BLACKROCK FLOATING RATE INCOME TRUST

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: 811-21566

Name of Fund: BlackRock Floating Rate Income Trust (BGT)

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

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

        Rate 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: 10/31/2015

Date of reporting period: 10/31/2015


Item 1 – Report to Stockholders


OCTOBER 31, 2015

 

 

ANNUAL REPORT

 

    LOGO

 

BlackRock Credit Allocation Income Trust (BTZ)

BlackRock Floating Rate Income Trust (BGT)

BlackRock Multi-Sector Income Trust (BIT)

 

Not FDIC Insured • May Lose Value • No Bank Guarantee


Table of Contents     

 

     Page  

The Markets in Review

    3   

Annual Report:

 

Trust Summaries

    4   

The Benefits and Risks of Leveraging

    10   

Derivative Financial Instruments

    10   
Financial Statements:  

Schedules of Investments

    11   

Statements of Assets and Liabilities

    61   

Statements of Operations

    63   

Statements of Changes in Net Assets

    64   

Statements of Cash Flows

    66   

Financial Highlights

    67   

Notes to Financial Statements

    70   

Report of Independent Registered Public Accounting Firm

    83   

Important Tax Information

    83   

Disclosure of Investment Advisory Agreements and Sub-Advisory Agreement

    84   

Automatic Dividend Reinvestment Plan

    88   

Officers and Trustees

    89   

Additional Information

    92   

 

 

LOGO

 

                
2    ANNUAL REPORT    OCTOBER 31, 2015   


The Markets in Review

 

Dear Shareholder,

Diverging monetary policies and shifting economic outlooks across regions were the overarching themes driving financial markets during the 12-month period ended October 31, 2015. U.S. economic growth was picking up considerably toward the end of 2014, while the broader global economy showed signs of slowing. Investors favored the stability of U.S. assets despite expectations that the Federal Reserve (the “Fed”) would eventually be inclined to raise short-term interest rates, while international markets struggled even as the European Central Bank and the Bank of Japan eased monetary policy. Oil prices plummeted in late 2014 due to a global supply-and-demand imbalance, fueling a sell-off in energy-related assets and emerging markets. U.S. Treasury bonds benefited as their persistently low yields had become attractive as compared to the even lower yields on international sovereign debt.

Equity markets reversed in early 2015, with international markets outperforming the United States as global risks temporarily abated, and the U.S. economy hit a soft patch amid a harsh winter and a west coast port strike. High valuations took their toll on U.S. stocks, while bond yields fell to extreme lows. (Bond prices rise as yields fall.) In contrast, economic reports in Europe and Asia began to improve, and accommodative policies from central banks in those regions helped international equities rebound. Oil prices stabilized, providing some relief for emerging market stocks, although a stronger U.S. dollar posed another significant headwind for the asset class.

U.S. economic growth regained momentum in the second quarter, helping U.S. stocks resume an upward path; however, the improving data underscored the likelihood that the Fed would raise short-term rates before the end of 2015 and bond yields moved swiftly higher. The month of June brought a sharp, but temporary, sell-off across most asset classes as Greece’s long-brewing debt troubles came to an impasse. These concerns abated when the Greek parliament passed a series of austerity and reform measures in July. But the market’s calm was short-lived. Signs of weakness in China’s economy sparked extreme levels of volatility in Chinese equities despite policymakers’ attempts to stabilize the market.

Higher volatility spread through markets globally in the third quarter as further evidence of deceleration in China stoked worries about overall global growth. Weakening Chinese demand caused oil prices to slide once again and ignited another steep sell-off in emerging markets. Speculation as to whether the Fed would raise rates at its September meeting further fueled global volatility. Ultimately, the Fed postponed the rate hike, but this brought little relief in the markets as the central bank’s decision reinforced investors’ concerns about the state of the global economy. Stock markets finished the third quarter with the worst performance since 2011. High yield bonds also declined, while higher quality assets, including U.S. Treasury bonds, municipal bonds and investment grade credit benefited from investors seeking shelter amid global uncertainty.

The period ended with a strong October rally in risk assets. Given the recent scarcity of evidence of global growth, equity markets had become more reliant on central banks to drive performance. Although October brought generally soft economic data and lower growth estimates, global equities powered higher as China’s central bank provided more stimulus, the European Central Bank poised for more easing and soft U.S. data pushed back expectations for a Fed rate hike. Treasury bonds declined in October while all other asset classes benefited from investors’ increased risk appetite.

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

Sincerely,

 

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

 

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

 

Total Returns as of October 31, 2015  
    6-month     12-month  

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

    0.77     5.20

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

    (4.12     0.34   

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

    (6.44     (0.07

Emerging market equities
(MSCI Emerging Markets Index)

    (17.75     (14.53

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

    0.01        0.02   

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

    (0.02     3.57   

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

    (0.10     1.96   

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

    1.58        2.87   

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

    (3.38     (1.91
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.    

 

                
   THIS PAGE NOT PART OF YOUR FUND REPORT       3


Trust Summary as of October 31, 2015    BlackRock Credit Allocation Income Trust

 

Trust Overview

BlackRock Credit Allocation Income Trust’s (BTZ) (the “Trust”) investment objective is to provide current income, current gains and capital appreciation. The Trust seeks to achieve its investment objective by investing, under normal market conditions, at least 80% of its assets in credit-related securities, including, but not limited to, investment grade corporate bonds, high yield bonds (commonly referred to as “junk” bonds), bank loans, preferred securities or convertible bonds or derivatives with economic characteristics similar to these credit-related securities. The Trust may invest directly in such securities or synthetically through the use of derivatives.

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

 

Trust Information     

Symbol on New York Stock Exchange (“NYSE”)

  BTZ

Initial Offering Date

  December 27, 2006

Current Distribution Rate on Closing Market Price as of October 31, 2015 ($12.53)1

  7.71%

Current Monthly Distribution per Common Share2

  $0.0805

Current Annualized Distribution per Common Share2

  $0.9660

Economic Leverage as of October 31, 20153

  31%

 

  1   

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

 

  2   

The distribution rate is not constant and is subject to change. A portion of the distribution may be deemed a return of capital or net realized gain.

 

  3   

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

 

Performance and Portfolio Management Commentary

Returns for the 12 months ended October 31, 2015 were as follows:

 

    Returns Based On  
     Market Price     NAV3  

BTZ1

    (0.33 )%      0.48

Lipper Corporate BBB-Rated Debt Funds (Leveraged)2

    1.05        (0.28

 

  1   

All returns reflect reinvestment of dividends and/or distributions.

 

  2   

Average return.

 

  3  

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

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

What factors influenced performance?

 

 

The Trust’s performance was helped by its positions in lower-quality bonds, which outperformed higher-rated issues during the period. The Trust maintained an allocation to capital securities, which benefited performance. (Capital securities are dividend-paying securities that combine some features of both corporate bonds and preferred stocks, while generally providing higher yields to compensate for being less senior in the issuer’s capital structure.)

 

 

The Trust’s yield curve positioning, which was geared for a flattening of the curve between the 10- and 30-year segments, was beneficial given the outperformance of longer-term bonds. Security selection in the utilities sector also aided performance.

 

 

Throughout the year, swap spreads faced tremendous pressure and in October they turned negative, largely due to technical pressures. After years of building reserves, official institutions (particularly Asian and

   

Middle Eastern) started selling treasuries in July. With no new source of demand, dealers were forced to sell inventory which caused U.S. Treasuries to cheapen. Swaps broke down as a hedge versus other spread products (credit spreads widened while swaps tightened). This breakdown in credit hedge triggered unwinds and further tightening pressure. In addition, quarter end funding and uncertainty over a rate hike by the Federal Reserve added pressure in October as well. As a result, swaps had a negative impact on performance.

Describe recent portfolio activity.

 

 

During the 12-month period, the investment advisor became more cautious with regard to corporate bonds due to rising credit risk and an increase in activities that benefit stockholders over bond investors.

 

 

Believing the U.S. Federal Reserve would begin raising interest rates, the investment advisor decreased the Trust’s duration (interest-rate sensitivity) during the period, and the Trust remained positioned for a flattening of the yield curve (outperformance for longer-term bonds).

 

 

Additionally, the Trust reduced its allocation to the industrial sector due to rising new-issue supply, and it increased its weighting in the financials sector. Within financials, the investment advisor sought opportunities lower in the capital structure among subordinated and preferred securities.

Describe portfolio positioning at period end.

 

 

Within the industrials sector, the Trust was overweight in the communications, energy and transportation subsectors, and it was underweight in the technology, capital goods and consumer subsectors. The Trust was underweight in financials and neutral in utilities.

 

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

 

                
4    ANNUAL REPORT    OCTOBER 31, 2015   


     BlackRock Credit Allocation Income Trust

 

 

Market Price and Net Asset Value Per Share Summary

 

      10/31/15     

10/31/14

     Change      High      Low  

Market Price

   $ 12.53       $ 13.54         (7.46 )%     $ 13.65       $ 12.06   

Net Asset Value

   $ 14.33       $ 15.36         (6.71 )%     $ 15.41       $ 14.18   

 

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

 

LOGO

 

Overview of the Trust’s Total Investments
Portfolio Composition   10/31/15    

10/31/141

 

Corporate Bonds

    76     78

Preferred Securities

    19        16   

Asset-Backed Securities

    4        3   

Municipal Bonds

    1        1   

Foreign Agency Obligations

           1   

U.S. Treasury Obligations

           1   

Other

    2       3  

 

  1   

Information has been revised to conform to current year presentation.

 

  2   

Includes a less than 1% holding in each of the following investment types: Foreign Agency Obligations, Options Purchased, Options Written, U.S. Sponsored-Agency Securities and Short-Term Securities.

 

  3   

Includes a less than 1% holding in each of the following investment types: Options Purchased, Options Written, U.S. Sponsored-Agency Securities and Short-Term Securities.

 

Credit Quality Allocation4,5   10/31/15    

10/31/141

 

AAA/Aaa6

    1     2

AA/Aa

    2        2   

A

    19        17   

BBB/Baa

    48        45   

BB/Ba

    18        21   

B

    9        9   

CCC/Caa

    1        2   

N/R

    2        2   

 

  4   

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

 

  5   

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

 

  6   

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

 

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    5


Trust Summary as of October 31, 2015    BlackRock Floating Rate Income Trust

 

Trust Overview

BlackRock Floating Rate Income Trust’s (BGT) (the “Trust”) primary investment objective is to provide a high level of current income. The Trust’s secondary investment objective is to seek the preservation of capital. The Trust seeks to achieve its investment objectives by investing primarily, under normal conditions, at least 80% of its assets in floating and variable rate instruments of U.S. and non-U.S. issuers, including a substantial portion of its assets in global floating and variable rate securities including senior secured floating rate loans made to corporate and other business entities. Under normal market conditions, the Trust expects that the average effective duration of its portfolio will be no more than 1.5 years. The Trust may invest directly in such securities or synthetically through the use of derivatives.

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

 

Trust Information

Symbol on NYSE

   BGT

Initial Offering Date

   August 30, 2004

Current Distribution Rate on Closing Market Price as of October 31, 2015 ($12.77)1

   5.48%

Current Monthly Distribution per Common Share2

   $0.0583

Current Annualized Distribution per Common Share2

   $0.6996

Economic Leverage as of October 31, 20153

   24%

 

  1   

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

 

  2   

The distribution rate is not constant and is subject to change. A portion of the distribution may be deemed a return of capital or net realized gain.

 

  3   

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

 

Performance and Portfolio Management Commentary

 

Returns for the 12 months ended October 31, 2015 were as follows:

 

    Returns Based On  
     Market Price     NAV3  

BGT1

    3.08     3.54

Lipper Loan Participation Funds2

    (2.06     (0.65

 

  1   

All returns reflect reinvestment of dividends and/or distributions.

 

  2   

Average return.

 

  3  

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

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

What factors influenced performance?

 

 

After marginally declining in late 2014, the market for floating rate loan interests (i.e. bank loans) recovered to provide a modest positive return for the full 12-month period. Given the positive returns experienced, the Trust’s use of leverage added to performance for the period. The Trust’s loan holdings in the healthcare and technology sectors were among the top performers over the period, while exposure to collateralized loan obligations (“CLOs”) also added to returns.

 

 

During the period, oil prices experienced a significant decline and most commodity prices came under pressure as well. As a result, prices for the Trust’s holdings within the energy sector fell notably during the period and detracted from returns. The metals & mining sector, while a smaller

   

component of the market, declined as well. The electric segment, and in particular Texas Utilities, was also a detractor. Finally, the Trust’s modest position in equities was a negative contributor.

Describe recent portfolio activity.

 

 

Throughout the 12-month period, the Trust maintained its focus on the higher quality segments of the loan market in terms of loan structure, liquidity and overall credit quality. The Trust has concentrated its investments in strong companies with stable cash flows and high quality collateral, with the ability to meet interest obligations and ultimately return principal. From a sector perspective, the Trust added to names in the pharmaceuticals and health care sectors, where increased merger and acquisition activity has led to some attractive investment opportunities.

Describe portfolio positioning at period end.

 

 

At period end, the Trust held 93% of its total portfolio in bank loans, with the remainder primarily in corporate bonds and CLOs. The Trust continued to favor loans rated B where the investment advisor was comfortable with credit quality, in view of the incremental income they offered versus BB loans. Additionally, the Trust held a modest position in CCC-rated loans, with a focus on names that have shown consistent credit improvement. In general, the Trust maintained a bias toward more liquid loans, which have held up better during recent market volatility. Top portfolio holdings included Valeant Pharmaceuticals (pharmaceuticals), First Data (IT services), and Level 3 Communications (diversified telecommunication services).

 

 

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

 

                
6    ANNUAL REPORT    OCTOBER 31, 2015   


     BlackRock Floating Rate Income Trust

 

 

Market Price and Net Asset Value Per Share Summary                              

 

      10/31/15     

10/31/14

     Change      High      Low  

Market Price

   $ 12.77       $ 13.18         (3.11 )%     $ 13.73       $ 12.27   

Net Asset Value

   $ 14.18       $ 14.57         (2.68 )%     $ 14.69       $ 14.12   

 

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

 

LOGO

 

Overview of the Trust’s Total Investments
Portfolio Composition    10/31/15    

10/31/141

 

Floating Rate Loan Interests

     93     93

Asset-Backed Securities

     4        2   

Corporate Bonds

     3        4   

Common Stocks

     2      1   

Other

     3       4  

 

  1   

Information has been revised to conform to current year presentation.

 

  2   

Includes a less that 1% holding in Common Stocks.

 

  3  

Includes a less than 1% holding in each of the following investment types: Non-Agency Mortgage — Backed Securities, Other Interests, Investment Companies, Warrants, Short-Term Securities and Options Purchased.

 

  4   

Includes a less than 1% holding in each of the following investment types: Non-Agency Mortgage-Backed Securities, Other Interests, Warrants and Options Purchased.

Credit Quality Allocation5,6    10/31/15    

10/31/141

 

A

     1       

BBB/Baa

     8        7

BB/Ba

     45        38   

B

     39        43   

CCC/Caa

     3        4   

N/R

     4        8   

 

  5   

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

 

  6  

Excludes Short-Term Securities and Options Purchased.

 

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    7


Trust Summary as of October 31, 2015    BlackRock Multi-Sector Income Trust

 

Trust Overview

BlackRock Multi-Sector Income Trust’s (BIT) (the “Trust”) primary investment objective is to seek high current income, with a secondary objective of capital appreciation. The Trust seeks to achieve its investment objectives by investing, under normal market conditions, at least 80% of its assets in loan and debt instruments and other investments with similar economic characteristics. The Trust may invest directly in such securities or synthetically through the use of derivatives.

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

 

Trust Information     

Symbol on NYSE

  BIT

Initial Offering Date

  February 27, 2013

Current Distribution Rate on Closing Market Price as of October 31, 2015 ($16.31)1

  8.59%

Current Monthly Distribution per Common Share2

  $0.1167

Current Annualized Distribution per Common Share2

  $1.4004

Economic Leverage as of October 31, 20153

  41%

 

  1   

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

 

  2   

The distribution rate is not constant and is subject to change. A portion of the distribution may be deemed a return of capital or net realized gain.

 

  3   

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

 

Performance and Portfolio Management Commentary

 

Returns for the 12 months ended October 31, 2015 were as follows:

 

    Returns Based On  
     Market Price     NAV3  

BIT1

    0.06     3.87 %4 

Lipper General Bond Funds2

    (1.69     (0.29

 

  1   

All returns reflect reinvestment of dividends and/or distributions.

 

  2   

Average return.

 

  3  

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

 

  4   

For financial reporting purposes, the market value of certain investments were adjusted as of report date. Accordingly, the net asset value (“NAV”) per share and total return performance based on net asset value presented herein are different than the information previously published on October 31, 2015.

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

What factors influenced performance?

 

 

The Trust’s positions in non-agency mortgage-backed securities (“MBS”), high yield corporate bonds, commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) were the most significant contributors to performance. The Trust also received positive contributions from its allocation to senior bank loans, as well as from both its stance

   

with respect to duration (a measure of interest rate sensitivity) and yield curve positioning.

 

 

The main detractors from the Trust’s performance were its allocations to emerging market debt and investment grade corporate bonds.

Describe recent portfolio activity.

 

 

During the period, the Trust rotated its exposure to sectors that trade at a yield spread versus U.S. Treasuries by reducing allocations to high yield corporate bonds, investment grade corporate bonds and CMBS, while increasing exposure to non-agency MBS and ABS. The net effect of this rotation was a reduction in credit risk. In addition, sensitivity to interest rates was reduced by lowering the Trust’s effective duration. Both macroeconomic and technical market factors contributed to the decision to reduce risk within the Trust, including historically tight credit spreads, an increase in market volatility and the prospect of a higher interest rate environment.

Describe portfolio positioning at period end.

 

 

The Trust maintained diversified exposure to non-government spread sectors, including high yield and investment grade corporate bonds, as well as to structured credits including CMBS, ABS and non-agency MBS.

 

 

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

 

                
8    ANNUAL REPORT    OCTOBER 31, 2015   


     BlackRock Multi-Sector Income Trust

 

 

Market Price and Net Asset Value Per Share Summary                              

 

      10/31/15      10/31/14      Change      High      Low  

Market Price

   $ 16.31       $ 17.79         (8.32 )%     $ 17.98       $ 15.15   

Net Asset Value

   $ 18.91       $ 19.87         (4.83 )%     $ 19.90       $ 18.77   

 

Market Price and Net Asset Value History Since Inception

 

LOGO

 

  1   

Commencement of operations.

 

Overview of the Trust’s Total Investments
Portfolio Composition   10/31/15     10/31/141  

Corporate Bonds

    33     35

Non-Agency Mortgage-Backed Securities

    25        29   

Asset-Backed Securities

    21        15   

Preferred Securities

    13        14   

Floating Rate Loan Interests

    5        5   

Foreign Agency Obligations

    2        1   

Short-Term Securities

    1        1   

Other2

             

 

  1   

Information has been revised to conform to current year presentation.

 

  2   

Includes a less than 1% holding in each of the following investment types: Options Purchased and Options Written.

Credit Quality Allocation3,4   10/31/15     10/31/141  

A

    3     3

BBB/Baa

    17        17   

BB/Ba

    28        25   

B

    12        17   

CCC/Caa

    19        21   

CC/Ca

    5        5   

N/R

    16        12   

 

  3   

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

 

  4   

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

 

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    9


The Benefits and Risks of Leveraging     

 

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

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

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

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

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

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

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

Under the Investment Company Act of 1940, as amended (the “1940 Act”), each Trust is permitted to issue debt up to 33  1/3% of its total managed assets. BIT is permitted to use economic leverage (which includes leverage attributable to reverse repurchase agreements) of up to 50% of its total managed assets. A Trust may voluntarily elect to limit its leverage to less than the maximum amount permitted under the 1940 Act. In addition, a Trust may also be subject to certain asset coverage, leverage or portfolio composition requirements imposed by its credit facility, which may be more stringent than those imposed by the 1940 Act.

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

 

 

Derivative Financial Instruments     

 

The Trusts may invest in various derivative financial instruments. Derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities 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. Derivative financial instruments also 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

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

 

 

                
10    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments October 31, 2015

  

BlackRock Credit Allocation Income Trust (BTZ)

(Percentages shown are based on Net Assets)

 

Asset-Backed Securities (a)   

Par  

(000)

    Value  

Asset-Backed Securities — 5.8%

  

 

ACAS CLO Ltd., Class C (b):

      

Series 2014-1A, 3.22%, 7/18/26

     USD        750      $ 726,187   

Series 2014-2A, 3.52%, 1/15/27

       1,000        980,188   

ALM Loan Funding (b):

      

Series 2012-5A, Class BR, 3.31%, 10/18/27

       2,000        1,962,600   

Series 2013-7R2A, Class B, 2.89%, 4/24/24

       3,000        2,968,766   

ALM XII Ltd., Series 2015-12A, Class B, 3.57%, 4/16/27 (b)

       1,000        995,000   

ALM XIV Ltd., Series 2014-14A (b):

      

Class B, 3.24%, 7/28/26

       5,000        4,912,841   

Class C, 3.74%, 7/28/26

       5,000        4,623,522   

Anchorage Capital CLO Ltd., 3.32%, 4/28/26 (b)

       1,000        972,012   

Apidos CDO, Series 2012-9AR, Class CR, 3.22%, 7/15/23 (b)

       1,000        990,600   

Apidos CLO XVII, Series 2014-17A, Class B, 3.17%, 4/17/26 (b)

       1,000        974,251   

Apidos CLO XVIII, Series 2014-18A, Class C, 3.97%, 7/22/26 (b)

       1,300        1,215,857   

Atlas Senior Loan Fund V Ltd., Series 2014-1A (b):

      

Class C, 3.32%, 7/16/26

       1,000        999,990   

Class D, 3.77%, 7/16/26

       2,000        1,828,801   

Atlas Senior Loan Fund VI Ltd., Series 2014-6A, Class D, 3.99%, 10/15/26 (b)

       3,000        2,779,176   

Atrium CDO Corp., Series 5A, Class A4, 0.72%, 7/20/20 (b)

       9,000        8,681,002   

Babson CLO Ltd., Series 2014-3A (b):

      

Class C1, 3.32%, 1/15/26

       1,500        1,490,250   

Class D1, 3.82%, 1/15/26

       1,000        927,500   

Battalion CLO VII Ltd., Series 2014-7A, Class C, 4.22%, 10/17/26 (b)

       1,000        926,590   

Benefit Street Partners CLO IV Ltd., Series 2014-IVA, Class B, 3.12%, 7/20/26 (b)

       1,250        1,221,875   

Benefit Street Partners CLO VI Ltd., Series 2015-VIA, Class B, 3.37%, 4/18/27 (b)

       1,000        985,000   

BlueMountain CLO Ltd., Series 2011-1A, Class D, 4.32%, 8/16/22 (b)

       2,000        2,003,664   

Bowman Park CLO Ltd., Series 2014-1A, Class D2, 4.28%, 11/23/25 (b)

       1,000        951,827   

Carlyle Global Market Strategies CLO Ltd., Class C (b):

      

Series 2014-5A, 4.47%, 10/16/25

       1,000        993,862   

Series 2015-1A, 3.44%, 4/20/27

       1,000        993,727   

CIFC Funding Ltd., Series 2014-3A (b):

      

Class C1, 3.12%, 7/22/26

       1,500        1,446,690   

Class D, 3.72%, 7/22/26

       1,071        974,311   

Dryden 34 Senior Loan Fund, Series 2014-34A, Class C, 3.12%, 10/15/26 (b)

       750        729,820   

GoldenTree Loan Opportunities IX Ltd., Series 2014-9A, Class D, 3.79%, 10/29/26 (b)

       1,000        928,929   

Highbridge Loan Management 4-2014 Ltd., Series 4A-2014, Class B, 3.29%, 7/28/25 (b)

       1,000        962,727   
Asset-Backed Securities (a)   

Par  

(000)

    Value  

Asset-Backed Securities (continued)

  

 

ING IM CLO Ltd., Series 2012-4A, Class C, 4.82%, 10/15/23 (b)

     USD        1,000      $ 984,662   

LCM XVIII LP, Series 18A, Class C1, 3.47%, 4/20/27 (b)

       1,000        982,675   

Limerock CLO III LLC, Series 2014-3A, Class C, 3.89%, 10/20/26 (b)

       1,000        905,137   

Madison Park Funding Ltd. (b):

      

Series 2012-10A, Class D, 4.57%, 1/20/25

       3,000        2,970,535   

Series 2012-8AR, Class CR, 3.10%, 4/22/22

       1,350        1,350,259   

Series 2012-8AR, Class DR, 4.15%, 4/22/22

       1,500        1,474,758   

Series 2014-14A, Class D, 3.89%, 7/20/26

       2,000        1,873,189   

Madison Park Funding IX Ltd., Series 2012-9AR, Class C1R, 3.17%, 8/15/22 (b)

       1,000        997,714   

Madison Park Funding XIII Ltd., Series 2014-13A, Class C, 3.07%, 1/19/25 (b)

       1,000        972,234   

Madison Park Funding XV Ltd., Series 2014-15A, Class B1, 3.55%, 1/27/26 (b)

       2,400        2,399,951   

Madison Park Funding XVI Ltd., Series 2015-16A, Class B, 3.30%, 4/20/26 (b)

       1,000        987,800   

Octagon Investment Partners XX Ltd., Series 2014-1A, Class C, 3.11%, 8/12/26 (b)

       750        724,101   

Octagon Loan Funding Ltd., Series 2014-1A, Class D, 3.97%, 11/18/26 (b)

       1,500        1,382,283   

OZLM VII Ltd., Series 2014-7A, Class C, 3.92%, 7/17/26 (b)

       1,500        1,379,154   

OZLM VIII Ltd., Series 2014-8A, Class B, 3.29%, 10/17/26 (b)

       900        871,457   

OZLM XI Ltd., Series 2015-11A, Class B, 3.30%, 1/30/27 (b)

       2,750        2,704,857   

Regatta IV Funding Ltd., Series 2014-1A (b):

      

Class C, 3.25%, 7/25/26

       1,500        1,453,592   

Class D, 3.80%, 7/25/26

       1,000        898,879   

Regatta V Funding Ltd., Series 2014-1A (b):

      

Class B, 3.32%, 10/25/26

       1,000        973,051   

Class C, 3.77%, 10/25/26

       1,000        899,408   

Silver Spring CLO Ltd., Series 2014-1A, Class D, 3.77%, 10/15/26 (b)

       750        646,133   

SLM Student Loan Trust, Series 2004-B, Class A2, 0.54%, 6/15/21

       1,745        1,736,554   

Sound Point CLO Ltd., Series 2014-3A, Class D, 3.92%, 1/23/27 (b)

       1,000        911,632   

Symphony CLO Ltd., Series 2012-10AR, Class CR, 3.17%, 7/23/23 (b)

       1,000        1,004,672   

Symphony CLO XV Ltd., Series 2014-15A (b):

      

Class C, 3.52%, 10/17/26

       1,500        1,483,125   

Class D, 4.07%, 10/17/26

       1,000        965,000   

Venture XIII CLO Ltd., Series 2013-13A, Class D, 3.88%, 6/10/25 (b)

       800        749,141   

Voya CLO Ltd., Class C (b):

      

Series 2014-3A, 3.92%, 7/25/26

       1,250        1,131,252   
 
Portfolio Abbreviations

 

ABS    Asset-Backed Security      FKA    Formerly Known As    OTC    Over-the-Counter
ADS    American Depositary Shares      GBP    British Pound    PIK    Payment-In-Kind
ARB    Airport Revenue Bonds      IDR    Indonesian Rupiah    PLN    Polish Zloty
AUD    Australian Dollar      JIBAR    Johannesburg Interbank Agreed Rate    RB    Revenue Bonds
BRL    Brazilian Real      JPY    Japanese Yen    REMIC    Real Estate Mortgage Investment Conduit
CAD    Canadian Dollar      KLIBOR    Kuala Lumpur Interbank Offered Rate    RUB    Russian Ruble
CLO    Collateralized Loan Obligation      KRW    South Korean Won    SEK    Swedish Krona
CLP    Chilean Peso      LIBOR    London Interbank Offered Rate    TRY    Turkish Lira
CNRR    Chinese Repo Rate      MXIBTIIE    Mexico Interbank TIIE 28 Day    TWD    Taiwan Dollar
CNY    Chinese Renminbi      MXN    Mexican Peso    USD    U.S. Dollar
DIP    Debtor-In-Possession      MYR    Malaysian Ringgit    ZAR    South African Rand
EUR    Euro      NZD    New Zealand Dollar      

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    11


Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust (BTZ)

 

Asset-Backed Securities (a)   

Par  

(000)

    Value  

Asset-Backed Securities (continued)

  

 

Voya CLO Ltd., Class C (b) (continued):

      

Series 2014-4A, 4.32%, 10/14/26

     USD        1,000      $ 952,637   

WhiteHorse IX Ltd., Series 2014-9A, Class C, 3.02%, 7/17/26 (b)

             1,500        1,404,816   
Total Asset-Backed Securities — 5.8%                      89,318,223   
      
                          
Corporate Bonds                      

Aerospace & Defense — 0.6%

      

Huntington Ingalls Industries, Inc.:

      

7.13%, 3/15/21

       2,000        2,090,000   

5.00%, 12/15/21 (b)

       536        557,440   

TransDigm, Inc.:

      

6.00%, 7/15/22

       4,585        4,630,850   

6.50%, 7/15/24

       2,140        2,177,450   
      

 

 

 
                       9,455,740   

Air Freight & Logistics — 0.2%

      

XPO Logistics, Inc. (b):

      

7.88%, 9/01/19

       1,548        1,557,675   

6.50%, 6/15/22

       1,576        1,406,580   
      

 

 

 
                       2,964,255   

Airlines — 1.1%

      

American Airlines Group, Inc.,
4.63%, 3/01/20 (b)

       692        685,945   

Continental Airlines Pass-Through Trust:

      

Series 2009-2, Class B, 9.25%, 11/10/18

       2,166        2,360,467   

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

       2,040        2,102,016   

Delta Air Lines Pass-Through Trust, Series 2002-1, Class G-1, 6.72%, 7/02/24

       3,200        3,639,748   

Turkish Airlines 2015-1 Class A Pass Through Trust, 4.20%, 9/15/28 (b)

       3,029        2,930,774   

United Airlines Pass-Through Trust, Series 2014-1, Class B, 4.75%, 10/11/23

       3,999        4,016,284   

Virgin Australia Trust, Series 2013-1, Class B, 6.00%, 4/23/22 (b)

       1,326        1,349,279   
      

 

 

 
                       17,084,513   

Auto Components — 1.3%

      

Goodyear Tire & Rubber Co., 6.50%, 3/01/21

       1,600        1,700,000   

Icahn Enterprises LP/Icahn Enterprises Finance Corp.:

      

3.50%, 3/15/17

       265        268,101   

4.88%, 3/15/19

       3,950        4,040,060   

6.00%, 8/01/20

       3,108        3,243,975   

5.88%, 2/01/22

       3,816        3,930,480   

Schaeffler Finance BV, 4.75%, 5/15/21 (b)

       2,470        2,513,225   

Schaeffler Holding Finance BV (b)(c):

      

6.25%, (6.25% Cash) 11/15/19

       1,112        1,173,160   

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

       2,417        2,640,572   

ZF North America Capital, Inc., 4.50%, 4/29/22 (b)

       291        292,999   
      

 

 

 
                       19,802,572   

Automobiles — 0.5%

  

General Motors Co.:

      

4.88%, 10/02/23

       1,875        1,967,072   

7.45%, 7/16/31

       3,660        4,697,724   

6.25%, 10/02/43

       940        1,037,945   
      

 

 

 
                       7,702,741   

Banks — 5.0%

  

Associated Banc-Corp, 5.13%, 3/28/16 (d)

       7,430        7,522,266   

CIT Group, Inc.:

      

4.25%, 8/15/17

       4,600        4,703,500   
Corporate Bonds   

Par  

(000)

    Value  

Banks (continued)

  

CIT Group, Inc. (continued):

      

5.25%, 3/15/18

     USD        4,030      $ 4,226,462   

6.63%, 4/01/18 (b)

       335        360,963   

5.50%, 2/15/19 (b)

       5,147        5,462,254   

5.00%, 8/01/23

       660        691,350   

City National Corp., 5.25%, 9/15/20 (d)

       2,900        3,261,636   

Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, 3.95%, 11/09/22 (d)

       3,775        3,816,593   

Credit Suisse Group AG, 6.50%, 8/08/23 (b)

       12,000        13,140,000   

Discover Bank, 8.70%, 11/18/19

       748        888,200   

Fifth Third Bancorp, 5.10% (a)(e)

       5,000        4,593,750   

HSBC Finance Corp., 6.68%, 1/15/21 (d)

       5,150        5,989,192   

Royal Bank of Scotland Group PLC, 6.00%, 12/19/23

       10,080        10,943,029   

Wells Fargo & Co. (d):

      

3.45%, 2/13/23

       2,325        2,331,756   

4.13%, 8/15/23

       4,000        4,162,764   

5.61%, 1/15/44

       4,119        4,670,176   
      

 

 

 
                       76,763,891   

Biotechnology — 0.2%

  

Amgen, Inc., 4.40%, 5/01/45 (d)

             3,050        2,824,690   

Building Products — 0.4%

  

Building Materials Corp. of America (b):

      

6.75%, 5/01/21

       2,700        2,863,350   

6.00%, 10/15/25

       2,828        3,004,750   

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

       610        637,450   
      

 

 

 
                       6,505,550   

Capital Markets — 3.1%

  

E*Trade Financial Corp., 5.38%, 11/15/22

       1,348        1,441,279   

Goldman Sachs Group, Inc. (d):

      

6.25%, 9/01/17

       625        678,345   

7.50%, 2/15/19

       5,165        6,019,719   

5.25%, 7/27/21

       1,175        1,311,070   

5.75%, 1/24/22

       5,500        6,302,494   

6.25%, 2/01/41

       15,000        18,147,945   

Morgan Stanley (d):

      

5.63%, 9/23/19

       6,770        7,543,053   

5.50%, 7/28/21

       2,695        3,050,508   

UBS AG, 5.88%, 7/15/16

       3,450        3,560,524   
      

 

 

 
                       48,054,937   

Chemicals — 1.3%

  

Ashland, Inc., 3.88%, 4/15/18

       1,745        1,803,894   

Axalta Coating Systems US Holdings, Inc./Axalta Coating Systems Dutch Holding BV,
7.38%, 5/01/21 (b)

       617        652,478   

Basell Finance Co. BV, 8.10%, 3/15/27 (b)(d)

       6,000        7,686,924   

CF Industries, Inc., 5.38%, 3/15/44

       2,500        2,468,767   

Chemours Co., 7.00%, 5/15/25 (b)

       434        323,330   

Huntsman International LLC:

      

4.88%, 11/15/20

       1,075        1,011,199   

5.13%, 11/15/22 (b)

       2,495        2,320,350   

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

       2,277        2,329,826   

Platform Specialty Products Corp.,
6.50%, 2/01/22 (b)

       1,372        1,166,200   
      

 

 

 
                       19,762,968   

Commercial Services & Supplies — 3.1%

  

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

       1,003        1,051,896   

Aviation Capital Group Corp. (b):

      

7.13%, 10/15/20 (d)

       31,000        36,037,500   

6.75%, 4/06/21

       7,850        8,890,125   

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

       301        272,405   
 

 

See Notes to Financial Statements.

