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 Trusts’ Schedules of Investments and the proceeds from the issuance of the short-term floating rate certificates shown on the Statements of Assets and Liabilities as trust certificates.
Interest income from the underlying securities 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 February 28, 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 short-term interest rates rise, but tend to outperform the market for fixed rate bonds when short-term 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 shareholders. Also, fluctuations in the market value of municipal bonds deposited into the TOB may adversely affect the Trusts’ net asset value per share.
Each Trust files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Trusts’ US federal tax returns remains open for each of the four years ended August 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.
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Notes to Financial Statements (continued) |
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 of the Trust’s Board, non-interested Directors/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 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. 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 0.55% for the Insured Trusts, Municipal Income II and MuniHoldings Insured, 0.65% for the Bond Trusts and 0.50% for MuniVest of each Trust’s average daily net assets. Average daily net assets is the average daily value of the Trusts’ total assets minus the sum of its accrued liabilities.
The Advisor has voluntarily agreed to waive a portion of the investment advisory fee. With respect to the Insured Trusts, the waiver, as a percentage of average daily net assets, is as follows: 0.15% through October 2008, 0.10% through October 2009, and 0.05% through October 2010. With respect to the Bond Trusts, the waiver, as a percentage of average daily net assets, is as follows: 0.20% through April 2009, 0.15% through April 2010, 0.10% through April 2011, and 0.05% through April 2012. With respect to Municipal Income II, the waiver, as a percentage of average daily net assets, is as follows: 0.10% through July 2009 and 0.05% through July 2012. With respect to MuniHoldings Insured, the Advisor waived its investment advisory fee on the proceeds of Preferred Shares and TOBs that exceed 35% of the average daily net assets. For the six months ended February 28, 2009, the Advisor waived the following amounts, which are included in fees waived by advisor on the Statements of Operations:
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Insured Municipal | | $ | 307,076 | |
Insured Investment | | $ | 105,713 | |
Municipal Bond | | $ | 175,572 | |
Bond Investment | | $ | 68,324 | |
Municipal Income II | | $ | 195,780 | |
MuniHoldings Insured | | $ | 306,243 | |
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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. For the six months ended February 28, 2009, the following amounts, which are included in fees waived by advisor on the Statements of Operations were waived:
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Insured Municipal | | $ | 6,862 | |
Insured Investment | | $ | 9,751 | |
Municipal Bond | | $ | 33,753 | |
Bond Investment | | $ | 12,897 | |
Municipal Income II | | $ | 39,011 | |
MuniHoldings Insured | | $ | 39,233 | |
MuniVest | | $ | 40,909 | |
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The Advisor has entered into a separate sub-advisory agreement with BlackRock Financial Management, Inc. (“BFM”), an affiliate of the Advisor, with respect to the Insured Trusts, Bond Trusts and Municipal Income II, and BlackRock Investment Management, LLC (“BIM”), an affiliate of the Advisor, with respect to MuniHoldings and MuniVest under which the Advisor pays BFM and BIM for services it provides, a monthly fee that is a percentage of the investment advisory fee paid by each Trust to the Advisor.
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SEMI-ANNUAL REPORT | FEBRUARY 28, 2009 | 55 |
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Notes to Financial Statements (continued) |
For the six months ended February 28, 2009, the Trusts reimbursed the Advisor for certain accounting services which are included in accounting services on the Statements of Operations as follows:
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| | Reimbursement | |
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Insured Municipal | | | $ | 4,470 | | |
Insured Investment | | | $ | 1,481 | | |
Municipal Bond | | | $ | 1,717 | | |
Bond Investment | | | $ | 678 | | |
Municipal Income II | | | $ | 4,458 | | |
MuniHoldings Insured | | | $ | 7,764 | | |
MuniVest | | | $ | 7,445 | | |
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Pursuant to the terms of the custody agreement, custodian fees may be reduced by amounts calculated on uninvested cash balances 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 investment securities, excluding short-term investments, for the six months ended February 28, 2009 were as follows:
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| | Purchases | | Sales | |
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Insured Municipal | | $ | 20,680,055 | | $ | 70,619,857 | |
Insured Investment | | $ | 37,075,212 | | $ | 46,282,150 | |
Municipal Bond | | $ | 55,318,201 | | $ | 54,916,094 | |
Bond Investment | | $ | 23,664,984 | | $ | 24,948,927 | |
Municipal Income II | | $ | 18,521,041 | | $ | 57,578,366 | |
MuniHoldings Insured | | $ | 143,348,130 | | $ | 254,316,714 | |
MuniVest | | $ | 152,205,777 | | $ | 180,167,526 | |
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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 the Schedules 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 obligation.
