--------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
CONSOLIDATED SEMI-ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISOR
--------------------------------------------------------------------------------
May 31, 2002
Dear Shareholder:
With an economy looking to find secure footing, volatility was widespread
through the overall marketplace for the semi-annual period. After the events of
September 11th, investors flocked to the bond market in search of stability.
However, at the onset of the period, returns in the fixed income markets were
depressed as strong consumer and military spending indicated the potential for
an economic recovery. Fluctuations continued into 2002 as bonds posted strong
returns during the first two months of the new year. In the closing days of
March, fixed income securities reversed their positive trend only to once again
rally during April. For the six months ended April 30, 2002, the LEHMAN BROTHERS
AGGREGATE INDEX, a broad measure of the taxable bond market, finished relatively
flat at -0.01%.*
Much of the activity in the market can be attributed to the actions of the
Federal Reserve Board (the "Fed"). After eleven rate reductions in 2001, the Fed
ended its accommodative monetary policy in the first quarter to assess the
impact of 4.75% of monetary stimulus on the economy. While this was an
acknowledgement that the country is in the early stages of economic recovery, it
also signaled that rates might rise on the belief that a comeback in inflation
poses the same risk as further economic weakness. In March, fixed income markets
suffered following the Fed's decision to leave rates unchanged, which led the
investment community to anticipate an economy in the early stages of recovery.
Looking broadly at the fixed income market, mortgage-backed securities
provided strong returns as fears of rising interest rates reduced the volume of
prepayments as the speed of mortgage refinancings decreased. Corporate bonds
experienced mixed returns over the period as concerns surrounding corporate
earnings and accounting practices increased the event risk within that sector
and impeded returns. In the wake of Enron's collapse, many companies have now
begun to reduce their debt and increase their credit quality. Longer-term U.S.
Government bond prices (which move in the opposite direction from yields) lagged
during the period with more promising economic data emerging throughout the
period. However, towards the latter part of the period, we believed Treasuries
were attractively priced and that rates should fall, barring a robust economic
recovery.
Closing out the period, despite rising unemployment numbers in April, U.S.
manufacturing, measured by the ISM (Institute for Supply Management) Index,
remained at expansionary levels while retail sales continued to grow. Inflation
levels remained relatively benign and low inventory levels should continue to
support the manufacturing data. However, we are skeptical about the continued
strength of consumer demand, which is essential to a sustained economic
recovery.
The fluctuations seen in the bond market over the last six months
reemphasize the need for investors to develop a strategy that best suits their
overall goals and risk tolerance. Working with a financial advisor is one of the
best means of doing this, and we encourage you to consult one when making an
investment.
The semi-annual report includes a summary of market conditions over the
period, a review of the strategy employed by your Trust's portfolio managers,
the Trust's unaudited financial statements and a listing of the portfolio's
holdings. We encourage you to read the report and we thank you for making
BlackRock part of your investment program.
Sincerely,
/s/ Laurence D. Fink /s/ Ralph L. Schlosstein
---------------------- -----------------------------
Laurence D. Fink Ralph L. Schlosstein
Chairman President
----------
* The Lehman Brothers Aggregate Index is used to measure the performance of
the U.S. investment grade fixed rate bond market. The Index is unmanaged and
cannot be purchased directly.
1
May 31, 2002
Dear Shareholder:
We are pleased to present the unaudited semi-annual report for The
BlackRock Broad Investment Grade 2009 Term Trust Inc. (the "Trust") for the six
months ended April 30, 2002. 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 changes in the Trust's stock price and NAV:
----------------------------------------------------------------
4/30/02 10/31/01 CHANGE HIGH LOW
-----------------------------------------------------------------------------------------------
STOCK PRICE $14.49 $14.39 0.69% $16.1514 $14.17
-----------------------------------------------------------------------------------------------
NET ASSET VALUE (NAV) $16.28 $16.05 1.43% $16.28 $15.51
-----------------------------------------------------------------------------------------------
10-YEAR U.S. TREASURY NOTE 5.09% 4.23% 20.33% 5.43% 4.18%
-----------------------------------------------------------------------------------------------
THE FIXED INCOME MARKETS
Economic performance was mixed during the semi-annual period although
increasingly positive economic data surfaced as time progressed. The U.S.
economy showed signs of a rebound on the heels of strong consumer and military
spending, which helped to overcome the devastation of September 11th. The Fed
also provided further monetary stimulus by cutting interest rates two additional
times prior to year-end, leaving the federal funds rate at 1.75%. This was in
addition to nine previous interest rate reductions by the Fed during 2001. The
Consumer Confidence Index initially reached its lowest level in eight years
during November, but marked a steady climb during the remainder of the period as
investors readily anticipated an economic recovery. The economy continued to see
increasingly optimistic data emerge throughout the first quarter of 2002. Gross
Domestic Product (GDP) during the first quarter rose 5.6%, the fastest rate in
two years, and the manufacturing sector saw substantial gains as the Purchasing
Managers Index indicated expansion for the first time in 19 months. Although
productivity increased 8.6% during the first quarter, unemployment in April
reached 6.0%. However, the unexpectedly high unemployment number is believed to
be a result of recent legislation prompting many to apply for extended benefits.
After surprising growth in the first quarter of 2002, the fixed income markets
came under pressure following the March 19th announcement by the Federal Open
Market Committee (FOMC) to leave rates steady, citing a bias shift from
"potential weakness" to "neutral." The equity markets did not significantly
benefit from the emergence of the strong growth indicators as they were
challenged by several high profile bankruptcies. Closing out the period, April
saw the largest advancement in retail sales in six months and inflationary
pressures remain relatively in check. However, concerns regarding the corporate
environment and violence in the Middle East and Asia have left many investors
apprehensive about the markets. Going forward, although low inventory levels
should continue to provide support for manufacturing data, concerns exist
surrounding the long-term strength of the highly leveraged consumer.
