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: 811-21349
Name of Fund: BlackRock Limited Duration Income Trust (BLW)
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Limited
Duration Income Trust, 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: 12/31/2019
Date of reporting period: 12/31/2019
Item 1 – Report to Stockholders
|
DECEMBER 31, 2019 |
| 2019 Annual Report | ||
BlackRock Debt Strategies Fund, Inc. (DSU)
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
BlackRock Limited Duration Income Trust (BLW)
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of each Fund’s shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from BlackRock or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
You may elect to receive all future reports in paper free of charge. If you hold accounts directly with BlackRock, you can call Computershare at (800) 699-1236 to request that you continue receiving paper copies of your shareholder reports. If you hold accounts through a financial intermediary, you can follow the instructions included with this disclosure, if applicable, or contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. Please note that not all financial intermediaries may offer this service. Your election to receive reports in paper will apply to all funds advised by BlackRock Advisors, LLC or its affiliates, or all funds held with your financial intermediary, as applicable.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive electronic delivery of shareholder reports and other communications by contacting your financial intermediary, if you hold accounts through a financial intermediary. Please note that not all financial intermediaries may offer this service.
| Not FDIC Insured • May Lose Value • No Bank Guarantee |
Supplemental Information
BlackRock Debt Strategies Fund, Inc.’s (DSU), BlackRock Floating Rate Income Strategies Fund, Inc.’s (FRA) and BlackRock Limited Duration Income Trust’s (BLW) (each a “Fund” and collectively, the “Funds”), amounts and sources of distributions reported are estimates and are being provided 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 Fund’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. Each Fund will provide a Form 1099-DIV each calendar year that will tell you how to report these distributions for U.S. federal income tax purposes.
December 31, 2019
| Total Fiscal Period to Date Cumulative Distributions by Character |
Percentage of Fiscal Period to Date Cumulative Distributions by Character |
|||||||||||||||||||||||||||||||||||||||
| Net Investment Income |
Net Realized Capital Gains 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 |
|||||||||||||||||||||||||||||||
| DSU |
$ | 0.702202 | $ | — | $ | — | $ | 0.061698 | * | $ | 0.763900 | 92 | % | 0 | % | 0 | % | 8 | % | 100 | % | |||||||||||||||||||
| FRA |
0.372091 | — | — | 0.012609 | * | 0.384700 | 97 | 0 | 0 | 3 | 100 | |||||||||||||||||||||||||||||
| BLW |
0.466456 | — | — | 0.005444 | * | 0.471900 | 99 | 0 | 0 | 1 | 100 | |||||||||||||||||||||||||||||
| * | The Fund estimates that it has distributed more than its net investment income and net realized capital 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 Fund is returned to the shareholder. A return of capital does not necessarily reflect the Fund’s investment performance and should not be confused with “yield” or “income.” When distributions exceed total return performance, the difference will reduce the Fund’s net asset value per share. |
Section 19(a) notices for each Fund, as applicable, are available on the BlackRock website at blackrock.com.
On September 5, 2019, the Funds, acting pursuant to a U.S. Securities and Exchange Commission (“SEC”) exemptive order and with the approval of each Fund’s Board of Directors/Trustees (the “Board”), each have adopted a managed distribution plan, consistent with its investment objectives and policies to support a level distribution of income, capital gains and/or return of capital (the “Plan”). In accordance with the Plans, starting in October 2019, DSU distributes a fixed amount of $0.0711 per share on a monthly basis, FRA distributes a fixed amount of $0.0788 per share on a monthly basis and BLW distributes a fixed amount of $0.0981 per share on a monthly basis.
The fixed amounts distributed per share are subject to change at the discretion of each Fund’s Board. Under its Plan, each Fund will distribute all available investment income to its shareholders as required by the Internal Revenue Code of 1986, as amended (the “Code”). If sufficient income (inclusive of net investment income and short-term capital gains) is not earned on a monthly basis, the Funds will distribute long-term capital gains and/or return of capital to shareholders in order to maintain a level distribution. Each monthly distribution to shareholders is expected to be at the fixed amount established by the Board; however, each Fund may make additional distributions from time to time, including additional capital gain distributions at the end of the taxable year, if required to meet requirements imposed by the Code and/or the Investment Company Act of 1940, as amended (the “1940 Act”).
Shareholders should not draw any conclusions about each Fund’s investment performance from the amount of these distributions or from the terms of the Plan. Each Fund’s total return performance is presented in its financial highlights table.
The Board may amend, suspend or terminate a Fund’s Plan at any time without prior notice to the Fund’s shareholders if it deems such actions to be in the best interests of the Fund or its shareholders. The suspension or termination of the Plan could have the effect of creating a trading discount (if the Fund’s stock is trading at or above net asset value) or widening an existing trading discount. The Funds are subject to risks that could have an adverse impact on their ability to maintain level distributions. Examples of potential risks include, but are not limited to, economic downturns impacting the markets, changes in interest rates, decreased market volatility, companies suspending or decreasing corporate dividend distributions and changes in the Code.
| 2 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
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| Fund Summary as of December 31, 2019 | BlackRock Debt Strategies Fund, Inc. |
Fund Overview
BlackRock Debt Strategies Fund, Inc.’s (DSU) (the “Fund”) primary investment objective is to seek to provide current income by investing primarily in a diversified portfolio of U.S. companies’ debt instruments, including corporate loans, which are rated in the lower rating categories of the established rating services (BBB or lower by S&P Global Ratings or Baa or lower by Moody’s Investors Service, Inc. (“Moody’s”)) or unrated debt instruments, which are in the judgment of the investment adviser of equivalent quality. Corporate loans include senior and subordinated corporate loans, both secured and unsecured. The Fund may invest directly in debt instruments or synthetically through the use of derivatives. The Fund’s secondary investment objective is to provide capital appreciation.
No assurance can be given that the Fund’s investment objectives will be achieved.
On September 5, 2019, the Board approved a change in the fiscal year-end of the Fund, effective as of December 31, 2019, from February 28 to December 31.
Fund Information
| Symbol on New York Stock Exchange (“NYSE”) |
DSU | |
| Initial Offering Date |
March 27, 1998 | |
| Current Distribution Rate on Closing Market Price as of December 31, 2019 ($11.20)(a) |
7.62% | |
| Current Monthly Distribution per Common Share(b) |
$0.0711 | |
| Current Annualized Distribution per Common Share(b) |
$0.8532 | |
| Leverage as of December 31, 2019(c) |
30% |
| (a) | 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 consists of income, net realized gains and/or a return of capital. Past performance does not guarantee future results. |
| (b) | The distribution rate is not constant and is subject to change. |
| (c) | Represents bank borrowings outstanding as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to borrowings), minus the sum of liabilities (other than borrowings representing financial leverage). Does not reflect derivatives or other instruments that may give rise to economic leverage. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 14. |
Market Price and Net Asset Value Per Share Summary
| 12/31/19 | 12/31/18 |
Change | High | Low | ||||||||||||||||
| Market Price |
$ | 11.20 | $ | 9.77 | 14.64 | % | $ | 11.20 | $ | 9.74 | ||||||||||
| Net Asset Value |
12.25 | 11.40 | 7.46 | 12.32 | 11.40 | |||||||||||||||
Market Price and Net Asset Value History For the Past Five Years
| FUND SUMMARY | 5 |
| Fund Summary as of December 31, 2019 (continued) | BlackRock Debt Strategies Fund, Inc. |
Performance and Portfolio Management Commentary
Returns for the period ended December 31, 2019 were as follows:
| Average Annual Total Returns | ||||||||||||||||
| 1 Year | 3 Years | 5 Years | ||||||||||||||
| Fund at NAV(a)(b) |
15.97 | % | 7.08 | % | 7.02 | % | ||||||||||
| Fund at Market Price(a)(b) |
23.72 | 7.18 | 7.65 | |||||||||||||
| Reference Benchmark(c) |
11.46 | 5.36 | 5.30 | |||||||||||||
| Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index(d) |
14.32 | 6.36 | 6.14 | |||||||||||||
| S&P/LSTA Leveraged Loan Index(e) |
8.64 | 4.35 | 4.45 | |||||||||||||
| (a) | All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices. Performance results reflect the Fund’s use of leverage. |
| (b) | The Fund’s discount to NAV narrowed during the period, which accounts for the difference between performance based on market price and performance based on NAV. |
| (c) | The Reference Benchmark is comprised of the Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index (50%) and the S&P/LSTA Leveraged Loan Index (50%). The Reference Benchmark’s index content and weightings may have varied over past periods. |
| (d) | An unmanaged index comprised of issuers that meet the following criteria: at least $150 million par value outstanding; maximum credit rating of Ba1; at least one year to maturity; and no issuer represents more than 2% of the index. |
| (e) | An unmanaged market value-weighted index designed to measure the performance of the U.S. leveraged loan market based upon market weightings, spreads and interest payments. |
Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.
Past performance is not indicative of future results.
DSU is presenting the Reference Benchmark to accompany fund performance. The Reference Benchmark is presented for informational purposes only, as the Fund is actively managed and does not seek to track or replicate the performance of the Reference Benchmark or any other index. The portfolio investments of the Fund may differ substantially from the securities that comprise the indices within the Reference Benchmark, which may cause the Fund’s performance to differ materially from that of the Reference Benchmark. The Fund employs leverage as part of its investment strategy, which may change over time at the discretion of BlackRock Advisors, LLC (the “Manager”) as market and other conditions warrant. In contrast, the Reference Benchmark is not adjusted for leverage. Therefore, leverage generally may result in the Fund outperforming the Reference Benchmark in rising markets and underperforming in declining markets. The Board considers additional factors to evaluate the Fund’s performance, such as the performance of the Fund relative to a peer group of funds, a leverage-adjusted benchmark and/or other information provided by the Manager.
More information about the historical performance can be found in the “Closed End Funds” section of http://www.blackrock.com.
The following discussion relates to the Fund’s absolute performance based on NAV:
What factors influenced performance?
The Fund’s positioning within floating rate loan interests (“bank loans”) made the largest contribution to portfolio returns, followed by holdings in high yield bonds. From a sector perspective, positioning within technology, health care and cable & satellite represented the three largest contributors, though holdings in most sectors were additive given strong overall market performance. In terms of credit ratings, B-rated credits were the largest contributors to Fund performance, followed by BB-rated and CCC-rated issues.
There were no meaningful detractors from an asset allocation perspective during the period. From a sector perspective, the Fund’s exposure to oil field services represented the lone detractor as energy-related sectors came under pressure.
Describe recent portfolio activity.
From an asset allocation perspective, the Fund added to its bank loan positioning relative to both high yield bonds and collateralized loan obligations (“CLOs”) over the period. This brought total loan exposure to approximately 85% of the portfolio, with high yield at approximately 15% and no exposure to CLOs at period end. Sector expressions remained broadly consistent over the past several quarters, though single name positioning is arguably more important to portfolio performance. The Fund’s top five issuer positions comprised approximately 9% of portfolio assets at the close of the period.
Describe portfolio positioning at period end.
At period end, bank loans remained the largest allocation in the portfolio, while high yield bonds also represented a meaningful position. The Fund’s largest positions were within the technology, consumer cyclical services and health care sectors. By contrast, the Fund had less exposure to communications names — specifically within wirelines and cable — as well as less exposure to retailers and home construction. Within energy, the Fund emphasized higher quality issuers within the midstream, independent energy and oil field services sectors. From a credit rating perspective, the Fund’s core positioning remained between BB-rated and B-rated issues, with a higher allocation to B-rated names at period end. The Fund also held a small CCC-rated allocation.
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 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Fund Summary as of December 31, 2019 (continued) | BlackRock Debt Strategies Fund, Inc. |
Overview of the Fund’s Total Investments
| FUND SUMMARY | 7 |
| Fund Summary as of December 31, 2019 | BlackRock Floating Rate Income Strategies Fund, Inc. |
Fund Overview
BlackRock Floating Rate Income Strategies Fund, Inc.’s (FRA) (the “Fund”) investment objective is to provide shareholders with high current income and such preservation of capital as is consistent with investment in a diversified, leveraged portfolio consisting primarily of floating rate debt securities and instruments. The Fund seeks to achieve its investment objective by investing, under normal market conditions, at least 80% of its managed assets in floating rate debt securities, including floating or variable rate debt securities that pay interest at rates that adjust whenever a specified interest rate changes and/or which reset on predetermined dates (such as the last day of a month or calendar quarter). The Fund invests a substantial portion of its investments in floating rate debt securities consisting of secured or unsecured senior floating rate loans that are rated below investment grade at the time of investment or, if unrated, are considered by the investment adviser to be of comparable quality. The Fund may invest directly in floating rate debt securities or synthetically through the use of derivatives.
No assurance can be given that the Fund’s investment objective will be achieved.
On September 5, 2019, the Board approved a change in the fiscal year-end of the Fund, effective as of December 31, 2019, from August 31 to December 31.
Fund Information
| Symbol on NYSE |
FRA | |
| Initial Offering Date |
October 31, 2003 | |
| Current Distribution Rate on Closing Market Price as of December 31, 2019 ($13.44)(a) |
7.04% | |
| Current Monthly Distribution per Common Share(b) |
$0.0788 | |
| Current Annualized Distribution per Common Share(b) |
$0.9456 | |
| Leverage as of December 31, 2019(c) |
29% |
| (a) | 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 return of capital. Past performance does not guarantee future results. |
| (b) | The distribution rate is not constant and is subject to change. |
| (c) | Represents bank borrowings outstanding as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to borrowings), minus the sum of liabilities (other than borrowings representing financial leverage). Does not reflect derivatives or other instruments that may give rise to economic leverage. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 14. |
Market Price and Net Asset Value Per Share Summary
| 12/31/19 | 12/31/18 |
Change | High | Low | ||||||||||||||||
| Market Price |
$ | 13.44 | $ | 11.90 | 12.94 | % | $ | 13.52 | $ | 11.82 | ||||||||||
| Net Asset Value |
14.55 | 13.77 | 5.66 | 14.68 | 13.76 | |||||||||||||||
Market Price and Net Asset Value History For the Past Five Years
| 8 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Fund Summary as of December 31, 2019 (continued) | BlackRock Floating Rate Income Strategies Fund, Inc. |
Performance and Portfolio Management Commentary
Returns for the period ended December 31, 2019 were as follows:
| Average Annual Total Returns | ||||||||||||||||
| 1 Year | 3 Years | 5 Years | ||||||||||||||
| Fund at NAV(a)(b) |
12.98 | % | 5.17 | % | 5.71 | % | ||||||||||
| Fund at Market Price(a)(b) |
20.76 | 3.71 | 6.22 | |||||||||||||
| S&P/LSTA Leveraged Loan Index(c) |
8.64 | 4.35 | 4.45 | |||||||||||||
| (a) | All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices. Performance results reflect the Fund’s use of leverage. |
| (b) | The Fund’s discount to NAV narrowed during the period, which accounts for the difference between performance based on market price and performance based on NAV. |
| (c) | An unmanaged market value-weighted index (the “Reference Benchmark”) designed to measure the performance of the U.S. leveraged loan market based upon market weightings, spreads and interest payments. |
Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.
Past performance is not indicative of future results.
The following discussion relates to the Fund’s absolute performance based on NAV:
What factors influenced performance?
Credit markets performed well over the period and the Fund’s core allocation to floating rate loan interests (“bank loans”) performed in sympathy with the broader credit market. By sector, exposure to names within technology, health care and consumer cyclical services added the most to absolute performance. From a credit rating perspective, B-rated positions were the largest absolute contributors to return, followed by holdings rated BB and BBB. Importantly, returns for all ratings categories CCC and above were positive over the period. From an asset allocation perspective, core bank loan positions drove most of the Fund’s performance, while liquid loan index positions were additive as well.
By sector, metals & mining was the sole, modest detractor over the period as the bank loan market saw strong total returns across the board. The Fund’s very small position in loans in the CC ratings category detracted modestly. From an asset allocation perspective, the strategy’s small equity allocation was just slightly detractive over the period.
Describe recent portfolio activity.
Positioning within respect to credit ratings remained relatively consistent over the period, with a focus on loans in the B range while underweighting CCCs. The investment adviser has tactically managed sector-level exposures, although the Fund’s single-name positioning is arguably more important to portfolio composition. In that light, the Fund’s top five issuer-level positions comprise approximately 6% of the portfolio. The investment adviser is an active user of liquid products within the loan market and tactically shifted these exposures throughout the period.
Describe portfolio positioning at period end
By credit rating, B-rated loans were the Fund’s largest position at period end. The Fund had very little exposure to the CCC-rated component of the loan market. Within single B area, the Fund was focused on the higher quality B1/B2 portion, with less exposure to B3s. Also reflecting a focus on relative quality, the Fund had a clear preference for loans with spreads in the 200-300 basis point (2%-3%) range over the London Inter-Bank Offered Rate reference rate as opposed to positions offering spreads in the 400 basis point or higher range. The largest sector positions included consumer cyclical services, pharmaceuticals and aerospace & defense, while retailers, other financials and leisure names were most notably underweight. Additionally, the Fund had a bias toward larger loan tranches and loan/bond capital structures relative to the loan-only segment. From a vintage year perspective, the investment adviser was more cautious on transactions initiated since 2017, given the arguably more aggressive lending standards and weaker protections for loan holders seen in recent years.
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.
| FUND SUMMARY | 9 |
| Fund Summary as of December 31, 2019 (continued) | BlackRock Floating Rate Income Strategies Fund, Inc. |
Overview of the Fund’s Total Investments
| 10 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Fund Summary as of December 31, 2019 | BlackRock Limited Duration Income Trust |
Fund Overview
BlackRock Limited Duration Income Trust’s (BLW) (the “Fund”) investment objective is to provide current income and capital appreciation. The Fund seeks to achieve its investment objective by investing primarily in three distinct asset classes:
| • | intermediate duration, investment grade corporate bonds, mortgage-related securities, asset-backed securities and U.S. Government and agency securities; |
| • | senior, secured floating rate loans made to corporate and other business entities; and |
| • | U.S. dollar-denominated securities of U.S. and non-U.S. issuers rated below investment grade at the time of investment or unrated and deemed by the investment adviser to be of comparable quality and, to a limited extent, non-U.S. dollar denominated securities of non-U.S. issuers rated below investment grade or unrated and deemed by the investment adviser to be of comparable quality. |
The Fund’s portfolio normally has an average portfolio duration of less than five years (including the effect of anticipated leverage), although it may be longer from time to time depending on market conditions. The Fund may invest directly in securities or synthetically through the use of derivatives.
No assurance can be given that the Fund’s investment objective will be achieved.
On September 5, 2019, the Board approved a change in the fiscal year-end of the Fund, effective as of December 31, 2019, from August 31 to December 31.
Fund Information
| Symbol on NYSE |
BLW | |
| Initial Offering Date |
July 30, 2003 | |
| Current Distribution Rate on Closing Market Price as of December 31, 2019 ($16.39)(a) |
7.18% | |
| Current Monthly Distribution per Common Share(b) |
$0.0981 | |
| Current Annualized Distribution per Common Share(b) |
$1.1772 | |
| Leverage as of December 31, 2019(c) |
26% |
| (a) | 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 return of capital. Past performance does not guarantee future results. |
| (b) | The distribution rate is not constant and is subject to change. |
| (c) | Represents reverse repurchase agreements as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to borrowing) minus the sum of liabilities (other than borrowings representing financial leverage). Does not reflect derivatives or other instruments that may give rise to economic leverage. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging and Derivative Financial Instruments on page 14. |
Market Price and Net Asset Value Per Share Summary
| 12/31/19 | 12/31/18 |
Change | High | Low | ||||||||||||||||
| Market Price |
$ | 16.39 | $ | 13.37 | 22.59 | % | $ | 16.55 | $ | 13.34 | ||||||||||
| Net Asset Value |
17.05 | 15.60 | 9.29 | 17.15 | 15.60 | |||||||||||||||
Market Price and Net Asset Value History For the Past Five Years
| FUND SUMMARY | 11 |
| Fund Summary as of December 31, 2019 (continued) | BlackRock Limited Duration Income Trust |
Performance and Portfolio Management Commentary
Returns for the period ended December 31, 2019 were as follows:
| Average Annual Total Returns | ||||||||||||||||
| 1 Year | 3 Years | 5 Years | ||||||||||||||
| Fund at NAV(a)(b) |
16.80 | % | 7.62 | % | 7.44 | % | ||||||||||
| Fund at Market Price(a)(b) |
31.00 | 9.45 | 8.56 | |||||||||||||
| Reference Benchmark(c) |
9.39 | 4.52 | 4.31 | |||||||||||||
| Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index(d) |
14.32 | 6.36 | 6.14 | |||||||||||||
| S&P/LSTA Leveraged Loan Index(e) |
8.64 | 4.35 | 4.45 | |||||||||||||
| BATS S Benchmark(f) |
5.31 | 2.82 | 2.28 | |||||||||||||
| (a) | All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices. Performance results reflect the Fund’s use of leverage. |
| (b) | The Fund’s discount to NAV narrowed during the period, which accounts for the difference between performance based on market price and performance based on NAV. |
| (c) | The Reference Benchmark is comprised of the Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index (33.33%), the S&P/LSTA Leveraged Loan Index (33.33%), and the BATS S Benchmark (33.34%). The Reference Benchmark’s index content and weightings may have varied over past periods. |
| (d) | An unmanaged index comprised of issuers that meet the following criteria: at least $150 million par value outstanding; maximum credit rating of Ba1; at least one year to maturity; and no issuer represents more than 2% of the index. |
| (e) | An unmanaged market value-weighted index designed to measure the performance of the U.S. leveraged loan market based upon market weightings, spreads and interest payments. |
| (f) | A composite index comprised of Bloomberg Barclays ABS 1-3 Year AAA Rated ex Home Equity Index, Bloomberg Barclays Corporate 1-5 year Index, Bloomberg Barclays CMBS Investment Grade 1-3.5 Yr. Index, Bloomberg Barclays MBS 15 Yr Index and Bloomberg Barclays Credit Ex-Corporate 1-5 Yr Index. |
Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.
Past performance is not indicative of future results.
The following discussion relates to the Fund’s absolute performance based on NAV:
What factors influenced performance?
Positive contributions to the Fund’s absolute performance over the period came from allocations to credit sectors including high yield corporate bonds, senior floating rate loan interests (“bank loans”) and capital securities. Exposure to commercial mortgage-backed securities (“CMBS”) also added to performance. Lastly, non-U.S. dollar exposure contributed positively.
The largest detractors from the Fund’s performance came from its exposures to municipal bonds, U.S. Treasuries and agency collateralized mortgage obligations.
Describe recent portfolio activity.
Over the period, the Fund significantly increased its allocation to U.S. Treasuries. In addition, the Fund modestly increased its allocation in high yield bonds. Allocations to most of the Fund’s other relevant sectors remained relatively constant.
Describe portfolio positioning at period end.
At period end, the Fund maintained a diversified exposure to non-government spread sectors including high yield corporate bonds, senior bank loans, CMBS, asset-backed securities and emerging market debt. The Fund also had exposure to government sectors, including U.S. Treasuries.
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.
| 12 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Fund Summary as of December 31, 2019 (continued) | BlackRock Limited Duration Income Trust |
Overview of the Fund’s Total Investments
| FUND SUMMARY | 13 |
The Benefits and Risks of Leveraging
The Funds may utilize leverage to seek to enhance the distribution rate on, and net asset value (“NAV”) of, their common shares (“Common Shares”). However, there is no guarantee that these objectives can 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 Fund on its longer-term portfolio investments purchased with the proceeds from leverage. To the extent that the total assets of the Funds (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, the Funds’ shareholders benefit from the incremental net income. The interest earned on securities purchased with the proceeds from leverage (after paying the leverage costs) is paid to shareholders in the form of dividends, and the value of these portfolio holdings (less the leverage liability) is reflected in the per share NAV.
To illustrate these concepts, assume a Fund’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 Fund’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 Fund with the proceeds from leverage earn income based on longer-term interest rates. In this case, a Fund’s financing cost of leverage is significantly lower than the income earned on a Fund’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 Funds’ return on assets purchased with leverage proceeds, income to shareholders is lower than if the Funds had not used leverage. Furthermore, the value of the Funds’ 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 Funds’ 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 Funds’ 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 Funds’ intended leveraging strategy will be successful.
The use of leverage also generally causes greater changes in each Fund’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 Fund’s shares than if the Fund were not leveraged. In addition, each Fund 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 Fund to incur losses. The use of leverage may limit a Fund’s ability to invest in certain types of securities or use certain types of hedging strategies. Each Fund 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 Funds’ investment advisory fees includes assets purchased with the proceeds of leverage, the investment advisory fees payable to the Funds’ investment adviser will be higher than if the Funds did not use leverage.
Each Fund 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”), each Fund is permitted to issue debt up to 331⁄3% of its total managed assets. A Fund may voluntarily elect to limit its leverage to less than the maximum amount permitted under the 1940 Act. In addition, a Fund 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 Fund segregates or designates on its books and records cash or liquid assets having a value not less than the value of a Fund’s obligations under a 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 imposed by the 1940 Act.
