UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY

 

 

Investment Company Act file number: 811-09401

 

Name of Fund: The BlackRock Strategic Municipal Trust (BSD)

 

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

 

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Municipal Income Trust, 55 East 52^nd Street, New York, NY 10055

 

Registrant’s telephone number, including area code: (800) 882-0052, Option 4

 

Date of fiscal year end: 04/30/2015

 

Date of reporting period: 07/31/2014

 

Item 1 – Schedule of Investments

Schedule of Investments July 31, 2014 (Unaudited)	BlackRock Strategic Municipal Trust (BSD)
	(Percentages shown are based on Net Assets)

 

 

 

		BlackRock Strategic Municipal Trust		July 31, 2014	1

Schedule of Investments (continued)	BlackRock Strategic Municipal Trust (BSD)
	(Percentages shown are based on Net Assets)

 

 

		BlackRock Strategic Municipal Trust		July 31, 2014	2

Schedule of Investments (continued)	BlackRock Strategic Municipal Trust (BSD)
	(Percentages shown are based on Net Assets)

 

 

		BlackRock Strategic Municipal Trust		July 31, 2014	3

Schedule of Investments (continued)	BlackRock Strategic Municipal Trust (BSD)
	(Percentages shown are based on Net Assets)

 

 

		BlackRock Strategic Municipal Trust		July 31, 2014	4

Schedule of Investments (continued)	BlackRock Strategic Municipal Trust (BSD)
	(Percentages shown are based on Net Assets)

 

		BlackRock Strategic Municipal Trust		July 31, 2014	5

Schedule of Investments (continued)	BlackRock Strategic Municipal Trust (BSD)
	(Percentages shown are based on Net Assets)

 

 

		BlackRock Strategic Municipal Trust		July 31, 2014	6

Schedule of Investments (continued)	BlackRock Strategic Municipal Trust (BSD)
	(Percentages shown are based on Net Assets)

 

		BlackRock Strategic Municipal Trust		July 31, 2014	7

Schedule of Investments (continued)	BlackRock Strategic Municipal Trust (BSD)
	(Percentages shown are based on Net Assets)

 

 

		BlackRock Strategic Municipal Trust		July 31, 2014	8

Schedule of Investments (continued)	BlackRock Strategic Municipal Trust (BSD)
	(Percentages shown are based on Net Assets)

 

 

Notes to Schedule of Investments
(a)	U.S. government securities, held in escrow, are used to pay interest on this security, as well as to retire the bond in full at the date indicated, typically at a premium to par.
(b)	Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.
(c)	Zero-coupon bond.
(d)	Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date.
(e)	Non-income producing security.
(f)	Issuer filed for bankruptcy and/or is in default of principal and/or interest payments.
(g)	Variable rate security. Rate shown is as of report date.
(h)	Represent bonds transferred to a TOB. In exchange for which the Trust received cash and residual interest certificates. These bonds serve as collateral in a financing transaction.
(i)	All or a portion of security is subject to a recourse agreement, which may require the Trust to pay the liquidity provider in the event there is a shortfall between the TOB trust certificates and proceeds received from the sale of the security contributed to the TOB trust. In the case of a shortfall, the aggregate maximum potential amount the Trust could ultimately be required to pay under the agreements, which expire from Octover 1, 2016 to February 15, 2031 is $4,041,634.
(j)	Investments in issuers considered to be an affiliate of the Trust during the period ended July 31, 2014, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

	Affiliate						Shares Held at April 30, 2014								Net Activity			Shares Held at July 31, 2014		Income
	FFI Institutional Tax-Exempt Fund						2,167,802							(1,583,201)				584,601	$	86

 

(k)	Represents the current yield as of report date.

 

Portfolio Abbreviations
AGC	Assured Guarantee Corp.
AGM	Assured Guaranty Municipal Corp.
AMT	Alternative Minimum Tax (subject to)
ARB	Airport Revenue Bonds
CAB	Capital Appreciation Bonds
COP	Certificates of Participation

		BlackRock Strategic Municipal Trust		July 31, 2014	9

Schedule of Investments (continued)	BlackRock Strategic Municipal Trust (BSD)

 

EDA	Economic Development Authority
EDC	Economic Development Corp.
GARB	General Airport Revenue Bonds
GO	General Obligation Bonds
IDA		Industrial Development Authority
LRB	Lease Revenue Bonds
NPFGC	National Public Finance Guarantee Corp.
RB	Revenue Bonds
S/F		Single-Family

 

•	Financial futures contracts outstanding as of July 31, 2014 were as follows:

 

Contracts Sold	Issue	Exchange	Expiration	Notional Value			Unrealized Appreciation
(83)	10-Year U.S. Treasury Note	Chicago Board of Trade	September 2014	$	10,342,578	$	89,368

 

•	Fair Value Measurements – Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes as follows:
	•	Level 1 – unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Trust has the ability to access
	•	Level 2 – other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)
	•	Level 3 – unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Trust's own assumptions used in determining the fair value of investments and derivative financial instruments)
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Trust's policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Trust's policy regarding valuation of investments and derivative financial instruments, please refer to the Trust's most recent financial statements as contained in its annual report. The following tables summarize the Trust's investments and derivative financial instruments categorized in the disclosure hierarchy as of July 31, 2014:

 

			Level 1				Level 2				Level 3				Total
Assets:
Investments:
	Long-Term Investments1			—		$		164,894,186				—		$	164,894,186
	Short-Term Securities	$		584,601				—				—			584,601
Total		$		584,601		$		164,894,186				—		$	165,478,787

 

1	See above Schedule of Investments for values in each state or political sub-division.

		BlackRock Strategic Municipal Trust		July 31, 2014	10

Schedule of Investments (concluded)	BlackRock Strategic Municipal Trust (BSD)

 

		Level 1				Level 2				Level 3				Total
Derivative Financial Instruments2
Assets:
Interest rate contracts	$		89,368				—				—		$	89,368

 

2	Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

 

The Trust may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial reporting purposes. As of July 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

 

			Level 1				Level 2					Level 3				Total
Assets:
	Cash pledged for financial futures contracts	$		151,000				—					—		$	151,000
Liabilities:
	TOB trust certificates			—		$		(19,308,550)					—			(19,308,550)
	VMTP Shares			—				(42,900,000)					—			(42,900,000)
Total		$		151,000		$		(62,208,550)					—		$	(62,057,550)

 

There were no transfers between levels during the period ended July 31, 2014.

 

 

		BlackRock Strategic Municipal Trust		July 31, 2014	11

 

Item 2 – Controls and Procedures

2(a) –

The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the ″1940 Act″)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended.

2(b) –

There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.

Item 3 – Exhibits

Certifications – Attached hereto

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

The BlackRock Strategic Municipal Trust

 

	By:	/s/ John M. Perlowski
		John M. Perlowski
		Chief Executive Officer (principal executive officer) of
		The BlackRock Strategic Municipal Trust

 

Date: September 25, 2014

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

	By:	/s/ John M. Perlowski
		John M. Perlowski
		Chief Executive Officer (principal executive officer) of
		The BlackRock Strategic Municipal Trust

 

Date: September 25, 2014

 

	By:	/s/ Neal J. Andrews
		Neal J. Andrews
		Chief Financial Officer (principal financial officer) of
		The BlackRock Strategic Municipal Trust

 

Date: September 25, 2014