Following a steepening of the yield curve throughout the majority of 2001,
yields over the period trended higher causing the curve to flatten. Signs of a
recovering economy caused yields to rise in sympathy with expectations of a
higher Fed funds rate by year-end. The 5- to 10-year portion of the yield curve
came under the most pressure, rising 93 and 86 basis points, respectively,
during the period. Yields on 2- and 30-year maturities also suffered during the
period rising 80 and 72 basis points, respectively. After struggling following
the FOMC's announcement of a bias shift in March, Treasuries bounced back in
April. April's
2
performance was driven by economic pessimism, which surfaced as enthusiasm for a
rapid economic recovery waned amidst tensions in the Middle East, cautious
corporate earnings announcements and government reports of a slower growth
pattern. Looking ahead, a budget surplus of only $78 billion and a 30% decline
in tax revenues for 2001 has caused Treasury finances to deteriorate sharply and
should result in larger auction sizes. However, the allowable debt limit set by
Congress will soon be reached, possibly leading the Treasury to pursue
additional methods of financing. As of April 30, 2002, the 10-year Treasury was
yielding 5.09% versus 4.23% on October 31, 2001.
For the period, the LEHMAN BROTHERS MORTGAGE INDEX returned 1.57% versus
-0.01% for the LEHMAN BROTHERS AGGREGATE INDEX. Mortgages saw poor performance
during the first two months of the period as prepayments increased dramatically
and the volume of refinancing reached record levels. The first quarter of 2002
fared much better for mortgage-backed securities, which benefited from reduced
volatility and increased demand. During the first three months of 2002,
refinancing activity, as measured by the MBAA (Mortgage Banking Association of
America) Refinance Index, declined 78% from the all-time high it reached in
November, helping mortgages to outperform Treasuries by 1.14% on a duration
adjusted basis. Although lower coupon mortgages outperformed during November and
December, decreased volatility in 2002 allowed higher coupons to outperform
lower coupon issues year-to-date. Prepayments are expected to remain elevated
for several months as over 25% of the mortgage coupons outstanding have an
incentive to refinance. Despite increasing discussions of reform initiatives
that could potentially affect FNMA and FHLMC, there has been little impact on
their performance.
For the semi-annual period, the LEHMAN BROTHERS U.S. CREDIT INDEX returned
-0.45% versus -0.01% for the LEHMAN BROTHERS AGGREGATE INDEX. No clear pattern
emerged in the corporate sector, as there was great disparity in returns among
sub-sectors and individual names. The market suffered from accusations regarding
accounting irregularities, earnings quality issues, off-balance sheet financing
risks, and volatile equity and Treasury markets. For the period, higher quality
intermediate maturity bonds outperformed lower quality investment grade issues.
Following record gross new issuance of $587 billion in 2001, market expectations
for supply in 2002 are lower due to reductions in capital expenditure, declining
global mergers and acquisitions and a lower level of overall economic activity.
Escalated accounting concerns have prompted rating agencies to consider harsher
standards and have led to increasing downgrades relative to upgrades. Some
firms, under widespread scrutiny, have begun to provide more transparency, which
should gradually improve corporate fundamentals. Corporates suffered over the
final month of the period as individual credit issues have caused some
contagion, and many corporations have found they have little pricing power,
which will pressure future profits.
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 shows the Trust's asset composition:
--------------------------------------------------------------------------------
SECTOR BREAKDOWN
--------------------------------------------------------------------------------
COMPOSITION APRIL 30, 2002 OCTOBER 31, 2001
--------------------------------------------------------------------------------
Inverse-Floating Rate Mortgages 22% 22%
--------------------------------------------------------------------------------
Multiple Class Mortgage Pass-Throughs 21% 22%
--------------------------------------------------------------------------------
U.S. Government and Agency Securities 20% 6%
--------------------------------------------------------------------------------
Interest-Only Mortgage-Backed Securities 14% 18%
--------------------------------------------------------------------------------
Corporate Bonds 11% 15%
--------------------------------------------------------------------------------
Taxable Municipal Bonds 5% 6%
--------------------------------------------------------------------------------
Commercial Mortgage-Backed Securities 3% 6%
--------------------------------------------------------------------------------
Principal-Only Mortgage-Backed Securities 2% 3%
--------------------------------------------------------------------------------
Asset-Backed Securities 2% 2%
--------------------------------------------------------------------------------
3
The Trust remains on schedule to achieve its primary investment objective
of returning the initial offering price to shareholders on or about its planned
termination date.
The Trust continued to focus on securities with final maturity dates (or
"bullet" maturities) that match the Trust's termination date of December 31,
2009. The Trust benefited from enhanced interest income and price appreciation
due to strong performance by mortgages over the period. As mortgage refinancing
spiked to record levels over the final two months of 2001, the Trust was
positioned to minimize prepayment and extension risk with a core position in
lower coupon mortgages and 15-year pass-throughs. The Trust's bias towards
15-years benefited performance as 15-years led 30-years for the semi-annual
period. The Trust modestly reduced its exposure to corporates as volatility and
credit risk spread through the corporate marketplace. Also, the Trust
selectively added Treasuries towards the latter part of the period on the belief
that Treasuries had become more attractively priced.
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 Managing Director and Portfolio Manager
4
--------------------------------------------------------------------------------
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 4/30/02: $14.49
--------------------------------------------------------------------------------
Net Asset Value as of 4/30/02: $16.28
--------------------------------------------------------------------------------
Yield on Closing Stock Price as of 4/30/02 ($14.49)(1): 5.18%
--------------------------------------------------------------------------------
Current Monthly Distribution per Share(2): $ 0.0625
--------------------------------------------------------------------------------
Current Annualized Distribution per Share(2): $ 0.7500
--------------------------------------------------------------------------------
(1) Yield on closing Stock Price is calculated by dividing the current
annualized distribution per share by the closing stock price per share.
(2) Distribution is not constant and is subject to change.
PRIVACY PRINCIPLES OF THE TRUST
The Trust is committed to maintaining the privacy of shareholders and to
safeguarding its non-public personal information. The following information is
provided to help you understand what personal information the Trust collects,
how we protect that information and why, in certain cases, we may share
information with select other parties.
Generally, the Trust does not receive any non-public personal information
relating to its shareholders, although certain nonpublic personal information of
its shareholders may become available to the Trust. The Trust does not disclose
any non-public personal information about its shareholders or former
shareholders to anyone, except as permitted by law or as is necessary in order
to service shareholder accounts (for example, to a transfer agent or third party
administrator).
The Trust restricts access to non-public personal information about the
shareholders to BlackRock employees with a legitimate business need for the
information. The Trust maintains physical, electronic and procedural safeguards
designed to protect the non-public personal information of its shareholders.
5
--------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT
GRADE 2009 TERM TRUST INC.