Derivative Financial Instruments
The Funds may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other assets 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 Funds’ 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 Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Funds’ investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.
| 14 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 15 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) (Percentages shown are based on Net Assets) |
| 16 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 17 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) (Percentages shown are based on Net Assets) |
| 18 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 19 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) (Percentages shown are based on Net Assets) |
| 20 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 21 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) (Percentages shown are based on Net Assets) |
| 22 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 23 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) (Percentages shown are based on Net Assets) |
| 24 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 25 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) (Percentages shown are based on Net Assets) |
| 26 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 27 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) (Percentages shown are based on Net Assets) |
During the period ended December 31, 2019, investments in issuers considered to be an affiliate/affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:
| Affiliate | Shares Held at 02/28/19 |
Net Activity |
Shares Held at 12/31/19 |
Value at 12/31/19 |
Income | Net Realized Gain (Loss) (a) |
Change in Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||
| BlackRock Liquidity Funds, T-Fund, Institutional Class(b) |
3,616,393 | (3,616,393 | ) | — | $ | — | $ | 26,680 | $ | 6 | $ | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| (a) | Includes net capital gain distributions, if applicable. |
| (b) | As of period end, the entity is no longer held by the Fund. |
For Fund compliance purposes, the Fund’s industry classifications refer to 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 sub-classifications for reporting ease.
| 28 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) |
Derivative Financial Instruments Outstanding as of Period End
Futures Contracts
| Description | Number of Contracts |
Expiration Date |
Notional Amount (000) |
Value/ Unrealized Appreciation (Depreciation) |
||||||||||||
| Long Contracts |
||||||||||||||||
| Euro Stoxx 50 Index |
1 | 03/20/20 | $ | 42 | $ | (193 | ) | |||||||||
| Euro Stoxx 600 Index |
1 | 03/20/20 | 8 | (35 | ) | |||||||||||
|
|
|
|||||||||||||||
| $ | (228 | ) | ||||||||||||||
|
|
|
|||||||||||||||
Forward Foreign Currency Exchange Contracts
| Currency Purchased |
Currency Sold |
Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) |
||||||||||||||||
| EUR | 153,000 | USD | 172,145 | UBS AG | 02/05/20 | $ | (173 | ) | ||||||||||||
| USD | 8,295,859 | EUR | 7,508,000 | Citibank N.A. | 02/05/20 | (143,135 | ) | |||||||||||||
| USD | 2,141,881 | GBP | 1,658,000 | Barclays Bank PLC | 02/05/20 | (56,379 | ) | |||||||||||||
|
|
|
|||||||||||||||||||
| Net unrealized depreciation | $ | (199,687 | ) | |||||||||||||||||
|
|
|
|||||||||||||||||||
Exchange-Traded Options Purchased
| Description | Number of Contracts |
Expiration Date |
Exercise Price |
Notional Amount (000) |
Value | |||||||||||||||||||
| Call | ||||||||||||||||||||||||
| Energy Select Sector SPDR Fund |
305 | 01/17/20 | USD | 60.21 | USD | 1,831 | $ | 27,908 | ||||||||||||||||
| Energy Select Sector SPDR Fund |
205 | 01/17/20 | USD | 59.21 | USD | 1,231 | 31,468 | |||||||||||||||||
| SPDR S&P Oil & Gas Exploration & Production ETF |
305 | 01/17/20 | USD | 22.00 | USD | 723 | 56,272 | |||||||||||||||||
| SPDR S&P Oil & Gas Exploration & Production ETF |
255 | 01/17/20 | USD | 23.00 | USD | 604 | 27,030 | |||||||||||||||||
|
|
|
|||||||||||||||||||||||
| $ | 142,678 | |||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
OTC Credit Default Swaps — Buy Protection
| Reference Obligation/Index | Financing Rate Paid by the Fund |
Payment Frequency |
Counterparty | Termination Date |
Notional Amount (000) |
Value | Upfront Premium Paid (Received) |
Unrealized Appreciation (Depreciation) |
||||||||||||||||||||||||||
| UPC Holding BV |
5.00 | % | Quarterly | JPMorgan Chase Bank N.A. | 06/20/24 | EUR | 20 | $ | (3,824 | ) | $ | (4,258 | ) | $ | 434 | |||||||||||||||||||
| UPC Holding BV |
5.00 | Quarterly | BNP Paribas S.A. | 06/20/24 | EUR | 4 | (789 | ) | (929 | ) | 140 | |||||||||||||||||||||||
| UPC Holding BV |
5.00 | Quarterly | Bank of America N.A. | 06/20/24 | EUR | 10 | (1,912 | ) | (2,221 | ) | 309 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| $ | (6,525 | ) | $ | (7,408 | ) | $ | 883 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
OTC Credit Default Swaps — Sell Protection
| Reference Obligation/Index | Financing Rate Received by the Fund |
Payment Frequency |
Counterparty | Termination Date |
Credit Rating (a) |
Notional Amount (000) (b) |
Value | Upfront Premium Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||||||||
| Casino Guichard Perrachon SA |
1.00 | % | Quarterly | JPMorgan Chase Bank N.A. | 06/20/23 | B | EUR | 10 | $ | (1,610 | ) | $ | (728 | ) | $ | (882 | ) | |||||||||||||||||||
| Casino Guichard Perrachon SA |
1.00 | Quarterly | Bank of America N.A. | 06/20/23 | B | EUR | 9 | (1,489 | ) | (1,037 | ) | (452 | ) | |||||||||||||||||||||||
| Casino Guichard Perrachon SA |
1.00 | Quarterly | JPMorgan Chase Bank N.A. | 06/20/23 | B | EUR | 5 | (877 | ) | (523 | ) | (354 | ) | |||||||||||||||||||||||
| Casino Guichard Perrachon SA |
1.00 | Quarterly | Citibank N.A. | 06/20/23 | B | EUR | 9 | (1,459 | ) | (929 | ) | (530 | ) | |||||||||||||||||||||||
| Casino Guichard Perrachon SA |
1.00 | Quarterly | JPMorgan Chase Bank N.A. | 06/20/23 | B | EUR | 9 | (1,460 | ) | (930 | ) | (530 | ) | |||||||||||||||||||||||
| Casino Guichard Perrachon SA |
1.00 | Quarterly | JPMorgan Chase Bank N.A. | 06/20/23 | B | EUR | 4 | (585 | ) | (349 | ) | (236 | ) | |||||||||||||||||||||||
| Casino Guichard Perrachon SA |
1.00 | Quarterly | Barclays Bank PLC | 06/20/23 | B | EUR | 6 | (932 | ) | (533 | ) | (399 | ) | |||||||||||||||||||||||
| CenturyLink, Inc. |
1.00 | Quarterly | Barclays Bank PLC | 12/20/23 | B+ | USD | 170 | (3,160 | ) | (10,531 | ) | 7,371 | ||||||||||||||||||||||||
| Chesapeake Energy Corp. |
5.00 | Quarterly | Barclays Bank PLC | 12/20/23 | B+ | USD | 168 | (64,550 | ) | 259 | (64,809 | ) | ||||||||||||||||||||||||
| Chesapeake Energy Corp. |
5.00 | Quarterly | Barclays Bank PLC | 12/20/23 | B+ | USD | 478 | (183,658 | ) | 3,718 | (187,376 | ) | ||||||||||||||||||||||||
| Tesco PLC |
1.00 | Quarterly | Citibank N.A. | 12/20/23 | B+ | EUR | 50 | 905 | (596 | ) | 1,501 | |||||||||||||||||||||||||
| SCHEDULES OF INVESTMENTS | 29 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) |
OTC Credit Default Swaps — Sell Protection (continued)
| Reference Obligation/Index | Financing Rate Received by the Fund |
Payment Frequency |
Counterparty | Termination Date |
Credit Rating (a) |
Notional Amount (000) (b) |
Value | Upfront Premium Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||||||||||
| Casino Guichard Perrachon SA |
5.00 | % | Quarterly | Credit Suisse International | 06/20/24 | B | EUR | 5 | $ | (358 | ) | $ | (356 | ) | $ | (2 | ) | |||||||||||||||||||||
| Casino Guichard Perrachon SA |
5.00 | Quarterly | Credit Suisse International | 06/20/24 | B | EUR | 5 | (317 | ) | (363 | ) | 46 | ||||||||||||||||||||||||||
| Telecom Italia SpA |
1.00 | Quarterly | Goldman Sachs International | 06/20/24 | B+ | EUR | 10 | (62 | ) | (828 | ) | 766 | ||||||||||||||||||||||||||
| Telecom Italia SpA |
1.00 | Quarterly | Citibank N.A. | 06/20/24 | B+ | EUR | 3 | (16 | ) | (80 | ) | 64 | ||||||||||||||||||||||||||
| Telecom Italia SpA |
1.00 | Quarterly | Bank of America N.A. | 06/20/24 | B+ | EUR | 3 | (15 | ) | (79 | ) | 64 | ||||||||||||||||||||||||||
| Telecom Italia SpA |
1.00 | Quarterly | Citibank N.A. | 06/20/24 | B+ | EUR | 3 | (15 | ) | (82 | ) | 67 | ||||||||||||||||||||||||||
| Garfunkelux Holdco 2 SA |
5.00 | Quarterly | Credit Suisse International | 12/20/24 | B+ | EUR | 10 | 284 | (134 | ) | 418 | |||||||||||||||||||||||||||
| Garfunkelux Holdco 2 SA |
5.00 | Quarterly | Credit Suisse International | 12/20/24 | B+ | EUR | 20 | 568 | — | 568 | ||||||||||||||||||||||||||||
| CenturyLink, Inc. |
1.00 | Quarterly | Barclays Bank PLC | 06/20/25 | B+ | USD | 185 | (12,299 | ) | (27,403 | ) | 15,104 | ||||||||||||||||||||||||||
| Telecom Italia SpA |
1.00 | Quarterly | Citibank N.A. | 06/20/26 | B+ | EUR | 5 | (281 | ) | (708 | ) | 427 | ||||||||||||||||||||||||||
| Virgin Media Finance PLC |
5.00 | Quarterly | Credit Suisse International | 12/20/26 | B | EUR | 10 | 2,243 | 2,440 | (197 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| $ | (269,143 | ) | $ | (39,772 | ) | $ | (229,371 | ) | ||||||||||||||||||||||||||||||
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|
|
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|
|
|||||||||||||||||||||||||||||||||
| (a) | Using the rating of the issuer or the underlying securities of the index, as applicable, provided by S&P Global Ratings. |
| (b) | The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement. |
Balances Reported in the Statements of Assets and Liabilities for OTC Swaps
| Swap Premiums Paid |
Swap Premiums Received |
Unrealized Appreciation |
Unrealized Depreciation |
|||||||||||||
| OTC Swaps |
$ | 6,417 | $ | (53,597 | ) | $ | 27,279 | $ | (255,767 | ) | ||||||
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 |
||||||||||||||||||||||||||||
| Options purchased |
||||||||||||||||||||||||||||
| Investments at value — unaffiliated(a) |
$ | — | $ | — | $ | 142,678 | $ | — | $ | — | $ | — | $ | 142,678 | ||||||||||||||
| Swaps — OTC |
||||||||||||||||||||||||||||
| Unrealized appreciation on OTC swaps; Swap premiums paid |
— | 33,696 | — | — | — | — | 33,696 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| $ | — | $ | 33,696 | $ | 142,678 | $ | — | $ | — | $ | — | $ | 176,374 | |||||||||||||||
|
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|
|
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|
|
|
|
|||||||||||||||
| Liabilities — Derivative Financial Instruments |
||||||||||||||||||||||||||||
| Futures contracts |
||||||||||||||||||||||||||||
| Unrealized depreciation on futures contracts(b) |
$ | — | $ | — | $ | 228 | $ | — | $ | — | $ | — | $ | 228 | ||||||||||||||
| Forward foreign currency exchange contracts |
||||||||||||||||||||||||||||
| Unrealized depreciation on forward foreign currency exchange contracts |
— | — | — | 199,687 | — | — | 199,687 | |||||||||||||||||||||
| Swaps — OTC |
||||||||||||||||||||||||||||
| Unrealized depreciation on OTC swaps; Swap premiums received |
— | 309,364 | — | — | — | — | 309,364 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| $ | — | $ | 309,364 | $ | 228 | $ | 199,687 | $ | — | $ | — | $ | 509,279 | |||||||||||||||
|
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|
|
|
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|
|
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|||||||||||||||
| (a) | Includes options purchased at value as reported in the Schedule of Investments. |
| (b) | Net cumulative unrealized appreciation (depreciation) on futures contracts, if any, are reported in the Schedule of Investments. In the Statements of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included in accumulated earnings (loss). |
| 30 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) |
Derivative Financial Instruments Categorized by Risk Exposure (continued)
For the period ended December 31, 2019, 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 |
$ | — | $ | — | $ | 9,797 | $ | — | $ | (28,472 | ) | $ | — | $ | (18,675 | ) | ||||||||||||
| Forward foreign currency exchange contracts |
— | — | — | 935,994 | — | — | 935,994 | |||||||||||||||||||||
| Options purchased(a) |
— | — | (161,866 | ) | — | (43,958 | ) | — | (205,824 | ) | ||||||||||||||||||
| Swaps |
— | 13,113 | — | — | 600,428 | — | 613,541 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| $ | — | $ | 13,113 | $ | (152,069 | ) | $ | 935,994 | $ | 527,998 | $ | — | $ | 1,325,036 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Options purchased are included in net realized gain (loss) from investments — unaffiliated. |
| 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 |
$ | — | $ | — | $ | (3,324 | ) | $ | — | $ | 2,253 | $ | — | $ | (1,071 | ) | ||||||||||||
| Forward foreign currency exchange contracts |
— | — | — | (352,702 | ) | — | — | (352,702 | ) | |||||||||||||||||||
| Options purchased(a) |
— | — | 84,589 | — | — | — | 84,589 | |||||||||||||||||||||
| Swaps |
— | (194,523 | ) | — | — | (569,000 | ) | — | (763,523 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| $ | — | $ | (194,523 | ) | $ | 81,265 | $ | (352,702 | ) | $ | (566,747 | ) | $ | — | $ | (1,032,707 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Options purchased are included in net change in unrealized appreciation (depreciation) on investments — unaffiliated. |
Average Quarterly Balances of Outstanding Derivative Financial Instruments
| Futures contracts: |
||||
| Average notional value of contracts – long |
$ | 46,588 | ||
| Average notional value of contracts – short |
$ | 252,884 | ||
| Forward foreign currency exchange contracts: |
||||
| Average amounts purchased — in USD |
$ | 22,178,497 | ||
| Average amounts sold — in USD |
$ | 10,210,939 | ||
| Options: |
||||
| Average value of option contracts purchased |
$ | 53,717 | ||
| Credit default swaps: |
||||
| Average notional value — buy protection |
$ | 28,349 | ||
| Average notional value — sell protection |
$ | 1,309,432 | ||
| Total return swaps: |
||||
| Average notional value |
$ | — | (a) |
| (a) | Derivative not held at any quarter-end. The risk exposure table serves as an indicator of activity during the period. |
For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.
Derivative Financial Instruments — Offsetting as of Period End
The Fund’s derivative assets and liabilities (by type) were as follows:
| Assets | Liabilities | |||||||
| Derivative Financial Instruments: |
||||||||
| Futures contracts |
$ | — | $ | — | ||||
| Forward foreign currency exchange contracts |
— | 199,687 | ||||||
| Options |
142,678 | (a) | — | |||||
| Swaps — OTC(b) |
33,696 | 309,364 | ||||||
|
|
|
|
|
|||||
| Total derivative assets and liabilities in the Statements of Assets and Liabilities |
$ | 176,374 | $ | 509,051 | ||||
| Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”) |
(142,678 | ) | — | |||||
|
|
|
|
|
|||||
| Total derivative assets and liabilities subject to an MNA |
$ | 33,696 | $ | 509,051 | ||||
|
|
|
|
|
|||||
| (a) | Includes options purchased at value which is included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Schedule of Investments. |
| (b) | Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums paid/received in the Statements of Assets and Liabilities. |
| SCHEDULES OF INVESTMENTS | 31 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) |
Derivative Financial Instruments — Offsetting as of Period End (continued)
The following tables present the Fund’s derivative assets (and liabilities) by counterparty net of amounts available for offset under an MNA and net of the related collateral received (and pledged) by the Fund:
| Counterparty | Derivative Assets Subject to an MNA by Counterparty |
Derivatives Available for Offset (a) |
Non-cash Collateral Received |
Cash Collateral Received |
Net Amount of Derivative Assets (b) |
|||||||||||||||
| Bank of America N.A. |
$ | 373 | $ | (373 | ) | $ | — | $ | — | $ | — | |||||||||
| Barclays Bank PLC |
26,452 | (26,452 | ) | — | — | — | ||||||||||||||
| BNP Paribas S.A. |
140 | (140 | ) | — | — | — | ||||||||||||||
| Citibank N.A. |
2,059 | (2,059 | ) | — | — | — | ||||||||||||||
| Credit Suisse International |
3,472 | (1,052 | ) | — | — | 2,420 | ||||||||||||||
| Goldman Sachs International |
766 | (766 | ) | — | — | — | ||||||||||||||
| JPMorgan Chase Bank N.A. |
434 | (434 | ) | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 33,696 | $ | (31,276 | ) | $ | — | $ | — | $ | 2,420 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Counterparty | Derivative Liabilities Subject to an MNA by Counterparty |
Derivatives Available for Offset (a) |
Non-cash Collateral Pledged |
Cash Collateral Pledged |
Net Amount of Derivative Liabilities (c) |
|||||||||||||||
| Bank of America N.A. |
$ | 3,789 | $ | (373 | ) | $ | — | $ | — | $ | 3,416 | |||||||||
| Barclays Bank PLC |
347,430 | (26,452 | ) | — | — | 320,978 | ||||||||||||||
| BNP Paribas S.A. |
929 | (140 | ) | — | — | 789 | ||||||||||||||
| Citibank N.A. |
146,060 | (2,059 | ) | — | — | 144,001 | ||||||||||||||
| Credit Suisse International |
1,052 | (1,052 | ) | — | — | — | ||||||||||||||
| Goldman Sachs International |
828 | (766 | ) | — | — | 62 | ||||||||||||||
| JPMorgan Chase Bank N.A. |
8,790 | (434 | ) | — | — | 8,356 | ||||||||||||||
| UBS AG |
173 | — | — | — | 173 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 509,051 | $ | (31,276 | ) | $ | — | $ | — | $ | 477,775 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (a) | The amount of derivatives available for offset is limited to the amount of derivative asset and/or liabilities that are subject to an MNA. |
| (b) | Net amount represents the net amount receivable from the counterparty in the event of default. |
| (c) | Net amount represents the net amount payable due to 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 Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.
The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: |
||||||||||||||||
| Investments: |
||||||||||||||||
| Long-Term Investments: |
||||||||||||||||
| Common Stocks(a) |
$ | 13,859 | $ | 85,760 | $ | 763,992 | $ | 863,611 | ||||||||
| Corporate Bonds(a) |
— | 129,521,663 | 2 | 129,521,665 | ||||||||||||
| Floating Rate Loan Interests(a) |
— | 679,661,494 | 30,343,623 | 710,005,117 | ||||||||||||
| Investment Companies |
30,541,558 | — | — | 30,541,558 | ||||||||||||
| Other Interests |
— | — | — | (b) | — | (b) | ||||||||||
| Preferred Securities(a) |
472,717 | 7,857,462 | — | 8,330,179 | ||||||||||||
| Warrants |
— | — | — | — | ||||||||||||
| Options Purchased: |
||||||||||||||||
| Equity Contracts |
83,302 | 59,376 | — | 142,678 | ||||||||||||
| Unfunded floating rate loan interests(c) |
— | 167,290 | — | 167,290 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 31,111,436 | $ | 817,353,045 | $ | 31,107,617 | $ | 879,572,098 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 32 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Debt Strategies Fund, Inc. (DSU) |
Fair Value Hierarchy as of Period End (continued)
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Derivative Financial Instruments(d) |
| |||||||||||||||
| Assets: |
| |||||||||||||||
| Credit contracts |
$ | — | $ | 27,279 | $ | — | $ | 27,279 | ||||||||
| Liabilities: |
| |||||||||||||||
| Credit contracts |
— | (255,767 | ) | — | (255,767 | ) | ||||||||||
| Equity contracts |
(228 | ) | — | — | (228 | ) | ||||||||||
| Forward foreign currency contracts |
— | (199,687 | ) | — | (199,687 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | (228 | ) | $ | (428,175 | ) | $ | — | $ | (428,403 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | See above Schedule of Investments for values in each industry. |
| (b) | Rounds to less than $1. |
| (c) | Unfunded floating rate loan interests are valued at the unrealized appreciation (depreciation) on the commitment. |
| (d) | Derivative financial instruments are swaps, futures contracts and forward foreign currency exchange contracts. Swaps, futures contracts and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument. |
The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, bank borrowings payable of $262,000,000 is categorized as Level 2 within the disclosure hierarchy.
A reconciliation of Level 3 investments is presented when the Fund 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 |
Corporate Bonds |
Floating Rate Loan Interests |
Other Interests |
Warrants | Options Purchased |
Total | ||||||||||||||||||||||
| Assets: |
||||||||||||||||||||||||||||
| Opening balance, as of February 28, 2019 |
$ | 3,075,400 | $ | 8,149,827 | $ | 42,349,614 | $ | — | (a) | $ | — | $ | — | $ | 53,574,841 | |||||||||||||
| Transfers into Level 3 |
— | — | 5,839,888 | — | — | — | 5,839,888 | |||||||||||||||||||||
| Transfers out of Level 3(b) |
— | — | (24,460,480 | ) | — | — | — | (24,460,480 | ) | |||||||||||||||||||
| Accrued discounts/premiums |
— | — | 22,490 | — | — | — | 22,490 | |||||||||||||||||||||
| Net realized gain (loss) |
(7,838,389 | ) | (1,581,795 | ) | (151,988 | ) | — | (30 | ) | (5,867 | ) | (9,578,069 | ) | |||||||||||||||
| Net change in unrealized appreciation (depreciation)(c)(d) |
6,546,822 | 2,923,642 | 126,751 | — | 30 | 5,867 | 9,603,112 | |||||||||||||||||||||
| Purchases |
10,161,243 | 204,106 | 16,145,692 | — | — | — | 26,511,041 | |||||||||||||||||||||
| Sales |
(11,181,084 | ) | (9,695,778 | ) | (9,528,344 | ) | — | — | — | (30,405,206 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Closing balance, as of December 31, 2019 |
$ | 763,992 | $ | 2 | $ | 30,343,623 | $ | — | (a) | $ | — | $ | — | $ | 31,107,617 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net change in unrealized appreciation (depreciation) on investments still held at December 31, 2019(d) |
$ | (1,336,995 | ) | $ | — | $ | 97,932 | $ | — | $ | — | $ | — | $ | (1,239,063 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Rounds to less than $1. |
| (b) | As of February 28, 2019, the Fund used significant unobservable inputs in determining the value of certain investments. As of December 31, 2019, the Fund used observable inputs in determining the value of the same investments. As a result, investments at the beginning of period value were transferred from Level 3 to Level 2 in the disclosure hierarchy. |
| (c) | Included in the related net change in unrealized appreciation (depreciation) in the Statements of Operations. |
| (d) | Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at December 31, 2019 is generally due to investments no longer held or categorized as Level 3 at period end. |
The Fund’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 could result in a significantly lower or higher value of such Level 3 investments.
See notes to financial statements.
| SCHEDULES OF INVESTMENTS | 33 |
| Schedule of Investments December 31, 2019 |
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) (Percentages shown are based on Net Assets) |
| 34 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 35 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) (Percentages shown are based on Net Assets) |
| 36 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 37 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) (Percentages shown are based on Net Assets) |
| 38 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 39 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) (Percentages shown are based on Net Assets) |
| 40 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 41 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) |
During the period ended December 31, 2019, investments in issuers considered to be an affiliate/affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, and/or related parties of the Fund were as follows:
| Affiliated Persons and/or Related Parties | Shares Held at 08/31/19 |
Shares Purchased |
Shares Sold |
Shares Held at 12/31/19 |
Value at 12/31/19 |
Income | Net Realized Gain (Loss) (a) |
Change in Unrealized Appreciation (Depreciation) |
||||||||||||||||||||||||
| BlackRock Liquidity Funds, T-Fund, Institutional Class(b)(c) |
— | — | — | — | $ | — | $ | 8,933 | $ | 5 | $ | — | ||||||||||||||||||||
| iShares iBoxx USD High Yield Corporate
Bond |
— | 17,680 | (17,680 | ) | — | — | — | 2,169 | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| $ | — | $ | 8,933 | $ | 2,174 | $ | — | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| (a) | Includes net capital gain distributions, if applicable. |
| (b) | As of period end, the entity is no longer held by the Fund. |
| (c) | Represents net shares purchased (sold). |
For Fund compliance purposes, the Fund’s industry classifications refer to 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 sub-classifications for reporting ease.
Derivative Financial Instruments Outstanding as of Period End
Forward Foreign Currency Exchange Contracts
| Currency Purchased |
Currency Sold |
Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) |
||||||||||||||||
| USD | 4,991,016 | EUR | 4,515,000 | Natwest Markets PLC | 02/05/20 | $ | (83,846 | ) | ||||||||||||
| USD | 2,391,207 | GBP | 1,851,000 | Barclays Bank PLC | 02/05/20 | (62,941 | ) | |||||||||||||
|
|
|
|||||||||||||||||||
| $ | (146,787 | ) | ||||||||||||||||||
|
|
|
|||||||||||||||||||
Exchange-Traded Options Purchased
| Description | Number of Contracts |
Expiration Date |
Exercise Price |
Notional Amount (000) |
Value | |||||||||||||||||||
| Call | ||||||||||||||||||||||||
| Energy Select Sector SPDR Fund |
260 | 01/17/20 | USD | 60.21 | USD | 1,561 | $ | 23,790 | ||||||||||||||||
| Energy Select Sector SPDR Fund |
175 | 01/17/20 | USD | 59.21 | USD | 1,051 | 26,863 | |||||||||||||||||
| SPDR S&P Oil & Gas Exploration & Production ETF |
265 | 01/17/20 | USD | 22.00 | USD | 628 | 48,892 | |||||||||||||||||
| SPDR S&P Oil & Gas Exploration & Production ETF |
220 | 01/17/20 | USD | 23.00 | USD | 521 | 23,320 | |||||||||||||||||
|
|
|
|||||||||||||||||||||||
| $ | 122,865 | |||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
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 |
||||||||||||||||||||||||||||
| Options purchased |
||||||||||||||||||||||||||||
| Investments at value — unaffiliated(a) |
$ | — | $ | — | $ | 122,865 | $ | — | $ | — | $ | — | $ | 122,865 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Liabilities — Derivative Financial Instruments |
||||||||||||||||||||||||||||
| Forward foreign currency exchange contracts |
||||||||||||||||||||||||||||
| Unrealized depreciation on forward foreign currency exchange contracts |
$ | — | $ | — | $ | — | $ | 146,787 | $ | — | $ | — | $ | 146,787 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Includes options purchased at value as reported in the Schedule of Investments. |
| 42 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) |
Derivative Financial Instruments Categorized by Risk Exposure (continued)
For the period ended December 31, 2019, 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: |
||||||||||||||||||||||||||||
| Forward foreign currency exchange contracts |
$ | — | $ | — | $ | — | $ | (69,658 | ) | $ | — | $ | — | $ | (69,658 | ) | ||||||||||||
| Options purchased(a) |
— | — | (85,910 | ) | — | — | — | (85,910 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| $ | — | $ | — | $ | (85,910 | ) | $ | (69,658 | ) | $ | — | $ | — | $ | (155,568 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Options purchased are included in net realized gain (loss) from investments — unaffiliated. |
| Commodity Contracts |
Credit Contracts |
Equity Contracts |
Foreign Currency Exchange Contracts |
Interest Rate Contracts |
Other Contracts |
Total | ||||||||||||||||||||||
| Net Change in Unrealized Appreciation (Depreciation) on: |
||||||||||||||||||||||||||||
| Forward foreign currency exchange contracts |
$ | — | $ | — | $ | — | $ | (237,245 | ) | $ | — | $ | — | $ | (237,245 | ) | ||||||||||||
| Options purchased(a) |
— | — | 92,367 | — | — | — | 92,367 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| $ | — | $ | — | $ | 92,367 | $ | (237,245 | ) | $ | — | $ | — | $ | (144,878 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Options purchased are included in net change in unrealized appreciation (depreciation) on investments — unaffiliated. |
Average Quarterly Balances of Outstanding Derivative Financial Instruments
| Forward foreign currency exchange contracts: |
||||
| Average amounts purchased — in USD |
$ | 11,095,708 | ||
| Average amounts sold — in USD |
$ | 3,677,181 | ||
| Options: |
||||
| Average value of option contracts purchased |
$ | 78,056 |
For more information about the Fund’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) are as follows:
| Assets | Liabilities | |||||||
| Forward foreign currency exchange contracts |
$ | — | $ | 146,787 | ||||
| Options |
122,865 | (a) | — | |||||
|
|
|
|
|
|||||
| Total derivative assets and liabilities in the Statements of Assets and Liabilities |
$ | 122,865 | $ | 146,787 | ||||
| Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”) |
(122,865 | ) | — | |||||
|
|
|
|
|
|||||
| Total derivative assets and liabilities subject to an MNA |
$ | — | $ | 146,787 | ||||
|
|
|
|
|
|||||
| (a) | Includes options purchased at value which is included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Schedule of Investments. |
The following table presents the Fund’s derivative liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral pledged by the Fund:
| Counterparty | Derivative Liabilities Subject to an MNA by Counterparty |
Derivatives Available for Offset |
Non-cash Collateral Pledged |
Cash Collateral Pledged |
Net Amount of Derivative Liabilities (a)(b) |
|||||||||||||||
| Natwest Markets PLC |
$ | 83,846 | $ | — | $ | — | $ | — | $ | 83,846 | ||||||||||
| Barclays Bank PLC |
62,941 | — | — | — | 62,941 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 146,787 | $ | — | $ | — | $ | — | $ | 146,787 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (a) | Net amount represents the net amount payable due to counterparty in the event of default |
| (b) | Net amount may also include forward foreign currency exchange contracts that are not required to be collateralized |
| SCHEDULES OF INVESTMENTS | 43 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) |
Fair Value Hierarchy as of Period End
Various inputs are used in determining the fair value of investments. For information about the Fund’s policy regarding valuation of investments, refer to the Notes to Financial Statements.
