RATE RATE DATE COST 1998 DEPRECIATION
- ---------- ---------- --------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$5,000 6.00% 3 month LIBOR 2/19/02 $106,466 $24,675 $ (81,791)
=========
</TABLE>
Details of open interest rate swaps at October 31, 1998 are as follows:
<TABLE>
<CAPTION>
NOTIONAL UNREALIZED
AMOUNT TERMINATION APPRECIATION
(000) TYPE RATE FLOATING RATE DATE (DEPRECIATION)
- ------------ --------------- ------------ ------------------ ------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 14,550 Interest Rate 6.3650% 3 month LIBOR 7/27/00 $ 635,174
(10,000) Interest Rate 6.4210% 3 month LIBOR 7/27/01 (578,813)
5,000 Interest Rate 3 month 3 month T-Bill 9/10/03
LIBOR +0.8175% (48,918)
----------
$ 7,443
==========
</TABLE>
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
for the year ended October 31, 1998 was approximately $18,614,002 at a weighted
average interest rate of approximately 5.55%. The maximum amount of reverse
repurchase agreements outstanding at any month-end during the period was
$20,464,250 as of November 30, 1997 which was 32% of total assets.
DOLLAR ROLLS: The Trust may enter into dollar rolls in which the Trust sells
securities for delivery in the current month and simultaneously contracts to
repurchase substantially similar (same type, coupon and maturity) securities on
a specified future date. During the roll period the Trust forgoes principal and
interest paid on the securities. The Trust will be compensated by the interest
earned on the cash proceeds of the initial sale and by the lower repurchase
price at the future date. The Trust did not enter into any dollar roll
transactions during the year ended October 31, 1998.
NOTE 5. CAPITAL
There are 200 million shares of $.01 par value common stock authorized. Of
the 2,957,093 shares outstanding at October 31, 1998, the Adviser owned 7,093
shares.
NOTE 6. DIVIDENDS
Subsequent to October 31, 1998, the Board of Directors of the Trust
declared a dividend from undistributed earnings of $0.075 per share payable
November 30, 1998 to shareholders of record on November 16, 1998.
15
<PAGE>
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THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
The BlackRock Broad Investment Grade 2009 Term Trust Inc.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of The BlackRock Broad Investment Grade
2009 Term Trust Inc. as of October 31, 1998 and the related statements of
operations and of cash flows for the year then ended and of changes in net
assets for each of the two years in the period then ended, and financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at October
31, 1998 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The BlackRock Broad
Investment Grade 2009 Term Trust Inc. at October 31, 1998 and the results of
its operations, its cash flows, the changes in its net assets and the financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
- --------------------------
Deloitte & Touche LLP
New York, New York
December 11, 1998
16
<PAGE>
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THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
TAX INFORMATION
- --------------------------------------------------------------------------------
We wish to advise you as to the federal tax status of dividends and
distributions paid by the Trust during its fiscal year ended October 31, 1998.
During the fiscal year ended October 31, 1998, the Trust paid dividends
totalling $.90 per share all of which is taxable as ordinary income. For
federal income tax purposes, the aggregate of any dividends and short-term
capital gains distributions you received are reportable in your 1998 federal
income tax return as ordinary income. Further, we wish to advise you that your
income dividends do not qualify for the dividends received deduction.
For the purpose of preparing your 1998 annual federal income tax return,
however, you should report the amounts as reflected on the appropriate Form
1099 DIV which will be mailed to you in January 1999.
- --------------------------------------------------------------------------------
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 and 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
transfer agent, as dividend disbursing agent.
The Plan Agent serves as agent for the shareholders in administering the
Plan. After the Trust declares a dividend or determines to make a capital gain
distribution, the 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 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.
17
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THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
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.
YEAR 2000 READINESS DISCLOSURE. The Trust is currently in the process of
evaluating its information technology infrastructure for Year 2000 compliance.
Substantially all of the Trust's information systems are supplied by the
Adviser. The Adviser has advised the Trust that it is currently evaluating
whether such systems are year 2000 compliant and that it expects to incure
costs of up to approximately five hundred thousand dollars to complete such
evaluation and to make any modifications to its systems as may be necessary to
achieve Year 2000 compliance. The Adviser has advised the Trust that it expects
to have fully tested its systems for Year 2000 compliance by December 31, 1998.
The Trust may be required to bear a portion of such cost incurred by the
Adviser in this regard. The Adviser has advised the Trust that it does not
anticipate any material disruption in the operations of the Trust as a result
of any failure by the Adviser to achieve Year 2000 compliance. There can be no
assurance that the costs will not exceed the amount referred to above or that
the Trust will not experience a disruption in operations.