 

                
12    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust (BTZ)

 

Corporate Bonds   

Par  

(000)

    Value  

Commercial Services & Supplies (continued)

  

Mobile Mini, Inc., 7.88%, 12/01/20

     USD        2,480      $ 2,579,200   
      

 

 

 
                       48,831,126   

Communications Equipment — 0.3%

  

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

       2,242        2,275,630   

CommScope, Inc., 5.50%, 6/15/24 (b)

       254        251,460   

Harris Corp., 5.05%, 4/27/45

       1,790        1,753,584   

Plantronics, Inc., 5.50%, 5/31/23 (b)

       423        430,403   
      

 

 

 
                       4,711,077   

Construction & Engineering — 0.3%

      

AECOM Co.:

      

5.75%, 10/15/22

       333        346,320   

5.88%, 10/15/24 (b)

       2,311        2,386,107   

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

       413        416,614   

Safway Group Holding LLC/Safway Finance Corp., 7.00%, 5/15/18 (b)

       568        583,620   

Weekley Homes LLC/Weekley Finance Corp., 6.00%, 2/01/23

       825        792,000   
      

 

 

 
                       4,524,661   

Construction Materials — 0.5%

  

Allegion US Holding Co., Inc., 5.75%, 10/01/21

       1,907        2,002,350   

HD Supply, Inc.:

      

7.50%, 7/15/20 (d)

       2,905        3,093,825   

5.25%, 12/15/21 (b)

       3,278        3,441,900   
      

 

 

 
                       8,538,075   

Consumer Finance — 2.9%

  

Ally Financial, Inc.:

      

5.13%, 9/30/24

       855        900,914   

4.63%, 3/30/25

       136        137,020   

8.00%, 11/01/31

       5,705        6,917,313   

Capital One Bank USA NA, 3.38%, 2/15/23 (d)

       11,610        11,360,698   

Countrywide Financial Corp., 6.25%, 5/15/16 (d)

       8,069        8,284,224   

Discover Financial Services, 3.85%, 11/21/22

       3,252        3,225,587   

Experian Finance PLC, 2.38%, 6/15/17 (b)(d)

       2,550        2,559,624   

Navient Corp., 6.25%, 1/25/16

       11,620        11,721,675   
      

 

 

 
                       45,107,055   

Containers & Packaging — 0.5%

  

Beverage Packaging Holdings Luxembourg II SA, 5.63%, 12/15/16 (b)

       904        904,000   

Crown Americas LLC/Crown Americas Capital Corp. III, 6.25%, 2/01/21

       3,128        3,249,210   

Sealed Air Corp. (b):

      

6.50%, 12/01/20

       2,330        2,603,775   

5.13%, 12/01/24

       649        666,848   

5.50%, 9/15/25

       835        880,925   
      

 

 

 
                       8,304,758   

Diversified Consumer Services — 0.3%

  

Service Corp. International, 4.50%, 11/15/20

             4,382        4,480,595   

Diversified Financial Services — 10.2%

  

AerCap Ireland Capital, Ltd./AerCap Global Aviation Trust:

      

4.63%, 10/30/20

       1,619        1,677,689   

4.63%, 7/01/22

       518        529,008   

Air Lease Corp., 3.75%, 2/01/22

       5,000        4,948,735   

Aircastle Ltd., 6.25%, 12/01/19

       3,937        4,301,172   

Bank of America Corp. (d):

      

3.75%, 7/12/16

       5,525        5,631,400   

5.00%, 5/13/21

       17,100        18,793,635   

5.70%, 1/24/22

       2,590        2,961,994   

Bank of America NA, 5.30%, 3/15/17 (d)

       13,440        14,100,845   
Corporate Bonds   

Par  

(000)

    Value  

Diversified Financial Services (continued)

  

Barclays PLC, 4.38%, 9/11/24

     USD        2,100      $ 2,062,578   

Citigroup, Inc. (d):

      

4.45%, 1/10/17

       4,800        4,980,048   

8.50%, 5/22/19

       464        560,186   

6.68%, 9/13/43

       4,125        5,163,316   

Deutsche Bank AG, 4.50%, 4/01/25

       3,985        3,872,085   

Ford Motor Credit Co. LLC:

      

8.00%, 12/15/16

       4,000        4,279,300   

5.88%, 8/02/21

       9,420        10,737,660   

General Motors Financial Co., Inc.:

      

6.75%, 6/01/18

       1,700        1,858,947   

4.38%, 9/25/21

       2,260        2,344,721   

4.25%, 5/15/23

       1,681        1,708,585   

ING Bank NV, 5.00%, 6/09/21 (b)(d)

       8,000        8,903,408   

Intesa Sanpaolo SpA, 3.13%, 1/15/16

       5,450        5,473,217   

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

       1,705        1,670,900   

Leucadia National Corp., 5.50%, 10/18/23

       4,000        3,989,852   

Moody’s Corp., 6.06%, 9/07/17

       20,000        20,618,360   

MSCI, Inc., 5.75%, 8/15/25 (b)

       738        778,221   

Mubadala GE Capital Ltd., 3.00%, 11/10/19 (b)

       5,000        4,978,550   

Pershing Square Holdings Ltd., 5.50%, 7/15/22 (b)

       5,500        5,170,000   

Resparcs Funding LP I, 8.00% (e)(f)(g)

       4,000        1,397,600   

Reynolds Group Issuer, Inc.:

      

9.00%, 4/15/19

       370        378,325   

7.88%, 8/15/19

       2,480        2,569,900   

9.88%, 8/15/19

       147        154,718   

5.75%, 10/15/20

       3,142        3,267,680   

6.88%, 2/15/21

       105        109,725   

Royal Bank of Scotland Group PLC:

      

6.10%, 6/10/23

       2,500        2,719,543   

5.13%, 5/28/24

       5,250        5,382,856   
      

 

 

 
                       158,074,759   

Diversified Telecommunication Services — 5.1%

  

AT&T, Inc.:

      

6.30%, 1/15/38 (d)

       12,000        13,341,528   

4.30%, 12/15/42

       265        229,734   

4.35%, 6/15/45

       367        317,775   

CenturyLink, Inc.:

      

5.63%, 4/01/20

       1,375        1,376,568   

6.45%, 6/15/21

       285        287,138   

Frontier Communications Corp.:

      

6.25%, 9/15/21

       980        875,140   

7.63%, 4/15/24

       1,384        1,238,680   

6.88%, 1/15/25

       475        410,446   

11.00%, 9/15/25 (b)

       797        835,352   

Level 3 Financing, Inc.:

      

5.38%, 8/15/22

       2,250        2,289,375   

5.13%, 5/01/23 (b)

       1,183        1,196,309   

5.38%, 1/15/24 (b)(h)

       754        763,425   

5.38%, 5/01/25 (b)

       2,455        2,461,137   

Telefonica Emisiones SAU, 3.19%, 4/27/18

       6,550        6,718,001   

Verizon Communications, Inc. (d):

      

5.15%, 9/15/23

       8,775        9,780,668   

6.40%, 9/15/33

       9,475        10,950,845   

7.35%, 4/01/39

       7,825        9,998,871   

6.55%, 9/15/43

       13,225        15,830,695   
      

 

 

 
                       78,901,687   

Electric Utilities — 3.8%

  

CMS Energy Corp., 5.05%, 3/15/22

       9,900        10,984,555   

Duke Energy Corp., 3.55%, 9/15/21 (d)

       3,650        3,776,542   

Great Plains Energy, Inc., 5.29%, 6/15/22 (i)

       5,550        6,149,988   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    13


Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust (BTZ)

 

Corporate Bonds   

Par  

(000)

    Value  

Electric Utilities (continued)

  

Midland Cogeneration Venture LP, 5.25%, 3/15/25 (b)

     USD        4,552      $ 4,729,342   

NiSource Finance Corp., 6.80%, 1/15/19 (d)

       3,075        3,496,241   

Oncor Electric Delivery Co. LLC (d):

      

4.10%, 6/01/22

       4,150        4,345,610   

5.30%, 6/01/42

       2,750        2,996,026   

Progress Energy, Inc., 7.00%, 10/30/31 (d)

       12,000        15,257,772   

Puget Energy, Inc.:

      

6.00%, 9/01/21

       275        315,647   

5.63%, 7/15/22

       5,550        6,270,496   
      

 

 

 
                       58,322,219   

Electrical Equipment — 0.1%

      

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

             1,950        1,111,500   

Electronic Equipment, Instruments & Components — 0.3%

  

Jabil Circuit, Inc., 8.25%, 3/15/18

       2,600        2,918,500   

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

       475        482,719   

Sanmina Corp., 4.38%, 6/01/19 (b)

       1,415        1,443,300   
      

 

 

 
                       4,844,519   

Energy Equipment & Services — 0.7%

  

Energy Transfer Partners LP, 5.20%, 2/01/22

       10,200        10,148,592   

Genesis Energy LP/Genesis Energy Finance Corp.:

      

5.75%, 2/15/21

       293        273,955   

6.75%, 8/01/22

       375        365,625   

Transocean, Inc., 6.00%, 3/15/18 (d)

       540        506,520   
      

 

 

 
                       11,294,692   

Food & Staples Retailing — 1.6%

  

CVS Health Corp.:

      

4.75%, 12/01/22 (b)

       289        315,002   

5.00%, 12/01/24 (b)

       183        203,267   

5.13%, 7/20/45

       3,879        4,158,618   

Family Tree Escrow LLC (b):

      

5.25%, 3/01/20

       335        349,238   

5.75%, 3/01/23

       4,623        4,871,486   

H.J. Heinz Finance Co., 7.13%, 8/01/39 (b)

       4,415        5,643,491   

Rite Aid Corp.:

      

6.75%, 6/15/21

       541        580,899   

6.13%, 4/01/23 (b)

       2,974        3,204,485   

Wal-Mart Stores, Inc., 5.25%, 9/01/35 (d)

       5,150        5,929,277   
      

 

 

 
                       25,255,763   

Food Products — 1.2%

  

Barry Callebaut Services NV, 5.50%, 6/15/23 (b)

       835        886,837   

Kellogg Co., Series B, 7.45%, 4/01/31 (d)

       3,425        4,403,139   

Mondelez International, Inc.:

      

6.50%, 8/11/17

       4,450        4,835,864   

6.13%, 8/23/18

       4,840        5,354,559   

Post Holdings, Inc. (b):

      

7.75%, 3/15/24

       1,502        1,599,630   

8.00%, 7/15/25

       743        806,155   

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

       715        750,750   
      

 

 

 
                       18,636,934   

Gas Utilities — 0.1%

  

Targa Resources Partners LP/Targa Resources Partners Finance Corp., 6.88%, 2/01/21

             1,265        1,271,325   

Health Care Equipment & Supplies — 0.6%

  

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

       2,065        2,049,513   

Mallinckrodt International Finance SA / Mallinckrodt CB LLC (b):

      

4.88%, 4/15/20

       517        495,674   

5.75%, 8/01/22

       1,370        1,302,349   
Corporate Bonds  

Par  

(000)

    Value  

Health Care Equipment & Supplies (continued)

  

Mallinckrodt International Finance SA / Mallinckrodt CB LLC (b) (continued):

     

5.63%, 10/15/23

    USD        1,099      $ 1,037,181   

Medtronic, Inc., 4.63%, 3/15/45 (d)

      4,565        4,799,034   
     

 

 

 
                      9,683,751   

Health Care Providers & Services — 4.2%

  

Acadia Healthcare Co., Inc., 5.13%, 7/01/22

      435        429,563   

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

      1,856        1,823,520   

CHS/Community Health Systems, Inc.:

     

5.13%, 8/15/18

      1,620        1,650,375   

6.88%, 2/01/22

      1,111        1,119,332   

DaVita HealthCare Partners, Inc.:

     

5.13%, 7/15/24

      1,990        2,019,850   

5.00%, 5/01/25

      1,871        1,857,338   

HCA, Inc.:

     

3.75%, 3/15/19 (d)

      4,364        4,440,370   

6.50%, 2/15/20 (d)

      10,421        11,658,494   

7.50%, 2/15/22

      2,214        2,546,100   

5.88%, 3/15/22

      340        374,000   

4.75%, 5/01/23

      676        692,900   

HealthSouth Corp.:

     

5.13%, 3/15/23

      512        503,040   

5.75%, 11/01/24

      889        889,000   

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

      805        840,219   

Tenet Healthcare Corp.:

     

6.25%, 11/01/18

      736        783,840   

4.75%, 6/01/20

      1,450        1,471,750   

6.00%, 10/01/20

      3,645        3,936,600   

4.50%, 4/01/21

      73        73,000   

4.38%, 10/01/21

      7,335        7,316,662   

8.13%, 4/01/22

      4,907        5,189,152   

6.75%, 6/15/23

      1,758        1,744,815   

UnitedHealth Group, Inc., 6.88%, 2/15/38 (d)

      10,000        13,420,100   
     

 

 

 
                      64,780,020   

Health Care Technology — 0.2%

  

Amgen, Inc., 5.15%, 11/15/41 (d)

            3,450        3,563,160   

Hotels, Restaurants & Leisure — 0.9%

  

CDW LLC/CDW Finance Corp.:

     

6.00%, 8/15/22

      1,380        1,481,071   

5.00%, 9/01/23

      306        317,475   

5.50%, 12/01/24

      2,458        2,574,755   

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

      688        690,546   

Jarden Corp., 5.00%, 11/15/23 (b)

      398        408,945   

MGM Resorts International, 6.00%, 3/15/23

      1,374        1,394,610   

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

      2,215        2,317,444   

Pinnacle Entertainment, Inc., 6.38%, 8/01/21

      1,586        1,689,090   

RHP Hotel Properties LP/RHP Finance Corp., 5.00%, 4/15/23

      607        626,727   

Sabre GLBL, Inc., 5.38%, 4/15/23 (b)

      594        602,910   

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

      1,718        1,782,425   
     

 

 

 
                      13,885,998   

Household Durables — 1.2%

  

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

      1,960        2,023,700   

Brookfield Residential Properties, Inc./Brookfield Residential US Corp., 6.13%, 7/01/22 (b)

      1,647        1,618,177   

K. Hovnanian Enterprises, Inc., 7.25%, 10/15/20 (b)

      398        374,120   

KB Home, 7.25%, 6/15/18

      1,990        2,129,300   

Shea Homes LP / Shea Homes Funding Corp. (b):

     

5.88%, 4/01/23

      910        952,088   

6.13%, 4/01/25

      920        963,700   

Standard Pacific Corp., 8.38%, 1/15/21

      3,015        3,576,694   
 

 

See Notes to Financial Statements.

 

                
14    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust (BTZ)

 

Corporate Bonds   

Par  

(000)

    Value  

Household Durables (continued)

  

Taylor Morrison Communities, Inc./Monarch Communities, Inc., 5.25%, 4/15/21 (b)

     USD        767      $ 772,753   

Toll Brothers Finance Corp., 4.88%, 11/15/25

       96        95,880   

TRI Pointe Holdings, Inc.:

      

4.38%, 6/15/19

       920        914,250   

5.88%, 6/15/24

       625        625,000   

United Rentals North America, Inc.:

      

7.38%, 5/15/20

       2,025        2,149,031   

7.63%, 4/15/22

       1,853        2,010,709   
      

 

 

 
                       18,205,402   

Household Products — 0.2%

  

Spectrum Brands, Inc.:

      

6.38%, 11/15/20

       810        864,675   

6.63%, 11/15/22

       1,110        1,212,675   

5.75%, 7/15/25 (b)

       1,002        1,068,383   
      

 

 

 
                       3,145,733   

Independent Power and Renewable Electricity Producers — 0.7%

  

Calpine Corp.:

      

6.00%, 1/15/22 (b)

       1,548        1,626,948   

5.38%, 1/15/23

       2,109        2,016,731   

5.88%, 1/15/24 (b)

       823        860,035   

5.50%, 2/01/24

       1,749        1,661,550   

5.75%, 1/15/25

       1,064        1,008,140   

Dynegy, Inc., 6.75%, 11/01/19

       2,195        2,189,513   

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

       1,927        1,734,300   
      

 

 

 
                       11,097,217   

Insurance — 5.4%

  

American International Group, Inc., 6.40%, 12/15/20 (d)

       8,710        10,284,594   

Aon Corp., 5.00%, 9/30/20 (d)

       7,700        8,493,247   

Aon PLC, 4.25%, 12/12/42 (d)

       6,500        5,913,401   

Forethought Financial Group, Inc., 8.63%, 4/15/21 (b)

       3,400        3,899,790   

Manulife Financial Corp., 4.90%, 9/17/20 (d)

       10,425        11,355,014   

MPL 2 Acquisition Canco, Inc., 9.88%, 8/15/18 (b)

       1,455        1,527,750   

Northwestern Mutual Life Insurance Co., 6.06%, 3/30/40 (b)(d)

       12,000        14,464,164   

Principal Financial Group, Inc., 8.88%, 5/15/19

       2,825        3,427,092   

Prudential Financial, Inc., 6.63%, 12/01/37 (d)

       10,000        12,559,130   

XLIT Ltd., 5.75%, 10/01/21 (d)

       10,085        11,374,962   
      

 

 

 
                       83,299,144   

Internet Software & Services — 0.0%

  

Netflix, Inc., 5.50%, 2/15/22 (b)

             563        593,965   

IT Services — 0.8%

  

Fidelity National Information Services, Inc., 5.00%, 10/15/25

       1,935        2,000,627   

First Data Corp. (b):

      

6.75%, 11/01/20

       1,768        1,863,030   

8.25%, 1/15/21

       250        262,188   

5.38%, 8/15/23

       1,854        1,886,445   

7.00%, 12/01/23 (h)

       6,385        6,496,737   
      

 

 

 
                       12,509,027   

Life Sciences Tools & Services — 0.9%

  

Life Technologies Corp., 6.00%, 3/01/20 (d)

             12,000        13,569,276   

Media — 7.0%

  

21st Century Fox America, Inc., 6.15%, 3/01/37 (d)

       9,575        11,023,832   

A&E Television Networks LLC, 3.11%, 8/22/19

       5,000        5,079,000   

Altice Financing SA, 6.63%, 2/15/23 (b)

       1,313        1,316,283   

Altice Finco SA, 7.63%, 2/15/25 (b)

       96        90,960   
Corporate Bonds   

Par  

(000)

    Value  

Media (continued)

  

Altice SA (b):

      

7.75%, 5/15/22

     USD        2,425      $ 2,334,062   

7.63%, 2/15/25

       1,515        1,393,042   

Altice US Finance I Corp., 5.38%, 7/15/23 (b)

       2,919        2,954,028   

AMC Networks, Inc.:

      

7.75%, 7/15/21

       1,330        1,426,425   

4.75%, 12/15/22

       685        687,569   

CCO Safari II LLC (b):

      

6.38%, 10/23/35

       479        493,412   

6.48%, 10/23/45

       4,584        4,753,571   

6.83%, 10/23/55

       3,540        3,587,040   

Cinemark USA, Inc., 5.13%, 12/15/22

       349        350,745   

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

       10,205        10,604,237   

COX Communications, Inc., 8.38%, 3/01/39 (b)(d)

       5,000        5,718,440   

CSC Holdings LLC, 8.63%, 2/15/19

       4,005        4,255,312   

DIRECTV Holdings LLC/DIRECTV Financing Co., Inc., 5.00%, 3/01/21 (d)

       8,575        9,374,104   

DISH DBS Corp., 5.88%, 11/15/24

       2,462        2,354,903   

Gray Television, Inc., 7.50%, 10/01/20

       543        566,729   

Grupo Televisa SAB, 5.00%, 5/13/45 (d)

       3,345        3,016,769   

Intelsat Jackson Holdings SA, 5.50%, 8/01/23

       2,909        2,398,107   

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

       6,025        5,911,423   

Live Nation Entertainment, Inc., 7.00%, 9/01/20 (b)

       463        490,780   

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

       1,471        1,518,807   

Neptune Finco Corp., 6.63%, 10/15/25 (b)

       1,436        1,511,390   

Numericable Group SA, 6.00%, 5/15/22 (b)

       8,520        8,541,300   

Outfront Media Capital LLC/Outfront Media Capital Corp.:

      

5.25%, 2/15/22

       249        255,848   

5.63%, 2/15/24

       122        126,957   

Sirius XM Radio, Inc., 4.25%, 5/15/20 (b)

       2,300        2,328,750   

Time Warner Cable, Inc., 6.55%, 5/01/37 (d)

       3,519        3,526,182   

Tribune Media Co., 5.88%, 7/15/22 (b)

       1,403        1,441,582   

Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH, 5.50%, 1/15/23 (b)

       1,000        1,027,800   

Univision Communications, Inc. (b):

      

5.13%, 5/15/23

       5,293        5,240,070   

5.13%, 2/15/25

       999        981,518   

Virgin Media Secured Finance PLC, 5.38%, 4/15/21 (b)

       1,255        1,317,330   
      

 

 

 
                       107,998,307   

Metals & Mining — 2.3%

  

Alcoa, Inc., 5.13%, 10/01/24

       1,903        1,886,349   

AngloGold Ashanti Holdings PLC, 5.13%, 8/01/22

       5,000        4,559,375   

ArcelorMittal, 6.13%, 6/01/18

       2,575        2,581,437   

Commercial Metals Co., 4.88%, 5/15/23

       2,194        1,941,690   

Constellium NV:

      

4.63%, 5/15/21

     EUR        490        434,835   

5.75%, 5/15/24 (b)

     USD        1,178        848,160   

First Quantum Minerals Ltd. (b):

      

7.00%, 2/15/21

       303        224,220   

7.25%, 5/15/22

       912        665,190   

Freeport-McMoRan, Inc.:

      

7.13%, 11/01/27 (d)

       8,500        7,626,310   

5.40%, 11/14/34

       5,225        3,685,245   

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

       3,247        3,255,117   

Southern Copper Corp., 5.88%, 4/23/45

       3,870        3,382,991   

Steel Dynamics, Inc.:

      

5.13%, 10/01/21

       1,105        1,096,713   

6.38%, 8/15/22

       1,430        1,469,325   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    15


Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust (BTZ)

 

Corporate Bonds   

Par  

(000)

    Value  

Metals & Mining (continued)

  

Steel Dynamics, Inc. (continued):

      

5.25%, 4/15/23

     USD        163      $ 158,518   

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

       2,785        2,631,825   
      

 

 

 
                       36,447,300   

Multi-Utilities — 1.3%

  

CenterPoint Energy, Inc. (d):

      

5.95%, 2/01/17

       9,000        9,469,665   

6.50%, 5/01/18

       9,675        10,694,581   
      

 

 

 
                       20,164,246   

Multiline Retail — 0.2%

  

Dufry Finance SCA, 5.50%, 10/15/20 (b)

             3,460        3,598,400   

Offshore Drilling & Other Services — 0.1%

  

Sensata Technologies BV (b):

      

5.63%, 11/01/24

       695        707,163   

5.00%, 10/01/25

       1,418        1,384,322   
      

 

 

 
                       2,091,485   

Oil, Gas & Consumable Fuels — 14.1%

  

Access Midstream Partners LP/ACMP Finance Corp.:

      

6.13%, 7/15/22

       1,668        1,707,410   

4.88%, 5/15/23

       343        309,591   

Anadarko Petroleum Corp., 6.38%, 9/15/17

       75        80,758   

Antero Resources Finance Corp., 5.38%, 11/01/21

       378        347,760   

Bonanza Creek Energy, Inc.:

      

6.75%, 4/15/21

       778        560,160   

5.75%, 2/01/23

       1,245        834,150   

California Resources Corp.:

      

5.00%, 1/15/20

       495        360,112   

5.50%, 9/15/21

       1,894        1,302,125   

6.00%, 11/15/24

       5,517        3,751,560   

Chesapeake Energy Corp., 6.88%, 11/15/20

       493        334,007   

Concho Resources, Inc.:

      

5.50%, 10/01/22

       166        166,623   

5.50%, 4/01/23

       1,079        1,084,395   

CONSOL Energy, Inc., 5.88%, 4/15/22

       5,691        3,599,557   

Continental Resources, Inc.:

      

5.00%, 9/15/22

       7,000        6,291,250   

4.50%, 4/15/23

       469        414,369   

Denbury Resources, Inc., 5.50%, 5/01/22

       604        422,800   

El Paso LLC:

      

7.80%, 8/01/31

       197        199,593   

7.75%, 1/15/32

       4,586        4,641,596   

El Paso Natural Gas Co. LLC, 8.63%, 1/15/22

       2,345        2,781,993   

El Paso Pipeline Partners Operating Co. LLC, 6.50%, 4/01/20

       5,075        5,519,164   

Enbridge Energy Partners LP, 9.88%, 3/01/19 (d)

       6,000        7,123,584   

Energy Transfer Equity LP:

      

7.50%, 10/15/20

       1,028        1,105,306   

5.88%, 1/15/24

       2,788        2,700,945   

Energy Transfer Partners LP, 6.13%, 12/15/45

       3,579        3,212,346   

Enterprise Products Operating LLC:

      

4.90%, 5/15/46

       5,375        4,926,429   

Series N, 6.50%, 1/31/19 (d)

       12,000        13,413,072   

EP Energy LLC/Everest Acquisition Finance, Inc., 9.38%, 5/01/20

       3,290        2,862,300   

Hilcorp Energy I LP/Hilcorp Finance Co., 5.00%, 12/01/24 (b)

       3,666        3,317,730   

Kinder Morgan Energy Partners LP:

      

6.85%, 2/15/20 (d)

       12,000        13,102,728   

4.25%, 9/01/24

       2,170        1,937,784   

5.40%, 9/01/44

       3,615        2,970,041   
Corporate Bonds   

Par  

(000)

    Value  

Oil, Gas & Consumable Fuels (continued)

  

Laredo Petroleum, Inc., 7.38%, 5/01/22

     USD        231      $ 228,113   

Linn Energy LLC/Linn Energy Finance Corp., 6.25%, 11/01/19

       597        140,295   

Marathon Petroleum Corp., 3.50%, 3/01/16 (d)

       4,600        4,638,654   

MarkWest Energy Partners LP/MarkWest Energy Finance Corp., 4.88%, 6/01/25

       1,144        1,069,640   

MEG Energy Corp. (b):

      

6.50%, 3/15/21

       3,839        3,368,722   

7.00%, 3/31/24

       3,533        3,056,045   

Midcontinent Express Pipeline LLC, 6.70%, 9/15/19 (b)

       3,500        3,395,000   

Nexen, Inc., 6.40%, 5/15/37 (d)

       4,615        5,390,020   

NGPL PipeCo LLC, 9.63%, 6/01/19 (b)

       902        845,625   

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

       3,448        3,496,238   

Oasis Petroleum, Inc.:

      

7.25%, 2/01/19 (d)

       915        873,825   

6.50%, 11/01/21

       1,025        873,812   

ONEOK Partners LP, 8.63%, 3/01/19 (d)

       10,000        11,486,090   

Paramount Resources Ltd., 6.88%, 6/30/23 (b)

       600        528,000   

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

       1,225        1,231,125   

Peabody Energy Corp., 6.00%, 11/15/18

       2,120        371,000   

Petrobras International Finance Co. SA, 3.88%, 1/27/16

       12,550        12,518,625   

Petroleos Mexicanos (d):

      

3.50%, 1/30/23

       5,000        4,642,500   

4.88%, 1/18/24

       2,000        1,998,400   

Petroleum Geo-Services ASA, 7.38%, 12/15/18 (b)

       3,980        3,228,775   

Pioneer Natural Resources Co., 6.88%, 5/01/18

       1,665        1,811,863   

Plains All American Pipeline LP/PAA Finance Corp.:

      

4.70%, 6/15/44

       1,498        1,290,173   

4.90%, 2/15/45

       2,102        1,867,261   

Range Resources Corp.:

      

5.00%, 8/15/22

       32        28,478   

5.00%, 3/15/23

       75        66,563   

Regency Energy Partners LP/Regency Energy Finance Corp., 4.50%, 11/01/23

       4,351        3,993,396   

Rockies Express Pipeline LLC, 6.88%, 4/15/40 (b)

       580        551,000   

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

       789        781,110   

Ruby Pipeline LLC, 6.00%, 4/01/22 (b)

       10,000        10,477,310   

Sabine Pass Liquefaction LLC:

      

5.63%, 4/15/23

       7,393        7,194,313   

5.75%, 5/15/24

       2,869        2,768,585   

Sabine Pass LNG LP, 7.50%, 11/30/16

       5,965        6,155,134   

Sanchez Energy Corp., Series WI, 6.13%, 1/15/23

       1,141        827,225   

SandRidge Energy, Inc.:

      

8.13%, 10/16/22

       114        29,925   

7.50%, 2/16/23

       622        157,444   

Seventy Seven Energy, Inc., 6.50%, 7/15/22

       469        141,873   

SM Energy Co., 6.50%, 1/01/23

       322        317,298   

Summit Midstream Holdings LLC/Summit Midstream Finance Corp., 7.50%, 7/01/21

       1,614        1,565,580   

Tesoro Logistics LP/Tesoro Logistics Finance Corp., 6.25%, 10/15/22 (b)

       1,519        1,579,760   

Western Gas Partners LP, 5.38%, 6/01/21 (d)

       5,125        5,430,640   

Whiting Petroleum Corp.:

      

5.00%, 3/15/19

       1,672        1,588,400   

5.75%, 3/15/21

       1,171        1,087,566   

Williams Cos., Inc.:

      

3.70%, 1/15/23

       5,283        4,312,196   

4.55%, 6/24/24

       1,813        1,517,370   

8.75%, 3/15/32

       2,478        2,431,136   

5.75%, 6/24/44

       685        501,336   
 

 

See Notes to Financial Statements.

