actions normally occurs within a month or more after the purchase or sale commitment is made. The Trusts may purchase securities under such conditions only with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, the Trusts may be required to pay more at settlement than the security is worth. In addition, the purchaser is not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed-delivery basis, the Trusts assume the rights and risks of ownership of the security, including the risk of price and yield fluctuations.
The cash received by the TOB from the sale of the short-term floating rate certificates, less transaction expenses, is paid to the Trust, which typically invests the cash in additional municipal bonds. The Trusts’ transfer of the municipal bonds to a TOB is accounted for as a secured borrowing, therefore the municipal bonds deposited into a TOB are presented in the Trust’s Schedule of Investments and the proceeds from the issuance of the short-term floating rate certificates are shown on the Statements of Assets and Liabilities as trust certificates.
Interest income from the underlying security is recorded by the Trusts on an accrual basis. Interest expense incurred on the secured borrowing and other expenses related to remarketing, administration and trustee services to a TOB are reported as expenses of the Trusts. The floating rate certificates have interest rates that generally reset weekly and their holders have the option to tender certificates to the TOB for redemption at par at each reset date. At January 31, 2009, the aggregate value of the underlying municipal bonds transferred to TOBs, the related liability for trust certificates and the range of interest rates on the liability for trust certificates were as follows:
Financial transactions executed through TOBs generally will underperform the market for fixed rate municipal bonds when interest rates rise, but tend to outperform the market for fixed rate bonds when interest rates decline or remain relatively stable. Should short-term interest rates rise, the Trusts’ investment in TOBs may adversely affect the Trusts’ investment income and distributions to Common Shareholders. Also, fluctuations in the market value of municipal bonds deposited into the TOB may adversely affect the Trusts’ net asset value per share.
| |
|
|
Notes to Financial Statements (continued) | |
Each Trust files US federal and various state and local tax returns. No income tax returns are currently under examination. The statue of limitations on Investment Quality Trusts’ and Income Trusts’ US federal tax returns remain open for the year ended July 31, 2008 and each of the three years ended October 31, 2007. The statutes of limitations on Florida 2020’s US federal tax returns remain open for the year ended July 31, 2008 and each of the three years ended December 31, 2008. The statutes of limitations on the Trusts’ state and local tax returns may remain open for an additional year depending upon the jurisdiction.
Recent Accounting Pronouncement: In March 2008, Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities • an amendment of FASB Statement No. 133” (“FAS 161”), was issued. FAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivative instruments affect an entity’s results of operations and financial position. FAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The impact on the Trusts’ financial statement disclosures, if any, is currently being assessed.
Deferred Compensation and BlackRock Closed-End Share Equivalent Investment Plan: Under the deferred compensation plan approved by each Trusts’ Board, non-interested Trustees (“Independent Trustees”) defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar amounts had been invested in common shares of other certain BlackRock Closed-End Funds selected by the Independent Trustees. This has approximately the same economic effect for the Independent Trustees as if, the Independent Trustees had invested the deferred amounts directly in the other certain BlackRock Closed-End Funds.
The deferred compensation plan is not funded and obligations thereunder represent general unsecured claims against the general assets of each Trust. Each Trust may, however, elect to invest in common shares of the other certain BlackRock Closed-End Funds selected by the Independent Trustees in order to match its deferred compensation obligations. Investments to cover each Trust’s deferred compensation liability are included in other assets on the Statements of Assets and Liabilities. Dividends and distributions from the BlackRock Closed-End Fund investments under the plan are included in income-affiliated on the Statements of Operations.
Other: Expenses directly related to each Trust are charged to that Trust. Other operating expenses shared by several funds are pro-rated among those funds on the basis of relative net assets or other appropriate methods.
2. Investment Advisory Agreement and Other Transactions with Affiliates:
Each Trust entered into an Investment Advisory Agreement with BlackRock Advisors, LLC (the “Advisor”), an indirect, wholly owned subsidiary of BlackRock, Inc., to provide investment advisory and administration services. As of January 31, 2009, The PNC Financial Services Group, Inc. (“PNC”) and Bank of America Corporation (“BAC”) are the largest stockholders of BlackRock, Inc. (“BlackRock”). BAC became a stockholder of BlackRock following its acquisition of Merrill Lynch & Co., Inc. (“Merrill Lynch”) on January 1, 2009. Prior to that date, both PNC and Merrill Lynch were considered affiliates of the Trusts under the 1940 Act. Subsequent to the acquisition, PNC remains an affiliate, but due to the restructuring of Merrill Lynch’s ownership interest of BlackRock, BAC is not deemed to be an affiliate under the 1940 Act.
