|
|
|
|
|
44
|
|
2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS
|
Statements of Cash Flows (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
BlackRock Floating Rate Income
Trust (BGT)
|
|
|
|
|
Period from
11/01/19 to
12/31/19
|
|
|
Year Ended
October 31,
2019
|
|
|
|
|
|
|
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net increase in net assets resulting from operations
|
|
$
|
8,693,597
|
|
|
|
8,959,718
|
|
|
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used
for) operating activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of long-term investments and principal paydowns
|
|
|
36,243,725
|
|
|
|
275,159,564
|
|
|
Purchases of long-term investments
|
|
|
(45,980,476
|
)
|
|
|
(244,123,208
|
)
|
|
Net proceeds from sales (purchases) of short-term securities
|
|
|
753,734
|
|
|
|
(457,965
|
)
|
|
Amortization of premium and accretion of discount on investments and other fees
|
|
|
(52,075
|
)
|
|
|
(226,297
|
)
|
|
Payment in-kind income
|
|
|
340,763
|
|
|
|
—
|
|
|
Net realized loss on investments
|
|
|
664,471
|
|
|
|
5,947,975
|
|
|
Net unrealized (appreciation) depreciation on investments, swaps and foreign currency translations
|
|
|
(6,697,058
|
)
|
|
|
3,635,999
|
|
|
|
|
(Increase) Decrease in Assets:
|
|
|
Receivables:
|
|
|
Dividends — affiliated
|
|
|
73
|
|
|
|
1,030
|
|
|
Interest — unaffiliated
|
|
|
10,228
|
|
|
|
293,464
|
|
|
Prepaid expenses
|
|
|
(666
|
)
|
|
|
1,011
|
|
|
|
|
Increase (Decrease) in Liabilities:
|
|
|
Payables:
|
|
|
Investment advisory fees
|
|
|
274,603
|
|
|
|
(25,415
|
)
|
|
Interest expense
|
|
|
(10,695
|
)
|
|
|
(87,223
|
)
|
|
Trustees’ and Officer’s fees
|
|
|
4,457
|
|
|
|
30,200
|
|
|
Other accrued expenses
|
|
|
7,021
|
|
|
|
(110,941
|
)
|
|
Other liabilities
|
|
|
352,473
|
|
|
|
—
|
|
|
Due to counterparty
|
|
|
—
|
|
|
|
(212,836
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) operating activities
|
|
|
(5,395,825
|
)
|
|
|
48,785,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
|
|
|
Cash dividends paid to Common Shareholders
|
|
|
(3,554,463
|
)
|
|
|
(18,975,103
|
)
|
|
Payments for bank borrowings
|
|
|
(26,000,000
|
)
|
|
|
(190,000,000
|
)
|
|
Payments on redemption of Common Shares
|
|
|
(1,017,888
|
)
|
|
|
(7,767,163
|
)
|
|
Proceeds from bank borrowings
|
|
|
33,000,000
|
|
|
|
171,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (provided by) used for financing activities
|
|
|
2,427,649
|
|
|
|
(45,742,266
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH IMPACT FROM FOREIGN EXCHANGE FLUCTUATIONS
|
|
|
Cash impact from foreign exchange fluctuations
|
|
$
|
57
|
|
|
$
|
171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND FOREIGN CURRENCY
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in restricted and unrestricted cash and foreign currency
|
|
|
(2,968,119
|
)
|
|
|
3,042,981
|
|
|
Restricted and unrestricted cash and foreign currency at beginning of period
|
|
|
5,019,393
|
|
|
|
1,976,412
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted and unrestricted cash and foreign currency at end of period
|
|
$
|
2,051,274
|
|
|
$
|
5,019,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
Cash paid during the period for interest expense
|
|
$
|
515,397
|
|
|
$
|
4,179,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF RESTRICTED AND UNRESTRICTED CASH AND FOREIGN CURRENCY AT THE END OF PERIOD
TO THE STATEMENTS OF ASSETS AND LIABILITIES
|
|
|
Cash
|
|
|
2,039,426
|
|
|
|
4,974,126
|
|
|
Foreign currency at value
|
|
|
11,848
|
|
|
|
45,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,051,274
|
|
|
$
|
5,019,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF RESTRICTED AND UNRESTRICTED CASH AND FOREIGN CURRENCY AT THE BEGINNING OF
PERIOD TO THE STATEMENTS OF ASSETS AND LIABILITIES
|
|
|
Cash
|
|
|
4,974,126
|
|
|
|
793,986
|
|
|
Foreign currency at value
|
|
|
45,267
|
|
|
|
1,182,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,019,393
|
|
|
$
|
1,976,412
|
|
|
|
|
|
|
|
|
|
|
|
See notes to financial statements.
Financial Highlights
(For a share outstanding throughout each period)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BTZ
|
|
|
|
|
Period from
11/01/19 to
12/31/19
|
|
|
|
|
|
Year Ended October 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
$
|
14.94
|
|
|
|
|
|
|
$
|
13.72
|
|
|
$
|
14.88
|
|
|
$
|
14.61
|
|
|
$
|
14.33
|
|
|
$
|
15.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income(a)
|
|
|
0.13
|
|
|
|
|
|
|
|
0.79
|
|
|
|
0.81
|
|
|
|
0.81
|
|
|
|
0.88
|
|
|
|
0.96
|
|
|
Net realized and unrealized gain (loss)
|
|
|
0.15
|
|
|
|
|
|
|
|
1.25
|
|
|
|
(1.17
|
)
|
|
|
0.30
|
|
|
|
0.32
|
|
|
|
(1.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) from investment operations
|
|
|
0.28
|
|
|
|
|
|
|
|
2.04
|
|
|
|
(0.36
|
)
|
|
|
1.11
|
|
|
|
1.20
|
|
|
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From net investment income
|
|
|
(0.23
|
)
|
|
|
|
|
|
|
(0.79
|
)
|
|
|
(0.80
|
)
|
|
|
(0.79
|
)
|
|
|
(0.86
|
)
|
|
|
(0.91
|
)
|
|
From return of capital
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
(0.03
|
)
|
|
|
—
|
|
|
|
(0.05
|
)
|
|
|
(0.06
|
)
|
|
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions
|
|
|
(0.25
|
)
|
|
|
|
|
|
|
(0.82
|
)
|
|
|
(0.80
|
)
|
|
|
(0.84
|
)
|
|
|
(0.92
|
)
|
|
|
(0.97
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period
|
|
$
|
14.97
|
|
|
|
|
|
|
$
|
14.94
|
|
|
$
|
13.72
|
|
|
$
|
14.88
|
|
|
$
|
14.61
|
|
|
$
|
14.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price, end of period
|
|
$
|
13.98
|
|
|
|
|
|
|
$
|
13.55
|
|
|
$
|
11.72
|
|
|
$
|
13.36
|
|
|
$
|
12.87
|
|
|
$
|
12.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Return(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on net asset value
|
|
|
2.02
|
%(d)
|
|
|
|
|
|
|
16.17
|
%
|
|
|
(1.72
|
)%
|
|
|
8.53
|
%
|
|
|
9.61
|
%
|
|
|
0.48
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on market price
|
|
|
5.05
|
%(d)
|
|
|
|
|
|
|
23.34
|
%
|
|
|
(6.49
|
)%
|
|
|
10.62
|
%
|
|
|
10.43
|
%
|
|
|
(0.33
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
1.68
|
%(e)(f)
|
|
|
|
|
|
|
2.26
|
%
|
|
|
1.82
|
%
|
|
|
1.23
|
%
|
|
|
1.20
|
%
|
|
|
1.16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses after fees waived and/or reimbursed
|
|
|
1.68
|
%(e)(f)
|
|
|
|
|
|
|
2.25
|
%
|
|
|
1.82
|
%
|
|
|
1.23
|
%
|
|
|
1.20
|
%
|
|
|
1.15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses after fees waived and/or reimbursed and excluding interest expense
|
|
|
0.92
|
%(e)
|
|
|
|
|
|
|
1.08
|
%
|
|
|
0.94
|
%
|
|
|
0.87
|
%
|
|
|
0.95
|
%
|
|
|
0.97
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
5.29
|
%(e)
|
|
|
|
|
|
|
5.57
|
%
|
|
|
5.69
|
%
|
|
|
5.53
|
%
|
|
|
6.21
|
%
|
|
|
6.40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000)
|
|
$
|
1,554,828
|
|
|
|
|
|
|
$
|
1,551,243
|
|
|
$
|
1,439,954
|
|
|
$
|
1,598,034
|
|
|
$
|
1,579,170
|
|
|
$
|
1,549,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings outstanding, end of period (000)
|
|
$
|
577,231
|
|
|
|
|
|
|
$
|
568,461
|
|
|
$
|
707,102
|
|
|
$
|
477,822
|
|
|
$
|
638,327
|
|
|
$
|
685,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio turnover rate
|
|
|
2
|
%
|
|
|
|
|
|
|
18
|
%
|
|
|
30
|
%
|
|
|
25
|
%
|
|
|
29
|
%
|
|
|
19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Based on average shares outstanding.
|
|
(b)
|
Distributions for annual periods determined in accordance with U.S. federal income tax regulations.
|
|
(c)
|
Total returns based on market price, which can be significantly greater or less than the net asset value, may result in
substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices.
|
|
(d)
|
Aggregate total return.
|
|
(f)
|
Audit costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the expense
ratio would have been 1.70%.
|
See notes to financial statements.
|
|
|
|
|
46
|
|
2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS
|
Financial Highlights (continued)
(For a share outstanding throughout each period)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BGT
|
|
|
|
|
Period from
11/01/19 to
12/31/19
|
|
|
|
|
|
Year Ended October 31,
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015 (a)
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
$
|
13.95
|
|
|
|
|
|
|
$
|
14.33
|
|
|
$
|
14.49
|
|
|
$
|
14.41
|
|
|
$
|
14.18
|
|
|
$
|
14.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income(b)
|
|
|
0.12
|
|
|
|
|
|
|
|
0.80
|
|
|
|
0.76
|
|
|
|
0.73
|
|
|
|
0.74
|
|
|
|
0.78
|
|
|
Net realized and unrealized gain (loss)
|
|
|
0.26
|
|
|
|
|
|
|
|
(0.37
|
)
|
|
|
(0.21
|
)
|
|
|
0.12
|
|
|
|
0.19
|
|
|
|
(0.36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase from investment operations
|
|
|
0.38
|
|
|
|
|
|
|
|
0.43
|
|
|
|
0.55
|
|
|
|
0.85
|
|
|
|
0.93
|
|
|
|
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions from net investment income(c)
|
|
|
(0.23
|
)
|
|
|
|
|
|
|
(0.81
|
)
|
|
|
(0.71
|
)
|
|
|
(0.77
|
)
|
|
|
(0.70
|
)
|
|
|
(0.81
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period
|
|
$
|
14.10
|
|
|
|
|
|
|
$
|
13.95
|
|
|
$
|
14.33
|
|
|
$
|
14.49
|
|
|
$
|
14.41
|
|
|
$
|
14.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price, end of period
|
|
$
|
12.87
|
|
|
|
|
|
|
$
|
12.42
|
|
|
$
|
12.72
|
|
|
$
|
14.31
|
|
|
$
|
13.58
|
|
|
$
|
12.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Return(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on net asset value
|
|
|
2.89
|
%(e)
|
|
|
|
|
|
|
4.00
|
%
|
|
|
4.25
|
%
|
|
|
6.13
|
%
|
|
|
7.27
|
%
|
|
|
3.54
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on market price
|
|
|
5.48
|
%(e)
|
|
|
|
|
|
|
4.31
|
%
|
|
|
(6.30
|
)%
|
|
|
11.21
|
%
|
|
|
12.25
|
%
|
|
|
3.08
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets(f)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
2.11
|
%(g)(h)
|
|
|
|
|
|
|
2.41
|
%
|
|
|
2.29
|
%
|
|
|
1.92
|
%
|
|
|
1.58
|
%
|
|
|
1.55
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses after fees waived and/or reimbursed
|
|
|
2.11
|
%(g)(h)
|
|
|
|
|
|
|
2.41
|
%
|
|
|
2.29
|
%
|
|
|
1.92
|
%
|
|
|
1.58
|
%
|
|
|
1.54
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses after fees waived and/or reimbursed and excluding interest expense
|
|
|
1.28
|
%(g)
|
|
|
|
|
|
|
1.16
|
%
|
|
|
1.21
|
%
|
|
|
1.20
|
%
|
|
|
1.16
|
%
|
|
|
1.19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
5.23
|
%(g)
|
|
|
|
|
|
|
5.68
|
%
|
|
|
5.27
|
%
|
|
|
5.02
|
%
|
|
|
5.29
|
%
|
|
|
5.37
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000)
|
|
$
|
323,708
|
|
|
|
|
|
|
$
|
321,091
|
|
|
$
|
339,096
|
|
|
$
|
342,890
|
|
|
$
|
340,944
|
|
|
$
|
335,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings outstanding, end of period (000)
|
|
$
|
130,000
|
|
|
|
|
|
|
$
|
123,000
|
|
|
$
|
142,000
|
|
|
$
|
150,000
|
|
|
$
|
148,000
|
|
|
$
|
104,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset coverage, end of period per $1,000 of bank borrowings
|
|
$
|
3,490
|
|
|
|
|
|
|
$
|
3,610
|
|
|
$
|
3,389
|
|
|
$
|
3,287
|
|
|
$
|
3,304
|
|
|
$
|
4,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio turnover rate
|
|
|
6
|
%
|
|
|
|
|
|
|
53
|
%
|
|
|
57
|
%
|
|
|
63
|
%
|
|
|
47
|
%
|
|
|
42
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Consolidated Financial Highlights.
|
|
(b)
|
Based on average shares outstanding.
|
|
(c)
|
Distributions for annual periods determined in accordance with U.S. federal income tax regulations.
|
|
(d)
|
Total returns based on market price, which can be significantly greater or less than the net asset value, may result in
substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices.
|
|
(e)
|
Aggregate total return.
|
|
(f)
|
Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
11/01/19
to 12/31/19
|
|
|
|
|
|
Year Ended October 31,
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015(a)
|
|
|
Investments in underlying funds
|
|
|
0.04
|
%
|
|
|
|
|
|
|
0.04
|
%
|
|
|
0.01
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(h)
|
Audit costs were not annualized in the calculation of the expense ratio. If these expenses were annualized, the expense
ratio would have been 2.21%.
|
See notes to financial statements.
