As filed with the Securities and Exchange Commission on July 23, 1999
Registration No. 333-
811-7666
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[_] Pre-Effective Amendment No. [_] Post-Effective Amendment No.
(Check Appropriate box or boxes)
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Exact Name of Registrant as Specified in Charter:
THE BLACKROCK FLORIDA INVESTMENT QUALITY MUNICIPAL TRUST ("RFA")
Area Code and Telephone Number:
(212) 754-5560
Address of Principal Executive Offices:
Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102
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Name and Address of Agent for Service:
Ralph L. Schlosstein, President
345 Park Avenue
New York, New York 10154
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Copies to:
Richard T. Prins, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
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Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.
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CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
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Proposed Proposed
Maximum Maximum
Title of Securities Amount Being Offering Price Aggregate Amount of
Being Registered Registered(1) Per Unit Offering Price Registration Fee
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Common Shares ($.01 par
value)................. 66,357 $ 15.07(1) $1,000,000 $278
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Auction Rate Municipal
Preferred Shares, Series
W7, (liquidation
preference $25,000 per
share).................. 1 $25,000(2) $ 25,000 $ 7
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Total................... N/A N/A $1,025,000 $285
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(1) For the common shares, estimated solely for the purpose of calculating
the registration fee pursuant to Rule 457(f) under the Securities Act of
1933, as amended (the "1933 Act"), based upon the net asset value per
common share of RFA on July 9, 1999.
(2) For the preferred shares, estimated solely for the purpose of calculating
the registration fee pursuant to Rule 457(f) under the 1933 Act, based
upon $25,000, the liquidation preference, on July 9, 1999, of the
preferred shares of RFA.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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CROSS-REFERENCE SHEET
ITEMS REQUIRED BY FORM N-14
PART A
Item
No. Item Caption Prospectus Caption
---- ------------ ------------------
1 Beginning of Registration Statement
and Outside Front Cover Page of Cover Page of Registration
Prospectus.......................... Statement; Cross-Reference Sheet;
Front Cover Page of Combined
Prospectus/Proxy Statement
2 Beginning and Outside Back Cover
Page of Prospectus.................. Table of Contents
3 Fee Table, Synopsis Information and Summary--Comparison of BRF and
Risk Factors........................ RFA; Summary--Proposed
Reorganization; Risks and Special
Considerations regarding the
Reorganizaiton
4 Information about the Transaction... Summary--The Proposed
Reorganization
5 Information about the Registrant.... Comparison of BRF and RFA;
Additional Information about RFA
6 Information about the Company being Comparison of BRF and RFA;
acquired............................ Additional Information about BRF
7 Voting Information.................. Voting Matters
8 Interest of Certain Persons and Financial Statements; Legal
Experts............................. Matters
9 Additional Information Required for
Reoffering by Persons Deemed to be
Underwriters........................ Not Applicable
PART B
Item
No. Item Caption Prospectus Caption
---- ------------ ------------------
10 Cover Page.......................... Cover Page
11 Table of Contents................... Table of Contents
12 Additional Information about the Incorporation of Documents by
Registrants......................... Reference in Statement of
Additional Information
13 Additional Information about the
Company being acquired.............. Additional Information about BRF
14 Financial Statements................ Exhibits to Statement of
Additional Information
PART C
Item
No.
----
15-17 Information required to be included
in Part C is set forth under the
appropriate Item, so numbered, in
Part C of this Registration
Statement.
IMPORTANT NOTICE: PLEASE COMPLETE THE
ENCLOSED PROXY(IES) AND RETURN IT OR THEM AS SOON AS POSSIBLE.
FOR YOUR CONVENIENCE, YOU MAY ALSO VOTE BY CALLING TOLL-FREE AT 1-
800- FROM 6:00 A.M. TO 8:00 P.M. EASTERN STANDARD TIME OR BY FAXING
YOUR PROXY(IES) TO AT 1-800-227-7BFM (7236). A CONFIRMATION OF YOUR
TELEPHONE OR TELEFACSIMILE VOTE WILL BE MAILED TO YOU.
THE BLACKROCK FLORIDA INVESTMENT QUALITY MUNICIPAL TRUST ("RFA")
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST ("BRF")
345 PARK AVENUE
NEW YORK, NEW YORK 10154
, 1999
To the Shareholders
of BRF and RFA:
On behalf of the Boards of Trustees of BRF and RFA, we are pleased to invite
you to a special combined meeting of shareholders on , 1999 to be held
at . At the meeting, you will be asked to consider the proposed
acquisition of all of the assets and assumption of all of the liabilities of
BRF by RFA. In the proposed reorganization, each outstanding common share of
BRF in effect would be exchanged on a net asset value for net asset value
basis for common shares of RFA and each outstanding preferred share of BRF in
effect would be exchanged for one substantially similar preferred share of
RFA. THE TRUSTEES OF BRF AND RFA RECOMMEND THAT YOU VOTE TO APPROVE THE
PROPOSED REORGANIZATION.
This proposal is being sent to you because the investment adviser and the
Boards of Trustees of BRF and RFA believe that the reorganization would
benefit shareholders of BRF by unlocking value in BRF and would also provide
benefits to shareholders of RFA. The reorganization may benefit shareholders
of BRF and RFA by providing (i) higher distribution rates on their common
shares, (ii) a special one-time tax-exempt dividend to shareholders of BRF,
(iii) a potential reduction in reinvestment risk for shareholders of BRF and
(iv) an enhanced likelihood that the common shares of RFA will trade at a
lower or no discount or premium to net asset value.
The investment adviser and the Boards of Trustees believe that these potential
benefits outweigh (i) the fact that shareholders of BRF will no longer have
the likelihood of receiving a specified distribution on BRF's scheduled
termination date and instead will be dependent on trading prices of RFA common
shares available in the market for the sale of their shares and (ii) the
detriment to common shareholders of BRF of a higher expense ratio following
the reorganization.
These potential benefits and detriments, as well as other important
considerations, are described in more detail in the proxy statement
accompanying this notice.
1
The reorganization should benefit shareholders as follows:
Higher Distribution Rate. Common shareholders of BRF and RFA are likely to be
paid dividends at a higher distribution rate after the reorganization, because
RFA is not required to retain a portion of its income each year to enable it
to return a fixed amount at the end of a specified term. Based on market
conditions as of April 30, 1999, we anticipate BRF's and RFA's distribution
rate to increase by approximately 12.3% for BRF and 18.0% for RFA.
Special Dividend. Shareholders of BRF would be paid a special tax-exempt
dividend immediately prior to the reorganization. The dividend will be paid
out of accumulated investment income of BRF that, but for the reorganization,
would be retained by BRF until the end of its term, to assure that BRF could
return to its shareholders upon liquidation the initial offering price of its
shares. Based on BRF's financial statements as of April 30, 1999, this
distribution is estimated to be $0.2262 per share for BRF.
Reduced Reinvestment Risk. The potential negative impact on shareholders of
BRF of portfolio securities of BRF being called by their issuers would be
reduced because RFA would be able to reinvest the proceeds from called
portfolio securities in longer maturity securities with higher rates of
interest (rather than securities with shorter maturities and lower rates of
interest required by the limited term of BRF).
Potential for Improved Stock Price Performance. The likelihood that the common
shares of RFA will trade at a lower or no discount to net asset value would be
improved due to the higher distribution rate. The market value of common
shares issued by closed-end municipal bond funds historically have had a high
correlation with the distribution rates on such shares, and a higher
distribution rate as a result of the reorganization may produce positive
shares price performance.
In considering these proposals, you should note:
Comparison of Investment Policies and Objections. RFA and BRF invest
substantially all of their assets in Florida municipal obligations. RFA
invests at least 80% of its assets in Florida municipal obligations rated
triple-B or higher, and BRF invests at least 80% of its assets in Florida
municipal obligations insured by a company with a triple-A claims paying
ability. The primary investment objective of RFA is to pay high current
income, whereas the primary investment objective of BRF is to pay current
income, in all cases exempt from regular Federal income tax and Florida
intangible personal property taxes. The secondary investment objective of RFA
is preservation of capital without a stated termination date, whereas the
secondary investment objective of BRF is to return to its common shareholders
$15 per share on or about December 31, 2008. The other investment policies and
restrictions of RFA and BRF are substantially similar.
Moderate Increase to Expenses for BRF. The anticipated expense ratio for RFA
after the reorganization will be approximately 0.02% higher than the current
expense ratio for BRF. The expense ratio of RFA will be reduced as a result of
the reorganization, which will benefit the current common shareholders of RFA.
Indefinite Term. BRF currently is scheduled to terminate on December 31 of
2008. As part of BRF's investment objective, it seeks to distribute to its
common shareholders $15 per common share in connection with its termination.
RFA has no scheduled termination date and, if the reorganization of BRF and
RFA is completed, common shareholders of BRF will be dependent on the trading
prices available in the market for the sale of their shares if they wish to
dispose of their shares.
2
Same net asset value of shares. The total net asset value of RFA common and
preferred shares that the common and preferred shareholders of BRF receive in
the reorganization will be the same as the total net asset value of BRF common
and preferred shares that such shareholders own immediately before the
reorganization. Holders of common shares of BRF will receive common shares of
RFA, and holders of preferred shares of BRF will receive preferred shares of
RFA.
Market value of shares. While the total net asset value of shares owned by
each shareholder after the reorganization will be the same, the market value
of the common shares that shareholders of BRF receive in the reorganization
may be more or less than the market value of the common shares that such
shareholders own immediately before the reorganization. There will be no
difference in the pre-reorganization and post-reorganization liquidation value
of preferred shares.
Similar investment management arrangements. Shareholders of BRF will enjoy
access to investment management arrangements that are substantially similar to
BRF's current arrangements.
The proposed reorganization and the reasons for the recommendation of the
Boards of BRF and RFA are discussed in detail in the enclosed materials, which
you should read carefully. If you have any questions about the reorganization,
please do not hesitate to call BlackRock at (800) 227-7BFM(7236)).
Very truly yours,
LAURENCE D. FINK
Chairman and Chief Executive Officer
RALPH L. SCHLOSSTEIN
President
New York, New York
, 1999
3
THE BLACKROCK FLORIDA INVESTMENT QUALITY MUNICIPAL TRUST ("RFA")
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST ("BRF")
800 SCUDDER MILL ROAD
PLAINSBORO, NEW JERSEY 08536
NOTICE OF SPECIAL SHAREHOLDERS MEETING
TO BE HELD ON , 1999
To the Shareholders
of BRF and RFA:
NOTICE IS HEREBY GIVEN THAT a combined Special Meeting of the shareholders of
BRF and RFA will be held at on , 1999 at a.m.
eastern standard time for the purpose of considering and voting upon:
ITEM 1. A proposal to approve an Agreement and Plan of Reorganization
providing for the acquisition of all of the assets and assumption of all of
the liabilities of BRF by RFA in exchange for an equal aggregate value of
newly-issued RFA common shares and RFA preferred shares and the
distribution of such RFA common shares to the holders of BRF common shares
and the distribution of such RFA preferred shares to holders of BRF
preferred shares. A vote in favor of this proposal also will constitute a
vote in favor of the liquidation and dissolution of BRF.
ITEM 2. Such other business as may properly come before the Special
Meeting or any adjournment(s).
We encourage you to contact BlackRock at (800) 227-7BFM (7236) if you have
any questions.
The shares transfer books will not be closed, but in lieu thereof, the
respective Boards of Trustees have fixed the close of business on , 1999 as
the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting.
By order of the respective Boards of
Trustees
Karen H. Sabath, Secretary
New York, New York
, 1999
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IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING IN PERSON OR BY
PROXY; IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND RETURN THE APPROPRIATE ENCLOSED PROXY OR PROXIES IN THE ACCOMPANYING
ENVELOPE PROVIDED FOR YOUR CONVENIENCE, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
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Subject to Completion--Dated July 23, 1999
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the Registration Statement +
+becomes effective. This Prospectus shall not constitute an offer to sell or +
+the solicitation of an offer to buy nor shall there be any sale of these +
+securities in any state in which such offer, solicitation or sale would be +
+unlawful prior to registration or qualification under the securities laws of +
+any such state. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
COMBINED PROXY STATEMENT/PROSPECTUS
THE BLACKROCK FLORIDA INVESTMENT QUALITY MUNICIPAL TRUST ("RFA")
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST ("BRF")
This Combined Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Boards of Trustees of BRF and RFA in connection
with a combined special meeting of shareholders to be held at a.m. eastern
standard time on , 1999 at . At the meeting,
shareholders of BRF and RFA will be asked to consider the proposed
reorganization of BRF and RFA.
Upon shareholder approval, RFA will acquire all of the assets, and assume all
of the liabilities, of BRF in exchange for an equal aggregate value of newly-
issued RFA common shares and RFA preferred shares and the distribution of such
RFA common shares to holders of BRF common shares and the distribution of such
RFA preferred shares to the holders of BRF preferred shares. Each holder of one
BRF common share will receive that number of RFA common shares having an
aggregate net asset value equal to the net asset value of the BRF common share.
Each holder of one BRF preferred share will receive one substantially similar
RFA preferred share. If the reorganization is approved, RFA will issue
approximately 10,114,847 common shares and 3,120 preferred shares to the common
shareholders and preferred shareholders, respectively, of BRF, based on the
number of shares outstanding and net asset value per share of BRF and RFA on
April 30, 1999. A copy of the reorganization agreement is attached hereto as
Appendix I.
BRF and RFA are closed-end, non-diversified investment companies that invest in
tax-exempt portfolios of Florida municipal obligations. The principal executive
office of BRF is 800 Scudders Mill Road, Plainsboro, New Jersey 08536 and the
principal executive offices of RFA are located at Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102. The phone number of RFA is (201)
and the phone number of BRF is (201) .
This Combined Proxy Statement/Prospectus sets forth concisely the information
that a shareholder should know before voting, and should be retained for future
reference. A Statement of Additional Information, dated , 1999, relating
to this Combined Proxy Statement/Prospectus has been filed with the Securities
and Exchange Commission ("SEC") and is incorporated herein by reference. Copies
of the Statement of Additional Information may be obtained without charge by
calling or writing RFA or BRF at the telephone number or address shown above.
In addition, each of RFA and BRF will furnish, without charge, a copy of its
most recent annual report and subsequent semi-annual report, if any, to a
shareholder upon request.
The common shares of RFA are listed on the American Stock Exchange (the "AMEX")
under the symbol RFA. The common shares of BRF are listed for trading on the
New York Stock Exchange ("NYSE") under the symbol BRF. Subsequent to the
reorganization, the common shares of RFA will [continue to be listed on the
AMEX under the symbol "RFA."] Reports, proxy materials and other information
concerning RFA may be inspected at the offices of AMEX, [ ], New York,
New York 10005 and concerning BRF at the offices of the NYSE, 11 Wall Street,
New York, New York 10005.
The securities of RFA offered hereby have not been approved or disapproved by
the Securities and Exchange Commission or any state securities commission nor
has the Securities and Exchange Commission or any state securities commission
passed upon the accuracy or adequacy of this Combined Proxy
Statement/Prospectus. Any representation to the contrary is a criminal offense.
No person has been authorized to give any information or to make any
representations other than those contained in this Combined Proxy
Statement/Prospectus and in the materials expressly incorporated herein by
reference and, if given or made, such other information or representations must
not be relied upon as having been authorized by RFA or BRF or their sponsors
and distributors.
The date of this Combined Proxy Statement/Prospectus is , 1999.
TABLE OF CONTENTS
Page
----
SUMMARY.................................................................... 4
Special Meetings......................................................... 4
Proposed Reorganization.................................................. 4
Reasons for the Reorganization........................................... 5
Comparison of BRF and RFA................................................ 7
RISKS AND SPECIAL CONSIDERATIONS REGARDING THE REORGANIZATION.............. 12
THE PROPOSED REORGANIZATION................................................ 15
Description of the Reorganization........................................ 16
Surrender and Exchange of BRF Share Certificates......................... 18
Appraisal Rights......................................................... 19
Reasons for the Reorganization; Board Consideration...................... 19
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................... 22
VOTING MATTERS............................................................. 23
General.................................................................. 23
Voting Requirements of BRF............................................... 25
Voting Requirements of RFA............................................... 25
Quorum................................................................... 26
DESCRIPTION OF COMMON SHARES OF RFA AND BRF................................ 26
General.................................................................. 26
Distributions............................................................ 27
Comparison of Rights of Holders of Common Shares of RFA and BRF.......... 27
Certain Provisions in RFA's and BRF's Charter............................ 27
Dividend Reinvestment Plan............................................... 28
DESCRIPTION OF PREFERRED SHARES OF RFA AND BRF............................. 29
General.................................................................. 29
Dividends and Dividend Periods........................................... 30
Voting Rights............................................................ 31
Redemption............................................................... 31
Liquidation.............................................................. 32
Auctions................................................................. 32
Rating Agency Guidelines................................................. 33
Additional Preferred Shares.............................................. 33
COMPARISON OF BRF AND RFA.................................................. 34
General.................................................................. 34
Investment Objectives and Policies....................................... 34
Florida Municipal Obligations............................................ 37
SERVICE PROVIDERS FOR BRF AND RFA.......................................... 38
MANAGEMENT OF RFA AND BRF.................................................. 40
Boards of Trustees and Officers.......................................... 40
The Investment Adviser................................................... 43
ADDITIONAL INFORMATION ABOUT RFA........................................... 45
ADDITIONAL INFORMATION ABOUT BRF........................................... 46
2
Page
----
FINANCIAL STATEMENTS....................................................... 46
LEGAL MATTERS.............................................................. 46
OTHER BUSINESS............................................................. 46
STATEMENT OF ADDITIONAL INFORMATION........................................ 47
SHAREHOLDER INQUIRIES...................................................... 47
UNAUDITED PRO FORMA FINANCIAL STATEMENTS FOR RFA........................... F-1
Portfolio of Investments................................................. F-1
Statement of Assets and Liabilities...................................... F-5
Statement of Operations.................................................. F-7
CERTAIN PRO FORMA FINANCIAL INFORMATION.................................... F-9
COMPARATIVE PERFORMANCE INFORMATION........................................ F-9
CAPITALIZATION............................................................. F-9
APPENDIX I--AGREEMENT AND PLAN OF REORGANIZATION........................... I-1
3
SUMMARY
The following is a summary of certain information relating to the proposed
reorganization, and is qualified by reference to the more complete information
contained elsewhere in this Combined Proxy Statement/Prospectus and the
Appendix attached hereto.
Special Meetings This Combined Proxy Statement/Prospectus is being
furnished in connection with the solicitation of
proxies by the Boards of Trustees of BRF and RFA for a
combined Special Meeting of Shareholders to be held at
on , 1999 at a.m. eastern
standard time. The special meeting and any
adjournment(s) thereof are referred to as the
"Meeting". At the Meeting, shareholders of BRF and RFA
will be asked to consider the proposed acquisition of
all of the assets and assumption of all of the
liabilities of BRF by RFA, as described below. Only
shareholders of record at the close of business on
, 1999 will be entitled to vote at the Meeting.
Each common share and each preferred share of BRF and
RFA is entitled to one vote. Shares represented by a
properly executed proxy will be voted in accordance
with the instructions thereon or, if no specification
is made, the persons named as proxies will vote in
favor of each proposal properly brought before the
Meeting. Proxies may be revoked at any time before they
are exercised by submitting to BRF or RFA, as
applicable, a written notice of revocation or a
subsequently executed proxy or by attending the Meeting
and voting in person.
Proposed Reorganization The Trustees of RFA and of BRF are proposing the
issuance of approximately 8,987,754 common shares and
2,640 preferred shares of RFA pursuant to an Agreement
and Plan of Reorganization, dated as of , 1999,
by and between BRF and RFA (the "Reorganization
Agreement"), based on the net assets and liabilities of
BRF and the net asset value per share of RFA on April
30, 1999. A copy of the Reorganization Agreement is
attached hereto as Appendix I. The Reorganization
Agreement provides for the acquisition of all of the
assets and assumption of all of the liabilities of BRF
by RFA in exchange for an equal aggregate value of
newly-issued RFA common shares and RFA preferred shares
and the distribution of such RFA common shares to the
holders of BRF common shares and the distribution of
such RFA preferred shares to the holders of BRF
preferred shares (the "Reorganization"). Each holder of
one BRF common share will receive that number of RFA
common shares having an aggregate net asset value equal
to the net asset value of the BRF common share. Each
holder of one BRF preferred share will
receive one substantially similar RFA preferred share.
For this
4
purpose, the value of each of BRF's and RFA's net
assets will be calculated net of the liquidation
preference (including accumulated and unpaid dividends)
of all its outstanding preferred shares.
The Reorganization is subject to a number of
conditions, including shareholder approval and
confirmation of the Aaa rating assigned by Moody's
Investors Service, Inc. ("Moody's") to the preferred
shares of RFA. The Reorganization Agreement provides
that the Reorganization may be abandoned at any time
prior to the completion thereof (the "Closing") in the
discretion of RFA. For further information, see "The
Proposed Reorganization."
Reasons for the
Reorganization The Reorganization should benefit shareholders as
follows:
Higher Distribution Rate. Common shareholders of BRF
and RFA are likely to be paid dividends at a higher
distribution rate, because RFA is not required to
retain a portion of its income each year to enable it
to return a fixed amount at the end of a specified
term. Based on market conditions as of April 30, 1999,
we anticipate the distribution rates to increase by
approximately 12.3% for BRF; and 18.0% for RFA.
Special Dividend. Shareholders of BRF would be paid a
special tax-exempt dividend immediately prior to the
Reorganization. The dividend will be paid out of
accumulated investment income of BRF that, but for the
Reorganization, would be retained by BRF until the end
of its term, to assure that BRF could return to its
shareholders upon liquidation the initial offering
price of its shares. Based on BRF's financial
statements as of April 30, 1999, this distributions is
estimated to be $0.2262 per share for BRF.
Reduced Reinvestment Risk. The potential negative
income impact on shareholders of BRF of portfolio
securities of BRF being called by their issuers would
be reduced because RFA would be able to reinvest the
proceeds from called portfolio securities in longer
maturity securities with higher rates of interest
(rather than securities with shorter maturities and
lower rates of interest required by the limited term of
BRF).
Potential for Improved Share Price Performance. The
likelihood that the common shares of RFA will trade at
a lower or no discount to net asset value would be
improved due to the higher distribution rate. The
market value of common shares issued by closed-end
municipal
5
bond funds historically have had a high correlation
with the distribution rates on such shares, and a
higher distribution rate as a result of the
reorganization may produce positive shares price
performance.
In considering these proposals, you should note:
Comparison of Investment Policies and Objectives. RFA
and BRF invest substantially all of their assets in
non-diversified portfolios of Florida municipal
obligations. RFA invests at least 80% of its total
assets in Florida municipal obligations rated triple-B
or higher and BRF invests at least 80% of its total
assets in Florida municipal obligations insured by a
company with a triple-A claims paying ability. The
primary investment objective of RFA is to pay high
current income, whereas the primary investment
objective of BRF is to pay current income, in all cases
exempt from regular Federal income tax and Florida
intangible personal property taxes. The secondary
investment objective of RFA is preservation of capital
without a stated termination date, whereas the
secondary investment objective of BRF is to return to
its common shareholders $15 per share on or about
December 31, 2008. The other investment policies and
restrictions of RFA and BRF are substantially similar.
Moderate Increase to Expenses for BRF. The anticipated
expense ratio for RFA after the reorganization will be
approximately 0.02% higher than the current expense
ratio for BRF. The expense ratio of RFA will be reduced
as a result of the reorganization, which will benefit
the current common shareholders of RFA.
Indefinite Term. BRF currently is scheduled to
terminate on December 31 of 2008. As part of BRF's
investment objective, it seeks to distribute to its
common shareholders $15 per common share in connection
with its termination. RFA has no scheduled termination
date and, if the merger of BRF is completed, common
shareholders of BRF will be dependent on the trading
prices available in the market for the sale of their
shares if they wish to dispose of their shares.
Same Net Asset Value of Shares. The total net asset
value of RFA common and preferred shares that the
common and preferred shareholders of BRF receive in the
Reorganization will be the same as the total net asset
value of BRF common and preferred shares that the
shareholders own immediately before the Reorganization.
Holders of common shares of BRF will receive common
shares of RFA, and holders of preferred shares of BRF
will receive preferred shares of RFA.
6
Market Value of Shares. While the total net asset value
of shares owned by each shareholder after the merger
will be the same, the market value of the common shares
that shareholders of BRF receive in the merger may be
more or less than the market value of the common shares
that such shareholders own immediately before the
reorgainization. There will be no difference in the
pre-reorgainization and post-reorgainization
liquidation value of preferred shares.
Similar Investment Management
Arrangements. Shareholders of BRF and RFA will enjoy
access to investment management arrangements that are
substantially similar to BRF's current arrangements.
Appraisal Rights. Holders of common shares and
preferred shares of BRF will not have appraisal rights
with respect to any of their shares in the
Reorganization.
Comparison of BRF
and RFA BRF and RFA are non-diversified closed-end management
investment companies that invest in tax-exempt
portfolios of Florida municipal obligations. The common
shares of BRF are listed and trade on the New York
Stock Exchange under the symbol BRF. The common shares
of RFA are listed and trade on the AMEX under the
symbol RFA. BRF and RFA are organized as Massachusetts
business trusts. The common shares of BRF and RFA have
equal voting rights and equal rights with respect to
the payment of dividends and distribution of assets
upon liquidation and have no preemptive, conversion or
exchange rights or rights to cumulative voting. All
preferred shares of BRF are rated Aaa by Moody's and
Standard & Poor's Ratings Group, a division of McGraw
Hill & Companies ("Standard & Poor's") and all of the
preferred shares of RFA are rated Aaa by Moody's. The
common shares and preferred shares of RFA to be issued
pursuant to the Reorganization will have rights and
preferences, including liquidation preferences, that
are substantially similar to those of the common shares
and preferred shares of BRF, except that RFA does not
have a fixed term.
Except as noted below, the investment objectives,
policies and restrictions of RFA are substantially
similar to those of BRF.
RFA's investment objective is to provide high current
income exempt from regular Federal income tax and
Florida intangible personal property taxes consistent
with the preservation of capital. BRF's investment
objective is to provide current income exempt from
regular Federal income tax and Florida intangible
personal property taxes and
7
to return $15 per common share to holders of its common
shares on or about December 31, 2008. Unlike BRF, RFA
does not have any term to its existence and does not
seek to return any particular amount of money to its
common shareholders at any time.
In seeking to provide income exempt from regular
Federal income tax and Florida intangible personal
property taxes, RFA invests substantially all of its
assets in a non-diversified portfolio of investment
grade Florida municipal obligations and actively
manages its assets in relation to market conditions and
interest rate changes. BRF invests substantially all
its assets in Florida municipal obligations rated Aaa
by Moody's or AAA by Standard & Poor's, guaranteed by
an entity with such rating or insured by an entity
whose claims-paying ability has such rating or
BlackRock Financial Management, Inc. (the "Investment
Adviser") considers the issuer, guarantor or insurer to
be of equivalent credit quality. In seeking to provide
income exempt from regular Federal income tax and
Florida intangible personal property taxes, BRF invests
at least 80% of its total assets in a non-diversified
portfolio of Florida municipal obligations insured as
to the timely payment of both principal and interest by
insurers with claims-paying abilities rated at the time
of investment Aaa by Moody's or AAA by Standard &
Poor's or which are determined by the Investment
Adviser to have equivalent claims-paying abilities. For
further information on the differences in the
investment objectives and certain significant
investment policies and restrictions of BRF and RFA,
see "Comparison of BRF and RFA" below.
As discussed under "Comparison of BRF and RFA--
Investment Adviser and Other Service Providers," the
Investment Adviser currently serves as the investment
adviser to BRF and RFA, and will continue to serve as
the investment adviser to RFA after the Reorganization.
The following Table shows the actual and pro forma
investment advisory fees and other expenses paid by BRF
and RFA during their latest fiscal year (October 30,
1998 for RFA and December 31, 1998 for BRF) and the pro
forma investment advisory fees and other expenses that
would be paid by RFA after consummation of the
reorganization.
8
COMPARATIVE EXPENSE TABLE
RFA
Pro Forma For
The
RFA BRF Reorganization
---- ---- --------------
Annual Expenses
(as a percentage of net assets attributable to the
common shares)
Management Fees.................................... 0.52% 0.51% 0.56%
Other Expenses..................................... 0.82 0.46 0.43
Total Annual Expenses.............................. 1.34 0.97 0.99
Example:
The following table illustrates the expenses on a $1,000 investment based upon
the fees and expenses shown above and assuming a 5% annual return.
10
1 Year 3 Years 5 Years Years
------- ------- ------- -------
RFA............................................. $ $ $ $
BRF.............................................
RFA Pro Forma for the Reorganization............
- --------
The purpose of the comparative expense table is to assist shareholders in
understanding the various costs and expenses of investing in shares of BRF and
RFA. The information in the table is based upon annualized expenses for the
fiscal year of BRF and RFA ended in 1998. The figures in the Example are not
necessarily indicative of past or future expenses, and actual expenses may be
greater or less than those shown. The actual rate of return of BRF and RFA may
be greater or less than the hypothetical 5% annual return above in the Example.
The administrators for BRF and RFA and the fees charged by each administrator
currently are as follows:
Fund Administrator Fee*
---- ------------- ----
RFA...................... Prudential Investment Funds Management LLC 0.10%
BRF...................... Princeton Administrators L.P. 0.10%
--------
* Payable monthly at an annual rate expressed as a percentage of
average weekly net investment assets.
After consummation of the reorganization, BlackRock Financial Management, Inc.
and will act as co-administrators of RFA and receive an aggregate fee equal to
[ ]% of RFA's weekly net assets.
9
Dividends and Distributions BRF and RFA have identical dividend policies with
respect to the payment of dividends on their
common shares. The present policy of BRF and RFA,
which may be changed by the Boards, is to make
regular monthly cash distributions to holders of
their common shares at a rate that reflects past
and projected performance and that may be changed
by the Boards of Trustees at any time. BRF has
experienced a marginally lower distribution rate
as a percentage of net asset value attributable
to common shares than RFA due to the requirement
that BRF retain income sufficient over the life
of BRF to return the initial offering price of
its common shares at the end of its term and due
to the fact that BRF also expects that its
distribution rate will decline over time as its
termination date becomes closer and it shortens
the maturities of its portfolio investments.
Accordingly, the Investment Adviser expects RFA's
level of monthly distributions to increase due to
advantages gained from the Reorganization and to
be higher than the current distribution rates of
BRF and RFA as a percentage of net asset value.
The dividend rates on the preferred shares of BRF
and RFA, including the RFA preferred shares to be
issued pursuant to the Reorganization, are
determined on the basis of auctions, which
typically are held weekly. See ("Description of
Preferred Shares of RFA--Auction Procedures") and
the Statement of Additional Information.
Certain Federal Income Tax
Consequences
The Reorganization is conditioned upon, among
other things, the receipt by RFA and BRF of an
opinion as of the closing of the Reorganization
(the "Closing") from Skadden, Arps, Slate,
Meagher & Flom LLP and its affiliates to the
effect that, on the basis of facts,
representations and assumptions set forth in such
opinion, the Reorganization will be treated for
Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the
"Code"), and RFA and BRF will each be a party to
such reorganization within the meaning of Section
368(b) of the Code. Accordingly, (i) no gain or
loss will be recognized by the RFA or BRF as a
result of the Reorganization, and (ii) no gain or
loss will be recognized by a shareholder of BRF
who receives RFA Shares (as defined herein) for
shares of BRF exchanged therefor (except with
respect to any cash received in lieu of a
fractional interest in RFA Shares). For
additional Federal income tax consequences of the
Reorganization, see "Certain Federal Income Tax
Consequences."
10
Board Consideration In reviewing the proposed Reorganization, the
Boards of Trustees of BRF and RFA considered the
potential impact of the Reorganization on its
shareholders, including but not limited to (i)
the terms and conditions of the Reorganization
Agreement; (ii) the capabilities, practices and
resources of the organizations that provide
investment advisory and certain other services to
BRF and RFA and of the organizations that would
provide such services to RFA after the
Reorganization, and the terms on which these
services are and would be provided; (iii) the
investment objectives, policies and restrictions
of BRF and RFA and their compatibility; (iv) the
historical investment performance of BRF and RFA
and anticipated future influences on such
investment performance with and without the
Reorganization; (v) the historical and projected
operating expenses of BRF and RFA and the
projected pro forma operating expenses of RFA;
(vi) the terms of the preferred shares of BRF and
RFA; (vii) the anticipated tax consequences of
the Reorganization; (viii) the shift on the part
of BRF's shareholders to a perpetual fund rather
than one having a stated term; (ix) the trading
history of the common shares of BRF and RFA and
the anticipated impact of the Reorganization on
the market price of such common shares; and (x)
the costs associated with the Reorganization. See
"The Proposed Reorganization--Reasons for the
Reorganization; Board Consideration."
Based upon their evaluations of the information
presented to them, and in light of their
fiduciary duties under Federal and state law, the
Boards of Trustees of BRF and RFA, including the
non-interested members of such Boards, have
determined the proposed Reorganization is
advisable and have directed the proposed
Reorganization to be submitted for consideration
by the shareholders of BRF and RFA at the
meeting.
Voting Matters In order for the proposed Reorganization to be
completed, the Reorganization Agreement must be
approved by (i) a majority of the outstanding
common shares of BRF voting as a separate class,
(ii) a majority of the outstanding preferred
shares of BRF voting as a separate class and
(iii) a majority of the outstanding common shares
and outstanding preferred shares of RFA voting
together as a single class. For additional
information, see "The Proposed Reorganization--
Votes Required For the Reorganization."
11
RISKS AND SPECIAL CONSIDERATIONS REGARDING THE REORGANIZATION
The following risks and special considerations should be considered by
shareholders of BRF and RFA in their evaluation of the Reorganization.
The market prices of the municipal obligations in which BRF and RFA invest are
inversely affected by changes in interest rates and, therefore, are subject to
the risk of market price fluctuations. The values of fixed income municipal
obligations with longer remaining maturities typically fluctuate more than
those of similarly rated fixed income municipal obligations with shorter
remaining maturities. The market prices of zero coupon municipal obligations
of any particular maturity tend to be more volatile than current pay
obligations of the same maturity. The values of fixed income municipal
obligations also may be affected by changes in the credit ratings or financial
conditions of the issuing entities. BRF and RFA may also invest in floating
rate municipal obligations the yields of which will vary in accordance with
prevailing interest rates. The market values of floating rate municipal
obligations tend to be affected by changes in prevailing interest rates to a
lesser extent than fixed rate municipal obligations.
Effective duration reflects the sensitivity of a portfolio to interest rate
fluctuations. A portfolio with a longer effective duration reacts more
strongly to interest rate changes than a portfolio with a shorter effective
duration. Duration is the weighted present value of principal and interest
payments expressed in years. Duration may more accurately measure a
portfolio's sensitivity to incremental changes in interest rates than weighted
average maturity. For example, a portfolio with a duration of 5.0 years should
have half the interest rate sensitivity of a portfolio with a duration of 10.0
years, because the portfolio with the shorter duration will receive payments
(and can reinvest at prevailing interest rates) twice as quickly.
The following table sets forth the nominal yield and duration of RFA's and
BRF's portfolio of municipal obligations as of April 30, 1999 and for RFA on a
pro forma basis assuming the Reorganization had occurred on such date.
BRF RFA Pro Forma RFA
---- ----- -------------
Nominal Yield*....................................... 3.57% 4.33% 3.65%
Effective Duration**................................. 5.91 10.52 6.42
- --------
* The nominal yield provided for BRF and RFA represents the portfolio's
internal rate of return given the weighted average price of portfolio
securities and expected cash flows.
** Expressed in years.
12
The following tables set forth the high and low market price, net asset value
and premium/discount to net asset value for RFA and for BRF for the periods
indicated.