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 the Trusts’ Statements of Assets and Liabilities.
5. Capital Share Transactions:
Common Shares
The Insured Trusts, the Bond Trusts and Municipal Income II are authorized to issue an unlimited number of shares, including Preferred Shares, par value $0.001 per share, all of which were initially classified as Common Shares. Each Trust’s Board is authorized, however, to reclassify any unissued shares without approval of Common Shareholders.
MuniHoldings Insured is authorized to issue an unlimited number of shares, including 1 million Preferred Shares, par value $0.10 per share.
MuniVest is authorized to issue 160 million shares, 150 million of which were initially classified as Common Shares, par value $0.10 per share and 10 million of which were classified as Preferred Shares.
Shares issued and outstanding during the six months ended February 28, 2009 and the year ended August 31, 2008 increased by the following amounts as a result of dividend reinvestment:
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| | Six Months
Ended
February 28,
2009 | | Year Ended
August 31,
2008 | |
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Insured Investment | | — | | | 10,322 | | |
Municipal Bond | | 18,364 | | | 58,148 | | |
Bond Investment | | — | | | 6,553 | | |
Municipal Income II | | — | | | 91,244 | | |
MuniVest | | — | | | 189,635 | | |
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Shares issued and outstanding remained constant for Insured Municipal and MuniHoldings Insured during the six months ended February 28, 2009 and the year ended August 31, 2008.
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 plus any accumulated unpaid dividends whether or not declared. The Preferred Shares are also subject to mandatory redemption at their liquidation preference plus any accumulated or 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 Statements of Preferences/Articles Supplementary/Certificates of Designation (“Governing Instrument”), as applicable, are not satisfied.
From time to time in the future, the Trusts may effect repurchases of their respective Preferred Shares at prices below their liquidation preferences as agreed upon by the Trusts and seller. The Trusts also may redeem their respective Preferred Shares from time to time as provided in the applicable Governing Instrument. The Trusts intend to effect such redemptions and/or repurchases to the extent necessary to maintain applicable asset coverage requirements or for such other reasons as the Board may determine.
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56 | SEMI-ANNUAL REPORT | FEBRUARY 28, 2009 |
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Notes to Financial Statements (continued) |
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, 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 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 sub-classification 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 at February 28, 2009:
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| | Series | | Shares | | Yield | | Reset
Frequency | |
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Insured Municipal | | | M-7 | | 1,999 | | 0.914 | % | 7 | | |
| | | R-7 | | 1,999 | | 0.899 | % | 7 | | |
| | | F-7 | | 1,999 | | 0.899 | % | 7 | | |
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Insured Investment | | | M-7 | | 1,775 | | 0.914 | % | 7 | | |
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Municipal Bond | | | T-7 | | 1,610 | | 0.959 | % | 7 | | |
| | | R-7 | | 1,610 | | 0.899 | % | 7 | | |
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Bond Investment | | | W-7 | | 1,047 | | 0.944 | % | 7 | | |
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Municipal Income II | | | M-7 | | 1,660 | | 0.914 | % | 7 | | |
| | | T-7 | | 1,661 | | 0.959 | % | 7 | | |
| | | W-7 | | 1,660 | | 0.944 | % | 7 | | |
| | | R-7 | | 1,661 | | 0.899 | % | 7 | | |
