BLACKROCK INCOME TRUST, INC.
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

Investment Company Act file number 811-05542

Name of Fund:  BlackRock Income Trust, Inc. (BKT)

Fund Address:  100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Income

             Trust, Inc., 55 East 52nd Street, New York, NY 10055

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

Date of fiscal year end: 08/31/2016

Date of reporting period: 08/31/2016


Table of Contents

Item 1  – Report to Stockholders

 


Table of Contents

AUGUST 31, 2016

 

 

ANNUAL REPORT

 

    LOGO

 

BlackRock Core Bond Trust (BHK)

BlackRock Corporate High Yield Fund, Inc. (HYT)

BlackRock Income Trust, Inc. (BKT)

 

Not FDIC Insured • May Lose Value • No Bank Guarantee


Table of Contents
Table of Contents     

 

     Page  

The Markets in Review

    3   

Annual Report:

 

Trust Summaries

    4   

The Benefits and Risks of Leveraging

    10   

Derivative Financial Instruments

    10   
Financial Statements:  

Schedules of Investments

    11   

Statements of Assets and Liabilities

    65   

Statements of Operations

    67   

Statements of Changes in Net Assets

    68   

Statements of Cash Flows

    71   

Financial Highlights

    73   

Notes to Financial Statements

    76   

Report of Independent Registered Public Accounting Firm

    92   

Important Tax Information

    92   

Disclosure of Investment Advisory Agreements

    93   

Automatic Dividend Reinvestment Plans

    97   

Officers and Trustees

    98   

Additional Information

    101   

 

                
2    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents
The Markets in Review

 

Dear Shareholder,

Uneven economic outlooks and the divergence of monetary policies across regions have been the overarching themes driving financial markets over the past couple of years. In the latter half of 2015, investors were focused largely on the timing of the Federal Reserve’s (the “Fed”) decision to end its near-zero interest rate policy. The Fed ultimately hiked rates in December, while, in contrast, the European Central Bank and the Bank of Japan increased stimulus, even introducing negative interest rates. The U.S. dollar had strengthened considerably, causing profit challenges for U.S. companies that generate revenues overseas, and pressuring emerging market currencies and commodities prices. Also during this time period, oil prices collapsed due to excess global supply. China showed signs of slowing economic growth and declining confidence in the country’s policymakers stoked worries about the potential impact on the global economy. Risk assets (such as equities and high yield bonds) struggled as volatility increased.

The elevated market volatility spilled over into 2016, but as the first quarter wore on, fears of a global recession began to fade, allowing markets to calm and risk assets to rebound. Central bank stimulus in Europe and Japan, combined with a more tempered outlook for rate hikes in the United States, helped bolster financial markets. A softening in U.S. dollar strength brought relief to U.S. exporters and emerging market economies, and oil prices rebounded as the world’s largest producers agreed to reduce supply.

Volatility spiked in late June when the United Kingdom shocked investors with its vote to leave the European Union. Uncertainty around how the British exit might affect the global economy and political landscape drove investors to high-quality assets, pushing already low global yields to even lower levels. However, risk assets recovered swiftly in July as economic data suggested that the consequences had thus far been contained to the United Kingdom.

With a number of factors holding interest rates down — central bank accommodation, an aging population in need of income, and institutions such as insurance companies and pension plans needing to meet liabilities — assets offering decent yield have become increasingly scarce. As a result, income-seeking investors have stretched into riskier assets despite high valuations in many sectors.

Market volatility touched a year-to-date low in August, which may be a signal that investors have become complacent given persistent macro risks: Geopolitical turmoil continues to loom. A surprise move from the Fed — i.e., raising rates sooner than expected — has the potential to roil markets. And perhaps most likely to stir things up — the U.S. presidential election.

At BlackRock, we believe investors need to think globally, extend their scope across a broad array of asset classes and be prepared to adjust accordingly as market conditions change over time. We encourage you to talk with your financial advisor and visit blackrock.com for further insight about investing in today’s markets.

Sincerely,

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

 

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

 

Total Returns as of August 31, 2016  
    6-month     12-month  

U.S. large cap equities
(S&P 500® Index)

    13.60     12.55

U.S. small cap equities
(Russell 2000® Index)

    20.87        8.59   

International equities
(MSCI Europe, Australasia,
Far East Index)

    10.35        (0.12

Emerging market equities
(MSCI Emerging Markets Index)

    22.69        11.83   

3-month Treasury bills
(BofA Merrill Lynch 3-Month
U.S. Treasury Bill Index)

    0.17        0.23   

U.S. Treasury securities
(BofA Merrill Lynch
10-Year U.S. Treasury
Index)

    2.22        7.35   

U.S. investment grade bonds
(Bloomberg Barclays U.S.
Aggregate Bond Index)

    3.68        5.97   

Tax-exempt municipal
bonds (S&P Municipal
Bond Index)

    3.35        7.03   

U.S. high yield bonds
(Bloomberg Barclays U.S. Corporate High Yield 2% Issuer
Capped Index)

    15.56        9.12   
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.    

 

                
   THIS PAGE NOT PART OF YOUR FUND REPORT       3


Table of Contents
Trust Summary as of August 31, 2016    BlackRock Core Bond Trust

 

Trust Overview

BlackRock Core Bond Trust’s (BHK) (the “Trust”) investment objective is to provide current income and capital appreciation. The Trust seeks to achieve its investment objective by investing at least 75% of its managed assets in bonds that are investment grade quality at the time of investment. The Trust’s investments will include a broad range of bonds, including corporate bonds, U.S. government and agency securities and mortgage-related securities. The Trust may invest up to 25% of its total managed assets in bonds that at the time of investment are rated Ba/BB or below by Moody’s Investors Service, Inc. (“Moody’s”), Fitch Ratings (“Fitch”) or another nationally recognized rating agency or bonds that are unrated but judged to be of comparable quality by the investment adviser. The Trust may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Trust’s investment objective will be achieved.

 

Trust Information     

Symbol on New York Stock Exchange (“NYSE”)

  BHK

Initial Offering Date

  November 27, 2001

Current Distribution Rate on Closing Market Price as of August 31, 2016 ($14.33)1

  5.44%

Current Monthly Distribution per Common Share2

  $0.065

Current Annualized Distribution per Common Share2

  $0.780

Economic Leverage as of August 31, 20163

  26%

 

  1   

Current distribution rate on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. The current distribution rate may consist of income, net realized gains and/or a tax return of capital. Past performance does not guarantee future results.

 

  2   

The distribution rate is not constant and is subject to change.

 

  3   

Represents reverse repurchase agreements outstanding as a percentage of total managed assets, which is the total assets of the Trust (including any assets attributable to borrowings) minus the sum of liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Trust, please see The Benefits and Risks of Leveraging on page 10.

 

Performance and Portfolio Management Commentary

 

Returns for the 12 months ended August 31, 2016 were as follows:

 

    Returns Based On  
     Market Price     NAV  

BHK1,2

    20.85     13.67

Lipper Corporate BBB-Rated Debt Funds (Leveraged)3

    15.43     7.69

 

  1   

All returns reflect reinvestment of dividends and/or distributions.

 

  2   

The Trust’s discount to NAV, which narrowed during the period, accounts for the difference between performance based on price and performance based on NAV.

 

  3   

Average return.

 

      Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

The following discussion relates to the Trust’s absolute performance based on NAV:

What factors influenced performance?

 

 

The largest positive contributor to the Trust’s performance was its allocation to investment grade corporate securities, followed by its allocation to U.S. Treasuries. Also contributing to performance was the Trust’s positioning within high yield corporates, commercial mortgage-backed securities (“CMBS”) and global sovereign/supranational/agency issues.

 

 

The Trust employs derivatives to manage duration and yield curve positioning. During the period, the employment of interest rate derivatives did not materially impact performance.

Describe recent portfolio activity.

 

 

At the start of the period the Trust maintained a consistent allocation, favoring investment grade and high yield corporates, securitized products such as asset-backed securities (“ABS”) and CMBS, as well as agency mortgage-backed securities (“MBS”). Volatility increased at year end 2015 in the wake of the first Fed rate hike in nine years and the subsequent currency depreciation of the Chinese yuan in January. As a result, the Trust reduced risk by decreasing exposure to structured products, corporate credit and sovereign securities in favor of U.S. Treasuries. During the second half of the period, the Trust continued to reduce exposure to spread products and added exposure to U.S. Treasuries, as the investment adviser expected market volatility to remain elevated ahead of the U.K. referendum on leaving the European Union. Most of the reductions were within high yield corporates and CMBS. Following the U.K. referendum vote, the Trust began to add exposure to spread products as a way of increasing yield and to benefit from investors’ global search for income due to very low interest rate levels.

Describe portfolio positioning at period end.

 

 

The Trust maintained diversified exposure within non-government spread sectors, including investment grade credit, high yield credit, CMBS and ABS, as well as smaller allocations to non-agency mortgages and U.S. municipals. The Trust also held exposure to government-related sectors such as U.S. Treasury securities, agency debt and agency MBS. The Trust closed the period with a long duration profile.

 

 

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

 

                
4    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents
     BlackRock Core Bond Trust

 

Market Price and Net Asset Value Per Share Summary

 

      8/31/16      8/31/15      Change      High      Low  

Market Price

   $ 14.33       $ 12.63         13.46    $ 14.34       $ 12.34   

Net Asset Value

   $ 15.25       $ 14.29         6.72    $ 15.28       $ 13.74   

 

Market Price and Net Asset Value History For the Past Five Years

 

LOGO

 

Overview of the Trust’s Total Investments

 

Portfolio Composition   8/31/16    

8/31/15

 

Corporate Bonds

    47     49

U.S. Treasury Obligations

    14        6   

Preferred Securities

    10        10   

Non-Agency Mortgage-Backed Securities

    10        12   

Asset-Backed Securities

    8        11   

U.S. Government Sponsored Agency Securities

    6        8   

Municipal Bonds

    2        2   

Foreign Agency Obligations

    2        2   

Floating Rate Loan Interests

    1          

Short-Term Securities

    1        1   

Options Written

    (1     (1

Other1

             

 

  1   

Representing less than 1% of the Trust’s total investments and may include Common Stocks and Options Purchased.

 

 

Credit Quality Allocation2,3   8/31/16    

8/31/15

 

AAA/Aaa4

    24     18

AA/Aa

    4        7   

A

    14        18   

BBB/Baa

    22        33   

BB/Ba

    17        13   

B

    12        7   

CCC/Caa

    4        1   

N/R

    3        3   

 

  2  

For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P or Moody’s if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

 

  3   

Excludes Short-Term Securities, Options Purchased and Options Written.

 

  4   

The investment adviser evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment adviser has deemed U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations as AAA/Aaa.

 

 

                
   ANNUAL REPORT    AUGUST 31, 2016    5


Table of Contents
Trust Summary as of August 31, 2016    BlackRock Corporate High Yield Fund, Inc.

 

Trust Overview

BlackRock Corporate High Yield Fund, Inc.’s (HYT) (the “Trust”) primary investment objective is to provide shareholders with current income. The Trust’s secondary investment objective is to provide shareholders with capital appreciation. The Trust seeks to achieve its objectives by investing primarily in a diversified portfolio of fixed income securities which are rated below investment grade or, if unrated, are considered by the investment adviser to be of comparable quality. The Trust may invest directly in fixed income securities or synthetically through the use of derivatives.

No assurance can be given that the Trust’s investment objectives will be achieved.

 

Trust Information     

Symbol on NYSE

  HYT

Initial Offering Date

  May 30, 2003

Current Distribution Rate on Closing Market Price as of August 31, 2016 ($10.88)1

  7.72%

Current Monthly Distribution per Common Share2

  $0.07

Current Annualized Distribution per Common Share2

  $0.84

Economic Leverage as of August 31, 20163

  29%

 

  1   

Current distribution rate on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. The current distribution rate may consist of income, net realized gains and/or a tax return of capital. Past performance does not guarantee future results.

 

  2   

The distribution rate is not constant and is subject to change.

 

  3   

Represents bank borrowings as a percentage of total managed assets, which is the total assets of the Trust (including any assets attributable to borrowings) minus the sum of liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Trust, please see The Benefits and Risks of Leveraging on page 10.

 

Performance and Portfolio Management Commentary

 

Returns for the 12 months ended August 31, 2016 were as follows:

 

    Returns Based On  
     Market Price     NAV  

HYT1,2

    20.29     7.76

Lipper High Yield Funds (Leveraged)3

    18.69     7.88

 

  1   

All returns reflect reinvestment of dividends and/or distributions.

 

  2   

The Trust’s discount to NAV, which narrowed during the period, accounts for the difference between performance based on price and performance based on NAV.

 

  3   

Average return.

 

      Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

The following discussion relates to the Trust’s absolute performance based on NAV:

What factors influenced performance?

 

 

Credit markets performed poorly during the first half of the period, driven in large part by declines in commodity prices. However, in the second half of the period, the high-yield market rebounded sharply, led by a recovery in commodity-related assets. Holdings within the energy and metals & mining industries were the most notable contributors to the Trust’s performance during the period. Holdings within the technology and cable & satellite industries helped performance as well.

 

 

The Trust’s exposure to equity and equity-like positions were the primary detractors to performance during the period.

Describe recent portfolio activity.

 

 

The Trust began the period somewhat conservatively positioned but steadily increased its risk profile as volatility decreased and risk markets became more stable. By the middle of the period, the Trust had transitioned to a market-neutral risk position and then proceeded to a slightly overweight risk position. The investment adviser added risk to the portfolio at a measured pace, while remaining underweight to the more distressed areas of the high yield market, which led performance over the period. The Trust added to exposure in the metals & mining sector and moved toward a more neutral-weight position in commodity-related issuers. The Trust decreased risk in the pharmaceutical and home construction industries during the period.

Describe portfolio positioning at period end.

 

 

The Trust held the majority of its portfolio in corporate bonds, with a modest allocation to floating rate loan interests (bank loans). Within high yield corporates, the Trust had most of its assets in single B-rated bonds, followed by BB-rated bonds. The Trust kept exposure to high conviction CCC-rated issues but favored select equity and equity-like assets over the higher-beta segment of the CCC-rated bond market.

 

 

Leading individual positions included Ally Financial (banking), First Data Corp. (technology), and Altice NV (cable & satellite). The Trust also maintained exposure to equity futures positions to help reduce portfolio risk. Bank loans provided diversification and helped increase the stability of the Trust’s portfolio, while providing attractive levels of income.

 

 

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

 

                
6    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents
     BlackRock Corporate High Yield Fund, Inc.

 

 

Market Price and Net Asset Value Per Share Summary

 

      8/31/16     

8/31/15

     Change      High      Low  

Market Price

   $ 10.88       $ 9.97         9.13    $ 10.93       $ 9.13   

Net Asset Value

   $ 11.79       $ 12.06         (2.24 )%     $ 12.06       $ 10.13   

 

Market Price and Net Asset Value History For the Past Five Years

 

LOGO

 

Overview of the Trust’s Total Investments

 

Portfolio Composition   8/31/16    

8/31/15

 

Corporate Bonds

    79     79

Floating Rate Loan Interests

    9        9   

Preferred Securities

    4        5   

Common Stocks

    4        5   

Asset-Backed Securities

    2        2   

Investment Companies

    1          

Other1

    1          

 

  1   

Representing less than 1% of the Trust’s total investments and may include Non-Agency Mortgage-Backed Securities, Warrants, Other Interests, Short-Term Securities and Options Purchased.

Credit Quality Allocation2   8/31/16    

8/31/15

 

A

    3     1

BBB/Baa

    10        6   

BB/Ba

    40        37   

B

    35        40   

CCC/Caa

    8        8   

N/R

    4        8   

 

  2   

For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P or Moody’s if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

 

 

                
   ANNUAL REPORT    AUGUST 31, 2016    7


Table of Contents
Trust Summary as of August 31, 2016    BlackRock Income Trust, Inc.

 

Trust Overview

BlackRock Income Trust, Inc.’s (BKT) (the “Trust”) investment objective is to manage a portfolio of high-quality securities to achieve both preservation of capital and high monthly income. The Trust seeks to achieve its investment objective by investing at least 65% of its assets in mortgage-backed securities. The Trust invests at least 80% of its assets in securities that are (i) issued or guaranteed by the U.S. government or one of its agencies or instrumentalities or (ii) rated at the time of investment either AAA by S&P or Aaa by Moody’s. The Trust may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Trust’s investment objective will be achieved.

 

Trust Information     

Symbol on NYSE

  BKT

Initial Offering Date

  July 22, 1988

Current Distribution Rate on Closing Market Price as of August 31, 2016 ($6.60)1

  4.82%

Current Monthly Distribution per Common Share2

  $0.0265

Current Annualized Distribution per Common Share2

  $0.3180

Economic Leverage as of August 31, 20163

  26%

 

  1   

Current distribution rate on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. The current distribution rate may consist of income, net realized gains and/or a tax return of capital. Past performance does not guarantee future results.

 

  2  

The distribution rate is not constant and is subject to change.

 

  3  

Represents reverse repurchase agreements outstanding as a percentage of total managed assets, which is the total assets of the Trust (including any assets attributable to borrowings) minus the sum of liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Trust, please see the Benefits and Risks of Leveraging on page 10.

 

Performance and Portfolio Management Commentary

 

Returns for the 12 months ended August 31, 2016 were as follows:

 

    Returns Based On  
     Market Price     NAV  

BKT1,2

    10.44     3.64

Lipper US Mortgage Funds3

    13.46     5.27

 

  1   

All returns reflect reinvestment of dividends and/or distributions.

 

  2   

The Trust’s discount to NAV, which narrowed during the period, accounts for the difference between performance based on price and performance based on NAV.

 

  3   

Average return.

 

      Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

The following discussion relates to the Trust’s absolute performance based on NAV:

What factors influenced performance?

 

 

The largest positive contributor to performance was the Trust’s allocation in well-structured agency collateralized mortgage obligations (“CMOs”) that offered call protected and seasoned collateral with favorable risk/reward characteristics and attractive income.

 

 

Detractors from performance included the Trust’s positioning with respect to overall portfolio duration (and corresponding sensitivity to changes in

   

market interest rates), as well as allocation-based strategies across both 30-year and 15-year mortgage-backed securities (“MBS”).

 

 

The Trust uses interest rate derivatives including futures, options, swaps and swaptions, mainly for the purpose of managing duration, convexity (the rate at which duration changes in response to interest rate movements) and yield curve positioning. During the period, the Trust employed Treasury futures, and also utilized mortgage derivatives to gain market exposure. The use of these derivatives had a negative impact on Trust performance for the period.

Describe recent portfolio activity.

 

 

The Trust decreased exposure to agency pass-throughs, primarily in generic 30-year MBS, while marginally adding exposure to longer duration, stable CMO cash flows.

Describe portfolio positioning at period end.

 

 

The Trust continued to be overweight agency CMOs. In addition, the Trust continued to maintain allocations to 30-year MBS and some 15-year MBS with higher coupons. The Trust closed the period with a long duration profile.

 

 

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

 

                
8    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents
     BlackRock Income Trust, Inc.

 

Market Price and Net Asset Value Per Share Summary

 

      8/31/16      8/31/15      Change      High      Low  

Market Price

   $ 6.60       $ 6.30         4.76    $ 6.66       $ 6.26   

Net Asset Value

   $ 6.96       $ 7.08         (1.69 )%     $ 7.10       $ 6.92   

 

Market Price and Net Asset Value History For the Past Five Years

 

LOGO

 

Overview of the Trust’s Total Investments

 

Portfolio Composition   8/31/16     8/31/15  

U.S. Government Sponsored Agency Securities

    97     98

U.S. Treasury Obligations

    2        2   

Non-Agency Mortgage-Backed Securities

    1        1   

Short-Term Securities

    1        4   

Asset-Backed Securities

    1        1 

Borrowed Bonds1

             

TBA Sale Commitments

    (2     (5

 

  1   

Representing less than 0.50% of the Trust’s total investments.

Credit Quality Allocation2,3   8/31/16     8/31/15  

AAA/Aaa4

    99     100

BBB

    1          

 

  2   

For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P or Moody’s if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

 

  3   

Excludes Money Market Funds.

 

  4   

The investment adviser evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment adviser has deemed U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations as AAA/Aaa.

 

 

                
   ANNUAL REPORT    AUGUST 31, 2016    9


Table of Contents
The Benefits and Risks of Leveraging     

 

The Trusts may utilize leverage to seek to enhance the distribution rate on, and net asset value (“NAV”) of, their common shares (“Common Shares”). However, these objectives cannot be achieved in all interest rate environments.

In general, the concept of leveraging is based on the premise that the financing cost of leverage, which is based on short-term interest rates, is normally lower than the income earned by a Trust on its longer-term portfolio investments purchased with the proceeds from leverage. To the extent that the total assets of the Trusts (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, the Trusts’ shareholders benefit from the incremental net income. The interest earned on securities purchased with the proceeds from leverage is paid to shareholders in the form of dividends, and the value of these portfolio holdings is reflected in the per share NAV.

To illustrate these concepts, assume a Trust’s capitalization is $100 million and it utilizes leverage for an additional $30 million, creating a total value of $130 million available for investment in longer-term income securities. If prevailing short-term interest rates are 3% and longer-term interest rates are 6%, the yield curve has a strongly positive slope. In this case, a Trust’s financing costs on the $30 million of proceeds obtained from leverage are based on the lower short-term interest rates. At the same time, the securities purchased by a Trust with the proceeds from leverage earn income based on longer-term interest rates. In this case, a Trust’s financing cost of leverage is significantly lower than the income earned on a Trust’s longer-term investments acquired from such leverage proceeds, and therefore the holders of Common Shares (“Common Shareholders”) are the beneficiaries of the incremental net income.

However, in order to benefit shareholders, the return on assets purchased with leverage proceeds must exceed the ongoing costs associated with the leverage. If interest and other costs of leverage exceed the Trusts’ return on assets purchased with leverage proceeds, income to shareholders is lower than if the Trusts had not used leverage. Furthermore, the value of the Trusts’ portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can influence the value of portfolio investments. In contrast, the value of the Trusts’ obligations under their respective leverage arrangements generally does not fluctuate in relation to interest rates. As a result, changes in interest

rates can influence the Trusts’ NAVs positively or negatively. Changes in the future direction of interest rates are very difficult to predict accurately, and there is no assurance that the Trusts’ intended leveraging strategy will be successful.

The use of leverage also generally causes greater changes in each Trust’s NAV, market price and dividend rates than comparable portfolios without leverage. In a declining market, leverage is likely to cause a greater decline in the NAV and market price of a Trust’s shares than if the Trust were not leveraged. In addition, each Trust may be required to sell portfolio securities at inopportune times or at distressed values in order to comply with regulatory requirements applicable to the use of leverage or as required by the terms of leverage instruments, which may cause the Trusts to incur losses. The use of leverage may limit a Trust’s ability to invest in certain types of securities or use certain types of hedging strategies. Each Trust incurs expenses in connection with the use of leverage, all of which are borne by shareholders and may reduce income to the shareholders. Moreover, to the extent the calculation of the Trusts’ investment advisory fees includes assets purchased with the proceeds of leverage, the investment advisory fees payable to the Trust’s investment adviser will be higher than if the Trusts did not use leverage.

Each Trust may utilize leverage through a credit facility or reverse repurchase agreements as described in the Notes to Financial Statements.

Under the Investment Company Act of 1940, as amended (the “1940 Act”), the Trusts are permitted to issue debt up to 33 1/3% of their total managed assets. A Trust may voluntarily elect to limit its leverage to less than the maximum amount permitted under the 1940 Act. In addition, a Trust may also be subject to certain asset coverage, leverage or portfolio composition requirements imposed by its credit facility, which may be more stringent than those imposed by the 1940 Act.

If a Trust segregates or designates on its books and records cash or liquid assets having values not less than the value of a Trust’s obligations under the reverse repurchase agreement (including accrued interest) then such transaction is not considered a senior security and is not subject to the foregoing limitations and requirements under the 1940 Act.

 

 

Derivative Financial Instruments     

 

The Trusts may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other asset without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the

transaction or illiquidity of the instrument. The Trusts’ successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation a Trust can realize on an investment and/or may result in lower distributions paid to shareholders. The Trusts’ investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

 

 

                
10    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Schedule of Investments August 31, 2016

  

BlackRock Core Bond Trust (BHK)

(Percentages shown are based on Net Assets)

 

Common Stocks (a)           Shares     Value  

Oil, Gas & Consumable Fuels — 0.0%

      

Denbury Resources, Inc.

       35,640      $ 107,729   

Whiting Petroleum Corp.

       10,932        79,694   
      

 

 

 
                       187,423   
Total Common Stocks — 0.0%                      187,423   
      
                          
Asset-Backed Securities          

Par  

(000)

        

Asset-Backed Securities — 10.2%

      

ALM VI Ltd., Series 2012-6A, Class B2R, 3.48%, 7/15/26 (b)(c)

     USD        1,000        993,775   

Apidos CDO, Series 2012-9AR, Class DR, 4.58%, 7/15/23 (b)(c)

       1,400        1,373,586   

Apidos CDO XI, Series 2012-11A, Class D, 4.93%, 1/17/23 (b)(c)

       1,200        1,191,345   

Apidos CLO XIX, Series 2014-19A, Class D, 4.43%, 10/17/26 (b)(c)

       1,000        979,272   

Ares CLO Ltd., Series 2014-32A, Class C, 5.02%, 11/15/25 (b)(c)

       1,250        1,249,923   

Ares XXIII CLO Ltd., Series 2012-1AR (b)(c):

      

Class CR, 3.89%, 4/19/23

       4,000        4,072,370   

Class DR, 4.84%, 4/19/23

       3,000        3,005,383   

Atrium CDO Corp., Series 9A, Class D, 4.33%, 2/28/24 (b)(c)

       1,500        1,462,896   

Babson CLO Ltd., Series 2012-1X, Class B, 3.18%, 4/15/22 (b)

       1,000        999,808   

Battalion CLO VII Ltd., Series 2014-7A, Class C, 4.58%, 10/17/26 (b)(c)

       1,000        915,000   

Bowman Park CLO Ltd., Series 2014-1A, Class D2, 4.77%, 11/23/25 (b)(c)

       3,000        2,881,402   

CenterPoint Energy Transition Bond Co. LLC, Series 2012-1, Class A3, 3.03%, 10/15/25

       2,210        2,348,369   

CIFC Funding Ltd. (b)(c):

      

Series 2012-1AR, Class B1R, 4.46%, 8/14/24

       1,500        1,494,066   

Series 2013-IA, Class B, 3.49%, 4/16/25

       1,000        998,024   

Series 2014-4A, Class D, 4.08%, 10/17/26

       2,000        1,859,453   

Series 2015-1A, Class C, 3.70%, 1/22/27

       1,000        999,801   

Countrywide Asset-Backed Certificates, Series 2006-13, Class 3AV2, 0.64%, 1/25/37 (b)

       329        317,177   

DCP Rights LLC, Series 2014-1A, Class A, 5.46%, 10/25/44 (c)

       3,925        3,855,298   

Dryden 34 Senior Loan Fund, Series 2014-34A, Class C, 3.48%, 10/15/26 (b)(c)

       1,000        988,657   

Ford Credit Floorplan Master Owner Trust, Series 2012-2:

      

Class B, 2.32%, 1/15/19

       490        491,592   

Class C, 2.86%, 1/15/19

       210        211,134   

Class D, 3.50%, 1/15/19

       400        402,439   

Galaxy XV CLO Ltd., Series 2013-15A, Class C, 3.28%, 4/15/25 (b)(c)

       1,000        995,436   
Asset-Backed Securities          

Par  

(000)

    Value  

Asset-Backed Securities (continued)

      

GoldenTree Loan Opportunities IX Ltd., Series 2014-9A, Class D, 4.25%,
10/29/26 (b)(c)

     USD        1,000      $ 965,571   

Highbridge Loan Management Ltd., Series 5A-2015, Class C1, 3.95%,
1/29/26 (b)(c)

       4,000        3,999,702   

Limerock CLO III LLC, Series 2014-3A, Class C, 4.30%, 10/20/26 (b)(c)

       3,750        3,508,218   

Madison Park Funding IX Ltd., Series 2012-9AR, Class DR, 4.67%, 8/15/22 (b)(c)

       1,200        1,188,168   

Madison Park Funding XV Ltd., Series 2014-15A, Class B1, 3.98%, 1/27/26 (b)(c)

       1,800        1,825,039   

Nelnet Student Loan Trust, Series 2006-1, Class A5, 0.93%, 8/23/27 (b)

       922        904,702   

Neuberger Berman CLO XVIII Ltd., Series 2014-18A, Class C, 4.57%, 11/14/25 (b)(c)

       2,250        2,175,131   

Oaktree EIF II Ltd., Series 2015-B1A, Class C, 3.92%, 2/15/26 (b)(c)

       1,000        1,000,293   

Octagon Investment Partners XX Ltd., Series 2014-1A (b)(c):

      

Class C, 3.62%, 8/12/26

       750        749,964   

Class D, 4.47%, 8/12/26

       1,000        947,972   

Octagon Investment Partners XXI Ltd., Series 2014-1A, Class C, 4.47%,
11/14/26 (b)(c)

       2,000        1,887,793   

Octagon Investment Partners XXII Ltd., Series 2014-1A, Class C1, 3.95%, 11/25/25 (b)(c)

       2,000        2,000,360   

OneMain Financial Issuance Trust, Series 2015-2A, Class C, 4.32%, 7/18/25 (c)

       5,000        4,974,713   

OZLM Funding III Ltd., Series 2013-3A (b)(c):

      

Class B, 3.80%, 1/22/25

       1,500        1,500,400   

Class C, 4.60%, 1/22/25

       500        486,836   

OZLM VII Ltd., Series 2014-7A, Class C, 4.28%, 7/17/26 (b)(c)

       470        442,055   

OZLM VIII Ltd., Series 2014-8A, Class C, 4.18%, 10/17/26 (b)(c)

       1,750        1,636,735   

Regatta V Funding Ltd., Series 2014-1A, Class C, 4.16%, 10/25/26 (b)(c)

       2,000        1,864,342   

SLM Private Credit Student Loan Trust, Series 2004-B, Class A2, 0.85%, 6/15/21 (b)

       56        55,362   

SLM Private Education Loan Trust, Series 2012-A, Class A1, 1.91%, 8/15/25 (b)(c)

       81        81,356   

SLM Student Loan Trust (c):

      

Series 2012-A, Class A2, 3.83%, 1/17/45

       690        714,035   

Series 2014-A, Class B, 3.50%, 11/15/44

       500        492,253   

Small Business Administration Participation Certificates, Series 1996-20K, Class 1, 6.95%, 11/01/16

       8        8,503   

SMB Private Education Loan Trust, Series 2015-C, Class C, 4.50%, 9/17/46 (c)

       5,900        5,824,718   

Sound Point CLO Ltd., Series 2014-3A, Class D, 4.31%, 1/23/27 (b)(c)

       1,250        1,184,716   
 

 

Portfolio Abbreviations                  

 

ADS   American Depositary Shares   EUR   Euro  

OTC

 

Over-the-Counter

AUD   Australian Dollar   EURIBOR   Euro Interbank Offered Rate  

PIK

 

Payment-in-Kind

CAD   Canadian Dollar   GBP   British Pound  

RB

 

Revenue Bonds

CHF   Swiss Franc   GO   General Obligation Bonds  

SEK

 

Swedish Krona

CDO   Collateralized Debt Obligation   JPY   Japanese Yen  

SGD

 

Singapore Dollar

CLO   Collateralized Loan Obligation  

LIBOR

 

London Interbank Offered Rate

 

SIFMA

 

Securities Industry and Financial Markets Association

CR   Custodian Receipt  

LOC

 

Letter of Credit

 

TBA

 

To Be Announced

DIP   Debtor-In-Possession  

MXN

 

Mexican Peso

 

USD

 

U.S. Dollar

ETF   Exchange-Traded Fund  

NOK

 

Norwegian Krone

   

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    11


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

Asset-Backed Securities          

Par  

(000)

    Value  

Asset-Backed Securities (continued)

      

Steele Creek CLO Ltd., Series 2014-1A, Class C, 4.01%, 8/21/26 (b)(c)

     USD        2,500      $ 2,499,950   

Stewart Park CLO Ltd., Series 2015-1A, Class D, 4.13%, 4/15/26 (b)(c)

       1,000        897,270   

Structured Asset Securities Corp., Series 2002-AL1, Class A2, 3.45%, 2/25/32

       786        781,955   

Symphony CLO Ltd., Series 2012-10AR, Class DR, 4.17%, 7/23/23 (b)(c)

       1,000        983,973   

Venture XIX CLO Ltd., Series 2014-19A, Class C, 3.98%, 1/15/27 (b)(c)

       555        555,000   

Voya CLO Ltd., Series 2012-2AR, Class CR, 3.63%, 10/15/22 (b)(c)

       1,500        1,500,780   

World Financial Network Credit Card Master Trust, Series 2012-C, Class C, 4.55%, 8/15/22

       2,360        2,419,022   
      

 

 

 
                       84,143,093   

Interest Only Asset-Backed Securities — 0.1%

  

 

Sterling Bank Trust, Series 2004-2, Class Note, 2.08%, 3/30/30 (c)

       3,349        237,541   

Sterling Coofs Trust, Series 2004-1, Class A, 2.36%, 4/15/29 (c)

       7,924        544,761   
      

 

 

 
                       782,302   
Total Asset-Backed Securities — 10.3%                      84,925,395   
      
                          
Corporate Bonds                      

Aerospace & Defense — 0.7%

      

Accudyne Industries Borrower/Accudyne Industries LLC, 7.75%, 12/15/20 (c)

       520        401,700   

Bombardier, Inc. (c):

      

5.50%, 9/15/18

       238        244,545   

6.00%, 10/15/22

       23        21,735   

6.13%, 1/15/23

       165        155,100   

7.50%, 3/15/25

       361        342,950   

KLX, Inc., 5.88%, 12/01/22 (c)

       205        215,147   

Moog, Inc., 5.25%, 12/01/22 (c)

       180        185,400   

TransDigm, Inc.:

      

5.50%, 10/15/20

       211        216,539   

7.50%, 7/15/21

       175        185,609   

6.00%, 7/15/22

       1,118        1,162,720   

6.50%, 7/15/24

       198        205,425   

6.38%, 6/15/26 (c)

       236        240,720   

United Technologies Corp., 6.13%, 7/15/38

       1,450        2,006,110   
      

 

 

 
                       5,583,700   

Air Freight & Logistics — 0.1%

      

XPO Logistics, Inc.:

      

7.88%, 9/01/19 (c)

       245        254,800   

5.75%, 6/15/21

     EUR        100        116,307   

6.50%, 6/15/22 (c)

     USD        535        555,731   

6.13%, 9/01/23 (c)

       156        160,290   
      

 

 

 
                       1,087,128   

Airlines — 2.1%

      

Air Canada Pass-Through Trust, Series 2015-1, Class B, 3.88%, 9/15/24 (c)

       1,940        1,869,788   

American Airlines Pass-Through Trust:

      

Series 2013-2, Class A, 4.95%, 7/15/24 (d)

       3,765        4,117,560   

Series 2015-2, Class A, 4.00%, 3/22/29

       1,500        1,597,500   

Series 2015-2, Class AA, 3.60%, 3/22/29

       1,500        1,601,250   

Continental Airlines Pass-Through Trust:

      

Series 2010-1, Class B, 6.00%, 7/12/20

       498        520,223   

Series 2012-3, Class C, 6.13%, 4/29/18

       520        546,000   
Corporate Bonds          

Par  

(000)

    Value  

Airlines (continued)

      

United Airlines Pass-Through Trust:

      

Series 2013-1, Class A, 4.30%, 2/15/27

     USD        3,609      $ 3,960,466   

Series 2014-2, Class B, 4.63%, 3/03/24

       2,615        2,641,254   
      

 

 

 
                       16,854,041   

Auto Components — 0.3%

      

Adient Global Holdings, Ltd., 4.88%, 8/15/26 (c)

       202        204,777   

CNH Industrial Finance Europe SA, 2.88%, 5/17/23

     EUR        175        201,818   

Faurecia, 3.63%, 6/15/23

       100        116,565   

Fiat Chrysler Finance Europe:

      

4.75%, 3/22/21

       100        124,463   

4.75%, 7/15/22

       100        123,609   

FTE Verwaltungs GmbH, 9.00%, 7/15/20

       100        117,455   

Goodyear Tire & Rubber Co., 5.00%, 5/31/26

     USD        46        48,156   

Icahn Enterprises LP/Icahn Enterprises Finance Corp., 4.88%, 3/15/19

       652        648,740   

Schaeffler Holding Finance BV (e):

      

(5.75% Cash or 6.50% PIK), 5.75%, 11/15/21

     EUR        60        72,532   

(6.75% Cash), 6.75%, 11/15/22 (c)

     USD        550        607,484   
      

 

 

 
                       2,265,599   

Automobiles — 0.9%

      

Ford Motor Co., 4.75%, 1/15/43 (d)

       4,255        4,603,038   

General Motors Co., 6.25%, 10/02/43

       2,506        3,003,666   
      

 

 

 
                       7,606,704   

Banks — 2.1%

      

Allied Irish Banks PLC, 4.13%, 11/26/25 (b)

     EUR        100        105,968   

Bankia SA, 4.00%, 5/22/24 (b)

       200        222,362   

Barclays Bank PLC, 3.65%, 3/16/25

     USD        4,320        4,294,452   

CIT Group, Inc.:

      

5.50%, 2/15/19 (c)

       206        218,103   

5.38%, 5/15/20

       410        438,187   

Commerzbank AG:

      

7.75%, 3/16/21

     EUR        100        134,765   

4.00%, 3/23/26

       28        32,055   

Cooperatieve Rabobank UA:

      

3.88%, 2/08/22

     USD        2,780        3,038,643   

3.95%, 11/09/22

       1,500        1,574,884   

HSBC Holdings PLC, 6.10%, 1/14/42

       610        828,722   

Santander Holdings USA, Inc., 4.50%, 7/17/25

       2,000        2,095,152   

Santander UK Group Holdings PLC, 2.88%, 8/05/21

       1,250        1,246,691   

Wells Fargo & Co., 3.50%, 3/08/22

       2,780        2,969,457   
      

 

 

 
                       17,199,441   

Beverages — 0.2%

      

Anheuser-Busch InBev Finance, Inc., 4.90%, 2/01/46

       1,320        1,601,061   

Verallia Packaging SASU, 5.13%, 8/01/22

     EUR        100        119,409   
      

 

 

 
                       1,720,470   

Biotechnology — 0.0%

      

Senvion Holding GmbH, 6.63%, 11/15/20

             100        117,189   

Building Materials — 0.0%

      

Dry Mix Solutions Investissements SAS, 3.99%, 6/15/21 (b)

       100        111,779   

Titan Global Finance PLC, 3.50%, 6/17/21

       100        114,885   
      

 

 

 
                       226,664   

Building Products — 0.4%

      

American Builders & Contractors Supply Co., Inc., 5.75%, 12/15/23 (c)

     USD        413        436,747   

Builders FirstSource, Inc., 5.63%, 9/01/24 (c)

       149        151,607   

Building Materials Corp. of America, 6.00%, 10/15/25 (c)

       380        416,575   
 

 

See Notes to Financial Statements.

 

                
12    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

Corporate Bonds          

Par  

(000)

    Value  

Building Products (continued)

      

CPG Merger Sub LLC, 8.00%, 10/01/21 (c)

     USD        520      $ 530,400   

Masonite International Corp., 5.63%, 3/15/23 (c)

       200        212,000   

Ply Gem Industries, Inc., 6.50%, 2/01/22

       546        563,745   

Standard Industries, Inc. (c):

      

5.13%, 2/15/21

       94        99,288   

5.50%, 2/15/23

       153        162,371   

USG Corp.:

      

9.50%, 1/15/18

       380        416,100   

5.88%, 11/01/21 (c)

       50        52,438   

5.50%, 3/01/25 (c)

       180        195,300   
      

 

 

 
                       3,236,571   

Capital Markets — 2.3%

      

BCD Acquisition, Inc., 9.63%, 9/15/23 (c)

       55        57,475   

CDP Financial, Inc., 5.60%, 11/25/39 (c)

       5,890        8,086,693   

E*Trade Financial Corp., 4.63%, 9/15/23

       275        285,412   

Goldman Sachs Group, Inc., 3.75%, 5/22/25 (d)

       8,965        9,488,117   

Morgan Stanley, 4.00%, 7/23/25

       905        978,112   
      

 

 

 
                       18,895,809   

Chemicals — 0.6%

      

Axalta Coating Systems LLC, 4.88%, 8/15/24 (c)

       161        167,842   

Chemours Co.:

      

6.63%, 5/15/23 (f)

       215        206,400   

7.00%, 5/15/25

       100        95,688   

Dow Chemical Co., 4.13%, 11/15/21

       700        765,948   

Huntsman International LLC, 4.88%, 11/15/20

       101        104,787   

Ineos Finance PLC, 4.00%, 5/01/23

     EUR        100        114,334   

INEOS Group Holdings SA, 5.63%, 8/01/24 (c)

     USD        200        199,500   

Inovyn Finance PLC, 6.25%, 5/15/21

     EUR        100        117,959   

Methanex Corp., 3.25%, 12/15/19

     USD        1,650        1,632,685   

Momentive Performance Materials, Inc., 3.88%, 10/24/21

       367        303,307   

NOVA Chemicals Corp., 5.25%, 8/01/23 (c)

       88        91,300   

Platform Specialty Products Corp. (c):

      

10.38%, 5/01/21

       37        38,850   

6.50%, 2/01/22

       934        884,965   

PQ Corp., 6.75%, 11/15/22 (c)

       214        226,840   

PSPC Escrow Corp., 6.00%, 2/01/23

     EUR        100        105,401   

WR Grace & Co-Conn (c):

      

5.13%, 10/01/21

     USD        97        103,305   

5.63%, 10/01/24

       80        86,400   
      

 

 

 
                       5,245,511   

Commercial Services & Supplies — 0.6%

  

ADS Waste Holdings, Inc., 8.25%, 10/01/20

       166        173,678   

ADT Corp.:

      

3.50%, 7/15/22

       317        303,528   

4.13%, 6/15/23

       55        53,900   

Aviation Capital Group Corp. (c):

      

4.63%, 1/31/18

       1,300        1,352,000   

7.13%, 10/15/20

       1,800        2,112,750   

Avis Budget Car Rental LLC/Avis Budget Finance, Inc., 5.50%, 4/01/23

       5        5,181   

Brand Energy & Infrastructure Services, Inc., 8.50%, 12/01/21 (c)

       344        343,140   

Iron Mountain, Inc.:

      

6.00%, 10/01/20 (c)

       175        185,939   

6.00%, 8/15/23

       80        85,400   

Mobile Mini, Inc., 5.88%, 7/01/24

       267        277,680   

Silk Bidco AS, 7.50%, 2/01/22

     EUR        100        119,520   

United Rentals North America, Inc.:

      

7.63%, 4/15/22

     USD        87        92,764   

5.75%, 11/15/24

       140        146,300   
      

 

 

 
                       5,251,780   
Corporate Bonds          

Par  

(000)

    Value  

Communications Equipment — 0.4%

  

Alcatel-Lucent USA, Inc., 6.45%, 3/15/29

     USD        1,000      $ 1,087,500   

CommScope Technologies Finance LLC, 6.00%, 6/15/25 (c)

       340        360,825   

CommScope, Inc. (c):

      

4.38%, 6/15/20

       250        258,750   

5.50%, 6/15/24

       115        120,750   

Nokia OYJ, 6.63%, 5/15/39

       135        147,150   

Zayo Group LLC/Zayo Capital, Inc.:

      

6.00%, 4/01/23

       834        867,360   

6.38%, 5/15/25

       278        293,348   
      

 

 

 
                       3,135,683   

Construction & Engineering — 0.6%

  

BlueLine Rental Finance Corp., 7.00%, 2/01/19 (c)

       382        330,430   

Engility Corp., 8.88%, 9/01/24 (c)

       101        102,767   

ITR Concession Co. LLC, 4.20%, 7/15/25 (c)

       4,000        4,243,184   
      

 

 

 
                       4,676,381   

Construction Materials — 0.5%

  

American Tire Distributors, Inc., 10.25%, 3/01/22 (c)

       164        145,448   

Beacon Roofing Supply, Inc., 6.38%, 10/01/23

       313        336,475   

HD Supply, Inc.:

      

7.50%, 7/15/20

       782        814,257   

5.25%, 12/15/21 (c)

       1,170        1,246,775   

5.75%, 4/15/24 (c)

       667        710,355   

LKQ Italia Bondco SpA, 3.88%, 4/01/24

     EUR        157        189,574   

PulteGroup, Inc.:

      

5.50%, 3/01/26

     USD        158        169,060   

6.00%, 2/15/35

       52        53,040   

Rexel SA, 3.50%, 6/15/23

     EUR        100        116,286   
      

 

 

 
                       3,781,270   

Consumer Finance — 1.9%

      

Ally Financial, Inc.:

      

6.25%, 12/01/17

     USD        320        335,600   

4.63%, 3/30/25

       430        446,125   

8.00%, 11/01/31

       2,043        2,558,858   

Capital One Financial Corp., 4.75%, 7/15/21 (d)

       1,935        2,161,923   

Corivas Campus Living USG LLC, 5.30%, 7/01/50

       5,700        6,213,000   

Ford Motor Credit Co. LLC:

      

8.13%, 1/15/20

       1,530        1,812,692   

4.25%, 9/20/22

       1,600        1,730,667   

Navient Corp.:

      

5.00%, 10/26/20

       180        180,900   

6.63%, 7/26/21

       104        107,250   

6.13%, 3/25/24

       59        56,640   

5.88%, 10/25/24

       56        52,780   

5.63%, 8/01/33

       101        82,820   

OneMain Financial Holdings LLC (c):

      

6.75%, 12/15/19

       67        70,350   

7.25%, 12/15/21

       78        81,705   
      

 

 

 
                       15,891,310   

Containers & Packaging — 0.5%

      

Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc.:

      

6.75%, 1/31/21 (c)

       200        207,250   

4.25%, 1/15/22

     EUR        100        115,728   

6.75%, 5/15/24

       100        120,748   

Ardagh Packaging Finance PLC/Ardagh MP Holdings USA, Inc. (c):

      

4.63%, 5/15/23

     USD        271        275,743   

7.25%, 5/15/24

       635        675,481   

Ball Corp., 5.00%, 3/15/22

       322        347,760   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    13


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

Corporate Bonds          

Par  

(000)

    Value  

Containers & Packaging (continued)

  

Crown Americas LLC/Crown Americas Capital Corp. IV, 4.50%, 1/15/23

     USD        175      $ 182,875   

Crown European Holdings SA, 3.38%, 5/15/25

     EUR        100        118,126   

JH-Holding Finance SA, 8.25%, 12/01/22 (e)

       100        119,735   

Reynolds Group Issuer, Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Lu (c):

      

4.13%, 7/15/21 (b)

     USD        528        535,920   

5.13%, 7/15/23

       258        267,675   

7.00%, 7/15/24

       333        356,726   

Sappi Papier Holding GmbH, 4.00%, 4/01/23

     EUR        100        117,122   

Sealed Air Corp. (c):

      

4.88%, 12/01/22

     USD        535        561,750   

5.13%, 12/01/24

       102        109,140   

6.88%, 7/15/33

       16        17,320   

Signode Industrial Group Lux SA/Signode Industrial Group US, Inc., 6.38%,
5/01/22 (c)

       16        16,320   
      

 

 

 
                       4,145,419   

Diversified Consumer Services — 0.2%

      

ADT Corp., 4.88%, 7/15/32 (c)

       75        64,125   

APX Group, Inc.:

      

6.38%, 12/01/19

       56        57,469   

8.75%, 12/01/20

       75        72,094   

7.88%, 12/01/22 (c)

       86        90,515   

Prime Security Services Borrower LLC/Prime Finance, Inc., 9.25%, 5/15/23 (c)

       556        605,345   

Service Corp. International:

      

4.50%, 11/15/20

       410        421,275   

5.38%, 5/15/24

       110        117,975   
      

 

 

 
                       1,428,798   

Diversified Financial Services — 4.6%

      

Aircastle Ltd.:

      

6.25%, 12/01/19

       353        390,506   

5.00%, 4/01/23

       91        96,460   

Bank of America Corp.:

      

5.63%, 7/01/20

       2,200        2,484,984   

3.30%, 1/11/23

       10,000        10,393,590   

Deutsche Bank AG, 4.50%, 5/19/26

     EUR        100        107,916   

FBM Finance, Inc., 8.25%, 8/15/21 (c)

     USD        80        83,800   

FMR LLC, 4.95%, 2/01/33 (c)

       2,300        2,578,610   

Garfunkelux Holdco 3 SA, 8.50%, 11/01/22

     GBP        100        135,254   

General Electric Capital Corp., 6.15%, 8/07/37 (d)

     USD        2,150        3,013,864   

General Electric Co.:

      

6.75%, 3/15/32 (d)

       2,500        3,575,585   

6.88%, 1/10/39

       135        205,874   

General Motors Financial Co., Inc., 4.25%, 5/15/23

       807        845,345   

IntercontinentalExchange Group, Inc., 4.00%, 10/15/23

       470        517,517   

International Lease Finance Corp., 8.25%, 12/15/20

       150        179,437   

Jefferies Finance LLC/JFIN Co-Issuer Corp., 7.38%, 4/01/20 (c)

       595        568,225   

Mercury Bondco PLC, (8.25% Cash, 9.00% PIK), 8.25%, 5/30/21 (e)

     EUR        100        116,576   

Moody’s Corp., 4.50%, 9/01/22 (d)

     USD        1,800        1,999,408   

MSCI, Inc., 5.75%, 8/15/25 (c)

       60        65,025   

Northern Trust Corp., 3.95%, 10/30/25 (d)

       8,000        8,928,688   

Reynolds Group Issuer, Inc.:

      

9.88%, 8/15/19

       145        149,169   

5.75%, 10/15/20

       194        200,062   

6.88%, 2/15/21

       470        487,625   

8.25%, 2/15/21

       300        312,000   
Corporate Bonds          

Par  

(000)

    Value  

Diversified Financial Services (continued)

      

UniCredit SpA:

      

6.95%, 10/31/22

     EUR        140      $ 178,371   

5.75%, 10/28/25 (b)

       107        125,190   

WMG Acquisition Corp., 5.00%, 8/01/23 (c)

     USD        48        49,320   
      

 

 

 
                       37,788,401   

Diversified Telecommunication Services — 3.5%

  

 

AT&T, Inc.:

      

6.38%, 3/01/41

       520        661,357   

5.15%, 3/15/42

       1,400        1,560,534   

4.75%, 5/15/46

       2,710        2,896,445   

CenturyLink, Inc., 6.45%, 6/15/21

       280        300,825   

Consolidated Communications, Inc., 6.50%, 10/01/22

       68        65,960   

Frontier Communications Corp.:

      

7.13%, 3/15/19

       115        123,913   

7.13%, 1/15/23

       50        47,125   

7.63%, 4/15/24

       205        192,700   

6.88%, 1/15/25

       885        794,287   

11.00%, 9/15/25

       280        302,400   

Level 3 Financing, Inc.:

      

5.38%, 8/15/22

       165        172,450   

5.63%, 2/01/23

       184        192,740   

5.13%, 5/01/23

       420        436,275   

5.38%, 1/15/24

       165        173,044   

5.38%, 5/01/25

       275        288,750   

5.25%, 3/15/26 (c)

       223        231,084   

OTE PLC, 3.50%, 7/09/20

     EUR        100        114,735   

SoftBank Group Corp., 5.25%, 7/30/27

       100        126,464   

Telecom Italia Capital SA:

      

6.38%, 11/15/33

     USD        70        72,363   

6.00%, 9/30/34

       265        266,352   

7.20%, 7/18/36

       105        112,481   

Telecom Italia SpA:

      

3.25%, 1/16/23

     EUR        141        170,875   

3.63%, 1/19/24

       200        242,900   

Verizon Communications, Inc.:

      

3.50%, 11/01/21

     USD        1,000        1,075,661   

6.40%, 2/15/38

       6,879        8,969,370   

6.55%, 9/15/43

       6,751        9,168,081   
      

 

 

 
                       28,759,171   

Electric Utilities — 6.0%

      

AES Corp., 4.88%, 5/15/23

       210        212,625   

Berkshire Hathaway Energy Co., 6.50%, 9/15/37

       5,515        7,663,991   

Black Hills Corp., 3.15%, 1/15/27

       405        409,833   

Cleveland Electric Illuminating Co., 5.95%, 12/15/36

       434        503,518   

CMS Energy Corp., 5.05%, 3/15/22 (d)

       1,832        2,081,857   

Duke Energy Carolinas LLC:

      

6.10%, 6/01/37

       640        858,092   

6.00%, 1/15/38 (d)

       1,675        2,294,157   

4.25%, 12/15/41 (d)

       750        854,920   

Duke Energy Florida LLC, 6.40%, 6/15/38 (d)

       770        1,100,406   

E.ON International Finance BV, 6.65%, 4/30/38 (c)

       3,100        3,901,238   

Electricite de France SA, 5.60%, 1/27/40 (c)

       2,800        3,352,532   

Florida Power Corp., 6.35%, 9/15/37

       2,775        3,946,877   

Jersey Central Power & Light Co., 7.35%, 2/01/19

       490        548,398   

Ohio Power Co., Series D, 6.60%, 3/01/33 (d)

       3,000        3,886,560   

PacifiCorp, 6.25%, 10/15/37 (d)

       1,225        1,720,717   

Public Service Co. of Colorado, Series 17, 6.25%, 9/01/37

       2,550        3,624,863   

Southern California Edison Co.:

      

5.63%, 2/01/36 (d)

       1,300        1,694,242   

Series A, 5.95%, 2/01/38

       2,175        3,001,511   
 

 

See Notes to Financial Statements.