 

                
16    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust (BTZ)

 

Corporate Bonds   

Par  

(000)

    Value  

Oil, Gas & Consumable Fuels (continued)

  

Williams Partners LP, 5.10%, 9/15/45 (d)

     USD        5,075      $ 3,904,964   

WPX Energy, Inc., 5.25%, 9/15/24

       856        710,480   
      

 

 

 
                       217,850,121   

Paper & Forest Products — 2.1%

  

 

Clearwater Paper Corp., 4.50%, 2/01/23

       532        508,060   

International Paper Co.:

      

7.50%, 8/15/21 (d)

       9,675        11,702,686   

8.70%, 6/15/38

       4,000        5,464,100   

7.30%, 11/15/39 (d)

       10,000        12,036,190   

Louisiana-Pacific Corp., 7.50%, 6/01/20

       2,130        2,236,500   
      

 

 

 
                       31,947,536   

Pharmaceuticals — 3.7%

  

 

AbbVie, Inc. (d):

      

2.90%, 11/06/22

       5,675        5,491,800   

4.70%, 5/14/45

       3,255        3,115,790   

Actavis Funding SCS:

      

3.45%, 3/15/22

       4,610        4,580,247   

3.85%, 6/15/24

       6,000        5,970,540   

3.80%, 3/15/25

       1,650        1,635,048   

4.75%, 3/15/45

       1,450        1,386,652   

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

      

7.25%, 12/15/20

       241        249,134   

7.75%, 1/15/22

       499        517,713   

6.00%, 7/15/23

       1,514        1,514,000   

6.00%, 2/01/25

       1,601        1,588,992   

Forest Laboratories, Inc. (b):

      

4.38%, 2/01/19

       2,924        3,076,238   

5.00%, 12/15/21

       1,631        1,762,716   

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

       1,613        1,669,455   

Merck & Co., Inc., 6.50%, 12/01/33 (d)

       6,420        8,479,453   

Valeant Pharmaceuticals International (b):

      

6.75%, 8/15/18

       6,955        6,712,270   

5.38%, 3/15/20

       1,668        1,451,160   

7.00%, 10/01/20

       382        353,350   

6.38%, 10/15/20

       3,180        2,846,100   

7.50%, 7/15/21

       273        249,113   

5.63%, 12/01/21

       1,737        1,506,847   

5.50%, 3/01/23

       979        822,360   

5.88%, 5/15/23

       2,513        2,115,632   

6.13%, 4/15/25

       476        400,435   
      

 

 

 
                       57,495,045   

Professional Services — 0.5%

  

 

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

       1,755        1,544,400   

Dun & Bradstreet Corp., 3.25%, 12/01/17

       5,750        5,859,256   
      

 

 

 
                       7,403,656   

Real Estate Investment Trusts (REITs) — 2.8%

  

 

AvalonBay Communities, Inc., 6.10%, 3/15/20 (d)

       10,000        11,409,510   

DDR Corp.:

      

4.75%, 4/15/18

       2,140        2,257,019   

7.88%, 9/01/20

       2,650        3,212,219   

ERP Operating LP, 5.75%, 6/15/17 (d)

       10,000        10,661,230   

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

       999        1,033,965   

HCP, Inc., 5.38%, 2/01/21 (d)

       3,450        3,799,030   

Host Hotels & Resorts LP, Series D, 3.75%, 10/15/23 (d)

       3,600        3,479,404   

iStar Financial, Inc.:

      

4.00%, 11/01/17

       825        806,437   

5.00%, 7/01/19

       580        567,675   

UDR, Inc., 4.25%, 6/01/18 (d)

       5,225        5,501,779   
      

 

 

 
                       42,728,268   
Corporate Bonds   

Par  

(000)

    Value  

Real Estate Management & Development — 0.8%

  

 

Lennar Corp.:

      

4.75%, 11/15/22

     USD        1,805      $ 1,805,000   

4.88%, 12/15/23

       816        812,940   

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

       4,485        3,937,130   

Realogy Corp., 7.63%, 1/15/20 (b)(d)

       5,090        5,351,066   

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

      

4.50%, 4/15/19

       803        827,090   

5.25%, 12/01/21 (d)

       344        356,900   
      

 

 

 
                       13,090,126   

Road & Rail — 1.1%

  

 

Hertz Corp.:

      

4.25%, 4/01/18

       983        995,287   

6.75%, 4/15/19

       1,167        1,197,634   

5.88%, 10/15/20

       925        957,375   

7.38%, 1/15/21

       310        322,592   

Norfolk Southern Corp., 6.00%, 3/15/05 (d)

       12,700        13,834,085   
      

 

 

 
                       17,306,973   

Semiconductors & Semiconductor Equipment — 0.3%

  

 

Micron Technology, Inc., 5.25%, 1/15/24 (b)

       1,115        1,067,613   

NXP BV/NXP Funding LLC (b):

      

4.13%, 6/15/20

       1,154        1,177,080   

5.75%, 2/15/21

       1,655        1,729,475   

4.63%, 6/15/22

       490        499,800   
      

 

 

 
                       4,473,968   

Software — 0.5%

  

 

Infor US, Inc., 6.50%, 5/15/22 (b)

       2,425        2,297,688   

Italics Merger Sub, Inc., 7.13%, 7/15/23 (b)

       557        552,538   

Nuance Communications, Inc., 5.38%, 8/15/20 (b)

       4,435        4,523,700   
      

 

 

 
                       7,373,926   

Specialty Retail — 1.3%

  

 

AutoNation, Inc., 6.75%, 4/15/18

       6,125        6,783,143   

L Brands, Inc.:

      

7.00%, 5/01/20

       3,050        3,494,171   

6.88%, 11/01/35 (b)

       1,514        1,572,668   

Penske Automotive Group, Inc., 5.38%, 12/01/24

       2,750        2,791,250   

VF Corp., 5.95%, 11/01/17 (d)

       5,000        5,448,850   
      

 

 

 
                       20,090,082   

Textiles Apparel & Shoes — 0.1%

  

 

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

             1,674        1,665,630   

Textiles, Apparel & Luxury Goods — 0.1%

  

 

Levi Strauss & Co., 5.00%, 5/01/25

       699        707,738   

William Carter Co., 5.25%, 8/15/21

       1,406        1,460,482   
      

 

 

 
                       2,168,220   

Thrifts & Mortgage Finance — 0.1%

  

 

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

             1,475        1,473,156   

Tobacco — 2.3%

  

 

Altria Group, Inc., 10.20%, 2/06/39 (d)

       13,392        22,137,873   

Reynolds American, Inc.:

      

3.50%, 8/04/16 (b)

       8,375        8,506,245   

3.25%, 11/01/22

       970        965,106   

4.85%, 9/15/23

       1,120        1,212,051   

5.85%, 8/15/45

       2,335        2,590,288   
      

 

 

 
                       35,411,563   

Trading Companies & Distributors — 0.4%

  

 

Doric Nimrod Air Alpha Pass-Through Trust, Series 2013-1 (b):

      

Class A, 5.25%, 5/30/25

       2,604        2,708,507   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    17


Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust (BTZ)

 

Corporate Bonds   

Par  

(000)

    Value  

Trading Companies & Distributors (continued)

  

 

Doric Nimrod Air Alpha Pass-Through Trust, Series 2013-1 (b) (continued):

      

Class B, 6.13%, 11/30/21

     USD        3,116      $ 3,217,266   
      

 

 

 
                       5,925,773   

Transportation Infrastructure — 1.0%

  

 

CEVA Group PLC (b):

      

4.00%, 5/01/18

       3,310        2,945,900   

7.00%, 3/01/21

       1,067        964,301   

Penske Truck Leasing Co. LP/PTL Finance Corp., 4.88%, 7/11/22 (b)

       10,500        11,029,820   
      

 

 

 
                       14,940,021   

Wireless Telecommunication Services — 5.6%

  

 

America Movil SAB de CV (d):

      

2.38%, 9/08/16

       12,495        12,605,781   

3.13%, 7/16/22

       1,275        1,261,679   

American Tower Corp.:

      

4.50%, 1/15/18

       6,500        6,823,908   

5.05%, 9/01/20

       500        543,525   

5.90%, 11/01/21 (d)

       3,770        4,187,614   

4.00%, 6/01/25

       4,225        4,175,229   

Crown Castle International Corp., 5.25%, 1/15/23

       1,380        1,485,225   

Crown Castle Towers LLC (b):

      

5.50%, 1/15/37

       4,000        4,103,650   

4.17%, 8/15/37

       3,000        3,068,622   

6.11%, 1/15/40

       4,555        5,030,380   

Digicel Group Ltd., 7.13%, 4/01/22 (b)

       370        305,250   

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

       1,285        1,156,500   

SBA Communications Corp., 4.88%, 7/15/22

       1,445        1,477,440   

SBA Tower Trust, 5.10%, 4/15/42 (b)

       13,975        14,268,943   

Sprint Communications, Inc. (b):

      

9.00%, 11/15/18

       5,290        5,815,667   

7.00%, 3/01/20

       9,302        9,767,100   

Sprint Corp.:

      

7.88%, 9/15/23

       2,715        2,511,375   

7.13%, 6/15/24

       1,755        1,541,109   

T-Mobile USA, Inc.:

      

6.63%, 4/28/21

       2,680        2,773,800   

6.73%, 4/28/22

       2,495        2,576,088   

6.84%, 4/28/23

       645        665,963   
      

 

 

 
                       86,144,848   
Total Corporate Bonds — 107.5%        1,665,253,945   
      
                          
Foreign Agency Obligations                      

Brazilian Government International Bond, 5.00%, 1/27/45

       5,000        3,750,000   

Indonesia Government International Bond, 5.88%, 1/15/24 (b)

       4,400        4,858,097   

Mexico Government International Bond, 4.75%, 3/08/44

             2,300        2,185,000   
Total Foreign Agency Obligations — 0.7%        10,793,097   
      
                          
Municipal Bonds                      

City of Chicago Illinois, Refunding ARB, O’Hare International Airport, General 3rd Lien, Build America Bonds, Series B, 6.85%, 1/01/38

       5,000        5,552,350   
Municipal Bonds   

Par  

(000)

    Value  

Metropolitan Transportation Authority, RB, Build America Bonds, Series B-1, 6.55%, 11/15/31 (d)

     USD        10,000      $ 12,690,500   
Total Municipal Bonds — 1.2%        18,242,850   
      
                          
U.S. Government Sponsored Agency Securities                      

Agency Obligations — 0.2%

  

Fannie Mae, 0.00%, 10/09/19 (d)(j)

             3,945        3,669,639   
      
                          
Preferred Securities  
Capital Trusts  

Banks — 4.0%

  

BNP Paribas SA (a)(b)(e):

      

7.20% (d)

       5,000        5,725,000   

7.38%

       4,535        4,693,725   

Capital One Financial Corp., Series E, 5.55% (a)(e)

       10,000        10,018,750   

Credit Agricole SA, 8.38% (a)(b)(e)

       5,000        5,663,000   

Credit Suisse Group AG, 7.50% (a)(e)

       3,250        3,430,992   

HSBC Capital Funding LP (a)(e):

      

6.38%

       4,695        4,636,312   

10.18% (b)

       11,835        17,870,850   

Nordea Bank AB, 6.13% (a)(b)(e)

       5,540        5,470,750   

Wells Fargo & Co. (a)(e):

      

Series S, 5.90%

       1,090        1,117,250   

Series U, 5.88%

       2,655        2,808,194   
      

 

 

 
                       61,434,823   

Capital Markets — 2.0%

  

Ameriprise Financial, Inc., 7.52%, 6/01/66 (a)

       3,000        2,985,000   

Goldman Sachs Group, Inc., Series L, 5.70% (a)(e)

       2,950        2,990,563   

Morgan Stanley (a)(e):

      

Series H, 5.45%

       2,200        2,164,250   

Series J, 5.55%

       6,530        6,521,838   

State Street Capital Trust IV, 1.34%, 6/01/77 (a)(d)

       17,845        14,409,837   

State Street Corp., Series F, 5.25% (a)(e)

       1,855        1,861,678   
      

 

 

 
                       30,933,166   

Consumer Finance — 0.3%

  

American Express Co., Series C, 4.90% (a)(e)

             4,510        4,374,700   

Diversified Financial Services — 4.6%

  

Bank of America Corp. (a)(e):

      

Series AA, 6.10%

       5,640        5,703,450   

Series K, 8.00%

       2,420        2,523,092   

Series M, 8.13%

       950        989,273   

Series U, 5.20%

       5,785        5,472,245   

Barclays PLC, 6.63% (a)(e)

       4,885        4,820,616   

Citigroup, Inc. (a)(e):

      

5.90%

       2,210        2,198,950   

5.95%

       7,000        6,755,000   

General Electric Capital Corp. (a)(e):

      

Series B, 6.25% (d)

       9,100        10,142,860   

Series C, 5.25%

       1,200        1,254,000   

JPMorgan Chase & Co. (a)(e):

      

Series 1, 7.90%

       3,650        3,792,350   

Series Q, 5.15%

       4,000        3,850,000   

Series R, 6.00%

       14,130        14,334,885   

Series S, 6.75%

       7,775        8,435,875   
 

 

See Notes to Financial Statements.

 

                
18    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust (BTZ)

 

Capital Trusts

  

Par  

(000)

    Value  

Diversified Financial Services (continued)

  

Royal Bank of Scotland Group PLC, 8.00% (a)(e)

     USD        970      $ 1,013,650   
      

 

 

 
                       71,286,246   

Electric Utilities — 0.4%

  

PPL Capital Funding, Inc., Series A, 6.70%, 3/30/67 (a)

             8,300        7,013,500   

Insurance — 7.4%

  

ACE Capital Trust II, 9.70%, 4/01/30 (d)

       7,000        10,237,500   

Allstate Corp., 6.50%, 5/15/67 (a)

       10,400        11,492,000   

American International Group, Inc., 8.18%, 5/15/68 (a)

       3,755        4,956,600   

AXA SA (a)(b)(e):

      

6.38%

       4,900        5,261,375   

6.46%

       6,000        6,232,500   

Bank One Capital III, 8.75%, 9/01/30 (d)

       2,000        2,841,514   

Chubb Corp., 6.38%, 3/29/67 (a)(d)

       7,400        7,104,000   

Equitable of Iowa Cos. Capital Trust II, Series B, 8.42%, 4/01/27

       5,000        5,930,545   

Farmers Exchange Capital II,
6.15%, 11/01/53 (a)(b)

       4,890        5,206,471   

Great-West Life & Annuity Insurance Capital LP II, 7.15%, 5/16/46 (a)(b)

       500        503,125   

Hartford Financial Services Group, Inc., 8.13%, 6/15/68 (a)

       5,050        5,608,025   

Liberty Mutual Group, Inc., 10.75%, 6/15/88 (a)(b)

       8,325        12,487,500   

MetLife, Inc., 6.40%, 12/15/66 (d)

       9,775        10,719,265   

Principal Financial Group, Inc., 4.70%, 5/15/55 (b)

       5,000        5,037,000   

Reinsurance Group of America, Inc., 6.75%, 12/15/65 (a)

       12,000        10,125,000   

Swiss Re Capital I LP, 6.85% (a)(b)(e)

       4,450        4,513,413   

ZFS Finance USA Trust II,
6.45%, 12/15/65 (a)(b)(d)

       6,800        6,898,600   
      

 

 

 
                       115,154,433   

Multi-Utilities — 0.3%

  

Dominion Resources, Inc., 7.50%, 6/30/66 (a)

             4,400        3,938,000   

Oil, Gas & Consumable Fuels — 1.4%

  

Enterprise Products Operating LLC, (a):

      

7.00%, 6/01/67

       2,500        2,225,000   

Series A, 8.38%, 8/01/66

       9,325        9,161,812   

TransCanada PipeLines Ltd.,
6.35%, 5/15/67 (a)

       9,400        7,802,000   

TransCanada Trust, 5.63%, 5/20/75 (a)

       2,755        2,637,913   
      

 

 

 
                       21,826,725   

Real Estate Investment Trusts (REITs) — 0.6%

  

Sovereign Real Estate Investment Trust, 12.00% (b)

             7,000        8,890,000   

Road & Rail — 0.4%

  

BNSF Funding Trust I, 6.61%, 12/15/55 (a)(d)

             6,125        6,866,125   
Total Capital Trusts — 21.4%        331,717,718   
      
                          
Preferred Stocks    Shares         

Banks — 0.9%

  

Wells Fargo & Co., 5.85% (a)(e)

             550,500        14,307,495   

Capital Markets — 0.7%

  

Goldman Sachs Group, Inc., Series J, 5.50% (a)(e)

       162,450        4,043,380   

SCE Trust III, 5.75% (a)(e)

       31,650        881,453   
Preferred Stocks        
Shares
    Value  

Capital Markets (continued)

  

State Street Corp., Series D, 5.90% (a)(e)

       220,495      $ 5,869,577   
      

 

 

 
                   10,794,410   

Consumer Finance — 0.0%

  

Ally Financial, Inc., Series A, 8.50% (a)(e)

         10,220        262,654   

Diversified Financial Services — 0.9%

  

Citigroup, Inc., Series K, 6.88% (a)(e)

         488,320        13,448,333   

Electric Utilities — 0.1%

  

Entergy Louisiana LLC, 5.25%

         90,000        2,295,900   

Machinery — 0.1%

  

Stanley Black & Decker, Inc., 6.25% (k)

         11,107        1,333,506   

Media — 0.4%

  

NBCUniversal Enterprise, Inc., 5.25% (b)(e)

         5,600        5,964,000   

Real Estate Investment Trusts (REITs) — 0.2%

  

Ventas Realty LP/Ventas Capital Corp., 5.45%

       75,000        1,983,000   

Vornado Realty Trust, Series K, 5.70% (e)

       50,000        1,275,500   
      

 

 

 
                   3,258,500   

Wireless Telecommunication Services — 1.2%

  

Centaur Funding Corp., 9.08% (b)

         15,143        18,701,605   
Total Preferred Stocks — 4.5%        70,366,403   
      
                      
Trust Preferreds — 0.5%  

Diversified Financial Services — 0.5%

  

GMAC Capital Trust I, Series 2,
8.13%, 2/15/40 (a)

         300,141        7,623,936   
Total Preferred Securities — 26.4%                  409,708,057   
Total Long-Term Investments
(Cost — $2,126,860,257) — 141.8%
        2,196,985,811   
      
                      
Short-Term Securities — 0.0%                    

BlackRock Liquidity Funds, TempFund, Institutional Class, 0.10% (l)(m)

         610,104        610,104   
Total Short-Term Securities
(Cost — $610,104) — 0.0%
                 610,104   
Options Purchased
(Cost — $4,852,495) — 0.1%
                 1,256,386   
Total Investments Before Options Written
(Cost — $2,132,322,856) — 141.9%
                 2,198,852,301   
Options Written
(Premiums Received — $1,061,185) — (0.0)%
        (21,225
Total Investments, Net of Options Written
(Cost — $2,131,261,671) — 141.9%
        2,198,831,076   
Liabilities in Excess of Other Assets — (41.9)%          (649,708,307
      

 

 

 
Net Assets — 100.0%        $ 1,549,122,769   
      

 

 

 
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    19


Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust (BTZ)

 

 

Notes to Schedule of Investments

 

(a)   Variable rate security. Rate shown is as of report date.

 

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

 

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

 

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

 

(e)   Security is perpetual in nature and has no stated maturity date.

 

(f)   Issuer filed for bankruptcy and/or is in default of interest payments.

 

(g)   Non-income producing security.

 

(h)   When-issued security.

 

(i)   Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date.

 

(j)   Zero-coupon bond.

 

(k)   Convertible security.

 

(l)   During the year ended October 31, 2015, investments in issuers considered to be an affiliate of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate      Shares Held
at October 31,
2014
       Net
Activity
       Shares Held
at October 31,
2015
       Income  

BlackRock Liquidity Funds, TempFund, Institutional Class

       4,283,291           (3,673,187        610,104         $ 7,660   

 

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

 

 

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

As of period end, reverse repurchase agreements outstanding were as follows:

 

Counterparty      Interest
Rate
       Trade
Date
     Maturity
Date1
     Face Value        Face Value
Including
Accrued
Interest
 

UBS Securities LLC

       0.32      2/05/14      Open      $ 956,709         $ 962,127   

UBS Securities LLC

       0.33      2/10/14      Open        6,197,000           6,232,674   

Barclays Capital, Inc.

       0.35      2/28/14      Open        7,944,000           7,991,190   

UBS Securities LLC

       0.30      5/08/14      Open        9,646,000           9,689,568   

Barclays Capital, Inc.

       0.35      10/29/14      Open        4,668,000           4,712,029   

UBS Securities LLC

       (0.50 )%       5/13/14      Open        2,016,000           2,000,992   

UBS Securities LLC

       0.32      5/13/14      Open        8,649,000           8,690,208   

UBS Securities LLC

       0.32      5/13/14      Open        2,182,000           2,192,396   

UBS Securities LLC

       0.32      5/13/14      Open        7,149,000           7,183,061   

UBS Securities LLC

       0.34      5/13/14      Open        1,256,000           1,262,358   

UBS Securities LLC

       0.34      5/13/14      Open        10,604,000           10,657,680   

UBS Securities LLC

       0.34      5/13/14      Open        683,000           686,458   

UBS Securities LLC

       0.34      5/13/14      Open        5,229,000           5,255,470   

UBS Securities LLC

       0.35      5/13/14      Open        10,880,000           10,936,697   

UBS Securities LLC

       0.35      5/13/14      Open        6,046,000           6,077,506   

UBS Securities LLC

       0.35      5/13/14      Open        1,115,000           1,120,810   

UBS Securities LLC

       0.35      5/13/14      Open        6,061,000           6,092,585   

UBS Securities LLC

       0.35      5/13/14      Open        5,546,000           5,574,901   

UBS Securities LLC

       0.35      5/13/14      Open        3,255,000           3,271,962   

UBS Securities LLC

       0.35      5/13/14      Open        23,285,000           23,406,341   

UBS Securities LLC

       0.35      5/13/14      Open        11,160,000           11,218,156   

Barclays Capital, Inc.

       0.35      5/14/14      Open        6,234,000           6,275,690   

Barclays Capital, Inc.

       0.35      5/14/14      Open        1,213,000           1,223,455   

Barclays Capital, Inc.

       0.35      5/14/14      Open        2,791,000           2,815,886   

Barclays Capital, Inc.

       0.35      5/14/14      Open        11,233,000           11,331,492   

Barclays Capital, Inc.

       0.40      7/01/14      Open        10,010,000           10,063,818   

Barclays Capital, Inc.

       0.40      10/07/14      Open        13,545,000           13,603,695   

Barclays Capital, Inc.

       0.35      10/29/14      Open        734,000           775,704   

Barclays Capital, Inc.

       0.35      10/29/14      Open        9,152,000           9,194,479   

Barclays Capital, Inc.

       0.35      10/29/14      Open        2,514,000           2,557,254   

Barclays Capital, Inc.

       0.35      10/29/14      Open        4,956,000           5,000,804   

Barclays Capital, Inc.

       0.35      10/29/14      Open        4,995,000           5,040,579   

Barclays Capital, Inc.

       0.35      10/29/14      Open        5,182,000           5,228,354   

 

See Notes to Financial Statements.

 

                
20    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust (BTZ)

 

As of period end, reverse repurchase agreements outstanding were as follows (continued):

 

Counterparty      Interest
Rate
       Trade
Date
     Maturity
Date1
  Face Value        Face Value
Including
Accrued
Interest
 

UBS Securities LLC

       0.34      5/13/14      Open   $ 4,668,000         $ 4,691,630   

Credit Suisse Securities (USA) LLC

       0.50      12/19/14      Open     3,368,000           3,382,688   

Credit Suisse Securities (USA) LLC

       0.40      12/19/14      Open     528,000           529,962   

Credit Suisse Securities (USA) LLC

       0.40      12/19/14      Open     3,197,000           3,210,943   

Credit Suisse Securities (USA) LLC

       0.40      12/19/14      Open     2,287,000           2,296,974   

Credit Suisse Securities (USA) LLC

       0.45      12/19/14      Open     556,000           558,045   

Credit Suisse Securities (USA) LLC

       0.45      4/27/15      Open     5,322,969           5,335,478   

Credit Suisse Securities (USA) LLC

       0.45      12/19/14      Open     4,926,000           4,947,483   

Credit Suisse Securities (USA) LLC

       0.45      12/19/14      Open     3,627,000           3,642,818   

Credit Suisse Securities (USA) LLC

       0.45      12/19/14      Open     6,627,000           6,655,901   

Credit Suisse Securities (USA) LLC

       0.50      12/19/14      Open     2,740,000           2,751,949   

Credit Suisse Securities (USA) LLC

       0.50      12/19/14      Open     1,203,000           1,208,246   

UBS Securities LLC

       0.40      12/19/14      Open     9,435,000           9,468,232   

Deutsche Bank Securities, Inc.

       0.17      3/05/15      Open     3,570,225           3,574,747   

HSBC Securities (USA), Inc.

       0.38      3/12/15      Open     8,240,466           8,260,820   

BNP Paribas Securities Corp.

       0.42      4/06/15      Open     5,675,000           5,687,788   

Credit Suisse Securities (USA) LLC

       0.45      4/07/15      Open     5,499,000           5,511,709   

BNP Paribas Securities Corp.

       0.42      4/29/15      Open     3,345,000           3,352,259   

BNP Paribas Securities Corp.

       0.42      4/30/15      Open     2,894,325           2,900,274   

BNP Paribas Securities Corp.

       0.42      5/07/15      Open     3,443,000           3,449,980   

BNP Paribas Securities Corp.

       0.42      5/14/15      Open     12,214,000           12,238,367   

BNP Paribas Securities Corp.

       0.42      5/14/15      Open     3,125,000           3,131,234   

Credit Suisse Securities (USA) LLC

       0.40      5/27/15      Open     3,484,500           3,492,147   

HSBC Securities (USA), Inc.

       0.40      6/01/15      Open     11,850,000           11,870,145   

BNP Paribas Securities Corp.

       0.42      6/10/15      Open     9,261,000           9,275,347   

BNP Paribas Securities Corp.

       0.42      6/10/15      Open     4,656,000           4,663,213   

BNP Paribas Securities Corp.

       0.42      6/10/15      Open     5,665,000           5,673,776   

BNP Paribas Securities Corp.

       0.42      6/10/15      Open     2,955,000           2,959,578   

BNP Paribas Securities Corp.

       0.42      6/10/15      Open     4,202,000           4,208,727   

BNP Paribas Securities Corp.

       0.42      6/10/15      Open     7,177,000           7,189,458   

BNP Paribas Securities Corp.

       0.42      6/10/15      Open     5,313,000           5,321,505   

BNP Paribas Securities Corp.

       0.42      6/10/15      Open     14,483,000           14,506,185   

BNP Paribas Securities Corp.

       0.42      6/10/15      Open     7,799,000           7,811,485   

BNP Paribas Securities Corp.

       0.42      6/10/15      Open     5,230,000           5,238,372   

BNP Paribas Securities Corp.

       0.42      6/10/15      Open     4,799,000           4,806,682   

BNP Paribas Securities Corp.

       0.42      6/10/15      Open     10,541,000           10,557,874   

BNP Paribas Securities Corp.

       0.42      6/10/15      Open     3,234,000           3,239,177   

BNP Paribas Securities Corp.

       0.42      6/10/15      Open     4,786,000           4,793,662   

BNP Paribas Securities Corp.

       0.42      6/10/15      Open     2,027,000           2,030,245   

BNP Paribas Securities Corp.

       0.42      6/10/15      Open     4,825,000           4,832,724   

BNP Paribas Securities Corp.

       0.42      6/10/15      Open     9,401,000           9,417,804   

RBC Capital Markets LLC

       0.39      6/10/15      Open     172,559,000           172,826,323   

RBC Capital Markets LLC

       0.39      6/12/15      Open     2,706,875           2,711,039   

RBC Capital Markets LLC

       (1.00 )%       6/16/15      Open     333,680           332,401   

RBC Capital Markets LLC

       0.39      6/25/15      Open     3,413,250           3,418,020   

RBC Capital Markets LLC

       0.39      6/25/15      Open     3,567,375           3,572,360   

RBC Capital Markets LLC

       0.39      9/03/15      Open     4,363,968           4,366,757   

BNP Paribas Securities Corp.

       0.45      9/11/15      Open     12,494,000           12,501,496   

BNP Paribas Securities Corp.

       0.45      9/11/15      Open     11,165,000           11,171,699   

BNP Paribas Securities Corp.

       0.45      9/11/15      Open     7,395,000           7,399,437   

RBC Capital Markets LLC

       0.39      10/21/15      Open     4,160,375           4,160,871   

RBC Capital Markets LLC

       0.39      10/23/15      Open     13,890,000           13,890,903   

RBC Capital Markets LLC

       0.39      10/23/15      Open     3,940,000           3,940,256   

RBC Capital Markets LLC

       0.39      10/23/15      Open     5,655,000           5,655,368   

RBC Capital Markets LLC

       0.39      10/23/15      Open     3,779,000           3,779,246   

RBC Capital Markets LLC

       0.39      10/23/15      Open     4,370,000           4,370,284   

RBC Capital Markets LLC

       0.39      10/23/15      Open     3,285,000           3,285,214   

Barclays Capital, Inc.

       (1.25 )%       10/29/15      Open     438,075           438,029   

Deutsche Bank Securities, Inc.

       (2.50 )%       10/29/15      Open     894,413           894,226   

Total

                 $ 683,676,205         $ 685,715,941   
                

 

 

 

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

      

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    21


Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust (BTZ)

 

 

Derivative Financial Instruments Outstanding as of Period End

      Financial Futures Contracts

 

Contracts
Long (Short)
       Issue      Expiration      Notional
Value
    Unrealized
Appreciation
(Depreciation)
 
  102         2-Year U.S. Treasury Note      December 2015        USD        22,302,938      $ (36,688
  2,286         5-Year U.S. Treasury Note      December 2015        USD        273,802,079        (728,387
  (542      10-Year U.S. Treasury Note      December 2015        USD        69,206,625        (13,095
  (202      Long U.S. Treasury Bond      December 2015        USD        31,600,375        404,250   
  617         Ultra Long U.S. Treasury Bond      December 2015        USD        98,565,750        (109,474
  (871      90-Day Euro Future      December 2016        USD        215,550,725        (790,992
  (900      90-Day Euro Future      March 2017        USD        222,412,500        (1,542,474
  Total                       $ (2,816,860
                  

 

 

 

      Exchange-Traded Options Purchased

 

Description  

Put/

Call

 

Strike
Price

    Expiration
Date
    Contracts     Value  

90-Day Euro-Dollar

  Put     USD        98.00        12/14/15        1,698      $ 10,612   

90-Day Euro-Dollar

  Put     USD        99.00        12/14/15        1,698        10,613   

S&P 500 Index

  Put     USD        1,980.00        1/15/16        250        717,500   

Total

            $ 738,725   
           

 

 

 

      OTC Interest Rate Swaptions Purchased

 

Description    Counterparty      Put/
Call
    

Exercise

Rate

  

Pay/

Receive
Exercise Rate

    

Floating Rate

Index

     Expiration
Date
     Notional
Amount
(000)
     Value  

30-Year Interest Swap

   Deutsche Bank AG      Put      3.35%    Pay      3-month LIBOR      6/09/16      USD    63,150      $ 517,661   

      Exchange-Traded Options Written

 

Description   Put/
Call
    Strike
Price
    Expiration
Date
  Contracts     Value  

90-Day Euro-Dollar

    Put        USD    98.50      12/14/15     3,396      $ (21,225

      Centrally Cleared Interest Rate Swaps

 

Fixed Rate   Floating
Rate
  Effective
Date
  Expiration
Date
    Notional
Amount
(000)
    Unrealized
Appreciation
(Depreciation)
 

1.65%1

  3-month LIBOR   N/A     11/30/19        USD        39,200      $ (478,038

1.36%1

  3-month LIBOR   1/6/20162     2/29/20        USD        50,180        141,774   

1.37%1

  3-month LIBOR   1/6/20162     2/29/20        USD        49,620        111,378   

1.32%1

  3-month LIBOR   1/6/20162     2/29/20        USD        24,690        109,131   

1.35%1

  3-month LIBOR   1/6/20162     2/29/20        USD        24,890        80,361   

2.21%1

  3-month LIBOR   N/A     10/18/20        USD        65,000        (2,233,926

2.79%1

  3-month LIBOR   N/A     10/11/23        USD        68,000        (4,574,794

2.79%1

  3-month LIBOR   N/A     11/18/23        USD        10,600        (710,255

3.03%1

  3-month LIBOR   N/A     1/08/24        USD        10,900        (933,899

2.38%1

  3-month LIBOR   N/A     5/14/25        USD        12,500        (381,543

3.03%1

  3-month LIBOR   N/A     2/15/40        USD        8,769        (897,056

3.05%1

  3-month LIBOR   N/A     2/15/40        USD        8,769        (914,046

3.05%1

  3-month LIBOR   N/A     2/15/40        USD        8,769        (918,379

3.06%1

  3-month LIBOR   N/A     2/15/40        USD        4,769        (512,457

Total

            $ (12,111,749
           

 

 

 

1    Trust pays the fixed rate and receives the floating rate.

       

 

2    Forward swap.

       

 

 

See Notes to Financial Statements.

 

                
22    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust (BTZ)

 

      OTC Credit Default Swaps — Buy Protection

 

Issuer/Index   Pay
Fixed
Rate
  Counterparty   Expiration
Date
    Notional
Amount
(000)
    Market
Value
    Premiums
Paid
(Received)
    Unrealized
Appreciation
(Depreciation)
 

Southwest Airlines Co.

  1.00%   Goldman Sachs Bank USA     12/20/16      USD     2,535      $ (27,174   $ 27,456      $ (54,630

Southwest Airlines Co.

  1.00%   Goldman Sachs International     12/20/16      USD     1,465        (15,704     15,867        (31,571

Southwest Airlines Co.

  1.00%   Royal Bank of Scotland PLC     12/20/16      USD     4,000        (42,964     47,112        (90,076

STMicro Electronics

  1.00%   Barclays Bank PLC     6/20/17      EUR     1,500        (13,567     21,083        (34,650

Cigna Corp.

  1.00%   Goldman Sachs Bank USA     9/20/17      USD     4,500        (78,066     (4,070     (73,996

Cigna Corp.

  1.00%   Goldman Sachs International     9/20/17      USD     2,800        (48,575     (2,532     (46,043

General Dynamic Corp.

  1.00%   Credit Suisse International     9/20/17      USD     5,585        (98,263     (52,441     (45,822

Humana, Inc.

  1.00%   Goldman Sachs Bank USA     9/20/17      USD     4,500        (76,327     28,010        (104,337

Humana, Inc.

  1.00%   Goldman Sachs International     9/20/17      USD     2,800        (47,493     17,428        (64,921

Lockheed Martin Corp.

  1.00%   Credit Suisse International     9/20/17      USD     5,585        (99,317     (18,247     (81,070

Northrop Grumman Corp.

  1.00%   Credit Suisse International     9/20/17      USD     4,715        (84,456     (40,729     (43,727

Raytheon Co.

  1.00%   Credit Suisse International     9/20/17      USD     4,715        (85,407     (43,385     (42,022

Citigroup, Inc.

  1.00%   Deutsche Bank AG     3/20/19      USD     16,700        (221,048     (48,292     (172,756

YUM! Brands, Inc.

  1.00%   Deutsche Bank AG     3/20/19      USD     20,000        235,915        (253,252     489,167   

MetLife, Inc.

  1.00%   Citibank N.A.     12/20/20      USD     1,360        (10,938     (1,318     (9,620

Prudential Financial, Inc.

  1.00%   Goldman Sachs International     12/20/20      USD     1,181        (9,291     (8,647     (644

Prudential Financial, Inc.

  1.00%   Citibank N.A.     12/20/20      USD     1,879        (14,782     (5,470     (9,312

Total

            $ (737,457   $ (321,427   $ (416,030
           

 

 

 

      OTC Credit Default Swaps — Sell Protection

 

Issuer/Index   Receive
Fixed
Rate
  Counterparty   Expiration
Date
  Credit
Rating1
  Notional
Amount
(000)2
    Market
Value
    Premiums
Paid
(Received)
    Unrealized
Appreciation
 

Anadarko Petroleum Corp.

  1.00%   Credit Suisse International   6/20/17   BBB     USD        2,425      $ 18,665      $ (39,736   $ 58,401   

Anadarko Petroleum Corp.

  1.00%   Morgan Stanley Capital Services LLC   6/20/17   BBB     USD        10        77        (181     258   

Anadarko Petroleum Corp.

  1.00%   UBS AG   6/20/17   BBB     USD        994        7,651        (17,717     25,368   

Anthem, Inc. (FKA WellPoint, Inc.)

  1.00%   Goldman Sachs International   9/20/17   A     USD        2,800        42,797        (10,023     52,820   

Anthem, Inc. (FKA WellPoint, Inc.)

  1.00%   Goldman Sachs Bank USA   9/20/17   A     USD        4,500        68,781        (16,108     84,889   

Comcast Corp.

  1.00%   Credit Suisse International   9/20/17   A-     USD        12,200        211,562        19,865        191,697   

United Health Group, Inc.

  1.00%   Goldman Sachs Bank USA   9/20/17   A+     USD        4,500        75,914        (4,053     79,967   

United Health Group, Inc.

  1.00%   Goldman Sachs International   9/20/17   A+     USD        2,800        47,235        (2,522     49,757   

MetLife, Inc.

  1.00%   Deutsche Bank AG   3/20/18   A-     USD        3,025        45,872        (58,587     104,459   

Bank of America Corp.

  1.00%   Deutsche Bank AG   3/20/19   A-     USD        16,700        260,427        86,105        174,322   

Valero Energy Corp.

  1.00%   Barclays Bank PLC   9/20/19   BBB     USD        40        387        146        241   

Valero Energy Corp.

  1.00%   Barclays Bank PLC   9/20/19   BBB     USD        3        28        11        17   

Valero Energy Corp.

  1.00%   Barclays Bank PLC   9/20/19   BBB     USD        110        1,071        364        707   

Valero Energy Corp.

  1.00%   Citibank N.A.   9/20/19   BBB     USD        24        233        159        74   

Total

              $ 780,700      $ (42,277   $ 822,977   
             

 

 

 

1    Using Standard & Poor’s rating of the issuer or the underlying securities of the index, as applicable.

       

2    The maximum potential amount the Trust may pay should a negative credit event take place as defined under the terms of the agreement.