The Adviser has advised the Trust that it is in the process of evaluating
the Year 2000 compliance of various suppliers of the Adviser and the Trust. The
Adviser has advised the Trust that it intends to communicate with such
suppliers to determine their Year 2000 compliance status and the extent to
which the Adviser or the Trust could be affected by any supplier's Year 2000
compliance issues. To date, however, the Adviser has not received responses
from all such suppliers with respect to their Year 2000 compliance, and there
can be no assurance that the systems of such suppliers, who are beyond the
Trust's control, will be Year 2000 compliant. In the event that any of the
Trust's significant suppliers do not successfully and timely achieve Year 2000
compliance, the Trust's business or operations could be adversely affected. The
Adviser has advised the Trust that it is in the process of preparing a
contingency plan for Year 2000 compliance by its suppliers. There can be no
assurance that such contingency plan will be successful in preventing a
disruption of the Trust's operations.
The Trust is designating this disclosure as its Year 2000 readiness
disclosure for all purposes under the Year 2000 Information and Readiness
Disclosure Act and the foregoing information shall constitute a Year 2000
statement for purposes of that Act.
18
<PAGE>
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THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
THE TRUST'S INVESTMENT OBJECTIVE
The BlackRock Broad Investment Grade 2009 Term Trust's investment objective is
to manage a portfolio of fixed income securities that will return $15 per share
(the initial public offering price per share) to investors on or about December
31, 2009 while providing high monthly income.
WHO MANAGES THE TRUST?
BlackRock Financial Management, Inc. ("BlackRock") is an SEC-registered
investment adviser. BlackRock and its affiliates currently manage over $122
billion on behalf of taxable and tax-exempt clients worldwide. Strategies
include fixed income, equity and cash and may incorporate both domestic and
international securities. Domestic fixed income strategies utilize the
government, mortgage, corporate and municipal bond sectors. BlackRock manages
twenty-one closed-end funds that are traded on either the New York or American
stock exchanges, and a $23 billion family of open-end equity and bond funds.
Current institutional clients number 410, domiciled in the United States and
overseas.
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
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 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.
19
<PAGE>
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 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 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.
20
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THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
GLOSSARY
- --------------------------------------------------------------------------------
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 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).
21
<PAGE>
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.
INVERSE-FLOATING RATE MORTGAGES: Mortgage instruments with coupons that adjust
at periodic intervals according to a formula
which sets inversely with a market level
interest rate index.
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.
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.
22
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BLACKROCK FINANCIAL MANAGEMENT, INC.
SUMMARY OF CLOSED-END FUNDS
- --------------------------------------------------------------------------------
TAXABLE TRUSTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STOCK MATURITY
SYMBOL DATE
PERPETUAL TRUSTS ---------- ---------
<S> <C> <C>
The BlackRock Income Trust Inc. BKT N/A
The BlackRock North American Government Income Trust Inc. BNA N/A
TERM TRUSTS
The BlackRock 1998 Term Trust Inc. BBT 12/98
The BlackRock 1999 Term Trust Inc. BNN 12/99
The BlackRock Target Term Trust Inc. BTT 12/00
The BlackRock 2001 Term Trust Inc. BLK 06/01
The BlackRock Strategic Term Trust Inc. BGT 12/02
The BlackRock Investment Quality Term Trust Inc. BQT 12/04
The BlackRock Advantage Term Trust Inc. BAT 12/05
The BlackRock Broad Investment Grade 2009 Term Trust Inc. BCT 12/09
</TABLE>
TAX-EXEMPT TRUSTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STOCK MATURITY
SYMBOL DATE
PERPETUAL TRUSTS --------- ---------
<S> <C> <C>
The BlackRock Investment Quality Municipal Trust Inc. BKN N/A
The BlackRock California Investment Quality Municipal Trust Inc. RAA N/A
The BlackRock Florida Investment Quality Municipal Trust RFA N/A
The BlackRock New Jersey Investment Quality Municipal Trust Inc. RNJ N/A
The BlackRock New York Investment Quality Municipal Trust Inc. RNY N/A
TERM TRUSTS
The BlackRock Municipal Target Term Trust Inc. BMN 12/06
The BlackRock Insured Municipal 2008 Term Trust Inc. BRM 12/08
The BlackRock California Insured Municipal 2008 Term Trust Inc. BFC 12/08
The BlackRock Florida Insured Municipal 2008 Term Trust BRF 12/08
The BlackRock New York Insured Municipal 2008 Term Trust Inc. BLN 12/08
The BlackRock Insured Municipal Term Trust Inc. BMT 12/10
</TABLE>
IF YOU WOULD LIKE FURTHER INFORMATION PLEASE CALL BLACKROCK AT
(800) 227-7BFM (7236)
OR CONSULT WITH YOUR FINANCIAL ADVISOR.
23
<PAGE>
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
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) 543-6217
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
(800) 699-1BFM
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1434
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
This report is for shareholder information. This is not a prospectus
intended for use in the purchase or sale of any securities.
THE BLACKROCK BROAD INVESTMENT GRADE 2009
TERM TRUST INC.
c/o Princeton Administrators, L.P.
P.O. Box 9095
Princeton, NJ 08543-9095
(800) 543-6217
- --------------------------------------------------------------------------------
THE BLACKROCK
BROAD INVESTMENT
GRADE 2009
TERM TRUST INC.
- --------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1998
[GRAPHIC OMITTED]
[LOGO] Printed on recycled paper 092472-10-6