 

                
14    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

Corporate Bonds          

Par  

(000)

    Value  

Electric Utilities (continued)

      

Southern Co., 3.25%, 7/01/26

     USD        1,680      $ 1,748,569   

Virginia Electric & Power Co., Series A, 6.00%, 5/15/37

       3,920        5,302,474   
      

 

 

 
                       48,707,380   

Electrical Equipment — 0.0%

      

Anixter, Inc., 5.63%, 5/01/19

       35        37,056   

Trionista TopCo GmbH, 6.88%, 4/30/21

     EUR        110        129,448   
      

 

 

 
                       166,504   

Electronic Equipment, Instruments & Components — 0.1%

  

CDW LLC/CDW Finance Corp.:

      

6.00%, 8/15/22

     USD        370        397,287   

5.00%, 9/01/23

       519        537,814   

5.50%, 12/01/24

       228        244,348   
      

 

 

 
        1,179,449   

Energy Equipment & Services — 0.9%

  

 

Ensco PLC:

      

4.70%, 3/15/21

       50        43,150   

4.50%, 10/01/24

       139        98,951   

5.20%, 3/15/25

       64        46,080   

Enterprise Products Operating LLC, 6.13%, 10/15/39 (d)

       1,400        1,680,337   

EOG Resources, Inc., 2.63%, 3/15/23

       3,800        3,793,935   

Gates Global LLC/Gates Global Co., 6.00%, 7/15/22 (c)

       249        236,550   

Genesis Energy LP/Genesis Energy Finance Corp.:

      

5.75%, 2/15/21

       142        140,935   

6.75%, 8/01/22

       155        158,100   

GrafTech International Ltd., 6.38%, 11/15/20

       600        463,500   

Noble Holding International Ltd.:

      

4.63%, 3/01/21

       25        20,940   

6.95%, 4/01/25

       35        28,525   

Transocean, Inc.:

      

6.00%, 3/15/18

       120        120,150   

7.38%, 4/15/18

       20        20,200   

8.13%, 12/15/21

       309        289,688   

5.05%, 10/15/22

       135        107,663   

Weatherford International, Ltd., 7.75%, 6/15/21

       70        69,300   
      

 

 

 
        7,318,004   

Environmental, Maintenance, & Security Service — 0.0%

  

 

Befesa Zinc SAU Via Zinc Capital SA, 8.88%, 5/15/18

     EUR        100        113,776   

Food & Staples Retailing — 0.5%

      

Albertsons Cos. LLC/Safeway, Inc./New Albertson’s, Inc./Albertson’s LLC (c):

      

6.63%, 6/15/24

     USD        151        162,114   

5.75%, 3/15/25

       295        305,325   

Casino Guichard Perrachon SA:

      

5.98%, 5/26/21

     EUR        100        130,635   

3.31%, 1/25/23

       100        121,797   

Dollar Tree, Inc., 5.75%, 3/01/23

     USD        1,560        1,678,950   

Rite Aid Corp.:

      

6.75%, 6/15/21

       258        271,867   

6.13%, 4/01/23 (c)

       905        977,020   

7.70%, 2/15/27

       215        273,050   
      

 

 

 
        3,920,758   

Food Products — 0.4%

  

 

Acosta, Inc., 7.75%, 10/01/22 (c)

       463        427,696   

Aramark Services, Inc.:

      

5.13%, 1/15/24

       311        322,468   

5.13%, 1/15/24 (c)

       92        95,393   

4.75%, 6/01/26 (c)

       151        151,770   

Darling Global Finance BV, 4.75%, 5/30/22

     EUR        100        116,899   
Corporate Bonds          

Par  

(000)

    Value  

Food Products (continued)

  

 

FAGE International SA/FAGE USA Dairy Industry, Inc., 5.63%, 8/15/26 (c)

     USD        200      $ 206,750   

JBS USA LLC/JBS USA Finance, Inc. (c):

      

7.25%, 6/01/21

       30        31,050   

5.75%, 6/15/25

       303        307,545   

Pinnacle Foods Finance Corp., 5.88%, 1/15/24 (c)

       42        45,255   

Post Holdings, Inc. (c):

      

6.75%, 12/01/21

       68        73,015   

7.75%, 3/15/24

       468        520,065   

8.00%, 7/15/25

       277        316,472   

5.00%, 8/15/26

       257        256,357   

Smithfield Foods, Inc., 5.88%, 8/01/21 (c)

       338        353,210   

TreeHouse Foods, Inc., 6.00%, 2/15/24 (c)

       89        96,788   

WhiteWave Foods Co., 5.38%, 10/01/22

       119        134,173   
      

 

 

 
        3,454,906   

Forest Products — 0.0%

  

 

Tereos Finance Groupe I SA, 4.13%, 6/16/23

     EUR        100        116,559   

Health Care Equipment & Supplies — 0.3%

      

Crimson Merger Sub, Inc., 6.63%, 5/15/22 (c)

     USD        405        362,475   

DJO Finco, Inc./DJO Finance LLC/DJO Finance Corp., 8.13%, 6/15/21 (c)

       785        690,800   

Fresenius Medical Care US Finance II, Inc., 4.75%, 10/15/24 (c)

       165        176,550   

Fresenius US Finance II, Inc., 4.50%, 1/15/23 (c)

       170        179,775   

Mallinckrodt International Finance SA/Mallinckrodt CB LLC, 5.63%, 10/15/23 (c)

       241        241,904   

Teleflex, Inc.:

      

3.88%, 8/01/17 (h)

       100        297,812   

5.25%, 6/15/24

       170        178,075   

4.88%, 6/01/26

       64        66,720   

Thermo Fisher Scientific, Inc., 3.00%, 4/15/23

       390        399,769   
      

 

 

 
        2,593,880   

Health Care Providers & Services — 1.6%

  

Acadia Healthcare Co., Inc.:

      

5.63%, 2/15/23

       411        418,192   

6.50%, 3/01/24

       41        43,101   

Aetna, Inc., 3.20%, 6/15/26

       1,005        1,021,723   

Alere, Inc., 6.38%, 7/01/23 (c)(f)

       109        111,453   

Amsurg Corp., 5.63%, 7/15/22

       553        570,972   

Centene Corp.:

      

5.63%, 2/15/21

       401        426,564   

4.75%, 5/15/22

       10        10,388   

6.13%, 2/15/24

       308        335,720   

CHS/Community Health Systems, Inc.:

      

5.13%, 8/15/18

       101        102,263   

8.00%, 11/15/19

       48        45,420   

DaVita HealthCare Partners, Inc.:

      

5.13%, 7/15/24

       576        594,720   

5.00%, 5/01/25

       56        56,756   

Envision Healthcare Corp., 5.13%, 7/01/22 (c)

       365        368,650   

HCA, Inc.:

      

3.75%, 3/15/19

       264        272,250   

6.50%, 2/15/20

       652        720,460   

4.75%, 5/01/23

       562        587,992   

5.38%, 2/01/25

       977        1,006,310   

5.25%, 4/15/25

       66        70,703   

5.88%, 2/15/26

       284        300,330   

5.25%, 6/15/26

       361        385,819   

4.50%, 2/15/27 (f)

       408        411,570   

HealthSouth Corp.:

      

5.75%, 11/01/24

       486        503,982   

5.75%, 9/15/25

       286        299,227   

2.00%, 12/01/43 (h)

       225        265,078   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    15


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

Corporate Bonds          

Par  

(000)

    Value  

Health Care Providers & Services (continued)

  

Hologic, Inc., 5.25%, 7/15/22 (c)

     USD        580      $ 616,975   

MEDNAX, Inc., 5.25%, 12/01/23 (c)

       134        141,035   

MPH Acquisition Holdings LLC, 7.13%, 6/01/24 (c)

       204        219,300   

RegionalCare Hospital Partners Holdings, Inc., 8.25%, 5/01/23 (c)

       237        241,444   

Surgery Center Holdings, Inc., 8.88%, 4/15/21 (c)

       48        51,240   

Tenet Healthcare Corp.:

      

6.25%, 11/01/18

       159        169,732   

6.00%, 10/01/20

       324        342,225   

4.50%, 4/01/21

       21        21,200   

4.38%, 10/01/21

       112        112,385   

8.13%, 4/01/22

       472        477,900   

6.75%, 6/15/23

       501        476,576   

UnitedHealth Group, Inc., 3.75%, 7/15/25

       1,375        1,524,178   
      

 

 

 
                       13,323,833   

Hotels, Restaurants & Leisure — 2.5%

  

 

Boyd Gaming Corp., 6.88%, 5/15/23

       172        185,760   

Caesars Entertainment Resort Properties LLC/Caesars Entertainment Resort Property, 8.00%, 10/01/20

       1,247        1,265,705   

CPUK Finance, Ltd., 7.00%, 2/28/42

     GBP        100        140,323   

ESH Hospitality, Inc., 5.25%, 5/01/25 (c)

     USD        525        524,837   

International Game Technology PLC, 4.75%, 2/15/23

     EUR        100        122,510   

KFC Holding Co/Pizza Hut Holdings LLC/Taco Bell of America LLC (c):

      

5.00%, 6/01/24

     USD        29        30,413   

5.25%, 6/01/26

       148        157,250   

McDonald’s Corp., 3.70%, 1/30/26

       510        550,499   

MGM Resorts International:

      

8.63%, 2/01/19

       96        108,600   

5.25%, 3/31/20

       320        342,400   

6.75%, 10/01/20

       113        126,278   

6.63%, 12/15/21

       710        796,975   

4.63%, 9/01/26

       154        152,460   

MGP Escrow Issuer LLC/MGP Escrow Co-Issuer, Inc., 5.63%, 5/01/24 (c)

       1,105        1,198,925   

New Red Finance, Inc., 6.00%, 4/01/22 (c)

       640        669,600   

PortAventura Entertainment Barcelona BV, 7.25%, 12/01/20

     EUR        100        116,329   

RHP Hotel Properties LP/RHP Finance Corp., 5.00%, 4/15/21

     USD        230        237,475   

Sabre GLBL, Inc. (c):

      

5.38%, 4/15/23

       82        84,768   

5.25%, 11/15/23

       185        190,087   

Scientific Games International, Inc.:

      

7.00%, 1/01/22 (c)

       210        223,125   

10.00%, 12/01/22

       202        186,850   

Six Flags Entertainment Corp., 5.25%, 1/15/21 (c)

       434        449,190   

Station Casinos LLC, 7.50%, 3/01/21

       570        606,135   

Unique Pub Finance Co. PLC:

      

Series A3, 6.54%, 3/30/21

     GBP        2,613        3,655,087   

Series A4, 5.66%, 6/30/27

       1,120        1,524,267   

Series M, 7.40%, 3/28/24

       3,000        3,861,088   

Series N, 6.46%, 3/30/32

       2,390        2,578,513   

Vue International Bidco PLC, 7.88%, 7/15/20

       100        137,224   

Yum! Brands, Inc.:

      

3.75%, 11/01/21

     USD        46        46,575   

3.88%, 11/01/23

       20        19,800   
      

 

 

 
                       20,289,048   
Corporate Bonds          

Par  

(000)

    Value  

Household Durables — 0.3%

      

Beazer Homes USA, Inc., 6.63%, 4/15/18

     USD        80      $ 81,500   

CalAtlantic Group, Inc.:

      

8.38%, 1/15/21

       55        65,588   

5.25%, 6/01/26

       15        15,225   

Century Communities, Inc., 6.88%, 5/15/22

       460        465,750   

DR Horton, Inc., 4.00%, 2/15/20

       220        230,450   

Lennar Corp.:

      

4.75%, 11/15/22

       320        336,800   

4.88%, 12/15/23

       85        89,038   

4.75%, 5/30/25

       180        186,750   

PulteGroup, Inc., 6.38%, 5/15/33

       330        347,325   

Riverbed Technology, Inc., 8.88%, 3/01/23 (c)

       155        166,237   

Standard Pacific Corp., 5.88%, 11/15/24

       20        21,600   

TRI Pointe Group, Inc.:

      

4.38%, 6/15/19

       10        10,275   

4.88%, 7/01/21

       125        128,750   

5.88%, 6/15/24

       250        261,250   
      

 

 

 
                       2,406,538   

Household Products — 0.1%

      

Prestige Brands, Inc., 6.38%, 3/01/24 (c)

       109        116,357   

Spectrum Brands, Inc.:

      

6.38%, 11/15/20

       310        322,012   

6.63%, 11/15/22

       355        379,850   

6.13%, 12/15/24

       112        120,820   

5.75%, 7/15/25

       10        10,838   

Tempur Sealy International, Inc., 5.50%, 6/15/26 (c)

       91        95,050   
      

 

 

 
                       1,044,927   

Independent Power and Renewable Electricity Producers — 0.3%

  

Calpine Corp.:

      

6.00%, 1/15/22 (c)

       99        103,826   

5.88%, 1/15/24 (c)

       194        205,155   

5.50%, 2/01/24

       5        4,988   

5.75%, 1/15/25

       50        49,813   

Dynegy, Inc.:

      

6.75%, 11/01/19

       470        481,750   

7.38%, 11/01/22

       151        149,112   

7.63%, 11/01/24

       25        24,500   

NRG Energy, Inc.:

      

8.25%, 9/01/20

       20        20,550   

7.88%, 5/15/21

       61        63,593   

6.63%, 3/15/23

       25        25,500   

6.25%, 5/01/24

       25        24,813   

7.25%, 5/15/26 (c)

       138        143,313   

6.63%, 1/15/27 (c)

       475        475,888   

NRG Yield Operating LLC, 5.38%, 8/15/24

       75        78,187   

QEP Resources, Inc., 5.38%, 10/01/22

       459        454,410   
      

 

 

 
                       2,305,398   

Industrial Conglomerates — 0.0%

      

Smiths Group PLC, 3.63%, 10/12/22 (c)

             360        369,317   

Insurance — 2.4%

      

Allied World Assurance Co. Holdings Ltd., 4.35%, 10/29/25

       1,495        1,548,941   

American International Group, Inc., 3.75%, 7/10/25

       3,380        3,568,137   

Aon PLC, 3.88%, 12/15/25

       1,445        1,555,896   

Assicurazioni Generali SpA, 5.00%, 6/08/48 (b)

     EUR        100        115,031   

AXA SA, 5.25%, 4/16/40 (b)

       500        625,590   

Five Corners Funding Trust, 4.42%, 11/15/23 (c)(d)

     USD        2,050        2,214,303   

Hartford Financial Services Group, Inc., 5.13%, 4/15/22

       1,860        2,108,805   
 

 

See Notes to Financial Statements.

 

                
16    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

Corporate Bonds          

Par  

(000)

    Value  

Insurance (continued)

      

HUB International Ltd. (c):

      

9.25%, 2/15/21

     USD        117      $ 123,435   

7.88%, 10/01/21

       418        427,405   

Liberty Mutual Group, Inc., 6.50%, 5/01/42 (c)(d)

       2,000        2,516,020   

Lincoln National Corp., 3.35%, 3/09/25 (d)

       1,045        1,063,459   

Muenchener Rueckversicherungs AG, 6.00%, 5/26/41 (b)

     EUR        400        531,993   

Prudential Financial, Inc. (d):

      

5.90%, 3/17/36

     USD        500        617,875   

5.70%, 12/14/36

       1,625        1,978,831   

TMF Group Holding BV, 9.88%, 12/01/19

     EUR        100        119,253   

Trader Corp., 9.88%, 8/15/18 (c)

     USD        75        76,875   

Wayne Merger Sub LLC, 8.25%, 8/01/23 (c)

       286        295,617   
      

 

 

 
                       19,487,466   

Internet Software & Services — 0.1%

      

Equinix, Inc.:

      

4.88%, 4/01/20

       173        179,920   

5.88%, 1/15/26

       350        381,280   

Netflix, Inc.:

      

5.50%, 2/15/22

       8        8,600   

5.75%, 3/01/24

       251        271,080   
      

 

 

 
                       840,880   

IT Services — 0.4%

      

Ceridian HCM Holding, Inc., 11.00%, 3/15/21 (c)

       155        160,425   

First Data Corp. (c):

      

5.38%, 8/15/23

       321        333,038   

7.00%, 12/01/23

       1,223        1,281,092   

5.75%, 1/15/24

       1,524        1,560,195   

Western Digital Corp., 10.50%, 4/01/24 (c)

       72        81,360   
      

 

 

 
                       3,416,110   

Life Sciences Tools & Services — 0.1%

      

Agilent Technologies, Inc., 3.20%, 10/01/22

             500        513,863   

Machinery — 0.1%

      

Gardner Denver, Inc., 6.88%, 8/15/21 (c)

       90        83,025   

SPX FLOW, Inc. (c):

      

5.63%, 8/15/24

       195        200,362   

5.88%, 8/15/26

       105        108,413   

Trinseo Materials Operating SCA/Trinseo Materials Finance, Inc., 6.38%, 5/01/22

     EUR        100        118,294   
      

 

 

 
                       510,094   

Marine — 0.3%

      

Nakilat, Inc., Series A, 6.07%, 12/31/33 (c)

     USD        2,150        2,596,985   

Media — 6.4%

      

21st Century Fox America, Inc., 7.63%, 11/30/28

       385        536,892   

Altice Financing SA:

      

6.50%, 1/15/22 (c)

       200        210,500   

5.25%, 2/15/23

     EUR        100        117,686   

7.50%, 5/15/26 (c)

     USD        200        210,500   

Altice Luxembourg SA (c):

      

7.75%, 5/15/22

       200        212,875   

7.63%, 2/15/25

       289        296,947   

Altice US Finance I Corp. (c):

      

5.38%, 7/15/23

       770        805,612   

5.50%, 5/15/26

       293        309,115   

AMC Networks, Inc.:

      

4.75%, 12/15/22

       111        114,330   

5.00%, 4/01/24

       191        195,775   

Cablevision Systems Corp.:

      

8.63%, 9/15/17

       76        80,769   

7.75%, 4/15/18

       311        331,992   

8.00%, 4/15/20

       85        90,525   
Corporate Bonds          

Par  

(000)

    Value  

Media (continued)

      

CCO Holdings LLC/CCO Holdings Capital Corp.:

      

5.25%, 9/30/22

     USD        600      $ 630,000   

5.13%, 5/01/23 (c)

       359        377,736   

5.88%, 4/01/24 (c)

       383        412,682   

5.75%, 2/15/26 (c)

       197        210,790   

5.50%, 5/01/26 (c)

       278        294,332   

5.88%, 5/01/27 (c)

       770        823,900   

Cellnex Telecom SA, 2.38%, 1/16/24

     EUR        100        115,070   

Cequel Communications Holdings I LLC/Cequel Capital Corp. (c):

      

6.38%, 9/15/20

     USD        100        103,375   

5.13%, 12/15/21

       409        412,701   

7.75%, 7/15/25

       960        1,048,800   

Charter Communications Operating LLC/Charter Communications Operating Capital, 4.91%, 7/23/25 (c)

       4,000        4,413,680   

Clear Channel International BV, 8.75%, 12/15/20 (c)

       284        301,040   

Clear Channel Worldwide Holdings, Inc., 6.50%, 11/15/22

       2,307        2,370,472   

Comcast Cable Communications Holdings, Inc., 9.46%, 11/15/22

       2,600        3,656,234   

Comcast Corp.:

      

3.38%, 8/15/25 (d)

       4,500        4,854,541   

6.45%, 3/15/37

       790        1,109,088   

Cox Communications, Inc. (c):

      

6.95%, 6/01/38

       1,000        1,141,073   

8.38%, 3/01/39 (d)

       3,475        4,459,287   

CSC Holdings LLC:

      

10.13%, 1/15/23 (c)

       790        902,081   

5.25%, 6/01/24

       615        598,469   

Discovery Communications LLC:

      

3.25%, 4/01/23

       1,850        1,852,662   

3.45%, 3/15/25

       210        206,607   

DISH DBS Corp.:

      

5.13%, 5/01/20

       90        93,150   

6.75%, 6/01/21

       314        337,354   

5.88%, 7/15/22

       73        74,460   

5.88%, 11/15/24

       99        97,639   

7.75%, 7/01/26 (c)

       530        565,505   

DISH Network Corp., 3.38%, 8/15/26 (c)(h)

       175        182,547   

eircom Finance DAC, 4.50%, 5/31/22

     EUR        100        114,029   

Gray Television, Inc., 5.88%, 7/15/26 (c)

     USD        54        56,295   

Hughes Satellite Systems Corp. (c):

      

5.25%, 8/01/26

       144        142,847   

6.63%, 8/01/26

       109        108,183   

iHeartCommunications, Inc.:

      

9.00%, 12/15/19

       185        149,619   

9.00%, 3/01/21

       9        6,750   

10.63%, 3/15/23

       961        708,737   

Intelsat Jackson Holdings SA:

      

7.25%, 10/15/20

       267        207,593   

5.50%, 8/01/23

       272        185,640   

Interpublic Group of Cos., Inc., 3.75%, 2/15/23

       2,000        2,104,122   

Lamar Media Corp., 5.75%, 2/01/26

       210        227,063   

LGE HoldCo VI BV, 7.13%, 5/15/24

     EUR        100        126,325   

McGraw-Hill Global Education Holdings LLC/McGraw-Hill Global Education Finance, 7.88%, 5/15/24 (c)

     USD        61        65,270   

MDC Partners, Inc., 6.50%, 5/01/24 (c)

       336        319,200   

Midcontinent Communications & Midcontinent Finance Corp., 6.25%, 8/01/21 (c)

       340        356,150   

NAI Entertainment Holdings/NAI Entertainment Holdings Finance Corp., 5.00%, 8/01/18 (c)

       117        118,755   

National CineMedia LLC, 5.75%, 8/15/26 (c)

       59        60,549   

Nexstar Escrow Corp., 5.63%, 8/01/24 (c)

       173        176,460   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    17


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

Corporate Bonds          

Par  

(000)

    Value  

Media (continued)

      

Nielsen Finance LLC/Nielsen Finance Co., 5.00%, 4/15/22 (c)

     USD        515      $ 529,096   

Numericable Group SA, 5.38%, 5/15/22

     EUR        106        124,079   

Outfront Media Capital LLC/Outfront Media Capital Corp.:

      

5.25%, 2/15/22

     USD        55        57,613   

5.63%, 2/15/24

       160        170,200   

SFR Group SA (c):

      

6.00%, 5/15/22

       345        352,590   

7.38%, 5/01/26

       1,701        1,756,282   

Sirius XM Radio, Inc. (c):

      

4.25%, 5/15/20

       463        472,260   

5.38%, 4/15/25

       90        94,275   

TCI Communications, Inc., 7.88%, 2/15/26 (d)

       610        869,806   

TEGNA, Inc. (c):

      

4.88%, 9/15/21

       50        51,875   

5.50%, 9/15/24

       165        174,075   

Time Warner, Inc.:

      

3.60%, 7/15/25 (d)

       750        804,786   

6.10%, 7/15/40

       830        1,067,825   

Tribune Media Co., 5.88%, 7/15/22

       514        525,565   

United Group BV, 7.88%, 11/15/20

     EUR        100        117,167   

Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH:

      

5.50%, 1/15/23 (c)

     USD        445        468,362   

4.00%, 1/15/25

     EUR        100        118,528   

3.50%, 1/15/27

       100        115,728   

Univision Communications, Inc. (c):

      

5.13%, 5/15/23

     USD        1,131        1,176,240   

5.13%, 2/15/25

       390        407,550   

UPCB Finance IV Ltd., 4.00%, 1/15/27

     EUR        100        114,306   

Virgin Media Finance PLC, 5.75%, 1/15/25 (c)

     USD        515        524,012   

Virgin Media Secured Finance PLC:

      

5.50%, 8/15/26 (c)

       200        209,000   

4.88%, 1/15/27

     GBP        100        137,552   

6.25%, 3/28/29

       100        145,169   

WaveDivision Escrow LLC/WaveDivision Escrow Corp., 8.13%, 9/01/20 (c)

     USD        520        542,750   

Wind Acquisition Finance SA:

      

7.00%, 4/23/21

     EUR        120        139,208   

7.38%, 4/23/21 (c)

     USD        200        206,000   

Ziggo Bond Finance BV, 5.88%, 1/15/25 (c)

       260        261,300   

Ziggo Secured Finance BV, 3.75%, 1/15/25

     EUR        100        114,049   
      

 

 

 
                       52,239,628   

Metals & Mining — 1.3%

  

Alcoa, Inc.:

      

5.40%, 4/15/21

     USD        340        360,720   

5.13%, 10/01/24

       445        469,475   

Anglo American Capital PLC:

      

4.45%, 9/27/20 (c)

       100        101,000   

4.13%, 4/15/21 (c)

       200        198,000   

4.13%, 9/27/22 (c)

       200        195,500   

3.25%, 4/03/23

     EUR        100        110,214   

ArcelorMittal:

      

6.13%, 6/01/18

     USD        251        265,432   

10.85%, 6/01/19

       97        115,673   

7.25%, 2/25/22

       14        15,750   

8.00%, 10/15/39

       64        68,800   

7.75%, 3/01/41

       191        198,640   

Constellium NV (c):

      

8.00%, 1/15/23

       650        663,000   

5.75%, 5/15/24

       250        231,250   

Freeport-McMoRan, Inc.:

      

2.30%, 11/14/17

       189        185,693   

2.38%, 3/15/18

       1,169        1,150,004   
Corporate Bonds          

Par  

(000)

    Value  

Metals & Mining (continued)

  

Freeport-McMoRan, Inc. (continued):

      

3.10%, 3/15/20

     USD        105      $ 96,600   

4.00%, 11/14/21

       126        115,290   

3.55%, 3/01/22

       370        322,825   

3.88%, 3/15/23

       725        621,687   

5.40%, 11/14/34

       278        216,840   

5.45%, 3/15/43

       364        278,460   

Glencore Finance Europe SA, 3.38%, 9/30/20

     EUR        100        120,747   

Joseph T Ryerson & Son, Inc., 11.00%, 5/15/22 (c)

     USD        115        126,500   

Kaiser Aluminum Corp., 5.88%, 5/15/24 (c)

       74        78,440   

Novelis Corp., 6.25%, 8/15/24 (c)

       743        774,577   

Novelis, Inc., 8.75%, 12/15/20

       683        715,442   

Steel Dynamics, Inc.:

      

5.13%, 10/01/21

       550        572,000   

5.25%, 4/15/23

       345        358,800   

5.50%, 10/01/24

       48        50,640   

Teck Resources Ltd.:

      

3.00%, 3/01/19

       140        135,800   

8.00%, 6/01/21 (c)

       86        92,826   

3.75%, 2/01/23

       235        201,513   

8.50%, 6/01/24 (c)

       295        331,875   

6.00%, 8/15/40

       236        191,160   

6.25%, 7/15/41

       200        165,375   

5.20%, 3/01/42

       95        69,588   

United States Steel Corp., 8.38%, 7/01/21 (c)

       215        233,812   

Wise Metals Group LLC/Wise Alloys Finance Corp., 8.75%, 12/15/18 (c)

       266        273,980   
      

 

 

 
                       10,473,928   

Multi-Utilities — 0.2%

      

Brooklyn Union Gas Co., 3.41%, 3/10/26 (c)

             1,880        1,998,239   

Multiline Retail — 0.0%

      

Neiman Marcus Group Ltd., 8.00%, 10/15/21 (c)

             430        367,951   

Offshore Drilling & Other Services — 0.1%

      

Lam Research Corp., 3.90%, 6/15/26

             460        480,684   

Oil, Gas & Consumable Fuels — 4.1%

      

Antero Resources Corp., 5.63%, 6/01/23

       26        26,065   

California Resources Corp., 8.00%, 12/15/22 (c)

       352        237,600   

Carrizo Oil & Gas, Inc., 6.25%, 4/15/23

       525        518,437   

Cenovus Energy, Inc.:

      

5.70%, 10/15/19

       30        32,241   

5.20%, 9/15/43

       15        13,189   

Cheniere Corpus Christi Holdings LLC, 7.00%, 6/30/24 (c)

       278        297,460   

Chesapeake Energy Corp.:

      

6.50%, 8/15/17

       30        30,225   

3.93%, 4/15/19 (b)

       603        545,715   

6.63%, 8/15/20

       95        84,550   

6.88%, 11/15/20

       110        96,525   

ConocoPhillips Canada Funding Co., 5.95%, 10/15/36

       685        828,112   

CONSOL Energy, Inc.:

      

5.88%, 4/15/22

       1,339        1,211,795   

8.00%, 4/01/23

       48        46,800   

Continental Resources, Inc.:

      

5.00%, 9/15/22

       89        86,108   

4.50%, 4/15/23

       133        125,352   

3.80%, 6/01/24

       417        376,342   

4.90%, 6/01/44

       65        54,275   

Crestwood Midstream Partners LP/Crestwood Midstream Finance Corp.:

      

6.00%, 12/15/20

       25        24,625   

6.13%, 3/01/22

       115        111,837   

6.25%, 4/01/23

       20        19,500   
 

 

See Notes to Financial Statements.

 

                
18    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

Corporate Bonds          

Par  

(000)

    Value  

Oil, Gas & Consumable Fuels (continued)

      

CrownRock LP/CrownRock Finance, Inc., 7.13%, 4/15/21 (c)

     USD        610      $ 634,400   

DCP Midstream LLC (c):

      

6.45%, 11/03/36

       95        91,913   

6.75%, 9/15/37

       149        144,530   

Denbury Resources, Inc., 9.00%, 5/15/21 (c)

       501        514,777   

Diamondback Energy, Inc., 7.63%, 10/01/21

       328        347,885   

Encana Corp.:

      

3.90%, 11/15/21

       99        97,882   

6.50%, 8/15/34

       129        130,231   

6.63%, 8/15/37

       108        109,474   

6.50%, 2/01/38

       319        319,265   

5.15%, 11/15/41

       131        114,955   

Energy Transfer Equity LP:

      

5.88%, 1/15/24

       579        593,475   

5.50%, 6/01/27

       251        251,627   

Extraction Oil & Gas Holdings LLC/Extraction Finance Corp., 7.88%, 7/15/21 (c)

       178        179,780   

Freeport-McMoran Oil & Gas LLC / FCX Oil & Gas, Inc., 6.88%, 2/15/23

       180        175,050   

Genesis Energy LP/Genesis Energy Finance Corp., 5.63%, 6/15/24

       55        52,938   

Gulfport Energy Corp.:

      

7.75%, 11/01/20

       146        151,840   

6.63%, 5/01/23

       15        15,413   

Halcon Resources Corp., 8.63%, 2/01/20 (a)(c)(i)

       100        95,000   

Hilcorp Energy I LP/Hilcorp Finance Co., 7.63%, 4/15/21 (c)

       30        30,825   

KeySpan Gas East Corp., 5.82%, 4/01/41 (c)(d)

       1,010        1,312,796   

Marathon Petroleum Corp., 6.50%, 3/01/41 (d)

       2,049        2,301,943   

Matador Resources Co., 6.88%, 4/15/23

       270        278,775   

MEG Energy Corp. (c):

      

6.50%, 3/15/21

       560        459,200   

7.00%, 3/31/24

       735        591,675   

Memorial Resource Development Corp., 5.88%, 7/01/22

       324        327,240   

MidAmerican Energy Co., 5.80%, 10/15/36 (d)

       1,500        2,013,390   

MidAmerican Energy Holdings Co., 5.95%, 5/15/37

       1,750        2,307,056   

Murphy Oil Corp., 6.88%, 8/15/24

       112        117,124   

NGPL PipeCo LLC (c):

      

7.12%, 12/15/17

       1,719        1,794,206   

7.77%, 12/15/37

       87        93,416   

Noble Energy, Inc., 5.63%, 5/01/21

       309        322,338   

Oasis Petroleum, Inc.:

      

7.25%, 2/01/19

       25        24,625   

6.50%, 11/01/21

       272        250,920   

6.88%, 3/15/22 (d)

       307        285,510   

6.88%, 1/15/23

       120        110,700   

ONEOK, Inc.:

      

4.25%, 2/01/22

       45        43,538   

7.50%, 9/01/23

       135        149,512   

Parsley Energy LLC/Parsley Finance Corp. (c):

      

7.50%, 2/15/22

       345        363,975   

6.25%, 6/01/24

       74        76,405   

PBF Holding Co. LLC/PBF Finance Corp., 8.25%, 2/15/20

       94        96,938   

PDC Energy, Inc., 7.75%, 10/15/22

       165        173,250   

QEP Resources, Inc.:

      

6.88%, 3/01/21

       105        109,777   

5.25%, 5/01/23

       73        71,540   

Range Resources Corp.:

      

5.75%, 6/01/21

       213        216,195   

5.00%, 8/15/22

       53        52,470   

5.00%, 3/15/23

       185        182,687   
Corporate Bonds          

Par  

(000)

    Value  

Oil, Gas & Consumable Fuels (continued)

      

Rockies Express Pipeline LLC, 5.63%, 4/15/20 (c)

     USD        565      $ 591,131   

RSP Permian, Inc., 6.63%, 10/01/22

       179        186,160   

Sabine Pass Liquefaction LLC:

      

5.63%, 2/01/21

       848        890,400   

6.25%, 3/15/22

       896        958,720   

5.63%, 4/15/23

       1,037        1,091,442   

5.88%, 6/30/26 (c)

       236        252,520   

Sanchez Energy Corp.:

      

7.75%, 6/15/21

       322        280,140   

6.13%, 1/15/23

       603        476,370   

SBA Communications Corp., 4.88%, 9/01/24 (c)

       388        393,335   

Seven Generations Energy Ltd. (c):

      

8.25%, 5/15/20

       705        749,944   

6.75%, 5/01/23

       15        15,338   

SM Energy Co.:

      

6.13%, 11/15/22

       9        8,753   

5.00%, 1/15/24

       10        9,138   

Southwestern Energy Co.:

      

7.50%, 2/01/18

       25        26,281   

5.80%, 1/23/20

       140        140,000   

4.10%, 3/15/22

       129        117,390   

6.70%, 1/23/25

       40        41,100   

Sunoco Logistics Partners Operations LP, 3.90%, 7/15/26

       310        312,576   

Tallgrass Energy Partners LP/Tallgrass Energy Finance Corp., 5.50%, 9/15/24 (c)(f)

       115        117,875   

Targa Resources Partners LP/Targa Resources Partners Finance Corp.:

      

6.88%, 2/01/21

       49        50,715   

6.38%, 8/01/22

       60        61,950   

5.25%, 5/01/23

       10        10,150   

6.75%, 3/15/24 (c)

       50        53,125   

Tesoro Logistics LP/Tesoro Logistics Finance Corp.:

      

6.13%, 10/15/21

       26        27,235   

6.38%, 5/01/24

       74        78,995   

Transcanada Trust, 5.88%, 8/15/76 (b)

       135        143,859   

Weatherford International LLC, 6.80%, 6/15/37

       15        11,175   

Weatherford International Ltd.:

      

4.50%, 4/15/22

       65        53,950   

6.50%, 8/01/36

       50        37,000   

7.00%, 3/15/38

       55        41,388   

5.95%, 4/15/42

       52        36,530   

Western Gas Partners LP, 5.38%, 6/01/21

       1,425        1,548,696   

Whiting Petroleum Corp.:

      

5.75%, 3/15/21

       3        2,689   

1.25%, 6/05/20 (h)

       458        393,734   

5.75%, 3/15/21 (h)

       270        252,450   

6.25%, 4/01/23 (h)

       118        109,372   

Williams Cos., Inc.:

      

3.70%, 1/15/23

       38        36,860   

4.55%, 6/24/24

       81        82,823   

5.75%, 6/24/44

       189        194,197   

WPX Energy, Inc.:

      

5.25%, 1/15/17

       30        30,150   

7.50%, 8/01/20

       50        51,344   

6.00%, 1/15/22

       278        270,355   

8.25%, 8/01/23

       125        130,000   

5.25%, 9/15/24

       145        133,762   
      

 

 

 
                       33,446,331   

Paper & Forest Products — 0.2%

      

International Paper Co., 6.00%, 11/15/41

       870        1,046,724   

Pfleiderer GmbH, 7.88%, 8/01/19

     EUR        100        116,163   

Unifrax I LLC/Unifrax Holding Co., 7.50%, 2/15/19 (c)

     USD        180        162,000   
      

 

 

 
                       1,324,887   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    19


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

Corporate Bonds          

Par  

(000)

    Value  

Pharmaceuticals — 1.7%

      

AbbVie, Inc., 3.60%, 5/14/25

     USD        870      $ 920,704   

Actavis Funding SCS, 4.55%, 3/15/35

       2,140        2,304,744   

Actavis, Inc., 3.25%, 10/01/22

       4,000        4,154,224   

DPx Holdings BV, 7.50%, 2/01/22 (c)

       75        79,701   

Endo Finance LLC, 5.75%, 1/15/22 (c)

       95        88,528   

Endo Finance LLC/Endo Finco, Inc. (c):

      

5.38%, 1/15/23

       235        212,675   

6.00%, 7/15/23

       315        285,862   

Forest Laboratories, Inc., 5.00%, 12/15/21 (c)

       758        851,322   

Grifols Worldwide Operations Ltd., 5.25%, 4/01/22

       200        209,000   

Jaguar Holding Co. II/Pharmaceutical Product Development LLC, 6.38%, 8/01/23 (c)

       795        832,762   

NBTY, Inc., 7.63%, 5/15/21 (c)

       397        405,932   

Synlab Bondco PLC, 6.25%, 7/01/22

     EUR        100        121,026   

Teva Pharmaceutical Finance Netherlands III BV, 2.80%, 7/21/23

     USD        1,040        1,045,607   

Valeant Pharmaceuticals International, Inc. (c):

      

6.75%, 8/15/18

       1,133        1,136,286   

5.38%, 3/15/20

       44        41,470   

6.38%, 10/15/20

       710        678,050   

5.63%, 12/01/21

       404        364,610   

5.88%, 5/15/23

       40        35,200   

6.13%, 4/15/25

       220        193,325   
      

 

 

 
                       13,961,028   

Real Estate — 0.2%

      

AvalonBay Communities, Inc., 3.45%, 6/01/25 (d)

       1,535        1,616,266   

Prologis LP, 3.75%, 11/01/25

       315        340,518   
      

 

 

 
                       1,956,784   

Real Estate Investment Trusts (REITs) — 1.4%

      

ERP Operating LP:

      

3.38%, 6/01/25

       1,245        1,306,850   

4.50%, 6/01/45

       1,155        1,305,266   

FelCor Lodging LP, 5.63%, 3/01/23

       34        34,935   

HCP, Inc. (d):

      

3.88%, 8/15/24

       3,000        3,071,841   

4.00%, 6/01/25

       2,000        2,059,608   

Hilton Escrow Issuer LLC/Hilton Escrow Issuer Corp., 4.25%, 9/01/24 (c)

       207        211,011   

MGM Growth Properties Operating Partnership LP/MGP Finance Co-Issuer, Inc., 4.50%, 9/01/26 (c)

       175        174,891   

Simon Property Group LP, 4.75%, 3/15/42

       1,670        2,029,113   

Ventas Realty LP, 4.13%, 1/15/26

       870        942,496   

Ventas Realty LP/Ventas Capital Corp., 4.75%, 6/01/21

       550        612,320   
      

 

 

 
                       11,748,331   

Real Estate Management & Development — 0.7%

  

Northwest Florida Timber Finance LLC, 4.75%, 3/04/29 (c)(d)

       4,600        4,026,559   

Punch Taverns Finance B, Ltd., Series A7, 5.27%, 3/30/24

     GBP        63        75,864   

Realogy Group LLC/Realogy Co-Issuer Corp. (c):

      

4.50%, 4/15/19

     USD        120        124,500   

5.25%, 12/01/21

       600        628,500   

4.88%, 6/01/23

       951        962,888   
      

 

 

 
                       5,818,311   

Road & Rail — 1.2%

      

Avis Budget Car Rental LLC/Avis Budget Finance, Inc. (c):

      

5.13%, 6/01/22

       495        503,663   

6.38%, 4/01/24

       20        21,110   

5.25%, 3/15/25

       425        420,750   
Corporate Bonds          

Par  

(000)

    Value  

Road & Rail (continued)

      

Burlington Northern Santa Fe LLC, 5.75%,
5/01/40 (d)

     USD        1,890      $ 2,535,178   

Herc Rentals, Inc. (c):

      

7.50%, 6/01/22

       118        122,720   

7.75%, 6/01/24

       8        8,360   

Hertz Corp., 5.88%, 10/15/20

       460        476,675   

Lima Metro Line 2 Finance Ltd., 5.88%, 7/05/34 (c)

       5,000        5,556,250   

United Rentals North America, Inc., 5.50%, 7/15/25

       125        128,906   
      

 

 

 
                       9,773,612   

Semiconductors & Semiconductor Equipment — 0.7%

  

 

Advanced Micro Devices, Inc., 7.50%, 8/15/22

       80        77,600   

Analog Devices, Inc., 3.90%, 12/15/25

       470        501,786   

Applied Materials, Inc., 3.90%, 10/01/25

       1,155        1,282,404   

Micron Technology, Inc. (c):

      

5.25%, 8/01/23

       206        199,305   

5.63%, 1/15/26

       79        75,445   

Microsemi Corp., 9.13%, 4/15/23 (c)

       26        29,770   

NXP BV/NXP Funding LLC (c):

      

4.13%, 6/15/20

       420        434,700   

4.13%, 6/01/21

       278        290,788   

3.88%, 9/01/22

       200        203,250   

5.75%, 3/15/23

       260        276,767   

ON Semiconductor Corp., Series B, 2.63%, 12/15/26 (h)

       250        272,969   

QUALCOMM, Inc., 3.45%, 5/20/25

       1,950        2,105,852   

Sensata Technologies BV, 5.00%, 10/01/25 (c)

       350        362,250   
      

 

 

 
                       6,112,886   

Software — 0.6%

      

ACI Worldwide, Inc., 6.38%, 8/15/20 (c)

       320        330,400   

BMC Software Finance, Inc., 8.13%, 7/15/21 (c)

       107        94,160   

Ensemble S Merger Sub, Inc., 9.00%, 9/30/23 (c)

       210        217,087   

Infinity Acquisition LLC/Infinity Acquisition Finance Corp., 7.25%, 8/01/22 (c)

       31        27,125   

Infor US, Inc., 6.50%, 5/15/22

       741        751,189   

Informatica LLC, 7.13%, 7/15/23 (c)

       183        172,935   

Nuance Communications, Inc. (c):

      

5.38%, 8/15/20

       90        92,138   

6.00%, 7/01/24

       170        176,800   

Oracle Corp., 5.38%, 7/15/40 (d)

       1,575        1,974,428   

PTC, Inc., 6.00%, 5/15/24

       71        76,769   

Solera LLC/Solera Finance, Inc., 10.50%,
3/01/24 (c)

       557        616,877   

SS&C Technologies Holdings, Inc., 5.88%, 7/15/23

       145        152,612   

Veritas US, Inc./Veritas Bermuda, Ltd., 7.50%, 2/01/23

     EUR        100        107,641   
      

 

 

 
                       4,790,161   

Specialty Retail — 0.6%

      

Asbury Automotive Group, Inc., 6.00%, 12/15/24

     USD        440        457,600   

Group 1 Automotive, Inc., 5.00%, 6/01/22

       430        432,150   

Home Depot, Inc., 5.88%, 12/16/36

       1,660        2,288,388   

JC Penney Corp., Inc.:

      

6.38%, 10/15/36

       33        27,720   

7.40%, 4/01/37

       27        24,300   

L Brands, Inc., 6.88%, 11/01/35

       347        379,097   

Penske Automotive Group, Inc.:

      

5.38%, 12/01/24

       371        377,493   

5.50%, 5/15/26

       127        127,079   

Sally Holdings LLC/Sally Capital, Inc., 5.50%, 11/01/23

       320        340,800   
 

 

See Notes to Financial Statements.

 

                
20    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

Corporate Bonds          

Par  

(000)

    Value  

Specialty Retail (continued)

      

THOM Europe SAS, 7.38%, 7/15/19

     EUR        100      $ 117,680   
      

 

 

 
                       4,572,307   

Technology Hardware, Storage & Peripherals — 0.3%

  

 

Diamond 1 Finance Corp./Diamond 2 Finance Corp. (c):

      

4.42%, 6/15/21

     USD        90        94,107   

5.88%, 6/15/21

       139        146,971   

7.13%, 6/15/24

       169        183,087   

6.02%, 6/15/26

       110        117,692   

8.35%, 7/15/46

       95        110,709   

Hewlett Packard Enterprise Co., 4.90%,
10/15/25 (c)

       1,500        1,603,434   

Western Digital Corp., 7.38%, 4/01/23 (c)

       384        416,640   
      

 

 

 
                       2,672,640   

Textiles, Apparel & Luxury Goods — 0.0%

      

BiSoho SAS, 5.88%, 5/01/23

     EUR        100        118,863   

Hanesbrands, Inc. (c):

      

4.63%, 5/15/24

     USD        36        37,665   

4.88%, 5/15/26 (f)

       85        88,825   

Springs Industries, Inc., 6.25%, 6/01/21

       36        37,485   

Wolverine World Wide, Inc., 5.00%, 9/01/26 (c)

       44        44,055   
      

 

 

 
                       326,893   

Thrifts & Mortgage Finance — 0.0%

  

Radian Group, Inc., 5.25%, 6/15/20

             185        195,730   

Tobacco — 1.5%

  

Altria Group, Inc.:

      

9.95%, 11/10/38

       516        939,104   

10.20%, 2/06/39

       894        1,665,759   

5.38%, 1/31/44

       4,030        5,224,976   

BAT International Finance PLC, 3.95%, 6/15/25 (c)

       2,000        2,228,648   

Reynolds American, Inc.:

      

4.45%, 6/12/25

       635        712,739   

7.00%, 8/04/41

       1,000        1,301,242   
      

 

 

 
                       12,072,468   

Transportation Infrastructure — 0.3%

      

CEVA Group PLC, 7.00%, 3/01/21 (c)

       310        252,650   

I 595 Express LLC, 3.31%, 12/31/31

       1,593        1,620,603   

Onorato Armatori SpA, 7.75%, 2/15/23

     EUR        100        114,635   

Transurban Finance Co., 4.13%, 2/02/26 (c)

     USD        580        619,121   
      

 

 

 
                       2,607,009   

Utilities — 0.0%

      

ContourGlobal Power Holdings SA, 5.13%, 6/15/21

     EUR        100        118,795   

Wireless Telecommunication Services — 2.0%

      

America Movil SAB de CV, 2.38%, 9/08/16 (d)

     USD        1,595        1,595,072   

Communications Sales & Leasing, Inc./CSL Capital LLC:

      

6.00%, 4/15/23 (c)

       46        47,840   

8.25%, 10/15/23

       652        679,710   

Crown Castle Towers LLC, 6.11%, 1/15/40 (c)

       3,155        3,502,306   

Digicel Ltd., 6.00%, 4/15/21 (c)

       1,550        1,416,312   

GEO Group, Inc.:

      

5.13%, 4/01/23

       265        236,512   

6.00%, 4/15/26

       42        37,643   

Rogers Communications, Inc., 7.50%, 8/15/38

       2,325        3,310,133   

SBA Communications Corp., 5.63%, 10/01/19

       138        142,140   

Sprint Capital Corp.:

      

6.90%, 5/01/19

       140        141,400   

6.88%, 11/15/28

       759        683,100   

8.75%, 3/15/32

       110        109,175   
Corporate Bonds          

Par  

(000)

    Value  

Wireless Telecommunication Services (continued)

  

 

Sprint Communications, Inc.:

      

9.00%, 11/15/18 (c)

     USD        1,360      $ 1,497,700   

7.00%, 8/15/20

       380        374,300   

Sprint Corp.:

      

7.25%, 9/15/21

       240        237,300   

7.88%, 9/15/23

       356        346,028   

7.13%, 6/15/24

       541        504,482   

7.63%, 2/15/25

       95        90,191   

T-Mobile USA, Inc.:

      

6.63%, 4/28/21

       490        513,275   

6.73%, 4/28/22

       130        136,663   

6.00%, 3/01/23

       250        265,010   

6.84%, 4/28/23

       40        42,900   

6.50%, 1/15/24

       240        258,000   

6.38%, 3/01/25

       220        236,500   

6.50%, 1/15/26

       309        338,162   
      

 

 

 
                       16,741,854   
Total Corporate Bonds — 62.4%                      513,373,172   
      
                          
Floating Rate Loan Interests (b)                      

Aerospace & Defense — 0.0%

      

Engility Corp.:

      

Term Loan B1, 4.88%, 8/12/20

       57        57,321   

Term Loan B2, 5.75%, 8/12/23

       110        110,431   
      

 

 

 
                       167,752   

Air Freight & Logistics — 0.0%

      

CEVA Group PLC, Synthetic LOC, 6.50%, 3/19/21

       20        15,683   

CEVA Intercompany BV, Dutch Term Loan, 6.50%, 3/19/21

       20        16,167   

CEVA Logistics Canada ULC, Canadian Term Loan, 6.50%, 3/19/21

       3        2,763   

CEVA Logistics US Holdings, Inc., Term Loan, 6.50%, 3/19/21

       28        22,313   

XPO Logistics, Inc., Term Loan B2, 4.25%, 10/30/21

       52        52,228   
      

 

 

 
                       109,154   

Auto Components — 0.1%

      

Gates Global, Inc., Term Loan B, 4.25%, 7/06/21

             371        364,889   

Chemicals — 0.0%

      

Chemours Co., Term Loan B, 3.75%, 5/12/22

       17        16,749   

MacDermid, Inc., Term Loan B3, 5.50%, 6/07/20

       103        103,168   
      

 

 

 
                       119,917   

Commercial Services & Supplies — 0.0%

      

Brand Energy & Infrastructure Services, Inc., Term Loan B, 4.75%, 11/26/20

             119        117,566   

Containers & Packaging — 0.0%

      

BWAY Holding Co., Inc., Term Loan B, 5.50%, 8/14/20

             112        112,351   

Diversified Consumer Services — 0.0%

      

Laureate Education, Inc., Term Loan B, 8.16%, 3/17/21

             96        95,468   

Diversified Telecommunication Services — 0.0%

  

Telenet International Finance Sarl, Term Loan AD, 4.25%, 6/30/24

             128        128,366   

Electrical Equipment — 0.1%

      

Texas Competitive Electric Holdings Co. LLC:

      

2016 DIP Term Loan B, 5.00%, 10/31/17

       355        355,554   

2016 DIP Term Loan C, 5.00%, 10/31/17

       78        78,241   
      

 

 

 
                       433,795   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    21


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

Floating Rate Loan Interests (b)          

Par  

(000)

    Value  

Energy Equipment & Services — 0.0%

  

 

Weatherford International Ltd., Term Loan, 1.95%, 7/13/20

     USD        265      $ 248,752   

Food Products — 0.0%

      

Reynolds Group Holdings, Inc., 2016 Term Loan, 4.25%, 2/05/23

             88        88,099   

Health Care Equipment & Supplies — 0.1%

  

 

Alere, Inc., 2015 Term Loan B, 4.25%, 6/18/22

       194        191,753   

Immucor, Inc., Refinancing Term Loan B2, 5.00%, 8/17/18

       159        154,301   
      

 

 

 
                       346,054   

Health Care Providers & Services — 0.0%

      

Vizient, Inc., 1st Lien Term Loan, 6.25%, 2/13/23

             77        78,024   

Hotels, Restaurants & Leisure — 0.2%

      

Amaya Holdings BV, 1st Lien Term Loan, 5.00%, 8/01/21

       189        186,503   

Caesars Entertainment Resort Properties LLC, Term Loan B, 7.00%, 10/11/20

       1,185        1,157,740   

MPH Acquisition Holdings LLC, 2016 Term Loan B, 5.00%, 6/07/23

       215        217,240   

Scientific Games International, Inc., 2014 Term Loan B1, 6.00%, 10/18/20

       152        151,806   
      

 

 

 
                       1,713,289   

Insurance — 0.0%

      

Alliant Holdings I, Inc., Incremental Term Loan B2, 5.00%, 8/12/22

             167        167,000   

IT Services — 0.0%

      

First Data Corp., 2021 Extended Term Loan, 4.52%, 3/24/21

       122        122,179   

WEX, Inc., Term Loan B, 4.25%, 7/01/23

       95        95,661   
      

 

 

 
                       217,840   

Machinery — 0.0%

      

Silver II US Holdings LLC, Term Loan, 4.00%, 12/13/19

             55        48,923   

Media — 0.1%

      

iHeartCommunications, Inc., Term Loan D, 7.27%, 1/30/19

       211        161,987   

Intelsat Jackson Holdings SA, Term Loan B2, 3.75%, 6/30/19

       648        614,552   
      

 

 

 
                       776,539   

Metals & Mining — 0.1%

      

FMG Resources August 2006 Property Ltd., Term Loan B, 3.75%, 6/30/19

             320        318,405   

Oil, Gas & Consumable Fuels — 0.1%

      

California Resources Corp., Term Loan A, 3.70%, 10/01/19

       182        172,809   

Chesapeake Energy Corp., Term Loan, 8.50%, 8/15/21

       767        791,169   

MEG Energy Corp., Refinancing Term Loan, 3.75%, 3/31/20

       58        52,885   
      

 

 

 
                       1,016,863   

Pharmaceuticals — 0.1%

      

DPx Holdings BV, 2014 Incremental Term Loan, 4.25%, 3/11/21

       190        189,658   

Jaguar Holding Co. II, 2015 Term Loan B, 4.25%, 8/18/22

       139        139,830   

NBTY, Inc., Term Loan B, 5.00%, 5/05/23

       105        105,033   

Valeant Pharmaceuticals International, Inc.:

      

Series A3 Tranche A, 4.28%, 10/20/18

       60        60,395   

Series D2 Term Loan B, 5.00%, 2/13/19

       15        14,975   

Series E Term Loan B, 5.25%, 8/05/20

       62        61,986   
Floating Rate Loan Interests (b)          

Par  

(000)

    Value  

Pharmaceuticals (continued)

      

Valeant Pharmaceuticals International, Inc. (continued):

      

Series F1 Term Loan B, 5.50%, 4/01/22

     USD        24      $ 23,990   
      

 

 

 
                       595,867   

Professional Services — 0.0%

      

Advantage Sales & Marketing, Inc.:

      

2014 1st Lien Term Loan, 4.25%, 7/23/21

       180        178,062   

2014 2nd Lien Term Loan, 7.50%, 7/25/22

       94        88,939   
      

 

 

 
                       267,001   

Semiconductors & Semiconductor Equipment — 0.1%

  

Avago Technologies Cayman Ltd., Term Loan B3, 3.51%, 2/01/23

       308        310,307   

Microsemi Corp., 2015 Term Loan B, 3.75%, 1/15/23

       28        28,457   
      

 

 

 
        338,764   

Software — 0.2%

  

 

BMC Software Finance, Inc., Term Loan, 5.00%, 9/10/20

       403        384,663   

Infor US, Inc., Term Loan B5, 3.75%, 6/03/20

       264        260,981   

Informatica Corp., Term Loan, 4.50%, 8/05/22

       172        166,092   

Solera LLC, Term Loan B, 5.75%, 3/03/23

       357        359,019   

Tibco Software Inc., Term Loan B, 6.50%, 12/04/20

       138        134,951   
      

 

 

 
        1,305,706   

Specialty Retail — 0.0%

  

 

Leslie’s Poolmart, Inc., 2016 Term Loan, 5.25%, 7/27/23

  

    101        101,631   

Textiles, Apparel & Luxury Goods — 0.0%

      

Ascend Performance Materials Operations LLC, Term Loan B, 6.75%, 8/12/22

       179        176,543   

J. Crew Group, Inc., Term Loan B, 4.00%, 3/05/21

       80        62,719   
      

 

 

 
        239,262   
Total Floating Rate Loan Interests — 1.2%        9,517,277   
      
                          
Foreign Agency Obligations                      

Argentine Republic Government International Bond (c):

      

7.50%, 4/22/26

       3,875        4,320,625   

7.63%, 4/22/46

       3,121        3,526,730   

Cyprus Government International Bond, 4.63%, 2/03/20 (c)

     EUR        1,210        1,445,928   

Iceland Government International Bond, 5.88%, 5/11/22

     USD        3,555        4,151,643   

Italian Government International Bond, 5.38%, 6/15/33

       2,925        3,602,167   

Portugal Government International Bond, 5.13%, 10/15/24 (c)

       5,870        5,891,918   

Slovenia Government International Bond, 5.85%, 5/10/23 (c)

             864        1,023,140   
Total Foreign Agency Obligations — 2.9%        23,962,151   
      
                          
Municipal Bonds                      

City of New York New York Municipal Water Finance Authority, Refunding RB, 2nd General Resolution:

      

Series EE, 5.50%, 6/15/43

       930        1,101,585   

Series GG, Build America Bonds, 5.72%, 6/15/42

       1,390        1,997,736   
 

 

See Notes to Financial Statements.