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MuniHoldings Insured | | | A | | 1,708 | | 0.960 | % | 7 | | |
| | | B | | 2,849 | | 0.914 | % | 7 | | |
| | | C | | 2,804 | | 0.914 | % | 7 | | |
| | | D | | 1,761 | | 0.944 | % | 7 | | |
| | | E | | 2,723 | | 0.899 | % | 7 | | |
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MuniVest | | | A | | 1,651 | | 0.738 | % | 28 | | |
| | | B | | 1,651 | | 0.650 | % | 28 | | |
| | | C | | 1,651 | | 0.617 | % | 28 | | |
| | | D | | 1,651 | | 0.980 | % | 28 | | |
| | | E | | 2,476 | | 0.617 | % | 7 | | |
| | | F | | 1,948 | | 1.972 | % | 7 | | |
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Dividends on seven-day Preferred Shares are cumulative at a rate which 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 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 all series of Preferred Shares (except MuniVest) 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 maximum applicable rate on the Preferred Shares of MuniVest for Series A, B, C, D and E is 110% of the interest equivalent of the 60-day commercial paper rate and for Series F is the higher of 110% plus or times (i) the Telerate/BBA LIBOR or (ii) 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 February 28, 2009 were as follows:
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| | Series | | Low | | High | | Average | |
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Insured Municipal | | | M-7 | | 0.594 | % | 10.205 | % | 2.765 | % | |
| | | R-7 | | 0.594 | % | 12.261 | % | 2.747 | % | |
| | | F-7 | | 0.594 | % | 11.728 | % | 2.782 | % | |
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Insured Investment | | | M-7 | | 0.591 | % | 10.205 | % | 2.765 | % | |
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Municipal Bond | | | T-7 | | 0.594 | % | 11.347 | % | 2.758 | % | |
| | | R-7 | | 0.594 | % | 12.261 | % | 2.787 | % | |
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Bond Investment | | | W-7 | | 0.64 | % | 12.565 | % | 2.799 | % | |
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Municipal Income II | | | M-7 | | 0.594 | % | 10.205 | % | 2.785 | % | |
| | | T-7 | | 0.594 | % | 11.347 | % | 2.759 | % | |
| | | W-7 | | 0.640 | % | 12.565 | % | 2.815 | % | |
| | | R-7 | | 0.594 | % | 12.261 | % | 2.800 | % | |
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MuniHoldings Insured | | | A | | 0.594 | % | 11.347 | % | 2.707 | % | |
| | | B | | 0.594 | % | 11.728 | % | 2.513 | % | |
| | | C | | 0.594 | % | 10.205 | % | 2.765 | % | |
| | | D | | 0.640 | % | 12.565 | % | 2.862 | % | |
| | | E | | 0.594 | % | 12.261 | % | 2.686 | % | |
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MuniVest | | | A | | 0.286 | % | 3.728 | % | 1.992 | % | |
| | | B | | 0.440 | % | 3.945 | % | 2.090 | % | |
| | | C | | 0.396 | % | 4.106 | % | 2.050 | % | |
| | | D | | 0.661 | % | 3.884 | % | 1.916 | % | |
| | | E | | 0.286 | % | 4.106 | % | 1.834 | % | |
| | | F | | 1.640 | % | 11.415 | % | 3.602 | % | |
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For the six months ended February 28, 2009, the Preferred Shares of the Trusts failed to clear any of their auctions. As a result, the Preferred Shares dividend rates were reset to the maximum applicable rate, which ranged from 0.286% 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 Preferred Shares. A failed auction occurs when there are more sellers of a fund’s auction rate preferred shares than buyers. It is impossible to predict how long this imbalance will last. A successful auction for the Trusts’ Preferred Shares may not occur for some time, if ever, and even if liquidity does resume, holders of the Preferred Shares may not have the ability to sell the Preferred Shares at their liquidation preference.
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SEMI-ANNUAL REPORT | FEBRUARY 28, 2009 | 57 |
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Notes to Financial Statements (continued) |
The Trusts 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 is less than 200%.