The following tables summarize the Fund’s investments categorized in the disclosure hierarchy:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: |
||||||||||||||||
| Investments: |
||||||||||||||||
| Long-Term Investments: |
||||||||||||||||
| Common Stocks(a) |
$ | 440,084 | $ | 89 | $ | 556,399 | $ | 996,572 | ||||||||
| Corporate Bonds(a) |
— | 5,998,292 | — | 5,998,292 | ||||||||||||
| Floating Rate Loan Interests (a) |
— | 668,826,696 | 29,886,699 | 698,713,395 | ||||||||||||
| Investment Companies |
35,941,500 | — | — | 35,941,500 | ||||||||||||
| Other Interests |
— | — | — | (b) | — | (b) | ||||||||||
| Warrants |
— | 727,147 | — | 727,147 | ||||||||||||
| Options Purchased |
||||||||||||||||
| Equity Contracts |
72,212 | 50,653 | — | 122,865 | ||||||||||||
| Unfunded floating rate loan interests(c) |
— | 149,328 | — | 149,328 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 36,453,796 | $ | 675,752,205 | $ | 30,443,098 | $ | 742,649,099 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments |
| |||||||||||||||
| Liabilities:(d) |
| |||||||||||||||
| Forward foreign currency contracts |
$ | — | $ | (146,787 | ) | $ | — | $ | (146,787 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | See above Schedule of Investments for values in each industry. |
| (b) | Rounds to less than $1. |
| (c) | Unfunded floating rate loan interests are valued at the unrealized appreciation (depreciation) on the commitment. |
| (d) | Derivative financial instruments are forward foreign currency exchange contracts. Forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument. |
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 |
Corporate Bonds |
Other |
Floating Rate Loan Interests |
Total | ||||||||||||||||
| Assets: |
||||||||||||||||||||
| Opening Balance, as of August 31, 2019 |
$ | 564,703 | $ | 875,355 | $ | — | (a) | $ | 24,982,577 | $ | 26,422,635 | |||||||||
| Transfers into Level 3(b) |
— | — | — | 12,286,684 | 12,286,684 | |||||||||||||||
| Transfers out of Level 3(c) |
— | — | — | (9,477,117 | ) | (9,477,117 | ) | |||||||||||||
| Accrued discounts/premiums |
— | 1,519 | — | 10,813 | 12,332 | |||||||||||||||
| Net realized gain (loss) |
— | (3,064 | ) | — | (97,483 | ) | (100,547 | ) | ||||||||||||
| Net change in unrealized appreciation (depreciation)(d)(e) |
(8,304 | ) | (28,938 | ) | — | 375,499 | 338,257 | |||||||||||||
| Purchases |
— | — | — | 6,462,704 | 6,462,704 | |||||||||||||||
| Sales |
— | (844,872 | ) | — | (4,656,978 | ) | (5,501,850 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Closing Balance, as of December 31, 2019 |
$ | 556,399 | $ | — | $ | — | (a) | $ | 29,886,699 | $ | 30,443,098 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net change in unrealized appreciation (depreciation) on investments still held at December 31, 2019 (d) |
$ | (8,304 | ) | $ | — | $ | — | $ | 293,355 | $ | 285,051 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (a) | Rounds to less than $1. |
| (b) | As of August 31, 2019, the Fund used observable inputs in determining the value of certain investments. As of December 31, 2019, the Fund 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. |
| (c) | As August 31, 2019, the Fund used significant unobservable inputs in determining the value of certain investments. As of December 31, 2019, the Fund 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. |
| (d) | Included in the related net change in unrealized appreciation (depreciation) in the Statements of Operations. |
| (e) | Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at December 31, 2019 is generally due to investments no longer held or categorized as Level 3 at period end. |
See notes to financial statements.
| 44 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 45 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| 46 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 47 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| 48 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 49 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| 50 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 51 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| 52 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 53 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| 54 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 55 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| 56 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 57 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| 58 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 59 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| 60 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 61 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| 62 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 63 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| 64 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 65 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) |
| (r) | During the period ended December 31, 2019, investments in issuers considered to be an affiliate/affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows: |
| Affiliate | Shares Held at 08/31/19 |
Net Activity |
Shares Held at 12/31/19 |
Value at 12/31/19 |
Income | Net Realized Gain (Loss) (a) |
Change in Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||
| BlackRock Liquidity Funds, T-Fund, Institutional Class |
3,688,908 | (2,330,263 | ) | 1,358,645 | $ | 1,358,645 | $ | 29,844 | $ | 4 | $ | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| (a) | Includes net capital gain distributions, if applicable. |
Reverse Repurchase Agreements
| Counterparty | Interest Rate |
Trade Date |
Maturity Date (a) |
Face Value | Face Value Including Accrued Interest |
Type of Non-Cash Underlying Collateral |
Remaining Contractual Maturity of the Agreements (a) | |||||||||||||||||
| UBS Ltd. |
2.05 | % | 09/20/18 | Open | $ | 3,026,213 | $ | 3,127,208 | Foreign Agency Obligations | Open/Demand | ||||||||||||||
| UBS Ltd. |
2.20 | 09/20/18 | Open | 1,730,000 | 1,792,145 | Capital Trusts | Open/Demand | |||||||||||||||||
| UBS Ltd. |
2.20 | 09/20/18 | Open | 746,250 | 773,057 | Corporate Bonds | Open/Demand | |||||||||||||||||
| UBS Ltd. |
2.20 | 09/20/18 | Open | 250,200 | 259,188 | Corporate Bonds | Open/Demand | |||||||||||||||||
| UBS Ltd. |
2.20 | 09/20/18 | Open | 362,780 | 375,812 | Corporate Bonds | Open/Demand | |||||||||||||||||
| UBS Ltd. |
2.20 | 12/12/18 | Open | 250,583 | 258,007 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Goldman Sachs & Co LLC |
1.75 | 02/12/19 | Open | 382,826 | 390,887 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Goldman Sachs & Co LLC |
2.05 | 02/12/19 | Open | 527,217 | 538,590 | Capital Trusts | Open/Demand | |||||||||||||||||
| Credit Suisse Securities (USA) LLC |
1.90 | 02/26/19 | Open | 207,680 | 211,983 | Foreign Agency Obligations | Open/Demand | |||||||||||||||||
| Goldman Sachs & Co LLC |
1.75 | 03/04/19 | Open | 273,257 | 278,813 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Goldman Sachs & Co LLC |
1.75 | 03/04/19 | Open | 477,720 | 487,434 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Goldman Sachs & Co LLC |
1.75 | 03/04/19 | Open | 242,685 | 247,296 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Goldman Sachs & Co LLC |
1.75 | 03/04/19 | Open | 158,392 | 161,613 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Goldman Sachs & Co LLC |
1.85 | 03/04/19 | Open | 659,311 | 672,830 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Goldman Sachs & Co LLC |
2.10 | 03/04/19 | Open | 1,207,335 | 1,232,612 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Goldman Sachs & Co LLC |
2.10 | 03/04/19 | Open | 383,152 | 391,174 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Goldman Sachs & Co LLC |
2.00 | 03/11/19 | Open | 190,858 | 194,574 | Foreign Agency Obligations | Open/Demand | |||||||||||||||||
| Goldman Sachs & Co LLC |
2.10 | 04/12/19 | Open | 1,354,175 | 1,378,211 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Credit Suisse Securities (USA) LLC |
2.00 | 05/07/19 | Open | 176,500 | 179,302 | Foreign Agency Obligations | Open/Demand | |||||||||||||||||
| Credit Suisse Securities (USA) LLC |
1.70 | 06/11/19 | Open | 210,250 | 212,744 | Foreign Agency Obligations | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
1.95 | 06/21/19 | Open | 2,902,500 | 2,941,321 | Capital Trusts | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
1.95 | 06/21/19 | Open | 1,483,125 | 1,502,962 | Capital Trusts | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
1.95 | 06/21/19 | Open | 581,788 | 589,340 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 06/21/19 | Open | 94,510 | 95,746 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 06/21/19 | Open | 226,188 | 229,418 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 06/21/19 | Open | 5,264,190 | 5,337,533 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 06/21/19 | Open | 369,923 | 375,114 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 06/21/19 | Open | 993,200 | 1,007,387 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 06/21/19 | Open | 944,843 | 958,100 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 06/21/19 | Open | 157,885 | 160,100 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 06/21/19 | Open | 590,008 | 598,435 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 06/21/19 | Open | 130,975 | 132,781 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 06/21/19 | Open | 2,421,969 | 2,454,963 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 1,776,250 | 1,799,459 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 98,375 | 99,660 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 993,431 | 1,006,412 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 535,575 | 542,573 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 392,531 | 397,660 | Corporate Bonds | Open/Demand | |||||||||||||||||
| 66 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) |
Reverse Repurchase Agreements (continued)
| Counterparty | Interest Rate |
Trade Date |
Maturity Date (a) |
Face Value | Face Value Including Accrued Interest |
Type of Non-Cash Underlying Collateral |
Remaining Contractual Maturity of the Agreements (a) | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | % | 06/21/19 | Open | $ | 1,455,000 | $ | 1,474,012 | Corporate Bonds | Open/Demand | ||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 1,434,125 | 1,452,864 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 1,493,888 | 1,513,407 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 654,063 | 662,609 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 1,528,788 | 1,548,763 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 407,531 | 412,856 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 154,635 | 156,656 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 256,275 | 259,624 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 386,250 | 391,297 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 288,563 | 292,333 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 680,231 | 689,119 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 229,125 | 232,119 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 1,110,819 | 1,125,333 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 275,224 | 279,109 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 465,000 | 471,076 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 2,364,675 | 2,395,573 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 263,313 | 266,753 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 285,938 | 289,674 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 1,218,544 | 1,234,466 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 430,650 | 436,277 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 1,452,506 | 1,471,485 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 370,781 | 375,626 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 843,750 | 854,775 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 162,350 | 164,471 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 134,925 | 136,688 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 06/21/19 | Open | 343,350 | 347,836 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 07/16/19 | Open | 457,464 | 462,479 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 07/16/19 | Open | 569,250 | 575,550 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 07/16/19 | Open | 795,150 | 803,951 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 07/16/19 | Open | 334,051 | 337,749 | Corporate Bonds | Open/Demand | |||||||||||||||||
| HSBC Securities (USA), Inc. |
1.85 | 07/17/19 | Open | 6,512,000 | 6,574,307 | U.S. Treasury Obligations | Open/Demand | |||||||||||||||||
| HSBC Securities (USA), Inc. |
1.85 | 07/17/19 | Open | 8,316,000 | 8,395,568 | U.S. Treasury Obligations | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 08/19/19 | Open | 297,040 | 299,592 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 08/26/19 | Open | 1,682,738 | 1,698,018 | Corporate Bonds | Open/Demand | |||||||||||||||||
| HSBC Securities (USA), Inc. |
1.85 | 08/27/19 | Open | 1,636,000 | 1,648,450 | U.S. Treasury Obligations | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
1.10 | 08/29/19 | Open | 264,128 | 265,352 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.04 | 08/29/19 | Open | 754,298 | 760,237 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.15 | 08/29/19 | Open | 643,125 | 648,433 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 08/29/19 | Open | 419,543 | 423,222 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 08/29/19 | Open | 567,484 | 572,460 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 08/29/19 | Open | 821,950 | 829,158 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 08/29/19 | Open | 447,368 | 451,291 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 08/29/19 | Open | 535,301 | 539,996 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 08/29/19 | Open | 1,561,573 | 1,575,267 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 08/29/19 | Open | 1,075,718 | 1,085,151 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 08/29/19 | Open | 1,218,870 | 1,229,559 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 08/29/19 | Open | 1,073,600 | 1,083,015 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.00 | 09/03/19 | Open | 1,437,188 | 1,447,807 | Capital Trusts | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.00 | 09/03/19 | Open | 2,349,187 | 2,366,545 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.00 | 09/03/19 | Open | 1,068,750 | 1,076,647 | Capital Trusts | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.00 | 09/03/19 | Open | 2,307,900 | 2,324,953 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.00 | 09/03/19 | Open | 1,622,771 | 1,634,762 | Capital Trusts | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.00 | 09/03/19 | Open | 1,081,267 | 1,089,257 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.00 | 09/03/19 | Open | 1,271,563 | 1,280,958 | Capital Trusts | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/03/19 | Open | 1,327,775 | 1,338,683 | Capital Trusts | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/03/19 | Open | 1,081,978 | 1,090,866 | Capital Trusts | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/03/19 | Open | 509,469 | 513,654 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/03/19 | Open | 2,310,000 | 2,328,977 | Capital Trusts | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/03/19 | Open | 1,226,569 | 1,236,645 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/04/19 | Open | 392,201 | 395,393 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
1.95 | 09/04/19 | Open | 908,438 | 914,906 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
1.95 | 09/04/19 | Open | 3,172,500 | 3,195,091 | Corporate Bonds | Open/Demand | |||||||||||||||||
| SCHEDULES OF INVESTMENTS | 67 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) |
Reverse Repurchase Agreements (continued)
| Counterparty | Interest Rate |
Trade Date |
Maturity Date (a) |
Face Value | Face Value Including Accrued Interest |
Type of Non-Cash Underlying Collateral |
Remaining Contractual Maturity of the Agreements (a) | |||||||||||||||||
| BNP Paribas S.A. |
1.95 | % | 09/04/19 | Open | $ | 6,781,988 | $ | 6,830,516 | Capital Trusts | Open/Demand | ||||||||||||||
| BNP Paribas S.A. |
1.95 | 09/04/19 | Open | 1,504,500 | 1,515,213 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
1.95 | 09/04/19 | Open | 3,555,000 | 3,580,315 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
1.95 | 09/04/19 | Open | 838,785 | 844,758 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
1.95 | 09/04/19 | Open | 1,002,394 | 1,009,532 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
1.95 | 09/04/19 | Open | 526,025 | 529,778 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
1.95 | 09/04/19 | Open | 3,812,057 | 3,839,202 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
1.95 | 09/04/19 | Open | 849,225 | 855,272 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
1.95 | 09/04/19 | Open | 288,400 | 290,458 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
1.95 | 09/04/19 | Open | 169,744 | 170,952 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 09/04/19 | Open | 2,289,375 | 2,307,258 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 09/04/19 | Open | 508,183 | 512,134 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 09/09/19 | Open | 446,500 | 449,836 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/11/19 | Open | 986,798 | 994,301 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/16/19 | Open | 919,050 | 925,761 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/16/19 | Open | 1,105,561 | 1,113,630 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/16/19 | Open | 778,500 | 784,123 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
0.42 | 09/17/19 | Open | 10,260 | 10,279 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
0.75 | 09/17/19 | Open | 122,045 | 121,615 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
1.25 | 09/17/19 | Open | 456,305 | 458,235 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
1.45 | 09/17/19 | Open | 400,000 | 401,925 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
1.55 | 09/17/19 | Open | 103,853 | 104,383 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.00 | 09/17/19 | Open | 1,357,860 | 1,366,573 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.00 | 09/17/19 | Open | 806,925 | 812,103 | Capital Trusts | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.05 | 09/17/19 | Open | 181,750 | 182,943 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.05 | 09/17/19 | Open | 292,370 | 294,289 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 230,340 | 231,986 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 188,663 | 190,011 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 514,639 | 518,316 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 494,250 | 497,782 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 105,495 | 106,249 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 1,078,761 | 1,086,470 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 728,850 | 734,058 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 597,690 | 601,961 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 670,605 | 675,397 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 454,436 | 457,684 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 855,400 | 861,513 | Capital Trusts | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 412,539 | 415,487 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 642,715 | 647,308 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 920,835 | 927,415 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 416,800 | 419,778 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 489,590 | 493,089 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 667,550 | 672,320 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 143,696 | 144,723 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 788,880 | 794,517 | Capital Trusts | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 580,051 | 584,196 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 43,416 | 43,726 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/17/19 | Open | 430,320 | 433,395 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/18/19 | Open | 1,076,190 | 1,083,798 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 09/20/19 | Open | 575,920 | 579,787 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 09/20/19 | Open | 512,513 | 515,812 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.30 | 09/30/19 | Open | 1,128,050 | 1,135,223 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 10/01/19 | Open | 264,600 | 266,352 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 10/01/19 | Open | 86,875 | 87,450 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 10/01/19 | Open | 308,355 | 310,396 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 10/01/19 | Open | 844,828 | 850,420 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 10/03/19 | Open | 207,671 | 208,917 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 10/08/19 | Open | 1,011,085 | 1,016,751 | Corporate Bonds | Open/Demand | |||||||||||||||||
| J.P. Morgan Securities LLC |
1.75 | 10/11/19 | Open | 200,430 | 201,253 | Corporate Bonds | Open/Demand | |||||||||||||||||
| J.P. Morgan Securities LLC |
2.10 | 10/11/19 | Open | 249,233 | 250,367 | Corporate Bonds | Open/Demand | |||||||||||||||||
| J.P. Morgan Securities LLC |
2.10 | 10/11/19 | Open | 446,400 | 448,232 | Corporate Bonds | Open/Demand | |||||||||||||||||
| J.P. Morgan Securities LLC |
2.10 | 10/11/19 | Open | 862,875 | 866,873 | Corporate Bonds | Open/Demand | |||||||||||||||||
| 68 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) |
Reverse Repurchase Agreements (continued)
| Counterparty | Interest Rate |
Trade Date |
Maturity Date (a) |
Face Value | Face Value Including Accrued Interest |
Type of Non-Cash Underlying Collateral |
Remaining Contractual Maturity of the Agreements (a) | |||||||||||||||||
| J.P. Morgan Securities LLC |
1.75 | % | 10/16/19 | Open | $ | 408,135 | $ | 409,765 | Corporate Bonds | Open/Demand | ||||||||||||||
| BNP Paribas S.A. |
1.60 | 10/29/19 | Open | 1,528,875 | 1,533,164 | U.S. Treasury Obligations | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 10/31/19 | Open | 532,675 | 534,706 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 11/04/19 | Open | 798,968 | 801,877 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 11/05/19 | Open | 102,603 | 102,970 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 11/05/19 | Open | 1,062,765 | 1,066,567 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 11/08/19 | Open | 778,050 | 780,481 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 11/12/19 | Open | 450,640 | 452,051 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.00 | 11/15/19 | Open | 390,181 | 391,200 | Capital Trusts | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.10 | 11/15/19 | Open | 202,120 | 202,674 | Foreign Agency Obligations | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.10 | 11/15/19 | Open | 111,260 | 111,565 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 11/15/19 | Open | 109,385 | 109,706 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 11/15/19 | Open | 218,738 | 219,380 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 11/15/19 | Open | 314,038 | 314,960 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 11/15/19 | Open | 447,440 | 448,754 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 11/15/19 | Open | 781,375 | 783,572 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 11/15/19 | Open | 1,370,880 | 1,374,734 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 11/15/19 | Open | 1,247,063 | 1,250,568 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 11/15/19 | Open | 380,190 | 381,332 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 11/15/19 | Open | 375,038 | 376,164 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 11/15/19 | Open | 684,203 | 686,257 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 11/15/19 | Open | 143,303 | 143,733 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 11/21/19 | Open | 310,030 | 310,805 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
(0.50 | ) | 12/05/19 | Open | 41,513 | 41,498 | Corporate Bonds | Open/Demand | ||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 12/05/19 | Open | 134,850 | 135,069 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 12/05/19 | Open | 553,465 | 554,364 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 12/05/19 | Open | 291,280 | 291,764 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 12/06/19 | Open | 402,480 | 403,033 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 12/09/19 | Open | 687,660 | 688,627 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Citigroup Global Markets, Inc. |
2.15 | 12/10/19 | 1/16/20 | 321,001 | 321,289 | U.S. Government Sponsored Agency Securities | Up to 30 Days | |||||||||||||||||
| Citigroup Global Markets, Inc. |
2.15 | 12/10/19 | 1/16/20 | 51,710 | 51,756 | U.S. Government Sponsored Agency Securities | Up to 30 Days | |||||||||||||||||
| Citigroup Global Markets, Inc. |
2.15 | 12/10/19 | 1/16/20 | 13,264,911 | 13,276,794 | U.S. Government Sponsored Agency Securities | Up to 30 Days | |||||||||||||||||
| Cantor Fitzgerald & Co. |
2.02 | 12/11/19 | 1/14/20 | 3,006,903 | 3,010,278 | U.S. Government Sponsored Agency Securities | Up to 30 Days | |||||||||||||||||
| Cantor Fitzgerald & Co. |
2.02 | 12/11/19 | 1/14/20 | 4,369,313 | 4,374,234 | U.S. Government Sponsored Agency Securities | Up to 30 Days | |||||||||||||||||
| Barclays Capital, Inc. |
2.00 | 12/12/19 | Open | 445,445 | 445,915 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 12/17/19 | Open | 1,048,005 | 1,048,881 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 12/17/19 | Open | 2,048,770 | 2,050,483 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 12/17/19 | Open | 1,704,063 | 1,705,487 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 12/17/19 | Open | 991,238 | 992,066 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 12/17/19 | Open | 1,357,563 | 1,358,698 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 12/17/19 | Open | 1,256,445 | 1,257,496 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
1.50 | 12/18/19 | Open | 743,040 | 743,442 | Corporate Bonds | Open/Demand | |||||||||||||||||
| Barclays Capital, Inc. |
2.25 | 12/18/19 | Open | 1,497,105 | 1,498,321 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 12/18/19 | Open | 1,143,000 | 1,143,887 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 12/18/19 | Open | 917,975 | 918,688 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 12/18/19 | Open | 321,722 | 321,990 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 12/18/19 | Open | 1,041,074 | 1,041,938 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 12/18/19 | Open | 1,105,403 | 1,106,321 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.35 | 12/19/19 | Open | 903,858 | 904,566 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.35 | 12/19/19 | Open | 952,680 | 953,426 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.38 | 12/19/19 | Open | 779,700 | 780,319 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.50 | 12/19/19 | Open | 527,438 | 527,877 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 12/19/19 | Open | 285,600 | 285,819 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 12/19/19 | Open | 124,880 | 124,984 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 12/19/19 | Open | 149,425 | 149,549 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 12/19/19 | Open | 165,205 | 165,342 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 12/19/19 | Open | 283,999 | 284,235 | Corporate Bonds | Open/Demand | |||||||||||||||||
| SCHEDULES OF INVESTMENTS | 69 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) |
Reverse Repurchase Agreements (continued)
| Counterparty | Interest Rate |
Trade Date |
Maturity Date (a) |
Face Value | Face Value Including Accrued Interest |
Type of Non-Cash Underlying Collateral |
Remaining Contractual Maturity of the Agreements (a) | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | % | 12/19/19 | Open | $ | 238,740 | $ | 238,938 | Corporate Bonds | Open/Demand | ||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 12/19/19 | Open | 334,670 | 334,948 | Corporate Bonds | Open/Demand | |||||||||||||||||
| BNP Paribas S.A. |
2.15 | 12/20/19 | Open | 866,860 | 867,326 | Corporate Bonds | Open/Demand | |||||||||||||||||
| RBC Capital Markets, LLC |
2.30 | 12/20/19 | Open | 1,726,231 | 1,727,223 | Corporate Bonds | Open/Demand | |||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| $ | 211,672,330 | $ | 213,399,446 | |||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| (a) | 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
| Description | Number of Contracts |
Expiration Date |
Notional Amount (000) |
Value/ Unrealized Appreciation (Depreciation) |
||||||||||||
| Long Contracts |
||||||||||||||||
| 10-Year U.S. Ultra Long Treasury Note |
229 | 03/20/20 | $ | 32,221 | $ | (413,202 | ) | |||||||||
| Euro Stoxx 600 Index |
1 | 03/20/20 | 8 | (35 | ) | |||||||||||
| 2-Year U.S. Treasury Note |
1,726 | 03/31/20 | 371,953 | (169,584 | ) | |||||||||||
|
|
|
|||||||||||||||
| (582,821 | ) | |||||||||||||||
|
|
|
|||||||||||||||
| Short Contracts |
||||||||||||||||
| 10-Year U.S. Treasury Note |
471 | 03/20/20 | 60,487 | 329,700 | ||||||||||||
| Long U.S. Treasury Bond |
17 | 03/20/20 | 2,650 | 57,390 | ||||||||||||
| U.S. Treasury Ultra Bond |
2 | 03/20/20 | 363 | 11,919 | ||||||||||||
| 5-Year U.S. Treasury Note |
980 | 03/31/20 | 116,237 | 343,646 | ||||||||||||
|
|
|
|||||||||||||||
| 742,655 | ||||||||||||||||
|
|
|
|||||||||||||||