 

                
22    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

Municipal Bonds          

Par  

(000)

    Value  

City of New York New York Municipal Water Finance Authority, Refunding RB, 2nd General Resolution (continued):

      

Water & Sewer System, Series EE, 5.38%, 6/15/43

     USD        770      $ 907,337   

East Bay Municipal Utility District, RB, Build America Bonds, 5.87%, 6/01/40

       1,900        2,687,873   

Indianapolis Local Public Improvement Bond Bank, RB, Build America Bonds, 6.12%, 1/15/40

       2,535        3,605,911   

Metropolitan Transportation Authority, RB, Build America Bonds, Series C, 7.34%, 11/15/39

       1,295        2,098,923   

Municipal Electric Authority of Georgia Plant Vogtle Units 3 & 4, Refunding RB, Build America Bonds, Series A, 7.06%, 4/01/57

       2,000        2,496,680   

New York State Dormitory Authority, RB, Build America Bonds:

      

5.63%, 3/15/39

       1,100        1,480,743   

5.60%, 3/15/40

       1,900        2,612,063   

Port Authority of New York & New Jersey, RB, 159th Series, 6.04%, 12/01/29

       780        1,052,945   

State of California, GO, Build America Bonds, Various Purposes:

      

7.55%, 4/01/39

       280        454,171   

7.63%, 3/01/40

       1,720        2,779,417   

State of Illinois, GO, Pension, 5.10%, 6/01/33

       2,000        1,949,700   

University of California, RB, Build America Bonds, 5.95%, 5/15/45

             885        1,208,990   
Total Municipal Bonds — 3.2%        26,434,074   
      
                          
Non-Agency Mortgage-Backed Securities                      

Collateralized Mortgage Obligations — 0.7%

      

Banc of America Funding Corp., Series 2007-2, Class 1A2, 6.00%, 3/25/37

       861        760,981   

Countrywide Alternative Loan Trust:

      

Series 2005-64CB, Class 1A15, 5.50%, 12/25/35

       1,521        1,414,775   

Series 2006-OA21, Class A1, 0.70%, 3/20/47 (b)

       1,011        701,308   

Credit Suisse Mortgage Capital Certificates, Series 2011-2R, Class 2A1, 3.01%, 7/27/36 (b)(c)

       885        880,465   

GMAC Mortgage Corp. Loan Trust, Series 2005-AR3, Class 5A1, 3.59%, 6/19/35 (b)

       619        612,792   

GSR Mortgage Loan Trust:

      

Series 2006-4F, Class 1A1, 5.00%, 5/25/36

       121        112,912   

Series 2007-4F, Class 3A1, 6.00%, 7/25/37

       279        251,597   

JPMorgan Mortgage Trust, Series 2006-S3, Class 1A12, 6.50%, 8/25/36

       101        81,522   

Merrill Lynch Mortgage Investors, Inc., Series 2006-A3, Class 3A1, 2.99%, 5/25/36 (b)

       778        637,453   

WaMu Mortgage Pass-Through Certificates, Series 2007-OA4, Class 1A, 1.26%, 5/25/47 (b)

       255        212,462   
      

 

 

 
        5,666,267   

Commercial Mortgage-Backed Securities — 11.9%

  

 

Banc of America Merrill Lynch Commercial Mortgage Securities Trust, Series 2015-200P, Class C, 3.72%, 4/14/33 (b)(c)

       4,170        4,322,294   
Non-Agency Mortgage-Backed Securities          

Par  

(000)

    Value  

Commercial Mortgage-Backed Securities (continued)

  

 

Banc of America Merrill Lynch Commercial Mortgage Trust, Series 2007-2, Class A4, 5.79%, 4/10/49 (b)

     USD        1,158      $ 1,166,679   

Citigroup Commercial Mortgage Trust, Series 2013-GC15, Class B, 5.27%, 9/10/46 (b)

       7,183        8,350,513   

Citigroup/Deutsche Bank Commercial Mortgage Trust, Series 2006-CD3, Class AM, 5.65%, 10/15/48

       2,193        2,210,818   

Commercial Mortgage Trust:

      

Series 2008-LS1, Class A4B, 6.30%, 12/10/49 (b)

       997        1,028,562   

Series 2013-CR11, Class B, 5.33%, 10/10/46 (b)

       7,000        8,125,505   

Series 2013-LC6, Class B, 3.74%, 1/10/46

       1,390        1,485,052   

Series 2015-3BP, Class A, 3.18%, 2/10/35 (c)

       7,570        8,040,304   

Series 2015-CR22, Class C, 4.26%, 3/10/48 (b)

       5,000        5,186,846   

Series 2015-LC19, Class C, 4.40%, 2/10/48 (b)

       3,500        3,705,213   

Core Industrial Trust, Series 2015-TEXW, Class D, 3.98%, 2/10/34 (b)(c)

       4,585        4,677,870   

Credit Suisse Commercial Mortgage Trust:

      

Series 2006-C5, Class AM, 5.34%, 12/15/39

       3,500        3,512,794   

Series 2010-RR2, Class 2A, 6.14%, 9/15/39 (b)(c)

       1,031        1,043,948   

Credit Suisse First Boston Mortgage Securities Corp., Series 2005-C3, Class AJ, 4.77%, 7/15/37

       8        8,102   

CSAIL Commercial Mortgage Trust, Series 2015-C1 (b):

      

Class B, 4.04%, 4/15/50

       1,110        1,215,005   

Class C, 4.44%, 4/15/50

       1,000        1,057,927   

Class D, 3.94%, 4/15/50 (c)

       480        403,103   

DBRR Trust, Series 2011-C32, Class A3A, 5.89%, 6/17/49 (b)(c)

       730        739,627   

GAHR Commercial Mortgage Trust, Series 2015-NRF, Class DFX, 3.49%, 12/15/34 (b)(c)

       6,170        6,209,258   

GS Mortgage Securities Corp. II, Series 2013-GC10, Class B, 3.68%, 2/10/46 (c)

       2,505        2,669,470   

Hilton USA Trust, Series 2013- HLT, 4.41%, 11/05/30

       5,900        5,919,017   

JPMorgan Chase Commercial Mortgage Securities Corp., Series 2004-LN2, Class A2, 5.12%, 7/15/41

       34        34,453   

LB-UBS Commercial Mortgage Trust (b):

      

Series 2007-C6, Class A4, 5.86%, 7/15/40

       7,835        7,963,309   

Series 2007-C7, Class A3, 5.87%, 9/15/45

       2,107        2,186,113   

Morgan Stanley Capital I Trust (b):

      

Series 2007-HQ11, Class A4, 5.45%, 2/12/44

       6,574        6,604,577   

Series 2014-CPT, Class G, 3.56%, 7/13/29 (c)

       3,200        3,081,242   

Wachovia Bank Commercial Mortgage Trust, Series 2007-C33, Class A4, 6.16%, 2/15/51 (b)

       3,815        3,876,965   

WF-RBS Commercial Mortgage Trust, Series 2012-C8:

      

Class B, 4.31%, 8/15/45

       1,395        1,527,358   

Class C, 5.04%, 8/15/45 (b)

       1,795        1,940,646   
      

 

 

 
                       98,292,570   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    23


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

Non-Agency Mortgage-Backed Securities          

Par  

(000)

    Value  

Interest Only Collateralized Mortgage Obligations — 0.0%

  

GSMPS Mortgage Loan Trust, Series 1998-5, 0.00%, 6/19/27 (b)(c)

     USD        1,059      $ 11   

Interest Only Commercial Mortgage-Backed Securities — 0.2%

  

Commercial Mortgage Loan Trust, Series 2015-LC21, Class XA, 1.02%, 7/10/48 (b)

       19,482        938,065   

WF-RBS Commercial Mortgage Trust, Series 2012-C8, Class XA, 2.30%, 8/15/45 (b)(c)

       11,222        808,949   
      

 

 

 
                       1,747,014   
Total Non-Agency Mortgage-Backed Securities — 12.8%        105,705,862   
      
                          
Preferred Securities                      
Capital Trusts                      

Banks — 2.3%

      

Banco Bilbao Vizcaya Argentaria SA, 7.00% (b)(g)

       200        210,820   

Banco Santander SA, 6.25% (b)(g)

       100        101,227   

BNP Paribas SA, 7.20% (b)(c)(g)

       2,000        2,250,000   

Capital One Financial Corp., Series E, 5.55% (b)(g)

       3,500        3,581,025   

Citigroup, Inc. (b)(g):

      

Series D, 5.95%

       2,100        2,169,562   

Series Q, 5.95%

       100        101,813   

Series R, 6.13%

       605        631,257   

Credit Agricole SA (b)(c)(g):

      

6.63%

       1,400        1,358,868   

7.88%

       1,000        1,023,750   

Intesa Sanpaolo SpA, 7.00% (b)(g)

       200        218,628   

Nordea Bank AB, 6.13% (b)(c)(g)

       2,960        2,945,200   

Wells Fargo & Co. (b)(g):

      

Series S, 5.90%

       3,390        3,606,112   

Series U, 5.88%

       750        828,338   
      

 

 

 
                       19,026,600   

Capital Markets — 0.7%

      

Goldman Sachs Group, Inc. (b)(g):

      

5.30%

       100        102,250   

Series L, 5.70%

       792        809,028   

Morgan Stanley, Series H, 5.45% (b)(g)

       2,627        2,633,568   

State Street Capital Trust IV, 1.65%, 6/15/37 (b)

       140        120,050   

State Street Corp., Series F, 5.25% (b)(g)

       2,000        2,085,200   
      

 

 

 
                       5,750,096   

Diversified Financial Services — 5.3%

      

Bank of America Corp. (b)(g):

      

Series V, 5.13%

       385        379,417   

Series X, 6.25%

       4,620        4,851,000   

Bank of New York Mellon Corp. (b)(g):

      

Series D, 4.50% (e)

       8,400        8,274,000   

Series E, 4.95%

       2,000        2,042,500   

Barclays PLC, 7.88% (b)(g)

       200        200,450   

Citigroup, Inc., Series M, 6.30% (b)(g)

       4,000        4,140,000   

JPMorgan Chase & Co. (b)(g):

      

Series 1, 7.90%

       7,000        7,262,500   

Series Q, 5.15%

       3,000        3,006,750   

Series U, 6.13%

       500        535,313   

Series V, 5.00%

       6,710        6,693,225   

Macquarie Bank Ltd., 10.25%, 6/20/57 (b)

       1,800        1,894,860   

Royal Bank of Scotland Group PLC,
8.63% (b)(g)

       200        203,750   

Societe Generale SA (b)(c)(g):

      

6.00%

       3,000        2,775,240   

7.88%

       1,000        994,000   
      

 

 

 
                       43,253,005   
Preferred Securities          

Par  

(000)

    Value  
Capital Trusts (continued)                      

Diversified Telecommunication Services — 0.0%

  

 

Telefonica Europe BV, 4.20% (b)(g)

     USD        200      $ 231,186   

Electric Utilities — 0.6%

      

ComEd Financing III, 6.35%, 3/15/33

       300        319,168   

Electricite de France SA, 5.25% (b)(c)(g)

       4,200        4,181,100   

Enel SpA (b):

      

5.00%, 1/15/75

     EUR        100        120,584   

7.75%, 9/10/75

     GBP        100        148,162   

Gas Natural Fenosa Finance BV, 4.13% (b)(g)

     USD        100        116,319   
      

 

 

 
                       4,885,333   

Industrial Conglomerates — 0.3%

      

General Electric Co., Series D, 5.00% (b)(g)

             2,131        2,285,498   

Insurance — 1.7%

      

Allstate Corp (b):

      

5.75%, 8/15/53

       2,000        2,160,000   

6.50%, 5/15/57

       4,100        4,735,500   

MetLife, Inc., 6.40%, 12/15/36

       2,554        2,868,142   

Voya Financial, Inc., 5.65%, 5/15/53 (b)

       4,500        4,500,000   
      

 

 

 
                       14,263,642   

Oil, Gas & Consumable Fuels — 0.0%

      

DCP Midstream LLC, 5.85%, 5/21/43 (c)

             30        22,950   
Total Capital Trusts — 10.9%                      89,718,310   
      
                          
Preferred Stocks           Shares         

Banks — 1.2%

      

US Bancorp, Series G, 6.00% (b)(g)

       300,000        7,818,000   

Wells Fargo & Co., 5.85% (b)(g)

       75,000        2,098,500   
      

 

 

 
                       9,916,500   

Capital Markets — 0.4%

      

Goldman Sachs Group, Inc., Series J, 5.50% (b)(g)

       92,000        2,488,600   

SCE Trust III, 5.75% (b)(g)

       25,314        789,544   
      

 

 

 
                       3,278,144   

Thrifts & Mortgage Finance — 0.0%

      

Fannie Mae, Series S, 8.25% (b)(g)

             10,000        38,500   
Total Preferred Stocks — 1.6%                      13,233,144   
      
                          
Trust Preferred — 0.1%                      

Diversified Financial Services — 0.1%

      

Citigroup Capital XIII, 7.88%, 10/30/40

             29,583        762,190   
Total Preferred Securities — 12.6%                      103,713,644   
      
                          
U.S. Government Sponsored Agency Securities          

Par  

(000)

        

Agency Obligations — 1.5%

      

Fannie Mae, 5.63%, 7/15/37 (d)

     USD        1,600        2,399,982   

Federal Home Loan Bank (d):

      

5.25%, 12/09/22

       1,375        1,676,297   

5.37%, 9/09/24

       2,175        2,754,716   

Resolution Funding Corp., 0.00%, 4/15/30 - 10/15/18 (k)

       7,105        5,379,492   
      

 

 

 
                       12,210,487   
 

 

See Notes to Financial Statements.

 

                
24    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

U.S. Government Sponsored Agency Securities          

Par  

(000)

    Value  

Collateralized Mortgage Obligations — 0.0%

      

Fannie Mae Mortgage-Backed Securities:

      

Series 2005-5, Class PK, 5.00%, 12/25/34

     USD        210      $ 220,018   

Series 1991-87, Class S, 25.29%, 8/25/21 (b)

       5        6,753   

Series G-49, Class S, 980.26%, 12/25/21 (b)

       (j)      51   

Series G-07, Class S, 1,085.42%, 3/25/21 (b)

       (j)      299   

Series 1991-46, Class S, 2,398.91%, 5/25/21 (b)

       (j)      1   

Freddie Mac Mortgage-Backed Securities, Series 0173, Class RS, 10.25%, 11/15/21 (b)

       (j)      2   
      

 

 

 
                       227,124   

Commercial Mortgage-Backed Securities — 0.3%

  

Freddie Mac, Series K013, Class A2, 3.97%, 1/25/21

             1,870        2,048,149   

Interest Only Collateralized Mortgage Obligations — 0.9%

  

Fannie Mae Mortgage-Backed Securities:

      

Series 1997-50, Class SI, 1.20%, 4/25/23 (b)

       48        1,334   

Series 2012-96, Class DI, 4.00%, 2/25/27

       6,986        514,926   

Series 2012-M9, Class X1, 4.20%, 12/25/17 (b)

       15,724        496,391   

Series 2012-47, Class NI, 4.50%, 4/25/42

       6,612        1,196,609   

Series 089, Class 2, 8.00%, 10/25/18

       (j)      4   

Series 007, Class 2, 8.50%, 4/25/17

       (j)      2   

Series G92-05, Class H, 9.00%, 1/25/22

       1        40   

Series 094, Class 2, 9.50%, 8/25/21

       (j)      45   

Series 1990-136, Class S, 19.55%, 11/25/20 (b)

       2        2   

Series 1991-139, Class PT, 648.35%, 10/25/21

       (j)      1   

Series G-10, Class S, 1,050.07%, 5/25/21 (b)

       (j)      1   

Series G-12, Class S, 1,114.50%, 5/25/21 (b)

       (j)      1   

Freddie Mac Mortgage-Backed Securities:

      

Series K707, Class X1, 1.67%, 12/25/18 (b)

       4,776        140,497   

Series 2611, Class QI, 5.50%, 9/15/32

       706        40,661   

Series 1254, Class Z, 8.50%, 4/15/22

       22        4,225   

Series 1043, Class H, 42.72%, 2/15/21 (b)

       2        2   

Ginnie Mae Mortgage-Backed Securities (b):

      

Series 2009-78, Class SD, 5.69%, 9/20/32

       6,638        1,251,149   

Series 2009-116, Class KS, 5.96%, 12/16/39

       2,634        399,937   

Series 2011-52, Class NS, 6.16%, 4/16/41

       18,166        3,642,459   
      

 

 

 
                       7,688,286   
U.S. Government Sponsored Agency Securities    

Par  

(000)

    Value  

Mortgage-Backed Securities — 5.0%

      

Fannie Mae Mortgage-Backed Securities:

      

3.00%, 8/01/43

     USD        11,425      $ 11,929,848   

4.00%, 12/01/41 - 12/01/43 (d)

       6,738        7,263,710   

4.50%, 7/01/41 - 4/01/42

       14,861        16,258,436   

5.00%, 8/01/34

       2,498        2,799,331   

5.50%, 6/01/38

       1,292        1,464,266   

6.00%, 12/01/38 (d)

       1,090        1,250,196   

Freddie Mac Mortgage-Backed Securities, 6.00%, 4/1/17 - 12/1/18

       49        49,736   

Ginnie Mae Mortgage-Backed Securities:

      

5.50%, 8/15/33

       59        66,298   

8.00%, 7/15/24

       (j)      237   
      

 

 

 
                       41,082,058   

Principal Only Collateralized Mortgage Obligations — 0.0%

  

Fannie Mae Mortgage-Backed Securities, 0.00%, 2/25/23 - 6/25/23 (k)

             16        15,393   
Total U.S. Government Sponsored Agency Securities — 7.7%        63,271,497   
      
                          
U.S. Treasury Obligations                      

U.S. Treasury Bonds (d):

      

3.00%, 11/15/44

       70,500        82,066,371   

2.50%, 2/15/46

       55,000        58,113,110   

U.S. Treasury Notes, 1.63%, 2/15/26 (d)

             15,000        15,060,930   
Total U.S. Treasury Obligations — 18.9%        155,240,411   
Total Long-Term Investments
(Cost — $1,011,466,051) — 132.0%
        1,086,330,906   
      
                          
Short-Term Securities — 1.6%     Shares         

BlackRock Liquidity Funds, TempFund, Institutional Class, 0.33% (l)(m)

             12,926,909        12,926,909   
Total Short-Term Securities
(Cost — $12,926,909) — 1.6%
        12,926,909   
Options Purchased
(Cost — $3,589,893) — 0.4%
        3,225,087   
Total Investments Before Options Written
(Cost — $1,027,982,853) — 134.0%
        1,102,482,902   
Options Written
(Premiums Received — $8,969,163) — (0.7)%
        (5,414,078
Total Investments, Net of Options Written
(Cost — $1,019,013,690) — 133.3%
        1,097,068,824   
Liabilities in Excess of Other Assets — (33.3)%        (274,519,911
      

 

 

 

Net Assets — 100.0%

  

  $ 822,548,913   
      

 

 

 
 
Notes to Schedule of Investments      

 

(a)   Non-income producing security.

 

(b)   Variable rate security. Rate as of period end.

 

(c)   Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

 

(d)   All or a portion of security has been pledged as collateral in connection with outstanding reverse repurchase agreements.

 

(e)   Payment-in-kind security which may pay interest/dividends in additional par/shares and/or in cash. Rates shown are the current rate and possible payment rates.

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    25


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

 

(f)   When-issued security.

 

(g)   Perpetual security with no stated maturity date.

 

(h)   Convertible security.

 

(i)   Issuer filed for bankruptcy and/or is in default

 

(j)   Amount is less than $500.

 

(k)   Zero-coupon bond.

 

(l)   During the year ended August 31, 2016, investments in issuers considered to be affiliates of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate      Shares Held
at August 31,
2015
       Net
Activity
       Shares Held
at August 31,
2016
       Value
at August 31,
2016
       Income  

BlackRock Liquidity Funds, TempFund, Institutional Class

       9,920,365           3,006,544           12,926,909         $ 12,926,909         $ 43,746   

 

(m)   Current yield as of period end.

 

 

For Trust compliance purposes, the Trust’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

Reverse Repurchase Agreements

 

Counterparty   Interest
Rate
    Trade
Date
    Maturity
Date1
    Face Value     Face Value
Including
Accrued
Interest
     Type of
Underlying Collateral
   Remaining
Contractual
Maturity of
the Agreements

Merrill Lynch, Pierce, Fenner & Smith, Inc.

    0.22     6/02/15        Open      $ 1,323,000      $ 1,326,687       U.S. Government Sponsored Agency Securities    Open/Demand1

Merrill Lynch, Pierce, Fenner & Smith, Inc.

    0.22     6/02/15        Open        830,000        832,313       U.S. Government Sponsored Agency Securities    Open/Demand1

Barclays Capital, Inc.

    0.55     12/17/15        Open        546,875        549,031       Corporate Bonds    Open/Demand1

Barclays Capital, Inc.

    0.55     12/17/15        Open        518,150        520,192       Corporate Bonds    Open/Demand1

Barclays Capital, Inc.

    0.55     12/17/15        Open        994,500        998,420       Corporate Bonds    Open/Demand1

Barclays Capital, Inc.

    0.55     12/17/15        Open        355,781        357,184       Corporate Bonds    Open/Demand1

Barclays Capital, Inc.

    0.55     12/17/15        Open        1,014,125        1,018,122       Corporate Bonds    Open/Demand1

Barclays Capital, Inc.

    0.55     12/17/15        Open        971,438        975,267       Corporate Bonds    Open/Demand1

Barclays Capital, Inc.

    0.55     12/17/15        Open        4,831,250        4,850,293       Corporate Bonds    Open/Demand1

Barclays Capital, Inc.

    0.55     12/17/15        Open        718,875        721,709       Corporate Bonds    Open/Demand1

Barclays Capital, Inc.

    0.55     12/17/15        Open        2,973,750        2,985,471       Corporate Bonds    Open/Demand1

Credit Suisse Securities (USA) LLC

    0.65     12/17/15        Open        950,950        955,380       Corporate Bonds    Open/Demand1

Credit Suisse Securities (USA) LLC

    0.65     12/17/15        Open        1,454,375        1,461,150       Corporate Bonds    Open/Demand1

Credit Suisse Securities (USA) LLC

    0.65     12/17/15        Open        1,104,687        1,109,833       Corporate Bonds    Open/Demand1

RBC Capital Markets, LLC

    0.64     12/17/15        Open        1,713,750        1,721,610       Corporate Bonds    Open/Demand1

RBC Capital Markets, LLC

    0.64     12/17/15        Open        3,131,250        3,145,612       Corporate Bonds    Open/Demand1

RBC Capital Markets, LLC

    0.64     12/17/15        Open        1,228,500        1,234,135       Corporate Bonds    Open/Demand1

RBC Capital Markets, LLC

    0.64     12/17/15        Open        2,028,510        2,037,814       Corporate Bonds    Open/Demand1

RBC Capital Markets, LLC

    0.64     12/17/15        Open        1,693,125        1,700,891       Corporate Bonds    Open/Demand1

RBC Capital Markets, LLC

    0.64     12/17/15        Open        4,342,500        4,362,418       Corporate Bonds    Open/Demand1

RBC Capital Markets, LLC

    0.64     12/17/15        Open        1,822,500        1,830,859       Corporate Bonds    Open/Demand1

RBC Capital Markets, LLC

    0.64     12/17/15        Open        2,036,475        2,045,816       Corporate Bonds    Open/Demand1

RBC Capital Markets, LLC

    0.64     12/17/15        Open        1,909,860        1,918,620       Corporate Bonds    Open/Demand1

RBC Capital Markets, LLC

    0.64     12/17/15        Open        1,835,000        1,843,416       Corporate Bonds    Open/Demand1

RBC Capital Markets, LLC

    0.64     12/17/15        Open        1,435,225        1,441,808       Corporate Bonds    Open/Demand1

RBC Capital Markets, LLC

    0.64     12/17/15        Open        2,019,250        2,028,512       Corporate Bonds    Open/Demand1

RBC Capital Markets, LLC

    0.64     12/17/15        Open        2,175,000        2,184,976       Corporate Bonds    Open/Demand1

RBC Capital Markets, LLC

    0.64     12/17/15        Open        2,002,725        2,011,911       Corporate Bonds    Open/Demand1

RBC Capital Markets, LLC

    0.64     12/17/15        Open        1,448,563        1,455,207       Corporate Bonds    Open/Demand1

RBC Capital Markets, LLC

    0.64     12/17/15        Open        4,725,000        4,746,672       Corporate Bonds    Open/Demand1

HSBC Securities (USA), Inc.

    0.65     12/18/15        Open        4,884,000        4,906,487       Corporate Bonds    Open/Demand1

HSBC Securities (USA), Inc.

    0.65     12/18/15        Open        3,995,000        4,013,394       Corporate Bonds    Open/Demand1

HSBC Securities (USA), Inc.

    0.65     12/18/15        Open        2,857,000        2,870,154       Corporate Bonds    Open/Demand1

HSBC Securities (USA), Inc.

    0.65     12/18/15        Open        3,930,000        3,948,094       Corporate Bonds    Open/Demand1

HSBC Securities (USA), Inc.

    0.65     12/18/15        Open        3,529,000        3,545,248       Corporate Bonds    Open/Demand1

HSBC Securities (USA), Inc.

    0.65     12/18/15        Open        7,342,000        7,375,804       Capital Trusts    Open/Demand1

HSBC Securities (USA), Inc.

    0.65     12/18/15        Open        3,698,000        3,715,026       Corporate Bonds    Open/Demand1

RBC Capital Markets, LLC

    0.64     2/11/16        Open        687,375        689,843       Corporate Bonds    Open/Demand1

Deutsche Bank AG

    0.36     4/22/16        Open        24,156,250        24,179,782       U.S. Treasury Obligations    Open/Demand1

 

See Notes to Financial Statements.

 

                
26    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

Reverse Repurchase Agreements (concluded)

 

Counterparty   Interest
Rate
    Trade
Date
    Maturity
Date1
    Face Value     Face Value
Including
Accrued
Interest
     Type of
Underlying Collateral
   Remaining
Contractual
Maturity of
the Agreements

BNP Paribas Securites Corp.

    0.46     5/03/16        Open      $ 1,397,975      $ 1,400,119       U.S. Government Sponsored Agency Securities    Open/Demand1

BNP Paribas Securites Corp.

    0.46     5/03/16        Open        850,025        851,328       U.S. Government Sponsored Agency Securities    Open/Demand1

BNP Paribas Securites Corp.

    0.46     5/03/16        Open        1,398,375        1,400,519       U.S. Government Sponsored Agency Securities    Open/Demand1

BNP Paribas Securites Corp.

    0.46     5/03/16        Open        871,500        872,836       U.S. Government Sponsored Agency Securities    Open/Demand1

BNP Paribas Securites Corp.

    0.52     5/06/16        Open        14,850,000        14,871,491       U.S. Treasury Obligations    Open/Demand1

BNP Paribas Securites Corp.

    0.75     5/18/16        Open        837,000        838,831       Corporate Bonds    Open/Demand1

Credit Suisse Securities (USA) LLC

    0.75     6/27/16        Open        1,503,288        1,505,292       Corporate Bonds    Open/Demand1

Nomura Securities International, Inc.

    0.35     6/28/16        Open        31,762,500        31,779,484       U.S. Treasury Obligations    Open/Demand1

BNP Paribas Securites Corp.

    0.53     6/29/16        Open        82,044,375        82,126,397       U.S. Treasury Obligations    Open/Demand1

RBC Capital Markets, LLC

    0.64     6/30/16        Open        2,859,500        2,862,703       Corporate Bonds    Open/Demand1

Deutsche Bank AG

    (3.00 )%      7/29/16        Open        278,602        277,882       Corporate Bonds    Open/Demand1

HSBC Securities (USA), Inc.

    0.60     8/10/16        9/14/16        24,013,000        24,021,405       U.S. Government Sponsored Agency Securities    Up to 30 Days
Merrill Lynch, Pierce, Fenner & Smith, Inc.     0.59     8/10/16        9/14/16        15,810,000        15,815,441       U.S. Government Sponsored Agency Securities    Up to 30 Days

Total

        $ 287,689,754      $ 288,238,889         
       

 

 

   

 

 

       

1    Certain agreements have no stated maturity and can be terminated by either party at any time.

 

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

 

Contracts
Long (Short)
    Issue              Expiration              Notional Value    

Unrealized
Appreciation

(Depreciation)

        
  (117)      90 Day Euro Future           September 2016            USD         28,991,137      $ 2,575     
  322      2-Year U.S. Treasury Note           December 2016            USD         70,296,625        (362  
  1,134      5-Year U.S. Treasury Note           December 2016            USD         137,497,500        (145,903  
  (457)      10-Year U.S. Treasury Note           December 2016            USD         59,831,297        129,307     
  21      10-Year U.S. Ultra Long Treasury Note           December 2016            USD         3,031,875        (8,325  
  (39)      Long U.S. Treasury Bond           December 2016            USD         6,644,625        (9,750  
  139      Ultra Long U.S. Treasury Bond           December 2016            USD         26,058,156        23,375     
  303      90 Day Euro Future           December 2017            USD         74,901,600        (69,313  
  (303)      90 Day Euro Future                 December 2018                  USD         74,806,913        40,279           
  Total                                 $ (38,117  
                    

 

 

 

Forward Foreign Currency Exchange Contracts

 

Currency
Purchased
       Currency
Sold
    Counterparty   Settlement
Date
       Unrealized
Appreciation
(Depreciation)
        
EUR        165,000         USD        186,378      BNP Paribas S.A.     9/06/16         $ (2,303  
EUR        300,000         USD        338,108      Standard Chartered Bank     9/06/16           (3,427  
USD        739,364         EUR        664,000      Royal Bank of Scotland PLC     9/06/16           (1,397  
USD        9,264,320         EUR        8,320,000      Royal Bank of Scotland PLC     9/06/16           (17,509  
USD        154,314         GBP        117,000      Bank of America N.A.     9/06/16           666     
USD        11,590,621         GBP        8,796,000      HSBC Bank PLC     9/06/16           39,456     
USD        865,739         GBP        657,000      HSBC Bank PLC     9/06/16           2,947     
AUD        1,600,000         CAD        1,570,350      Citibank N.A.     9/14/16           4,581     
AUD        2,650,000         CAD        2,626,283      HSBC Bank PLC     9/14/16           (11,774  
AUD        2,680,000         CAD        2,632,698      JPMorgan Chase Bank N.A.     9/14/16           5,873     
CAD        2,706,941         AUD        2,745,000      BNP Paribas S.A.     9/14/16           1,908     
CAD        2,139,891         AUD        2,135,000      Citibank N.A.     9/14/16           27,788     
CAD        2,072,546         AUD        2,115,000      Deutsche Bank AG     9/14/16           (8,543  
CAD        2,641,936         AUD        2,680,000      Deutsche Bank AG     9/14/16           1,172     
AUD        2,120,000         USD        1,625,555      HSBC Bank PLC     9/22/16           (33,051  

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    27


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

Forward Foreign Currency Exchange Contracts (concluded)

 

Currency
Purchased
       Currency
Sold
    Counterparty   Settlement
Date
       Unrealized
Appreciation
(Depreciation)
        
EUR        730,000           SEK           6,901,043      Citibank N.A.     9/22/16         $ 8,055     
SEK        13,855,422           EUR           1,460,000      Citibank N.A.     9/22/16           (9,874  
USD        1,633,195           AUD           2,120,000      Citibank N.A.     9/22/16           40,691     
JPY        100,812,258           EUR           890,000      UBS AG     9/26/16           (18,384  
USD        740,716           EUR           664,000      Royal Bank of Scotland PLC     10/05/16           (1,008  
USD        8,762,535           EUR           7,855,000      Royal Bank of Scotland PLC     10/05/16           (11,919  
USD        11,535,083           GBP           8,796,000      Royal Bank of Scotland PLC     10/05/16           (24,772  
USD        1,011,090           GBP           771,000      Royal Bank of Scotland PLC     10/05/16           (2,171  
NOK        33,703,812           USD           4,000,000      Citibank N.A.     10/07/16           45,031     
USD        4,000,000           NOK           33,715,840      Goldman Sachs International     10/07/16           (46,475  
CHF        799,328           USD           830,000      Goldman Sachs International     10/25/16           (14,748  
CHF        794,742           USD           820,000      JPMorgan Chase Bank N.A.     10/25/16           (9,426  
SEK        17,213,055           USD           2,050,000      Citibank N.A.     10/25/16           (34,040  
USD        2,050,000           SEK           17,128,958      Goldman Sachs International     10/25/16           43,889     
MXN        14,685,693           USD           780,000      Citibank N.A.     2/03/17           (10,617  
USD        1,250,000           MXN           22,971,800      HSBC Bank PLC     2/03/17           46,508     
USD        4,800,000           MXN           92,410,464      JPMorgan Chase Bank N.A.     2/03/17           (41,382        
Total                         $ (34,255  
                       

 

 

 

Exchange-Traded Options Purchased

 

Description   Put/
Call
  Expiration
Date
    Strike
Price
  Contracts     Value         

30-Year U.S. Treasury Bond Future

  Put     9/23/16      USD   166.00     27      $ 12,234     

90-Day Euro Future

  Put     10/14/16      USD   99.00     160        12,000           

Total

  

  $ 24,234     
             

 

 

 

OTC Interest Rate Swaptions Purchased

 

Description   Counterparty     Put/
Call
    Exercise
Rate
    Pay/
Receive
Exercise Rate
    Floating Rate
Index
    Expiration
Date
    Notional
Amount
(000)
    Value         

10-Year Interest Rate Swap

    JPMorgan Chase Bank N.A.        Call        2.25     Receive        3-Month LIBOR        2/17/17        USD        3,000      $ 224,938     

2-Year Interest Rate Swap

    Citibank N.A.        Call        1.55     Receive        3-Month LIBOR        1/25/18        USD        40,000        403,397     

10-Year Interest Rate Swap

    Barclays Bank PLC        Call        1.60     Receive        3-Month LIBOR        8/16/18        USD        3,500        143,363     

10-Year Interest Rate Swap

    Wells Fargo Bank N.A.        Call        1.60     Receive        3-Month LIBOR        8/16/18        USD        3,500        144,195     

30-Year Interest Rate Swap

    Deutsche Bank AG        Call        3.12     Receive        3-Month LIBOR        9/17/20        USD        800        280,939     

30-Year Interest Rate Swap

    JPMorgan Chase Bank N.A.        Call        3.12     Receive        3-Month LIBOR        9/17/20        USD        800        280,939     

30-Year Interest Rate Swap

    JPMorgan Chase Bank N.A.        Call        2.42     Receive        3-Month LIBOR        2/08/21        USD        670        151,816     

30-Year Interest Rate Swap

    JPMorgan Chase Bank N.A.        Call        2.50     Receive        3-Month LIBOR        4/27/21        USD        500        120,427     

10-Year Interest Rate Swap

    JPMorgan Chase Bank N.A.        Call        3.03     Receive        3-Month LIBOR        12/10/25        USD        2,000        269,938     

10-Year Interest Rate Swap

    Barclays Bank PLC        Call        2.83     Receive        3-Month LIBOR        1/13/26        USD        2,000        246,269     

10-Year Interest Rate Swap

    Goldman Sachs Bank USA        Put        1.75     Pay        3-Month LIBOR        9/20/16        GBP        5,000        1     

30-Year Interest Rate Swap

    JPMorgan Chase Bank N.A.        Put        3.30     Pay        3-Month LIBOR        9/21/16        USD        4,020            

30-Year Interest Rate Swap

    Citibank N.A.        Put        2.85     Pay        3-Month LIBOR        10/14/16        USD        6,000        14     

30-Year Interest Rate Swap

    UBS AG        Put        2.85     Pay        3-Month LIBOR        10/14/16        USD        6,000        14     

10-Year Interest Rate Swap

    Goldman Sachs Bank USA        Put        1.85     Pay        3-Month LIBOR        1/13/17        USD        6,000        29,970     

30-Year Interest Rate Swap

    Bank of America N.A.        Put        2.85     Pay        3-Month LIBOR        1/13/17        USD        6,000        3,391     

10-Year Interest Rate Swap

    Barclays Bank PLC        Put        1.80     Pay        3-Month LIBOR        1/23/17        USD        2,300        14,880     

10-Year Interest Rate Swap

    Wells Fargo Bank N.A.        Put        1.75     Pay        3-Month LIBOR        2/17/17        USD        8,000        72,414     

10-Year Interest Rate Swap

    Barclays Bank PLC        Put        1.70     Pay        3-Month LIBOR        2/23/17        USD        5,000        54,112     

30-Year Interest Rate Swap

    Barclays Bank PLC        Put        2.40     Pay        3-Month LIBOR        4/13/17        USD        2,650        23,280     

30-Year Interest Rate Swap

    Goldman Sachs Bank USA        Put        2.55     Pay        3-Month LIBOR        4/04/19        USD        3,600        156,405     

30-Year Interest Rate Swap

    Deutsche Bank AG        Put        3.12     Pay        3-Month LIBOR        9/17/20        USD        800        28,178     

30-Year Interest Rate Swap

    JPMorgan Chase Bank N.A.        Put        3.12     Pay        3-Month LIBOR        9/17/20        USD        800        28,178     

10-Year Interest Rate Swap

    Bank of America N.A.        Put        3.50     Pay        3-Month LIBOR        2/01/21        USD        4,000        54,589     

30-Year Interest Rate Swap

    JPMorgan Chase Bank N.A.        Put        2.42     Pay        3-Month LIBOR        2/08/21        USD        670        53,293     

30-Year Interest Rate Swap

    JPMorgan Chase Bank N.A.        Put        2.50     Pay        3-Month LIBOR        4/27/21        USD        500        37,937     

10-Year Interest Rate Swap

    JPMorgan Chase Bank N.A.        Put        3.03     Pay        3-Month LIBOR        12/10/25        USD        2,000        76,558     

10-Year Interest Rate Swap

    Barclays Bank PLC        Put        2.83     Pay        3-Month LIBOR        1/13/26        USD        2,000        86,548           

Total

                  $ 2,985,983     
                 

 

 

 

 

See Notes to Financial Statements.

 

                
28    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

OTC Options Purchased

 

Description      Put/
Call
       Counterparty        Expiration
Date
       Strike
Price
       Notional
Amount
(000)
    Value         

AUD Currency

       Call           Deutsche Bank AG           09/12/16           CAD        1.01           AUD        10,845      $ 3,383     

AUD Currency

       Call           UBS AG           09/22/16           NZD        1.07           AUD        16,105        5,289     

AUD Currency

       Call           Barclays Bank PLC           10/20/16           CAD        1.00           AUD        16,190        73,772     

EUR Currency

       Put           Deutsche Bank AG           09/20/16           SEK        9.35           EUR        10,980        4,973     

EUR Currency

       Put           Deutsche Bank AG           09/22/16           JPY        113.00           EUR        7,035        32,723     

USD Currency

       Put           UBS AG           10/21/16           SEK        8.25           USD        12,320        32,956     

USD Currency

       Put           JPMorgan Chase Bank N.A.           02/01/17           MXN        17.06           USD        18,990        61,774           

Total

                               $ 214,870     
                              

 

 

 

OTC Interest Rate Swaptions Written

 

Description   Counterparty   Put/
Call
  Exercise
Rate
    Pay/Receive
Exercise Rate
  Floating Rate
Index
  Expiration
Date
    Notional
Amount
(000)
    Value  

5-Year Interest Rate Swap

  Deutsche Bank AG   Call     2.10   Pay   3-Month LIBOR     12/05/16      USD     6,700      $ (284,495

5-Year Interest Rate Swap

  Barclays Bank PLC   Call     0.01   Pay   6-Month EURIBOR     2/10/17      EUR     39,800        (354,954

10-Year Interest Rate Swap

  JPMorgan Chase Bank N.A.   Call     1.50   Pay   3-Month LIBOR     2/17/17      USD     4,500        (89,986

5-Year Interest Rate Swap

  Barclays Bank PLC   Call     0.01   Pay   6-Month EURIBOR     2/17/17      EUR     4,500        (40,353

5-Year Interest Rate Swap

  UBS AG   Call     0.01   Pay   6-Month EURIBOR     3/10/17      EUR     10,000        (90,964

10-Year Interest Rate Swap

  Barclays Bank PLC   Call     1.51   Pay   3-Month LIBOR     6/28/17      USD     2,000        (51,965

10-Year Interest Rate Swap

  Barclays Bank PLC   Call     1.57   Pay   3-Month LIBOR     8/03/17      USD     3,300        (99,167

10-Year Interest Rate Swap

  Goldman Sachs Bank USA   Call     0.15   Pay   6-Month EURIBOR     12/04/17      EUR     5,700        (88,984

2-Year Interest Rate Swap

  Barclays Bank PLC   Call     1.05   Pay   3-Month LIBOR     12/15/17      USD     39,800        (177,400

2-Year Interest Rate Swap

  Barclays Bank PLC   Call     0.88   Pay   3-Month LIBOR     1/08/18      USD     8,200        (27,519

2-Year Interest Rate Swap

  Citibank N.A.   Call     1.05   Pay   3-Month LIBOR     1/25/18      USD     60,000        (281,356

2-Year Interest Rate Swap

  Deutsche Bank AG   Call     0.70   Pay   3-Month LIBOR     2/09/18      USD     11,000        (27,484

2-Year Interest Rate Swap

  Barclays Bank PLC   Call     0.90   Pay   3-Month LIBOR     2/12/18      USD     17,600        (64,833

2-Year Interest Rate Swap

  JPMorgan Chase Bank N.A.   Call     1.00   Pay   3-Month LIBOR     3/16/18      USD     6,500        (29,664

2-Year Interest Rate Swap

  Goldman Sachs Bank USA   Call     1.00   Pay   3-Month LIBOR     3/19/18      USD     38,200        (175,518

2-Year Interest Rate Swap

  Goldman Sachs Bank USA   Call     0.85   Pay   3-Month LIBOR     4/06/18      USD     25,000        (92,491

2-Year Interest Rate Swap

  Goldman Sachs Bank USA   Call     0.75   Pay   3-Month LIBOR     4/12/18      USD     38,200        (117,471

2-Year Interest Rate Swap

  Deutsche Bank AG   Call     0.90   Pay   3-Month LIBOR     4/16/18      USD     38,800        (156,305

2-Year Interest Rate Swap

  JPMorgan Chase Bank N.A.   Call     0.85   Pay   3-Month LIBOR     4/27/18      USD     15,000        (56,203

2-Year Interest Rate Swap

  Deutsche Bank AG   Call     0.90   Pay   3-Month LIBOR     4/30/18      USD     17,100        (70,446

10-Year Interest Rate Swap

  Deutsche Bank AG   Call     1.56   Pay   3-Month LIBOR     7/06/18      USD     690        (26,495

10-Year Interest Rate Swap

  Royal Bank of Canada   Call     1.65   Pay   3-Month LIBOR     8/01/18      USD     4,750        (207,102

10-Year Interest Rate Swap

  Barclays Bank PLC   Call     1.35   Pay   3-Month LIBOR     8/16/18      USD     4,800        (148,348

10-Year Interest Rate Swap

  Wells Fargo Bank N.A.   Call     1.35   Pay   3-Month LIBOR     8/16/18      USD     4,800        (148,348

5-Year Interest Rate Swap

  Deutsche Bank AG   Put     0.75   Receive   6-Month EURIBOR     9/02/16      EUR     10,400        (1

10-Year Interest Rate Swap

  Goldman Sachs Bank USA   Put     1.55   Receive   3-Month LIBOR     9/20/16      GBP     10,000        (1

5-Year Interest Rate Swap

  JPMorgan Chase Bank N.A.   Put     2.45   Receive   3-Month LIBOR     9/21/16      USD     16,900        (2

5-Year Interest Rate Swap

  Goldman Sachs Bank USA   Put     2.00   Receive   3-Month LIBOR     10/03/16      USD     1,000        (7

5-Year Interest Rate Swap

  Deutsche Bank AG   Put     2.10   Receive   3-Month LIBOR     12/05/16      USD     6,700        (1,342

5-Year Interest Rate Swap

  JPMorgan Chase Bank N.A.   Put     2.20   Receive   3-Month LIBOR     1/09/17      USD     3,600        (1,094

5-Year Interest Rate Swap

  Barclays Bank PLC   Put     0.50   Receive   6-Month EURIBOR     2/10/17      EUR     49,800        (9,653

10-Year Interest Rate Swap

  JPMorgan Chase Bank N.A.   Put     3.50   Receive   3-Month LIBOR     2/17/17      USD     3,000        (146

5-Year Interest Rate Swap

  Barclays Bank PLC   Put     0.51   Receive   6-Month EURIBOR     2/17/17      EUR     6,000        (1,260

5-Year Interest Rate Swap

  Barclays Bank PLC   Put     0.45   Receive   6-Month EURIBOR     2/23/17      EUR     12,100        (3,694

5-Year Interest Rate Swap

  Barclays Bank PLC   Put     1.60   Receive   3-Month LIBOR     4/13/17      USD     12,900        (65,981

10-Year Interest Rate Swap

  Barclays Bank PLC   Put     1.51   Receive   3-Month LIBOR     6/28/17      USD     2,000        (51,857

10-Year Interest Rate Swap

  Barclays Bank PLC   Put     1.57   Receive   3-Month LIBOR     8/03/17      USD     3,300        (83,567

10-Year Interest Rate Swap

  Royal Bank of Canada   Put     1.75   Receive   3-Month LIBOR     8/11/17      USD     8,000        (147,959

5-Year Interest Rate Swap

  Goldman Sachs Bank USA   Put     1.15   Receive   6-Month EURIBOR     9/11/17      EUR     10,800        (2,454

5-Year Interest Rate Swap

  Royal Bank of Scotland PLC   Put     1.10   Receive   6-Month EURIBOR     9/25/17      EUR     10,000        (2,973

5-Year Interest Rate Swap

  Goldman Sachs Bank USA   Put     2.20   Receive   3-Month LIBOR     10/02/17      USD     1,200        (3,385

5-Year Interest Rate Swap

  Citibank N.A.   Put     0.50   Receive   6-Month EURIBOR     10/23/17      EUR     3,340        (6,474

5-Year Interest Rate Swap

  Citibank N.A.   Put     1.00   Receive   6-Month EURIBOR     10/23/17      EUR     6,670        (3,277

5-Year Interest Rate Swap

  UBS AG   Put     0.50   Receive   6-Month EURIBOR     10/26/17      EUR     6,200        (12,266

5-Year Interest Rate Swap

  UBS AG   Put     1.00   Receive   6-Month EURIBOR     10/26/17      EUR     12,300        (6,208

5-Year Interest Rate Swap

  Goldman Sachs Bank USA   Put     0.50   Receive   6-Month EURIBOR     10/30/17      EUR     7,000        (14,122

5-Year Interest Rate Swap

  Goldman Sachs Bank USA   Put     1.00   Receive   6-Month EURIBOR     10/30/17      EUR     14,000        (7,271

5-Year Interest Rate Swap

  Goldman Sachs Bank USA   Put     0.65   Receive   6-Month EURIBOR     12/04/17      EUR     10,000        (16,264

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    29


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

OTC Interest Rate Swaptions Written (concluded)

 

Description   Counterparty     Put/
Call
    Exercise
Rate
    Pay/Receive
Exercise Rate
    Floating Rate
Index
    Expiration
Date
    Notional
Amount
(000)
    Value         

2-Year Interest Rate Swap

    Barclays Bank PLC        Put        1.95     Receive        3-Month LIBOR        12/15/17        USD        39,800      $ (54,505  

2-Year Interest Rate Swap

    Barclays Bank PLC        Put        1.88     Receive        3-Month LIBOR        1/08/18        USD        8,200        (14,142  

5-Year Interest Rate Swap

    UBS AG        Put        1.00     Receive        6-Month EURIBOR        1/08/18        EUR        7,200        (6,068  

2-Year Interest Rate Swap

    Citibank N.A.        Put        2.30     Receive        3-Month LIBOR        1/25/18        USD        20,000        (16,215  

2-Year Interest Rate Swap

    Deutsche Bank AG        Put        1.70     Receive        3-Month LIBOR        2/09/18        USD        11,000        (29,782  

2-Year Interest Rate Swap

    Barclays Bank PLC        Put        1.90     Receive        3-Month LIBOR        2/12/18        USD        17,600        (33,005  

5-Year Interest Rate Swap

    Barclays Bank PLC        Put        0.75     Receive        6-Month EURIBOR        3/05/18        EUR        15,000        (30,420  

5-Year Interest Rate Swap

    Deutsche Bank AG        Put        0.35     Receive        6-Month EURIBOR        3/09/18        EUR        22,310        (118,334  

5-Year Interest Rate Swap

    Barclays Bank PLC        Put        0.65     Receive        6-Month EURIBOR        3/12/18        EUR        3,450        (9,086  

2-Year Interest Rate Swap

    JPMorgan Chase Bank N.A.        Put        2.00     Receive        3-Month LIBOR        3/16/18        USD        6,500        (11,281  

2-Year Interest Rate Swap

    Goldman Sachs Bank USA        Put        2.00     Receive        3-Month LIBOR        3/19/18        USD        38,200        (67,080  

2-Year Interest Rate Swap

    Goldman Sachs Bank USA.        Put        1.85     Receive        3-Month LIBOR        3/29/18        USD        5,000        (11,882  

2-Year Interest Rate Swap

    Goldman Sachs Bank USA        Put        1.85     Receive        3-Month LIBOR        4/06/18        USD        25,000        (60,158  

2-Year Interest Rate Swap

    Goldman Sachs Bank USA        Put        1.75     Receive        3-Month LIBOR        4/12/18        USD        38,200        (111,771  

2-Year Interest Rate Swap

    Deutsche Bank AG        Put        1.70     Receive        3-Month LIBOR        4/16/18        USD        38,800        (125,148  

2-Year Interest Rate Swap

    JPMorgan Chase Bank N.A.        Put        1.75     Receive        3-Month LIBOR        4/27/18        USD        15,000        (45,555  

2-Year Interest Rate Swap

    Deutsche Bank AG        Put        1.90     Receive        3-Month LIBOR        4/30/18        USD        17,100        (40,541  

2-Year Interest Rate Swap

    Morgan Stanley Capital Services LLC        Put        1.60     Receive        3-Month LIBOR        6/18/18        USD        10,000        (43,416  

2-Year Interest Rate Swap

    Goldman Sachs Bank USA        Put        1.45     Receive        3-Month LIBOR        6/27/18        USD        10,000        (54,995  

2-Year Interest Rate Swap

    Citibank N.A.        Put        1.40     Receive        3-Month LIBOR        7/05/18        USD        10,000        (59,983  

10-Year Interest Rate Swap

    Deutsche Bank AG        Put        1.56     Receive        3-Month LIBOR        7/06/18        USD        690        (28,612  

5-Year Interest Rate Swap

    Deutsche Bank AG        Put        0.50     Receive        6-Month EURIBOR        7/16/18        EUR        10,730        (61,026  

10-Year Interest Rate Swap

    Royal Bank of Canada        Put        1.65     Receive        3-Month LIBOR        8/01/18        USD        4,750        (179,830  

10-Year Interest Rate Swap

    Wells Fargo Bank N.A.        Put        1.90     Receive        3-Month LIBOR        8/17/18        USD        8,000        (227,966  

2-Year Interest Rate Swap

    Goldman Sachs Bank USA        Put        1.70     Receive        3-Month LIBOR        8/20/18        USD        5,500        (23,146  

2-Year Interest Rate Swap

    Goldman Sachs Bank USA        Put        1.75     Receive        3-Month LIBOR        4/04/19        USD        40,000        (221,157  

2-Year Interest Rate Swap

    Barclays Bank PLC        Put        0.40     Receive        6-Month EURIBOR        7/08/19        EUR        21,060        (63,230  

2-Year Interest Rate Swap

    Barclays Bank PLC        Put        0.40     Receive        6-Month EURIBOR        7/08/19        EUR        1,975        (5,930  

2-Year Interest Rate Swap

    JPMorgan Chase Bank N.A.        Put        0.40     Receive        6-Month EURIBOR        7/08/19        EUR        1,965        (5,900  

10-Year Interest Rate Swap

    Bank of America N.A.        Put        5.50     Receive        3-Month LIBOR        2/01/21        USD        10,000        (36,151        

Total

                  $ (5,145,424  
                 

 

 

 

OTC Options Written

 

Description   Put/
Call
    Counterparty     Expiration
Date
    Strike
Price
    Notional
Amount
(000)
    Value         

AUD Currency

    Call        Barclays Bank PLC        10/20/16        CAD        1.01        AUD        16,190      $ (43,110  

USD Currency

    Call        JPMorgan Chase Bank N.A.        2/01/17        MXN        21.22        USD        18,990        (201,237  

USD Currency

    Put        UBS AG        10/21/16        CHF        0.94        USD        12,320        (24,307        

Total

                $ (268,654  
               

 

 

 

Centrally Cleared Credit Default Swaps — Buy Protection

 

Issuer/Index   Pay
Fixed
Rate
     Expiration
Date
    Notional
Amount
(000)
    Unrealized
Depreciation
 

Markit iTraxx XO, Series 25, Version 1

    5.00      6/20/21        EUR        350      $ (12,404

Centrally Cleared Interest Rate Swaps

 

Fixed Rate   Floating
Rate
  Effective
Date
  Expiration
Date
    Notional
Amount
(000)
    Unrealized
Appreciation
(Depreciation)
 

0.77%1

  3-Month LIBOR   N/A     2/05/18        USD        107,000      $ 345,118   

1.13%2

  3-Month LIBOR   8/07/183     8/07/20        USD        7,000        (17,647

1.18%2

  3-Month LIBOR   8/13/183     8/12/20        USD        6,400        (10,691

1.19%2

  3-Month LIBOR   8/14/183     8/14/20        USD        5,000        (7,085

1.24%1

  3-Month LIBOR   N/A     8/20/20        USD        5,000        2,555   

1.26%1

  3-Month LIBOR   N/A     8/21/20        USD        3,000        290   

 

See Notes to Financial Statements.

 

                
30    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

Centrally Cleared Interest Rate Swaps (concluded)

 

Fixed Rate   Floating
Rate
    Effective
Date
    Expiration
Date
    Notional
Amount
(000)
    Unrealized
Appreciation
(Depreciation)
        

1.26%2

    3-Month LIBOR        8/21/183        8/21/20        USD        20,500      $ (1,219  

1.26%1

    3-Month LIBOR        N/A        8/23/20        USD        4,860        203     

1.31%1

    3-Month LIBOR        8/31/183        8/31/20        USD        3,500        (2,846  

1.31%1

    3-Month LIBOR        N/A        8/31/20        USD        1,500        (1,425  

1.33%1

    3-Month LIBOR        8/31/183        8/31/20        USD        3,240        (3,933  

1.33%1

    3-Month LIBOR        N/A        8/31/20        USD        3,240        (4,123  

0.78%1

    Fed Funds Effective Rate plus 0.25%        N/A        2/28/21        USD        26,550        41,963     

1.18%1

    3-Month LIBOR        1/05/173        2/28/21        USD        32,890        28,550     

0.00%2

    6-Month EURIBOR        N/A        6/28/21        EUR        3,500        1,270     

1.00%2

    3-Month LIBOR        N/A        6/28/21        USD        1,000        (9,058  

0.00%1

    6-Month EURIBOR        N/A        7/14/21        EUR        2,350        3,076     

1.05%2

    3-Month LIBOR        N/A        7/14/21        USD        3,900        (26,655  

0.00%1

    6-Month EURIBOR        10/19/163        10/19/21        EUR        2,100        (60  

0.08%2

    6-Month EURIBOR        8/14/183        8/14/23        EUR        2,450        (3,265  

1.33%1

    3-Month LIBOR        12/30/163        8/15/23        USD        9,700        (2,151  

1.40%1

    3-Month LIBOR        N/A        8/16/26        USD        200        611     

1.41%2

    3-Month LIBOR        N/A        8/25/26        USD        1,640        (3,626  

2.41%1

    3-Month LIBOR        N/A        1/19/46        USD        300        (52,916  

2.33%1

    3-Month LIBOR        N/A        1/25/46        USD        300        (47,258  

2.25%1

    3-Month LIBOR        N/A        2/05/46        USD        400        (55,582  

2.16%1

    3-Month LIBOR        N/A        2/12/46        USD        500        (58,339  

2.11%1

    3-Month LIBOR        N/A        4/07/46        USD        300        (30,843  

1.96%1

    3-Month LIBOR        N/A        6/21/46        USD        300        (19,920  

1.76%1

    3-Month LIBOR        N/A        7/15/46        USD        100        (1,745  

1.72%1

    3-Month LIBOR        8/25/163        8/25/46        USD        250        (1,523        

Total

            $ 61,726     
           

 

 

 

1    Trust pays the fixed rate and receives the floating rate.

       

 

2    Trust pays the floating rate and receives the fixed rate.

       

 

3    Forward swap.

       

 

OTC Credit Default Swaps — Buy Protection

 

Issuer/Index    Pay Fixed Rate      Counterparty        Expiration
Date
     Notional
Amount
(000)
       Value      Premiums
Paid
       Unrealized
Depreciation
        

Australia & New Zealand Banking Group Ltd.