Notes to Financial Statements
The following are registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as closed-end
management investment companies and are referred to herein collectively as the “Trusts”, or individually as a “Trust”:
|
|
|
|
|
|
|
|
|
Trust Name
|
|
Herein Referred To As
|
|
Organized
|
|
Diversification
Classification
|
|
BlackRock Credit Allocation Income Trust
|
|
BTZ
|
|
Delaware
|
|
Diversified
|
|
BlackRock Floating Rate Income Trust
|
|
BGT
|
|
Delaware
|
|
Diversified
|
The Boards of Trustees of the Trusts are collectively referred to throughout this report as the “Board of Trustees” or the
“Board,” and the trustees thereof are collectively referred to throughout this report as “Trustees”. The Trusts determine and make available for publication the net asset values (“NAVs”) of their Common Shares on a
daily basis.
The Trusts, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates,
are included in a complex of non-index fixed-income mutual funds and all BlackRock-advised closed-end funds referred to as the BlackRock Fixed-Income Complex.
On September 5, 2019, the Board approved a change in the fiscal year-end of BTZ and BGT, effective as of December 31,
2019, from October 31 to December 31.
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may
require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Trust is considered an investment company under U.S. GAAP and follows the accounting and reporting
guidance applicable to investment companies. Below is a summary of significant accounting policies:
Investment Transactions and Income Recognition: For
financial reporting purposes, investment transactions are recorded on the dates the transactions are executed. Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Trusts are informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, a portion of the dividend income
received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities and
payment-in-kind interest, is recognized on an accrual basis.
Foreign Currency Translation: Each Trust’s books and records are maintained in U.S. dollars.
Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of
investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the
opposite effect occurs if the U.S. dollar falls in relative value.
Each Trust does not isolate the portion of the results of operations arising as a result of
changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statements of Operations
from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. Each Trust reports realized currency gains (losses) on foreign currency related
transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.
Segregation and Collateralization: In cases where a Trust enters into certain investments (e.g., futures contracts, forward foreign currency exchange contracts,
options written and swaps) or certain borrowings (e.g., reverse repurchase transactions) that would be treated as “senior securities” for 1940 Act purposes, a Trust may segregate or designate on its books and records cash or liquid assets
having a market value at least equal to the amount of its future obligations under such investments or borrowings. Doing so allows the investment or borrowings to be excluded from treatment as a “senior security.” Furthermore, if required
by an exchange or counterparty agreement, the Trusts may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.
Distributions: Distributions paid by the Trusts are recorded on the ex-dividend date. Subject to the Trusts’ managed
distribution plan, the Trusts intend to make monthly cash distributions to shareholders, which may consist of net investment income, and net realized and unrealized gains on investments and/or return of capital.
The character of distributions is determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. The portion of distributions that
exceeds a Trust’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a non-taxable return of capital. See Note 8, Income Tax Information, for the tax
character of each Trust’s distributions paid during the period.
Deferred Compensation Plan: Under the Deferred Compensation Plan (the “Plan”)
approved by the Board, the Trustees who are not “interested persons” of the Trusts, as defined in the 1940 Act (“Independent Trustees”), may defer a portion of their annual complex-wide compensation. Deferred amounts earn an
approximate return as though equivalent dollar amounts had been invested in common shares of certain funds in the BlackRock Fixed-Income Complex selected by the Independent Trustees. This has the same economic effect for the Independent Trustees as
if the Independent Trustees had invested the deferred amounts directly in certain funds in the BlackRock Fixed-Income Complex.
|
|
|
|
|
48
|
|
2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS
|
Notes to Financial Statements (continued)
The Plan is not funded and obligations
thereunder represent general unsecured claims against the general assets of each Trust, as applicable. Deferred compensation liabilities are included in the Trustees’ and Officer’s fees payable in the Statements of Assets and Liabilities
and will remain as a liability of the Trusts until such amounts are distributed in accordance with the Plan.
Recent Accounting Standards: The Trust has
adopted Financial Accounting Standards Board Accounting Standards Update 2017-08 to amend the amortization period for certain purchased callable debt securities held at a premium. Under the new standard, the
Trust has changed the amortization period for the premium on certain purchased callable debt securities with non-contingent call features to the earliest call date. In accordance with the transition provisions
of the standard, the Trust applied the amendments on a modified retrospective basis beginning with the fiscal period ended December 31, 2019. The adjusted cost basis of securities at October 31, 2019 are as follows:
|
|
|
|
|
|
|
BTZ
|
|
$
|
1,937,098,557
|
|
|
BGT
|
|
|
467,742,520
|
|
This change in accounting policy has been made to comply with the newly issued accounting standard and had no impact on accumulated
earnings (loss) or the net asset value of the Trusts.
Indemnifications: In the normal course of business, a Trust enters into contracts that contain a variety
of representations that provide general indemnification. A Trust’s maximum exposure under these arrangements is unknown because it involves future potential claims against a Trust, which cannot be predicted with any certainty.
Other: Expenses directly related to a Trust are charged to that Trust. Other operating expenses shared by several funds, including other funds managed by the
Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods.
|
3.
|
INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS
|
Investment Valuation Policies: The Trusts’ investments are valued at fair value (also referred to as “market value” within the financial statements)
as of the close of trading on the NYSE (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Trusts would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at
the measurement date. The Trusts determine the fair values of their financial instruments using various independent dealers or pricing services under policies approved by each Board. The BlackRock Global Valuation Methodologies Committee (the
“Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.
Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each Trust’s assets and liabilities:
|
|
•
|
|
Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if
available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day
may be valued at the last available bid (long positions) or ask (short positions) price.
|
|
|
•
|
|
Fixed-income securities for which market quotations are readily available are generally valued using the last available bid
prices or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more independent brokers or dealers as obtained from a third party
pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but a fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower
prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), credit
quality information, perceived market movements, news, and other relevant information. Certain fixed-income securities, including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash
flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect
to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value.
|
Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally,
events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Trusts’ net assets. Each business day, the Trusts use a pricing
service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and over-the-counter (“OTC”) options (the
“Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of
the local markets.
|
|
•
|
|
Municipal investments (including commitments to purchase such investments on a “when-issued” basis) are valued on
the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing
matrixes, market transactions in comparable investments and information with respect to various relationships between investments.
|
|
|
•
|
|
Investments in open-end U.S. mutual funds are valued at NAV each business day.
|
|
|
•
|
|
Futures contracts traded on exchanges are valued at their last sale price.
|
|
|
•
|
|
Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of
the close of trading on the NYSE based on that day’s prevailing forward exchange rate for the underlying currencies. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not
available.
|
|
|
|
|
|
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
|
49
|
|
Notes to Financial Statements (continued)
|
|
•
|
|
Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in
which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is
determined that the prior day’s price no longer reflects the fair value of the option. OTC and options on swaps (“swaptions”) are valued by an independent pricing service using a mathematical model, which incorporates a number of
market data factors, such as the trades and prices of the underlying instruments.
|
|
|
•
|
|
Swap agreements are valued utilizing quotes received daily by the Trusts’ pricing service or through brokers, which are
derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments.
|
If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the
event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global
Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include
market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining
the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each Trust might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair
value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.
For investments in
equity or debt issued by privately held companies or funds (“Private Company” or collectively, the “Private Companies”) and other Fair Valued Investments, the fair valuation approaches that are used by the Global Valuation
Committee and third party pricing services utilize one or a combination of, but not limited to, the following inputs.
|
|
|
|
|
|
|
Standard Inputs Generally Considered By Third Party Pricing Services
|
|
Market approach
|
|
(i) recent market transactions, including subsequent
rounds of financing, in the underlying investment or comparable issuers;
(ii) recapitalizations and other transactions
across the capital structure; and
(iii) market multiples of comparable issuers.
|
|
Income approach
|
|
(i) future cash flows discounted to present and
adjusted as appropriate for liquidity, credit, and/or market risks;
(ii) quoted prices for similar investments or
assets in active markets; and
(iii) other risk factors, such as interest rates, yield curves,
volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates.
|
|
Cost approach
|
|
(i) audited or unaudited financial statements, investor
communications and financial or operational metrics issued by the Private Company;
(ii) changes in the valuation of
relevant indices or publicly traded companies comparable to the Private Company;
(iii) relevant news and
other public sources; and
(iv) known secondary market transactions in the Private Company’s
interests and merger or acquisition activity in companies comparable to the Private Company.
|
Investments in series of preferred stock issued by Private Companies are typically valued utilizing market approach in determining the
enterprise value of the company. Such investments often contain rights and preferences that differ from other series of preferred and common stock of the same issuer. Valuation techniques such as an option pricing model (“OPM”),
a probability weighted expected return model (“PWERM”) or a hybrid of those techniques are used in allocating enterprise value of the company, as deemed appropriate under the circumstances. The use of OPM and PWERM techniques involve
a determination of the exit scenarios of the investment in order to appropriately allocate the enterprise value of the company among the various parts of its capital structure.
The Private Companies are not subject to the public company disclosure, timing, and reporting standards as other investments held by a Trust. Typically, the most recently
available information by a Private Company is as of a date that is earlier than the date a Trust is calculating its NAV. This factor may result in a difference between the value of the investment and the price a Trust could receive upon the sale of
the investment.
Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs
to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:
|
|
•
|
|
Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that each
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 Global Valuation Committee’s 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. Investments classified within
Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by
|
|
|
|
|
50
|
|
2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS
|
Notes to Financial Statements (continued)
Private Companies. There may not be a
secondary market, and/or there are a limited number of investors. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial
instruments and is not necessarily an indication of the risks associated with investing in those securities.
|
4.
|
SECURITIES AND OTHER INVESTMENTS
|
Asset-Backed and Mortgage-Backed Securities: Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed
securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically
issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e.,
loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with
respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, a fund may subsequently have to reinvest the proceeds at lower interest rates. If a fund has purchased such an asset-backed security at
a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.
For mortgage pass-through securities (the
“Mortgage Assets”) there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related
securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by
Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United
States, but are supported by the right of the issuer to borrow from the U.S. Treasury.
Non-agency mortgage-backed securities
are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage
loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors,
including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.
Collateralized Debt Obligations: Collateralized debt obligations (“CDOs”), including collateralized bond obligations (“CBOs”) and
collateralized loan obligations (“CLOs”), are types of asset-backed securities. A CDO is an entity that is backed by a diversified pool of debt securities (CBOs) or syndicated bank loans (CLOs). The cash flows of the CDO can be split into
multiple segments, called “tranches,” which will vary in risk profile and yield. The riskiest segment is the subordinated or “equity” tranche. This tranche bears the greatest risk of defaults from the underlying assets in the CDO
and serves to protect the other, more senior, tranches from default in all but the most severe circumstances. Since it is shielded from defaults by the more junior tranches, a “senior” tranche will typically have higher credit ratings and
lower yields than their underlying securities, and often receive investment grade ratings from one or more of the nationally recognized rating agencies. Despite the protection from the more junior tranches, senior tranches can experience substantial
losses due to actual defaults, increased sensitivity to future defaults and the disappearance of one or more protecting tranches as a result of changes in the credit profile of the underlying pool of assets.
Multiple Class Pass-Through Securities: Multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”)
and commercial mortgage-backed securities, may be issued by Ginnie Mae, U.S. Government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal
entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through securities the Mortgage Assets. The payments on these are used to make payments on the CMOs or multiple pass-through securities. Multiple
class pass-through securities represent direct ownership interests in the Mortgage Assets. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs
and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive
the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the
underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to
maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, a trust’s initial investment in the IOs may not fully recoup.