PER SHARE DATA FOR RFA COMMON SHARES*
TRADED ON THE AMERICAN STOCK EXCHANGE
Premium
(Discount) to
Net Asset
Market Price** Net Asset Value Value
--------------- --------------- ---------------
Period High Low High Low High Low
------ ------- ------- --------------- ------ -------
First Quarter 1997........... 13.0000 12.2500 14.440 13.830 (6.000) (13.430)
Second Quarter............... 13.1875 12.4375 14.530 13.700 (7.470) (12.440)
Third Quarter................ 13.4375 12.6250 14.880 14.520 (9.430) (13.280)
Fourth Quarter............... 13.8125 13.0625 15.250 14.610 (7.860) (10.830)
First Quarter 1998........... 14.3750 13.6250 15.510 15.220 (6.740) (11.530)
Second Quarter............... 14.7500 13.7500 15.190 15.430 (4.410) (10.480)
Third Quarter................ 15.1250 14.1875 15.680 15.370 (2.880) (6.430)
Fourth Quarter............... 15.8750 14.6250 15.940 15.580 0.860 (7.550)
First Quarter 1999........... 15.5625 14.6875 15.850 15.590 (0.140) (6.860)
Second Quarter 1999.......... 15.1875 14.5000 15.710 14.990 (1.690) (4.090)
July 1, 1999 through July 16,
1999........................ 14.6250 14.5625 15.070 15.020 (3.050) (3.370)
PER SHARE DATA FOR BRF COMMON SHARES*
TRADED ON THE AMERICAN STOCK EXCHANGE
Premium
(Discount) to
Net Asset
Market Price** Net Asset Value Value
--------------- --------------- --------------
Period High Low High Low High Low
------ ------- ------- --------------- ------ ------
First Quarter 1997............ 15.3750 14.7500 15.990 15.560 (2.800) (6.190)
Second Quarter................ 15.5000 14.8750 16.000 15.460 (1.820) (4.640)
Third Quarter................. 16.0000 15.1875 16.250 15.990 (1.750) (5.310)
Fourth Quarter................ 16.2500 15.5000 16.350 16.040 0.470 (3.910)
First Quarter 1998............ 16.3750 15.7500 16.530 16.290 (0.640) (3.500)
Second Quarter................ 16.3125 15.6250 16.210 16.410 (1.260) (3.290)
Third Quarter................. 16.7500 15.7500 16.510 16.250 0.700 (3.230)
Fourth Quarter................ 17.0000 16.3750 16.700 16.430 2.330 (1.040)
First Quarter 1999............ 16.8750 15.9375 16.650 16.380 1.830 (2.400)
Second Quarter 1999........... 16.4375 15.2500 16.450 15.850 0.220 (4.320)
July 1, 1999 through July 16,
1999......................... 15.8750 15.6250 15.880 15.910 (0.610) (1.210)
- --------
* Calculations are based on common shares outstanding on the last day of each
period indicated.
** As reported in the consolidated transaction system.
BRF currently is scheduled to terminate on December 31 of 2008, whereas RFA
has no scheduled termination date and intends to continue operating
indefinitely. If the Reorganization of BRF is completed, the shareholders of
BRF will no longer have a likelihood of receiving a specified distribution of
$15 on BRF's scheduled termination date. RFA has no scheduled termination date
and, if the Reorganization of BRF is completed, common shareholders of BRF
will be dependent on the trading prices of RFA common shares available in the
market for the sale of their shares. Such market prices may be at, above or
below the amount they would have received upon termination of BRF.
13
BRF and RFA utilize a leveraged capital structure through the issuance of
perpetual preferred shares whose dividend rates are reset weekly or monthly by
auction in relation to prevailing short-term municipal rates. Utilization of
leverage through the issuance of preferred shares is a speculative investment
technique and involves certain risks to the holders of common shares. These
include the possibility of higher volatility of the net asset value of the
common shares, potentially more volatility in the market value of the common
shares and fluctuations in the dividend rate on the preferred shares that may
affect the yield to holders of common shares. So long as BRF or RFA is able to
realize a higher net return on its investment portfolio than the then current
dividend rate of any preferred shares together with other related expenses,
the effect of the leverage will be to cause holders of common shares to
realize a higher current net investment income than if BRF or RFA were not so
leveraged. On the other hand, to the extent that the then current dividend
rate on any preferred shares approaches the net return on BRF's or RFA's
investment portfolio, the benefit of leverage to holders of common shares will
be reduced, and if the then current dividend rate on any preferred shares were
to exceed the net return on BRF's or RFA's portfolio, the leveraged capital
structure would result in a lower rate of return to holders of common shares
than if BRF or RFA were not so leveraged. Similarly, since any decline in the
net asset value of the investments will be borne entirely by holders of common
shares, the effect of leverage in a declining market would be a greater
decrease in net asset value applicable to the common shares than if BRF or RFA
were not leveraged. Any such decrease would likely be reflected in a decline
in the market price of the common shares. If BRF or RFA's current investment
income were not sufficient to meet dividend requirements on any preferred
shares, it could be necessary for BRF or RFA to liquidate certain of its
investments, thereby reducing the net asset value attributable to the common
shares. Moreover, while dividends on preferred shares, which will be
cumulative, are unpaid, no dividends would be permitted to be paid on common
shares until BRF became current in its payments of dividends on the preferred
shares.
With respect to the outstanding preferred shares of BRF and RFA, as of April
30, 1999, the asset coverage was 307.3% for RFA and 315.9% for BRF. If the
Reorganization had occurred as of that date, the asset coverage of RFA would
have been 312.1, which significantly exceeds the minimum asset coverage
required by the Investment Company Act of 1940, as amended (the "1940 Act")
and rating agency guidelines. If RFA issues additional preferred shares after
the completion of the Merger, as currently is contemplated, RFA anticipates
that its asset coverage would be approximately 262.9% immediately after such
issuance. See "Description of Preferred Shares of RFA and BRF--Additional
Preferred Shares."
The following table sets forth for RFA and BRF as of April 30, 1999 and for
RFA on a pro forma basis assuming the Reorganization is completed the
percentage of its portfolio invested in securities rated in the four highest
rating categories by Moody's and Standard & Poor's.
Ratings BRF RFA Pro Forma RFA
------- ---- ---- -------------
Aaa/AAA.............................................. 93.5* 53.7** 89.1**
Aa/AA................................................ 0 16.9 1.9
A/A.................................................. 65 8.1 6.7
Baa/BBB.............................................. 0 21.3 2.4
- --------
* Represents the claims paying ability of the insurance companies that insure
the municipal obligations in which BRF invests.
** Includes unrated securities deemed by the Adviser to have a credit quality
equivalent to Aaa/AAA, and short-term securities rated A-1/P-1. As of April
30, 1999, unrated securities comprised [ ]% of RFA's portfolio and short-
term securities comprised [ ]% of RFA's portfolio.
14
See "Comparison of BRF and RFA--Investment Objectives and Policies" for a
discussion of the credit quality of the portfolio securities of BRF and RFA,
and see Annex A to the Statement of Additional Information for a general
description of Moody's and Standard & Poor's ratings of municipal obligations.
From time to time RFA and BRF may invest in municipal obligations the interest
on which would be subject to the alternative minimum tax ("AMT"). Each of RFA
and BRF expects that no more than 20% of its respective assets will be
invested in municipal obligations subject to such tax at any time. As of April
30, 1999, none of RFA's portfolio securities were subject to the AMT. As of
April 30, 1999, [none] of BRF's portfolio securities were subject to the AMT.
Based on the foregoing, none of RFA's portfolio securities would have been
subject to the AMT on a pro forma basis, assuming the Reorganization was
completed on such date. RFA may not be a suitable investment for investors who
are subject to the AMT.
BRF and RFA may purchase securities as to which no liquid trading market
exists. Such illiquid securities may include unrated securities and securities
such as lease obligations and small issues for which market quotations are not
readily available. Should BRF or RFA desire to sell such securities, BRF or
RFA would be subject to the risk that it may not be able to find a ready buyer
at the price which BRF or RFA believes reflects the value of these securities,
as dealers may not maintain daily markets in these securities and retail
secondary markets may not exist. In that case, BRF or RFA may be forced to
withdraw such securities from sale or accept a price which, in its opinion,
does not reflect the value of these securities. The value of BRF's net assets
could be adversely affected as a result. To the extent BRF invests in newer
types of municipal obligation products, it may be subject to the risk that
such assets may become illiquid even though they were considered to be liquid
at the time of investment.
From time to time, BRF and RFA's investments may include securities as to
which BRF or RAA, by themselves or together with other funds or accounts
managed by the Investment Adviser, holds a major portion or all of an issue of
municipal obligations. Because relatively few potential purchasers may be
available for these investments and, in some cases, contractual restrictions
may apply on resales, BRF or RFA may find it more difficult to sell these
securities at a time when the Investment Adviser believes it is desirable to
do so.
The charters (each, a "Charter") of BRF and RFA include provisions that could
have the effect of limiting the ability of other entities or persons to
acquire control of BRF or RFA and which will require the vote of 75% of the
shares of Common Shares in addition to the favorable vote (which may entail
approval of a majority or up to 75%) of any other class of stock to convert
BRF to open-end status.
THE PROPOSED REORGANIZATION
The terms and conditions of the Reorganization are set forth in the
Reorganization Agreement. Significant provisions of the Reorganization
Agreement are summarized below; however, this summary is qualified in its
entirety by reference to the Reorganization Agreement, a copy of which is
attached as Appendix I to this Combined Proxy Statement/Prospectus.
15
Description of the Reorganization. The Reorganization Agreement provides for
the reorganization of BRF and RFA. As a consequence, RFA would acquire all of
the assets and assume all of the liabilities of BRF, each shareholder of BRF
would become a shareholder of RFA on the terms described below and the
Charter, bylaws, trustees and officers of RFA immediately prior to the closing
of the Reorganization would remain the Charter, bylaws, directors and officers
of RFA as the surviving company after such Reorganization.
Common shares of beneficial interest, par value $.01 per share, of RFA ("RFA
Common") and preferred shares of beneficial interest, liquidation value
$25,000 per share, of RFA ("RFA Preferred") and together with the RFA Common,
the "RFA Shares") with an aggregate net asset value or liquidation preference,
as the case may be, equal to the value of the assets of BRF acquired by RFA in
the Reorganization, reduced by an amount of liabilities of BRF assumed by RFA,
shall be issued by RFA to BRF in exchange for the assets of BRF. BRF then
shall distribute the RFA Common and RFA Preferred to its corresponding holders
of BRF common shares and BRF preferred shares in exchange for their shares.
Each BRF common share will be exchanged for that number of shares of RFA
Common with an equal net asset value, except that cash will be distributed in
lieu of fractional shares of RFA Common. Each BRF preferred share will be
exchanged for one share of RFA Preferred with substantially the same terms.
In addition, BRF will declare a special dividend (a "Special Dividend"),
payable to holders of record of its common shares immediately prior to the
Reorganization, in an amount at least equal to the amount necessary for BRF to
satisfy the requirements of Section 852(a)(1) of the Code, the compliance with
which is necessary for BRF to qualify as a regulated investment company for
Federal income tax purposes for its taxable year ending on the day on which
the Closing occurs. Although the precise amount of the special dividend will
not be known until the time of the Reorganization, it is currently anticipated
that the amount of such dividend will be approximately $0.2262 per share in
the case of BRF. Such dividends will reduce the net asset value per common
share of BRF for purposes of determining the number of shares of RFA Common
issuable in respect of such common shares. Such dividends will be payable in
the form of additional common shares of BRF (which will convert into common
shares of RFA by operation of the Reorganization) or in cash, at the election
of the shareholders. Such dividends will be paid on or before , 1999 in
shares of RFA Common unless a holder of common shares of BRF elects to receive
cash on or before , 1999. Such election may be made by shareholders on a
form that will be mailed to them at least days prior to the election
deadline or within 15 days after the Reorganization.
The net asset value per share of the common shares of BRF and RFA Common shall
be computed as of the close of business on the last business day prior to the
date on which the Reorganization is completed by dividing the value of BRF and
RFA's total assets, less liabilities and less the aggregate liquidation
preference of all of their respective outstanding preferred shares and any
accumulated and unpaid dividends thereon, by the number of their respective
common shares outstanding. The net assets and the liabilities of BRF also will
be computed as of the close of business on the last business day prior to the
date on which the Reorganization is completed. In determining the value of BRF
and RFA's assets, State Street will utilize the valuations of portfolio
securities furnished by a pricing service approved by the Boards of Trustees
of BRF and RFA pursuant to procedures utilized by RFA to value its own assets
and to determine its own liabilities, which procedures are substantially
similar
16
to those currently used by BRF. The pricing service values portfolio
securities at the mean between the quoted bid and asked price or the yield
equivalent when quotations are readily available. Securities for which
quotations are not readily available (which constitute a majority of the
securities held by BRF) are valued at fair value as determined by the pricing
service using methods which include consideration of yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications as to value from dealers, and general market conditions.
The pricing service may employ electronic data processing techniques or a
matrix system, or both, to determine valuations. The procedures of the pricing
service and its valuations are reviewed periodically by the officers of BRF
and RFA under the general supervision of the Board of Trustees of BRF or RFA.
No fractional shares of RFA Common will be delivered to holders of BRF's
common shares. In lieu thereof, BRF's transfer agent will aggregate all
fractional shares of RFA Common and sell the resulting whole shares of RFA
Common on the AMEX for the account of all shareholders of fractional
interests, and each such shareholder will be entitled to his or her pro rata
share of the proceeds of such sale upon surrender of his or her Trust common
share certificates.
Following the Reorganization, each preferred shareholder of BRF will own the
same number of shares of RFA Preferred as he or she held of preferred shares
of BRF, and the RFA Preferred shares will have rights and preferences the same
as those of the preferred shares of BRF. Dividends will accumulate on
preferred shares of each series of BRF up to and including the day on which
the Closing occurs and will be paid, together with the dividends then payable
in respect of the corresponding series of RFA Preferred, to the holders
thereof on the dividend payment date in respect of such corresponding series
of RFA Preferred. The "Initial Dividend Period" for newly issued shares of RFA
Preferred issued pursuant to the Reorganization Agreement will be the same
dividend period in effect for the corresponding series of preferred shares of
BRF in effect immediately prior to the Reorganization. The dividend rate for
the newly issued shares of RFA Preferred issued pursuant to the Reorganization
Agreement for such Initial Dividend Period will be the dividend rate in effect
immediately prior to the closing for the corresponding series of preferred
shares of BRF. The initial auction for the shares of RFA Preferred issued
pursuant to the Reorganization Agreement will be held on the day on which the
auction next succeeding the closing would have been held for the corresponding
preferred shares of BRF but for the Reorganization.
Under the terms of the Reorganization Agreement, the Reorganization is
conditioned upon (i) approval by the shareholders of BRF and RFA, as described
under "Votes Required for the Reorganization" below, (ii) BRF's and RFA's
receipt of written advice from Moody's (a) confirming that consummation of the
Reorganization will not impair the Aaa ratings assigned to the outstanding
preferred shares of RFA and (b) assigning Aaa ratings to the shares of RFA
Preferred to be issued pursuant to the Reorganization, (iii) BRF's and RFA's
receipt of an opinion to the effect that the Reorganization will qualify as a
tax-free reorganization under the Code, (iv) BRF's and RFA's receipt of
certain routine certificates and legal opinions, (v) BRF not owning any assets
or being subject to any liabilities that RFA is prohibited from acquiring or
assuming and (vi) the SEC not taking any action to prohibit the
Reorganization. Assuming satisfaction of the conditions in the Reorganization
Agreement, the Reorganization will close on November 30, 1999 or such other
date as agreed to by the parties.
17
The Reorganization Agreement may be terminated before or after approval by
shareholders of BRF or RFA, at any time prior to the closing of the
Reorganization (i) by RFA in its sole discretion, (ii) by BRF if any condition
to BRF's obligations under the Reorganization Agreement has not been satisfied
or waived, (iii) by the mutual consent of the parties or (iv) by any party to
the Reorganization if the Reorganization has not occurred by December 31,
1999. The Reorganization Agreement provides further that at any time before or
(to the extent permitted by law) after approval of the Reorganization
Agreement by the shareholders of BRF (x) the parties may, by written agreement
authorized by their respective Boards of Trustees and with or without the
approval of their shareholders, amend any of the provisions of the
Reorganization Agreement provided that such amendment does not materially
adversely affect the shareholders of the parties and (y) any party may waive
any default by another party or the failure to satisfy any of the conditions
to its obligations (the waiver to be in writing and authorized by the Board of
Trustees of the waiving party with or without the approval of such party's
shareholders) if in the judgment of the Boards of Trustees such action or
waiver would not have a material adverse effect on the benefits intended under
this Agreement.
Surrender and Exchange of BRF Share Certificates. After the closing of the
Reorganization, each holder of an outstanding certificate or certificates
formerly representing common shares of BRF will be entitled to receive, upon
surrender of his or her certificates, a certificate or certificates
representing (i) the number of RFA Common shares exchangeable for such
holder's BRF common shares, (ii) the number of RFA Common shares payable as
the special dividend declared by BRF prior to the Reorganization, unless the
shareholder has elected to receive cash in which case the shareholder shall
receive such dividend in cash and (iii) cash in lieu of any fractional RFA
Common shares. Promptly after the closing of the Reorganization, the Transfer
Agent will mail to each holder of certificates formerly representing BRF
common shares a letter of transmittal for use in surrendering his or her
certificates for certificates representing RFA Common shares and cash in lieu
of any fractional RFA Common shares.
After the closing of the Reorganization, each holder of an outstanding
certificate or certificates formerly representing preferred shares of BRF will
be entitled to receive, upon surrender of his or her certificate or
certificates, a certificate or certificates representing the number of shares
of RFA Preferred distributable with respect to such holder's preferred shares
of BRF. Promptly after the closing of the Reorganization, the transfer agent
for the RFA Preferred will mail to each holder of certificates formerly
representing preferred shares of BRF a letter of transmittal for use in
surrendering his or her certificates for certificates representing preferred
shares of BRF.
Shareholders should not send in any share certificates at this time. Upon
consummation of the Reorganization, holders of BRF shares will be furnished
instructions for exchanging their BRF share certificates for RFA share
certificates and, if applicable, cash in lieu of fractional RFA Common shares.
From and after the closing of the Reorganization, certificates formerly
representing BRF shares will be deemed for all purposes to evidence ownership
of the number of full RFA Shares distributable with respect to BRF shares in
the Reorganization, provided that until BRF share certificates have been so
surrendered, no dividends payable to the holders of record of RFA Shares as of
any date subsequent to 30 days after the Reorganization are required to be
paid to the holders of BRF share certificates. Unpaid dividends on RFA shares
to holders of record as of any date after such 30th day and prior to
18
the exchange of certificates by BRF shareholder will be paid to such
shareholder, without interest, at the time such shareholder surrenders in
proper form his or her BRF share certificates for exchange.
From and after the closing of the Reorganization, there will be no transfers
on the record transfer books of BRF. If, after the closing, certificates
representing BRF shares are presented to BRF, they will be cancelled and
exchanged for certificates representing RFA shares and, if applicable, the
cash in lieu of fractional RFA common shares distributable with respect to
such fractional RFA shares.
Appraisal Rights. Under BRF's Charter, neither the holders of BRF common
shares nor the holders of BRF preferred shares are entitled to appraisal
rights in connection with the Reorganization.
Reasons for the Reorganization; Board Consideration. At the August 12, 1998
meeting of the Boards of Trustees of BRF and RFA, each Board was advised that
the Investment Adviser was studying whether a reorganization of BRF and RFA
would be in the best interests of the shareholders. Following that meeting,
the Investment Adviser completed its studies and at a meeting of the Boards of
Trustees of BRF held on May 13, 1999, the Investment Adviser presented a
preliminary proposal for the Reorganization. The preliminary proposal was
discussed by the Boards at such meeting, after which the Boards requested
additional information from the Investment Adviser. This additional
information was considered in depth by the Boards of Trustees of BRF and RFA
at a meeting held on July 12, 1999. At that meeting, the Boards of Trustees of
BRF and RFA (the "Boards"), which consist of the same individuals, concluded
that the Reorganization is in the best interests of the shareholders of BRF
and RFA, approved the Reorganization Agreement and approved the submission of
the Reorganization Agreement to BRF's and RFA's shareholders for approval.
Also on July 12, 1999, the Boards of Trustees preliminarily approved the
filing of an amended Certificate of Designation to increase the number of
shares of RFA Preferred so that shares of RFA Preferred may be issued to
holders of preferred shares of BRF as part of the Reorganization.
The Boards of Directors of BRF and RFA recommend that the shareholders of BRF
and RFA, respectively, vote FOR the proposal relating to the Reorganization
Agreement.
In reviewing the proposed Reorganization, the Boards of Trustees of BRF and
RFA considered the potential impact of the Reorganization on its shareholders,
including but not limited to (i) the terms and conditions of the
Reorganization Agreement; (ii) the capabilities, practices and resources of
the organizations that provide investment advisory and certain other services
to BRF and RFA and of the organizations that would provide such services to
RFA after the Reorganization, and the terms on which these services are and
would be provided; (iii) the investment objectives, policies and restrictions
of BRF and RFA and their compatibility; (iv) the historical investment
performance of BRF and RFA and anticipated future influences on such
investment performance with and without the Reorganization; (v) the historical
and projected operating expenses of BRF and RFA and the projected pro forma
operating expenses of RFA; (vi) the terms of the preferred shares of BRF and
RFA; (vii) the anticipated tax consequences of the Reorganization; (viii) the
shift on the part of BRF's shareholders to a perpetual fund rather than one
having a stated term; (ix) the trading history of the common shares of BRF and
RFA and the anticipated impact of the Reorganization on the market price of
such common shares; and (x) the costs associated with the Reorganization.
19
In approving the Reorganization, the Boards identified certain benefits that
are likely to result from the Reorganization, including: higher distribution
rates; the payment of a special dividend to the common shareholders of BRF
immediately prior to the Reorganization; reducing the impact on shareholders
of BRF of having portfolio securities being called by their issuers, because
RFA would be able to reinvest the proceeds from called portfolio securities in
securities with longer maturities and higher rates of interest (rather than
securities with shorter maturities and lower rates of interest required by the
limited term of BRF); increased possibility of trading at a lower or at no
discount from net asset value; and a more liquid trading market for common
shares of BRF after being merged with RFA. The Boards also considered the
possible adverse effects and estimated costs of the Reorganization. See "Risks
and Special Considerations Regarding the Reorganization."
Higher Distribution Rate. Based on data presented by the Investment Adviser
regarding BRF's and RFA's current distribution rate and the absence for RFA of
the requirement to retain income in order to be able to meet an objective of
distributing a specified amount at a specified termination time, the Boards of
Trustees of BRF and RFA anticipate that the monthly distribution rate of RFA
will be higher per dollar of net assets attributable to a share of common
shares than would be the case for BRF by itself and for RFA by itself.
Special Dividend. BRF, as part of its investment objective, seeks to return to
its common shareholders the initial offering price of its common shares upon
the expiration of BRF. In order to assure that BRF will be able to achieve
this portion of its investment objective, BRF retains each year a portion of
its net investment income and holds such income until the expiration of BRF.
In connection with the Reorganization, BRF will pay its common shareholders
immediately prior to the Reorganization a special dividend out of such
retained income. As of April 30, 1999, the Investment Adviser estimates this
distribution to be $0.2262 per share for BRF. This distribution will be exempt
from regular Federal income tax and Florida intangible personal property
taxes.
Reduced Reinvestment Risk. The terms of municipal obligations often give
their issuers the right periodically to "call" or repay their municipal
obligations. Issuers will exercise call rights when interest rates decline and
they can refinance their municipal obligations at lower interest rates. At the
time BRF was formed, most of the municipal obligations available in the market
were subject to call provisions. Because interest rates have declined, the
Investment Adviser believes that many of the municipal obligations owned by
BRF will be called prior to the termination of BRF. The Investment Adviser
would then reinvest the proceeds from the called securities in other municipal
obligations but, because BRF has a limited term, would be required to reinvest
in municipal obligations maturing prior to the expiration of BRF's term. The
relatively short term remaining for BRF would require the Investment Adviser
to reinvest in shorter term municipal obligations with relatively lower
interest rates. The Reorganization would result in the Investment Adviser
being able to reinvest the proceeds from called portfolio securities into
municipal obligations with longer maturities and relatively higher interest
rates, because RFA has an indefinite term.
Potential for Improved Shares Price Performance. Based on data presented by
the Investment Adviser regarding the trading patterns of BRF and RFA, as well
as other leveraged municipal bond funds, and regarding the potential impact of
higher distribution rates, the Boards of Trustees of BRF and RFA believe that
the common shares of RFA may trade at a lower or no discount from net asset
value following the Reorganization. In this connection, the Boards of Trustees
noted that the market
20
value of common stocks issued by closed-end municipal bond funds historically
have had a high correlation with the distribution rates on such stock, and
that a higher distribution rate as a result of the Reorganization may produce
positive stock price performance.
Increased Liquidity. The Reorganization would result in RFA having a
significantly larger number of common shares outstanding, and a significantly
larger number of common shareholders, than RFA prior to the Reorganization.
Market prices of common shares of smaller investment companies are likely to
experience greater spreads between their bid and offer prices than market
prices of common shares of larger investment companies, and that increasing
the size of RFA as a result of the Reorganization should result in a higher
average daily trading volume, a narrower average spread between bid and offer
prices and reduced price volatility for its common shares. There can be no
assurance that the Reorganization will produce these anticipated benefits.
However, the Boards of BRF and RFA believe that these results, if obtained,
would benefit holders of common shares by affording them a more liquid trading
market for their shares and the opportunity for more favorable price execution
in trading the common shares.
In approving the Reorganization, the Boards of BRF and RFA also considered a
report of the Investment Adviser indicating that the Reorganization should
have a beneficial overall effect on the financial status and ongoing
performance of RFA, and considered such measures as nominal annual earnings,
annual dividends, dividend rates as a percentage of market price, management
fees and undistributed net investment income balances. The Boards of BRF and
RFA also examined the relative credit strength, maturity characteristics,
preferred share asset coverages and mix of type of securities of BRF and RFA's
portfolios of municipal obligations and the costs involved in the
Reorganization. The Boards noted the many similarities between BRF and RFA.
Based on these factors, the Boards determined that the Reorganization is
likely to provide benefits to the shareholders of BRF, as discussed above,
that outweigh the possible adverse effects and the costs (including legal,
accounting and administrative costs, some of which have already been incurred
in evaluating and analyzing the Reorganization) presented by the
Reorganization.
Expense Ratios. In evaluating the Reorganization, the Board of Directors of
BRF considered increase in expense ratios that will be experienced by common
shareholders of BRF. The average aggregate expense ratios for BRF's latest
three fiscal years was 0.97% for BRF. The anticipated aggregate pro forma
expense ratio for RFA, assuming that the Reorganization is completed, is
0.99%. The Boards of Trustees also considered that the anticipated aggregate
pro forma expense ratio for RFA will be [less than/approximately the same as]
the average aggregate expense ratio for closed-end national municipal bond
funds as reported in information prepared by Lipper and presented to the
Boards by the Investment Adviser. In recommending that the common shareholders
of BRF approve the Reorganization, the Board of Trustees of BRF concluded that
the anticipated benefits of higher distribution rates on the common shares,
the special dividend to be paid to common shareholders of BRF prior to the
Reorganization, the potential reduction in reinvestment risk and the enhanced
likelihood that the common shares of BRF would trade at a lower or no discount
to net asset value after the Reorganization outweighed the detriment of a
higher expense ratio. The aggregate expense ratio of RFA will be reduced as a
result of the Reorganization, which will benefit the current shareholders of
RFA.
21
Indefinite Term. BRF currently is scheduled to terminate on December 31 of
2008. As part of BRF's investment objective, it seeks to distribute to its
common shareholders $15 per common share, in connection with its termination.
RFA has no scheduled termination date and, if the Reorganization of BRF is
completed, common shareholders of BRF will be dependent on the trading prices
available in the market for the sale of their shares. Such market prices may
be at, above or below the amount they would have received upon termination of
BRF. In recommending that the common shareholders of BRF approve the
Reorganization, the Board of Trustees of BRF determined that the
Reorganization is likely to provide benefits to the shareholders of BRF, as
discussed above, that outweigh the possible market risks associated with the
disposition of their common shares following the Reorganization.
Expenses of the Reorganization. In evaluating the Reorganization, the
Investment Adviser estimated the amount of expenses BRF and RFA would incur to
be $147,884, which includes additional stock exchange listing fees, SEC
registration fees, legal and accounting fees and proxy and distribution costs.
These estimates were based on information provided by BRF's and RFA's service
providers. The Reorganization Agreement provides that BRF and RFA will each be
responsible for that portion of the expenses of the Reorganization equal to
the proportion its total assets bears to the combined total assets of BRF and
RFA.
In approving the Reorganization, the Board's Directors determined that the
Reorganization should result in no dilution of the interests of BRF's or RFA's
existing shareholders.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The consummation of the Reorganization is conditioned upon, among other
things, the receipt by RFA and BRF of an opinion as of the Closing from
Skadden, Arps, Slate, Meagher & Flom LLP to the effect that, on the basis of
facts, representations and assumptions set forth in such opinion, the
Reorganization will be treated as a reorganization within the meaning of
Section 368(a) of the Code, and RFA and BRF will each be a party to such
reorganization within the meaning of Section 368(b) of the Code. Accordingly,
no gain or loss will be recognized by RFA or BRF as a result of the
Reorganization, and no gain or loss will be recognized by a shareholder of BRF
who receives RFA Shares for shares of BRF exchanged therefor (except with
respect to any cash received in lieu of a fractional interest in RFA Shares
and the special dividend paid to holders of common shares of BRF prior to the
Reorganization). The opinion referred to above has been filed as an exhibit to
the Registration Statement of which this Combined Proxy Statement/Prospectus
is a part.
The aggregate tax basis of the RFA Shares to be received by shareholders of
BRF will be the same as the aggregate tax basis in the shares of BRF
surrendered in exchange therefor (reduced by any amount allocable to a
fractional share interest for which cash is received), and the holding period
of the RFA Shares to be received by shareholders of BRF in connection with the
Reorganization will include the holding period of the shares of BRF
surrendered in exchange therefor, provided that the shares in BRF are held as
a capital asset at the closing of the Reorganization.
Cash received in lieu of a fractional RFA Share will be treated as received in
redemption for such fractional interest, and gain or loss will be recognized,
measured by the difference between the amount received and the portion of the
tax basis of a Shareholder's shares in BRF allocable to such fractional
22
interest. Such gain or loss generally will constitute capital gain or loss if
the shares of BRF are held as a capital asset at the closing of the
Reorganization, and will be long-term capital gain or loss if the holding
period of such shares is greater than one year at the closing.
It is intended that the special dividend constitute a distribution from BRF.
As such, each distribution will be treated as ordinary income (except to the
extent eligible for designation by BRF as an exempt-interest dividend or a
capital gain dividend), whether a shareholder receives the special dividend in
shares or elects to receive cash in lieu of shares.
No tax ruling has been or will be received from the Internal Revenue Service
("IRS") in connection with the Reorganization. An opinion of counsel is not
binding on the IRS, and there can be no assurance that the IRS would not adopt
a contrary position or that the IRS position would not be sustained by a
court. THE ABOVE DISCUSSION MAY NOT APPLY TO PARTICULAR CATEGORIES OF HOLDERS
OF SHARES OF BRF SUBJECT TO SPECIAL TREATMENT UNDER THE CODE, SUCH AS
PREFERRED SHAREHOLDERS OF BRF WHO ELECT APPRAISAL RIGHTS, FOREIGN HOLDERS OR
HOLDERS WHOSE SHARES WERE ACQUIRED PURSUANT TO THE EXERCISE OF AN EMPLOYEE
STOCK OPTION OR OTHERWISE AS COMPENSATION. SHAREHOLDERS OF BRF ARE URGED TO
CONSULT THEIR TAX ADVISORS TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE
REORGANIZATION TO THEM, INCLUDING ANY STATE, LOCAL OR OTHER TAX CONSEQUENCES
OF THE REORGANIZATION.
VOTING MATTERS
General. This Combined Proxy Statement/Prospectus is furnished in connection
with the solicitation by the Boards of Trustees of BRF and RFA of proxies to
be voted at the Meeting and at any adjournments thereof, for the purposes set
forth in the accompanying Notice of Special Shareholders Meeting. Any such
adjournment will require the affirmative vote of a majority of the shares
present in person or by proxy to be voted at the Meeting. The persons named as
proxies will vote in favor of any such adjournment those proxies that instruct
them to vote in favor of any of the proposals. Conversely, they will vote
against any such adjournment any proxies that instruct them to vote against
the proposals.
The Meeting is scheduled as a joint meeting of the respective shareholders of
BRF and RFA because the shareholders of BRF and RFA are expected to consider
and vote on similar matters. The Boards of BRF and RFA have determined that
the use of a joint proxy statement/prospectus for the Meeting is in the best
interest of BRF's and RFA's shareholders. In the event that any shareholder
present at the Meeting objects to the holding of a joint meeting and moves for
an adjournment of BRF's meeting to a time immediately after the Meeting so
that BRF's meeting may be held separately, the persons named as proxies will
vote in favor of such adjournment. Shareholders of BRF and RFA will vote
separately on the proposal.
The cost of soliciting proxies will be borne by BRF and RFA in proportion to
the amount of proxies solicited on behalf of BRF and RFA. In addition, certain
officers, directors and employees of BRF, RFA, the Investment Adviser and the
administrator of BRF and RFA (none of whom will receive
23
additional compensation therefor) may solicit proxies in person or by
telephone, telegraph or mail. In addition, BRF and RFA may employ Shareholder
Communications Corporation pursuant to its standard contract as proxy
solicitor, the cost of which will be borne proportionately by BRF and RFA and
is estimated to be approximately $3,500 for each of BRF and RFA.
All properly executed proxies received prior to the Meeting will be voted at
the Meeting in accordance with the instructions marked thereon or otherwise as
provided therein. Abstentions will be counted as present but not voting with
respect to those proposals from which a shareholder abstains. Broker non-votes
will be treated as shares that are not present. Unless instructions to the
contrary are marked, shares represented by all properly executed proxies will
be voted "FOR" all the proposals. Any proxy may be revoked at any time prior
to the exercise thereof by submitting another proxy bearing a later date or by
giving written notice to the Secretary at the address indicated above or by
voting in person at the Meeting.
The Boards of BRF and RFA know of no business other than that specifically
mentioned in the Notice of Meeting which will be presented for consideration
at the Meeting. If any other matters are properly presented, it is the
intention of the persons named in the enclosed proxy to vote thereon in
accordance with their best judgment.
The Boards of BRF and RFA have fixed the close of business on ,
1999, as the record date for the determination of stockholders of BRF and RFA
entitled to notice of and to vote at the Meeting or any adjournment thereof.
At the close of business on April 30, 1999, RFA and BRF had outstanding the
number of common shares and preferred shares set forth below:
Amount Held Amount Outstanding
by Fund for Exclusive of
Amount its Own Amount Shown in
Fund Designation Authorized Account Previous Column
- ---- ----------- ----------- ----------- ------------------
RFA...................... Common 199,999,660 0 1,127,093
Preferred:
R7 300 0 300
BRF...................... Common 199,997,360 8,707,093
Preferred:
R7 2,640 0 2,640
For BRF and RFA, the class or classes of shares listed above are the only
authorized class or classes of shares.
The principal executive offices of BRF are located at 800 Scudders Mill Road,
Plainsboro, New Jersey 08536 and the principal executive offices of RFA are
located at Gateway Center Three, 100 Mulberry Street, Newark, New Jersey
07102. The enclosed proxy or proxies and this proxy statement are first being
sent to BRF's and RFA's shareholders on or about , 1999.
BRF and RFA will furnish, without charge, a copy of BRF's most recent Annual
Report and the most recent Semi-Annual Report succeeding the Annual Report, if
any, to any shareholder upon request, provided such Annual or Semi-Annual
Report is not enclosed herein. Requests should be directed to 345 Park Avenue,
New York, New York 10154 (telephone number (800) 227-7BFM(7236)).
24
As of February 26, 1999, none of BRF or RFA was aware of any beneficial or
record owner of 5% or more of any class of shares of BRF or RFA.
All proxies received will be voted in favor of the proposal, unless otherwise
directed therein.
If the accompanying proxy is or the accompanying proxies are executed and
returned in time for the Meeting, the shares covered thereby will be voted in
accordance with the proxy or proxies on all matters that may properly come
before the Meeting.
Voting Requirements of BRF
Votes of Common Shareholders as a Separate Class. Common shareholders of BRF
are being asked to approve the Reorganization Agreement pursuant to
Massachusetts law and under the Charter of BRF. Because of the separate class
vote with respect to the preferred shares of BRF described below, the Charter
of BRF requires the common shares of BRF to vote as a separate class with
respect to the Reorganization and the related Reorganization Agreement. The
affirmative vote of shareholders representing at least a majority of the
outstanding common shares of BRF is required to approve BRF's Reorganization
and the Reorganization Agreement.