CONSOLIDATED PORTFOLIO OF INVESTMENTS
APRIL 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--139.4%
MORTGAGE PASS-THROUGHS--3.1%
Federal National Mortgage Association,
$1,294 5.50%, 1/01/17 - 2/01/17 ............... $ 1,285,308
217 6.50%, 7/01/29 ......................... 219,839
-----------
1,505,147
-----------
AGENCY MULTIPLE CLASS MORTGAGE
PASS-THROUGHS--25.9%
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage
Participation Certificates,
2,168+ Series 1510, Class 1510-G,
5/15/13 ............................... 2,282,991
400 Series 1534, Class 1534-IG,
2/15/10 ............................... 385,872
600+ Series 1601, Class 1601-SD,
10/15/08 .............................. 615,000
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
319 Trust 1992-43, Class 43-E,
4/25/22 ............................... 332,942
1,000+ Trust 1993-49, Class 49-H,
4/25/13 ............................... 1,046,320
143 Trust 1993-69, Class 69-Z,
1/25/22 ............................... 145,656
3,053+ Trust 1993-79, Class 79-PK,
4/25/22 ............................... 3,161,407
3,146+ Trust 1993-87, Class 87-J,
4/25/22 ............................... 3,114,005
692 Trust 1993-214, Class 214-SK,
12/25/08 .............................. 716,068
643 Trust 1994-13, Class 13-SJ,
2/25/09 ............................... 662,398
-----------
12,462,659
-----------
INVERSE FLOATING RATE
MORTGAGES--30.8%
AAA 462 Citicorp Mortgage Securities, Inc.,
Series 1993-14, Class A-4,
11/25/23 .............................. 467,299
Aaa 550 Countrywide Funding Corp.,
Series 1994-2, Class A-12S,
2/25/09 ............................... 582,302
Aaa 866 Countrywide Mortgage-Backed
Securities, Inc.,
Series 1993-D, Class A-15,
1/25/09 ............................... 896,529
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage
Participation Certificates,
336 Series 1425, Class 1425-SB,
12/15/07 .............................. 386,097
319 Series 1506, Class 1506-S,
5/15/08 ............................... $ 362,157
465 Series 1515, Class 1515-S,
5/15/08 ............................... 507,026
193 Series 1580, Class 1580-SD,
9/15/08 ............................... 199,809
647 Series 1606, Class 1606-SC,
11/15/08 .............................. 712,338
423 Series 1618, Class 1618-SA,
11/15/08 .............................. 435,543
1,023 Series 1626, Class 1626-SA,
12/15/08 .............................. 977,324
555 Series 1661, Class 1661-SB,
1/15/09 ............................... 602,350
500 Series 1688, Class 1688-S,
12/15/13 .............................. 504,375
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
608 Trust 1992-187, Class 187-SB,
10/25/07 .............................. 703,465
645 Trust 1992-190, Class 190-S,
11/25/07 .............................. 794,005
1,515 Trust 1993-156, Class 156-SE,
10/25/19 .............................. 1,566,525
605 Trust 1993-173, Class 173-SA,
9/25/08 ............................... 580,258
589 Trust 1993-191, Class 191-SD,
10/25/08 .............................. 663,044
412 Trust 1993-202, Class 202-VB,
11/25/23 .............................. 439,548
166 Trust 1993-209, Class 209-SG,
8/25/08 ............................... 167,445
498 Trust 1993-214, Class 214-SH,
12/25/08 .............................. 520,798
544 Trust 1993-224, Class 224-SE,
11/25/23 .............................. 552,486
Aaa 600 PaineWebber Mortgage
Acceptance Corp.,
Series 1994-6, Class A-9,
4/25/09 ............................... 607,781
Residential Funding Mortgage
Securities, Inc.,
AAA 751 Series 1993-S23, Class A-12,
6/25/08 ............................... 784,111
AAA 776 Series 1993-S23, Class A-16,
6/25/08 ............................... 821,737
-----------
14,834,352
-----------
INTEREST ONLY MORTGAGE-BACKED
SECURITIES--19.5%
18,416 Chase Mortgage Finance Corp.,
Series 1999-S4, Class A-14,
4/25/29 ............................... 54,672
See Notes to Consolidated Financial Statements.
6
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
INTEREST ONLY MORTGAGE-BACKED
SECURITIES--(CONT'D)
$ 8,846 Credit Suisse First Boston Mortgage
Securities Corp.,
Series 1998-1, Class A-7,
9/25/28 ................................. $ 9,675
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage
Participation Certificates,
5 Series 65, Class 65-I,
8/15/20 ................................. 104,584
2 Series 141, Class 141-H,
5/15/21 ................................. 22,965
2,698 Series 194, Class 194-IO,
4/01/28 ................................. 613,582
6 Series 1114, Class 1114-J,
7/15/06 ................................. 78,550
7 Series 1285, Class 1285-M,
5/15/07 ................................. 52,531
1,030 Series 1353, Class 1353-S,
8/15/07 ................................. 88,857
1,842 Series 1645, Class 1645-IB,
9/15/08 ................................. 197,078
259 Series 1747, Class 1747-I,
6/15/23 ................................. 5,330
1,317 Series 2039, Class 2039-PI,
2/15/12 ................................. 117,675
443 Series 2049, Class 2049-LC,
10/15/23 ................................ 28,493
379 Series 2061, Class 2061-JR,
9/20/22 ................................. 28,586
2,266 Series 2063, Class 2063-PU,
10/15/26 ................................ 507,043
1,134 Series 2075, Class 2075-IB,
12/15/21 ................................ 45,366
9,410 Series 2081, Class 2081-S,
5/15/25 ................................. 623,424
3,024 Series 2306, Class 2306-PM,
5/15/26 ................................. 476,359
6,909 Series 2376, Class 2376-MI,
7/15/11 ................................. 788,068
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
1 Trust G-21, Class 21-L,
7/25/21 ................................. 31,839
97 Trust G93-25, Class 25-J,
12/25/19 ................................ 148,496
4 Trust 1991-72, Class 72-H,
7/25/06 ................................. 80,992
39 Trust 1992-51, Class 51-K,
4/25/07 ................................. 592,612
25 Trust 1992-174, Class 174-S,
9/25/22 ................................. 67,014
14 Trust 1993-8, Class 8-HA,
1/25/08 ................................. 316,798
30 Trust 1993-49, Class 49-L,
4/25/13 ................................. 300,000