The Advisor is responsible for the management of each Trust’s portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each Trust. For such services, each Trust pays the Advisor a monthly fee at an annual rate of 0.35% for the Investment Quality Trusts, 0.60% for the Income Trusts and 0.50% for Florida 2020 of each Trust’s average daily net assets. Average daily net assets is the average daily value of each Trust’s total assets minus the sum of its accrued liabilities.
The Advisor has voluntarily agreed to waive a portion of the investment advisory fee on the Income Trusts as a percentage of average daily net assets as follows: 0.10% through July 31, 2009 and 0.05% through July 31, 2010. For the six months ended January 31, 2009, the Advisor waived the following amounts, which are included in fees waived by advisor on Statements of Operations:
| | | | |
| |
| | Fees Waived
by Advisor | |
| |
California Income | | $ | 161,746 | |
Municipal Income Investment | | $ | 71,346 | |
New Jersey Income | | $ | 78,859 | |
New York Income | | $ | 132,767 | |
| |
The Advisor has agreed to waive its advisory fees by the amount of investment advisory fees each Trust pays to the Advisor indirectly through its investment in affiliated money market funds, which are included in fees waived by advisor on the Statements of Operations. For the six months ended January 31, 2009, the amounts waived were as follows:
| | | | |
| |
| | Fees Waived
by Advisor | |
| |
California Investment Quality | | $ | 1,873 | |
California Income | | $ | 28,921 | |
Florida 2020 | | $ | 9,578 | |
Investment Quality | | $ | 3,035 | |
Municipal Income Investment | | $ | 20,697 | |
New Jersey Investment Quality | | $ | 1,823 | |
New Jersey Income | | $ | 22,371 | |
New York Investment Quality | | $ | 1,221 | |
New York Income | | $ | 8.908 | |
| |
Each Investment Quality Trust has an Administration Agreement with the Advisor. The administration fee to the Advisor is computed daily and payable monthly based on an annual rate of 0.10% of each respective Trust’s average daily net assets for California Investment Quality, Investment Quality, New Jersey Investment Quality and New York Investment Quality.
The Advisor has entered into a separate sub-advisory agreement with BlackRock Financial Management, Inc. (“BFM”), an affiliate of the Advisor, with respect to each Trust, under which the Advisor pays BFM for services it
| | | |
| | | |
| SEMI-ANNUAL REPORT | JANUARY 31, 2009 | 57 |
| |
|
|
Notes to Financial Statements (continued) | |
provides, a monthly fee that is a percentage of the investment advisory fee paid by each Trust to the Advisor.
For the six months ended January 31, 2009, certain Trusts reimbursed the Advisor for certain accounting services in the following amounts, which are included in accounting services in the Statement of Operations:
| | | | |
| |
| | Reimbursement | |
| |
California Income | | $ | 2,465 | |
Florida 2020 | | $ | 1,100 | |
Municipal Income Investment | | $ | 1,272 | |
New Jersey Income | | $ | 1,391 | |
New York Income | | $ | 2,507 | |
| |
Pursuant to the terms of the custody agreement, custodian fees may be reduced by amounts calculated on uninvested cash balances (“custody credits”), which are shown on the Statements of Operations as fees paid indirectly.
Certain officers and/or trustees of the Trusts are officers and/or directors of BlackRock, Inc. or its affiliates. The Trusts reimburse the Advisor for compensation paid to the Trusts’ Chief Compliance Officer.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six months ended January 31, 2009 were as follows:
| | | | | | | |
| |
| | | Purchases | | | Sales | |
| |
California Investment Quality | | $ | 3,788,228 | | $ | 4,943,062 | |
California Income | | $ | 81,129,579 | | $ | 82,225,506 | |
Florida 2020 | | $ | 2,031,659 | | $ | 8,345,394 | |
Investment Quality | | $ | 7,518,706 | | $ | 9,385,451 | |
Municipal Income Investment | | $ | 31,866,120 | | $ | 32,124,975 | |
New Jersey Investment Quality | | $ | 2,475,411 | | $ | 2,724,594 | |
New Jersey Income | | $ | 15,115,288 | | $ | 30,820,316 | |
New York Investment Quality | | $ | 3,001,537 | | $ | 3,144,558 | |
New York Income | | $ | 20,472,964 | | $ | 27,878,093 | |
| |
|
4. Concentration, Market and Credit Risk:
Each Trust invests a substantial amount of its assets in issuers located in a single state or limited number of states. Please see each Trust’s Schedule of Investments for concentrations in specific states.
Many municipalities insure repayment of their bonds, which reduces the risk of loss due to issuer default. The market value of these bonds may fluctuate for other reasons, including market perception of the value of such insurance, and there is no guarantee that the insurer will meet its obligations.