Prior to December 22, 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. As of December 22, 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 if all shares successfully clear their auctions. Merrill Lynch, Pierce, Fenner & Smith Incorporated, a wholly owned subsidiary of Merrill Lynch, earned commissions as follows for the period September 1, 2008 through December 31, 2008:
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Insured Municipal | | $ | 4,197 | |
Insured Investment | | $ | 1,176 | |
Municipal Bond | | $ | 8,141 | |
Bond Investment | | $ | 1,587 | |
Municipal Income II | | $ | 46,943 | |
MuniHoldings Insured | | $ | 142,711 | |
MuniVest | | $ | 106,158 | |
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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:
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| | Series | | Redemption
Date | | Shares
Redeemed | | Aggregate
Principal | |
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Insured Municipal | | | M-7 | | 6/24/08 | | 1,054 | | | $ | 26,350,000 | |
| | | R-7 | | 6/27/08 | | 1,054 | | | $ | 26,350,000 | |
| | | F-7 | | 6/30/08 | | 1,054 | | | $ | 26,350,000 | |
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Insured Investment | | | M-7 | | 6/24/08 | | 1,265 | | | $ | 31,625,000 | |
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Municipal Bond | | | T-7 | | 6/25/08 | | 200 | | | $ | 5,000,000 | |
| | | R-7 | | 6/27/08 | | 200 | | | $ | 5,000,000 | |
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Bond Investment | | | W-7 | | 6/26/08 | | 144 | | | $ | 3,600,000 | |
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Municipal Income II | | | M-7 | | 6/24/08 | | 395 | | | $ | 9,875,000 | |
| | | T-7 | | 6/25/08 | | 395 | | | $ | 9,875,000 | |
| | | W-7 | | 6/26/08 | | 395 | | | $ | 9,875,000 | |
| | | R-7 | | 6/27/08 | | 395 | | | $ | 9,875,000 | |
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MuniHoldings Insured | | | A | | 6/25/08 | | 387 | | | $ | 9,675,000 | |
| | | B | | 6/23/08 | | 646 | | | $ | 16,150,000 | |
| | | C | | 6/24/08 | | 636 | | | $ | 15,900,000 | |
| | | D | | 6/26/08 | | 399 | | | $ | 9,975,000 | |
| | | E | | 6/27/08 | | 617 | | | $ | 15,425,000 | |
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MuniVest | | | A | | 6/30/08 | | 349 | | | $ | 8,725,000 | |
| | | B | | 7/07/08 | | 349 | | | $ | 8,725,000 | |
| | | C | | 6/16/08 | | 349 | | | $ | 8,725,000 | |
| | | D | | 6/23/08 | | 349 | | | $ | 8,725,000 | |
| | | E | | 6/16/08 | | 524 | | | $ | 13,100,000 | |
| | | F | | 6/25/08 | | 412 | | | $ | 10,300,000 | |
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The Trusts financed the Preferred Share redemptions with cash received from TOB transactions.
Shares issued and outstanding for the six months ended February 28, 2009 remained constant.