598 Trust 1993-138, Class 138-JK,
5/25/19 ................................. 9,336
2,518 Trust 1993-191, Class 191-S,
10/25/07 ................................ $ 2,361
767 Trust 1993-194, Class 194-PV,
6/25/08 ................................. 76,247
5,027 Trust 1993-208, Class 208-S,
2/25/23 ................................. 317,351
930 Trust 1993-223, Class 223-PT,
10/25/23 ................................ 98,984
443 Trust 1994-39, Class 39-PE,
1/25/23 ................................. 44,496
1,387 Trust 1994-42, Class 42-SO,
3/25/23 ................................. 166,570
1,500 Trust 1996-20, Class 20-SB,
10/25/08 ................................ 300,000
1,259 Trust 1996-20, Class 20-SL,
9/25/08 ................................. 342,756
7,358 Trust 1997-81, Class 81-SD,
12/18/27 ................................ 1,150
1,500 Trust 1997-90, Class 90-M,
1/25/28 ................................. 377,055
1,223 Trust 1998-30, Class 30-QG,
12/18/25 ................................ 189,559
400 Trust 1998-43, Class 43-YI,
7/18/28 ................................. 7,746
3,206 Trust 2001-9, Class 9-IB,
5/25/27 ................................. 547,024
2,069 Trust 2001-29, Class 29-BE,
5/25/28 ................................. 234,682
4,895 Trust 2001-80, Class 80-PI,
9/25/23 ................................. 569,099
385 Government National Mortgage
Association, REMIC Pass-Through
Certificates,
Trust 1998-24, Class 24-IB,
5/20/23 ................................. 25,008
1,351 Norwest Asset Securities Corp.,
Series 1998-5, Class A-5,
3/25/28 ................................. 94,584
692 PNC Mortgage Securities Corp.,
Series 1998-8, Class 4-X,
10/25/13 ................................ 117,635
Residential Funding Mortgage
Securities, Inc.,
3,772 Series 1993-S44, Class A-4,
11/25/23 ................................ 254,624
5,799 Series 1998-S19, Class A-8,
8/25/28 ................................. 15,403
86 Salomon Brothers Mortgage
Securities Inc. VI,
Series 1987-3, Class B,
10/23/17 ................................ 15,713
20,166 Structured Asset Securities Corp.,
Series 1999-ALS1, Class ALS1-3AX,
5/25/29 ................................. 138,642
33,049 Vendee Mortgage Trust,
Series 2002-1, Class 1-1IO,
10/15/31 ................................ 72,295
----------
9,398,909
----------
See Notes to Consolidated Financial Statements.
7
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
PRINCIPAL ONLY MORTGAGE-BACKED
SECURITIES--3.3%
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
$ 1,341 Trust 1994-46, Class 46-D,
11/25/23 .............................. $ 1,335,502
98 Trust 1996-54, Class 54-A,
4/25/21 ............................... 96,791
AAA 104 PaineWebber Mortgage
Acceptance Corp. IV,
Series 1993-5, Class A-14,
6/25/08 ............................... 92,454
AAA 86 Salomon Brothers Mortgage
Securities Inc. VI,
Series 1987-3, Class A,
10/23/17 .............................. 74,714
-----------
1,599,461
-----------
COMMERCIAL MORTGAGE-BACKED
SECURITIES--4.0%
AAA 79 Citicorp Mortgage Securities, Inc.,
Series 1998-3, Class A-6,
6.75%, 5/25/28 ........................ 80,363
AAA 750 NYC Mortgage Loan Trust, Multifamily,
Series 1996, Class A-2,
6.75%, 6/25/11** ...................... 770,625
AAA 1,000 Prudential Securities Secured
Financing Corp.,
Series 1998-C1, Class A1-B,
6.506%, 7/15/08 ....................... 1,048,709
-----------
1,899,697
-----------
ASSET-BACKED SECURITIES--2.8%
AAA 1,230+ Chase Credit Card Master Trust,
Series 1997-5, Class A,
6.194%, 8/15/05 ....................... 1,259,405
NR 240++ GLOBAL RATED ELIGIBLE ASSET TRUST,
SERIES 1998-A, CLASS A-1,
7.33%, 3/15/06 @/** ................... 22,181
Structured Mortgage Asset
Residential Trust,
NR 579++ Series 1997-2,
8.24%, 3/15/06 @/@@ ................... 33,291
NR 642++ Series 1997-3,
8.724%, 4/15/06 @/@@ .................. 36,904
-----------
1,351,781
-----------
U.S GOVERNMENT AND AGENCY
SECURITIES--27.9%
268 Small Business Administration,
Series 1998-10, Class 10-A,
6.12%, 2/01/08 ........................ 270,602
11,000+ U.S. Treasury Bond Strip,
Zero Coupon, 11/15/09 ................... 7,328,750
U.S. Treasury Notes,
1,450+ 3.50%, 11/15/06 ......................... 1,396,075
100 4.25%, 5/31/03 .......................... 102,016
500+ 5.00%, 8/15/11 .......................... 496,015
2,700+ 5.75%, 11/15/05 ......................... 2,846,799
550+ 6.00%, 8/15/09 .......................... 585,321
385+ 6.625%, 5/15/07 ......................... 420,551
-----------
13,446,129
-----------
TAXABLE MUNICIPAL BONDS--6.9%
AAA 500 Fresno California
Pension Obligation,
Series 1994, 7.80%, 6/01/14 ............ 568,775
AAA 500 Kern County California
Pension Obligation,
6.98%, 8/15/09 .......................... 538,570
Los Angeles County California
Pension Obligation,
AAA 1,000 Series A, 8.62%, 6/30/06 ................ 1,129,790
AAA 500 Series D, 6.97%, 6/30/08 ................ 541,545
AAA 500 Orleans Parish Louisiana
School Board,
Series A, 6.60%, 2/01/08 ................ 524,970
-----------
3,303,650
-----------
CORPORATE BONDS--15.2%
FINANCE & BANKING--6.0%
A+ 600 Equitable Life Assured Society,
6.95%, 12/01/05** ....................... 623,858
A+ 500 Metropolitan Life Insurance Co.,
6.30%, 11/01/03** ....................... 515,460
AA- 1,000 Morgan Stanley Group, Inc.,
10.00%, 6/15/08 ......................... 1,175,060
AAA 500 PaineWebber Group, Inc.,
8.875%, 3/15/05 ......................... 554,905
-----------
2,869,283
-----------
INDUSTRIALS--4.8%
BBB- 100 American Airlines, Inc.,
Secured Equipment Trust,
Series 1990-M,
10.44%, 3/04/07 ......................... 106,086
A 1,000 Dow Capital BV,
9.20%, 6/01/10 .......................... 1,172,390
BBB+ 500 Ralcorp Holdings, Inc.,
8.75%, 9/15/04 .......................... 546,205
BBB+ 500 TCI Communications, Inc.,
8.25%, 1/15/03 .......................... 512,860
-----------
2,337,541
-----------
UTILITIES--2.2%
A 500 Alltel Corp.,
7.50%, 3/01/06 .......................... 524,485
Baa1 500 Ohio Edison Co.,
8.625%, 9/15/03 ......................... 523,505
-----------
1,047,990
-----------
See Notes to Consolidated Financial Statements.