Votes of Preferred Shareholders as a Separate Class. Preferred shareholders of
BRF are being asked to approve the Reorganization Agreement pursuant to the
Articles Supplementary pertaining to each series of preferred shares,
Massachusetts law and as a "plan of reorganization" under the 1940 Act.
Section 18(a)(2)(D) of the 1940 Act provides that the terms of preferred
shares issued by a registered closed-end investment company must contain
provisions requiring approval by the vote of a majority of such shares, voting
as a separate class, of any plan of reorganization adversely affecting such
shares. The 1940 Act makes no distinction between a plan of reorganization
that has an adverse effect as opposed to a materially adverse effect. While
the Board of Trustees of BRF does not believe that the holders of preferred
shares of BRF would be materially adversely affected by the Reorganization, it
is possible that there may be insignificant adverse effects (such as where the
asset coverage with respect to the shares of RFA Preferred issued pursuant to
the Reorganization is slightly more or less than the asset coverage with
respect to the preferred shares of BRF for which they are exchanged or such as
the absence of a fixed termination date for RFA). Accordingly, BRF is seeking
approval of the Reorganization Agreement by the holders of preferred shares of
BRF. Accordingly, the affirmative vote of shareholders representing at least a
majority of the outstanding preferred shares of BRF, with all the series of
preferred shares of BRF voting together as a single class, is required to
approve BRF's Reorganization and the Reorganization Agreement. Please note
that the asset coverage tests applicable to the RFA Preferred under the 1940
Act and required by the rating agencies will be satisfied following completion
of the Reorganization.
Voting Requirement of RFA
Combined Vote of Common and Preferred Shareholders. A combined vote of the
common and preferred shareholders of RFA is required to approve the
Reorganization. The affirmative vote of shareholders representing at least a
majority of the shares of RFA Common and RFA Preferred present at the meeting
and entitled to vote, voting together as a single class, is required to
approve the Reorganization and the related Reorganization Agreement.
25
Quorum
A quorum is constituted with respect to RFA and BRF by the presence in person
or by proxy of the holders of more than 50% of the outstanding shares of RFA
or BRF entitled to vote at the Meeting and with respect to a class vote of the
preferred shares or common shares of BRF by the presence in person or by proxy
of the holders of more than 50% of the outstanding shares of such class
entitled to vote at the Meeting. For purposes of determining the presence of a
quorum for transacting business at the Meeting, abstentions will be treated as
shares that are present at the Meeting but which have not been voted.
Abstentions will have the effect of a "no" vote for purposes of obtaining the
requisite approvals. Broker "non-votes" (that is, proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owners or other persons entitled to vote shares on a particular
matter with respect to which the brokers or nominees do not have discretionary
power) will not be treated as shares that are present at the Meeting and,
accordingly, could make it more difficult to obtain the requisite approvals.
In the event that a quorum is not present at the Meeting, or in the event that
a quorum is present at the Meeting but sufficient votes to approve the
Reorganization Agreement are not received with respect to RFA or BRF, the
persons named as proxies may propose one or more adjournments of the Meeting
or a portion thereof to permit further solicitation of proxies. Any such
adjournment(s) will require the affirmative vote of a majority of those shares
affected by the adjournment(s) that are represented at the Meeting at that
time in person or by proxy. If a quorum is not present on a particular matter,
the persons named as proxies will vote those proxies in favor of adjournment
except to the extent the proxy expressly states otherwise. If a quorum is
present on a particular matter, the persons named as proxies will vote in
favor of such adjournment(s) all proxies other than those proxies required to
be voted AGAINST such proposal, which will be voted against any
adjournment(s). A shareholder vote may be taken with respect to RFA or BRF on
some or all matters before any such adjournment(s) if sufficient votes have
been received for approval.
DESCRIPTION OF COMMON SHARES OF RFA AND BRF
General. The Charter of RFA authorizes the issuance of 199,999,660 shares of
RFA Common in a single class, par value $.01 per share. As of April 30, 1999,
there were issued and outstanding 1,127,093 shares of RFA Common. If the
Reorganization is approved, it is anticipated that RFA will be authorized to
issue approximately 199,997,020 shares of RFA Common immediately after the
Reorganization due to the increase in authorized shares of RFA Preferred. If
the Reorganization is approved, at the closing RFA will issue a number of
additional shares of RFA Common that, as described above, will be based on the
relative aggregate per share net asset values of RFA and BRF, as of the close
of business on the last business day prior to the closing. Based on the
relative per share net asset values as of April 30, 1999, RFA would have
issued approximately 8,987,754 additional shares of RFA Common if the
Reorganization had occurred as of the next business day, assuming that all
common shareholders of BRF elect to receive the special dividend paid to them
in connection with the Reorganization in additional common shares of BRF.
Shares of RFA Common will be, when issued in the Reorganization or against
receipt of consideration therefor, at least equal to the par value thereof,
fully paid and nonassessable and will have one vote per share in all matters
on which such shares are entitled to vote.
26
The common shares of BRF and RFA have equal voting rights and equal rights
with respect to the payment of dividends and distribution of assets upon
liquidation and have no preemptive, conversion or exchange rights or rights to
cumulative voting.
Distributions. The common shares of RFA and BRF have equal rights with respect
to the payment of dividends and the distribution of assets upon liquidation.
Neither RFA nor BRF will be permitted to declare, pay or set apart for payment
any dividend or distribution on common shares (other than in additional common
shares), unless (a) cumulative dividends on its respective outstanding
preferred shares have been paid in full and (b) it meets the asset coverage
tests applicable to its preferred shares. This latter limitation on RFA's and
BRF's ability to make distributions on common shares could under certain
circumstances impair their ability to maintain their qualification for
taxation as a regulated investment company under the Code.
RFA currently distributes monthly all or a portion of its net investment
income to holders of RFA Common. Monthly distributions to holders of RFA
Common consist of net investment income remaining after the payment of
dividends on outstanding preferred shares. For Federal income tax purposes,
however, if RFA realizes net capital gains, a portion of RFA's distributions
will be required to be allocated pro rata among the holders of RFA Common and
holders of RFA Preferred.
Comparison of Rights of Holders of Common Shares of RFA and BRF. The
provisions of the Charter of RFA are substantially the same as the provisions
of the Charter of BRF in all respects, except as described in this paragraph.
The full text of BRF's and RFA's Charter is on file with the SEC and may be
obtained as described under "Available Information." The Charter of BRF
provides for termination of its existence on a specific date, which is
December 31, 2008 in the case of BRF whereas RFA's Charter provides for its
perpetual existence. The Charter of BRF provides that the specific termination
provision of its Charter may not be amended or repealed without the
affirmative vote of at least 75% of the outstanding shares entitled to vote
thereon and the 1940 Act would require separate approval of any such amendment
or repeal by a majority of the outstanding preferred shares of BRF or, if
less, at least two-thirds of the preferred shares voting thereon if at least
50% of the preferred shares are present and voting. RFA has no termination
provision and accordingly no provision requiring a supermajority vote for
amendment or repeal of such a provision.
Certain Provisions in RFA's and BRF's Charter. BRF and RFA have in their
Charters and by-laws ("By-Laws") certain substantially similar provisions
commonly referred to as "antitakeover" provisions, which may have the effect
of limiting the ability of other entities or persons to acquire control of BRF
or RFA, to cause them to engage in certain transactions or to modify their
structure.
First, a trustee may be removed from office only for cause by the vote of at
least 75% of the shares entitled to be voted on the matter. Second, the
affirmative vote of the holders of at least 75% of the shares will be required
to authorize BRF's or RFA's conversion from a closed-end to an open-end
investment company, which conversion would result in delisting from the AMEX.
Third, the present board is classified into three classes, each with a term of
three years with only one class of trustees standing for election in any year.
Such classification may prevent replacement of a majority of the trustees for
up to a two year period. The affirmative vote of at least 75% of the shares of
capital shares will be required to amend the Charter or By-Laws to change any
of the foregoing provisions.
27
The percentage of votes required under these provisions, which are greater
than the minimum requirements under the 1940 Act, will make more difficult a
change in BRF's or RFA's business or management and may have the effect of
depriving shareholders of an opportunity to sell shares at a premium over
prevailing market prices by discouraging a third party from seeking to obtain
control of BRF or RFA in a tender offer or similar transaction. Reference
should be made to RFA's Charter on file with the SEC for the full text of
these provisions.
Dividend Reinvestment Plan. Pursuant to RFA's Dividend Reinvestment Plan (the
"Plan"), each RFA shareholder automatically has all distributions of dividends
and capital gains reinvested by State Street Bank & Trust Company (the "Plan
Agent") in shares of RFA pursuant to the Plan, unless an election is made to
receive cash. Pursuant to BRF's Plan, each shareholder of BRF automatically
has all distributions of dividends and capital gains paid in cash, unless the
shareholder elects to have such distributions reinvested by the Plan Agent in
shares of BRF. Shareholders of BRF, upon consummation of the Reorganization,
will have their election to receive dividends paid in cash or reinvested in
shares preserved following the Reorganization into RFA.
The Plan Agent effects purchases of shares under the Plans in the open market.
Shareholders who do not participate in the Plans receive all distributions in
cash paid by check in U.S. dollars mailed directly to the shareholder of
record (or if the shares are held in street or other nominee name, then to the
nominee) by the custodian, as dividend disbursing agent.
The Plan Agent serves as agent for the stockholders in administering the
Plans. After BRF or RFA declares a dividend or determines to make a capital
gain distribution, the Plan Agent, as agent for the participants, receives the
cash payment and uses it to buy shares in the open market, on the AMEX or
elsewhere, for the participants' accounts. New shares are not issued in
connection with the Plan.
Participants in the Plans may withdraw from the Plans upon written notice to
the Plan Agent. When a participant withdraws from a Plan or upon termination
of such Plan as provided below, certificates for whole shares credited to his
or her account under the Plan will be issued and a cash payment will be made
for any fraction of a share credited to such account.
The Plan Agent maintains each shareholder's account in each Plan and furnishes
monthly written confirmations of all transactions in the accounts, including
information needed by shareholders for personal and tax records. Shares in the
account of each Plan participant are held by the Plan Agent in non-
certificated form in the name of the participant, and each shareholder's proxy
will include those shares purchased pursuant to such Plan.
Shareholders whose common shares are held in the name of a broker or nominee
should contact such broker or nominee to determine whether and how they may
participate in a Plan.
In the case of shareholders, such as banks, brokers or nominees, that hold
shares for others who are the beneficial owners, the Plan Agent administers
the Plans on the basis of the number of shares certified from time to time by
the record shareholder as representing the total amount registered in the
record shareholder's name and held for the account of beneficial owners who
are participants in a Plan.
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions are paid by BRF and RFA, as applicable. However, each
participant pays a pro rata share of brokerage
28
commissions incurred with respect to the Plan Agent's open market purchases in
connection with the reinvestment of dividends and distributions. There are no
other charges to participants for reinvesting dividends or capital gain
distributions, except for certain brokerage commissions, as described above.
The automatic reinvestment of dividends and distributions does not relieve
participants of any Federal income tax that may be payable or required to be
withheld on such dividends or distributions.
Experience under the Plans may indicate that changes are desirable.
Accordingly, BRF and RFA reserve the right to amend the Plans as applied to
any dividend or distribution paid subsequent to written notice of the change
sent to all participants in the Plans at least 90 days before the record date
for the dividend or distribution. The Plans also may be amended by the Plan
Agent by at least 90 days' written notice to all participants in the Plan. The
Plans may be terminated by the Plan Agent or BRF or RFA upon at least 30 days'
written notice to the participants in the Plan. All correspondence concerning
the Plan should be directed to the Plan Agent at P.O. Box 366, Boston,
Massachusetts 02101.
In connection with the Reorganization, a common shareholder of BRF might
receive a number of RFA common shares in the Reorganization which consists of
or includes an "odd lot" (i.e., less than 100 shares). Such odd lot holders
may participate in RFA's Dividend Reinvestment Plan for the limited purpose of
purchasing a sufficient number of RFA common shares to bring their odd lot
shares up to a 100-share "round lot." Each such odd lot holder would send in
the certificates representing his or her odd lot shares and direct the Plan
Agent to reinvest dividends only until a sufficient number of RFA common
shares have been acquired to form a round lot. When this is accomplished, (a)
certificates representing the round lot of RFA common shares would be issued
to the holder, (b) any excess RFA common shares or fractional RFA common
shares would be sold and a check for the sale issued to the holder, and (c)
dividend reinvestment on behalf of such holder would be discontinued.
DESCRIPTION OF PREFERRED SHARES OF RFA AND BRF
General. RFA and BRF utilize a leveraged capital structure through the
issuance of perpetual preferred shares whose dividend rates are reset weekly
by auction in relation to prevailing short-term municipal rates. As of the
date of this Combined Proxy Statement/Prospectus, each of RFA and BRF had
outstanding one series of preferred shares with the designations, dividend
periods, auction dates and annual dividend rate as of April 30, 1999 set forth
below:
Annual
Dividend Rate
(as of
Dividend Auction April 30,
Trust Designation Period Date 1999)
- ----- ----------- -------- -------- -------------
RFA................................. R7 7 days Thursday 3.20%
BRF................................. R7 7 days Thursday 3.31
In connection with the Reorganization, the Board of Trustees of RFA classified
up to 2,640 authorized and unissued shares of RFA capital shares as new shares
of RFA Preferred, which may be issued in one or more series. Upon completion
of the Reorganization, each outstanding preferred share of BRF will, in
effect, be exchanged for one share of RFA Preferred having the same terms,
including the same auction dates, dividend periods and dividend payment dates,
as the BRF preferred shares.
29
Under the 1940 Act, RFA is permitted to have outstanding more than one series
of preferred shares as long as no single series has priority over another
series as to the distribution of assets or the payment of dividends. All
outstanding shares of RFA Preferred and all shares of RFA Preferred issued
pursuant to the Reorganization will rank on a parity with each other as to the
payment of dividends and the distribution of assets upon liquidation. Shares
of RFA Preferred issued pursuant to the Reorganization will be, when issued,
fully paid and nonassessable and have no preemptive, conversion or exchange
rights or rights to cumulative voting.
None of the RFA Preferred or the BRF preferred shares are traded on any stock
exchange or over-the-counter. Shares of RFA Preferred and the BRF preferred
shares can be purchased at auctions as described herein or through broker-
dealers, if any, who maintain a secondary market in such shares.
Dividends and Dividend Periods. The dividends and distributions policy of each
share of RFA Preferred issued in connection with the Reorganization will be
the same as those of the outstanding shares of RFA Preferred and those of the
outstanding BRF preferred shares.
Holders of RFA Preferred and holders of BRF preferred shares are entitled to
receive, when, as and if declared by the Board of Trustees of RFA or BFC, as
the case may be, out of funds legally available therefore, cumulative cash
dividends on their shares. Dividends on RFA Preferred and on BRF preferred
shares so declared and payable (i) are in preference to and have priority over
any dividends so declared and payable on RFA Common or common shares of BRF,
as the case may be, and (ii) to the extent permitted under the Code and to the
extent available, out of net tax-exempt income earned on RFA's or BRF's
investments. The dividend rate per annum for the RFA Preferred and the BRF
preferred shares may vary from dividend period to dividend period and is
determined for each dividend period through an auction of all of the
outstanding shares of such series by an agent (the "Auction Agent") of RFA or
BRF, as the case may be. Dividends on the RFA Preferred and on the BRF
preferred shares are paid through The Depository Trust Company ("DTC") (or a
successor securities depository) on each dividend payment date. DTC's normal
procedures provide for it to distribute dividends in same-day funds to agent
members, who in turn are expected to distribute such dividends to the person
for whom they are acting as agent in accordance with the instructions of such
person. Prior to each dividend payment date, RFA and BRF are required to
deposit with the Auction Agent sufficient funds for the payment of such
declared dividends. None of RFA or BRF has established a reserve for the
payment of dividends, and no interest is payable by RFA or BRF in respect of
any dividend payment or payment on RFA Preferred or preferred shares of BRF
which may be in arrears.
Dividends paid by RFA and BRF, to the extent paid from tax-exempt income
earned on municipal obligations, are exempt from Federal income taxes, subject
to the possible application of the alternative minimum tax. However, RFA and
BRF are required to allocate net capital gains and other income subject to
regular Federal income taxes, if any, proportionally between its common shares
and its preferred shares in accordance with the current position of the IRS.
RFA and BRF notify the Auction Agent of the amounts of any such dividends. The
Auction Agent in turn notifies each broker-dealer whenever it receives any
such notice from RFA or BRF, and each broker-dealer then notifies its
customers who are holders of the RFA Preferred or the preferred shares of BRF.
RFA and BRF also may include such income in a dividend on their preferred
shares without giving advance notice thereof if they increase the dividend by
an additional amount to offset the tax effect thereof.
30
If RFA or BRF retroactively allocates any net capital gains or other income
subject to regular Federal income taxes to shares of its preferred shares
without having given advance notice thereof as described above, which only may
happen when such allocation is made as a result of the redemption of all or a
portion of the outstanding shares of RFA Preferred or all of the preferred
shares of BRF or the liquidation of RFA or BRF, RFA or BRF will make certain
payments to holders of shares of its preferred shares to which such allocation
was made to offset substantially the tax effect thereof. In no other instances
will RFA or BRF be required to make payments to holders of shares of its
preferred shares to offset the tax effect of any reallocation of net capital
gains or other taxable income.
Neither RFA nor BRF is permitted to declare, pay or set apart for payment any
dividend or distribution on its common shares (other than in additional common
shares), unless (a) cumulative dividends on all its respective outstanding
shares of preferred shares have been paid in full and (b) RFA or BRF meets the
asset coverage tests required by the rating agencies and the 1940 Act. This
latter limitation on RFA's and BRF's ability to make distributions on common
shares could, under certain circumstances, impair the ability of RFA or BRF to
maintain its qualification for taxation as a regulated investment company
under the Code.
Voting Rights. The voting rights of the RFA Preferred to be issued in
connection with the Reorganization will be substantially similar to those of
the outstanding shares of RFA Preferred and the outstanding BRF preferred
shares.
The provisions of the Charter of RFA are substantially the same as the
provisions of the Charter of BRF in all respects, except that the Charter of
BRF provides for a finite term. The 1940 Act requires separate approval of any
plan of reorganization that may adversely affect preferred shares by a
majority of the outstanding preferred shares of RFA or BRF or, if less, at
least two-thirds of the preferred shares voting thereon if at least 50% of the
preferred shares are present and voting. The 1940 Act requires that the
holders of RFA Preferred and the holders of BRF preferred shares and any other
preferred shares issued by RFA or BRF, voting as a separate class, have the
right to elect at least two directors at all times and to elect a majority of
the directors at any time when two years' dividends on the preferred shares or
any other preferred shares are unpaid. The holders of RFA Preferred and the
holders of BRF preferred shares also vote as a separate class on certain other
matters as required under their Charters and the 1940 Act.
Redemption. The redemption rights of the RFA Preferred to be issued in
connection with the Reorganization will be substantially similar to those of
the outstanding shares of RFA Preferred and the outstanding BRF preferred
shares.
If a series of RFA Preferred or a series of BRF preferred shares fails to meet
the asset coverage tests required by the rating agencies and the 1940 Act, the
RFA Preferred or the BRF preferred shares would be subject to mandatory
redemption, out of funds legally available therefor, at the redemption price
of $25,000 per share plus an amount equal to dividends thereon (whether or not
earned or declared) accumulated but unpaid to the date fixed for redemption
plus any premiums thereon. Any such redemption would be limited to the number
of preferred shares necessary to satisfy the asset coverage tests applicable
to the respective series of RFA Preferred or the respective series of BRF
preferred shares. The ability of RFA and BRF to make such a mandatory
redemption may be restricted
31
by the provisions of the 1940 Act. In addition, holders of preferred shares
may be entitled to receive additional dividends in the event of a mandatory
redemption of such preferred shares.
Shares of RFA Preferred and the BRF preferred shares are redeemable at the
option of RFA or BRF, in whole or in part, on any dividend payment date
(except during certain excluded periods) for such series, at the redemption
price of $25,000 per share, plus an amount equal to dividends thereon
accumulated but unpaid to the date fixed for redemption (whether or not earned
or declared) plus any applicable premium. In addition, holders of preferred
shares may be entitled to receive additional dividends in the event of an
optional redemption of such preferred shares.
Liquidation. The terms of the liquidation preferences of the RFA Preferred to
be issued in connection with the Reorganization will be substantially similar
to the liquidation preference of the outstanding shares of RFA Preferred and
the outstanding BRF preferred shares.
The liquidation preference of each share of RFA Preferred and each preferred
share of BRF is $25,000, plus an amount equal to accumulated but unpaid
dividends (whether or not earned or declared) plus any premium applicable
thereto. In addition, holders of RFA Preferred and holders of preferred shares
of BRF may be entitled to receive additional dividends in the event of
redemption of such preferred shares.
Upon any liquidation, dissolution or winding up of RFA or BRF, whether
voluntary or involuntary, the holders of shares of RFA Preferred or BRF's
preferred shares would be entitled to receive $25,000 per share together with
the amount of any dividends accumulated but unpaid (whether or not earned or
declared) thereon to the date of distribution. Such amount would be paid out
of the assets of RFA or BRF available for distribution to stockholders, before
any distribution or payment is made upon any shares of RFA Common or BRF
common shares or any other capital shares of RFA or BRF ranking junior in
right of payment upon liquidation to the RFA Preferred or BRF's preferred
shares. If the assets of RFA or BRF are insufficient to make the full
liquidation payment on its preferred shares and liquidation payments on any
other outstanding class or series of preferred shares of RFA or BRF ranking on
a parity with the RFA Preferred or BRF's preferred shares as to payment upon
liquidation, then such assets will be distributed among the holders of shares
of RFA Preferred or BRF's preferred shares and the holders of shares of such
other class or series ratably in proportion to the respective preferential
amounts to which they are entitled. After payment of the full amount of any
liquidation distribution to which they are entitled, the holders of shares of
the RFA Preferred or BRF's preferred shares would not be entitled to any
further participation in any distribution of assets by RFA or BRF except for
any additional dividends. A consolidation, reorganization or share exchange of
RFA or BRF with or into any other entity or entities or a sale, whether for
cash, shares of shares, securities or properties, of all or substantially all
or any part of the assets of RFA or BRF shall not be deemed or construed to be
a liquidation, dissolution or winding up of RFA or BRF.
Auctions. The dividend rate per annum for the RFA Preferred and for the BRF
preferred shares is determined for each dividend period through an auction of
all of such outstanding preferred shares by the Auction Agent. The Auction
Agent for the RFA and for each series of preferred shares of BRF is Bankers
Trust Company.
32
Rating Agency Guidelines. The rating agency guidelines applicable to the RFA
Preferred and the BRF preferred shares are substantially similar, except the
BRF preferred shares are rated by both Moody's and Standard & Poor's and the
RFA Preferred are rated only by Moody's. RFA intends that, so long as shares
of RFA Preferred are outstanding, the composition of its portfolio will
reflect guidelines established by Moody's in connection with RFA's receipt of
a rating for such shares on their date of original issue of "Aaa" from
Moody's. The Reorganization is conditioned upon RFA and BRF receiving written
advice from Moody's (i) confirming that consummation of the Reorganization
will not impair the Aaa ratings assigned to the outstanding shares of the RFA
Preferred and (ii) assigning Aaa ratings to the shares of the RFA Preferred to
be issued pursuant to the Reorganization.
Moody's and S&P, which are nationally recognized statistical rating
organizations, issue ratings for various securities reflecting the perceived
creditworthiness of such securities. The guidelines for rating the RFA
Preferred and the BRF preferred shares have been developed by Moody's and S&P
in connection with issuances of asset-backed and similar securities, including
debt obligation and variable rate preferred stocks, generally on a case-by-
case basis through discussions with the issuers of these securities. The
guidelines are designed to ensure that assets underlying outstanding debt or
preferred shares will be varied sufficiently and will be of sufficient quality
and amount to justify investment-grade ratings. The guidelines do not have the
force of law but have been adopted by RFA and BRF in order to satisfy current
requirements necessary for Moody's to issue the above-described ratings for
shares of the RFA Preferred, which ratings generally are relied upon by
institutional investors in purchasing such securities and the preferred shares
of RFA and BRF. The guidelines provide a set of tests for portfolio
composition and asset coverage that supplement (and in some cases are more
restrictive than) the applicable requirements under the 1940 Act.
RFA and BRF may, but are not required to, adopt modifications to these
guidelines that hereafter may be established by Moody's or Standard & Poor's.
Failure to adopt any such modifications, however, may result in a change in
the ratings described above or a withdrawal of the ratings altogether. In
addition, any rating agency providing a rating for the shares of the RFA
Preferred and the BRF preferred shares, at any time, may change or withdraw
any such rating. As set forth in the Articles Supplementary of RFA and BRF,
the Boards of Trustees, without stockholder approval, may modify certain
definitions or restrictions that have been adopted by RFA and BRF pursuant to
the rating agency guidelines, provided the boards of directors have obtained
written confirmation from Moody's and Standard & Poor's that any such change
would not impair the ratings then assigned by Moody's and Standard & Poor's to
the RFA Preferred or the preferred shares of BRF.
For so long as any shares of RFA Preferred or the preferred shares of BRF are
rated by Moody's or Standard & Poor's, as the case may be, RFA's and BRF's use
of options and financial futures contracts and options thereon will be subject
to certain limitations mandated by the rating agencies.
Additional Preferred Shares. The RFA Preferred represented approximately 38%
of RFA's total assets immediately after RFA initially issued the RFA
Preferred. If the Reorganization is completed, RFA anticipates that the RFA
Preferred will represent approximately % of RFA's total assets. RFA's Board
of Trustees has indicated its intention to authorize an offering of additional
shares of RFA Preferred such that, immediately after the offering of the
additional preferred, the RFA Preferred would once again represent
approximately 38% of RFA's total assets.
33
So long as RFA is able to realize a higher net return on its investment
portfolio than the dividend rate paid on the RFA Preferred, the effect of the
additional RFA Preferred will be to enhance the benefits of the Reorganization
to the holders of common shares of RFA and BRF, particularly the benefits of a
higher distribution rate and a greater likelihood of trading at little or no
discount to net asset value. On the other hand, to the extent that the then
current dividend rate on the additional RFA Preferred approaches the net
return on RFA's investment portfolio, the benefit of additional leverage will
be reduced, and if the then current dividend rate on any additional RFA
Preferred were to exceed the net return on RFA's portfolio, the additional
leverage would reduce the benefits of the Reorganization to holders of common
shares of RFA and BRF.
The offering of additional shares of RFA Preferred will be subject to market
conditions and to the Board of Director's of RFA continuing belief that adding
additional leverage to RFA's capital structure through the issuance of
additional RFA Preferred is likely to achieve the intended benefits for
holders of RFA's common shares. The Board of Trustees reserves the right to
change the foregoing percentage limitation and may issue the additional RFA
Preferred to the extent that the aggregate liquidation preference of all
outstanding shares of RFA Preferred does not exceed 50% of the value of RFA's
total assets. Although the terms of any additional shares of RFA Preferred
will be determined by RFA's Board of Trustees at the time of issuance, RFA
anticipates that such shares will be additional shares of the existing series
of RFA Preferred described in this Combined Proxy Statement/Prospectus or a
new series of RFA Preferred with provisions substantially similar to the
existing series of RFA Preferred.
The discussion above describes the present intention of RFA's Board of
Trustees with respect to a potential offering of additional shares of RFA
Preferred. If the Board of Trustees determines to proceed with such an
offering, the terms of the additional RFA Preferred may be the same as, or
different from, the terms described above, subject to applicable law and RFA's
Charter. The Board of Trustees, without the approval of the holders of RFA
Common, may authorize an offering of RFA Preferred or may determine not to
authorize such an offering, and may fix the terms of the RFA Preferred to be
offered. We cannot assure you that any additional shares of RFA Preferred will
be issued.
COMPARISON OF BRF AND RFA
General. BRF and RFA are non-diversified closed-end management investment
companies that invest in tax-exempt portfolios of Florida municipal
obligations. The common shares of RFA [are listed and trade on the AMEX under
the symbol RFA.] The common shares of BRF are listed and trade on the NYSE
under the symbol BRF. RFA and BRF are organized as Massachusetts business
trusts.
Investment Objectives and Policies. Except as noted below, the investment
objectives, policies and restrictions of RFA are similar to those of BRF.
RFA's investment objective is to provide high current income exempt from
regular Federal income tax and Florida intangible personal property tax
consistent with the preservation of capital. In seeking to provide income
exempt from such Federal and Florida taxes, RFA invests substantially all of
its assets in a non-diversified portfolio of investment grade Florida
municipal obligations and actively manages its assets in relation to market
conditions and interest rate changes. Under normal circumstances, at least 80%
of RFA's assets are invested in
34
securities rated investment grade by Moody's (at least Baa3, MIG4 or P-3),
Standard & Poor's (at least BBB-, SP-2 or A-3), Fitch (at least BBB- or F-3)
or another nationally recognized statistical rating agency. Up to 20% of RFA's
assets may be invested in unrated securities that are deemed by the Investment
Adviser to be of equivalent credit quality. RFA emphasizes investments in
Florida municipal obligations with long-term maturities and maintains an
average portfolio maturity of 15-20 years, but the average maturity may be
shortened from time to time depending on market conditions.
In addition, RFA may utilize certain options, futures, interest rate swaps and
related transactions for hedging purposes. To the extent RFA utilizes such
hedging strategies or invests in taxable securities, RFA's ability to achieve
its investment objective of providing high current income exempt from regular
Federal income tax and Florida intangible personal property taxes may be
limited. Accordingly, under normal circumstances, RFA's use of such practices
is not significant.
For purposes of enhancing liquidity and/or preserving capital, on a temporary
defensive basis, RFA may invest without limit in securities issued by the U.S.
Government or its agencies or instrumentalities, repurchase agreements
collateralized by such securities, or certificates of deposit, time deposits
or bankers' acceptances. RFA also may invest in municipal obligations with
maturities of less than one year, other debt obligations of corporate issuers,
such as interest-paying corporate bonds, commercial paper and certificates of
deposit, bankers' acceptances and interest-bearing savings accounts of banks
having assets greater than $1 billion and which are members of the Federal
Deposit Insurance Corporation. During temporary defensive periods, the current
dividend rate on any preferred shares will be more likely to approximate or
exceed the net rate of return on RFA's investment portfolio, with the result
that the leverage resulting from the preferred shares may become less
beneficial or adverse to the holders of shares of RFA Common.
BRF's investment objective is to provide current income exempt from regular
Federal income tax and Florida intangible personal property taxes and to
return $15 per common share to holders of common shares on or about December
31, 2008. In seeking to provide income exempt from such Federal and Florida
taxes, BRF invests at least 80% of its total assets in a non-diversified
portfolio of Florida municipal obligations insured as to the timely payment of
both principal and interest by insurers with claims-paying abilities rated at
the time of investment Aaa by Moody's or AAA by S&P or which are determined by
the Investment Adviser to have equivalent claims-paying abilities. BRF may
invest up to 20% of its total assets in uninsured Florida Municipal
Obligations which are (i) rated at the time of investment Aaa by Moody's or
AAA by S&P, (ii) guaranteed by an entity with an Aaa or AAA rating, (iii)
backed by an escrow or trust account containing sufficient U.S. Government or
U.S. Government agency securities to ensure timely payment of principal and
interest, or (iv) determined by the Investment Adviser to be of triple-A
credit quality at the time of investment. Generally, Florida Municipal
Obligations which are covered by insurance or a guarantee would not be rated
Aaa or AAA, and might not be considered to be of investment grade credit
quality in the absence of such insurance or guarantee. In determining whether
to purchase a particular Florida municipal obligation which is covered by
insurance or a guarantee, BRF considers the credit quality of the underlying
issuer (among other factors such as price, yield and maturity), although such
credit quality will not necessarily be the determinative factor in making the
investment decision.
The investment objective of RFA and BRF and the following investment
restrictions are fundamental and cannot be changed without the approval of the
holders of a majority of RFA's and BRF's
35
outstanding voting securities (defined in the 1940 Act as the lesser of (i)
more than 50% of the outstanding shares or (ii) 67% or more of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented). All other investment policies or practices are considered by RFA
and BRF not to be fundamental and accordingly may be changed without
stockholder approval. If a percentage restriction on investment or use of
assets set forth below is adhered to at that time a transaction is effected,
later changes in percentage resulting from changing market values will not be
considered a deviation from policy. RFA and BRF may not:
(1) invest 25% or more of the value of its total assets in any one industry
provided that such limitation shall not be applicable to Florida municipal
obligations other than those Florida municipal obligations backed only by
assets and revenues of non-governmental users;
(2) issue senior securities other than (a) preferred shares not in excess
of 50% of its total assets over any senior securities described in clause
(b) below that are outstanding, (b) senior securities other than preferred
shares (including borrowing money, including on margin if margin securities
are owned and through entering into reverse repurchase agreements) not in
excess of 33 1/3% of its total assets, and (c) borrowing up to 5% of its
total assets for temporary purposes without regard to the amount of senior
securities outstanding under clauses (a) and (b) above; provided, however,
that RFA's and BRF's obligations under interest rate swaps, when issued and
forward commitment transactions and similar transactions are not treated as
senior securities if covering assets are appropriately segregated; or
pledge its assets other than to secure such issuances or in connection with
hedging transactions, short sales, when-issued and forward commitment
transactions and similar investment strategies. For purposes of clauses
(a), (b) and (c) above, "total assets" shall be calculated after giving
effect to the net proceeds of any such issuance and net of any liabilities
and indebtedness that do not constitute senior securities except for such
liabilities and indebtedness as are excluded from treatment as senior
securities by the proviso to this item (2);
(3) make loans of money or property to any person, except through loans of
portfolio securities, the purchase of fixed income securities consistent
with RFA's and BRF's investment objective and policies or the acquisition
of securities subject to repurchase agreements;
(4) underwrite the securities of other issuers, except to the extent that
in connection with the disposition of portfolio securities or the sale of
its own securities RFA and BRF may be deemed to be an underwriter;
(5) invest for purpose of exercising control over any issuer;
(6) purchase or sell real estate or interests therein other than Florida
municipal obligations secured by real estate or interests therein;
(7) purchase or sell commodities or commodity contracts except for hedging
purposes or as permitted by applicable law without RFA or BRF becoming
subject to registration with the Commodities Futures Trading Commission as
a Commodity Pool; or
(8) make any short sale of securities except in conformity with applicable
laws, rules and regulations and unless, after giving effect to such sale,
the market value of all securities sold short does not exceed 25% of the
value of RFA's and BRF's total assets and RFA's and BRF's
36
aggregate short sales of a particular class of securities does not exceed
25% of the then outstanding securities of that class.
Additional information with respect to the investment policies and
restrictions of BRF and RFA is included in their respective Prospectuses,
which have been filed with the Securities and Exchange Commission and may be
obtained therefrom as provided under "Additional Information."
Florida Municipal Obligations. RFA and BRF invest primarily in portfolios of
Florida municipal obligations, which are municipal obligations the interest on
which, in the opinion of bond counsel or other counsel to the issuers of such
obligations, is, at the time of issuance, exempt from Florida intangible
personal property taxes. Because RFA and BRF invest primarily in portfolios of
Florida municipal obligations, they are more susceptible to political,
economic, regulatory or other factors affecting issuers of Florida municipal
obligations than a fund which does not limit its investments to such issuers.
These risks include possible legislative, state constitutional or regulatory
amendments that may affect the ability of state and local governments or
regional governmental authorities to raise money to pay principal and interest
on their municipal obligations. Economic, fiscal and budgetary conditions
throughout the state may also influence performance.
The following information is a summary of a more detailed description of
certain factors affecting Florida municipal obligations which is contained in
the Statement of Additional Information. Investors should obtain a copy of the
Statement of Additional Information for the more detailed discussion of such
factors. Such information is derived from certain official statements of the
State of Florida published in connection with the issuance of specific Florida
municipal obligations, as well as from other publicly available documents.
Such information has not been independently verified by BRF or RFA and many
not apply to all Florida municipal obligations acquired by BRF or RFA. BRF and
RFA assume no responsibility for the completeness or accuracy of such
information.
Florida state and local government obligations may be adversely affected by
political and economic conditions and developments within the State of Florida
and the nation as a whole.