   1.00%        Deutsche Bank AG           9/20/17         USD         1         $ (5    $ 4         $ (9  

Westpac Banking Corp.

   1.00%        Deutsche Bank AG           9/20/17         USD         1           (4      3           (7        

Total

                        $ (9    $ 7         $ (16  
                       

 

 

 

OTC Credit Default Swaps — Sell Protection

 

Issuer/Index   Receive
Fixed Rate
   
Counterparty
    Expiration
Date
    Credit
Rating1
    Notional
Amount
(000)2
    Value     Premiums
(Received)
    Unrealized
Appreciation
(Depreciation)
        

MetLife, Inc.

    1.00     Credit Suisse International        9/20/16        A-        USD        1,080      $ 2,694      $ (1,126   $ 3,820     

MetLife, Inc.

    1.00     Deutsche Bank AG        9/20/16        A-        USD        1,460        3,642        (1,379     5,021     

MetLife, Inc.

    1.00     Goldman Sachs Bank USA        9/20/16        A-        USD        1,000        2,495        (912     3,407     

MetLife, Inc.

    1.00     Morgan Stanley Capital Services LLC        9/20/16        A-        USD        1,810        4,515        (1,677     6,192     

MetLife, Inc.

    1.00     Morgan Stanley Capital Services LLC        9/20/16        A-        USD        550        1,372        (452     1,824     

MetLife, Inc.

    1.00     Citibank N.A.        12/20/16        A-        USD        595        2,743        (2,691     5,434     

MetLife, Inc.

    1.00     Citibank N.A.        12/20/16        A-        USD        575        2,663        (2,819     5,482     

Markit CMBX North America, Series 8

    3.00     Barclays Bank PLC        10/17/57        NR        USD        5,000        (820,502     (528,977     (291,525  

Markit CMBX North America, Series 8

    3.00     Credit Suisse International        10/17/57        NR        USD        2,500        (410,251     (261,322     (148,929        

Total

              $ (1,210,629   $ (801,355   $ (409,274  
             

 

 

 

1    Using Standard & Poor’s (“S&P’s”) rating of the issuer or the underlying securities of the indes, as applicable.

       

2    The maximum potential amount the Trust may pay should a negative credit event take place as defined under the terms of the agreement.

       

 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    31


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

OTC Interest Rate Swaps

 

Fixed Rate   Floating
Rate
 
Counterparty
  Effective
Date
    Expiration
Date
    Notional
Amount
(000)
    Value     Premiums
Paid
(Received)
    Unrealized
Appreciation
        

SIFMA Rate1

  3-Month LIBOR   Citibank N.A.     6/09/25 2      6/09/35        USD        1,500      $ 26,297             $ 26,297           

1    Trust pays the fixed rate and receives the floating rate.

       

           

2    Forward swap.

       

           

 

Transactions in Options Written for the Year Ended August 31, 2016
          Calls  
                Notional (000)        
            Contracts     AUD     CAD     EUR     GBP     NZD     USD    

Premiums

Received

 

Outstanding options, beginning of year

      449                      16,350                    $ 173,900      $ 2,666,359   

Options written

      186        41,615               121,550               28,040        534,520        6,975,375   

Options exercised

                                         (28,040     (24,000     (670,405

Options expired

             (25,425            (14,160                   (35,380     (702,766

Options closed

      (635                   (63,740                   (283,110     (5,206,884
   

 

 

 

Outstanding options, end of year

             16,190               60,000                    $ 365,930      $ 3,061,679   
   

 

 

 
          Puts  
                Notional (000)        
            Contracts     AUD     CAD     EUR     GBP     NZD     USD    

Premiums

Received

 

Outstanding options, beginning of year

                           56,000                    $ 208,200      $ 4,126,898   

Options written

      110        14,960        15,285        312,605        34,000        106,570        711,290        10,554,058   

Options exercised

                           (3,630                          (8,166

Options expired

                    (15,285     (54,390     (24,000     (78,525     (57,380     (1,768,049

Options closed

      (110     (14,960            (68,285            (28,045     (411,850     (6,997,257
   

 

 

 

Outstanding options, end of year

                           242,300        10,000             $ 450,260      $ 5,907,484   
   

 

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

                  Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Currency
Exchange
Contracts
    Interest Rate
Contracts
    Other
Contracts
    Total  
Assets — Derivative Financial Instruments                                            

Futures contracts

     Net unrealized appreciation1                               $ 195,536             $ 195,536   

Forward foreign currency exchange contracts

    

Unrealized appreciation on forward foreign currency exchange contracts

                       $ 268,565                      268,565   

Options purchased

     Investments at value — unaffiliated2                          214,870        3,010,217               3,225,087   

Swaps — centrally cleared

     Net unrealized appreciation1                                 423,636               423,636   

Swaps — OTC

     Unrealized appreciation on OTC derivatives; Swap premiums paid          $ 31,187                      26,297               57,484   

Total

              $ 31,187             $ 483,435      $ 3,655,686             $ 4,170,308   
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                  

 

See Notes to Financial Statements.

 

                
32    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

Liabilities — Derivative Financial Instruments   Commodity
Contracts
  Credit
Contracts
    Equity
Contracts
  Foreign
Currency
Exchange
Contracts
    Interest Rate
Contracts
    Other
Contracts
    Total  

Futures contracts

     Net unrealized depreciation1                     $ 233,653             $ 233,653   

Forward foreign currency exchange contracts

    

Unrealized depreciation on forward foreign currency exchange contracts

             $ 302,820                      302,820   

Options written

     Options written at value                268,654        5,145,424               5,414,078   

Swaps — centrally cleared

     Net unrealized depreciation1     $ 12,404                 361,910               374,314   

Swaps — OTC

     Unrealized depreciation on OTC derivatives; Swap premiums received       1,241,825                               1,241,825   

Total

         $ 1,254,229        $ 571,474      $ 5,740,987             $ 7,566,690   
      

 

 

 

 

   

 

 

 

 

   

 

 

   

 

 

   

 

 

 

1    Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedules of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

        

2   Includes options purchased at value as reported in the Schedule of Investments.

       

For the year ended August 31, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

     Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Net Realized Gain (Loss) from:

                   

Futures contracts

                                  $ 2,738,560               $ 2,738,560   

Forward foreign currency exchange contracts

                          $ 2,418,791                         2,418,791   

Options purchased1

                            (1,864,389      (21,275              (1,885,664

Options written

                            1,516,897         2,370,997                 3,887,894   

Swaps

          $ 241,648                         (4,507,611              (4,265,963
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

          $ 241,648               $ 2,071,299       $ 580,671               $ 2,893,618   
 

 

 

 
     Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Net Change in Unrealized Appreciation (Depreciation) on:

                   

Futures contracts

                                  $ 1,159,137               $ 1,159,137   

Forward foreign currency exchange contracts

                          $ (230,637                      (230,637

Options purchased2

                            (309,409      (1,005              (310,414

Options written

                            144,893         2,290,324                 2,435,217   

Swaps

          $ (509,296                      214,861                 (294,435
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

          $ (509,296            $ (395,153    $ 3,663,317               $ 2,758,868   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

1    Options purchased are included in net realized gain (loss) from investments.

       

2    Options purchased are included in net change in unrealized appreciation (depreciation) on investments.

       

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:

    

Average notional value of contracts — long

     $ 299,103,926   

Average notional value of contracts — short

     $ 180,387,482   
Forward foreign currency exchange contracts:     

Average amounts purchased — in USD

     $ 64,786,917   

Average amounts sold — in USD

     $ 28,779,249   
Options:     

Average value of option contracts purchased

     $ 337,444   

Average value of option contracts written

     $ 232,344   

Average notional value of swaption contracts purchased

     $ 95,586,437   

Average notional value of swaption contracts written

     $ 875,476,254   
Credit default swaps:     

Average notional value — buy protection

     $ 1,898,602   

Average notional value — sell protection

     $ 12,695,000   
Interest rate swaps:     

Average notional value — pays fixed rate

     $ 163,197,384   

Average notional amount — receives fixed rate

     $ 52,841,004   

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    33


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

For more information about the Trust’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

 

Derivative Financial Instruments — Offsetting as of Period End            

The Trust’s derivative assets and liabilities (by type) were as follows:

 

     Assets        Liabilities  
Derivative Financial Instruments:       

Futures contracts

  $ 75,335         $ 3,169   

Forward foreign currency exchange contracts

    268,565           302,820   

Options

    3,225,087 1          5,414,078   

Swaps — centrally cleared

    5,906             

Swaps — OTC2

    57,484           1,241,825   
 

 

 

 

Total derivative assets and liabilities in the Statement of Assets and Liabilities

  $ 3,632,377         $ 6,961,892   
 

 

 

 

Derivatives not subject to a master netting agreement or similar agreement (“MNA”)

    (105,475        (3,169
 

 

 

 

Total derivative assets and liabilities subject to an MNA

  $ 3,526,902         $ 6,958,723   
 

 

 

 

1    Includes options purchased at value which is included in Investments at value — unaffiliated in the Statement of Assets and Liabilities and reported in the Schedule of Investments.

 

2    Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums paid/received in the Statement of Assets and Liabilities.

         

       

The following table presents the Trust’s derivative assets and liabilities by counterparty net of amounts available for offset under an Master Netting Agreement (“MNA”) and net of the related collateral received and pledged by the Trust:

 

Counterparty   Derivative Assets
Subject to an MNA
by Counterparty
    Derivatives
Available for
Offset1
    Non-cash Collateral
Received
    Cash
Collateral
Received2
    Net
Amount of
Derivative
Assets3
        

Bank of America N.A.

  $ 58,646      $ (36,151                 $ 22,495     

Barclays Bank PLC

    642,224        (642,224                       

BNP Paribas S.A.

    1,908        (1,908                       

Citibank N.A.

    566,770        (427,346                   139,424     

Credit Suisse International

    3,820        (3,820                       

Deutsche Bank AG

    356,396        (356,396                       

Goldman Sachs Bank USA

    189,783        (189,783                       

Goldman Sachs International

    43,889        (43,889                       

HSBC Bank PLC

    88,911        (44,825                   44,086     

JPMorgan Chase Bank N.A.

    1,311,671        (491,876          $ (520,000     299,795     

Morgan Stanley Capital Services LLC

    8,016        (8,016                       

UBS AG

    38,259        (38,259                       

Wells Fargo Bank N.A.

    216,609        (216,609                       
 

 

 

 

Total

  $ 3,526,902      $ (2,501,102          $ (520,000   $ 505,800     
 

 

 

 

 

Counterparty   Derivative Liabilities
Subject to an MNA
by Counterparty
    Derivatives
Available for
Offset1
    Non-cash Collateral
Pledged
    Cash
Collateral
Pledged4
    Net
Amount of
Derivative
Liabilities5
        

Bank of America N.A.

  $ 36,151      $ (36,151                       

Barclays Bank PLC

    2,254,481        (642,224          $ (1,612,257         

BNP Paribas S.A.

    2,303        (1,908                 $ 395     

Citibank N.A.

    427,346        (427,346                       

Credit Suisse International

    411,377        (3,820            (407,557         

Deutsche Bank AG

    979,949        (356,396            (623,553         

Goldman Sachs Bank USA

    1,069,069        (189,783            (879,286         

Goldman Sachs International

    61,223        (43,889                   17,334     

HSBC Bank PLC

    44,825        (44,825                       

JPMorgan Chase Bank N.A.

    491,876        (491,876                       

Morgan Stanley Capital Services LLC

    45,545        (8,016                   37,529     

Royal Bank of Canada

    534,891                             534,891     

Royal Bank of Scotland PLC

    61,749                             61,749     

Standard Chartered Bank

    3,427                             3,427     

UBS AG

    158,197        (38,259                   119,938     

Wells Fargo Bank N.A.

    376,314        (216,609                   159,705     
 

 

 

 

Total

  $ 6,958,723      $ (2,501,102          $ (3,522,653   $ 934,968     
 

 

 

 

1    The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

       

 

2    Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

       

 

 

See Notes to Financial Statements.

 

                
34    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Core Bond Trust (BHK)

 

3    Net amount represents the net amount receivable from the counterparty in the event of default.

 

4    Excess of collateral pledged from the individual counterparty is not shown for financial reporting purposes.

 

5    Net amount represents the net amount payable due to the counterparty in the event of default.

 

 

Fair Value Hierarchy as of Period End      

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Trust’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Trust’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

     Level 1        Level 2        Level 3        Total  

Assets:

                
Investments:                 

Long-Term Investments:

                

Asset-Backed Securities

            $ 78,690,093         $ 6,235,302         $ 84,925,395   

Common Stocks

  $ 79,694           107,729                     187,423   

Corporate Bonds

              505,539,569           7,833,603           513,373,172   

Floating Rate Loan Interests

              9,091,982           425,295           9,517,277   

Foreign Agency Obligations

              23,962,151                     23,962,151   

Municipal Bonds

              26,434,074                     26,434,074   

Non-Agency Mortgage-Backed Securities

              105,705,862                     105,705,862   

Preferred Securities

    13,995,334           89,718,310                     103,713,644   

U.S. Government Sponsored Agency Securities

              63,271,495           2           63,271,497   

U.S. Treasury Obligations

              155,240,411                     155,240,411   

Short-Term Securities:

                

Money Market Funds

    12,926,909                               12,926,909   

Options Purchased:

                

Interest rate contracts

    24,234           2,985,983                     3,010,217   

Foreign currency exchange contracts

              214,870                     214,870   
 

 

 

 

Total

  $ 27,026,171         $ 1,060,962,529         $ 14,494,202         $ 1,102,482,902   
 

 

 

 
                
Derivative Financial Instruments1                                         

Assets:

                

Credit contracts

            $ 31,180                   $ 31,180   

Foreign currency exchange contracts

              268,565                     268,565   

Interest rate contracts

  $ 195,536           449,933                     645,469   

Liabilities:

                

Credit contracts

              (452,874                  (452,874

Foreign currency exchange contracts

              (571,474                  (571,474

Interest rate contracts

    (233,653        (5,507,334                  (5,740,987
 

 

 

 

Total

  $ (38,117      $ (5,782,004                $ (5,820,121
 

 

 

 

1    Derivative financial instruments are swaps, futures contracts, forward foreign currency exchange contracts and options written. Swaps, futures contracts and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument and options written are shown at value.

        

The Trust may hold assets and/or liabilities in which the fair value approximates the carrying amount, or face value, including accrued interest, for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

 

     Level 1        Level 2        Level 3        Total  

Assets:

                

Cash

  $ 44,891                             $ 44,891   

Foreign currency at value

    437,584                               437,584   

Cash pledged:

                

Centrally cleared swaps

    1,239,940                               1,239,940   

Collateral — OTC derivatives

    4,020,000                               4,020,000   

Futures contracts

    1,349,970                               1,349,970   

Liabilities:

                

Cash received:

                

Collateral — OTC derivatives

            $ (520,000                  (520,000

Collateral — reverse repurchase agreements

              (1,204,000                  (1,204,000

Reverse repurchase agreements

              (288,238,889                  (288,238,889
 

 

 

 

Total

  $ 7,092,385         $ (289,962,889                $ (282,870,504
 

 

 

 

During the year ended August 31, 2016, there were no transfers between Level 1 and Level 2.

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    35


Table of Contents

Schedule of Investments (concluded)

  

BlackRock Core Bond Trust (BHK)

 

A reconciliation of Level 3 investments is presented when the Trust had a significant amount of Level 3 investments at the beginning and/or end of the period in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

 

     Asset-
Backed
Securities
   

Corporate

Bonds

    Floating
Rate Loan
Interests
    Non-Agency
Mortgage-Backed
Securities
    U.S. Government
Sponsored Agency
Securities
    Total  

Assets:

           

Opening Balance, as of August 31, 2015

  $ 22,613,310      $ 5,716,325             $ 8      $ 357      $ 28,330,000   

Transfers into Level 3

                                         

Transfers out of Level 31

    (11,329,317                                 (11,329,317

Accrued discounts/premiums

    (194,024          $ 511                      (193,513

Net realized gain

    (425,159                   8        4        (425,147

Net change in unrealized appreciation (depreciation)2,3

    256,242        524,704        3,459        (8     (355     784,042   

Purchases

           1,621,622        421,325                      2,042,947   

Sales

    (4,685,750     (29,048            (8     (4     (4,714,810

Closing Balance, as of August 31, 2016

  $ 6,235,302      $ 7,833,603      $ 425,295             $ 2      $ 14,494,202   
 

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation) on investments still held at August 31, 20162

  $ 329,847      $ 524,704      $ 3,459      $ (8   $ (355   $ 857,647   
 

 

 

   

 

 

 

1    As of August 31, 2015, the Trust used significant unobservable inputs in determining the value of certain investments. As of August 31, 2016, the Trust used observable inputs in determining the value of the same investments. As a result, investments at beginning of period value were transferred from Level 3 to Level 2 in the disclosure hierarchy

         

2    Included in the related net change in unrealized appreciation (depreciation) in the Statement of Operations.

       

3    Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments held as of August 31, 2016 is generally due to investments no longer held or categorized as Level 3 at period end.

        

Certain of the Trust’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information inputs could result in a significantly lower or higher value of such Level 3 investments.

 

See Notes to Financial Statements.

 

                
36    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Consolidated Schedule of Investments August 31, 2016

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

(Percentages shown are based on Net Assets)

 

Common Stocks    Shares    

Value

 

Banks — 0.2%

      

Bank of America Corp.

       66,105      $ 1,066,935   

Citigroup, Inc.

       21,622        1,032,234   

JPMorgan Chase & Co.

       15,066        1,016,955   

Wells Fargo & Co.

       20,755        1,054,354   
      

 

 

 
                       4,170,478   

Capital Markets — 1.9%

      

American Capital Ltd. (a)

       1,522,327        25,712,103   

Goldman Sachs Group, Inc.

       5,851        991,510   

Morgan Stanley

       33,459        1,072,696   

Uranium Participation Corp. (a)

       176,860        528,665   
      

 

 

 
                       28,304,974   

Chemicals — 0.1%

      

Advanced Emissions Solutions, Inc. (a)

             168,580        1,250,864   

Consumer Finance — 1.5%

      

Ally Financial, Inc.

             1,126,277        22,570,591   

Diversified Financial Services — 0.1%

  

 

Concrete Investments II S.C.A. (a)

       4,997          

Kcad Holdings I Ltd. (a)

       2,223,465,984        755,978   
      

 

 

 
                       755,978   

Diversified Telecommunication Services — 0.0%

  

Broadview Networks Holdings, Inc. (a)

             192,400        250,119   

Energy Equipment & Services (b) — 0.1%

  

Laricina Energy Ltd. (a)

       211,764        2   

Osum Oil Sands Corp. (a)

       400,000        957,755   
      

 

 

 
                       957,757   

Hotels, Restaurants & Leisure — 0.4%

      

Amaya, Inc. (a)

             377,280        5,664,666   

Media — 0.0%

      

Emmis Communications Corp., Class A (a)

             7,210        28,984   

Metals & Mining — 0.1%

      

Peninsula Energy Ltd. (a)

             2,051,920        925,273   

Oil, Gas & Consumable Fuels — 0.3%

  

Denbury Resources, Inc. (a)

       138,760        419,427   

Gener8 Maritime Corp. (a)

       965,338        4,836,343   

Whiting Petroleum Corp. (a)

       16,886        123,099   
      

 

 

 
                       5,378,869   

Real Estate Investment Trusts (REITs) — 0.0%

  

Ovation Acquisition I LLC, (Acquired 12/29/15, cost $187,463) (c)

             12,175        12,175   

Semiconductors & Semiconductor Equipment — 0.0%

  

SunPower Corp. (a)

             1,025        10,209   

Wireless Telecommunication Services — 0.2%

  

T-Mobile U.S., Inc. (a)

             59,550        2,759,547   
Total Common Stocks — 4.9%                      73,040,484   
      
                          
Asset-Backed Securities   

Par  

(000)

        

Asset-Backed Securities — 3.1%

  

ALM Loan Funding,
Series 2013-7RA (d)(e):

      

Class C, 4.16%, 4/24/24

     USD        2,340        2,278,658   

Class D, 5.71%, 4/24/24

       2,360        2,209,253   

ALM VII R-2, Ltd., Series 2013-7R2A, Class C, 4.16%, 4/24/24 (d)(e)

       500        486,116   

ALM XII Ltd., Series 2015-12A (d)(e):

      

Class C1, 4.43%, 4/16/27

       1,500        1,439,400   

Class D, 6.18%, 4/16/27

       250        227,188   
Asset-Backed Securities   

Par  

(000)

    Value  

Asset-Backed Securities (continued)

  

ALM XIV Ltd., Series 2014-14A, Class C, 4.19%, 7/28/26 (d)(e)

     USD       500      $ 484,710   

AMMC CLO 18, Ltd., Series 2016-18A, Class D, 5.67%, 5/26/28 (d)(e)

       500        498,750   

AMMC CLO IX, Ltd., Series 2011-9A (d)(e):

      

Class DR, 6.33%, 1/15/22

       1,000        1,009,176   

Class ER, 8.33%, 1/15/22

       1,000        995,560   

AMMC CLO Ltd., Series 2014-15A, Class C1, 4.12%, 12/09/26 (d)(e)

       1,000        1,000,000   

Anchorage Capital CLO 3, Ltd., Series 2014-3A, Class C, 4.24%, 4/28/26 (d)(e)

       500        478,739   

Anchorage Capital CLO 8, Ltd., Series 2016-8A, Class D, 4.92%, 7/28/28 (d)(e)

       1,000        952,500   

Apidos CLO XVIII, Series 2014-18A, Class C, 4.35%, 7/22/26 (d)(e)

       550        536,037   

Ares XXXIX CLO, Ltd., Series 2016-39A, Class E, 7.94%, 7/18/28 (d)(e)

       1,000        927,700   

Ares XXXVII CLO, Ltd., Series 2015-4A, Class D1, 7.48%, 10/15/26 (d)(e)

       500        483,750   

Atlas Senior Loan Fund V Ltd., Series 2014-1A, Class C, 3.63%, 7/16/26 (d)(e)

       250        249,285   

Atlas Senior Loan Fund, Ltd., Series 2012-1A (d)(e):

      

Class A3LR, 3.26%, 8/15/24

       500        500,000   

Class B1LR, 4.66%, 8/15/24

       500        500,000   

Atrium CDO Corp., Series 9A, Class D, 4.33%, 2/28/24 (d)(e)

       750        731,448   

Ballyrock CLO, Ltd., Series 2016-1A, Class C, 1.00%, 10/15/28 (d)(e)(f)

       1,000        996,500   

Benefit Street Partners CLO, Ltd., Series 2014-IVA, Class C, 4.20%, 7/20/26 (d)(e)

       500        465,626   

BlueMountain CLO Ltd., Series 2015-1A, Class D, 6.12%, 4/13/27 (d)(e)

       750        717,053   

Carlyle Global Market Strategies CLO Ltd. (d)(e):

      

Series 2013-3A, Class B, 3.33%, 7/15/25

       500        498,819   

Series 2014-5A, Class C, 4.83%, 10/16/25

       1,000        999,958   

Series 2016-3A, Class D, 1.00%, 10/20/29 (f)

       500        483,085   

Cedar Funding, Ltd., Series 2014-3A, Class D, 4.36%, 5/20/26 (d)(e)

       535        518,612   

CIFC Funding Ltd. (d)(e):

      

Series 2014-2A, Class A3L, 3.68%, 5/24/26

       500        496,043   

Series 2014-3A, Class C1, 3.50%, 7/22/26

       1,250        1,248,772   

Dryden Senior Loan Fund, Series 2014-36A, Class D, 4.54%, 11/09/25 (d)(e)

       1,000        967,726   

HPS Loan Management 9-2016, Ltd., Series 9A-2016, Class D2, 7.08%, 7/19/27 (d)(e)

       800        731,772   

LCM X LP, Series 10AR, Class ER, 6.13%, 4/15/22 (d)(e)

       1,000        981,855   

LCM XIII LP, Series 13A, Class D, 4.49%, 1/19/23 (d)(e)

       500        497,533   

LCM XV LP, Series 15A, Class C, 3.93%, 8/25/24 (d)(e)

       500        500,016   

Madison Park Funding Ltd. (d)(e):

      

Series 2012-8AR, Class CR, 3.44%, 4/22/22

       500        500,102   

Series 2012-8AR, Class DR, 4.49%, 4/22/22

       250        248,124   

Series 2014-14A,Class D, 4.30%, 7/20/26

       500        486,198   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    37


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

Asset-Backed Securities   

Par  

(000)

    Value  

Asset-Backed Securities (continued)

  

Mill Creek II CLO, Ltd., Series 2016-1A, Class E, 8.37%, 4/20/28 (d)(e)

     USD       500      $ 497,500   

Neuberger Berman CLO XIII, Ltd., Series 2012-13A, Class C, 3.56%, 1/23/24 (d)(e)

       1,000        1,000,500   

Neuberger Berman CLO XVII Ltd., Series 2014-17A, Class D, 4.32%, 8/04/25 (d)(e)

       500        469,088   

Neuberger Berman CLO XVIII Ltd., Series 2014-18A (d)(e):

      

Class B, 3.97%, 11/14/25

       500        500,023   

Class C, 4.57%, 11/14/25

       1,500        1,450,088   

Neuberger Berman CLO XX, Ltd., Series 2015-20A, Class E, 7.12%, 1/15/28 (d)(e)

       500        467,525   

OCP CLO, Series 2014-7A, Class A1A, 2.30%, 10/20/26 (d)(e)

       500        500,763   

Octagon Investment Partners 26 Ltd., Series 2016-1A, Class D, 5.63%, 4/15/27 (d)(e)

       500        500,659   

Octagon Investment Partners 27, Ltd., Series 2016-1A, Class E, 7.76%, 7/15/27 (d)(e)

       1,000        978,750   

Octagon Investment Partners XII Ltd., Series 2012-1AR, Class ER, 6.13%, 5/05/23 (d)(e)

       1,200        1,169,370   

Octagon Investment Partners XVII, Ltd., Series 2013-1A, Class A2R, 2.44%, 10/25/25 (d)(e)(f)

       1,500        1,500,000   

Octagon Investment Partners XXII Ltd., Series 2014-1A (d)(e):

      

Class C1, 3.95%, 11/25/25

       1,000        1,000,180   

Class D1, 4.60%, 11/25/25

       1,000        956,427   

OneMain Financial Issuance Trust, Series 2015-2A, Class C, 4.32%, 7/18/25 (e)

       200        198,989   

OZLM IX Ltd., Series 2014-9A, Class C, 4.30%, 1/20/27 (d)(e)

       1,000        945,458   

OZLM XII Ltd., Series 2015-12A, Class D, 6.16%, 4/30/27 (d)(e)

       250        210,517   

Race Point IX CLO, Ltd., Series 2015-9A, Class A1, 2.19%, 4/15/27 (d)(e)

       500        499,000   

Sound Point CLO XII, Ltd., Series 2016-2A, Class E, 6.88%, 10/20/28 (d)(e)

       500        451,694   

Symphony CLO Ltd., Series 2016-17A, Class D, 5.50%, 4/15/28 (d)(e)

       250        250,347   

Symphony CLO XI, Ltd., Series 2013-11A, Class B1, 2.88%, 1/17/25 (d)(e)

       500        499,963   

Venture XIII CLO Ltd., Series 2013-13A, Class D, 4.21%, 6/10/25 (d)(e)

       1,000        962,496   

Venture XIX CLO Ltd., Series 2014-19A, Class C,
3.98%, 1/15/27 (d)(e)

       700        700,000   

Venture XVII CLO, Ltd., Series 2014-17A, Class B1, 2.78%, 7/15/26 (d)(e)

       500        499,887   

Voya CLO Ltd., Series 2014-4A, Class C, 4.67%, 10/14/26 (d)(e)

       1,750        1,719,765   

Westcott Park Clo, Ltd., Series 2016-1A (d)(e):

      

Class D, 5.01%, 7/20/28

       500        494,500   

Class E, 7.86%, 7/20/28

             500        475,000   
Total Asset-Backed Securities — 3.1%                      46,224,553   
      
                          
Corporate Bonds         

Aerospace & Defense — 2.0%

      

Accudyne Industries Borrower/Accudyne Industries LLC, 7.75%, 12/15/20 (e)

       3,118        2,408,655   
Corporate Bonds   

Par  

(000)

    Value  

Aerospace & Defense (continued)

      

Bombardier, Inc. (e):

      

5.50%, 9/15/18

     USD       1,217      $ 1,250,468   

6.00%, 10/15/22

       1,212        1,145,340   

6.13%, 1/15/23

       1,451        1,363,940   

7.50%, 3/15/25

       3,811        3,620,450   

KLX, Inc., 5.88%, 12/01/22 (e)

       2,025        2,125,237   

Meccanica Holdings USA, Inc., 6.25%, 1/15/40 (e)

       100        100,000   

TransDigm, Inc.:

      

5.50%, 10/15/20

       1,563        1,604,029   

6.00%, 7/15/22

       7,850        8,164,000   

6.50%, 7/15/24

       4,160        4,316,000   

6.38%, 6/15/26 (e)

       2,912        2,970,240   
      

 

 

 
                       29,068,359   

Air Freight & Logistics — 0.8%

      

Air Medical Merger Sub Corp., 6.38%, 5/15/23 (e)

       1,321        1,291,278   

National Air Cargo Group, Inc.:

      

11.88%, 5/02/18

       536        536,258   

11.88%, 5/08/18

       555        554,866   

XPO Logistics, Inc.:

      

7.88%, 9/01/19 (e)

       2,958        3,076,320   

5.75%, 6/15/21

     EUR        383        445,454   

6.50%, 6/15/22 (e)

     USD        4,105        4,264,069   

6.13%, 9/01/23 (e)

       1,617        1,661,468   
      

 

 

 
                       11,829,713   

Airlines — 1.8%

      

American Airlines Pass-Through Trust, Series 2013-2, Class C, 6.00%, 1/15/17 (e)

       6,255        6,333,541   

Continental Airlines Pass-Through Trust, Series 1997-4, Class B, 6.90%, 7/02/18

       106        108,368   

Delta Air Lines Pass-Through Trust, Series 2009-1, Class B, 9.75%, 6/17/18

       701        721,597   

Norwegian Air Shuttle ASA Pass-Through Trust, Series 2016-1, Class B, 7.50%, 5/10/25 (e)

       1,895        1,868,982   

US Airways Pass-Through Trust:

      

Series 2012-2, Class C, 5.45%, 6/03/18

       5,720        5,927,350   

Series 2013-1, Class B, 5.38%, 5/15/23

       4,764        4,931,247   

Virgin Australia Trust, Series 2013-1 (e):

      

Class C, 7.13%, 10/23/18

       4,625        4,682,618   

Class D, 8.50%, 10/23/16

       2,743        2,754,119   
      

 

 

 
                       27,327,822   

Auto Components — 1.7%

      

Adient Global Holdings Ltd.:

      

3.50%, 8/15/24

       250        290,407   

4.88%, 8/15/26 (e)

       2,105        2,133,944   

CNH Industrial Finance Europe SA, 2.88%, 5/17/23

       725        836,102   

Faurecia, 3.63%, 6/15/23

       300        349,694   

Fiat Chrysler Finance Europe:

      

4.75%, 3/22/21

     EUR        400        497,852   

4.75%, 7/15/22

       1,217        1,504,317   

FTE Verwaltungs GmbH, 9.00%, 7/15/20

       100        117,455   

Goodyear Dunlop Tires Europe BV, 3.75%, 12/15/23

       100        117,986   

Goodyear Tire & Rubber Co., 5.00%, 5/31/26

     USD        471        493,076   

Icahn Enterprises LP/Icahn Enterprises Finance Corp., 4.88%, 3/15/19

       7,711        7,672,445   

Schaeffler Finance BV, 4.75%, 5/15/23 (e)

       1,440        1,497,600   

Schaeffler Holding Finance BV (g):

      

(5.75% Cash or 6.50% PIK), 5.75%, 11/15/21

     EUR        360        435,193   

(6.25% Cash), 6.25%, 11/15/19 (e)

     USD        2,130        2,209,875   

(6.75% Cash), 6.75%, 11/15/22 (e)

       3,951        4,366,169   
 

 

See Notes to Financial Statements.

 

                
38    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

Corporate Bonds   

Par  

(000)

    Value  

Auto Components (continued)

      

Schaeffler Holding Finance BV (g) (continued):

      

(6.88% Cash or 7.63% PIK), 6.88%, 8/15/18 (e)

     USD       1,000      $ 1,025,000   

(6.88% Cash), 6.88%, 8/15/18

     EUR        510        583,102   

UCI International, Inc., 8.63%, 2/15/19 (a)(h)

     USD        7,080        1,522,200   

ZF North America Capital, Inc., 4.50%, 4/29/22 (e)

       321        339,457   
      

 

 

 
                       25,991,874   

Banks — 1.5%

      

Allied Irish Banks PLC, 4.13%, 11/26/25 (d)

     EUR        820        868,936   

Banco Espirito Santo SA (a)(h):

      

4.75%, 1/15/18

       1,900        487,452   

4.00%, 1/21/19

       1,100        282,209   

Bankia SA, 4.00%, 5/22/24 (d)

       1,000        1,111,810   

CIT Group, Inc.:

      

5.25%, 3/15/18

     USD        4,320        4,503,600   

6.63%, 4/01/18 (e)

       1,400        1,491,700   

5.50%, 2/15/19 (e)

       6,919        7,325,491   

5.00%, 8/01/23

       560        593,600   

6.00%, 4/01/36

       2,800        2,716,000   

Commerzbank AG, 7.75%, 3/16/21

     EUR        400        539,061   

HSH Nordbank AG, 0.50%, 2/14/17 (d)

       810        868,187   

Ibercaja Banco SA, 5.00%, 7/28/25 (d)

       600        621,909   

Intesa Sanpaolo SpA, 3.93%, 9/15/26

       200        233,541   
      

 

 

 
                       21,643,496   

Beverages — 0.1%

      

Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc., 4.13%, 5/15/23

       275        322,455   

Verallia Packaging SASU, 5.13%, 8/01/22

       775        925,419   
      

 

 

 
                       1,247,874   

Biotechnology — 0.1%

      

Senvion Holding GmbH, 6.63%, 11/15/20

             700        820,324   

Building Materials — 0.1%

      

Cemex Finance LLC, 4.63%, 6/15/24

       400        464,696   

Dry Mix Solutions Investissements SAS, 5.50%, 3/15/23 (d)

       200        227,552   

Titan Global Finance PLC, 3.50%, 6/17/21

       100        114,885   
      

 

 

 
                       807,133   

Building Products — 2.1%

      

American Builders & Contractors Supply Co., Inc. (e):

      

5.63%, 4/15/21

     USD        1,315        1,364,313   

5.75%, 12/15/23

       982        1,038,465   

BMBG Bond Finance SCA, 3.00%, 6/15/21

     EUR        225        257,541   

Builders FirstSource, Inc., 5.63%, 9/01/24 (e)

     USD        1,583        1,610,702   

Building Materials Corp. of America, 6.00%, 10/15/25 (e)

       4,118        4,514,357   

CPG Merger Sub LLC, 8.00%, 10/01/21 (e)

       4,330        4,416,600   

HeidelbergCement AG, 2.25%, 3/30/23

     EUR        425        508,678   

Masonite International Corp., 5.63%, 3/15/23 (e)

     USD        2,950        3,127,000   

Ply Gem Industries, Inc., 6.50%, 2/01/22

       4,730        4,883,725   

Standard Industries, Inc. (e):

      

5.13%, 2/15/21

       949        1,002,381   

5.50%, 2/15/23

       1,576        1,672,530   

USG Corp.:

      

9.50%, 1/15/18

       4,320        4,730,400   

5.88%, 11/01/21 (e)

       385        403,769   

5.50%, 3/01/25 (e)

       1,314        1,425,690   
      

 

 

 
                       30,956,151   

Capital Markets — 2.0%

      

American Capital Ltd., 6.50%, 9/15/18 (e)

       3,840        3,908,736   
Corporate Bonds   

Par  

(000)

    Value  

Capital Markets (continued)

      

BCD Acquisition, Inc., 9.63%, 9/15/23 (e)

     USD        745      $ 778,525   

Blackstone CQP Holdco LP, 9.30%, 3/19/19

       20,290        20,492,983   

E*Trade Financial Corp.:

      

5.38%, 11/15/22

       1,232        1,322,860   

4.63%, 9/15/23

       2,784        2,889,402   

Series A, 0.00%, 8/31/19 (i)(j)

       373        947,166   
      

 

 

 
                       30,339,672   

Chemicals — 1.6%

      

Axalta Coating Systems LLC, 4.88%, 8/15/24 (e)

       1,686        1,757,655   

Chemours Co.:

      

6.63%, 5/15/23

       1,115        1,070,400   

7.00%, 5/15/25

       1,826        1,747,254   

Huntsman International LLC:

      

4.88%, 11/15/20

       286        296,725   

5.13%, 4/15/21

     EUR        679        814,195   

5.13%, 11/15/22

     USD        1,254        1,294,755   

Ineos Finance PLC, 4.00%, 5/01/23

     EUR        548        626,548   

Inovyn Finance PLC, 6.25%, 5/15/21

       200        235,918   

Momentive Performance Materials, Inc., 3.88%, 10/24/21

     USD        4,488        3,709,108   

Montichem Holdco 3 SA, 5.25%, 6/15/21

     EUR        211        239,361   

NOVA Chemicals Corp. (e):

      

5.25%, 8/01/23

     USD        349        362,088   

5.00%, 5/01/25

       415        428,487   

Platform Specialty Products Corp. (e):

      

10.38%, 5/01/21

       468        491,400   

6.50%, 2/01/22

       7,764        7,356,390   

PQ Corp., 6.75%, 11/15/22 (e)

       2,197        2,328,820   

PSPC Escrow Corp., 6.00%, 2/01/23

     EUR        394        415,280   

WR Grace & Co-Conn, 5.13%, 10/01/21 (e)

     USD        232        247,080   
      

 

 

 
                       23,421,464   

Commercial Services & Supplies — 1.5%

      

AA Bond Co., Ltd., 5.50%, 7/31/43

     GBP        400        538,391   

ADS Waste Holdings, Inc., 8.25%, 10/01/20

     USD        1,341        1,403,021   

ADT Corp.:

      

3.50%, 7/15/22

       2,787        2,668,552   

4.13%, 6/15/23

       537        526,260   

Avis Budget Car Rental LLC/Avis Budget Finance, Inc., 5.50%, 4/01/23

       45        46,631   

Bilbao Luxembourg SA, (10.50% Cash or 11.25% PIK), 11.06%, 12/01/18 (g)

     EUR        428        473,126   

Brand Energy & Infrastructure Services, Inc., 8.50%, 12/01/21 (e)

     USD        1,875        1,870,313   

Iron Mountain Europe PLC, 6.13%, 9/15/22

     GBP        100        139,589   

Mobile Mini, Inc., 5.88%, 7/01/24

     USD        2,683        2,790,320   

Mustang Merger Corp., 8.50%, 8/15/21 (e)

       2,688        2,808,960   

Silk Bidco AS, 7.50%, 2/01/22

     EUR        247        295,216   

United Rentals North America, Inc.:

      

7.63%, 4/15/22

     USD        5,555        5,923,019   

5.75%, 11/15/24

       1,354        1,414,930   

Verisure Holding AB, 6.00%, 11/01/22

     EUR        775        946,599   
      

 

 

 
                       21,844,927   

Communications Equipment — 2.0%

      

Alcatel-Lucent USA, Inc., 6.45%, 3/15/29

     USD        6,533        7,104,638   

CommScope Technologies Finance LLC, 6.00%, 6/15/25 (e)

       2,125        2,255,156   

CommScope, Inc. (e):

      

4.38%, 6/15/20

       2,278        2,357,730   

5.50%, 6/15/24

       2,169        2,277,450   

Nokia OYJ, 6.63%, 5/15/39

       3,596        3,919,640   

Zayo Group LLC/Zayo Capital, Inc.:

      

6.00%, 4/01/23

       4,466        4,644,640   

6.38%, 5/15/25

       6,837        7,214,471   
      

 

 

 
                       29,773,725   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    39


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

Corporate Bonds   

Par  

(000)

    Value  

Construction & Engineering — 0.5%

      

AECOM Co.:

      

5.75%, 10/15/22

     USD        716      $ 758,960   

5.88%, 10/15/24

       2,124        2,323,125   

BlueLine Rental Finance Corp., 7.00%, 2/01/19 (e)

       2,187        1,891,755   

Engility Corp., 8.88%, 9/01/24 (e)

       1,064        1,082,620   

Novafives SAS, 4.50%, 6/30/21

     EUR        320        331,994   

Swissport Investments SA, 6.75%, 12/15/21

       827        963,994   

Weekley Homes LLC/Weekley Finance Corp.,
6.00%, 2/01/23

     USD        862        793,040   
      

 

 

 
                       8,145,488   

Construction Materials — 2.2%

      

American Tire Distributors, Inc., 10.25%, 3/01/22 (e)

       1,839        1,630,972   

Beacon Roofing Supply, Inc., 6.38%, 10/01/23

       566        608,450   

HD Supply, Inc.:

      

7.50%, 7/15/20

       10,167        10,586,389   

5.25%, 12/15/21 (e)

       10,967        11,686,655   

5.75%, 4/15/24 (e)

       3,888        4,140,720   

LKQ Italia Bondco SpA, 3.88%, 4/01/24

     EUR        500        603,737   

Officine MaccaFerri SpA, 5.75%, 6/01/21

       300        271,653   

PulteGroup, Inc., 5.50%, 3/01/26

     USD        1,571        1,680,970   

Rexel SA, 3.50%, 6/15/23

     EUR        972        1,130,297   
      

 

 

 
                       32,339,843   

Consumer Finance — 2.2%

      

Alliance Data Systems Corp. (e):

      

5.25%, 12/01/17

     USD        150        153,375   

5.38%, 8/01/22

       503        495,455   

Ally Financial, Inc.:

      

5.13%, 9/30/24

       1,230        1,332,244   

4.63%, 3/30/25

       2,029        2,105,087   

8.00%, 11/01/31

       18,930        23,709,825   

Navient Corp.:

      

6.63%, 7/26/21

       1,074        1,107,562   

5.50%, 1/25/23

       165        156,750   

6.13%, 3/25/24

       642        616,320   

5.88%, 10/25/24

       723        681,428   

5.63%, 8/01/33

       1,821        1,493,220   

OneMain Financial Holdings LLC (e):

      

6.75%, 12/15/19

       915        960,750   

7.25%, 12/15/21

       275        288,063   
      

 

 

 
                       33,100,079   

Containers & Packaging — 2.3%

      

Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc.:

      

6.75%, 1/31/21 (e)

       1,458        1,510,852   

4.07%, 5/15/21 (d)(e)

       693        705,128   

6.00%, 6/30/21 (e)

       1,752        1,804,560   

4.25%, 1/15/22

     EUR        791        915,408   

6.75%, 5/15/24

       650        784,859   

Ardagh Packaging Finance PLC/Ardagh MP Holdings USA, Inc. (e):

      

6.25%, 1/31/19

     USD        3,868        3,955,030   

4.63%, 5/15/23

       1,738        1,768,415   

7.25%, 5/15/24

       3,608        3,838,010   

Ball Corp.:

      

5.00%, 3/15/22

       843        910,440   

4.00%, 11/15/23

       1,374        1,398,045   

Beverage Packaging Holdings Luxembourg II SA, 5.63%, 12/15/16 (e)

       978        980,445   

Crown European Holdings SA:

      

4.00%, 7/15/22

     EUR        558        697,174   

3.38%, 5/15/25

       503        594,175   
Corporate Bonds   

Par  

(000)

    Value  

Containers & Packaging (continued)

      

JH-Holding Finance SA, (8.25% Cash), 8.25%, 12/01/22 (g)

     EUR        300      $ 359,204   

Lecta SA, 6.50%, 8/01/23

       125        142,220   

Norske Skog, 11.75%, 12/15/19

       228        200,279   

Reynolds Group Issuer, Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer (e):

      

4.13%, 7/15/21 (d)

     USD        3,894        3,952,410   

5.13%, 7/15/23

       899        932,713   

7.00%, 7/15/24

       3,584        3,839,360   

Sappi Papier Holding GmbH, 4.00%, 4/01/23

     EUR        150        175,683   

Sealed Air Corp.:

      

4.88%, 12/01/22 (e)

     USD        709        744,450   

4.50%, 9/15/23

     EUR        560        696,112   

5.13%, 12/01/24 (e)

     USD        1,976        2,114,320   

SGD Group SAS, 5.63%, 5/15/19

     EUR        205        235,404   

Signode Industrial Group Lux SA/Signode Industrial Group US, Inc., 6.38%, 5/01/22 (e)

     USD        177        180,540   

Smurfit Kappa Acquisitions, 2.75%, 2/01/25

     EUR        376        444,063   

Stora Enso OYJ, 2.13%, 6/16/23

       175        199,658   
      

 

 

 
                       34,078,957   

Diversified Consumer Services — 0.6%

      

ADT Corp., 4.88%, 7/15/32 (e)

     USD        798        682,290   

APX Group, Inc.:

      

6.38%, 12/01/19

       578        593,167   

8.75%, 12/01/20

       627        602,704   

7.88%, 12/01/22 (e)

       975        1,026,187   

Cognita Financing PLC, 7.75%, 8/15/21

     GBP        225        310,255   

Prime Security Services Borrower LLC/Prime Finance, Inc., 9.25%, 5/15/23 (e)

     USD        3,359        3,657,111   

Service Corp. International, 5.38%, 5/15/24

       1,690        1,812,525   
      

 

 

 
                       8,684,239   

Diversified Financial Services — 2.5%

      

Aircastle Ltd.:

      

7.63%, 4/15/20

       128        147,840   

5.13%, 3/15/21

       643        697,655   

5.50%, 2/15/22

       2,119        2,301,764   

5.00%, 4/01/23

       1,404        1,488,240   

Deutsche Bank AG, 4.50%, 5/19/26

     EUR        600        647,494   

DFC Finance Corp., 12.00%, 6/16/20 (e)(g)

     USD        2,083        1,281,151   

FBM Finance, Inc., 8.25%, 8/15/21 (e)

       625        654,688   

Gala Group Finance PLC, 8.88%, 9/01/18

     GBP        681        919,885   

Garfunkelux Holdco 3 SA, 8.50%, 11/01/22

       225        304,322   

HRG Group, Inc., 7.88%, 7/15/19

       2,745        2,902,837   

International Lease Finance Corp.:

      

5.88%, 4/01/19

       160        172,600   

8.25%, 12/15/20

       150        179,438   

4.63%, 4/15/21

       687        728,564   

Jefferies Finance LLC/JFIN Co-Issuer Corp. (e):

      

7.38%, 4/01/20

     USD       2,695        2,573,725   

6.88%, 4/15/22

       2,552        2,315,940   

Lehman Brother Holding Escrow, 1.00%, 9/22/18 (a)(h)

       430        31,175   

Lehman Brothers Holdings, Inc. (a)(h):

      

5.38%, 10/17/16

     EUR        350        34,005   

4.75%, 1/16/17

       1,890        183,624   

1.00%, 2/05/17

       3,950        385,968   

1.00%, 12/31/49

     USD        1,535        111,288   

Mercury Bondco PLC, (8.25% Cash, 9.00% PIK), 8.25%, 5/30/21 (g)

     EUR        564        657,227   

MSCI, Inc., 5.75%, 8/15/25 (e)

     USD        807        874,586   

Pershing Square Holdings, Ltd., 5.50%, 7/15/22 (e)

       2,100        2,094,750   

ProGroup AG, 5.13%, 5/01/22

     EUR        206        246,729   
 

 

See Notes to Financial Statements.