8
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
YANKEE--2.2%
BBB $ 500 Empresa Electric Guacolda SA,
7.95%, 4/30/03** ........................ $ 518,943
A- 500 Israel Electric Corp., Ltd.,
7.25%, 12/15/06** ....................... 528,765
-----------
1,047,708
-----------
Total corporate bonds ..................... 7,302,522
-----------
Total long-term investments
(cost $63,874,587) ...................... 67,104,307
-----------
SHORT-TERM INVESTMENT--2.9%
DISCOUNT NOTE
1,400 Federal Home Loan Bank,
1.79%, 5/01/02
(cost $1,400,000) ....................... 1,400,000
-----------
Total investments before
outstanding put
option written--142.3%
(cost $65,274,587) ...................... 68,504,307
-----------
--------------------------------------------------------------------------------
NOTIONAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
OUTSTANDING PUT OPTION WRITTEN--(0.1%)
$25,000 Interest Rate Swap,
3 months LIBOR over 3.98%
expires 6/05/02
(premium received $118,750) ............. $ (38,802)
-----------
Total investments, net of outstanding
put option written--142.2% .............. 68,465,505
Liabilities in excess of other
assets--(42.2%) ......................... (20,323,286)
-----------
NET ASSETS--100% .......................... $48,142,219
===========
----------
* Using the higher of Standard & Poor's, Moody's or Fitch's rating.
** Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified institutional buyers. As of April 30, 2002, the
Trust held 6.2% of its net assets in securities restricted as to resale.
+ Entire or partial principal amount pledged as collateral for reverse
repurchase agreements or financial futures contracts.
++ Security is fair valued. (Note 1)
@ Illiquid securities representing 0.19% of net assets.
@@ Security is restricted as to public resale. The securities were acquired in
1997 and have an aggregate current cost of $107,729.
--------------------------------------------------------------------------------
KEY TO ABBREVIATION:
REMIC -- Real Estate Mortgage Investment Conduit.
--------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
9
--------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT
GRADE 2009 TERM TRUST INC.
CONSOLIDATED STATEMENT OF
ASSETS AND LIABILITIES
APRIL 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $65,274,587) (Note 1) .......... $68,504,307
Cash ....................................................... 77,647
Interest receivable ........................................ 993,998
Due from broker--variation margin (Notes 1 & 3) ............ 9,113
Receivable for investment sold ............................. 4,027
Other assets ............................................... 7,715
-----------
69,596,807
-----------
LIABILITIES
Reverse repurchase agreements (Note 4) ..................... 21,211,931
Outstanding option written, at value
(premium received $118,750) (Note 1 & 3) ................. 38,802
Interest payable ........................................... 24,678
Investment advisory fee payable (Note 2) ................... 21,510
Deferred directors fees (Note 1) ........................... 5,869
Administration fee payable (Note 2) ........................ 5,866
Other accrued expenses ..................................... 145,932
-----------
21,454,588
-----------
NET ASSETS ................................................. $48,142,219
===========
Net assets were comprised of:
Common stock, par value (Note 5) ......................... $ 29,571
Paid-in capital in excess of par ........................... 40,372,832
-----------
40,402,403
Undistributed net investment income ...................... 5,377,806
Accumulated net realized loss ............................ (1,178,892)
Net unrealized appreciation .............................. 3,540,902
-----------
Net assets, April 30, 2002 ................................. $48,142,219
===========
NET ASSET VALUE PER SHARE:
($48,142,219 / 2,957,093 shares of
common stock issued and outstanding) ..................... $16.28
======
--------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT
GRADE 2009 TERM TRUST INC.
CONSOLIDATED STATEMENT OF
OPERATIONS
SIX MONTHS ENDED APRIL 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest earned (net of discount/premium
accretion/amortization of $1,560,621 and
interest expense of $160,997) ............................ $ 3,205,415
-----------
OPERATING EXPENSES
Investment advisory ...................................... 128,294
Administration ........................................... 34,989
Custodian ................................................ 30,000
Independent accountants .................................. 24,000
Reports to shareholders .................................. 19,500
Directors ................................................ 7,500
Legal .................................................... 6,500
Transfer agent ........................................... 5,500
Miscellaneous ............................................ 13,601
-----------
Total operating expenses ............................... 269,884
-----------
Net investment income before excise tax .................... 2,935,531
Excise tax ............................................... 135,500
-----------
Net investment income ...................................... 2,800,031
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) on:
Investments .............................................. 405,643
Option written ........................................... 89,077
Futures .................................................. (507,127)
-----------
(12,407)
-----------
Net change in unrealized appreciation (depreciation) on:
Investments .............................................. (1,301,364)
Option written ........................................... 79,948
Futures .................................................. 208,863
Interest rate cap ........................................ 9,803
-----------
(1,002,750)
-----------
NET LOSS ON INVESTMENTS .................................... (1,015,157)
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................................ $ 1,784,874
===========
See Notes to Consolidated Financial Statements.