Florida's economic outlook is projected generally to reflect the national
economic outlook and is expected to experience steady if unspectacular growth
over the next couple of years. Historically, Florida's unemployment rate has
generally tracked below that of the nation; however, beginning with the
recession in the early 1990's, the trend reversed. Since 1995, the state's
unemployment rate has again been below or about the same as the nation's. The
unemployment rate for Florida in 1997 was 4.8% while the national rate in 1997
was 4.9%. Florida's unemployment rate is expected to be 4.5% for fiscal year
1998-99 and 4.7% for fiscal year 1999-00. For the State's fiscal year ended
June 30, 1997, receipts from the sales and use tax, the greatest single source
of tax revenue to the State of Florida, were $12,089 million, an increase of
5.5% from fiscal year 1995-96.
Tourism is one of Florida's most important industries. Approximately 47
million people visited the State in 1997. By the end of fiscal year 1998-99,
49.7 million domestic and international tourists are expected to have visited
the state. In 1999-2000, tourist arrivals should approximately 50.6 million.
County and municipal governments in Florida depend primarily upon ad valorem
property taxes, sales, motor fuel and other local excise taxes and
miscellaneous revenue sources, including revenues from utilities services.
Florida school districts derive substantially all of their revenues from local
property
37
taxes. The overall level of revenue from these sources is in part dependent
upon the local, state and national economies. Local government obligations
held by the Fund may constitute general obligations or may be special
obligations payable solely from one or more specified revenue sources. The
ability of the local governments to repay their obligations on a timely basis
will be dependent upon the continued strength of the revenues pledged and of
the overall fiscal status of the local government.
Voters at the general election in November 1994 approved an amendment to the
Constitution of the State of Florida limiting future state revenues. It is
unclear what effect, if any, such amendment would have on state or local
government debt obligations.
The value of Florida municipal instruments may also be affected by general
conditions in the money markets or the municipal bond markets, the levels of
federal income tax rates, the supply of tax-exempt bonds, the credit quality
and rating of the issues and perceptions with respect to the level of interest
rates.
There can be no assurance that there will not be a decline in economic
conditions or that particular Florida municipal obligations in the portfolio
of BRF or RFA will not be adversely affected by any such changes.
More detailed information concerning Florida municipal obligations and the
State of Florida is included in the Statement of Additional Information.
SERVICE PROVIDERS FOR BRF AND RFA
The service providers for BRF and RFA are as set forth in the following table.
Administrator................... RFA*--Prudential Mutual Fund Management, Inc.
BRF--Middlesex Administrators L.P.
Registrar/Transfer Agent/ State Street Bank & Trust Company
Distributor/Custodian.......... One Heritage Drive, P2N
North Quincy, MA 02171
Independent Auditors............ Deloitte & Touche LLP
- --------
* After the Reorganization, BlackRock Financial Management, Inc. will be a
co-administrator of RFA.
The locations of the Administrators are as follows: Prudential Mutual Fund
Management, Inc., One Seaport Plaza, New York, New York 10292 and Middlesex
Administrators L.P. is located at 800 Scudders Mill Road, Plainsboro, New
Jersey 08536. State Street Bank & Trust Company, which serves as registrar,
transfer agent, dividend disbursing agent and custodian, maintains offices at
225 Franklin Street, Boston, Massachusetts 02110. Deloitte & Touche LLP, the
independent auditors, maintains offices at Two World Financial Center, New
York, New York 10281.
Currently, for its services as administrator to RFA, Prudential Mutual Fund
Management, Inc. receives a fee payable monthly at an annual rate of 0.10% of
RFA's average weekly net investment assets. After consummation of the
Reorganization, BlackRock Financial Management, Inc. and Prudential Mutual
Fund Management, Inc. will act as co-Administrators of RFA and will receive an
aggregate
38
fee in the amount of [ ]% of RFA's weekly net assets. Under the
Administration Agreement with Blackrock Financial Management and Prudential
Mutual Fund Management, Inc. (the "Administration Agreement"), the
Administrators will administer RFA's corporate affairs subject to the
supervision of RFA's Board of Trustees and in connection therewith furnish RFA
with office facilities together with such ordinary clerical and bookkeeping
services (e.g., preparation of annual and other reports to stockholders and
the SEC and filing of federal, state and local income tax returns) as are not
being furnished by the Custodian. The Administrators also may facilitate bank
or other borrowing by RFA when the Investment Adviser determines that leverage
may be in the best interests of RFA's shareholders. In connection with its
administration of the corporate affairs of RFA, each Administrator will bear
the following expenses:
(a) salaries and expenses of all personnel of such Administrator; and
(b) all expenses incurred by such Administrator or by RFA in connection
with administering the ordinary course of RFA's business, other than those
assumed by RFA, as described below.
The Administration Agreement was approved by RFA's Board of Trustees on
, 1999 and are effective until terminated. The Administration Agreement
terminates automatically if it is assigned (as defined in the Investment
Company Act and the rules thereunder) and is otherwise terminable on 60 days'
notice by either party to the other.
39
MANAGEMENT OF RFA AND BRF
Boards of Trustees and Officers. The following individuals are the current
Trustees for BRF and RFA and have served in such capacity since BRF and RFA
commenced their respective operations except that Richard E. Cavanagh has
served as Director since his appointment by each of the Boards on August 11,
1994 to fill a vacancy and, with respect to Walter F. Mondale, who was
previously a Trustee of BRF from inception to August 12, 1993, has served as
Trustee since his election at BRF's annual meeting of shareholders on April
15, 1997. Except as indicated, each individual has held the office shown or
other offices in the same company for the last five years. The "interested"
Trustees (as defined by Section 2(a)(19) of the 1940 Act) are indicated by an
asterisk(*). Unless specified otherwise below, the business address of the
Trustees and officers of BRF, RFA and the Investment Adviser is 345 Park
Avenue, New York, New York 10154.
% of
Principal Occupations or Shares Shares
Name and Age Employment in Past 5 Years Owned Outstanding
------------ -------------------------- ------- -----------
Andrew F. Brimmer President of Brimmer & Company, 0
4400 MacArthur Blvd N.W. Inc., a Washington, D.C.-based
Suite 302 economic and financial
Washington, DC 20007 consulting firm. Formerly
Age: 72 member of the Board of
Governors of the Federal
Reserve System. Director,
Airborne Express, Borg Warner
Automotive and CarrAmerica
Realty Corporation.
Richard E. Cavanagh President and Chief Executive 0
845 Third Avenue Officer of The Conference
New York, NY 10022 Board, Inc., a leading global
Age: 52 business membership
organization. Former Executive
Dean of the John F. Kennedy
School of Government at Harvard
University from 1988-1995.
Acting Director, Harvard Center
for Business and Government
(1991-1993). Formerly Partner
(principal) of McKinsey &
Company, Inc. (1980-1988).
Former Executive Director of
Federal Cash Management, White
House Office of Management and
Budget (1977-1979). Co-author,
THE WINNING PERFORMANCE (best
selling management book
published in 13 national
editions). Trustee, Wesleyan
University, Drucker Foundation
and Educational Testing Service
(ETS). Director, Arch Chemicals
(chemicals), Fremont Group
(investments) and The Guardian
Life Insurance Company of
America (insurance).
Kent Dixon Consultant/Investor. Former BRF 100 (1)
9495 Blind Pass Road President and Chief Executive RFA 100 (1)
Unit #602 Officer of Empire Federal
St. Petersburg, FL 33706 Savings Bank of America and
Age: 62 Banc PLUS Savings Association,
former Chairman of the Board,
President and Chief Executive
Officer of Northeast Savings.
Former Director of ISFA (the
owner of INVEST, a national
securities brokerage service
designed for banks and thrift
institutions).
40
% of
Principal Occupations or Shares Shares
Name and Age Employment in Past 5 Years Owned Outstanding
------------ -------------------------- ------ -----------
Frank J. Fabozzi Consultant. Editor of THE 0
858 Tower View Circle JOURNAL OF PORTFOLIO
New Hope, PA 18938 MANAGEMENT and Adjunct
Age: 50 Professor of Finance at the
School of Management at Yale
University. Director,
Guardian Mutual Funds Group.
Author and editor of several
books on fixed income
portfolio management.
Visiting Professor of
Finance and Accounting at
the Sloan School of
Management, Massachusetts
Institute of Technology from
1986 to August 1992.
Laurence D. Fink* Chairman and Chief Executive 0
Age 46 Officer of BlackRock
Financial Management, Inc.,
the Investment Adviser.
Formerly, a Managing
Director of The First Boston
Corporation, member of its
Management Committee, co-
head of its Taxable Fixed
Income Division and head of
its Mortgage and Real Estate
Products Group. Currently,
Chairman of the Board and
Director of each of
BlackRock's Trust and
Anthracite Capital, Inc. and
as Director of BlackRock
Fund Investors I, BlackRock
Fund Investors II, BlackRock
Fund Investors III,
BlackRock Asset Investors
(collectively, "BAI") and
BlackRock MQE Investors,
Trustee of New York
University Medical Center,
Dwight-Englewood School,
National Outdoor Leadership
School and Phoenix House. A
Director of VIMRx
Pharmaceuticals, Inc. and
Innovir Laboratories, Inc.
James Grosfeld Consultant/Investor. 0
20500 Civic Center Drive Director of BAI and Copart,
Suite 3000 Inc. (retail automobile).
Southfield, MI 48076 Formerly Chairman of the
Age: 61 Board and Chief Executive
Officer of Pulte Corporation
(homebuilding and mortgage
banking and finance) from
May 1974-April 1990.
James Clayburn LaForce, Jr. Dean Emeritus of The John E. 0
P.O. Box 1595 Anderson Graduate School of
Pauma Valley, CA 92061 Management, University of
Age: 70 California since July 1,
1993. Director, Eli Lilly
and Company
(pharmaceuticals), Imperial
Credit Industries (mortgage
banking), Jacobs Engineering
Group, Inc., Rockwell
International Corporation,
Payden & Rygel Investment
Trust (mutual fund),
Provident Investment Counsel
Funds (investment
companies), Timken Company
(roller bearing and steel)
and Motor Cargo Industries
(transportation). Acting
Dean of The School of
Business, Hong Kong
University of Science and
Technology 1990-1993. From
1978 to September 1993, Dean
of The John E. Anderson
Graduate School of
Management, University of
California.
Walter F. Mondale Partner, Dorsey & Whitney, a 0
220 South Sixth Street law firm (December 1996-
Minneapolis, MN 55402 present, September 1987-
Age: 71 August 1993). Formerly, U.S.
Ambassador to Japan (1993-
1996). Formerly Vice
President of the United
States, U.S. Senator and
Attorney General of the
State of Minnesota. 1984
Democratic Nominee for
President of the United
States.
41
% of
Principal Occupations or Shares Shares
Name and Age Employment in Past 5 Years Owned Outstanding
------------ -------------------------- ------ -----------
Ralph L. Schlosstein* President of BlackRock Financial 0
Age: 48 Management, the Investment Adviser.
Formerly, a Managing Director of
Lehman Brothers, Inc. and co-head
of its Mortgage and Savings
Institutional Group. Currently,
President of each of BlackRock's
Trusts. Trustee of Denison
University and New Visions for
Public Education in New York City.
A Director of the Pulte Corporation
and a member of the Visiting Board
of Overseers of the John F. Kennedy
School of Government at Harvard
University.
- --------
(1) Less than 1%.
All Trustees and officers as a group owned less than 1% of the shares of BRF
and RFA as of February 26, 1999. Each of BRF and RFA has an executive
committee composed of Messrs. Fink and Schlosstein.
Neither of BRF nor RFA has a compensation or nominating committee of the Board
of Trustees, or committees performing similar functions. BRF and RFA have an
audit committee composed of all the Trustees who are not interested persons of
BRF or RFA or the Investment Adviser which is charged with recommending a firm
of independent accountants to BRF or RFA and reviewing accounting matters with
the accountants. With respect to BRF there was one meeting of the audit
committee held between January 1, 1998 and December 31, 1998. With respect to
RFA, there were two meetings of the audit committee held between November 1,
1997 and October 31, 1998. With respect to BRF and RFA, all members attended
at least 75% of the meetings.
Four meetings of the Board of Trustees of RFA were held between November 1,
1997 and October 31, 1998. Four meetings of the Board of Trustees of BRF were
held between January 1, 1998 and December 31, 1998. With respect to BRF and
RFA, all Trustees attended at least 75% of the meetings.
In addition to Messrs. Fink and Schlosstein, all the executive officers hold
the same position with BRF and RFA.
Name and Age Title Other Principal Occupations in Past 5 Years
------------ ----- -------------------------------------------
Keith T. Anderson Vice President Managing Director of the Investment Adviser.
Age: 39 From February 1987 to April 1988, Vice
President at The First Boston Corporation in
the Fixed Income Research Department.
Previously Vice President and Senior
Portfolio Manager at Criterion Investment
Management Company (now Nicholas-Applegate).
Henry Gabbay Treasurer Managing Director of the Investment Adviser.
Age: 51 From September 1984 to February 1989, Vice
President at The First Boston Corporation.
Michael C. Huebsch Vice President Managing Director of the Investment Adviser.
Age: 40 From July 1985 to January 1989, Vice
President at The First Boston Corporation in
the Fixed Income Research Department.
Robert S. Kapito Vice President Managing Director and Vice Chairman of the
Age: 42 Investment Adviser. From December 1985 to
March 1988, Vice President at The First
Boston Corporation in the Mortgage Products
Group.
Kevin Klingert Vice President Managing Director of the Investment Adviser.
Age: 36 From March 1985 to October 1991, Assistant
Vice President at Merrill Lynch, Pierce,
Fenner & Smith in the Unit Investment Trust
Department.
42
Other Principal Occupations in Past 5
Name and Age Title Years
------------ ----- -------------------------------------
James Kong Assistant Treasurer Managing Director of the Investment
Age: 38 Adviser. From April 1987 to April 1989,
Assistant Vice President at The First
Boston Corporation in the CMO-ABO
Administration Department. Previously
affiliated with Deloitte, Haskins &
Sells (now Deloitte & Touche LLP).
Karen H. Sabath Secretary Managing Director of the Investment
Age: 33 Adviser. From June 1986 to July 1988,
Associate at The First Boston
Corporation in the Mortgage Finance
Department. From August 1988 to
December 1992, Associate/Vice President
of the Investment Adviser.
Richard Shea, Esq. Vice President/Tax Director of the Investment Adviser.
Age: 39 From December 1988 to February 1993,
Associate Vice President and Tax
Counsel at Prudential Securities, Inc.
From August 1984 to December 1988,
Senior Tax Specialist at Laventhol &
Horwath.
Officers of RFA and BRF are elected by, and serve at the pleasure of, the
Board of Trustees of BRF. Officers receive no remuneration from each issuer
for their services in such capacities.
The Investment Adviser. The Investment Adviser to BRF and RFA is BlackRock
Financial Management, Inc. The Investment Adviser is responsible for the
investment strategy of BRF and RFA and focuses on investments in Florida
Municipal Obligations. The Investment Adviser also provides portfolio
administration and other administrative services to BRF and RFA. The
Investment Adviser is located at 345 Park Avenue, New York, New York 10154.
The investment professionals of the Investment Adviser who are responsible for
investment management are described below.
The Investment Adviser provides fixed income, liquidity, equity, alternative
investment, and risk management products for clients worldwide. The Investment
Adviser manages $80 billion in various fixed income sectors, including $10
billion in municipal securities. The Investment Adviser also manages
approximately $44 billion in cash or other short term, highly liquid
investments, including $4.4 billion in short term municipal securities. The
Investment Adviser has $62 billion in mutual fund assets under management,
including two open-end mutual fund families, BlackRock Funds and Provident
Institutional Funds, 21 publicly traded closed-end funds (including BRF and
RFA) and several short-term investment funds. Among these products, the
Investment Adviser manages 11 closed-end, 6 open-end and 6 money market
municipal funds. In addition to asset management services, the Investment
Adviser has become a significant provider of risk management and advisory
services that combine its capital markets expertise with the firm's
proprietary risk management systems and technology.
Investment Philosophy. The Investment Adviser's investment decision-making
process for the municipal bond sector is subject to the same discipline,
oversight and investment philosophy that the firm applies to all other sectors
of the fixed income market.
The Investment Adviser uses a relative value strategy that determines the
trade-off between risk and return to achieve BRF's and RFA's investment
objectives. This strategy is combined with disciplined risk control techniques
and applied in every sector, sub-sector and individual security selection
decision. The Investment Adviser's extensive personnel and technology
resources are the key drivers of the investment philosophy.
43
The Investment Adviser's Municipal Bond Team. The Investment Adviser uses a
team approach to managing municipal portfolios. The Investment Adviser
believes that this approach offers substantial benefits over one that is
dependent on the market wisdom or investment expertise of only a few
individuals.
The Investment Adviser's municipal bond team includes two portfolio managers
and six credit research analysts. The team is lead by Kevin Klingert, a
Managing Director and portfolio manager at the Investment Adviser. Mr.
Klingert has over 15 years of experience in the municipal market. Prior to
joining the Investment Adviser in 1991, Mr. Klingert was an Assistant Vice
President in the Unit Investment Trust Department at Merrill Lynch, Pierce,
Fenner & Smith. Mr. Klingert joined Merrill Lynch in 1985 and was responsible
for investing over $1 billion annually for municipal UITs and for supervising
over $21 billion of existing municipal UITs. The portfolio management team
also includes Craig Kasap, Associate.
The Investment Adviser's municipal bond portfolio managers are responsible for
25 municipal bond portfolios, valued at approximately $5.5 billion, plus an
additional $2.5 billion in municipal bonds held across portfolios with broader
investment mandates. The team is responsible for portfolios with a variety of
investment objectives and constraints, including national funds, state-
specific funds, and portfolios with various indices. Currently, the team
manages 11 closed-end municipal funds with over $2 billion in assets,
including BRF and RFA.
The Investment Adviser's Investment Process. The Investment Adviser has in-
depth expertise in all sectors of the fixed income market. The Investment
Adviser applies the same risk-controlled, active sector rotation style to the
management process for all of its fixed income portfolios. The Investment
Adviser is unique in its integration of taxable and municipal bond
specialists. Both taxable and municipal bond portfolio managers share the same
trading floor and interact frequently for determining the firm's overall
investment strategy. This interaction allows each portfolio manager to
leverage the combined experience and expertise of the entire portfolio
management group at the Investment Adviser.
The Investment Adviser's portfolio management process emphasizes research and
analysis of specific sectors and securities, not interest rate speculation.
The Investment Adviser believes that market-timing strategies can be highly
volatile and potentially produce inconsistent results. Instead, the Investment
Adviser thinks that value over the long-term is best achieved through a risk-
controlled approach, focusing on sector allocation, security selection and
yield curve management.
In the municipal market, the Investment Adviser believes one of the most
important determinants of value is supply and demand. The Investment Adviser's
ability to monitor investor flows and frequency and seasonality of issuance is
helpful in anticipating which sectors will be most heavily impacted by the
supply/demand equation. The breadth and expertise of its municipal bond team
allows it to anticipate issuance flows, forecast which sectors will have the
most supply and plan its investment strategy accordingly.
The Investment Adviser also believes that over the long-term, intense credit
analysis will add substantial incremental value and avoid significant relative
performance impairments. The municipal credit team is led by Susan Heide,
Ph.D., who has been with the Investment Adviser since 1993 and is
44
a managing director responsible for our municipal credit research. She co-
heads the Credit Committee and Credit Research, and is assisted by five
municipal research analysts. The group averages 10 years of experience in
municipal credit research.
Given the nature of the municipal market (whereby supply is largely dependent
on new issues, as well as the secondary market; and each deal may be somewhat
unique), the credit analysts research potential new issues and closely monitor
our existing holdings. Diversification of sectors, issuers, geographic regions
and security structures is stressed. Communication and interaction with credit
resources throughout the Investment Adviser are facilitated in formal
investment strategy meetings and encouraged informally as well.
The Investment Adviser's approach to credit risk incorporates a combination of
sector-based top-down macro-analysis of industry sectors to determine relative
weightings with a name-specific bottom-up detailed credit analysis of issuers
and structures. The sector-based approach focuses on rotating into sectors
that are undervalued and exiting sectors when fundamentals or technicals
become unattractive. The name-specific approach focuses on identifying special
opportunities where the market undervalues a credit, and devoting concentrated
resources to research the credit and monitor the position. The Investment
Adviser's analytic process focuses on anticipating change in credit trends
before market recognition. Credit research is a critical, independent element
of our municipal process.
The Investment Adviser is a wholly-owned corporate subsidiary of BlackRock
Advisors Inc., an indirect majority-owned subsidiary of PNC Bank N.A. ("PNC"),
and is a global asset management firm with assets of $142 billion under
management and over 600 employees. The Investment Adviser currently is owned
80% by PNC and 20% by its senior professionals.
The Investment Adviser has advised BRF and RFA that it is not aware of any
financial condition that would be reasonably likely to impair the financial
ability of the Investment Adviser to fulfill its commitments to BRF under the
investment advisory agreements of BRF or RFA.
As of February 26, 1999, none of BRF or RFA was aware of any beneficial or
record owner of 5% or more of any class of shares of BRF or RFA.
ADDITIONAL INFORMATION ABOUT RFA
RFA is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and the 1940 Act, and in accordance therewith it
files reports, proxy materials and other information with the SEC. Reports and
other information filed by RFA can be inspected and copied at the Public
Reference Facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, these materials can be inspected and
copied at the SEC's Regional Offices at 7 World Trade Center, Suite 1300, New
York, New York 10048, and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials also can be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington, D.C.
20549, at prescribed rates.
Information included in this Combined Proxy Statement/Prospectus concerning
RFA was provided by RFA.
45
ADDITIONAL INFORMATION ABOUT BRF
Reports and other information filed by BRF can be inspected and copied at the
Public Reference Facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the offices of BlackRock listed above. In
addition, these materials can be inspected and copied at the SEC's Regional
Offices at 7 World Trade Center, Suite 1300, New York, New York 10048, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials also can be obtained from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed
rates.
Information included in this Combined Proxy Statement/Prospectus concerning
BRF was provided by BRF.
FINANCIAL STATEMENTS
The financial highlights included herein and the financial statements included
in the Statement of Additional Information, which is incorporated herein by
reference, with respect to RFA for the annual period ended October 31, 1998
have been audited by Deloitte & Touche LLP to the extent indicated in their
reports thereon and have been included herein or incorporated herein by
reference in reliance upon such reports given the authority of such firm in
accounting and auditing.
The financial highlights included herein and the financial statements included
in the Statement of Additional Information, which is incorporated herein by
reference, with respect to BRF for the annual period ended December 31, 1998,
have been audited by Deloitte & Touche LLP to the extent indicated in its
reports thereon and have been included herein or incorporated herein by
reference in reliance upon such reports given the authority of such firm in
accounting and auditing.
The pro forma financial information included herein or incorporated herein by
reference has not been audited.
LEGAL MATTERS
Certain legal matters in connection with the shares of RFA Common and RFA
Preferred to be issued pursuant to the Reorganization will be passed upon by
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York ("Skadden Arps").
Skadden Arps will rely as to certain matters of Maryland law on the opinion of
Miles & Stockbridge, Baltimore, Maryland.
OTHER BUSINESS
The Boards of Trustees of BRF and RFA knows of no other business to be brought
before the Meeting. However, if any other matters come before the Meeting, it
is the intention that proxies which do not contain specific restrictions to
the contrary will be voted on such matters in accordance with the judgment of
the persons named in the enclosed form of proxy.
46
STATEMENT OF ADDITIONAL INFORMATION
RFA has filed with the SEC a Statement of Additional Information, dated ,
1999, relating to this Combined Proxy Statement/Prospectus and which is
incorporated herein by reference. The Table of Contents of the Statement of
Additional Information is set forth below:
Statement of Additional Information
Table of Contents
Page
----
Audited Financial Statements for RFA for the annual period ended October
31, 1998................................................................
Unaudited Financial Statements for RFA for the six-month period ended
April 30, 1999..........................................................
Audited Financial Statements for BRF for the annual period ended December
31, 1998................................................................
Annex A: Description of Credit Ratings for Municipal Obligations.........
Annex B: Description of Florida Municipal Securities.....................
RFA and BRF will provide, without charge, upon the written or oral request of
any person to whom this Combined Proxy Statement/Prospectus is delivered, a
copy of any and all documents that have been incorporated by reference in the
registration statement of which this Combined Proxy Statement/Prospectus is a
part.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to BRF and RFA in writing at the
appropriate address on the cover page of this Combined Proxy
Statement/Prospectus or by telephoning BRF at 1-800-227-7BFM (7236).
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED TO
MARK, SIGN AND DATE THE ENCLOSED PROXY OR PROXIES AND RETURN IT OR THEM IN THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
SHAREHOLDERS ALSO MAY RETURN PROXIES BY TELEFAX OR VOTE BY TELEPHONE.
BRF AND RFA WILL FURNISH, WITHOUT CHARGE, COPIES OF ITS 1998 ANNUAL
SHAREHOLDERS REPORT AND ITS MOST RECENT SEMI-ANNUAL SHAREHOLDERS REPORT TO ANY
SHAREHOLDER UPON REQUEST ADDRESSED TO 345 PARK AVENUE, NEW YORK, NEW YORK
10154 OR BY TELEPHONE AT 1-800-227-7BFM (7236).
47
UNAUDITED PRO FORMA FINANCIAL STATEMENTS FOR RFA(/1/)
PORTFOLIO OF INVESTMENTS
(As of April 30, 1999)
Principal
Amount Option Call Value
Rating* (000) Description(a) Provisions+ (Note 1)
------- --------- -------------- -------------- ----------
LONG-TERM INVESTMENTS--145.7%
Florida--143.0%
Altamonte Springs Wtr. & Swr.
Sys. Rev., 6.00%, 10/01/08,
AAA 1,500 FGIC........................... 10/02 at 102 1,617,285
Boynton Beach Util. Sys. Rev.,
FGIC,
AAA 170 6.25%, 11/01/20............... No Opt. Call 194,162
AAA 830 6.25%, 11/01/20............... 11/02 at 102 901,015
Brevard Cnty. Hlth. Fac.,
Holmes Regl. Med. Ctr., 5.75%,
A1 1,000 10/01/13....................... 10/03 at 102 1,042,160
Brevard Cnty. Sch. Brd.,
C.O.P., Ser. A, 6.375%,
AAA 10,000 7/01/02, AMBAC................. N/A 10,980,000
Brevard Cnty. Sch. Brd. C.O.P.,
AAA 1,000 Ser. B, 5.50%, 7/01/21, AMBAC.. 7/06 at 102 1,037,280
Canaveral Port Auth. Impvt.
Rev., FGIC,
AAA 2,980 6.00%, 6/01/07................ 6/02 at 102 3,197,093
AAA 3,155 6.00%, 6/01/08................ 6/02 at 102 3,384,842
Collier Cnty. Sch. Brd. C.O.P.,
AAA 1,000 5.00%, 2/15/16, FSA............ 2/06 at 101 999,950
Dade Cnty., G.O.,
AAA 2,000 Zero Coupon, 10/01/08, AMBAC.. No Opt. Call 1,327,139
Dade Cnty. Aviation Rev.,
Ser. A, 6.00%, 10/01/08,
AAA 1,000 AMBAC.......................... 10/05 at 102 1,113,010
Miami Int'l Arpt., Ser. C,
AAA 1,000 5.75%, 10/01/25, MBIA.......... 10/05 at 102 1,073,930
Dade Cnty. Gtd. Entitlement
Rev., Ser. A, Zero Coupon,
AAA 5,000 2/01/08, MBIA.................. 2/06 at 92.852 3,391,500
Dade Cnty. Sch. Brd., C.O.P.,
Ser. A, MBIA,
AAA 2,000++ 5.75%, 5/01/04................ N/A 2,184,660
AAA 3,465++ 5.75%, 5/01/04................ N/A 3,784,924
Dade Cnty. Sch. Brd., C.O.P.,
Ser. A, 6.00%, 5/01/04,
AAA 1,000++ MBIA++......................... N/A 1,103,570
Dade Cnty. Sch. Dist. Rev.,
AAA 2,500++ 6.125%, 8/01/01, FGIC.......... N/A 2,635,550
Dade Cnty. Spl. Oblig., Ser. B,
Zero Coupon, 10/01/08,
AAA 1,000++ AMBAC++........................ N/A 476,090
Daytona Beach Wtr. & Swr. Rev.,
AAA 2,500 6.00%, 11/15/09, AMBAC......... 11/02 at 102 2,699,550
Duval Cnty. Sch. Dist., G.O.,
AMBAC,
AAA 3,015 6.30%, 8/01/06................ 8/02 at 102 3,251,617
AAA 9,000 6.30%, 8/01/07................ 8/02 at 102 9,677,880
Escambia Cnty. Utils. Auth.
Sys. Rev., FGIC,
AAA 2,450++ Ser. A, 6.10%, 1/01/03........ N/A 2,686,719
F-1
Principal
Amount Option Call Value
Rating* (000) Description(a) Provisions+ (Note 1)
------- --------- -------------- ------------ ----------
AAA 1,595 Ser. B, 6.125%, 1/01/09......... No Opt. Call 1,816,880
First Florida Gov. Fin. Comn.
Rev., Gainsville, Hollywood &
St. Petersburg,
AAA 1,000 5.75%, 7/01/16, AMBAC........... 7/06 at 101 1,079,790
Florida Hsg. Fin. Agcy., Sngl.
Fam. Mtge., Ser. A, 6.25%,
AAA 740 7/01/11, GNMA.................... 7/04 at 102 783,112
Florida St. Brd. of Ed., Ser. C,
AA+ 1,000 5.85%, 6/01/18................... 6/03 at 101 1,084,820
Florida St. Brd. of Ed. Wtr. &
Swr. Sys. Rev., Pub. Ed., 6.125%,
AAA 8,255 6/01/08, FGIC.................... 6/02 at 101 8,803,050
Florida St. Brd. of Ed., Pub.
AA+ 1,000 Ed., Ser. B, 5.875%, 6/01/24..... 6/05 at 101 1,092,070
Florida St. Dept. of Corrections,
C.O.P., Okeechobee Correctional
AAA 500 Fac., 6.25%, 3/01/15, AMBAC...... 3/05 at 102 556,890
Florida St. Dept. of Trans.,
AA+ 1,000 5.80%, 7/01/21................... 7/05 at 101 1,100,530
Florida St. Div. Bd. Fin. Dept.
Rev., Nat. Res. & Pres., Ser.
AAA 2,500++ 2000-A, 6.75%, 7/01/01, AMBAC.... N/A 2,709,150
Florida St. Div. Bd. Fin. Dept.
Rev. Dept., Nat. Res. &Pres.,
Ser. 2000-A, MBIA,
AAA 3,500++ 6.25%, 7/01/02.................. N/A 3,798,865
AAA 11,000++ 6.25%, 7/01/02.................. N/A 11,939,290
Florida St. Div. of Bond Fin.
Dept., Gen. Svcs. Rev., Dept. of
Environ. Preservation,
AAA 1,000 Ser. A, 5.75%, 7/01/11, AMBAC... 7/05 at 101 1,082,380
Greater Orlando Aviation Auth.,
Arpt. Fac. Rev., Ser. D, 6.20%,
AAA 3,000 10/01/08, AMBAC.................. 10/02 at 102 3,253,470
Hillsborough Cnty.,
Cap. Impvt., 6.25%, 8/01/04,
AAA 2,630++ FGIC............................. N/A 2,944,259
Cap. Impvt., 6.60%, 8/01/04,
AAA 1,500++ FGIC............................. N/A 1,703,895
Tampa Intl. Arpt. Aviation Rev.,
AAA 10,000 Ser. A, 5.75%, 10/01/11, AMBAC... 10/99 at 104 10,484,500
Hillsborough Cnty. Sch. Brd.,
AAA 5,000 C.O.P., 5.875%, 7/01/04, MBIA.... N/A 5,543,800
Indian Trace Cmnty. Dev. Dist.,
Wtr. Mgmt. Spec. Benefit, Ser. A,
MBIA,
AAA 3,000 5.625%, 5/01/08................. 5/05 at 102 3,263,970
AAA 2,910 5.75%, 5/01/09.................. 5/05 at 102 3,167,331
Jacksonville, G.O., Ser. A,
AAA 5,000 5.50%, 10/01/12, AMBAC........... 10/02 at 102 5,256,550
Jacksonville Elec. Auth. Rev.,
AAA 4,000 5.75%, 10/01/12, AMBAC........... 10/02 at 102 4,234,600
Jacksonville Cap. Impvt. Rev.,
Gator Bowl Proj., 5.50%,
AAA 1,000 10/01/14, AMBAC.................. 10/04 at 101 1,055,060
Lakeland Elec. & Wtr. Rev., Jr.
Sub. Lien, , 5.875%, 10/01/08,
AAA 2,000 FGIC............................. No Opt. Call 2,252,180
Lakeland Florida Hosp. Sys. Rev.,
Regl. Med. Care Ctr.Proj., Ser.
B, FGIC,
AAA 6,605++ 6.10%, 11/15/02................. N/A 7,249,978
AAA 3,245 6.10%, 11/15/08................. 11/02 at 102 3,515,698
Lakeland Wastewtr. Impvt. Rev.,
AAA 1,100 5.50%, 10/01/08, MBIA............ 10/02 at 102 1,166,880
Lee Cnty., G.O., Ser. A, 7.30%,
AAA 4,750 10/01/07, MBIA................... 10/99 at 102 4,915,965
Lee Cnty. Arpt. Rev., Ser. A,
AAA 4,500 5.50%, 10/01/10, AMBAC........... 10/02 at 100 4,660,515
Lee Cnty. Local Option Gas Tax
AAA 1,650++ Rev., 5.50%, 10/01/99, MBIA...... N/A 1,665,081
F-2
Principal
Amount Option Call Value
Rating* (000) Description(a) Provisions+ (Note 1)
------- --------- -------------- ------------ -----------
Lee Cnty. Trans. Fac. Rev.,
AAA 1,000 5.75%, 10/01/22, MBIA........... 10/05 at 102 1,068,050
Marion Cnty. Hosp. Dist. Rev.,
Munroe Regl. Med. Ctr., 6.20%,
AAA 1,000 10/01/07, FGIC.................. 10/02 at 102 1,082,820
Melbourne Wtr. & Swr. Rev., Ser.
AAA 3,750 C, 6.25%, 10/01/08, FGIC........ 10/02 at 102 4,072,725
Miami, G.O., FGIC,
AAA 1,345 5.90%, 12/01/08................ No Opt. Call 1,520,832
AAA 1,000 6.00%, 12/01/09................ No Opt. Call 1,141,010
AAA 11,000 Miami Beach Hlth. Facs. Auth.
Hosp. Rev., Mt. Sinai Med. Ctr.
Proj., 6.25%, 11/15/08, FSA.... 11/02 at 102 11,971,300
Orange Cnty. Pub. Svc.Tax,
AAA 1,000 5.70%, 10/01/08, FGIC........... 10/05 at 102 1,096,330
Orange Cnty. Tourist Devel. Tax
Rev., Ser. A, 5.85%, 10/01/08,
AAA 1,500 MBIA............................ No Opt. Call 1,686,255
Orlando & Orange Cnty. Expwy.,
A- 1,000 5.95%, 7/01/23.................. 7/01 at 102 1,024,120
Orlando Utils. Comn. Wtr. &
Elec. Rev., Ser. D, 5.50%,
Aa2 1,000 10/01/20........................ 10/99 at 100 1,002,320
Osceola Cnty. Trans. Rev.,
Osceola Pkwy. Proj., 5.95%,
AAA 2,000 4/01/08, MBIA................... 4/02 at 102 2,134,700
Palm Bay Util. Rev., Ser. B,
MBIA,
AAA 1,505++ 6.10%, 10/01/02................ N/A 1,648,126
AAA 1,595++ 6.10%, 10/01/02................ N/A 1,746,684
Pasco Cnty. Solid Waste Disp. &
Res. Rec. Sys. Rev., 6.00%,
AAA 7,085 4/01/09, FGIC................... 4/02 at 102 7,579,887
Pasco Cnty. Wtr. & Swr. Rev., ,
AAA 11,000 Ser. A, 6.00%, 10/01/09, FGIC... 10/02 at 102 11,856,460
Seminole Cnty. Sch. Brd.,
C.O.P., Ser. A,
AAA 1,000++ 5.90%, 7/01/04, MBIA........... N/A 1,109,910
AAA 1,000++ 6.125%, 7/01/04, MBIA.......... N/A 1,120,330
Seminole Cnty. Wtr. & Swr. Rev.,
AAA 2,000 6.00%, 10/01/09, MBIA........... No Opt. Call 2,274,820
Sunrise Florida Util. Sys. Rev.,
AAA 1,000++ Ser. A, 5.75%, 10/01/06, AMBAC.. N/A 1,109,800
Tampa Florida Wtr. & Swr. Rev.,
Ser. A, FGIC,
AAA 1,405++ 6.25%, 10/01/02................ N/A 1,532,883
AAA 1,095 6.25%, 10/01/12................ 10/02 @ 101 1,176,435
Volusia Cnty. Ed. Fac. Auth.