Capital Securities and Trust Preferred Securities: Capital securities, including trust preferred securities, are typically issued by corporations, generally in the
form of interest-bearing notes with preferred securities characteristics. In the case of trust preferred securities, an affiliated business trust of a corporation issues these securities, generally in the form of beneficial interests in subordinated
debentures or similarly structured securities. The securities can be structured with either a fixed or adjustable coupon that can have either a perpetual or stated maturity date. For trust preferred securities, the issuing bank or corporation pays
interest to the trust, which is then distributed to holders of these securities as a dividend. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment
obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. These securities generally are rated below that of the issuing company’s senior debt securities and are freely
callable at the issuer’s option.
Preferred Stocks: Preferred stock has a preference over common stock in liquidation (and generally in receiving
dividends as well), but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived
credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit
quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only
if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.
|
|
|
|
|
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
|
51
|
|
Notes to Financial Statements (continued)
Warrants: Warrants entitle a fund to
purchase a specified number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date of the
warrants, if any. If the price of the underlying stock does not rise above the strike price before the warrant expires, the warrant generally expires without any value and a fund will lose any amount it paid for the warrant. Thus, investments in
warrants may involve more risk than investments in common stock. Warrants may trade in the same markets as their underlying stock; however, the price of the warrant does not necessarily move with the price of the underlying stock.
Floating Rate Loan Interests: Floating rate loan interests are typically issued to companies (the “borrower”) by banks, other financial institutions, or
privately and publicly offered corporations (the “lender”). Floating rate loan interests are generally non-investment grade, often involve borrowers whose financial condition is troubled or uncertain
and companies that are highly leveraged or in bankruptcy proceedings. In addition, transactions in floating rate loan interests may settle on a delayed basis, which may result in proceeds from the sale not being readily available for a trust to make
additional investments or meet its redemption obligations. Floating rate loan interests may include fully funded term loans or revolving lines of credit. Floating rate loan interests are typically senior in the corporate capital structure of the
borrower. Floating rate loan interests generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. Since the rates reset only periodically, changes in prevailing interest rates (and
particularly sudden and significant changes) can be expected to cause some fluctuations in the NAV of a trust to the extent that it invests in floating rate loan interests. The base lending rates are generally the lending rate offered by one or more
European banks, such as the London Interbank Offered Rate (“LIBOR”), the prime rate offered by one or more U.S. banks or the certificate of deposit rate. Floating rate loan interests may involve foreign borrowers, and investments may be
denominated in foreign currencies. These investments are treated as investments in debt securities for purposes of a fund’s investment policies.
When a trust
purchases a floating rate loan interest, it may receive a facility fee and when it sells a floating rate loan interest, it may pay a facility fee. On an ongoing basis, a trust may receive a commitment fee based on the undrawn portion of the
underlying line of credit amount of a floating rate loan interest. Facility and commitment fees are typically amortized to income over the term of the loan or term of the commitment, respectively. Consent and amendment fees are recorded to income as
earned. Prepayment penalty fees, which may be received by a trust upon the prepayment of a floating rate loan interest by a borrower, are recorded as realized gains. A trust may invest in multiple series or tranches of a loan. A different series or
tranche may have varying terms and carry different associated risks.
Floating rate loan interests are usually freely callable at the borrower’s option. A trust
may invest in such loans in the form of participations in loans (“Participations”) or assignments (“Assignments”) of all or a portion of loans from third parties. Participations typically will result in a trust having a
contractual relationship only with the lender, not with the borrower. A trust has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the
lender of the payments from the borrower. In connection with purchasing Participations, a trust generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of offset against the borrower. A
trust may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, a trust assumes the credit risk of both the borrower and the lender that is selling the Participation. A trust’s
investment in loan participation interests involves the risk of insolvency of the financial intermediaries who are parties to the transactions. In the event of the insolvency of the lender selling the Participation, a trust may be treated as a
general creditor of the lender and may not benefit from any offset between the lender and the borrower. Assignments typically result in a trust having a direct contractual relationship with the borrower, and a trust may enforce compliance by the
borrower with the terms of the loan agreement.
In connection with floating rate loan interests, certain trusts may also enter into unfunded floating rate loan
interests (“commitments”). In connection with these commitments, a trust earns a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is included in interest income in the Statements of Operations,
is recognized ratably over the commitment period. Unfunded floating rate loan interests are marked-to-market daily, and any unrealized appreciation (depreciation) is
included in the Statements of Assets and Liabilities and Statements of Operations. As of period end, the Trusts had the following unfunded floating rate loan interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust Name
|
|
Borrower
|
|
Par
|
|
|
Commitment
Amount
|
|
|
Value
|
|
|
Unrealized
Appreciation
|
|
|
BGT
|
|
BCPE Empire Holdings, Inc.
|
|
$
|
112,616
|
|
|
$
|
112,616
|
|
|
$
|
112,828
|
|
|
$
|
212
|
|
|
|
|
Bleriot US Bidco Inc.
|
|
|
109,787
|
|
|
|
108,688
|
|
|
|
110,747
|
|
|
|
2,059
|
|
|
|
|
Connect Finco Sarl
|
|
|
3,542,189
|
|
|
|
3,473,642
|
|
|
|
3,556,570
|
|
|
|
82,928
|
|
|
|
|
McDermott Technology Americas Inc.
|
|
|
259,062
|
|
|
|
258,342
|
|
|
|
263,984
|
|
|
|
5,642
|
|
|
|
|
MED ParentCo LP
|
|
|
161,057
|
|
|
|
159,447
|
|
|
|
160,806
|
|
|
|
1,359
|
|
Reverse Repurchase Agreements: Reverse repurchase agreements are agreements with qualified third party broker dealers in which a
trust sells securities to a bank or broker-dealer and agrees to repurchase the same securities at a mutually agreed upon date and price. A trust receives cash from the sale to use for other investment purposes. During the term of the reverse
repurchase agreement, a trust continues to receive the principal and interest payments on the securities sold. Certain agreements have no stated maturity and can be terminated by either party at any time. Interest on the value of the reverse
repurchase agreements issued and outstanding is based upon competitive market rates determined at the time of issuance. A trust may utilize reverse repurchase agreements when it is anticipated that the interest income to be earned from the
investment of the proceeds of the transaction is greater than the interest expense of the transaction. Reverse repurchase agreements involve leverage risk. If a trust suffers a loss on its investment of the transaction proceeds from a reverse
repurchase agreement, a trust would still be required to pay the full repurchase price. Further, a trust remains subject to the risk that the market value of the securities repurchased declines below the repurchase price. In such cases, a trust
would be required to return a portion of the cash received from the transaction or provide additional securities to the counterparty.
Cash received in exchange for
securities delivered plus accrued interest due to the counterparty is recorded as a liability in the Statements of Assets and Liabilities at face value including accrued interest. Due to the short-term nature of the reverse repurchase agreements,
face value approximates fair value. Interest payments made by a trust to the counterparties are recorded as a component of interest expense in the Statements of Operations. In periods of increased demand for the security, a trust may receive a fee
for the use of the security by the counterparty, which may result in interest income to a trust.
|
|
|
|
|
52
|
|
2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS
|
Notes to Financial Statements (continued)
For the period ended December 31, 2019,
the average amount of reverse repurchase agreements outstanding and the daily weighted average interest rate for the BTZ was $566,423,935 and 2.14%, respectively.
Reverse repurchase transactions are entered into by a trust under Master Repurchase Agreements (each, an “MRA”), which permit a trust, under certain
circumstances, including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables under the MRA with collateral held and/or posted to the counterparty and create one single net payment due to or from a trust.
With reverse repurchase transactions, typically a trust and counterparty under an MRA are permitted to sell, re-pledge, or use the collateral associated with the transaction. Bankruptcy or insolvency laws of a
particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Pursuant to the terms of the MRA, a trust receives or posts securities and cash
as collateral with a market value in excess of the repurchase price to be paid or received by a trust upon the maturity of the transaction. Upon a bankruptcy or insolvency of the MRA counterparty, a trust is considered an unsecured creditor with
respect to excess collateral and, as such, the return of excess collateral may be delayed.
As of period end, the following table is a summary of a Trust’s open
reverse repurchase agreements by counterparty which are subject to offset under an MRA on a net basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BTZ
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Counterparty
|
|
Reverse Repurchase
Agreements
|
|
|
Fair Value of
Non-cash Collateral
Pledged Including
Accrued Interest (a)
|
|
|
Cash Collateral
Pledged/Received
|
|
|
Net
Amount
|
|
|
Barclays Capital, Inc.
|
|
$
|
150,227,013
|
|
|
$
|
(150,227,013
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
BNP Paribas S.A.
|
|
|
77,268,976
|
|
|
|
(77,268,976
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Goldman Sachs & Co. LLC
|
|
|
771,187
|
|
|
|
(771,187
|
)
|
|
|
—
|
|
|
|
—
|
|
|
J.P. Morgan Securities LLC
|
|
|
6,307,430
|
|
|
|
(6,307,430
|
)
|
|
|
—
|
|
|
|
—
|
|
|
RBC Capital Markets LLC
|
|
|
342,656,345
|
|
|
|
(342,656,345
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
577,230,951
|
|
|
$
|
(577,230,951
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Net collateral, including accrued interest, with a value of $621,949,558 has been pledged/received in connection with open
reverse repurchase agreements. Excess of net collateral pledged to the individual counterparty is not shown for financial reporting purposes.
|
|
In the event the counterparty of securities under an MRA files for bankruptcy or becomes insolvent, a trust’s use of the
proceeds from the agreement may be restricted while the counterparty, or its trustee or receiver, determines whether or not to enforce a trust’s obligation to repurchase the securities.
|
5.
|
DERIVATIVE FINANCIAL INSTRUMENTS
|
The Trusts engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Trusts and/or to manage their exposure to
certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the
Schedules of Investments. These contracts may be transacted on an exchange or OTC.
Futures Contracts: Futures contracts are purchased or sold to gain exposure
to, or manage exposure to, changes in interest rates (interest rate risk) and changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).
Futures contracts are agreements between the Trusts and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a
specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract,
the Trusts are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established
level over the life of the contract. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts in the Statements of Assets and Liabilities.
Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited, if any, are shown as cash pledged for futures contracts in the
Statements of Assets and Liabilities. Pursuant to the contract, the Trusts agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin
is recorded as unrealized appreciation (depreciation) and, if any, shown as variation
margin receivable (or payable) on futures contracts in the Statements of Assets
and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it
was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.
Forward Foreign Currency Exchange Contracts: Forward foreign currency exchange contracts are entered into to gain or reduce exposure to foreign currencies
(foreign currency exchange rate risk).
A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange
rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the Trusts are denominated and in some cases, may be used to obtain exposure to a particular market.
The contract is marked-to-market daily and the change in market value is recorded as
unrealized appreciation (depreciation) in the Statements of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the value at the time it was opened
and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign
|
|
|
|
|
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
|
53
|
|
Notes to Financial Statements (continued)
currency. The use of forward foreign
currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies, and such value may exceed the amount(s) reflected in
the Statements of Assets and Liabilities. Cash amounts pledged for forward foreign currency exchange contracts are considered restricted and are included in cash pledged as collateral for OTC derivatives in the Statements of Assets and Liabilities.
Options: Certain Trusts purchase and write call and put options to increase or decrease their exposure to the risks of underlying instruments, including
equity risk, interest rate risk and/or commodity price risk and/or, in the case of options written, to generate gains from options premiums.
A call option gives the
purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised) the underlying instrument at the exercise or strike price at any time or at a specified time during
the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period.
Premiums paid on options purchased and premiums received on options written, as well as the daily fluctuation in market value, are included in investments at value –
unaffiliated and options written at value, respectively, in the Statements of Assets and Liabilities. When an instrument is purchased or sold through the exercise of an option, the premium is offset against the cost or proceeds of the underlying
instrument. When an option expires, a realized gain or loss is recorded in the Statements of Operations to the extent of the premiums received or paid. When an option is closed or sold, a gain or loss is recorded in the Statements of Operations to
the extent the cost of the closing transaction exceeds the premiums received or paid. When the Trusts write a call option, such option is typically “covered,” meaning that they hold the underlying instrument subject to being called by the
option counterparty. When the Trusts write a put option, cash is segregated in an amount sufficient to cover the obligation. These amounts, which are considered restricted, are included in cash pledged as collateral for options written in the
Statements of Assets and Liabilities.
|
|
•
|
|
Swaptions — Certain Trusts purchase and write options on swaps (“swaptions”) primarily to preserve a return
or spread on a particular investment or portion of the Trusts’ holdings, as a duration management technique or to protect against an increase in the price of securities it anticipates purchasing at a later date. The purchaser and writer of a
swaption is buying or granting the right to enter into a previously agreed upon interest rate or credit default swap agreement (interest rate risk and/or credit risk) at any time before the expiration of the option.
|
In purchasing and writing options, the Trusts bear the risk of an unfavorable change in the value of the underlying instrument or the risk that they may
not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Trusts purchasing or selling a security when they otherwise would not, or at a price different from the current market value.
Swaps: Swap contracts are entered into to manage exposure to issuers, markets and securities. Such contracts are agreements between the Trusts and a
counterparty to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract (“OTC swaps”) or
centrally cleared (“centrally cleared swaps”).