| $ | 159,834 | |||||||||||||||
|
|
|
|||||||||||||||
Forward Foreign Currency Exchange Contracts
| Currency Purchased |
Currency Sold |
Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) |
||||||||||||||||
| USD | 6,680 | GBP | 5,000 | Barclays Bank PLC | 02/05/20 | $ | 51 | |||||||||||||
| CAD | 6,080,000 | NOK | 40,976,768 | Morgan Stanley & Co. International PLC | 03/18/20 | 14,916 | ||||||||||||||
| NOK | 41,836,480 | CAD | 6,080,000 | Bank of America N.A. | 03/18/20 | 83,031 | ||||||||||||||
| NOK | 41,532,543 | CAD | 6,060,000 | JPMorgan Chase Bank N.A. | 03/18/20 | 63,809 | ||||||||||||||
| NOK | 41,291,864 | CAD | 6,080,000 | Morgan Stanley & Co. International PLC | 03/18/20 | 20,983 | ||||||||||||||
| NZD |
7,077,831 | AUD | 6,750,000 | JPMorgan Chase Bank N.A. | 03/18/20 | 24,170 | ||||||||||||||
|
|
|
|||||||||||||||||||
| 206,960 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||
| USD |
4,661,725 | EUR | 4,219,000 | Citibank N.A. | 02/05/20 | (80,433 | ) | |||||||||||||
| USD |
936,305 | EUR | 847,000 | State Street Bank and Trust Co. | 02/05/20 | (15,723 | ) | |||||||||||||
| USD |
8,933,036 | EUR | 8,081,000 | State Street Bank and Trust Co. | 02/05/20 | (150,012 | ) | |||||||||||||
| USD |
1,270,648 | GBP | 983,000 | BNP Paribas S.A. | 02/05/20 | (32,663 | ) | |||||||||||||
| USD |
8,338,706 | GBP | 6,451,000 | BNP Paribas S.A. | 02/05/20 | (214,353 | ) | |||||||||||||
| USD |
1,173,422 | GBP | 908,000 | Citibank N.A. | 02/05/20 | (30,450 | ) | |||||||||||||
| USD |
519,225 | MXN | 10,254,000 | Toronto-Dominion Bank | 02/05/20 | (20,449 | ) | |||||||||||||
| USD |
55,395 | NZD | 86,000 | Westpac Banking Corp. | 02/05/20 | (2,525 | ) | |||||||||||||
| AUD |
6,670,000 | NZD | 6,968,082 | Bank of America N.A. | 03/18/20 | (6,454 | ) | |||||||||||||
| AUD |
6,750,000 | NZD | 7,052,535 | Bank of America N.A. | 03/18/20 | (7,123 | ) | |||||||||||||
| CAD |
6,060,000 | NOK | 41,315,177 | JPMorgan Chase Bank N.A. | 03/18/20 | (39,045 | ) | |||||||||||||
| CAD |
6,080,000 | NOK | 41,609,799 | JPMorgan Chase Bank N.A. | 03/18/20 | (57,205 | ) | |||||||||||||
|
|
|
|||||||||||||||||||
| (656,435 | ) | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| Net Unrealized Depreciation | $ | (449,475 | ) | |||||||||||||||||
|
|
|
|||||||||||||||||||
| 70 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) |
OTC Interest Rate Swaptions Purchased
| Description | Paid by the Fund | Received by the Fund | Counterparty | Expiration Date |
Exercise Rate |
Notional Amount (000) |
Value | |||||||||||||||||||||||||||
| Rate | Frequency | Rate | Frequency | |||||||||||||||||||||||||||||||
| Call |
||||||||||||||||||||||||||||||||||
| 1-Year Interest Rate Swap, 11/25/21 |
1.25% | Semi-Annual | 3-Month LIBOR, 1.91% | Quarterly | Morgan Stanley & Co. International PLC | 11/23/20 | 1.25 | % | USD | 124,270 | $ | 99,208 | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||||
OTC Interest Rate Swaptions Written
| Description | Paid by the Fund | Received by the Fund | Counterparty | Expiration Date |
Exercise Rate |
Notional Amount (000) |
Value | |||||||||||||||||||||||||||
| Rate | Frequency | Rate | Frequency | |||||||||||||||||||||||||||||||
| Call |
||||||||||||||||||||||||||||||||||
| 1-Year Interest Rate Swap, 11/25/21 |
3-Month LIBOR, 1.91% | Quarterly | 0.75% | Semi-Annual | Morgan Stanley & Co. International PLC | 11/23/20 | 0.75 | % | USD | 124,270 | $ | (31,530 | ) | |||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||||
Centrally Cleared Credit Default Swaps — Buy Protection
| Reference Obligation/Index | Financing Rate Paid by the Fund |
Payment Frequency |
Termination Date |
Notional Amount (000) |
Value | Upfront Premium Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||||||
| CDX.NA.IG.33.V1 |
1.00 | % | Quarterly | 12/20/24 | USD | 66,100 | $ | (1,737,578 | ) | $ | (1,175,776 | ) | $ | (561,802 | ) | |||||||||||||||||
| CDX.NA.HY.33.V1 |
5.00 | Quarterly | 12/20/24 | USD | 2,574 | (281,571 | ) | (157,677 | ) | (123,894 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| $ | (2,019,149 | ) | $ | (1,333,453 | ) | $ | (685,696 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
OTC Credit Default Swaps — Buy Protection
| Reference Obligation/Index | Financing Rate Paid by the Fund |
Payment Frequency |
Counterparty | Termination Date |
Notional Amount (000) |
Value | Upfront Premium Paid (Received) |
Unrealized Appreciation (Depreciation) |
||||||||||||||||||||||||
| UPC Holding BV |
5.00 | % | Quarterly | JPMorgan Chase Bank N.A. | 06/20/24 | EUR | 30 | $ | (5,736 | ) | $ | (6,387 | ) | $ | 651 | |||||||||||||||||
| UPC Holding BV |
5.00 | Quarterly | BNP Paribas S.A. | 06/20/24 | EUR | 4 | (789 | ) | (929 | ) | 140 | |||||||||||||||||||||
| UPC Holding BV |
5.00 | Quarterly | Bank of America N.A. | 06/20/24 | EUR | 10 | (1,912 | ) | (2,220 | ) | 308 | |||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| $ | (8,437 | ) | $ | (9,536 | ) | $ | 1,099 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
OTC Credit Default Swaps — Sell Protection
| Reference Obligation/Index | Financing Rate Received by the Fund |
Payment Frequency |
Counterparty | Termination Date |
Credit Rating (a) |
Notional Amount (000) (b) |
Value | Upfront Premium Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||||||||
| Casino Guichard Perrachon SA |
1.00 | % | Quarterly | Citibank N.A. | 06/20/23 | B | EUR | 11 | $ | (1,730 | ) | $ | (1,136 | ) | $ | (594 | ) | |||||||||||||||||||
| Casino Guichard Perrachon SA |
1.00 | Quarterly | Barclays Bank PLC | 12/20/23 | B | EUR | 40 | (7,703 | ) | (5,164 | ) | (2,539 | ) | |||||||||||||||||||||||
| Chesapeake Energy Corp. |
5.00 | Quarterly | Barclays Bank PLC | 12/20/23 | B+ | USD | 79 | (30,353 | ) | 122 | (30,475 | ) | ||||||||||||||||||||||||
| Chesapeake Energy Corp. |
5.00 | Quarterly | Barclays Bank PLC | 12/20/23 | B+ | USD | 62 | (23,822 | ) | 482 | (24,304 | ) | ||||||||||||||||||||||||
| Broadcom, Inc. |
1.00 | Quarterly | Citibank N.A. | 06/20/24 | B- | USD | 1,185 | 3,094 | (81,240 | ) | 84,334 | |||||||||||||||||||||||||
| Casino Guichard Perrachon SA |
5.00 | Quarterly | Credit Suisse International | 06/20/24 | B | EUR | 11 | (717 | ) | (712 | ) | (5 | ) | |||||||||||||||||||||||
| Casino Guichard Perrachon SA |
5.00 | Quarterly | Credit Suisse International | 06/20/24 | B | EUR | 9 | (634 | ) | (726 | ) | 92 | ||||||||||||||||||||||||
| Telecom Italia SpA |
1.00 | Quarterly | Citibank N.A. | 06/20/24 | BB+ | EUR | 5 | (32 | ) | (160 | ) | 128 | ||||||||||||||||||||||||
| Telecom Italia SpA |
1.00 | Quarterly | Bank of America N.A. | 06/20/24 | BB+ | EUR | 5 | (31 | ) | (157 | ) | 126 | ||||||||||||||||||||||||
| Telecom Italia SpA |
1.00 | Quarterly | Citibank N.A. | 06/20/24 | BB+ | EUR | 5 | (31 | ) | (164 | ) | 133 | ||||||||||||||||||||||||
| Telecom Italia SpA |
1.00 | Quarterly | Morgan Stanley & Co. International PLC |
06/20/24 | BB+ | EUR | 5 | (30 | ) | (162 | ) | 132 | ||||||||||||||||||||||||
| Garfunkelux Holdco 2 SA |
5.00 | Quarterly | Credit Suisse International | 12/20/24 | B- | EUR | 10 | 285 | (133 | ) | 418 | |||||||||||||||||||||||||
| Garfunkelux Holdco 2 SA |
5.00 | Quarterly | Credit Suisse International | 12/20/24 | B- | EUR | 30 | 852 | — | 852 | ||||||||||||||||||||||||||
| Telecom Italia SpA |
1.00 | Quarterly | Citibank N.A. | 06/20/26 | BB+ | EUR | 10 | (561 | ) | (1,416 | ) | 855 | ||||||||||||||||||||||||
| Virgin Media Finance PLC |
5.00 | Quarterly | Credit Suisse International | 12/20/26 | B | EUR | 20 | 4,485 | 4,879 | (394 | ) | |||||||||||||||||||||||||
| Tesco PLC |
1.00 | Quarterly | Morgan Stanley & Co. International PLC |
12/20/28 | BB+ | EUR | 60 | (2,775 | ) | (5,529 | ) | 2,754 | ||||||||||||||||||||||||
| CMBX.NA.8 |
3.00 | Monthly | Barclays Bank PLC | 10/17/57 | NR | USD | 5,000 | (104,603 | ) | (503,599 | ) | 398,996 | ||||||||||||||||||||||||
| SCHEDULES OF INVESTMENTS | 71 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) |
OTC Credit Default Swaps — Sell Protection (continued)
| Reference Obligation/Index | Financing Rate Received by the Fund |
Payment Frequency |
Counterparty | Termination Date |
Credit Rating (a) |
Notional Amount (000) (b) |
Value | Upfront Premium Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||||||||||
| CMBX.NA.8 |
3.00 | % | Monthly | Credit Suisse International | 10/17/57 | NR | USD | 2,500 | $ | (52,302 | ) | $ | (249,068 | ) | $ | 196,766 | ||||||||||||||||||||||
| CMBX.NA.8 |
3.00 | Monthly | |
Morgan Stanley & Co. International PLC |
|
10/17/57 | NR | USD | 4,450 | (93,097 | ) | (588,771 | ) | 495,674 | ||||||||||||||||||||||||
| CMBX.NA.9 |
3.00 | % | Monthly | |
Morgan Stanley & Co. International PLC |
|
09/17/58 | NR | USD | 7,550 | (39,645 | ) | (924,229 | ) | 884,584 | |||||||||||||||||||||||
| CMBX.NA.9 |
3.00 | Monthly | Credit Suisse International | 09/17/58 | NR | USD | 5,000 | (26,255 | ) | (539,090 | ) | 512,835 | ||||||||||||||||||||||||||
| CMBX.NA.9 |
3.00 | Monthly | Credit Suisse International | 09/17/58 | NR | USD | 5,000 | (26,255 | ) | (539,090 | ) | 512,835 | ||||||||||||||||||||||||||
| CMBX.NA.9 |
3.00 | Monthly | Credit Suisse International | 09/17/58 | NR | USD | 5,000 | (26,254 | ) | (533,201 | ) | 506,947 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| $ | (428,114 | ) | $ | (3,968,264 | ) | $ | 3,540,150 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| (a) | Using the rating of the issuer or the underlying securities of the index, as applicable, provided by S&P Global Ratings. |
| (b) | The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement. |
Balances Reported in the Statements of Assets and Liabilities for Centrally Cleared Swaps, OTC Swaps and Options Written
| Swap Premiums Paid |
Swap Premiums Received |
Unrealized Appreciation |
Unrealized Depreciation |
Value | ||||||||||||||||
| Centrally Cleared Swaps (a) |
$ | — | $ | (1,333,453 | ) | $ | — | $ | (685,696 | ) | $ | — | ||||||||
| OTC Swaps |
5,483 | (3,983,283 | ) | 3,599,560 | (58,311 | ) | — | |||||||||||||
| Options Written |
N/A | N/A | 57,323 | — | (31,530 | ) | ||||||||||||||
| (a) | Includes cumulative appreciation (depreciation) on centrally cleared swaps, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities and is net of any previously paid (received) swap premium amounts. |
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 |
||||||||||||||||||||||||||||
| Unrealized appreciation on futures contracts (a) |
$ | — | $ | — | $ | — | $ | — | $ | 742,655 | $ | — | $ | 742,655 | ||||||||||||||
| Forward foreign currency exchange contracts |
||||||||||||||||||||||||||||
| Unrealized appreciation on forward foreign currency exchange contracts |
— | — | — | 206,960 | — | — | 206,960 | |||||||||||||||||||||
| Options Purchased |
||||||||||||||||||||||||||||
| Options Purchased at value |
— | — | — | — | 99,208 | — | 99,208 | |||||||||||||||||||||
| Swaps — OTC |
||||||||||||||||||||||||||||
| Unrealized appreciation on OTC swaps; Swap premiums paid |
— | 3,605,043 | — | — | — | — | 3,605,043 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| $ | — | $ | 3,605,043 | $ | — | $ | 206,960 | $ | 841,863 | $ | — | $ | 4,653,866 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Liabilities — Derivative Financial Instruments | ||||||||||||||||||||||||||||
| Futures contracts |
||||||||||||||||||||||||||||
| Unrealized depreciation on futures contracts (a) |
$ | — | $ | — | $ | 35 | $ | — | $ | 582,786 | $ | — | $ | 582,821 | ||||||||||||||
| Forward foreign currency exchange contracts |
||||||||||||||||||||||||||||
| Unrealized depreciation on forward foreign currency exchange contracts |
— | — | — | 656,435 | — | — | 656,435 | |||||||||||||||||||||
| Options written |
||||||||||||||||||||||||||||
| Options written at value |
— | — | — | — | 31,530 | — | 31,530 | |||||||||||||||||||||
| Swaps — centrally cleared |
||||||||||||||||||||||||||||
| Unrealized depreciation on centrally cleared swaps (a) |
— | 685,696 | — | — | — | — | 685,696 | |||||||||||||||||||||
| Swaps — OTC |
||||||||||||||||||||||||||||
| Unrealized depreciation on OTC swaps; Swap premiums received |
— | 4,041,593 | — | — | — | — | 4,041,593 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| $ | — | $ | 4,727,289 | $ | 35 | $ | 656,435 | $ | 614,316 | $ | — | $ | 5,998,075 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Net cumulative unrealized appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, are reported in the Schedule of Investments. In the Statements of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included in accumulated earnings (loss). |
| 72 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) |
Derivative Financial Instruments Categorized by Risk Exposure (continued)
For the period ended December 31, 2019, 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 |
$ | — | $ | — | $ | 841 | $ | — | $ | (1,131,190 | ) | $ | — | $ | (1,130,349 | ) | ||||||||||||
| Forward foreign currency exchange contracts |
— | — | — | (363,250 | ) | — | — | (363,250 | ) | |||||||||||||||||||
| Swaps |
— | 60,265 | — | — | — | — | 60,265 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| $ | — | $ | 60,265 | $ | 841 | $ | (363,250 | ) | $ | (1,131,190 | ) | $ | — | $ | (1,433,334 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net Change in Unrealized Appreciation (Depreciation) on: | ||||||||||||||||||||||||||||
| Futures contracts |
$ | — | $ | — | $ | 472 | $ | — | $ | 119,167 | $ | — | $ | 119,639 | ||||||||||||||
| Forward foreign currency exchange contracts |
— | — | — | (785,566 | ) | — | — | (785,566 | ) | |||||||||||||||||||
| Options purchased(a) |
— | — | — | — | (135,662 | ) | — | (135,662 | ) | |||||||||||||||||||
| Options written |
— | — | — | — | 57,323 | — | 57,323 | |||||||||||||||||||||
| Swaps |
— | 668,499 | — | — | — | — | 668,499 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| $ | — | $ | 668,499 | $ | 472 | $ | (785,566 | ) | $ | 40,828 | $ | — | $ | (75,767 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | 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 |
$ | 359,695,432 | ||
| Average notional value of contracts — short |
$ | 169,107,922 | ||
| Forward foreign currency exchange contracts: |
| |||
| Average amounts purchased — in USD |
$ | 79,544,317 | ||
| Average amounts sold – in USD |
$ | 53,256,502 | ||
| Options: |
||||
| Average notional amount of swaption contracts purchased |
$ | 124,270,000 | ||
| Average notional amount of swaption contracts written |
$ | 124,270,000 | ||
| Credit default swaps: |
| |||
| Average notional value — buy protection |
$ | 68,736,060 | ||
| Average notional value — sell protection |
$ | 36,142,301 | ||
For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.
Derivative Financial Instruments — Offsetting as of Period End
| Assets | Liabilities | |||||||
| Derivative Financial Instruments: |
||||||||
| Futures contracts |
$ | 163,546 | $ | 40,535 | ||||
| Forward foreign currency exchange contracts |
206,960 | 656,435 | ||||||
| Options |
99,208 | (a) | 31,530 | |||||
| Swaps — Centrally cleared |
7,859 | — | ||||||
| Swaps — OTC(b) |
3,605,043 | 4,041,593 | ||||||
|
|
|
|
|
|||||
| Total derivative assets and liabilities in the Statements of Assets and Liabilities |
$ | 4,082,616 | $ | 4,770,093 | ||||
|
|
|
|
|
|||||
| Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”) |
(171,405 | ) | (40,535 | ) | ||||
|
|
|
|
|
|||||
| Total derivative assets and liabilities subject to an MNA |
$ | 3,911,211 | $ | 4,729,558 | ||||
|
|
|
|
|
|||||
| (a) | Includes options purchased at value which is included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Schedule of Investments. |
| (b) | Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums (paid/received) in the Statements of Assets and Liabilities. |
| SCHEDULES OF INVESTMENTS | 73 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) |
Derivative Financial Instruments — Offsetting as of Period End (continued)
The following tables present the Fund’s derivative assets (and liabilities) by counterparty net of amounts available for offset under an MNA and net of the related collateral received (and pledged) by the Fund:
| Counterparty | Derivative Assets Subject to an MNA by Counterparty |
Derivatives Available for Offset (a) |
Non-cash Collateral Received |
Cash Collateral Received |
Net Amount of Derivative Assets (b) |
|||||||||||||||
| Bank of America N.A. |
$ | 83,465 | $ | (15,954 | ) | $ | — | $ | — | $ | 67,511 | |||||||||
| Barclays Bank PLC |
399,651 | (399,651 | ) | — | — | — | ||||||||||||||
| BNP Paribas S.A. |
140 | (140 | ) | — | — | — | ||||||||||||||
| Citibank N.A. |
85,450 | (85,450 | ) | — | — | — | ||||||||||||||
| Credit Suisse International |
1,735,624 | (1,735,624 | ) | — | — | — | ||||||||||||||
| JPMorgan Chase Bank N.A. |
88,630 | (88,630 | ) | — | — | — | ||||||||||||||
| Morgan Stanley & Co. International PLC |
1,518,251 | (1,518,251 | ) | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 3,911,211 | $ | (3,843,700 | ) | $ | — | $ | — | $ | 67,511 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Counterparty | Derivative Liabilities Subject to an MNA by Counterparty |
Derivatives Available for Offset (a) |
Non-cash Collateral Pledged |
Cash Collateral Pledged (c) |
Net Amount of Derivative Liabilities (d) |
|||||||||||||||
| Bank of America N.A. |
$ | 15,954 | $ | (15,954 | ) | $ | — | $ | — | $ | — | |||||||||
| Barclays Bank PLC |
566,081 | (399,651 | ) | — | (166,430 | ) | — | |||||||||||||
| BNP Paribas S.A. |
247,946 | (140 | ) | — | — | 247,806 | ||||||||||||||
| Citibank N.A. |
195,593 | (85,450 | ) | — | — | 110,143 | ||||||||||||||
| Credit Suisse International |
1,862,418 | (1,735,624 | ) | — | (126,794 | ) | — | |||||||||||||
| JPMorgan Chase Bank N.A. |
102,636 | (88,630 | ) | — | (10,000 | ) | 4,006 | |||||||||||||
| Morgan Stanley & Co. International PLC |
1,550,221 | (1,518,251 | ) | — | (31,970 | ) | — | |||||||||||||
| State Street Bank and Trust Co. |
165,735 | — | — | — | 165,735 | |||||||||||||||
| Toronto-Dominion Bank |
20,449 | — | — | — | 20,449 | |||||||||||||||
| Westpac Banking Corp. |
2,525 | — | — | — | 2,525 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 4,729,558 | $ | (3,843,700 | ) | $ | — | $ | (335,194 | ) | $ | 550,664 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (a) | The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA. |
| (b) | Net amount represents the net amount receivable from the counterparty in the event of default. |
| (c) | Excess of collateral pledged to the individual counterparty is not shown for financial reporting purposes. |
| (d) | Net amount represents the net amount payable due to the counterparty in the event of default. Net amount may be offset further by the options written receivable/payable on the Statements of Assets and Liabilities. |
| 74 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) |
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 Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.
The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: |
||||||||||||||||
| Investments: |
||||||||||||||||
| Long-Term Investments: |
||||||||||||||||
| Common Stocks(a) |
$ | 156,323 | $ | 41,302 | $ | 522,907 | $ | 720,532 | ||||||||
| Asset-Backed Securities |
— | 25,491,801 | 1,015,603 | 26,507,404 | ||||||||||||
| Corporate Bonds(a) |
— | 387,289,938 | 1,561,152 | 388,851,090 | ||||||||||||
| Floating Rate Loan Interests(a) |
— | 241,680,564 | 8,974,479 | 250,655,043 | ||||||||||||
| Foreign Agency Obligations(a) |
— | 17,536,662 | — | 17,536,662 | ||||||||||||
| Investment Companies |
17,246,375 | — | — | 17,246,375 | ||||||||||||
| Non-Agency Mortgage-Backed Securities |
— | 8,784,146 | — | 8,784,146 | ||||||||||||
| Other Interests |
— | — | 10 | 10 | ||||||||||||
| Preferred Securities(a) |
13,609,936 | 42,641,391 | — | 56,251,327 | ||||||||||||
| U.S. Government Sponsored Agency Securities |
— | 32,173,052 | — | 32,173,052 | ||||||||||||
| U.S. Treasury Obligations |
— | 17,878,022 | — | 17,878,022 | ||||||||||||
| Warrants |
— | 246,793 | — | 246,793 | ||||||||||||
| Options Purchased: |
||||||||||||||||
| Interest rate contracts |
— | 99,208 | — | 99,208 | ||||||||||||
| Short-Term Securities: |
||||||||||||||||
| Foreign Agency Obligations |
— | 355,531 | — | 355,531 | ||||||||||||
| Money Market Fund |
1,358,645 | — | — | 1,358,645 | ||||||||||||
| Unfunded floating rate loan interests |
— | 55,285 | — | 55,285 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Subtotal |
$ | 32,371,279 | $ | 774,273,695 | $ | 12,074,151 | $ | 818,719,125 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Investments Valued at NAV(b) |
42,060 | |||||||||||||||
|
|
|
|||||||||||||||
| Total Investments |
$ | 818,761,185 | ||||||||||||||
|
|
|
|||||||||||||||
| Derivative Financial Instruments(c) |
||||||||||||||||
| Assets: |
||||||||||||||||
| Credit contracts |
$ | — | $ | 3,515,226 | $ | 84,334 | $ | 3,599,560 | ||||||||
| Forward foreign currency contracts |
— | 206,960 | — | 206,960 | ||||||||||||
| Interest rate contracts |
742,655 | — | — | 742,655 | ||||||||||||
| Liabilities: |
||||||||||||||||
| Credit contracts |
— | (744,007 | ) | — | (744,007 | ) | ||||||||||
| Equity contracts |
(35 | ) | — | — | (35 | ) | ||||||||||
| Forward foreign currency contracts |
— | (656,435 | ) | — | (656,435 | ) | ||||||||||
| Interest rate contracts |
(582,786 | ) | (31,530 | ) | — | (614,316 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 159,834 | $ | 2,290,214 | $ | 84,334 | $ | 2,534,382 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | See above Schedule of Investments for values in each industry. |
| (b) | Certain investments of the Fund were fair valued using NAV per share or its equivalent as no quoted market value is available and therefore have been excluded from the fair value hierarchy. |
| (c) | 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 Fund 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, reverse repurchase agreements of $213,399,446 are categorized within as Level 2 the disclosure hierarchy.
| SCHEDULES OF INVESTMENTS | 75 |
| Schedule of Investments (continued) December 31, 2019 |
BlackRock Limited Duration Income Trust (BLW) |
Fair Value Hierarchy as of Period End (continued)
A reconciliation of Level 3 Investments is presented when the Fund 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 |
Common Stocks |
Corporate Bonds |
Floating Rate Loan Interests |
Other Interests |
Grand Total | |||||||||||||||||||
| Assets: |
||||||||||||||||||||||||
| Opening balance, as of August 31, 2019 |
$ | 4,155,566 | $ | 534,756 | $ | 1,577,528 | $ | 7,282,908 | $ | 10 | $ | 13,550,768 | ||||||||||||
| Transfers into Level 3(a) |
— | — | — | 3,638,737 | — | 3,638,737 | ||||||||||||||||||
| Transfers out of Level 3(b) |
— | — | — | (3,251,322 | ) | — | (3,251,322 | ) | ||||||||||||||||
| Accrued discounts/premiums |
(37,631 | ) | — | — | 2,677 | — | (34,954 | ) | ||||||||||||||||
| Net realized gain (loss) |
— | — | — | (26,942 | ) | — | (26,942 | ) | ||||||||||||||||
| Net change in unrealized appreciation (depreciation)(c)(d) |
(10,467 | ) | (11,849 | ) | (16,376 | ) | 128,717 | — | 90,025 | |||||||||||||||
| Purchases |
— | — | — | 2,459,072 | — | 2,459,072 | ||||||||||||||||||
| Sales |
(3,091,865 | ) | — | — | (1,259,368 | ) | — | (4,351,233 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Closing balance, as of December 31, 2019 |
$ | 1,015,603 | $ | 522,907 | $ | 1,561,152 | $ | 8,974,479 | $ | 10 | $ | 12,074,151 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net change in unrealized appreciation (depreciation) on investments still held at December 31, 2019(d) |
$ | 4,533 | $ | (11,849 | ) | $ | (16,376 | ) | $ | 113,069 | $ | — | $ | 89,377 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (a) | As of August 31, 2019, the Fund used observable inputs in determining the value of certain investments. As of December 31, 2019, the Fund 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. |
| (b) | As August 31, 2019, the Fund used significant unobservable inputs in determining the value of certain investments. As of December 31, 2019, the Fund 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. |
| (c) | Included in the related net change in unrealized appreciation (depreciation) in the Statements of Operations. |
| (d) | Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at December 31, 2019 is generally due to investments no longer held or categorized as Level 3 at period end. |
| Credit Contracts |
Grand Total |
|||||||
| Assets: |
||||||||
| Opening balance, as of August 31, 2019 |
$ | — | $ | — | ||||
| Transfers into Level 3 |
— | — | ||||||
| Transfers out of Level 3 |
— | — | ||||||
| Accrued discounts/premiums |
5,033 | 5,033 | ||||||
| Net realized gain (loss) |
— | — | ||||||
| Net change in unrealized appreciation (depreciation)(a)(b) |
79,301 | 79,301 | ||||||
| Purchases |
— | — | ||||||
| Sales |
— | — | ||||||
|
|
|
|
|
|||||
| Closing balance, as of December 31, 2019 |
$ | 84,334 | $ | 84,334 | ||||
|
|
|
|
|
|||||
| Net change in unrealized appreciation (depreciation) on derivative financial instruments still held at December 31, 2019(a) |
$ | 79,301 | $ | 79,301 | ||||
|
|
|
|
|
|||||
| (a) | Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on derivative financial instruments still held at December 31, 2019 is generally due to derivative financial instruments no longer held or categorized as Level 3 at period end. |
| (b) | Included in the related net change in unrealized appreciation (depreciation) in the Statements of Operations. |
The Fund’s investments and derivative financial instruments 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 could result in a significantly lower or higher value of such Level 3 investments and derivative financial instruments.
See notes to financial statements.
| 76 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Statements of Assets and Liabilities
December 31, 2019
| DSU | FRA | BLW | ||||||||||
| ASSETS |
| |||||||||||
| Investments at value — unaffiliated(a) |
$ | 879,404,808 | $ | 742,499,771 | $ | 817,347,255 | ||||||
| Investments at value — affiliated(b) |
— | — | 1,358,645 | |||||||||
| Cash |
2,941,945 | 2,708,544 | 1,806,397 | |||||||||
| Cash pledged: |
| |||||||||||
| Collateral — reverse repurchase agreements |
— | — | 2,088,865 | |||||||||
| Collateral — OTC derivatives |
— | — | 1,510,000 | |||||||||
| Futures contracts |
4,000 | — | 822,592 | |||||||||
| Centrally cleared swaps |
— | — | 662,000 | |||||||||
| Foreign currency at value(c) |
163,338 | 1,112,382 | 1,746,248 | |||||||||
| Receivables: |
| |||||||||||
| Investments sold |
6,974,648 | 7,853,283 | 2,303,790 | |||||||||
| Dividends — affiliated |
2,038 | 1,454 | 5,254 | |||||||||
| Dividends — unaffiliated |
— | — | 71,038 | |||||||||
| Interest — unaffiliated |
3,629,433 | 1,656,329 | 7,600,837 | |||||||||
| Principal paydowns |
— | — | 1,138 | |||||||||
| Variation margin on futures contracts |
— | — | 163,546 | |||||||||
| Variation margin on centrally cleared swaps |
— | — | 7,859 | |||||||||
| Swap premiums paid |
6,417 | — | 5,483 | |||||||||
| Unrealized appreciation on: |
| |||||||||||
| Forward foreign currency exchange contracts |
— | — | 206,960 | |||||||||
| OTC swaps |
27,279 | — | 3,599,560 | |||||||||
| Unfunded floating rate loan interests |
167,290 | 149,328 | 55,285 | |||||||||
| Prepaid expenses |
4,761 | 3,950 | 4,625 | |||||||||
| Other assets |
8,627 | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total assets |
893,334,584 | 755,985,041 | 841,367,377 | |||||||||
|
|
|
|
|
|
|
|||||||
| LIABILITIES |
| |||||||||||
| Collateral — reverse repurchase agreements |
— | — | 59,288 | |||||||||
| Options written at value(d) |
— | — | 31,530 | |||||||||
| Reverse repurchase agreements at value |
— | — | 213,399,446 | |||||||||
| Payables: |
| |||||||||||
| Investments purchased |
19,437,842 | 14,182,317 | 6,732,113 | |||||||||
| Bank borrowings |
262,000,000 | 214,000,000 | — | |||||||||
| Income dividend distributions |
3,513,465 | 2,829,318 | 3,515,184 | |||||||||
| Interest expense |
539,565 | 443,528 | — | |||||||||
| Investment advisory fees |
778,295 | 903,911 | 746,439 | |||||||||
| Directors’ and Officer’s fees |
362,698 | 567 | 454,404 | |||||||||
| Other accrued expenses |
377,462 | 365,232 | 417,490 | |||||||||
| Principal payups |
981 | — | — | |||||||||
| Variation margin on futures contracts |
— | — | 40,535 | |||||||||
| Swap premiums received |
53,597 | — | 3,983,283 | |||||||||
| Unrealized depreciation on: |
| |||||||||||
| Forward foreign currency exchange contracts |
199,687 | 146,787 | 656,435 | |||||||||
| OTC swaps |
255,767 | — | 58,311 | |||||||||
| Other Liabilities |
575,071 | 568,672 | 205,327 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total liabilities |
288,094,430 | 233,440,332 | 230,299,785 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 605,240,154 | $ | 522,544,709 | $ | 611,067,592 | ||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS CONSIST OF |
| |||||||||||
| Paid-in capital(e)(f)(g) |
$ | 696,863,455 | $ | 559,292,295 | $ | 636,378,755 | ||||||
| Accumulated loss |
(91,623,301 | ) | (36,747,586 | ) | (25,311,163 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 605,240,154 | $ | 522,544,709 | $ | 611,067,592 | ||||||
|
|
|
|
|
|
|
|||||||
| Net asset value |
$ | 12.25 | $ | 14.55 | $ | 17.05 | ||||||
|
|
|
|
|
|
|
|||||||
| (a) Investments at cost — unaffiliated |
$ | 894,686,263 | $ | 747,197,205 | $ | 803,464,912 | ||||||
| (b) Investments at cost — affiliated |
$ | — | $ | — | $ | 1,358,645 | ||||||
| (c) Foreign currency at cost |
$ | 161,547 | $ | 1,099,899 | $ | 1,714,080 | ||||||
| (d) Premiums received |
$ | — | $ | — | $ | 88,853 | ||||||
| (e) Par value |
$ | 0.100 | $ | 0.100 | $ | 0.001 | ||||||
| (f) Shares outstanding |
49,415,828 | 35,905,051 | 35,832,657 | |||||||||
| (g) Shares authorized |
400 million | 200 million | unlimited | |||||||||
See notes to financial statements.