In the normal course of business, the Trusts invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (credit risk). The value of securities held by the Trusts may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Trusts; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to credit risk, the Trusts may be exposed to counterparty risk, or the risk that an entity with which the Trusts have unsettled or open transactions may default. Financial assets, which potentially expose the Trusts to credit and counterparty risks, consist principally of investments and cash due from counterparties. The extent of the Trusts’ exposure to credit and counterparty risks with respect to these financial assets is approximated by their value recorded in each Trust’s Statement of Assets and Liabilities.
5. Capital Share Transactions:
Each Investment Quality Trust is authorized to issue 200,000,000 shares, including Preferred Shares, par value $0.01 per share, all of which were initially classified as Common Shares. There are an unlimited number of $0.001 par value common shares authorized for the Income Trusts and Florida 2020. Each Trust’s Board is authorized, however, to reclassify any unissued shares of shares without approval of Common Shareholders. At January 31, 2009 the Common Shares owned by affiliates of the Advisor for Florida 2020 was 8,028 shares.
Common Shares
During the six months ended January 31, 2009, the period November 1, 2007 to July 31, 2008 and the year ended October 31, 2007 the shares issued and outstanding increased by the following amounts as a result of dividend reinvestment:
| | | | | | | | | |
| |
| | Six Months
Ended
January 31,
2009 | | Period
November 1,
2007
to July 31,
2008 | | Year Ended
October 31,
2007 | |
| |
California Investment Quality | | — | | | 73 | | | — | |
California Income | | 8,447 | | | 46,329 | | | 61,958 | |
Municipal Income Investment | | — | | | 8,026 | | | 16,959 | |
New Jersey Investment Quality | | — | | | 3,040 | | | 1,972 | |
New Jersey Income | | 18,660 | | | 31,657 | | | 39,482 | |
New York Investment Quality | | — | | | 2,856 | | | 1,724 | |
New York Income | | 24,174 | | | 44,125 | | | 56,191 | |
| |
|
Shares issued and outstanding for Florida 2020 and Investment Quality for the six months ended January 31, 2009, the period November 1, 2007 to July 31, 2008 for Investment Quality, the period November 1, 2007 to July 31, 2008 for Florida 2020 and during the year ended December 31, 2007 (October 31, 2007 for Investment Quality) remained constant.
Preferred Shares
The Preferred Shares are redeemable at the option of each Trust, in whole or in part, on any dividend payment date at their liquidation preference per share plus any accumulated but unpaid dividends whether or not declared. The Preferred Shares are also subject to mandatory redemption at $25,000 per share plus any accumulated but unpaid dividends, whether or not declared, if certain requirements relating to the composition of the assets and liabilities of a Trust, as set forth in each Trust’s Statement of Preferences/Articles of Supplementary, are not satisfied.
The holders of Preferred Shares have voting rights equal to the holders of Common Shares (one vote per share) and will vote together with holders of Common Shares (one vote per share) as a single class. However, the holders of Preferred Shares, voting as a separate class, are also entitled to elect two Trustees for each Trust. In addition, the 1940 Act requires that along with approval by shareholders that might otherwise be required, the
| | | |
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58 | SEMI-ANNUAL REPORT | JANUARY 31, 2009 | |
|
|
|
Notes to Financial Statements (continued) |
approval of the holders of a majority of any outstanding Preferred Shares, voting separately as a class would be required to (a) adopt any plan of reorganization that would adversely affect the Preferred Shares, (b) change a Trust’s subclassification as a closed-end investment company or change its fundamental investment restrictions or (c) change its business so as to cease to be an investment company.