6. Capital Loss Carryforward:
As of August 31, 2008, the Trusts had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates:
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Expires
August 31, | | Insured
Municipal | | Insured
Investment | | Municipal
Bond | | Bond
Investment | | Municipal
Income II | | MuniHoldings
Insured | | MuniVest | |
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2009 | | | — | | | — | | | — | | | — | | | — | | $ | 18,667,152 | | $ | 14,922,557 | |
2012 | | | — | | | — | | | — | | | — | | $ | 5,097,889 | | | 1,836,991 | | | — | |
2013 | | | — | | $ | 218,563 | | | — | | | — | | | — | | | 7,986,138 | | | — | |
2015 | | $ | 1,544,099 | | | — | | | — | | $ | 45,701 | | | — | | | — | | | — | |
2016 | | | 3,217,765 | | | 250,838 | | $ | 1,183,459 | | | — | | | 1,648,836 | | | — | | | 5,453,226 | |
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|
|
Total | | $ | 4,761,864 | | $ | 469,401 | | $ | 1,183,459 | | $ | 45,701 | | $ | 6,746,725 | | $ | 28,490,281 | | $ | 20,375,783 | |
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58 | SEMI-ANNUAL REPORT | FEBRUARY 28, 2009 |
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|
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Notes to Financial Statements (concluded) |
7. Subsequent Events:
The Trusts paid a net investment income dividend to Common Shareholders in the following amounts per share on April 1, 2009 to shareholders of record on March 16, 2009:
| | | | |
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| | Common
Dividend
Per Share | |
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|
|
|
Insured Municipal | | $ | 0.0610 | |
Insured Investment | | $ | 0.0580 | |
Municipal Bond | | $ | 0.0725 | |
Bond Investment | | $ | 0.0688 | |
Municipal Income II | | $ | 0.0660 | |
MuniHoldings Insured | | $ | 0.0555 | |
MuniVest | | $ | 0.0430 | |
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|
The dividends declared on Preferred Shares for the period March 1, 2009 to March 31, 2009 were as follows:
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| | Series | | Dividends
Declared | |
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Insured Municipal | | | M-7 | | $ | 32,640 | |
| | | R-7 | | $ | 31,775 | |
| | | F-7 | | $ | 32,403 | |
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Insured Investment | | | M-7 | | $ | 28,977 | |
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Municipal Bond | | | T-7 | | $ | 26,222 | |
| | | R-7 | | $ | 25,592 | |
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Bond Investment | | | W-7 | | $ | 16,950 | |
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Municipal Income II | | | M-7 | | $ | 27,113 | |
| | | T-7 | | $ | 27,067 | |
| | | W-7 | | $ | 26,874 | |
| | | R-7 | | $ | 26,489 | |
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MuniHoldings Insured | | | A | | $ | 27,818 | |
| | | B | | $ | 46,182 | |
| | | C | | $ | 45,784 | |
| | | D | | $ | 28,510 | |
| | | E | | $ | 43,283 | |
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MuniVest | | | A | | $ | 21,025 | |
| | | B | | $ | 19,843 | |
| | | C | | $ | 21,039 | |
| | | D | | $ | 19,804 | |
| | | E | | $ | 29,568 | |
| | | F | | $ | 72,873 | |
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SEMI-ANNUAL REPORT | FEBRUARY 28, 2009 | 59 |
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| |
Officers and Directors/Trustees |
|
Richard E. Cavanagh, Chairman of the Board and Director/Trustee |
Karen P. Robards, Vice Chair of the Board, |
Chair of the Audit Committee and Director/Trustee |
G. Nicholas Beckwith, III, Director/Trustee |
Richard S. Davis, Trust President1 and Director/Trustee |
Kent Dixon, Director/Trustee |
Frank J. Fabozzi, Director/Trustee |
Kathleen F. Feldstein, Director/Trustee |
James T. Flynn, Director/Trustee |
Henry Gabbay, Director/Trustee |
Jerrold B. Harris, Director/Trustee |
R. Glenn Hubbard, Director/Trustee |
W. Carl Kester, Director/Trustee |
Donald C. Burke, Trust President2 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 |
| | |
| 1 | Trust President of BlackRock MuniHoldings Insured Investment Fund. |
| | |
| 2 | Trust President of BlackRock Insured Municipal Income Trust, BlackRock Insured Municipal Income Investment Trust, BlackRock Municipal Bond Trust, BlackRock Municipal Bond Investment Trust, BlackRock Municipal Income Trust II and BlackRock MuniVest Fund, Inc. |
|
Effective January 1, 2009, Robert S. Salomon, Jr. retired as Director/Trustee of the Funds/Trusts. The Board wishes Mr. Salomon well in his retirement. |
|
BlackRock Insured Municipal Income Trust,
BlackRock Insured Municipal Income Investment Trust,