| FINANCIAL STATEMENTS | 77 |
| DSU | FRA | |||||||||||||||||||
| Period from 03/01/19 to 12/31/19 |
Year Ended February 28, 2019 |
Period from 09/01/19 to 12/31/19 |
Year Ended August 31, 2019 |
|||||||||||||||||
| INVESTMENT INCOME |
||||||||||||||||||||
| Dividends — affiliated |
$ | 26,680 | $ | 69,401 | $ | 8,933 | $ | 38,562 | ||||||||||||
| Dividends — unaffiliated |
1,021,457 | 179,730 | 596,550 | 1,151,000 | ||||||||||||||||
| Interest — unaffiliated |
41,995,062 | 56,515,763 | 12,292,382 | 42,149,744 | ||||||||||||||||
| Other income |
425,226 | 458,588 | 177,999 | 584,116 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total investment income |
43,468,425 | 57,223,482 | 13,075,864 | 43,923,422 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| EXPENSES |
| |||||||||||||||||||
| Investment advisory |
4,024,649 | 5,261,589 | 1,812,237 | 5,651,988 | ||||||||||||||||
| Transfer agent |
180,025 | 203,796 | 34,994 | 57,141 | ||||||||||||||||
| Professional |
136,957 | 526,206 | 152,163 | 193,421 | ||||||||||||||||
| Accounting services |
108,895 | 119,191 | 36,831 | 111,942 | ||||||||||||||||
| Directors and Officer |
66,251 | 68,104 | 11,187 | 43,190 | ||||||||||||||||
| Custodian |
58,062 | 68,646 | 12,573 | 37,942 | ||||||||||||||||
| Printing |
40,561 | 48,145 | 11,512 | 29,541 | ||||||||||||||||
| Registration |
15,938 | 26,680 | 4,581 | 14,061 | ||||||||||||||||
| Offering |
— | — | — | 30,883 | ||||||||||||||||
| Miscellaneous |
89,111 | 37,989 | 11,313 | 28,298 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total expenses excluding interest expense |
4,720,449 | 6,360,346 | 2,087,391 | 6,198,407 | ||||||||||||||||
| Interest expense |
6,720,598 | 8,407,818 | 1,805,975 | 6,951,555 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total expenses |
11,441,047 | 14,768,164 | 3,893,366 | 13,149,962 | ||||||||||||||||
| Less fees waived and/or reimbursed by the Manager |
(1,164 | ) | (2,535 | ) | (300 | ) | (1,728 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total expenses after fees waived and/or reimbursed |
11,439,883 | 14,765,629 | 3,893,066 | 13,148,234 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net investment income |
32,028,542 | 42,457,853 | 9,182,798 | 30,775,188 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| REALIZED AND UNREALIZED GAIN (LOSS) |
| |||||||||||||||||||
| Net realized gain (loss) from: |
| |||||||||||||||||||
| Investments — unaffiliated |
(11,972,717 | ) | (8,924,179 | ) | (1,936,801 | ) | (9,904,223 | ) | ||||||||||||
| Investments — affiliated |
— | — | 2,169 | 27,274 | ||||||||||||||||
| Capital gain distributions from investment companies — affiliated |
6 | (476 | ) | 5 | — | |||||||||||||||
| Futures contracts |
(18,675 | ) | 13,627 | — | — | |||||||||||||||
| Forward foreign currency exchange contracts |
935,994 | 1,858,657 | (69,658 | ) | 587,067 | |||||||||||||||
| Foreign currency transactions |
67,379 | 264,048 | 43,804 | 117,500 | ||||||||||||||||
| Swaps |
613,541 | (575,153 | ) | — | (610,309 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| (10,374,472 | ) | (7,363,476 | ) | (1,960,481 | ) | (9,782,691 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||||||||||||||
| Investments — unaffiliated |
20,685,137 | (17,140,243 | ) | 8,142,352 | (6,292,224 | ) | ||||||||||||||
| Futures contracts |
(1,071 | ) | (24 | ) | — | — | ||||||||||||||
| Forward foreign currency exchange contracts |
(352,702 | ) | (289,954 | ) | (237,245 | ) | 36,256 | |||||||||||||
| Foreign currency translations |
1,526 | 32,067 | 38,939 | (130,922 | ) | |||||||||||||||
| Swaps |
(763,523 | ) | 421,600 | — | — | |||||||||||||||
| Unfunded floating rate loan interests |
167,889 | (3,093 | ) | 154,125 | (1,585 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| 19,737,256 | (16,979,647 | ) | 8,098,171 | (6,388,475 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net realized and unrealized gain (loss) |
9,362,784 | (24,343,123 | ) | 6,137,690 | (16,171,166 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | 41,391,326 | $ | 18,114,730 | $ | 15,320,488 | $ | 14,604,022 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
See notes to financial statements.
| 78 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Statements of Operations (continued)
| BLW | ||||||||
| Period from 09/01/19 to 12/31/19 |
Year Ended August 31, 2019 |
|||||||
| INVESTMENT INCOME |
| |||||||
| Dividends — affiliated |
$ | 29,844 | $ | 171,752 | ||||
| Dividends — unaffiliated |
576,101 | 1,323,406 | ||||||
| Interest — unaffiliated |
13,530,096 | 43,277,038 | ||||||
| Other income |
66,202 | 224,044 | ||||||
| Foreign taxes withheld |
— | (12,750 | ) | |||||
|
|
|
|
|
|||||
| Total investment income |
14,202,243 | 44,983,490 | ||||||
|
|
|
|
|
|||||
| EXPENSES |
| |||||||
| Investment advisory |
1,490,181 | 4,443,460 | ||||||
| Professional |
132,651 | 170,541 | ||||||
| Transfer agent |
44,983 | 71,995 | ||||||
| Directors and Officer |
39,877 | 54,293 | ||||||
| Accounting services |
39,561 | 115,798 | ||||||
| Custodian |
24,132 | 75,575 | ||||||
| Printing |
12,720 | 23,989 | ||||||
| Registration |
4,482 | 13,877 | ||||||
| Miscellaneous |
25,963 | 95,711 | ||||||
|
|
|
|
|
|||||
| Total expenses excluding interest expense |
1,814,550 | 5,065,239 | ||||||
| Interest expense |
1,564,054 | 5,810,660 | ||||||
|
|
|
|
|
|||||
| Total expenses |
3,378,604 | 10,875,899 | ||||||
| Less fees waived and/or reimbursed by the Manager |
(1,339 | ) | (5,603 | ) | ||||
|
|
|
|
|
|||||
| Total expenses after fees waived and/or reimbursed |
3,377,265 | 10,870,296 | ||||||
|
|
|
|
|
|||||
| Net investment income |
10,824,978 | 34,113,194 | ||||||
|
|
|
|
|
|||||
| REALIZED AND UNREALIZED GAIN (LOSS) |
| |||||||
| Net realized gain (loss) from: |
| |||||||
| Investments — unaffiliated |
(367,501 | ) | (9,484,091 | ) | ||||
| Capital gain distributions from investment companies — affiliated |
4 | — | ||||||
| Futures contracts |
(1,130,349 | ) | 767,291 | |||||
| Forward foreign currency exchange contracts |
(363,250 | ) | 2,682,747 | |||||
| Foreign currency transactions |
90,235 | (399,761 | ) | |||||
| Swaps |
60,265 | 2,360,524 | ||||||
|
|
|
|
|
|||||
| (1,710,596 | ) | (4,073,290 | ) | |||||
|
|
|
|
|
|||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||
| Investments — unaffiliated |
8,355,284 | 14,278,431 | ||||||
| Futures contracts |
119,639 | 36,999 | ||||||
| Forward foreign currency exchange contracts |
(785,566 | ) | (108,409 | ) | ||||
| Foreign currency translations |
139,182 | (54,655 | ) | |||||
| Options written |
57,323 | — | ||||||
| Swaps |
668,499 | 235,180 | ||||||
| Unfunded floating rate loan interests |
56,973 | (906 | ) | |||||
|
|
|
|
|
|||||
| 8,611,334 | 14,386,640 | |||||||
|
|
|
|
|
|||||
| Net realized and unrealized gain (loss) |
6,900,738 | 10,313,350 | ||||||
|
|
|
|
|
|||||
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | 17,725,716 | $ | 44,426,544 | ||||
|
|
|
|
|
|||||
See notes to financial statements.
| FINANCIAL STATEMENTS | 79 |
Statements of Changes in Net Assets
| DSU | FRA | |||||||||||||||||||||||||||
| Period from 03/01/19 to 12/31/19 |
Year Ended February 28, | Period from 09/01/19 to 12/31/19 |
Year Ended August 31, | |||||||||||||||||||||||||
| 2019 | 2018 (a) | 2019 | 2018 (a) | |||||||||||||||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
| |||||||||||||||||||||||||||
| OPERATIONS |
|
|||||||||||||||||||||||||||
| Net investment income |
$ | 32,028,542 | $ | 42,457,853 | $ | 46,719,970 | $ | 9,182,798 | $ | 30,775,188 | $ | 29,305,147 | ||||||||||||||||
| Net realized gain (loss) |
(10,374,472 | ) | (7,363,476 | ) | 9,864,675 | (1,960,481 | ) | (9,782,691 | ) | 638,332 | ||||||||||||||||||
| Net change in unrealized appreciation (depreciation) |
19,737,256 | (16,979,647 | ) | (14,273,107 | ) | 8,098,171 | (6,388,475 | ) | (3,031,229 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net increase in net assets resulting from operations |
41,391,326 | 18,114,730 | 42,311,538 | 15,320,488 | 14,604,022 | 26,912,250 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| DISTRIBUTIONS TO SHAREHOLDERS(b) |
|
|||||||||||||||||||||||||||
| From net investment income |
(37,103,506 | ) | (44,243,908 | ) | (49,464,126 | ) | (13,875,793 | ) | (32,025,983 | ) | (27,514,809 | ) | ||||||||||||||||
| From return of capital |
(1,264,429 | ) | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Decrease in net assets resulting from distributions to shareholders |
(38,367,935 | ) | (44,243,908 | ) | (49,464,126 | ) | (13,875,793 | ) | (32,025,983 | ) | (27,514,809 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| CAPITAL SHARE TRANSACTIONS |
|
|||||||||||||||||||||||||||
| Redemption of shares resulting from share repurchase program (including transaction costs) |
(39,003,259 | ) | (74,855,117 | ) | (31,452,392 | ) | (5,346,886 | ) | (11,500,788 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| NET ASSETS |
|
|||||||||||||||||||||||||||
| Total increase (decrease) in net assets |
(35,979,868 | ) | (100,984,295 | ) | (38,604,980 | ) | (3,902,191 | ) | (28,922,749 | ) | (602,559 | ) | ||||||||||||||||
| Beginning of period |
641,220,022 | 742,204,317 | 780,809,297 | 526,446,900 | 555,369,649 | 555,972,208 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| End of period |
$ | 605,240,154 | $ | 641,220,022 | $ | 742,204,317 | $ | 522,544,709 | $ | 526,446,900 | $ | 555,369,649 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (a) | Consolidated Statements of Changes in Net Assets through November 30, 2017. |
| (b) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
| 80 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Statements of Changes in Net Assets (continued)
| BLW | ||||||||||||
| Period from 09/01/19 to 12/31/19 |
Year Ended August 31, | |||||||||||
| 2019 | 2018 | |||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
|
|||||||||||
| OPERATIONS |
|
|||||||||||
| Net investment income |
$ | 10,824,978 | $ | 34,113,194 | $ | 34,941,919 | ||||||
| Net realized gain (loss) |
(1,710,596 | ) | (4,073,290 | ) | 7,252,073 | |||||||
| Net change in unrealized appreciation (depreciation) |
8,611,334 | 14,386,640 | (19,132,912 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Net increase in net assets resulting from operations |
17,725,716 | 44,426,544 | 23,061,080 | |||||||||
|
|
|
|
|
|
|
|||||||
| DISTRIBUTIONS TO SHAREHOLDERS(a) |
|
|||||||||||
| Decrease in net assets resulting from distributions to shareholders |
(16,909,431 | ) | (34,575,364 | ) | (35,259,837 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| CAPITAL SHARE TRANSACTIONS |
|
|||||||||||
| Redemption of shares resulting from share repurchase program (including transaction costs) |
— | (11,648,172 | ) | (5,481,140 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
|
|||||||||||
| Total increase (decrease) in net assets |
816,285 | (1,796,992 | ) | (17,679,897 | ) | |||||||
| Beginning of period |
610,251,307 | 612,048,299 | 629,728,196 | |||||||||
|
|
|
|
|
|
|
|||||||
| End of period |
$ | 611,067,592 | $ | 610,251,307 | $ | 612,048,299 | ||||||
|
|
|
|
|
|
|
|||||||
| (a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
| FINANCIAL STATEMENTS | 81 |
| DSU | FRA | BLW | ||||||||||||||||||||||||||||||
| Period from 03/01/19 to 12/31/19 |
Year Ended February 28, 2019 |
Period from 09/01/19 to 12/31/19 |
Year Ended August 31, 2019 |
Period from 09/01/19 to 12/31/19 |
Year Ended August 31, 2019 |
|||||||||||||||||||||||||||
| CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES |
||||||||||||||||||||||||||||||||
| Net increase in net assets resulting from operations |
$ | 41,391,326 | $ | 18,114,730 | $ | 15,320,488 | $ | 14,604,022 | $ | 17,725,716 | $ | 44,426,544 | ||||||||||||||||||||
| Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used for) operating activities: |
||||||||||||||||||||||||||||||||
| Proceeds from sales of long-term investments and principal paydowns |
555,950,087 | 739,881,239 | 137,412,091 | 449,031,617 | 110,732,501 | 449,365,731 | ||||||||||||||||||||||||||
| Purchases of long-term investments |
(505,765,810 | ) | (602,427,845 | ) | (139,081,950 | ) | (406,462,634 | ) | (126,298,068 | ) | (399,504,230 | ) | ||||||||||||||||||||
| Net proceeds from sales (purchases) of short-term securities |
3,637,675 | (3,616,393 | ) | (19,117 | ) | 155,382 | 2,233,480 | (3,770,137 | ) | |||||||||||||||||||||||
| Amortization of premium and accretion of discount on investments and other fees |
(390,681 | ) | (217,775 | ) | (295,175 | ) | (386,564 | ) | 340,048 | 372,746 | ||||||||||||||||||||||
| Paid-in-kind income |
587,513 | (2,235,184 | ) | — | — | — | — | |||||||||||||||||||||||||
| Premiums received from options written |
— | — | — | — | 88,853 | — | ||||||||||||||||||||||||||
| Premiums paid on closing options written |
(4,274 | ) | 4,274 | — | — | — | — | |||||||||||||||||||||||||
| Net realized loss on investments |
11,972,717 | 9,045,430 | 1,960,664 | 9,882,763 | 376,621 | 9,484,002 | ||||||||||||||||||||||||||
| Net unrealized (appreciation) depreciation on investments, options written, swaps, forward foreign currency exchange contracts, foreign currency translations and unfunded floating rate loan interests |
(19,738,327 | ) | 16,836,939 | (8,059,232 | ) | 6,257,553 | (8,880,828 | ) | (15,551,799 | ) | ||||||||||||||||||||||
| (Increase) Decrease in Assets: |
||||||||||||||||||||||||||||||||
| Receivables: |
||||||||||||||||||||||||||||||||
| Dividends — affiliated |
9,352 | (10,383 | ) | 1,044 | (1,011 | ) | 13,306 | (9,055 | ) | |||||||||||||||||||||||
| Dividends — unaffiliated |
— | — | — | — | (71,038 | ) | — | |||||||||||||||||||||||||
| Interest — unaffiliated |
2,597,804 | 2,880,764 | 816,712 | 299,782 | 527,214 | 101,721 | ||||||||||||||||||||||||||
| Variation margin on futures contracts |
1,112 | (1,112 | ) | — | — | (120,098 | ) | (16,354 | ) | |||||||||||||||||||||||
| Variation margin on centrally cleared swaps |
— | — | — | — | (6,887 | ) | (972 | ) | ||||||||||||||||||||||||
| Swap premiums paid |
17,474 | 283,004 | — | — | (4,424 | ) | 19,832 | |||||||||||||||||||||||||
| Prepaid expenses |
13,958 | (3,050 | ) | 2,584 | 2,463 | 2,044 | 3,082 | |||||||||||||||||||||||||
| Deferred offering costs |
— | — | — | 30,883 | — | — | ||||||||||||||||||||||||||
| Other assets |
4,741 | 21,586 | — | — | — | — | ||||||||||||||||||||||||||
| Increase (Decrease) in Liabilities: |
||||||||||||||||||||||||||||||||
| Cash received: |
||||||||||||||||||||||||||||||||
| Collateral — reverse repurchase agreements |
— | — | — | — | — | 59,288 | ||||||||||||||||||||||||||
| Collateral — OTC derivatives |
— | (440,000 | ) | — | — | — | (150,000 | ) | ||||||||||||||||||||||||
| Payables: |
||||||||||||||||||||||||||||||||
| Interest expense |
(149,243 | ) | 85,727 | (86,993 | ) | (35,153 | ) | 20,084 | 982,760 | |||||||||||||||||||||||
| Investment advisory fees |
398,859 | (77,860 | ) | 438,792 | (38,541 | ) | 369,650 | (23,117 | ) | |||||||||||||||||||||||
| Directors’ and Officer’s fees |
34,126 | 8,879 | (6,756 | ) | (1,216 | ) | 25,702 | (618 | ) | |||||||||||||||||||||||
| Variation margin on futures contracts |
— | (1,359 | ) | — | — | (2,711 | ) | (17,893 | ) | |||||||||||||||||||||||
| Variation margin on centrally cleared swaps |
— | (47,143 | ) | — | — | — | (114,007 | ) | ||||||||||||||||||||||||
| Other accrued expenses |
(49,783 | ) | 52,803 | 56,086 | (72,636 | ) | 21,427 | (44,422 | ) | |||||||||||||||||||||||
| Swap premiums received |
(9,813 | ) | 60,726 | — | — | 61,631 | (52,099 | ) | ||||||||||||||||||||||||
| Other Liabilities |
575,071 | — | 568,672 | — | 205,327 | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Net cash provided by (used for) operating activities |
91,083,884 | 178,197,997 | 9,027,910 | 73,266,710 | (2,640,450 | ) | 85,561,003 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES |
||||||||||||||||||||||||||||||||
| Cash dividends paid to Common Shareholders |
(34,989,396 | ) | (44,252,264 | ) | (11,127,442 | ) | (32,025,792 | ) | (13,500,091 | ) | (34,562,280 | ) | ||||||||||||||||||||
| Payments on offering costs |
— | — | (4,000 | ) | — | — | — | |||||||||||||||||||||||||
| Payments for bank borrowings |
(340,000,000 | ) | (433,000,000 | ) | (86,000,000 | ) | (306,000,000 | ) | — | — | ||||||||||||||||||||||
| Payments on Common Shares redeemed |
(39,003,259 | ) | (74,855,117 | ) | (5,346,886 | ) | (11,500,788 | ) | — | (11,769,182 | ) | |||||||||||||||||||||
| Proceeds from bank borrowings |
324,000,000 | 373,000,000 | 96,000,000 | 277,000,000 | — | — | ||||||||||||||||||||||||||
| Net borrowing of reverse repurchase agreements |
— | — | — | — | 11,147,609 | (33,373,160 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Net cash used for financing activities |
(89,992,655 | ) | (179,107,381 | ) | (6,478,328 | ) | (72,526,580 | ) | (2,352,482 | ) | (79,704,622 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| CASH IMPACT FROM FOREIGN EXCHANGE FLUCTUATIONS |
|
|||||||||||||||||||||||||||||||
| Cash impact from foreign exchange fluctuations |
$ | (417 | ) | $ | 4,343 | $12,666 | $ | (169 | ) | $ | 130,785 | $ | (57,073 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| CASH AND FOREIGN CURRENCY |
||||||||||||||||||||||||||||||||
| Net increase (decrease) in restricted and unrestricted cash and foreign currency |
1,090,812 | (905,041 | ) | 2,562,248 | 739,961 | (4,862,147 | ) | 5,799,308 | ||||||||||||||||||||||||
| Restricted and unrestricted cash and foreign currency at beginning of period |
2,018,471 | 2,923,512 | 1,258,678 | 518,717 | 13,498,249 | 7,698,941 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Restricted and unrestricted cash and foreign currency at end of period |
$ | 3,109,283 | $ | 2,018,471 | $ | 3,820,926 | $ | 1,258,678 | $ | 8,636,102 | $ | 13,498,249 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
See notes to financial statements.
| 82 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Statements of Cash Flows (continued)
| DSU | FRA | BLW | ||||||||||||||||||||||||||||||
| Period from 03/01/19 to 12/31/19 |
Year Ended February 28, 2019 |
Period from 09/01/19 to 12/31/19 |
Year Ended August 31, 2019 |
Period from 09/01/19 to 12/31/19 |
Year Ended August 31, 2019 |
|||||||||||||||||||||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
||||||||||||||||||||||||||||||||
| Cash paid during the period for interest expense |
$ | 6,869,841 | $ | 8,322,091 | $ | 1,892,968 | $ | 6,986,708 | $ | 1,543,970 | $ | 4,827,900 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| RECONCILIATION OF RESTRICTED AND UNRESTRICTED CASH AND FOREIGN CURRENCY AT THE END OF PERIOD TO THE STATEMENTS OF ASSETS AND LIABILITIES |
||||||||||||||||||||||||||||||||
| Cash |
$ | 2,941,945 | $ | 1,855,920 | $ | 2,708,544 | $ | 1,243,343 | $ | 1,806,397 | $ | 988,391 | ||||||||||||||||||||
| Cash pledged: |
||||||||||||||||||||||||||||||||
| Collateral — reverse repurchase agreements |
— | — | — | — | 2,088,865 | — | ||||||||||||||||||||||||||
| Collateral — OTC derivatives |
— | — | — | — | 1,510,000 | 1,930,000 | ||||||||||||||||||||||||||
| Futures contracts |
4,000 | 11,000 | — | — | 822,592 | 342,300 | ||||||||||||||||||||||||||
| Centrally cleared swaps |
— | — | — | — | 662,000 | 689,000 | ||||||||||||||||||||||||||
| Foreign currency at value |
163,338 | 151,551 | 1,112,382 | 15,335 | 1,746,248 | 9,548,558 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| $ | 3,109,283 | $ | 2,018,471 | $ | 3,820,926 | $ | 1,258,678 | $ | 8,636,102 | $ | 13,498,249 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| RECONCILIATION OF RESTRICTED AND UNRESTRICTED CASH AND FOREIGN CURRENCY AT THE BEGINNING OF PERIOD TO THE STATEMENTS OF ASSETS AND LIABILITIES |
||||||||||||||||||||||||||||||||
| Cash |
$ | 1,855,920 | $ | 1,208,459 | $ | 1,243,343 | $ | 508,498 | $ | 988,391 | $ | 172,706 | ||||||||||||||||||||
| Cash pledged: |
||||||||||||||||||||||||||||||||
| Collateral — reverse repurchase agreements |
— | — | — | — | — | 908,000 | ||||||||||||||||||||||||||
| Collateral — OTC derivatives |
— | — | — | — | 1,930,000 | 3,540,000 | ||||||||||||||||||||||||||
| Futures contracts |
11,000 | 10,000 | — | — | 342,300 | 497,859 | ||||||||||||||||||||||||||
| Centrally cleared swaps |
— | 1,602,000 | — | — | 689,000 | 1,017,170 | ||||||||||||||||||||||||||
| Foreign currency at value |
151,551 | 103,053 | 15,335 | 10,219 | 9,548,558 | 1,563,206 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| $ | 2,018,471 | $ | 2,923,512 | $ | 1,258,678 | $ | 518,717 | $ | 13,498,249 | $ | 7,698,941 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
See notes to financial statements.
| FINANCIAL STATEMENTS | 83 |
(For a share outstanding throughout each period)
| DSU | ||||||||||||||||||||||||||||
| Period from 03/01/19 to 12/31/19 |
Year Ended February 28, | Year Ended February 29, 2016 (a)(b) |
Year Ended February 28, 2015 (a)(b) |
|||||||||||||||||||||||||
| 2019 | 2018 (a) | 2017 (a) | ||||||||||||||||||||||||||
| Net asset value, beginning of period |
$ | 12.16 | $ | 12.62 | $ | 12.70 | $ | 11.38 | $ | 12.87 | $ | 13.32 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net investment income(c) |
0.64 | 0.79 | 0.78 | 0.73 | 0.77 | 0.87 | ||||||||||||||||||||||
| Net realized and unrealized gain (loss) |
0.21 | (0.43 | ) | (0.04 | ) | 1.34 | (1.46 | ) | (0.43 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net increase (decrease) from investment operations |
0.85 | 0.36 | 0.74 | 2.07 | (0.69 | ) | 0.44 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Distributions to Shareholders(d) |
||||||||||||||||||||||||||||
| From net investment income |
(0.73 | ) | (0.82 | ) | (0.82 | ) | (0.75 | ) | (0.80 | ) | (0.89 | ) | ||||||||||||||||
| From return of capital |
(0.03 | ) | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total distributions |
(0.76 | ) | (0.82 | ) | (0.82 | ) | (0.75 | ) | (0.80 | ) | (0.89 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net asset value, end of period |
$ | 12.25 | $ | 12.16 | $ | 12.62 | $ | 12.70 | $ | 11.38 | $ | 12.87 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Market price, end of period |
$ | 11.20 | $ | 10.78 | $ | 11.47 | $ | 11.68 | $ | 9.96 | $ | 11.43 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Return(e) |
| |||||||||||||||||||||||||||
| Based on net asset value |
8.03 | %(f) | 3.86 | % | 6.60 | %(g) | 19.57 | % | (4.73 | )% | 4.15 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Based on market price |
11.42 | %(f) | 1.30 | % | 5.35 | % | 25.53 | % | (6.03 | )% | 0.66 | % | ||||||||||||||||
|
|
|
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|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Ratios to Average Net Assets(h) |
| |||||||||||||||||||||||||||
| Total expenses |
2.21 | %(i)(j) | 2.23 | % | 1.86 | % | 1.36 | % | 1.18 | % | 1.24 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total expenses after fees waived and/or reimbursed |
2.21 | %(i)(j) | 2.23 | % | 1.85 | % | 1.35 | % | 1.18 | % | 1.24 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total expenses after fees waived and/or reimbursed and excluding interest expense |
0.92 | %(i) | 0.96 | % | 0.94 | % | 0.87 | % | 0.84 | % | 0.89 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net investment income |
6.25 | %(i) | 6.40 | % | 6.12 | % | 6.04 | % | 6.29 | % | 6.68 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Supplemental Data |
| |||||||||||||||||||||||||||
| Net assets, end of period (000) |
$ | 605,240 | $ | 641,220 | $ | 742,204 | $ | 780,810 | $ | 709,236 | $ | 801,887 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Borrowings outstanding, end of period (000) |
$ | 262,000 | $ | 278,000 | $ | 338,000 | $ | 318,000 | $ | 190,000 | $ | 295,000 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Asset coverage, end of period per $1,000 of bank borrowings |
$ | 3,310 | $ | 3,308 | $ | 3,196 | $ | 3,455 | $ | 4,733 | $ | 3,719 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Portfolio turnover rate |
53 | % | 62 | % | 59 | % | 55 | % | 41 | % | 54 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (a) | Consolidated Financial Highlights through November 30, 2017. |
| (b) | Per share operating performance amounts have been adjusted to reflect a one-for-three reverse stock split effective after the close of trading on November 15, 2016 for the shareholders of record on November 15, 2016. |
| (c) | Based on average shares outstanding. |
| (d) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (e) | Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices. |
| (f) | Aggregate total return. |
| (g) | Includes payment received from an affiliate, which had no impact on the Fund’s total return. |
| (h) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| Period from 03/01/19 to 12/31/19 |
Year Ended August 31, | Year Ended February 29, 2016 |
Year Ended February 28, 2015 |
|||||||||||||||||||||||||
| 2019 | 2018 | 2017 | ||||||||||||||||||||||||||
| Investments in underlying funds |
0.03 | % | — | % | — | % | 0.02 | % | 0.01 | % | — | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (i) | Annualized. |
| (j) | Audit costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses and total expenses after fees waived and/or reimbursed would have been 2.23%. |
See notes to financial statements.