The Trusts had the following series of Preferred Shares outstanding and effective yields as of January 31, 2009:
| | | | | | | |
| | | | | | | | |
| | Series | | Shares | | Yield | |
| | | | | | | | |
California Investment Quality | | W7 | | 273 | | 0.746 | % |
| | | | | | | | |
California Income | | T7 | | 2,018 | | 0.731 | % |
| | | | | | | | |
| | R7 | | 2,018 | | 0.716 | % |
Florida 2020 | | F7 | | 1,716 | | 0.716 | % |
| | | | | | | | |
Investment Quality | | R7 | | 285 | | 0.716 | % |
| | | | | | | | |
Municipal Income Investment | | T7 | | 1,982 | | 0.731 | % |
| | | | | | | | |
New Jersey Investment Quality | | T7 | | 283 | | 0.732 | % |
| | | | | | | | |
New Jersey Income | | R7 | | 2,419 | | 0.716 | % |
| | | | | | | | |
New York Investment Quality | | F7 | | 392 | | 0.716 | % |
| | | | | | | | |
New York Income | | W7 | | 1,917 | | 0.746 | % |
| | | | | | | | |
| | F7 | | 1,917 | | 0.716 | % |
| | | | | | | | |
Each Trust’s series of Preferred Shares has a reset frequency of seven days. Dividends on seven-day Preferred Shares are cumulative at a rate that is reset every seven days based on the results of an auction. If the Preferred Shares fail to clear the auction on an auction date, the affected Trust is required to pay the maximum applicable rate on the Preferred Shares to holders of such shares for successive dividend periods until such time as the shares are successfully auctioned. The maximum applicable rate on the Preferred Shares is the higher of 110% of the AA commercial paper rate or 110% of 90% of the Kenny S&P 30-day High Grade Index rate divided by 1.00 minus the marginal tax rate. The low, high and average dividend rates on the Preferred Shares for each Trust for the six months ended January 31, 2009 were as follows:
| | | | | | | | | |
| | | | | | | | | | |
| | Series | | Low | | High | | Average | |
| | | | | | | | | | |
California Investment Quality | | W7 | | 0.640 | % | 12.565 | % | 3.254 | % |
| | | | | | | | | | |
California Income | | T7 | | 0.594 | % | 11.347 | % | 3.130 | % |
| | | | | | | | | | |
| | R7 | | 0.594 | % | 12.261 | % | 3.165 | % |
Florida 2020 | | F7 | | 0.594 | % | 11.728 | % | 3.109 | % |
| | | | | | | | | | |
Investment Quality | | R7 | | 0.594 | % | 12.261 | % | 3.049 | % |
| | | | | | | | | | |
Municipal Income Investment | | T7 | | 0.594 | % | 11.347 | % | 3.044 | % |
| | | | | | | | | | |
New Jersey Investment Quality | | T7 | | 0.594 | % | 11.347 | % | 3.034 | % |
| | | | | | | | | | |
New Jersey Income | | R7 | | 0.594 | % | 12.261 | % | 3.066 | % |
| | | | | | | | | | |
New York Investment Quality | | F7 | | 0.594 | % | 11.728 | % | 3.891 | % |
| | | | | | | | | | |
New York Income | | W7 | | 0.640 | % | 12.565 | % | 3.610 | % |
| | | | | | | | | | |
| | F7 | | 0.594 | % | 11.728 | % | 3.643 | % |
| | | | | | | | | | |
For the six months ended January 31, 2009, the Preferred Shares of each Trust failed to clear any of their auctions. As a result, the Preferred Share dividend rates were reset to the maximum applicable rate that ranged from 0.594% to 12.565%. A failed auction is not an event of default for the Trusts but it has a negative impact on the liquidity of the Preferred Shares. A failed auction occurs when there are more sellers of a trust’s auction rate Preferred Shares than buyers. It is impossible to predict how long this imbalance will last. A successful auction for each Trust’s Preferred Shares may not occur for some time, if ever, and even if liquidity does resume, Preferred Shareholders may not have the ability to sell the Preferred Shares at their liquidation preference.
A Trust may not declare dividends or make other distributions on Common Shares or purchase any such shares if, at the time of the declaration, distribution or purchase, asset coverage with respect to the outstanding Preferred Shares would be less than 200%.
Prior to December 31, 2008, the Trusts paid commissions to certain broker-dealers at the end of each auction at an annual rate of 0.25%, calculated on the aggregate principal amount. In December 2008, commissions paid to broker-dealers on preferred shares that experienced a failed auction were reduced to 0.15% on the aggregate principal amount. The Trusts will pay commissions of 0.25% on the aggregate principal amount of all shares that successfully clear their auctions. Merrill Lynch, Pierce, Fenner & Smith, Incorporated (“MLPF&S”), a wholly owned subsidiary of Merrill Lynch, earned commissions for the period August 1, 2008 through December 31, 2008 as follows:
| | | | |
| | | | |
| | Commissions | |
| | | | |
California Income | | $ | 48,261 | |
Municipal Income Investment | | $ | 36,726 | |
New Jersey Income | | $ | 18,367 | |
New York Income | | $ | 61,654 | |
| | | | | |
Subsequent to that date, neither MLPF&S nor Merrill Lynch are considered affiliates of the Trusts.
Shares issued and outstanding during the six months ended January 31, 2009 remained constant.