10
--------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT
GRADE 2009 TERM TRUST INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED APRIL 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
RECONCILIATION OF NET INCREASE IN
NET ASSETS RESULTING FROM OPERATIONS
TO NET CASH FLOWS USED FOR
OPERATING ACTIVITIES
Net increase in net assets resulting from
operations .............................................. $ 1,784,874
-----------
Increase in investments ................................... (8,838,196)
Decrease in receivable for securities sold ................ 1,510
Decrease in payable for securities purchased .............. (873,316)
Net realized loss ......................................... 12,407
Decrease in unrealized appreciation ....................... 1,002,750
Increase in interest rate cap ............................. (71,419)
Increase in interest receivable ........................... (23,530)
Decrease in due from broker-variation margin .............. 66,203
Increase in other assets .................................. (946)
Increase in interest payable .............................. 19,559
Increase in net options written ........................... 207,827
Decrease in accrued expenses .............................. (46,897)
-----------
Total adjustments ....................................... (8,544,048)
-----------
Net cash flows used for operating activities .............. $(6,759,174)
===========
INCREASE (DECREASE) IN CASH
NET CASH FLOWS USED FOR OPERATING ACTIVITIES .............. $(6,759,174)
-----------
Cash flows provided by financing activities:
Increase in reverse repurchase agreements ............... 7,839,293
Cash dividends paid ..................................... (1,108,808)
-----------
Net cash flows provided by financing activities ........... 6,730,485
-----------
Net decrease in cash .................................... (28,689)
Cash at beginning of period ............................. 106,336
-----------
Cash at end of period ................................... $ 77,647
===========
--------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT
GRADE 2009 TERM TRUST INC.
CONSOLIDATED STATEMENTS OF CHANGES
IN NET ASSETS (UNAUDITED)
--------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
2002 2001
------------ -----------
INCREASE (DECREASE) IN
NET ASSETS
Operations:
Net investment income .................... $ 2,800,031 $ 3,467,213
Net realized loss ........................ (12,407) (10,528)
Net change in unrealized
appreciation (depreciation) .............. (1,002,750) 5,979,787
------------ -----------
Net increase in net assets resulting
from operations ........................ 1,784,874 9,436,472
Dividends from
net investment income .................. (1,108,808) (2,291,507)
------------ -----------
Total increase ........................... 676,066 7,144,965
NET ASSETS
Beginning of period ........................ 47,466,153 40,321,188
------------ -----------
End of period (including
undistributed net investment
income of $5,377,806 and
$3,686,583, respectively) ................ $48,142,219 $47,466,153
=========== ===========
See Notes to Consolidated Financial Statements.
11
--------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (UNAUDITED)
--------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
SIX MONTHS ENDED ------------------------------------------------------
APRIL 30, 2002 2001 2000 1999 1998 1997
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............. $ 16.05 $ 13.64 $ 13.64 $ 15.01 $ 14.48 $ 13.46
------- ------- ------- ------- ------- -------
Net investment income (net of interest expense
of $0.05, $0.30, $0.36, $0.33, $0.36 and
$0.36, respectively) ......................... .94 1.17 .91 .93 1.20 1.10
Net realized and unrealized gain (loss) .......... (.34) 2.01 (.09) (1.45) .23 .82
------- ------- ------- ------- ------- -------
Net increase (decrease) from investment operations .60 3.18 .82 (.52) 1.43 1.92
------- ------- ------- ------- ------- -------
Dividends from net investment income ............. (.37) (.77) (.82) (.85) (.90) (.90)
------- ------- ------- ------- ------- -------
Net asset value, end of period* .................. $ 16.28 $ 16.05 $ 13.64 $ 13.64 $ 15.01 $ 14.48
======= ======= ======= ======= ======= =======
Market value, end of period* ..................... $ 14.49 $ 14.39 $ 11.94 $ 11.44 $ 13.25 $ 12.13
======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN+ ......................... 3.32% 27.66% 12.11% (7.68)% 17.15% 19.05%
======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS:
Operating expenses ............................... 1.15%+++ 1.16% 1.31% 1.03% 1.01% 1.02%
Operating expenses and interest expense .......... 1.84%+++ 3.20% 4.02% 3.33% 3.44% 3.65%
Operating expenses, interest expense and
excise taxes ................................... 2.42%+++ 3.52% 4.36% 3.49% 3.51% 3.65%
Net investment income ............................ 12.00%+++ 7.93% 6.83% 6.58% 8.13% 8.03%
SUPPLEMENTAL DATA:
Average net assets (000) ......................... $47,039 $43,701 $39,425 $41,909 $43,482 $40,416
Portfolio turnover ............................... 12% 19% 36% 25% 25% 36%
Net assets, end of period (000) .................. $48,142 $47,466 $40,321 $40,345 $44,395 $42,810
Reverse repurchase agreements outstanding,
end of period (000) ............................ $21,212 $13,373 $18,850 $16,304 $19,770 $20,363
Asset coverage++ ................................. $ 3,270 $ 4,550 $ 3,139 $ 3,475 $ 3,246 $ 3,102
----------
* Net asset value and market value are published in BARRON'S on Saturday and
THE WALL STREET JOURNAL on Monday.
+ 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. Past performance
is no guarantee of future results. Total investment returns for period of
less than one full year is not annualized.
++ Per $1,000 of reverse repurchase agreements outstanding.
+++ Annualized.
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 Consolidated Financial Statements.
12
--------------------------------------------------------------------------------
THE BLACKROCK BROAD INVESTMENT
GRADE 2009 TERM TRUST INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
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 about
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.
On December 3, 1999, the Trust transferred a substantial portion of its total
assets to a 100% owned regulated investment company subsidiary called BCT
Subsidiary, Inc. These consolidated financial statements include the operations
of both the Trust and its wholly-owned subsidiary after elimination of all
intercompany transactions and balances.
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. Short-term securities may
be valued at amortized cost. Any securities or other assets for which such
current market quotations are not readily available are valued at fair value as
determined in good faith under procedures established by and under the general
supervision and responsibility of the Trust's Board of Directors. On April 30,
2002, the Trust held two positions that were valued at fair value, which is
significantly lower than their purchase cost.
REPURCHASE AGREEMENTS: 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, or collections of 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
13
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.
Interest rate swaps are efficient 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 swap. However, the Trust closely monitors swaps and does not
anticipate non-performance by any counterparty.
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 in a manner similar to more generic options described above.
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
14
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.
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 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.
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.
SEGREGATION: In cases in which the Investment Company Act of 1940, as amended
and the interpretive positions of the Securities and Exchange Commission ("SEC")
require that the Trust segregate assets in connection with certain Trust
investments (e.g., when issued securities, reverse repurchase agreements or
futures contracts), the Trust will, consistent with certain interpretive letters
issued by the SEC, designate on its books and records cash or other liquid debt
securities having a market value at least equal to the amount that would
otherwise be required to be physically segregated.