       

 

Transactions in Options Written for the Year Ended October 31, 2015  
        Calls         Puts  
          Contracts   Notional
(000)1
    Premiums
Received
         Contracts   Notional
(000)1
    Premiums
Received
 

Outstanding options, beginning of year

                      3,396     406,600      $ 7,454,970   

Options written

        44,200      $ 901,516        1,230     44,200        2,405,492   

Options exercised

                                   

Options expired

                      (850)            (327,114

Options closed

        (44,200     (901,516     (380)     (450,800     (8,472,163
   

 

 

Outstanding options, end of year

                      3,396          $ 1,061,185   
   

 

 

1    Amount shown is in the currency in which the transaction was denominated.

       

       

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    23


Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust (BTZ)

 

 

Derivative Financial Instruments Categorized by Risk Exposure

 

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

           Commodity
Contracts
  Credit
Contracts
    Equity
Contracts
    Foreign
Currency
Exchange
Contracts
 

Interest

Rate
Contracts

    Other
Contacts
  Total  
Assets — Derivative Financial Instruments                                           

Financial futures contracts

   Net unrealized appreciation1                     $ 404,250        $ 404,250   

Options purchased

   Investments at value — unaffiliated2            $ 717,500          538,886          1,256,386   

Swaps — OTC

  

Unrealized appreciation on OTC swaps; Swap

premiums paid

    $ 1,575,750                          1,575,750   

Swaps — centrally cleared

   Net unrealized appreciation1                       442,644          442,644   
    

 

 

 

 

   

 

 

   

 

 

 

 

   

 

 

 

 

 

Total

    $ 1,575,750      $ 717,500        $ 1,385,780        $ 3,679,030   
    

 

 

 

 

   

 

 

   

 

 

 

 

   

 

 

 

 

 
                                                   
Liabilities — Derivative Financial Instruments                                           

Financial futures contracts

   Net unrealized depreciation1                     $ 3,221,110        $ 3,221,110   

Options written

   Options written at value                       21,225          21,225   

Swaps — OTC

  

Unrealized depreciation on OTC swaps; Swap

premiums received

    $ 1,532,507                          1,532,507   

Swaps — centrally cleared

   Net unrealized depreciation1                       12,554,393          12,554,393   
    

 

 

 

 

   

 

 

   

 

 

 

 

   

 

 

 

 

 

Total

       $ 1,532,507               $ 15,796,728        $ 17,329,235   
    

 

 

 

 

   

 

 

   

 

 

 

 

   

 

 

 

 

 

1   Includes cumulative appreciation (depreciation) on financial futures contracts and centrally cleared swaps, if any, as reported in the Schedules of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

       

2    Includes options purchased at value as reported in the Schedules of Investments.

 

For the year ended October 31, 2015, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

     Commodity
Contracts
   Credit
Contracts
    

Equity

Contracts

    

Foreign

Currency

Exchange

Contracts

  

Interest

Rate

Contracts

    

Other

Contacts

   Total  

Net Realized Gain (Loss) from:

                   

Financial futures contracts

                        $ (901,072       $ (901,072

Options purchased1

             $ 1,988,820            (5,067,151         (3,078,331

Options written

               (1,180,312         5,857,045            4,676,733   

Swaps

     $ (492,839                 (3,665,540         (4,158,379
 

 

  

 

 

    

 

 

    

 

  

 

 

    

 

  

 

 

 

Total

     $ (492,839    $ 808,508          $ (3,776,718       $ (3,461,049
 

 

  

 

 

    

 

 

    

 

  

 

 

    

 

  

 

 

 

1    Options purchased are included in net realized gain (loss) from investments.

       

                                                   
     Commodity
Contracts
   Credit
Contracts
    

Equity

Contracts

    

Foreign

Currency

Exchange

Contracts

  

Interest

Rate

Contracts

    

Other

Contacts

   Total  

Net Change in Unrealized Appreciation (Depreciation) on:

  

Financial futures contracts

                        $ (3,241,507       $ (3,241,507

Options purchased1

             $ (85,760         1,299,762            1,214,002   

Options written

                          (3,970,751         (3,970,751

Swaps

     $ 799,554                    (7,720,941         (6,921,387
 

 

  

 

 

    

 

 

    

 

  

 

 

    

 

  

 

 

 

Total

     $ 799,554       $ (85,760       $ (13,633,437       $ (12,919,643
 

 

  

 

 

    

 

 

    

 

  

 

 

    

 

  

 

 

 

1    Options purchased are included in net change in unrealized appreciation (depreciation) on investments.

       

 

See Notes to Financial Statements.

 

                
24    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust (BTZ)

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Financial futures contracts:

        

Average notional value of contracts — long

   $ 334,314,350   

Average notional value of contracts — short

   $ 827,532,673   
Options:   

Average value of option contracts purchased

   $ 504,769   

Average value of option contracts written

   $ 68,981   

Average notional value of swaption contracts purchased

   $ 179,800,000   

Average notional value of swaption contracts written

   $ 203,300,000   
Credit default swaps:   

Average notional value — buy protection

   $ 84,010,394   

Average notional value — sell protection

   $ 50,843,791   
Interest rate swaps:   

Average notional value — pays fixed rate

   $ 283,760,000   

Average notional value — receives fixed rate

   $ 11,800,000   

For more information about the Trust’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

 

Derivative Financial Instruments — Offsetting as of Period End

The Trust’s derivative assets and liabilities (by type) were as follows:

 

     Assets     Liabilities  
Derivative Financial Instruments:    

Financial futures contracts

  $ 715,208      $ 160,317   

Options

    1,256,386 1      21,225   

Swaps — Centrally cleared

           498,178   

Swaps — OTC2

    1,575,750        1,532,507   
 

 

 

 

Total derivative assets and liabilities in the Statements of Assets and Liabilities

  $ 3,547,344      $ 2,212,227   
 

 

 

 

Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)

    (1,453,933     (679,720
 

 

 

 

Total derivative assets and liabilities subject to an MNA

  $ 2,093,411      $ 1,532,507   
 

 

 

 

1    Includes options purchased at value which is included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Schedules of Investments.

        

2    Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums paid/received in the Statements of Assets and Liabilities.

       

 

The following table presents the Trust’s derivative assets and liabilities by counterparty net of amounts available for offset under an Master Netting Agreement (“MNA”) and net of the related collateral received and pledged by the Trust:

 

Counterparty        Derivative Assets
Subject to an MNA
by  Counterparty
    Derivatives
Available for
Offset1
    Non-cash Collateral
Received
  Cash Collateral
Received2
    Net
Amount of
Derivative
Assets3
 

Barclays Bank PLC

    $ 22,569      $ (22,569                

Citibank N.A.

      233        (233                

Credit Suisse International

      269,963        (269,963 )                 

Deutsche Bank AG

      1,371,714        (532,887     $ (838,827       

Goldman Sachs Bank USA

      220,322        (220,322                

Goldman Sachs International

      135,872        (135,872                

Morgan Stanley Capital Services LLC

      258        (181            $ 77   

Royal Bank of Scotland PLC

      47,112        (47,112                

UBS AG

      25,368        (17,717              7,651   
   

 

 

   

 

 

   

 

 

 

 

   

 

 

 
    $ 2,093,411      $ (1,246,856     $ (838,827   $ 7,728   
   

 

 

   

 

 

   

 

 

 

 

   

 

 

 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    25


Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust (BTZ)

 

Counterparty        Derivative Liabilities
Subject to an MNA
by  Counterparty
    Derivatives
Available for
Offset1
    Non-cash Collateral
Pledged
  Cash Collateral
Pledged
  Net
Amount of
Derivative
Liabilities4
 

Barclays Bank PLC

    $ 34,650      $ (22,569       $ 12,081   

Citibank N.A.

      25,720        (233         25,487   

Credit Suisse International

      407,179        (269,963         137,216   

Deutsche Bank AG

      532,887        (532,887           

Goldman Sachs Bank USA

      257,194        (220,322         36,872   

Goldman Sachs International

      166,903        (135,872         31,031   

Morgan Stanley Capital Services LLC

      181        (181           

Royal Bank of Scotland PLC

      90,076        (47,112         42,964   

UBS AG

      17,717        (17,717           
   

 

 

 

Total

    $ 1,532,507      $ (1,246,856       $ 285,651   
   

 

 

 

1   The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

      

2   Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

      

3   Net amount represents the net amount receivable from the counterparty in the event of default.

      

4   Net amount represents the net amount payable due to the counterparty in the event of default.

      

 

Fair Value Hierarchy as of Period End      

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Trust’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Trust’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

     Level 1        Level 2        Level 3        Total  

Assets:

                
Investments:                 
Long-Term Investments:                 

Asset-Backed Securities

            $ 77,792,608         $ 11,525,615         $ 89,318,223   

Corporate Bonds

              1,660,174,945           5,079,000           1,665,253,945   

Foreign Agency Obligations

              10,793,097                     10,793,097   

Municipal Bonds

              18,242,850                     18,242,850   

Preferred Securities

  $ 53,324,734           356,383,323                     409,708,057   

U.S. Government Sponsored Agency Securities

              3,669,639                     3,669,639   

Short-Term Securities

    610,104                               610,104   
Options Purchased:                 

Interest Rate Contracts

    21,225           517,661                     538,886   

Equity Contracts

    717,500                               717,500   
 

 

 

 

Total

  $ 54,673,563         $ 2,127,574,123         $ 16,604,615         $ 2,198,852,301   
 

 

 

 
                
     Level 1        Level 2        Level 3        Total  
Derivative Financial Instruments1                 

Assets:

                

Credit contracts

            $ 1,312,144                   $ 1,312,144   

Interest rate contracts

  $ 404,250           442,644                     846,894   

Liabilities:

                

Credit contracts

              (905,197                  (905,197

Interest rate contracts

    (3,242,335        (12,554,393                  (15,796,728
 

 

 

 

Total

  $ (2,838,085      $ (11,704,802                $ (14,542,887
 

 

 

 

1    Derivative financial instruments are swaps, financial futures contracts and options written. Swaps and financial futures contracts are valued at the unrealized appreciation (depreciation) on the instrument and options written are shown at value.

        

 

See Notes to Financial Statements.

 

                
26    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (concluded)

  

BlackRock Credit Allocation Income Trust (BTZ)

 

The Trust may hold assets and/or liabilities in which the fair value approximates the carrying amount or face value, including accrued interest, for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

 

     Level 1        Level 2        Level 3      Total  

Assets:

                

Cash

  $ 1,697,637                        $ 1,697,637   

Cash pledged for centrally cleared swaps

    9,035,930                          9,035,930   

Cash pledged as collateral for reverse repurchase agreements

    2,704,000                          2,704,000   

Cash pledged for financial futures contracts

    4,302,780                          4,302,780   

Foreign currency at value

    8,883                          8,883   

Liabilities:

                

Cash received as collateral for OTC derivatives

            $ (1,000,000             (1,000,000

Reverse repurchase agreements

              (685,715,941             (685,715,941
 

 

 

 

Total

  $ 17,749,230         $ (686,715,941           $ (668,966,711
 

 

 

 

During the year ended October 31, 2015, there were no transfers between Level 1 and Level 2.

A reconciliation of Level 3 investments is presented when the Trust had a significant amount of Level 3 investments at the beginning and/or end of the year in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

 

     Asset-Backed
Securities
       Corporate
Bonds
       Total  

Assets:

           

Opening Balance, as of October 31, 2014

  $ 5,930,350         $ 21,431,574         $ 27,361,924   

Transfers into Level 31

    3,359,388                     3,359,388   

Transfers out of Level 32

    (2,392,425        (4,477,824        (6,870,249

Accrued discounts/premiums

    16,955                     16,955   

Net realized gain (loss)

    (17,637        (230,000        (247,637

Net change in unrealized appreciation (depreciation)3,4

    66,834           (374,750        (307,916

Purchases

    7,154,650                     7,154,650   

Sales

    (2,592,500        (11,270,000        (13,862,500

Closing Balance, as of October 31, 2015

  $ 11,525,615         $ 5,079,000         $ 16,604,615   
 

 

 

      

 

 

      

 

 

 

Net change in unrealized appreciation (depreciation) on investments still held at October 31, 20154

  $ 60,052         $ 56,500         $ 116,552   
 

 

 

      

 

 

      

 

 

 

1    As of October 31, 2015, the Trust used observable inputs in determining the value of certain investments. As of October 31, 2015, the Trust used significant unobservable inputs in determining the value of the same investments. As a result, investments at beginning of period value of $3,359,388 were transferred from Level 2 to Level 3 in the disclosure hierarchy.

         

2    As of October 31, 2015, the Trust used significant unobservable inputs in determining the value of certain investments. As of October 31, 2015, the Trust used observable inputs in determining the value of the same investments. As a result, investments at beginning of period value of $6,870,249 were transferred from Level 3 to Level 2 in the disclosure hierarchy.

         

3    Included in the related net change in unrealized appreciation (depreciation) in the Statements of Operations.

       

4    Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at October 31, 2015 is generally due to investments no longer held or categorized as Level 3 at period end.

        

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    27


Schedule of Investments October 31, 2015

  

BlackRock Floating Rate Income Trust (BGT)

(Percentages shown are based on Net Assets)

 

Common Stocks        
Shares
    Value  

Construction & Engineering — 0.1%

      

USI United Subcontractors

             8,067      $ 242,024   

Diversified Consumer Services — 0.2%

      

Houghton Mifflin Harcourt Co. (a)

             32,847        643,473   

Household Durables — 0.0%

      

Berkline Benchcraft Equity LLC (a)

             6,155          
Total Common Stocks — 0.3%                      885,497   
      
                          
Asset-Backed Securities — 4.5%   

Par  

(000)

        

ALM Loan Funding (b)(c):

      

Series 2012-5A, Class BR, 3.31%, 10/18/27

     USD        560        549,528   

Series 2013-7R2A, Class B, 2.89%, 4/24/24

       350        346,356   

Series 2013-7RA, Class C, 3.74%, 4/24/24

       630        614,896   

Series 2013-7RA, Class D, 5.29%, 4/24/24

       550        532,375   

ALM XIV Ltd., Series 2014-14A, Class C, 3.74%, 7/28/26 (b)(c)

       713        658,852   

ALM XVI Ltd./ALM XVI LLC, Series 2015-16A, Class B, 3.16%, 7/15/27 (b)(c)

       880        868,120   

AMMC CLO 15 Ltd., Series 2014-15A, Class D, 4.48%, 12/09/26 (b)(c)

       250        246,875   

Apidos CDO XI, Series 2012-11A, Class D, 4.57%, 1/17/23 (b)(c)

       500        489,331   

Atlas Senior Loan Fund Ltd., Series 2014-6A, Class D, 3.99%, 10/15/26 (b)(c)

       525        486,356   

Atrium CDO Corp., Series 9A, Class D, 3.83%, 2/28/24 (b)(c)

       500        472,214   

Benefit Street Partners CLO VII Ltd., Series 2015-VIIA, Class B, 3.23%,
7/18/27 (b)(c)

       405        394,672   

Carlyle Global Market Strategies CLO Ltd. (b)(c):

      

Series 2012-4A, Class D, 4.79%, 1/20/25

       450        449,980   

Series 2013-1A, Class C, 4.31%, 2/14/25

       250        241,733   

Series 2014-5A, Class C, 4.47%, 10/16/25

       1,250        1,242,328   

Cent CLO 22 Ltd., Series 2014-22A, Class C, 4.06%, 11/07/26 (b)(c)

       750        715,575   

CIFC Funding 2014-II Ltd., Series 2014-2A, Class A3L, 3.18%, 5/24/26 (b)(c)

       275        268,274   

Highbridge Loan Management Ltd., Series 2015-7A, Class C, 3.70%, 11/15/26 (b)(c)(d)

       250        248,783   

LCM XVIII LP, Series 18A, Class INC, 3.45%, 4/20/27 (b)

       1,500        1,098,105   

Madison Park Funding XI Ltd., Series 2013-11A, Class D, 3.82%, 10/23/25 (b)(c)

       250        235,531   

North End CLO Ltd., Series 2013-1A, Class D, 3.82%, 7/17/25 (b)(c)

       500        474,950   

Octagon Investment Partners XVII Ltd., Series 2013-1A, Class D, 3.50%,
10/25/25 (b)(c)

       750        669,471   

OZLM Funding Ltd. (b)(c):

      

Series 2012-1A, Class BR, 3.32%, 7/22/27

       275        274,093   

Series 2012-2A, Class C, 4.65%, 10/30/23

       500        495,059   

OZLM VIII Ltd., Series 2014-8A, Class B, 3.29%, 10/17/26 (b)(c)

       280        271,120   

Sound Point CLO IV Ltd., Series 2013-3A, Class A, 1.66%, 1/21/26 (b)(c)

       390        384,208   

Symphony CLO Ltd., Series 2012-9A, Class D, 4.57%, 4/16/22 (b)(c)

       775        764,227   

Treman Park CLO LLC, Series 2015-1A, Class D, 4.13%, 4/20/27 (b)(c)

       700        661,500   

Venture XXI CLO Ltd., Series 2015-21A, Class A, 1.77%, 7/15/27 (b)(c)

       400        397,440   

Voya CLO Ltd., Series 2014-4A, Class SUB, 4.28%, 10/14/26 (b)

             1,000        627,440   
Total Asset-Backed Securities — 4.5%                      15,179,392   
Corporate Bonds   

Par  

(000)

    Value  

Airlines — 0.6%

  

American Airlines Pass-Through Trust, Series 2013-2, Class C, 6.00%, 1/15/17 (c)

     USD        592      $ 606,946   

US Airways Pass-Through Trust, Series 2012-2, Class C, 5.45%, 6/03/18

       1,585        1,604,812   
      

 

 

 
                       2,211,758   

Auto Components — 0.1%

  

Icahn Enterprises LP/Icahn Enterprises Finance Corp., 3.50%, 3/15/17

             410        414,797   

Capital Markets — 0.5%

  

Blackstone CQP Holdco LP, 9.30%, 3/19/19

       579        584,504   

E*Trade Financial Corp., 0.00%, 8/31/19 (c)(e)(f)

       439        1,204,915   
      

 

 

 
                       1,789,419   

Commercial Services & Supplies — 0.1%

  

Avis Budget Car Rental LLC/Avis Budget Finance, Inc., 3.07%, 12/01/17 (b)

       179        179,986   

AWAS Aviation Capital Ltd., 7.00%, 10/17/16 (c)

       130        129,889   
      

 

 

 
                       309,875   

Communications Equipment — 0.1%

  

Avaya, Inc., 7.00%, 4/01/19 (c)

             232        188,500   

Containers & Packaging — 0.3%

  

Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc., 3.34%, 12/15/19 (b)(c)

             920        906,200   

Diversified Telecommunication Services — 0.3%

  

Level 3 Financing, Inc.:

      

3.91%, 1/15/18 (b)

       607        611,552   

6.13%, 1/15/21

       337        355,114   
      

 

 

 
                       966,666   

Health Care Equipment & Supplies — 0.1%

  

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

             190        188,575   

Health Care Providers & Services — 0.4%

  

Care UK Health & Social Care PLC, 5.58%, 7/15/19 (b)

     GBP        327        464,027   

Tenet Healthcare Corp., 3.84%, 6/15/20 (b)(c)

     USD        840        833,700   
      

 

 

 
                       1,297,727   

Household Durables — 0.0%

  

Berkline/Benchcraft LLC, 4.50%, 5/03/16 (a)(g)

             400          

Media — 0.5%

  

Altice Financing SA, 6.63%, 2/15/23 (c)

       335        335,837   

Altice US Finance I Corp., 5.38%, 7/15/23 (c)

       745        753,940   

Numericable Group SA, 6.00%, 5/15/22 (c)

       512        513,280   
      

 

 

 
                       1,603,057   

Oil, Gas & Consumable Fuels — 0.4%

  

California Resources Corp., 5.50%, 9/15/21

       875        601,563   

CONSOL Energy, Inc., 5.88%, 4/15/22

       380        240,350   

MEG Energy Corp., 7.00%, 3/31/24 (c)

       525        454,125   
      

 

 

 
                       1,296,038   

Pharmaceuticals — 0.1%

  

Valeant Pharmaceuticals International, Inc., 5.38%, 3/15/20 (c)

             560        487,200   

Wireless Telecommunication Services — 0.2%

  

Sprint Communications, Inc., 7.00%, 3/01/20 (c)

             730        766,500   
Total Corporate Bonds — 3.7%        12,426,312   
 

 

See Notes to Financial Statements.

 

                
28    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Floating Rate Income Trust (BGT)

 

Floating Rate Loan Interests (b)   

Par  

(000)

    Value  

Aerospace & Defense — 2.4%

  

BE Aerospace, Inc., 2014 Term Loan B, 4.00%, 12/16/21

     USD        1,689      $ 1,696,461   

DigitalGlobe, Inc., Term Loan B, 3.75%, 1/31/20

       916        912,571   

TASC, Inc., 2nd Lien Term Loan, 12.00%, 5/30/21

       725        739,500   

Transdigm, Inc.:

      

2015 Term Loan E, 3.50%, 5/14/22

       506        494,974   

Term Loan C, 3.75%, 2/28/20

       340        335,182   

Term Loan D, 3.75%, 6/04/21

       518        510,661   

TransUnion LLC, Term Loan B2, 3.50%, 4/09/21

       3,324        3,275,513   
      

 

 

 
                       7,964,862   

Air Freight & Logistics — 0.6%

  

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

       423        370,353   

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

       439        384,696   

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

       69        60,255   

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

       606        530,615   

XPO Logistics, Inc., Term Loan, 5.50%, 10/15/22

       820        811,800   
      

 

 

 
                       2,157,719   

Airlines — 0.4%

      

Northwest Airlines, Inc.:

      

2.39%, 3/10/17

       237        234,630   

1.77%, 9/10/18

       435        421,465   

US Airways Group, Inc., Term Loan B1, 3.50%, 5/23/19

       686        682,570   
      

 

 

 
                       1,338,665   

Auto Components — 2.8%

      

Autoparts Holdings Ltd.:

      

1st Lien Term Loan, 7.00%, 7/29/17

       1,506        1,229,632   

2nd Lien Term Loan, 11.00%, 1/29/18

       546        280,278   

Dayco Products LLC, Term Loan B, 5.25%, 12/12/19

       688        682,921   

FPC Holdings, Inc., 1st Lien Term Loan, 5.25%, 11/19/19

       889        841,592   

Gates Global, Inc., Term Loan B, 4.25%, 7/05/21

       5,296        4,962,012   

Goodyear Tire & Rubber Co., 2nd Lien Term Loan, 3.75%, 4/30/19

       936        937,696   

GPX International Tire Corp., Term Loan (a)(g):

      

12.25%, 3/30/2012

       274          

PIK, 13.00%, 3/30/2012

       4          

INA Beteiligungsgesellschaft mbH, Term Loan B, 4.25%, 5/15/20

       558        559,007   
      

 

 

 
                       9,493,138   

Automobiles — 0.4%

      

Chrysler Group LLC, Term Loan B:

      

2018, 3.25%, 12/31/18

       497        495,560   

3.50%, 5/24/17

       854        853,055   
      

 

 

 
                       1,348,615   

Banks — 0.3%

      

Redtop Acquisitions Ltd.:

      

1st Lien Term Loan, 4.50%, 12/03/20

       865        865,681   

2nd Lien Term Loan, 8.25%, 6/03/21

       182        180,323   
      

 

 

 
                       1,046,004   

Biotechnology — 0.2%

      

AMAG Pharmaceuticals, Inc., 2015 1st Lien Term Loan, 4.75%, 8/13/21

             520        509,600   

Building Materials — 0.1%

      

USAGM HoldCo LLC:

      

2015 2nd Lien Delayed Draw Term Loan, 9.50%, 7/28/23

       24        23,489   

2015 2nd Lien Term Loan, 9.50%, 7/28/23

       371        360,155   
      

 

 

 
                       383,644   
Floating Rate Loan Interests (b)   

Par  

(000)

    Value  

Building Products — 3.6%

      

Continental Building Products LLC, 1st Lien Term Loan, 4.00%, 8/28/20

     USD        778      $ 774,698   

CPG International, Inc., Term Loan, 4.75%, 9/30/20

       3,238        3,197,032   

GYP Holdings III Corp., 1st Lien Term Loan, 4.75%, 4/01/21

       746        722,647   

Hanson Building Products Ltd., 1st Lien Term Loan, 6.50%, 2/18/22

       266        261,780   

Jeld-Wen, Inc., Term Loan B, 5.25%, 10/15/21

       1,861        1,860,937   

Ply Gem Industries, Inc., Term Loan, 4.00%, 2/01/21

       611        601,161   

Quikrete Holdings, Inc., 1st Lien Term Loan, 4.00%, 9/28/20

       1,046        1,043,583   

Universal Services of America LP:

      

2015 Delayed Draw Term Loan, 4.75%, 7/28/22

       99        95,599   

2015 Term Loan, 4.75%, 7/28/22

       1,403        1,355,770   

Wilsonart LLC:

      

Incremental Term Loan B2, 4.00%, 10/31/19

       506        501,879   

Term Loan B, 4.00%, 10/31/19

       1,512        1,499,960   
      

 

 

 
                       11,915,046   

Capital Markets — 1.0%

      

Affinion Group, Inc., Term Loan B, 6.75%, 4/30/18

       795        762,105   

American Capital Holdings, Inc., 2017 Term Loan, 3.50%, 8/22/17

       481        478,931   

RPI Finance Trust, Term Loan B4, 3.50%, 11/09/20

       2,027        2,020,204   
      

 

 

 
                       3,261,240   

Chemicals — 3.5%

      

Allnex (Luxembourg) & Cy SCA, Term Loan B1, 4.50%, 10/03/19

       585        584,715   

Allnex USA, Inc., Term Loan B2, 4.50%, 10/03/19

       304        303,381   

Axalta Coating Systems US Holdings, Inc., Term Loan, 3.75%, 2/01/20

       1,315        1,312,948   

CeramTec Acquisition Corp., Term Loan B2, 4.25%, 8/30/20

       70        70,308   

Charter NEX US Holdings, Inc., Term Loan B, 5.25%, 2/07/22

       692        694,403   

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

       516        471,650   

Chemtura Corp., Term Loan B, 3.50%, 8/27/16

       69        68,229   

Chromaflo Technologies Corp., 2nd Lien Term Loan, 8.25%, 6/02/20

       295        279,133   

Evergreen Acqco 1 LP, Term Loan, 5.00%, 7/09/19

       736        620,459   

INEOS US Finance LLC, 6 Year Term Loan, 3.75%, 5/04/18

       428        422,312   

Klockner-Pentaplast of America, Inc., Term Loan, 5.00%, 4/28/20

       444        444,323   

MacDermid, Inc.:

      

1st Lien Term Loan, 4.50%, 6/07/20

       1,030        996,966   

Term Loan B2, 4.75%, 6/07/20

       89        85,574   

Nexeo Solutions LLC, Term Loan B, 5.00%, 9/08/17

       77        72,430   

OXEA Finance LLC:

      

2nd Lien Term Loan, 8.25%, 7/15/20

       845        766,136   

Term Loan B2, 4.25%, 1/15/20

       1,401        1,340,677   

Royal Holdings, Inc.:

      

2015 1st Lien Term Loan, 4.50%, 6/19/22

       693        686,115   

2015 2nd Lien Term Loan, 8.50%, 6/19/23

       285        283,812   

Solenis International LP:

      

1st Lien Term Loan, 4.25%, 7/31/21

       936        918,242   

2nd Lien Term Loan, 7.75%, 7/31/22

       1,055        983,788   

Tata Chemicals North America, Inc., Term Loan B, 3.75%, 8/07/20

       315        306,989   
      

 

 

 
                       11,712,590   

Commercial Services & Supplies — 6.7%

  

ADMI Corp., 2015 Term Loan B, 5.50%, 4/30/22

       727        729,269   

ADS Waste Holdings, Inc., Term Loan, 3.75%, 10/09/19

       1,791        1,767,724   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    29


Schedule of Investments (continued)

  

BlackRock Floating Rate Income Trust (BGT)

 

Floating Rate Loan Interests (b)   

Par  

(000)

    Value  

Commercial Services & Supplies (continued)

  

ARAMARK Corp.:

      

Term Loan E, 3.25%, 9/07/19

     USD        1,501      $ 1,498,998   

Term Loan F, 3.25%, 2/24/21

       525        523,252   

Asurion LLC, Term Loan B4, 5.00%, 8/04/22

       788        743,699   

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

       2,284        2,108,982   

Catalent Pharma Solutions, Inc., Term Loan B, 4.25%, 5/20/21

       2,025        2,020,072   

Connolly Corp.:

      

1st Lien Term Loan, 4.50%, 5/14/21

       1,837        1,829,165   

2nd Lien Term Loan, 8.00%, 5/14/22

       900        892,125   

Creative Artists Agency LLC, Term Loan B, 5.50%, 12/17/21

       635        635,397   

Dealer Tire LLC, Term Loan B, 5.50%, 12/22/21

       546        549,287   

KAR Auction Services, Inc., Term Loan B2, 3.50%, 3/11/21

       816        815,815   

Koosharem LLC, Exit Term Loan, 7.50%, 5/15/20

       1,432        1,401,501   

Livingston International, Inc., 1st Lien Term Loan, 5.00%, 4/18/19

       802        745,441   

PSSI Holdings LLC, Term Loan B, 5.00%, 12/02/21

       997        995,797   

Spin Holdco, Inc., Term Loan B, 4.25%, 11/14/19

       2,940        2,902,445   

US Ecology, Inc., Term Loan, 3.75%, 6/17/21

       424        422,993   

Waste Industries USA, Inc., Term Loan B, 4.25%, 2/27/20

       559        559,607   

West Corp., Term Loan B10, 3.25%, 6/30/18

       1,405        1,391,730   
      

 

 

 
                       22,533,299   

Communications Equipment — 2.2%

  

Applied Systems, Inc.:

      

1st Lien Term Loan, 4.25%, 1/25/21

       867        859,284   

2nd Lien Term Loan, 7.50%, 1/24/22

       230        221,087   

Avaya, Inc., Term Loan B7, 6.25%, 5/29/20

       1,189        910,525   

CommScope, Inc., Term Loan B5, 3.75%, 12/29/22

       560        558,953   

Riverbed Technology, Inc., Term Loan B, 6.00%, 4/24/22

       368        368,150   

Telesat Canada, Term Loan A, 3.89%, 3/24/17

     CAD        2,271        1,734,408   

Zayo Group LLC, Term Loan B, 3.75%, 5/06/21

     USD        2,708        2,703,619   
      

 

 

 
                       7,356,026   

Construction & Engineering — 0.1%

  

AECOM Technology Corp., Term Loan B, 3.75%, 10/15/21

             376        376,778   

Construction Materials — 1.1%

  

Filtration Group Corp., 1st Lien Term Loan, 4.25%, 11/21/20

       858        856,619   

HD Supply, Inc., 2015 Term Loan B, 3.75%, 8/13/21

       2,025        2,017,406   

Headwaters, Inc., Term Loan B, 4.50%, 3/24/22

       449        449,654   

McJunkin Red Man Corp., Term Loan, 4.75%, 11/08/19

       266        258,662   
      

 

 

 
                       3,582,341   

Containers & Packaging — 1.2%

  

Ardagh Holdings USA, Inc., Incremental Term Loan, 4.00%, 12/17/19

       812        810,250   

Berry Plastics Holding Corp.:

      

Term Loan E, 3.75%, 1/06/21

       763        761,597   

Term Loan F, 4.00%, 10/01/22

       2,021        2,023,846   

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

       504        505,139   
      

 

 

 
                       4,100,832   

Distributors — 0.7%

  

ABC Supply Co., Inc., Term Loan, 3.50%, 4/16/20

       1,252        1,243,407   

American Tire Distributors Holdings, Inc., 2015 Term Loan, 5.25%, 9/01/21

       945        948,010   
      

 

 

 
                       2,191,417   
Floating Rate Loan Interests (b)   

Par  

(000)

    Value  

Diversified Consumer Services — 2.9%

  

Allied Security Holdings LLC:

      

1st Lien Term Loan, 4.25%, 2/12/21

     USD        1,740      $ 1,696,639   

2nd Lien Term Loan, 8.00%, 8/13/21

       864        812,273   

Bright Horizons Family Solutions, Inc.:

      

Incremental Term Loan B1, 4.25%, 1/30/20

       318        317,997   

Term Loan B, 3.75%, 1/30/20

       1,713        1,715,113   

CT Technologies Intermediate Holdings, Inc., 1st Lien Term Loan, 5.25%, 12/01/21

       736        731,777   

Iglo Foods Midco Ltd., Term Loan C1, 3.50%, 7/05/20

     EUR        606        655,983   

ROC Finance LLC, Term Loan, 5.00%, 6/20/19

     USD        647        608,600   

ServiceMaster Co., 2014 Term Loan B, 4.25%, 7/01/21

       3,242        3,239,497   
      

 

 

 
                       9,777,879   

Diversified Financial Services — 3.7%

  

AlixPartners, LLP, 2015 Term Loan B, 4.50%, 7/28/22

       1,180        1,178,773   

AssuredPartners Capital, Inc., 2015 1st Lien Term Loan, 5.75%, 10/21/22

       1,055        1,054,346   

Diamond US Holding LLC, Term Loan B, 4.75%, 12/17/21

       596        595,500   

Jefferies Finance LLC, Term Loan, 4.50%, 5/14/20

       1,696        1,691,511   

Onex Wizard US Acquisition, Inc., Term Loan, 4.25%, 3/13/22

       1,264        1,263,195   

Reynolds Group Holdings, Inc., Dollar Term Loan, 4.50%, 12/01/18

       3,899        3,905,197   

SAM Finance Luxembourg Sarl, Term Loan, 4.25%, 12/17/20

       1,106        1,107,882   

SIG Euro Holdings AG & Co. KG, 2013 Term Loan, 4.50%, 12/02/18

     EUR        878        965,154   

TransFirst, Inc., 2014 2nd Lien Term Loan, 9.00%, 11/12/22

     USD        521        520,414   
      

 

 

 
                       12,281,972   

Diversified Telecommunication Services — 3.2%

  

Altice Financing SA, Term Loan:

      

5.25%, 2/04/22

       24        23,793   

Delayed Draw, 5.50%, 7/02/19

       1,854        1,853,397   

Hawaiian Telcom Communications, Inc., Term Loan B, 5.00%, 6/06/19

       1,426        1,420,541   

Integra Telecom, Inc.:

      

2015 1st Lien Term Loan, 5.25%, 8/14/20

       1,388        1,373,135   

2nd Lien Term Loan, 9.75%, 2/21/20

       459        452,374   

Level 3 Financing, Inc.:

      

2013 Term Loan B, 4.00%, 1/15/20

       4,685        4,693,199   

2019 Term Loan, 4.00%, 8/01/19

       902        904,165   
      

 

 

 
                       10,720,604   

Electrical Equipment — 1.1%

  

Southwire Co., Term Loan, 3.00%, 2/10/21

       606        598,203   

Texas Competitive Electric Holdings Co. LLC:

      

DIP Term Loan, 3.75%, 11/07/16

       2,753        2,749,653   

Extended Term Loan, 4.68%, 10/10/17 (a)(g)

       1,050        354,564   
      

 

 

 
                       3,702,420   

Electronic Equipment, Instruments & Components — 0.4%

  

CDW LLC, Term Loan, 3.25%, 4/29/20

       995        991,154   

CPI Acquisition, Inc., Term Loan B, 6.75%, 8/17/22

       497        494,553   
      

 

 

 
                       1,485,707   

Energy Equipment & Services — 1.6%

  

Dynegy Holdings, Inc., Term Loan B2, 4.00%, 4/23/20

       2,526        2,505,686   

Exgen Texas Power LLC, Term Loan B, 5.75%, 9/16/21

       208        166,683   

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

       2,931        2,750,914   
      

 

 

 
                       5,423,283   
 

 

See Notes to Financial Statements.