On June 4, 2008, the Trusts announced the following redemptions of Preferred Shares at a price of $25,000 per share plus any accrued and unpaid dividends through the redemption dates:
| | | | | | | | | | |
| | | | | | | | | | |
| | Series | | Redemption
Date | | Shares
Redeemed | | Aggregate
Principal | |
| | | | | | | | | | |
California Investment Quality | | W7 | | 6/26/08 | | 27 | | $ | 675,000 | |
| | | | | | | | | | |
California Income | | R7 | | 6/27/08 | | 621 | | $ | 15,525,000 | |
| | T7 | | 6/25/08 | | 621 | | $ | 15,525,000 | |
| | | | | | | | | | |
Florida 2020 | | F7 | | 6/30/08 | | 240 | | $ | 6,000,000 | |
| | | | | | | | | | |
Investment Quality | | R7 | | 6/27/08 | | 55 | | $ | 1,375,000 | |
| | | | | | | | | | |
Municipal Income Investment | | T7 | | 6/25/08 | | 320 | | $ | 8,000,000 | |
| | | | | | | | | | |
New Jersey Investment Quality | | T7 | | 6/25/08 | | 17 | | $ | 425,000 | |
| | | | | | | | | | |
New Jersey Income | | R7 | | 6/27/08 | | 133 | | $ | 3,325,000 | |
| | | | | | | | | | |
New York Income | | F7 | | 6/30/08 | | 278 | | $ | 6,950,000 | |
| | | | | | | | | | |
| | W7 | | 6/26/08 | | 278 | | $ | 6,950,000 | |
| | | | | | | | | | | |
The Trusts financed the Preferred Share redemptions with cash received from TOB transactions.
Shares issued and outstanding during six months ended January 31, 2009 and the year ended October 31, 2007 (December 31, 2007 for Florida 2020) remained constant.
| | | |
| | | |
| SEMI-ANNUAL REPORT | JANUARY 31, 2009 | 59 |
|
|
|
Notes to Financial Statements (concluded) |
6. Capital Loss Carryforward:
As of July 31, 2008, the Trusts had a capital loss carryforward available to offset future realized capital gains through the indicated expiration dates as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Expires July 31, | | California
Investment
Quality | | California
Income | | Florida
2020 | | Investment
Quality | | Municipal
Income
Investment | | New Jersey
Investment
Quality | | New Jersey
Income | | New York
Investment
Quality | | New York
Income | |
| | | | | | | | | | | | | | | | | | | | |
2012 | | | — | | $ | 3,247,213 | | | — | | | — | | $ | 796,318 | | | — | | $ | 588,553 | | | — | | $ | 197,144 | |
2014 | | | — | | | 1,320,764 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
2015 | | $ | 5,173 | | | — | | | — | | $ | 137,267 | | | 426,674 | | $ | 52,624 | | | 592,744 | | | — | | | — | |
2016 | | | 103,738 | | | — | | $ | 28,100 | | | 389,530 | | | 866,417 | | | 244,748 | | | 15,502 | | $ | 55,630 | | | 459,430 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 108,911 | | $ | 4,567,977 | | $ | 28,100 | | $ | 526,797 | | $ | 2,089,409 | | $ | 297,372 | | $ | 1,196,799 | | $ | 55,630 | | $ | 656,574 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
7. Subsequent Events:
The Trusts paid a net investment income dividend in the following amounts per share on March 2, 2009 to Common Shareholders of record on February 13, 2009:
| | | | |
| | | | |
| | Common Dividend
Per Share | |
| | | | |
California Investment Quality | | $ | 0.046500 | |
California Income | | $ | 0.068200 | |
Florida 2020 | | $ | 0.051000 | |
Investment Quality | | $ | 0.044500 | |
Municipal Income Investment. | | $ | 0.072875 | |
New Jersey Investment Quality | | $ | 0.051400 | |
New Jersey Income | | $ | 0.077600 | |
New York Investment Quality. | | $ | 0.058200 | |
New York Income | | $ | 0.075339 | |
| | | | | |
The dividends declared on Preferred Shares for the period February 1, 2009 to February 28, 2009 for the Trusts were as follows:
| | | | | | |
| | | | | | |
| | Series | | Dividends
Declared | |
| | | | | | |
California Investment Quality | | W7 | | $ | 4,017 | |
| | | | | | |
California Income | | T7 | | $ | 28,523 | |
| | R7 | | $ | 29,620 | |
| | | | | | |
Florida 2020 | | F7 | | $ | 24,422 | |
| | | | | | |
Investment Quality | | R7 | | $ | 461 | |
| | | | | | |
Municipal Income Investment | | T7 | | $ | 28,014 | |
| | | | | | |
New Jersey Investment Quality | | T7 | | $ | 3,784 | |
| | | | | | |
New Jersey Income | | R7 | | $ | 35,506 | |
| | | | | | |
New York Investment Quality | | F7 | | $ | 5,583 | |
| | | | | | |
New York Income | | W7 | | $ | 28,204 | |
| | | | | | |
| | F7 | | $ | 27,282 | |
| | | | | | | |
| | | |
| | | |
60 | SEMI-ANNUAL REPORT | JANUARY 31, 2009 | |
|
Richard E. Cavanagh, Chairman of the Board and Trustee |
Karen P. Robards, Vice Chair of the Board, Chair of the |
Audit Committee and Trustee |
G. Nicholas Beckwith, III, Trustee |
Richard S. Davis, Trustee |
Kent Dixon, Trustee |
Frank J. Fabozzi, Trustee |
Kathleen F. Feldstein, Trustee |
James T. Flynn, Trustee |