BlackRock Municipal Bond Trust,
BlackRock Municipal Bond Investment Trust and
BlackRock Municipal Income Trust II: |
|
Custodian
State Street Bank and
Trust Company
Boston, MA 02101 |
|
Transfer Agents |
Common Shares: |
Computershare Trust |
Companies, N.A. |
Canton, MA 02021 |
|
Preferred Shares: |
For the Insured Trusts and Bond Trusts |
BNY Mellon Shareowner Services |
Jersey City, NJ 07310 |
|
For the Income II Trust |
Deutsche Bank Trust |
Company Americas |
New York, NY 10005 |
|
BlackRock MuniHoldings Insured Investment Fund and
BlackRock MuniVest Fund, Inc.: |
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Custodian |
The Bank of New York Mellon
New York, NY 10286 |
|
Transfer Agent |
Common Shares and
Preferred Shares:
BNY Mellon Shareowner Services
Jersey City, NJ 07310 |
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For All Funds/Trusts: |
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Accounting Agent |
State Street Bank and
Trust Company
Princeton, NJ 08540 |
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Independent Registered
Public Accounting Firm |
Deloitte & ToucheLLP
Princeton, NJ 08540 |
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Legal Counsel |
Skadden, Arps, Slate,
Meagher & FlomLLP
New York, NY 10036 |
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Trusts Address |
BlackRock Closed-End Funds
c/o BlackRock Advisors, LLC
100 Bellevue Parkway
Wilmington, DE 19809 |
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60 | SEMI-ANNUAL REPORT | FEBRUARY 28, 2009 |
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| |
Additional Information |
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|
Proxy Results |
|
The Annual Meeting of Shareholders was held on September 12, 2008 for shareholders of record on July 14, 2008 to elect director or trustee nominees of each Trust:
Approved the Class I Directors/Trustees as follows:
| | | | | | | | | | | | | |
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| | G. Nicholas Beckwith, III | | Kent Dixon | | R. Glenn Hubbard | |
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| | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | |
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BlackRock Insured Municipal Income Investment Trust | | 7,995,033 | | 166,308 | | 8,001,288 | | 160,053 | | 8,001,836 | | 159,505 | |
BlackRock Insured Municipal Income Trust | | 23,876,220 | | 479,179 | | 23,892,969 | | 462,430 | | 23,904,630 | | 450,769 | |
BlackRock Municipal Bond Investment Trust | | 2,866,956 | | 108,912 | | 2,866,956 | | 108,912 | | 2,865,556 | | 110,312 | |
BlackRock Municipal Bond Trust | | 9,372,590 | | 257,110 | | 9,371,355 | | 258,345 | | 9,366,657 | | 263,043 | |
BlackRock Municipal Income Trust II | | 20,499,400 | | 389,225 | | 20,496,836 | | 391,789 | | 20,494,144 | | 394,481 | |
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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 Insured Municipal Income Investment Trust | | 1,666 | 1 | 22 | 1 | 7,993,438 | | 167,903 | | | | | |
BlackRock Insured Municipal Income Trust | | 5,350 | 1 | 182 | 1 | 23,894,094 | | 461,305 | | | | | |
BlackRock Municipal Bond Investment Trust | | 930 | 1 | 5 | 1 | 2,866,331 | | 109,537 | | | | | |
BlackRock Municipal Bond Trust | | 2,632 | 1 | 57 | 1 | 9,369,658 | | 260,042 | | | | | |
BlackRock Municipal Income Trust II | | 4,688 | 1 | 1,043 | 1 | 20,495,973 | | 392,652 | | | | | |
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Approved the Directors/Trustees as follows:
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| | G. Nicholas Beckwith, III | | Kent Dixon | | R. Glenn Hubbard | |
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| |
| |
| | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | |
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BlackRock MuniHoldings Insured Investment Fund | | 32,855,780 | | 1,729,078 | | 32,850,882 | | 1,733,976 | | 32,859,428 | | 1,725,430 | |
BlackRock MuniVest Fund, Inc. | | 54,452,301 | | 2,620,412 | | 54,461,494 | | 2,611,219 | | 54,454,006 | | 2,618,707 | |
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| | | | | | | | | | | | | |
| | W. Carl Kester | | Robert S. Salomon, Jr. | | Richard S. Davis | |
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| |
| |
| |
| | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | |
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BlackRock MuniHoldings Insured Investment Fund | | 11,205 | 1 | 399 | 1 | 32,848,420 | | 1,736,438 | | 32,867,987 | | 1,716,871 | |
BlackRock MuniVest Fund, Inc. | | 9,255 | 1 | 223 | 1 | 54,440,709 | | 2,632,004 | | 54,479,559 | | 2,593,154 | |