 

                
40    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

Corporate Bonds   

Par  

(000)

    Value  

Diversified Financial Services (continued)

      

Reynolds Group Issuer, Inc.:

      

5.75%, 10/15/20

     USD        6,454      $ 6,655,687   

8.25%, 2/15/21

       6,366        6,620,640   

UniCredit SpA:

      

6.95%, 10/31/22

     EUR        475        605,186   

5.75%, 10/28/25 (d)

       700        819,000   

4.38%, 1/03/27 (d)

       675        749,923   

WMG Acquisition Corp., 5.00%, 8/01/23 (e)

     USD        495        508,613   
      

 

 

 
                       37,894,544   

Diversified Telecommunication Services — 3.0%

  

CenturyLink, Inc., 6.45%, 6/15/21

       6,545        7,031,784   

Consolidated Communications, Inc., 6.50%, 10/01/22

       1,020        989,400   

Frontier Communications Corp.:

      

8.50%, 4/15/20

       2,275        2,454,156   

6.25%, 9/15/21

       3,005        2,930,837   

7.13%, 1/15/23

       1,330        1,253,525   

7.63%, 4/15/24

       1,897        1,783,180   

6.88%, 1/15/25

       4,331        3,887,073   

11.00%, 9/15/25

       845        912,600   

Level 3 Financing, Inc.:

      

5.38%, 8/15/22

       315        329,222   

5.63%, 2/01/23

       2,186        2,289,835   

5.13%, 5/01/23

       3,232        3,357,240   

5.38%, 1/15/24

       1,771        1,857,336   

5.38%, 5/01/25

       4,442        4,664,100   

5.25%, 3/15/26 (e)

       1,973        2,044,521   

OTE PLC, 3.50%, 7/09/20

     EUR        300        344,206   

SoftBank Group Corp.:

      

4.75%, 7/30/25

       110        138,804   

5.25%, 7/30/27

       100        126,464   

Telecom Italia Capital SA:

      

6.00%, 9/30/34

     USD        2,890        2,904,739   

7.20%, 7/18/36

       690        739,163   

Telecom Italia Finance SA, 7.75%, 1/24/33

     EUR        380        580,001   

Telecom Italia SpA:

      

6.38%, 6/24/19

     GBP        900        1,323,418   

3.25%, 1/16/23

     EUR        300        363,564   

5.88%, 5/19/23

     GBP        400        624,124   

Telenet Finance V Luxembourg SCA, 6.75%, 8/15/24

     EUR        1,982        2,476,121   
      

 

 

 
                       45,405,413   

Electric Utilities — 0.1%

  

Viridian Group FundCo II Ltd., 7.50%, 3/01/20

             454        539,635   

Electrical Equipment — 0.2%

  

Areva SA, 4.88%, 9/23/24

       50        54,072   

Belden, Inc., 5.50%, 4/15/23

       672        798,380   

Trionista Holdco GmbH, 5.00%, 4/30/20

       1,405        1,611,544   

Trionista TopCo GmbH, 6.88%, 4/30/21

       418        491,902   
      

 

 

 
                       2,955,898   

Electronic Equipment, Instruments & Components — 0.7%

  

CDW LLC/CDW Finance Corp.:

      

5.00%, 9/01/23

     USD        4,354        4,511,832   

5.50%, 12/01/24

       5,917        6,341,249   
      

 

 

 
                       10,853,081   

Energy Equipment & Services — 0.9%

      

Ensco PLC:

      

4.70%, 3/15/21

       515        444,445   

4.50%, 10/01/24

       1,189        846,425   

5.20%, 3/15/25

       932        671,040   

Gates Global LLC/Gates Global Co.:

      

5.75%, 7/15/22

     EUR        110        113,016   

6.00%, 7/15/22 (e)

     USD        1,247        1,184,650   
Corporate Bonds   

Par  

(000)

    Value  

Energy Equipment & Services (continued)

      

Genesis Energy LP/Genesis Energy Finance Corp.:

      

5.75%, 2/15/21

     USD        283      $ 280,878   

6.75%, 8/01/22

       1,526        1,556,520   

Noble Holding International Ltd.:

      

4.63%, 3/01/21

       195        163,332   

6.95%, 4/01/25

       305        248,575   

Transocean, Inc.:

      

3.75%, 10/15/17

       1,339        1,335,652   

6.00%, 3/15/18

       3,455        3,459,319   

7.38%, 4/15/18

       175        176,750   

8.13%, 12/15/21

       553        518,438   

5.05%, 10/15/22

       1,522        1,213,795   

Weatherford International Ltd., 7.75%, 6/15/21

       933        923,670   
      

 

 

 
                       13,136,505   

Environmental, Maintenance, & Security Service — 0.0%

  

Befesa Zinc SAU Via Zinc Capital SA, 8.88%, 5/15/18

     EUR        380        432,349   

Food & Staples Retailing — 2.5%

  

Albertsons Cos. LLC/Safeway, Inc./New Albertson’s, Inc./Albertson’s LLC (e):

      

6.63%, 6/15/24

     USD        1,082        1,161,635   

5.75%, 3/15/25

       2,651        2,743,785   

Bakkavor Finance 2 PLC, 8.25%, 2/15/18

     GBP        326        436,430   

Casino Guichard Perrachon SA:

      

5.98%, 5/26/21

     EUR        200        261,270   

3.31%, 1/25/23

       600        730,783   

3.25%, 3/07/24

       600        719,105   

2.33%, 2/07/25

       300        337,742   

4.05%, 8/05/26

       200        233,701   

Dollar Tree, Inc.:

      

5.25%, 3/01/20

     USD        262        272,807   

5.75%, 3/01/23

       13,049        14,043,986   

Family Dollar Stores, Inc., 5.00%, 2/01/21

       1,434        1,559,475   

R&R Ice Cream PLC, (9.25% Cash or 10.00% PIK), 9.25%, 5/15/18 (g)

     EUR        823        922,045   

Rite Aid Corp.:

      

9.25%, 3/15/20

     USD        2,080        2,194,400   

6.75%, 6/15/21

       1,091        1,149,641   

6.13%, 4/01/23 (e)

       9,022        9,739,971   

Tesco Corporate Treasury Services PLC, 2.50%, 7/01/24

     EUR        130        149,494   

Tesco PLC:

      

5.00%, 3/24/23

     GBP        100        145,451   

6.00%, 12/14/29

       200        308,167   
      

 

 

 
                       37,109,888   

Food Products — 1.7%

  

Acosta, Inc., 7.75%, 10/01/22 (e)

     USD        3,347        3,091,791   

Aramark Services, Inc.:

      

5.75%, 3/15/20

       321        330,630   

5.13%, 1/15/24

       1,712        1,775,130   

5.13%, 1/15/24 (e)

       934        968,441   

Darling Global Finance BV, 4.75%, 5/30/22

     EUR        100        116,899   

FAGE International SA/FAGE USA Dairy Industry, Inc., 5.63%, 8/15/26 (e)

     USD        1,544        1,596,110   

JBS USA LLC/JBS USA Finance, Inc. (e):

      

7.25%, 6/01/21

       340        351,900   

5.75%, 6/15/25

       1,860        1,887,900   

Pinnacle Foods Finance Corp., 5.88%, 1/15/24 (e)

       445        479,488   

Post Holdings, Inc. (e):

      

7.75%, 3/15/24

       4,599        5,110,639   

8.00%, 7/15/25

       1,826        2,086,205   

5.00%, 8/15/26

       2,709        2,702,227   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    41


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

Corporate Bonds   

Par  

(000)

    Value  

Food Products (continued)

  

Smithfield Foods, Inc.:

      

5.88%, 8/01/21 (e)

     USD        891      $ 931,095   

6.63%, 8/15/22

       1,516        1,606,960   

TreeHouse Foods, Inc., 6.00%, 2/15/24 (e)

       976        1,061,400   

WhiteWave Foods Co., 5.38%, 10/01/22

       1,255        1,415,013   
      

 

 

 
                       25,511,828   

Forest Products — 0.0%

  

Tereos Finance Groupe I SA, 4.13%, 6/16/23

     EUR        400        466,236   

Health Care Equipment & Supplies — 0.9%

      

Crimson Merger Sub, Inc., 6.63%, 5/15/22 (e)

     USD        3,373        3,018,835   

DJO Finco, Inc./DJO Finance LLC/DJO Finance Corp., 8.13%, 6/15/21 (e)

       6,387        5,620,560   

Fresenius Medical Care US Finance, Inc., 5.75%, 2/15/21 (e)

       1,580        1,793,300   

IDH Finance PLC, 6.25%, 8/15/22

     GBP        225        294,099   

Mallinckrodt International Finance SA/Mallinckrodt CB LLC (e):

      

4.88%, 4/15/20

     USD        980        1,002,050   

5.75%, 8/01/22

       1,250        1,254,688   

Teleflex, Inc., 4.88%, 6/01/26

       684        713,070   
      

 

 

 
                       13,696,602   

Health Care Providers & Services — 6.8%

  

Acadia Healthcare Co., Inc.:

      

5.13%, 7/01/22

       502        500,745   

5.63%, 2/15/23

       1,378        1,402,115   

6.50%, 3/01/24

       434        456,243   

Alere, Inc., 6.38%, 7/01/23 (e)

       2,503        2,559,317   

Amsurg Corp., 5.63%, 7/15/22

       5,476        5,653,970   

Centene Corp.:

      

5.63%, 2/15/21

       2,516        2,676,395   

4.75%, 5/15/22

       2,852        2,962,515   

6.13%, 2/15/24

       1,484        1,617,560   

CHS/Community Health Systems, Inc.:

      

5.13%, 8/15/18

       427        432,338   

6.88%, 2/01/22

       3,208        2,662,640   

DaVita HealthCare Partners, Inc.:

      

5.13%, 7/15/24

       1,398        1,443,435   

5.00%, 5/01/25

       3,899        3,951,636   

Envision Healthcare Corp., 5.13%, 7/01/22 (e)

       835        843,350   

HCA Holdings, Inc., 6.25%, 2/15/21

       5        5,413   

HCA, Inc.:

      

3.75%, 3/15/19

       2,911        3,001,969   

6.50%, 2/15/20

       4,735        5,232,175   

7.50%, 2/15/22

       1,059        1,207,260   

5.88%, 3/15/22

       1,840        2,024,000   

4.75%, 5/01/23

       512        535,680   

5.88%, 5/01/23

       4,096        4,352,000   

5.00%, 3/15/24

       1,955        2,072,300   

5.38%, 2/01/25

       6,160        6,344,800   

5.25%, 4/15/25

       813        870,926   

5.88%, 2/15/26

       3,125        3,304,687   

5.25%, 6/15/26

       4,406        4,708,912   

4.50%, 2/15/27

       2,772        2,796,255   

HealthSouth Corp.:

      

5.13%, 3/15/23

       2,840        2,875,500   

5.75%, 11/01/24

       2,360        2,447,320   

5.75%, 9/15/25

       1,670        1,747,238   

Hologic, Inc., 5.25%, 7/15/22 (e)

       2,620        2,787,025   

MEDNAX, Inc., 5.25%, 12/01/23 (e)

       1,134        1,193,535   

MPH Acquisition Holdings LLC, 7.13%, 6/01/24 (e)

       2,051        2,204,825   

RegionalCare Hospital Partners Holdings, Inc., 8.25%, 5/01/23 (e)

       2,444        2,489,825   
Corporate Bonds   

Par  

(000)

    Value  

Health Care Providers & Services (continued)

  

Sterigenics-Nordion Holdings LLC, 6.50%, 5/15/23 (e)

     USD        424      $ 443,114   

Surgery Center Holdings, Inc., 8.88%, 4/15/21 (e)

       388        414,190   

Surgical Care Affiliates, Inc., 6.00%, 4/01/23 (e)

       2,641        2,773,050   

Tenet Healthcare Corp.:

      

6.25%, 11/01/18

       1,308        1,396,290   

4.75%, 6/01/20

       1,805        1,850,125   

4.15%, 6/15/20 (d)

       1,432        1,433,790   

6.00%, 10/01/20

       3,835        4,050,719   

4.50%, 4/01/21

       74        74,703   

4.38%, 10/01/21

       525        526,806   

8.13%, 4/01/22

       1,933        1,957,162   

6.75%, 6/15/23

       6,195        5,892,994   

Voyage Care Bondco PLC, 6.50%, 8/01/18

     GBP        586        765,273   

WellCare Health Plans, Inc., 5.75%, 11/15/20

     USD        1,066        1,101,978   
      

 

 

 
                       102,044,098   

Health Care Technology — 0.1%

  

IMS Health, Inc., 6.00%, 11/01/20 (e)

             795        809,906   

Hotels, Restaurants & Leisure — 4.0%

      

Boyd Gaming Corp., 6.88%, 5/15/23

       1,096        1,183,680   

Caesars Entertainment Resort Properties LLC/Caesars Entertainment Resort Property, 8.00%, 10/01/20

       3,693        3,748,395   

Carlson Travel Holdings, Inc., (7.50% Cash or 8.25% PIK), 7.50%, 8/15/19 (e)(g)

       654        650,730   

Cedar Fair LP/Canada’s Wonderland Co., 5.38%, 6/01/24

       1,070        1,131,525   

Cirsa Funding Luxembourg SA:

      

5.75%, 5/15/21

     EUR        225        266,035   

5.88%, 5/15/23

       206        241,352   

Codere Finance 2 Luxembourg SA (5.50% Cash or 3.50% PIK) (g):

      

9.00%, 6/30/21 (e)

     USD        154        158,620   

9.00%, 6/30/21

       85        87,866   

CPUK Finance Ltd., 7.00%, 2/28/42

     GBP        275        385,889   

Enterprise Funding Ltd., Series ETI, 3.50%, 9/10/20 (j)

       400        413,905   

ESH Hospitality, Inc., 5.25%, 5/01/25 (e)

     USD        4,185        4,183,703   

Gala Electric Casinos Ltd., 11.50%, 6/01/19

     GBP        426        576,676   

International Game Technology PLC:

      

6.25%, 2/15/22 (e)

     USD        400        431,000   

4.75%, 2/15/23

     EUR        310        379,781   

KFC Holding Co/Pizza Hut Holdings LLC/Taco Bell of America LLC (e):

      

5.00%, 6/01/24

     USD        255        267,424   

5.25%, 6/01/26

       1,551        1,647,937   

MGM Resorts International:

      

8.63%, 2/01/19

       790        893,687   

6.75%, 10/01/20

       3,912        4,371,660   

6.63%, 12/15/21

       1,130        1,268,425   

4.63%, 9/01/26

       1,414        1,399,860   

MGP Escrow Issuer LLC/MGP Escrow Co-Issuer, Inc., 5.63%, 5/01/24 (e)

       8,737        9,479,645   

New Red Finance, Inc., 6.00%, 4/01/22 (e)

       4,455        4,661,044   

Pizzaexpress Financing 2 PLC, 6.63%, 8/01/21

     GBP        300        391,992   

PortAventura Entertainment Barcelona BV, 7.25%, 12/01/20

     EUR        439        510,683   

Regal Entertainment Group, 5.75%, 2/01/25

     USD        489        497,558   

Sabre GLBL, Inc. (e):

      

5.38%, 4/15/23

       1,516        1,567,165   

5.25%, 11/15/23

       807        829,193   

Schumann SpA, 7.00%, 7/31/23

     EUR        175        201,051   

Scientific Games International, Inc.:

      

7.00%, 1/01/22 (e)

     USD        1,521        1,616,062   

10.00%, 12/01/22

       1,908        1,764,900   
 

 

See Notes to Financial Statements.

 

                
42    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

Corporate Bonds   

Par  

(000)

    Value  

Hotels, Restaurants & Leisure (continued)

      

Six Flags Entertainment Corp., 5.25%, 1/15/21 (e)

     USD        3,247      $ 3,360,645   

Station Casinos LLC, 7.50%, 3/01/21

       5,785        6,151,734   

Tropicana Entertainment LLC/Tropicana Finance Corp., 9.63%, 12/15/16 (a)(h)

       1,850          

Unique Pub Finance Co. PLC:

      

Series A3, 6.54%, 3/30/21

     GBP        756        1,058,052   

Series A4, 5.66%, 6/30/27

       774        1,053,402   

Series N, 6.46%, 3/30/32

       1,000        1,078,876   

Vue International Bidco PLC, 7.88%, 7/15/20

       520        713,565   

Yum! Brands, Inc.:

      

3.75%, 11/01/21

     USD        526        532,575   

3.88%, 11/01/23

       195        193,050   
      

 

 

 
                       59,349,342   

Household Durables — 2.0%

      

Beazer Homes USA, Inc., 6.63%, 4/15/18

       215        219,031   

Brookfield Residential Properties, Inc./Brookfield Residential US Corp., 6.13%, 7/01/22 (e)

       1,604        1,612,020   

CalAtlantic Group, Inc.:

      

8.38%, 1/15/21

       2,680        3,195,900   

5.25%, 6/01/26

       710        720,650   

DR Horton, Inc., 4.00%, 2/15/20

       2,408        2,522,380   

Lennar Corp.:

      

4.50%, 11/15/19

       2,482        2,621,613   

4.75%, 4/01/21

       1,909        2,048,357   

4.75%, 11/15/22

       158        166,295   

4.88%, 12/15/23

       968        1,013,980   

PulteGroup, Inc., 6.38%, 5/15/33

       2,805        2,952,262   

Riverbed Technology, Inc., 8.88%, 3/01/23 (e)

       1,502        1,610,895   

Ryland Group, Inc., 6.63%, 5/01/20

       1,160        1,302,100   

Standard Pacific Corp.:

      

10.75%, 9/15/16

       3,420        3,424,275   

5.88%, 11/15/24

       2,360        2,548,800   

TRI Pointe Group, Inc.:

      

4.38%, 6/15/19

       1,060        1,089,150   

4.88%, 7/01/21

       1,275        1,313,250   

5.88%, 6/15/24

       1,540        1,609,300   
      

 

 

 
                       29,970,258   

Household Products — 0.6%

      

Prestige Brands, Inc., 6.38%, 3/01/24 (e)

       1,026        1,095,255   

Spectrum Brands, Inc.:

      

6.38%, 11/15/20

       1,635        1,698,356   

6.63%, 11/15/22

       1,385        1,481,950   

6.13%, 12/15/24

       1,832        1,976,270   

5.75%, 7/15/25

       1,721        1,865,134   

Tempur Sealy International, Inc., 5.50%, 6/15/26 (e)

       944        986,008   
      

 

 

 
                       9,102,973   

Independent Power and Renewable Electricity Producers — 1.5%

  

Calpine Corp.:

      

6.00%, 1/15/22 (e)

       356        373,355   

5.38%, 1/15/23

       514        514,319   

5.88%, 1/15/24 (e)

       1,999        2,113,942   

5.75%, 1/15/25

       1,856        1,849,040   

Dynegy, Inc.:

      

6.75%, 11/01/19

       4,240        4,346,000   

7.38%, 11/01/22

       1,735        1,713,312   

7.63%, 11/01/24

       190        186,200   

MPM Escrow LLC, 8.88%, 10/15/20

       3,738          

NRG Energy, Inc.:

      

8.25%, 9/01/20

       155        159,263   

7.88%, 5/15/21

       826        861,105   

6.63%, 3/15/23

       210        214,200   

6.25%, 5/01/24

       185        183,613   
Corporate Bonds   

Par  

(000)

    Value  

Independent Power and Renewable Electricity Producers (continued)

  

NRG Energy, Inc. (continued):

      

7.25%, 5/15/26 (e)

     USD        1,452      $ 1,507,902   

6.63%, 1/15/27 (e)

       4,973        4,982,300   

NRG Yield Operating LLC, 5.38%, 8/15/24

       645        672,412   

QEP Resources, Inc., 5.38%, 10/01/22

       2,563        2,537,370   
      

 

 

 
                       22,214,333   

Insurance — 0.9%

      

Assicurazioni Generali SpA, 5.00%, 6/08/48 (d)

     EUR        400        460,123   

BNP Paribas Cardif SA, 4.03% (d)(k)

       100        112,833   

Credit Agricole Assurances SA, 4.50% (d)(k)

       200        228,389   

HUB International Ltd. (e):

      

9.25%, 2/15/21

     USD        874        922,070   

7.88%, 10/01/21

       5,484        5,607,390   

Old Mutual PLC, 8.00%, 6/03/21

     GBP        100        150,745   

Pension Insurance Corp. PLC, 6.50%, 7/03/24

       275        362,844   

Radian Group, Inc., 7.00%, 3/15/21

     USD        366        411,750   

TMF Group Holding BV, 9.88%, 12/01/19

     EUR        570        679,741   

Trader Corp., 9.88%, 8/15/18 (e)

     USD        913        935,825   

Wayne Merger Sub LLC, 8.25%, 8/01/23 (e)

       2,687        2,777,350   
      

 

 

 
                       12,649,060   

Internet Software & Services — 0.4%

  

Equinix, Inc.:

      

5.38%, 1/01/22

       1,110        1,185,613   

5.88%, 1/15/26

       2,567        2,796,413   

Netflix, Inc.:

      

5.50%, 2/15/22

       2,087        2,243,525   

5.75%, 3/01/24

       235        253,800   

5.88%, 2/15/25

       2        2,170   
      

 

 

 
                       6,481,521   

IT Services — 2.9%

      

Ceridian HCM Holding, Inc., 11.00%, 3/15/21 (e)

       1,349        1,396,215   

First Data Corp. (e):

      

5.38%, 8/15/23

       5,725        5,939,687   

7.00%, 12/01/23

       13,314        13,946,415   

5.75%, 1/15/24

       16,685        17,081,269   

Western Digital Corp., 10.50%, 4/01/24 (e)

       751        848,630   

WEX, Inc., 4.75%, 2/01/23 (e)

       4,804        4,731,940   
      

 

 

 
                       43,944,156   

Machinery — 0.2%

      

Gardner Denver, Inc., 6.88%, 8/15/21 (e)

       730        673,425   

SPX FLOW, Inc. (e):

      

5.63%, 8/15/24

       993        1,020,308   

5.88%, 8/15/26

       993        1,025,272   

Trinseo Materials Operating SCA/Trinseo Materials Finance, Inc., 6.38%, 5/01/22

     EUR        490        579,638   
      

 

 

 
                       3,298,643   

Media — 15.6%

      

Altice Financing SA:

      

6.50%, 1/15/22 (e)

     USD        1,945        2,047,112   

5.25%, 2/15/23

     EUR        485        570,775   

7.50%, 5/15/26 (e)

     USD        1,259        1,325,098   

Altice Luxembourg SA:

      

7.75%, 5/15/22 (e)

       2,649        2,819,529   

6.25%, 2/15/25

     EUR        342        376,715   

7.63%, 2/15/25 (e)

     USD        653        670,958   

Altice US Finance I Corp. (e):

      

5.38%, 7/15/23

       6,270        6,559,987   

5.50%, 5/15/26

       2,435        2,568,925   

AMC Networks, Inc.:

      

4.75%, 12/15/22

       1,613        1,661,390   

5.00%, 4/01/24

       756        774,900   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    43


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

Corporate Bonds   

Par  

(000)

    Value  

Media (continued)

      

Cablevision Systems Corp.:

      

8.63%, 9/15/17

     USD        783      $ 832,133   

7.75%, 4/15/18

       1,393        1,487,028   

8.00%, 4/15/20

       810        862,650   

CCO Holdings LLC/CCO Holdings Capital Corp.:

      

5.25%, 9/30/22

       1,235        1,296,750   

5.13%, 5/01/23 (e)

       678        713,385   

5.88%, 4/01/24 (e)

       3,589        3,867,147   

5.75%, 2/15/26 (e)

       1,227        1,312,890   

5.50%, 5/01/26 (e)

       3,108        3,290,595   

5.88%, 5/01/27 (e)

       6,267        6,705,690   

Cellnex Telecom SA, 2.38%, 1/16/24

     EUR        200        230,140   

Cequel Communications Holdings I LLC/Cequel Capital Corp. (e):

      

5.13%, 12/15/21

     USD        4,672        4,716,215   

7.75%, 7/15/25

       6,029        6,586,682   

Clear Channel International BV, 8.75%, 12/15/20 (e)

       3,146        3,334,760   

Clear Channel Worldwide Holdings, Inc.:

      

6.50%, 11/15/22

       15,207        15,810,976   

Series B, 7.63%, 3/15/20

       5,090        5,128,175   

Columbus Cable Barbados Ltd., 7.38%, 3/30/21 (e)

       2,647        2,832,290   

CSC Holdings LLC:

      

10.13%, 1/15/23 (e)

       4,025        4,596,047   

5.25%, 6/01/24

       5,315        5,172,133   

6.63%, 10/15/25 (e)

       2,461        2,673,261   

10.88%, 10/15/25 (e)

       4,008        4,699,380   

DISH DBS Corp.:

      

4.25%, 4/01/18

       3,209        3,299,430   

6.75%, 6/01/21

       134        143,966   

5.88%, 7/15/22

       145        147,900   

5.00%, 3/15/23

       5,022        4,834,177   

5.88%, 11/15/24

       1,001        987,236   

7.75%, 7/01/26 (e)

       3,927        4,190,070   

DISH Network Corp., 3.38%, 8/15/26 (e)(j)

       1,894        1,975,679   

eircom Finance DAC, 4.50%, 5/31/22

     EUR        300        342,087   

Gray Television, Inc.:

      

7.50%, 10/01/20

     USD        1,318        1,370,720   

5.88%, 7/15/26 (e)

       554        577,545   

Hughes Satellite Systems Corp. (e):

      

5.25%, 8/01/26

       1,503        1,490,961   

6.63%, 8/01/26

       856        849,580   

iHeartCommunications, Inc.:

      

9.00%, 12/15/19

       1,292        1,044,905   

9.00%, 3/01/21

       241        180,750   

9.00%, 9/15/22

       3,845        2,816,462   

10.63%, 3/15/23

       770        567,875   

Intelsat Jackson Holdings SA:

      

7.25%, 10/15/20

       2,929        2,277,297   

5.50%, 8/01/23

       2,761        1,884,383   

Lamar Media Corp., 5.75%, 2/01/26

       526        568,738   

LGE HoldCo VI BV, 7.13%, 5/15/24

     EUR        300        378,974   

McGraw-Hill Global Education Holdings LLC/McGraw-Hill Global Education Finance, 7.88%, 5/15/24 (e)

     USD        639        683,730   

MDC Partners, Inc., 6.50%, 5/01/24 (e)

       2,992        2,842,400   

Midcontinent Communications & Midcontinent Finance Corp., 6.25%, 8/01/21 (e)

       3,901        4,086,297   

NAI Entertainment Holdings/NAI Entertainment Holdings Finance Corp., 5.00%, 8/01/18 (e)

       2,039        2,069,585   

National CineMedia LLC, 5.75%, 8/15/26 (e)

       605        620,881   

Nexstar Escrow Corp., 5.63%, 8/01/24 (e)

       1,669        1,702,380   

Nielsen Finance LLC/Nielsen Finance Co., 5.00%, 4/15/22 (e)

       5,232        5,375,200   

Numericable Group SA, 5.38%, 5/15/22

     EUR        280        327,755   
Corporate Bonds   

Par  

(000)

    Value  

Media (continued)

      

Outfront Media Capital LLC/Outfront Media Capital Corp.:

      

5.25%, 2/15/22

     USD        650      $ 680,875   

5.63%, 2/15/24

       1,064        1,131,830   

Play Finance 2 SA, 5.25%, 2/01/19

     EUR        1,070        1,224,862   

Radio One, Inc., 7.38%, 4/15/22 (e)

     USD        805        815,063   

RCN Telecom Services LLC/RCN Capital Corp., 8.50%, 8/15/20 (e)

       1,130        1,204,863   

SFR Group SA:

      

6.00%, 5/15/22 (e)

       4,689        4,792,158   

5.63%, 5/15/24

     EUR        1,460        1,726,271   

7.38%, 5/01/26 (e)

     USD        10,344        10,680,180   

Sirius XM Radio, Inc. (e):

      

4.25%, 5/15/20

       2,204        2,248,080   

5.75%, 8/01/21

       1,811        1,892,495   

4.63%, 5/15/23

       345        348,881   

Sterling Entertainment Corp., 9.75%, 12/15/19

       4,810        4,761,900   

TEGNA, Inc.:

      

5.13%, 10/15/19

       857        881,639   

4.88%, 9/15/21 (e)

       1,827        1,895,513   

5.50%, 9/15/24 (e)

       1,308        1,379,940   

Townsquare Media, Inc., 6.50%, 4/01/23 (e)

       517        520,878   

Tribune Media Co., 5.88%, 7/15/22

       4,670        4,775,075   

United Group BV, 7.88%, 11/15/20

     EUR        350        410,084   

Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH:

      

5.50%, 1/15/23 (e)

     USD        4,302        4,527,855   

5.63%, 4/15/23

     EUR        166        199,903   

4.00%, 1/15/25

       1,411        1,672,426   

5.00%, 1/15/25 (e)

     USD        1,354        1,411,545   

4.63%, 2/15/26

     EUR        100        121,584   

3.50%, 1/15/27

       400        462,912   

Univision Communications, Inc. (e):

      

8.50%, 5/15/21

     USD        784        815,360   

5.13%, 5/15/23

       10,883        11,318,320   

5.13%, 2/15/25

       7,930        8,286,850   

UPCB Finance IV Ltd., 4.00%, 1/15/27

     EUR        400        457,223   

Virgin Media Finance PLC:

      

4.50%, 1/15/25

       183        211,272   

5.75%, 1/15/25 (e)

     USD        2,405        2,447,087   

Virgin Media Secured Finance PLC:

      

6.00%, 4/15/21

     GBP        2,432        3,347,873   

5.25%, 1/15/26 (e)

     USD        486        496,935   

5.50%, 8/15/26 (e)

       1,144        1,195,480   

4.88%, 1/15/27

     GBP        200        275,105   

6.25%, 3/28/29

       829        1,203,448   

WaveDivision Escrow LLC/WaveDivision Escrow Corp., 8.13%, 9/01/20 (e)

     USD        4,428        4,621,725   

Wind Acquisition Finance SA:

      

4.75%, 7/15/20 (e)

       250        253,125   

7.00%, 4/23/21

     EUR        400        464,027   

7.38%, 4/23/21 (e)

     USD        1,265        1,302,950   

Ziggo Bond Finance BV:

      

4.63%, 1/15/25

     EUR        159        179,574   

5.88%, 1/15/25 (e)

     USD        2,643        2,656,215   
      

 

 

 
                       232,460,060   

Metals & Mining — 7.0%

  

 

Alcoa, Inc.:

      

6.15%, 8/15/20

       1,330        1,452,613   

5.13%, 10/01/24

       3,854        4,065,970   

5.90%, 2/01/27

       215        230,588   

6.75%, 1/15/28

       477        530,663   

5.95%, 2/01/37

       264        266,558   
 

 

See Notes to Financial Statements.

 

                
44    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

Corporate Bonds   

Par  

(000)

    Value  

Metals & Mining (continued)

  

 

Anglo American Capital PLC:

      

6.88%, 5/01/18

     GBP        100      $ 140,704   

2.50%, 9/18/18

     EUR        100        113,645   

2.75%, 6/07/19

       210        240,702   

1.50%, 4/01/20

       800        869,957   

3.63%, 5/14/20 (e)

     USD        1,116        1,104,840   

4.45%, 9/27/20 (e)

       412        416,120   

2.88%, 11/20/20

     EUR        300        337,893   

3.50%, 3/28/22

       100        112,726   

4.13%, 9/27/22 (e)

     USD        1,656        1,618,740   

3.25%, 4/03/23

     EUR        100        110,214   

ArcelorMittal:

      

6.13%, 6/01/18

     USD        2,342        2,476,665   

7.25%, 2/25/22

       115        129,375   

8.00%, 10/15/39

       400        430,000   

7.75%, 3/01/41

       1,305        1,357,200   

Constellium NV:

      

7.88%, 4/01/21 (e)

       357        386,453   

4.63%, 5/15/21

     EUR        100        104,283   

8.00%, 1/15/23 (e)

     USD        6,525        6,655,500   

5.75%, 5/15/24 (e)

       4,689        4,337,325   

First Quantum Minerals Ltd. (e):

      

7.00%, 2/15/21

       392        340,060   

7.25%, 5/15/22

       1,883        1,614,672   

Freeport-McMoRan, Inc.:

      

2.30%, 11/14/17

       1,337        1,313,602   

2.38%, 3/15/18

       13,439        13,220,616   

3.10%, 3/15/20

       820        754,400   

4.00%, 11/14/21

       3,313        3,031,395   

3.55%, 3/01/22

       4,396        3,835,510   

3.88%, 3/15/23

       6,919        5,933,042   

5.40%, 11/14/34

       689        537,420   

5.45%, 3/15/43

       2,457        1,879,605   

Glencore Finance Europe SA, 3.38%, 9/30/20

     EUR        200        241,495   

Joseph T Ryerson & Son, Inc., 11.00%, 5/15/22 (e)

     USD        1,378        1,515,800   

Kaiser Aluminum Corp., 5.88%, 5/15/24 (e)

       773        819,380   

Novelis Corp., 6.25%, 8/15/24 (e)

       7,660        7,985,550   

Novelis, Inc., 8.75%, 12/15/20

       9,952        10,424,720   

Outokumpu OYJ, 7.25%, 6/16/21

     EUR        175        203,815   

Steel Dynamics, Inc.:

      

5.13%, 10/01/21

     USD        3,085        3,208,400   

6.38%, 8/15/22

       1,345        1,418,975   

5.25%, 4/15/23

       949        986,960   

5.50%, 10/01/24

       1,540        1,624,700   

Teck Resources Ltd.:

      

3.00%, 3/01/19

       1,460        1,416,200   

8.00%, 6/01/21 (e)

       762        822,484   

3.75%, 2/01/23

       1,265        1,084,738   

8.50%, 6/01/24 (e)

       3,290        3,701,250   

6.00%, 8/15/40

       2,074        1,679,940   

6.25%, 7/15/41

       2,085        1,724,034   

5.20%, 3/01/42

       760        556,700   

United States Steel Corp., 8.38%, 7/01/21 (e)

       2,224        2,418,600   

Wise Metals Group LLC/Wise Alloys Finance Corp., 8.75%, 12/15/18 (e)

       2,990        3,079,700   
      

 

 

 
                       104,862,497   

Multiline Retail — 0.4%

      

CST Brands, Inc., 5.00%, 5/01/23

       653        690,548   

Dufry Finance SCA, 5.50%, 10/15/20 (e)

       1,927        1,979,992   

Neiman Marcus Group Ltd., 8.00%, 10/15/21 (e)

       4,467        3,822,412   
      

 

 

 
                       6,492,952   

Offshore Drilling & Other Services — 0.1%

      

Sensata Technologies BV, 5.63%, 11/01/24 (e)

             903        957,180   
Corporate Bonds   

Par  

(000)

    Value  

Oil, Gas & Consumable Fuels — 13.5%

      

Antero Resources Corp., 5.63%, 6/01/23

     USD        269      $ 269,673   

California Resources Corp., 8.00%, 12/15/22 (e)

       3,808        2,570,400   

Carrizo Oil & Gas, Inc.:

      

7.50%, 9/15/20

       672        690,480   

6.25%, 4/15/23

       2,334        2,304,825   

Cenovus Energy, Inc.:

      

5.70%, 10/15/19

       312        335,308   

5.20%, 9/15/43

       110        96,720   

Cheniere Corpus Christi Holdings LLC, 7.00%, 6/30/24 (e)

       3,678        3,935,460   

Chesapeake Energy Corp.:

      

6.50%, 8/15/17

       225        226,688   

3.93%, 4/15/19 (d)

       6,292        5,694,260   

6.63%, 8/15/20

       910        809,900   

6.88%, 11/15/20

       970        851,175   

Concho Resources, Inc., 6.50%, 1/15/22

       222        230,880   

CONSOL Energy, Inc.:

      

5.88%, 4/15/22

       11,942        10,807,510   

8.00%, 4/01/23

       116        113,100   

Continental Resources, Inc.:

      

5.00%, 9/15/22

       1,650        1,596,375   

4.50%, 4/15/23

       1,069        1,007,532   

3.80%, 6/01/24

       3,964        3,577,510   

4.90%, 6/01/44

       512        427,520   

Crestwood Midstream Partners LP/Crestwood Midstream Finance Corp.:

      

6.00%, 12/15/20

       230        226,550   

6.25%, 4/01/23

       175        170,625   

CrownRock LP/CrownRock Finance, Inc. (e):

      

7.13%, 4/15/21

       3,208        3,336,320   

7.75%, 2/15/23

       1,064        1,130,500   

DCP Midstream LLC (e):

      

6.45%, 11/03/36

       840        812,700   

6.75%, 9/15/37

       1,400        1,358,000   

Denbury Resources, Inc., 9.00%, 5/15/21 (e)

       2,046        2,102,265   

Diamondback Energy, Inc., 7.63%, 10/01/21

       1,770        1,877,306   

Encana Corp.:

      

3.90%, 11/15/21

       1,015        1,003,541   

6.50%, 8/15/34

       1,270        1,282,116   

6.63%, 8/15/37

       1,042        1,056,223   

6.50%, 2/01/38

       3,034        3,036,518   

5.15%, 11/15/41

       1,203        1,055,657   

Energy Transfer Equity LP:

      

7.50%, 10/15/20

       405        443,475   

5.88%, 1/15/24

       4,667        4,783,675   

5.50%, 6/01/27

       1,965        1,969,912   

Extraction Oil & Gas Holdings LLC/Extraction Finance Corp., 7.88%, 7/15/21 (e)

       1,468        1,482,680   

Freeport-McMoran Oil & Gas LLC/FCX Oil & Gas, Inc., 6.88%, 2/15/23

       1,612        1,567,670   

Genesis Energy LP/Genesis Energy Finance Corp.:

      

6.00%, 5/15/23

       428        425,860   

5.63%, 6/15/24

       445        428,313   

Gulfport Energy Corp.:

      

7.75%, 11/01/20

       2,137        2,222,480   

6.63%, 5/01/23

       114        117,135   

Halcon Resources Corp., 8.63%, 2/01/20 (g)

       1,185        1,125,750   

Hilcorp Energy I LP/Hilcorp Finance Co. (e):

      

7.63%, 4/15/21

       240        246,600   

5.00%, 12/01/24

       1,758        1,705,260   

MEG Energy Corp. (e):

      

6.50%, 3/15/21

       4,781        3,920,420   

6.38%, 1/30/23

       575        448,500   

7.00%, 3/31/24

       4,923        3,963,015   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    45


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

Corporate Bonds   

Par  

(000)

    Value  

Oil, Gas & Consumable Fuels (continued)

      

Memorial Production Partners LP/Memorial Production Finance Corp.:

      

7.63%, 5/01/21

     USD        995      $ 507,450   

6.88%, 8/01/22

       852        421,740   

Memorial Resource Development Corp., 5.88%, 7/01/22

       4,621        4,667,210   

Murphy Oil Corp., 6.88%, 8/15/24

       1,356        1,418,036   

NGPL PipeCo LLC (e):

      

7.12%, 12/15/17

       14,746        15,391,137   

9.63%, 6/01/19

       3,476        3,649,800   

7.77%, 12/15/37

       1,463        1,570,896   

Noble Holding US Corp/Noble Drilling Services 6 LLC/Noble Drilling Holding LLC, 7.50%, 3/15/19

       720        727,200   

Oasis Petroleum, Inc.:

      

7.25%, 2/01/19

       205        201,925   

6.50%, 11/01/21

       3,886        3,584,835   

6.88%, 3/15/22

       1,064        989,520   

6.88%, 1/15/23

       480        442,800   

OHL Investments SA, Series OHL, 4.00%, 4/25/18 (j)

     EUR        300        301,841   

ONEOK, Inc.:

      

4.25%, 2/01/22

     USD        450        435,375   

7.50%, 9/01/23

       1,400        1,550,500   

Parsley Energy LLC/Parsley Finance Corp. (e):

      

7.50%, 2/15/22

       3,361        3,545,855   

6.25%, 6/01/24

       748        772,310   

PDC Energy, Inc., 7.75%, 10/15/22

       1,625        1,706,250   

QEP Resources, Inc.:

      

6.88%, 3/01/21

       240        250,920   

5.25%, 5/01/23

       2,190        2,146,200   

Range Resources Corp.:

      

5.75%, 6/01/21

       568        576,520   

5.00%, 8/15/22

       530        524,700   

5.00%, 3/15/23

       1,960        1,935,500   

Rockies Express Pipeline LLC (e):

      

6.00%, 1/15/19

       574        604,135   

5.63%, 4/15/20

       265        277,256   

6.88%, 4/15/40

       3,820        3,858,200   

RSP Permian, Inc., 6.63%, 10/01/22

       2,065        2,147,600   

Sabine Pass Liquefaction LLC:

      

5.63%, 2/01/21

       2,043        2,145,150   

6.25%, 3/15/22

       406        434,420   

5.63%, 4/15/23

       3,087        3,249,067   

5.75%, 5/15/24

       5,824        6,188,000   

5.63%, 3/01/25

       567        599,603   

5.88%, 6/30/26 (e)

       3,524        3,770,680   

Sanchez Energy Corp.:

      

7.75%, 6/15/21

       138        120,060   

6.13%, 1/15/23

       6,650        5,253,500   

SBA Communications Corp., 4.88%, 9/01/24 (e)

       4,119        4,175,636   

Seven Generations Energy Ltd. (e):

      

8.25%, 5/15/20

       6,771        7,202,651   

6.75%, 5/01/23

       675        690,188   

SM Energy Co.:

      

6.13%, 11/15/22

       1,746        1,697,985   

6.50%, 1/01/23

       523        512,540   

5.00%, 1/15/24

       88        80,410   

Southwestern Energy Co.:

      

7.50%, 2/01/18

       144        151,380   

5.80%, 1/23/20

       1,679        1,679,000   

4.10%, 3/15/22

       1,670        1,519,700   

6.70%, 1/23/25

       460        472,650   

Tallgrass Energy Partners LP/Tallgrass Energy Finance Corp., 5.50%, 9/15/24 (e)(f)

       1,206        1,236,150   
Corporate Bonds   

Par  

(000)

    Value  

Oil, Gas & Consumable Fuels (continued)

      

Targa Resources Partners LP/Targa Resources Partners Finance Corp.:

      

6.88%, 2/01/21

     USD        393      $ 406,755   

6.38%, 8/01/22

       4,053        4,184,722   

5.25%, 5/01/23

       78        79,170   

6.75%, 3/15/24 (e)

       394        418,625   

Tesoro Logistics LP/Tesoro Logistics Finance Corp.:

      

6.13%, 10/15/21

       321        336,248   

6.25%, 10/15/22

       3,154        3,338,509   

6.38%, 5/01/24

       849        906,308   

Transcanada Trust, Series 16-A, 5.88%, 8/15/76 (d)

       1,340        1,427,937   

Tullow Oil Jersey, Ltd., Series TLW, 6.63%, 7/12/21 (j)

       200        230,860   

Tullow Oil PLC, 6.00%, 11/01/20 (e)

       200        174,500   

Weatherford International LLC, 6.80%, 6/15/37

       167        124,415   

Weatherford International Ltd.:

      

4.50%, 4/15/22

       655        543,650   

6.50%, 8/01/36

       520        384,800   

7.00%, 3/15/38

       541        407,103   

5.95%, 4/15/42

       476        334,390   

Whiting Petroleum Corp.:

      

1.25%, 6/05/20 (j)

       4,885        4,196,709   

5.75%, 3/15/21

       12        10,755   

5.75%, 3/15/21 (j)

       1,537        1,437,282   

6.25%, 4/01/23 (j)

       244        226,079   

Williams Cos., Inc.:

      

3.70%, 1/15/23

       300        291,000   

4.55%, 6/24/24

       2,459        2,514,327   

5.75%, 6/24/44

       1,119        1,149,772   

WPX Energy, Inc.:

      

5.25%, 1/15/17

       300        301,500   

7.50%, 8/01/20

       385        395,347   

6.00%, 1/15/22

       2,577        2,506,132   

8.25%, 8/01/23

       1,375        1,430,000   
      

 

 

 
        201,985,758   

Paper & Forest Products — 0.3%

  

 

Norbord, Inc., 6.25%, 4/15/23 (e)

       1,605        1,705,312   

Pfleiderer GmbH, 7.88%, 8/01/19

     EUR        430        499,501   

Unifrax I LLC/Unifrax Holding Co., 7.50%, 2/15/19 (e)

     USD        2,865        2,578,500   
      

 

 

 
        4,783,313   

Personal Products — 0.0%

  

 

Avon International Operations, Inc., 7.88%, 8/15/22 (e)

             569        587,538   

Pharmaceuticals — 3.0%

  

Concordia Healthcare Corp., 7.00%, 4/15/23 (e)

       399        309,225   

DPx Holdings BV, 7.50%, 2/01/22 (e)

       2,670        2,837,356   

Endo Finance LLC/Endo Finco, Inc. (e):

      

7.25%, 1/15/22

       696        675,120   

6.00%, 7/15/23

       1,609        1,460,168   

6.50%, 2/01/25

       2,591        2,299,512   

Ephios Bondco PLC, 6.25%, 7/01/22

     EUR        675        816,928   

Ephios Holdco II PLC, 8.25%, 7/01/23

       259        316,419   

Grifols Worldwide Operations Ltd., 5.25%, 4/01/22

     USD        4,047        4,229,115   

Jaguar Holding Co. II/Pharmaceutical Product Development LLC, 6.38%, 8/01/23 (e)

       7,115        7,452,962   

NBTY, Inc., 7.63%, 5/15/21 (e)

       3,353        3,428,442   

Synlab Bondco PLC, 6.25%, 7/01/22

     EUR        210        254,155   

Valeant Pharmaceuticals International, Inc.:

      

6.75%, 8/15/18 (e)

     USD        813        815,358   

5.38%, 3/15/20 (e)

       890        838,825   

7.00%, 10/01/20 (e)

       4,173        4,068,675   
 

 

See Notes to Financial Statements.

 

                
46    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

Corporate Bonds   

Par  

(000)

    Value  

Pharmaceuticals (continued)

  

Valeant Pharmaceuticals International, Inc. (continued):

      

6.38%, 10/15/20 (e)

     USD        5,468      $ 5,221,940   

7.50%, 7/15/21 (e)

       3,060        3,007,399   

6.75%, 8/15/21 (e)

       2,793        2,656,841   

5.50%, 3/01/23 (e)

       77        67,183   

4.50%, 5/15/23

     EUR        226        209,236   

5.88%, 5/15/23 (e)

     USD        1,392        1,224,960   

6.13%, 4/15/25 (e)

       2,444        2,147,665   
      

 

 

 
        44,337,484   

Real Estate Investment Trusts (REITs) — 0.4%

  

 

Hilton Escrow Issuer LLC/Hilton Escrow Issuer Corp., 4.25%, 9/01/24 (e)

       2,209        2,251,799   

iStar, Inc.:

      

4.00%, 11/01/17

       685        685,856   

5.00%, 7/01/19

       480        480,600   

MGM Growth Properties Operating Partnership LP/MGP Finance Co-Issuer, Inc., 4.50%, 9/01/26 (e)

       1,855        1,853,841   
      

 

 

 
        5,272,096   

Real Estate Management & Development — 1.2%

  

 

Annington Finance No 5 PLC, 13.00%, 1/15/23 (g)

     GBP        367        552,320   

Aroundtown Property Holdings PLC, 3.00%, 5/05/20 (j)

     EUR        100        157,133   

Crescent Resources LLC/Crescent Ventures, Inc., 10.25%, 8/15/17 (e)

     USD        1,731        1,731,000   

Punch Taverns Finance B Ltd., Series A6, 5.94%, 9/30/22

     GBP        532        649,694   

Punch Taverns Finance PLC, Series M3, 6.03%, 10/15/27 (d)(e)

       1,202        1,339,384   

Realogy Group LLC/Realogy Co-Issuer Corp. (e):

      

4.50%, 4/15/19

     USD        806        836,225   

5.25%, 12/01/21

       3,396        3,557,310   

4.88%, 6/01/23

       6,276        6,354,450   

Rialto Holdings LLC/Rialto Corp., 7.00%, 12/01/18 (e)

       1,065        1,080,975   

Woodside Homes Co. LLC/Woodside Homes Finance, Inc., 6.75%, 12/15/21 (e)

       1,195        1,114,338   
      

 

 

 
        17,372,829   

Road & Rail — 1.0%

  

 

Avis Budget Car Rental LLC/Avis Budget Finance, Inc. (e):

      

5.13%, 6/01/22

       1,055        1,073,463   

6.38%, 4/01/24

       1,105        1,166,327   

5.25%, 3/15/25

       1,810        1,791,900   

EC Finance PLC, 5.13%, 7/15/21

     EUR        675        790,575   

Florida East Coast Holdings Corp., 6.75%, 5/01/19 (e)

     USD        2,037        2,098,110   

Herc Rentals, Inc. (e):

      

7.50%, 6/01/22

       853        887,120   

7.75%, 6/01/24

       83        86,735   

Hertz Corp.:

      

5.88%, 10/15/20

       370        383,413   

7.38%, 1/15/21

       2,360        2,457,350   

6.25%, 10/15/22

       1,490        1,566,884   

Loxam SAS, 3.50%, 5/03/23

     EUR        150        174,847   

United Rentals North America, Inc., 4.63%, 7/15/23

     USD        1,055        1,079,318   

Watco Cos. LLC/Watco Finance Corp., 6.38%, 4/01/23 (e)

       1,093        1,095,732   
      

 

 

 
        14,651,774   
Corporate Bonds   

Par  

(000)

    Value  

Semiconductors & Semiconductor Equipment — 1.2%

  

 

Advanced Micro Devices, Inc.:

      

7.50%, 8/15/22

     USD        665      $ 645,050   

7.00%, 7/01/24

       440        404,800   

Micron Technology, Inc. (e):

      

5.25%, 8/01/23

       1,989        1,924,357   

5.63%, 1/15/26

       851        812,705   

Microsemi Corp., 9.13%, 4/15/23 (e)

       257        294,265   

NXP BV/NXP Funding LLC (e):

      

4.13%, 6/15/20

       2,685        2,778,975   

4.13%, 6/01/21

       1,448        1,514,608   

4.63%, 6/15/22

       1,319        1,389,065   

3.88%, 9/01/22

       1,422        1,445,108   

5.75%, 3/15/23

       2,180        2,320,588   

4.63%, 6/01/23

       417        439,935   

Sensata Technologies BV, 5.00%, 10/01/25 (e)

       3,923        4,060,305   
      

 

 

 
        18,029,761   

Software — 1.5%

  

 

BMC Software Finance, Inc., 8.13%, 7/15/21 (e)

       947        833,360   

Ensemble S Merger Sub, Inc., 9.00%, 9/30/23 (e)

       1,553        1,605,414   

Infinity Acquisition LLC/Infinity Acquisition Finance Corp., 7.25%, 8/01/22 (e)

       244        213,500   

Infor Software Parent LLC/Infor Software Parent, Inc., (7.13% Cash or 7.88% PIK), 7.13%, 5/01/21 (e)(g)

       2,061        1,932,187   

Infor US, Inc., 6.50%, 5/15/22

       5,376        5,449,920   

Informatica LLC, 7.13%, 7/15/23 (e)

       946        893,970   

Nuance Communications, Inc. (e):

      

5.38%, 8/15/20

       830        849,713   

6.00%, 7/01/24

       1,600        1,664,000   

PTC, Inc., 6.00%, 5/15/24

       722        780,663   

Solera LLC/Solera Finance, Inc., 10.50%, 3/01/24 (e)

       5,797        6,420,177   

SS&C Technologies Holdings, Inc., 5.88%, 7/15/23

       2,204        2,319,710   
      

 

 

 
        22,962,614   

Specialty Retail — 1.2%

  

 

Asbury Automotive Group, Inc., 6.00%, 12/15/24

       2,413        2,509,520   

JC Penney Corp., Inc.:

      

6.38%, 10/15/36

       434        364,560   

7.40%, 4/01/37

       346        311,400   

L Brands, Inc.:

      

8.50%, 6/15/19

       3,925        4,597,156   

6.88%, 11/01/35

       2,574        2,812,095   

Penske Automotive Group, Inc.:

      

5.75%, 10/01/22

       2,545        2,640,438   

5.38%, 12/01/24

       1,447        1,472,323   

5.50%, 5/15/26

       1,358        1,358,842   

Sally Holdings LLC/Sally Capital, Inc., 5.75%, 6/01/22

       1,599        1,668,956   

THOM Europe SAS, 7.38%, 7/15/19

     EUR        503        591,930   
      

 

 

 
        18,327,220   

Technology Hardware, Storage & Peripherals — 0.7%

  

 

Diamond 1 Finance Corp./Diamond 2 Finance Corp. (e):

      

4.42%, 6/15/21

     USD        1,565        1,636,422   

5.88%, 6/15/21

       1,447        1,529,974   

7.13%, 6/15/24

       1,755        1,901,288   

6.02%, 6/15/26

       2,940        3,145,582   

8.35%, 7/15/46

       945        1,101,266   

Western Digital Corp., 7.38%, 4/01/23 (e)

       1,339        1,452,815   
      

 

 

 
        10,767,347   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    47


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

Corporate Bonds   

Par  

(000)

    Value  

Textiles, Apparel & Luxury Goods — 0.2%

  

 

BiSoho SAS, 5.88%, 5/01/23

     EUR        400      $ 475,452   

Hanesbrands, Inc., 4.88%, 5/15/26 (e)

     USD        1,263        1,319,835   

Springs Industries, Inc., 6.25%, 6/01/21

       274        285,302   

Wolverine World Wide, Inc., 5.00%, 9/01/26 (e)

       496        496,620   
      

 

 

 
        2,577,209   

Thrifts & Mortgage Finance — 0.1%

  

 

MGIC Investment Corp., 5.75%, 8/15/23

       1,117        1,170,058   

Radian Group, Inc., 5.25%, 6/15/20

       706        746,948   
      

 

 

 
        1,917,006   

Trading Companies & Distributors — 0.0%

  

 

Ashtead Capital, Inc., 5.63%, 10/01/24 (e)

             553        581,341   

Transportation Infrastructure — 0.1%

  

Jack Cooper Enterprises, Inc.,

      

(10.50% Cash or 11.25% PIK),

      

10.50%, 3/15/19 (e)(g)

       2,813        759,581   

Onorato Armatori SpA, 7.75%, 2/15/23

     EUR        698        800,151   

WFS Global Holding SAS, 9.50%, 7/15/22

       365        392,890   
      

 

 

 
        1,952,622   

Utilities — 0.0%

  

 

ContourGlobal Power Holdings SA, 5.13%, 6/15/21

             175        207,892   

Wireless Telecommunication Services — 5.4%

  

Communications Sales & Leasing, Inc./CSL Capital LLC:

      

6.00%, 4/15/23 (e)

     USD        477        496,080   

8.25%, 10/15/23

       4,660        4,858,050   

Digicel Group Ltd., 7.13%, 4/01/22 (e)

       2,085        1,688,850   

Digicel Ltd., 6.00%, 4/15/21 (e)

       8,447        7,718,446   

GEO Group, Inc.:

      

5.88%, 1/15/22

       350        330,750   

5.88%, 10/15/24

       2,030        1,827,000   

6.00%, 4/15/26

       530        475,013   

Matterhorn Telecom SA, 3.88%, 5/01/22

     EUR        635        708,226   

SBA Communications Corp., 5.63%, 10/01/19

     USD        1,111        1,144,330   

Sprint Capital Corp.:

      

6.90%, 5/01/19

       640        646,400   

6.88%, 11/15/28

       6,017        5,415,300   

8.75%, 3/15/32

       408        404,940   

Sprint Communications, Inc.:

      

9.00%, 11/15/18 (e)

       17,517        19,290,596   

7.00%, 8/15/20

       1,270        1,250,950   

Sprint Corp.:

      

7.25%, 9/15/21

       922        911,628   

7.88%, 9/15/23

       761        739,684   

7.13%, 6/15/24

       10,595        9,879,837   

7.63%, 2/15/25

       2,985        2,833,884   

T-Mobile USA, Inc.:

      

6.63%, 4/28/21

       2,180        2,283,550   

6.13%, 1/15/22

       367        387,185   

6.73%, 4/28/22

       1,227        1,289,884   

6.00%, 3/01/23

       2,599        2,755,044   

6.50%, 1/15/24

       2,638        2,835,850   

6.38%, 3/01/25

       3,490        3,751,750   

6.50%, 1/15/26

       4,881        5,341,644   

Wind Acquisition Finance SA, 4.00%, 7/15/20

     EUR        724        819,700   
      

 

 

 
        80,084,571   
Total Corporate Bonds — 109.9%        1,640,458,473   
Floating Rate Loan Interests (d)   

Par  

(000)

    Value  

Aerospace & Defense — 0.1%

      

Engility Corp.:

      

Term Loan B1, 5.50%, 8/12/20

     USD        590      $ 593,322   

Term Loan B2, 6.50%, 8/12/23

       1,145        1,153,173   
      

 

 

 
        1,746,495   

Air Freight & Logistics — 0.3%

  

CEVA Group PLC, Synthetic LOC, 4.75%, 3/19/21

       1,156        921,289   

CEVA Intercompany BV, Dutch Term Loan, 4.75%, 3/19/21

       1,192        949,729   

CEVA Logistics Canada ULC, Canadian Term Loan, 5.00%, 3/19/21

       205        163,609   

CEVA Logistics US Holdings, Inc., Term Loan, 5.50%, 3/19/21

       1,645        1,310,905   

XPO Logistics, Inc., Term Loan B2, 5.25%, 10/30/21

       600        602,628   
      

 

 

 
        3,948,160   

Airlines — 0.5%

  

Delta Air Lines, Inc., 2018 Term Loan B1, 7.00%, 10/18/18

       2,307        2,311,754   

Northwest Airlines, Inc.:

      

4.00%, 3/10/17

       1,772        1,758,490   

3.75%, 9/10/18

       1,353        1,318,687   

4.00%, 9/10/18

       1,364        1,329,656   

4.50%, 9/10/18

       1,343        1,309,344   
      

 

 

 
        8,027,931   

Auto Components — 0.3%

  

Gates Global, Inc., Term Loan B, 6.50%, 7/06/21

             4,984        4,902,965   

Chemicals — 0.1%

      

Axalta Coating Systems US Holdings, Inc., Term Loan, 6.75%, 2/01/20

       211        211,977   

Chemours Co., Term Loan B, 5.50%, 5/12/22

       127        125,122   

MacDermid, Inc., Term Loan B3, 5.25%, 6/07/20

       1,148        1,147,748   
      

 

 

 
        1,484,847   

Commercial Services & Supplies — 0.3%

  

Brand Energy & Infrastructure Services, Inc., Term Loan B, 3.51%, 11/26/20

             3,750        3,702,082   

Containers & Packaging — 0.1%

      

BWAY Holding Co., Inc., Term Loan B, 6.00%, 8/14/20

             1,158        1,161,624   

Diversified Consumer Services — 0.4%

      

AssuredPartners, Inc., 2015 1st Lien Term Loan, 5.00%, 10/21/22

       1,226        1,229,930   

Gol LuxCo S.A., 1st Lien Term Loan, 3.75%, 8/31/20

       3,885        3,875,288   

Laureate Education, Inc., Term Loan B, 4.52%, 3/17/21

       1,410        1,401,033   
      

 

 

 
        6,506,251   

Diversified Telecommunication Services — 0.3%

  

Hawaiian Telcom Communications, Inc., Term Loan B, 9.50%, 6/06/19

       1,407        1,410,023   

Level 3 Financing, Inc., 2019 Term Loan, 4.25%, 8/01/19

       1,785        1,792,443   

Telenet International Finance Sarl, Term Loan AD, 13.50%, 6/30/24

       1,285        1,288,675   
      

 

 

 
        4,491,141   

Electrical Equipment — 0.3%

  

Texas Competitive Electric Holdings Co. LLC:

      

2016 DIP Term Loan B, 5.50%, 10/31/17

       3,759        3,767,357   

2016 DIP Term Loan C, 3.75%, 10/31/17

       840        842,249   
      

 

 

 
        4,609,606   
 

 

See Notes to Financial Statements.