For OTC swaps, any upfront premiums paid and any upfront fees received are shown as swap premiums paid and
swap premiums received, respectively, in the Statements of Assets and Liabilities and amortized over the term of the contract. The daily fluctuation in market value is recorded as unrealized appreciation (depreciation) on OTC Swaps in the Statements
of Assets and Liabilities. Payments received or paid are recorded in the Statements of Operations as realized gains or losses, respectively. When an OTC swap is terminated, a realized gain or loss is recorded in the Statements of Operations equal to
the difference between the proceeds from (or cost of) the closing transaction and the Trusts’ basis in the contract, if any. Generally, the basis of the contract is the premium received or paid.
In a centrally cleared swap, immediately following execution of the swap contract, the swap contract is novated to a central counterparty (the “CCP”) and the
Trusts’ counterparty on the swap agreement becomes the CCP. The Trusts are required to interface with the CCP through the broker. Upon entering into a centrally cleared swap, the Trusts are required to deposit initial margin with the broker in
the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited is shown as cash
pledged for centrally cleared swaps in the Statements of Assets and Liabilities. Amounts pledged, which are considered restricted cash, are included in cash pledged for centrally cleared swaps in the Statements of Assets and Liabilities.
Pursuant to the contract, the Trusts agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation
(depreciation) and shown as variation margin receivable (or payable) on centrally cleared swaps in the Statements of Assets and Liabilities. Payments received from (paid to) the counterparty, including at termination, are recorded as realized gains
(losses) in the Statements of Operations.
|
|
•
|
|
Credit default swaps — Credit default swaps are entered into to manage exposure to the market or certain sectors of the
market, to reduce risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which a trust is not otherwise exposed (credit risk).
|
The Trusts may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name
issuers or traded indexes. Credit default swaps are agreements in which the protection buyer pays fixed periodic payments to the seller in consideration for a promise from the protection seller to make a specific payment should a negative credit
event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation acceleration, repudiation, moratorium or restructuring). As a buyer, if an underlying credit event occurs, the Trusts will either (i) receive
from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising the index, or (ii) receive a net settlement of cash equal to the notional amount of the swap less the
recovery value of the security or underlying securities comprising the index. As a seller (writer), if an underlying credit event occurs, the Trusts will either pay the buyer an amount equal to the notional amount of the swap and take delivery of
the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.
Master Netting Arrangements: In order to define their contractual rights and to secure rights that will help them mitigate their counterparty risk, the Trusts may
enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their counterparties. An ISDA Master Agreement is a bilateral agreement between each Trust and a
counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, each Trust may, under
certain circumstances,
|
|
|
|
|
54
|
|
2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS
|
Notes to Financial Statements (continued)
offset with the counterparty certain
derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default
including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events.
Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Trusts and the counterparty.
Cash collateral that has been pledged to cover obligations of the Trusts and cash collateral received from the counterparty, if any, is reported separately in the
Statements of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Trusts, if any, is noted in the Schedules of Investments.
Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the Trusts. Any additional required collateral
is delivered to/pledged by the Trusts on the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it
receives. A Trust generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use
cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Trusts from their counterparties are not fully collateralized, they bear the risk of loss
from counterparty non-performance. Likewise, to the extent the Trusts have delivered collateral to a counterparty and stand ready to perform under the terms of their agreement with such counterparty, they bear
the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.
For financial reporting purposes, the Trusts do not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the
Statements of Assets and Liabilities.
|
6.
|
INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
|
Investment Advisory: Each Trust entered into an Investment Advisory Agreement with the Manager, the Trusts’ investment adviser and an indirect, wholly-owned
subsidiary of BlackRock, Inc. (“BlackRock”) to provide investment advisory and administrative services. The Manager is responsible for the management of each Trust’s portfolio and provides the personnel, facilities, equipment and
certain other services necessary to the operations of each Trust.
For such services, BTZ and BGT each pays the Manager a monthly fee at an annual rate equal to 0.62%
and 0.75%, respectively, of the average weekly value of each Trust’s managed assets. For purposes of calculating these fees, “managed assets” are determined as total assets of the Trust (including any assets attributable to money
borrowed for investment purposes) less the sum of its accrued liabilities (other than money borrowed for investment purposes).
Expense Waivers: With respect
to each Trust, the Manager contractually agreed to waive its investment advisory fees by the amount of investment advisory fees each Trust pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated
money market fund waiver”) through June 30, 2021. Prior to December 1, 2019, this waiver and/or reimbursement was voluntary. These amounts are included in fees waived and/or reimbursed by the Manager in the Statements of Operations.
The amounts waived were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BTZ
|
|
|
BGT
|
|
|
|
|
Period from
11/01/19
to 12/31/19
|
|
|
Year Ended
10/31/19
|
|
|
Period from
11/01/19
to 12/31/19
|
|
|
Year Ended
10/31/19
|
|
|
Amounts waived
|
|
$
|
1,322
|
|
|
$
|
13,066
|
|
|
$
|
133
|
|
|
$
|
771
|
|
The Manager contractually agreed to waive its investment advisory fee with respect to any portion of each Trust’s assets invested in
affiliated equity and fixed income mutual funds and affiliated exchange-traded funds that have a contractual management fee through June 30, 2021. The agreement can be renewed for annual periods thereafter, and may be terminated on 90
days’ notice, each subject to approval by a majority of the Trusts’ Independent Trustees. The amounts waived for BGT were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
BGT
|
|
|
|
|
Period from
11/01/19
to 12/31/19
|
|
|
Year Ended
10/31/19
|
|
|
Amounts waived
|
|
$
|
—
|
|
|
$
|
125
|
|
Trustees and Officers: Certain trustees and/or officers of the directors are trustees and/or officers of BlackRock or its
affiliates. The Trusts reimburse the Manager for a portion of the compensation paid to the Trusts’ Chief Compliance Officer, which is included in Trustees and Officer in the Statements of Operations.
For the period ended December 31, 2019, purchases and sales of investments, including paydowns and excluding short-term securities, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
BTZ
|
|
|
BGT
|
|
|
Purchases
|
|
$
|
50,361,261
|
|
|
$
|
26,845,043
|
|
|
Sales
|
|
|
54,182,290
|
|
|
|
34,147,559
|
|
|
|
|
|
|
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
|
55
|
|
Notes to Financial Statements (continued)
|
8.
|
INCOME TAX INFORMATION
|
It is each Trust’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to
distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.
Each Trust files U.S. federal
and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each Trust’s U.S. federal tax returns generally remains open for each of the four years ended October 31, 2019
and period ended December 31, 2019. The statutes of limitations on each Trust’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.
Management has analyzed tax laws and regulations and their application to the Trusts as of December 31, 2019, inclusive of the open tax return years, and does not
believe that there are any uncertain tax positions that require recognition of a tax liability in the Trusts’ financial statements.
The tax character of
distributions paid was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BTZ
|
|
|
BGT
|
|
|
Ordinary income
|
|
|
12/31/19
|
|
|
$
|
23,997,745
|
|
|
$
|
5,265,812
|
|
|
|
|
|
10/31/19
|
|
|
|
82,221,384
|
|
|
|
18,989,845
|
|
|
|
|
|
10/31/18
|
|
|
|
85,614,025
|
|
|
|
16,888,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return of capital
|
|
|
12/31/19
|
|
|
|
2,145,215
|
|
|
|
—
|
|
|
|
|
|
10/31/19
|
|
|
|
3,261,831
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
12/31/19
|
|
|
$
|
26,142,960
|
|
|
$
|
5,265,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/31/19
|
|
|
$
|
85,483,215
|
|
|
$
|
18,989,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/31/18
|
|
|
$
|
85,614,025
|
|
|
$
|
16,888,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of period end, the tax components of accumulated net earnings (losses) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
BTZ
|
|
|
BGT
|
|
|
Non-expiring capital loss carryforwards(a)
|
|
$
|
(51,626,561)
|
|
|
$
|
(16,422,605
|
)
|
|
Net unrealized gains (losses)(b)
|
|
|
169,865,673
|
|
|
|
(2,057,527
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
118,239,112
|
|
|
$
|
(18,480,132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Amounts available to offset future realized capital gains.
|
|
|
|
(b)
|
The difference between book-basis and tax-basis net unrealized gains (losses) was
attributable primarily to the tax deferral of losses on wash sales and straddles, the realization for tax purposes of unrealized gains/losses on certain futures, options and foreign currency exchange contracts, amortization methods for premiums and
discounts on fixed income securities, the accrual of income on securities in default, the timing and recognition of partnership income, the accounting for swap agreements, the deferral of compensation to Trustees and the classification of
investments.
|
|
During the year ended December 31, 2019, the Trusts listed below utilized the following amounts of their respective capital
loss carryforward:
|
|
|
|
|
|
|
|
|
BTZ
|
|
|
Amount utilized
|
|
$
|
221,417
|
|
As of December 31, 2019, gross
unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
BTZ
|
|
|
BGT
|
|
|
Tax cost
|
|
$
|
1,943,835,780
|
|
|
$
|
458,974,806
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross unrealized appreciation
|
|
$
|
199,072,758
|
|
|
$
|
3,538,528
|
|
|
Gross unrealized depreciation
|
|
|
(19,600,093
|
)
|
|
|
(4,498,722
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized appreciation (depreciation)
|
|
$
|
179,472,665
|
|
|
$
|
(960,194)
|
|
|
|
|
|
|
|
|
|
|
|
BGT is party to a senior committed secured, 360-day rolling line of credit facility and a separate security agreement (the
“SSB Agreement”) with State Street Bank and Trust Company (“SSB”). SSB may elect to terminate its commitment upon 360-days written notice to BGT. As of period end, BGT has not received any
notice to terminate. BGT has granted a security interest in substantially all of its assets to SSB.
The SSB Agreement allows for the maximum commitment amount of
$168,000,000 for BGT.
Advances will be made by SSB to BGT, at BGT’s option of (a) the higher of (i) 0.80% above the Fed Funds rate and (ii) 0.80% above
Overnight LIBOR or (b) 0.80% above 7-day, 30-day, 60-day or 90-day LIBOR. Overnight LIBOR
and LIBOR rates are subject to a 0% floor.
|
|
|
|
|
56
|
|
2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS
|
Notes to Financial Statements (continued)
In addition, BGT paid a commitment fee
(based on the daily unused portion of the commitments). The fees associated with each of the agreements are included in the Statements of Operations as borrowing costs, if any. Advances to BGT as of period end, if any, are shown in the Statements of
Assets and Liabilities as bank borrowings payable. Based on the short-term nature of the borrowings under the line of credit and the variable interest rate, the carrying amount of the borrowings approximates fair value.
BGT may not declare dividends or make other distributions on shares or purchase any such shares if, at the time of the declaration, distribution or purchase, asset
coverage with respect to the outstanding short-term borrowings is less than 300%.
For the period ended December 31, 2019, the average amount of bank borrowings
and the daily weighted average interest rates for BGT for loans under the revolving credit agreements were $122,426,230 and 2.47%, respectively.
Many municipalities insure repayment of their bonds, which may reduce the potential for loss due to credit risk. The market value of these bonds may fluctuate for other
reasons, including market perception of the value of such insurance, and there is no guarantee that the insurer will meet its obligation.
Inventories of municipal
bonds held by brokers and dealers may decrease, which would lessen their ability to make a market in these securities. Such a reduction in market making capacity could potentially decrease the Trust’s ability to buy or sell bonds. As a result,
the Trust may sell a security at a lower price, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative impact on performance. If the Trust needed to sell large blocks of bonds, those sales could
further reduce the bonds’ prices and impact performance.
In the normal course of business, the Trusts invest in securities or other instruments and may enter
into certain transactions, and such activities subject each Trust to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments
may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or
international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations.
Each Trust may be exposed to prepayment risk,
which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force each Trust to reinvest in lower yielding securities. Each Trust may also be
exposed to reinvestment risk, which is the risk that income from each Trust’s portfolio will decline if each Trust invests the proceeds from matured, traded or called fixed-income securities at market interest rates that are below each Trust
portfolio’s current earnings rate.
Each Trust may invest without limitation in illiquid or less liquid investments or investments in which no secondary market
is readily available or which are otherwise illiquid, including private placement securities. A Trust may not be able to readily dispose of such investments at prices that approximate those at which a Trust could sell such investments if they were
more widely traded and, as a result of such illiquidity, a Trust may have to sell other investments or engage in borrowing transactions if necessary to raise funds to meet its obligations. Limited liquidity can also affect the market price of
investments, thereby adversely affecting a Trust’s net asset value and ability to make dividend distributions. Privately issued debt securities are often of below investment grade quality, frequently are unrated and present many of the same
risks as investing in below investment grade public debt securities.
Valuation Risk: The market values of equities, such as common stocks and preferred
securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry
or industries. A Trust may invest in illiquid investments. An illiquid investment is any investment that a Trust reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or
disposition significantly changing the market value of the investment. A Trust may experience difficulty in selling illiquid investments in a timely manner at the price that they believe the investments are worth. Prices may fluctuate widely over
short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause each Trust’s NAV to experience significant increases or
decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of a Trust may lose value, regardless of the individual results of the securities and other instruments in which a Trust invests.