 

                
30    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Floating Rate Income Trust (BGT)

 

Floating Rate Loan Interests (b)   

Par  

(000)

    Value  

Food & Staples Retailing — 1.3%

  

Hostess Brands, LLC, 2nd Lien Term Loan, 8.50%, 8/03/23

     USD        210      $ 209,213   

New Albertson’s, Inc., Term Loan, 4.75%, 6/27/21

       891        884,879   

Rite Aid Corp., 2nd Lien Term Loan, 5.75%, 8/21/20

       540        540,448   

Supervalu, Inc., Refinancing Term Loan B, 4.50%, 3/21/19

       1,069        1,066,732   

US Foods, Inc., Refinancing Term Loan, 4.50%, 3/31/19

       1,687        1,685,841   
      

 

 

 
                       4,387,113   

Food Products — 2.7%

  

CTI Foods Holding Co. LLC, 1st Lien Term Loan, 4.50%, 6/29/20

       510        496,860   

Diamond Foods, Inc., Term Loan, 4.25%, 8/20/18

       1,764        1,760,268   

Dole Food Co., Inc., Term Loan B, 4.50%, 11/01/18

       1,522        1,520,746   

New HB Acquisition LLC, 1st Lien Term Loan, 4.50%, 8/03/22

       1,340        1,341,246   

Pabst Brewing Co., Inc., Term Loan, 5.75%, 10/21/21

       1,082        1,083,732   

Performance Food Group Co., 2nd Lien Term Loan, 6.25%, 11/14/19

       698        696,887   

Pinnacle Foods Finance LLC, Term Loan G, 3.00%, 4/29/20

       995        993,029   

Post Holdings Inc., Series A Incremental Term Loan, 3.75%, 6/02/21

       (h)      373   

Reddy Ice Corp.:

      

1st Lien Term Loan, 6.75%, 5/01/19

       980        809,951   

2nd Lien Term Loan, 10.75%, 11/01/19

       725        435,000   
      

 

 

 
                       9,138,092   

Health Care Equipment & Supplies — 4.4%

  

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

       1,408        1,408,050   

Auris Luxembourg III Sarl, Term Loan B4, 4.25%, 1/15/22

       643        642,770   

Capsugel Holdings US, Inc., Term Loan B, 3.50%, 8/01/18

       1,154        1,149,392   

DJO Finance LLC, 2015 Term Loan, 4.25%, 6/08/20

       2,030        2,011,928   

Iasis Healthcare LLC, Term Loan B2, 4.50%, 5/03/18

       1,657        1,658,943   

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

       1,690        1,653,641   

Leonardo Acquisition Corp., Term Loan, 4.25%, 1/31/21

       1,401        1,388,022   

Mallinckrodt International Finance SA, Term Loan B, 3.25%, 3/19/21

       679        643,353   

Millennium Health LLC, Term Loan B, 5.25%, 4/16/21

       919        323,999   

National Vision, Inc., 1st Lien Term Loan, 4.00%, 3/12/21

       1,925        1,850,883   

Ortho-Clinical Diagnostics, Inc., Term Loan B, 4.75%, 6/30/21

       1,679        1,652,484   

Sage Products Holdings III LLC, Refinancing Term Loan B2, 4.25%, 12/13/19

       485        484,551   
      

 

 

 
                       14,868,016   

Health Care Providers & Services — 7.4%

  

Acadia Healthcare Co., Inc., Term Loan B, 4.25%, 2/11/22

       292        291,795   

Air Medical Group Holdings, Inc., Term Loan B, 4.50%, 4/28/22

       593        582,143   

Amsurg Corp., 1st Lien Term Loan B, 3.50%, 7/16/21

       1,780        1,766,180   

CHG Healthcare Services Inc., Term Loan, 4.25%, 11/19/19

       1,531        1,522,245   

Community Health Systems, Inc.:

      

Term Loan F, 3.58%, 12/31/18

       981        975,576   

Term Loan G, 3.75%, 12/31/19

       1,679        1,670,495   

Term Loan H, 4.00%, 1/27/21

       1,342        1,337,604   
Floating Rate Loan Interests (b)   

Par  

(000)

    Value  

Health Care Providers & Services (continued)

  

Curo Health Services LLC, 2015 1st Lien Term Loan, 6.50%, 2/07/22

     USD        945      $ 942,887   

DaVita HealthCare Partners, Inc., Term Loan B, 3.50%, 6/24/21

       5,861        5,873,648   

Envision Healthcare Corp., Term Loan, 4.00%, 5/25/18

       901        897,603   

Genesis HealthCare Corp., Term Loan B, 10.00%, 12/04/17

       468        474,221   

HC Group Holdings III, Inc., Term Loan B, 6.00%, 4/07/22

       449        449,417   

HCA, Inc., Term Loan B5, 2.94%, 3/31/17

       849        848,311   

MPH Acquisition Holdings LLC, Term Loan, 3.75%, 3/31/21

       1,103        1,087,601   

National Mentor Holdings, Inc., Term Loan B, 4.25%, 1/31/21

       650        637,815   

Sterigenics-Nordion Holdings, LLC, 2015 Term Loan B, 4.25%, 5/15/22

       1,885        1,863,794   

Surgery Center Holdings, Inc., 1st Lien Term Loan, 5.25%, 11/03/20

       1,195        1,187,731   

Surgical Care Affiliates, Inc., Term Loan B, 4.25%, 3/17/22

       1,416        1,411,591   

U.S. Renal Care, Inc., 2013 Term Loan, 4.25%, 7/03/19

       1,001        999,265   
      

 

 

 
                       24,819,922   

Health Care Technology — 1.0%

  

Emdeon Business Services LLC, Term Loan B3, 3.75%, 11/02/18

       198        195,773   

IMS Health, Inc., Term Loan, 3.50%, 3/17/21

       1,980        1,972,782   

MedAssets, Inc., Term Loan B, 4.00%, 12/13/19

       1,120        1,112,380   
      

 

 

 
                       3,280,935   

Hotels, Restaurants & Leisure — 9.5%

  

Amaya Holdings BV:

      

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

       795        775,221   

2nd Lien Term Loan, 8.00%, 8/01/22

       862        865,546   

Boyd Gaming Corp., Term Loan B, 4.00%, 8/14/20

       1,288        1,288,515   

Bronco Midstream Funding LLC, Term Loan B, 5.00%, 8/15/20

       1,740        1,626,737   

Burger King Newco Unlimited Liability Co., 2015 Term Loan B, 3.75%, 12/12/21

       2,897        2,901,725   

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

       3,644        3,442,855   

CCM Merger, Inc., Term Loan B, 4.50%, 8/08/21

       916        913,032   

Diamond Resorts Corp., Term Loan, 5.50%, 5/09/21

       1,088        1,085,306   

Eldorado Resorts LLC, Term Loan B, 4.25%, 7/13/22

       549        547,939   

ESH Hospitality, Inc., Term Loan, 5.00%, 6/24/19

       580        585,800   

Hilton Worldwide Finance LLC, Term Loan B2, 3.50%, 10/26/20

       1,579        1,581,792   

Intrawest ULC, Term Loan, 4.75%, 12/09/20

       771        771,903   

La Quinta Intermediate Holdings LLC, Term Loan B, 3.75%, 4/14/21

       3,464        3,429,244   

Las Vegas Sands LLC, Term Loan B, 3.25%, 12/19/20

       1,717        1,692,599   

MGM Resorts International, Term Loan B, 3.50%, 12/20/19

       2,138        2,133,304   

Pinnacle Entertainment, Inc., Term Loan B2, 3.75%, 8/13/20

       444        443,008   

RHP Hotel Properties LP, Term Loan B, 3.50%, 1/15/21

       780        780,453   

Sabre, Inc.:

      

Incremental Term Loan, 4.00%, 2/19/19

       304        303,420   

Term Loan B, 4.00%, 2/19/19

       1,402        1,401,067   

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

       2,024        1,975,252   

Station Casinos LLC, Term Loan B, 4.25%, 3/02/20

       3,207        3,207,341   

Travelport Finance (Luxembourg) Sarl, 2014 Term Loan B, 5.75%, 9/02/21

       283        279,971   
      

 

 

 
                       32,032,030   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    31


Schedule of Investments (continued)

  

BlackRock Floating Rate Income Trust (BGT)

 

Floating Rate Loan Interests (b)   

Par  

(000)

    Value  

Household Durables — 0.3%

  

Jarden Corp., 2015 Term Loan B2, 2.94%, 7/30/22

     USD        965      $ 964,141   

Household Products — 0.9%

  

Bass Pro Group LLC, 2015 Term Loan, 4.00%, 6/05/20

       1,419        1,400,802   

Spectrum Brands, Inc., Term Loan, 3.75%, 6/23/22

       1,705        1,710,117   
      

 

 

 
                       3,110,919   

Independent Power and Renewable Electricity Producers — 2.3%

  

Aria Energy Operating LLC, Term Loan, 5.00%, 5/27/22

       893        857,052   

Calpine Corp., Term Loan B5, 3.50%, 5/27/22

       868        857,749   

Energy Future Intermediate Holding Co. LLC, DIP Term Loan, 4.25%, 6/19/16

       3,237        3,235,344   

Granite Acquisition, Inc.:

      

Term Loan B, 5.00%, 12/19/21

       1,888        1,840,718   

Term Loan C, 5.00%, 12/19/21

       84        81,604   

Terra-Gen Finance Co. LLC, Term Loan B, 5.25%, 12/09/21

       934        896,948   
      

 

 

 
                       7,769,415   

Industrial Conglomerates — 0.2%

  

Sequa Corp., Term Loan B, 5.25%, 6/19/17

             768        626,089   

Insurance — 1.1%

  

AmWINS Group LLC, 2014 2nd Lien Term Loan, 9.50%, 9/04/20

       349        349,996   

Asurion LLC, Term Loan B1, 5.00%, 5/24/19

       227        216,051   

Cooper Gay Swett & Crawford of Delaware Holding Corp., 1st Lien Term Loan, 5.00%, 4/16/20

       971        874,276   

Sedgwick Claims Management Services, Inc.:

      

1st Lien Term Loan, 3.75%, 3/01/21

       1,157        1,135,674   

2nd Lien Term Loan, 6.75%, 2/28/22

       1,230        1,146,212   
      

 

 

 
                       3,722,209   

Internet Software & Services — 1.6%

  

Go Daddy Operating Co. LLC, Term Loan B, 4.25%, 5/13/21

       1,555        1,558,127   

Interactive Data Corp., 2014 Term Loan, 4.75%, 5/02/21

       3,402        3,400,212   

W3 Co., 2nd Lien Term Loan, 9.25%, 9/11/20

       419        284,886   
      

 

 

 
                       5,243,225   

IT Services — 4.6%

  

Blue Coat Holdings Inc., 2015 Term Loan, 4.50%, 5/20/22

       1,295        1,284,744   

Epicor Software Corp., 1st Lien Term Loan, 4.75%, 6/01/22

       1,940        1,927,041   

First Data Corp.:

      

2018 Extended Term Loan, 3.70%, 3/24/18

       7,645        7,582,022   

2018 Term Loan, 3.70%, 9/24/18

       730        724,525   

First Data Corporation, Extended 2021 Term Loan, 4.20%, 3/24/21

       340        339,771   

SunGard Data Systems, Inc.:

      

Term Loan C, 3.94%, 2/28/17

       925        923,844   

Term Loan E, 4.00%, 3/08/20

       170        169,767   

TransFirst, Inc., Incremental Term Loan B, 4.75%, 11/12/21

       1,329        1,328,303   

Vantiv LLC, 2014 Term Loan B, 3.75%, 6/13/21

       1,043        1,044,167   
      

 

 

 
                       15,324,184   

Leisure Products — 0.3%

  

Bauer Performance Sports Ltd., Term Loan B, 4.50%, 4/15/21

             977        966,919   

Machinery — 2.1%

  

Allison Transmission, Inc., Term Loan B3, 3.50%, 8/23/19

       731        731,505   

Faenza Acquisition GmbH:

      

Term Loan B1, 4.25%, 8/30/20

       684        683,947   

Term Loan B3, 4.25%, 8/30/20

       207        207,003   
Floating Rate Loan Interests (b)   

Par  

(000)

    Value  

Machinery (continued)

  

Infiltrator Systems, Inc., 2015 Term Loan, 5.25%, 5/27/22

     USD        927      $ 924,959   

Mueller Water Products, Inc., Term Loan B, 4.00%, 11/25/21

       496        497,282   

Rexnord LLC, 1st Lien Term Loan B, 4.00%, 8/21/20

       1,482        1,463,253   

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

       2,133        1,948,546   

Wabash National Corp., 2015 Term Loan B, 4.25%, 3/16/22

       694        696,324   
      

 

 

 
                       7,152,819   

Manufactured Goods — 0.1%

  

KP Germany Erste GmbH, 1st Lien Term Loan, 5.00%, 4/28/20

             190        189,881   

Media — 12.1%

  

Cengage Learning Acquisitions, Inc.:

      

1st Lien Term Loan, 7.00%, 3/31/20

       2,574        2,555,272   

Term Loan, 0.00%, 7/03/16 (a)(g)

       1,296          

Charter Communications Operating LLC:

      

Term Loan H, 3.25%, 8/24/21

       650        648,375   

Term Loan I, 3.50%, 1/24/23

       3,970        3,964,402   

Clear Channel Communications, Inc., Term Loan D, 6.94%, 1/30/19

       3,597        3,006,781   

Hemisphere Media Holdings LLC, Term Loan B, 5.00%, 7/30/20

       1,019        981,113   

Houghton Mifflin Harcourt Publishing Co., 2015 Term Loan B, 4.00%, 5/31/21

       1,695        1,669,895   

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

       1,207        1,168,570   

Liberty Cablevision of Puerto Rico LLC, 1st Lien Term Loan, 4.50%, 1/07/22

       735        714,053   

Live Nation Entertainment, Inc., 2020 Term Loan B1, 3.50%, 8/16/20

       299        298,652   

MCC Iowa LLC:

      

Term Loan I, 2.66%, 6/30/17

       662        647,843   

Term Loan J, 3.75%, 6/30/21

       321        317,192   

Media General, Inc., Term Loan B, 4.00%, 7/31/20

       683        681,643   

Mediacom Communications Corp., Term Loan F, 2.66%, 3/31/18

       502        492,931   

Neptune Finco Corp., 2015 Term Loan B, 5.00%, 10/09/22

       2,475        2,482,079   

Numericable U.S. LLC:

      

Term Loan B1, 4.50%, 5/21/20

       1,347        1,328,278   

Term Loan B2, 4.50%, 5/21/20

       1,165        1,149,142   

Term Loan B6, 4.75%, 1/31/23

       1,430        1,413,098   

SBA Senior Finance II LLC:

      

Incremental Term Loan B, 3.25%, 6/10/22

       903        892,130   

Term Loan B1, 3.25%, 3/24/21

       1,807        1,792,722   

Sinclair Television Group, Inc., Term Loan B, 3.00%, 4/09/20

       122        119,775   

Tribune Media Company, Term Loan, 3.75%, 12/27/20

       2,240        2,232,683   

TWCC Holding Corp., Extended Term Loan, 5.75%, 2/11/20

       995        995,090   

Univision Communications, Inc., Term Loan C4, 4.00%, 3/01/20

       3,322        3,298,288   

Virgin Media Investment Holdings Ltd.:

      

Term Loan E, 4.25%, 6/30/23

     GBP        1,105        1,678,988   

Term Loan F, 3.50%, 6/30/23

     USD        2,405        2,390,845   

WideOpenWest Finance LLC, 2015 Term Loan B, 4.50%, 4/01/19

       843        827,640   

Ziggo Financing Partnership:

      

Term Loan B1, 3.50%, 1/15/22

       1,108        1,090,267   

Term Loan B2A, 3.50%, 1/15/22

       719        707,284   

Term Loan B3, 3.50%, 1/15/22

       1,182        1,163,228   
      

 

 

 
                       40,708,259   
 

 

See Notes to Financial Statements.

 

                
32    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Floating Rate Income Trust (BGT)

 

Floating Rate Loan Interests (b)   

Par  

(000)

    Value  

Metals & Mining — 0.5%

  

Ameriforge Group, Inc., 2nd Lien Term Loan, 8.75%, 12/19/20

     USD        265      $ 147,518   

Novelis, Inc., 2015 Term Loan B, 4.00%, 6/02/22

       1,626        1,594,096   
      

 

 

 
                       1,741,614   

Multiline Retail — 2.1%

  

BJ’s Wholesale Club, Inc.:

      

1st Lien Term Loan, 4.50%, 9/26/19

       2,233        2,210,954   

2nd Lien Term Loan, 8.50%, 3/26/20

       375        364,286   

Dollar Tree, Inc., Term Loan B1, 3.50%, 7/06/22

       1,465        1,466,863   

Hudson’s Bay Co., 2015 Term Loan B, 4.75%, 9/30/22

       1,405        1,406,321   

Neiman Marcus Group, Inc., 2020 Term Loan, 4.25%, 10/25/20

       1,621        1,582,061   
      

 

 

 
                       7,030,485   

Oil, Gas & Consumable Fuels — 3.3%

  

CITGO Holding Inc., 2015 Term Loan B, 9.50%, 5/12/18

       1,065        1,043,884   

Drillships Financing Holding, Inc., Term Loan B1, 6.00%, 3/31/21

       752        431,123   

EP Energy LLC/Everest Acquisition Finance, Inc., Term Loan B3, 3.50%, 5/24/18

       1,170        1,040,329   

Green Energy Partners/Stonewall LLC, Term Loan B1, 6.50%, 11/13/21

       545        525,925   

Obsidian Natural Gas Trust, Term Loan, 7.00%, 5/02/16

       32        31,702   

Offshore Group Investment Ltd., Term Loan B, 5.75%, 3/28/19

       66        18,598   

Panda Patriot LLC, Term Loan B1, 6.75%, 12/19/20

       865        817,425   

Power Buyer LLC:

      

1st Lien Term Loan, 4.25%, 5/06/20

       309        301,905   

2nd Lien Term Loan, 8.25%, 11/06/20

       285        270,750   

Samchully Midstream 3 LLC, Term Loan B, 5.75%, 10/20/21

       1,092        1,058,998   

Seventy Seven Operating LLC, Term Loan B, 3.75%, 6/25/21

       161        132,726   

Southcross Energy Partners LP, 1st Lien Term Loan, 5.25%, 8/04/21

       1,210        1,072,638   

Southcross Holdings Borrower LP, Term Loan B, 6.00%, 8/04/21

       573        424,791   

Stonewall Gas Gathering LLC, Term Loan B, 8.75%, 1/28/22

       842        831,254   

TPF II Power LLC, Term Loan B, 5.50%, 10/02/21

       971        967,700   

Veresen Midstream Limited Partnership, Term Loan B1, 5.25%, 3/31/22

       1,020        1,015,622   

WTG Holdings III Corp., 1st Lien Term Loan, 4.75%, 1/15/21

       1,032        1,026,467   
      

 

 

 
                       11,011,837   

Personal Products — 0.3%

  

Prestige Brands, Inc., Term Loan B3, 3.50%, 9/03/21

             1,160        1,159,612   

Pharmaceuticals — 6.1%

  

Akorn, Inc., Term Loan B, 5.50%, 4/16/21

       1,351        1,337,837   

Amneal Pharmaceuticals LLC, Term Loan, 4.50%, 11/01/19

       1,028        1,015,964   

CCC Information Services, Inc., Term Loan, 4.00%, 12/20/19

       506        499,222   

Endo Luxembourg Finance Co. I Sarl, 2015 Term Loan B, 3.75%, 9/26/22

       2,565        2,518,112   

Grifols Worldwide Operations USA, Inc., Term Loan B, 3.19%, 2/27/21

       2,593        2,586,486   

Horizon Pharma Holdings USA, Inc., Term Loan B, 4.50%, 5/07/21

       588        541,039   

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

       2,909        2,864,179   
Floating Rate Loan Interests (b)   

Par  

(000)

    Value  

Pharmaceuticals (continued)

  

JLL/Delta Dutch Newco BV, 2014 Incremental Term Loan, 4.25%, 3/11/21

     USD        2,133      $ 2,088,066   

Valeant Pharmaceuticals International, Inc.:

      

Series C2 Term Loan B, 3.75%, 12/11/19

       975        909,637   

Series D2 Term Loan B, 3.50%, 2/13/19

       943        877,344   

Series E Term Loan B, 3.75%, 8/05/20

       1,158        1,074,081   

Term Loan B F1, 4.00%, 4/01/22

       4,553        4,226,432   
      

 

 

 
                       20,538,399   

Professional Services — 2.7%

  

Acosta Holdco, Inc., 2015 Term Loan, 4.25%, 9/26/21

       1,172        1,142,386   

Advantage Sales & Marketing, Inc.:

      

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

       1,302        1,272,147   

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

       465        427,512   

Emdeon Business Services LLC, Term Loan B2, 3.75%, 11/02/18

       1,753        1,733,086   

ON Assignment, Inc., 2015 Term Loan, 3.75%, 6/05/22

       1,145        1,145,382   

SIRVA Worldwide, Inc., Term Loan, 7.50%, 3/27/19

       1,073        1,024,250   

Sterling Infosystems, Inc., 1st Lien Term Loan B, 4.50%, 6/20/22

       1,362        1,353,649   

Truven Health Analytics, Inc., Term Loan B, 4.50%, 6/06/19

       1,019        997,815   
      

 

 

 
                       9,096,227   

Real Estate Management & Development — 1.8%

  

CityCenter Holdings LLC, Term Loan B, 4.25%, 10/16/20

       1,396        1,396,419   

DTZ US Borrower LLC, 2015 1st Lien Term Loan, 5.50%, 11/04/21

       1,546        1,529,705   

Realogy Corp.:

      

Extended Letter of Credit, 2.22%, 10/10/16

       109        107,506   

Term Loan B, 3.75%, 3/05/20

       2,855        2,852,705   
      

 

 

 
                       5,886,335   

Road & Rail — 0.8%

  

Hertz Corp., Term Loan B2, 3.00%, 3/11/18

       879        869,578   

Road Infrastructure Investment LLC:

      

1st Lien Term Loan, 4.25%, 3/31/21

       1,226        1,198,732   

2nd Lien Term Loan, 7.75%, 9/30/21

       600        558,000   
      

 

 

 
                       2,626,310   

Semiconductors & Semiconductor Equipment — 1.9%

  

Avago Technologies Cayman Ltd., Term Loan B, 3.75%, 5/06/21

       2,850        2,849,478   

Freescale Semiconductor, Inc.:

      

Term Loan B4, 4.25%, 2/28/20

       2,150        2,147,556   

Term Loan B5, 5.00%, 1/15/21

       426        426,108   

NXP BV, Term Loan D, 3.25%, 1/11/20

       853        840,169   
      

 

 

 
                       6,263,311   

Software — 4.0%

  

GCA Services Group, Inc.:

      

2nd Lien Term Loan, 9.25%, 10/22/20

       400        396,000   

Term Loan B, 4.25%, 11/01/19

       1,000        994,205   

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

       2,073        2,015,466   

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

       2,135        2,104,559   

IQOR US, Inc., Term Loan B, 6.00%, 4/01/21

       537        424,968   

Kronos, Inc.:

      

2nd Lien Term Loan, 9.75%, 4/30/20

       1,088        1,099,284   

Initial Incremental Term Loan, 4.50%, 10/30/19

  

    896        893,518   

Mitchell International, Inc.:

      

1st Lien Term Loan, 4.50%, 10/12/20

       1,323        1,321,223   

2nd Lien Term Loan, 8.50%, 10/11/21

       1,000        993,540   

Sophia L.P., 2015 Term Loan B, 4.75%, 9/30/22

       530        528,839   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    33


Schedule of Investments (continued)

  

BlackRock Floating Rate Income Trust (BGT)

 

Floating Rate Loan Interests (b)   

Par  

(000)

    Value  

Software (continued)

  

SS&C Technologies, Inc.:

      

2015 Term Loan B1, 4.00%, 7/08/22

     USD        2,125      $ 2,129,829   

2015 Term Loan B2, 4.00%, 7/08/22

       329        329,544   

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

       84        79,509   
      

 

 

 
                       13,310,484   

Specialty Retail — 3.4%

  

Equinox Holdings, Inc., Repriced Term Loan B, 5.00%, 1/31/20

       796        796,620   

General Nutrition Centers, Inc., Term Loan, 3.25%, 3/04/19

       305        292,739   

Leslie’s Poolmart, Inc., Term Loan, 4.25%, 10/16/19

       1,212        1,191,937   

Michaels Stores, Inc.:

      

Incremental 2014 Term Loan B2, 4.00%, 1/28/20

       1,763        1,765,631   

Term Loan B, 3.75%, 1/28/20

       890        888,820   

Party City Holdings Inc., 2015 Term Loan B, 4.25%, 8/19/22

       1,915        1,914,042   

Petco Animal Supplies, Inc., Term Loan, 4.00%, 11/24/17

       1,809        1,804,057   

PetSmart, Inc., Term Loan B, 4.25%, 3/11/22

       2,224        2,222,624   

Things Remembered, Inc., Term Loan B, 8.25%, 5/24/18

       890        645,605   
      

 

 

 
                       11,522,075   

Technology Hardware, Storage & Peripherals — 0.7%

  

Dell International LLC, Term Loan B2, 4.00%, 4/29/20

       863        863,016   

Dell, Inc., Term Loan C, 3.75%, 10/29/18

       872        871,124   

Linxens France SA, Term Loan, 5.00%, 10/14/22

       480        473,602   
      

 

 

 
                       2,207,742   

Textiles, Apparel & Luxury Goods — 0.4%

  

Ascend Performance Materials LLC, Term Loan B, 6.75%, 4/10/18

             1,387        1,243,851   

Thrifts & Mortgage Finance — 0.3%

  

IG Investment Holdings LLC, Term Loan B, 6.00%, 10/29/21

             1,172        1,168,933   

Trading Companies & Distributors — 0.1%

  

Beacon Roofing Supply, Inc., Term Loan B, 4.00%, 10/01/22

             385        384,519   

Transportation — 0.2%

  

Gruden Acquisition, Inc., 1st Lien Term Loan, 5.75%, 8/18/22

             780        760,500   

Transportation Infrastructure — 0.2%

  

Penn Products Terminals LLC, Term Loan B, 4.75%, 4/13/22

             691        693,010   

Wireless Telecommunication Services — 2.3%

  

Communications Sales & Leasing, Inc., Term Loan B, 5.00%, 10/24/22

       594        559,386   

Crown Castle Operating Co., Term Loan B2, 3.00%, 1/31/21

       1,199        1,198,147   

LTS Buyer LLC, 1st Lien Term Loan, 4.00%, 4/13/20

       2,531        2,489,799   

New Lightsquared LLC, PIK Exit Term Loan, 9.75%, 6/15/20

       3,500        3,403,750   
      

 

 

 
                       7,651,082   
Total Floating Rate Loan Interests — 123.2%        413,264,175   
                          
Non-Agency Mortgage-Backed Securities — 0.2%                

Collateralized Mortgage Obligations — 0.2%

  

Hilton USA Trust, Series 2013-HLT, Class EFX, 4.45%, 11/05/30 (b)(c)

             813        818,589   
Investment Companies          

Shares

    Value  

Capital Market — 0.0%

  

Eaton Vance Floating-Rate Income Trust

       34      $ 448   

Eaton Vance Senior Income Trust

             8,925        53,996   
Total Investment Companies — 0.0%        54,444   
      
                          
Other Interests (i)           Beneficial
Interest
(000)
        

Auto Components — 0.0%

  

 

Lear Corp. Escrow

     USD        500        4,375   

Construction Materials — 0.1%

  

 

USI Senior Holdings

             8        169,417   
Total Other Interests — 0.1%        173,792   
      
                          
Warrants           Shares         

Chemicals — 0.0%

  

 

British Vita Holdings Co. (Non-Expiring)

             166          

Software — 0.0%

  

 

Bankruptcy Management Solutions, Inc.:

      

Expires 07/01/18

       181          

Expires 07/01/19

       195          

Expires 07/02/20

       292          

HMH Holdings/EduMedia (Issued/exercisable 3/09/10, 19 Shares for 1 Warrant, Expires 6/22/19, Strike Price $42.27)

       1,501        8,643   
      

 

 

 
                       8,643   
Total Warrants — 0.0%        8,643   
Total Long-Term Investments
(Cost — $452,508,965) — 132.0%
        442,810,844   
      
                          
Short-Term Securities — 0.3%         

BlackRock Liquidity Funds, TempFund, Institutional Class, 0.10% (j)(k)

             1,094,113        1,094,113   
Total Short-Term Securities
(Cost — $1,094,113) — 0.3%
        1,094,113   
Options Purchased
(Cost — $25,422) — 0.0%
                  
Total Investments (Cost — $453,628,500) — 132.3%        443,904,957   

Liabilities in Excess of Other Assets — (32.3)%

  

    (108,461,183
      

 

 

 
Net Assets — 100.0%        $ 335,443,774   
      

 

 

 
 

 

See Notes to Financial Statements.

 

                
34    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Floating Rate Income Trust (BGT)

 

 

Notes to Schedule of Investments

 

(a)   Non-income producing security.

 

(b)   Variable rate security. Rate shown is as of report date.

 

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

 

(d)   When-issued security.

 

(e)   Zero-coupon bond.

 

(f)   Convertible security.

 

(g)   Issuer filed for bankruptcy and/or is in default of interest payments.

 

(h)   Amount is less than $500.

 

(i)   Other interests represent beneficial interests in liquidation trusts and other reorganization or private entities.

 

(j)   During the year ended October 31, 2015, investments in issuers considered to be an affiliate of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate      Shares Held
at October 31,
2014
       Net
Activity
       Shares Held
at October 31,
2015
       Income  

BlackRock Liquidity Funds,TempFund, Institutional Class

       2,630,534           (1,536,421        1,094,113         $ 420   

 

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

 

 

For Trust compliance purposes, the Trust’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. 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)
 
EUR        800,000         USD        907,528      Morgan Stanley & Co. International PLC     11/04/15         $ (27,797
EUR        188,000         USD        207,318      State Street Bank and Trust Co.     11/04/15           (581
GBP        36,000         USD        55,755      Goldman Sachs International     11/04/15           (258
USD        1,407,168         CAD        1,838,000      HSBC Bank PLC     11/04/15           1,560   
USD        2,249,947         EUR        1,980,000      Barclays Bank PLC     11/04/15           72,614   
USD        47,847         GBP        31,000      Goldman Sachs International     11/04/15           58   
USD        1,721,795         GBP        1,131,000      Morgan Stanley & Co. International PLC     11/04/15           (21,743
USD        1,391,501         CAD        1,834,000      UBS AG     12/03/15           (10,794
USD        1,090,729         EUR        987,000      Barclays Bank PLC     12/03/15           4,969   
USD        1,728,553         GBP        1,126,000      Morgan Stanley & Co. International PLC     12/03/15           (6,972
Total                         $ 11,056   
                       

 

 

 

      OTC Options Purchased

 

Description   Put/
Call
    Counterparty     Expiration
Date
    Strike
Price
    Contracts     Value  

Marsico Parent Superholdco LLC

    Call        Goldman Sachs & Co.        12/14/19        USD        942.86        26          

 

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

           Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Currency
Exchange
Contracts
    Interest
Rate
Contracts
    Other
Contacts
    Total  
Assets — Derivative Financial Instruments                                                 

Forward foreign currency exchange contracts

  

Unrealized appreciation on forward foreign currency exchange contracts

                       $ 79,201                    $ 79,201   

Options purchased

   Investments at value — unaffiliated1                                                 

Total

                          $ 79,201                    $ 79,201   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    35


Schedule of Investments (continued)

  

BlackRock Floating Rate Income Trust (BGT)

 

 

           Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Currency
Exchange
Contracts
    Interest
Rate
Contracts
    Other
Contacts
    Total  
Liabilities — Derivative Financial Instruments                                                 

Forward foreign currency exchange contracts

  

Unrealized depreciation on forward foreign currency exchange contracts

                       $ 68,145                    $ 68,145   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1    Includes options purchased at value as reported in the Schedule of Investments.