Baa2 1,000 Rev., 6.125%, 10/15/16.......... 10/06 at 102 1,077,880
AAA 4,065 Volusia Cnty. Edl. Fac. Auth.
Rev., Embry-Riddle Aeronautical
Univ., 6.50%, 10/15/08, CONNIE
LEE............................. 10/02 at 102 4,450,118
-----------
225,424,280
-----------
Puerto Rico--2.7%
Puerto Rico Elec. Pwr. Auth.
Rev.,
BBB+ 1,000++ Ser. T, 6.375%, 7/01/04 ....... N/A 1,131,910
BBB+ 1,000 Ser. U, 6.00%, 7/01/14......... 7/04 at 102 1,097,980
F-3
Principal
Amount Option Call Value
Rating* (000) Description(a) Provisions+ (Note 1)
------- --------- -------------- ------------- -----------
Puerto Rico Pub. Bldg. Auth.,
Gtd. Pub. Ed. & Hlth. Fac.,
Ser. M,
A 1,000 5.50%, 7/01/21................ 7/03 at 101.5 1,032,380
A 1,000 5.75%, 7/01/15................ 7/03 at 101.5 1,050,650
-----------
4,312,920
-----------
Total Long-Term Investments
(cost $209,421,455)............ 229,737,200
-----------
SHORT-TERM INVESTMENTS**--0.9%
Perry Cnty. P.C.R., F.R.D.D.,
P1 1,400 4.25%, 3/01/02................. N/A 1,400,000
(cost $1,400,000).............. 1,400,000
-----------
Total Investments 146.6% (cost
$210,821,455).................. 231,137,200
Assets in excess of other
liabilities--(14.8%) .......... 23,259,149
Liquidation value of preferred
stock--(61.3%)................. (96,750,000)
-----------
Net Assets Applicable to Common
Shareholders--100%............. 157,646,349
===========
- ----
(a) The following abbreviations are used in portfolio descriptions:
AMBAC--American Municipal Bond Assurance Corporation
BIGI--Bond Investors Guaranty Insurance Company
CGIC--Capital Guaranteed Insurance Company
C.O.P.--Certificate of Participation
CONNIE LEE--College Construction Loan Insurance Association
FHA--Federal Housing Administration
FNMA--Federal National Mortgage Association
FGIC--Financial Guaranty Insurance Company
FSA--Financial Security Assurance
F.R.D.D.--Floating Rate Daily Demand**
F.R.W.D--Floating Rate Weekly Demand**
G.O.--General Obligation Bond
MBIA--Municipal Bond Insurance Association
PSFG--Permanent School Fund Guaranty
* Rating: Using the higher of Standard & Poor's, Moody's or Fitch's rating.
** For purposes of amortized cost valuation, the maturity date of these
instruments is considered to be the earlier of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
+ Option call provisions: Date (month/year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
++ This bond is prefunded. See Glossary for definition.
F-4
STATEMENT OF ASSETS AND LIABILITIES
The following table sets forth, as of April 30, 1999, (i) the Statement of
Assets and Liabilities of BRF; (ii) the Statement of Assets and Liabilities of
RFA; and (iii) the pro forma Statement of Assets and Liabilities of RFA as
adjusted to give effect to the Reorganization. The Statement of Assets and
Liabilities of BRF and RFA is likely to be different at the Closing as a
result of the effects of BRF's and RFA's ongoing operations.
Pro Forma
Statements of Assets and
Liabilities Pro Forma
April 30, 1999 (Unaudited) RFA BRF Adjustments Pro Forma
- -------------------------- ----------- ------------ ----------- ------------
Assets
Investments, at value
(cost $22,837,085,
$187,984,369 and
$210,821,454
respectively)............. $25,378,229 $205,758,971 $231,137,200
Cash...................... 423,483 39,730 463,213
Receivable for shares
sold...................... 22,250,000 (3) 22,250,000
Interest receivable....... 367,340 2,855,732 3,223,072
Other assets.............. 0 8,561 8,561
----------- ------------ ----------- ------------
26,169,052 208,662,994 22,250,000 257,082,046
----------- ------------ ----------- ------------
Liabilities
Payable for investments
purchased.................
Dividends payable-common
shares.................... 0 0 1,969,872 (1) 1,969,872
Preferred share issuance
cost payable.............. 344,311 (4) 344,311
Reorganization cost
payable................... 147,895 (2) 147,885
Investment advisory fee
payable................... 7,542 60,433 67,975
Administration fee
payable................... 2,155 17,267 19,422
Dividends payable-
preferred shares.......... 745 5,985 6,730
Other accrued expenses.... 37,300 92,202 129,502
----------- ------------ ----------- ------------
47,742 175,887 2,462,068 2,685,697
----------- ------------ ----------- ------------
Net Investment Assets..... $26,121,310 $208,487,107 $19,787,932 $254,396,349
=========== ============ =========== ============
Net investment assets were
comprised of Common
Shares:
Par value............... $ 11,271 $ 87,071 2,806 (5) $ 101,148
Paid-in capital in
excess of par........... 15,585,445 120,907,481 (495,002)(5)(4)(2) 135,997,924
Preferred shares.......... 8,500,000 66,000,000 22,250,000 (1) 96,750,000
----------- ------------ ----------- ------------
24,096,746 186,994,552 21,757,804 232,849,072
(continued on next page)
F-5
Pro Forma
Statements of Assets and
Liabilities
April 30, 1999 Pro Forma
(Unaudited) RFA BRF Adjustments Pro Forma
- ------------------------ ----------- ------------ ----------- ------------
Undistributed net
investment income...... 181,209 3,930,580 (1,969,872)(1) 2,141,917
Accumulated net realized
loss................... (697,759) (212,627) (910,386)
Net unrealized
appreciation........... 2,541,144 17,774,602 20,315,746
----------- ------------ ----------- ------------
Net investment assets,
April 30, 1999......... $26,121,310 $208,487,107 $19,787,932 $254,396,349
=========== ============ =========== ============
Net assets applicable to
common shareholders.... $17,621,310 $142,487,107 $157,646,349
=========== ============ ============
Net Asset value per
common share........... $ 15.63 $ 16.36 $ 15.59
=========== ============ ============
COMMON SHARES
OUTSTANDING............ 1,127,093 8,707,093 10,114,847
Adjustment 1 Special
Dividend............... 1,964,872 1,969,872
Adjustment 2
Reorganization Cost.... 16,479 131,406 147,885
Adjustment 3 New
Preferred Issuance..... 22,250,000
Adjustment 4 Preferred
Issuance Cost.......... 344,311
Adjustment 5 Reclass
Between Par Value And
Paid-In Capital In
Excess Of Par.......... 2,806 2,806
- ------------------
/1/Assumes that the Reorganization is consummated.
F-6
STATEMENT OF OPERATIONS
The following table sets forth for the six months ended April 30, 1999 and for
the year ended October 31, 1998, the statement of operations for BRF and the
pro forma statement of operations as adjusted to give effect to the
Reorganization.
Pro Forma
Statement of Operations
For the Six months ended Pro Forma Pro Forma
April 30, 1999 (Unaudited) RFA BRF Adjustments* Combined
- -------------------------- ---------- ----------- ------------ -----------
Net Investment Income
Income
Interest and discount earned.. $1,405,985 $11,566,596 $ 0 $12,972,581
---------- ----------- -------- -----------
Expenses........................
Investment advisory........... 89,817 729,928 0 819,745
Administration................ 25,662 208,551 0 234,213
Auction agent................. 21,000 178,000 (4,000) 195,000
Custodian..................... 3,000 58,000 0 61,000
Reports to shareholders....... 22,500 45,500 (15,000) 53,000
Trustees...................... 14,000 33,656 36,344 84,000
Audit......................... 7,000 29,500 (3,500) 33,000
Transfer agent................ 10,000 16,500 0 26,500
Legal......................... 5,500 6,500 (2,000) 10,000
Miscellaneous................. 28,978 66,452 (23,978) 71,452
---------- ----------- -------- -----------
Total expenses................ 227,457 1,372,587 (12,134) 1,587,910
---------- ----------- -------- -----------
Net investment income........... 1,178,528 10,194,009 (12,134) 11,384,671
---------- ----------- -------- -----------
Realized and Unrealized Gain
(Loss) on Investments
Net realized gain (loss) on
investments..................... 0 19 0 19
Net change in unrealized
appreciation on investments..... 912,460 2,500,808 0 3,413,268
---------- ----------- -------- -----------
Net gain on investments......... 912,460 2,500,827 0 3,413,287
---------- ----------- -------- -----------
Net Increase in Net Investment
Assets
Resulting from Operations ...... $2,090,988 $12,694,936 $ 0 $14,797,958
========== =========== ======== ===========
- ----
* Adjustments to reflect anticipated expenses based on historical information
and Pro Forma Combined Net Assets.
Continued on next page
F-7
Pro Forma
Statement of Operations
For the Year ended Pro Forma Pro Forma
October 31, 1998 (Unaudited) RFA BRF Adjustments* Combined
- ---------------------------- -------- ----------- ------------ -----------
Net Investment Income
Income
Interest and discount
earned.................... $700,074 $11,566,596 $ 0 $12,266,670
-------- ----------- ------- -----------
Expenses.....................
Investment advisory........ 45,538 364,495 0 410,033
Administration............. 13,011 104,141 0 117,152
Auction agent.............. 7,000 89,000 (2,000) 94,000
Custodian.................. 2,000 29,000 0 31,000
Reports to shareholders.... 10,500 22,750 (6,750) 26,500
Trustees................... 5,000 16,828 20,172 42,000
Audit...................... 3,500 14,750 (1,750) 16,500
Transfer agent............. 5,000 8,250 0 13,250
Legal...................... 2,000 3,250 (250) 5,000
Miscellaneous.............. 2,136 33,226 364 35,726
-------- ----------- ------- -----------
Total expenses............. 95,685 685,690 9,786 791,161
-------- ----------- ------- -----------
Net investment income........ 604,389 10,880,906 9,786 11,475,509
-------- ----------- ------- -----------
Realized and Unrealized Gain
(Loss) on Investments
Net realized gain (loss) on
investments................. (85,962) (1,916,567) 0 (2,002,529)
Net Increase in Net
Investment Assets
Resulting from Operations .. $518,427 $ 8,964,339 $ 0 $ 9,472,980
======== =========== ======= ===========
- -----
* Adjustments to reflect anticipated expenses based on historical information
and Pro Forma Combined Net Assets.
F-8
CERTAIN PRO FORMA FINANCIAL INFORMATION
The following tables present other pro-forma financial information for the
periods indicated as adjusted to give effect to the potential Reorganization.
Pro-forma Pro-forma Pro-forma
Period Total Returns Average Net Assets Operating Expense Ratios
- ------ ------------- ------------------ ------------------------
Six months ended April
30, 1999................ 2.66% $161,173 0.99%*
Year ended October 31,
1998.................... 21.30% 159,539 1.00%
Year ended October 31,
1997.................... 16.87% 154,385 1.00%
Year ended October 31,
1996.................... 4.50% 151,841 1.01%
- ----
* annualized
COMPARATIVE PERFORMANCE INFORMATION
Comparative investment performance for RFA and BRF for certain periods ended
April 30, 1999 are shown below.
Average Annual Average Annual
Total Investment Total Return
Return on Market On Net Asset
Value Value
---------------------- ------------------
1 3 5 1 3 5
---- ---- ---- ---- ---- ----- -----
Year Yrs. Yrs. Life Year Yrs. Yrs.
---- ---- ---- ---- ---- ----- -----
RFA..................................... % % % % 8.20% 10.17% 10.16%
BRF..................................... % % % % 6.56% 7.52% 8.10%
Total Investment Return on Market Value is the average annual combination of
reinvested dividend income, reinvested capital gains distributions, if any,
and changes in price per share. Total Return on Net Asset Value is the average
annual combination of reinvested dividend income, reinvested capital gains
distributions, if any, and changes in net asset value per common share. [The
life of RFA and BRF is calculated from April 30, 1999 to April 12, 1993 for
RFA and November 19, 1992 for BRF.] Past performance information is not
necessarily indicative of future results.
CAPITALIZATION
The following table sets forth, as of April 30, 1999, (i) the capitalization
of BRF; (ii) the capitalization of RFA; and (iii) the pro forma capitalization
of RFA as adjusted to give effect to the Reorganization. The capitalization of
BRF and RFA is likely to be different at the Closing as a result of the
effects of BRF's and RFA's ongoing operations.
F-9
APPENDIX I
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of the
day of , 1999, by and among The BlackRock Florida Insured Municipal
2008 Term Trust Inc. ("BRF") and The BlackRock Florida Investment Quality
Municipal Trust Inc. ("RFA" and, together with BRF, the "Funds"), each a
Massachusetts business trust.
PLAN OF REORGANIZATION
The reorganization will comprise the following: (i) the acquisition by RFA of
all of the assets, and the assumption by RFA of all of the liabilities, of BRF
in exchange solely for an equal aggregate value of newly-issued shares of (a)
common shares of beneficial interest, par value $.01 per share, of RFA (the
"RFA Common Shares") and (b) preferred shares of beneficial interest of RFA
designated Auction Rate Municipal Preferred Shares of Beneficial Interest,
Series R7 ("RFA Preferred Shares"), and (ii) the subsequent distribution to
BRF shareholders of (x) all of the RFA Common Shares received by BRF in
exchange for their common shares of beneficial interest, par value $.01 per
share, of BRF (the "BRF Common Shares") and (y) all of the RFA Preferred
Shares for their preferred shares of beneficial interest of BRF ("BRF
Preferred Shares") [plus an amount equal to accumulated but unpaid dividends
thereon (whether or not earned or declared)], all upon and subject to the
terms hereinafter set forth (collectively, the "Reorganization").
In the course of the Reorganization, RFA Common Shares and RFA Preferred
Shares will be distributed to BRF shareholders as follows: (i) each holder of
BRF Common Shares will be entitled to receive a number of full RFA Common
Shares equal to the aggregate net asset value of the BRF Common Shares owned
by such shareholder on the Effective Date (as defined in Section 7 of this
Agreement) plus cash in lieu of fractional shares; (ii) each holder of BRF
Preferred Shares will be entitled to receive one RFA Preferred Share for each
BRF Preferred Share held by such shareholder on the Effective Date.
The parties intend that the Reorganization shall qualify as a reorganization
under Section 368(a) of the Internal Revenue Code of 1986, as amended
("Code").
As promptly as practicable after the liquidation of BRF in connection with the
Reorganization, BRF shall be dissolved in accordance with the laws of the
Commonwealth of Massachusetts and will terminate its registration under the
Investment Company Act of 1940, as amended (the "1940 Act").
AGREEMENT
In consideration of the covenants and agreements hereinafter set forth, and
intending to be legally bound, the Funds hereby agree as follows:
1. Representations and Warranties of RFA.
RFA represents and warrants to, and agrees with BRF that:
a. RFA is a voluntary association with transferable shares organized and
existing under and by virtue of the laws of the Commonwealth of
Massachusetts (a "Massachusetts Business
I-1
Trust"), and has the power to own all of its assets and to carry out this
Agreement. RFA has all necessary federal, state and local authorizations to
carry on its business as it is now being conducted and to carry out this
Agreement.
b. RFA is duly registered under the 1940 Act as a diversified, closed-end
management investment company and such registration has not been revoked or
rescinded and is in full force and effect. RFA has elected and qualified
for the special tax treatment afforded regulated investment companies
("RICs") under Sections 851-855 of the Code at all times since its
inception and intends to continue to so qualify until consummation of the
Reorganization and thereafter.
c. RFA has full power and authority to enter into and perform its
obligations under this Agreement. The execution, delivery and performance
of this Agreement has been duly authorized by all necessary action of RFA's
Board of Trustees, and this Agreement constitutes a valid and binding
contract enforceable in accordance with its terms, subject to the effects
of bankruptcy, insolvency, moratorium, fraudulent conveyance and similar
laws relating to or affecting creditors' rights generally and court
decisions with respect thereto.
d. There are no material legal, administrative or other proceedings pending
or, to the knowledge of RFA, threatened against RFA which assert liability
on the part of RFA or which materially affect its financial condition or
its ability to consummate the Reorganization. RFA is not charged with or,
to the best of its knowledge, threatened with any violation or
investigation of any possible violation of any provisions of any Federal,
state or local law or regulation or administrative ruling relating to any
aspect of its business.
e. RFA is not a party to or obligated under any provision of its
Declaration of Trust, as amended, its Certificate of Designation
Establishing Preferred Shares ("Certificate of Designation"), as amended,
or its by-laws, as amended, or any contract or other commitment or
obligation, and is not subject to any order or decree, which would be
violated by its execution of or performance under this Agreement, except
for those that will be complied with, satisfied, amended or waived to cure
any potential violation as a condition precedent to the Reorganization.
f. BRF has been furnished with a statement of assets, liabilities and
capital and a schedule of investments of RFA, each as of the end of RFA's
most recently completed fiscal year, said financial statements having been
audited by Deloitte & Touche LLP, independent public accountants. An
unaudited statement of assets, liabilities and capital of RFA, each as of
the Valuation Time (as defined in Section 3(d) of this Agreement), will be
furnished to BRF at or prior to the Effective Date for the purpose of
determining the number of RFA Common Shares and RFA Preferred Shares to be
issued pursuant to Section 4 of this Agreement; each will fairly present
the financial position of RFA as of the Valuation Time in conformity with
generally accepted accounting principles applied on a consistent basis.
g. BRF has been furnished with RFA's Annual Report to Shareholders for
RFA's most recently completed fiscal year, and the audited financial
statements appearing therein fairly present the financial position of RFA
as of the dates indicated therein, in conformity with generally accepted
accounting principles applied on a consistent basis.
h. There are no material contracts outstanding to which RFA is a party that
have not been disclosed in the N-14 Registration Statement (as defined in
Section l(1) below) or will not otherwise be disclosed to BRF prior to the
Valuation Time.
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i. RFA has no known liabilities of a material amount, contingent or
otherwise, other than those shown on RFA's statements of assets,
liabilities and capital referred to above, those incurred in the ordinary
course of its business as an investment company since the end of RFA's most
recently completed fiscal year and those incurred in connection with the
Reorganization. Prior to the Effective Date, RFA will advise BRF in writing
of all known liabilities, contingent or otherwise, whether or not incurred
in the ordinary course of business, existing or accrued.
j. RFA has filed, or has obtained extensions to file, all Federal, state
and local tax returns which are required to be filed by it, and has paid
all Federal, state and local taxes shown on said returns to be due and
owing and all assessments received by it, up to and including the taxable
year in which the Effective Date occurs. All tax liabilities of RFA have
been adequately provided for on its books, and no tax deficiency or
liability of RFA has been asserted and no question with respect thereto has
been raised by the Internal Revenue Service or by any state or local tax
authority for taxes in excess of those already paid, up to and including
the taxable year in which the Effective Date occurs.
k. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by RFA of the
Reorganization, except such as may be required under the Securities Act of
1933, as amended (the "1933 Act"), the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the 1940 Act, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") and the laws of the Commonwealth
of Massachusetts.
l. The registration statement filed by RFA on Form N-14 relating to the RFA
Common Shares and RFA Preferred Shares to be issued pursuant to this
Agreement, and any supplement or amendment thereto or to the documents
therein (as amended, the "N-14 Registration Statement"), on the effective
date of the N-14 Registration Statement, at the time of the shareholders'
meeting referred to in Section 6(a) of this Agreement and at the Effective
Date, insofar as it relates to RFA (i) will comply in all material respects
with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the
rules and regulations thereunder and (ii) will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading; and the prospectus included therein will not contain any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the
representations and warranties in this subsection only shall apply to
statements in or omissions from the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by RFA for use
in the N-14 Registration Statement as provided in Section 6 of this
Agreement.
m. RFA is authorized to issue 200,000,000 shares of beneficial interest,
par value $.01 per share, 199,000,660 of which shares are designated RFA
Common Shares, 392 of which are designated Auction Rate Municipal Preferred
Shares of Beneficial Interest, Series R7. Each outstanding share of
beneficial interest of RFA is fully paid, nonassessable and has full voting
rights.
n. All of the issued and outstanding RFA Common Shares and RFA Preferred
Shares have been offered for sale and sold in conformity with all
applicable Federal and state securities laws.
o. The RFA Common Shares and the RFA Preferred Shares to be issued pursuant
to this Agreement will have been duly authorized and, when issued and
delivered pursuant to this
I-3
Agreement, will be legally and validly issued and will be fully paid and
nonassessable and will have full voting rights, and no shareholder of RFA
will have any preemptive right of subscription or purchase in respect
thereof.
p. At or prior to the Effective Date, the RFA Common Shares and the RFA
Preferred Shares to be issued pursuant to this Agreement will be duly
qualified for offering to the public in conformity with all applicable
federal and state securities laws, and there will be a sufficient number of
such shares registered under the 1933 Act to permit the issuance
contemplated by this Agreement.
q. At or prior to the Effective Date, RFA will have obtained any and all
regulatory, rating agency, trustee and shareholder approvals necessary to
issue the RFA Common Shares and the RFA Preferred Shares in connection with
the Reorganization.
r. The books and records of RFA made available to BRF and/or its counsel
are substantially true and correct and contain no material misstatements or
omissions with respect to the operations of RFA.
2. Representations and Warranties of BRF.
BRF represents and warrants to, and agrees with, RFA that:
a. BRF is a Massachusetts Business Trust, and has the power to own all of
its assets and to carry out this Agreement. BRF has all necessary Federal,
state and local authorizations to carry on its business as it is now being
conducted and to carry out this Agreement.
b. BRF is duly registered under the 1940 Act as a diversified, closed-end
management investment company and such registration has not been revoked or
rescinded and is in full force and effect. BRF has elected and qualified
for the special tax treatment afforded RICs under Sections 851-855 of the
Code at all times since its inception and intends to continue to so qualify
for its taxable year ending upon the termination of BRF.
c. BRF has full power and authority to enter into and perform its
obligations under this Agreement, including full power and authority to
transfer the Investments (defined below) to RFA. The execution, delivery
and performance of this Agreement has been duly authorized by all necessary
action of BRF's Board of Trustees, and this Agreement constitutes a valid
and binding contract enforceable in accordance with its terms, subject to
the effects of bankruptcy, insolvency, moratorium, fraudulent conveyance
and similar laws relating to or affecting creditors' rights generally and
court decisions with respect thereto. At the Effective Date, subject only
to the delivery of the Investments (defined below) as contemplated in this
Agreement, BRF will have good and marketable title to all of the
Investments, and RFA will acquire all of the Investments free and clear of
any encumbrances, liens or security interests and without any restrictions
upon the transfer thereof (except those imposed by the Federal or state
securities laws and those imperfections of title or encumbrances as do not
materially detract from the value or use of the Investments or materially
affect title thereto). As used in this Agreement, the term "Investments"
shall mean (i) the investments of BRF shown on the schedule of its
investments as of the Valuation Time furnished to RFA, and (ii) all other
assets owned by BRF or liabilities incurred as of the Valuation Time.
d. There are no material legal, administrative or other proceedings pending
or, to the knowledge of BRF, threatened against BRF which assert liability
on the part of BRF or which materially affect its financial condition or
its ability to consummate the Reorganization. BRF is not charged
I-4
with or, to the best of its knowledge, threatened with any violation or
investigation of any possible violation of any provisions of any Federal,
state or local law or regulation or administrative ruling relating to any
aspect of its business.
e. BRF is not a party to or obligated under any provision of its
Declaration of Trust, as amended, Certificate of Designation, as amended,
or its by-laws, as amended, or any contract or other commitment or
obligation, and is not subject to any order or decree which would be
violated by its execution of or performance under this Agreement, except
for those that will be complied with, satisfied, amended or waived to cure
any potential violation as a condition precedent to the Reorganization.
f. RFA has been furnished with a statement of assets, liabilities and
capital and a schedule of investments of BRF, each as of the end of BRF's
most recently completed fiscal year, said financial statements having been
audited by Deloitte & Touche LLP, independent public accountants. An
unaudited statement of assets, liabilities and capital of BRF, each as of
the Valuation Time (as defined in Section 3(d) of this Agreement), will be
furnished to RFA at or prior to the Effective Date for the purpose of
determining the number of RFA Common Shares and RFA Preferred Shares to be
issued pursuant to Section 4 of this Agreement; each will fairly present
the financial position of BRF as of the Valuation Time in conformity with
generally accepted accounting principles applied on a consistent basis.
g. RFA has been furnished with BRF's Annual Report to Shareholders for
BRF's most recently completed fiscal year, and the audited financial
statements appearing therein fairly present the financial position of BRF
as of the date thereof, in conformity with generally accepted accounting
principles applied on a consistent basis.
h. There are no material contracts outstanding to which BRF is a party that
have not been disclosed in the N-14 Registration Statement or will not
otherwise be disclosed to RFA prior to the Valuation Time.
i. BRF has no known liabilities of a material amount, contingent or
otherwise, other than those shown on its statements of assets, liabilities
and capital referred to above, those incurred in the ordinary course of its
business as an investment company since the date of such statements, and
those incurred in connection with the Reorganization. Prior to the
Effective Date, BRF will advise RFA in writing of all known liabilities,
contingent or otherwise, whether or not incurred in the ordinary course of
business, existing or accrued.
j. BRF has filed, or has obtained extensions to file, all Federal, state
and local tax returns which are required to be filed by it, and has paid
all Federal, state and local taxes shown on said returns to be due and
owing and all assessments received by it, up to and including the taxable
year in which the Effective Date occurs. All tax liabilities of BRF have
adequately been provided for on its books, and no tax deficiency or
liability of BRF has been asserted and no question with respect thereto has
been raised by the Internal Revenue Service or by any state or local tax
authority for taxes in excess of those already paid, up to and including
the taxable year in which the Effective Date occurs.
k. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by BRF of the
Reorganization, except such as may be required under the 1933 Act, the 1934
Act, the 1940 Act, the HSR Act and the laws of the Commonwealth of
Massachusetts.
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l. The N-14 Registration Statement, on its effective date, at the time of
the shareholders' meetings referred to in Section 6(a) of this Agreement
and on the Effective Date, insofar as it relates to BRF (i) will comply in
all material respects with the provisions of the 1933 Act, the 1934 Act and
the 1940 Act and the rules and regulations thereunder, and (ii) will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading; and the prospectus included therein will
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the representations and warranties in this subsection shall
apply only to statements in or omissions from the N-14 Registration
Statement made in reliance upon and in conformity with information
furnished by BRF for use in the N-14 Registration Statement as provided in
Section 6 of this Agreement.
m. BRF is authorized to issue 200,000,000 shares of beneficial interest,
par value $.01 per share, 199,997,360 of which are designated BRF Common
Shares, 1,310 of which are designated Auction Rate Municipal Preferred
Shares of Beneficial Interest, Series R7, and 1,320 of which are designated
Auction Rate Municipal Preferred Shares of Beneficial Interest, Series R28.
Each outstanding share of beneficial interest of BRF is fully paid,
nonassessable and has full voting rights.
n. All of the issued and outstanding BRF Common Shares and BRF Preferred
Shares have been offered for sale and sold in conformity with all
applicable Federal and state securities laws.
o. The books and records of BRF made available to RFA and/or its counsel
are substantially true and correct and contain no material misstatements or
omissions with respect to the operations of BRF.
p. BRF will not sell or otherwise dispose of any of the RFA Common Shares
or RFA Preferred Shares to be received in the Reorganization, except in
distribution to its share-holders as provided in Section 4 of this
Agreement.
3. The Reorganization.
a. Subject to the requisite approvals of the shareholders of RFA and BRF
being given, and to the other terms and conditions contained herein, BRF
agrees to convey, transfer and deliver to RFA for the benefit of RFA, and
RFA agrees to acquire from BRF for the benefit of RFA, on the Effective
Date, all of the Investments (including interest accrued as of the
Valuation Time on debt instruments) of BRF, and assume all of the
liabilities of BRF, in exchange solely for that number of RFA Common Shares
and RFA Preferred Shares provided for in Section 4 of this Agreement.
b. Prior to the Effective Date, BRF shall declare a dividend or dividends
which, together with all previous dividends, shall have the effect of
distributing to its shareholders all of its net investment company taxable
income for the period from the beginning of its current fiscal year to and
including the Effective Date, if any (computed without regard to any
deduction for dividends paid), and all of its net capital gain, if any,
realized for such period. In this regard, the last dividend period for each
series of BRF Preferred Shares prior to the Effective Date may be shorter
than the dividend period for each such series determined as set forth in
the applicable Certificate of Designation.
I-6
c. BRF will pay or cause to be paid to RFA any interest it receives on or
after the Effective Date with respect to the Investments.
d. The "Valuation Time" shall be as of the close of business on the
business day immediately preceding the Effective Date, or such earlier or
later date as mutually agreed upon in writing by the parties.
e. From and after the Effective Date, recourse for the liabilities of BRF
acquired by RFA pursuant to this Agreement will be limited to RFA.
f. BRF will be dissolved following the Reorganization by filing a Letter of
Termination with the Secretary of State of the Commonwealth of
Massachusetts.
4. Issuance and Valuation of RFA Common Shares and RFA Preferred Shares in the
Reorganization.
On the Effective Date, RFA Common Shares and RFA Preferred Shares with an
aggregate net asset value or liquidation preference, as the case may be, equal
(to the nearest one ten thousandth of one cent) to the value of the assets of
BRF acquired by RFA in the Reorganization, reduced by the amount of
liabilities of BRF assumed by RFA, shall be issued by RFA to BRF in exchange
for the assets of BRF, plus RFA shall transfer to BRF cash in lieu of
fractional shares. The net asset value of each Fund shall be determined as of
the Valuation Time, and no formula will be used to adjust the net asset value
so determined of either RFA or BRF to take into account differences in
realized and unrealized gains and losses. The value of the Investments of BRF
to be transferred to RFA shall be determined by RFA pursuant to the procedures
utilized by RFA in valuing its own assets and determining its own liabilities
for purposes of the Reorganization. Such valuation and determination shall be
made by RFA in cooperation with BRF and shall be confirmed in writing by RFA
to BRF. RFA shall issue to BRF separate certificates or share deposit receipts
for the RFA Common Shares and the RFA Preferred Shares, each registered in the
name of BRF. BRF then shall distribute the RFA Common Shares and the RFA
Preferred Shares to its corresponding holders of BRF Common Shares and BRF
Preferred Shares by redelivering the certificates or share deposit receipts
evidencing ownership of the RFA Common Shares and the RFA Preferred Shares to
RFA's transfer agent and registrar for each such class of shares. Each full
BRF Common Share will be exchanged for an equivalent dollar amount (to the
nearest one ten-thousandth of one cent) of full RFA Common Shares and cash in
lieu of any fractional RFA Common Shares. Each BRF Preferred Share will be
exchanged for one RFA Preferred Share. With respect to any BRF shareholder
holding certificates evidencing ownership of either the BRF Common Shares or
BRF Preferred Shares as of the Effective Date, and subject to RFA being
informed thereof in writing by BRF, RFA will not permit such shareholder to
receive new certificates evidencing ownership of the RFA Common Shares or RFA
Preferred Shares or pledge or redeem such RFA Common Shares or RFA Preferred
Shares, in any case, until notified by BRF or its agent that such shareholder
has surrendered his or her outstanding certificates evidencing ownership of
the BRF Common Shares or the BRF Preferred Shares, or in the event of lost
certificates, posted adequate bond. BRF, at its own expense, will request its
shareholders to surrender their outstanding certificates evidencing ownership
of the BRF Common Shares or the BRF Preferred Shares, as the case may be, or
post adequate bond therefor.
I-7
Dividends payable to holders of record of shares of RFA Common Shares and RFA
Preferred Shares, as the case may be, as of any date after the Effective Date
and prior to the exchange of certificates by any shareholder of BRF shall be
payable to such shareholder without interest; however, such dividends shall
not be paid unless and until such shareholder surrenders his or her share
certificates of BRF for exchange.
No fractional shares of RFA Common Shares will be issued to holders of BRF
Common Shares. In lieu thereof, RFA's transfer agent will aggregate all
fractional shares of RFA Common Shares and sell the resulting full shares on
the American Stock Exchange at the current market price for shares of RFA for
the account of all holders of fractional interests, and each such holder will
receive such holder's pro rata share of the proceeds of such sale upon
surrender of such holder's BRF Common Share certificates.
5. Payment of Expenses.
a. RFA and BRF shall each pay, immediately prior to the Effective Date, a
pro rata portion of all expenses incurred in connection with the
Reorganization. Such fees and expenses shall include legal, accounting and
state securities or blue sky fees (if any), printing costs, filing fees,
stock exchange fees, rating agency fees, portfolio transfer taxes (if any),
and any similar expenses incurred in connection with the Reorganization.
Neither RFA nor BRF shall pay any expenses of its respective shareholders
arising out of or in connection with the Reorganization.
6. Covenants of the Funds.
a. Each Fund agrees to call a special meeting of its respective
shareholders to be held as soon as is practicable after the effective date
of the N-14 Registration Statement for the purpose of considering the
Reorganization as described in this Agreement.
b. Each Fund covenants to operate its respective business as presently
conducted between the date hereof and the Effective Date.
c. BRF agrees that following the consummation of the Reorganization, it
will liquidate and dissolve in accordance with the laws of the Commonwealth
of Massachusetts and any other applicable law, it will not make any
distributions of any RFA Common Shares or RFA Preferred Shares other than
to the shareholders of BRF and without first paying or adequately providing
for the payment of all of BRF's liabilities not assumed by RFA, if any, and
on and after the Effective Date it shall not conduct any business except in
connection with its liquidation and dissolution.
d. RFA undertakes that if the Reorganization is completed it will file, or
cause its agents to file, an application pursuant to Section 8(f) of the
1940 Act for an order declaring that BRF has ceased to be a registered
investment company.
e. RFA will file the N-14 Registration Statement with the Securities and
Exchange Commission (the "Commission") and will use its best efforts to
provide that the N-14 Registration Statement becomes effective as promptly
as practicable. BRF agrees to cooperate fully with RFA and will furnish to
RFA the information relating to itself to be set forth in the N-14
Registration Statement as required by the 1933 Act, the 1934 Act, the 1940
Act, and the rules and regulations thereunder.
I-8
f. Each Fund agrees to proceed as promptly as possible to cause to be made
all necessary filings under the HSR Act with respect to the transactions
contemplated by this Agreement and to ensure that the related waiting
period expires or is otherwise terminated at the earliest possible time.
g. RFA agrees that it has no plan or intention to sell or otherwise dispose
of the assets of BRF to be acquired in the Reorganization, except for
dispositions made in the ordinary course of business.
h. Each Fund agrees that, on or before the Effective Date, all of BRF's
Federal and other tax returns and reports required to be filed on or before
such date shall have been filed and all taxes shown as due on said returns
either shall have been paid or adequate liability reserves shall have been
provided for the payment of such taxes. In connection with this covenant,
each Fund agrees to cooperate with the other Fund in filing any tax return,
amended return or claim for refund, determining a liability for taxes or a
right to a refund of taxes or participating in or conducting any audit or
other proceeding in respect of taxes. RFA agrees to retain for a period of
ten (10) years following the Effective Date all returns, schedules and work
papers and all material records or other documents relating to tax matters
of BRF for its taxable periods first ending after such Effective Date and
for all prior taxable periods. Any information obtained under this
subsection shall be kept confidential except as otherwise may be necessary
in connection with the filing of returns or claims for refund or in
conducting an audit or other proceeding. After the Effective Date, RFA
shall prepare, or cause its agents to prepare, any Federal, state or local
tax returns, including any Forms 1099, required to be filed by BRF with
respect to its final taxable years ending with the Effective Date and for
any prior periods or taxable years and further shall cause such tax returns
and Forms 1099 to be duly filed with the appropriate taxing authorities.