 

                
48    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

Floating Rate Loan Interests (d)   

Par  

(000)

    Value  

Energy Equipment & Services — 0.2%

  

Dynegy Holdings, Inc., Term Loan B2, 4.00%, 4/23/20

     USD        915      $ 914,179   

Weatherford International Ltd., Term Loan, 2.75%, 7/13/20

       2,646        2,487,517   
      

 

 

 
        3,401,696   

Food Products — 0.1%

      

Reynolds Group Holdings, Inc., 2016 Term Loan, 8.16%, 2/05/23

             920        920,775   

Health Care Equipment & Supplies — 0.3%

  

 

Alere, Inc., 2015 Term Loan B, 4.25%, 6/18/22

       1,486        1,466,990   

DJO Finance LLC, 2015 Term Loan, 4.00%, 6/08/20

       1,306        1,258,517   

Immucor, Inc., Refinancing Term Loan B2, 4.25%, 8/17/18

       1,288        1,248,876   
      

 

 

 
        3,974,383   

Health Care Providers & Services — 0.2%

      

Air Medical Group Holdings, Inc., Term Loan B, 4.25%, 4/28/22

       1,653        1,627,988   

Surgery Center Holdings, Inc., 1st Lien Term Loan, 5.25%, 11/03/20

       952        951,642   

Vizient, Inc., 1st Lien Term Loan, 2.75%, 2/13/23

       758        765,713   
      

 

 

 
        3,345,343   

Hotels, Restaurants & Leisure — 1.6%

      

Amaya Holdings BV:

      

1st Lien Term Loan, 4.25%, 8/01/21

       4,734        4,682,094   

2nd Lien Term Loan, 4.25%, 8/01/22

       248        245,989   

Bronco Midstream Funding LLC, Term Loan B, 3.75%, 8/15/20

       5,405        4,837,163   

Caesars Entertainment Resort Properties LLC, Term Loan B, 5.00%, 10/11/20

       11,337        11,078,618   

MPH Acquisition Holdings LLC, 2016 Term Loan B, 5.00%, 6/07/23

       2,255        2,278,497   

Scientific Games International, Inc., 2014 Term Loan B1, 5.00%, 10/18/20

       1,091        1,090,603   
      

 

 

 
        24,212,964   

Independent Power and Renewable Electricity Producers — 0.1%

  

 

Energy Future Intermediate Holding Co. LLC, DIP Term Loan, 4.25%, 12/19/16

             1,443        1,448,411   

Insurance — 0.1%

  

 

Alliant Holdings I, Inc., Incremental Term Loan B2, 7.50%, 8/12/22

             1,440        1,440,000   

IT Services — 0.2%

  

 

First Data Corp., 2021 Extended Term Loan, 6.50%, 3/24/21

       2,090        2,100,177   

WEX, Inc., Term Loan B, 4.00%, 7/01/23

       973        979,772   
      

 

 

 
        3,079,949   

Machinery — 0.4%

      

Rexnord LLC, 1st Lien Term Loan B, 9.75%, 8/21/20

       2,693        2,692,423   

Silver II US Holdings LLC, Term Loan, 5.25%, 12/13/19

       2,863        2,546,680   
      

 

 

 
        5,239,103   

Media — 0.7%

      

iHeartCommunications, Inc., Term Loan D, 3.25%, 1/30/19

       6,888        5,279,951   

Intelsat Jackson Holdings SA, Term Loan B2, 4.00%, 6/30/19

       5,557        5,270,969   
      

 

 

 
        10,550,920   
Floating Rate Loan Interests (d)   

Par  

(000)

    Value  

Metals & Mining — 0.3%

      

FMG Resources August 2006 Property Ltd., Term Loan B, 6.50%, 6/30/19

     USD        3,317      $ 3,297,648   

Novelis, Inc., 2015 Term Loan B, 4.25%, 6/02/22

       1,563        1,566,110   
      

 

 

 
        4,863,758   

Oil, Gas & Consumable Fuels — 1.1%

      

California Resources Corp., Term Loan A, 4.75%, 10/01/19

       1,615        1,534,447   

Chesapeake Energy Corp., Term Loan, 5.50%, 8/15/21

       7,945        8,193,718   

CITGO Holding, Inc., 2015 Term Loan B, 7.00%, 5/12/18

       2,516        2,530,503   

MEG Energy Corp., Refinancing Term Loan, 5.25%, 3/31/20

       464        426,095   

Ultra Resources, Inc., Revolver, 3.75%, 10/06/16

       4,600        4,255,000   
      

 

 

 
        16,939,763   

Pharmaceuticals — 0.8%

      

DPx Holdings BV, 2014 Incremental Term Loan, 5.25%, 3/11/21

       1,681        1,673,315   

Jaguar Holding Co. II, 2015 Term Loan B, 4.88%, 8/18/22

       5,277        5,291,170   

NBTY, Inc., Term Loan B, 3.75%, 5/05/23

       1,145        1,145,355   

Valeant Pharmaceuticals International, Inc.:

      

Series A3 Tranche A, 5.00%, 10/20/18

       468        468,062   

Series C2 Term Loan B, 5.00%, 12/11/19

       682        682,353   

Series D2 Term Loan B, 2.13%, 2/13/19

       125        124,791   

Series E Term Loan B, 2.13%, 8/05/20

       1,524        1,521,029   

Series F1 Term Loan B, 2.13%, 4/01/22

       911        912,325   
      

 

 

 
                       11,818,400   

Professional Services — 0.3%

  

 

Advantage Sales & Marketing, Inc.:

      

2014 1st Lien Term Loan, 4.25%, 7/23/21

       1,670        1,656,470   

2014 2nd Lien Term Loan, 4.25%, 7/25/22

       3,248        3,088,282   
      

 

 

 
                       4,744,752   

Semiconductors & Semiconductor Equipment — 0.3%

  

 

Avago Technologies Cayman Ltd., Term Loan B3, 8.00%, 2/01/23

       3,495        3,525,404   

Microsemi Corp., 2015 Term Loan B, 7.27%, 1/15/23

       326        327,904   
      

 

 

 
                       3,853,308   

Software — 1.1%

  

 

BMC Software Finance, Inc., Term Loan, 5.00%, 9/10/20

       4,096        3,905,517   

Infor US, Inc., Term Loan B5, 4.25%, 6/03/20

       2,619        2,589,006   

Informatica Corp., Term Loan, 4.25%, 8/05/22

       1,940        1,872,193   

Kronos, Inc., 2nd Lien Term Loan, 5.75%, 4/30/20

       2,856        2,914,329   

Solera LLC, Term Loan B, 4.00%, 3/03/23

       2,729        2,743,788   

Tibco Software Inc., Term Loan B, 4.00%, 12/04/20

       1,422        1,386,252   

Veritas US, Inc./Veritas Bermuda Ltd.,7.50%, 2/01/23

     EUR        500        538,205   
      

 

 

 
                       15,949,290   

Specialty Retail — 0.1%

  

 

Leslie’s Poolmart, Inc., 2016 Term Loan, 3.75%, 7/27/23

     USD        1,034        1,040,462   

Textiles, Apparel & Luxury Goods — 0.4%

      

Ascend Performance Materials Operations LLC, Term Loan B, 5.00%, 8/12/22

       5,348        5,268,002   

J. Crew Group, Inc., Term Loan B, 4.25%, 3/05/21

       890        701,671   
      

 

 

 
                       5,969,673   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    49


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

Floating Rate Loan Interests (d)   

Par  

(000)

    Value  

Wireless Telecommunication Services — 1.6%

  

 

Ligado Networks LLC, 2015 2nd Lien Term Loan, 6.50%, 12/07/20 (a)(h)

     USD        34,627      $ 24,239,205   
Total Floating Rate Loan Interests — 12.6%        187,613,257   
      
                          
Investment Companies    Shares         

United States — 2.5%

      

Financial Select Sector SPDR Fund

       280,066        6,878,421   

iShares iBoxx USD High Yield Corporate Bond ETF (l)

       152,000        13,179,920   

SPDR Barclays High Yield Bond ETF

       431,279        15,758,935   

SPDR S&P Oil & Gas Exploration & Production ETF

             25,675        944,583   
Total Investment Companies — 2.5%        36,761,859   
      
                          
Non-Agency Mortgage-Backed Securities   

Par  

(000)

        

Collateralized Mortgage Obligations — 0.2%

      

Hilton USA Trust, Series 2013-HLT, Class EFX, 5.61%, 11/05/30 (d)(e)

     USD        2,882        2,889,233   

Commercial Mortgage-Backed Securities — 0.1%

  

   

GAHR Commercial Mortgage Trust 2015-NRF, Series 2015-NRF, Class FFX, 3.49%, 12/15/34 (d)(e)

             1,925        1,822,410   
Total Non-Agency Mortgage-Backed Securities — 0.3%        4,711,643   
      
                          
Other Interests — 0.0% (m)    Beneficial
Interest
(000)
        

Auto Components — 0.0%

      

Lear Corp. Escrow

             1,250        13   
      
                          
Preferred Securities   

Par  

(000)

        
Capital Trusts               

Banks — 1.4%

      

ABN AMRO Bank NV, 5.75% (d)(k)

     USD        300        332,125   

Banco Bilbao Vizcaya Argentaria SA (d)(k):

      

6.75%

       400        419,409   

7.00%

       1,200        1,264,921   

8.88%

       200        235,973   

Banco Popular Espanol SA, 8.25% (d)(k)

       600        612,215   

Banco Santander SA, 6.25% (d)(k)

       1,100        1,113,498   

Bank of Ireland, 7.38% (d)(k)

       250        269,664   

BNP Paribas SA, 7.20% (d)(k)

       100        112,500   

Citigroup, Inc. (d)(k):

      

5.95%

       2,675        2,782,000   

Series D, 5.95%

       2,592        2,677,860   

Series O, 5.88%

       2,405        2,441,075   

Series Q, 5.95%

       1,165        1,186,116   

Series R, 6.13%

       615        641,691   

Cooperatieve Rabobank UA (d)(k):

      

5.50%

       200        225,321   

6.63%

       200        238,088   
Preferred Securities   

Par  

(000)

    Value  
Capital Trusts (continued)               

Banks (continued)

      

Intesa Sanpaolo SpA (d)(k):

      

7.00%

     USD        375      $ 409,928   

7.70%

       200        185,502   

Wells Fargo & Co. (d)(k):

      

Series S, 5.90%

       3,310        3,521,013   

Series U, 5.88%

       2,545        2,810,825   
      

 

 

 
                       21,479,724   

Capital Markets — 0.8%

  

Credit Suisse Group AG, 6.25% (d)(e)(k)

       200        195,748   

Goldman Sachs Group, Inc. (d)(k):

      

5.30%

       1,040        1,063,400   

Series L, 5.70%

       5,218        5,330,187   

Morgan Stanley (d)(k):

      

Series H, 5.45%

       3,309        3,317,273   

Series J, 5.55%

       440        451,000   

UBS Group AG (d)(k):

      

5.75%

       800        930,285   

7.00%

       425        453,156   
      

 

 

 
                       11,741,049   

Chemicals — 0.0%

  

Solvay Finance SA, 5.12% (d)(k)

             110        132,482   

Diversified Financial Services — 2.1%

      

Bank of America Corp. (d)(k):

      

Series AA, 6.10%

       5,121        5,383,451   

Series V, 5.13%

       2,205        2,173,028   

Series X, 6.25%

       2,874        3,017,700   

Series Z, 6.50%

       2,791        3,042,469   

Barclays PLC, 7.88% (d)(k)

       325        325,731   

Credit Agricole SA, 6.50% (d)(k)

       600        669,270   

HBOS Capital Funding LP, 6.85% (k)

       300        304,137   

JPMorgan Chase & Co. (d)(k):

      

6.75%

       5,324        6,003,928   

Series Q, 5.15%

       850        851,913   

Series U, 6.13%

       4,228        4,526,602   

Series V, 5.00%

       3,075        3,067,313   

Royal Bank of Scotland Group PLC, 8.63% (d)(k)

       1,525        1,553,594   
      

 

 

 
                       30,919,136   

Diversified Telecommunication Services — 0.3%

  

Koninklijke KPN NV, 6.13% (d)(k)

       566        681,852   

Orange SA (d)(k):

      

4.00%

       600        720,448   

5.75%

       100        144,118   

Telefonica Europe BV (d)(k):

      

4.20%

       1,500        1,733,898   

6.50

       600        724,939   

6.75%

       100        141,919   
      

 

 

 
                       4,147,174   

Electric Utilities — 0.0%

  

Enel SpA (d):

      

6.50%, 1/10/74

       689        842,489   

7.75%, 9/10/75

     GBP        105        155,570   

Origin Energy Finance, Ltd. (d):

      

7.88%, 6/16/71

     USD        100        116,667   

4.00%, 9/16/74

       110        115,794   
      

 

 

 
                       1,230,520   

Media — 0.0%

  

NBCUniversal Enterprise, Inc., 5.25% (e)(k)

             400        424,000   

Oil, Gas & Consumable Fuels — 0.2%

      

DCP Midstream LLC, 5.85%, 5/21/43 (d)

       225        172,125   

Gas Natural Fenosa Finance BV, 3.38% (d)(k)

       1,200        1,301,731   
 

 

See Notes to Financial Statements.

 

                
50    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

Preferred Securities   

Par  

(000)

    Value  
Capital Trusts (continued)               

Oil, Gas & Consumable Fuels (continued)

      

Repsol International Finance BV, 4.50%, 3/25/75 (d)

     USD        369      $ 381,760   

TOTAL SA, 3.88% (d)(k)

       625        748,760   
      

 

 

 
                       2,604,376   
Total Capital Trusts — 4.8%        72,678,461   
      
                          
Preferred Stocks    Shares         

Diversified Financial Services — 0.1%

  

Concrete Investments II

             4,997        652,147   

Hotels, Restaurants & Leisure — 1.1%

  

Amaya, Inc.

             19,851        16,549,564   

Wireless Telecommunication Services — 0.0%

  

CF-B L2 (D) LLC, (Aquired 4/08/15, cost $629,122) (c)

             633,461        523,176   
Total Preferred Stocks — 1.2%        17,724,887   
      
                          
Trust Preferred — 0.4%         

Diversified Financial Services — 0.4%

  

GMAC Capital Trust I, Series 2, 6.41%, 2/15/40 (d)

             256,246        6,454,520   
Total Preferred Securities — 6.4%        96,857,868   

Warrants

  

Shares

    Value  

Metals & Mining — 0.0%

      

Peninsula Energy Ltd. (Expires 12/31/17)

       288,820      $ 130   

Peninsula Energy Ltd. (Expires 12/31/18)

       515,378        30,987   
      

 

 

 
                       31,117   

Software — 0.0%

      

HMH Holdings/EduMedia (Issued/exercisable 3/09/10, 19 Shares for 1 Warrant, Expires 6/22/19, Strike Price $42.27)

             6,494        13,231   
Total Warrants — 0.0%                      44,348   
Total Long-Term Investments
(Cost — $2,114,819,403) — 139.7%
        2,085,712,498   
Options Purchased
(Cost — $98,133) — 0.0%
                     67,870   
Total Investments Before Options Written
(Cost — $2,114,917,536) — 139.7%
                     2,085,780,368   
Options Written
(Premiums Received — $19,000) — (0.0)%
                     (22,041
Total Investments, Net of Options Written
(Cost — $2,114,898,536) — 139.7%
         2,085,758,327   
Liabilities in Excess of Other Assets — (39.7)%        (592,809,866
      

 

 

 
Net Assets — 100.0%        $ 1,492,948,461   
      

 

 

 
 
Notes to Schedule of Investments

 

(a)   Non-income producing security.

 

(b)   All or a portion of security is held by a wholly owned subsidiary.

 

(c)   Restricted security as to resale, excluding 144A securities. As of period end, the Trust held restricted securities with a current value of $535,351 and an original cost of $816,585, which was 0.04% of its net assets.

 

(d)   Variable rate security. Rate as of period end.

 

(e)   Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

 

(f)   When-issued security.

 

(g)   Payment-in-kind security which may pay interest/dividends in additional par/shares and/or in cash. Rates shown are the current rate and possible payment rates.

 

(h)   Issuer filed for bankruptcy and/or is in default.

 

(i)   Zero-coupon bond.

 

(j)   Convertible security.

 

(k)   Perpetual security with no stated maturity date.

 

(l)   During the year ended August 31, 2016, investments in issuers considered to be affiliates of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate    Shares Held
at August 31,
2015
     Shares
Purchased
     Shares
Sold
     Shares Held
at August 31,
2016
    Value at
August 31,
2016
     Income      Realized
Gain (Loss)
 

BlackRock Liquidity Funds, TempFund, Institutional Class1

                                          $ 4,410           

iShares iBoxx USD High Yield Corporate Bond ETF

             1,256,443         (1,104,443      152,000      $ 13,179,920         817,027       $ (2,263,123

Total

              $ 13,179,920       $ 821,437       $ (2,263,123
             

 

 

    

 

 

    

 

 

 

1   No longer held by the Trust as of report date.

      

       

 

(m)   Other interests represent beneficial interests in liquidation trusts and other reorganization or private entities.

 

 

For Trust compliance purposes, the Trust’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such industry subclassifications for reporting ease.

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    51


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

 

Derivative Financial Instruments Outstanding as of Period End      

Futures Contracts

 

Contracts
Short
    Issue    Expiration      Notional Value     Unrealized
Depreciation
               
  (80   Russell 2000 Mini Index      September 2016         USD         9,910,400      $ (757,024    
  (267   S&P 500 E-Mini Index      September 2016         USD         28,962,825        (595,638                
  Total                 $ (1,352,662    
            

 

 

 

Forward Foreign Currency Exchange Contracts

 

Currency
Purchased
       Currency
Sold
    Counterparty   Settlement
Date
    Unrealized
Appreciation
(Depreciation)
        
EUR        1,034,000           USD           1,154,132      Barclays Bank PLC     9/06/16      $ (597  
EUR        60,000           USD           66,956      Barclays Bank PLC     9/06/16        (20  
EUR        230,000           USD           260,644      Citibank N.A.     9/06/16        (4,055  
EUR        481,500           USD           537,919      Deutsche Bank AG     9/06/16        (755  
EUR        100,000           USD           111,669      Deutsche Bank AG     9/06/16        (109  
EUR        380,000           USD           430,442      Goldman Sachs International     9/06/16        (6,513  
EUR        700,000           USD           782,109      Morgan Stanley & Co. International PLC     9/06/16        (1,186  
EUR        460,000           USD           514,857      Morgan Stanley & Co. International PLC     9/06/16        (1,679  
EUR        500,000           USD           559,651      Royal Bank of Canada     9/06/16        (1,848  
GBP        145,000           USD           187,943      Australia And New Zealand Bank Group     9/06/16        2,475     
GBP        300,000           USD           393,636      Citibank N.A.     9/06/16        333     
GBP        700,000           USD           917,018      Deutsche Bank AG     9/06/16        2,242     
GBP        1,450,000           USD           1,897,501      Morgan Stanley & Co. International PLC     9/06/16        6,682     
GBP        920,000           USD           1,208,503      Morgan Stanley & Co. International PLC     9/06/16        (332  
USD        1,203,007           AUD           1,605,000      Westpac Group     9/06/16        (3,112  
USD        21,538,235           CAD           28,080,000      Westpac Group     9/06/16        125,421     
USD        134,308           EUR           119,000      Australia And New Zealand Bank Group     9/06/16        1,551     
USD        11,168           EUR           10,000      Barclays Bank PLC     9/06/16        12     
USD        1,493,971           EUR           1,335,000      BNP Paribas S.A.     9/06/16        4,639     
USD        141,202           EUR           127,000      Citibank N.A.     9/06/16        (479  
USD        277,544           EUR           250,000      Citibank N.A.     9/06/16        (1,357  
USD        282,162           EUR           250,000      Morgan Stanley & Co. International PLC     9/06/16        3,260     
USD        81,140,745           EUR           72,870,000      Royal Bank of Scotland PLC     9/06/16        (153,354  
USD        36,106           EUR           32,000      State Street Bank And Trust Co.     9/06/16        406     
USD        23,962,647           GBP           18,185,000      HSBC Bank USA N.A.     9/06/16        81,572     
USD        145,620           GBP           110,000      Morgan Stanley & Co. International PLC     9/06/16        1,165     
USD        122,575           GBP           94,000      Morgan Stanley & Co. International PLC     9/06/16        (869  
USD        1,205,435           AUD           1,605,000      Commonwealth Bank of Australia     10/05/16        174     
USD        21,405,425           CAD           28,080,000      Westpac Group     10/05/16        (10,602  
USD        5,582           EUR           5,000      Bank of America N.A.     10/05/16        (4  
USD        79,149,510           EUR           70,952,000      Royal Bank of Scotland PLC     10/05/16        (107,665  
USD        19,385,130           GBP           14,782,000      Royal Bank of Scotland PLC     10/05/16        (41,631        
Total                      $ (106,235  
                    

 

 

 

OTC Credit Default Swaptions Purchased

 

Description    Counterparty      Put/
Call
   Exercise
Rate
  Pay/
Receive
Exercise Rate
   Floating Rate
Index
   Expiration
Date
    Notional
Amount
(000)
     Value  

Bought Protection on 5-Year Credit Default Swap

   Goldman Sachs International      Put    103.00%   Pay   

Markit CDX North America High Yield Index, Series 26

     10/19/16        USD         10,000       $ 67,870   

OTC Options Purchased

 

Description      Put/
Call
     Counterparty      Expiration
Date
     Strike
Price
       Contracts        Value  

Marsico Parent Superholdco LLC

     Call      Goldman Sachs & Co.      12/14/19      USD        942.86           39             

 

See Notes to Financial Statements.

 

                
52    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

OTC Credit Default Swaptions Written

 

Description   Counterparty   Put/
Call
  Exercise
Rate
    Pay/Receive
Exercise Rate
  Floating Rate
Index
  Expiration
Date
    Notional
Amount (000)
    Value  

Sold Protection on 5-Year Credit Default Swap

  Goldman Sachs International   Put     100.00   Receive  

Markit CDX North America High Yield Index, Series 26

    10/19/16      USD     10,000      $ (22,041

Centrally Cleared Credit Default Swaps — Buy Protection

 

Issuer / Index      Pay
Fixed Rate
     Expiration
Date
       Notional
Amount
(000)
       Unrealized
Depreciation
 

Markit iTraxx XO, Series 25, Version 1

     5.00%        6/20/21           EUR    3,730         $ (134,079

Centrally Cleared Credit Default Swaps — Sold Protection

 

Issuer / Index      Receive
Fixed
Rate
     Expiration
Date
      

Credit

Rating1

       Notional
Amount
(000)2
       Unrealized
Appreciation
 

Dow Jones CDX North America High Yield Index, Series 26, Version 2

     5.00%        6/20/21           B+           50,055         $ 40,399   

OTC Credit Default Swaps — Sell Protection

 

Issuer/Index   Receive
Fixed
Rate
    Counterparty     Expiration
Date
    Credit
Rating1
    Notional
Amount
(000)2
    Value     Premiums
Paid
    Unrealized
Appreciation
        

CCO Holdings LLC

    8.00     Deutsche Bank AG        9/20/17        NR        USD    8,180      $ 794,712             $ 794,712     

CNH Industrial NV

    5.00     Goldman Sachs International        6/20/21        BB+        EUR       554        81,631      $ 53,238        28,393           

Total

            $ 876,343      $ 53,238      $ 823,105     
           

 

 

 

1    Using Standard & Poors (“S&P’s”) rating of the issuer or the underlying securities of the index, as applicable.

       

 

2   The maximum potential amount the Trust may pay should a negative credit event take place as defined under the terms of the agreement.

      

 

OTC Total Return Swaps

 

Reference Entity   Fixed Rate/
Floating Rate
  Counterparty   Effective
Date
    Expiration
Date
    Notional
Amount
(000)
    Value     Premiums
Received
    Unrealized
Appreciation
(Depreciation)
 

iBoxx USD Liquid High Yield Index

  3-Month LIBOR   JPMorgan Chase Bank N.A.     N/A        9/20/16        USD        6,000      $ 426,416             $ 426,416   

iBoxx USD Liquid High Yield Index

  3-Month LIBOR   Goldman Sachs International     N/A        9/20/16        USD        1,500        94,548               94,548   

iBoxx USD Liquid High Yield Index

  3-Month LIBOR   Goldman Sachs International     N/A        12/20/16        USD        2,000        127,775               127,775   

iBoxx USD Liquid High Yield Index

  3-Month LIBOR   Morgan Stanley Capital Services LLC     N/A        12/20/16        USD        2,700        170,187               170,187   

iBoxx USD Liquid High Yield Index

  3-Month LIBOR   JPMorgan Chase Bank N.A.     N/A        12/20/16        USD        1,000        63,009               63,009   

iBoxx USD Liquid High Yield Index

  3-Month LIBOR   JPMorgan Chase Bank N.A.     N/A        12/20/16        USD        2,700        121,045               121,045   

iBoxx USD Liquid High Yield Index

  3-Month LIBOR   Citibank N.A.     N/A        12/20/16        USD        1,400        23,029      $ (629     23,658   

iBoxx USD Liquid High Yield Index

  3-Month LIBOR   Goldman Sachs International     N/A        12/20/16        USD        3,725        37,170        (3,144     40,314   

Markit iBoxx Liquid High Yield Index

  3-Month LIBOR   Goldman Sachs International     N/A        12/20/16        USD        1,900        10,825        (1,809     12,634   

iBoxx USD Liquid High Yield Index

  3-Month LIBOR   Goldman Sachs International     N/A        3/20/17        USD        5,800        274,424        (104     274,528   

iBoxx USD Liquid High Yield Index

  3-Month LIBOR   Goldman Sachs International     N/A        3/20/17        USD        13,000        169,964        (7,705     177,669   

Morgan Stanley Energy Long Basket Index

  Fed Funds Effective Rate plus 0.25%   Morgan Stanley & Co. International PLC     N/A        3/30/17        USD        1        1,073               1,073   

Morgan Stanley Energy Long Basket Index

  Fed Funds Effective Rate plus 0.25%   Morgan Stanley & Co. International PLC     N/A        3/30/17        USD        1      (32            (32

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    53


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

OTC Total Return Swaps (concluded)

 

Reference Entity   Fixed Rate/
Floating Rate
  Counterparty   Effective
Date
    Expiration
Date
    Notional
Amount
(000)
    Value     Premiums
Received
    Unrealized
Appreciation
(Depreciation)
 

Morgan Stanley Energy Long Basket Index

  Fed Funds Effective Rate plus 0.25%   Morgan Stanley & Co. International PLC     N/A        3/30/17        USD        1      $ (1,845          $ (1,845

Morgan Stanley Energy Long Basket Index

  Fed Funds Effective Rate plus 0.25%   Morgan Stanley & Co. International PLC     N/A        3/30/17        USD        30        216,515               216,515   

iBoxx USD Liquid High Yield Index

  3-Month LIBOR   Goldman Sachs International     N/A        6/20/17        USD        1,800        11,503      $ (1,681     13,184   

iBoxx USD Liquid High Yield Index

  3-Month LIBOR   Morgan Stanley Capital Services LLC     N/A        6/20/17        USD        1,400        45,252        (453     45,705   

iBoxx USD Liquid High Yield Index

  3-Month LIBOR   Morgan Stanley Capital Services LLC     N/A        6/20/17        USD        2,700        6,267        (2,813     9,080   

Total

              $ 1,797,125      $ (18,338   $ 1,815,463   
             

 

 

 

1    Amount is less than $500.

       

         

 

Transactions in Options Written for the Year Ended August 31, 2016

 

          Puts  
            Contracts     Notional
(000)
    Premiums
Received
 

Outstanding options, beginning of year

                      

Options written

      4,734      $ 10,000      $ 331,605   

Options expired

      (3,934            (231,039

Options closed

      (800            (81,566
   

 

 

   

 

 

   

 

 

 

Outstanding options, end of year

           $ 10,000      $ 19,000   
   

 

 

   

 

 

   

 

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

 

  As   of period end, the fair values of derivative financial instruments located in the Consolidated Statement of Assets and Liabilities were as follows:

 

               Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Currency
Exchange
Contracts
    Interest Rate
Contracts
    Other
Contracts
    Total  
Assets — Derivative Financial Instruments                                            

Futures contracts

    Net unrealized appreciation1                                                 

Forward foreign currency exchange contracts

   

Unrealized appreciation on forward foreign currency exchange contracts

                       $ 229,932                    $ 229,932   

Options purchased

    Investments at value — unaffiliated2     $ 67,870                67,870   

Swaps — centrally cleared

    Net unrealized appreciation1            40,399                                    40,399   

Swaps — OTC

    Unrealized appreciation on OTC swaps, Swap premiums paid            876,343      $ 217,588             $ 1,599,752               2,693,683   

Total

             $ 984,612      $ 217,588      $ 229,932      $ 1,599,752             $ 3,031,884   
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                 
Liabilities — Derivative Financial Instruments                                            

Futures contracts

    Net unrealized depreciation1                 $ 1,352,662                           $ 1,352,662   

Forward foreign currency exchange contracts

   

Unrealized depreciation on forward foreign currency exchange contracts

                       $ 336,167                      336,167   

Options written

    Options written at value     $ 22,041                22,041   

Swaps — centrally cleared

    Net unrealized depreciation1            134,079                                    134,079   

Swaps — OTC

    Unrealized depreciation on OTC swaps, Swap premiums received                   1,877             $ 18,338               20,215   

Total

             $ 156,120      $ 1,354,539      $ 336,167      $ 18,338             $ 1,865,164   
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1    Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, as reported in the Consolidated Schedule of Investments. Only current day’s variation margin is reported within the Consolidated Statement of Asset and Liabilities.

        

2    Includes options purchased at value as reported in the Consolidated Schedule of Investments.

       

       

 

See Notes to Financial Statements.

 

                
54    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

For the year ended August 31, 2016, the effect of derivative financial instruments in the Consolidated Statement of Operations was as follows:

 

     Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
    

Interest

Rate

Contracts

     Other
Contracts
     Total  

Net Realized Gain (Loss) from:

                   

Futures contracts

                  $ (3,489,133            $ (829,018            $ (4,318,151

Forward foreign currency exchange contracts

                          $ 3,781,389                         3,781,389   

Options purchased1

                    (1,288,782                              (1,288,782

Options written

                    259,773                                 259,773   

Swaps

          $ 4,051,821         1,251,588                 780,396                 6,083,805   
 

 

 

 

Total

          $ 4,051,821       $ (3,266,554    $ 3,781,389       $ (48,622            $ 4,518,034   
 

 

 

 

 

     Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
    

Interest

Rate
Contracts

     Other
Contracts
     Total  

Net Change in Unrealized Appreciation (Depreciation) on:

  

                 

Futures contracts

                  $ (7,567,960       $ (95,646            $ (7,663,606

Forward foreign currency exchange contracts

                          $ 23,421                         23,421   

Options purchased2

          $ 7,870                                         7,870   

Options written

            (3,041                                      (3,041

Swaps

            (298,660      489,959                 1,817,452                 2,008,751   
 

 

 

 

Total

          $ (293,831    $ (7,078,001    $ 23,421       $ 1,721,806               $ (5,626,605
 

 

 

 

1    Options purchased are included in net realized gain (loss) from investments.

       

  

2   Options purchased are included in net change in unrealized appreciation (depreciation) on investments.

      

  

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments
Futures contracts:     

Average notional value of contracts — short

     $ 99,135,415   
Forward foreign currency exchange contracts:     

Average amounts purchased — in USD

     $ 280,657,112   

Average amounts sold — in USD

     $ 6,538,790   
Options:     

Average value of options contracts written

     $ 299,768 1 

Average value of options swaption contracts purchased

     $ 2,500,000   

Average value of options swaption contract written

     $ 2,500,000   
Credit default swaps:     

Average notional value — buy protection

     $ 1,717,657   

Average notional value — sell protection

     $ 36,529,846   
Total return rate swaps:     

Average notional value

     $ 25,894,870   

1    Actual amounts for the period are shown due to limited outstanding derivative financial instruments as of each quarter.

       

For more information about the Trust’s investment risks regarding derivative financial instruments, refer to the Notes to Consolidated Financial Statements.

The Trust’s derivative assets and liabilities (by type) were as follows:

 

     Assets        Liabilities         
Derivative Financial Instruments:         

Futures contracts

  $ 132,895               

Forward foreign currency exchange contracts

    229,932         $ 336,167     

Options

    67,870 1         22,041     

Swaps — centrally cleared

              99,311     

Swaps — OTC2

    2,693,683           20,215     
 

 

 

 

Total derivative assets and liabilities in the Consolidated Statement of Assets and Liabilities

  $ 3,124,380         $ 477,734     
 

 

 

 

Derivatives not subject to a master netting agreement or similar agreement (“MNA”)

    (132,895        (99,311  
 

 

 

 

Total derivative assets and liabilities subject to an MNA

  $ 2,991,485         $ 378,423     
 

 

 

 

1    Includes options purchased at value which is included in Investments at value — unaffiliated in the Consolidated Statement of Assets and Liabilities and reported in the Consolidated Schedule of Investments.

        

 

2    Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums paid/received in the Consolidated Statement of Assets and Liabilities.

       

 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    55


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

The following table presents the Trust’s derivative assets and liabilities by counterparty net of amounts available for offset under an Master Netting Agreement (“MNA”) and net of the related collateral received by the Trust:

 

Counterparty   Derivative Assets
Subject to an MNA
by Counterparty
     Derivatives
Available for
Offset1
    Non-cash Collateral
Received
    Cash Collateral
Received2
    Net
Amount of
Derivative
Assets3
        

Australia And New Zealand Bank Group

  $ 4,026                            $ 4,026     

Barclays Bank PLC

    12       $ (12                       

BNP Paribas S.A.

    4,639                              4,639     

Citibank N.A.

    23,991         (6,520                   17,471     

Commonwealth Bank of Australia

    174                              174     

Deutsche Bank AG

    796,954         (864          $ (796,090         

Goldman Sachs International

    890,153         (42,997            (800,000     47,156     

HSBC Bank USA N.A.

    81,572                              81,572     

JPMorgan Chase Bank N.A.

    610,470                       (530,000     80,470     

Morgan Stanley & Co. International PLC

    228,695         (5,943                   222,752     

Morgan Stanley Capital Services LLC

    224,972         (3,266                   221,706     

State Street Bank and Trust Company

    406                              406     

Westpac Group

    125,421         (13,714                   111,707     
 

 

 

 

Total

  $ 2,991,485       $ (73,316          $ (2,126,090   $ 792,079     
 

 

 

 

 

Counterparty   Derivative Liabilities
Subject to an MNA
by  Counterparty
     Derivatives
Available for
Offset1
    Non-cash Collateral
Pledged
    Cash Collateral
Pledged
    Net
Amount of
Derivative
Liabilities4
        

Bank of America, N.A.

  $ 4                            $ 4     

Barclays Bank PLC

    617       $ (12                   605     

Citibank N.A.

    6,520         (6,520                       

Deutsche Bank AG

    864         (864                       

Goldman Sachs International

    42,997         (42,997                       

Morgan Stanley & Co. International PLC

    5,943         (5,943                       

Morgan Stanley Capital Services LLC

    3,266         (3,266                       

Royal Bank of Canada

    1,848                              1,848     

Royal Bank of Scotland PLC

    302,650                              302,650     

Westpac Group

    13,714         (13,714                       
 

 

 

 

Total

  $ 378,423       $ (73,316                 $ 305,107     
 

 

 

 

1    The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

       

   

2    Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

       

   

3    Net amount represents the net amount receivable from the counterparty in the event of default.

       

   

4    Net amount represents the net amount payable due to the counterparty in the event of default.

       

   

 

Fair Value Hierarchy as of Period End      

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Trust’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Consolidated Financial Statements.

The following tables summarize the Trust’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

     Level 1        Level 2        Level 3     Total  

Assets:

             
Investments:              

Long-Term Investments:

             

Asset-Backed Securities

            $ 33,032,621         $ 13,191,932      $ 46,224,553   

Common Stocks

  $ 41,964,842           29,349,732           1,725,910        73,040,484   

Corporate Bonds

              1,634,605,449           5,853,024        1,640,458,473   

Floating Rate Loan Interests

              165,429,110           22,184,147        187,613,257   

Investment Companies

    36,761,859                            36,761,859   

Non-Agency Mortgage-Backed Securities

              4,711,643                  4,711,643   

Other Interests

                        13        13   

Preferred Securities

    6,454,520           72,678,461           17,201,711        96,334,692   

Warrants

              30,987           13,361        44,348   

Options Purchased:

             

Credit contracts

              67,870                  67,870   
 

 

 

 

Subtotal

  $ 85,181,221         $ 1,939,905,873         $ 60,170,098      $ 2,085,257,192   
 

 

 

 

Investments Valued at NAV1

                523,176   
             

 

 

 

Total

              $ 2,085,780,368   
             

 

 

 

1    As of August 31, 2016, certain of the Trust’s investments were fair valued using net asset value (“NAV”) per share as no quoted market value is available and have been excluded from the fair value hierarchy.

        

 

See Notes to Financial Statements.

 

                
56    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Consolidated Schedule of Investments (concluded)

  

BlackRock Corporate High Yield Fund, Inc. (HYT)

 

The following tables summarize the Trust’s investments and derivative financial instruments categorized in the disclosure hierarchy (concluded):

 

     Level 1        Level 2        Level 3        Total  
Derivative Financial Instruments1                 

Assets:

                

Credit contracts

            $ 863,504                   $ 863,504   

Equity contracts

              217,588                     217,588   

Foreign currency exchange contracts

              229,932                     229,932   

Interest rate contracts

              1,599,752                     1,599,752   

Liabilities:

                

Credit contracts

              (156,120                  (156,120

Equity contracts

  $ (1,352,662        (1,877                  (1,354,539

Foreign currency exchange contracts

              (336,167                  (336,167
 

 

 

 

Total

  $ (1,352,662      $ 2,416,612                   $ 1,063,950   
 

 

 

 

1    Derivative financial instruments are swaps, futures contracts and forward foreign currency exchange contracts and options written. Swaps, futures contracts and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument and options written are shown at value.

        

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

 

     Level 1        Level 2        Level 3        Total  

Assets:

                

Foreign currency at value

  $ 631,458                             $ 631,458   

Cash pledged:

                

Centrally cleared swaps

    2,857,000                               2,857,000   

Futures contracts

    1,568,150                               1,568,150   

Liabilities:

                

Bank overdraft

            $ (2,604                  (2,604

Bank borrowings payable

              (604,000,000                  (604,000,000

Cash received as collateral for OTC derivatives

              (2,330,000                  (2,330,000
 

 

 

 

Total

  $ 5,056,608         $ (606,332,604                $ (601,275,996
 

 

 

 

During the year ended August 31, 2016, there were no transfers between Level 1 and Level 2.

A reconciliation of Level 3 investments is presented when the Trust had a significant amount of Level 3 investments at the beginning and/or end of the period in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

 

     Common
Stocks
    Asset-Backed
Securities
    Corporate
Bonds
   

Floating
Rate Loan

Interests

    Other
Interests
    Preferred
Securities
    Warrants     Total  

Assets:

               

Opening Balance, as of August 31, 20151

  $ 3,739,028      $ 5,936,098      $ 25,160,883      $ 25,557,215      $ 10,978      $ 20,459,861      $ 74,732      $ 80,938,795   

Transfers into Level 32

                         5,372,890                             5,372,890   

Transfers out of Level 33

           (1,499,223     (18,524,109                                 (20,023,332

Accrued discounts/premiums

           14,387        11,411        148,129                             173,927   

Net realized gain (loss)

    (1,991,849     (6,361     2,553        213,080        (400                   (1,782,977

Net change in unrealized appreciation (depreciation)4,5

    (208,733     95,351        (156,996     190,237        (10,565     (3,258,150     (61,371     (3,410,227

Purchases

    187,464        9,897,780        1,359        2,447,823                             12,534,426   

Sales

           (1,246,100     (642,077     (11,745,227                          (13,633,404

Closing Balance, as of August 31, 2016

  $ 1,725,910      $ 13,191,932      $ 5,853,024      $ 22,184,147      $ 13      $ 17,201,711      $ 13,361      $ 60,170,098   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net change in unrealized appreciation/depreciation on investments still held at August 31, 20163

  $ (2,200,578   $ 130,810      $ (156,996   $ 237,746      $ (10,925   $ (3,258,150   $ (61,371   $ (5,319,464
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1    The opening balance of preferred securities has been adjusted to exclude certain investments amounting to $555,106 that were valued using NAV per share as no quoted market value is available. The fair value of those investments have been excluded from the fair value hierarchy due to the adoption of the Accounting Standard Update related to Fair Value Measurement: Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).

         

2    As of August 31, 2015, the Trust used observable inputs in determining the value of certain investments. As of August 31, 2016, the Trust used significant unobservable inputs in determining the value of the same investments. As a result, investments at beginning of period value were transferred from Level 2 to Level 3 in the disclosure hierarchy.

         

3    As of August 31, 2015, the Trust used significant unobservable inputs in determining the value of certain investments. As of August 31, 2016, the Trust used observable inputs in determining the value of the same investments. As a result, investments at beginning of period value were transferred from Level 3 to Level 2 in the disclosure hierarchy.

         

4    Included in the related net change in unrealized appreciation (depreciation) in the Consolidated Statement of Operations.

       

5    Any difference between net change in unrealized appreciation (depreciation) on investments still held at August 31, 2016 is generally due to investments no longer held or categorized as Level 3 at period end.

        

Certain of the Trust’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information inputs could result in a significantly lower or higher value of such Level 3 investments.

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    57


Table of Contents

Schedule of Investments August 31, 2016

  

BlackRock Income Trust, Inc. (BKT)

(Percentages shown are based on Net Assets)

 

Asset-Backed Securities    Par  
(000)
    Value  

Asset-Backed Securities — 0.4%

    

Securitized Asset Backed Receivables LLC Trust, Series 2005-OP2, Class M1, 0.95%, 10/25/35 (a)

   $ 1,875      $ 1,697,659   

Small Business Administration Participation Certificates, Class 1:

    

Series 1996-20K, 6.95%, 11/01/16

     16        16,099   

Series 1997-20C, 7.15%, 3/01/17

     16        15,924   
    

 

 

 
               1,729,682   

Interest Only Asset-Backed Securities — 0.1%

    

Small Business Administration Participation Certificates, Series 2000-1, 1.00%, 3/15/21

     392        3,434   

Sterling Bank Trust, Series 2004-2, Class Note, 2.08%, 3/30/30 (b)

     1,783        126,492   

Sterling Coofs Trust, Series 2004-1, Class A, 2.36%, 4/15/29

     4,930        338,962   
    

 

 

 
        468,888   
Total Asset-Backed Securities — 0.5%        2,198,570   
    
                  
Non-Agency Mortgage-Backed Securities               

Collateralized Mortgage Obligations — 0.6%

    

Deutsche Securities, Inc. Mortgage Alternate Loan Trust, Series 2006-AR5, Class 22A, 5.50%, 10/25/21

     226        219,879   

Homebanc Mortgage Trust, Series 2005-4, Class A1, 0.79%, 10/25/35 (a)

     1,636        1,504,527   

Kidder Peabody Acceptance Corp., Series 1993-1, Class A6, 15.65%, 8/25/23 (a)

     36        40,911   

Structured Adjustable Rate Mortgage Loan Trust, Series 2004-11, Class A, 3.00%, 8/25/34 (a)

     810        803,514   
    

 

 

 
        2,568,831   

Commercial Mortgage-Backed Securities — 0.5%

    

Credit Suisse Commercial Mortgage Trust,
Series 2007-C2, Class A3, 5.54%, 1/15/49 (a)

     2,146        2,157,090   

Interest Only Collateralized Mortgage Obligations — 0.4%

  

CitiMortgage Alternative Loan Trust, Series 2007-A5, Class 1A7, 6.00%, 5/25/37

     467        125,018   

GSMPS Mortgage Loan Trust, Series 1998-5, 0.00%, 6/19/27 (a)(b)

     2,106        21   

IndyMac INDX Mortgage Loan Trust, Series 2006-AR33, Class 4AX, 0.17%, 1/25/37

     48,947        12,150   

MASTR Adjustable Rate Mortgages Trust, Series 2004-3, Class 3AX, 0.48%, 4/25/34 (c)

     5,552        111,047   

MASTR Alternative Loans Trust, Series 2003-9, Class 15X2, 6.00%, 1/25/19

     113        6,075   

Morgan Stanley Mortgage Loan Trust, Series 2004-3, Class 1AX, 5.00%, 5/25/19

     77        1,743   

Sequoia Mortgage Trust, Series 2005-2, Class XA, 0.90%, 3/20/35 (a)

     25,086        689,878   

Structured Adjustable Rate Mortgage Loan Trust, Series 2006-7, Class 3AS, 2.28%, 8/25/36 (a)

     10,878        788,658   

Vendee Mortgage Trust, Series 1999-2, Class 1, 0.00%, 5/15/29 (a)

     27,397        27   
    

 

 

 
        1,734,617   

Principal Only Collateralized Mortgage Obligations — 0.1%

  

Countrywide Home Loan Mortgage Pass-Through Trust:

    

Series 2003-J5, 0.00%, 7/25/33

     48        43,821   

Series 2003-J8, 0.00%, 9/25/23

     36        34,798   

Drexel Burnham Lambert CMO Trust, Series K, Class 1, 0.00%, 9/23/17

     (d)      32   
Non-Agency Mortgage-Backed Securities    Par  
(000)
    Value  

Principal Only Collateralized Mortgage Obligations (continued)

  

Residential Asset Securitization Trust, Series 2005-A15, Class 1A8, 0.00%, 2/25/36

   $ 352      $ 245,918   

Structured Mortgage Asset Residential Trust, Series 1993-3C, Class CX, 0.00%, 4/25/24

     5        4,414   

Washington Mutual Alternative Mortgage Pass-Through Certificates, Series 2005-9, Class CP, 0.00%, 11/25/35

     137        100,371   
    

 

 

 
        429,354   
Total Non-Agency Mortgage-Backed Securities — 1.6%        6,889,892   
    
                  
U.S. Government Sponsored Agency Securities               

Agency Obligations — 2.7%

    

Federal Housing Administration:

    

USGI Projects, Series 99, 7.43%, 6/01/21 - 10/01/23

     2,667        2,547,650   

Reilly Projects, Series 41, 8.28%, 3/01/20

     33        32,415   

Resolution Funding Corp., 0.00%, 4/15/30 (e)

     13,000        9,334,962   
    

 

 

 
        11,915,027   

Collateralized Mortgage Obligations — 66.3%

  

Fannie Mae Mortgage-Backed Securities:

    

Series 2011-142, Class PE, 3.50%, 1/25/42

     15,567        17,338,637   

Series 2014-28, Class BD, 3.50%, 8/25/43

     6,560        6,986,233   

Series 2010-136, Class CY, 4.00%, 12/25/40

     3,060        3,480,266   

Series 2011-117, Class CP, 4.00%, 11/25/41

     14,350        16,499,734   

Series 2011-99, Class CB, 4.50%, 10/25/41

     43,000        50,389,309   

Series 2010-47, Class JB, 5.00%, 5/25/30

     10,000        11,120,972   

Series 2003-135, Class PB, 6.00%, 1/25/34

     10,109        10,822,168   

Series 2004-31, Class ZG, 7.50%, 5/25/34

     4,609        5,694,484   

Series 1993-247, Class SN, 10.00%, 12/25/23 (a)

     116        143,519   

Series 2005-73, Class DS, 16.19%, 8/25/35 (a)

     687        849,296   

Series 1991-87, Class S, 25.29%, 8/25/21 (a)

     12        14,755   

Series G-49, Class S, 980.26%, 12/25/21 (a)

     (d)      110   

Series G-07, Class S, 1,085.42%, 3/25/21 (a)

     (d)      641   

Series 1991-46, Class S, 2,398.91%, 5/25/21 (a)

     (d)      1   

Freddie Mac Mortgage-Backed Securities:

    

Series T-11, Class A9, 3.08%, 1/25/28 (a)

     884        928,434   

Series K048, Class A2, 3.28%, 6/25/25 (a)

     1,600        1,756,045   

Series 4242, Class PA, 3.50%, 5/15/41

     6,716        7,061,778   

Series 3762, Class LN, 4.00%, 11/15/40

     2,000        2,294,383   

Series 4269, Class PM, 4.00%, 8/15/41

     8,884        10,087,017   

Series 4016, Class BX, 4.00%, 9/15/41

     15,408        17,803,602   

Series 3668, Class PB, 4.50%, 8/15/32

     10,000        10,721,913   

Series 4316, Class VB, 4.50%, 3/15/34

     10,787        12,142,392   

Series 3856, Class PB, 5.00%, 5/15/41

     10,000        11,882,404   

Series 2758, Class KV, 5.50%, 5/15/23

     4,364        4,424,596   

Series 2927, Class BZ, 5.50%, 2/15/35

     3,900        4,477,425   

Series 2542, Class UC, 6.00%, 12/15/22

     1,892        2,046,332   

Series 0040, Class K, 6.50%, 8/17/24

     114        130,104   

Series 0019, Class F, 8.50%, 3/15/20

     11        11,578   

Series 2218, Class Z, 8.50%, 3/15/30

     2,108        2,443,509   

Series 0173, Class RS, 10.04%, 11/15/21 (a)

     (d)      3   

Series 1160, Class F, 38.00%, 10/15/21 (a)

     5        8,754   

Ginnie Mae Mortgage-Backed Securities:

    

Series 2010-099, Class JM, 3.75%, 12/20/38

     19,300        20,163,924   

Series 2015-96, Class ZM, 4.00%, 1/20/39 - 7/20/45

     58,402        63,205,965   

Series 2004-89, Class PE, 6.00%, 10/20/34

     129        134,740   
    

 

 

 
        295,065,023   
 

 

See Notes to Financial Statements.

 

                
58    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Income Trust, Inc. (BKT)

 

U.S. Government Sponsored Agency Securities    Par  
(000)
    Value  

Interest Only Collateralized Mortgage Obligations — 2.1%

  

Fannie Mae Mortgage-Backed Securities:

    

Series 1997-50, Class SI, 1.20%, 4/25/23 (a)

   $ 96      $ 2,668   

Series G92-60, Class SB, 1.60%, 10/25/22 (a)

     54        1,861   

Series 2012-96, Class DI, 4.00%, 2/25/27

     4,435        326,839   

Series 2013-45, Class EI, 4.00%, 4/25/43

     9,050        1,105,974   

Series 2010-74, Class DI, 5.00%, 12/25/39

     5,335        253,774   

Series 1997-90, Class M, 6.00%, 1/25/28

     1,558        196,178   

Series 2011-124, Class GS, 6.18%, 3/25/37 (a)

     9,527        874,168   

Series 1999-W4, 6.50%, 12/25/28

     131        12,808   

Series 1993-199, Class SB, 6.98%, 10/25/23 (a)

     27        347   

Series 089, Class 2, 8.00%, 10/25/18

     (d)      9   

Series 007, Class 2, 8.50%, 4/25/17

     (d)      4   

Series G92-05, Class H, 9.00%, 1/25/22

     2        103   

Series 094, Class 2, 9.50%, 8/25/21

     1        95   

Series 1990-136, Class S, 19.55%, 11/25/20 (a)

     4        4   

Series 1991-139, Class PT, 648.35%, 10/25/21

     (d)      1   

Series G-10, Class S, 1,050.07%, 5/25/21 (a)

     (d)      4   

Series G-12, Class S, 1,114.50%, 5/25/21 (a)

     (d)      1   

Freddie Mac Mortgage-Backed Securities:

    

Series 2559, 0.50%, 8/15/30 (a)

     43        264   

Series 3745, Class IN, 4.00%, 1/15/35

     14,714        576,698   

Series 3744, Class PI, 4.00%, 6/15/39

     10,013        896,678   

Series 4026, 4.50%, 4/15/32

     3,303        383,165   

Series 2611, Class QI, 5.50%, 9/15/32

     644        37,106   

Series 1043, Class H, 42.72%, 2/15/21 (a)

     3        5   

Ginnie Mae Mortgage-Backed Securities (a):

    

Series 2009-116, Class KS, 5.96%, 12/16/39

     1,526        231,766   

Series 2011-52, Class MJ, 6.14%, 4/20/41

     10,531        2,028,809   

Series 2011-52, Class NS, 6.16%, 4/16/41

     11,980        2,402,008   
    

 

 

 
        9,331,337   

Mortgage-Backed Securities — 55.5%

  

Fannie Mae Mortgage-Backed Securities:

    

3.00%, 1/01/43

     22,860        23,778,688   

3.50%, 10/01/42 - 10/01/45

     27,712        29,372,665   

4.00%, 1/01/41 - 9/01/42 (f)

     23,273        25,015,051   

4.50%, 8/01/25 - 9/01/41 (f)

     60,908        67,128,143   

5.00%, 1/01/23 - 10/01/41

     40,031        44,772,998   

5.50%, 11/01/16 - 10/01/39

     18,301        20,537,947   

6.50%, 12/01/37 - 10/01/39

     5,728        6,611,853   

7.50%, 2/01/22

     (d)      20   

9.50%, 1/01/19 - 9/01/19

     1        1,104   

Freddie Mac Mortgage-Backed Securities:

    

2.80%, 10/01/34 (a)

     102        104,356   

2.86%, 1/01/35 (a)

     170        173,902   

3.14%, 11/01/17 (a)

     (d)      414   

5.00%, 2/01/22 - 4/01/22

     174        184,674   

5.50%, 1/01/39

     20,372        23,105,660   

9.00%, 9/01/20

     6        5,821   

Ginnie Mae Mortgage-Backed Securities:

    

5.00%, 10/15/39

     5,444        6,081,986   

7.50%, 8/15/21 - 12/15/23

     86        90,061   

8.00%, 10/15/22 - 8/15/27

     40        42,824   

9.00%, 4/15/20 - 9/15/21

     2        2,213   
    

 

 

 
        247,010,380   

Principal Only Collateralized Mortgage Obligations — 0.2%

  

Fannie Mae Mortgage-Backed Securities (e):

    

Series 1991-7, Class J, 0.00%, 2/25/21

     2        2,219   

Series G93-2, Class KB, 0.00%, 1/25/23

     59        56,790   

Series 1993-51, Class E, 0.00%, 2/25/23

     21        19,651   

Series 203, Class 1, 0.00%, 2/25/23

     6        5,845   
U.S. Government Sponsored Agency Securities    Par  
(000)
    Value  

Principal Only Collateralized Mortgage Obligations (continued)

  

Fannie Mae Mortgage-Backed Securities (e) (continued):

  

Series 1993-70, Class A, 0.00%, 5/25/23

   $ 3      $ 3,054   

Series 0228, Class 1, 0.00%, 6/25/23

     5        4,499   

Series 1999-W4, 0.00%, 2/25/29

     54        51,490   

Series 2002-13, Class PR, 0.00%, 3/25/32

     121        114,439   

Freddie Mac Mortgage-Backed Securities (e):

    

Series 1418, Class M, 0.00%, 11/15/22

     21        19,862   

Series 1571, Class G, 0.00%, 8/15/23

     153        143,953   

Series 1691, Class B, 0.00%, 3/15/24

     301        282,817   

Series T-8, Class A10, 0.00%, 11/15/28

     36        35,171   
    

 

 

 
               739,790   
Total U.S. Government Sponsored Agency Securities — 126.8%        564,061,557   
    
                  
U.S. Treasury Obligations               

U.S. Treasury Bonds, 2.50%, 2/15/46

     2,500        2,641,505   

U.S. Treasury Notes:

    

1.00%, 11/30/19 (f)

     2,965        2,967,781   

1.38%, 8/31/20 (f)

     4,045        4,086,874   

1.63%, 11/15/22

     780        791,883   

2.00%, 8/15/25

     2,860        2,964,793   
Total U.S. Treasury Obligations — 3.0%        13,452,836   
Total Long-Term Investments
(Cost — $579,171,867) — 131.9%
        586,602,855   
    
                  
Short-Term Securities    Shares         

Money Market Funds — 1.6%

  

BlackRock Liquidity Funds, TempFund, Institutional Class, 0.33% (i)(j)

     7,183,580        7,183,580   
    
                  
      Par  
(000)
        

Borrowed Bond Agreement (g)(h) — 0.2%

  

Credit Suisse Securities (USA) LLC, 0.44%, Open (Purchased on 3/15/16 to be repurchased at $937,283. Collateralized by U.S. Treasury Bonds, 2.75%, 11/15/42, par and fair values of $917,000 and $1,018,658, respectively)

   $ 935        935,340   
Total Short-Term Securities
(Cost — $8,118,920) — 1.8%
        8,118,920   
Total Investments Before Borrowed Bonds and TBA Sale Commitments
(Cost — $587,290,787) — 133.7%
         594,721,775   
    
                  
Borrowed Bonds               

U.S. Treasury Bonds, 2.75%, 11/15/42

     917        (1,018,658
Total Borrowed Bonds
(Proceeds — $842,347) — (0.3)%
        (1,018,658
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    59


Table of Contents

Schedule of Investments (continued)

  

BlackRock Income Trust, Inc. (BKT)

 

TBA Sale Commitments    Par  
(000)
    Value  

Fannie Mae Mortgage-Backed Securities, 5.00%, 9/01/46 (k)

   $ 12,900      $ (14,296,827
Total TBA Sale Commitments
(Proceeds — $14,255,743) — (3.2)%
        (14,296,827
Total Investments, Net of Borrowed Bonds and
TBA Sale Commitments
(Cost — $572,192,697) — 130.2%
         579,406,290   
Liabilities in Excess of Other Assets — (30.2)%        (134,524,169
    

 

 

 
Net Assets — 100.0%      $ 444,882,121   
    

 

 

 
 

 

Notes to Schedule of Investments

 

(a)   Variable rate security. Rate as of period end.