       

       

For the year ended October 31, 2015, the effect of derivative financial instruments in the Consolidated Statements of Operations was as follows:

 

     Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Currency
Exchange
Contracts
    Interest
Rate
Contracts
    Other
Contacts
    Total  
Net Realized Gain (Loss) from:              

Forward foreign currency exchange contracts

                       $ 2,014,193                    $ 2,014,193   

Swaps

         $ (43,669                                 (43,669
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

         $ (43,669          $ 2,014,193                    $ 1,970,524   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Currency
Exchange
Contracts
    Interest
Rate
Contracts
    Other
Contacts
    Total  
Net Change in Unrealized Appreciation (Depreciation) on:              

Forward foreign currency exchange contracts

                       $ (180,035                 $ (180,034
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Forward foreign currency exchange contracts:

       

Average amounts purchased — in USD

  $ 8,848,362   

Average amounts sold — in USD

  $ 467,482   
Credit default swaps:  

Average notional value — sell protection

  $ 445,500   

For more information about the Trust’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

 

Derivative Financial Instruments — Offsetting as of Period End

The Trust’s derivative assets and liabilities (by type) were as follows:

 

     Assets     Liabilities  
Derivative Financial Instruments:    

Forward foreign currency exchange contracts

  $ 79,201      $ 68,145   
 

 

 

 

Total derivative assets and liabilities in the Statements of Assets and Liabilities

  $ 79,201      $ 68,145   
 

 

 

 

Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)

             
 

 

 

 

Total derivative assets and liabilities subject to an MNA

  $ 79,201      $ 68,145   
 

 

 

 

The following table presents the Trust’s derivative assets and liabilities by counterparty net of amounts available for offset under an Master Netting Agreement (“MNA”) and net of the related collateral received and pledged by the Trust:

 

Counterparty        Derivative Assets
Subject to an MNA
by Counterparty
    Derivatives
Available for
Offset1
    Non-cash Collateral
Received
 

Cash Collateral

Received

  Net
Amount of
Derivative
Assets2
 

Barclays Bank PLC

    $ 77,583                 $ 77,583   

Goldman Sachs International

      58      $ (58           

HSBC Bank PLC

      1,560                   1,560   
   

 

 

   

 

 

   

 

 

 

 

 

 

 

Total

    $ 79,201      $ (58       $ 79,143   
   

 

 

   

 

 

   

 

 

 

 

 

 

 

 

See Notes to Financial Statements.

 

                
36    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Floating Rate Income Trust (BGT)

 

Counterparty        Derivative Liabilities
Subject to an MNA
by  Counterparty
    Derivatives
Available for
Offset1
    Non-cash Collateral
Pledged
  Cash Collateral
Pledged
    Net
Amount of
Derivative
Liabilities3
 

Goldman Sachs International

    $ 258      $ (58            $ 200   

Morgan Stanley & Co. International PLC

      56,512                        56,512   

State Street Bank and Trust Co.

      581                        581   

UBS AG

      10,794                        10,794   
   

 

 

 

Total

    $ 68,145      $ (58            $ 68,087   
   

 

 

 

1    The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

       

2    Net amount represents the net amount receivable from the counterparty in the event of default.

       

3    Net amount represents the net amount payable due to the counterparty in the event of default.

       

 

Fair Value Hierarchy as of Period End      

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Trust’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Trust’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

     Level 1        Level 2        Level 3        Total  

Assets:

                
Investments:                 

Long-Term Investments:

                

Asset-Backed Securities

            $ 10,870,732         $ 4,308,660         $ 15,179,392   

Common Stocks

  $ 643,473                     242,024           885,497   

Corporate Bonds

              11,841,808           584,504           12,426,312   

Floating Rate Loan Interests

              392,903,603           20,360,572           413,264,175   

Investment Companies

    54,444                               54,444   

Non-Agency Mortgage-Backed Securities

              818,589                     818,589   

Other Interests

                        173,792           173,792   

Warrants

                        8,643           8,643   

Short-Term Securites

    1,094,113                               1,094,113   
 

 

 

 

Total

  $ 1,792,030         $ 416,434,732         $ 25,678,195         $ 443,904,957   
 

 

 

 
                
     Level 1        Level 2        Level 3        Total  
Derivative Financial Instruments1                 

Assets:

                

Foreign currency exchange contracts

            $ 79,201                   $ 79,201   

Liabilities:

                

Foreign currency exchange contracts

              (68,145                  (68,145
 

 

 

 

Total

            $ 11,056                   $ 11,056   
 

 

 

 

1   Derivative financial instruments are forward foreign currency exchange contracts which are valued at the unrealized appreciation (depreciation) on the instrument.

      

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

 

     Level 1        Level 2        Level 3      Total  

Assets:

                

Cash

  $ 948,823                        $ 948,823   

Foreign currency at value

    5,141                          5,141   

Liabilities:

                

Bank borrowings payable

            $ (104,000,000             (104,000,000
 

 

 

 

Total

  $ 953,964         $ (104,000,000           $ (103,046,036
 

 

 

 

During the year ended October 31, 2015, there were no transfers between Level 1 and Level 2.

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    37


Schedule of Investments (concluded)

  

BlackRock Floating Rate Income Trust (BGT)

 

A reconciliation of Level 3 investments is presented when the Trust had a significant amount of Level 3 investments at the beginning and/or end of the period in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

 

     Asset-Backed
Securities
    Common
Stocks
    Corporate
Bonds
    Floating
Rate Loan
Interests
    Other
Interests
    Warrants     Total  

Assets:

             

Opening balance, as of October 31, 2014

  $ 715,650      $ 153,282      $ 560,826      $ 37,080,633      $ 4,375      $ 1,214      $ 38,515,980   

Transfers into Level 31

    466,391                      4,310,780               8,274        4,785,445   

Transfers out of Level 32

                         (12,797,161                   (12,797,161

Accrued discounts/premiums

    4,147               (634     55,509                      59,022   

Net realized gain (loss)

                  300        (1,977,792            (4,686     (1,982,178

Net change in unrealized appreciation (depreciation)3,4

    (42,138     88,742        868        795,709        169,417        7,206        1,019,804   

Purchases

    3,164,610               53,444        9,470,989                      12,689,043   

Sales

                  (30,300     (16,578,095            (3,365     (16,611,760

Closing Balance, as of October 31, 2015

  $ 4,308,660      $ 242,024      $ 584,504      $ 20,360,572      $ 173,792      $ 8,643      $ 25,678,195   
 

 

 

 

Net change in unrealized appreciation (depreciation) on investments still held at October 31, 20154

  $ (42,138   $ 88,742      $ 868      $ (1,067,486   $ 169,417      $ 369      $ (850,228
 

 

 

 

1    As of October 31, 2015, the Trust used observable inputs in determining the value of certain investments. As of October 31, 2015, the Trust used significant unobservable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $4,785,445 were transferred from Level 2 to Level 3 in the disclosure hierarchy.

         

2    As October 31, 2015, the Trust used significant unobservable inputs in determining the value of certain investments. As of October 31, 2015, the Trust used observable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $12,797,161 were transferred from Level 3 to Level 2 in the disclosure hierarchy.

         

3    Included in the related net change in unrealized appreciation (depreciation) in the Consolidated Statement of Operations.

       

4    Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at October 31, 2015 is generally due to investments no longer held or categorized as Level 3 at period end.

        

The Trust’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information could result in a significantly lower or higher value of such Level 3 investments.

 

See Notes to Financial Statements.

 

                
38    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments October 31, 2015

  

BlackRock Multi-Sector Income Trust (BIT)

(Percentages shown are based on Net Assets)

 

Asset-Backed Securities          

Par  

(000)

    Value  

Asset-Backed Securities — 35.0%

      

ACE Securities Corp. Home Equity Loan Trust, Series 2006-HE1, Class A2D, 0.50%, 2/25/36 (a)

     USD        6,775      $ 6,033,665   

Adirondack Park CLO Ltd., Series 2013-1A, Class E, 4.97%, 4/15/24 (a)(b)

       2,000        1,713,791   

ALM Loan Funding, Series 2013-7RA, Class D, 5.29%, 4/24/24 (a)(b)

       1,000        967,955   

ALM VI Ltd., Series 2012-6A (a)(b)(c):

      

Class B2R, 3.09%, 7/15/26

       1,300        1,274,130   

Class CR, 4.04%, 7/15/26

       1,000        969,500   

ALM XIV Ltd., Series 2014-14A, Class C, 3.74%, 7/28/26 (a)(b)(c)

       3,610        3,338,183   

American Homes 4 Rent, Series 2014-SFR2, Class E, 6.23%, 10/17/36 (b)

       2,000        2,078,542   

AMMC CDO, Series 2015-16A, Class C, 3.42%, 4/14/27 (a)(b)

       1,250        1,226,826   

AMMC CLO XII Ltd., Series 2013-12A, Class D1, 4.06%, 5/10/25 (a)(b)(c)

       1,000        958,138   

Anchorage Capital CLO 3 Ltd., Series 2014-3A, Class B, 3.32%, 4/28/26 (a)(b)

       1,000        972,012   

Anchorage Capital CLO 6 Ltd., Series 2015-6A (a)(b):

      

Class C, 3.17%, 4/15/27

       700        669,480   

Class D, 3.72%, 4/15/27

       1,000        885,800   

Apidos CDO, Series 2012-9AR, Class CR, 3.22%, 7/15/23 (a)(b)(c)

       1,250        1,238,250   

Apidos CLO XII, Series 2013-12A, Class D, 3.37%, 4/15/25 (a)(b)(c)

       1,000        913,143   

Atrium X, Series 10A (a)(b):

      

Class D, 3.82%, 7/16/25 (c)

       1,000        925,355   

Class E, 4.82%, 7/16/25

       2,000        1,697,887   

Benefit Street Partners CLO II Ltd., Series 2013-IIA, Class C, 3.82%, 7/15/24 (a)(b)(c)

       1,750        1,599,222   

Benefit Street Partners CLO VI Ltd., Series 2015-VIA (a)(b)(c):

      

Class B, 3.37%, 4/18/27

       1,000        985,000   

Class C, 4.02%, 4/18/27

       1,000        945,000   

Betony CLO Ltd., Series 2015-1A, Class D, 3.92%, 4/15/27 (a)(b)

       1,000        936,250   

C-BASS Trust, Series 2006-CB7, Class A4, 0.36%, 10/25/36 (a)

       9,348        6,638,894   

Carlyle Global Market Strategies CLO
Ltd. (a)(b)(c):

      

Series 2012-1AR, Class DR, 4.07%, 4/20/22

       1,000        987,500   

Series 2012-4A, Class D, 4.79%, 1/20/25

       2,350        2,349,893   

Series 2013-2A, Class D, 4.07%, 4/18/25

       1,250        1,190,449   

Carrington Mortgage Loan Trust, Series 2006-FRE2 (a):

      

Class A2, 0.32%, 10/25/36

       6,640        3,838,173   

Class A5, 0.28%, 10/25/36

       7,041        4,050,069   

CIFC Funding Ltd. (a)(b):

      

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

       2,000        1,962,600   

Series 2014-3A, Class D, 3.72%, 7/22/26

       480        436,666   

Countrywide Asset-Backed Certificates, Series 2006-BC5, Class 2A3, 0.37%, 3/25/37 (a)

       4,081        4,155,647   

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

       3,699        3,739,563   
Asset-Backed Securities          

Par  

(000)

    Value  

Asset-Backed Securities (continued)

      

Fieldstone Mortgage Investment Trust, Series 2006-3, Class 2A3,
0.36%, 11/25/36 (a)

     USD        12,412      $ 6,831,379   

Flatiron CLO Ltd., Series 2012-1A, Class C, 4.80%, 10/25/24 (a)(b)(c)

       1,375        1,371,480   

Fremont Home Loan Trust, Class 2A3 (a):

      

Series 2006-A, 0.36%, 5/25/36

       26,717        15,365,365   

Series 2006-D, 0.35%, 11/25/36

       24,592        11,011,976   

GoldenTree Loan Opportunities VII Ltd., Series 2013-7A, Class D, 3.62%, 4/25/25 (a)(b)

       1,250        1,168,471   

GSAMP Trust (a):

      

Series 2006-FM2, Class A2C, 0.35%, 9/25/36

       12,408        5,827,045   

Series 2007-FM2, Class A2B, 0.29%, 1/25/37

       8,934        5,343,686   

Highbridge Loan Management 4-2014 Ltd., Series 4A-2014, Class B, 3.29%, 7/28/25 (a)(b)(c)

       2,500        2,406,818   

Home Equity Mortgage Loan Asset-Backed Trust, Series 2006-E, Class 2A3, 0.37%, 4/25/37 (a)

       14,998        9,939,234   

Jamestown CLO I Ltd., Series 2012-1A, Class C, 4.30%, 11/05/24 (a)(b)(c)

       2,550        2,448,487   

Lehman ABS Manufactured Housing Contract Trust, Series 2001-B, Class M2, 7.17%, 4/15/40 (a)

       6,374        4,340,891   

Long Beach Mortgage Loan Trust 2006-1, Series 2006-1, Class 1A, 0.42%, 2/25/36 (a)

       6,891        5,582,803   

Madison Park Funding IX Ltd., Series 2012-9AR, Class C1R, 3.17%, 8/15/22 (a)(b)(c)

       1,000        997,714   

Madison Park Funding Ltd. (a):

      

Series 2012-10A, Class D, 4.57%, 1/20/25 (b)(c)

       1,000        990,178   

Series 2012-8X, Class E, 5.65%, 4/22/22

       3,000        2,928,804   

Madison Park Funding XV Ltd., Series 2014-15A, Class B1, 3.55%, 1/27/26 (a)(b)(c)

       1,600        1,599,967   

Madison Park Funding XVI Ltd., Series 2015-16A (a)(b)(c):

      

Class B, 3.30%, 4/20/26

       1,000        987,800   

Class C, 4.00%, 4/20/26

       1,000        967,500   

Mastr Asset-Backed Securities Trust (a):

      

Series 2006-HE2, Class A3, 0.35%, 6/25/36

       12,443        6,616,692   

Series 2006-WMC2, Class A5, 0.45%, 4/25/36

       9,325        3,981,727   

Morgan Stanley IXIS Real Estate Capital Trust, Series 2006-2, Class A3,
0.35%, 11/25/36 (a)

       15,534        7,356,932   

Octagon Investment Partners XIV Ltd., Series 2012-1A, Class C, 4.32%, 1/15/24 (a)(b)(c)

       1,000        970,749   

Octagon Investment Partners XVI Ltd., Series 2013-1A, Class D, 3.67%, 7/17/25 (a)(b)(c)

       2,250        2,031,414   

Octagon Investment Partners XXI Ltd., Series 2014-1A, Class C,
3.93%, 11/14/26 (a)(b)

       1,000        911,075   

OHA Credit Partners VII Ltd., Series 2012-7A, Class D, 4.33%, 11/20/23 (a)(b)(c)

       3,000        2,938,523   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    39


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

Asset-Backed Securities          

Par  

(000)

    Value  

Asset-Backed Securities (continued)

      

OneMain Financial Issuance Trust (b):

      

Series 2015-1A, Class D, 6.63%, 3/18/26

     USD        5,075      $ 5,209,640   

Series 2015-2A, Class C, 4.32%, 7/18/25

       5,000        4,994,900   

Series 2015-2A, Class D, 5.64%, 7/18/25

       2,500        2,481,775   

OZLM Funding IV Ltd., Series 2013-4A, Class C, 3.52%, 7/22/25 (a)(b)(c)

       1,250        1,144,490   

OZLM Funding Ltd., Series 2012-2A, Class C, 4.65%, 10/30/23 (a)(b)(c)

       2,000        1,980,236   

Race Point CLO Ltd., Series 2011-5AR, Class ER, 6.34%, 12/15/22 (a)(b)

       1,500        1,513,020   

Renaissance Home Equity Loan Trust, Series 2007-3, Class AF2,
7.00%, 9/25/37 (d)

       4,717        2,828,034   

Santander Drive Auto Receivables Trust (b)(j)

      

Series 2014-S1, 0.00%, 8/16/18

       3        8,140,800   

Series 2014-S2, 0.00%, 11/16/18

       3        6,296,400   

Series 2014-S3, 0.00%, 2/19/19

       3        8,522,400   

Series 2014-S4, 0.00%, 4/16/19

       3        11,829,600   

Saxon Asset Securities Trust, Series 2007-3, Class 2A3, 0.60%, 9/25/47 (a)

       5,000        3,515,729   

Scholar Funding Trust, Series 2013-A, Class R, 0.00% (b)(e)

       (f)      4,056,591   

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

       4,100        3,706,982   

Symphony CLO Ltd., Series 2012-10AR, Class CR, 3.17%, 7/23/23 (a)(b)(c)

       1,500        1,507,008   

Symphony CLO XV Ltd., Series 2014-15A, Class D, 4.07%, 10/17/26 (a)(b)

       3,500        3,377,500   

TICP CLO I Ltd., Series 2015-1A, Class C, 3.28%, 7/20/27 (a)(b)

       1,000        977,479   

Treman Park CLO LLC, Series 2015-1A, Class D, 4.13%, 4/20/27 (a)(b)

       1,500        1,417,500   

Tyron Park CLO Ltd., Series 2013-1A (a)(b):

      

Class C, 3.82%, 7/15/25 (c)

       1,250        1,172,013   

Class D, 4.72%, 7/15/25

       1,000        842,756   

Venture XX CLO Ltd., Series 2015-20A (a)(b):

      

Class C, 3.43%, 4/15/27 (c)

       1,000        980,900   

Class D, 4.13%, 4/15/27

       520        487,344   

Venture XXI CLO Ltd., Series 2015-21A, Class D, 3.88%, 7/15/27 (a)(b)

       480        442,368   

Voya CLO Ltd., Series 2012-2AR, Class CR, 3.27%, 10/15/22 (a)(b)(c)

       1,350        1,335,285   

WaMu Asset-Backed Certificates Trust, Series 2007-HE3, Class 2A3, 0.44%, 5/25/47 (a)

       11,451        7,236,996   

Westvue Mortgage Loan Trust, Series 2015-1A, Class A, 4.50%, 9/25/20 (b)

             4,000        3,957,160   
Total Asset-Backed Securities — 35.0%                      254,549,199   
      
                          
Corporate Bonds                      

Aerospace & Defense — 0.4%

      

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

       690        598,576   

TransDigm, Inc., 6.00%, 7/15/22

       2,150        2,171,500   
      

 

 

 
                       2,770,076   
Corporate Bonds          

Par  

(000)

    Value  

Airlines — 5.2%

      

Air Canada Pass-Through Trust, Series 2013-1 (b)(c):

      

Class B, 5.38%, 11/15/22

     USD        3,008      $ 3,083,395   

Class C, 6.63%, 5/15/18

       761        777,970   

American Airlines Pass-Through Trust (c):

      

Series 2013-1, Class C,
6.13%, 7/15/18 (b)

       1,500        1,550,625   

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

       2,170        2,324,048   

Series 2013-2, Class B, 5.60%, 1/15/22 (b)

       2,585        2,655,790   

Series 2013-2, Class C,
6.00%, 1/15/17 (b)

       2,763        2,832,412   

Continental Airlines Pass-Through Trust (c):

      

Series 2003-ERJ1, 7.88%, 1/02/20

       5,515        5,740,606   

Series 2007-1, Class B, 6.90%, 10/19/23

       2,794        2,891,854   

Series 2012-1, Class B, 6.25%, 10/11/21

       429        450,771   

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

       678        698,611   

Delta Air Lines Pass-Through Trust, Class B (c):

      

Series 2007-1, 8.02%, 2/10/24

       2,102        2,364,674   

Series 2012-1, 6.88%, 5/07/19 (b)

       3,674        3,949,515   

United Airlines Pass-Through Trust,
Series 2014-2, Class B,
4.63%, 3/03/24 (c)

       2,750        2,743,125   

US Airways Pass-Through Trust, Class B:

      

Series 2011-1, 9.75%, 4/22/20

       2,224        2,485,483   

Series 2013-1, 5.38%, 5/15/23 (c)

       2,997        3,064,850   
      

 

 

 
                       37,613,729   

Auto Components — 1.0%

      

Dana Holding Corp., 6.75%, 2/15/21 (c)

       1,257        1,307,280   

Icahn Enterprises LP/Icahn Enterprises Finance Corp. (c):

      

3.50%, 3/15/17

       170        171,989   

4.88%, 3/15/19

       2,898        2,964,074   

6.00%, 8/01/20

       434        452,988   

5.88%, 2/01/22

       1,334        1,374,020   

Schaeffler Finance BV, 4.75%, 5/15/21 (b)(c)

       1,045        1,063,287   
      

 

 

 
                       7,333,638   

Automobiles — 0.3%

      

General Motors Co., 6.25%, 10/02/43 (c)

             2,194        2,422,608   

Banks — 2.6%

      

CIT Group, Inc., 5.25%, 3/15/18 (c)

       9,558        10,023,953   

Fifth Third Bancorp, 5.10% (a)(c)(g)

       5,000        4,593,750   

Rizal Commercial Banking Corp., 4.25%, 1/22/20

       100        103,986   

Sberbank of Russia Via SB Capital SA, 5.25%, 5/23/23 (b)

       5,000        4,406,250   
      

 

 

 
                       19,127,939   

Beverages — 0.1%

      

Ball Corp., 5.25%, 7/01/25 (c)

             670        680,888   

Building Products — 0.3%

      

American Builders & Contractors Supply Co., Inc., 5.63%, 4/15/21 (b)(c)

       375        385,313   

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

       922        979,625   

Cemex SAB de CV, 5.88%, 3/25/19 (b)(c)

       200        202,200   

USG Corp., 9.75%, 1/15/18 (c)

       572        642,070   
      

 

 

 
                       2,209,208   
 

 

See Notes to Financial Statements.

 

                
40    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

Corporate Bonds          

Par  

(000)

    Value  

Capital Markets — 0.4%

      

AE-Rotor Holding BV, 4.97%, 3/28/18

     USD        1,600      $ 1,646,066   

American Capital Ltd., 6.50%, 9/15/18 (b)(c)

       700        722,750   

E*Trade Financial Corp., 5.38%, 11/15/22 (c)

       430        459,755   
      

 

 

 
                       2,828,571   

Chemicals — 0.0%

      

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

       100        94,065   

PetroLogistics LP/PetroLogistics Finance Corp., 6.25%, 4/01/20 (c)

       246        257,685   
      

 

 

 
                       351,750   

Commercial Services & Supplies — 1.6%

      

ARAMARK Corp., 5.75%, 3/15/20 (c)

       672        701,400   

Aviation Capital Group Corp.,
6.75%, 4/06/21 (b)(c)

       5,000        5,662,500   

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

       207        187,335   

Iron Mountain, Inc., 6.00%, 10/01/20 (b)(c)

       490        519,400   

United Rentals North America, Inc. (c):

      

8.25%, 2/01/21

       1,942        2,043,955   

7.63%, 4/15/22

       2,440        2,647,668   
      

 

 

 
                       11,762,258   

Communications Equipment — 0.8%

      

Alcatel-Lucent USA, Inc., 8.88%, 1/01/20 (b)(c)

       942        1,018,537   

Avaya, Inc., 7.00%, 4/01/19 (b)

       385        312,813   

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

       610        619,150   

Nokia OYJ, 6.63%, 5/15/39

       245        256,351   

Zayo Group LLC/Zayo Capital, Inc., 10.13%, 7/01/20 (c)

       3,257        3,550,130   
      

 

 

 
                       5,756,981   

Construction & Engineering — 0.1%

      

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

       183        184,601   

Safway Group Holding LLC/Safway Finance Corp., 7.00%, 5/15/18 (b)(c)

       290        297,975   
      

 

 

 
                       482,576   

Construction Materials — 1.1%

      

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

       760        767,600   

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

       93        97,883   

HD Supply, Inc., 7.50%, 7/15/20 (c)

       6,388        6,803,220   
      

 

 

 
                       7,668,703   

Consumer Finance — 1.6%

      

Ally Financial, Inc., 8.00%, 11/01/31 (c)

       9,315        11,294,437   

Navient Corp.:

      

5.50%, 1/25/23

       30        27,038   

6.13%, 3/25/24

       30        27,075   

5.88%, 10/25/24

       45        40,162   
      

 

 

 
                       11,388,712   

Diversified Consumer Services — 0.2%

      

APX Group, Inc., 6.38%, 12/01/19 (c)

       289        281,053   

Laureate Education, Inc., 10.00%, 9/01/19 (b)(c)

       395        314,025   

Service Corp. International, 5.38%, 5/15/24 (c)

       860        916,975   
      

 

 

 
                       1,512,053   
Corporate Bonds          

Par  

(000)

    Value  

Diversified Financial Services — 1.8%

      

AerCap Ireland Capital, Ltd. / AerCap Global Aviation Trust, 4.63%, 10/30/20

     USD        472      $ 489,110   

Aircastle Ltd., 6.25%, 12/01/19 (c)

       2,624        2,866,720   

DPL, Inc., 6.50%, 10/15/16 (c)

       112        114,520   

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

       326        331,350   

Intesa Sanpaolo SpA, 5.02%, 6/26/24 (b)(c)

       2,290        2,293,691   

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

       845        828,100   

Reynolds Group Issuer, Inc. (c):

      

9.88%, 8/15/19

       979        1,030,398   

5.75%, 10/15/20

       4,941        5,138,640   
      

 

 

 
                       13,092,529   

Diversified Telecommunication Services — 2.1%

  

AT&T, Inc., 4.75%, 5/15/46 (c)

       2,545        2,336,709   

CenturyLink, Inc., Series V, 5.63%, 4/01/20 (c)

       834        834,951   

Frontier Communications Corp.:

      

6.88%, 1/15/25

       120        103,692   

11.00%, 9/15/25 (b)(c)

       898        941,212   

Level 3 Financing, Inc. (b):

      

5.38%, 1/15/24 (h)

       294        297,675   

5.38%, 5/01/25

       1,980        1,984,950   

Verizon Communications, Inc., 6.55%, 9/15/43

       6,500        7,780,682   

Windstream Corp. (c):

      

7.75%, 10/15/20

       450        405,000   

6.38%, 8/01/23

       555        439,837   
      

 

 

 
                       15,124,708   

Electric Utilities — 0.2%

  

Star Energy Geothermal Wayang Windu Ltd., 6.13%, 3/27/20

             1,700        1,653,250   

Electronic Equipment, Instruments & Components — 0.1%

  

CDW LLC/CDW Finance Corp.,
5.00%, 9/01/23 (c)

             920        954,500   

Energy Equipment & Services — 0.4%

  

MEG Energy Corp., 6.50%, 3/15/21 (b)(c)

       3,586        3,146,715   

Peabody Energy Corp., 6.00%, 11/15/18 (c)

       506        88,550   
      

 

 

 
                       3,235,265   

Food & Staples Retailing — 0.4%

  

Family Tree Escrow LLC, 5.75%, 3/01/23 (b)(c)

       2,350        2,476,312   

Rite Aid Corp. (c):

      

6.75%, 6/15/21

       329        353,264   

6.13%, 4/01/23 (b)

       177        190,718   
      

 

 

 
                       3,020,294   

Food Products — 0.1%

  

Barry Callebaut Services NV, 5.50%, 6/15/23 (b)

       363        385,535   

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

       307        322,350   

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

       161        172,673   
      

 

 

 
                       880,558   

Health Care Equipment & Supplies — 0.2%

  

DJO Finance LLC/DJO Finance Corp., 8.13%, 6/15/21 (b)

       1,280        1,270,400   

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

       351        331,256   
      

 

 

 
                       1,601,656   

Health Care Providers & Services — 3.3%

  

Acadia Healthcare Co., Inc., 5.63%, 2/15/23 (b)

       218        218,273   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    41


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

Corporate Bonds          

Par  

(000)

    Value  

Health Care Providers & Services (continued)

  

Alere, Inc., 7.25%, 7/01/18

     USD        730      $ 761,025   

Amsurg Corp., 5.63%, 7/15/22 (c)

       1,350        1,326,375   

CHS/Community Health Systems, Inc., 6.88%, 2/01/22 (c)

       1,018        1,025,635   

DaVita HealthCare Partners, Inc., 5.13%, 7/15/24 (c)

       2,500        2,537,500   

HCA, Inc. (c):

      

6.50%, 2/15/20

       7,143        7,991,231   

5.88%, 3/15/22

       124        136,400   

4.75%, 5/01/23

       161        165,025   

HealthSouth Corp.:

      

5.75%, 11/01/24 (c)

       600        600,000   

5.75%, 9/15/25 (b)

       316        314,618   

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

       450        469,687   

Tenet Healthcare Corp. (c):

      

6.25%, 11/01/18

       6,087        6,482,655   

6.00%, 10/01/20

       1,150        1,242,000   

8.13%, 4/01/22

       1,007        1,064,902   
      

 

 

 
                       24,335,326   

Hotels, Restaurants & Leisure — 3.6%

      

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

       1,150        1,219,000   

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

       2,773        2,752,202   

Enterprise Inns PLC, 6.00%, 10/06/23

     GBP        3,320        5,105,314   

Jarden Corp., 5.00%, 11/15/23 (b)

     USD        162        166,455   

MGM Resorts International, 6.00%, 3/15/23 (c)

       520        527,800   

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

       750        784,688   

Pinnacle Entertainment, Inc., 6.38%, 8/01/21 (c)

       720        766,800   

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

       1,305        1,393,088   

Unique Pub Finance Co. PLC:

      

Series A3, 6.54%, 3/30/21

     GBP        2,335        3,752,940   

Series M, 7.40%, 3/28/24

       6,400        10,063,560   
      

 

 

 
                       26,531,847   

Household Durables — 0.6%

      

Brookfield Residential Properties, Inc./Brookfield Residential US Corp., 6.13%, 7/01/22 (b)(c)

     USD        750        736,875   

Lennar Corp.:

      

4.50%, 11/15/19 (c)

       450        465,750   

4.88%, 12/15/23

       256        255,040   

Standard Pacific Corp., 8.38%, 1/15/21 (c)

       2,000        2,372,600   

Taylor Morrison Communities, Inc./Monarch Communities, Inc., 5.25%, 4/15/21 (b)(c)

       177        178,327   

Toll Brothers Finance Corp., 4.88%, 11/15/25

       38        37,953   

TRI Pointe Holdings, Inc. (c):

      

4.38%, 6/15/19

       415        412,406   

5.88%, 6/15/24

       280        280,000   
      

 

 

 
                       4,738,951   

Independent Power and Renewable Electricity Producers — 1.2%

  

Calpine Corp. (c):

      

6.00%, 1/15/22 (b)

       254        266,954   

5.38%, 1/15/23

       4,000        3,825,000   

5.88%, 1/15/24 (b)

       240        250,800   

Dynegy, Inc., 6.75%, 11/01/19 (c)

       1,030        1,027,425   

NRG Energy, Inc., 7.63%, 1/15/18 (c)

       2,735        2,864,912   

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

       265        242,475   
      

 

 

 
                       8,477,566   
Corporate Bonds          

Par  

(000)

    Value  

Insurance — 0.2%

      

MPL 2 Acquisition Canco, Inc., 9.88%, 8/15/18 (b)(c)

     USD        1,400      $ 1,470,000   

Internet Software & Services — 0.2%

      

Blue Coat Holdings, Inc., 8.38%, 6/01/23 (b)

       355        367,425   

Equinix, Inc., 4.88%, 4/01/20 (c)

       144        150,480   

Netflix, Inc., 5.75%, 3/01/24 (c)

       590        624,804   
      

 

 

 
                       1,142,709   

IT Services — 1.1%

      

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

       287        252,560   

First Data Corp. (b):

      

6.75%, 11/01/20 (c)

       3,111        3,278,216   

5.38%, 8/15/23 (c)

       465        473,138   

7.00%, 12/01/23 (h)

       2,764        2,812,370   

SunGard Data Systems, Inc.,
6.63%, 11/01/19 (c)

       1,126        1,165,410   
      

 

 

 
                       7,981,694   

Media — 7.5%

      

Altice US Finance I Corp., 5.38%, 7/15/23 (b)(c)

       1,380        1,396,560   

AMC Networks, Inc., 4.75%, 12/15/22

       344        345,290   

Bharti Airtel International Netherlands BV, 5.13%, 3/11/23

       3,000        3,182,424   

CCO Holdings LLC/CCO Holdings Capital Corp., 5.13%, 2/15/23 (c)

       7,029        7,046,572   

CCO Safari II LLC, 6.48%, 10/23/45 (b)(c)

       3,000        3,110,976   

Clear Channel Worldwide Holdings, Inc. (c):

      

7.63%, 3/15/20

       5,274        5,471,775   

6.50%, 11/15/22

       2,573        2,682,352   

Columbus International, Inc.,
7.38%, 3/30/21 (b)(c)

       1,195        1,242,800   

DISH DBS Corp., 5.13%, 5/01/20 (c)

       5,500        5,479,375   

Gannett Co., Inc., 6.38%, 10/15/23 (c)

       1,400        1,512,000   

Gray Television, Inc., 7.50%, 10/01/20 (c)

       891        929,937   

iHeartCommunications, Inc., 9.00%, 12/15/19 (c)

       320        270,800   

Inmarsat Finance PLC, 4.88%, 5/15/22 (b)(c)

       1,000        992,500   

Intelsat Jackson Holdings SA (c):

      

7.25%, 10/15/20

       1,250        1,140,625   

5.50%, 8/01/23

       2,241        1,847,424   

Live Nation Entertainment, Inc.,
7.00%, 9/01/20 (b)(c)

       199        210,940   

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

       250        258,750   

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

       629        649,443   

Neptune Finco Corp. (b):

      

10.13%, 1/15/23

       528        558,360   

6.63%, 10/15/25

       550        578,875   

10.88%, 10/15/25

       481        513,468   

Numericable Group SA, 6.00%, 5/15/22 (b)(c)

       2,795        2,801,987   

Outfront Media Capital LLC/Outfront Media Capital Corp. (c):

      

5.25%, 2/15/22

       3,117        3,202,717   

5.63%, 2/15/24

       94        97,819   

RCN Telecom Services LLC/RCN Capital Corp., 8.50%, 8/15/20 (b)(c)

       350        367,938   

Sirius XM Radio, Inc., 4.25%, 5/15/20 (b)(c)

       994        1,006,425   

Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH, 5.50%, 1/15/23 (b)(c)

       5,287        5,433,979   
 

 

See Notes to Financial Statements.