The price a Trust could receive upon the sale of any particular portfolio investment may differ from a Trust’s valuation of the investment, particularly for
securities that trade in thin or volatile markets or that are valued using a fair valuation technique or a price provided by an independent pricing service. Changes to significant unobservable inputs and assumptions (i.e., publicly traded company
multiples, growth rate, time to exit) due to the lack of observable inputs may significantly impact the resulting fair value and therefore a Trust’s results of operations. As a result, the price received upon the sale of an investment may be
less than the value ascribed by a Trust, and a Trust could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. A Trust’s ability to value its investments may also be impacted by technological
issues and/or errors by pricing services or other third party service providers.
Counterparty Credit Risk: The Trusts may be exposed to counterparty credit
risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Trusts manage counterparty credit risk by entering into transactions only with counterparties that the Manager
believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Trusts to market, issuer and counterparty credit risks, consist
principally of financial instruments and receivables due from counterparties. The extent of the Trusts’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the
Statements of Assets and Liabilities, less any collateral held by the Trusts.
A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform
under the contract.
|
|
|
|
|
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
|
57
|
|
Notes to Financial Statements (continued)
A Trust’s risk of loss from
counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by such Trust.
For OTC
options purchased, each Trust bears the risk of loss in the amount of the premiums paid plus the positive change in market values net of any collateral held by the Trusts should the counterparty fail to perform under the contracts. Options written
by the Trusts do not typically give rise to counterparty credit risk, as options written generally obligate the Trusts, and not the counterparty, to perform. The Trusts may be exposed to counterparty credit risk with respect to options written to
the extent each Trust deposits collateral with its counterparty to a written option.
With exchange-traded options purchased and futures and centrally cleared swaps,
there is less counterparty credit risk to the Trusts since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract;
therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Trust does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default
(including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While
clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the
clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Trusts.
Concentration Risk: Certain Trusts may invest in securities that are rated below investment grade quality (sometimes called “junk bonds”), which are
predominantly speculative, have greater credit risk and generally are less liquid than, and have more volatile prices than, higher quality securities.
Certain Trusts
invest a significant portion of their assets in fixed-income securities and/or use derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or
liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as interest rates rise. The Trusts may be subject to a greater risk of rising
interest rates due to the current period of historically low rates.
Certain Trusts invest a significant portion of their assets in securities backed by commercial or
residential mortgage loans or in issuers that hold mortgage and other asset-backed securities. Investment percentages in these securities are presented in the Schedules of Investments. Changes in economic conditions, including delinquencies and/or
defaults on assets underlying these securities, can affect the value, income and/or liquidity of such positions.
|
11.
|
CAPITAL SHARE TRANSACTIONS
|
Each Trust is authorized to issue an unlimited number of shares, all of which were initially classified as Common Shares. The par value for each Trust’s Common
Shares is $0.001. The Board is authorized, however, to reclassify any unissued Common Shares to Preferred Shares without the approval of Common Shareholders.
Common Shares: The Trusts participate in an open market share repurchase program (the “Repurchase Program”). From December 1, 2018 through
November 30, 2019, each Trust was permitted to repurchase up to 5% of its outstanding common shares under the Repurchase Program, based on common shares outstanding as of the close of business on November 30, 2018, subject to certain
conditions. From December 1, 2019 through November 30, 2020, each Trust may repurchase up to 5% of its outstanding common shares under the Repurchase Program, based on common shares outstanding as of the close of business on
November 30, 2019, subject to certain conditions. There is no assurance that the Trusts will purchase shares in any particular amounts.
The total cost of the
shares repurchased is reflected in the Trusts’ Statements of Changes in Net Assets. For the period and years shown, shares repurchased and cost, including transaction costs were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BTZ
|
|
|
BGT
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Period ended December 31, 2019
|
|
|
—
|
|
|
$
|
—
|
|
|
|
64,799
|
|
|
$
|
810,222
|
|
|
Year ended October 31, 2019
|
|
|
1,057,409
|
|
|
|
12,507,349
|
|
|
|
649,075
|
|
|
|
7,974,829
|
|
|
Year ended October 31, 2018
|
|
|
2,489,141
|
|
|
|
30,991,477
|
|
|
|
—
|
|
|
|
—
|
|
Management’s evaluation of the impact of all subsequent events on the Trusts’ financial statements was completed through the date the financial statements were
issued and the following items were noted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Dividend Per Share
|
|
|
|
|
Paid (a)
|
|
|
Declared (b)
|
|
|
BTZ
|
|
$
|
0.0839
|
|
|
$
|
0.0839
|
|
|
BGT
|
|
|
0.0764
|
|
|
|
0.0764
|
|
|
|
(a)
|
Net investment income dividend paid on January 9, 2020 to shareholders of record on December 31, 2019.
|
|
|
|
(b)
|
Net investment income dividend declared on February 3, 2020, payable to shareholders of record on February 14, 2020.
|
|
|
|
|
|
|
58
|
|
2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS
|
Notes to Financial Statements (continued)
BTZ conducted a tender offer to purchase for
cash up to 10% of BTZ’s outstanding common shares of beneficial interest, at a price equal to 98% of the NAV per share, determined on the business day on which the Tender Offer expired (the “Valuation Date”).
The results of the tender offer for BTZ were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commencement Date (a)
|
|
Valuation Date
|
|
|
Number of
Shares
Tendered
|
|
|
Tendered Shares
as a Percentage of
Outstanding Shares
|
|
|
Number of
Tendered Shares
Purchased
|
|
|
Tendered Shares
Purchased as a
Percentage of
Outstanding Shares
|
|
|
January 2, 2020
|
|
|
February 3, 2020
|
|
|
|
41,241,878
|
|
|
|
40
|
%
|
|
|
10,386,555
|
|
|
|
10.00
|
%
|
|
|
(a)
|
Date the tender offer period began.
|
|
|
|
|
|
|
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
|
59
|
|
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of BlackRock Credit Allocation Income Trust and BlackRock
Floating Rate Income Trust:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statements of assets and liabilities of BlackRock Credit Allocation Income Trust and BlackRock Floating Rate Income Trust, including the
schedules of investments, as of December 31, 2019, the related statements of operations and cash flows for the period from November 1, 2019 through December 31, 2019 and for the year ended October 31, 2019, the statements of changes in net assets
for the period from November 1, 2018 through December 31, 2019 and for each of the two years in the period ended October 31, 2019, the financial highlights for the period from November 1, 2019 through December 31, 2019 and for each of the five years
in the period ended October 31, 2019, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Funds as of December 31, 2019, and the results of
their operations and their cash flows for the period from November 1, 2019 through December 31, 2019 and for the year ended October 31, 2019, the changes in their net assets for the period from November 1, 2019 through December 31, 2019 and for each
of the two years in the period ended October 31, 2019, and the financial highlights for the period from November 1, 2019 through December 31, 2019 and for each of the five years in the period ended October 31, 2019, in conformity with accounting
principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’
financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our
audits in accordance with the standards of the PCAOB. 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,
whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as
of December 31, 2019, by correspondence with the custodian, agent banks, and brokers; when replies were not received from agent banks or brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our
opinion.
Deloitte & Touche LLP
Boston, Massachusetts
February 25, 2020
We have served as the auditor of one or more BlackRock investment
companies since 1992.
Important Tax Information (unaudited)
During the fiscal year ended December 31, 2019, the following information is provided with respect to the
ordinary income distributions paid by the Trusts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable Dates
|
|
BGT
|
|
|
BTZ
|
|
|
Qualified Dividend Income for Individuals(a)
|
|
November 2019 — December 2019
|
|
|
—
|
|
|
|
15.07
|
%
|
|
Dividends Qualifying for the Dividend Received Deduction for Corporations(a)
|
|
November 2019 — December 2019
|
|
|
—
|
|
|
|
11.79
|
|
|
Interest-Related Dividends and Qualified Short-Term Gains for
Non-U.S. Residents(b)
|
|
November 2019
|
|
|
77.84
|
|
|
|
61.54
|
|
|
|
|
December 2019
|
|
|
77.96
|
|
|
|
61.54
|
|
|
|
|
January 2020
|
|
|
77.96
|
|
|
|
—
|
|
|
|
(a)
|
The Trusts hereby designate the percentage indicated or the maximum amount allowable by law.
|
|
|
|
(b)
|
Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for
nonresident aliens and foreign corporations.
|
|
|
|
|
|
|
60
|
|
2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS
|
Automatic Dividend Reinvestment Plan
Pursuant to each Trust’s Dividend Reinvestment Plan (the “Reinvestment Plan”),
Common Shareholders are automatically enrolled to have all distributions of dividends and capital gains and other distributions reinvested by Computershare Trust Company, N.A. (the “Reinvestment Plan Agent”) in the respective Trust’s
Common Shares pursuant to the Reinvestment Plan. Shareholders who do not participate in the Reinvestment Plan will receive all distributions in cash paid by check and mailed directly to the shareholders of record (or if the shares are held in street
name or other nominee name, then to the nominee) by the Reinvestment Plan Agent, which serves as agent for the shareholders in administering the Reinvestment Plan.
After the Trusts declare a dividend or determine to make a capital gain or other distribution, the Reinvestment Plan Agent will acquire shares for the participants’
accounts, depending upon the following circumstances, either (i) through receipt of unissued but authorized shares from the Trusts (“newly issued shares”) or (ii) by purchase of outstanding shares on the open market or on the Trust’s
primary exchange (“open-market purchases”). If, on the dividend payment date, the net asset value per share (“NAV”) is equal to or less than the market price per share plus estimated brokerage commissions (such condition often
referred to as a “market premium”), the Reinvestment Plan Agent will invest the dividend amount in newly issued shares acquired on behalf of the participants. The number of newly issued shares to be credited to each participant’s
account will be determined by dividing the dollar amount of the dividend by the NAV on the date the shares are issued. However, if the NAV is less than 95% of the market price on the dividend payment date, the dollar amount of the dividend will be
divided by 95% of the market price on the dividend payment date. If, on the dividend payment date, the NAV is greater than the market price per share plus estimated brokerage commissions (such condition often referred to as a “market
discount”), the Reinvestment Plan Agent will invest the dividend amount in shares acquired on behalf of the participants in open-market purchases. If the Reinvestment Plan Agent is unable to invest the full dividend amount in open-market
purchases, or if the market discount shifts to a market premium during the purchase period, the Reinvestment Plan Agent will invest any un-invested portion in newly issued shares. Investments in newly issued shares made in this manner would be made
pursuant to the same process described above and the date of issue for such newly issued shares will substitute for the dividend payment date.
You may elect not to
participate in the Reinvestment Plan and to receive all dividends in cash by contacting the Reinvestment Plan Agent, at the address set forth below.
Participation in
the Reinvestment Plan is completely voluntary and may be terminated or resumed at any time without penalty by notice if received and processed by the Reinvestment Plan Agent prior to the dividend record date. Additionally, the Reinvestment Plan
Agent seeks to process notices received after the record date but prior to the payable date and such notices often will become effective by the payable date. Where late notices are not processed by the applicable payable date, such termination or
resumption will be effective with respect to any subsequently declared dividend or other distribution.
The Reinvestment Plan Agent’s fees for the handling of
the reinvestment of distributions will be paid by each Trust However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Reinvestment Plan Agent’s open-market purchases in connection with the
reinvestment of all distributions. The automatic reinvestment of all distributions will not relieve participants of any U.S. federal, state or local income tax that may be payable on such dividends or distributions.