 

(b)   Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

 

(c)   Step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate as of period end.

 

(d)   Amount is less than $500.

 

(e)   Zero-coupon bond.

 

(f)   All or a portion of security has been pledged as collateral in connection with outstanding reverse repurchase agreements.

 

(g)   The amount to be repurchased assumes the maturity will be the day after period end.

 

(h)   Certain agreements have no stated maturity and can be terminated by either party at any time.

 

(i)   During the year ended August 31, 2016, investments in issuers considered to be affiliates of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate      Shares Held
at August 31,
2015
       Net
Activity
       Shares Held
at August 31,
2016
       Value
at August 31,
2016
       Income  

BlackRock Liquidity Funds, TempFund, Institutional Class

       24,634,500           (17,450,920        7,183,580         $ 7,183,580         $ 36,838   

 

(j)   Current yield as of period end.

 

(k)   Represents or includes a TBA transaction. As of period end, unsettled TBA transactions were as follows:

 

Counterparty      Value        Unrealized
Depreciation
 

Barclays Bank PLC

     $ (1,474,014      $ (4,572

Credit Suisse Securities (USA) LLC

     $ (7,946,376      $ (25,512

Goldman Sachs & Co.

     $ (4,876,437      $ (11,000

 

 

For Trust compliance purposes, the Trust’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such industry subclassifications for reporting ease.

Reverse Repurchase Agreements

 

Counterparty   Interest
Rate
    Trade
Date
    Maturity
Date1
    Face Value     Face Value
Including
Accrued
Interest
       Type of
Underlying Collateral
   Remaining
Contractual
Maturity of
the Agreements

Credit Suisse Securities (USA) LLC

    0.51     3/15/16        Open      $ 12,505,774      $ 12,535,715         U.S. Government Sponsored Agency Securities    Open/Demand1

BNP Paribas Securities Corp.

    0.52     6/13/16        Open        2,972,413        2,976,060         U.S. Treasury Obligations    Open/Demand1

BNP Paribas Securities Corp.

    0.57     6/13/16        Open        4,110,731        4,116,423         U.S. Treasury Obligations    Open/Demand1

HSBC Securities (USA), Inc.

    0.60     8/10/16        9/14/16        80,143,000        80,171,050         U.S. Government Sponsored Agency Securities    Up to 30 Days
Merrill Lynch, Pierce, Fenner & Smith, Inc.     0.59     8/10/16        9/14/16        53,041,000        53,059,255         U.S. Government Sponsored Agency Securities    Up to 30 Days

Total

  

  $ 152,772,918      $ 152,858,503           
       

 

 

   

 

 

         

1    Certain agreements have no stated maturity and can be terminated by either party at any time.

 

See Notes to Financial Statements.

 

                
60    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Income Trust, Inc. (BKT)

 

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

 

Contracts
Long (Short)
    Issue              Expiration              Notional Value    

Unrealized
Appreciation

(Depreciation)

        
  118      2-Year U.S. Treasury Note           December 2016            USD         25,760,875      $ (22  
  (100)      5-Year U.S. Treasury Note           December 2016            USD         12,125,000        (3,720  
  (123)      10-Year U.S. Treasury Note           December 2016            USD         16,103,391        (10,852  
  (108)      10-Year U.S. Ultra Long Treasury Note           December 2016            USD         15,592,500        (1,223  
  (814)      Long U.S. Treasury Bond           December 2016            USD         138,685,250        8,470     
  285      Ultra Long U.S. Treasury Bond                 December 2016                  USD         53,428,594        94,205           
  Total                         $ 86,858     
                    

 

 

 

OTC Interest Rate Swaps

 

Fixed Rate   Floating
Rate
    Counterparty     Effective
Date
    Expiration
Date
   

Notional
Amount
(000)

    Value     Premiums
Received
   

Unrealized
Appreciation

(Depreciation)

        

4.31%1

    3-Month LIBOR        Deutsche Bank AG        N/A        10/01/18        $        60,000      $ (5,064,509          $ (5,064,509  

3.43%2

    3-Month LIBOR        JPMorgan Chase Bank N.A.        N/A        3/28/21        $        6,000        685,358      $ (128,872     814,230     

5.41%2

    3-Month LIBOR        JPMorgan Chase Bank N.A.        N/A        8/15/22        $        9,565        2,328,637               2,328,637           

Total

              $ (2,050,514   $ (128,872   $ (1,921,642  
             

 

 

 

1    Fund pays a fixed rate and receives the floating rate.

       

           

2    Fund pays a floating rate and receives the fixed rate.

       

           

 

Derivative Financial Instruments Categorized by Risk Exposure

 

As   of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

                Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Currency
Exchange
Contracts
    Interest Rate
Contracts
    Other
Contacts
    Total  
Assets — Derivative Financial Instruments                                            

Futures contracts

     Net unrealized appreciation1                               $ 102,675             $ 102,675   

Swaps — OTC

     Unrealized appreciation on OTC swaps                                 3,142,867                3,142,867   

Total

                                   $ 3,245,542             $ 3,245,542   
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                  
Liabilities — Derivative Financial Instruments                                            

Futures contracts

     Net unrealized depreciation1                               $ 15,817             $ 15,817   

Swaps — OTC

     Unrealized depreciation on OTC swaps: Swap premiums received                                 5,193,381               5,193,381   

Total

                                   $ 5,209,198             $ 5,209,198   
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1    Includes cumulative appreciation (depreciation) on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

        

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    61


Table of Contents

Schedule of Investments (continued)

  

BlackRock Income Trust, Inc. (BKT)

 

For the year ended August 31, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

     Commodity
Contracts
     Credit
Contracts
    

Equity

Contracts

     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contacts
     Total  

Net Realized Gain (Loss) From:

                   

Futures contracts

                                  $ (7,752,347            $ (7,752,347

Swaps

                                    (112,714              (112,714
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

                                  $ (7,865,061            $ (7,865,061
 

 

 

 
                   

Net Change in Unrealized Appreciation (Depreciation) on:

                   

Futures contracts

                                  $ (2,102,198            $ (2,102,198

Swaps

                                    289,644                 289,644   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

                                  $ (1,812,554            $ (1,812,554
 

 

 

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:

    

Average notional value of contracts — long

     $ 70,241,758   

Average notional value of contracts — short

     $ 170,537,795   
Interest rate swaps:     

Average notional value — pays fixed rate

     $ 60,000,000   

Average notional value — receives fixed rate

     $ 25,990,000   

For more information about the Trust’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

 

Derivative Financial Instruments — Offsetting as of Period End

The Trust’s derivative assets and liabilities (by type) were as follows:

 

     Assets        Liabilities         
Derivative Financial Instruments:         

Futures contracts

  $ 92,750         $ 54,125     

Swaps — OTC1

    3,142,867           5,193,381     
 

 

 

 

Total derivative assets and liabilities in the Statement of Assets and Liabilities

  $ 3,235,617         $ 5,247,506     
 

 

 

 

Derivatives not subject to a master netting agreement or similar agreement (“MNA”)

    (92,750        (54,125  
 

 

 

 

Total derivative assets and liabilities subject to an MNA

  $ 3,142,867         $ 5,193,381     
 

 

 

 

1    Includes unrealized appreciation(depreciation) on OTC swaps and swap premiums paid/received in the Statements of Assets and Liabilities.

       

 

The following table presents the Trust’s derivative assets and liabilities by counterparty net of amounts available for offset under an Master Netting Agreement (“MNA”) and net of the related collateral received and pledged by the Trust:

 

Counterparty         

Derivative Assets
Subject to an MNA
by Counterparty

    Derivatives
Available
for Offset1
    Non-cash Collateral
Received
    Cash Collateral
Received2
    Net
Amount of
Derivative
Assets3
 

JPMorgan Chase Bank N.A.

      $ 3,142,867      $ (128,872            $(3,013,995)          
     

 

 

 
             
Counterparty         

Derivative Liabilities
Subject to an MNA
by Counterparty

    Derivatives
Available for
Offset1
    Non-cash Collateral
Pledged
    Cash Collateral
Pledged4
    Net
Amount of
Derivative
Liabilities5
 

Deutsche Bank AG

      $ 5,064,509                    $ (5,040,000     $24,509   

JPMorgan Chase Bank N.A.

        128,872      $ (128,872                     
     

 

 

 

Total

      $ 5,193,381      $ (128,872          $ (5,040,000   $ 24,509   
     

 

 

 

1    The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

       

2    Excess of collateral received from the individual counterparty is not shown for financial reporting purposes

       

3    Net amount represents the net amount receivable from the counterparty in the event of default.

       

4    Excess of collateral pledged from the individual counterparty is not shown for financial reporting purposes. 

       

5    Net amount represents the net amount payable due to the counterparty in the event of default.

       

 

See Notes to Financial Statements.

 

                
62    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Income Trust, Inc. (BKT)

 

 

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Trust’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Trust’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

     Level 1        Level 2        Level 3        Total  

Assets:

                
Investments:                 

Long-Term Investments:

                

Asset-Backed Securities

            $ 1,729,682         $ 468,888         $ 2,198,570   

Non-Agency Mortgage-Backed Securities

              5,300,309           1,589,583           6,889,892   

U.S. Government Sponsored Agency Securities

              561,481,489           2,580,068           564,061,557   

U.S. Treasury Obligations

              13,452,836                     13,452,836   

Short-Term Securities:

                

Money Market Funds

  $ 7,183,580                               7,183,580   

Borrowed Bond Agreement

              935,340                     935,340   

Liabilities:

                
Investments:                 

Borrowed Bonds

              (1,018,658                  (1,018,658

TBA Sale Commitments

              (14,296,827                  (14,296,827
 

 

 

 

Total

  $ 7,183,580         $ 567,584,171         $ 4,638,539         $ 579,406,290   
 

 

 

 
                
Derivative Financial Instruments1                                         

Assets:

                

Interest rate contracts

  $ 102,675         $ 3,142,867                   $ 3,245,542   

Liabilities:

                

Interest rate contracts

    (15,817        (5,064,509                  (5,080,326
 

 

 

 

Total

  $ 86,858         $ (1,921,642                $ (1,834,784
 

 

 

 

1    Derivative financial instruments are swaps and futures contracts. Swaps and futures contracts are valued at the unrealized appreciation (depreciation) on the instrument.

       

The Trust may hold assets and/or liabilities in which the fair value approximates the carrying amount, or face value, including accrued interest, for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

 

  

     Level 1        Level 2        Level 3        Total  

Assets:

                

Cash pledged:

                

Futures contracts

  $ 2,523,260                             $ 2,523,260   

Collateral — OTC derivatives

    5,040,000                               5,040,000   

Collateral — reverse repurchase agreements

    682,769                               682,769   

Liabilities:

                

Cash received as collateral for OTC derivatives

            $ (3,330,000                  (3,330,000

Reverse repurchase agreements

              (152,858,503                  (152,858,503
 

 

 

 

Total

  $ 8,246,029         $ (156,188,503                $ (147,942,474
 

 

 

 

During the year ended August 31, 2016, there were no transfers between Level 1 and Level 2.

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    63


Table of Contents

Schedule of Investments (concluded)

  

BlackRock Income Trust, Inc. (BKT)

 

A reconciliation of Level 3 investments is presented when the Trust had a significant amount of Level 3 investments at the beginning and/or end of the period in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

 

    

Asset-Backed
Securities

     Non-Agency
Mortgage-Backed
Securities
     U.S. Government
Sponsored Agency
Securities
     Total  

Assets:

            

Opening Balance, as of August 31, 2015

    $ 522,965       $ 2,114,419       $ 3,072,791       $ 5,710,175   

Transfers into Level 3

                                

Transfers out of Level 3

                                

Accrued discounts/premiums

      (135,173              (11,442      (146,615

Net realized gain (loss)

      (185,161      7         (11,113      (196,267

Net change in unrealized appreciation (depreciation)1,2

      266,257         (524,836      (669      (259,248

Purchases

                                

Sales

              (7      (469,499      (469,506
   

 

 

    

 

 

    

 

 

    

 

 

 

Closing Balance, as of August 31, 2016

    $ 468,888       $ 1,589,583       $ 2,580,068       $ 4,638,539   
   

 

 

 

Net change in unrealized appreciation (depreciation) on investments held as of August 31, 20162

    $ 266,257       $ (524,836    $ (669    $ (259,248
   

 

 

 

1    Included in the related net change in unrealized appreciation (depreciation) in the Statements of Operations.

       

2    Any difference between net change in unrealized appreciation (depreciation) and Net change in unrealized appreciation (depreciation) on investments held as of August 31, 2016 is generally due to investments no longer held or categorized as Level 3 at period end.

        

Certain of the Trust’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information inputs could result in a significantly lower or higher value of such Level 3 investments.

 

See Notes to Financial Statements.

 

                
64    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents
Statements of Assets and Liabilities     

 

August 31, 2016  

BlackRock

Core Bond

Trust
(BHK)

   

BlackRock
Corporate

High Yield

Fund, Inc.
(HYT)1

   

BlackRock
Income

Trust, Inc.
(BKT)

 
     
Assets                        

Investments at value — unaffiliated2

  $ 1,089,555,993      $ 2,072,600,448      $ 587,538,195   

Investments at value — affiliated3

    12,926,909        13,179,920        7,183,580   

Cash

    44,891                 
Cash pledged:      

Collateral — OTC derivatives

    4,020,000               5,040,000   

Collateral — reverse repurchase agreements

                  682,769   

Futures contracts

    1,349,970        1,568,150        2,523,260   

Centrally cleared swaps

    1,239,940        2,857,000          

Foreign currency at value4

    437,584        631,458          
Receivables:      

Investments sold

    2,367,639        6,225,127        34,621   

Options written

    162,906                 

TBA sale commitments

                  14,255,743   

Dividends — unaffiliated

    27,422        8,761          

Dividends — affiliated

    3,137        566        6,576   

Interest

    11,124,669        29,724,353        2,129,649   

Principal paydowns

                  5,744   

Variation margin on futures contracts

    75,335        132,895        92,750   

Variation margin on centrally cleared swaps

    5,906                 

Swap premiums paid

    7        53,238          
Unrealized appreciation on:      

Forward foreign currency exchange contracts

    268,565        229,932          

OTC swaps

    57,477        2,640,445        3,142,867   

Prepaid expenses

    13,608        29,663        11,647   

Other assets

    5,942               768   
 

 

 

 

Total assets

    1,123,687,900        2,129,881,956        622,648,169   
 

 

 

 
     
Liabilities                        

Bank overdraft

           2,604          
Cash received:      

Collateral — OTC derivatives

    520,000        2,330,000        3,330,000   

Collateral — reverse repurchase agreements

    1,204,000                 

Borrowed bonds at value5

                  1,018,658   

Options written at value6

    5,414,078        22,041          

TBA sale commitments at value7

                  14,296,827   

Reverse repurchase agreements

    288,238,889               152,858,503   
Payables:      

Investments purchased

    2,145,291        25,568,515          

Administration fees

                  113,243   

Bank borrowings

           604,000,000          

Income dividends

    82,854        454,688        47,756   

Interest expense

           758,592        7,469   

Investment advisory fees

    933,797        2,061,804        489,753   

Officer’s and Trustees’ fees

    196,948        506,722        182,154   

Options written

    315,214                 

Other accrued expenses

    299,342        772,836        174,179   

Variation margin on futures contracts

    3,169               54,125   

Variation margin on centrally cleared swaps

           99,311          

Swap premiums received

    801,355        18,338        128,872   
Unrealized depreciation on:      

Forward foreign currency exchange contracts

    302,820        336,167          

OTC swaps

    440,470        1,877        5,064,509   

Other liabilities

    240,760                 

Contingencies

           8        
 

 

 

 

Total liabilities

    301,138,987        636,933,495        177,766,048   
 

 

 

 

Net Assets

  $ 822,548,913      $ 1,492,948,461      $ 444,882,121   
 

 

 

 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2016    65


Table of Contents
Statements of Assets and Liabilities (concluded)     

 

August 31, 2016  

BlackRock

Core Bond

Trust
(BHK)

   

BlackRock
Corporate

High Yield

Fund, Inc.
(HYT)1

   

BlackRock
Income

Trust, Inc.
(BKT)

 
     
Net Assets Consist of                        

Paid-in capital9,10,11

  $ 761,161,052      $ 1,778,771,251      $ 478,262,054   

Undistributed (distributions in excess of) net investment income

    (234,993     6,355,015        4,211,880   

Accumulated net realized loss

    (16,074,607     (264,241,991     (42,971,317

Net unrealized appreciation (depreciation)

    77,697,461        (27,935,814     5,379,504   
 

 

 

 

Net Assets

  $ 822,548,913      $ 1,492,948,461      $ 444,882,121   
 

 

 

 

Net asset value, offering and redemption price per share

  $ 15.25      $ 11.79      $ 6.96   
 

 

 

 

1    Consolidated Statement of Assets and Liabilities

     

2    Investments at cost — unaffiliated

  $ 1,015,055,944      $ 2,101,867,196      $ 580,107,207   

3    Investments at cost — affiliated

  $ 12,926,909      $ 13,050,340      $ 7,183,580   

4   Foreign currency at cost

  $ 434,549      $ 630,843          

5   Proceeds received from borrowed bonds

                $ 842,347   

6   Premiums received

  $ 8,969,163      $ 19,000          

7   Proceeds from TBA sale commitments

                $ 14,255,743   

8   See Note 12 of the Notes to Financial Statements for details of contingencies.

     

9   Par value

  $ 0.001      $ 0.100      $ 0.010   

10  Shares outstanding

    53,935,126        126,599,668        63,942,535   

11  Shares authorized

    Unlimited        200 million        200 million   

 

 

See Notes to Financial Statements.      
                
66    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents
Statements of Operations     

 

Year Ended August 31, 2016  

BlackRock

Core Bond

Trust
(BHK)

   

BlackRock
Corporate

High Yield

Fund, Inc.
(HYT)1

   

BlackRock
Income

Trust, Inc.
(BKT)

 
     
Investment Income   

Interest

  $ 48,713,009      $ 122,323,419      $ 22,470,081   

Dividends — unaffiliated

    722,567        805,002          

Dividends — affiliated

    43,746        821,437        36,838   

Other income

    487,964               263,157   

Foreign taxes withheld

           (16       
 

 

 

 

Total income

    49,967,286        123,949,842        22,770,076   
 

 

 

 
     
Expenses   

Investment advisory

    5,338,516        11,975,292        2,910,565   

Professional

    135,071        313,246        97,388   

Miscellaneous

    125,385        208,159        45,407   

Transfer agent

    109,693        146,109        73,485   

Officer and Trustees

    101,665        187,462        63,238   

Accounting services

    99,724        204,867        64,703   

Custodian

    94,698        201,859        35,662   

Registration

    17,970        41,873        21,791   

Printing

    17,127        31,636        15,018   

Administration

                  671,669   
 

 

 

 

Total expenses excluding interest expense and income tax

    6,039,849        13,310,503        3,998,926   

Interest expense

    1,494,097        6,431,659        824,201   

Income tax

           29,880          
 

 

 

 

Total expenses

    7,533,946        19,772,042        4,823,127   

Less fees waived by the Manager

    (9,230     (997     (7,301

Less fees paid indirectly

    (195            (302
 

 

 

 

Total expenses after fees waived and paid indirectly

    7,524,521        19,771,045        4,815,524   
 

 

 

 

Net investment income

    42,442,765        104,178,797        17,954,552   
 

 

 

 
     
Realized and Unrealized Gain (Loss)   
Net realized gain (loss) from:   

Investments

    (14,009,882     (88,802,531     632,667   

Investments — affiliated

           (2,263,123       

Futures contracts

    2,738,560        (4,318,151     (7,752,347

Foreign currency transactions

    2,545,608        7,230,510          

Options written

    3,887,894        259,773          

Swaps

    (4,265,963     6,083,805        (112,714
 

 

 

 
    (9,103,783     (81,809,717     (7,232,394
 

 

 

 
Net change in unrealized appreciation (depreciation) on:      

Investments

    60,815,086        74,000,645        5,553,116   

Investments — affiliated

           129,580          

Futures contracts

    1,159,137        (7,663,606     (2,102,198

Foreign currency translations

    (178,895     144,189          

Options written

    2,435,217        (3,041       

Swaps

    (294,435     2,008,751        289,644   

Borrowed bonds

                  (136,440
 

 

 

 
    63,936,110        68,616,518        3,604,122   
 

 

 

 

Net realized and unrealized gain (loss)

    54,832,327        (13,193,199     (3,628,272
 

 

 

 

Net Increase in Net Assets Resulting from Operations

  $ 97,275,092      $ 90,985,598      $ 14,326,280   
 

 

 

 

1   Consolidated Statement of Operations.

      

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2016    67


Table of Contents
Statements of Changes in Net Assets     

 

    BlackRock Core Bond Trust (BHK)  
    Year Ended August 31,  
Increase (Decrease) in Net Assets:   2016     2015  
   
Operations   

Net investment income

  $ 42,442,765      $ 42,093,223   

Net realized gain (loss)

    (9,103,783     19,284,069   

Net change in unrealized appreciation (depreciation)

    63,936,110        (53,137,205
 

 

 

 

Net increase in net assets resulting from operations

    97,275,092        8,240,087   
 

 

 

 
   
Distributions to Shareholders1    

From net investment income

    (45,548,216     (47,657,688

In excess of net investment income

           (1,743,768
 

 

 

 

Decrease in net assets resulting from distributions to shareholders

    (45,548,216     (49,401,456
 

 

 

 
   
Capital Share Transactions   

Net proceeds from the issuance of shares due to reorganization

           399,906,769   

Cost of shares redeemed

           (1,775
 

 

 

 

Net increase in net assets derived from capital transactions

           399,904,994   
 

 

 

 
   
Net Assets   

Total increase in net assets

    51,726,876        358,743,625   

Beginning of year

    770,822,037        412,078,412   
 

 

 

 

End of year

  $ 822,548,913      $ 770,822,037   
 

 

 

 

Distributions in excess of net investment income, end of year

  $ (234,993   $ (17,798
 

 

 

 

1   Distributions for annual periods determined in accordance with federal income tax regulations.

      

 

 

See Notes to Financial Statements.      
                
68    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents
Consolidated Statements of Changes in Net Assets     

 

       

BlackRock Corporate High Yield Fund, Inc. (HYT)

 
       

Year Ended August 31,

 
Increase (Decrease) in Net Assets:           2016           2015        
           
Operations           

Net investment income

      $ 104,178,797        $ 110,710,853     

Net realized gain (loss)

        (81,809,717       3,532,873     

Net change in unrealized appreciation (depreciation)

        68,616,518          (169,304,412  
     

 

 

 

Net increase (decrease) in net assets resulting from operations

        90,985,598          (55,060,686  
     

 

 

 
           
Distributions to Shareholders1            

From net investment income

        (125,343,672       (123,054,879  
     

 

 

 
           
Net Assets           

Total decrease in net assets

        (34,358,074       (178,115,565  

Beginning of year

        1,527,306,535          1,705,422,100     
     

 

 

 

End of year

      $ 1,492,948,461        $ 1,527,306,535     
     

 

 

 

Undistributed net investment income, end of year

      $ 6,355,015        $ 22,469,916     
     

 

 

 

 

  1   

Distributions for annual periods determined in accordance with federal income tax regulations.

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2016    69


Table of Contents
Statements of Changes in Net Assets     

 

    BlackRock Income Trust, Inc. (BKT)  
    Year Ended August 31,  
Increase (Decrease) in Net Assets:   2016     2015  
   
Operations   

Net investment income

  $ 17,954,552      $ 20,490,679   

Net realized loss

    (7,232,394     (6,803,051

Net change in unrealized appreciation (depreciation)

    3,604,122        (682,875
 

 

 

 

Net increase in net assets resulting from operations

    14,326,280        13,004,753   
 

 

 

 
   
Distributions to Shareholders1    

From net investment income

    (22,060,177     (25,321,248
 

 

 

 
   
Net Assets   

Total decrease in net assets

    (7,733,897     (12,316,495

Beginning of year

    452,616,018        464,932,513   
 

 

 

 

End of year

  $ 444,882,121      $ 452,616,018   
 

 

 

 

Undistributed net investment income, end of year

  $ 4,211,880      $ 7,048,258   
 

 

 

 

 

  1   

Distributions for annual periods determined in accordance with federal income tax regulations.

 

 

See Notes to Financial Statements.      
                
70    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents
Statements of Cash Flows     

 

Year Ended August 31, 2016   BlackRock
Core Bond
Trust
(BHK)
    BlackRock
Corporate
High Yield
Fund,  Inc.
(HYT)1
   

BlackRock

Income
Trust, Inc.
(BKT)

 
     
Cash Provided by (Used for) Operating Activities   

Net increase in net assets resulting from operations

  $ 97,275,092      $ 90,985,598      $ 14,326,280   
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities:   

Proceeds from sales of long term investments and principal paydowns

    386,810,823        1,334,108,590        907,319,977   

Purchases of long term investments

    (376,278,777     (1,296,727,395     (895,903,574

Net proceeds from sales of short-term securities

                  17,362,580   

Net purchases of short-term securities

    (3,006,544              

Amortization of premium and accretion of discount on investments

    4,482,327        (1,428,429     4,989,570   

Premiums paid on closing options written

    (10,489,307     (52,832       

Premiums received from options written

    17,366,527        331,605          

Net realized (gain) loss on investments and options written

    9,485,896        90,278,943        204,031   

Net unrealized loss on investments, options written, swaps, borrowed bonds and foreign currency translations

    (62,457,584     (76,225,662     (5,708,711
(Increase) Decrease in Assets:      
Cash Pledged:      

Collateral — OTC derivatives

    1,640,000        80,000        1,460,000   

Collateral — reverse repurchase agreements

    2,140,000               483,231   

Futures contracts

    85,080        3,986,240        (531,950

Centrally cleared swaps

    (1,130,790     (2,334,250       
Receivables:      

Dividends — unaffiliated

           (3,674       

Income — affiliated

    (3,137     (566     (6,576

Interest

    462,018        3,747,970        168,585   

Swaps

    15,098        224,244        248,798   

Variation margin on futures contracts

    15,953        1,060,225        312,182   

Variation margin on centrally cleared swaps

    30,155                 

Swap premiums paid

    65,721        47,171          

Prepaid expenses

    (2,951     (4,751     (1,771

Other assets

    18,507               2,466   
Increase (Decrease) in Liabilities:      
Cash received:      

Collateral — reverse repurchase agreements

    1,204,000                 

Collateral — OTC derivatives

    520,000        730,000        (640,000
Payables:   

Swaps

    (7,510            (1,111,408

Administration fees

                  (2,242

Interest expense

    198,235        239,863        44,205   

Investment advisory fees

    (1,394     (193,022     (9,181

Officer’s and Trustees’ fees

    12,951        85,853        27,346   

Other accrued expenses

    3,269        65,265        (8,421

Variation margin on futures contracts

    (258,593     (73     (46,344

Variation margin on centrally cleared swaps

    (19,444     74,968          

Swap premiums received

    674,064        (33,046     (27,312
 

 

 

 

Net cash provided by operating activities

    68,849,685        149,042,835        42,951,761   
 

 

 

 

1    Consolidated Statement of Cash Flows.

     

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2016    71


Table of Contents
Statements of Cash Flows (concluded)     

 

Year Ended August 31, 2016   BlackRock
Core Bond
Trust
(BHK)
    BlackRock
Corporate
High Yield
Fund,  Inc.
(HYT)1
   

BlackRock

Income
Trust, Inc.
(BKT)

 
     
Cash Used for Financing Activities                        

Cash dividends paid to Common Shareholders

  $ (45,546,171   $ (125,391,326   $ (22,068,187

Payments on bank borrowings

           (676,000,000       

Proceeds from bank borrowings

           649,000,000          

Increase (decrease) in bank overdraft

           2,604        (2,492

Net borrowing of reverse repurchase agreements

    (23,202,872            (20,881,082
 

 

 

 

Net cash used for financing activities

    (68,749,043     (152,388,722     (42,951,761
 

 

 

 
     
Cash Impact from Foreign Exchange Fluctuations                        

Cash impact from foreign exchange fluctuations

  $ 10,387      $ 727          
 

 

 

 
     
Cash and Foreign Currency                        

Net increase (decrease) in cash and foreign currency at value

    111,029        (3,345,160       

Cash and foreign currency at value at beginning of year

    371,446        3,976,618          
 

 

 

 

Cash and foreign currency at value at end of year

  $ 482,475      $ 631,458          
 

 

 

 
     
Supplemental Disclosure of Cash Flow Information   

Cash paid during the year for interest expense

  $ 1,295,862      $ 6,191,796      $ 779,996   
 

 

 

 

1    Consolidated Statement of Cash Flows.

       

 

 

See Notes to Financial Statements.      
                
72    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents
Financial Highlights    BlackRock Core Bond Trust (BHK)

 

    Year Ended August 31,  
    2016     2015     2014     2013     2012  
         
Per Share Operating Performance                           

Net asset value, beginning of year

  $ 14.29      $ 15.24      $ 14.05      $ 15.21      $ 13.78   
 

 

 

 

Net investment income1

    0.79        0.86        0.87        0.89        0.88   

Net realized and unrealized gain (loss)

    1.01        (0.73     1.23        (1.11     1.37   
 

 

 

 

Net increase (decrease) from investment operations

    1.80        0.13        2.10        (0.22     2.25   
 

 

 

 

Distributions:2

         

From net investment income

    (0.84     (1.04     (0.91     (0.94     (0.82

In excess of net investment income3

           (0.04                     
 

 

 

 

Total distributions

    (0.84     (1.08     (0.91     (0.94     (0.82
 

 

 

 

Net asset value, end of year

  $ 15.25      $ 14.29      $ 15.24      $ 14.05      $ 15.21   
 

 

 

 

Market price, end of year

  $ 14.33      $ 12.63      $ 13.64      $ 12.50      $ 15.41   
 

 

 

 
         
Total Return4                            

Based on net asset value

    13.67%        1.62%        16.09% 5      (1.42)%        17.06%   
 

 

 

 

Based on market price

    20.85%        0.35%        16.78%        (13.43)%        28.78%   
 

 

 

 
         
Ratios to Average Net Assets                           

Total expenses

    0.97%        0.95% 6      1.06% 6      1.03%        0.95%   
 

 

 

 

Total expenses after fees waived and paid indirectly

    0.97%        0.95% 6      1.02% 6      0.98%        0.94%   
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense

    0.78%        0.82% 6      0.91% 6      0.86%        0.86%   
 

 

 

 

Net investment income

    5.48%        5.83%        5.94%        5.92%        6.13%   
 

 

 

 
         
Supplemental Data                           

Net assets, end of year (000)

  $  822,549      $  770,822      $  412,078      $  379,913      $  411,136   
 

 

 

 

Borrowings outstanding, end of year (000)

  $ 288,239      $ 303,651      $ 168,301      $ 172,537      $ 182,679   
 

 

 

 

Portfolio turnover rate7

    35%        55%        82%        100%        290%   
 

 

 

 

 

  1   

Based on average shares outstanding.

 

  2   

Distributions for annual periods determined in accordance with federal income tax regulations.

 

  3   

Taxable distribution.

 

  4   

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.

 

  5   

Includes proceeds received from a settlement of litigation, which impacted the Trust’s total return. Excluding these proceeds, the total return would have been 16.01%.

 

  6   

Includes reorganization costs associated with the Trust’s merger. Without these costs, total expenses, total expenses after fees waived and paid indirectly, and total expenses after fees waived and paid indirectly and excluding interest expense would have been 0.94%, 0.94% and 0.82% for the year ended August 31, 2015 and 1.00%, 0.96% and 0.85% for the year ended August 31, 2014, respectively.

 

  7   

Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

 

    Year Ended August 31,  
    2016     2015     2014     2013     2012  
         

Portfolio turnover (excluding MDRs)

    35%        51%        48%        63%        237%   
 

 

 

 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2016    73


Table of Contents
Consolidated Financial Highlights    BlackRock Corporate High Yield Fund, Inc. (HYT)

 

    Year Ended August 31,  
    2016     2015     2014     2013     2012  
         
Per Share Operating Performance   

Net asset value, beginning of year

  $ 12.06      $ 13.47      $ 12.62      $ 12.32      $ 11.49   
 

 

 

 

Net investment income1

    0.82        0.87        0.98        1.00        1.04   

Net realized and unrealized gain (loss)

    (0.10     (1.31     0.91        0.41        0.83   
 

 

 

 

Net increase (decrease) from investment operations

    0.72        (0.44     1.89        1.41        1.87   
 

 

 

 

Distributions from net investment income2

    (0.99     (0.97     (1.04     (1.11     (1.04
 

 

 

 

Net asset value, end of year

  $ 11.79      $ 12.06 3    $ 13.47      $ 12.62      $ 12.32   
 

 

 

 

Market price, end of year

  $ 10.88      $ 9.97      $ 12.07      $ 11.37      $ 12.96   
 

 

 

 
         
Total Return4    

Based on net asset value

    7.76%        (2.40)% 3      16.21%        11.90%        17.14%   
 

 

 

 

Based on market price

    20.29%        (9.96)%        15.58%        (4.16)%        26.30%   
 

 

 

 
         
Ratios to Average Net Assets   

Total expenses

    1.39% 5      1.37%        1.35% 6      1.54% 7      1.51%   
 

 

 

 

Total expenses after fees waived and paid indirectly

    1.39% 5      1.37%        1.35% 6      1.54% 7      1.51%   
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense and income tax

    0.93% 5      0.96%        0.98% 6      1.16% 7,8      1.19% 9 
 

 

 

 

Net investment income

    7.30% 5      6.88%        7.40%        7.83%        8.84%   
 

 

 

 
         
Supplemental Data   

Net assets, end of year (000)

  $  1,492,948      $  1,527,307      $  1,705,422      $     446,847      $     435,955   
 

 

 

 

Borrowings outstanding, end of year (000)

  $ 604,000      $ 631,000      $ 723,000      $ 191,000      $ 181,000   
 

 

 

 

Asset coverage, end of year $1,000 of bank borrowing

  $ 3,472      $ 3,419      $ 3,359      $ 3,340      $ 3,409   
 

 

 

 

Portfolio turnover rate

    66%        57%        64%        77%        61%   
 

 

 

 

 

  1   

Based on average shares outstanding.

 

  2   

Distributions for annual periods determined in accordance with federal income tax regulations.

 

  3   

For financial reporting purposes, the market value of certain total return swaps were adjusted as of report date. Accordingly, the net asset value (“NAV”) per share and total return performance based on net asset value presented herein are different than the information previously published on August 31, 2015.

 

  4   

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.

 

  5   

Does not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.11%.

 

  6   

Includes reorganization costs. Without these costs, total expenses, total expenses after fees waived and paid indirectly, and total expenses after fees waived and paid indirectly and excluding interest expense would have been 1.34%, 1.34% and 0.97%, respectively.

 

  7   

Includes reorganization costs. Without these costs, total expenses, total expenses after fees waived and paid indirectly, and total expenses after fees waived and paid indirectly and excluding interest expense would have been 1.50%, 1.50% and 1.12%, respectively.

 

  8   

For the year ended August 31, 2013, the total expense ratio after fees waived and paid indirectly and excluding interest expense, borrowing costs and income tax was 1.15%.

 

  9   

For the year ended August 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense and borrowing costs was 1.09%.

 

 

See Notes to Financial Statements.      
                
74    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents
Financial Highlights    BlackRock Income Trust, Inc. (BKT)

 

    Year Ended August 31,  
    2016     2015     2014     2013     2012  
         
Per Share Operating Performance                           

Net asset value, beginning of year

  $ 7.08      $ 7.27      $ 7.32      $ 7.94      $ 7.96   
 

 

 

 

Net investment income1

    0.28        0.32        0.35        0.32        0.39   

Net realized and unrealized gain (loss)

    (0.05     (0.11     0.03        (0.46     0.06   
 

 

 

 

Net increase (decrease) from investment operations

    0.23        0.21        0.38        (0.14     0.45   
 

 

 

 

Distributions:2

         

From net investment income

    (0.35     (0.40     (0.43     (0.48     (0.27

From net realized gain

                                (0.20
 

 

 

 

Total distributions

    (0.35     (0.40     (0.43     (0.48     (0.47
 

 

 

 

Net asset value, end of year

  $ 6.96      $ 7.08      $ 7.27      $ 7.32      $ 7.94   
 

 

 

 

Market price, end of year

  $ 6.60      $ 6.30      $ 6.42      $ 6.40      $ 7.63   
 

 

 

 
         
Total Return3                            

Based on net asset value

    3.64%        3.56%        6.05%        (1.45)%        6.24%   
 

 

 

 

Based on market price

    10.44%        4.35%        7.12%        (10.34)%        13.19%   
 

 

 

 
         
Ratios to Average Net Assets                           

Total expenses

    1.08%        0.99% 4      1.02% 4      1.00%        0.97%   
 

 

 

 

Total expenses after fees waived and paid indirectly

    1.08%        0.99% 4      1.02% 4      1.00%        0.97%   
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense

    0.89%        0.90% 4      0.96% 4      0.90%        0.90%   
 

 

 

 

Net investment income

    4.01%        4.48%        4.74%        4.18%        4.86%   
 

 

 

 
         
Supplemental Data                           

Net assets, end of year (000)

  $  444,882      $  452,616      $  464,933      $  467,948      $  507,852   
 

 

 

 

Borrowings outstanding, end of year (000)

  $ 152,859      $ 173,695      $ 205,415      $ 148,344      $ 119,706   
 

 

 

 

Portfolio turnover rate5

    141%        191%        256%        358%        487%   
 

 

 

 

 

  1   

Based on average shares outstanding.

 

  2   

Distributions for annual periods determined in accordance with federal income tax regulations.

 

  3   

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.

 

  4   

Includes reorganization costs. Without these costs, total expenses, total expenses after fees waived and paid indirectly, and total expenses after fees waived and paid indirectly and excluding interest expense would have been 0.99%, 0.99% and 0.89% for the year ended August 31, 2015 and 0.97%, 0.97% and 0.90% for the year ended August 31, 2014, respectively.

 

  5   

Includes MDRs. Additional information regarding portfolio turnover rate is as follows:

 

    Year Ended August 31,  
    2016     2015     2014     2013     2012  
         

Portfolio turnover (excluding MDRs)

    63%        78%        125%        196%        230%   
 

 

 

 

 

                
   ANNUAL REPORT    AUGUST 31, 2016    75


Table of Contents
Notes to Financial Statements     

 

1. Organization:

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, a “Trust”:

 

Trust Name   Herein Referred To As     Organized     Diversification Classification  

BlackRock Core Bond Trust

    BHK        Delaware        Diversified   

BlackRock Corporate High Yield Fund, Inc.

    HYT        Maryland        Diversified   

BlackRock Income Trust, Inc.

    BKT        Maryland        Diversified   

The Boards of Directors and Boards of Trustees of the Trusts are collectively referred to throughout this report as the “Board of Trustees” or the “Board,” and the directors/trustees thereof are collectively referred to throughout this report as “Trustees.” The Trusts determine and make available for publication the 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 closed-end funds referred to as the Closed-End Complex.

Reorganization: The Board and shareholders of BHK and the Board and shareholders of BlackRock Income Opportunity Trust, Inc. (“BNA” or the “Target Fund”) approved the reorganization of the Target Fund into BHK pursuant to which BHK acquired substantially all of the assets and substantially all of the liabilities of the Target Fund in exchange for an equal aggregate value of newly-issued Common Shares of BHK. The purpose of the transaction was to combine two funds managed by BlackRock Advisors, LLC (the “Manager”) with the same or substantially similar (but not identical) investment objectives, investment policies, strategies, risks and restrictions. The reorganization was a tax-free event and was effective on November 10, 2014.

Each Common Shareholder of the Target Fund received Common Shares of BHK in an amount equal to the aggregate net asset value of such Common Shareholder’s Target Fund Common Shares, as determined at the close of business on November 7, 2014, less the costs of the Target Fund’s reorganization. Cash was distributed for any fractional shares.

The reorganization was accomplished by a tax-free exchange of shares of BHK in the following amount and at the following conversion ratio:

 

Target Fund   Shares Prior to
Reorganization
     Conversion
Ratio
    

Shares of

BHK

 

BNA

    34,456,370         0.78050585         26,893,279   

BNA’s net assets and composition of net assets on November 7, 2014, the valuation date of the reorganization, was as follows:

 

     BNA  

Net assets

  $ 399,906,040   

Paid-in capital

  $ 384,183,492   

Distributions in excess of net investment income

  $ (65,119

Accumulated net realized loss

  $ (14,090,276

Net unrealized appreciation/ depreciation

  $ 29,877,943   

For financial reporting purposes, assets received and shares issued by BHK were recorded at fair value. However, the cost basis of the investments received from the Target Fund were carried forward to maintain ongoing reporting of BHK’s realized and unrealized gains and losses distributable to shareholders for tax purposes.

The net assets of BHK before the acquisition were $402,115,685. The aggregate net assets of BHK immediately after the acquisition amounted to $802,021,725. The Target Fund’s fair value and cost of investments and derivative financial investments prior to the reorganization were as follows:

 

Target Fund  

Fair Value of

Investments and
Derivative Financial
Instruments

   

Cost of

Investments

 

BNA

  $ 587,550,335      $ 557,681,213   

In connection with the reorganization, BHK investment advisory fee was reduced by 5 basis points, from 0.55% of BHK’s average weekly net assets to 0.50% of BHK’s average weekly net assets as defined in Note 6. In addition to this reduction, BHK’s contractual investment advisory fee waiver of 0.03%, as a percentage of average weekly net assets, was discontinued in connection with the reorganization.

Assuming the acquisition had been completed on September 1, 2014, the beginning of the fiscal reporting period of BHK, the pro forma results of operations for the year ended August 31, 2015, are as follows:

 

 

Net investment income/loss: $46,563,761

 

 

Net realized and change in unrealized gain/loss on investments: $(39,413,545)

 

 

Net increase/decrease in net assets resulting from operations: $7,150,216

 

                
76    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents
Notes to Financial Statements (continued)     

 

Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of the BHK Target Fund that have been included in BHK’s Statement of Operations since November 10, 2014.

Reorganization costs incurred in connection with the reorganization were expensed by BHK.

Basis of Consolidation: The accompanying consolidated financial statements of HYT include the accounts of BLK HYT (Luxembourg) Investments, S.a.r.l., BLK HYV (Luxembourg) Investments, S.a.r.l., BLK COY (Luxembourg) Investments, S.a.r.l. and BLK CYE (Luxembourg) Investments, S.a.r.l. (the “Taxable Subsidiaries”), which are wholly owned taxable subsidiaries of HYT which hold shares of private Canadian companies, Laricina Energy Ltd. and Osum Oil Sands Corp. Such shares are held in the Taxable Subsidiaries in order to realize benefits under the Double Tax Avoidance Convention between Canada and Luxembourg, the result of which is gains on the sale of such shares will generally not be subject to capital gains taxes in Canada. Income earned on the investment held by the Taxable Subsidiary may be taxable to such subsidiary in Luxembourg. A tax provision, if any, is included in expenses in the Consolidated Statement of Operations for HYT. The net assets of the Taxable Subsidiaries as of period end were $699,084, which is less than 0.1% of HYT’s consolidated net assets. Intercompany accounts and transactions, if any, have been eliminated. The Taxable Subsidiaries are subject to the same investment policies and restrictions that apply to HYT.

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:

Foreign Currency: Each Trust’s books and records are maintained in U.S. dollars. 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 federal income tax purposes.

Segregation and Collateralization: In cases where a Trust enters into certain investments (e.g., dollar rolls, TBA sale commitments, futures contracts, forward foreign currency exchange contracts, options written, swaps and short sales) 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 borrowing to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Trust 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.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). 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, some 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, is recognized on the accrual basis.

Distributions: Distributions from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. Portions of return of capital distributions under U.S. GAAP may be taxed at ordinary income rates. The character of distributions is determined in accordance with 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, as measured on a tax basis, constitute a non-taxable return of capital. Realized net capital gains can be offset by capital losses carried forward from prior years. However, certain Trusts have capital loss carryforwards from pre-2012 tax years that offset realized net capital gains but do not offset current earnings and profits. Consequently, if distributions in any tax year are less than the Trust’s current earnings and profits but greater than net investment income and net realized capital gains (taxable income), distributions in excess of taxable income are not treated as non-taxable return of capital, but rather may be taxable to shareholders at ordinary income rates. Under certain circumstances, taxable excess distributions could be significant. See Note 8, Income Tax Information, for the tax character of each Trust’s distributions paid during the year.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    77


Table of Contents
Notes to Financial Statements (continued)     

 

Deferred Compensation Plan: Under the Deferred Compensation Plan (the “Plan”) approved by each Trust’s Board, the independent Trustees (“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 other BlackRock Closed-End Funds 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 other BlackRock Closed-End Funds.

The Plan is not funded and obligations thereunder represent general unsecured claims against the general assets of each Trust, if applicable. Deferred compensation liabilities are included in officer’s and trustees’ 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 Standard: In April 2015, the Financial Accounting Standards Board issued “Disclosures for Investments in Certain Entities that Calculate Net Asset Value (“NAV”) per Share” which eliminates the requirement to categorize investments within the fair value hierarchy when fair value is based on the NAV per share and no quoted market value is available. As of August 31, 2016, certain investments of HYT were valued using NAV per share as no quoted market value is available and have been excluded from the fair value hierarchy.

Indemnifications: In the normal course of business, each 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.

Through May 31, 2016, the Trusts had an arrangement with their custodian whereby credits were earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. Credits previously earned may be utilized until December 31, 2016. Under current arrangements effective June 1, 2016, the Trusts no longer earn credits on uninvested cash, and may incur charges on uninvested cash balances and overdrafts, subject to certain conditions.

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 New York Stock Exchange (“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 the Board of Trustees. 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 (or “techniques”) 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.

 

 

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of business on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of business 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 business on the NYSE, which follows the close of the local markets.

 

 

Bond investments are valued on the basis of last available bid prices or current market quotations provided by dealers or pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more brokers or dealers as obtained from a pricing service. 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, various relationships observed in the market between investments and calculated yield measures. Asset-backed and mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche-specific spread to the benchmark yield based on the unique attributes of the tranche.

 

                
78    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents
Notes to Financial Statements (continued)     

 

 

 

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.

 

 

To-be-announced (“TBA”) commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services.

 

 

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.

 

 

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 business on the NYSE. Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of business on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

 

 

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 options 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 instruments, 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”). 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, which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. The market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and is adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Trusts’ pricing vendors, regular reviews of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

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 each Trust’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for

 

                
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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. The significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments are typically categorized as Level 3. The fair value hierarchy for each Trust’s investments and derivative financial instruments has been included in the Schedules of Investments.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with each Trust’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the 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, the Trusts may subsequently have to reinvest the proceeds at lower interest rates. If a Trust 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, the Trust’s initial investment in the IOs may not fully recoup.

 

                
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Stripped Mortgage-Backed Securities: Stripped mortgage-backed securities are typically issued by the U.S. Government, its agencies and instrumentalities. Stripped mortgage-backed securities are usually structured with two classes that receive different proportions of the interest (IOs) and principal (POs) distributions on a pool of Mortgage Assets. Stripped mortgage-backed securities may be privately issued.

Zero-Coupon Bonds: Zero-coupon bonds are normally issued at a significant discount from face value and do not provide for periodic interest payments. These bonds may experience greater volatility in market value than other debt obligations of similar maturity which provide for regular interest payments.

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. Payments on these securities are treated as interest rather than dividends for federal income tax purposes. 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 Stock: 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.

Warrants: Warrants entitle a Trust 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 Trust 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 to not be 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 net asset value of a Trust to the extent that it invests in floating rate debt securities. 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 Trust’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 the Trusts 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

 

                
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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.

Forward Commitments and When-Issued Delayed Delivery Securities: Certain Trusts may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. A Trust may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, a Trust may be required to pay more at settlement than the security is worth. In addition, a Trust is not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, a Trust assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, a Trust’s maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions.

TBA Commitments: TBA commitments are forward agreements for the purchase or sale of mortgage-backed securities for a fixed price, with payment and delivery on an agreed upon future settlement date. The specific securities to be delivered are not identified at the trade date. However, delivered securities must meet specified terms, including issuer, rate and mortgage terms. When entering into TBA commitments, a Trust may take possession of or deliver the underlying mortgage-backed securities but can extend the settlement or roll the transaction. TBA commitments involve a risk of loss if the value of the security to be purchased or sold declines or increases, respectively, prior to settlement date.

In order to better define contractual rights and to secure rights that will help a Trust mitigate its counterparty risk, TBA commitments may be entered into by a Trust under Master Securities Forward Transaction Agreements (each, an “MSFTA”). An MSFTA typically contains, among other things, collateral posting terms and netting provisions in the event of default and/or termination event. 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 the collateral currently pledged by a Trust and the counterparty. Cash collateral that has been pledged to cover the obligations of a Trust and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as cash pledged as collateral for TBA commitments or cash received as collateral for TBA commitments, respectively. Non-cash collateral pledged by a Trust, if any, is noted in the Schedules of Investments. Typically, a Trust is permitted to sell, repledge or use the collateral it receives; however, the counterparty is not permitted to do so. To the extent amounts due to a Trust are not fully collateralized, contractually or otherwise, a Trust bears the risk of loss from counterparty non-performance.

Mortgage Dollar Roll Transactions: Certain Trusts may sell TBA mortgage-backed securities and simultaneously contract to repurchase substantially similar (i.e., same type, coupon and maturity) securities on a specific future date at an agreed upon price. During the period between the sale and repurchase, a Trust is not entitled to receive interest and principal payments on the securities sold. Mortgage dollar roll transactions are treated as purchases and sales and realize gains and losses on these transactions. Mortgage dollar rolls involve the risk that the market value of the securities that a Trust is required to purchase may decline below the agreed upon repurchase price of those securities.

Borrowed Bond Agreements: Repurchase agreements may be referred to as borrowed bond agreements when entered into in connection with short sales of bonds. In a borrowed bond agreement, a Trust borrows a bond from a counterparty in exchange for cash collateral. The agreement contains a commitment that the security and the cash will be returned to the counterparty and a Trust at a mutually agreed upon date. Certain agreements have no stated maturity and can be terminated by either party at any time. Earnings on cash collateral and compensation to the lender of the bond are based on agreed upon rates between a Trust and the counterparty. The value of the underlying cash collateral approximates the market value and accrued interest of the borrowed bond. To the extent that a borrowed bond transaction exceeds one business day, the value of the cash collateral in the possession of the counterparty is monitored on a daily basis to ensure the adequacy of the collateral. As the market value of the borrowed bond changes, the cash collateral is periodically increased or decreased with a frequency and in amounts prescribed in the borrowed bond agreement. A Trust may also experience delays in gaining access to the collateral.

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.

 

                
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Notes to Financial Statements (continued)     

 

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 use of the security by the counterparty, which may result in interest income to a Trust.

For the year ended August 31, 2016, the average amount of reverse repurchase agreements outstanding and the daily weighted average interest rates were as follows:

 

    

Average

Amount

Outstanding

   

Daily
Weighted

Average

Interest Rate

 

BHK

  $ 293,360,951        0.51

BKT

  $ 160,153,322        0.51

Borrowed bond agreements and 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 borrowed bond agreements and reverse repurchase transactions, typically a Trust and the 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 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 the Trusts’ open borrowed bond agreements and reverse repurchase agreements by counterparty which are subject to offset under an MRA on a net basis:

 

BHK                                   
Counterparty   Reverse Repurchase
Agreements
   

Fair Value of Non-cash

Collateral Pledged
Including

Accrued Interest1

   

Cash Collateral

Pledged

    Net Amount2         

Barclays Capital, Inc.

  $ 12,975,689      $ (12,975,689                

BNP Paribas Securities Corp.

    102,361,521        (102,361,521                

Credit Suisse Securities (USA) LLC

    5,031,655        (5,031,655                

Deutsche Bank AG

    24,457,665        (24,457,665                

HSBC Securities (USA), Inc.

    54,395,612        (54,395,612                

Merrill Lynch, Pierce, Fenner & Smith, Inc

    17,974,441        (17,974,441                

Nomura Securities International, Inc

    31,779,484        (31,732,707          $ 46,777     

RBC Capital Markets, LLC

    39,262,822        (39,262,822                
 

 

 

 

Total

  $ 288,238,889      $ (288,192,112          $ 46,777     
 

 

 

 

 

  1   

Net collateral with a value of $296,141,939 has been pledged in connection with open reverse repurchase agreements. Excess of collateral pledged to the individual counterparty is not shown for financial reporting purposes.

 

  2   

Net amount represents the net amount payable due to counterparty in the event of default.

 

BKT                                                                         
Counterparty          Borrowed
Bonds
Agreements1
    Reverse
Repurchase
Agreements
   

Borrowed
Bonds at

Value
including
Accrued
Interest2

    Net Amount
before Collateral
    Non-cash
Collateral
Received
  Cash
Collateral
Received
 

Non-cash
Collateral

Pledged

   

Cash

Collateral

Pledged

    Net
Collateral
(Received)/
Pledged3
    Net Exposure
Due (to)/from
Counterparty4
 

BNP Paribas Securities Corp

           $ (7,092,483          $ (7,092,483       $ 7,062,347             $ 7,062,347      $ (30,136

Credit Suisse Securities (USA) LLC

    $ 935,340        (12,535,715   $ (1,026,127     (12,626,502         12,245,942      $ 380,560        12,626,502          

HSBC Securities (USA) LLC

             (80,171,050            (80,171,050         80,171,050               80,171,050          

Merrill Lynch, Pierce, Fenner & Smith Inc.

             (53,059,255            (53,059,255         53,059,255               53,059,255          
   

 

 

 

Total

    $ 935,340      $ (152,858,503   $ (1,026,127   $ (152,949,290       $ 152,538,594      $ 380,560      $ 152,919,154      $ (30,136
   

 

 

 

 

  1   

Included in investments at value-unaffiliated in the Statements of Assets and Liabilities.

 

  2   

Includes accrued interest on borrowed bonds in the amount of $7,469 which is included in interest expense payable in the Statements of Assets and Liabilities.

 

  3   

Net collateral with a value of $158,123,036 has been pledged in connection with open reverse repurchase agreements. Excess of net collateral pledged to the individual counterparty is not shown for financial reporting purposes.

 

  4   

Net exposure represents the net receivable (payable) that would be due from/to the counterparty in the event of default.

 

                
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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.

Short Sale Transactions: In short sale transactions, a Trust sells a security it does not hold in anticipation of a decline in the market price of that security. When a Trust makes a short sale, it will borrow the security sold short (borrowed bond) and deliver the security to the counterparty to which it sold the security short. An amount equal to the proceeds received by a Trust is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the market value of the short sale. A Trust is required to repay the counterparty interest on the security sold short, which, if applicable, is shown as interest expense in the Statements of Operations. A Trust is exposed to market risk based on the amount, if any, that the market value of the security increases beyond the market value at which the position was sold. Thus, a short sale of a security involves the risk that instead of declining, the price of the security sold short will rise. The short sale of securities involves the possibility of an unlimited loss since there is an unlimited potential for the market price of the security sold short to increase. A gain is limited to the price at which a Trust sold the security short. A realized gain or loss is recognized upon the termination of a short sale if the market price is either less than or greater than the proceeds originally received. There is no assurance that a Trust will be able to close out a short position at a particular time or at an acceptable price.