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
15
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.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States of America.
ESTIMATES: The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
DEFERRED COMPENSATION PLAN: Under a deferred compensation plan approved by the
Board of Directors on February 24, 2000, non-interested Directors may elect to
defer receipt of all or a portion of their annual compensation.
Deferred amounts earn a return as though equivalent dollar amounts had been
invested in common shares of other BlackRock funds selected by the Directors.
This has the same economic effect as if the Directors had invested the deferred
amounts in such other BlackRock funds.
The deferred compensation plan is not funded and obligations thereunder
represent general unsecured claims against the general assets of the Trust. The
Trust may, however, elect to invest in common shares of those funds selected by
the Directors in order to match its deferred compensation obligations.
NOTE 2. AGREEMENTS
The Trust has an Investment Advisory Agreement with BlackRock Advisors, Inc.
(the "Advisor"), which is a wholly-owned subsidiary of BlackRock, Inc., which in
turn is an indirect, majority-owned subsidiary of PNC Financial Services Group,
Inc. The Trust has an Administration Agreement with Princeton Administrators,
L.P. (the "Administrator"), an indirect wholly-owned affiliate of Merrill Lynch
& Co., Inc.
The investment advisory fee paid to the Advisor is computed weekly and
payable monthly at an annual rate of 0.55% of the Trust's average weekly net
assets. The total dollar amounts paid to the Advisor by the Trust under the
Investment Advisory Agreement for the six months ended April 30, 2002 and the
years ended October 31, 2001, 2000 and 1999 were $128,294, $241,016, $218,030
and $231,176, respectively. 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. The total dollar amounts paid to the
Administrator by the Trust under the Administration Agreement for the six months
ended April 30, 2002 and the years ended October 31, 2001, 2000 and 1999 were
$34,989, $65,732, $59,463 and $63,048, respectively.
Pursuant to the agreements, the Advisor 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, which include
reimbursements to the Advisor for certain operational support services provided
to the Trust.
NOTE 3. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term investments
and dollar rolls, for the six months ended April 30, 2002 aggregated $16,975,480
and $7,236,612, respectively.
The Trust may from time to time purchase in the secondary market certain
mortgage pass-through securities packaged or master serviced by affiliates 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, an affiliate of PNC 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
an affiliate of PNC or its affiliates, including Midland Loan Services, Inc.
The Federal income tax basis of the Trust's investments at April 30, 2002 was
$65,301,568, and accordingly, net unrealized appreciation was $3,202,739 (gross
unrealized appre- ciation--$4,869,301, gross unrealized depreciation--
$1,666,562).
For Federal income tax purposes, the Trust had a capital loss carryforward at
October 31, 2001 of approximately $1,031,000, of which $806,000 expires in 2003
and $225,000 expires in 2008. Accordingly, no capital gain distribution is
expected to be paid to shareholders until net gains have been realized in excess
of such amount.
16
Details of open financial futures contracts at April 30, 2002 were as
follows:
VALUE AT VALUE AT
NUMBER OF EXPIRATION TRADE APRIL 30, UNREALIZED
CONTRACTS TYPE DATE DATE 2002 APPRECIATION
-------- ---------- ---------- ---------- ---------- ------------
Long Position: 10-yr U.S.
83 T-Note June '02 $8,530,453 $8,761,687 $231,234
========== ========== ========
Transactions in options written during the period ended April 30, 2002, were
as follows:
NATIONAL
AMOUNT PREMIUM
(000) RECEIVED
------- --------
Options outstanding at October 31, 2001 -- --
Options written $56,700 $243,014
Options terminated in closing purchase transactions (31,700) (124,264)
------- --------
Options outstanding at April 30, 2002 $25,000 $118,750
======= ========
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 establishes and maintains a segregated account
with the lender, containing liquid investment grade securities having a value
not less than the repurchase price, including accrued interest of the reverse
repurchase agreement.
The average daily balance of reverse repurchase agreements outstanding for
the six months ended April 30, 2002 was approximately $17,309,000 at a weighted
average interest rate of approximately 1.87%. The maximum amount of reverse
repurchase agreements outstanding at any month-end during the period was
$21,458,625 as of March 31, 2002 which was 27.9% 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, 2002.
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, 2002, the Advisor owned 7,093 shares.
NOTE 6. DIVIDENDS
Subsequent to April 30, 2002, the Board of Directors of the Trust declared
dividends from undistributed earnings of $0.0625 per share payable May 31, 2002
to shareholders of record on May 15, 2002.
17
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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
reinvested by EquiServe Trust Company, N.A. (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 and 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 Plan 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 in connection with 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.
The Trust reserves the right to amend or terminate the Plan as applied to
any dividend or distribution paid subsequent to written notice of the change
sent to all shareholders of the Trust at least 90 days before the record date
for the dividend or distribution. The Plan also may be amended or terminated by
the Plan Agent upon at least 90 days' written notice to all shareholders of the
Trust. All correspondence concerning the Plan should be directed to the Plan
Agent at (800) 699-1BFM. The addresses are on the back of this report.
18
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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.
Quarterly performance and other information regarding the Trust may be
found on BlackRock's website, which can be accessed at
http://www.blackrock.com/funds/cefunds.html. This reference to BlackRock's
website is intended to allow investors public access to quarterly information
regarding the Trust and is not intended to incorporate BlackRock's website into
this report.
The Annual Meeting of Trust Shareholders was held May 23, 2002 to vote on the
following matter:
To elect three Directors as follows:
DIRECTOR: CLASS TERM EXPIRING
------- ------ ----- --------
Frank J. Fabozzi .............. III 3 years 2005
Walter F. Mondale ............. III 3 years 2005
Ralph L. Schlosstein .......... III 3 years 2005
Directors whose term of office continues beyond this meeting are Andrew F.
Brimmer, Richard E. Cavanagh, Kent Dixon, Laurence D. Fink and James Clayburn La
Force, Jr.
Shareholders elected the three Directors. The results of the voting were
as follows:
VOTES FOR VOTES AGAINST ABSTENTIONS
---------- ------------- ------------
Frank J. Fabozzi .............. 2,731,032 -- 38,835
Walter F. Mondale ............. 2,719,616 -- 50,251
Ralph L. Schlosstein .......... 2,731,115 -- 38,752
Laurence D. Fink, Chairman of the Trust's Board of Directors, and certain
of the officers of the Trust listed on the cover of this Report to Shareholders,
are also officers of the Advisor. They serve in the following capacities for the
Advisor:Laurence D. Fink --Chief Executive Officer, Ralph
L.Schlosstein--Director and President, Robert S. Kapito--Director and ViCE
Chairman, Henry Gabbay--Managing Director, and Anne Ackerley--Managing Director.