Each Trust reserves the right to amend or terminate the Reinvestment Plan. There is no direct service charge to participants in the Reinvestment Plan; however, each Trust
reserves the right to amend the Reinvestment Plan to include a service charge payable by the participants. Participants that request a sale of shares are subject to a $2.50 sales fee and a $0.15 per share sold brokerage commission fee. All
correspondence concerning the Reinvestment Plan should be directed to Computershare Trust Company, N.A. through the internet at computershare.com/blackrock, or in writing to Computershare, P.O. Box 505000, Louisville, KY 40233, Telephone:
(800) 699-1236. Overnight correspondence should be directed to the Reinvestment Plan Agent at Computershare, 462 South 4th Street, Suite 1600, Louisville, KY 40202.
|
|
|
|
|
|
|
AUTOMATIC DIVIDEND REINVESTMENT PLAN
|
|
|
61
|
|
Trustee and Officer Information
|
|
|
|
|
|
|
|
|
|
|
Independent Trustees (a)
|
|
|
|
|
|
|
Name
Year of Birth (b)
|
|
Position(s) Held
(Length of Service) (c)
|
|
Principal Occupation(s) During Past Five Years
|
|
Number of BlackRock-Advised
Registered Investment Companies
(“RICs”) Consisting
of
Investment Portfolios
(“Portfolios”) Overseen (d)
|
|
Public Company and Other
Investment Company
Directorships Held During
Past Five Years
|
|
Richard E. Cavanagh
1946
|
|
Co-Chair of the Board and Trustee
(Since 2007)
|
|
Director, The Guardian Life Insurance Company of America since 1998; Board Chair, Volunteers of America (a
not-for-profit organization) from 2015 to 2018 (board member since 2009); Director, Arch Chemicals (chemical and allied products) from 1999 to 2011; Trustee, Educational
Testing Service from 1997 to 2009 and Chairman thereof from 2005 to 2009; Senior Advisor, The Fremont Group since 2008 and Director thereof since 1996; Faculty Member/Adjunct Lecturer, Harvard University since 2007 and Executive Dean from 1987 to
1995; President and Chief Executive Officer, The Conference Board, Inc. (global business research organization) from 1995 to 2007.
|
|
86 RICs consisting of 110 Portfolios
|
|
None
|
|
Karen P. Robards
1950
|
|
Co-Chair of the Board and Trustee
(Since 2007)
|
|
Principal of Robards & Company, LLC (consulting and private investing) since 1987; Co-founder and Director of the Cooke Center for Learning and
Development (a not-for-profit organization) since 1987; Director of Enable Injections, LLC (medical devices) since 2019; Investment Banker at Morgan Stanley from 1976 to
1987.
|
|
86 RICs consisting of 110 Portfolios
|
|
Greenhill & Co., Inc.; AtriCure, Inc. (medical devices) from 2000 until 2017
|
|
Michael J. Castellano
1946
|
|
Trustee
(Since 2011)
|
|
Chief Financial Officer of Lazard Group LLC from 2001 to 2011; Chief Financial Officer of Lazard Ltd from 2004 to 2011; Director, Support Our Aging Religious
(non-profit) from 2009 to June 2015 and since 2017; Director, National Advisory Board of Church Management at Villanova University since 2010; Trustee, Domestic Church Media Foundation since 2012; Director,
CircleBlack Inc. (financial technology company) since 2015.
|
|
86 RICs consisting of 110 Portfolios
|
|
None
|
|
Cynthia L. Egan
1955
|
|
Trustee
(Since 2016)
|
|
Advisor, U.S. Department of the Treasury from 2014 to 2015; President, Retirement Plan Services, for T. Rowe Price Group, Inc. from 2007 to 2012; executive positions within Fidelity
Investments from 1989 to 2007.
|
|
86 RICs consisting of 110 Portfolios
|
|
Unum (insurance); The Hanover Insurance Group (insurance); Envestnet (investment platform) from 2013 until 2016
|
|
Frank J. Fabozzi (d)
1948
|
|
Trustee
(Since 2007)
|
|
Editor of The Journal of Portfolio Management since 1986; Professor of Finance, EDHEC Business School (France) since 2011; Visiting Professor, Princeton University for the 2013 to 2014
academic year and Spring 2017 semester; Professor in the Practice of Finance, Yale University School of Management from 1994 to 2011 and currently a Teaching Fellow in Yale’s Executive Programs; Board Member, BlackRock Equity-Liquidity Funds
from 2014 to 2016; affiliated professor Karlsruhe Institute of Technology from 2008 to 2011.
|
|
87 RICs consisting of 111 Portfolios
|
|
None
|
|
Henry Gabbay
1947
|
|
Trustee
(Since 2019)
|
|
Board Member, BlackRock Equity-Bond Board from 2007 to 2018; Board Member, BlackRock Equity-Liquidity and BlackRock Closed-End Fund Boards from 2007
through 2014; Consultant, BlackRock, Inc. from 2007 to 2008; Managing Director, BlackRock, Inc. from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target
Shares (formerly, BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.
|
|
86 RICs consisting of 110 Portfolios
|
|
None
|
|
|
|
|
|
62
|
|
2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS
|
Trustee and Officer Information (continued)
|
|
|
|
|
|
|
|
|
|
|
Independent Trustees (a) (continued)
|
|
|
|
|
|
|
Name
Year of Birth (b)
|
|
Position(s) Held
(Length of Service) (c)
|
|
Principal Occupation(s) During Past Five Years
|
|
Number of BlackRock-Advised
Registered Investment Companies
(“RICs”) Consisting
of
Investment Portfolios
(“Portfolios”) Overseen (d)
|
|
Public Company and Other
Investment Company
Directorships Held During
Past Five Years
|
|
R. Glenn Hubbard
1958
|
|
Trustee
(Since 2007)
|
|
Dean, Columbia Business School from 2004 to 2019; Faculty member, Columbia Business School since 1988.
|
|
86 RICs consisting of 110 Portfolios
|
|
ADP (data and information services); Metropolitan Life Insurance Company (insurance); KKR Financial Corporation (finance) from 2004 until 2014
|
|
W. Carl Kester (d)
1951
|
|
Trustee
(Since 2007)
|
|
George Fisher Baker Jr. Professor of Business Administration, Harvard Business School since 2008; Deputy Dean for Academic Affairs from 2006 to 2010; Chairman of the Finance Unit, from 2005 to
2006; Senior Associate Dean and Chairman of the MBA Program from 1999 to 2005; Member of the faculty of Harvard Business School since 1981.
|
|
87 RICs consisting of 111 Portfolios
|
|
None
|
|
Catherine A. Lynch (d)
1961
|
|
Trustee
(Since 2016)
|
|
Chief Executive Officer, Chief Investment Officer and various other positions, National Railroad Retirement Investment Trust from 2003 to 2016; Associate Vice President for Treasury
Management, The George Washington University from 1999 to 2003; Assistant Treasurer, Episcopal Church of America from 1995 to 1999.
|
|
87 RICs consisting of 111 Portfolios
|
|
None
|
|
|
|
Interested Trustees (a)(e)
|
|
|
|
|
|
|
Name
Year of Birth (b)
|
|
Position(s) Held
(Length of Service) (c)
|
|
Principal Occupation(s) During Past Five Years
|
|
Number of BlackRock-Advised
Registered Investment Companies
(“RICs”)
Consisting of
Investment Portfolios
(“Portfolios”) Overseen (d)
|
|
Public Company and Other
Investment Company
Directorships Held During
Past Five Years
|
|
Robert Fairbairn
1965
|
|
Trustee
(Since 2018)
|
|
Vice Chairman of BlackRock, Inc. since 2019; Member of BlackRock’s Global Executive and Global Operating Committees; Co-Chair of BlackRock’s
Human Capital Committee; Senior Managing Director of BlackRock, Inc. from 2010 to 2019; oversaw BlackRock’s Strategic Partner Program and Strategic Product Management Group from 2012 to 2019; Member of the Board of Managers of BlackRock
Investments, LLC from 2011 to 2018; Global Head of BlackRock’s Retail and iShares® businesses from 2012 to 2016.
|
|
123 RICs consisting of 287 Portfolios
|
|
None
|
|
John M. Perlowski (d)
1964
|
|
Trustee
(Since 2015)
President and Chief Executive Officer
(Since 2010)
|
|
Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Accounting and Product Services since 2009; Advisory Director of Family Resource Network (charitable foundation) since
2009.
|
|
124 RICs consisting of 288 Portfolios
|
|
None
|
|
(a) The address of each Trustee is c/o
BlackRock, Inc., 55 East 52nd Street, New York, New York 10055.
|
|
(b) Each Independent Trustee holds
office until his or her successor is duly elected and qualifies or until his or her earlier death, resignation, retirement or removal as provided by the Trust’s by-laws or charter or statute, or until
December 31 of the year in which he or she turns 75. Trustees who are “interested persons,” as defined in the Investment Company Act serve until their successor is duly elected and qualifies or until their earlier death, resignation,
retirement or removal as provided by the Trust’s by-laws or statute, or until December 31 of the year in which they turn 72. The Board may determine to extend the terms of Independent Trustees on a case-by-case basis, as appropriate.
|
|
(c) Following the combination of
Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. Certain Independent
Trustees first became members of the boards of other legacy MLIM or legacy BlackRock funds as follows: Richard E. Cavanagh, 1994; Frank J. Fabozzi, 1988; R. Glenn Hubbard, 2004; W. Carl Kester, 1995; and Karen P. Robards, 1998. Mr. Gabbay
became a member of the boards of the open-end funds in the BlackRock Fixed-Income Complex in 2007.
|
|
(d) Dr. Fabozzi, Dr. Kester,
Ms. Lynch and Mr. Perlowski are also trustees of the BlackRock Credit Strategies Fund.
|
|
(e) Mr. Fairbairn and
Mr. Perlowski are both “interested persons,” as defined in the 1940 Act, of the Trust based on their positions with BlackRock, Inc. and its affiliates. Mr. Fairbairn and Mr. Perlowski are also board members of the BlackRock
Multi-Asset Complex.
|
|
|
|
|
|
|
|
TRUSTEE AND OFFICER INFORMATION
|
|
|
63
|
|
Trustee and Officer Information (continued)
|
|
|
|
|
|
|
Officers Who Are Not Trustees (a)
|
|
|
|
|
Name
Year of Birth (b)
|
|
Position(s) Held
(Length of Service)
|
|
Principal Occupation(s) During Past Five Years
|
|
Jonathan Diorio
1980
|
|
Vice President
(Since 2015)
|
|
Managing Director of BlackRock, Inc. since 2015; Director of BlackRock, Inc. from 2011 to 2015.
|
|
Neal J. Andrews
1966
|
|
Chief Financial Officer
(Since 2007)
|
|
Chief Financial Officer of the iShares® exchange traded funds since 2019; Managing Director of BlackRock, Inc. since 2006.
|
|
Jay M. Fife
1970
|
|
Treasurer
(Since 2007)
|
|
Managing Director of BlackRock, Inc. since 2007.
|
|
Charles Park
1967
|
|
Chief Compliance Officer
(Since 2014)
|
|
Anti-Money Laundering Compliance Officer for certain BlackRock-advised Funds from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the
BlackRock Multi-Asset Complex and the BlackRock Fixed-Income Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund
Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer
for BlackRock Asset Management International Inc. since 2012.
|
|
Janey Ahn
1975
|
|
Secretary
(Since 2012)
|
|
Managing Director of BlackRock, Inc. since 2018; Director of BlackRock, Inc. from 2009 to 2017.
|
|
(a) The address of each Officer is c/o
BlackRock, Inc., 55 East 52nd Street, New York, New York 10055.
|
|
(b) Officers of the Trust serve at the
pleasure of the Board.
|
Effective February 19, 2020, Henry Gabbay resigned as a Trustee of the Trusts.
Investment Adviser
BlackRock Advisors, LLC
Wilmington, DE 19809
Accounting Agent and Custodian
State Street Bank and Trust Company
Boston, MA 02111
Transfer Agent
Computershare Trust Company, N.A.
Canton, MA 02021
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Boston, MA 02116
Legal Counsel
Willkie Farr & Gallagher LLP
New York, NY 10019
Address of the Trusts
100 Bellevue Parkway
Wilmington, DE 19809
|
|
|
|
|
64
|
|
2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS
|
Additional Information
Trust Certification
The Trusts are listed for trading on the NYSE and have filed with the NYSE their annual chief executive officer certification regarding compliance with the NYSE’s
listing standards. The Trusts filed with the SEC the certification of their chief executive officer and chief financial officer required by section 302 of the Sarbanes-Oxley Act.
Dividend Policy
Each Trust’s policy is to make monthly distributions
to shareholders. In order to provide shareholders with a more stable level of dividend distributions, each Trust employs a managed distribution plan (the Plan”), the goal of which is to provide shareholders with consistent and predictable cash
flows by setting distribution rates based on expected long-term returns of each Trust.
The distributions paid by the Trusts for any particular month may be more or
less than the amount of net investment income earned by the Trusts during such month. Furthermore, the final tax characterization of distributions is determined after the year-end of the Trust and is reported in each Trust’s annual report to
shareholders. Distributions can be characterized as ordinary income, capital gains and/or return of capital. The Trust’s taxable net investment income and net realized capital gains (“taxable income”) may not be sufficient to support
the level of distributions paid. To the extent that distributions exceed the Trust’s current and accumulated earnings and profits, the excess may be treated as a non-taxable return of capital.
A return of capital is a return of a portion of an investor’s original investment. A return of capital is not expected to be taxable, but it reduces a
shareholder’s tax basis in his or her shares, thus reducing any loss or increasing any gain on a subsequent disposition by the shareholder of his or her shares. It is possible that a substantial portion of the distributions paid during a
calendar year may ultimately be classified as return of capital for U.S. federal income tax purposes when the final determination of the source and character of the distributions is made.
Such distributions, under certain circumstances, may exceed a Trust’s total return performance. When total distributions exceed total return performance for the
period, the difference reduces the Trust’s total assets and net asset value per share (“NAV”) and, therefore, could have the effect of increasing the Trust’s expense ratio and reducing the amount of assets the Trust has available
for long term investment.
General Information
On July 29, 2019, the
Board approved the elimination of BTZ’s non-fundamental policy limiting investments in illiquid securities to 10% of BTZ’s managed assets. As a result, BTZ may invest without limit in illiquid securities. Effective February 8, 2019, BTZ
changed its non-fundamental investment policy with respect to investments in non-U.S. securities. Under its new non-fundamental policy, under normal market conditions, up to 50% of BTZ’s Managed Assets may be invested in non-U.S. securities,
which may include securities denominated in U.S. dollars or in non-U.S. currencies or multinational currency units.
The Trusts do not make available copies of their
Statements of Additional Information because the Trusts’ shares are not continuously offered, which means that the Statement of Additional Information of each Trust has not been updated after completion of the respective Trust’s offerings
and the information contained in each Trust’s Statement of Additional Information may have become outdated.