Henry Gabbay, Trustee |
Jerrold B. Harris, Trustee |
R. Glenn Hubbard, Trustee |
W. Carl Kester, Trustee |
Donald C. Burke, Trust President and Chief Executive Officer |
Anne F. Ackerley, Vice President |
Neal J. Andrews, Chief Financial Officer |
Jay M. Fife, Treasurer |
Brian P. Kindelan, Chief Compliance Officer of the Trusts |
Howard B. Surloff, Secretary |
|
Effective January 1, 2009, Robert S. Salomon, Jr. retired as Director/Trustee
of the Trusts. The Board wishes Mr. Salomon well in his retirement. |
|
Custodian |
State Street Bank and Trust |
Company |
Boston, MA 02101 |
|
Trusts Address |
BlackRock Closed-End |
Funds |
c/o BlackRock Advisors. LLC |
100 Bellevue Parkway |
Wilmington, DE 19809 |
|
Transfer Agents |
Common Shares: |
Computershare Trust |
Companies, N.A. |
Canton, MA 02021 |
|
Preferred Shares: |
For the Income Trusts |
BNY Mellon Shareowner |
Services |
Jersey City, N.J. 07310 |
|
For the Investment Quality |
Trusts |
Deutsche Bank Trust |
Company Americas |
New York, NY 10005 |
|
Accounting Agent |
State Street Bank and Trust |
Company |
Princeton, NJ 08540 |
|
Independent Registered |
Public Accounting Firm |
Deloitte & Touche LLP |
Princeton, NJ 08540 |
|
Legal Counsel |
Skadden, Arps, Slate, |
Meagher & Flom LLP |
New York, NY 10036 |
| | | |
| | | |
| SEMI-ANNUAL REPORT | JANUARY 31, 2009 | 61 |
The Annual Meeting of Shareholders was held on September 12, 2008 for shareholders of record on July 14, 2008 to elect director/trustee nominees of each Fund/Trust:
Approved the Class I Directors/Trustees as follows:
| | | | | | | | | | | | | |
| | G. Nicholas Beckwith, III | | Kent Dixon | | R. Glenn Hubbard | |
| | | | |
| | Votes For | | Votes Withheld | | Votes For | | Votes Withheld | | Votes For | | Votes Withheld | |
| | | | | | | | | | | | | | |
BlackRock California Investment Quality Municipal Trust Inc. | | 893,677 | | 41,311 | | 893,677 | | 41,311 | | 893,677 | | 41,311 | |
BlackRock California Municipal Income Trust | | 13,112,831 | | 258,429 | | 13,108,203 | | 263,057 | | 13,100,200 | | 271,060 | |
BlackRock Florida Municipal 2020 Term Trust | | 4,631,661 | | 695,549 | | 4,627,661 | | 699,549 | | 4,631,661 | | 695,549 | |
BlackRock Investment Quality Municipal Income Trust | | 866,146 | | 172,255 | | 866,146 | | 172,255 | | 866,146 | | 172,255 | |
BlackRock Municipal Income Investment Trust | | 6,105,336 | | 184,946 | | 6,107,836 | | 182,446 | | 6,119,460 | | 170,822 | |
BlackRock New Jersey Investment Quality Municipal Trust Inc. | | 876,890 | | 58,994 | | 878,556 | | 57,328 | | 878,556 | | 57,328 | |
BlackRock New Jersey Municipal Income Trust | | 6,697,147 | | 505,132 | | 6,698,663 | | 503,616 | | 6,698,663 | | 503,616 | |
BlackRock New York Investment Quality Municipal Trust Inc. | | 1,191,470 | | 35,138 | | 1,191,474 | | 35,134 | | 1,191,474 | | 35,134 | |
BlackRock New York Municipal Income Trust | | 11,513,344 | | 233,875 | | 11,512,046 | | 235,173 | | 11,515,076 | | 232,143 | |
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| | W. Carl Kester | | Robert S. Salomon, Jr. | | | | | |
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| | Votes For | | Votes Withheld | | Votes For | | Votes Withheld | | | | | |
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BlackRock California Investment Quality Municipal Trust Inc. | | 203 | 1 | | 1 | 893,677 | | 41,311 | | | | | |
BlackRock California Municipal Income Trust | | 2,772 | 1 | 116 | 1 | 13,112,331 | | 258,929 | | | | | |
BlackRock Florida Municipal 2020 Term Trust | | 1,684 | 1 | 3 | 1 | 4,627,661 | | 699,549 | | | | | |
BlackRock Investment Quality Municipal Income Trust | | 162 | 1 | 0 | 1 | 866,146 | | 172,255 | | | | | |
BlackRock Municipal Income Investment Trust | | 1,928 | 1 | 4 | 1 | 6,116,360 | | 173,922 | | | | | |
BlackRock New Jersey Investment Quality Municipal Trust Inc. | | 136 | 1 | 107 | 1 | 878,556 | | 57,328 | | | | | |
BlackRock New Jersey Municipal Income Trust | | 2,310 | 1 | 70 | 1 | 6,698,663 | | 503,616 | | | | | |
BlackRock New York Investment Quality Municipal Trust Inc. | | 342 | 1 | 12 | 1 | 1,191,470 | | 35,138 | | | | | |
BlackRock New York Municipal Income Trust | | 3,621 | 1 | 145 | 1 | 11,512,146 | | 235,073 | | | | | |
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1 | Voted on by holders of Preferred Shares only. |
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Availability of Quarterly Schedule of Investments |
Each Trust files their complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Each Trust’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. Each Trust’s Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.