Notwithstanding the aforementioned provisions of this subsection, any
expenses incurred by RFA or BRF (other than for payment of taxes) in
connection with the preparation and filing of said tax returns and Forms
1099 after the Effective Date shall be borne by RFA.
i. Each Fund agrees to mail to each of its respective shareholders of
record entitled to vote at the special meeting of shareholders at which
action is to be considered regarding this Agreement, in sufficient time to
comply with requirements as to notice thereof, a combined Proxy Statement
and Prospectus which complies in all material respects with the applicable
provisions of Section 14(a) of the 1934 Act and Section 20(a) of the 1940
Act, and the rules and regulations, respectively, thereunder.
j. Following the consummation of the Reorganization, RFA expects to stay in
existence and continue its business as a closed-end management investment
company registered under the 1940 Act.
k. Except as contemplated herein, each Fund agrees that, during the period
from the date hereof to and including the Effective Date, it will declare
and pay dividends consistent with past practices and the terms of the
Common Shares and Preferred Shares issued by each such Fund.
7. Effective Date.
a. Delivery of the Investments from BRF to RFA and delivery of the RFA
Common Shares and RFA Preferred Shares from RFA to BRF, shall be made at
the offices of Skadden, Arps, Slate,
I-9
Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022, at 10:00
a.m. on , 1999, or at such other place, time and date agreed to by the
Funds, the date and time upon which such delivery is to take place being
referred to herein as the "Effective Date." To the extent that any
Investments, for any reason, are not transferable on the Effective Date,
BRF shall cause such Investments to be transferred to RFA's account with
its custodian at the earliest practicable date thereafter. RFA shall have
made prior arrangements for the delivery on the Effective Date of the
Investments to its custodian.
b. BRF will deliver to RFA on the Effective Date confirmations or other
adequate evidence as to the tax basis of each of the Investments delivered
to RFA hereunder, certified by Ernst & Young LLP.
c. Prior to the Effective Date, BRF shall have made arrangements with its
transfer agent to deliver to RFA, as soon as practicable after the
Effective Date, a list of the names and addresses of all of the
shareholders of record of BRF on the Effective Date and the number of
shares of BRF Common Shares and BRF Preferred Shares owned by each such
shareholder, certified by its transfer agent or by its President to the
best of their knowledge and belief.
8. RFA Conditions.
The obligation of RFA to consummate the Reorganization shall be subject to the
satisfaction or waiver of the following conditions:
a. This Agreement shall have been adopted, and the Reorganization shall
have been approved, by the affirmative vote of a majority of the RFA Common
Shares and the RFA Preferred Shares outstanding on the record date for the
Special Meeting of RFA shareholders voting together as a single class; and
BRF shall have delivered to RFA a copy of the resolutions approving this
Agreement and the Reorganization adopted by its Board of Trustees and
shareholders and certified by its respective Secretary.
b. BRF shall have furnished to RFA a statement of assets, liabilities and
capital, with values determined as provided in Section 4 of this Agreement,
together with a schedule of Investments with their respective dates of
acquisition and tax costs, all as of the Valuation Time, certified on its
behalf by its President (or any Vice President) and its Treasurer, and a
certificate of both such officers, dated as of the Effective Date,
certifying that as of the Valuation Time and as of the Effective Date there
has been no material adverse change in its respective financial position
since the date of BRF's most recent financial statements provided to RFA,
other than changes in its portfolio securities since that date or changes
in the market value of its portfolio securities.
c. BRF shall have furnished to RFA a certificate signed by its President
(or any Vice President) and its Treasurer, dated the Effective Date,
certifying that as of the Valuation Time and as of such Effective Date all
representations and warranties made in this Agreement are true and correct
in all material respects as if made at and as of such date and it has
complied with all of the agreements and satisfied all of the conditions on
its part to be performed or satisfied at or prior to such date.
d. BRF shall have delivered to RFA a letter from Deloitte & Touche LLP,
dated the Effective Date, stating that such firm has performed a limited
review of the Federal, state and local income tax returns for BRF's most
recently completed fiscal year, and that based on such limited review,
I-10
nothing came to their attention which caused them to believe that such
returns did not properly reflect, in all material respects, the Federal,
state and local income taxes of BRF for the period covered thereby; and
that for the period from such date, to and including such Effective Date
and for any taxable year ending upon its dissolution, such firm has
performed a limited review to ascertain the amount of applicable Federal,
state and local taxes, and has determined that either such amount has been
paid or reserves have been established for payment of such taxes, this
review to be based on unaudited financial data; and that based on such
limited review, nothing has come to their attention which caused them to
believe that the taxes paid or reserves set aside for payment of such taxes
were not adequate in all material respects for the satisfaction of Federal,
state and local taxes for the period from such date, to and including such
Effective Date and for any taxable year ending upon its dissolution or that
BRF would not continue to qualify as a regulated investment company for
Federal income tax purposes.
e. RFA shall have received an opinion from Skadden, Arps, Slate, Meagher &
Flom LLP (together with its affiliates, "Skadden"), as special counsel to
RFA, in form and substance satisfactory to RFA and dated the Effective
Date, to the effect that (i) each Fund is organized and subsisting as a
Massachusetts Business Trust; (ii) all actions required to be taken by each
Fund to authorize this Agreement and to effect the Reorganization have been
duly authorized by all necessary corporate actions thereof; (iii) the
execution and delivery of this Agreement does not, and the consummation of
the Reorganization will not, violate any material provision of the
Declaration of Trust, as amended, the Certificate of Designation, as
amended, or the by-laws, as amended, or any agreement (known to such
counsel) to which RFA or BRF is a party or by which RFA or BRF is bound,
except insofar as the parties have agreed to amend such provision as a
condition precedent to the Reorganization; (iv) to the best of such
counsel's knowledge, no consent, approval, authorization or order of any
Massachusetts state court or governmental authority is required for the
consummation by either Fund of the Reorganization, except such as have been
obtained under Massachusetts law and under state securities or blue sky
laws; (v) this Agreement has been duly authorized, executed and delivered
by each Fund and represents a valid and binding contract, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws pertaining to
the enforcement of creditors' rights generally and by equitable principles;
(vi) the RFA Common Shares and RFA Preferred Shares to be issued pursuant
to the Reorganization are duly authorized and, upon delivery and payment of
consideration therefor pursuant to the terms of the Reorganization, will be
validly issued and outstanding and fully paid and nonassessable, and no
shareholder of RFA has any preemptive right to subscription or purchase in
respect thereof (pursuant to the Declaration of Trust, as amended,
Certificate of Designation, as amended, or the by-laws of RFA or as a
matter of Massachusetts law); (vii) each Fund is registered as a
diversified, closed-end management investment company under the 1940 Act;
(viii) to the best of such counsel's knowledge, no consent, approval,
authorization or order of any United States federal governmental authority
is required for the consummation of the Reorganization by either Fund,
except such as have been obtained under the 1933 Act, the 1934 Act and the
1940 Act and the published rules and regulations of the Commission
thereunder and such as may be required under state securities or blue sky
laws; (ix) the N-14 Registration Statement has become effective under the
1933 Act, no stop order suspending the effectiveness of the N-14
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or
I-11
contemplated under the 1933 Act, and the N-14 Registration Statement, and
each amendment or supplement thereto, as of their respective effective
dates, appear on their face to be appropriately responsive in all material
respects to the requirements of the 1933 Act, the 1934 Act and the 1940 Act
and the published rules and regulations of the Commission thereunder,
except that such counsel need not opine with respect to financial
statements and schedules and other financial and statistical data included
or incorporated by reference in the N-14 Registration Statement or to
schedules, exhibits or appendices included or incorporated by reference in
the N-14 Registration Statement; and (x) to the best of such counsel's
knowledge, no material suit, action or legal or administrative proceeding
is pending or threatened against either Fund, the unfavorable outcome of
which would materially adversely affect such Fund. Such opinion also shall
state that (A) while such counsel cannot make any representation as to the
accuracy or completeness of statements of fact in the N-14 Registration
Statement or any amendment or supplement thereto, nothing has come to their
attention that would lead them to believe that, on the respective effective
dates of the N-14 Registration Statement and any amendment or supplement
thereto, (1) the N-14 Registration Statement or any amendment or supplement
thereto contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading; and (2) the prospectus included in
the N-14 Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and (B) such counsel does not express any opinion or
belief as to financial statements and schedules and other financial and
statistical data included or incorporated by reference in the N-14
Registration Statement or to schedules, exhibits or appendices included or
incorporated by reference in the N-14 Registration Statement. In giving the
opinion set forth above, Skadden may state that it is relying on
certificates of officers of RFA and BRF with regard to matters of fact and
certificates and written statements of government officials with respect to
factual matters.
f. RFA shall have received an opinion from Skadden, as counsel to RFA, in
form and substance satisfactory to RFA and dated the Effective Date, to the
effect that for Federal income tax purposes the Reorganization will
constitute a "reorganization" within the meaning of Section 368(a) of the
Code and each Fund will be deemed a "party" to such reorganization within
the meaning of Section 368(b) of the Code. In giving the opinion set forth
above, Skadden may state that it is relying on certificates of officers of
RFA and BRF with regard to factual and other matters.
g. The assets or liabilities of BRF to be transferred to RFA shall not
include any assets or liabilities which RFA, by reason of charter
limitations or otherwise, may not properly acquire or assume.
h. The N-14 Registration Statement shall have become effective under the
1933 Act and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of BRF, shall be contemplated by the
Commission.
i. The Commission shall not have issued an unfavorable advisory report
under Section 25(b) of the 1940 Act, nor instituted or threatened to
institute any proceeding seeking to enjoin consummation of the
Reorganization under Section 25(c) of the 1940 Act and no other legal,
administrative or other proceeding shall be instituted or threatened which
would materially affect the financial condition of BRF or would prohibit
the Reorganization.
I-12
j. All proceedings taken by BRF and its counsel in connection with the
Reorganization and all documents incidental thereto shall be satisfactory
in form and substance to RFA.
k. Prior to the Effective Date, BRF shall have declared a dividend or
dividends which, together with all such previous dividends, shall have the
effect of distributing to its shareholders all of its net investment
company taxable income, if any, for the tax year of BRF ending on the
Effective Date, and all of its net capital gain, if any, realized for the
tax year of BRF ending on the Effective Date.
l. On or before the Effective Date, RFA shall have received from Moody's
Investors Service written evidence confirming that consummation of the
Reorganization will not impair the Aaa rating assigned to the outstanding
shares of RFA Preferred Shares and assigning an Aaa rating to the shares of
RFA Preferred Shares issued in connection with the Reorganization.
9. BRF's Conditions.
The obligations of BRF hereunder shall be subject to the following conditions:
a. This Agreement shall have been adopted, and the Reorganization shall
have been approved, by the affirmative vote of a majority of the BRF Common
Shares and the BRF Preferred Shares outstanding on the record Date for the
special meeting of BRF's shareholders, each voting as a separate class; and
RFA shall have delivered to BRF a copy of the resolutions approving this
Agreement and the Reorganization adopted by its Board of Trustees and
shareholders and certified by its Secretary.
b. RFA shall have furnished to BRF, a statement of assets, liabilities and
capital, with values determined as provided in Section 4 of this Agreement,
together with a schedule of its investments, all as of the Valuation Time
certified on its behalf by its President (or any Vice President) and its
Treasurer, and a certificate of both such officers, dated as of the
Effective Date, certifying that as of the Valuation Time and as of the
Effective Date there has been no material adverse change in its financial
position since the Date of RFA's most recent financial statements provided
to BRF, other than changes in its portfolio securities since that Date or
changes in the market value of its portfolio securities.
c. RFA shall have furnished to BRF a certificate signed by its President
(or any Vice President) and its Treasurer, dated as of the Effective Date,
certifying that (i) as of the Valuation Time and as of the Effective Date,
all representations and warranties of RFA made in this Agreement are true
and correct in all material respects with the same effect as if made at and
as of such Effective Date, and that RFA has complied with all of the
agreements and satisfied all of the conditions on its part to be performed
or satisfied at or prior to such date and (ii) immediately after the
Effective Date, RFA will be in compliance with all asset coverage tests
applicable to the RFA Preferred Shares.
d. BRF shall have received the opinion or opinions of Skadden, as counsel
to BRF, in form and substance satisfactory to BRF and dated the Effective
Date, with respect to the matters specified in Sections 8(e) and (f) of
this Agreement and such other matters as BRF reasonably may deem necessary
or desirable.
e. All proceedings taken by RFA and its counsel in connection with the
Reorganization and all documents incidental thereto shall be satisfactory
in form and substance to BRF.
I-13
f. The N-14 Registration Statement shall have become effective under the
1933 Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of RFA, shall be contemplated by the
Commission.
g. The Commission shall not have issued an unfavorable advisory report
under Section 25(b) of the 1940 Act, nor instituted or threatened to
institute any proceeding seeking to enjoin consummation of the
Reorganization under Section 25(c) of the 1940 Act, no other legal,
administrative or other proceeding shall be instituted or threatened which
would materially affect the financial condition of RFA or would prohibit
the Reorganization.
h. On or before the Effective Date, the Board of Trustees of RFA shall have
increased the number of authorized RFA Preferred Shares with, and shall
have filed an amended Certificate of Designation with the Secretary of the
Commonwealth of Massachusetts in order to effect such increase.
i. On or before the Effective Date, RFA shall have received from Moody's
Investors Service written evidence confirming that consummation of the
Reorganization will not impair the Aaa ratings assigned to the outstanding
shares of RFA Preferred Shares and assigning Aaa ratings to shares of RFA
Preferred Shares to be issued in connection with the Reorganization.
10. Termination, Postponement and Waivers.
a. Notwithstanding anything contained in this Agreement to the contrary,
this Agreement may be terminated and the Reorganization abandoned at any
time (whether before or after adoption thereof by the shareholders of the
Funds) prior to the Effective Date, or such Effective Date may be
postponed, (i) by mutual consent of the Boards of Trustees of the Funds;
(ii) by the Board of Trustees of BRF if any condition of BRF's obligations
set forth in Section 9 of this Agreement has not been fulfilled or waived
and (iii) by the Board of Trustees of RFA in its sole discretion.
b. If the transactions contemplated by this Agreement have not been
consummated by December 31, 1999, either Fund may terminate this Agreement
by action of its Board of Trustees.
c. In the event of termination of this Agreement pursuant to the provisions
hereof, the same shall become void and have no further effect, and there
shall not be any liability on the part of either Fund or persons who are
their Trustees, trustees, officers, agents or shareholders in respect of
this Agreement.
d. At any time prior to the Effective Date, the Board of Trustees of either
Fund may, by written instrument signed by it (i) extend the time for the
performance of any of the obligations or other acts of the other, (ii)
waive any inaccuracies in the representations and warranties of the other
contained herein, (iii) waive compliance with any of the agreements of the
other or conditions to its obligations contained herein and (iv) amend this
Agreement; provided in each case that, in the judgment of the Board of
Trustees of such Fund, after consultation with its counsel, such action or
waiver will not have a material adverse effect on the benefits intended
under this Agreement to the shareholders of such Fund. This Agreement may
not be amended except by an instrument in writing executed by the parties
affected by any such amendment.
e. The respective representations and warranties contained in Sections 1
and 2 of this Agreement shall expire with, and be terminated by, the
consummation of the Reorganization, and none of
I-14
RFA, BRF or any of their officers, Trustees or trustees, agents or
shareholders shall have any liability with respect to such representations
or warranties after the Effective Date. This provision shall not protect
any officer, trustee, agent or shareholder of RFA or BRF against any
liability to the entity for which that officer, trustee, agent or
shareholder so acts or to its shareholders to which that officer, trustee,
agent or shareholder otherwise would be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the
duties in the conduct of such office.
f. If any order or orders of the Commission with respect to this Agreement
shall be issued prior to the Effective Date and shall impose any terms or
conditions which are determined by action of the Boards of Trustees of RFA
or BRF to be acceptable, such terms and conditions shall be binding as if a
part of this Agreement without further vote or approval of the shareholders
of such Fund, unless such terms and conditions shall result in a change in
the method of computing the number of RFA Common Shares or RFA Preferred
Shares to be issued pursuant to this Agreements in which event, unless such
terms and conditions shall have been included in the proxy solicitation
materials furnished to the shareholders of the Funds prior to the meetings
at which the Reorganization shall have been approved, this Agreement shall
not be consummated and shall terminate, unless the Funds promptly shall
call special meetings of shareholders at which such conditions so imposed
shall be submitted for approval.
11. Other Matters.
a. Pursuant to Rule 145 under the 1933 Act, and in connection with the
issuance of any shares to any person who at the time of the Reorganization
is, to its knowledge, an affiliate of a party to the Reorganization
pursuant to Rule 145(c), RFA will cause to be affixed upon the
certificate(s) issued to such person (if any) a legend as follows:
THESE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT TO BRF (OR
ITS STATUTORY SUCCESSOR) OR ITS PRINCIPAL UNDERWRITER UNLESS (I) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE
SECURITIES ACT OF 1933 OR (II) IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE FUND, SUCH REGISTRATION IS NOT REQUIRED
and, further, that stop transfer instructions will be issued to RFA's
transfer agent with respect to such shares. BRF will provide RFA on the
Effective Date with the name of any BRF shareholder who is to the knowledge
of BRF an affiliate of it on such Date.
b. Any notice, report or demand required or permitted by any provision of
this Agreement shall be in writing and shall be deemed to have been given
if delivered or mailed, first class postage prepaid, addressed to RFA or
any BRF in either case at 345 Park Avenue, New York, New York, 10154, Attn:
Ralph L. Schlosstein, President.
c. This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the Reorganization,
constitutes the only understanding with respect to the Reorganization, may
not be changed except by a letter of agreement signed by each party and
shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts applicable to agreements made and to be
performed in said state.
I-15
d. Copies of the Declaration of Trust and Certificate of Designation, and
all amendments, if any, of RFA and BRF are on file with the Secretary of
State of the Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Trustees of RFA and BRF. This
Agreement may be executed in any number of counterparts, each of which,
when executed and delivered, shall be deemed to be an original but all such
counterparts together shall constitute but one instrument.
IN WITNESS WHEREOF, each of the undersigned has executed and delivered this
Agreement and Plan of Reorganization as of the Date first written above.
The BlackRock Florida Investment
Quality Municipal Trust Inc.
By: _________________________________
Name: Ralph L. Schlosstein
Title: President
The BlackRock Florida Insured
Municipal 2008 Term Trust Inc.
By: _________________________________
Name: Ralph L. Schlosstein
Title: President
I-16
SUBJECT TO COMPLETION--DATED July 23, 1999
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
THE BLACKROCK FLORIDA INVESTMENT QUALITY MUNICIPAL TRUST, INC.
345 Park Avenue
New York, New York 10154
(212) 754-5560
---------------
STATEMENT OF ADDITIONAL INFORMATION
Relating to the Merger of:
THE BLACKROCK FLORIDA MUNICIPAL 2008 TERM TRUST INC. ("BRF")
with and into:
THE BLACKROCK FLORIDA INVESTMENT QUALITY MUNICIPAL TRUST INC. ("RFA")
Dated __________, 1999
----------------
This Statement of Additional Information provides information about RFA, a
closed-end management investment company organized as a Massachusetts
business trust, in addition to information contained in the Combined Proxy
Statement/Prospectus of RFA, dated ________, 1999, which also serves as the
proxy statement of BRF a closed-end management investment company organized
as a Massachusetts business trust, in connection with the issuance of
common shares and preferred shares of RFA to shareholders of BRF.
This Statement of Additional Information is not a prospectus. It
should be read in conjunction with the Combined Proxy Statement/Prospectus,
into which it has been incorporated by reference and which may be obtained
by contacting RFA or BRF at the address and telephone number set forth
above.
TABLE OF CONTENTS
Page
----
Audited Financial Statements for RFA for the annual period ended October 31, 1998 1
Unaudited Financial Statements for RFA for the six-month period ended April 30, 1999 9
Audited Financial Statements for BRF for the annual period ended December 31, 1998 18
Annex A: Description of Credit Ratings for Municipal Obligations A-1
Annex B: Description of Florida Municipal Securities B-1
RFA and BRF will provide, without charge, upon the written or oral request
of any person to whom the Combined Proxy Statement/Prospectus is delivered, a
copy of this Statement of Additional Information.
- --------------------------------------------------------------------------------
THE BLACKROCK FLORIDA INVESTMENT QUALITY MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT OPTION CALL VALUE
RATING* (000) DESCRIPTION PROVISIONS+ (NOTE 1)
====================================================================================================================================
LONG-TERM INVESTMENTS-144.0%
FLORIDA-119.5%
Boynton Beach Util. Sys. Rev., FGIC,
AAA $ 830 6.25%, 11/01/20 ............................................................ 11/02 at 102 $ 901,015
AAA 170 6.25%, 11/01/20 ............................................................ ETM 194,162
A1 1,000 Brevard Cnty. Hlth. Fac., Holmes Regl. Med. Ctr., 5.75%, 10/01/13 ............ 10/03 at 102 1,042,160
AAA 1,000 Brevard Cnty. Sch. Brd., C.O.P., Ser. B, 5.50%, 7/01/21, AMBAC ............... 7/06 at 102 1,037,280
AAA 1,000 Collier Cnty. Sch. Brd., C.O.P., 5.00%, 2/15/16, FSA ......................... 2/06 at 101 999,950
AAA 1,000 Dade Cnty. Aviation Rev., Miami Int'l. Arpt., Ser. C, 5.75%, 10/01/25, MBIA. 10/05 at 102 1,073,930
AAA 1,000++ Dade Cnty. Sch. Brd., C.O.P., Ser. A, 6.00%, 5/01/04, MBIA ................... N/A 1,103,570
AAA 1,000++ Dade Cnty. Spl. Oblig., Ser. B, Zero Coupon, 10/01/08, AMBAC ................. N/A 476,090
AAA 1,000 First Florida Gov. Fin. Comn. Rev., Gainsville, Hollywood & St. Petersburg,
740 5.75%, 7/01/16, AMBAC ...................................................... 7/06 at 101 1,079,790
AAA 1,000 Florida Hsg. Fin. Agcy., Sngl. Fam. Mtge., Ser. A, 6.25%, 7/01/11, GNMA ...... 7/04 at 102 783,112
AA+ 1,000 Florida St. Brd. of Ed., Ser. C, 5.85%, 6/01/18 .............................. 6/03 at 101 1,084,820
AA+ 500 Florida St. Brd. of Ed., Pub. Ed., Ser. B, 5.875%, 6/01/24 ................... 6/05 at 101 1,092,070
AAA 1,000 Florida St. Dept. of Corrections, C.O.P., Okeechobee Correctional Fac.,
1,000 6.25%, 3/01/15, AMBAC ...................................................... 3/05 at 102 556,890
AA+ 1,000 Florida St. Dept. of Trans., 5.80%, 7/01/21 .................................. 7/05 at 101 1,100,530
AAA 1,000 Florida St. Div. of Bond Fin. Dept. Gen. Svcs. Rev., Dept. of Environ.
1,000 Preservation, Ser. A, 5.75%, 7/01/11, AMBAC ................................ 7/05 at 101 1,082,380
AAA 1,000 Jacksonville Cap. Impvt. Rev., Gator Bowl Proj., 5.50%, 10/01/14, AMBAC. 10/04 at 101 1,055,060
AAA 1,000++ Lee Cnty. Trans. Fac. Rev., 5.75%, 10/01/22, MBIA ............................ 10/05 at 102 1,068,050
A- 1,000++ Orlando & Orange Cnty. Expwy., 5.95%, 7/01/23 ................................ 7/01 at 102 1,024,120
Aa 1,000 Orlando Utils. Comn. Wtr. & Elec. Rev., Ser. D, 5.50%, 10/01/20 .............. 10/99 at 100 1,002,320
AAA 1,000++ Seminole Cnty. Sch. Brd., C.O.P., Ser. A, 6.125%, 7/01/04, MBIA ............... N/A 1,120,330
AAA 1,000++ Sunrise Florida Util. Sys. Rev., Ser. A, 5.75%, 10/01/06, AMBAC ............... N/A 1,109,800
Baa2 1,000 Volusia Cnty. Ed. Fac. Auth. Rev., 6.125%, 10/15/16 ........................... 10/06 at 102 1,077,880
-----------
21,065,309
------------
PUERTO RICO-24.5%
Puerto Rico Elec. Pwr. Auth. Rev.,
BBB+ 1,000++ Ser. T, 6.375%, 7/01/04 ..................................................... N/A 1,131,910
BBB+ 1,000 Ser. U, 6.00%, 7/01/14 ...................................................... 7/04 at 102 1,097,980
Puerto Rico Pub. Bldg. Auth., Gtd. Pub. Ed. & Hlth. Fac., Ser. M,
A 1,000 5.50%, 7/01/21 .............................................................. 7/03 at 101.5 1,032,380
A 1,000 5.75%, 7/01/15 .............................................................. 7/03 at 101.5 1,050,650
-----------
4,312,920
-----------
See Notes to Financial Statements.
1
================================================================================
VALUE
DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS-144.0% (COST $22,837,085) ................ $ 25,378,229
Other assets in excess of liabilities-4.2% ................. 743,081
Liquidation value of preferred stock-(48.2)% ............... (8,500,000)
------------
Net Assets Applicable to Common Shareholders-100% .......... $ 17,621,310
============
- ----------
* Rating: using the higher of Standard & Poor's, Moody's or Fitch's rating.
+ Option call provisions: date (month/year) and prices of the earliest option
call on redemption. There may be other call provisions at varying prices at
later dates.
++ This bond is prerefunded. See Glossary for definitions.
- -----------------------------------------------------------------------------------------------------------------------
THE FOLLOWING ABBREVIATIONS ARE USED IN PORTFOLIO DESCRIPTIONS:
AMBAC - American Municipal Bond Assurance Corporation FSA - Financial Security Assurance
C.O.P. - Certificate of Participation GNMA - Government National Mortgage Association
ETM - Escrowed To Maturity MBIA - Municipal Bond Insurance Association
FGIC - Financial Guaranty Insurance Company
- ------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
2
- --------------------------------------------------------------------------------
THE BLACKROCK FLORIDA INVESTMENT QUALITY
MUNICIPAL TRUST
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $22,837,085) (Note 1)......... $25,378,229
Cash ..................................................... 423,483
Interest receivable ...................................... 367,340
-----------
26,169,052
-----------
LIABILITIES
Investment advisory fee payable (Note 2) ................. 7,542
Administration fee payable (Note 2) ...................... 2,155
Dividends payable-preferred stock ........................ 745
Other accrued expenses ................................... 37,300
-----------
47,742
-----------
NET INVESTMENT ASSETS .................................... $26,121,310
===========
Net investment assets were comprised of:
Common stock:
Par value (Note 4) ..................................... $ 11,271
Paid-in capital in excess of par ....................... 15,585,445
Preferred stock (Note 4) ................................ 8,500,000
-----------
24,096,716
Undistributed net investment income ..................... 181,209
Accumulated net realized loss ........................... (697,759)
Net unrealized appreciation ............................. 2,541,144
-----------
Net investment assets, April 30, 1999 .................... $26,121,310
===========
Net assets applicable to common shareholders ............. $17,621,310
===========
Net asset value per share:
($17,621,310 o/o 1,127,093 shares of
common stock issued and outstanding) ................... $15.63
======
- --------------------------------------------------------------------------------
THE BLACKROCK FLORIDA INVESTMENT QUALITY
MUNICIPAL TRUST
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest and discount earned ......... $700,074
--------
Expenses
Investment advisory .................. 45,538
Administration ....................... 13,011
Auction agent ........................ 10,500
Directors ............................ 7,000
Reports to shareholders .............. 5,000
Transfer agent ....................... 5,000
Audit ................................ 3,500
Custodian ............................ 2,000
Legal ................................ 2,000
Miscellaneous ........................ 2,136
--------
Total expenses ......................... 95,685
--------
Net investment income .................. 604,389
--------
UNREALIZED LOSS
ON INVESTMENTS (NOTE 3)
Net change in unrealized appreciation
on investments ........................ (85,962)
--------
NET INCREASE IN NET INVESTMENT ASSETS
RESULTING FROM OPERATIONS .............. $518,427
========
See Notes to Financial Statements.
3
- --------------------------------------------------------------------------------
THE BLACKROCK FLORIDA INVESTMENT QUALITY MUNICIPAL TRUST
STATEMENTS OF CHANGES IN NET INVESTMENT ASSETS (UNAUDITED)
- --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
1999 1998
---------------- -----------
INCREASE (DECREASE) IN NET INVESTMENT ASSETS
Operations:
Net investment income ................................................... $ 604,389 $ 1,178,528
Net change in unrealized appreciation on investments .................... (85,962) 912,460
----------- -----------
Net increase in net investment assets resulting from operations ......... 518,427 2,090,988
Dividends and distributions:
To common shareholders from net investment income ....................... (448,308) (839,826)
To preferred shareholders from net investment income .................... (133,091) (311,954)
----------- -----------
Total dividends and distributions ....................................... (581,399) (1,151,780)
----------- -----------
Total increase (decrease) ............................................. (62,972) 939,208
NET INVESTMENT ASSETS
Beginning of period ...................................................... 26,184,282 25,245,074
----------- -----------
End of period ............................................................ $26,121,310 $26,184,282
=========== ===========
See Notes to Financial Statements.
4
- --------------------------------------------------------------------------------
THE BLACKROCK FLORIDA INVESTMENT QUALITY MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30,
1999
----
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............................... $ 15.69
-------
Net investment income ............................................. .54
Net realized and unrealized gain (loss) on investments ............ (.08)
-------
Net increase (decrease) from investment operations ................ .46
-------
Dividends and distributions:
Dividends from net investment income to:
Common shareholders ............................................. (.40)
Preferred shareholders .......................................... (.12)
Distributions from capital gains to:
Common shareholders ............................................. -
Preferred shareholders .......................................... -
Distributions in excess of net realized gain on investments to:
Common shareholders ............................................. -
Preferred shareholders .......................................... -
-------
Total dividends and distributions .................................. (.52)
-------
Net asset value, end of period* .................................... $ 15.63
=======
Per share market value, end of period* ............................. $ 15.0625
=======
TOTAL INVESTMENT RETURN+: ......................................... 2.20%
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS++:
Expenses ........................................................... 1.09%+++
Net investment income before preferred stock dividends ............. 6.90%+++
Preferred stock dividends .......................................... 1.52%+++
Net investment income available to common shareholders ............. 5.38%+++
SUPPLEMENTAL DATA:
Average net assets of common shareholders (in thousands) ........... $17,675
Portfolio turnover rate ............................................ 0%
Net assets of common shareholders, end of period (in thousands)..... $17,621
Asset coverage per share of preferred stock, end of period# ........ $76,830
Preferred stock outstanding (in thousands) ......................... $ 8,500
FOR THE YEAR ENDED OCTOBER 31,
---------------------------------------------
1998 1997 1996 1995
---- ---- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............................... $ 14.86 $ 14.15 $ 14.01 $ 11.69
------- ------- ------- -------
Net investment income ............................................. 1.05 1.06 1.03 1.05
Net realized and unrealized gain (loss) on investments ............ .81 .65 .13 2.36
------- ------- ------- -------
Net increase (decrease) from investment operations ................ 1.86 1.71 1.16 3.41
------- ------- ------- -------
Dividends and distributions:
Dividends from net investment income to:
Common shareholders ............................................. (.75) (.72) (.73) (.79)
Preferred shareholders .......................................... (.28) (.28) (.28) (.30)
Distributions from capital gains to:
Common shareholders ............................................. - - - -
Preferred shareholders .......................................... - - - -
Distributions in excess of net realized gain on investments to:
Common shareholders ............................................. - ** ( .01) -
Preferred shareholders .......................................... - ** ** -
------- ------- ------- -------
Total dividends and distributions .................................. ( 1.03) ( 1.00) (1.02) (1.09)
-------- ------- ------- -------
Net asset value, end of period* .................................... $ 15.69 $ 14.86 $ 14.15 $ 14.01
======= ======= ======= =======
Per share market value, end of period* ............................. $ 15.125 $ 13.3125 $ 12.25 $ 12.625
======= ======= ======= =======
TOTAL INVESTMENT RETURN+: ......................................... 19.70% 14.95% 2.92% 29.29%
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS++:
Expenses ........................................................... 1.31% 1.26% 1.46% 1.44%
Net investment income before preferred stock dividends ............. 6.81% 7.43% 7.41% 7.96%
Preferred stock dividends .......................................... 1.80% 1.92% 1.97% 2.28%
Net investment income available to common shareholders ............. 5.01% 5.51% 5.44% 5.68%
SUPPLEMENTAL DATA:
Average net assets of common shareholders (in thousands) ........... $17,299 $16,150 $15,699 $14,759
Portfolio turnover rate ............................................ 0% 5% 73% 112%
Net assets of common shareholders, end of period (in thousands)..... $17,684 $16,745 $15,951 $15,788
Asset coverage per share of preferred stock, end of period# ........ $77,017 $74,253 $71,915 $71,437
Preferred stock outstanding (in thousands) ......................... $ 8,500 $ 8,500 $ 8,500 $ 8,500
FOR THE YEAR
ENDED OCTOBER
31,
-------------
1994
-------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............................... $ 14.77
---------
Net investment income ............................................. .98
Net realized and unrealized gain (loss) on investments ............ ( 3.02)
---------
Net increase (decrease) from investment operations ................ ( 2.04)
---------
Dividends and distributions:
Dividends from net investment income to:
Common shareholders ............................................. (.79)
Preferred shareholders .......................................... (.20)
Distributions from capital gains to:
Common shareholders ............................................. (.04)
Preferred shareholders .......................................... (.01)
Distributions in excess of net realized gain on investments to:
Common shareholders ............................................. -
Preferred shareholders .......................................... -
---------
Total dividends and distributions .................................. (1.04)
---------
Net asset value, end of period* .................................... $ 11.69
=========
Per share market value, end of period* ............................. $ 10.375
=========
TOTAL INVESTMENT RETURN+: ......................................... (20.98%)
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS++:
Expenses ........................................................... 1.50%
Net investment income before preferred stock dividends ............. 7.34%
Preferred stock dividends .......................................... 1.48%
Net investment income available to common shareholders ............. 5.86%
SUPPLEMENTAL DATA:
Average net assets of common shareholders (in thousands) ........... $ 15,015
Portfolio turnover rate ............................................ 206%
Net assets of common shareholders, end of period (in thousands)..... $ 13,174
Asset coverage per share of preferred stock, end of period# ........ $127,494
Preferred stock outstanding (in thousands) ......................... $ 8,500
- ----------
* Net asset value and market value are published in THE WALL STREET JOURNAL
each Monday.
** Actual amount paid to common shareholders for the year ended October 31,
1997 was $0.004325, and the actual amount paid to preferred shareholders
was $0.000185 per common share. Actual amount paid to preferred
shareholders for the year ended October 31, 1996 was $0.0030 per common
share.
# A stock split occurred on July 24, 1995 (Note 4).
+ Total investment return is calculated assuming a purchase of common stock
at the current market value on the first day and a sale at the current
market price on the last day of each period reported. Dividends and
distributions are assumed for purposes of this calculation to be reinvested
at prices obtained under the Trust's dividend reinvestment plan. This
calculation does not reflect brokerage commissions. Total investment
returns for periods of less than one year are not annualized.
++ Ratios are calculated on the basis of income, expenses and preferred stock
dividends applicable to both the common and preferred shares relative to the
average net assets of common shareholders.
+++ Annualized.
The information above represents the unaudited operating performance data for a
share of common stock outstanding, total investment return, ratios to average
net assets and other supplemental data for the periods indicated. This
information has been determined based upon financial information provided in
the financial statements and market value data for the Trust's common shares.
See Notes to Financial Statements.
5
- --------------------------------------------------------------------------------
THE BLACKROCK FLORIDA INVESTMENT
QUALITY MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION & The BlackRock Florida Investment Quality
ACCOUNTING Municipal Trust (the "Trust") was organized
POLICIES in Massachusetts on April 15, 1993 as a non-
diversified closed-end management investment
company. The Trust's investment objective is to manage a portfolio of high
quality securities while providing high current income exempt from regular
federal income tax and Florida intangible personal property tax consistent with
the preservation of capital. The ability of issuers of debt securities held by
the Trust to meet their obligations may be affected by economic developments in
the state, a specific industry or region. No assurance can be given that the
Trust's investment objective will be achieved.
The following is a summary of significant accounting policies followed by
the Trust.
SECURITIES VALUATION: Municipal securities (including commitments to purchase
such securities on a "when-issued" basis) are valued on the basis of prices
provided by a pricing service which uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities in
determining values. Any securities or other assets for which such current
market quotations are not readily available are valued at fair value as
determined in good faith under procedures established by and under the general
supervision and responsibility of the Trust's Board of Directors.
Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days or
less are valued at amortized cost, if their term to maturity from date of
purchase is 60 days or less, or by amortizing their value on the 61st day prior
to maturity, if their original term to maturity from date of purchase exceeded
60 days.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized and unrealized gains and losses are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis and the Trust accretes original issue discounts or amortizes
premium on securities purchased using the interest method.
FEDERAL INCOME TAXES: For federal income tax purposes, the Trust is treated as
a separate taxpaying entity. It is the intent of the Trust to continue to meet
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its net income to shareholders.
For this reason and because substantially all of the Trust's gross income
consists of tax-exempt interest, no federal income tax provision is required.
DIVIDENDS AND DISTRIBUTIONS: The Trust declares and pays dividends and
distributions to common shareholders monthly from net investment income, net
realized short-term capital gains and other sources, if necessary. Net
long-term capital gains, if any, in excess of loss carryforwards may be
distributed annually. Dividends and distributions are recorded on the
ex-dividend date. Dividends and distributions to preferred shareholders are
accrued and determined as described in Note 4.
ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 2. AGREEMENTS The Trust has an Investment Advisory Agreement
with BlackRock Financial Management, Inc. (the
"Adviser"), a wholly-owned corporate subsidiary of BlackRock Advisors, Inc.,
which is an indirect majority-owned subsidiary of PNC Bank, N.A., and an
Administration Agreement with Prudential Investments Fund Management LLC
("PIFM"), an indirect, wholly-owned subsidiary of The Prudential Insurance
Company of America.
The investment fee paid to the Adviser is computed weekly and payable
monthly at an annual rate of 0.35% of the Trust's average weekly net investment
assets. The administration fee paid to PIFM is also computed weekly and payable
monthly at an annual rate of 0.10% of the Trust's average weekly net investment
assets.
Pursuant to the agreements, the Adviser provides continuous supervision
of the investment portfolio and pays the compensation of officers of the Trust
who are affiliated persons of the Adviser. PIFM pays occupancy and certain
clerical and accounting costs of the Trust. The Trust bears all other costs and
expenses.
6
NOTE 3. PORTFOLIO Sales of investment securities other than
SECURITIES short-term investments, for the six months
ended April 30, 1999 aggregated $35,000. There
were no purchases for the same period.
The federal income tax basis of the Trust's investments at April 30, 1999
was substantially the same as for financial reporting purposes and,
accordingly, net and gross unrealized appreciation was $2,541,144.
For federal income tax purposes, the Trust had a capital loss
carryforward at October 31, 1998 of approximately $699,000 which will expire in
2002. Accordingly, no capital gain distribution is expected to be paid to
shareholders until net gains have been realized in excess of such amount.
NOTE 4. CAPITAL There are 200 million shares of $.01 par
value common stock authorized. Of the
1,127,093 shares outstanding at April 30, 1999, the Adviser owned 7,093 shares.
As of April 30, 1999 there were 340 shares at Preferred Stock Series R7
outstanding.
The Trust may classify or reclassify any unissued shares of common stock
into one or more series of preferred stock. On July 29, 1993 the Trust
reclassified 170 shares of common stock and issued a series of Auction Market
Preferred Stock ("Preferred Stock") Series R7. The Preferred Stock had a
liquidation value of $50,000 per share plus any accumulated but unpaid
dividends. On May 16, 1995 shareholders approved a proposal to split each share
of the Trust's Auction Rate Municipal Preferred Stock into two shares and
simultaneously reduce each share's liquidation preference from $50,000 to
$25,000. The stock split occurred on July 24, 1995.
Dividends on Series R7 are cumulative at a rate which is reset every 7
days based on the results of an auction. Dividend rates ranged from 3.00% to
3.75% during the six months ended April 30, 1999.
The Trust may not declare dividends or make other distributions on shares
of common stock or purchase any such shares if, at the time of the declaration,
distribution, or purchase, asset coverage with respect to the outstanding
Preferred Stock would be less than 200%.
The Preferred Stock is redeemable at the option of the Trust, in whole or
in part, on any dividend payment date at $25,000 per share plus any accumulated
or unpaid dividends whether or not declared. The Preferred Stock is also
subject to mandatory redemption at $25,000 per share plus any accumulated or
unpaid dividends, whether or not declared if certain requirements relating to
the composition of the assets and liabilities of the Trust as set forth in the
Articles of Incorporation are not satisfied.
The holders of Preferred Stock have voting rights equal to the holders of
common stock (one vote per share) and will vote together with holders of shares
of common stock as a single class. However, holders of Preferred Stock are also
entitled to elect two of the Trust's directors. In addition, the Investment
Company Act of 1940 requires that along with approval by stockholders 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 and (b) take any action requiring a vote of security holders, including,
among other things, changes in the Trust's subclassification as a closed-end
investment company or changes in its fundamental investment restriction.
NOTE 5. DIVIDENDS Subsequent to April 30, 1999, the Board of
Directors of the Trust declared dividends
from undistributed earnings of 0.0663 per common share payable May 28, 1999 to
shareholders of record on May 14, 1999.
For the period May 1, 1999 through May 31, 1999 dividends declared on
Preferred Stock totaled $23,552 in aggregate for the outstanding Preferred
Stock.
7
- --------------------------------------------------------------------------------
The BlackRock Florida Insured Municipal 2008 Term Trust
Portfolio of Investments December 31, 1998
- --------------------------------------------------------------------------------
Option
Principal Call
Rating* Amount Provisions++ Value
(Unaudited) (000) Description (Unaudited) (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--143.1%
AAA $ 1,500 Altamonte Springs Wtr. & Swr. Sys. Rev., 6.00%, 10/01/08, FGIC .............. 10/02 at 102 $ 1,634,400
AAA 10,000 Brevard Cnty. Sch. Brd., C.O.P., Ser. A, 6.375%, 7/01/02+, AMBAC ............ N/A 11,060,700
Canaveral Port Auth. Impvt. Rev., FGIC,
AAA 2,980 6.00%, 6/01/07 .......................................................... 6/02 at 102 3,234,730
AAA 3,155 6.00%, 6/01/08 .......................................................... 6/02 at 102 3,419,421
AAA 1,000 Dade Cnty. Aviation Rev., Ser. A, 6.00%, 10/01/08, AMBAC .................... 10/05 at 102 1,131,070
Dade Cnty. G.O.,
AAA 5,000 Ser. A, Zero Coupon, 2/01/08, MBIA. ..................................... 2/06 at 92.852 3,378,050
AAA 2,000 Ser. B, Zero Coupon, 10/01/08, AMBAC .................................... No Opt. Call 1,328,423
AAA 5,465 Dade Cnty. Sch. Brd., C.O.P., Ser. A, 5.75%, 5/01/04+, MBIA ................. N/A 5,990,624
AAA 2,500 Dade Cnty. Sch. Dist. Rev., 6.125%, 8/01/01+, FGIC .......................... N/A 2,653,525
AAA 2,500 Daytona Beach Wtr. & Swr. Rev., 6.00%, 11/15/09, AMBAC ...................... 11/02 at 102 2,713,325
Duval Cnty. Sch. Dist., G.O., AMBAC,
AAA 3,015 6.30%, 8/01/06 .......................................................... 8/02 at 102 3,259,034
AAA 9,000 6.30%, 8/01/07. ......................................................... 8/02 at 102 9,728,460
Escambia Cnty. Utils. Auth. Sys. Rev., FGIC,
AAA 2,450 Ser. A, 6.10%, 1/01/03+ ................................................. N/A 2,698,773
AAA 1,595 Ser. B, 6.125%, 1/01/09 ................................................. No Opt. Call 1,845,574
AAA 8,255 Florida St. Brd. of Ed. Wtr. & Swr. Sys. Rev., Pub. Ed., 6.125%,
6/01/08, FGIC. .......................................................... 6/02 at 101 8,907,062
Florida St. Div. Bd. Fin. Dept. Rev. Nat. Res. & Pres., Ser. 2000-A,
AAA 14,500 6.25%, 7/01/02+, MBIA ................................................... N/A 15,826,460
AAA 2,500 6.75%, 7/01/01+, AMBAC .................................................. N/A 2,731,425
AAA 3,000 Greater Orlando Aviation Auth., Arpt. Fac. Rev., Ser. D, 6.20%,
10/01/08, AMBAC ......................................................... 10/02 at 102 3,294,960
Hillsborough Cnty. Cap. Impvt., FGIC,
AAA 2,630 6.25%, 8/01/04+ ......................................................... N/A 2,964,878
AAA 1,500 6.60%, 8/01/04+ ......................................................... N/A 1,717,095
AAA 5,000 Hillsborough Cnty. Sch. Brd., C.O.P., 5.875%, 7/01/04+, MBIA ................ N/A 5,564,350
AAA 10,000 Hillsborough Cnty. Tampa Intl. Arpt. Aviation Rev., Ser. A, 5.75%,
10/01/11, AMBAC ......................................................... 10/99 at 104 10,512,000
Indian Trace Cmnty. Dev. Dist., Wtr. Mgmt. Spec. Benefit, Ser. A, MBIA,
AAA 3,000 5.625%, 5/01/08 ......................................................... 5/05 at 102 3,294,930
AAA 2,910 5.75%, 5/01/09 .......................................................... 5/05 at 102 3,212,698
AAA 4,000 Jacksonville Elec. Auth. Rev., 5.75%, 10/01/12, AMBAC. ...................... 10/02 at 102 4,233,480
AAA 5,000 Jacksonville G.O., Ser. A, 5.50%, 10/01/12, AMBAC ........................... 10/02 at 102 5,282,900
AAA 2,000 Lakeland Elec. & Wtr. Rev., Jr. Sub. Lien, 5.875%, 10/01/08, FGIC ........... No Opt. Call 2,279,980
Lakeland Hosp. Sys. Rev., Regl. Med. Care Ctr. Proj., Ser. B, FGIC,
AAA 6,605 6.10%, 11/15/02+ ........................................................ N/A 7,284,456
AAA 3,245 6.10%, 11/15/08 ......................................................... 11/02 at 102 3,517,580
AAA 1,100 Lakeland Wastewater Impvt. Rev., 5.50%, 10/01/08, MBIA. ..................... 10/02 at 102 1,171,676
AAA 4,500 Lee Cnty. Arpt. Rev., Ser. A, 5.50%, 10/01/10, AMBAC ........................ 10/02 at 100 4,681,080
AAA 4,750 Lee Cnty. G.O., Ser. A, 7.30%, 10/01/07, MBIA. .............................. 10/99 at 102 4,972,300
AAA 1,650 Lee Cnty. Local Option Gas Tax Rev., 5.50%, 10/01/99+, MBIA. ................ N/A 1,679,733
See Notes to Financial Statements.
8
- --------------------------------------------------------------------------------
Option
Principal Call
Rating* Amount Provisions++ Value
(Unaudited) (000) Description (Unaudited) (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
AAA $ 1,000 Marion Cnty. Hosp. Dist. Rev., Munroe Regl. Med. Ctr., 6.20%,
10/01/07, FGIC ........................................................... 10/02 at 102 $ 1,094,650
AAA 3,750 Melbourne Wtr. & Swr. Rev., Ser. C, 6.25%, 10/01/08, FGIC. ................... 10/02 at 102 4,118,288
AAA 11,000 Miami Beach Hlth. Fac. Auth. Hosp. Rev., Mt. Sinai Med. Ctr. Proj.,
6.25%, 11/15/08, FSA ..................................................... 11/02 at 102 12,064,910
Miami, G.O., FGIC,
AAA 1,345 5.90%, 12/01/08 .......................................................... No Opt. Call 1,526,952
AAA 1,000 6.00%, 12/01/09 .......................................................... No Opt. Call 1,162,490
AAA 1,000 Orange Cnty. Pub. Svc. Tax, 5.70%, 10/01/08, FGIC ............................ 10/05 at 102 1,107,240
AAA 1,500 Orange Cnty. Tourist Devel. Tax Rev., Ser. A, 5.85%, 10/01/08, MBIA .......... No Opt. Call 1,707,000
AAA 2,000 Osceola Cnty. Trans. Rev., Osceola Pkwy. Proj., 5.95%, 4/01/08, MBIA. ........ 4/02 at 102 2,152,320
AAA 3,100 Palm Bay Util. Rev., Ser. B, 6.10%, 10/01/02+, MBIA .......................... N/A 3,411,240
AAA 7,085 Pasco Cnty. Solid Waste Disp. & Res. Rec. Sys. Rev., 6.00%, 4/01/09,
FGIC ..................................................................... 4/02 at 102 7,642,023
AAA 11,000 Pasco Cnty. Wtr. & Swr. Rev., Ser. A, 6.00%, 10/01/09, FGIC .................. 10/02 at 102 11,957,440
AAA 1,000 Seminole Cnty. Sch. Brd., C.O.P., Ser. A, 5.90%, 7/01/04+, MBIA .............. N/A 1,114,100
AAA 2,000 Seminole Cnty. Wtr. & Swr. Rev., 6.00%, 10/01/09, MBIA. ...................... No Opt. Call 2,311,520
Tampa Wtr. & Swr. Rev., Ser. A, FGIC,
AAA 1,405 6.25%, 10/01/02+. ........................................................ N/A 1,543,687
AAA 1,095 6.25%, 10/01/12. ......................................................... 10/02 at 101 1,185,502
AAA 4,065 Volusia Cnty. Edl. Fac. Auth. Rev., Embry-Riddle Aeronautical Univ.,
6.50%, 10/15/08, CONNIE LEE .............................................. 10/02 at 102 4,487,516
------------
Total Investments--143.1% (cost $186,488,579) ................................ 205,792,030
Other assets in excess of liabilities--2.8% .................................. 3,977,170
Liquidation value of preferred stock--(45.9)% ................................ (66,000,000)
------------
Net Assets Applicable to Common Shareholders--100% ........................... $143,769,200
============
- ----------
* Using the higher of Standard & Poor's, Moody's or Fitch's rating.
+ These bonds are prerefunded. See glossary for definition.
++ Option call provisions: date (month/year) and price of the earliest
optional call or redemption. There may be other
call provisions at varying prices at later dates.
- --------------------------------------------------------------------------------
THE FOLLOWING ABBREVIATIONS ARE USED IN PORTFOLIO DESCRIPTIONS:
AMBAC -- American Municipal Bond Assurance Corporation
C.O.P -- Certificate of Participation
CONNIE LEE -- College Construction Loan Insurance Association
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Security Assurance
G.O.-- General Obligation Bond
MBIA -- Municipal Bond Insurance Association
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
9
- --------------------------------------------------------------------------------
The BlackRock Florida Insured
Municipal 2008 Term Trust
Statement of Assets and Liabilities
December 31, 1998
- --------------------------------------------------------------------------------
Assets
Investments, at value (cost $186,488,579)
(Note 1) ................................................... $ 205,792,030
Cash ......................................................... 989,574
Interest receivable .......................................... 3,174,904
Other assets ................................................. 8,561
-------------
............................................................. 209,965,069
-------------
Liabilities
Investment advisory fee payable (Note 2) ..................... 62,233
Administration fee payable (Note 2) .......................... 17,781
Dividends payable--preferred stock ........................... 5,405
Other accrued expenses ....................................... 110,450
-------------
195,869
-------------
Net Investment Assets ........................................ $ 209,769,200
=============
Net investment assets were comprised of:
Common shares of beneficial interest:
Par value (Note 4) ....................................... $ 87,071
Paid-in capital in excess of par ......................... 120,907,481
Preferred shares of beneficial interest
(Note 4) ................................................. 66,000,000
-------------
186,994,552
Undistributed net investment income ........................ 3,683,824
Accumulated net realized loss .............................. (212,627)
Net unrealized appreciation ................................ 19,303,451
-------------
Net investment assets, December 31, 1998 ................... $ 209,769,200
=============
Net assets applicable to common
shareholders ............................................. $ 143,769,200
=============
Net asset value per common share of
beneficial interest: ($143,769,200 / 8,707,093
common shares of beneficial interest issued
and outstanding) ........................................... $ 16.51
=============
- --------------------------------------------------------------------------------
The BlackRock California Insured
Municipal 2008 Term Trust Inc.
Statement of Operations
Year Ended December 31, 1998
- --------------------------------------------------------------------------------
Net Investment Income
Income
Interest and discount earned ............................... $ 11,561,708
-------------
Expenses
Investment advisory ........................................ 732,329
Administration ............................................. 209,237
Auction agent .............................................. 179,000
Custodian .................................................. 60,000
Reports to shareholders .................................... 46,000
Directors .................................................. 32,000
Audit ...................................................... 31,500
Transfer agent ............................................. 19,500
Legal ...................................................... 7,000
Miscellaneous .............................................. 5,827
-------------
Total expenses ......................................... 1,322,393
-------------
Net investment income ........................................ 10,239,315
-------------
Unrealized Gain On
Investments (Note 3)
Net change in unrealized appreciation
on investments ............................................. 805,116
-------------
Net Increase In Net Investment
Assets Resulting From Operations ........................... $ 11,044,431
=============
See Notes to Financial Statements.
10
- --------------------------------------------------------------------------------
The BlackRock Florida Insured Municipal 2008 Term Trust
Statements of Changes in Net Investment Assets
- --------------------------------------------------------------------------------
Year Ended December 31,
------------------------------
1998 1997
------------- -------------
Increase in Net Investment Assets
Operations:
Net investment income ......................................... $ 10,239,315 $ 10,185,612
Net change in unrealized appreciation on investments .......... 805,116 4,566,620
------------- -------------
Net increase in net investment assets resulting from operations 11,044,431 14,752,232
------------- -------------
Dividends:
To common shareholders from net investment income ............. (7,510,220) (7,510,256)
To preferred shareholders from net investment income .......... (2,108,430) (2,292,150)
------------- -------------
Total dividends ............................................. (9,618,650) (9,802,406)
------------- -------------
Total increase ............................................ 1,425,781 4,949,826
Net Investment Assets
Beginning of year ................................................. 208,343,419 203,393,593
------------- -------------
End of year ....................................................... $ 209,769,200 $ 208,343,419
============= =============
See Notes to Financial Statements.
11
- --------------------------------------------------------------------------------
The BlackRock Florida Insured Municipal 2008 Term Trust
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
PER COMMON SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of the year .................. $ 16.35 $ 15.78 $ 16.04 $ 13.93 $ 16.13
----------- ----------- ----------- ----------- -----------
Net investment income ................................. 1.18 1.17 1.16 1.15 1.15
Net realized and unrealized gain (loss) on investments 0.08 0.52 (0.31) 2.10 (2.27)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) from investment operations ...... 1.26 1.69 0.85 3.25 (1.12)
----------- ----------- ----------- ----------- -----------
Dividends from net investment income to:
Preferred shareholders ................................ (0.24) (0.26) (0.25) (0.28) (0.22)
Common shareholders ................................... (0.86) (0.86) (0.86) (0.86) (0.86)
Distributions in excess of net realized
gain on investments to:
Preferred shareholders ................................ -- -- -- * --
Common shareholders ................................... -- -- -- * --
----------- ----------- ----------- ----------- -----------
Total dividends and distributions ....................... (1.10) (1.12) (1.11) (1.14) (1.08)
----------- ----------- ----------- ----------- -----------
Net asset value, end of year** .......................... $ 16.51 $ 16.35 $ 15.78 $ 16.04 $ 13.93
=========== =========== =========== =========== ===========
Market value, end of year** ............................. $ 16.81 $ 16.06 $ 15.13 $ 15.00 $ 12.13
=========== =========== =========== =========== ===========
TOTAL INVESTMENT RETURN+ ................................ 10.32% 12.25% 6.88% 31.26% (13.27%)
=========== =========== =========== =========== ===========
RATIOS TO AVERAGE NET ASSETS
OF COMMON SHAREHOLDERS:++
Expenses ................................................ 0.93% 0.97% 1.02% 1.02% 1.09%
Net investment income before preferred stock dividends .. 7.17% 7.33% 7.26% 7.55% 7.86%
Preferred stock dividends ............................... 1.48% 1.65% 1.54% 1.84% 1.48%
Net investment income available to common shareholders .. 5.69% 5.68% 5.72% 5.71% 6.38%
SUPPLEMENTAL DATA:
Average net assets of common shareholders (in thousands) $ 142,817 $ 138,890 $ 138,644 $ 133,042 $ 127,640
Portfolio turnover 0% 0% 1% 11% 30%
Net assets of common shareholders, end of year
(in thousands) ...................................... $ 143,769 $ 142,343 $ 137,394 $ 139,628 $ 121,268
Preferred stock outstanding (in thousands) .............. $ 66,000 $ 66,000 $ 66,000 $ 66,000 $ 66,000
Asset coverage per share of preferred stock, end of year# $ 79,458 $ 78,918 $ 77,043 $ 77,889 $ 141,870
- ----------
* Actual amount paid to preferred shareholders was $0.00344 per common share
for the fiscal year ended December 31, 1995. For fiscal year ended
December 31, 1995 the actual amount paid to common shareholders was $.001
per common share.
** Net asset value and market value are published in The Wall Street Journal
each Monday.
# A stock split occurred on July 24, 1995 (Note 4).
+ Total investment return is calculated assuming a purchase of common stock
at the current market price on the first day and a sale at the current
market value on the last day of the year reported. Dividends and
distributions, if any, are assumed for purposes of this calculation to be
reinvested at prices obtained under the Trust's dividend reinvestment
plan. Total investment return does not reflect brokerage commissions.
++ Ratios calculated on the basis of income and expenses applicable to both
the common and preferred shares, and preferred stock dividends, relative
to the average net assets of common shareholders.
The information above represents the audited operating performance data for a
share of common stock outstanding, total investment return, ratios to average
net assets and other supplemental data for the years indicated. This information
has been determined based upon financial information provided in the financial
statements and market value data for Trust's shares.
See Notes to Financial Statements.
12
- --------------------------------------------------------------------------------
The BlackRock Florida Insured
Municipal 2008 Term Trust
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 1. Organization & Accounting Policies
The BlackRock Florida Insured Municipal 2008 Term Trust (the "Trust") was
organized in Massachusetts on August 7, 1992 as a non-diversified closed-end
management investment company. The Trust's investment objective is to manage a
non-diversified portfolio of high quality securities that will return $15 per
share to investors on or about December 31, 2008 while providing current income
exempt from regular federal income tax and Florida intangible property tax. The
ability of issuers of debt securities held by the Trust to meet their
obligations may be affected by economic developments in the state, a specific
industry or region. No assurance can be given that the Trust's investment
objective will be achieved.
The following is a summary of significant accounting policies followed by
the Trust.
Securities Valuation: Municipal securities (including commitments to purchase
such securities on a "when-issued" basis) are valued on the basis of prices
provided by a pricing service which uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities in
determining values. Any securities or other assets for which such current market
quotations are not readily available are valued at fair value as determined in
good faith under procedures established by and under the general supervision and
responsibility of the Trust's Board of Trustees.
Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days or less
are valued at amortized cost, if their term to maturity from date of purchase is
60 days or less or by amortizing their value on the 61st day prior to maturity,
if their original term to maturity from date of purchase exceeded 60 days.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized and unrealized gains and losses are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis and the Trust amortizes premium or accretes original issue
discount on securities purchased using the interest method.
Federal Income Taxes: It is the Trust's intention to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute sufficient net income to shareholders. For this
reason and because substantially all of the Trust's gross income consists of
tax-exempt interest, no Federal income tax provision is required.
Dividends and Distributions: The Trust declares and pays dividends and
distributions to common shareholders monthly from net investment income, net
realized short-term capital gains and other sources, if necessary. Net long-term
capital gains, if any, in excess of loss carryforwards may be distributed
annually. Dividends and distributions are recorded on the ex-dividend date.
Dividends and distributions to preferred shareholders are accrued and determined
as described in Note 4.
Estimates: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Note 2. Agreements
The Trust has an Investment Advisory Agreement with BlackRock Financial
Management, Inc. (the "Adviser"), a wholly-owned corporate subsidiary of
BlackRock Advisors, Inc., which is an indirect majority-owned subsidiary of PNC
Bank, N.A., and an Administration Agreement with Princeton Administrators, L.P.
(the "Administrator"), an indirect wholly-owned subsidiary of Merrill Lynch &
Co., Inc.
The investment advisory fee paid to the Adviser is computed weekly and
payable monthly at an annual rate of 0.35% of the Trust's average weekly net
investment assets. The administration fee paid to the Administrator is also
computed weekly and payable monthly at an annual rate of 0.10% of the Trust's
average weekly net investment assets.
Pursuant to the agreements, the Adviser provides continuous supervision of
the investment portfolio and pays the compensation of officers of the Trust who
are affiliated persons of the Adviser. The Administrator pays occupancy and
certain clerical and accounting costs of the Trust. The Trust bears all other
costs and expenses.
13
Note 3. Portfolio Securities
There were no purchases and sales of investment securities, other than for
short-term investments, for the year ended December 31, 1998.
The federal income tax basis of the Trust's investments at December 31,
1998 was substantially the same as the basis for financial reporting, and
accordingly, gross and net unrealized appreciation for federal income tax
purposes was $19,303,451.
For federal income tax purposes, the Trust had a capital loss carryforward
at December 31, 1998 of $212,627 which will expire in 2002. Accordingly, no
capital gain distribution is expected to be paid to shareholders until net gains
have been realized in excess of such amount.
Note 4. Capital
There are 200 million shares of $.01 par value of benefi- cial interest
authorized. Of the 8,707,093 common shares outstanding at December 31, 1998, the
Adviser owned 7,093 shares. As of December 31, 1998, there were 2,640 Series R7
preferred shares outstanding
The Trust may classify or reclassify any unissued common shares of
beneficial interest into one or more series of preferred stock. On November 23,
1992, the Trust reclassified 1,320 shares of beneficial interest and issued a
series of Auction Market Preferred Stock ("Preferred Stock") as follows: Series
R7--1,320 shares. The Preferred Stock has a liquidation value of $25,000 per
share plus any accumulated but unpaid dividends. On May 16, 1995 shareholders
approved a proposal to split each share of the Trust's Auction Rate Municipal
Preferred Stock into two shares and simultaneously reduce each share's
liquidation preference from $50,000 to $25,000 plus accumulated but unpaid
dividends. The stock split occurred on July 24, 1995.
Dividends on Series R7 are cumulative at a rate which is reset every 7
days based on the results of an auction. Dividend rates ranged from 0.90% to
4.15% during the year ended December 31, 1998.
The Trust may not declare dividends or make other distributions on shares
of common stock or purchase any such shares if, at the time of the declaration,
distribution or purchase, asset coverage with respect to the outstanding
Preferred Stock would be less than 200%.
The Preferred Stock is redeemable at the option of the Trust, in whole or
in part, on any dividend payment date at $25,000 per share plus any accumulated
or unpaid dividends whether or not declared. The Preferred Stock is also subject
to mandatory redemption at $25,000 per share plus any accumulated or unpaid
dividends, whether or not declared if certain requirements relating to the
composition of the assets and liabilities of the Trust as set forth in the
Articles of Incorporation are not satisfied.
The holders of Preferred Stock have voting rights equal to the holders of
common stock (one vote per share) and will vote together with holders of shares
of common stock as a single class. However, holders of Preferred Stock are also
entitled to elect two of the Trust's trustees. In addition, the Investment
Company Act of 1940 requires that along with approval by stockholders 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
Stock, and (b) take any action requiring a vote of security holders, including,
among other things, changes in the Trust's subclassification as a closed-end
investment company or changes in its fundamental investment restrictions.
Note 5. Dividends
Subsequent to December 31, 1998, the Board of Trustees of the Trust declared a
dividend from undistributed earnings of $0.07188 per common share payable
January 29, 1999 to shareholders of record on January 15, 1999.
For the period January 1, 1999 to January 31, 1999 dividends declared on
Preferred Stock totalled $158,158 in aggregate for the outstanding Preferred
Stock series.
14
- --------------------------------------------------------------------------------
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
The BlackRock Florida Insured Municipal 2008 Term Trust:
We have audited the accompanying statement of assets and liabilities including
the portfolio of investments, of The BlackRock Florida Insured Municipal 2008
Term Trust, of December 31, 1998, and the related statements of operations, and
of changes in net assets for each of the two years in the period then ended and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1998, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The BlackRock
Florida Insured Municipal 2008 Term Trust as of December 31, 1998, the results
of its operations, the changes in its net investment assets and the financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
February 12, 1999
15
- --------------------------------------------------------------------------------
THE BLACKROCK FLORIDA INVESTMENT QUALITY MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPA OPTION CALL
RATING* AMOUNT PROVISIONS+ VALUE
(UNAUDITED) (000) DESCRIPTION (UNAUDITED) (NOTE 1)
===================== =============================================================================== =============== ==============
LONG-TERM INVESTMENTS-144.1%
FLORIDA-119.7%
Boynton Beach Util. Sys. Rev., FGIC,
AAA $ 170 6.25%, 11/01/20, ETM ......................................................... No Opt. Call $ 199,201
AAA 830 6.25%, 11/01/20 .............................................................. 11/02 at 102 903,430
A1 1,000 Brevard Cnty. Hlth. Fac., Holmes Regl. Med. Ctr., 5.75%, 10/01/13 ............. 10/03 at 102 1,051,000
AAA 1,000 Brevard Cnty. Sch. Brd., C.O.P., Ser. B, 5.50%, 7/01/21, AMBAC ................ 7/06 at 102 1,043,630
AAA 1,000 Collier Cnty. Sch. Brd., C.O.P., 5.00%, 2/15/16, FSA .......................... 2/06 at 101 1,002,040
AAA 1,000 Dade Cnty. Aviation Rev., Miami Int'l Arpt., Ser. C, 5.75%, 10/01/25, MBIA..... 10/05 at 102 1,081,950
AAA 1,000 Dade Cnty. Sch. Brd., C.O.P., Ser A., 6.00%, 5/01/04, MBIA .................... 5/04 at 101 1,111,000
AAA 1,000 Dade Cnty. Spl. Oblig., Ser. B, Zero Coupon, 10/01/08, AMBAC++ ................ N/A 473,920
AAA 1,000 First Florida Gov. Fin. Comn. Rev., Gainsville, Hollywood & St. Petersburg,
5.75%, 7/01/16, AMBAC ......................................................... 7/06 at 101 1,081,960
AAA 775 Florida Hsg. Fin. Agcy., Sngl. Fam. Mtge., Ser. A, 6.25%, 7/01/11, GNMA ....... 7/04 at 102 828,382
AA+ 1,000 Florida St. Brd. of Ed., Pub. Ed., Ser. B, 5.875%, 6/01/24 .................... 6/05 at 101 1,078,940
Aa2 1,000 Florida St. Brd. of Ed., Ser. C, 5.85%, 6/01/18 ............................... 6/03 at 101 1,071,560
AAA 500 Florida St. Dept. of Corrections, C.O.P., Okeechobee Correctional Fac.,
6.25%, 3/01/15, AMBAC ......................................................... 3/05 at 102 561,365
AA+ 1,000 Florida St. Dept. of Trans., 5.80%, 7/01/21 ................................... 7/05 at 101 1,077,200
AAA 1,000 Florida St. Div. of Bond Fin. Dept., Gen. Svcs. Rev., Dept. of Environ.
Preservation, Ser. A, 5.75%, 7/01/11, AMBAC ................................... 7/05 at 101 1,088,190
AAA 1,000 Jacksonville Cap. Impvt. Rev., Gator Bowl Project., 5.50%, 10/01/14, AMBAC 10/04 at 101 1,045,580
AAA 1,000 Lee Cnty. Trans. Fac. Rev., 5.75%, 10/01/22, MBIA ............................. 10/05 at 102 1,082,570
Aa2 1,000 Orlando Utils. Comn. Wtr. & Elec. Rev., Ser. D, 5.50%, 10/01/20 ............... 10/99 at 100 1,007,430
A- 1,000 Orlando & Orange Cnty. Expwy., 5.95%, 7/01/23 ................................. 7/01 at 102 1,028,100
AAA 1,000 Seminole Cnty. Sch. Brd., C.O.P., Ser. A, 6.125%, 7/01/04, MBIA++ ............. N/A 1,128,010
AAA 1,000 Sunrise Florida Util. Sys. Rev. Ser. A, 5.75%, 10/1/06, AMBAC++ ............... N/A 1,124,910
Baa2 1,000 Volusia Cnty. Ed. Fac. Auth. Rev., 6.125%, 10/15/16 ........................... 10/06 at 102 1,092,860
------------
21,163,228
------------
PUERTO RICO-24.4%
Puerto Rico Elec. Pwr. Auth. Rev.,
Baa1 1,000 Ser. U, 6.00%, 7/01/14 ....................................................... 7/04 at 102 1,083,190
BBB+ 1,000 Ser. T, 6.375%, 7/01/04++ .................................................... N/A 1,140,590
Puerto Rico Pub. Bldg. Auth., Gtd. Pub. Ed. & Hlth. Fac., Ser. M,
A 1,000 5.50%, 7/01/21 ............................................................... 7/03 at 101.5 1,039,910
A 1,000 5.75%, 7/01/15 ............................................................... 7/03 at 101.5 1,053,370
------------
4,317,060
------------
Total Long-Term Investments (cost $22,853,182)................................. 25,480,288
------------
See Notes to Financial Statements.
16
- --------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
============= ========== ============================================================================== ===============
SHORT-TERM INVESTMENTS**-1.7%
A1+ $300 Hillsborough Cnty. Ind. Dev. Auth., Poll. Ctrl. Rev., Tampa Elec. Co., Gannon,
3.70%, 11/02/98, FRDD (cost $300,000)......................................... $ 300,000
------------
TOTAL INVESTMENTS-145.8% (COST $23,153,182) .................................. 25,780,288
Other assets in excess of liabilities-(2.3)% ................................. 403,994
Liquidation value of preferred stock-(48.1)% ................................. (8,500,000)
------------
Net Assets Applicable to Common Shareholders-100% ............................ $ 17,684,282
============
- ----------
* Rating: using the higher of Standard & Poor's, Moody's or Fitch's rating.
** For purposes of amortized cost valuation, the maturity date of these
instruments is considered to be the earlier of the next date on which the
security can be redeemed at par or the next date on which the rate of
interest is adjusted.
+ Option call Provisions: date (month/year) and prices of the earliest option
call on redemption. There may be other call provisions at varying prices at
later dates.
++ This bond is prerefunded. See Glossary for definitions.
THE FOLLOWING ABBREVIATIONS ARE USED IN PORTFOLIO DESCRIPTIONS:
AMBAC - American Municipal Bond Assurance Corporation FRDD - Floating Rate Daily Demand
C.O.P. - Certificate of Participation FSA - Financial Security Assurance
ETM - Escrowed To Maturity GNMA - Government National Mortgage Association
FGIC - Financial Guaranty Insurance Company MBIA - Municipal Bond Insurance Association
See Notes to Financial Statements.
17
- --------------------------------------------------------------------------------
THE BLACKROCK FLORIDA INVESTMENT QUALITY
MUNICIPAL TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
ASSETS
Investments, at value ($23,153,182) (Note 1).......... $25,780,288
Cash ................................................. 97,265
Interest receivable .................................. 368,911
-----------
26,246,464
-----------
LIABILITIES
Advisory fee payable (Note 2) ........................ 8,821
Administration fee payable (Note 2) .................. 2,520
Dividends payable-preferred stock .................... 1,583
Other accrued expenses ............................... 49,258
-----------
62,182
-----------
NET INVESTMENT ASSETS ................................ $26,184,282
===========
Net investment assets were comprised of:
Common stock:
Par value (Note 4) ................................. $ 11,271
Paid-in capital in excess of par ................... 15,585,445
Preferred stock (Note 4) ............................ 8,500,000
-----------
24,096,716
Undistributed net investment income ................. 158,219
Accumulated net realized loss ....................... (697,759)
Net unrealized appreciation ......................... 2,627,106
-----------
Net investment assets, October 31, 1998 .............. $26,184,282
===========
Net assets applicable to common shareholders ......... $17,684,282
===========
Net asset value per share:
($17,684,282 / 1,127,093 shares of
common stock issued and outstanding) ............... $ 15.69
===========
- --------------------------------------------------------------------------------
THE BLACKROCK FLORIDA INVESTMENT QUALITY
MUNICIPAL TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1998
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest and discount earned ........... $1,405,985
----------
Expenses
Investment advisory .................... 89,817
Administration ......................... 25,662
Shareholder reports .................... 22,500
Auction agent .......................... 21,000
Directors .............................. 14,000
Transfer agent ......................... 10,000
Audit .................................. 7,000
Legal .................................. 5,500
Custodian .............................. 3,000
Miscellaneous .......................... 28,978
----------
Total expenses ........................... 227,457
----------
Net investment income .................... 1,178,528
----------
UNREALIZED GAIN
ON INVESTMENTS (NOTE 3)
Net change in unrealized appreciation
on investments .......................... 912,460
----------
NET INCREASE IN NET INVESTMENT
ASSETS RESULTING FROM OPERATIONS ......... $2,090,988
==========
See Notes to Financial Statements.