| 84 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| FRA | ||||||||||||||||||||||||||||
| Period from 09/01/19 to 12/31/19 |
Year Ended August 31, | |||||||||||||||||||||||||||
| 2019 | 2018 (a) | 2017 (a) | 2016 (a) | 2015 (a) | ||||||||||||||||||||||||
| Net asset value, beginning of period |
$ | 14.49 | $ | 14.92 | $ | 14.93 | $ | 14.78 | $ | 14.91 | $ | 15.38 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net investment income(b) |
0.25 | 0.84 | 0.79 | 0.76 | 0.76 | 0.81 | ||||||||||||||||||||||
| Net realized and unrealized gain (loss) |
0.19 | (0.40 | ) | (0.06 | ) | 0.20 | (0.14 | ) | (0.47 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net increase from investment operations |
0.44 | 0.44 | 0.73 | 0.96 | 0.62 | 0.34 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Distributions from net investment income(c) |
(0.38 | ) | (0.87 | ) | (0.74 | ) | (0.81 | ) | (0.75 | ) | (0.81 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net asset value, end of period |
$ | 14.55 | $ | 14.49 | $ | 14.92 | $ | 14.93 | $ | 14.78 | $ | 14.91 | (d) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Market price, end of period |
$ | 13.44 | $ | 12.46 | $ | 13.80 | $ | 14.10 | $ | 13.70 | $ | 12.94 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Return(e) |
||||||||||||||||||||||||||||
| Based on net asset value |
3.41 | %(f) | 3.94 | % | 5.28 | % | 6.93 | % | 5.00 | % | 2.88 | %(d) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Based on market price |
11.08 | %(f) | (3.37 | )% | 3.11 | % | 8.95 | % | 12.14 | % | (3.71 | )% | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Ratios to Average Net Assets(g) |
||||||||||||||||||||||||||||
| Total expenses |
2.20 | %(h)(i) | 2.45 | % | 2.23 | % | 1.88 | % | 1.54 | % | 1.56 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total expenses after fees waived and/or reimbursed |
2.20 | %(h)(i) | 2.45 | % | 2.22 | % | 1.88 | % | 1.54 | % | 1.56 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total expenses after fees waived and/or reimbursed and excluding interest expense |
1.19 | %(h) | 1.16 | % | 1.20 | % | 1.21 | % | 1.14 | % | 1.19 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net investment income |
5.26 | %(h) | 5.74 | % | 5.27 | % | 5.08 | % | 5.27 | % | 5.39 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Supplemental Data |
||||||||||||||||||||||||||||
| Net assets, end of period (000) |
$ | 522,545 | $ | 526,447 | $ | 555,370 | $ | 555,972 | $ | 550,271 | $ | 555,104 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Borrowings outstanding, end of period (000) |
$ | 214,000 | $ | 204,000 | $ | 233,000 | $ | 237,000 | $ | 225,000 | $ | 196,000 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Asset coverage, end of period per $1,000 of bank borrowings |
$ | 3,442 | $ | 3,582 | $ | 3,385 | $ | 3,346 | $ | 3,446 | $ | 3,832 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Portfolio turnover rate |
16 | % | 53 | % | 57 | % | 64 | % | 48 | % | 43 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (a) | Consolidated Financial Highlights through November 30, 2017. |
| (b) | Based on average shares outstanding. |
| (c) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (d) | For financial reporting purposes, the market value of certain investments were adjusted as of report date. Accordingly, the net asset value per share and total return performance presented herein are different than the information previously published on August 31, 2015. |
| (e) | Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices. |
| (f) | Aggregate total return. |
| (g) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| Period from 09/01/19 to 12/31/19 |
Year Ended August 31, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Investments in underlying funds 0.04% |
0.04 | % | 0.03 | % | 0.01 | % | — | % | — | % | — | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (h) | Annualized. |
| (i) | Audit costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses and total expenses after fees waived and/or reimbursed would have been 2.23%. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS | 85 |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| BLW | ||||||||||||||||||||||||||||
| Period from 09/01/19 to 12/31/19 |
Year Ended August 31, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 (a) | ||||||||||||||||||||||||
| Net asset value, beginning of period |
$ | 17.03 | $ | 16.71 | $ | 17.02 | $ | 16.84 | $ | 17.04 | $ | 18.09 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net investment income(b) |
0.31 | 0.94 | 0.95 | 1.01 | 1.32 | 1.16 | ||||||||||||||||||||||
| Net realized and unrealized gain (loss) |
0.18 | 0.33 | (0.31 | ) | 0.44 | (0.22 | ) | (0.92 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net increase from investment operations |
0.49 | 1.27 | 0.64 | 1.45 | 1.10 | 0.24 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Distributions from net investment income(c) |
(0.47 | ) | (0.95 | ) | (0.95 | ) | (1.27 | ) | (1.30 | ) | (1.29 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net asset value, end of period |
$ | 17.05 | $ | 17.03 | $ | 16.71 | $ | 17.02 | $ | 16.84 | $ | 17.04 | (d) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Market price, end of period |
$ | 16.39 | $ | 15.44 | $ | 15.06 | $ | 15.99 | $ | 15.74 | $ | 14.60 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Return(e) |
||||||||||||||||||||||||||||
| Based on net asset value |
3.11 | %(f) | 8.77 | % | 4.42 | % | 9.62 | % | 7.78 | % | 2.23 | %(d) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Based on market price |
9.32 | %(f) | 9.41 | % | 0.18 | % | 10.18 | % | 17.59 | % | (5.74 | )% | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Ratios to Average Net Assets(g) |
||||||||||||||||||||||||||||
| Total expenses |
1.64 | %(h)(i) | 1.81 | % | 1.73 | % | 1.45 | % | 1.21 | % | 1.15 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total expenses after fees waived and/or reimbursed |
1.64 | %(h)(i) | 1.81 | % | 1.73 | % | 1.45 | % | 1.21 | % | 1.15 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total expenses after fees waived and/or reimbursed and excluding interest expense |
0.89 | %(h) | 0.84 | % | 0.89 | % | 0.89 | % | 0.89 | % | 0.92 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net investment income |
5.32 | %(h) | 5.69 | % | 5.60 | % | 6.00 | % | 8.04 | % | 6.65 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Supplemental Data |
||||||||||||||||||||||||||||
| Net assets, end of period (000) |
$ | 611,068 | $ | 610,251 | $ | 612,048 | $ | 629,728 | $ | 623,219 | $ | 630,388 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Borrowings outstanding, end of period (000) |
$ | 213,399 | $ | 202,539 | $ | 234,622 | $ | 252,280 | $ | 263,445 | $ | 264,036 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Portfolio turnover rate |
14 | % | 50 | % | 50 | % | 55 | % | 54 | % | 47 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (a) | Consolidated Financial Highlights. |
| (b) | Based on average shares outstanding. |
| (c) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (d) | For financial reporting purposes, the market value of certain investments were adjusted as of report date. Accordingly, the net asset value per share and total return performance presented herein are different than the information previously published on August 31, 2015. |
| (e) | Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices. |
| (f) | Aggregate total return. |
| (g) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| Period from 09/01/19 to 12/31/19 |
Year Ended August 31, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Investments in underlying funds |
0.02 | % | 0.02 | % | — | % | — | % | — | % | — | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (h) | Annualized. |
| (i) | Audit costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses and total expenses after fees waived and/or reimbursed would have been 1.66%. |
See notes to financial statements.
| 86 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| 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 “Funds”, or individually as a “Fund”:
| Fund Name | Herein Referred To As | Organized | Diversification Classification | |||
| BlackRock Debt Strategies Fund, Inc. |
DSU | Maryland | Diversified | |||
| BlackRock Floating Rate Income Strategies Fund, Inc. |
FRA | Maryland | Diversified | |||
| BlackRock Limited Duration Income Trust |
BLW | Delaware | Diversified |
The Boards of Directors and Boards of Trustees of the Funds are collectively referred to throughout this report as the “Board of Directors” or the “Board,” and the directors/trustees thereof are collectively referred to throughout this report as “Directors”. The Funds determine and make available for publication the net asset values (“NAVs”) of their Common Shares on a daily basis.
On September 5, 2019, the Board approved a change in the fiscal year-end of DSU, FRA and BLW, effective as of December 31 from February 28 for DSU and from August 31 for FRA and BLW to December 31.
The Funds, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, are included in a complex of non-index fixed-income mutual funds and all BlackRock-advised closed-end funds referred to as the BlackRock Fixed-Income Complex.
Basis of Consolidation: The accompanying consolidated financial statements of DSU and FRA include the account of DSU Subsidiary, LLC (the “Taxable Subsidiary”) and FRA Subsidiary, LLC (the “Taxable Subsidiary”). As of period end, the Taxable Subsidiary, which was wholly-owned by DSU and FRA, was dissolved. The Taxable Subsidiary enabled DSU and FRA to hold an investment in an operating partnership and satisfy Regulated Investment Company (“RIC”) tax requirements. Income earned and gains realized on the investment held by the Taxable Subsidiary were taxable to such subsidiary. There was no tax provision required for income or realized gains during the period.
| 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 Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:
Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are executed. Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Funds are informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, a portion of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, and payment-in-kind interest are recognized on an accrual basis.
Foreign Currency Translation: Each Fund’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.
Each Fund 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 Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.
Segregation and Collateralization: In cases where a Fund enters into certain investments (e.g., futures contracts, forward foreign currency exchange contracts, options written and swaps) or certain borrowings (e.g., reverse repurchase transactions) that would be treated as “senior securities” for 1940 Act purposes, a Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments or borrowings. Doing so allows the investment or borrowings to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Funds may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.
Distributions: Distributions paid by the Funds are recorded on the ex-dividend date. Subject to the Funds’ managed distribution plan, the Funds intend to make monthly cash distributions to shareholders, which may consist of net investment income, and net realized and unrealized gains on investments and/or return of capital.
The character of distributions is determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. The portion of distributions that exceeds a Fund’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a non-taxable return of capital. See Note 8, Income Tax Information, for the tax character of each Fund’s distributions paid during the period.
| NOTES TO FINANCIAL STATEMENTS | 87 |
Notes to Financial Statements (continued)
Deferred Compensation Plan: Under the Deferred Compensation Plan (the “Plan”) approved by the Board, the Directors who are not “interested persons” of the Funds, as defined in the 1940 Act (“Independent Directors”), may defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar amounts had been invested in common shares of certain funds in the BlackRock Fixed-Income Complex selected by the Independent Directors. This has the same economic effect for the Independent Directors as if the Independent Directors had invested the deferred amounts directly in certain funds in the BlackRock Fixed-Income Complex.
The Plan is not funded and obligations thereunder represent general unsecured claims against the general assets of each Fund, as applicable. Deferred compensation liabilities are included in the Directors’ and Officer’s fees payable in the Statements of Assets and Liabilities and will remain as a liability of the Funds until such amounts are distributed in accordance with the Plan.
Recent Accounting Standards: The Funds have adopted Financial Accounting Standards Board Accounting Standards Update 2017-08 to amend the amortization period for certain purchased callable debt securities held at a premium. Under the new standard, the Funds have changed the amortization period for the premium on certain purchased callable debt securities with non-contingent call features to the earliest call date. In accordance with the transition provisions of the standard, the Funds applied the amendments on a modified retrospective basis beginning with the fiscal period ended December 31, 2019. The adjusted cost basis of securities at February 28, 2019 for DSU and August 31, 2019 for FRA and BLW are as follows:
| DSU |
$ | 981,862,236 | ||
| FRA |
766,424,756 | |||
| BLW |
798,906,816 |
This change in accounting policy has been made to comply with the newly issued accounting standard and had no impact on accumulated earnings (loss) or the net asset value of the Funds.
Indemnifications: In the normal course of business, a Fund enters into contracts that contain a variety of representations that provide general indemnification. A Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against a Fund, which cannot be predicted with any certainty.
Other: Expenses directly related to a Fund are charged to that Fund. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods.
| 3. | INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS |
Investment Valuation Policies: The Funds’ investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the NYSE (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds determine the fair values of their financial instruments using various independent dealers or pricing services under policies approved by the Board. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.
Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each Fund’s assets and liabilities:
| • | Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price. |
| • | Fixed-income securities for which market quotations are readily available are generally valued using the last available bid prices or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more independent brokers or dealers as obtained from a third party pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but a fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), credit quality information, perceived market movements, news, and other relevant information. Certain fixed-income securities, including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value. |
Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Funds’ net assets. Each business day, the Funds use a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.
| • | Investments in open-end U.S. mutual funds are valued at NAV each business day. |
| • | Futures contracts traded on exchanges are valued at their last sale price. |
| • | Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE based on that day’s prevailing forward exchange rate for the underlying currencies. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. |
| 88 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
| • | Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that the prior day’s price no longer reflects the fair value of the option. OTC 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 Funds’ pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments. |
If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.
For investments in equity or debt issued by privately held companies or funds (“Private Company” or collectively, the “Private Companies”) and other Fair Valued Investments, the fair valuation approaches that are used by the Global Valuation Committee and third party pricing services utilize one or a combination of, but not limited to, the following inputs.
| Standard Inputs Generally Considered By Third Party Pricing Services | ||
| Market approach |
(i) recent market transactions, including subsequent rounds of financing, in the underlying investment or comparable issuers; (ii) recapitalizations and other transactions across the capital structure; and (iii) market multiples of comparable issuers. | |
| Income approach |
(i) future cash flows discounted to present and adjusted as appropriate for liquidity, credit, and/or market risks; (ii) quoted prices for similar investments or assets in active markets; and (iii) other risk factors, such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. | |
| Cost approach |
(i) audited or unaudited financial statements, investor communications and financial or operational metrics issued by the Private Company; (ii) changes in the valuation of relevant indices or publicly traded companies comparable to the Private Company; (iii) relevant news and other public sources; and (iv) known secondary market transactions in the Private Company’s interests and merger or acquisition activity in companies comparable to the Private Company. |
Investments in series of preferred stock issued by Private Companies are typically valued utilizing market approach in determining the enterprise value of the company. Such investments often contain rights and preferences that differ from other series of preferred and common stock of the same issuer. Valuation techniques such as an option pricing model (“OPM”), a probability weighted expected return model (“PWERM”) or a hybrid of those techniques are used in allocating enterprise value of the company, as deemed appropriate under the circumstances. The use of OPM and PWERM techniques involve a determination of the exit scenarios of the investment in order to appropriately allocate the enterprise value of the company among the various parts of its capital structure.
The Private Companies are not subject to the public company disclosure, timing, and reporting standards as other investments held by a Fund. Typically, the most recently available information by a Private Company is as of a date that is earlier than the date a Fund is calculating its NAV. This factor may result in a difference between the value of the investment and the price a Fund could receive upon the sale of the investment.
Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:
| • | Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that each Fund has the ability to access |
| • | Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs) |
| • | Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Global Valuation Committee’s assumptions used in determining the fair value of investments and derivative financial instruments) |
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by Private Companies. There may not be a secondary market, and/or there are a limited number of investors. The categorization of a value determined for investments and
| NOTES TO FINANCIAL STATEMENTS | 89 |
Notes to Financial Statements (continued)
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.
As of December 31, 2019, certain investments of BLW were valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.
| 4. | SECURITIES AND OTHER INVESTMENTS |
Asset-Backed and Mortgage-Backed Securities: Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, a fund may subsequently have to reinvest the proceeds at lower interest rates. If a fund has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.
For mortgage pass-through securities (the “Mortgage Assets”) there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury.
Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.
Collateralized Debt Obligations: Collateralized debt obligations (“CDOs”), including collateralized bond obligations (“CBOs”) and collateralized loan obligations (“CLOs”), are types of asset-backed securities. A CDO is an entity that is backed by a diversified pool of debt securities (CBOs) or syndicated bank loans (CLOs). The cash flows of the CDO can be split into multiple segments, called “tranches,” which will vary in risk profile and yield. The riskiest segment is the subordinated or “equity” tranche. This tranche bears the greatest risk of defaults from the underlying assets in the CDO and serves to protect the other, more senior, tranches from default in all but the most severe circumstances. Since it is shielded from defaults by the more junior tranches, a “senior” tranche will typically have higher credit ratings and lower yields than their underlying securities, and often receive investment grade ratings from one or more of the nationally recognized rating agencies. Despite the protection from the more junior tranches, senior tranches can experience substantial losses due to actual defaults, increased sensitivity to future defaults and the disappearance of one or more protecting tranches as a result of changes in the credit profile of the underlying pool of assets.
Multiple Class Pass-Through Securities: Multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities, may be issued by Ginnie Mae, U.S. Government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through securities Mortgage Assets. The payments on these are used to make payments on the CMOs or multiple pass-through securities. Multiple class pass-through securities represent direct ownership interests in the Mortgage Assets. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, a fund’s initial investment in the IOs may not fully recoup.
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 the 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. These securities generally are rated below that of the issuing company’s senior debt securities and are freely callable at the issuer’s option.
| 90 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
Preferred Stocks: Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well), but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.
Warrants: Warrants entitle a fund to purchase a specified number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date of the warrants, if any. If the price of the underlying stock does not rise above the strike price before the warrant expires, the warrant generally expires without any value and a fund will lose any amount it paid for the warrant. Thus, investments in warrants may involve more risk than investments in common stock. Warrants may trade in the same markets as their underlying stock; however, the price of the warrant does not necessarily move with the price of the underlying stock.
Floating Rate Loan Interests: Floating rate loan interests are typically issued to companies (the “borrower”) by banks, other financial institutions, or privately and publicly offered corporations (the “lender”). Floating rate loan interests are generally non-investment grade, often involve borrowers whose financial condition is troubled or uncertain and companies that are highly leveraged or in bankruptcy proceedings. In addition, transactions in floating rate loan interests may settle on a delayed basis, which may result in proceeds from the sale not being readily available for a fund to make additional investments or meet its redemption obligations. Floating rate loan interests may include fully funded term loans or revolving lines of credit. Floating rate loan interests are typically senior in the corporate capital structure of the borrower. Floating rate loan interests generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. Since the rates reset only periodically, changes in prevailing interest rates (and particularly sudden and significant changes) can be expected to cause some fluctuations in the NAV of a fund to the extent that it invests in floating rate loan interests. The base lending rates are generally the lending rate offered by one or more European banks, such as the London Interbank Offered Rate (“LIBOR”), the prime rate offered by one or more U.S. banks or the certificate of deposit rate. Floating rate loan interests may involve foreign borrowers, and investments may be denominated in foreign currencies. These investments are treated as investments in debt securities for purposes of a fund’s investment policies.
When a fund 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 fund may receive a commitment fee based on the undrawn portion of the underlying line of credit amount of a floating rate loan interest. Facility and commitment fees are typically amortized to income over the term of the loan or term of the commitment, respectively. Consent and amendment fees are recorded to income as earned. Prepayment penalty fees, which may be received by a fund upon the prepayment of a floating rate loan interest by a borrower, are recorded as realized gains. A fund 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 fund 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 fund having a contractual relationship only with the lender, not with the borrower. A fund 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 fund 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 fund may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, a fund assumes the credit risk of both the borrower and the lender that is selling the Participation. A fund’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 fund 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 fund having a direct contractual relationship with the borrower, and a fund may enforce compliance by the borrower with the terms of the loan agreement.
In connection with floating rate loan interests, certain funds may also enter into unfunded floating rate loan interests (“commitments”). In connection with these commitments, a fund earns a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is included in interest income in the Statements of Operations, is recognized ratably over the commitment period. Unfunded floating rate loan interests are marked-to-market daily, and any unrealized appreciation (depreciation) is included in the Statements of Assets and Liabilities and Statements of Operations. As of period end, the funds had the following unfunded floating rate loan interests:
| Fund Name | Borrower | Par | Commitment Amount |
Value | Unrealized Appreciation/ (Depreciation) |
|||||||||||||
| DSU |
BCPE Empire Holdings, Inc. | $ | 209,732 | $ | 209,732 | $ | 210,126 | $ | 394 | |||||||||
| Bleriot US Bidco Inc. | 204,156 | 202,114 | 205,942 | 3,828 | ||||||||||||||
| Connect Finco Sarl | 6,589,665 | 6,466,292 | 6,616,419 | 150,127 | ||||||||||||||
| McDermott Technology Americas Inc | 478,224 | 476,887 | 487,310 | 10,423 | ||||||||||||||
| MED ParentCo LP | 298,335 | 295,351 | 297,869 | 2,518 | ||||||||||||||
| FRA |
BCPE Empire Holdings, Inc. | 183,126 | 183,126 | 183,470 | 344 | |||||||||||||
| Bleriot US Bidco Inc. | 177,286 | 175,514 | 178,838 | 3,324 | ||||||||||||||
| Connect Finco Sarl | 5,732,045 | 5,620,958 | 5,755,317 | 134,359 | ||||||||||||||
| McDermott Technology Americas Inc | 418,903 | 417,755 | 426,862 | 9,107 | ||||||||||||||
| MED ParentCo LP | 259,962 | 257,362 | 259,556 | 2,194 | ||||||||||||||
| NOTES TO FINANCIAL STATEMENTS | 91 |
Notes to Financial Statements (continued)
| Fund Name | Borrower | Par | Commitment Amount |
Value | Unrealized Appreciation/ (Depreciation) |
|||||||||||||
| BLW |
BCPE Empire Holdings, Inc. | $ | 64,320 | $ | 64,320 | $ | 64,441 | $ | 121 | |||||||||
| Bleriot US Bidco Inc. | 61,926 | 61,307 | 62,468 | 1,161 | ||||||||||||||
| Connect Finco Sarl | 2,137,252 | 2,096,279 | 2,145,929 | 49,650 | ||||||||||||||
| McDermott Technology Americas Inc | 161,692 | 161,169 | 164,764 | 3,595 | ||||||||||||||
| MED ParentCo LP | 89,717 | 88,819 | 89,577 | 758 | ||||||||||||||
Forward Commitments, When-Issued and Delayed Delivery Securities: Certain funds 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 fund 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 fund may be required to pay more at settlement than the security is worth. In addition, a fund is not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, a fund 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 fund’s maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions.
Reverse Repurchase Agreements: Reverse repurchase agreements are agreements with qualified third party broker dealers in which a fund sells securities to a bank or broker-dealer and agrees to repurchase the same securities at a mutually agreed upon date and price. A fund receives cash from the sale to use for other investment purposes. During the term of the reverse repurchase agreement, a fund 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 fund 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 fund suffers a loss on its investment of the transaction proceeds from a reverse repurchase agreement, a fund would still be required to pay the full repurchase price. Further, a fund remains subject to the risk that the market value of the securities repurchased declines below the repurchase price. In such cases, a fund would be required to return a portion of the cash received from the transaction or provide additional securities to the counterparty.
Cash received in exchange for securities delivered plus accrued interest due to the counterparty is recorded as a liability in the Statements of Assets and Liabilities at face value including accrued interest. Due to the short-term nature of the reverse repurchase agreements, face value approximates fair value. Interest payments made by a fund 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 fund may receive a fee for the use of the security by the counterparty, which may result in interest income to a fund.
For the period ended December 31, 2019, the average amount of reverse repurchase agreements outstanding and the daily weighted average interest rate for BLW was $204,014,862 and 2.29%, respectively.
Reverse repurchase transactions are entered into by a fund under Master Repurchase Agreements (each, an “MRA”), which permit a fund, 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 fund. With reverse repurchase transactions typically a fund and counterparty under an MRA are permitted to sell, re-pledge, or use the collateral associated with the transaction. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Pursuant to the terms of the MRA, a fund receives or posts securities and cash as collateral with a market value in excess of the repurchase price to be paid or received by a fund upon the maturity of the transaction. Upon a bankruptcy or insolvency of the MRA counterparty, a fund 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 BLW’s open reverse repurchase agreements by counterparty which are subject to offset under an MRA on a net basis:
| Counterparty | Reverse Repurchase Agreements |
Fair Value of Non-cash Collateral Pledged Including Accrued Interest (a) |
Cash Collateral Pledged/Received |
Net Amount (b) |
||||||||||||
| Barclays Capital, Inc. |
$ | 46,755,864 | $ | (46,755,864 | ) | $ | — | $ | — | |||||||
| BNP Paribas S.A. |
64,013,091 | (64,013,091 | ) | — | — | |||||||||||
| Cantor Fitzgerald & Co. |
7,384,512 | (7,384,512 | ) | — | — | |||||||||||
| Citigroup Global Markets, Inc. |
13,649,839 | (13,649,839 | ) | — | — | |||||||||||
| Credit Suisse Securities (USA) LLC |
604,029 | (604,029 | ) | — | — | |||||||||||
| Goldman Sachs & Co LLC |
5,974,034 | (5,974,034 | ) | — | — | |||||||||||
| HSBC Securities (USA), Inc. |
16,618,325 | (16,492,721 | ) | — | 125,604 | |||||||||||
| J.P. Morgan Securities LLC |
2,176,490 | (2,176,490 | ) | — | — | |||||||||||
| RBC Capital Markets, LLC |
49,637,845 | (49,637,845 | ) | — | — | |||||||||||
| UBS Ltd. |
6,585,417 | (6,585,417 | ) | — | — | |||||||||||
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| $ | 213,399,446 | $ | (213,273,842 | ) | $ | — | $ | 125,604 | ||||||||
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| (a) | Net collateral, including accrued interest, with a value of $241,943,885 has been pledged/received in connection with open reverse repurchase agreements. Excess of net collateral pledged to the individual counterparty is not shown for financial reporting purposes. |
| (b) | Net amount represents the net amount payable due to the counterparty in the event of default. |
| 92 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
In the event the counterparty of securities under an MRA files for bankruptcy or becomes insolvent, a fund’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 fund’s obligation to repurchase the securities.
| 5. | DERIVATIVE FINANCIAL INSTRUMENTS |
The Funds engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Funds and/or to manage their exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedules of Investments. These contracts may be transacted on an exchange or OTC.
Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk) and changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).
Futures contracts are agreements between the Funds 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 Funds are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts in the Statements of Assets and Liabilities.
Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited, if any, are shown as cash pledged for futures contracts in the Statements of Assets and Liabilities. Pursuant to the contract, the Funds agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statements of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.
Forward Foreign Currency Exchange Contracts: Forward foreign currency exchange contracts are entered into to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk).
A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the Funds 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, and such value may exceed the amount(s) reflected in the Statements of Assets and Liabilities. Cash amounts pledged for forward foreign currency exchange contracts are considered restricted and are included in cash pledged as collateral for OTC derivatives in the Statements of Assets and Liabilities.
Options: Certain Funds purchase and write call and put options to increase or decrease their exposure to the risks of underlying instruments, including equity risk, interest rate risk and/or commodity price risk and/or, in the case of options written, to generate gains from options premiums.
A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised) the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period.
Premiums paid on options purchased and premiums received on options written, as well as the daily fluctuation in market value, are included in investments at value – unaffiliated and options written at value, respectively, in the Statements of Assets and Liabilities. When an instrument is purchased or sold through the exercise of an option, the premium is offset against the cost or proceeds of the underlying instrument. When an option expires, a realized gain or loss is recorded in the Statements of Operations to the extent of the premiums received or paid. When an option is closed or sold, a gain or loss is recorded in the Statements of Operations to the extent the cost of the closing transaction exceeds the premiums received or paid. When the Funds 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 Funds write a put option, cash is segregated in an amount sufficient to cover the obligation. These amounts, which are considered restricted, are included in cash pledged as collateral for options written in the Statements of Assets and Liabilities.
| • | Swaptions — Certain Funds purchase and write options on swaps (“swaptions”) primarily to preserve a return or spread on a particular investment or portion of the Funds’ 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 Funds 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. |
| NOTES TO FINANCIAL STATEMENTS | 93 |
Notes to Financial Statements (continued)
In purchasing and writing options, the Funds 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 Funds purchasing or selling a security when they otherwise would not, or at a price different from the current market value.
Swaps: Swap contracts are entered into to manage exposure to issuers, markets and securities. Such contracts are agreements between the Funds 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 Funds’ 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 Funds’ counterparty on the swap agreement becomes the CCP. The Funds are required to interface with the CCP through the broker. Upon entering into a centrally cleared swap, the Funds are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited is shown as cash pledged for centrally cleared swaps in the Statements of Assets and Liabilities. Amounts pledged, which are considered restricted cash, are included in cash pledged for centrally cleared swaps in the Statements of Assets and Liabilities. Pursuant to the contract, the Funds agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and shown as variation margin receivable (or payable) on centrally cleared swaps in the Statements of Assets and Liabilities. Payments received from (paid to) the counterparty, including at termination, are recorded as realized gains (losses) in the Statements of Operations.
| • | Credit default swaps — Credit default swaps are entered into to manage exposure to the market or certain sectors of the market, to reduce risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which a fund is not otherwise exposed (credit risk). |
The Funds 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 Funds 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 Funds 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 — Total return swaps are entered into to obtain exposure to a security or market without owning such security or investing directly in such market or to exchange the risk/return of one security or market (e.g., fixed-income) with another security or market (e.g., equity or commodity prices) (equity risk, commodity price risk and/or interest rate risk). |
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 (distributions plus capital gains/losses) of an underlying instrument, or basket of underlying instruments, in exchange for fixed or floating rate interest payments. If the total return of the instrument or index underlying the transaction exceeds or falls short of the offsetting fixed or floating interest rate obligation, the Funds receive payment from or make a payment to the counterparty.
| • | Interest rate swaps — Interest rate swaps are entered into 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.
| • | Inflation swaps — Inflation swaps are entered into to gain or reduce exposure to inflation (inflation risk). In an inflation swap, one party makes fixed interest payments on a notional principal amount in exchange for another party’s variable payments based on an inflation index, such as the Consumer Price Index. |
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 Funds 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 Fund 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 Fund 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
| 94 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events.
Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty.
Cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, is reported separately in the Statements of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Funds, 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 Funds. Any additional required collateral is delivered to/pledged by the Funds on the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. A Fund generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Funds from their counterparties are not fully collateralized, they bear the risk of loss from counterparty non-performance. Likewise, to the extent the Funds 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 Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statements of Assets and Liabilities.
| 6. | INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Investment Advisory: Each Fund entered into an Investment Advisory Agreement with the Manager, the Funds’ investment adviser and an indirect, wholly-owned subsidiary of BlackRock, Inc. (“BlackRock”), to provide investment advisory and administrative services. The Manager is responsible for the management of each Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of each Fund.
For such services, DSU and FRA pay the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of each Fund’s net assets, plus the proceeds of any debt securities or outstanding borrowings used for leverage:
| DSU | FRA | |||||||
| Investment advisory fees |
0.55 | % | 0.75 | % | ||||
For purposes of calculating these fees, “net assets” means the total assets of each Fund minus the sum of its accrued liabilities.
For such services, BLW pays the Manager a monthly fee at an annual rate equal to 0.55% of the average weekly value of the Fund’s managed assets, plus the proceeds of any debt securities or outstanding borrowings used for leverage. For purposes of calculating this fee, “managed assets” mean the total assets of the Fund minus the sum of its accrued liabilities (other than the aggregate indebtedness constituting financial leverage).
With respect to DSU and BLW, effective November 21, 2019, the Manager entered into separate sub-advisory agreements with BlackRock International Limited (“BIL”) an affiliate of the Manager. With respect to BLW, effective November 21, 2019, the Manager also entered into a separate sub-advisory agreement with BlackRock (Singapore) Limited (“BRS”) an affiliate of the Manager. The Manager pays BIL and, with respect to BLW, BRS for services they provide for that portion of each Fund for which BIL and, with respect to BLW, BRS acts as sub-adviser, a monthly fee that is equal to a percentage of the investment advisory fees paid by each Fund to the Manager.
Distribution Fees: FRA had entered into a Distribution Agreement with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager, to provide for distribution of FRA common shares on a reasonable best efforts basis through an equity shelf offering (a “Shelf Offering”) (the “Distribution Agreement”); however, as of December 31, 2019, FRA is no longer actively engaged in a Shelf Offering and has no effective registration statement or current prospectus and the Distribution Agreement with FRA has been terminated. Pursuant to the Distribution Agreement, FRA compensated BRIL with respect to sales of common shares at a commission rate of 1.00% of the gross proceeds of the sale of FRA’s common shares and a portion of such commission was re-allowed to broker-dealers engaged by BRIL. The commissions retained by BRIL during the period ended December 31, 2019 amounted to $0 since no sales of FRA’s common shares were made prior to termination of the Distribution Agreement.
Expense Waivers and Reimbursements: With respect to each Fund, the Manager contractually agreed to waive its investment advisory fees by the amount of investment advisory fees each Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”) through June 30, 2021. Prior to December 1, 2019, this waiver and/or reimbursement was voluntary. These amounts are included in fees waived and/or reimbursed by the Manager in the Statements of Operations. For the period ended December 31, 2019, the amounts waived were as follows:
| DSU | FRA | BLW | ||||||||||||||||||||||
| Period from 03/01/19 to 12/31/19 |
Year Ended 02/28/19 |
Period from 09/01/19 to 12/31/19 |
Year Ended 08/31/19 |
Period from 09/01/19 to 12/31/19 |
Year Ended 08/31/19 |
|||||||||||||||||||
| Amounts waived |
$ | 965 | $ | 2,535 | $ | 300 | $ | 1,255 | $ | 1,339 | $ | 5,603 | ||||||||||||
| NOTES TO FINANCIAL STATEMENTS | 95 |
Notes to Financial Statements (continued)
The Manager contractually agreed to waive its investment advisory fee with respect to any portion of each Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through June 30, 2021. The agreement can be renewed for annual periods thereafter, and may be terminated on 90 days’ notice, each subject to approval by a majority of the Funds’ Independent Directors. These amounts are included in fees waived and/or reimbursed by the Manager in the Statements of Operations. The amounts waived were as follows:
| DSU | FRA | |||||||||||||||
| Period from 03/01/19 to 12/31/19 |
Year Ended 02/28/19 |
Period from 09/01/19 to 12/31/19 |
Year Ended 08/31/19 |
|||||||||||||
| Amounts waived |
$ | 199 | $ | — | $ | — | $ | 473 | ||||||||
Directors and Officers: Certain directors and/or officers of the Funds are directors and/or officers of BlackRock or its affiliates. The Funds reimburse the Manager for a portion of the compensation paid to the Funds’ Chief Compliance Officer, which is included in Directors and Officer in the Statements of Operations.
Other Transactions: The Funds 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 directors. For the period ended December 31, 2019, the purchase and sale transactions and any net realized gains (losses) with affiliated funds in compliance with Rule 17a-7 under the 1940 Act were as follows:
| Purchases | Sales | Net Realized Gain | ||||||||||
| DSU |
$ | 1,559,119 | $ | — | $ | — | ||||||
| 7. | PURCHASES AND SALES |
For the periods ended December 31, 2019, purchases and sales of investments, including paydowns and excluding short-term securities, were as follows:
| DSU | FRA | BLW | ||||||||||
| Purchases |
$ | 474,695,498 | $ | 117,287,363 | $ | 119,582,282 | ||||||
| Sales |
546,322,006 | 134,968,500 | 110,811,608 | |||||||||
| 8. | INCOME TAX INFORMATION |
It is each Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.
Each Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on FRA, BLW and DSU’s U.S. federal tax returns generally remains open, for FRA and BLW, each of the four years ended August 31, 2019 and period ended December 31, 2019 and for DSU, each of the four years ended February 28, 2019 and period ended December 31, 2019. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.
Management has analyzed tax laws and regulations and their application to the Funds as of December 31, 2019, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.
The tax character of distributions paid was as follows:
| DSU | FRA | BLW | ||||||||||||||
| Ordinary income |
12/31/2019 | $ | 37,103,506 | $ | 13,875,793 | $ | 16,909,431 | |||||||||
| 8/31/2019 | — | 32,025,983 | 34,575,364 | |||||||||||||
| 2/28/2019 | 44,243,908 | — | — | |||||||||||||
| 8/31/2018 | — | 27,514,809 | 35,259,837 | |||||||||||||
| 2/28/2018 | 49,464,126 | — | — | |||||||||||||
| Return of Capital |
12/31/2019 | 1,264,429 | — | — | ||||||||||||
| 8/31/2019 | — | — | — | |||||||||||||
| 2/28/2019 | — | — | — | |||||||||||||
| 8/31/2018 | — | — | — | |||||||||||||
| 2/28/2018 | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| 12/31/2019 | $ | 38,367,935 | $ | 13,875,793 | $ | 16,909,431 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| 8/31/2019 | $ | — | $ | 32,025,983 | $ | 34,575,364 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| 2/28/2019 | $ | 44,243,908 | $ | — | $ | — | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| 8/31/2018 | $ | — | $ | 27,514,809 | $ | 35,259,837 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| 2/28/2018 | $ | 49,464,126 | $ | — | $ | — | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| 96 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
As of period end the tax components of accumulated loss were as follows:
| DSU | FRA | BLW | ||||||||||
| Non-expiring Capital loss carryforwards(a) |
$ | (71,050,350 | ) | $ | (29,632,724 | ) | $ | (38,457,929 | ) | |||
| Net unrealized gains (losses)(b) |
(19,831,822 | ) | (6,996,788 | ) | 13,146,766 | |||||||
| Qualified late-year losses(c) |
(741,129 | ) | (118,076 | ) | — | |||||||
|
|
|
|
|
|
|
|||||||
| $ | (91,623,301 | ) | $ | (36,747,588 | ) | $ | (25,311,163 | ) | ||||
|
|
|
|
|
|
|
|||||||
| (a) | Amounts available to offset future realized capital gains. |
| (b) | The differences between book-basis and tax-basis net unrealized gains (losses) were attributable primarily to the tax deferral of losses on wash sales and straddles, the accrual of income on securities in default, the classification of investments, the realization for tax purposes of unrealized gains/losses on certain futures and foreign currency contracts, the timing and recognition of partnership income, the timing of distributions, amortization methods for premiums on fixed income securities, the accounting for swap agreements and the deferral of compensation to directors. |
| (c) | The Fund has elected to defer certain qualified late-year losses and recognize such losses in the next taxable year. |
As of December 31, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
| DSU | FRA | BLW | ||||||||||
| Tax cost |
$ | 895,095,317 | $ | 747,470,163 | $ | 805,517,520 | ||||||
|
|
|
|
|
|
|
|||||||
| Gross unrealized appreciation |
$ | 13,807,907 | $ | 5,590,122 | $ | 31,399,414 | ||||||
| Gross unrealized depreciation |
(29,671,478 | ) | (10,560,514 | ) | (15,276,491 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net unrealized appreciation (depreciation) |
$ | (15,863,571 | ) | $ | (4,970,392 | ) | $ | 16,122,923 | ||||
|
|
|
|
|
|
|
|||||||
| 9. | BANK BORROWINGS |
DSU and FRA are 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 DSU and FRA. As of period end, DSU and FRA have not received any notice to terminate. DSU and FRA have granted a security interest in substantially all of its assets to SSB.
The SSB Agreement allows for the following maximum commitment amounts:
| Commitment Amounts |
||||
| DSU |
$ | 340,000,000 | ||
| FRA |
274,000,000 | |||
Advances will be made by SSB to DSU and FRA, at DSU’s and FRA’s option of (a) the higher of (i) 0.80% above the Fed Funds rate and (ii) 0.80% above Overnight LIBOR or (b) 0.80% above 7-day, 30-day, 60-day or 90-day LIBOR. Overnight LIBOR and LIBOR rates are subject to a 0% floor.
In addition, DSU and FRA paid a commitment fee (based on the daily unused portion of the commitments). The fees associated with each of the agreements are included in the Statements of Operations as borrowing costs, if any. Advances to DSU and FRA as of period end, if any, are shown in the Statements of Assets and Liabilities as bank borrowings payable. Based on the short-term nature of the borrowings under the line of credit and the variable interest rate, the carrying amount of the borrowings approximates fair value.
DSU and FRA may not declare dividends or make other distributions on shares or purchase any such shares if, at the time of the declaration, distribution or purchase, asset coverage with respect to the outstanding short-term borrowings is less than 300%.
For the period ended December 31, 2019, the average amount of bank borrowings and the daily weighted average interest rates for DSU and FRA for loans under the revolving credit agreements were as follows:
| Average Amount |
Daily Weighted Average Interest Rate |
|||||||
| DSU |
$ | 264,316,994 | 3.03 | % | ||||
| FRA |
202,762,295 | 2.66 | ||||||
| 10. | PRINCIPAL RISKS |
In the normal course of business, certain Funds invest in securities or other instruments and may enter into certain transactions, and such activities subject each Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations.
| NOTES TO FINANCIAL STATEMENTS | 97 |
Notes to Financial Statements (continued)
Each Fund 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 Fund to reinvest in lower yielding securities. Each Fund may also be exposed to reinvestment risk, which is the risk that income from each Fund’s portfolio will decline if each Fund 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.
Each Fund may invest without limitation in illiquid or less liquid investments or investments in which no secondary market is readily available or which are otherwise illiquid, including private placement securities. A Fund may not be able to readily dispose of such investments at prices that approximate those at which a Fund could sell such investments if they were more widely traded and, as a result of such illiquidity, a Fund may have to sell other investments or engage in borrowing transactions if necessary to raise funds to meet its obligations. Limited liquidity can also affect the market price of investments, thereby adversely affecting a Fund’s net asset value and ability to make dividend distributions. Privately issued debt securities are often of below investment grade quality, frequently are unrated and present many of the same risks as investing in below investment grade public debt securities.
Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. A Fund may invest in illiquid investments. An illiquid investment is any investment that a Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. A Fund may experience difficulty in selling illiquid investments in a timely manner at the price that they believe the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause each Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of a Fund may lose value, regardless of the individual results of the securities and other instruments in which a Fund invests.
The price a Fund could receive upon the sale of any particular portfolio investment may differ from a Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation technique or a price provided by an independent pricing service. Changes to significant unobservable inputs and assumptions (i.e., publicly traded company multiples, growth rate, time to exit) due to the lack of observable inputs may significantly impact the resulting fair value and therefore a Fund’s results of operations. As a result, the price received upon the sale of an investment may be less than the value ascribed by a Fund, and a Fund could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. A Fund’s ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third party service providers.
Counterparty Credit Risk: The Funds 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 Funds 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 Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ 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 Funds.
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 Fund’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 Fund.
For OTC options purchased, each Fund 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 Funds should the counterparty fail to perform under the contracts. Options written by the Funds do not typically give rise to counterparty credit risk, as options written generally obligate the Funds, and not the counterparty, to perform. The Funds may be exposed to counterparty credit risk with respect to options written to the extent each Fund deposits collateral with its counterparty to a written option.
With exchange-traded options purchased and futures and centrally cleared swaps, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.
Concentration Risk: Certain Funds may invest in securities that are rated below investment grade quality (sometimes called “junk bonds”), which are predominantly speculative, have greater credit risk and generally are less liquid than, and have more volatile prices than, higher quality securities.
Certain Funds 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 Funds may be subject to a greater risk of rising interest rates due to the current period of historically low rates.
| 98 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
| 11. | CAPITAL SHARE TRANSACTIONS |
DSU is authorized to issue 400 million shares, all of which were initially classified as Common Shares. FRA is authorized to issue 200 million shares, all of which were initially classified as Common Shares. BLW is authorized to issue an unlimited number of shares, all of which were initially classified as Common Shares. The par value for DSU’s, FRA’s and BLW’s shares is $0.10, $0.10 and $0.001, respectively. Each Board is authorized, however, to reclassify any unissued Common Shares to Preferred Shares without the approval of Common Shareholders.
Open Market Share Repurchase Program: Each Fund participates in an open market share repurchase program (the “Repurchase Program”). From December 1, 2018 through November 30, 2019, each Fund was permitted to repurchase up to 5% of its outstanding common shares under the Repurchase Program, based on common shares outstanding as of the close of business on November 30, 2018, subject to certain conditions. From December 1, 2019 through November 30, 2020, each Fund may repurchase up to 5% of its outstanding common shares under the Repurchase Program, based on common shares outstanding as of the close of business on November 30, 2019, subject to certain conditions. There is no assurance that the Funds will purchase shares in any particular amounts.
The total cost of the shares repurchased is reflected in the Funds’ Statements of Changes in Net Assets. For the periods shown, shares repurchased and cost, including transaction costs were as follows:
| DSU | FRA | BLW | ||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
| Period Ended December 31, 2019 |
686,397 | $ | 7,398,251 | 420,202 | $ | 5,346,886 | — | $ | — | |||||||||||||||
| Year Ended August 31, 2019 |
— | — | 907,235 | 11,500,788 | 803,959 | 11,648,172 | ||||||||||||||||||
| Year Ended August 31, 2018 |
— | — | — | — | 367,238 | 5,481,140 | ||||||||||||||||||
| Year Ended February 28, 2019 |
173,552 | 1,913,158 | — | — | — | — | ||||||||||||||||||
| Year Ended February 28, 2018 |
2,707,359 | 31,452,392 | — | — | — | — | ||||||||||||||||||
Discount Management Program: DSU’s three-year discount management program (the “Program”) is expected to end in 2020. Under the Program, the Fund intends to offer to repurchase its common shares based on three 3-month measurement periods if the Fund’s common shares trade at an average daily discount to net asset value (“NAV”) of more than 7.5% during a measurement period (the “discount trigger”). There is no guarantee that shareholders will be able to sell all of the shares that they desire to sell in any particular repurchase that is executed.
The discount trigger was met for the first measurement period, which began on December 1, 2017 and ended on February 28, 2018. As a result, the Fund conducted a tender offer for 10% of its outstanding shares of common stock. The tender offer expired on April 17, 2018 and the number of shares tendered was 26,225,806 (45% of the Fund’s then outstanding shares). The Fund purchased 5,879,192 common shares (10% of the Fund’s then outstanding shares) on a pro rata basis at a purchase price of $12.4068 per share, for a total amount of $72,941,959.
The discount trigger was met for the second measurement period, which began on December 1, 2018 and ended on February 28, 2019. As a result, the Fund conducted a tender offer for 5% of its outstanding shares of common stock. The tender offer expired on April 15, 2019 and the number of shares tendered was 21,792,955 (41% of the Fund’s then outstanding shares). The Fund purchased 2,636,959 common shares (5% of the Fund’s then outstanding shares) on a pro rata basis at a purchase price of $11.9854 per share, for a total amount of $31,605,008.
The results of the third measurement period, and any action approved by the Board as a result, will be announced promptly after the end of the measurement period. There is no guarantee that shareholders will be able to sell all of the shares that they desire to sell in any particular repurchase that is executed.
| 12. | SUBSEQUENT EVENTS |
Management’s evaluation of the impact of all subsequent events on the Funds’ financial statements was completed through the date the financial statements were issued and the following items were noted:
| Common Dividend Per Share | ||||||||
| Paid (a) | Declared (b) | |||||||
| DSU |
$ | 0.0711 | $0.0711 | |||||
| FRA |
0.0788 | 0.0788 | ||||||
| BLW |
0.0981 | 0.0981 | ||||||
| (a) | Net investment income dividend paid on January 9, 2020 to shareholders of record on December 31, 2019. |
| (b) | Net investment income dividend declared on February 3, 2020, payable to shareholders of record on February 14, 2020. |
| NOTES TO FINANCIAL STATEMENTS | 99 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees/Directors of BlackRock Debt Strategies Fund, Inc., BlackRock Floating Rate Income Strategies Fund, Inc. and BlackRock Limited Duration Income Trust:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statements of assets and liabilities of BlackRock Debt Strategies Fund, Inc., BlackRock Floating Rate Income Strategies Fund, Inc. and BlackRock Limited Duration Income Trust (the “Funds”), including the schedules of investments, as of December 31, 2019, and the related statements of operations, cash flows, changes in net assets and the financial highlights for the periods indicated in the table below, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Funds as of December 31, 2019, and the results of their operations, their cash flows, changes in their net assets and the financial highlights for the periods indicated in the table below, in conformity with accounting principles generally accepted in the United States of America.
| Fund | Statements of Operations and Statements of Cash Flows |
Statements of Changes in Net Assets | Financial Highlights | |||
| BlackRock Debt Strategies Fund, Inc. |
For the period from March 1, 2019 through December 31, 2019 and for the year ended February 28, 2019 | For the period from March 1, 2019 through December 31, 2019 and for each of the two years in the period ended February 28, 2019. The presented statements of changes in net assets were consolidated through November 30, 2017. | For the period from March 1, 2019 through December 31, 2019 and for each of the five years in the period ended February 28, 2019. The presented financial highlights were consolidated through November 30, 2017. | |||
| BlackRock Floating Rate Income Strategies Fund, Inc. |
For the period from September 1, 2019 through December 31, 2019 and for the year ended August 31, 2019 |
For the period from September 1, 2019 through December 31, 2019 and for each of the two years in the period ended August 31, 2019. The presented statements of changes in net assets were consolidated through November 30, 2017. |
For the period from September 1, 2019 through December 31, 2019 and for each of the five years in the period ended August 31, 2019. The presented financial highlights were consolidated through November 30, 2017. | |||
| BlackRock Limited Duration Income Trust |
For the period from September 1, 2019 through December 31, 2019 and for the year ended August 31, 2019 |
For the period from September 1, 2019 through December 31, 2019 and for each of the two years in the period ended August 31, 2019 |
For the period from September 1, 2019 through December 31, 2019 and for each of the five years in the period ended August 31, 2019 |
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2019, by correspondence with the custodian, agent banks, and brokers; when replies were not received from agent banks or brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
Deloitte & Touche LLP
Boston, Massachusetts
February 25, 2020
We have served as the auditor of one or more BlackRock investment companies since 1992.
| 100 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Important Tax Information (unaudited)
During the period ended December 31, 2019, the following information is provided with respect to the ordinary income distributions paid:
| Payable Dates | DSU | FRA | BLW | |||||||||||
| Qualified Dividend Income for Individuals(a) |
March 2019 | 1.13 | % | — | % | — | % | |||||||
| April — December 2019 | 1.12 | — | — | |||||||||||
| September 2019 | — | — | 8.88 | |||||||||||
| October 2019 | — | — | 10.18 | |||||||||||
| November 2019 — January 2020 | — | — | 10.93 | |||||||||||
| Dividends Qualifying for the Dividends Received Deduction for Corporations(a) |
March — December 2019 | 0.66 | — | — | ||||||||||
| September 2019 — January 2020 | — | — | 7.15 | |||||||||||
| Interest-Related Dividends for Non-U.S. Residents(b) |
March 2019 | 82.10 | — | — | ||||||||||
| April — December 2019 | 74.01 | — | — | |||||||||||
| September 2019 | — | 74.13 | 57.22 | |||||||||||
| October 2019 | — | 74.65 | 64.88 | |||||||||||
| November 2019 — January 2020 | — | 74.72 | 69.33 | |||||||||||
| Federal Obligation Interest(c) |
September 2019 — January 2020 | — | — | 1.02 | ||||||||||
| (a) | The Fund hereby designates the percentage indicated above or the maximum amount allowable by law. |
| (b) | Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations. |
| (c) | 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. |
| TAX INFORMATION | 101 |
| Disclosure of Sub-Advisory Agreement | BlackRock Debt Strategies Fund, Inc. |
The Board of Directors (the “Board,” and the members of which are referred to as “Board Members”) of BlackRock Debt Strategies Fund, Inc. (the “Fund”), met in person on November 14-15, 2019 (the “November Meeting”) to consider the initial approval of the sub-advisory agreement (the “Sub-Advisory Agreement”) among the Fund, BlackRock Advisors, LLC (the “Manager”), the Fund’s investment advisor, and BlackRock International Limited. The Sub-Advisory Agreement was substantially similar to the sub-advisory agreements previously approved with respect to certain other portfolios in the BlackRock Fixed-Income Complex.
On the date of the November Meeting, the Board consisted of eleven individuals, nine of whom were not “interested persons” of the Fund as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). Pursuant to the 1940 Act, the Board is required to consider the initial approval of the Sub-Advisory Agreement.
At the November Meeting, the Board reviewed materials relating to its consideration of the proposed Sub-Advisory Agreement. The Fund’s investment advisory agreement with the Manager was most recently approved by the Board at in-person meetings on May 1, 2019 (the “May Meeting”) and June 5-6, 2019 (the “June Meeting”). A discussion of the basis for the Board’s approval of this agreement at the May and June Meetings is included in the Fund’s semi-annual shareholder report for the fiscal period ended August 31, 2019. The factors considered by the Board at the November Meeting in connection with approval of the proposed Sub-Advisory Agreement were substantially the same as the factors considered at the May and June Meetings.
Following discussion, all the Board Members present at the November Meeting, including all the Independent Board Members present, approved the Sub-Advisory Agreement among the Fund, the Manager and BlackRock International Limited for a two-year term beginning on the effective date of the Sub-Advisory Agreement. Based upon its evaluation of all of the aforementioned factors in their totality, the Board, including the Independent Board Members, was satisfied that the terms of the Sub-Advisory Agreement were fair and reasonable and in the best interest of the Fund and its shareholders. In arriving at its decision to approve the Sub-Advisory Agreement, the 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.
| 102 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Disclosure of Sub-Advisory Agreements | BlackRock Limited Duration Income Trust |
The Board of Trustees (the “Board,” and the members of which are referred to as “Board Members”) of BlackRock Limited Duration Income Trust (the “Fund”), met in person on November 14-15, 2019 (the “November Meeting”) to consider the initial approval of the sub-advisory agreements (the “Sub-Advisory Agreements”) among the Fund, BlackRock Advisors, LLC (the “Manager”), the Fund’s investment advisor, (a) BlackRock International Limited and (b) BlackRock (Singapore) Limited. The Sub-Advisory Agreements were substantially similar to the sub-advisory agreements previously approved with respect to certain other portfolios in the BlackRock Fixed-Income Complex.
On the date of the November Meeting, the Board consisted of eleven individuals, nine of whom were not “interested persons” of the Fund as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). Pursuant to the 1940 Act, the Board is required to consider the initial approval of the Sub-Advisory Agreements.
At the November Meeting, the Board reviewed materials relating to its consideration of the proposed Sub-Advisory Agreements. The Fund’s investment advisory agreement with the Manager was most recently approved by the Board at in-person meetings on May 1, 2019 (the “May Meeting”) and June 5-6, 2019 (the “June Meeting”). A discussion of the basis for the Board’s approval of this agreement at the May and June Meetings is included in the Fund’s annual shareholder report for the fiscal year ended August 31, 2019. The factors considered by the Board at the November Meeting in connection with approval of the proposed Sub-Advisory Agreements were substantially the same as the factors considered at the May and June Meetings.
Following discussion, all the Board Members present at the November Meeting, including all the Independent Board Members present, approved the Sub-Advisory Agreements among the Fund, the Manager, (a) BlackRock International Limited and (b) BlackRock (Singapore) Limited for a two-year term beginning on the effective date of the Sub-Advisory Agreements. Based upon its evaluation of all of the aforementioned factors in their totality, the Board, including the Independent Board Members, was satisfied that the terms of the Sub-Advisory Agreements were fair and reasonable and in the best interest of the Fund and its shareholders. In arriving at its decision to approve the Sub-Advisory Agreements, the 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.
| DISCLOSURE OF SUB-ADVISORY AGREEMENTS | 103 |
Automatic Dividend Reinvestment Plan
Pursuant to each Fund’s Dividend Reinvestment Plan (the “Reinvestment Plan”), Common Shareholders are automatically enrolled to have all distributions of dividends and capital gains and other distributions reinvested by Computershare Trust Company, N.A. (the “Reinvestment Plan Agent”) in the respective Fund’s Common Shares pursuant to the Reinvestment Plan. Shareholders who do not participate in the Reinvestment Plan will receive all distributions in cash paid by check and mailed directly to the shareholders of record (or if the shares are held in street name or other nominee name, then to the nominee) by the Reinvestment Plan Agent, which serves as agent for the shareholders in administering the Reinvestment Plan.
After the Funds 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 Funds (“newly issued shares”) or (ii) by purchase of outstanding shares on the open market or on the Fund’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 Fund. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Reinvestment Plan Agent’s open-market purchases in connection with the reinvestment of all distributions. The automatic reinvestment of all distributions will not relieve participants of any U.S. federal, state or local income tax that may be payable on such dividends or distributions.