Electronic copies of most financial reports are available on the Trusts’ website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Trusts’ electronic delivery program.
Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:
Please contact your financial advisor to enroll. Please note that not all investment advisors, banks or brokerages may offer this service.
The Trusts will mail only one copy of shareholder documents, including annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and it is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact the Trusts at (800) 441-7762.
Quarterly performance, semi-annual and annual reports and other information regarding each Trust may be found on BlackRock’s website, which can be accessed at http://www.blackrock.com. This reference to BlackRock’s website is intended to allow investors public access to information regarding each Trust and does not, and is not intended to, incorporate BlackRock’s website into this report.
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62 | SEMI-ANNUAL REPORT | JANUARY 31, 2009 | |
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Additional Information (continued) |
The amounts and sources of distributions reported are only estimates and are not being provided for tax reporting purposes. The actual amounts and source for tax reporting purposes will depend upon the Trusts’ investment experience during the year and may be subject to changes based on the tax regulations. Each Trust will send you a Form 1099-DIV each calendar year that will tell you how to report these distributions for federal income tax purposes.
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| | Total Fiscal Year-to-Date
Cumulative Distributions
by Character | | Percentage of Fiscal
Year-to-Date
Cumulative Distributions
by Character | |
| | | | | | | | | | | | | | | | | | |
| | Net
Investment
Income | | Net Realized
Capital Gains | | Return of
Capital | | Total Per
Common
Share | | Net
Investment
Income | | Net Realized
Capital Gains | | Return of
Capital | | Total Per
Common
Share | |
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BlackRock California Investment Quality Municipal Trust Inc. | | $ | 0.279 | | | — | | | — | | $ | 0.279 | | | 100 | % | | 0 | % | | 0 | % | | 100 | % |
BlackRock New York Investment Quality Municipal Trust Inc. | | $ | 0.349 | | $ | 0.005 | | | — | | $ | 0.354 | | | 99 | % | | 1 | % | | 0 | % | | 100 | % |
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On September 12, 2008, the Board of Trustees of BlackRock Florida Investment Quality Municipal Trust and BlackRock Florida Municipal Income Trust voted unanimously to change a non-fundamental investment policy of the Trusts, and to rename the Trusts “BlackRock Investment Quality Municipal Income Trust” and “BlackRock Municipal Income Investment Trust”, respectively. The Trusts’ previous non-fundamental investment policy required BlackRock Florida Investment Quality Municipal Trust to invest at least 80% of its assets, and BlackRock Florida Municipal Income Trust to invest at least 80% of its total assets, in Florida municipal bonds rated investment grade at the time of investment. Due to the repeal of the Florida Intangible Personal Property Tax as of January 2007, the Board has approved an amended policy allowing the Trusts flexibility to invest in municipal obligations regardless of geographic location. The Trusts’ new investment policy, under normal market conditions, is to invest at least 80% of their assets or total assets, as the case may be, in municipal bonds rated investment grade at the time of investment. The approved changes will not alter the Trusts’ investment objectives.
Under current market conditions, the Advisor anticipates that it will gradually reposition the Trusts’ portfolios over time and that during such period the Trusts may continue to hold a substantial portion of its assets in Florida municipal bonds. At this time, it is uncertain how long the repositioning may take, and the Trusts will continue to be subject to risks associated with investing a substantial portion of its assets in Florida municipal bonds until the repositioning is complete.
The Advisor and the Board believe the amended policy will allow the Advisor to better manage the Trusts’ portfolios in the best interests of the Trusts’ shareholders and to better meet the Trusts’ investment objectives.