 

                
42    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

Corporate Bonds          

Par  

(000)

    Value  

Media (continued)

      

Univision Communications, Inc., 5.13%, 5/15/23 (b)

     USD        250      $ 247,500   

Virgin Media Finance PLC, 6.38%, 4/15/23 (b)(c)

       805        829,150   

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

       980        953,050   
      

 

 

 
                       54,361,811   

Metals & Mining — 1.6%

  

Commercial Metals Co., 4.88%, 5/15/23 (c)

       984        870,840   

Constellium NV, 8.00%, 1/15/23 (b)

       1,500        1,271,250   

Novelis, Inc., 8.75%, 12/15/20 (c)

       7,164        7,181,910   

Steel Dynamics, Inc., 5.13%, 10/01/21 (c)

       970        962,725   

Teck Resources Ltd.:

      

3.00%, 3/01/19

       146        111,674   

5.20%, 3/01/42

       70        37,450   

5.40%, 2/01/43

       62        33,170   

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

       1,140        1,077,300   
      

 

 

 
                       11,546,319   

Multiline Retail — 0.3%

  

Neiman Marcus Group Ltd. (b)(c):

      

8.00%, 10/15/21

       927        962,921   

8.75% (8.75% Cash or 9.50% PIK), 10/15/21 (i)

       963        1,000,268   
      

 

 

 
                       1,963,189   

Oil, Gas & Consumable Fuels — 2.3%

  

Antero Resources Finance Corp., 5.38%, 11/01/21

       165        151,800   

Bonanza Creek Energy, Inc., 6.75%, 4/15/21 (c)

       99        71,280   

Chesapeake Energy Corp., 5.75%, 3/15/23 (c)

       1,145        721,350   

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

       1,121        1,136,414   

Diamondback Energy, Inc., 7.63%, 10/01/21 (c)

       730        777,450   

MarkWest Energy Partners LP/MarkWest Energy Finance Corp., 4.88%, 6/01/25 (c)

       790        738,650   

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

       970        914,225   

MIE Holdings Corp., 6.88%, 2/06/18

       2,000        1,211,264   

Newfield Exploration Co., 5.63%, 7/01/24

       61        60,390   

Noble Energy, Inc., 5.63%, 5/01/21 (c)

       3,286        3,331,971   

ONEOK, Inc., 7.50%, 9/01/23

       150        148,125   

Pertamina Persero PT, 5.63%, 5/20/43 (b)(c)

       2,000        1,663,000   

Pratama Agung Pte. Ltd., 6.25%, 2/24/20

       1,600        1,567,486   

Range Resources Corp. (c):

      

5.00%, 8/15/22

       91        80,985   

5.00%, 3/15/23

       211        187,263   

Sabine Pass Liquefaction LLC, 6.25%, 3/15/22 (c)

       752        746,360   

Seven Generations Energy Ltd., 8.25%, 5/15/20 (b)

       1,550        1,503,500   

Summit Midstream Holdings LLC/Summit Midstream Finance Corp., 7.50%, 7/01/21 (c)

       703        681,910   

Whiting Petroleum Corp., 5.00%, 3/15/19 (c)

       878        834,100   
      

 

 

 
                       16,527,523   

Paper & Forest Products — 0.1%

  

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

             390        376,350   
Corporate Bonds          

Par  

(000)

    Value  

Pharmaceuticals — 1.1%

  

Endo Finance LLC/Endo Finco, Inc.,
5.38%, 1/15/23 (b)

     USD        620      $ 608,034   

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

       718        775,984   

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

       1,094        1,132,290   

Valeant Pharmaceuticals International, Inc. (b):

      

6.75%, 8/15/18 (c)

       1,807        1,743,936   

6.75%, 8/15/21 (c)

       1,276        1,135,640   

5.63%, 12/01/21 (c)

       1,182        1,025,385   

5.88%, 5/15/23

       1,715        1,443,816   
      

 

 

 
                       7,865,085   

Real Estate Investment Trusts (REITs) — 0.5%

  

Hilton Worldwide Finance LLC/Hilton Worldwide Finance Corp., 5.63%, 10/15/21

       160        167,467   

Pakuwon Prima Pte. Ltd., 7.13%, 7/02/19

       3,350        3,350,218   
      

 

 

 
                       3,517,685   

Real Estate Management & Development — 3.8%

  

Caifu Holdings Ltd., 8.75%, 1/24/20

       3,000        3,070,668   

Lai Sun International Finance 2012 Ltd., 5.70%, 1/18/18

       2,000        2,029,800   

Lodha Developers International Ltd., 12.00%, 3/13/20

       350        307,565   

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

       4,360        3,827,400   

Punch Taverns Finance B Ltd.:

      

7.37%, 9/30/21

     GBP        2,743        4,271,512   

Series A6, 5.94%, 9/30/22

       6,346        9,538,414   

Realogy Corp., 7.63%, 1/15/20 (b)

     USD        2,454        2,579,866   

Sparkle Assets Ltd., 6.88%, 1/30/20

       2,000        2,116,550   

Vingroup JSC, 11.63%, 5/07/18

       250        264,489   
      

 

 

 
                       28,006,264   

Road & Rail — 1.1%

      

Avis Budget Car Rental LLC/Avis Budget Finance, Inc., 5.25%, 3/15/25 (b)(c)

       640        637,600   

Hertz Corp. (c):

      

4.25%, 4/01/18

       400        405,000   

7.38%, 1/15/21

       3,075        3,199,906   

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

       4,000        4,030,000   
      

 

 

 
                       8,272,506   

Software — 0.1%

      

Nuance Communications, Inc.,
5.38%, 8/15/20 (b)(c)

       335        341,700   

Rolta Americas LLC, 8.88%, 7/24/19

       200        101,800   
      

 

 

 
                       443,500   

Specialty Retail — 0.2%

      

L Brands, Inc., 6.88%, 11/01/35 (b)(c)

       589        611,824   

Sally Holdings LLC/Sally Capital, Inc., 5.75%, 6/01/22 (c)

       647        682,585   
      

 

 

 
                       1,294,409   

Technology Hardware, Storage & Peripherals — 0.1%

  

Pacific Emerald Property Ltd., 9.75%, 7/25/18

             1,000        992,500   

Textiles, Apparel & Luxury Goods — 0.3%

      

Springs Industries, Inc., 6.25%, 6/01/21 (c)

       1,434        1,426,830   

William Carter Co., 5.25%, 8/15/21 (c)

       604        627,405   
      

 

 

 
                       2,054,235   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    43


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

Corporate Bonds          

Par  

(000)

    Value  

Thrifts & Mortgage Finance — 0.0%

      

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

     USD        300      $ 299,625   

Tobacco — 0.1%

      

Reynolds American, Inc., 5.85%, 8/15/45 (c)

             465        515,839   

Trading Companies & Distributors — 0.5%

      

Doric Nimrod Air Finance Alpha Ltd. Pass-Through Trust (b)(c):

      

Series 2012-1, Class B, 6.50%, 5/30/21

       805        833,785   

Series 2013-1, Class A, 5.25%, 5/30/25

       2,604        2,708,508   
      

 

 

 
                       3,542,293   

Transportation Infrastructure — 0.1%

      

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

             520        515,294   

Wireless Telecommunication Services — 4.2%

  

Crown Castle International Corp., 5.25%, 1/15/23 (c)

       6,565        7,065,581   

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

       5,000        4,500,000   

SBA Communications Corp., 4.88%, 7/15/22

       910        930,430   

Softbank Corp., 4.50%, 4/15/20 (b)(c)

       1,500        1,486,500   

Sprint Communications, Inc., 9.00%, 11/15/18 (b)(c)

       8,131        8,938,977   

Sprint Corp., 7.88%, 9/15/23 (c)

       1,922        1,777,850   

T-Mobile USA, Inc. (c):

      

6.63%, 4/28/21

       3,820        3,953,700   

6.73%, 4/28/22

       945        975,713   

6.84%, 4/28/23

       610        629,825   
      

 

 

 
                       30,258,576   
Total Corporate Bonds — 55.1%                400,503,546   
      
                          
Floating Rate Loan Interests (a)                      

Aerospace & Defense — 0.1%

      

TransUnion LLC, Term Loan B2, 3.50%, 4/09/21

             916        902,339   

Airlines — 0.4%

      

Delta Air Lines, Inc., 2016 Term Loan B2, 2.45%, 4/18/16

             2,918        2,910,819   

Auto Components — 0.2%

      

Gates Global, Inc., Term Loan B, 4.25%, 7/05/21

             1,344        1,259,125   

Chemicals — 0.0%

      

Allnex (Luxembourg) & Cy SCA, Term Loan B1, 4.50%, 10/03/19

       87        86,743   

Allnex USA, Inc., Term Loan B2, 4.50%, 10/03/19

       45        45,007   
      

 

 

 
                       131,750   

Commercial Services & Supplies — 0.0%

      

ADS Waste Holdings, Inc., Term Loan, 3.75%, 10/09/19

             359        353,947   

Containers & Packaging — 0.0%

      

Berry Plastics Holding Corp., Term Loan F, 4.00%, 10/01/22

             234        234,325   

Diversified Consumer Services — 0.1%

      

Bright Horizons Family Solutions, Inc., Term Loan B, 3.75%, 1/30/20

             486        486,858   

Diversified Financial Services — 1.7%

      

AssuredPartners Capital, Inc., 2015 1st Lien Term Loan, 5.75%, 10/21/22

       195        194,879   
Floating Rate Loan Interests (a)          

Par  

(000)

    Value  

Diversified Financial Services (continued)

      

Aviron Capital LLC, Term Loan, 15.32%, 10/20/16

     USD        12,000      $ 12,000,000   
      

 

 

 
                       12,194,879   

Diversified Telecommunication Services — 0.1%

  

Level 3 Financing, Inc., 2013 Term Loan B, 4.00%, 1/15/20

             925        926,619   

Electronic Equipment, Instruments & Components — 0.0%

  

CDW LLC, Term Loan, 3.25%, 4/29/20

             293        291,478   

Energy Equipment & Services — 0.1%

  

Dynegy Holdings, Inc., Term Loan B2, 4.00%, 4/23/20

             606        600,733   

Health Care Equipment & Supplies — 0.2%

  

DJO Finance LLC, 2015 Term Loan, 4.25%, 6/08/20

       450        445,950   

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

       729        713,569   
      

 

 

 
                       1,159,519   

Health Care Providers & Services — 0.0%

      

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

             155        150,350   

Hotels, Restaurants & Leisure — 3.3%

  

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

       1,803        1,703,440   

Hilton Ft. Lauderdale, Mezzanine Term Loan 5, 6.21%, 8/04/19

       6,500        6,500,000   

Hilton Los Cabos, B-Note, 8.20%, 9/18/18

       5,375        5,375,000   

Hilton Orlando, Mezzanine A3, 5.82%, 8/01/16

       7,250        7,250,000   

MGM Resorts International, Term Loan A, 2.94%, 12/20/17

       717        714,398   

Starwood Schulte, Mezzanine Term Loan, 8.04%, 6/30/17

       2,000        1,990,000   

Station Casinos LLC, Term Loan B, 4.25%, 3/02/20

       406        406,262   
      

 

 

 
                       23,939,100   

Insurance — 0.6%

      

Dallas Design District, Mezzanine Term Loan, 6.90%, 11/09/16

       4,000        4,000,000   

Sedgwick Claims Management Services, Inc., 1st Lien Term Loan, 3.75%, 3/01/21

       477        468,020   
      

 

 

 
                       4,468,020   

IT Services — 0.3%

      

First Data Corp.:

      

2018 Extended Term Loan, 3.70%, 3/24/18

       1,700        1,686,043   

New Term Loan B, 3.70%, 3/24/17

       310        309,176   

SunGard Data Systems, Inc., Term Loan E, 4.00%, 3/08/20

       227        226,356   
      

 

 

 
                       2,221,575   

Machinery — 0.1%

      

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

             544        497,049   

Media — 0.3%

      

Cengage Learning Acquisitions, Inc., 1st Lien Term Loan, 7.00%, 3/31/20

       450        446,738   

Clear Channel Communications, Inc., Term Loan D, 6.94%, 1/30/19

       1,054        881,199   

Univision Communications, Inc., Term Loan C4, 4.00%, 3/01/20

       487        483,968   
      

 

 

 
                       1,811,905   
 

 

See Notes to Financial Statements.

 

                
44    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

Floating Rate Loan Interests (a)          

Par  

(000)

    Value  

Oil, Gas & Consumable Fuels — 0.1%

      

Offshore Group Investment Ltd., Term Loan B, 5.75%, 3/28/19

     USD        1,170      $ 330,525   

Power Buyer LLC, 1st Lien Term Loan,
4.25%, 5/06/20

       714        697,323   
      

 

 

 
                       1,027,848   

Pharmaceuticals — 0.1%

  

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

       500        492,230   

Valeant Pharmaceuticals International, Inc.:

      

Series E Term Loan B, 3.75%, 8/05/20

       201        186,456   

Term Loan B F1, 4.00%, 4/01/22

       134        124,385   
      

 

 

 
                       803,071   

Real Estate Management & Development — 0.7%

  

680 Madison Avenue, Mezzanine Term Loan, 5.41%, 8/09/17

       4,000        4,000,000   

Realogy Corp., Term Loan B, 3.75%, 3/05/20

       873        872,088   
      

 

 

 
                       4,872,088   

Road & Rail — 0.1%

      

Hertz Corp., Term Loan B2, 3.00%, 3/11/18

             500        494,790   

Semiconductors & Semiconductor Equipment — 0.1%

  

Freescale Semiconductor, Inc., Term Loan B4, 4.25%, 2/28/20

             488        487,000   
Total Floating Rate Loan Interests — 8.6%                      62,225,187   
      
                          
Foreign Agency Obligations                      

Cyprus Government International Bond (b):

      

3.75%, 11/01/15

     EUR        2,025        2,226,792   

4.63%, 2/03/20

       2,950        3,488,077   

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

     USD        3,415        3,902,232   

Mexican Bonos, 4.75%, 6/14/18

     MXN        4,400        268,442   

Perusahaan Penerbit SBSN Indonesia III, 4.33%, 5/28/25 (b)

     USD        312        302,640   

Poland Government Bond:

      

1.50%, 4/25/20

     PLN        1,021        258,278   

3.25%, 7/25/25

       856        232,647   

2.50%, 7/25/26

     PLN        2,040        512,435   

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

     USD        5,430        5,734,080   

Russian Federal Bond, 7.00%, 8/16/23

     RUB        1,640        21,792   

Slovenia Government International Bond:

      

2.25%, 3/25/22

     EUR        922        1,091,387   

5.85%, 5/10/23 (b)(c)

     USD        766        885,687   

Sri Lanka Government International Bond:

      

5.88%, 7/25/22

       3,000        2,887,500   

6.85%, 11/03/25 (b)

             200        198,750   
Total Foreign Agency Obligations — 3.0%                22,010,739   
      
                          
Non-Agency Mortgage-Backed Securities  

Collateralized Mortgage Obligations — 28.5%

  

Alternative Loan Trust:

      

Series 2005-61, Class 2A1, 0.48%, 12/25/35 (a)(c)

       4,295        3,744,712   

Series 2005-9CB, Class 1A3, 0.65%, 5/25/35 (a)(c)

       5,711        4,699,831   

Series 2006-40T1, Class 2A5, 0.60%, 12/25/36 (a)

       3,340        1,450,023   
Non-Agency Mortgage-Backed Securities          

Par  

(000)

    Value  

Collateralized Mortgage Obligations (continued)

  

Alternative Loan Trust (continued):

      

Series 2006-7CB, Class 2A1, 6.50%, 5/25/36

     USD        4,223      $ 3,117,084   

Series 2006-J7, Class 2A1, 2.14%, 11/20/36 (a)

       9,213        6,717,563   

Series 2006-J8, Class A5, 6.00%, 2/25/37

       2,570        2,008,906   

Series 2006-OA10, Class 2A1, 0.39%, 8/25/46 (a)

       9,187        6,989,908   

Series 2006-OA14, Class 3A1, 1.07%, 11/25/46 (a)

       14,107        11,338,123   

Series 2006-OA16, Class A2, 0.39%, 10/25/46 (a)

       10,653        9,327,146   

Series 2006-OA18, Class A1, 0.32%, 12/25/46 (a)

       6,449        5,582,112   

Series 2006-OA22, Class A1, 0.36%, 2/25/47 (a)

       5,621        4,672,904   

Series 2006-OA6, Class 1A1A, 0.41%, 7/25/46 (a)

       10,953        8,521,636   

Series 2006-OA8, Class 1A1, 0.39%, 7/25/46 (a)

       3,893        3,199,402   

Series 2007-12T1, Class A22, 5.75%, 6/25/37 (c)

       7,236        5,901,417   

Series 2007-12T1, Class A5, 6.00%, 6/25/37

       3,511        2,915,627   

Series 2007-22, Class 2A16, 6.50%, 9/25/37

       11,980        9,384,423   

Series 2007-23CB, Class A1, 6.00%, 9/25/37

       10,530        9,239,854   

Series 2007-4CB, Class 1A3, 0.55%, 4/25/37 (a)

       6,632        4,911,194   

Series 2007-OA2, Class 1A1, 1.06%, 3/25/47 (a)

       6,748        5,089,093   

Series 2007-OA6, Class A1A, 0.34%, 6/25/37 (a)

       11,053        9,383,752   

American Home Mortgage Assets Trust, Series 2006-5, Class A1, 1.14%, 11/25/46 (a)

       6,751        3,450,017   

CHL Mortgage Pass-Through Trust:

      

Series 2006-3, Class 1A1, 0.44%, 3/25/36 (a)

       14,493        12,429,706   

Series 2007-J2, Class 2A1, 0.85%, 7/25/37 (a)

       6,196        3,888,948   

Series 2007-J2, Class 2A8, 6.00%, 7/25/37

       3,421        2,823,648   

Citigroup Mortgage Loan Trust, Series 2006-AR7, Class 2A3A, 2.70%, 11/25/36 (a)

       8,647        7,180,580   

Countrywide Home Loan Mortgage Pass-Through Trust, Series 2006-OA5, Class 3A1, 0.40%, 4/25/46 (a)

       11,269        9,902,170   

Fannie Mae Connecticut Avenue Securities, Class 1M2 (a):

      

Series 2014-C02, 2.80%, 5/25/24

       10,000        8,716,738   

Series 2014-C03, 3.19%, 7/25/24

       6,000        5,409,338   

GreenPoint Mortgage Funding Trust, Series 2007-AR3, Class A1, 0.42%, 6/25/37 (a)

       7,057        5,900,481   

Hilton USA Trust, Series 2013-HLT, Class EFX, 4.45%, 11/05/30 (a)(b)(c)

       5,000        5,034,372   

Morgan Stanley Re-REMIC Trust, Series 2010-R5, Class 7B, 0.49%, 5/26/37 (a)(b)

       17,706        11,154,878   

Nomura Asset Acceptance Corp. Alternative Loan Trust, Series 2006-AF1, Class 1A2, 6.16%, 5/25/36 (a)

       9,738        5,121,260   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    45


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

Non-Agency Mortgage-Backed Securities          

Par  

(000)

    Value  

Collateralized Mortgage Obligations (continued)

  

Residential Asset Securitization Trust, Series 2006-A8, Class 2A5, 0.80%, 8/25/36 (a)

     USD        8,276      $ 3,054,651   

WaMu Mortgage Pass-Through Certificates, Series 2007-OA4, Class 1A, 0.99%, 5/25/47 (a)

       6,147        5,174,615   
      

 

 

 
                       207,436,112   

Commercial Mortgage-Backed Securities — 13.8%

  

Bank of America Merrill Lynch Commercial Mortgage Securities Trust, Series 2013-DSMZ, Class M, 5.89%, 9/15/18 (a)(b)

       7,500        7,499,925   

BHMS Mortgage Trust, Series 2014-MZ, Class M, 7.37%, 7/05/33 (a)(b)

       2,000        2,010,540   

BXHTL Mortgage Trust, Series 2015-JWRZ (a)(b):

      

Class DR3, 4.09%, 5/15/29

       2,000        1,880,000   

Class GL3, 3.77%, 5/15/29

       2,510        2,346,199   

CD Commercial Mortgage Trust, Series 2007-CD5, Class C, 6.12%, 11/15/44 (a)(c)

       3,372        3,469,494   

CDGJ Commercial Mortgage Trust, Series 2014-BXCH, Class EPA, 4.45%, 12/15/27 (a)(b)

       5,000        4,949,639   

CG-CCRE Commercial Mortgage Trust, Series 2014-FL1 (a)(b):

      

Class D, 2.95%, 6/15/31 (c)

       3,000        2,939,359   

Class E, 4.85%, 6/15/31

       1,931        1,920,283   

Commercial Mortgage Pass-Through Certificates (a):

      

Series 2007-C9, Class E, 5.80%, 12/10/49 (c)

       5,000        5,040,377   

Series 2013-LC13, Class D, 5.05%, 8/10/46 (b)(c)

       2,650        2,521,526   

Series 2014-CR16, Class D, 4.91%, 4/10/47 (b)(c)

       2,000        1,813,834   

Series 2014-FL5, Class HFL1, 3.45%, 7/15/31 (b)

       6,057        5,811,868   

Series 2014-KYO, Class F, 3.70%, 6/11/27 (b)(c)

       8,500        8,377,072   

Series 2014-LC15, Class D, 4.94%, 4/10/47 (b)(c)

       3,000        2,691,966   

Series 2014-PAT, Class E, 3.35%, 8/13/27 (b)

       1,000        987,952   

Series 2014-PAT, Class F, 2.64%, 8/13/27 (b)

       3,000        2,869,159   

Series 2014-PAT, Class G, 1.79%, 8/13/27 (b)

       2,000        1,778,400   

Credit Suisse First Boston Mortgage Securities Corp., Series 2005-C3, Class B, 4.88%, 7/15/37

       2,000        1,996,275   

Del Coronado Trust, Series 2013-HDMZ, Class M, 5.20%, 3/15/18 (a)(b)

       6,000        6,000,000   

GAHR Commericial Mortgage Trust, Series 2015-NRF, Class GFX, 3.38%, 12/15/19 (a)(b)

       2,500        2,286,245   

Goldman Sachs Mortgage Securities Trust, Series 2014-GSFL (a)(b):

      

Class D, 4.10%, 7/15/31 (c)

       1,325        1,315,455   

Class E, 6.15%, 7/15/31

       1,000        989,612   

Great Wolf Trust, Series 2015-WFMZ, Class M, 7.19%, 5/15/32 (a)(b)

       3,300        3,284,424   
Non-Agency Mortgage-Backed Securities          

Par  

(000)

    Value  

Commercial Mortgage-Backed Securities (continued)

  

JPMorgan Chase Commercial Mortgage Securities Trust (a)(b):

      

Series 2014-CBMZ, Class M, 6.42%, 10/15/19

     USD        2,000      $ 2,002,300   

Series 2014-DSTY, Class E, 3.80%, 6/10/27

       5,000        4,726,248   

London & Regional Debt Securitisation No. 2 PLC, Series 2, Class A, 3.58%, 10/15/18 (a)

     GBP        1,512        2,326,376   

Madison Avenue Trust, Series 2013-650M, Class E, 4.03%, 10/12/32 (a)(b)

     USD        5,000        4,966,201   

New York Mortgage Securitization Trust, Series 2013-1, Class A, 5.44%, 8/27/24 (a)(b)

       5,000        5,025,000   

Talisman Finance PLC, Series 6, Class A, 0.13%, 10/22/16 (a)

     EUR        136        148,013   

Wachovia Bank Commercial Mortgage Trust, Series 2007-C33, Class AJ, 5.95%, 2/15/51 (a)(c)

     USD        6,000        6,146,303   
      

 

 

 
                       100,120,045   
Total Non-Agency Mortgage-Backed Securities — 42.3%        307,556,157   
      
                          
Preferred Securities                      
Capital Trusts                      

Banks — 4.5%

      

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

       7,500        8,587,500   

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

       3,500        3,506,562   

Fifth Third Bancorp, Series J, 4.90% (a)(c)(g)

       3,000        2,835,000   

HSBC Holdings PLC, 6.38% (a)(c)(g)

       3,700        3,653,750   

Lloyds Bank PLC, 12.00% (a)(b)(c)(g)

       3,500        5,005,000   

Wells Fargo & Co., Series S, 5.90% (a)(c)(g)

       8,800        9,020,000   
      

 

 

 
                       32,607,812   

Capital Markets — 2.1%

      

Bank of New York Mellon Corp., Series D, 4.50% (a)(c)(g)

       6,067        5,642,310   

Credit Suisse Group AG (a)(b)(c)(g)

      

6.25%

       1,035        1,027,977   

7.50%

       2,851        3,009,772   

Morgan Stanley, Series H, 5.45% (a)(c)(g)

       3,644        3,584,785   

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

       1,875        1,881,750   
      

 

 

 
                       15,146,594   

Diversified Financial Services — 6.1%

      

Bank of America Corp., (a)(c)(g)

      

Series AA, 6.10%

       2,865        2,897,231   

Series U, 5.20%

       1,750        1,655,390   

Series X, 6.25%

       4,425        4,487,171   

Citigroup, Inc., (a)(c)(g)

      

5.90%

       2,250        2,238,750   

Series D, 5.95%

       3,700        3,570,500   

General Electric Capital Corp., Series B, 6.25% (a)(g)

       5,000        5,573,000   

JPMorgan Chase & Co., (a)(c)(g)

      

Series Q, 5.15%

       5,500        5,293,750   

Series V, 5.00%

       2,500        2,465,000   

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

       10,000        10,662,410   

Societe Generale SA, 6.00% (a)(b)(c)(g)

       5,540        5,263,000   
      

 

 

 
                       44,106,202   
 

 

See Notes to Financial Statements.

 

                
46    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

Capital Trusts          

Par  

(000)

    Value  

Electric Utilities — 1.0%

      

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

     USD        7,500      $ 7,462,500   

Insurance — 3.8%

      

Allstate Corp, 5.75%, 8/15/53 (a)(c)

       2,000        2,082,500   

Liberty Mutual Group, Inc., 7.80%, 3/07/87 (b)(c)

       14,000        16,415,000   

Metlife, Inc., 5.25% (a)(c)(g)

       1,900        1,917,813   

Prudential Financial, Inc.,
5.63%, 6/15/43 (a)(c)

       6,000        6,279,000   

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

       1,090        1,103,625   
      

 

 

 
                       27,797,938   

Oil, Gas & Consumable Fuels — 0.5%

      

Enterprise Products Operating LLC, Series A, 8.38%, 8/01/66 (a)(c)

             3,248        3,191,160   

Real Estate Investment Trusts (REITs) — 1.7%

  

Firstar Realty LLC, 8.88% (b)(g)

             10,000        12,443,750   
Total Capital Trusts — 19.7%                142,755,956   
      
                          
Preferred Stocks           Shares         

Aerospace & Defense — 0.3%

  

 

United Technologies Corp., 7.50%

             25,650        2,524,217   

Capital Markets — 1.8%

  

   

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

       395,017        9,831,973   

Morgan Stanley, 6.88% (a)(g)

       100,000        2,705,000   

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

       23,730        660,881   
      

 

 

 
                       13,197,854   

Diversified Financial Services — 0.3%

  

 

Citigroup, Inc., Series K, 6.88% (a)(g)

             75,000        2,065,500   
Preferred Stocks    Shares     Value  

Real Estate Investment Trusts (REITs) — 0.3%

      

SunTrust Real Estate Investment Corp.,
9.00% (b)(g)

         15      $ 1,833,459   
Total Preferred Stocks — 2.7%                  19,621,030   
Total Preferred Securities — 22.4%                  162,376,986   
Total Long-Term Investments
(Cost — $1,212,611,579) — 166.4%
                 1,209,221,814   
      
                      
Short-Term Securities — 0.9%                    

BlackRock Liquidity Funds, TempFund, Institutional Class, 0.10% (k)(l)

         6,140,532        6,140,532   
Total Short-Term Securities
(Cost — $6,140,532) — 0.9%
                 6,140,532   
Options Purchased
(Cost — $138,816) — 0.0%
        133,129   
Total Investments Before Options Written
(Cost — $1,218,890,927) — 167.3%
        1,215,495,475   
Options Written
(Premiums Received — $112,509) — (0.0)%
        (105,670
Total Investments, Net of Options Written
(Cost — $1,218,778,418) — 167.3%
        1,215,389,805   
Liabilities in Excess of Other Assets — (67.3)%        (488,958,131
      

 

 

 
Net Assets — 100.0%      $ 726,431,674   
      

 

 

 
 
Notes to Schedule of Investments

 

(a)   Variable rate security. Rate shown is as of report date.

 

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

 

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

 

(d)   Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date.

 

(e)   Zero-coupon bond.

 

(f)   Amount is less than $500.

 

(g)   Security is perpetual in nature and has no stated maturity date.

 

(h)   When-issued security.

 

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

 

(j)   Security is eligible to receive residual cash flows.

 

(k)   During the year ended October 31, 2015, investments in issuers considered to be an affiliate of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate      Shares Held
at October 31,
2014
       Net
Activity
       Shares Held
at October 31,
2015
       Income  

BlackRock Liquidity Funds, TempFund, Institutional Class

       18,823,385           (12,682,853        6,140,532         $ 23,186   

 

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

 

 

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

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    47


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

As of period end, reverse repurchase agreements outstanding were as follows:

 

Counterparty      Interest
Rate
       Trade
Date
       Maturity
Date1
       Face Value        Face Value
Including
Accrued
Interest
 

Barclays Bank PLC

       0.45        5/07/14           Open         $ 2,528,000         $ 2,545,159   

Barclays Bank PLC

       0.55        5/07/14           Open           3,248,000           3,274,945   

UBS Securities LLC

       0.40        5/13/14           Open           5,061,000           5,091,141   

UBS Securities LLC

       0.45        5/13/14           Open           7,397,000           7,446,560   

UBS Securities LLC

       0.50        5/13/14           Open           7,707,000           7,764,374   

Barclays Bank PLC

       0.40        5/14/14           Open           5,942,000           5,994,983   

Barclays Bank PLC

       0.45        5/14/14           Open           5,189,000           5,227,557   

Barclays Bank PLC

       0.60        6/16/14           Open           2,038,000           2,055,051   

Barclays Bank PLC

       0.60        10/29/14           Open           1,001,000           1,010,930   

Barclays Bank PLC

       0.60        10/29/14           Open           781,000           797,905   

Barclays Bank PLC

       0.75        10/29/14           Open           4,813,000           4,823,705   

UBS Securities LLC

       0.55        12/09/14           Open           4,770,000           4,793,757   

UBS Securities LLC

       0.55        12/09/14           Open           4,700,000           4,723,409   

UBS Securities LLC

       0.55        12/09/14           Open           4,290,000           4,311,367   

Barclays Bank PLC

       0.95        12/17/14           Open           2,291,000           2,310,165   

Deutsche Bank Securities, Inc.

       0.60        12/17/14           Open           1,829,000           1,838,694   

Deutsche Bank Securities, Inc.

       0.60        12/17/14           Open           1,602,000           1,610,491   

Deutsche Bank Securities, Inc.

       0.60        12/17/14           Open           1,504,000           1,511,971   

Deutsche Bank Securities, Inc.

       0.60        12/17/14           Open           475,000           477,517   

UBS Securities LLC

       0.38        12/17/14           Open           287,219           288,186   

UBS Securities LLC

       0.38        12/17/14           Open           8,558,000           8,586,817   

UBS Securities LLC

       0.55        12/17/14           Open           10,075,000           10,123,794   

UBS Securities LLC

       0.65        12/17/14           Open           2,628,750           2,643,796   

Deutsche Bank Securities, Inc.

       0.50        12/18/14           Open           786,000           789,461   

UBS Securities LLC

       0.60        3/02/15           Open           1,456,000           1,461,897   

UBS Securities LLC

       0.55        4/08/15           Open           3,454,875           3,465,748   

UBS Ltd.

       0.70        4/16/15           Open           1,792,500           1,799,401   

UBS Ltd.

       0.75        4/16/15           Open           1,230,000           1,235,074   

UBS Securities LLC

       0.55        4/16/15           Open           4,165,031           4,177,694   

Deutsche Bank Securities, Inc.

       0.60        5/06/15           Open           1,181,556           1,185,081   

Deutsche Bank Securities, Inc.

       0.70        5/21/15           Open           2,568,000           2,576,189   

Deutsche Bank Securities, Inc.

       0.50        6/02/15           Open           1,976,000           1,980,144   

Deutsche Bank Securities, Inc.

       0.60        6/02/15           Open           2,461,000           2,467,194   

Deutsche Bank Securities, Inc.

       0.60        6/02/15           Open           2,571,000           2,577,470   

Deutsche Bank Securities, Inc.

       0.60        6/02/15           Open           300,000           300,755   

Deutsche Bank Securities, Inc.

       0.60        6/02/15           Open           943,000           945,373   

Deutsche Bank Securities, Inc.

       0.60        6/02/15           Open           2,253,000           2,258,670   

Deutsche Bank Securities, Inc.

       0.60        6/02/15           Open           2,649,000           2,655,667   

Deutsche Bank Securities, Inc.

       0.60        6/02/15           Open           1,578,000           1,581,971   

Deutsche Bank Securities, Inc.

       0.60        6/02/15           Open           4,728,000           4,739,899   

Deutsche Bank Securities, Inc.

       0.60        6/02/15           Open           2,192,000           2,197,517   

Deutsche Bank Securities, Inc.

       0.60        6/02/15           Open           2,683,000           2,689,752   

Deutsche Bank Securities, Inc.

       0.60        6/02/15           Open           1,512,000           1,515,805   

Deutsche Bank Securities, Inc.

       0.60        6/02/15           Open           3,221,000           3,229,106   

Deutsche Bank Securities, Inc.

       0.60        6/02/15           Open           2,826,000           2,833,112   

Deutsche Bank Securities, Inc.

       0.60        6/02/15           Open           189,000           189,476   

Deutsche Bank Securities, Inc.

       0.60        6/02/15           Open           560,000           561,409   

Deutsche Bank Securities, Inc.

       0.60        6/02/15           Open           722,000           723,817   

Deutsche Bank Securities, Inc.

       0.60        6/02/15           Open           2,288,000           2,293,758   

Deutsche Bank Securities, Inc.

       0.75        6/03/15           Open           1,710,000           1,715,379   

Deutsche Bank Securities, Inc.

       0.75        6/03/15           Open           1,706,000           1,711,367   

UBS Ltd.

       0.80        6/03/15           Open           158,000           158,527   

UBS Ltd.

       0.85        6/03/15           Open           920,000           923,258   

UBS Ltd.

       0.85        6/03/15           Open           232,500           233,323   

BNP Paribas Securities Corp.

       0.42        6/10/15           Open           688,000           689,101   

BNP Paribas Securities Corp.

       0.42        6/10/15           Open           7,322,000           7,333,721   

BNP Paribas Securities Corp.

       0.42        6/10/15           Open           302,000           302,483   

HSBC Securities (USA), Inc.

       0.40        6/10/15           Open           2,906,000           2,910,617   

RBC Capital Markets LLC

       0.39        6/10/15           Open           482,000           482,747   

Deutsche Bank Securities, Inc.

       0.85        6/24/15           Open           2,364,949           2,372,152   

UBS Securities LLC

       0.85        6/26/15           Open           2,151,500           2,157,850   

Barclays Bank PLC

       0.65        6/30/15           Open           1,404,625           1,407,744   

Credit Suisse Securities (USA) LLC

       0.40        7/01/15           Open           815,198           816,312   

 

See Notes to Financial Statements.