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| | | | | | | | | | | | | |
| | Frank J. Fabozzi | | James T. Flynn | | Karen P. Robards | |
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| |
| |
| |
| | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | |
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BlackRock MuniHoldings Insured Investment Fund | | 11,205 | 1 | 399 | 1 | 32,863,713 | | 1,721,145 | | 32,862,367 | | 1,722,491 | |
BlackRock MuniVest Fund, Inc. | | 9,255 | 1 | 223 | 1 | 54,464,832 | | 2,607,881 | | 54,468,218 | | 2,604,495 | |
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| | | | | | | | | | | | | |
| | Richard E. Cavanagh | | Kathleen F. Feldstein | | Henry Gabbay | |
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| | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | |
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BlackRock MuniHoldings Insured Investment Fund | | 32,863,784 | | 1,721,074 | | 32,858,104 | | 1,726,754 | | 32,858,949 | | 1,725,909 | |
BlackRock MuniVest Fund, Inc. | | 54,470,322 | | 2,602,391 | | 54,444,559 | | 2,628,154 | | 54,474,031 | | 2,598,682 | |
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| | | | | | | | | | | | | |
| | Jerrold B. Harris | | | | | | | | | |
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| | | | | | | | | |
| | Votes For | | Votes
Withheld | | | | | | | | | |
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BlackRock MuniHoldings Insured Investment Fund | | 32,844,263 | | 1,740,595 | | | | | | | | | |
BlackRock MuniVest Fund, Inc. | | 54,465,897 | | 2,606,816 | | | | | | | | | |
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1 Voted on by holders of preferred shares only. | | | | | | | | | | | | | |
The Trusts’ dividend policy is to distribute all or a portion of their net investment income to their shareholders on a monthly basis. In order to provide shareholders with a more stable level of dividend distributions, the Trusts may at times pay out less than the entire amount of net investment income earned in any particular month and may at times in any particular month pay out such accumulated but undistributed income in addition to net investment income earned in that month. As a result, the dividends paid by the Trusts for any particular month may be more or less than the amount of net investment income earned by the Trusts during such month. The Trusts’ current accumulated but undistributed net investment income, if any, is disclosed in the Statements of Assets and Liabilities, which comprises part of the financial information included in this report.
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SEMI-ANNUAL REPORT | FEBRUARY 28, 2009 | 61 |
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| |
Additional Information (continued) |
|
|
Board Approvals |
|
On September 12, 2008, the Board of Insured Investment, MuniHoldings Insured and Insured Municipal voted unanimously to change certain investment guidelines of the Trusts. Under normal circumstances, the Trusts are required to invest at least 80% of their managed assets in municipal bonds either (i) insured under an insurance policy purchased by the Trusts or (ii) insured under an insurance policy obtained by the issuer of the municipal bond or any other party. Historically, the Trusts have had an additional nonfundamental investment policy limiting their purchases of insured municipal bonds to those bonds insured by insurance providers with claims-paying abilities rated AAA or Aaa at the time of investment.
Following the onset of the credit and liquidity crises currently troubling the financial markets, the applicable rating agencies lowered the claims-paying ability rating of most of the municipal bond insurance providers below the highest rating category. As a result, the Advisor recommended, and the Board approved, an amended policy with respect to the purchase of insured municipal bonds that such bonds must be insured by insurance providers or other entities with claims-paying abilities rated at least investment grade. This investment grade restriction is measured at the time of investment, and the Trusts will not be required to dispose of municipal bonds they hold in the event of subsequent downgrades. The Trusts’ new investment policy is, under normal conditions, to invest at least 80% of their assets in municipal bonds insured by insurers or other entities with claims-paying abilities rated at least investment grade at the time of investment. Due to recent downgrades, some of the insurers insuring a portion of the Trusts’ current holdings are already rated below the highest rating category.