Except as described above, there were no material
changes in the Trusts’ investment objectives or policies or to the Trusts’ charters or by-laws that would delay or prevent a change of control of the Trusts that were not approved by the shareholders or in the principal risk factors
associated with investment in the Trusts.
As of the date of this report, the portfolio managers of BGT are James E. Keenan, David Delbos, Mitchell S. Garfin, Carly
Wilson and Abigail Apistolas.
Except as noted above, there have been no changes in the persons who are primarily responsible for the day-to-day management of the
Trusts’ portfolios.
In accordance with Section 23(c) of the Investment Company Act of 1940, each Trust may from time to time purchase shares of its common stock
in the open market or in private transactions.
Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding the
Trusts may be found on BlackRock’s website, which can be accessed at blackrock.com. Any reference to BlackRock’s website in this report is intended to allow investors public access to information regarding the Trusts and does not,
and is not intended to, incorporate BlackRock’s website in this report.
Electronic Delivery
Shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual shareholder reports by enrolling in the electronic delivery program.
Electronic copies of shareholder reports are available on BlackRock’s website.
To enroll in electronic delivery:
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial advisor. Please note that not all investment advisers, banks or brokerages may offer this service.
|
|
|
|
|
|
|
ADDITIONAL INFORMATION
|
|
|
65
|
|
Additional Information (continued)
Householding
The Trusts will mail only one copy of shareholder documents, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same
address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you
instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Trusts at (800) 882-0052.
Availability of Quarterly Schedule of Investments
The Trusts file their
complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The
Trusts’ Forms N-PORT and N-Q are available on the SEC’s website at sec.gov. The Trusts’ Forms N-Q may also be obtained upon request and without charge by
calling (800) 882-0052.
Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that the Trusts use to determine how to vote proxies relating to portfolio securities is available upon request and without
charge (1) by calling (800) 882-0052; (2) at blackrock.com; and (3) on the SEC’s website at sec.gov.
Availability of Proxy Voting Record
Information about how the Trusts voted proxies relating to securities held in the Trusts’ portfolios during the most recent 12-month period ended June 30 is
available upon request and without charge (1) at blackrock.com; or by calling (800) 882-0052 and (2) on the SEC’s website at sec.gov.
Availability
of Trust Updates
BlackRock will update performance and certain other data for the Trusts on a monthly basis on its website in the “Closed-end Funds”
section of blackrock.com as well as certain other material information as necessary from time to time. Investors and others are advised to check the website for updated performance information and the release of other material information
about the Trusts. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Trusts and does not, and is not intended to, incorporate BlackRock’s website in this report.
BlackRock Privacy Principles
BlackRock is committed to maintaining the
privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal
information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.
If you are located in a
jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive
from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv)
from visits to our websites.
BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as
permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended
purpose.
We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may
be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and
procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.
|
|
|
|
|
66
|
|
2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS
|
Glossary of Terms Used in this Report
|
|
|
|
|
Currency
|
|
|
|
|
AUD
|
|
Australian Dollar
|
|
|
|
|
BRL
|
|
Brazilian Real
|
|
|
|
|
CAD
|
|
Canadian Dollar
|
|
|
|
|
EUR
|
|
Euro
|
|
|
|
|
GBP
|
|
British Pound
|
|
|
|
|
IDR
|
|
Indonesian Rupiah
|
|
|
|
|
MXN
|
|
Mexican Peso
|
|
|
|
|
NGN
|
|
Nigerian Naira
|
|
|
|
|
NOK
|
|
Norwegian Krone
|
|
|
|
|
USD
|
|
U.S. Dollar
|
|
|
|
|
|
Portfolio Abbreviations
|
|
|
|
|
ALL
|
|
Albanian Lek
|
|
|
|
|
ARB
|
|
Airport Revenue Bonds
|
|
|
|
|
CR
|
|
Custodian Receipt
|
|
|
|
|
CLO
|
|
Collateralized Loan Obligation
|
|
|
|
|
ETF
|
|
Exchange-Traded Fund
|
|
|
|
|
EURIBOR
|
|
Euro Interbank Offered Rate
|
|
|
|
|
FNMA
|
|
Federal National Mortgage Association
|
|
|
|
|
LIBOR
|
|
London Interbank Offered Rate
|
|
|
|
|
MSCI
|
|
Morgan Stanley Capital International
|
|
|
|
|
MTN
|
|
Medium-Term Note
|
|
|
|
|
PIK
|
|
Payment-In-Kind
|
|
|
|
|
RB
|
|
Revenue Bonds
|
|
|
|
|
REIT
|
|
Real Estate Investment Trust
|
|
|
|
|
REMIC
|
|
Real Estate Mortgage Investment Conduit
|
|
|
|
|
S&P
|
|
Standard & Poor’s
|
|
|
|
|
SPDR
|
|
Standard & Poor’s Depository Receipts
|
|
|
|
|
|
|
|
GLOSSARY OF TERMS USED IN THIS REPORT
|
|
|
67
|
|
Want to know more?
blackrock.com | 877-275-1255 (1-877-ASK-1BLK)
This report is intended for current holders. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future
performance. Statements and other information herein are as dated and are subject to change.
CE-CAFRI-3-12/19-AR
|
Item 2 –
|
Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end of
the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. During the period covered by this
report, the code of ethics was amended to update certain information and to make other non-material changes. During the period covered by this report, there have been no waivers granted under the code of
ethics. The registrant undertakes to provide a copy of the code of ethics to any person upon request, without charge, who calls
1-800-882-0052, option 4.
|
|
Item 3 –
|
Audit Committee Financial Expert – The registrant’s board of directors (the “board of
directors”), has determined that (i) the registrant has the following audit committee financial experts serving on its audit committee and (ii) each audit committee financial expert is independent:
|
Michael Castellano
Frank J.
Fabozzi
Henry Gabbay
Catherine A. Lynch
Karen P.
Robards
The registrant’s board of directors has determined that Karen P. Robards qualifies as an audit committee financial expert
pursuant to Item 3(c)(4) of Form N-CSR.
Ms. Robards has a thorough understanding of
generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Ms. Robards has been President of Robards & Company, a financial advisory firm, since
1987. Ms. Robards was formerly an investment banker for more than 10 years where she was responsible for evaluating and assessing the performance of companies based on their financial results. Ms. Robards has over 30 years of experience
analyzing financial statements. She also is a member of the audit committee of one publicly held company and a non-profit organization.
Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for
any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an
audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the
absence of such designation or identification. The designation or identification of a person as an audit committee financial expert does not affect the duties, obligations, or liability of any other member of the audit committee or board of
directors.
2
|
Item 4 –
|
Principal Accountant Fees and Services
|
The following table presents fees billed by Deloitte & Touche LLP (“D&T”) in each of the last two fiscal years for the
services rendered to the Fund:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Audit Fees
|
|
(b) Audit-Related Fees1
|
|
(c) Tax Fees2
|
|
(d) All Other Fees
|
|
Entity Name
|
|
Current
Fiscal
Year
End
12/31/193
|
|
Previous
Fiscal
Year End
10/31/19
|
|
Current
Fiscal
Year
End
12/31/193
|
|
Previous
Fiscal
Year End
10/31/19
|
|
Current
Fiscal Year
End 12/31/193
|
|
Previous
Fiscal
Year End
10/31/19
|
|
Current
Fiscal
Year
End
12/31/193
|
|
Previous
Fiscal
Year End
10/31/19
|
BlackRock Credit
Allocation Income
Trust
|
|
$37,546
|
|
$44,166
|
|
$0
|
|
$0
|
|
$11,000
|
|
$22,000
|
|
$0
|
|
$0
|
The following table presents fees billed by D&T that were required to be approved by the registrant’s
audit committee (the “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock Advisors LLC (“Investment Adviser” or “BlackRock”)
and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another
investment adviser) that provide ongoing services to the Fund (“Affiliated Service Providers”):
|
|
|
|
|
|
|
|
|
Current Fiscal Year End
12/31/193
|
|
Previous Fiscal Year End 10/31/19
|
|
(b) Audit-Related Fees1
|
|
$0
|
|
$0
|
|
(c) Tax Fees2
|
|
$0
|
|
$0
|
|
(d) All Other Fees4
|
|
$2,050,500
|
|
$2,050,500
|
1 The nature of the services includes assurance and related services
reasonably related to the performance of the audit or review of financial statements not included in Audit Fees, including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters,
out-of-pocket expenses and internal control reviews not required by regulators.
2 The nature of the services includes tax compliance and/or tax preparation, including services relating to
the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews, taxable income and tax distribution calculations.
3 The registrant changed its fiscal year end from October 31 to December 31 effective
December 31, 2019 whereby this fiscal year consists of the two months ended December 31, 2019.
4 Non-audit fees of $2,050,500 and $2,050,500 for the current
fiscal year and previous fiscal year, respectively, were paid to the Fund’s principal accountant in their entirety by BlackRock, in connection with services provided to the Affiliated Service Providers of the Fund and of certain other funds
sponsored and advised by BlackRock or its affiliates for a service organization review and an accounting research tool subscription. These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The Committee has adopted policies and procedures with regard to the pre-approval of
services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the Investment Adviser and Affiliated Service Providers that relate directly to the
operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are (a) consistent with the SEC’s auditor independence rules and
(b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific
case-by-case basis (“general pre-approval”). The term of any general
pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other
non-audit services provided to the registrant which have a direct impact on the operations or financial reporting of the registrant will only be deemed pre-approved
provided that any individual project does not exceed $10,000 attributable to the registrant or $50,000 per project. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels.
3
Any proposed services exceeding the
pre-approved cost levels will require specific pre-approval by the Committee, as will any other services not subject to general
pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved subject to general pre-approval at the next regularly
scheduled in-person board meeting. At this meeting, an analysis of such services is presented to the Committee for ratification. The Committee may delegate to the Committee Chairman the authority to approve
the provision of and fees for any specific engagement of permitted non-audit services, including services exceeding pre-approved cost levels.
(e)(2) None of the services described in each of Items 4(b) through (d) were approved by the Committee pursuant to the de minimis
exception in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable
(g) The
aggregate non-audit fees, defined as the sum of the fees shown under “Audit-Related Fees,” “Tax Fees” and “All Other Fees,” paid to the accountant for services rendered by the
accountant to the registrant, the Investment Adviser and the Affiliated Service Providers were:
|
|
|
|
|
|
|
|
|
|
|
Entity Name
|
|
Current Fiscal Year
End
12/31/191
|
|
Previous Fiscal Year
End 10/31/19
|
|
|
BlackRock Credit Allocation
Income Trust
|
|
$11,000
|
|
$22,000
|
1The registrant changed its fiscal year end from
October 31 to December 31 effective December 31, 2019 whereby this fiscal year consists of the two months ended December 31, 2019.
Additionally, the amounts billed by D&T in connection with services provided to the Affiliated Service Providers of the Fund and of other
funds sponsored or advised by BlackRock or its affiliates during the current and previous fiscal years for a service organization review and an accounting research tool subscription were:
|
|
|
|
|
|
|
|
|
|
|
Current Fiscal
Year
End
12/31/191
|
|
Previous Fiscal
Year End
10/31/19
|
|
|
|
|
$2,050,500
|
|
$2,050,500
|
1The registrant changed its fiscal year end from
October 31 to December 31 effective
December 31, 2019 whereby this fiscal year consists of the two months ended
December 31, 2019.
These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.
(h) The Committee has considered and determined that the provision of non-audit services that were
rendered to the Investment Adviser, and the Affiliated Service Providers that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
4
|
Item 5 –
|
Audit Committee of Listed Registrants
|
(a) The following individuals are members of the registrant’s separately designated standing audit committee established in accordance
with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)):
Michael Castellano
Frank J. Fabozzi
Henry Gabbay
Catherine A. Lynch
Karen P.
Robards
(b) Not Applicable
(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.