Each Fund reserves the right to amend or terminate the Reinvestment Plan. There is no direct service charge to participants in the Reinvestment Plan; however, each Fund reserves the right to amend the Reinvestment Plan to include a service charge payable by the participants. Participants that request a sale of shares are subject to a $2.50 sales fee and a $0.15 per share sold brokerage commission fee. All correspondence concerning the Reinvestment Plan should be directed to Computershare Trust Company, N. A. through the internet at computershare.com/blackrock, or in writing to Computershare, P. O. Box 505000, Louisville, KY 40233, Telephone: (800) 699-1236. Overnight correspondence should be directed to the Reinvestment Plan Agent at Computershare, 462 South 4th Street, Suite 1600, Louisville, KY 40202.
| 104 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Director and Officer Information
| Independent Directors (a) | ||||||||
| Name Year of Birth (b) |
Position(s) Held (Length of Service) (c) |
Principal Occupation(s) During Past Five Years | Number of BlackRock-Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen (d) |
Public Company and Other Investment Company Directorships Held During Past Five Years | ||||
| Richard E. Cavanagh 1946 |
Co-Chair of the Board and Director (Since 2007) |
Director, The Guardian Life Insurance Company of America since 1998; Board Chair, Volunteers of America (a not-for-profit organization) from 2015 to 2018 (board member since 2009); Director, Arch Chemicals (chemical and allied products) from 1999 to 2011; Trustee, Educational Testing Service from 1997 to 2009 and Chairman thereof from 2005 to 2009; Senior Advisor, The Fremont Group since 2008 and Director thereof since 1996; Faculty Member/Adjunct Lecturer, Harvard University since 2007 and Executive Dean from 1987 to 1995; President and Chief Executive Officer, The Conference Board, Inc. (global business research organization) from 1995 to 2007. | 86 RICs consisting of 110 Portfolios | None | ||||
| Karen P. Robards 1950 |
Co-Chair of the Board and Director (Since 2007) |
Principal of Robards & Company, LLC (consulting and private investing) since 1987; Co-founder and Director of the Cooke Center for Learning and Development (a not-for-profit organization) since 1987; Director of Enable Injections, LLC (medical devices) since 2019; Investment Banker at Morgan Stanley from 1976 to 1987. | 86 RICs consisting of 110 Portfolios | Greenhill & Co., Inc.; AtriCure, Inc. (medical devices) from 2000 until 2017 | ||||
| Michael J. Castellano 1946 |
Director (Since 2011) |
Chief Financial Officer of Lazard Group LLC from 2001 to 2011; Chief Financial Officer of Lazard Ltd from 2004 to 2011; Director, Support Our Aging Religious (non-profit) from 2009 to June 2015 and since 2017; Director, National Advisory Board of Church Management at Villanova University since 2010; Trustee, Domestic Church Media Foundation since 2012; Director, CircleBlack Inc. (financial technology company) since 2015. | 86 RICs consisting of 110 Portfolios | None | ||||
| Cynthia L. Egan 1955 |
Director (Since 2016) |
Advisor, U.S. Department of the Treasury from 2014 to 2015; President, Retirement Plan Services, for T. Rowe Price Group, Inc. from 2007 to 2012; executive positions within Fidelity Investments from 1989 to 2007. | 86 RICs consisting of 110 Portfolios | Unum (insurance); The Hanover Insurance Group (insurance); Envestnet (investment platform) from 2013 until 2016 | ||||
| Frank J. Fabozzi (d) 1948 |
Director |
Editor of The Journal of Portfolio Management since 1986; Professor of Finance, EDHEC Business School (France) since 2011; Visiting Professor, Princeton University for the 2013 to 2014 academic year and Spring 2017 semester; Professor in the Practice of Finance, Yale University School of Management from 1994 to 2011 and currently a Teaching Fellow in Yale’s Executive Programs; Board Member, BlackRock Equity-Liquidity Funds from 2014 to 2016; affiliated professor Karlsruhe Institute of Technology from 2008 to 2011. | 87 RICs consisting of 111 Portfolios | None | ||||
| Henry Gabbay 1947 |
Director (Since 2019) |
Board Member, BlackRock Equity-Bond Board from 2007 to 2018; Board Member, BlackRock Equity-Liquidity and BlackRock Closed-End Fund Boards from 2007 through 2014; Consultant, BlackRock, Inc. from 2007 to 2008; Managing Director, BlackRock, Inc. from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly, BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006. | 86 RICs consisting of 110 Portfolios | None | ||||
| DIRECTOR AND OFFICER INFORMATION | 105 |
Director and Officer Information (continued)
| Independent Directors (a) (continued) | ||||||||
| Name Year of Birth (b) |
Position(s) Held (Length of Service) (c) |
Principal Occupation(s) During Past Five Years | Number of BlackRock-Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen (d) |
Public Company and Other Investment Company Directorships Held During Past Five Years | ||||
| R. Glenn Hubbard 1958 |
Director (Since 2007) |
Dean, Columbia Business School from 2004 to 2019; Faculty member, Columbia Business School since 1988. | 86 RICs consisting of 110 Portfolios | ADP (data and information services); Metropolitan Life Insurance Company (insurance); KKR Financial Corporation (finance) from 2004 until 2014 | ||||
| W. Carl Kester (d) 1951 |
Director (Since 2007) |
George Fisher Baker Jr. Professor of Business Administration, Harvard Business School since 2008; Deputy Dean for Academic Affairs from 2006 to 2010; Chairman of the Finance Unit, from 2005 to 2006; Senior Associate Dean and Chairman of the MBA Program from 1999 to 2005; Member of the faculty of Harvard Business School since 1981. | 87 RICs consisting of 111 Portfolios | None | ||||
| Catherine A. Lynch (d) 1961 |
Director (Since 2016) |
Chief Executive Officer, Chief Investment Officer and various other positions, National Railroad Retirement Investment Trust from 2003 to 2016; Associate Vice President for Treasury Management, The George Washington University from 1999 to 2003; Assistant Treasurer, Episcopal Church of America from 1995 to 1999. | 87 RICs consisting of 111 Portfolios | None | ||||
| Interested Directors (e) | ||||||||
| Name Year of Birth (b) |
Position(s) Held (Length of Service) (c) |
Principal Occupation(s) During Past Five Years | Number of BlackRock-Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen (d) |
Public Company and Other Investment Company Directorships Held During Past Five Years | ||||
| Robert Fairbairn 1965 |
Director (Since 2018) |
Vice Chairman of BlackRock, Inc. since 2019; Member of BlackRock’s Global Executive and Global Operating Committees; Co-Chair of BlackRock’s Human Capital Committee; Senior Managing Director of BlackRock, Inc. from 2010 to 2019; oversaw BlackRock’s Strategic Partner Program and Strategic Product Management Group from 2012 to 2019; Member of the Board of Managers of BlackRock Investments, LLC from 2011 to 2018; Global Head of BlackRock’s Retail and iShares® businesses from 2012 to 2016. | 123 RICs consisting of 287 Portfolios | None | ||||
| John M. Perlowski (d) 1964 |
Director (Since 2015); President and Chief Executive Officer (Since 2010) |
Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Accounting and Product Services since 2009; Advisory Director of Family Resource Network (charitable foundation) since 2009. | 124 RICs consisting of 288 Portfolios | None | ||||
| (a) The address of each Director is c/o BlackRock, Inc., 55 East 52nd Street, New York, New York 10055. | ||||||||
| (b) Each Independent Director holds office until his or her successor is duly elected and qualifies or until his or her earlier death, resignation, retirement or removal as provided by the Fund’s by-laws or charter or statute, or until December 31 of the year in which he or she turns 75. Directors who are “interested persons,” as defined in the Investment Company Act serve until their successor is duly elected and qualifies or until their earlier death, resignation, retirement or removal as provided by the Fund’s by-laws or statute, or until December 31 of the year in which they turn 72. The Board may determine to extend the terms of Independent Directors on a case-by-case basis, as appropriate. | ||||||||
| (c) Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. Certain Independent Directors first became members of the boards of other legacy MLIM or legacy BlackRock funds as follows: Richard E. Cavanagh, 1994; Frank J. Fabozzi, 1988; R. Glenn Hubbard, 2004; W. Carl Kester, 1995; and Karen P. Robards, 1998. Mr. Gabbay became a member of the boards of the open-end funds in the BlackRock Fixed-Income Complex in 2007. | ||||||||
| (d) Dr. Fabozzi, Dr. Kester, Ms. Lynch and Mr. Perlowski are also trustees of the BlackRock Credit Strategies Fund. | ||||||||
| (e) Mr. Fairbairn and Mr. Perlowski are both “interested persons,” as defined in the 1940 Act, of the Fund based on their positions with BlackRock, Inc. and its affiliates. Mr. Fairbairn and Mr. Perlowski are also board members of the BlackRock Multi-Asset Complex. | ||||||||
| 106 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Director and Officer Information (continued)
| Officers Who Are Not Directors (a) | ||||
| Name Year of Birth (b) |
Position(s) Held (Length of Service) |
Principal Occupation(s) During Past Five Years | ||
| Jonathan Diorio 1980 |
Vice President (Since 2015) |
Managing Director of BlackRock, Inc. since 2015; Director of BlackRock, Inc. from 2011 to 2015. | ||
| Neal J. Andrews 1966 |
Chief Financial Officer (Since 2007) |
Chief Financial Officer of the iShares® exchange traded funds since 2019; Managing Director of BlackRock, Inc. since 2006. | ||
| Jay M. Fife 1970 |
Treasurer (Since 2007) |
Managing Director of BlackRock, Inc. since 2007. | ||
| Charles Park 1967 |
Chief Compliance Officer (Since 2014) | Anti-Money Laundering Compliance Officer for certain BlackRock-advised Funds from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the BlackRock Multi-Asset Complex and the BlackRock Fixed-Income Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012. | ||
| Janey Ahn 1975 |
Secretary (Since 2012) |
Managing Director of BlackRock, Inc. since 2018; Director of BlackRock, Inc. from 2009 to 2017. | ||
| (a) The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, New York 10055. | ||||
| (b) Officers of the Fund serve at the pleasure of the Board. | ||||
Effective February 19, 2020, Henry Gabbay resigned as a Director of the Fund.
| (a) | For DSU and BLW only. |
| (b) | For BLW only. |
| DIRECTOR AND OFFICER INFORMATION | 107 |
Fund Certification
The Funds 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 Funds 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 Fund’s policy is to make monthly distributions to shareholders. In order to provide shareholders with a more stable level of dividend distributions, each Fund employs a managed distribution plan (the Plan”), the goal of which is to provide shareholders with consistent and predictable cash flows by setting distribution rates based on expected long-term returns of each Fund.
The distributions paid by the Funds for any particular month may be more or less than the amount of net investment income earned by the Funds during such month. Furthermore, the final tax characterization of distributions is determined after the year-end of the Fund and is reported in each Fund’s annual report to shareholders. Distributions can be characterized as ordinary income, capital gains and/or return of capital. The Fund’s taxable net investment income and net realized capital gains (“taxable income”) may not be sufficient to support the level of distributions paid. To the extent that distributions exceed the Fund’s current and accumulated earnings and profits, the excess may be treated as a non-taxable return of capital.
A return of capital is a return of a portion of an investor’s original investment. A return of capital is not expected to be taxable, but it reduces a shareholder’s tax basis in his or her shares, thus reducing any loss or increasing any gain on a subsequent disposition by the shareholder of his or her shares. It is possible that a substantial portion of the distributions paid during a calendar year may ultimately be classified as return of capital for U.S. federal income tax purposes when the final determination of the source and character of the distributions is made.
Such distributions, under certain circumstances, may exceed a Fund’s total return performance. When total distributions exceed total return performance for the period, the difference reduces the Fud’s total assets and net asset value per share (“NAV”) and, therefore, could have the effect of increasing the Fund’s expense ratio and reducing the amount of assets the Fund has available for long term investment.
General Information
The Funds do not make available copies of their Statement of Additional Information because the Funds’ shares are not continuously offered, which means that the Statement of Additional Information of each Fund has not been updated after completion of the respective Fund’s offerings and the information contained in its Statement of Additional Information may have become outdated.
During the period, there were no material changes in the Funds’ investment objectives or policies or to the Funds’ charters or by-laws that would delay or prevent a change of control of the Funds that were not approved by the shareholders or in the principal risk factors associated with investment in the Funds. There have been no changes in the persons who are primarily responsible for the day-to-day management of the Funds’ portfolios.
In accordance with Section 23(c) of the Investment Company Act of 1940, each Fund may from time to time purchase shares of its common stock in the open market or in private transactions.
Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding the Funds may be found on BlackRock’s website, which can be accessed at blackrock.com. Any reference to BlackRock’s website in this report is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website in this report.
Electronic Delivery
Shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual shareholder reports by enrolling in the electronic delivery program. Electronic copies of shareholder reports are available on BlackRock’s website.
To enroll in electronic delivery:
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial advisor. Please note that not all investment advisers, banks or brokerages may offer this service.
Householding
The Funds will mail only one copy of shareholder documents, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Funds at (800) 882-0052.
| 108 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Additional Information (continued)
Availability of Quarterly Schedule of Investments
The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Funds’ Forms N-PORT and N-Q are available on the SEC’s website at sec.gov. The Funds’ 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 Funds use to determine how to vote proxies relating to portfolio securities is available upon request and without charge (1) by calling (800) 882-0052; (2) at blackrock.com; and (3) on the SEC’s website at sec.gov.
Availability of Proxy Voting Record
Information about how the Funds voted proxies relating to securities held in the Funds’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at blackrock.com or by calling (800) 882-0052 and (2) on the SEC’s website at sec.gov.
Availability of Fund Updates
BlackRock will update performance and certain other data for the Funds on a monthly basis on its website in the “Closed-end Funds” section of blackrock.com as well as certain other material information as necessary from time to time. Investors and others are advised to check the website for updated performance information and the release of other material information about the Funds. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website in this report.
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.
If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.
| ADDITIONAL INFORMATION | 109 |
Glossary of Terms Used in this Report
| 110 | 2019 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Want to know more?
blackrock.com | 877-275-1255 (1-877-ASK-1BLK)
This report is intended for current holders. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. The Funds 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.
CEFT-BK3-12/19-AR
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| Item 2 – | Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. During the period covered by this report, the code of ethics was amended to update certain information and to make other non-material changes. During the period covered by this report, there have been no waivers granted under the code of ethics. The registrant undertakes to provide a copy of the code of ethics to any person upon request, without charge, who calls 1-800-882-0052, option 4. |
| Item 3 – | Audit Committee Financial Expert – The registrant’s board of directors (the “board of directors”), has determined that (i) the registrant has the following audit committee financial experts serving on its audit committee and (ii) each audit committee financial expert is independent: |
Michael Castellano
Frank J. Fabozzi
Henry Gabbay
Catherine A. Lynch
Karen P. Robards
The registrant’s board of directors has determined that Karen P. Robards qualifies as an audit committee financial expert pursuant to Item 3(c)(4) of Form N-CSR.
Ms. Robards has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Ms. Robards has been President of Robards & Company, a financial advisory firm, since 1987. Ms. Robards was formerly an investment banker for more than 10 years where she was responsible for evaluating and assessing the performance of companies based on their financial results. Ms. Robards has over 30 years of experience analyzing financial statements. She also is a member of the audit committee of one publicly held company and a non-profit organization.
Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification. The designation or identification of a person as an audit committee financial expert does not affect the duties, obligations, or liability of any other member of the audit committee or board of directors.
| 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:
2
| (a) Audit Fees | (b) Audit-Related Fees1 | (c) Tax Fees2 | (d) All Other Fees | |||||||||||||
| Entity Name |
Current Fiscal Year End 12/31/193 |
Previous Fiscal Year End 8/31/19 |
Current Fiscal Year End 12/31/193 |
Previous Fiscal Year End 8/31/19 |
Current Fiscal Year End 12/31/193 |
Previous Fiscal Year End 8/31/19 |
Current Fiscal Year End 12/31/193 |
Previous Fiscal Year End 8/31/19 | ||||||||
| BlackRock Limited Duration Income Trust | $65,718 | $72,420 | $0 | $0 | $8,450 | $16,900 | $0 | $0 | ||||||||
The following table presents fees billed by D&T that were required to be approved by the registrant’s audit committee (the “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock Advisors, LLC (“Investment Adviser” or “BlackRock”) and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund (“Affiliated Service Providers”):
| Current Fiscal Year End 12/31/193 | Previous Fiscal Year End 8/31/19 | |||
| (b) Audit-Related Fees1 |
$0 | $0 | ||
| (c) Tax Fees2 |
$0 | $0 | ||
| (d) All Other Fees4 |
$2,050,500 | $2,050,500 |
1 The nature of the services includes assurance and related services reasonably related to the performance of the audit or review of financial statements not included in Audit Fees, including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters, out-of-pocket expenses and internal control reviews not required by regulators.
2 The nature of the services includes tax compliance and/or tax preparation, including services relating to the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews, taxable income and tax distribution calculations.
3 The registrant changed its fiscal year end from August 31 to December 31 effective December 31, 2019 whereby this fiscal year consists of the four months ended December 31, 2019.
4 Non-audit fees of $2,050,500 and $2,050,500 for the current fiscal year and previous fiscal year, respectively, were paid to the Fund’s principal accountant in their entirety by BlackRock, in connection with services provided to the Affiliated Service Providers of the Fund and of certain other funds sponsored and advised by BlackRock or its affiliates for a service organization review and an accounting research tool subscription. These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The Committee has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the Investment Adviser and Affiliated Service Providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are (a) consistent with the SEC’s auditor independence rules and (b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operations or financial reporting of the registrant will only be deemed pre-approved provided that any individual project does not exceed $10,000 attributable to the registrant or $50,000 per project. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels.
3
Any proposed services exceeding the pre-approved cost levels will require specific pre-approval by the Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. At this meeting, an analysis of such services is presented to the Committee for ratification. The Committee may delegate to the Committee Chairman the authority to approve the provision of and fees for any specific engagement of permitted non-audit services, including services exceeding pre-approved cost levels.
(e)(2) None of the services described in each of Items 4(b) through (d) were approved by the Committee pursuant to the de minimis exception in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable
(g) The aggregate non-audit fees, defined as the sum of the fees shown under “Audit-Related Fees,” “Tax Fees” and “All Other Fees,” paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Affiliated Service Providers were:
| Entity Name | Current Fiscal Year
End 12/31/191 |
Previous Fiscal Year
End 8/31/19 |
||||
| BlackRock Limited Duration Income Trust | $8,450 | $16,900 |
1The registrant changed its fiscal year end from August 31 to December 31 effective December 31, 2019 whereby this
fiscal year consists of the four months ended December 31, 2019.
Additionally, the amounts billed by D&T in connection with services provided to the Affiliated Service Providers of the Fund and of other funds sponsored or advised by BlackRock or its affiliates during the current and previous fiscal years for a service organization review and an accounting research tool subscription were:
| Current Fiscal Year End 12/31/191 |
Previous Fiscal Year End 8/31/19 | |
| $2,050,500 | $2,050,500 |
1 The registrant changed its fiscal year end from August 31 to December 31 effective
December 31, 2019 whereby this fiscal year consists of the four months ended December 31, 2019.
These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.
(h) The Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser, and the Affiliated Service Providers that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
| Item 5 – | Audit Committee of Listed Registrants |
| (a) | The following individuals are members of the registrant’s separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)): |
Michael Castellano
Frank J. Fabozzi
Henry Gabbay
Catherine A. Lynch
Karen P. Robards
(b) Not Applicable
4
| 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.
| Item 7 – | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – The board of directors has delegated the voting of proxies for the Fund’s portfolio securities to the Investment Adviser pursuant to the Investment Adviser’s proxy voting guidelines. Under these guidelines, the Investment Adviser will vote proxies related to Fund securities in the best interests of the Fund and its stockholders. From time to time, a vote may present a conflict between the interests of the Fund’s stockholders, on the one hand, and those of the Investment Adviser, or any affiliated person of the Fund or the Investment Adviser, on the other. In such event, provided that the Investment Adviser’s Equity Investment Policy Oversight Committee, or a sub-committee thereof (the “Oversight Committee”) is aware of the real or potential conflict or material non-routine matter and if the Oversight Committee does not reasonably believe it is able to follow its general voting guidelines (or if the particular proxy matter is not addressed in the guidelines) and vote impartially, the Oversight Committee may retain an independent fiduciary to advise the Oversight Committee on how to vote or to cast votes on behalf of the Investment Adviser’s clients. If the Investment Adviser determines not to retain an independent fiduciary, or does not desire to follow the advice of such independent fiduciary, the Oversight Committee shall determine how to vote the proxy after consulting with the Investment Adviser’s Portfolio Management Group and/or the Investment Adviser’s Legal and Compliance Department and concluding that the vote cast is in its client’s best interest notwithstanding the conflict. A copy of the Fund’s Proxy Voting Policy and Procedures are attached as Exhibit 99.PROXYPOL. Information on how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, (i) at www.blackrock.com and (ii) on the SEC’s website at http://www.sec.gov. |
| Item 8 – | Portfolio Managers of Closed-End Management Investment Companies |
(a)(1) As of the date of filing this Report:
The registrant is managed by a team of investment professionals comprised of James E. Keenan, Managing Director of BlackRock, Thomas Musmanno, Managing Director at BlackRock, Mitchell Garfin, Managing Director at BlackRock, Scott MacLellan, Director at BlackRock and David Delbos, Managing Director at BlackRock. Mr. Keenan is responsible for setting the registrant’s
5
overall investment strategy and overseeing the registrant’s investment process and performance. Messrs. Musmanno, Garfin, MacLellan, and Delbos are jointly responsible for the day-to-day management of the registrant’s portfolio, which includes setting the registrant’s overall investment strategy, overseeing the management of the registrant and/or selection of its investments. Messrs. Keenan, Musmanno and Garfin have been members of the registrant’s portfolio management team since 2007, 2012, and 2016, respectively. Messrs. MacLellan and Delbos have been members of the registrant’s portfolio management ream since 2018.
| Portfolio Manager | Biography | |
| James E. Keenan | Managing Director of BlackRock since 2008 and Head of the Leveraged Finance Portfolio team; Director of BlackRock from 2006 to 2007. | |
| Thomas Musmanno | Managing Director of BlackRock since 2010; Director of BlackRock from 2006 to 2009. | |
| Mitchell Garfin | Managing Director of BlackRock, Inc. since 2009; Director of BlackRock, Inc. from 2005 to 2008. | |
| Scott MacLellan | Director of BlackRock, Inc. since 2010; Vice President of BlackRock, Inc. from 2007 to 2009. | |
| David Delbos | Managing Director of BlackRock, Inc. since 2012; Director of BlackRock, Inc. from 2007 to 2011; Vice President of BlackRock, Inc. from 2005 to 2006. |
(a)(2) As of December 31, 2019:
|
(ii) Number of Other Accounts Managed and Assets by Account Type |
(iii) Number of Other Accounts and Assets for Which Advisory Fee is Performance-Based | |||||||||||
| (i) Name of Portfolio Manager |
Other Registered Investment Companies |
Other Pooled Investment Vehicles |
Other Accounts |
Other Registered Investment Companies |
Other Pooled Investment Vehicles |
Other Accounts | ||||||
|
James E. Keenan |
19 | 31 | 15 | 0 | 10 | 13 | ||||||
| $31.52 Billion | $15.26 Billion | $7.21 Billion | $0 | $8.78 Billion | $7.16 Billion | |||||||
|
Thomas Musmanno |
12 | 12 | 133 | 0 | 0 | 123 | ||||||
| $17.56 Billion | $4.21 Billion | $43.69 Billion | $0 | $0 | $37.69 Million | |||||||
|
Mitchell Garfin |
20 | 19 | 30 | 0 | 3 | 30 | ||||||
| $33.61 Billion | $12.57 Billion | $12.37 Billion | $0 | $6.31 Billion | $12.37 Billion | |||||||
|
Scott MacLellan |
12 | 12 | 131 | 0 | 0 | 124 | ||||||
| $17.56 Billion | $4.21 Billion | $53.32 Billion | $0 | $0 | $44.09 Million | |||||||
|
David Delbos |
20 | 12 | 30 | 0 | 3 | 29 | ||||||
| $30.58 Billion | $12.25 Billion | $12.29 Billion | $0 | $6.31 Billion | $12.27 Billion | |||||||
(iv) Portfolio Manager Potential Material Conflicts of Interest
6
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. Keenan, Musmanno, Garfin, MacLellan and Delbos 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. Keenan, Musmanno, Garfin, MacLellan and Delbos may therefore be entitled to receive a portion of any incentive fees earned on such accounts.
As a fiduciary, BlackRock owes a duty of loyalty to its clients and must treat each client fairly. When BlackRock purchases or sells securities for more than one account, the trades must be allocated in a manner consistent with its fiduciary duties. BlackRock attempts to allocate investments in a fair and equitable manner among client accounts, with no account receiving preferential treatment. To this end, BlackRock, Inc. has adopted policies that are intended to ensure reasonable efficiency in client transactions and provide BlackRock with sufficient flexibility to allocate investments in a manner that is consistent with the particular investment discipline and client base, as appropriate.
(a)(3) As of December 31, 2019:
Portfolio Manager Compensation Overview
The discussion below describes the portfolio managers’ compensation as of December 31, 2019.
7
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 | |
| James Keenan Mitchell Garfin David Delbos
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A combination of market-based indices (e.g., The Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Cap Index), certain customized indices and certain fund industry peer groups.
| |
| Thomas Musmanno Scott MacLellan |
A combination of market-based indices (e.g., Bank of America Merrill Lynch U.S. Corporate & Government Index, 1-3 Years), certain customized indices and certain fund industry peer groups.
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Distribution of Discretionary Incentive Compensation. Discretionary incentive compensation is distributed to portfolio managers in a combination of cash, deferred BlackRock, Inc. stock awards, and/or deferred cash awards that notionally track the return of certain BlackRock investment products.
Portfolio managers receive their annual discretionary incentive compensation in the form of cash. Portfolio managers whose total compensation is above a specified threshold also receive deferred BlackRock, Inc. stock awards annually as part of their discretionary incentive compensation. Paying a portion of discretionary incentive compensation in the form of deferred BlackRock, Inc. stock puts compensation earned by a portfolio manager for a given year “at risk” based on BlackRock’s ability to sustain and improve its performance over future periods. In some cases, additional deferred BlackRock, Inc. stock may be granted to certain key employees as part of a long-term incentive award to aid in retention, align interests with long-term shareholders and motivate performance. Deferred BlackRock, Inc. stock awards are generally granted in the form of BlackRock, Inc. restricted stock units that vest pursuant to the terms of the applicable plan and, once vested, settle in BlackRock, Inc. common stock. The portfolio managers of this Fund have deferred BlackRock, Inc. stock awards.
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For certain portfolio managers, a portion of the discretionary incentive compensation is also distributed in the form of deferred cash awards that notionally track the returns of select BlackRock investment products they manage, which provides direct alignment of portfolio manager discretionary incentive compensation with investment product results. Deferred cash awards vest ratably over a number of years and, once vested, settle in the form of cash. Only portfolio managers who manage specified products and whose total compensation is above a specified threshold are eligible to participate in the deferred cash award program.
Other Compensation Benefits. In addition to base salary and discretionary incentive compensation, portfolio managers may be eligible to receive or participate in one or more of the following:
Incentive Savings Plans — BlackRock, Inc. has created a variety of incentive savings plans in which BlackRock, Inc. employees are eligible to participate, including a 401(k) plan, the BlackRock Retirement Savings Plan (RSP), and the BlackRock Employee Stock Purchase Plan (ESPP). The employer contribution components of the RSP include a company match equal to 50% of the first 8% of eligible pay contributed to the plan capped at $5,000 per year, and a company retirement contribution equal to 3-5% of eligible compensation up to the Internal Revenue Service limit ($280,000 for 2019). The RSP offers a range of investment options, including registered investment companies and collective investment funds managed by the firm. BlackRock, Inc. contributions follow the investment direction set by participants for their own contributions or, absent participant investment direction, are invested into a target date fund that corresponds to, or is closest to, the year in which the participant attains age 65. The ESPP allows for investment in BlackRock, Inc. common stock at a 5% discount on the fair market value of the stock on the purchase date. Annual participation in the ESPP is limited to the purchase of 1,000 shares of common stock or a dollar value of $25,000 based on its fair market value on the purchase date. All of the eligible portfolio managers are eligible to participate in these plans.
(a)(4) Beneficial Ownership of Securities – As of December 31, 2019.
| Portfolio Manager | Dollar Range of Equity Securities of the Fund Beneficially Owned | |
| James E. Keenan | None | |
| Thomas Musmanno | $50,001-$100,000 | |
| Mitchell Garfin | $10,001-$50,000 | |
| Scott MacLellan | None | |
| David Delbos | None |
(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. |
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| Item 10 – | Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures. |
| Item 11 – | Controls and Procedures |
(a) – The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended.
(b) – There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
| Item 12 – | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies -- Not Applicable |
| Item 13 – | Exhibits attached hereto |
(a)(1) – Code of Ethics – See Item 2
(a)(2) – Certifications – Attached hereto
(a)(3) – Not Applicable
(a)(4) – Not Applicable
(b) – Certifications – Attached hereto
(c) – Notices to the registrant’s common shareholders in accordance with the order under Section 6(c) of the 1940 Act granting an exemption from Section 19(b) of the 1940 Act and Rule 19b-1 under the 1940 Act, dated May 9, 20091
1 The Fund has received exemptive relief from the Securities and Exchange Commission permitting it to make periodic distributions of long-term capital gains with respect to its outstanding common stock as frequently as twelve times each year, and as frequently as distributions are specified by or in accordance with the terms of its outstanding preferred stock. This relief is conditioned, in part, on an undertaking by the Fund to make the disclosures to the holders of the Fund’s common shares, in addition to the information required by Section 19(a) of the 1940 Act and Rule 19a-1 thereunder. The Fund is likewise obligated to file with the SEC the information contained in any such notice to shareholders and, in that regard, has attached hereto copies of each such notice made during the period.
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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 Limited Duration Income Trust | ||
| By: | /s/ John M. Perlowski | |
| John M. Perlowski | ||
| Chief Executive Officer (principal executive officer) of | ||
| BlackRock Limited Duration Income Trust | ||
| Date: March 6, 2020 | ||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ John M. Perlowski | |
| John M. Perlowski | ||
| Chief Executive Officer (principal executive officer) of | ||
| BlackRock Limited Duration Income Trust | ||
| Date: March 6, 2020 | ||
| By: | /s/ Neal J. Andrews | |
| Neal J. Andrews | ||
| Chief Financial Officer (principal financial officer) of | ||
| BlackRock Limited Duration Income Trust | ||
| Date: March 6, 2020 | ||
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