19
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THE BLACKROCK BROAD INVESTMENTGRADE2009 TERMTRUST 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 Advisors, Inc. (the "Advisor") manages the Trust. The Advisor is a
wholly-owned subsidiary of BlackRock, Inc. ("BlackRock"), which is one of the
largest publicly traded investment management firms in the United States with
$238 billion of assets under management as of March 31, 2002. BlackRock manages
assets on behalf of institutional and individual investors worldwide through a
variety of equity, fixed income, liquidity and alternative investment products,
including the BLACKROCK FUNDS and BLACKROCK PROVIDENT INSTITUTIONAL FUNDS. In
addition, BlackRock provides risk management advice and investment system
services to a growing number of institutional investors under the BLACKROCK
SOLUTIONS name. Clients are served from the Company's headquarters in New York
City, as well as offices in Boston, Edinburgh, Hong Kong, San Francisco, Tokyo
and Wilmington. BlackRock is a member of The PNC Financial Services Group (NYSE:
PNC), and is majority-owned by PNC and by BlackRock employees.
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 ADVISOR'S INVESTMENT STRATEGY?
The Advisor 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 Advisor will implement a 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 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 Advisor will attempt to purchase securities with call
protection or projected 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 Advisor
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 Advisor 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 advisor. The Trust
pays
20
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, EquiServe
Trust Company, N.A. 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 THE 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 allowed to leverage 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. The Advisor'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 the Advisor 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.
INTEREST-ONLY SECURITIES (IO). The yield to maturity on an IO class is extremely
sensitive to the rate of principal payments (including prepayments) on the
related underlying Mortgage Assets, and a rapid rate of principal payments may
have a material adverse effect on such security's yield to maturity. If the
underlying Mortgage Assets experience greater than anticipated prepayments of
principal, the Trust may fail to recoup fully its initial investment in these
securities even if the securities are rated AAA by S&P or Aaa by Moody's.
INVERSE FLOATING RATE MORTGAGE-BACKED SECURITIES. ARMs with interest rates that
adjust at periodic intervals in the opposite direction from the market rate of
interest to which they are indexed. An inverse floater may be considered to be
leveraged to the extent that its interest rate may vary by a magnitude that
exceeds the magnitude of the change in the index rate of interest.
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 than 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 up to 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.
21
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THE BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST INC.
GLOSSARY
--------------------------------------------------------------------------------
ADJUSTABLE RATE MORTGAGE- Mortgage instruments with interest rates that adjust
BACKED SECURITIES (ARMS): 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
Trust invests in a portfolio of securities in
accordance with its stated investment objectives and
policies.
COLLATERALIZED MORTGAGE Mortgage-backed securities which separate mortgage
OBLIGATIONS (CMOs): 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.
COMMERCIAL MORTGAGE Mortgage-backed securities secured or backed by
BACKED SECURITIES (CMBS): mortgage loans on commercial properties.
DISCOUNT: When a Trust's net asset value is greater than its
market 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 Administration, 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 Administration, 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, FNMA and FHLMC.
22
INTEREST-ONLY SECURITIES: Mortgage securities including CMBS 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 Mortgage instruments with coupons that adjust at
MORTGAGE: 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 Trust, this is the
price at which one share of the Trust 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.
NET ASSET VALUE (NAV): Net asset value is the total market value of all
securities and other assets held by the Trust,
including 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 on Monday.
PRINCIPAL-ONLY SECURITIES: Mortgage securities that receive only the principal
cash flows from an underlying pool of mortgage loans
or underlying pass-through securities. Also known as
strips.
PROJECT LOANS: Mortgages for multi-family, low- to middle-income
housing.
PREMIUM: When a Trust's market 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, FNMA REMICs are
formed as trusts and are backed by mortgage-backed
securities.
RESIDUALS: Securities issued in connection with collateralized
mortgage obligations that generally represent the
excess cash flow from the mortgage assets underlying
the CMO after payment of principal and interest on
the other CMO securities and related administrative
expenses.
REVERSE REPURCHASE In a reverse repurchase agreement, the Trust sells
AGREEMENTS: 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 separated
SECURITIES: into two classes that receive different proportions
of the interest and principal distributions from
underlying mortgage-backed securities. IO's and PO's
are examples of strips.
23
[LOGO]
BLACKROCK
DIRECTORS
Laurence D. Fink, CHAIRMAN
Andrew F. Brimmer
Richard E. Cavanagh
Kent Dixon
Frank J. Fabozzi
James Clayburn La Force, Jr.
Walter F. Mondale
Ralph L. Schlosstein
OFFICERS
Ralph L. Schlosstein, PRESIDENT
Robert S. Kapito, VICE PRESIDENT
Richard M. Shea, VICE PRESIDENT/TAX
Henry Gabbay, TREASURER
James Kong, ASSISTANT TREASURER
Anne Ackerley, SECRETARY
INVESTMENT ADVISOR
BlackRock Advisors, Inc.
100 Bellevue Parkway
Wilmington, DE 19809
(800) 227-7BFM
ADMINISTRATOR
Princeton Administrators, L.P.
P.O. Box 9095
Princeton, NJ 08543-9095
(800) 543-6217
CUSTODIAN
State Street Bank and Trust Company
1 Heritage Drive
North Quincy, MA 02171
TRANSFER AGENT
EquiServe Trust Company, N.A.
150 Royall Street
Canton, MA 02021
(800) 699-1BFM
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square
New York, NY 10036
LEGAL COUNSEL - INDEPENDENT DIRECTORS
Debevoise & Plimpton
919 Third Avenue
New York, NY 10022
The accompanying financial statements as of April 30, 2002 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.
Statements and other information contained in this report are as dated and
are subject to change.
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
[LOGO] Printed on recycled paper 09247Q-10-6
THE BLACKROCK
BROAD INVESTMENT
GRADE 2009
TERM TRUST INC.
--------------------------------------------------------------------------------
CONSOLIDATED
SEMI-ANNUAL REPORT
APRIL 30, 2002
[LOGO] BLACKROCK