In addition, on September 12, 2008, the Board of Insured Investment, MuniHoldings Insured and Bond Investment (formerly BlackRock Florida Insured Municipal Income Trust, BlackRock MuniHoldings Florida Insured Investment Fund and BlackRock Florida Municipal Bond Trust, respectively) voted unanimously to change a non-fundamental investment policy of the Trusts, and to rename the Trusts “BlackRock Insured Municipal Income Investment Trust,” “BlackRock MuniHoldings Insured Investment Fund” and “BlackRock Municipal Bond Investment Trust,” respectively. The previous policy required these Trusts, under normal circumstances, to invest at least 80% of their total assets in Florida municipal bonds insured by insurers with claims-paying abilities rated AAA or Aaa 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, as well as revising the policy with respect to the claims-paying ability rating adopted by the Trusts. Under current market conditions, the Advisor anticipates that it will gradually reposition each Trust’s portfolio over time and that during such period the Trusts may continue to hold a substantial portion of their 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 significant portion of their assets in Florida municipal bonds until the repositioning is complete.
The changes to the Trusts’ non-fundamental investment policies described above do not alter the Trusts’ investment objectives. The Advisor and the Board believe the amended policies will allow the Advisor to better manage the Trusts’ portfolios in the best interests of the Trusts’ shareholders and meet the Trusts’ investment objectives.
Effective September 13, 2008, following approval by the Trusts’ Board and the applicable rating agencies, the Board amended the terms of the Trusts’ Articles Supplementary 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.
These amounts and sources of distributions reported are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon each Trust’s investment experience during the year and may be subject to changes based on the tax regulations. The Trusts will send you a Form 1099-DIV each calendar year that will tell you how to report these distributions for federal income tax purposes.
| | | | | | | | | | | | | | | | | |
| | Total Fiscal Period-to-Date
Cumulative Distributions by Character | | Percentage of Fiscal Period-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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MuniHoldings Insured | | $0.33472 | | $— | | $— | | $0.33472 | | 100% | | 0% | | 0% | | 100% | |
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62 | SEMI-ANNUAL REPORT | FEBRUARY 28, 2009 |
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Additional Information (concluded) |
|
|
General Information |
|
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 the Trusts 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 the Trusts and does not, and is not intended to, incorporate BlackRock’s website into this report.
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Availability of Quarterly Schedule of Investments |
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The Trusts file their complete schedule of portfolio holdings with the Securities and Exchange Commission (the “SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Trusts’ Forms N-Q are available on the Commission’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. The Trusts’ 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’ web-sites or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports by enrolling in the Trusts’ electronic delivery program.
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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.
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SEMI-ANNUAL REPORT | FEBRUARY 28, 2009 | 63 |
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) 441-7762; (2) at www.blackrock.com; and (3) on the Securities and Exchange Commission’s website at http://www.sec.gov. Information about how the Trusts voted proxies relating to securities held in the Trusts’ portfolios 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 |
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| (a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form. |
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| (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 |
| | |
| 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. |
| |
| BlackRock Municipal Bond Investment Trust |
| |
| By: | /s/ Donald C. Burke |
| |
|
| | Donald C. Burke |
| | Chief Executive Officer of |
| | BlackRock Municipal Bond Investment Trust |
| | |
| Date: April 22, 2009 |
| |
| 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. |
| |
| By: | /s/ Donald C. Burke |
| |
|
| | Donald C. Burke |
| | Chief Executive Officer (principal executive officer) of |
| | BlackRock Municipal Bond Investment Trust |
| | |
| Date: April 22, 2009 |
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| By: | /s/ Neal J. Andrews |
| |
|
| | Neal J. Andrews |
| | Chief Financial Officer (principal financial officer) of |
| | BlackRock Municipal Bond Investment Trust |
| | |
| Date: April 22, 2009 |