(b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form
N-CSR filing.
|
Item 7 –
|
Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies – The board of directors has delegated the voting of proxies for the Fund’s portfolio securities to the Investment Adviser pursuant to the Investment Adviser’s proxy voting guidelines. Under these
guidelines, the Investment Adviser will vote proxies related to Fund securities in the best interests of the Fund and its stockholders. From time to time, a vote may present a conflict between the interests of the Fund’s stockholders, on the
one hand, and those of the Investment Adviser, or any affiliated person of the Fund or the Investment Adviser, on the other. In such event, provided that the Investment Adviser’s Equity Investment Policy Oversight Committee, or a sub-committee thereof (the “Oversight Committee”) is aware of the real or potential conflict or material non-routine matter and if the Oversight Committee does not
reasonably believe it is able to follow its general voting guidelines (or if the particular proxy matter is not addressed in the guidelines) and vote impartially, the Oversight Committee may retain an independent fiduciary to advise the Oversight
Committee on how to vote or to cast votes on behalf of the Investment Adviser’s clients. If the Investment Adviser determines not to retain an independent fiduciary, or does not desire to follow the advice of such independent fiduciary, the
Oversight Committee shall determine how to vote the proxy after consulting with the Investment Adviser’s Portfolio Management Group and/or the Investment Adviser’s Legal and Compliance Department and concluding that the vote cast is in its
client’s best interest notwithstanding the conflict. A copy of the Fund’s Proxy Voting Policy and Procedures are attached as Exhibit 99.PROXYPOL. Information on how the Fund voted proxies relating to portfolio securities during the most
recent 12-month period ended June 30 is available without charge, (i) at www.blackrock.com and (ii) on the SEC’s website at http://www.sec.gov.
|
|
Item 8 –
|
Portfolio Managers of Closed-End Management Investment Companies
|
(a)(1) As of the date of filing this Report:
The Fund is managed by a team of investment professionals comprised of Jeff Cucunato, Managing Director at BlackRock, Mitchell S. Garfin,
Managing Director at BlackRock and
5
Stephan Bassas, Managing Director at BlackRock. Messrs. Cucunato, Bassas and Garfin are the Fund’s portfolio managers and are responsible for the day-to-day management of the Fund’s portfolio and the selection of its investments. Messrs. Cucunato, Bassas and Garfin have been members of the Fund’s portfolio management team since 2011.
|
|
|
|
|
|
|
|
|
|
|
Portfolio Manager
|
|
Biography
|
|
|
|
|
|
Jeffrey Cucunato
|
|
Managing Director of BlackRock since 2005.
|
|
|
|
|
|
Mitchell S. Garfin
|
|
Managing Director of BlackRock since 2009; Director of BlackRock from 2005 to 2008.
|
|
|
|
|
|
Stephan Bassas
|
|
Managing Director of BlackRock since 2017; Director of BlackRock since 2006.
|
|
|
(a)(2) As of December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(ii) Number of Other Accounts Managed
and Assets by Account Type
|
|
(iii) Number of Other Accounts and
Assets for Which Advisory Fee is
Performance-Based
|
|
(i) Name of
Portfolio
Manager
|
|
Other
Registered
Investment
Companies
|
|
Other Pooled
Investment
Vehicles
|
|
Other
Accounts
|
|
Other
Registered
Investment
Companies
|
|
Other Pooled
Investment
Vehicles
|
|
Other
Accounts
|
|
Jeffrey Cucunato
|
|
11
|
|
2
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
$1.88 Billion
|
|
$210.0 Million
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
Mitchell S. Garfin
|
|
20
|
|
19
|
|
30
|
|
0
|
|
3
|
|
30
|
|
|
|
$32.66 Billion
|
|
$12.57 Billion
|
|
$12.37 Billion
|
|
$0
|
|
$6.31 Billion
|
|
$12.37 Billion
|
|
Stephan Bassas
|
|
7
|
|
14
|
|
58
|
|
0
|
|
6
|
|
56
|
|
|
|
$2.38 Billion
|
|
$4.25 Billion
|
|
$37.49 Billion
|
|
$0
|
|
$1.89 Billion
|
|
$36.38 Billion
|
(iv) Portfolio Manager Potential Material Conflicts of Interest
BlackRock has built a professional working environment, firm-wide compliance culture and compliance procedures and systems
designed to protect against potential incentives that may favor one account over another. BlackRock has adopted policies and procedures that address the allocation of investment opportunities, execution of portfolio transactions, personal trading by
employees and other potential conflicts of interest that are designed to ensure that all client accounts are treated equitably over time. Nevertheless, BlackRock furnishes investment management and advisory services to numerous clients in addition
to the Fund, and BlackRock may, consistent with applicable law, make investment recommendations to other clients or accounts (including accounts which are hedge funds or have performance or higher fees paid to BlackRock, or in which portfolio
managers have a personal interest in the receipt of such fees), which may be the same as or different from those made to the Fund. In addition, BlackRock, Inc., its affiliates and significant shareholders and any officer, director, shareholder
or employee may or may not have an interest in the securities whose purchase and sale BlackRock recommends to the Fund. BlackRock, Inc., or any of its affiliates or significant shareholders, or any officer, director, shareholder, employee or
any member of their families may take different actions than those recommended to the Fund by BlackRock with respect to the same securities. Moreover, BlackRock may refrain from rendering any advice or services concerning securities of
companies of which any of
6
BlackRock, Inc.’s (or its affiliates’ or significant shareholders’) officers, directors or employees are directors or officers, or companies as to which BlackRock, Inc. or any of
its affiliates or significant shareholders or the officers, directors and employees of any of them has any substantial economic interest or possesses material non-public information. Certain portfolio
managers also may manage accounts whose investment strategies may at times be opposed to the strategy utilized for a fund. It should also be noted that Messrs. Bassas, Cucunato and Garfin may be managing hedge fund and/or long only accounts, or
may be part of a team managing hedge fund and/or long only accounts, subject to incentive fees. Messrs. Bassas, Cucunato and Garfin may therefore be entitled to receive a portion of any incentive fees earned on such accounts.
As a fiduciary, BlackRock owes a duty of loyalty to its clients and must treat each client fairly. When BlackRock
purchases or sells securities for more than one account, the trades must be allocated in a manner consistent with its fiduciary duties. BlackRock attempts to allocate investments in a fair and equitable manner among client accounts, with no
account receiving preferential treatment. To this end, BlackRock, Inc. has adopted policies that are intended to ensure reasonable efficiency in client transactions and provide BlackRock with sufficient flexibility to allocate investments in a
manner that is consistent with the particular investment discipline and client base, as appropriate.
(a)(3) As of December 31,
2019:
Portfolio Manager Compensation Overview
The discussion below describes the portfolio managers’ compensation as of December 31, 2019.
BlackRock’s financial arrangements with its portfolio managers, its competitive compensation and its career path
emphasis at all levels reflect the value senior management places on key resources. Compensation may include a variety of components and may vary from year to year based on a number of factors. The principal components of compensation include a base
salary, a performance-based discretionary bonus, participation in various benefits programs and one or more of the incentive compensation programs established by BlackRock.
Base Compensation. Generally, portfolio managers receive base compensation based on their position with the firm.
Discretionary Incentive Compensation
Discretionary incentive compensation is a function of several components: the performance of BlackRock, Inc., the performance of the
portfolio manager’s group within BlackRock, the investment performance, including risk-adjusted returns, of the firm’s assets under management or supervision by that portfolio manager relative to predetermined benchmarks, and the
individual’s performance and contribution to the overall performance of these portfolios and BlackRock. In most cases, these benchmarks are the same as the benchmark or benchmarks against which the performance of the Funds or other
accounts managed by the portfolio managers are measured. Among other things, BlackRock’s Chief Investment Officers make a subjective determination with respect to each portfolio manager’s compensation based on the performance of the
funds and other accounts managed by each portfolio manager relative to the various benchmarks. Performance of
7
fixed income funds is measured on a pre-tax and/or after-tax basis over various time periods including 1-, 3- and 5- year periods, as applicable. With respect to these portfolio managers, such benchmarks for the Fund and other accounts
are:
|
|
|
|
|
|
|
|
|
Portfolio Manager
|
|
Benchmark
|
|
|
Jeffrey Cucunato
Stephen Bassas
|
|
Bloomberg Barclays US Credit Index
|
|
|
Mitchell S. Garfin
|
|
A combination of market-based indices (e.g., The
Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Cap Index), certain customized indices and certain fund industry peer groups.
|
Distribution of Discretionary Incentive Compensation.
Discretionary incentive compensation is distributed to portfolio managers in a combination of cash, deferred BlackRock, Inc.
stock awards, and/or deferred cash awards that notionally track the return of certain BlackRock investment products.
Portfolio managers receive their annual discretionary incentive compensation in the form of cash. Portfolio managers whose
total compensation is above a specified threshold also receive deferred BlackRock, Inc. stock awards annually as part of their discretionary incentive compensation. Paying a portion of discretionary incentive compensation in the form of deferred
BlackRock, Inc. stock puts compensation earned by a portfolio manager for a given year “at risk” based on BlackRock’s ability to sustain and improve its performance over future periods. In some cases, additional deferred BlackRock,
Inc. stock may be granted to certain key employees as part of a long-term incentive award to aid in retention, align interests with long-term shareholders and motivate performance. Deferred BlackRock, Inc. stock awards are generally granted in the
form of BlackRock, Inc. restricted stock units that vest pursuant to the terms of the applicable plan and, once vested, settle in BlackRock, Inc. common stock. The portfolio managers of this Fund have deferred BlackRock, Inc. stock awards.
For certain portfolio managers, a portion of the discretionary incentive compensation is also distributed in the form of
deferred cash awards that notionally track the returns of select BlackRock investment products they manage, which provides direct alignment of portfolio manager discretionary incentive compensation with investment product results. Deferred cash
awards vest ratably over a number of years and, once vested, settle in the form of cash. Only portfolio managers who manage specified products and whose total compensation is above a specified threshold are eligible to participate in the deferred
cash award program.
Other Compensation Benefits. In addition to base salary and discretionary incentive
compensation, portfolio managers may be eligible to receive or participate in one or more of the following:
Incentive
Savings Plans — BlackRock, Inc. has created a variety of incentive savings plans in which BlackRock, Inc. employees are eligible to participate, including a 401(k) plan, the BlackRock Retirement Savings Plan (RSP), and the
BlackRock Employee Stock Purchase Plan (ESPP). The employer contribution components of the RSP include a company match equal to 50% of the first 8% of eligible pay contributed to the plan capped at $5,000 per year, and a company
8
retirement contribution equal to 3-5% of eligible compensation up to the Internal Revenue Service limit ($280,000 for 2019). The RSP offers a range of
investment options, including registered investment companies and collective investment funds managed by the firm. BlackRock, Inc. contributions follow the investment direction set by participants for their own contributions or, absent participant
investment direction, are invested into a target date fund that corresponds to, or is closest to, the year in which the participant attains age 65. The ESPP allows for investment in BlackRock, Inc. common stock at a 5% discount on the fair
market value of the stock on the purchase date. Annual participation in the ESPP is limited to the purchase of 1,000 shares of common stock or a dollar value of $25,000 based on its fair market value on the purchase date. All of the
eligible portfolio managers are eligible to participate in these plans.
(a)(4) Beneficial Ownership of Securities – As of
December 31, 2019.
|
|
|
|
|
Portfolio Manager
|
|
Dollar Range of Equity Securities
of the Fund Beneficially Owned
|
|
Jeffrey Cucunato
|
|
$100,001 - $500,000
|
|
Mitchell S. Garfin
|
|
$500,001 - $1,000,000
|
|
Stephan Bassas
|
|
$100,001 - $500,000
|
(b) Not Applicable
|
Item 9 –
|
Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers – Not Applicable due to no such purchases during the period covered by this report.
|
|
Item 10 –
|
Submission of Matters to a Vote of Security Holders – There have been no material changes to these
procedures.
|
|
Item 11 –
|
Controls and Procedures
|
(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.
(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 period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial
reporting.
|
Item 12 –
|
Disclosure of Securities Lending Activities for Closed-End Management
Investment Companies --Not Applicable
|
|
Item 13 –
|
Exhibits attached hereto
|
(a)(1) – Code of Ethics – See Item 2
9
(a)(2) – Certifications – Attached hereto
(a)(3) – Not Applicable
(a)(4) – Not Applicable
(b) – Certifications – Attached hereto
(c) – Notices to the registrant’s common shareholders in accordance with the order under Section 6(c) of the 1940 Act granting
an exemption from Section 19(b) of the 1940 Act and Rule 19b-1 under the 1940 Act, dated May 9, 20091
1 The Fund has received exemptive relief from the Securities and Exchange Commission
permitting it to make periodic distributions of long-term capital gains with respect to its outstanding common stock as frequently as twelve times each year, and as frequently as distributions are specified by or in accordance with the terms of its
outstanding preferred stock. This relief is conditioned, in part, on an undertaking by the Fund to make the disclosures to the holders of the Fund’s common shares, in addition to the information required by Section 19(a) of the 1940 Act and
Rule 19a-1 thereunder. The Fund is likewise obligated to file with the SEC the information contained in any such notice to shareholders and, in that regard, has attached hereto copies of each such notice made during the period.
10
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
|
|
|
BlackRock Credit Allocation Income Trust
|
|
|
|
|
|
|
|
By:
|
|
/s/ John M. Perlowski
|
|
|
|
|
|
John M. Perlowski
|
|
|
|
|
|
|
|
Chief Executive Officer (principal executive officer) of
|
|
|
|
|
|
BlackRock Credit Allocation Income Trust
|
|
|
Date: March 6, 2020
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
|
|
|
|
|
|
BlackRock Credit Allocation Income Trust
|
|
|
Date: March 6, 2020
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Neal J. Andrews
|
|
|
|
|
|
Neal J. Andrews
|
|
|
|
|
|
Chief Financial Officer (principal financial officer) of
|
|
|
|
|
|
BlackRock Credit Allocation Income Trust
|
|
|
Date: March 6, 2020
11
BlackRock Credit Allocat... (NYSE:BTZ)
Gráfica de Acción Histórica
De May 2024 a Jun 2024
BlackRock Credit Allocat... (NYSE:BTZ)
Gráfica de Acción Histórica
De Jun 2023 a Jun 2024