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: Certain Trusts invest in long and/or short positions in futures and options on futures contracts to gain exposure to, or manage exposure to changes in interest rates (interest rate risk), 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.

Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited, if any, is 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 value of the contract at the time it was opened and the value 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: Certain Trusts enter into forward foreign currency exchange contracts 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 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.

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

 

                
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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, such option is covered by cash in an amount sufficient to cover the obligation.

 

 

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.

 

 

Foreign currency options — Certain Trusts purchase and write foreign currency options, foreign currency futures and options on foreign currency futures to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk). Foreign currency options give the purchaser the right to buy from or sell to the writer a foreign currency 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 it otherwise would not, or at a price different from the current market value.

Swaps: Certain Trusts enter into swap contracts 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. 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 — Certain Trusts enter into credit default swaps to manage their exposure to the market or certain sectors of the market, to reduce their risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which they are 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.

 

 

Total return swaps — Certain Trusts enter into total return swaps to obtain exposure to a security or market without owning such security or investing directly in that market or to transfer the risk/return of one market (e.g., fixed income) to another market (e.g., equity or commodity prices) (equity risk, commodity price risk and/or interest rate risk).

 

                
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Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (coupons plus capital gains/losses) of an underlying instrument in exchange for fixed or floating rate interest payments. To the extent the total return of the instrument or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Trusts will receive a payment from or make a payment to the counterparty.

 

 

Forward swaps — Certain Trusts enter into forward interest rate swaps and forward total return swaps. In a forward swap, the Trust and the counterparty agree to make periodic net payments beginning on a specified date or a net payment at termination.

 

 

Interest rate swaps — Certain Trusts enter into interest rate swaps to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate (interest rate risk).

Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, in exchange for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time. In more complex interest rate swaps, the notional principal amount may decline (or amortize) over time.

Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Statements of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.

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, 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. In addition, certain ISDA Master Agreements allow counterparties to terminate derivative contracts prior to maturity in the event the Trusts’ net assets decline by a stated percentage or the Trusts fail to meet the terms of their ISDA Master Agreements. The result would cause the Trusts to accelerate payment of any net liability owed to the counterparty.

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 Trust 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 on 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. The Trusts generally agree 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:

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: Each Trust entered into an Investment Advisory Agreement with the Manager, the Trusts’ investment adviser, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration 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.

 

                
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For such services, BHK pays the Manager a monthly fee based on an annual rate of 0.50% of the average weekly value of the Trust’s managed assets. For purposes of calculating this fee, “managed assets” means the total assets of the Trust minus the sum of the accrued liabilities (other than the aggregate indebtedness constituting financial leverage).

For such services, HYT pays the Manager a monthly fee based on an annual rate of 0.60% of the average daily value of the Trust’s net assets, plus the proceeds of any outstanding debt securities or borrowings used for leverage. For purposes of calculating these fees, “net assets” means the total assets of the Trust minus the sum of the accrued liabilities.

For such services, BKT pays the Manager a monthly fee based on an annual rate of 0.65% of the average weekly value of the Trust’s net assets. For purposes of calculating these fees, “net assets” means the total assets of the Trust minus the sum of the accrued liabilities (including the aggregate indebtedness constituting financial leverage).

Distribution Fees: HYT has entered into a Distribution Agreement with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager, to provide for distribution of HYT’s Common Shares on a reasonable best efforts basis through an equity shelf offering (a “Shelf Offering”) (the “Distribution Agreement”). Pursuant to the Distribution Agreement, HYT will compensate BRIL with respect to sales of Common Shares at a commission rate of 1.00% of the gross proceeds of the sale of HYT’s Common Shares and a portion of such commission is re-allowed to broker-dealers engaged by BRIL.

Administration: BKT has an Administration Agreement with the Manager. The administration fee paid to the Manager is computed at an annual rate of 0.15% of BKT’s average weekly net assets.

Expense Waivers: The Manager voluntarily 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. These amounts are shown as fees waived by the Manager in the Statements of Operations. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with each Trust’s investments in other affiliated investment companies, if any. For the year ended August 31, 2016, the amounts waived were as follows:

 

     BHK      HYT      BKT  

Amounts waived

  $ 9,230       $ 997       $ 7,301   

The Manager provides investment management and other services to the Taxable Subsidiaries. The Manager does not receive separate compensation from the Taxable Subsidiaries for providing investment management or administrative services. However, HYT pays the Manager based on HYT’s net assets, plus the proceeds of any debt securities or outstanding borrowings used for leverage, which includes the assets of the Taxable Subsidiaries.

Officers and Trustees Fees: Certain officers and/or Trustees of the Trusts are officers and/or directors 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 Officer and Trustees in the Statements of Operations.

Other Transactions: The Trusts may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common trustees. For the year ended August 31, 2016, the purchase and sale transactions which resulted in net realized gains (losses) with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act for HYT were as follow:

 

     Purchases      Sales      Net Realized Loss  

HYT

  $ 2,004,265       $ 1,004,787       $ (34,538

7. Purchases and Sales:

For the year ended August 31, 2016, purchases and sales of investments including paydowns, mortgage dollar rolls and TBA transactions and excluding short-term securities were as follows:

 

Purchases                       
     BHK      HYT      BKT  

Non-U.S. Government Securities

  $ 260,415,862       $ 1,316,661,413       $ 828,498,409   

U.S. Government Securities

    108,397,735                 13,392,722   
 

 

 

 

Total Purchases

  $ 368,813,597       $ 1,316,661,413       $ 841,891,131   
 

 

 

 
Sales                       
     BHK      HYT      BKT  

Non-U.S. Government Securities

  $ 348,713,421       $ 1,332,807,230       $ 877,456,351   

U.S. Government Securities

    35,702,275                 11,407,693   
 

 

 

 

Total Sales

  $ 384,415,696       $ 1,332,807,230       $ 888,864,044   
 

 

 

 

For the year ended August 31, 2016, purchases and sales related to mortgage dollar rolls for BKT were $462,681,717 and $462,783,644, respectively.

 

                
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8. Income Tax Information:

It is the Trusts’ 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 their taxable income to their shareholders. Therefore, no federal income tax provision is required, except with respect to any taxes related to the Taxable Subsidiaries.

The Trusts file U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Trusts’ U.S. federal tax returns generally remains open for each of the four years ended August 31, 2016. The statutes of limitations on the Trusts’ 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 August 31, 2016, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Trusts’ financial statements.

US GAAP require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of August 31, 2016 the following permanent differences attributable to the accounting for swap agreements, the classification of investments, foreign currency transactions, the expiration of capital loss carryforwards, income recognized from investments in partnerships, net paydowns gains, and dividends recognized for tax purposes were reclassified to the following accounts:

 

     BHK      HYT      BKT  

Paid-in capital

    —         $ (4,056,597      —     

Undistributed net investment income

  $ 2,888,256       $ 5,049,974       $ 1,269,247   

Accumulated net realized loss

  $ (2,888,256    $ (993,377    $ (1,269,247

The tax character of distributions paid was as follows:

 

             BHK      HYT      BKT  

Ordinary income

    8/31/2016       $ 45,548,216       $ 125,343,672       $ 22,060,177   
    8/31/2015       $ 49,401,456       $ 123,054,879       $ 25,321,248   
 

 

 

    

 

 

    

 

 

    

 

 

 

Total

    8/31/2016       $ 45,548,216       $ 125,343,672       $ 22,060,177   
 

 

 

    

 

 

    

 

 

    

 

 

 
    8/31/2015       $ 49,401,456       $ 123,054,879       $ 25,321,248   
 

 

 

    

 

 

    

 

 

    

 

 

 

As of August 31, 2016 the tax components of accumulated net earnings (losses) were as follows:

 

     BHK      HYT      BKT  

Undistributed ordinary income

  $ 405,350       $ 11,543,563       $ 4,387,342   

Capital loss carryforwards

    (16,990,715      (265,114,804      (43,751,932

Net unrealized gains1

    77,973,226         (32,251,549      5,984,657   
 

 

 

    

 

 

    

 

 

 

Total

  $ 61,387,861       $ (285,822,790    $ (33,379,933
 

 

 

    

 

 

    

 

 

 

 

  1   

The differences between book-basis and tax-basis net unrealized gains were attributable primarily to the tax deferral of losses on wash sales and straddles, amortization methods for premiums and discounts on fixed income securities, the accrual of income on securities in default, the realization for tax purposes of unrealized gains/losses on certain futures and foreign currency contracts, the realization for tax purposes of unrealized gains on investments in passive foreign investment companies, the accounting for swap agreements, the investment in a wholly owned subsidiary, dividends recognized for tar purposes, the classification of investments and the deferral of compensation to trustees.

As of August 31, 2016, the Trusts had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:

 

Expires   BHK      HYT      BKT  

No expiration date2

  $ 11,373,636       $ 114,202,809       $ 43,751,932   

2017

    5,617,079         95,246,388         —     

2018

    —           55,665,607         —     
 

 

 

    

 

 

    

 

 

 

Total

  $ 16,990,715       $ 265,114,804       $ 43,751,932   
 

 

 

    

 

 

    

 

 

 

 

  2   

Must be utilized prior to losses subject to expiration.

As of August 31, 2016, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

 

     BHK      HYT      BKT  

Tax cost

  $ 1,027,813,449       $ 2,118,135,188       $ 587,334,727   
 

 

 

    

 

 

    

 

 

 

Gross unrealized appreciation

  $ 86,739,765       $ 78,880,786       $ 29,842,960   

Gross unrealized depreciation

    (12,070,312      (111,235,606      (22,455,912
 

 

 

    

 

 

    

 

 

 

Net unrealized appreciation (depreciation)

  $ 74,669,453       $ (32,354,820    $ 7,387,048   
 

 

 

    

 

 

    

 

 

 

 

                
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9. Bank Borrowings:

HYT 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 HYT. As of period end, the HYT has not received any notice to terminate. HYT has granted a security interest in substantially all of their assets to SSB.

The SSB Agreement allows for a maximum commitment of $732,000,000 for HYT. Prior to August 31, 2016, the maximum commitment amount for HYT was $798,000,000.

Advances will be made by SSB to HYT, at HYT’s option of (a) the higher of (i) 0.80% above the Fed Funds rate and (ii) 0.80% above the Overnight LIBOR or (b) 0.80% above 7-day, 30-day, 60-day or 90-day LIBOR.

In addition, HYT paid a facility fee and may pay a commitment fee (based on the daily unused portion of the commitments). The commitment fees are waived if HYT meets certain conditions. The fees associated with each of the agreements are included in the Statements of Operations as borrowing costs, if any. Advances to HYT as of period end 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.

HYT 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 year ended August 31, 2016, the average amount of bank borrowings and the daily weighted average interest rates for HYT with loans under the revolving credit agreement were $568,838,798 and 1.13%.

10. Principal Risks:

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 a Trust’s ability to buy or sell bonds. As a result, a 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 a 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 and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer to meet all its obligations, including the ability to pay principal and interest when due (issuer credit risk). The value of securities held by the Trusts may decline in response to certain events, including those directly involving the issuers of securities owned by the Trusts. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

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 Fund portfolio’s current earnings rate.

Counterparty Credit Risk: Similar to issuer 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.

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 the Trusts deposit collateral with their counterparty to a written option.

 

                
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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, the Trusts do 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 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

BHK is authorized to issue an unlimited number of shares, par value $0.001, all of which were initially classified as Common Shares. HYT is authorized to issue 200 million shares, par value $0.10, all of which were initially classified as Common Shares. BKT is authorized to issue 200 million shares, par value $0.01, all of which were initially classified as Common Shares. The Board is authorized, however, to reclassify any unissued shares to Preferred Shares without approval of Common Shareholders.

Common Shares: HYT filed a final prospectus with the U.S. Securities and Exchange Commission (“SEC”) allowing it is issue an additional 10,425,000 Common Shares through an equity shelf program (a “Shelf Offering”). Under the Shelf Offering, HYT, subject to market conditions, may raise additional equity capital from time to time in varying amounts and utilizing various offering methods at a net price at or above HYT’s net asset value (“NAV”) per Common Share (calculated within 48 hours of pricing). HYT has not issued any Common Shares through the Shelf Offering. See Additional Information — Shelf Offering Program for additional information about the Shelf Offering.

Costs incurred by the HYT in connection with the Shelf Offering are recorded as a deferred charge and amortized over 12 months.

For the year ended August 31, 2016, shares issued and outstanding remained constant for BHK, HYT and BKT. For the year ended August 31, 2015, shares issued and outstanding increased by 26,893,279 for BHK due to the reorganization for BHK and remained constant for HYT and BKT.

12. Contingencies:

In May 2015, the Motors Liquidation Company Avoidance Action Trust, as the Trust Administrator and Trustee of the General Motors bankruptcy estate, began serving amended complaints on defendants, which include former holders of certain General Motors debt (the “Debt”), in an adversary proceeding in the United States Bankruptcy Court for the Southern District of New York. In addition to HYT, the lawsuit also names over five hundred other institutional investors as defendants, some of which are also managed by BlackRock Advisors, LLC or its affiliates. The plaintiffs are seeking an order that HYT and other defendants return proceeds received in 2009 in full payment of the principal and interest on the Debt. The holders received a full repayment of a term loan pursuant to a court order in the General Motors bankruptcy proceeding with the understanding that the Debt was fully secured at the time of repayment. The plaintiffs contend that the Fund and other defendants were not secured creditors at the time of the 2009 payments and therefore not entitled to the payments in full. HYT cannot predict the outcome of the lawsuit, or the effect, if any, on HYT’s net asset value. As such, no liability for litigation related to this matter is reflected in the financial statements. Management cannot determine the amount of loss that will be realized by HYT but does not expect the loss to exceed the payment received in 2009. The amount of the proceeds received in 2009 is $3,528,671.

 

                
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Notes to Financial Statements (concluded)     

 

13. Subsequent Events:

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  
     Paid1      Declared2  

BHK

  $ 0.0650       $ 0.0650   

HYT

  $ 0.0700       $ 0.0700   

BKT

  $ 0.0265       $ 0.0265   

 

  1   

Net investment income dividend paid on September 30, 2016 to Common Shareholders of record on September 15, 2016.

 

  2   

Net investment income dividend declared on October 3, 2016, payable to Common Shareholders of record on October 14, 2016.

On October 26, 2016, the Board approved an open market share repurchase program that allows each Trust to purchase up to 5% of its outstanding common shares from time to time in open market transactions through November 30, 2017, subject to certain conditions. There is no assurance that the Trusts will purchase shares in any particular amounts.

 

                
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Table of Contents
Report of Independent Registered Public Accounting Firm

 

To the Shareholders and Board of Trustees/Directors of BlackRock Core Bond Trust, BlackRock Corporate High Yield Fund, Inc., BlackRock Income Trust, Inc.:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of BlackRock Core Bond Trust and BlackRock Income Trust, Inc. (collectively the “Funds”) as of August 31, 2016, and the related statements of operations and cash flows for the year then ended, and the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. We have also audited the consolidated statement of assets and liabilities, including the consolidated schedule of investments of BlackRock Corporate High Yield Fund, Inc., (collectively with the Funds mentioned above, the “Trusts”) as of August 31, 2016, and the related consolidated statements of operations and consolidated cash flows for the year then ended, the consolidated statements of changes in net assets for each of the two years in the period then ended, and the consolidated financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trusts’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trusts are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trusts’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2016, by correspondence with the custodian, brokers, and agent banks; where replies were not received from brokers or agent banks, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial positions of BlackRock Core Bond Trust and BlackRock Income Trust, Inc., as of August 31, 2016, the results of their operations and their cash flows for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, and the consolidated financial position of BlackRock Corporate High Yield Fund, Inc., as of August 31, 2016, the consolidated results of its operations and its consolidated cash flows for the year then ended, the consolidated changes in its net assets for each of the two years in the period then ended, and its consolidated financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Boston, Massachusetts

October 28, 2016

 

Important Tax Information (Unaudited)     

The following information is provided with respect to the ordinary income distributions paid by the Trusts during the fiscal year ended August 31, 2016

 

     Payable Dates   BHK     HYT     BKT  

Interest-Related Dividends for Non-U.S. Residents1

  September 2015 - January 2016     73.53%        57.11%        98.32%   
    February 2016 - August 2016     61.74%        78.90%        100.00%   

Qualified Dividend Income For individuals2

  September 2015 - January 2016     9.04%        4.46%          
    February 2016 - August 2016     11.42%        2.80%          

Dividends Qualifying for Dividends Received deduction for corporations2

  September 2015 - January 2016     7.33%        3.14%          
    February 2016 - August 2016     9.00%        3.60%          

Federal Obligation Interest3

  September 2015 - January 2016     4.39%               0.51%   
    February 2016 - August 2016     5.59%               1.11%   

 

  1   

Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations.

 

  2   

The Trust hereby designates the percentage indicated above or the maximum amount allowable by law.

 

  3   

The law varies in each state as to whether and what percentage of dividend income attributable to federal obligations is exempt from state income tax. We recommend that you consult your tax advisor to determine if any portion of the dividends you received is exempt from state income taxes.

 

                
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Table of Contents
Disclosure of Investment Advisory Agreements     

 

The Board of Trustees or the Board of Directors, as applicable (the “Board,” the members of which are referred to as “Board Members”), of BlackRock Core Bond Trust (“BHK”), BlackRock Corporate High Yield Fund, Inc. (“HYT”) and BlackRock Income Trust, Inc. (“BKT” and together with BHK and HYT, each a “Trust,” and, collectively, the “Trusts”) met in person on April 28, 2016 (the “April Meeting”) and June 9-10, 2016 (the “June Meeting”) to consider the approval of each Trust’s investment advisory agreement (each an “Agreement,” and, collectively, the “Agreements”) with BlackRock Advisors, LLC (the “Manager”), each Trust’s investment advisor. The Manager is also referred to herein as “BlackRock”.

Activities and Composition of the Board

On the date of the June Meeting, the Board of each Trust consisted of eleven individuals, nine of whom were not “interested persons” of the Trust as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of its Trust and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chair of each Board is an Independent Board Member. Each Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee, and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Executive Committee, which also has one interested Board Member).

The Agreements

Pursuant to the 1940 Act, each Board is required to consider the continuation of the Agreement for its Trust on an annual basis. Each Board has four quarterly meetings per year, each extending over two days, a fifth one-day meeting to consider specific information surrounding the consideration of renewing the Agreement for its Trust and additional in-person and telephonic meetings as needed. In connection with this year-long deliberative process, each Board assessed, among other things, the nature, extent and quality of the services provided to its Trust by BlackRock, BlackRock’s personnel and affiliates, including, as applicable; investment management, administrative, and shareholder services; the oversight of fund service providers; marketing; risk oversight; compliance; and ability to meet applicable legal and regulatory requirements.

Each Board, acting directly and through its committees, considers at each of its meetings, and from time to time as appropriate, factors that are relevant to its annual consideration of the renewal of the Agreement for its Trust, including the services and support provided by BlackRock to the Trust and its shareholders. BlackRock also furnished additional information to each Board in response to specific questions from the Board. This additional information is discussed further below in the section titled “Board Considerations in Approving the Agreements.” Among the matters each Board considered were: (a) investment performance for one-year, three-year, five-year, ten-year, and/or since inception periods, as applicable, against peer funds, applicable benchmarks, and performance metrics, as applicable, as well as senior management’s and portfolio managers’ analysis of the reasons for any over-performance or underperformance relative to its peers, benchmarks, and other performance metrics, as applicable; (b) fees, including advisory, administration, if applicable, paid to BlackRock and its affiliates by the Trust for services; (c) Trust operating expenses and how BlackRock allocates expenses to the Trust; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of the Trust’s investment objective(s), policies and restrictions, and meeting regulatory requirements; (e) the Trust’s compliance with its compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Board; (i) execution quality of portfolio transactions; (j) BlackRock’s implementation of the Trust’s valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment mandates across the open-end fund, closed-end fund and institutional account product channels, as applicable, and the similarities and differences between these products and the services provided as compared to the Trust; (l) BlackRock’s compensation methodology for its investment professionals and the incentives and accountability it creates, along with investment professionals’ investments in the fund(s) they manage; and (m) periodic updates on BlackRock’s business.

Board Considerations in Approving the Agreements

The Approval Process: Prior to the April Meeting, each Board requested and received materials specifically relating to the Agreement for its Trust. Each Board is continuously engaged in a process with its independent legal counsel and BlackRock to review the nature and scope of the information provided to better assist its deliberations. The materials provided to the Board of each Trust in connection with the April Meeting included (a) information independently compiled and prepared by Broadridge Financial Solutions, Inc. (“Broadridge”) on Trust fees and expenses as compared with a peer group of funds as determined by Broadridge (“Expense Peers”) and the investment performance of the Trust as compared with a peer group of funds as determined by Broadridge,1 as well as the performance of BHK and BKT as compared with its custom benchmark; (b) information on the profits realized by BlackRock and its affiliates pursuant to the Trust’s Agreement and a discussion of fall-out benefits to BlackRock and its affiliates; (c) a general analysis provided by BlackRock concerning investment management fees charged to other clients, such as institutional clients, sub-advised mutual funds, and open-end funds, under similar investment mandates, as applicable; (d) review of non-management fees; (e) the existence, impact and sharing of potential economies of scale; and (f) a summary of aggregate amounts paid by the Trust to BlackRock.

 

1  

Trusts are ranked by Broadridge in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable.

 

                
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Disclosure of Investment Advisory Agreements (continued)     

 

At the April Meeting, each Board reviewed materials relating to its consideration of the Agreement for its Trust. As a result of the discussions that occurred during the April Meeting, and as a culmination of each Board’s year-long deliberative process, each Board presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the June Meeting.

At the June Meeting, each Board, including the Independent Board Members, unanimously approved the continuation of the Agreement between the Manager and its Trust for a one-year term ending June 30, 2017. In approving the continuation of the Agreement for its Trust, each Board considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Trust; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with the Trust; (d) the Trust’s costs to investors compared to the costs of Expense Peers and performance compared to the relevant performance metrics as previously discussed; (e) the sharing of potential economies of scale; (f) fall-out benefits to BlackRock and its affiliates as a result of its relationship with the Trust; and (g) other factors deemed relevant by the Board Members.

Each Board also considered other matters it deemed important to the approval process, such as other payments made to BlackRock or its affiliates relating to securities lending and cash management, services related to the valuation and pricing of Trust portfolio holdings, and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review. Each Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. Each Board did not identify any particular information as determinative, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock: Each Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of its Trust. Throughout the year, each Board compared its Trust’s performance to the performance of a comparable group of closed-end funds, relevant benchmark, and performance metrics, as applicable. Each Board met with BlackRock’s senior management personnel responsible for investment activities, including the senior investment officers. Each Board also reviewed the materials provided by its Trust’s portfolio management team discussing the Trust’s performance and the Trust’s investment objective(s), strategies and outlook.

Each Board considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and its Trust’s portfolio management team; BlackRock’s research capabilities; investments by portfolio managers in the funds they manage; portfolio trading capabilities; use of technology; commitment to compliance; credit analysis capabilities; risk analysis and oversight capabilities; and the approach to training and retaining portfolio managers and other research, advisory and management personnel. Each Board engaged in a review of BlackRock’s compensation structure with respect to the Trust’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to investment advisory services, each Board considered the quality of the administrative and other non-investment advisory services provided to its Trust. BlackRock and its affiliates provide each Trust with certain administrative, shareholder, and other services (in addition to any such services provided to the Trust by third parties) and officers and other personnel as are necessary for the operations of the Trust. In particular, BlackRock and its affiliates provide each Trust with administrative services including, among others: (i) preparing disclosure documents, such as the prospectus and the statement of additional information in connection with the initial public offering, registration statements in connection with HYT’s equity shelf program and periodic shareholder reports; (ii) preparing communications with analysts to support secondary market trading of the Trust; (iii) oversight of daily accounting and pricing; (iv) preparing periodic filings with regulators and stock exchanges; (v) overseeing and coordinating the activities of other service providers; (vi) organizing Board meetings and preparing the materials for such Board meetings; (vii) providing legal and compliance support; (viii) furnishing analytical and other support to assist the Board in its consideration of strategic issues such as the merger, consolidation or repurposing of certain closed-end funds; and (ix) performing other administrative functions necessary for the operation of the Trust, such as tax reporting, fulfilling regulatory filing requirements and call center services. Each Board reviewed the structure and duties of BlackRock’s fund administration, shareholder services, and legal & compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Trusts and BlackRock: Each Board, including the Independent Board Members, also reviewed and considered the performance history of its Trust. In preparation for the April Meeting, the Board of each Trust was provided with reports independently prepared by Broadridge, which included a comprehensive analysis of the Trust’s performance. Each Board also reviewed a narrative and statistical analysis of the Broadridge data that was prepared by BlackRock. In connection with its review, the Board of each Trust received and reviewed information regarding the investment performance, based on net asset value (NAV), of the Trust as compared to other funds in its applicable Broadridge category and the performance of BHK and BKT as compared with its custom benchmark. Each Board was provided with a description of the methodology used by Broadridge to select peer funds and periodically meets with Broadridge representatives to review its methodology. Each Board was provided with information on the composition of the Broadridge performance universes and expense universes. Each Board and its Performance Oversight Committee regularly review, and meet with Trust management to discuss, the performance of its Trust throughout the year.

In evaluating performance, each Board recognized that the performance data reflects a snapshot of a period as of a particular date and that selecting a different performance period could produce significantly different results. Further, each Board recognized that it is possible that long-term performance can

 

                
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Disclosure of Investment Advisory Agreements (continued)

 

be adversely affected by even one period of significant underperformance so that a single investment decision or theme has the ability to affect long-term performance disproportionately.

The Board of each of BHK and BKT noted that for each of the one-, three- and five-year periods reported, each of BHK and BKT exceeded its customized benchmark. BlackRock believes that performance relative to the customized benchmark is an appropriate performance metric for the Trust.

The Board of HYT noted that for the one-, three- and five-year periods reported, the Trust ranked in the second, first and first quartiles, respectively, against its Broadridge Performance Universe.

C. Consideration of the Advisory/Management Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Trusts: Each Board, including the Independent Board Members, reviewed its Trust’s contractual management fee rate compared with the other funds in its Broadridge category. The contractual management fee rate represents a combination of the advisory fee and any administrative fees, before taking into account any reimbursements or fee waivers. Each Board also compared its Trust’s total expense ratio, as well as its actual management fee rate as a percentage of total assets, to those of other funds in its Broadridge category. The total expense ratio represents a fund’s total net operating expenses, excluding any investment related expenses. The total expense ratio gives effect to any expense reimbursements or fee waivers that benefit a fund, and the actual management fee rate gives effect to any management fee reimbursements or waivers that benefit a fund. Each Board considered the services provided and the fees charged by BlackRock and its affiliates to other types of clients with similar investment mandates, as applicable, including institutional accounts and sub-advised mutual funds (including mutual funds sponsored by third parties).

Each Board received and reviewed statements relating to BlackRock’s financial condition. Each Board reviewed BlackRock’s profitability methodology and was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to its Trust. Each Board reviewed BlackRock’s profitability with respect to its Trust and other funds the Board currently oversees for the year ended December 31, 2015 compared to available aggregate profitability data provided for the prior two years. Each Board reviewed BlackRock’s profitability with respect to certain other U.S. fund complexes managed by the Manager and/or its affiliates. Each Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. Each Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. As a result, calculating and comparing profitability at individual fund level is difficult.

Each Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. Each Board reviewed BlackRock’s overall operating margin, in general, compared to that of certain other publicly-traded asset management firms. Each Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

In addition, each Board considered the cost of the services provided to its Trust by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management of its Trust and the other funds advised by BlackRock and its affiliates. As part of its analysis, each Board reviewed BlackRock’s methodology in allocating its costs of managing its Trust, to the Trust. Each Board may receive and review information from independent third parties as part of its annual evaluation. Each Board considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Trust’s Agreement and to continue to provide the high quality of services that is expected by the Board. Each Board further considered factors including but not limited to BlackRock’s commitment of time, assumption of risk, and liability profile in servicing its Trust in contrast to what is required of BlackRock with respect to other products with similar investment mandates across the open-end fund, ETF, closed-end fund, sub-advised mutual fund and institutional account product channels, as applicable.

The Board of each Trust noted that its Trust’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Expense Peers.

D. Economies of Scale: Each Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of its Trust increase. Each Board also considered the extent to which its Trust benefits from such economies in a variety of ways, and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable the Trust to more fully participate in these economies of scale. The Board considered the Trust’s asset levels and whether the current fee was appropriate.

Based on each Board’s review and consideration of the issue, each Board concluded that most closed-end funds do not have fund level breakpoints because closed-end funds generally do not experience substantial growth after the initial public offering. They are typically priced at scale at a fund’s inception. The Board of HYT noted that although HYT may from time to time make additional share offerings pursuant to its equity shelf program, the growth of HYT’s assets will occur primarily through the appreciation of its investment portfolio.

E. Other Factors Deemed Relevant by the Board Members: Each Board, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from their respective relationships with its Trust, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Trust, including for administrative,

 

                
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Disclosure of Investment Advisory Agreements (concluded)

 

securities lending and cash management services. Each Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. Each Board also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts. Each Board further noted that it had considered the investment by BlackRock’s funds in affiliated exchange traded funds (i.e., ETFs) without any offset against the management fees payable by the funds to BlackRock.

In connection with its consideration of the Agreement for its Trust, each Board also received information regarding BlackRock’s brokerage and soft dollar practices. Each Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

Each Board noted the competitive nature of the closed-end fund marketplace, and that shareholders are able to sell their Trust shares in the secondary market if they believe that the Trust’s fees and expenses are too high or if they are dissatisfied with the performance of the Trust.

Each Board also considered the various notable initiatives and projects BlackRock performed in connection with its closed-end fund product line. These initiatives included the redemption of auction rate preferred shares (“AMPS”) for the BlackRock closed-end funds with AMPS outstanding; developing equity shelf programs; efforts to eliminate product overlap with fund mergers; ongoing services to manage leverage that has become increasingly complex; periodic evaluation of share repurchases and other support initiatives for certain BlackRock funds; and continued communications efforts with shareholders, fund analysts and financial advisers. With respect to the latter, the Independent Board Members noted BlackRock’s continued commitment to supporting the secondary market for the common shares of its closed-end funds through a comprehensive secondary market communication program designed to raise investor and analyst awareness and understanding of closed-end funds. BlackRock’s support services included, among other things: continuing communications concerning the redemption efforts related to AMPS; sponsoring and participating in conferences; communicating with closed-end fund analysts covering the BlackRock funds throughout the year; providing marketing and product updates for the closed-end funds; and maintaining and enhancing its closed-end fund website.

Conclusion

Each Board, including the Independent Board Members, unanimously approved the continuation of the Agreement between the Manager and its Trust for a one-year term ending June 30, 2017. Based upon its evaluation of all of the aforementioned factors in their totality, as well as other information, each Board, including the Independent Board Members, was satisfied that the terms of Agreement for its Trust were fair and reasonable and in the best interest of the Trust and its shareholders. In arriving at its decision to approve the Agreement for its Trust, each Board did not identify any single factor or group of factors as, all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination. The contractual fee arrangements for each Trust reflect the results of several years of review by the Trust’s Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.

 

                
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Automatic Dividend Reinvestment Plans     

 

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 reinvested by Computershare Trust Company, N.A. (the “Reinvestment Plan Agent”) in the respective Trust’s 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 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 fee. Per share fees include any applicable brokerage commissions the Reinvestment Plan Agent is required to pay. All correspondence concerning the Reinvestment Plan should be directed to Computershare Trust Company, N.A. through the internet at http://www.computershare.com/blackrock, or in writing to Computershare, P.O. Box 30170, College Station, TX 77842-3170, Telephone: (800) 699-1236. Overnight correspondence should be directed to the Reinvestment Plan Agent at Computershare, 211 Quality Circle, Suite 210, College Station, TX 77845.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    97


Table of Contents
Officers and Trustees     

 

Name, Address1
and Year of Birth
  Position(s)
Held with
the Trusts
  Length
of Time
Served3
  Principal Occupation(s) During Past Five Years   Number of BlackRock-
Advised Registered
Investment Companies
(“RICs”) Consisting of
Investment Portfolios
(“Portfolios”) Overseen4
  Public Company and
Other Investment
Company Directorships
During Past Five Years
Independent Trustees2          

Richard E. Cavanagh

 

1946

  Chair of the Board and Trustee   Since 2007   Director, The Guardian Life Insurance Company of America since 1998; Director, Arch Chemical (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; President and Chief Executive Officer, The Conference Board, Inc. (global business research organization) from 1995 to 2007.   74 RICs consisting of 74 Portfolios   None

Karen P. Robards

 

1950

  Vice 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; Investment Banker at Morgan Stanley from 1976 to 1987.   74 RICs consisting of 74 Portfolios   AtriCure, Inc. (medical devices); Greenhill & Co., Inc.

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; 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.   74 RICs consisting of 74 Portfolios   None

Cynthia L. Egan

 

1955

  Trustee   Since 2016   Advisor, U.S. Department of the Treasury from 2014 to 2015; a President at T. Rowe Price Group, Inc. from 2007 to 2012.   74 RICs consisting of 74 Portfolios   Unum (insurance); The Hanover Insurance Group (insurance); Envestnet (investment platform) from 2013 until 2016

Frank J. Fabozzi

 

1948

  Trustee   Since 2007   Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Visiting Professor, Princeton University from 2013 to 2014; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011.   74 RICs consisting of 74 Portfolios   None

Jerrold B Harris

 

1942

  Trustee   Since 2007   Trustee, Ursinus College from 2000 to 2012; Director, Ducks Unlimited — Canada (conservation) since 2015; Director, Waterfowl Chesapeake (conservation) since 2014; Director, Ducks Unlimited, Inc. since 2013; Director, Troemner LLC (scientific equipment) since 2000; Director of Delta Waterfowl Foundation from 2010 to 2012; President and Chief Executive Officer, VWR Scientific Products Corporation from 1990 to 1999.   74 RICs consisting of 74 Portfolios   BlackRock Capital Investment Corp. (business development company)

R. Glenn Hubbard

 

1958

  Trustee   Since 2007   Dean, Columbia Business School since 2004; Faculty member, Columbia Business School since 1988.   74 RICs consisting of 74 Portfolios   ADP (data and information services); Metropolitan Life Insurance Company (insurance)

W. Carl Kester

 

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.   74 RICs consisting of 74 Portfolios   None

Catherine A. Lynch

 

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.   74 RICs consisting of 74 Portfolios   None

 

                
98    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents
Officers and Trustees (continued)     

 

Name, Address1
and Year of Birth
  Position(s)
Held with
the Trusts
  Length
of Time
Served3
  Principal Occupation(s) During Past Five Years   Number of BlackRock-
Advised Registered
Investment Companies
(“RICs”) Consisting of
Investment Portfolios
(“Portfolios”) Overseen4
  Public Company and
Other Investment
Company Directorships
During Past Five Years
Interested Trustees5          

Barbara G. Novick

 

1960

  Trustee   Since 2014   Vice Chairman of BlackRock, Inc. since 2006; Chair of Blackrock’s Government Relations Steering Committee since 2009; Head of the Global Client Group of BlackRock, Inc. from 1988 to 2008.   100 RICs consisting of 218 Portfolios   None

John M. Perlowski

 

1964

  Trustee, President and Chief Executive Officer   Since 2014 (Trustee); Since 2011 (President and Chief Executive Officer)   Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Fund & Accounting Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.   128 RICs consisting of 316 Portfolios   None
 

1    The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.

 

2    Each Independent Trustees serve until his or her successor is elected and qualifies, or until his or her earlier death, resignation, retirement or removal, or until December 31 of the year in which he or she turns 75. The maximum age limitation may be waived as to any Trustee by action of a majority of the Trustees upon finding of good cause therefor.

 

3    Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. (“BlackRock”) in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. As a result, although the chart shows certain Independent Trustees as joining the Board in 2007, each Trustee first became a member of the boards of other legacy MLIM or legacy BlackRock funds as follows: Richard E. Cavanagh, 1994; Frank J. Fabozzi, 1988; Jerrold B. Harris, 1999; R. Glenn Hubbard, 2004; W. Carl Kester, 1995 and Karen P. Robards, 1998.

 

4    For purposes of this chart, “RICs” refers to investment companies registered under the 1940 Act and “Portfolios” refers to the investment programs of the BlackRock-advised funds. The Closed-End Complex is comprised of 74 RICs. Mr. Perlowski and Ms. Novick are also board members of certain complexes of BlackRock registered open-end funds. Mr. Perlowski is also a board member of the BlackRock Equity-Bond Complex and the BlackRock Equity-Liquidity Complex, and Ms. Novick is also a board member of the BlackRock Equity-Liquidity Complex.

 

5    Mr. Perlowski and Ms. Novick are both “interested persons,” as defined in the 1940 Act, of the Trust based on their positions with BlackRock and its affiliates. Mr. Perlowski and Ms. Novick are also board members of certain complexes of BlackRock registered open-end funds. Mr. Perlowski is also a board member of the BlackRock Equity-Bond Complex and the BlackRock Equity-Liquidity Complex, and Ms. Novick is also a board member of the BlackRock Equity-Liquidity Complex. Interested Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The maximum age limitation may be waived as to any Trustee by action of a majority of the Trustees upon a finding of good cause therefor.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    99


Table of Contents
Officers and Trustees (concluded)     

 

 

Name, Address1
and Year of Birth
  Position(s)
Held with
the Trusts
  Length
of Time
Served as
an Officer
  Principal Occupation(s) During Past Five Years
Officers Who Are Not Trustees2     

Jonathan Diorio

 

1980

  Vice President   Since 2015   Managing Director of BlackRock, Inc. since 2015; Director of BlackRock, Inc. from 2011 to 2015; Director of Deutsche Asset & Wealth Management from 2009 to 2011.

Neal J. Andrews

 

1966

  Chief Financial Officer   Since 2007   Managing Director of BlackRock, Inc. since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.

Jay M. Fife

 

1970

  Treasurer   Since 2007   Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.

Charles Park

 

1967

  Chief Compliance Officer   Since 2014   Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End 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   Director of BlackRock, Inc. since 2009; Assistant Secretary of the funds in the Closed-End Complex from 2008 to 2012.
 

1    The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.

   

2    Officers of the Trust serve at the pleasure of the Board.

 

Effective September 30, 2016, the Portfolio Managers for BKT are Ron Sion and Matt Kraeger.

 

       

Investment Advisor

BlackRock Advisors, LLC

Wilmington, DE 19809

 

Accounting Agent and Custodian

State Street Bank and
Trust Company

Boston, MA 02110

 

Distributor

BlackRock Investments,  LLC1
New York, NY, 10022

  Address of the Trusts 100 Bellevue Parkway Wilmington, DE 19809
Transfer Agent
Computershare Trust
Company, N.A.
Canton, MA 02021
 

Legal Counsel

Skadden, Arps, Slate,

Meagher & Flom LLP

Boston, MA 02116

 

Independent Registered
Public Accounting Firm
Deloitte & Touche LLP
Boston, MA 02116

 

 

  1  

For HYT.

 

                
100    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents
Additional Information     

 

Proxy Results

The Annual Meeting of Shareholders was held on July 26, 2016 for shareholders of record on May 31, 2016, to elect trustee nominees for each Trust. There were no broker non-votes with regard to any of the Trusts. Approved the Trustees as follows:

 

     

Catherine A. Lynch1

  

Richard E. Cavanagh2

  

Cynthia L. Egan2

      Votes For    Votes
Withheld
   Abstain    Votes For    Votes
Withheld
   Abstain    Votes For    Votes
Withheld
   Abstain

BHK

   44,966,706    2,727,798    0    44,905,433    2,789,070    0    44,946,194    2,748,310    0

BKT

   46,338,795    11,167,857    0    46,433,755    11,072,896    0    46,348,678    11,157,973    0
    

Jerrold B. Harris2

  

Barbara G. Novick2

              
      Votes For    Votes
Withheld
   Abstain    Votes For    Votes
Withheld
   Abstain               

BHK

   44,863,568    2,830,935    0    44,960,080    2,734,424    0         

BKT

   46,377,066    11,129,585    0    46,401,962    11,104,690    0         

For the Trusts listed above, Trustees whose term of office continued after the Annual Meeting of Shareholders because they were not up for election are Michael J. Castellano,

Frank J. Fabozzi, R. Glenn Hubbard, W. Carl Kester, John M. Perlowski, and Karen P. Robards.

 

  1   

Class II

 

  2   

Class III

Approved the Trustees as follows:

 

     

Michael J. Castellano

  

Richard E. Cavanagh

  

Cynthia L. Egan

      Votes For    Votes
Withheld
   Abstain    Votes For    Votes
Withheld
   Abstain    Votes For    Votes
Withheld
   Abstain

HYT

   105,565,164    2,378,529    0    105,569,992    2,373,701    0    105,617,062    2,326,631    0
    

Frank J. Fabozzi

  

Jerrold B. Harris

  

R. Glenn Hubbard

      Votes For    Votes
Withheld
   Abstain    Votes For    Votes
Withheld
   Abstain    Votes For    Votes
Withheld
   Abstain

HYT

   105,802,206    2,141,487    0    105,556,714    2,386,979    0    105,656,239    2,287,453    0
    

W. Carl Kester

  

Catherine A. Lynch

  

Barbara G. Novick

      Votes For    Votes
Withheld
   Abstain    Votes For    Votes
Withheld
   Abstain    Votes For    Votes
Withheld
   Abstain

HYT

   105,656,522    2,287,171    0    105,632,194    2,311,499    0    105,547,258    2,396,435    0
    

John M. Perlowski

  

Karen P. Robards

              
      Votes For    Votes
Withheld
   Abstain    Votes For    Votes
Withheld
   Abstain               

HYT

   105,704,555    2,239,138    0    105,538,490    2,405,203    0         

 

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 its chief executive officer and chief financial officer required by section 302 of the Sarbanes-Oxley Act.

 

Dividend Policy

Each Trust’s dividend policy is to distribute all or a portion of its net investment income to its shareholders on a monthly basis. In order to provide shareholders with a more stable level of dividend distributions, 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. 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 nontaxable return of capital. Distributions in excess of a Trust’s taxable income and net capital gains, but not in excess of a Trust’s earnings and profits, will be taxable to shareholders as ordinary income and will not constitute a nontaxable return of capital. The Trusts’ current accumulated but undistributed net investment income, if any, is disclosed in the Statements of Assets and Liabilities, which comprises part of the financial information included in this report.

 

                
   ANNUAL REPORT    AUGUST 31, 2016    101


Table of Contents
Additional Information (continued)     

 

 

General Information

BHK and BKT do not make available copies of their respective Statements of Additional Information because each of BHK and BKT’s shares are not continuously offered, which means that BHK and BKT’s respective Statements of Additional Information have not been updated after the completion of BHK and BKT’s respective offerings and the information contained in BHK and BKT’s Statements of Additional Information may have become outdated.

In accordance with Section 23(c) of the 1940 Act, notice is hereby given that each Trust may from time to time purchase its Common Shares in open market transactions.

HYT’s Statement of Additional Information includes additional information about its Board and is available, without charge upon request by calling (800) 882-0052.

During the period, there were no material changes in the Trusts’ investment objectives or policies or to the Trusts’ charter 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. There have been no changes in the persons who are primarily responsible for the day-to-day management of the Trusts’ portfolios.

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 http://www.blackrock.com. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Trusts and does not, and is not intended to, incorporate BlackRock’s website 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 Trusts’ electronic delivery program. Electronic copies of shareholder reports are available on BlackRock’s website.

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.

Householding

The Trusts will mail only one copy of shareholder documents, including annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and 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 on Form N-Q. The Trusts’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Trusts’ Forms N-Q may also be obtained upon request and without charge by calling (800) 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 http://www.blackrock.com; and (3) on the SEC’s website at http://www.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 http://www.blackrock.com or by calling (800) 882-0052; and (2) on the SEC’s website at http://www.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 http://www.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.

 

                
102    ANNUAL REPORT    AUGUST 31, 2016   


Table of Contents
Additional Information (concluded)     

 

 

Section 19(a) Notices

BHK’s amounts and sources of distributions reported are estimates and are being provided to you pursuant to regulatory requirements and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon the Trust’s investment experience during the remainder of the fiscal year and may be subject to changes based on tax regulations. The Trust will provide a Form 1099-DIV each calendar year that will tell you how to report these distributions for federal income tax purposes.

 

    Total Fiscal Year-to-Date Cumulative Distributions by Character     Percentage of Fiscal Year-to-Date Cumulative Distributions by Character  
     Net Investment
Income
    Net Realized
Capital Gains
Short Term
    Net Realized
Capital Gains
Long Term
    Return of
Capital
    Total Per
Common
Share
    Net Investment
Income
    Net Realized
Capital Gains
Short Term
    Net Realized
Capital Gains
Long Term
    Return of
Capital
    Total Per
Common
Share
 

BHK

  $ 0.784983111                    $ 0.059517      $ 0.8445        93     0     0     7     100

The Trust estimates that it has distributed more than the amount of earned income and net realized gains; therefore, a portion of the distribution may be a return of capital. A return of capital may occur, for example, when some or all of the shareholder's investment in the Trust is returned to the shareholder. A return of capital does not necessarily reflect the Trust's investment performance and should not be confused with "yield" or "income". When distributions exceed total return performance, the difference will incrementally reduce the Trust's net asset value per share.

Section 19(a) notices for the Trusts, as applicable, are available on the BlackRock website http://www.blackrock.com.

 

Shelf Offering Program

From time-to-time, each Trust may seek to raise additional equity capital through an equity shelf program (a “Shelf Offering”). In a Shelf Offering, a Trust may, subject to market conditions, raise additional equity capital by issuing new Common Shares from time to time in varying amounts at a net price at or above the Trust’s net asset value (“NAV”) per Common Share (calculated within 48 hours of pricing). While any such Shelf Offering may allow a Trust to pursue additional investment opportunities without the need to sell existing portfolio investments, it could also entail risks — including that the issuance of additional Common Shares may limit the extent to which the Common Shares are able to trade at a premium to NAV in the secondary market. Each Trust, other than HYT, has not filed a registration statement with respect to any Shelf Offerings. This report is not an offer to sell Trust Common Shares and is not a solicitation of an offer to buy Trust Common Shares. If a Trust files a registration statement with respect to any Shelf Offering, the prospectus contained therein will contain more complete information about the Trust and should be read carefully before investing.

On December 23, 2015, HYT filed a final prospectus with the SEC in connection with its Shelf Offering. This report and the prospectus are not offers to sell HYT Common Shares or solicitations of an offer to buy HYT Common Shares in any jurisdiction where such offers or sales are not permitted. The prospectus contains important information about HYT, including its investment objectives, risks, charges and expenses. Investors are urged to read the prospectus of HYT carefully and in its entirety before investing. A copy of the final prospectus for HYT can be obtained from BlackRock at http://www.blackrock.com.

 

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.

 

                
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Table of Contents

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. The Trusts have leveraged their Common Shares, which creates risks for Common Shareholders, including the likelihood of greater volatility of net asset value and market price of the Common Shares, and the risk that fluctuations in short-term interest rates may reduce the Common Shares’ yield. Statements and other information herein are as dated and are subject to change.

 

LOGO

 

CEFBHK-8/16-AR    LOGO


Table of Contents
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, by calling 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

James T. Flynn

W. Carl Kester

Karen P. Robards

The registrant’s board of directors has determined that W. Carl Kester and Karen P. Robards qualify as financial experts pursuant to Item 3(c)(4) of Form N-CSR.

Prof. Kester has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Prof. Kester has been involved in providing valuation and other financial consulting services to corporate clients since 1978. Prof. Kester’s financial consulting services present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements.

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 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


Table of Contents
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 Fees3
Entity Name   

Current

Fiscal Year
End

   Previous
Fiscal Year
End
  

Current

Fiscal Year
End

   Previous
Fiscal Year
End
  

Current

Fiscal Year
End

   Previous
Fiscal Year
End
  

Current

Fiscal Year
End

   Previous
Fiscal Year
End

BlackRock

Income Trust, Inc.    

   $65,713    $65,713    $0    $0    $6,732    $6,732    $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 (“Fund Service Providers”):

 

      Current Fiscal Year End    Previous Fiscal Year End
(b) Audit-Related Fees1    $0    $0
(c) Tax Fees2    $0    $0
(d) All Other Fees3    $2,129,000    $2,391,000

1 The nature of the services includes assurance and related services reasonably related to the performance of the audit of financial statements not included in Audit Fees.

2 The nature of the services includes tax compliance, tax advice and tax planning.

3 Aggregate fees borne by BlackRock in connection with the review of compliance procedures and attestation thereto performed by D&T with respect to all of the registered closed-end funds and some of the registered open-end funds advised by BlackRock.

(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 Fund 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.

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

 

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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 paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Fund Service Providers were:

 

Entity Name   

Current Fiscal Year

End

  

Previous Fiscal Year

End

    
BlackRock Income Trust, Inc.    $6,732    $6,732   

Additionally, SSAE 16 Review (Formerly, SAS No. 70) fees for the current and previous fiscal years of $2,129,000 and $2,391,000, respectively, were billed by D&T to the Investment Adviser.

(h) The Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser, and the Fund 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.

 

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

James T. Flynn

W. Carl Kester

Karen P. Robards

 

  (b) Not Applicable

 

Item 6  – Investments

(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.

(b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.

 

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Item 7  – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – 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 – as of August 31, 2016.

(a)(1) The registrant is managed by a team of investment professionals comprised of Akiva Dickstein, Managing Director at BlackRock, Thomas Musmanno, Managing Director at BlackRock, Matthew Kraeger, Managing Director at BlackRock and Ron Sion, Managing Director at BlackRock. Messrs. Dickstein, Musmanno, Kraeger and Sion are the Fund’s co-portfolio managers and are responsible for the day-to-day management of the Fund’s portfolio , which includes setting the Fund’s overall investment strategy, overseeing the management of the Fund and/or selection of its investments. Messrs. Dickstein, Musmanno, Kraeger and Sion have been members of the Fund’s portfolio management team since 2009, 2012, 2016 and 2016 respectively.

 

   

Portfolio Manager            

 

  

Biography

 

  Akiva Dickstein   

Managing Director of BlackRock since 2009; Managing Director of Merrill Lynch Investment Managers, L.P. from 2003 to 2009 and Head of the U.S. Rates & Structured Credit Research Group.

 

  Thomas Musmanno   

Managing Director of BlackRock since 2010; Director of BlackRock from 2006 to 2009.

 

  Matthew Kraeger   

Managing Director of BlackRock, Inc. since 2015; Director of BlackRock, Inc. since 2015; Director of BlackRock, Inc. since 2009.

 

  Ron Sion   

Managing Director of BlackRock, Inc. since 2011; Director of BlackRock, Inc. since 2007.

 

(a)(2) As of August 31, 2016:

 

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(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

             

Akiva Dickstein

 

  

9

 

  

17

 

  

102

 

  

0

 

  

1

 

  

3

 

             
    

$7.11 Billion

 

  

$6.06 Billion

 

  

$45.09 Billion

 

  

$0

 

  

$293.8 Million

 

  

$1.41 Billion

 

             

Thomas Musmanno

 

  

11

 

  

12

 

  

139

 

  

0

 

  

1

 

  

0

 

             
    

$11.50 Billion

 

  

$5.00 Billion

 

  

$54.45 Billion

 

  

$0

 

  

$1.58 Billion

 

  

$0

 

             

Matthew Kraeger

 

  

6

 

  

10

 

  

21

 

  

0

 

  

1

 

  

1

 

             
    

$2.68 Billion

 

  

$1.90 Billion

 

  

$11.00 Billion

 

  

$0

 

  

$293.8 Million

 

  

$252.8 Million

 

             

Ron Sion

 

  

0

 

  

0

 

  

0

 

  

0

 

  

0

 

  

0

 

             
    

$0

 

  

$0

 

  

$0

 

  

$0

 

  

$0

 

  

$0

 

 

  (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 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. Dickstein, Musmanno, Kraeger and Sion 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. Dickstein, Musmanno, Kraeger and Sion 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

 

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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 August 31, 2016:

Portfolio Manager Compensation Overview

The discussion below describes the portfolio managers’ compensation as of August 31, 2016.

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 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

Akiva Dickstein

Matthew Kraeger

 

  

A combination of market-based indices (e.g. Citigroup Mortgage Index, Barclays GNMA MBS Index), certain cusThomasized indices and certain fund industry peer groups.

 

Thomas Musmanno   

A combination of market-based indices (e.g., Bank of America Merrill Lynch U.S. Corporate & Government Index, 1-3 Years), certain cusThomasized indices and certain fund industry peer groups.

 

Ron Sion   

Citigroup Mortgage Index

 

 

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Distribution of Discretionary Incentive Compensation.  Discretionary incentive compensation is distributed to portfolio managers in a combination of cash and BlackRock, Inc. restricted stock units which vest ratably over a number of years. For some portfolio managers, discretionary incentive compensation is also distributed in deferred cash awards that notionally track the returns of select BlackRock investment products they manage and that vest ratably over a number of years. The BlackRock, Inc. restricted stock units, upon vesting, will be settled in BlackRock, Inc. common stock. Typically, the cash portion of the discretionary incentive compensation, when combined with base salary, represents more than 60% of total compensation for the portfolio managers. Paying a portion of discretionary incentive compensation in 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. Providing a portion of discretionary incentive compensation in deferred cash awards that notionally track the BlackRock investment products they manage provides direct alignment with investment product results.

Long-Term Incentive Plan Awards — From time to time long-term incentive equity awards are granted to certain key employees to aid in retention, align their interests with long-term shareholder interests and motivate performance. Equity awards are generally granted in the form of BlackRock, Inc. restricted stock units that, once vested, settle in BlackRock, Inc. common stock. The portfolio managers of this Fund have unvested long-term incentive awards.

Deferred Compensation Program — A portion of the compensation paid to eligible United States-based BlackRock employees may be voluntarily deferred at their election for defined periods of time into an account that tracks the performance of certain of the firm’s investment products. Any portfolio manager who is either a managing director or director at BlackRock with compensation above a specified threshold is eligible to participate in the deferred compensation 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 retirement contribution equal to 3-5% of eligible compensation up to the Internal Revenue Service limit ($265,000 for 2016). 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

 

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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 August 31, 2016.

 

Portfolio Manager   

Dollar Range of Equity Securities

of the Fund Beneficially Owned

 

Akiva Dickstein

   None

Thomas Musmanno

   None

Matthew Kraeger

   $10,001 - $50,000

Ron Sion

   $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 second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 12  – Exhibits attached hereto

(a)(1) – Code of Ethics – See Item 2

(a)(2) – Certifications – Attached hereto

(a)(3) – Not Applicable

(b) – Certifications – Attached hereto

 

 

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

BlackRock Income Trust, Inc.

 

By:     

/s/ John M. Perlowski

   
  John M. Perlowski    
  Chief Executive Officer (principal executive officer) of
  BlackRock Income Trust, Inc.
Date: November 3, 2016  

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 Income Trust, Inc.
Date: November 3, 2016  
By:  

/s/ Neal J. Andrews

   
  Neal J. Andrews    
  Chief Financial Officer (principal financial officer) of
  BlackRock Income Trust, Inc.
Date: November 3, 2016  

 

10