18
- --------------------------------------------------------------------------------
THE BLACKROCK FLORIDA INVESTMENT QUALITY MUNICIPAL TRUST
STATEMENTS OF CHANGES IN NET INVESTMENT ASSETS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED
OCTOBER 31,
---------------------------------
1998 1997
--------------- ---------------
INCREASE (DECREASE) IN NET INVESTMENT ASSETS
Operations:
Net investment income ....................................................... $ 1,178,528 $ 1,200,029
Net realized gain on investments ............................................ -- 39,699
Net change in unrealized appreciation on investments ........................ 912,460 677,912
------------ ------------
Net increase in net investment assets resulting from operations ............. 2,090,988 1,917,640
Dividends and distributions:
To common shareholders from net investment income ........................... (839,826) (806,563)
To preferred shareholders from net investment income ........................ (311,954) (310,486)
To common shareholders in excess of net realized gain on investments ........ -- (4,875)
To preferred shareholders in excess of net realized gain on investments ..... -- (1,819)
------------ ------------
Total dividends and distributions ........................................... (1,151,780) (1,123,743)
------------ ------------
Total increase ............................................................ 939,208 793,897
NET INVESTMENT ASSETS
Beginning of year ............................................................ 25,245,074 24,451,177
------------ ------------
End of year .................................................................. $ 26,184,282 $ 25,245,074
============ ============
See Notes to Financial Statements.
19
- --------------------------------------------------------------------------------
THE BLACKROCK FLORIDA INVESTMENT QUALITY MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31,
----------------------------
1998 1997
PER SHARE OPERATING PERFORMANCE: ------------- --------------
Net asset value, beginning of year ............................... $ 14.86 $ 14.15
-------- --------
Net investment income ........................................... 1.05 1.06
Net realized and unrealized gain (loss) on investments .......... .81 .65
-------- --------
Net increase (decrease) from investment operations .............. 1.86 1.71
-------- --------
Dividends and distributions:
Dividends from net investment income to:
Common shareholders ............................................ (.75) (.72)
Preferred shareholders ......................................... (.28) (.28)
Distributions from capital gains to:
Common shareholders ............................................ -- --
Preferred shareholders ......................................... -- --
Distributions in excess of net realized gain on
investments to:
Common shareholders ............................................ -- **
Preferred shareholders ......................................... -- **
-------- ---------
Total dividends and distributions .............................. (1.03) (1.00)
-------- ---------
Net asset value, end of year* .................................... $ 15.69 $ 14.86
======== =========
Per share market value, end of year* ............................. $ 15.125 $ 13.3125
======== =========
TOTAL INVESTMENT RETURN+: ........................................ 19.70% 14.95%
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS++:
Expenses ......................................................... 1.31% 1.26%
Net investment income before preferred stock dividends ........... 6.81% 7.43%
Preferred stock dividends ........................................ 1.80% 1.92%
Net investment income available to common shareholders ........... 5.01% 5.51%
SUPPLEMENTAL DATA:
Average net assets of common shareholders (in thousands) ......... $ 17,299 $ 16,150
Portfolio turnover rate .......................................... 0% 5%
Net assets of common shareholders, end of year (in thousands)..... $ 17,684 $ 16,745
Asset coverage per share of preferred stock, end of year# ........ $ 77,017 $ 74,253
Preferred stock outstanding (in thousands) ....................... $ 8,500 $ 8,500
FOR THE YEAR ENDED OCTOBER 31,
---------------------------------------
1996 1995 1994
PER SHARE OPERATING PERFORMANCE: ----------- ------------- -------------
Net asset value, beginning of year ............................... $ 14.01 $ 11.69 $ 14.77
-------- --------- --------
Net investment income ........................................... 1.03 1.05 .98
Net realized and unrealized gain (loss) on investments .......... .13 2.36 (3.02)
-------- --------- --------
Net increase (decrease) from investment operations .............. 1.16 3.41 (2.04)
-------- --------- --------
Dividends and distributions:
Dividends from net investment income to:
Common shareholders ............................................ (.73) (.79) (.79)
Preferred shareholders ......................................... (.28) (.30) (.20)
Distributions from capital gains to:
Common shareholders ............................................ -- -- (.04)
Preferred shareholders ......................................... -- -- (.01)
Distributions in excess of net realized gain on
investments to:
Common shareholders ............................................ (.01) -- --
Preferred shareholders ......................................... ** -- --
--------- --------- ---------
Total dividends and distributions .............................. (1.02) (1.09) (1.04)
-------- --------- ---------
Net asset value, end of year* .................................... $ 14.15 $ 14.01 $ 11.69
======== ========= =========
Per share market value, end of year* ............................. $ 12.25 $ 12.625 $ 10.375
======== ========= =========
TOTAL INVESTMENT RETURN+: ........................................ 2.92% 29.29% (20.98%)
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS++:
Expenses ......................................................... 1.46% 1.44% 1.50%
Net investment income before preferred stock dividends ........... 7.41% 7.96% 7.34%
Preferred stock dividends ........................................ 1.97% 2.28% 1.48%
Net investment income available to common shareholders ........... 5.44% 5.68% 5.86%
SUPPLEMENTAL DATA:
Average net assets of common shareholders (in thousands) ......... $ 15,699 $ 14,759 $ 15,015
Portfolio turnover rate .......................................... 73% 112% 206%
Net assets of common shareholders, end of year (in thousands)..... $ 15,951 $ 15,788 $ 13,174
Asset coverage per share of preferred stock, end of year# ........ $ 71,915 $ 71,437 $ 127,494
Preferred stock outstanding (in thousands) ....................... $ 8,500 $ 8,500 $ 8,500
- ----------
* Net asset value and market value are published in The Wall Street Journal
each Monday.
** Actual amount paid to common shareholders for the year ended October 31, 1997
was $0.004325, and the actual amount paid to preferred shareholders was
$0.000185 per common share. Actual amount paid to preferred shareholders for
the year ended October 31, 1996 was $0.0030 per common share.
# A stock split occurred on July 24, 1995 (Note 4).
+ Total investment return is calculated assuming a purchase of common stock at
the current market value on the first day and a sale at the current market
price on the last day of each year reported. Dividends and distributions are
assumed for purposes of this calculation to be reinvested at prices obtained
under the Trust's dividend reinvestment plan. This calculation does not
reflect brokerage commissions.
++ Ratios are calculated on the basis of income, expenses and preferred stock
dividends applicable to both the common and preferred shares relative to the
average net assets of common shareholders.
The information above represents the audited operating performance data for a
share of common stock outstanding, total investment return, ratios to average
net assets and other supplemental data for the years indicated. This
information has been determined based upon financial information provided in
the financial statements and market value data for the Trust's common shares.
See Notes to Financial Statements.
20
- --------------------------------------------------------------------------------
THE BLACKROCK FLORIDA INVESTMENT
QUALITY MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION & ACCOUNTING POLICIES
The BlackRock Florida Investment Quality Municipal Trust (the "Trust") was
organized in Massachusetts on April 15, 1993 as a non-diversified closed-end
management investment company. The Trust's investment objective is to provide
high current income exempt from regular federal income tax and Florida
intangible personal property tax consistent with the preservation of capital.
The ability of issuers of debt securities held by the Trust to meet their
obligations may be affected by economic developments in the state, a specific
industry or region. No assurance can be given that the Trust's investment
objective will be achieved.
The following is a summary of significant accounting policies followed by
the Trust.
SECURITIES VALUATION: Municipal securities (including commitments to purchase
such securities on a "when-issued" basis) are valued on the basis of prices
provided by a pricing service which uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities in
determining values. Any securities or other assets for which such current
market quotations are not readily available are valued at fair value as
determined in good faith under procedures established by and under the general
supervision and responsibility of the Trust's Board of Directors.
Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days or
less are valued at amortized cost, if their term to maturity from date of
purchase is 60 days or less, or by amortizing their value on the 61st day prior
to maturity, if their original term to maturity from date of purchase exceeded
60 days.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized and unrealized gains and losses are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis and the Trust accretes original issue discounts or amortizes
premium on securities purchased using the interest method.
FEDERAL INCOME TAXES: For federal income tax purposes, the Trust is treated as
a separate taxpaying entity. It is the intent of the Trust to continue to meet
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its net income to shareholders.
For this reason and because substantially all of the Trust's gross income
consists of tax-exempt interest, no federal income tax provision is required.
DIVIDENDS AND DISTRIBUTIONS: The Trust declares and pays dividends and
distributions to common shareholders monthly from net investment income, net
realized short-term capital gains and other sources, if necessary. Net
long-term capital gains, if any, in excess of loss carryforwards may be
distributed annually. Dividends and distributions are recorded on the
ex-dividend date. Dividends and distributions to preferred shareholders are
accrued and determined as described in Note 4.
DEFERRED ORGANIZATION EXPENSES: A total of $16,000 was incurred in connection
with the organization of the Trust. These costs were deferred and have been
amortized ratably over a period of sixty months from the date the Trust
commenced investment operations.
ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 2. AGREEMENTS
The Trust has an Investment Advisory Agreement with BlackRock Financial
Management, Inc. (the "Adviser"), a wholly-owned corporate subsidiary of
BlackRock Advisors, Inc., which is an indirect majority-owned subsidiary of PNC
Bank, N.A., and an Administration Agreement with Prudential Investments Fund
Management LLC ("PIFM"), an indirect, wholly-owned subsidiary of The Prudential
Insurance Company of America.
The investment fee paid to the Adviser is computed weekly and payable
monthly at an annual rate of 0.35% of the Trust's average weekly net investment
assets. The administration fee paid to PIFM is also computed weekly and payable
monthly at an annual rate of 0.10% of the Trust's average weekly net investment
assets.
Pursuant to the agreements, the Adviser provides continuous supervision
of the investment portfolio and pays the compensation of officers of the Trust
who are affiliated persons of the Adviser. PIFM pays occupancy and certain
clerical and accounting costs of the Trust. The Trust bears all other costs and
expenses.
21
NOTE 3. PORTFOLIO SECURITIES
There were no purchases or sales of investment securi ties other than
short-term investments, for the year ended October 31, 1998.
The federal income tax basis of the Trust's investments at October 31,
1998 was substantially the same as for financial reporting purposes and,
accordingly, net and gross unrealized appreciation was $2,627,106.
For federal income tax purposes, the Trust had a capital loss
carryforward at October 31, 1998 of approximately $699,000 which will expire in
2002. Accordingly, no capital gain distribution is expected to be paid to
shareholders until net gains have been realized in excess of such amount.
NOTE 4. CAPITAL
There are 200 million shares of $.01 par value common stock authorized. Of
the 1,127,093 shares outstanding at October 31, 1998, the Adviser owned 7,093
shares. As of October 31, 1998 there were 340 shares at Preferred Stock Series
R7 outstanding.
The Trust may classify or reclassify any unissued shares of common stock
into one or more series of preferred stock. On July 29, 1993 the Trust
reclassified 170 shares of common stock and issued a series of Auction Market
Preferred Stock ("Preferred Stock") Series R7. The Preferred Stock had a
liquidation value of $50,000 per share plus any accumulated but unpaid
dividends. On May 16, 1995 shareholders approved a proposal to split each share
of the Trust's Auction Rate Municipal Preferred Stock into two shares and
simultaneously reduce each share's liquidation preference from $50,000 to
$25,000. The stock split occurred on July 24, 1995.
Dividends on Series R7 are cumulative at a rate which is reset every 7
days based on the results of an auction. Dividend rates ranged from 3.35% to
4.20% during the year ended October 31, 1998.
The Trust may not declare dividends or make other distributions on shares
of common stock or purchase any such shares if, at the time of the declaration,
distribution, or purchase, asset coverage with respect to the outstanding
Preferred Stock would be less than 200%.
The Preferred Stock is redeemable at the option of the Trust, in whole or
in part, on any dividend payment date at $25,000 per share plus any accumulated
or unpaid dividends whether or not declared. The Preferred Stock is also
subject to mandatory redemption at $25,000 per share plus any accumulated or
unpaid dividends, whether or not declared if certain requirements relating to
the composition of the assets and liabilities of the Trust as set forth in the
Articles of Incorporation are not satisfied.
The holders of Preferred Stock have voting rights equal to the holders of
common stock (one vote per share) and will vote together with holders of shares
of common stock as a single class. However, holders of Preferred Stock are also
entitled to elect two of the Trust's directors. In addition, the Investment
Company Act of 1940 requires that along with approval by stockholders 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 and (b) take any action requiring a vote of security holders, including,
among other things, changes in the Trust's subclassification as a closed-end
investment company or changes in its fundamental investment restriction.
NOTE 5. DIVIDENDS
Subsequent to October 31, 1998, the Board of Directors of the Trust
declared dividends from undistributed earnings of 0.06630 per common share
payable November 30, 1998 to shareholders of record on November 16, 1998.
For the period November 1, 1998 through November 30, 1998 dividends
declared on Preferred Stock totalled $22,166 in aggregate for the outstanding
Preferred Stock.
22
- --------------------------------------------------------------------------------
THE BLACKROCK FLORIDA INVESTMENT QUALITY MUNICIPAL TRUST
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To The Shareholders and Board of Directors of
The BlackRock Florida Investment Quality Municipal Trust Inc.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of The BlackRock Florida Investment
Quality Municipal Trust Inc. as of October 31, 1998 and the related statements
of operations for the year then ended and of changes in net investment assets
for each of the two years in the period then ended and the financial highlights
for each of the five years in the period then ended. These financial statements
and financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at October
31, 1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The BlackRock
Florida Investment Quality Municipal Trust Inc. at October 31, 1998, and the
results of its operations, the changes in its net investment assets and its
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
Deloitte & Touche LLP
New York, New York
December 11, 1998
23
ANNEX A
DESCRIPTION OF CREDIT RATINGS FOR MUNICIPAL OBLIGATIONS
Standard & Poor's Corporation--A brief description of the applicable Standard &
Poor's Corporation ("S&P") rating symbols and their meanings (as published by
S&P) follows:
LONG TERM DEBT
An S&P corporate or municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The debt rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
an audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default--capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with
the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the laws
of bankruptcy and other laws affecting creditors' rights.
INVESTMENT GRADE
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in
small degree.
A Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
SPECULATIVE GRADE RATING
Debt rated "BB", "B", "CCC", "CC" and "C" is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. "BB" indicates the least degree of speculation and "C" the highest.
While such debt will likely have some quality and protective characteristics
these are outweighed by major uncertainties or major exposures to adverse
conditions.
A-1
BB Debt rated "BB" has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments. The "BB" rating category is also
used for debt subordinated to senior debt that is assigned an actual
or implied "BBB--" rating.
B Debt rated "B" has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal.
The "B" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BB" or "BB--" rating.
CCC Debt rated "CCC" has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and
economic conditions to meet timely payment of interest and repayment
of principal. In the event of adverse business, financial, or
economic conditions, it is not likely to have the capacity to pay
interest and repay principal.
The "CCC" rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied "B" or "B--"
rating.
CC The rating "CC" typically is applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" debt rating.
C The rating "C" typically is applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC--" debt rating. The
"C" rating may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued.
CI The rating "CI" is reserved for income bonds on which no interest is
being paid.
D Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period.
The "D" rating also will be used upon the filing of a bankruptcy
petition if debt service payments are jeopardized.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project financed by the debt being rated and indicates that payment of debt
service requirements is largely or entirely dependent upon the successful and
timely completion of the project. This rating, however, while addressing credit
quality subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise judgment with respect to such likelihood and risk.
L The letter "L" indicates that the rating pertains to the principal
amount of those bonds to the extent that the underlying deposit
collateral is federally insured by the Federal Savings & Loan
Insurance Corp. or the Federal Deposit Insurance Corp.* and interest
is adequately collateralized. In the case of certificates of deposit
the letter "L" indicates that the deposit, combined with other
deposits being held in the same right and capacity will be honored
for principal and accrued pre-default interest up to the Federal
insurance
A-2
limits within 30 days after closing of the insured institution or, in
the event that the deposit is assumed by a successor insured
institution, upon maturity.
* Continuance of the rating is contingent upon S&P's receipt of an
executed copy of the escrow agreement or closing documentation
confirming investments and cash flow.
NR Indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
MUNICIPAL NOTES
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note rating.
Notes maturing beyond 3 years will most likely receive a long-term debt rating.
The following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity
relative to other maturities, the more likely it will
be treated as a note).
-- Source of payment (the more dependent the issue is on
the market for its refinancing, the more likely it will
be treated as a note).
Note rating symbols are as follows:
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics
will be given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
A note rating is not a recommendation to purchase, sell, or hold a security
inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information or based on other circumstances.
COMMERCIAL PAPER
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the
highest quality obligations to "D" for the lowest. These categories are as
follows:
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign(+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high
as for issues designated "A-1."
A-3
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated "B" are regarded as having only speculative capacity
for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated "D" is in payment default. The "D" rating category is
used when interest payments or principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period.
A commercial rating is not a recommendation to purchase, sell, or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information or based on other circumstances.
Moody's Investors Service, Inc.--A brief description of the applicable
Moody's Investors Service, Inc. ("Moody's") rating symbols and their meanings
(as published by Moody's) follows:
MUNICIPAL BONDS
Aaa Bonds which are rated Aaa are judged to be of the best quality.They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may
A-4
be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect
to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Con(...) Bonds for which the security depends upon the completion of some
act or the fulfillment of some condition are rated conditionally.
These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation
experience, (c) rentals which begin when facilities are completed,
or (d) payments to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
category from Aa to B in the public finance sectors. The modifier 1 indicates
that the issuer is in the higher end of its letter rating category; the modifier
2 indicates a mid-range ranking; the modifier 3 indicates that the issuer is in
the lower end of the letter ranking category.
SHORT-TERM LOANS
MIG 1/VMIG 1 This designation denotes best quality. There is
present strong protection by established cash flows, superior
liquidity support or demonstrated broadbased access to the market
for refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less
well-established.
MIG 4/VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
S.G. This designation denotes speculative quality. Debt instruments in
this category lack margins of protection.
A-5
COMMERCIAL PAPER
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:
-- Leading market positions in well-established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
-- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
-- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Fitch IBCA, Inc.--A brief description of the applicable Fitch IBCA, Inc.
("Fitch") ratings symbols and meanings (as published by Fitch) follows:
LONG-TERM CREDIT RATINGS
LONG-TERM CREDIT RATINGS
INVESTMENT GRADE
AAA Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low
expectation of credit risk. They indicate very strong
capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable
events.
A High credit quality. `A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered strong. This capacity may,
A-6
nevertheless, be more vulnerable to changes in circumstances
or in economic conditions than is the case for higher
ratings.
BBB Good credit quality. `BBB' ratings indicate that there is currently
a low expectation of credit risk. The capacity for timely payment
of financial commitments is considered adequate, but adverse
changes in circumstances and in economic conditions are more likely
to impair this capacity. This is the lowest investment-grade
category.
SPECULATIVE GRADE
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains. Financial
commitments are currently being met; however, capacity for
continued payment is contingent upon a sustained, favorable
business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity
for meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A `CC' rating
indicates that default of some kind appears probable. `C' ratings
signal imminent default.
DDD, DD,
and D Default. The ratings of obligations in this category are based on
their prospects for achieving partial or full recovery in a
reorganization or liquidation of the obligor. While expected
recovery values are highly speculative and cannot be estimated with
any precision, the following serve as general guidelines. `DDD'
obligations have the highest potential for recovery, around
90%-100% of outstanding amounts and accrued interest. `DD'
indicates potential recoveries in the range of 50%-90%, and `D' the
lowest recovery potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all of their
obligations. Entities rated `DDD' have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated `DD' and `D' are generally undergoing a formal
reorganization or liquidation process; those rated `DD' are likely to satisfy a
higher portion of their outstanding obligations, while entities rated `D' have a
poor prospect for repaying all obligations.
Short-Term Credit Ratings
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial commitments
in a timely manner.
F1 Highest credit quality. Indicates the strongest capacity for timely
payment of financial commitments; may have an added "+" to denote
any exceptionally strong credit feature.
F2 Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as
in the case of the higher ratings.
F3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.
A-7
B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.
C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.
D Default. Denotes actual or imminent payment default.
NOTES:
"+" or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the `AAA' long-term rating
category, to categories below `CCC', or to short-term ratings other than `F1'.
`NR' indicates that Fitch IBCA does not rate the issuer or issue in question.
`Withdrawn': A rating is withdrawn when Fitch IBCA deems the amount of
information available to be inadequate for rating purposes, or when an
obligation matures, is called, or refinanced.
Rating Alert: Ratings are placed on Rating Alert to notify investors that there
is a reasonable probability of a rating change and the likely direction of such
change. These are designated as "Positive", indicating a potential upgrade,
"Negative", for a potential downgrade, or "Evolving", if ratings may be raised,
lowered or maintained. RatingAlert is typically resolved over a relatively short
period.
A-8
ANNEX B
DESCRIPTION OF FLORIDA MUNICIPAL SECURITIES
GENERAL. As described in the Prospectus, except during temporary periods, the
Funds invest substantially all of their assets in Florida municipal securities.
The Funds are therefore susceptible to political, economic, regulatory or other
factors affecting issuers of Florida municipal securities. In addition, the
specific Florida municipal securities in which the Funds invest are expected to
change from time to time. The following information constitutes only a brief
summary of some of the complex factors which may have an impact on the financial
situation of issuers of Florida municipal securities and does not purport to be
a complete or exhaustive description of all adverse conditions to which issuers
of Florida municipal securities may be subject and is not applicable to
"conduit" obligations, such as industrial development revenue bonds, with
respect to which the public issuer itself has no financial responsibility. Such
information is derived from certain official statements of the State of Florida
published in connection with the issuance of specific State of Florida
securities, as well as from other publicly available documents. Such information
has not been independently verified by the Funds and may not apply to all
Florida municipal securities acquired by the Funds. The Funds assume no
responsibility for the completeness or accuracy of such information.
Additionally, many factors, including national, economic, social and
environmental policies and conditions, which are not within the control of such
issuers, could have an adverse impact on the financial condition of such
issuers. The Funds cannot predict whether or to what extent such factors or
other factors may affect the issuers of Florida municipal securities, the market
value or marketability of such securities or the ability of the respective
issuers of such securities acquired by the Funds to pay interest on or principal
of such securities. The creditworthiness of obligations issued by local Florida
issuers may be unrelated to the creditworthiness of obligations issued by the
State of Florida, and there is no responsibility on the part of the State of
Florida to make payments on such local obligations. There may be specific
factors that are applicable in connection with investment in the obligations of
particular issuers located within Florida, and it is possible the Funds may
invest in obligations of particular issuers as to which such specific factors
are applicable. However, the information set forth below is intended only as a
general summary and not as discussion of any specific factors that may affect
any particular issuer of Florida municipal securities.
Florida state and local government obligations may be adversely affected by
political and economic conditions and developments within the State of Florida
and the nation as a whole. Florida's economic outlook is generally projected to
reflect the national economic outlook, and is expected to experience steady if
unspectacular growth over the next couple of years. The Florida constitution and
statutes require a balanced unspectacular growth over the next couple of years.
The Florida constitution and statutes require a balanced budget, which may
affect the ability of the State of Florida to issue and /or repay its
obligations. In addition, various limitations on the State of Florida, its
governmental agencies and its local governments, including school and special
districts and authorities, may inhibit the ability of these issuers to repay
existing indebtedness and issue additional indebtedness. The ability of such
issuers to repay revenue bonds may also depend on the success of the capital
projects to which they relate. The ability of such issuers to repay general
obligation bonds will also depend on the success of such issuers maintaining its
ad valorem tax base.
INVESTMENT PRACTICES AND POLICIES OF ISSUERS OF FLORIDA MUNICIPAL ISSUERS.
Florida law does provide certain restrictions on the investment of funds for the
State of Florida and its local governments; however, with respect to all
municipalities and its charter counties, such restrictions may be limited by the
constitutional home rule powers of such entities. Although the Florida municipal
securities which are purchased by the Funds are insured, only those securities
which are insured by Original Issuance Insurance will contain restrictions on
B-1
investments imposed by the issuer of such insurance. Because statutory
restrictions on investments and investment policies with respect to the
investment of funds is limited by constitutional home rule powers, there can be
no assurance as to whether any issuer will suffer losses as a result of
investments or the magnitude or any such loses.
POPULATION, INCOME AND EMPLOYMENT. Florida has experienced a large
population growth. As of April 1, 1997, Florida ranks fourth with an estimated
population of 14.7 million. Since the beginning of the eighties, Florida has
surpassed Ohio, Illinois and Pennsylvania in total population. Because of the
national recession, Florida's net in-migration declined to 138,000 in 1992, but
migration has since recovered and reached 255,000 in 1996. The personal income
of residents of Florida has been growing strongly over the last several years
and generally has historically outperformed both the nation as a whole and the
southeast in particular. The State's economy since the early seventies has
diversified in such a way as to provide a greater insulation from national
economic downturns. The structure of income of residents of Florida differs from
that of the nation and the southeast in that, due to a proportionately greater
retirement age population, property income (dividends, interest and rent) and
transfer payments (Social Security and pension benefits, among other sources of
income) are an important source of income.
Real personal income in Florida is estimated to increase at 4.9% and 3.5%
for 1998-99 and 1999-2000 respectively, while real personal income per capita is
projected to grow 3.1% in 1998-99 and 1.8% in 1999-2000.
Florida's economic dependence on the highly cyclical construction and
construction related industries has declined over time. The service and trade
sectors are Florida's largest employers. Presently, the State's service and
trade sectors employment constitutes approximately 60% of the total non-farm
employment. While structurally the southeast and the nation are endowed with a
greater proportion of manufacturing jobs, which tend to pay higher wages,
service jobs are less sensitive to business cycle swings.
Historically, Florida's unemployment rate has generally tracked below that
of the nation; however, beginning with the recession in the early 1990's, the
trend reversed. Since 1995, the State's unemployment rate has again been below
or about the same as the nations. The unemployment rate for Florida in 1997 was
4.8% while the nation's rate in 1997 was 4.9%. Florida's unemployment rate is
expected to be 4.5% for fiscal year 1998-99 and 4.7% in 1999-2000.
TOURISM INDUSTRY. Tourism is one of Florida's most important industries.
Approximately 47 million people visited the State in 1997. By the end of fiscal
year 1998-99, 49.7 million domestic and international tourists are expected to
have visited the State. In 1999-2000 tourist arrivals should approximate 50.6
million.
STATE FINANCIAL OPERATIONS. Financial operations of the State covering all
receipts and expenditures are maintained through the use of four funds - the
General Revenue Fund, Trust Funds, the Working Capital Fund, and the Budget
Stabilization Fund. In fiscal year 1996-97, the State derived an estimated 67%
of its total direct revenues to these funds from state taxes and fees. Federal
funds and other special revenues accounted for the remaining revenues. Major
sources of tax revenues to the General Revenue Fund are the sales and use tax,
corporate income tax, intangible personal property tax, beverage tax and estate
tax, which amounts to 68%, 8%, 4%, 3% and 3%, respectively, of the total General
Revenue Funds available. State expenditures are categorized for budget and
appropriation purposes by type of fund and spending unit, which are further
subdivided by line item. In fiscal year 1996-97, appropriations from the General
Revenue Fund for education, health and welfare, and public safety amounted to
approximately 53%, 26%, and 14%, respectively, of total General Revenues.
The sales and use tax is the greatest single source of tax receipts in
Florida. The sales tax is 6% of the sales price of tangible personal property
sold at retail in the State. The use tax is at 6% of the cost price of tangible
personal property when the same is not sold but is used, or stored for use, in
the State. Slightly less than 10% of the sales tax is designated for local
governments and is distributed to the
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respective counties in which collected for use by the county and the
municipalities therein. In addition to this distribution, local governments may
(by referendum) assess certain discretionary sales surtaxes within their county,
for certain purposes, restricted as to amount. The proceeds of these surtaxes
are required to be applied to the purposes for which such surtax is assessed.
For the State fiscal year which ended June 30, 1997, receipts from the sales
and use tax were $12,089 million, an increase of 5.5% from fiscal year 1995-96.
The second largest source of State tax receipts, including those distributed
to local governments, is the tax on motor fuels. Preliminary data show
collections from this source in the State fiscal year ending June 30, 1997 were
$2,012 million. However, these revenues are almost entirely trust funds
dedicated for specific purposes and are not included in the State General
Revenue Fund. Alcoholic beverage tax and license revenues totaled $447.2 million
in the State fiscal year ended June 30, 1997. The receipts of corporate income
tax for the State fiscal year ended June 30, 1997 were $1,362.3 million, an
increase of 17.2% over the prior fiscal year. In November 1986, the voters of
the State approved a constitutional amendment to allow the State to operate a
lottery, the proceeds of which are required to be applied as follows: 50% to be
returned to the public as prizes, at least 38% to be deposited in the
Educational Enhancement Trust (for public education), and no more than 12% to be
spent on the administrative cost of operating the lottery. State fiscal year
1996-97 produced gross revenues of $2.09 billion of which education received
approximately $792.3 million.
The State Constitution does not permit a personal income tax. An amendment
to the State Constitution would be required to impose a personal income tax in
the State.
For fiscal year 1998-99, the estimated General Revenue plus Working Capital
and Budget Stabilization funds available total $19,463.7 million, a 5.1%
increase over 1997-98.
For fiscal year 1999-2000, the estimated General Revenue plus Working
Capital and Budget Stabilization funds available total $19,923.7 million, a 2.4%
increase over 1998-99. The $18,386.1 million in Estimated Revenues represent a
3.9% increase over the analogous figure in 1998-99.
LOCAL GOVERNMENT REVENUE SOURCES. County and municipal governments in
Florida depend primarily upon ad valorem property taxes, and sales, motor fuels
and other local excise taxes and miscellaneous revenue sources, including
revenues from utilities services. Florida school districts derive substantially
all of their revenues from local property taxes. The overall levels of revenues
from these sources is in part dependent upon the local, state and national
economy. Local government obligations held by the Funds may constitute general
obligations or may be special obligations payable solely from one or more
specified revenue sources. The ability of the local governments to repay their
obligations on a timely basis will be dependent upon the continued strength of
the revenues pledged and of the overall fiscal status of the local government.
STATE CONSTITUTIONAL AMENDMENT LIMITING STATE REVENUES. An amendment to the
Constitution of the State of Florida was approved by the voters of the State of
Florida at the November 1994 general election. This amendment limits the amount
of taxes, fees, licenses and charges imposed by the State Legislature and
collected during any fiscal year to the amount of revenues allowed for the prior
fiscal year, plus an adjustment for growth. Growth is defined as the amount
equal to the average annual rate of growth in Florida personal income over the
most recent twenty quarters times the state revenues allowed for the prior
fiscal year. The revenues allowed for any fiscal year could be increased by a
two-thirds vote of the Legislature. The limit was effective in the fiscal year
1995-1996. Excess revenues generated will initially be deposited in the budget
stabilization fund until it is fully funded; any additional excess revenues will
then be refunded to taxpayers. This amendment could limit the amount of actual
revenues from which the State of Florida could appropriate funds, including
funds appropriated to local governments. It is unclear at this point what
effect, if any, this amendment would have on local government debt obliga-
B-3
tions payable from state revenues which may be subject to this amendment, such
as state revenue sharing moneys or other state revenues distributed to local
governments. Certain State of Florida debt obligations, which are not by their
terms subject to appropriation, should not be affected, depending upon the
language of the legislation authorizing the issuance of such obligations.
OTHER FACTORS. Florida will continue to face enormous spending pressures
well into the future. The large number of elderly residents will continue to
demand health services, an area where cost escalation is significant, and the
constant influx of people to Florida will continue to place sizable pressure on
the State for infrastructure needs.
The value of Florida municipal instruments may also be affected by general
conditions in the money markets or the municipal bond markets, the levels of
federal income tax rates, the supply of tax-exempt bonds, the credit quality and
rating of the issues and perceptions with respect to the level of interest
rates.
There can be no assurance that there will not be a decline in economic
conditions or that particular Florida municipal securities in the portfolio of
the Funds will not be adversely affected by any such changes.
PART C
OTHER INFORMATION
Item 15. Indemnification.
Reference is made to Article VI of RFA's By-laws.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Securities Act") may be permitted to trustees, officers and
controlling persons of the Company pursuant to the foregoing provisions or
otherwise, the Company has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expense incurred or paid by the director, officer, or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the shares being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
16. Exhibits
(1) Articles of Incorporation+
(1)(a) Articles of Amendment+
(2) By-Laws+
(3) INAPPLICABLE
(4) Agreement of Reorganization**
(5) Articles Supplementary+
(6) Investment Advisory Contract+
(7) INAPPLICABLE
(8) INAPPLICABLE
(9) Custodian Contract+
(10) INAPPLICABLE
(11) Opinion of Counsel+
(12) Consent of Skadden, Arps, Slate, Meagher & Flom LLP+
(13)(a) Transfer Agency Agreement between the Registrant and State Street Bank
& Trust Company+
(b)Form of Auction Agent Agreement+
(c)Form of Broker-Dealer Agreement+
(d)Form of Letter of Representations+
(14) Consent of Deloitte & Touche LLP, independent auditors for the
Applicant*
(15) INAPPLICABLE
(16) Power of Attorney*
(17) INAPPLICABLE
- --------
* Filed herewith
**Included as Appendix I to Proxy Statement/Prospectus
+To be filed by amendment
C-1
Item 17. Undertakings.
(a) The Registrant undertakes to suspend its offering of the common shares
covered hereby until it amends its Prospectus contained herein if (1)
subsequent to the effective date of this Registration Statement, its net asset
value per common share declines more than 10 percent from its net asset value
per share of common share as of the effective date of this Registration
Statement, or (2) its net asset value per common share increases to an amount
greater than its net proceeds as stated in the prospectus contained herein.
(b) The Registrant undertakes that: (1) For the purpose of determining any
liability under the Securities Act, the information omitted from the form of
prospectus filed as part of a registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the Registrant pursuant
to Rule 497(h) under the Securities Act shall be deemed to be a part of the
registration statement as of the time it was declared effective. (2) For the
purpose of determining any liability under the Securities Act, each post-
effective amendment that contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
SIGNATURE
As required by the Securities Act of 1933, this registration statement has
been signed on behalf by the registrant, in the City of New York, and State of
New York, on the 23rd day of July, 1999.
THE BLACKROCK FLORIDA INVESTMENT
QUALITYMUNICIPAL TRUST INC.
/s/ Ralph L. Schlosstein
By___________________________________
Ralph L. Schlosstein President
Each person whose signature appears below hereby authorizes Ralph L.
Schlosstein, Laurence D. Fink and Karen H. Sabath, or any of them, as
attorney-in-fact, to sign on his behalf, individually and in each capacity
stated below, any amendments to this Registration Statement (including post-
effective amendments) and to file the same, with all exhibits thereto, with
the Securities and Exchange Commission.
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
Signatures Title Date
* President (Principal July 23 1999
- ------------------------------------- Executive Officer)
Laurence D. Fink and Director
/s/ Henry Gabbay
- ------------------------------------- Treasurer (Principal July 23, 1999
Henry Gabbay Financial and
Accounting Officer)
/s/ Ralph L. Schlosstein
- ------------------------------------- President and July 23, 1999
Ralph L. Schlosstein Director
*
- ------------------------------------- Director July 23, 1999
Andrew F. Brimmer
Director
- -------------------------------------
Richard E. Cavanagh
Signatures Title Date
* Director July 23, 1999
- -------------------------------------
Kent Dixon
* Director July 23, 1999
- -------------------------------------
Frank J. Fabozzi
Director
- -------------------------------------
James Grosfeld
* Director July 23, 1999
- -------------------------------------
James Clayburn LaForce, Jr.
* Director July 23, 1999
- -------------------------------------
Walter F. Mondale
- --------
* Signed by Ralph L. Schlosstein pursuant to power of attorney, dated July 22,
1999.
/s/ Ralph L. Schlosstein
- -------------------------------------
Ralph L. Schlosstein
THE BLACKROCK FLORIDA INVESTMENT
QUALITY MUNICIPAL TRUST INC. ("RFA")
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
Consent of Deloitte & Touche LLP, independent auditors for the
(14) Applicant
(16) Power of Attorney