Effective September 12, 2008, following approval by the Trusts’ Board, the Board ratified the amendment of the terms of the Trusts’ Preferred Shares in order to allow the Trusts to enter into TOB transactions, the proceeds of which were used to redeem a portion of the Trusts’ Preferred Shares. Accordingly, the definition of Inverse Floaters was amended to incorporate the Trusts’ permissible ratio of floating rate instruments into inverse floating rate instruments. Additionally, conforming changes and certain formula modifications concerning inverse floaters were made to the definitions of Moody’s Discount Factor and S&P Discount Factor, as applicable, to integrate the Trusts’ investments in TOBs into applicable calculations.
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| SEMI-ANNUAL REPORT | JANUARY 31, 2009 | 63 |
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Additional Information (concluded) |
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BlackRock Privacy Principles |
BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively,”Clients”) and to safeguarding their nonpublic personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.
If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.
BlackRock obtains or verifies personal nonpublic information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to nonaffiliated third parties any nonpublic information about its Clients, except as permitted by law or as necessary to service Client accounts. These nonaffiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to nonpublic personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the nonpublic personal information of its Clients, including procedures relating to the proper storage and disposal of such information.
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64 | SEMI-ANNUAL REPORT | JANUARY 31, 2009 | |
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This report is transmitted to shareholders only. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. The Trusts have leveraged their Common Shares, which creates risks for Common Shareholders, including the likelihood of greater volatility of net asset value and market price of the Common Shares and the risk that fluctuations in the short-term dividend rates of the Preferred Shares, currently set at the maximum reset rate as a result of failed auctions, may affect the yield to Common Shareholders. Statements and other information herein are as dated and are subject to change.
A description of the policies and procedures that the Trusts use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling toll-free (800) 411-7762; (2) at www.blackrock.com; and (3) on the Securities and Exchange Commission’s website at http://www.sec.gov. Information about how each Trust voted proxies relating to securities held in each Trust’s portfolio during the most recent 12-month period ended June 30 is available upon request and without charge (1) at www.blackrock.com or by calling (800) 441-7762 and (2) on the Securities and Exchange Commission’s website at http://www.sec.gov.
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| Item 2 – | | Code of Ethics – Not Applicable to this semi-annual report |
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| Item 3 – | | Audit Committee Financial Expert – Not Applicable to this semi-annual report |
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| Item 4 – | | Principal Accountant Fees and Services – Not Applicable to this semi-annual report |
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| Item 5 – | | Audit Committee of Listed Registrants – Not Applicable to this semi-annual report |
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| Item 6 – | | Investments |
| | | (a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form. |
| | | (b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing. |
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| Item 7 – | | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not Applicable to this semi-annual report |
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| Item 8 – | | Portfolio Managers of Closed-End Management Investment Companies – Not Applicable to this semi- annual report |
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| Item 9 – | | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable |
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| Item 10 – | | Submission of Matters to a Vote of Security Holders – The registrant’s Nominating and Governance Committee will consider nominees to the board of directors recommended by shareholders when a vacancy becomes available. Shareholders who wish to recommend a nominee should send nominations that include biographical information and set forth the qualifications of the proposed nominee to the registrant’s Secretary. There have been no material changes to these procedures. |
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| Item 11 – | | Controls and Procedures |
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| 11(a) – | | The registrant’s principal executive and principal financial officers or persons performing similar functions have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13(a)-15(b) under the Securities Exchange Act of 1934, as amended. |
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| 11(b) – | | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a- 3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
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| Item 12 – | | Exhibits attached hereto |
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| 12(a)(1) – | | Code of Ethics – Not Applicable to this semi-annual report |
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| 12(a)(2) – | | Certifications – Attached hereto |
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| 12(a)(3) – | | Not Applicable |
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| 12(b) – | | Certifications – Attached hereto |
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| | | Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. |
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| | | BlackRock Municipal Income Investment Trust |
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| | | By: | /s/ Donald C. Burke |
| | | | Donald C. Burke |
| | | | Chief Executive Officer of |
| | | | BlackRock Municipal Income Investment Trust |
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| | | Date: March 25, 2009 |
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| | | Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. |
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| | | By: | /s/ Donald C. Burke |
| | | | Donald C. Burke |
| | | | Chief Executive Officer (principal executive officer) of |
| | | | BlackRock Municipal Income Investment Trust |
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| | | Date: March 25, 2009 |
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| | | By: | /s/ Neal J. Andrews |
| | | | Neal J. Andrews |
| | | | Chief Financial Officer (principal financial officer) of |
| | | | BlackRock Municipal Income Investment Trust |
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| | | Date: March 25, 2009 |