 

                
48    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

As of period end, reverse repurchase agreements outstanding were as follows (continued):

 

Counterparty      Interest
Rate
       Trade
Date
       Maturity
Date1
       Face Value        Face Value
Including
Accrued
Interest
 

Credit Suisse Securities (USA) LLC

       0.40        7/01/15           Open         $ 1,511,400         $ 1,513,466   

UBS Ltd.

       0.70        7/01/15           Open           5,097,413           5,109,505   

Barclays Bank PLC

       0.60        8/12/15           Open           451,000           451,601   

Barclays Bank PLC

       0.60        8/12/15           Open           954,000           955,272   

Barclays Bank PLC

       0.60        8/12/15           Open           658,000           658,877   

Barclays Bank PLC

       0.60        8/12/15           Open           927,000           928,236   

Barclays Bank PLC

       0.60        8/12/15           Open           1,117,000           1,118,489   

Barclays Bank PLC

       0.60        8/12/15           Open           769,000           770,025   

Barclays Bank PLC

       0.60        8/12/15           Open           163,000           163,217   

Barclays Bank PLC

       0.60        8/12/15           Open           511,000           511,681   

Barclays Bank PLC

       0.60        8/12/15           Open           947,000           948,263   

Barclays Bank PLC

       0.60        8/12/15           Open           864,000           865,152   

Barclays Bank PLC

       0.60        8/12/15           Open           900,000           901,200   

Barclays Bank PLC

       0.60        8/12/15           Open           771,000           772,028   

Barclays Bank PLC

       0.60        8/12/15           Open           229,000           229,305   

Barclays Bank PLC

       0.60        8/12/15           Open           1,042,000           1,043,389   

Barclays Bank PLC

       0.60        8/12/15           Open           651,000           651,868   

Barclays Bank PLC

       0.60        8/12/15           Open           762,000           763,016   

Barclays Bank PLC

       0.65        8/12/15           Open           1,708,000           1,710,467   

Barclays Bank PLC

       0.65        8/12/15           Open           911,000           912,316   

Barclays Bank PLC

       0.65        8/12/15           Open           742,000           743,072   

BNP Paribas Securities Corp.

       0.71        8/12/15           Open           6,806,000           6,814,621   

BNP Paribas Securities Corp.

       0.71        8/12/15           Open           692,000           693,000   

BNP Paribas Securities Corp.

       0.71        8/12/15           Open           6,366,000           6,374,064   

BNP Paribas Securities Corp.

       0.71        8/12/15           Open           317,000           317,444   

BNP Paribas Securities Corp.

       0.71        8/12/15           Open           3,532,000           3,536,945   

Credit Suisse Securities (USA) LLC

       0.65        8/12/15           Open           581,025           581,864   

Credit Suisse Securities (USA) LLC

       0.65        8/12/15           Open           769,775           770,887   

Credit Suisse Securities (USA) LLC

       0.65        8/12/15           Open           793,244           794,390   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           1,825,000           1,828,042   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           2,869,000           2,873,782   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           769,000           770,282   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           180,000           180,300   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           270,000           270,450   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           77,000           77,128   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           639,000           640,065   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           1,235,000           1,237,058   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           2,845,000           2,849,742   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           910,000           911,517   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           252,000           252,420   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           1,379,000           1,381,298   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           50,000           50,083   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           597,000           597,995   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           228,000           228,380   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           891,000           892,485   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           349,000           349,582   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           87,000           87,145   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           5,100,000           5,108,500   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           2,920,000           2,924,867   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           95,000           95,158   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           1,244,000           1,246,073   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           2,429,000           2,433,048   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           830,000           831,383   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           646,000           647,077   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           625,000           626,042   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           666,000           667,110   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           700,000           701,167   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           353,000           353,588   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           1,102,000           1,103,837   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           2,349,000           2,352,915   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           911,000           912,518   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           1,313,000           1,315,188   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           2,954,000           2,958,923   

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    49


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

As of period end, reverse repurchase agreements outstanding were as follows (continued):

 

Counterparty      Interest
Rate
       Trade
Date
       Maturity
Date1
       Face Value        Face Value
Including
Accrued
Interest
 

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open         $ 1,763,000         $ 1,765,938   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           3,279,000           3,284,465   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           196,000           196,327   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           1,012,000           1,013,687   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           162,000           162,270   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           2,608,000           2,612,347   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           125,000           125,208   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           70,000           70,117   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           243,000           243,405   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           1,402,000           1,404,337   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           3,709,000           3,715,182   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           1,145,000           1,146,908   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           588,000           588,980   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           2,000,000           2,003,333   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           158,000           158,263   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           374,000           374,623   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           963,000           964,605   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           304,000           304,507   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           650,000           651,083   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           156,000           156,260   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           864,000           865,440   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           650,000           651,083   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           1,856,000           1,859,093   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           104,000           104,173   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           611,000           612,018   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           150,000           150,250   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           2,043,000           2,046,405   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           258,000           258,430   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           2,003,000           2,006,338   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           135,000           135,225   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           745,000           746,242   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           1,356,000           1,358,260   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           369,000           369,615   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           726,000           727,210   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           581,000           581,968   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           294,000           294,490   

Deutsche Bank Securities, Inc.

       0.75        8/12/15           Open           317,000           317,528   

RBC Capital Markets LLC

       0.65        8/12/15           Open           2,075,000           2,077,997   

RBC Capital Markets LLC

       0.75        8/12/15           Open           149,919           150,169   

UBS Securities LLC

       0.50        8/12/15           Open           6,125,000           6,131,806   

UBS Securities LLC

       0.55        8/12/15           Open           2,577,000           2,580,150   

UBS Securities LLC

       0.55        8/12/15           Open           8,131,000           8,140,938   

UBS Securities LLC

       0.55        8/12/15           Open           4,699,000           4,704,743   

UBS Securities LLC

       0.55        8/12/15           Open           4,219,000           4,224,157   

UBS Securities LLC

       0.55        8/12/15           Open           8,936,000           8,946,922   

UBS Securities LLC

       0.55        8/12/15           Open           10,165,000           10,177,424   

UBS Securities LLC

       0.55        8/12/15           Open           5,821,000           5,828,115   

UBS Securities LLC

       0.55        8/12/15           Open           5,320,000           5,326,502   

UBS Securities LLC

       0.55        8/12/15           Open           4,620,000           4,625,647   

UBS Securities LLC

       0.55        8/12/15           Open           6,982,000           6,990,534   

UBS Securities LLC

       0.55        8/12/15           Open           4,531,000           4,536,538   

UBS Securities LLC

       0.55        8/12/15           Open           1,862,000           1,864,276   

UBS Securities LLC

       0.65        8/12/15           Open           500,000           500,722   

Deutsche Bank Securities, Inc.

       0.75        8/24/15           Open           282,425           282,831   

Deutsche Bank Securities, Inc.

       0.75        8/24/15           Open           931,950           933,290   

UBS Ltd.

       0.80        9/08/15           Open           343,943           344,348   

UBS Securities LLC

       0.65        9/21/15           Open           1,208,291           1,209,164   

UBS Securities LLC

       0.65        9/21/15           Open           2,125,000           2,126,535   

UBS Securities LLC

       0.65        9/21/15           Open           2,400,350           2,402,084   

UBS Securities LLC

       0.65        9/21/15           Open           14,805,000           14,815,692   

UBS Securities LLC

       0.65        9/21/15           Open           5,842,850           5,847,070   

Deutsche Bank Securities, Inc.

       0.75        9/22/15           Open           248,000           248,207   

Deutsche Bank Securities, Inc.

       0.75        10/01/15           Open           321,000           321,201   

 

See Notes to Financial Statements.

 

                
50    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

As of period end, reverse repurchase agreements outstanding were as follows (continued):

 

Counterparty      Interest
Rate
       Trade
Date
       Maturity
Date1
     Face Value        Face Value
Including
Accrued
Interest
 

Deutsche Bank Securities, Inc.

       0.75        10/05/15         Open      $ 1,052,000         $ 1,052,592   

Deutsche Bank Securities, Inc.

       0.75        10/05/15         Open        1,327,000           1,327,746   

Deutsche Bank Securities, Inc.

       0.75        10/06/15         Open        299,000           299,162   

JPMorgan Securities LLC

       1.45        10/07/15         11/06/15        2,556,000           2,558,464   

JPMorgan Securities LLC

       1.45        10/07/15         11/06/15        5,051,000           5,055,869   

BNP Paribas Securities Corp.

       1.10        10/07/15         11/09/15        6,854,000           6,859,008   

BNP Paribas Securities Corp.

       1.20        10/07/15         11/09/15        2,352,000           2,353,875   

RBC Capital Markets LLC

       1.54        10/07/15         11/09/15        2,076,000           2,078,131   

Deutsche Bank Securities, Inc.

       0.75        10/07/15         Open        204,000           204,106   

Barclays Bank PLC

       1.70        10/08/15         11/09/15        18,002,908           18,023,257   

BNP Paribas Securities Corp.

       1.20        10/08/15         11/09/15        21,112,000           21,128,133   

UBS Securities LLC

       0.50        10/09/15         Open        5,060,000           5,061,335   

UBS Securities LLC

       0.60        10/09/15         Open        3,605,000           3,606,142   

UBS Securities LLC

       0.60        10/09/15         Open        3,068,303           3,069,274   

UBS Securities LLC

       0.75        10/09/15         Open        3,136,875           3,138,117   

UBS Securities LLC

       0.75        10/09/15         Open        3,191,250           3,192,513   

UBS Securities LLC

       0.75        10/09/15         Open        2,862,120           2,863,253   

UBS Securities LLC

       0.75        10/09/15         Open        2,750,753           2,751,841   

Barclays Bank PLC

       1.70        10/13/15         11/13/15        8,348,534           8,356,006   

Morgan Stanley Co., Inc.

       1.25        10/13/15         11/13/15        5,383,900           5,387,452   

Deutsche Bank Securities, Inc.

       0.75        10/14/15         Open        2,556,493           2,557,452   

RBC Capital Markets LLC

       1.55        10/20/15         11/23/15        4,577,000           4,579,168   

RBC Capital Markets LLC

       0.39        10/23/15         Open        244,000           244,013   

Deutsche Bank Securities, Inc.

       0.75        10/29/15         Open        313,919           313,932   

Deutsche Bank Securities, Inc.

       0.75        10/29/15         Open        1,039,043           1,039,086   

Deutsche Bank Securities, Inc.

       0.75        10/29/15         Open        408,645           408,665   

RBC Capital Markets LLC

       0.39        10/30/15         Open        445,000           445,000   

RBC Capital Markets LLC

       0.39        10/30/15         Open        486,000           486,000   

RBC Capital Markets LLC

       0.70        10/30/15         Open        750,000           750,000   

RBC Capital Markets LLC

       0.70        10/30/15         Open        387,000           387,000   

RBC Capital Markets LLC

       0.70        10/30/15         Open        380,000           380,000   

RBC Capital Markets LLC

       0.70        10/30/15         Open        383,000           383,000   

RBC Capital Markets LLC

       0.70        10/30/15         Open        489,000           489,000   

RBC Capital Markets LLC

       0.70        10/30/15         Open        769,000           769,000   

RBC Capital Markets LLC

       0.70        10/30/15         Open        761,000           761,000   

RBC Capital Markets LLC

       0.70        10/30/15         Open        791,000           791,000   

RBC Capital Markets LLC

       0.70        10/30/15         Open        558,000           558,000   

RBC Capital Markets LLC

       0.70        10/30/15         Open        608,000           608,000   

RBC Capital Markets LLC

       0.70        10/30/15         Open        1,139,000           1,139,000   

RBC Capital Markets LLC

       0.70        10/30/15         Open        621,000           621,000   

RBC Capital Markets LLC

       0.75        10/30/15         Open        502,000           502,000   

RBC Capital Markets LLC

       0.75        10/30/15         Open        827,000           827,000   

RBC Capital Markets LLC

       0.75        10/30/15         Open        624,000           624,000   

RBC Capital Markets LLC

       0.75        10/30/15         Open        752,000           752,000   

RBC Capital Markets LLC

       0.75        10/30/15         Open        417,000           417,000   

RBC Capital Markets LLC

       0.75        10/30/15         Open        1,073,000           1,073,000   

RBC Capital Markets LLC

       0.75        10/30/15         Open        630,000           630,000   

RBC Capital Markets LLC

       0.75        10/30/15         Open        381,000           381,000   

RBC Capital Markets LLC

       0.75        10/30/15         Open        2,003,000           2,003,000   

RBC Capital Markets LLC

       0.75        10/30/15         Open        453,000           453,000   

RBC Capital Markets LLC

       0.75        10/30/15         Open        480,000           480,000   

RBC Capital Markets LLC

       0.75        10/30/15         Open        515,000           515,000   

Total

                    $ 509,242,031         $ 510,352,370   
                   

 

 

 

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

        

    

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    51


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

 

Derivative Financial Instruments Outstanding as of Period End

      Financial Futures Contracts

 

Contracts
Short
  Issue      Expiration           Notional Value     Unrealized
Appreciation
(Depreciation)
 
(197)   2-Year U.S. Treasury Note      December 2015        USD      43,075,281      $ 1,903   
(207)   5-Year U.S. Treasury Note      December 2015        USD      24,793,102        7,818   
(323)   10-Year U.S. Treasury Note      December 2015        USD      41,243,063        76,853   
    (7)   90-Day Euro-Dollar      December 2015        USD      1,742,912        (1,322
  (10)   Euro BOBL Futures      December 2015        USD      1,423,167        (8,917
    (5)   90-Day Euro-Dollar      December 2016        USD      1,237,375        (1,944
    (2)   90-Day Euro-Dollar      March 2017          USD      494,250        622   
Total                    $ 75,013   
                  

 

 

 

      Forward Foreign Currency Exchange Contracts

 

Currency
Purchased
       Currency
Sold
    Counterparty   Settlement
Date
       Unrealized
Appreciation
(Depreciation)
 
USD        1,178,800         EUR        1,032,000      Deutsche Bank AG     11/02/15         $ 43,961   
USD        1,150,922         EUR        1,006,000      JPMorgan Chase Bank N.A.     11/02/15           44,674   
BRL        256,791         USD        65,600      Deutsche Bank AG     11/04/15           986   
BRL        321,358         USD        83,277      Goldman Sachs International     11/04/15           51   
BRL        1,906,345         USD        494,013      Goldman Sachs International     11/04/15           301   
BRL        260,766         USD        67,575      Goldman Sachs International     11/04/15           41   
BRL        260,806         USD        67,585      Goldman Sachs International     11/04/15           41   
BRL        1,075,526         USD        278,713      Goldman Sachs International     11/04/15           170   
BRL        181,992         USD        46,933      Goldman Sachs International     11/04/15           257   
BRL        3,497,590         USD        894,067      Goldman Sachs International     11/04/15           12,855   
BRL        261,756         USD        66,000      Goldman Sachs International     11/04/15           1,873   
BRL        297,950         USD        77,211      Royal Bank of Scotland PLC     11/04/15           47   
BRL        133,467         USD        34,587      Royal Bank of Scotland PLC     11/04/15           21   
GBP        1,684,000         USD        2,604,920      Goldman Sachs International     11/04/15           (8,884
MXN        8,120,280         USD        490,000      Goldman Sachs International     11/04/15           1,608   
MXN        4,574,712         USD        278,000      Goldman Sachs International     11/04/15           (1,043
MXN        1,341,475         USD        82,000      UBS AG     11/04/15           (786
USD        66,545         BRL        256,791      Deutsche Bank AG     11/04/15           (41
USD        82,000         BRL        321,358      Goldman Sachs International     11/04/15           (1,328
USD        66,000         BRL        260,766      Goldman Sachs International     11/04/15           (1,616
USD        66,000         BRL        260,806      Goldman Sachs International     11/04/15           (1,627
USD        67,832         BRL        261,756      Goldman Sachs International     11/04/15           (41
USD        47,162         BRL        181,992      Goldman Sachs International     11/04/15           (29
USD        906,370         BRL        3,497,590      Goldman Sachs International     11/04/15           (552
USD        490,000         BRL        1,906,345      Goldman Sachs International     11/04/15           (4,314
USD        278,000         BRL        1,075,526      Goldman Sachs International     11/04/15           (883
USD        73,000         BRL        297,950      Royal Bank of Scotland PLC     11/04/15           (4,258
USD        34,000         BRL        133,467      Royal Bank of Scotland PLC     11/04/15           (608
USD        3,887,409         EUR        3,421,000      Barclays Bank PLC     11/04/15           125,461   
USD        4,434,376         GBP        2,881,000      Citibank N.A.     11/04/15           (6,943
USD        33,260,631         GBP        21,848,000      Morgan Stanley & Co. International PLC     11/04/15           (420,012
USD        82,000         MXN        1,352,738      Goldman Sachs International     11/04/15           104   
TRY        1,362,102         USD        470,000      Royal Bank of Scotland PLC     11/06/15           (3,349
USD        311,947         EUR        281,771      Citibank N.A.     11/06/15           2,086   
USD        248,800         ZAR        3,374,873      Morgan Stanley & Co. International PLC     11/10/15           5,222   
USD        35,000         ZAR        484,063      UBS AG     11/10/15           63   
ZAR        490,552         USD        35,500      Citibank N.A.     11/10/15           (95
ZAR        1,109,671         USD        81,000      Citibank N.A.     11/10/15           (910
ZAR        982,599         USD        71,000      Goldman Sachs International     11/10/15           (82
ZAR        490,481         USD        35,500      UBS AG     11/10/15           (100
MXN        2,945,664         USD        178,000      Bank of America N.A.     11/12/15           231   
MXN        280,222         USD        17,000      BNP Paribas S.A.     11/12/15           (45
TRY        191,534         USD        66,000      Goldman Sachs International     11/12/15           (498
USD        68,000         MXN        1,129,970      Deutsche Bank AG     11/12/15           (370
USD        66,000         TRY        194,103      BNP Paribas S.A.     11/12/15           (381

 

See Notes to Financial Statements.

 

                
52    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

      Forward Foreign Currency Exchange Contracts (continued)

 

Currency
Purchased
       Currency
Sold
    Counterparty   Settlement
Date
       Unrealized
Appreciation
(Depreciation)
 
CLP        43,848,350         USD        65,000      Credit Suisse International     11/16/15         $ (1,674
CLP        44,013,450         USD        65,000      Credit Suisse International     11/16/15           (1,436
IDR        2,263,255,000         USD        163,000      Morgan Stanley & Co. International PLC     11/16/15           1,631   
TRY        485,529         USD        166,763      BNP Paribas S.A.     11/16/15           (912
TWD        2,648,600         USD        82,000      BNP Paribas S.A.     11/16/15           (436
USD        65,000         CLP        44,335,850      Credit Suisse International     11/16/15           970   
USD        65,000         CLP        44,686,850      Credit Suisse International     11/16/15           463   
USD        1,075,026         EUR        953,876      Goldman Sachs International     11/16/15           25,930   
USD        163,000         IDR        2,234,730,000      Deutsche Bank AG     11/16/15           444   
USD        67,000         TRY        195,988      BNP Paribas S.A.     11/16/15           53   
USD        67,000         TRY        196,464      BNP Paribas S.A.     11/16/15           (110
USD        65,525         TRY        191,642      BNP Paribas S.A.     11/16/15           63   
USD        82,000         TWD        2,622,196      Standard Chartered Bank     11/16/15           1,249   
AUD        2,530,000         NZD        2,693,484      Goldman Sachs International     11/18/15           (19,133
GBP        1,217,822         EUR        1,640,000      State Street Bank and Trust Co.     11/18/15           73,462   
GBP        2,390,000         SEK        29,931,408      Goldman Sachs International     11/18/15           179,594   
SEK        29,483,243         GBP        2,390,000      Citibank N.A.     11/18/15           (232,066
KRW        74,642,700         USD        66,000      HSBC Bank PLC     11/19/15           (657
KRW        56,627,686         USD        50,042      JPMorgan Chase Bank N.A.     11/19/15           (470
USD        66,400         KRW        74,965,600      Bank of America N.A.     11/19/15           775   
USD        16,600         KRW        18,916,530      BNP Paribas S.A.     11/19/15           40   
USD        33,042         KRW        37,355,791      JPMorgan Chase Bank N.A.     11/19/15           341   
USD        71,500         ZAR        949,502      Goldman Sachs International     11/19/15           3,078   
USD        71,500         ZAR        945,194      JPMorgan Chase Bank N.A.     11/19/15           3,388   
ZAR        1,885,119         USD        143,000      Standard Chartered Bank     11/19/15           (7,156
USD        441,790         MXN        7,277,823      State Street Bank and Trust Co.     11/20/15           1,708   
USD        142,000         KRW        162,519,000      HSBC Bank PLC     11/30/15           (229
USD        894,067         BRL        3,533,621      Goldman Sachs International     12/02/15           (13,419
USD        60,000         BRL        237,426      Royal Bank of Scotland PLC     12/02/15           (974
USD        3,739,641         EUR        3,384,000      Barclays Bank PLC     12/03/15           17,037   
USD        35,377,002         GBP        23,045,000      Morgan Stanley & Co. International PLC     12/03/15           (142,701
USD        264,475         PLN        995,006      Citibank N.A.     12/04/15           7,252   
USD        956         PLN        3,557      Citibank N.A.     12/04/15           36   
USD        240,605         PLN        912,814      Goldman Sachs International     12/04/15           4,629   
USD        134,951         PLN        497,711      Standard Chartered Bank     12/04/15           6,285   
USD        403,824         PLN        1,500,990      UBS AG     12/04/15           15,797   
RUB        2,209,000         USD        32,726      Citibank N.A.     12/09/15           1,499   
RUB        5,981,072         USD        87,443      HSBC Bank PLC     12/09/15           5,226   
RUB        5,906,000         USD        84,263      Morgan Stanley & Co. International PLC     12/09/15           7,242   
USD        23,595         RUB        1,625,837      Deutsche Bank AG     12/09/15           (1,595
USD        183,226         RUB        12,852,559      JPMorgan Chase Bank N.A.     12/09/15           (15,907
USD        22,176         RUB        1,382,000      Morgan Stanley & Co. International PLC     12/09/15           765   
Total                         $ (298,660
                       

 

 

 

      OTC Interest Rate Swaptions Purchased

 

Description   Counterparty    Put/
Call
    

Exercise

Rate

     Pay/Receive
Exercise Rate
    

Floating Rate

Index

     Expiration
Date
     Notional
Amount
(000)
     Value  

2-Year Interest Rate Swap

  Deutsche Bank AG      Call         1.92      Receive         KRW 3-month CD         11/09/16         KRW    911,735       $ 5,448   

      OTC Interest Rate Swaptions Written

 

Description   Counterparty    Put/
Call
    

Exercise

Rate

     Pay/Receive
Exercise Rate
    

Floating Rate

Index

     Expiration
Date
     Notional
Amount
(000)
     Value  

2-Year Interest Rate Swap

  Deutsche Bank AG      Call         1.63      Pay         KRW 3-month CD         11/09/16         KRW    911,735       $ (1,004

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    53


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

      OTC Options Purchased

 

Description   Put/
Call
  Counterparty   Expiration
Date
   

Strike
Price

   

Notional

Amount
(000)

    Value  

USD Currency

  Call   HSBC Bank PLC     11/02/15      KRW     1,195.00      USD     213          

USD Currency

  Call   Deutsche Bank AG     11/25/15      KRW     1,140.00      USD     142      $ 1,761   

USD Currency

  Call   Goldman Sachs International     11/27/15      ZAR     14.40      USD     70        489   

USD Currency

  Put   HSBC Bank PLC     11/06/15      ZAR     13.25      USD     54        32   

USD Currency

  Put   Goldman Sachs International     11/12/15      MXN     16.40      USD     121        509   

USD Currency

  Put   HSBC Bank PLC     11/13/15      TRY     2.88      USD     209        554   

USD Currency

  Put   Deutsche Bank AG     11/27/15      ZAR     13.50      USD     157        941   

NZD Currency

  Put   Citibank N.A.     1/28/16      JPY     78.25      NZD     11,170        123,395   

Total

                $ 127,681   
               

 

 

 

      OTC Options Written

 

Description   Put/
Call
  Counterparty   Strike
Price
    Expiration
Date
   

Notional

Amount

(000)

    Value  

USD Currency

  Call   HSBC Bank PLC   KRW     1,235.00        11/02/15      USD     213          

USD Currency

  Call   HSBC Bank PLC   ZAR     14.77        11/06/15      USD     108      $ (34

USD Currency

  Call   HSBC Bank PLC   BRL     3.60        11/09/15      USD     73        (5,735

USD Currency

  Call   Goldman Sachs International   MXN     17.00        11/12/15      USD     121        (215

USD Currency

  Call   HSBC Bank PLC   TRY     3.00        11/13/15      USD     209        (1,246

USD Currency

  Call   Deutsche Bank AG   ZAR     14.75        11/27/15      USD     125        (455

USD Currency

  Put   HSBC Bank PLC   KRW     1,145.00        11/02/15      USD     213        (1,262

USD Currency

  Put   HSBC Bank PLC   TRY     2.80        11/13/15      USD     209        (64

USD Currency

  Put   Deutsche Bank AG   KRW     1,110.00        11/25/15      USD     142        (359

NZD Currency

  Put   Citibank N.A.   JPY     72.51        1/28/16      NZD     11,170        (39,203

NZD Currency

  Put   Citibank N.A.   JPY     74.28        1/28/16      NZD     11,170        (56,093

Total

                $ (104,666
               

 

 

 

      Centrally Cleared Interest Rate Swaps

 

Fixed Rate   Floating
Rate
  Effective
Date
    Expiration
Date
  Notional
Amount
(000)
    Unrealized
Appreciation
(Depreciation)
 

2.13%1

  3-month LIBOR     N/A      8/25/25   USD     110      $ 764   

2.27%2

  3-month LIBOR     N/A      9/11/25   USD     68        (1,326

Total

            $    (562
           

 

 

 

1   Trust receives the fixed rate and pays the floating rate.

      

 

2   Trust pays the fixed rate and receives the floating rate.

      

 

      OTC Credit Default Swaps — Buy Protection

 

Issuer/Index   Pay
Fixed
Rate
  Counterparty   Expiration
Date
 

Notional
Amount
(000)

    Value    

Premiums

Paid

(Received)

    Unrealized
Appreciation
(Depreciation)
 

Federation of Malaysia

  1.00%   Citibank N.A.   12/20/20   USD     80      $ 3,813      $ 4,319      $ (506

Federation of Malaysia

  1.00%   Citibank N.A.   12/20/20   USD     90        4,289        4,977        (688

Federation of Malaysia

  1.00%   Barclays Bank PLC   12/20/20   USD     104        4,967        5,483        (516

Federation of Malaysia

  1.00%   Bank of America N.A.   12/20/20   USD     113        5,374        6,278        (904

Republic of Brazil

  1.00%   Deutsche Bank AG   12/20/20   USD     80        11,962        12,312        (350

Republic of Brazil

  1.00%   Deutsche Bank AG   12/20/20   USD     134        20,036        19,740        296   

Republic of Brazil

  1.00%   Deutsche Bank AG   12/20/20   USD     82        12,261        13,241        (980

Republic of Brazil

  1.00%   Deutsche Bank AG   12/20/20   USD     71        10,616        11,545        (929

Republic of Brazil

  1.00%   Barclays Bank PLC   12/20/20   USD     27        4,037        4,431        (394

Republic of Brazil

  1.00%   Barclays Bank PLC   12/20/20   USD     16        2,392        2,660        (268

Republic of Brazil

  1.00%   Barclays Bank PLC   12/20/20   USD     63        9,420        10,546        (1,126

Republic of Brazil

  1.00%   Barclays Bank PLC   12/20/20   USD     78        11,663        13,028        (1,365

Republic of Brazil

  1.00%   Barclays Bank PLC   12/20/20   USD     58        8,672        9,600        (928

Republic of Brazil

  1.00%   Barclays Bank PLC   12/20/20   USD     47        7,027        7,779        (752

 

See Notes to Financial Statements.

 

                
54    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

      OTC Credit Default Swaps — Buy Protection (continued)

 

Issuer/Index   Pay
Fixed
Rate
  Counterparty   Expiration
Date
   

Notional
Amount
(000)

    Value    

Premiums

Paid

(Received)

    Unrealized
Appreciation
(Depreciation)
 

Republic of Brazil

  1.00%   Citibank N.A.     12/20/20      USD     245      $ 36,633      $ 37,241      $ (608

Republic of Brazil

  1.00%   Bank of America N.A.     12/20/20      USD     98        14,654        14,795        (141

Republic of Brazil

  1.00%   Barclays Bank PLC     12/20/20      USD     80        11,962        12,072        (110

Republic of Brazil

  1.00%   Barclays Bank PLC     12/20/20      USD     80        11,962        12,226        (264

Republic of Brazil

  1.00%   Deutsche Bank AG     12/20/20      USD     90        13,457        14,091        (634

Republic of South Africa

  1.00%   Citibank N.A.     12/20/20      USD     80        5,810        5,489        321   

Republic of South Africa

  1.00%   Citibank N.A.     12/20/20      USD     80        5,810        5,595        215   

Republic of South Africa

  1.00%   Barclays Bank PLC     12/20/20      USD     80        5,810        5,542        268   

Republic of South Africa

  1.00%   Barclays Bank PLC     12/20/20      USD     240        17,465        16,081        1,384   

Republic of South Africa

  1.00%   Bank of America N.A.     12/20/20      USD     80        5,822        5,449        373   

Republic of South Africa

  1.00%   Goldman Sachs International     12/20/20      USD     132        9,589        9,901        (312

United Mexican States

  1.00%   Citibank N.A.     6/20/20      USD     604        10,594        5,409        5,185   

United Mexican States

  1.00%   Bank of America N.A.     9/20/20      USD     604        12,676        7,380        5,296   

Total

            $ 278,773      $ 277,210      $ 1,563   
           

 

 

   

 

 

   

 

 

 

      OTC Credit Default Swaps — Sell Protection

 

Issuer/Index   Receive
Fixed
Rate
    Counterparty   Expiration
Date
   

Credit

Rating1

    Notional
Amount
(000)2
    Value    

Premiums

Paid

(Received)

    Unrealized
Appreciation
(Depreciation)
 

Dow Jones CDX North America Investment Grade, Series 9

    5.00   Bank of America N.A.     12/20/17        BBB-      USD     10,000      $ 626,786      $ (369,856   $ 996,642   

Federation of Russia

    1.00   Bank of America N.A.     12/20/20        BB+      USD 240        (20,826     (21,011     185   

Federation of Russia

    1.00   Barclays Bank PLC     12/20/20        BB+      USD 240        (20,826     (21,011     185   

Federation of Russia

    1.00   Bank of America N.A.     12/20/20        BB+      USD 80        (6,942     (7,021     79   

Federation of Russia

    1.00   Goldman Sachs International     12/20/20        BB+      USD 132        (11,434     (12,123     689   

Federation of Russia

    1.00   Barclays Bank PLC     12/20/20        BB+      USD 198        (17,158     (16,898     (260

Markit CMBX North America, Series 7

    3.00   Barclays Bank PLC     1/17/47        BBB-      USD 10,000        (353,452     (554,548     201,096   

Markit CMBX North America, Series 7

    3.00   Barclays Bank PLC     1/17/47        BBB-      USD 5,000        (176,726     (276,951     100,225   

Markit CMBX North America, Series 8

    3.00   Goldman Sachs International     10/17/57        BBB-      USD 10,000        (995,298     (1,123,048     127,750   

Republic of Indonesia

    1.00   Barclays Bank PLC     12/20/20        BB+      USD 48        (2,732     (2,301     (431

Republic of Indonesia

    1.00   Barclays Bank PLC     12/20/20        BB+      USD 48        (2,732     (2,343     (389

Republic of Indonesia

    1.00   Barclays Bank PLC     12/20/20        BB+      USD 48        (2,732     (2,383     (349

Republic of Indonesia

    1.00   Barclays Bank PLC     12/20/20        BB+      USD 44        (2,482     (2,262     (220

United Mexican States

    1.00   Bank of America N.A.     6/20/20        BBB+      USD 604        (10,594     (5,692     (4,902
United Mexican States     1.00   Citibank N.A.     9/20/20        BBB+      USD 604        (12,676     (6,998     (5,678

Total

            $ (1,009,824   $ (2,424,446   $ 1,414,622   
           

 

 

   

 

 

   

 

 

 

1   Using Standard & Poor’s rating of the issuer or the underlying securities of the index, as applicable.

      

 

2   The maximum potential amount the Trust may pay should a negative credit event take place as defined under the terms of the agreement.

      

 

      OTC Interest Rate Swaps

 

Fixed Rate   Floating
Rate
  Counterparty   Effective
Date
 

Expiration

Date

    Notional
Amount
(000)
    Value    

Premiums

Paid

(Received)

    Unrealized
Appreciation
(Depreciation)
 
1.67%1   3-month KRWCD   Bank of America N.A.   N/A     6/08/17      KRW     1,146,756      $ 1,684      $ 3      $ 1,681   
2.34%1   7-day CNRR   Bank of America N.A.   N/A     7/10/17      CNY     17,030        1,302               1,302   
7.54%1   3-month JIBAR   Citibank N.A.   8/25/162     8/25/17      ZAR     14,135        2,834               2,834   
7.57%1   3-month JIBAR   Citibank N.A.   8/26/162     8/26/17      ZAR     7,940        1,737               1,737   
7.45%1   3-month JIBAR   Bank of America N.A.   8/29/162     8/29/17      ZAR     14,135        1,933               1,933   
7.48%1   3-month JIBAR   Bank of America N.A.   8/29/162     8/29/17      ZAR     9,690        1,516               1,516   
7.59%1   3-month JIBAR   Citibank N.A.   9/05/162     9/05/17      ZAR     6,190        1,342               1,342   
4.64%1   1-month MXIBTIIE   Goldman Sachs International   10/05/162     10/04/17      MXN     8,966        (251            (251
4.65%1   1-month MXIBTIIE   Bank of America N.A.   10/05/162     10/04/17      MXN     2,898        (73            (73
4.55%3   3-month KLIBOR   Citibank N.A.   N/A     9/11/20      MYR     1,275        (3,905            (3,905
4.34%3   3-month KLIBOR   Bank of America N.A.   N/A     9/18/20      MYR     1,277        (912     9        (921
6.32%1   1-month MXIBTIIE   Morgan Stanley
Capital Services LLC
  N/A     7/17/25      MXN     5,813        1,670        (30     1,700   

6.33%1

  1-month MXIBTIIE   Citibank N.A.   N/A     7/17/25      MXN     2,897        897        (15     912   

6.32%1

  1-month MXIBTIIE   Goldman Sachs International   N/A     8/06/25      MXN     8,688        2,316        (43     2,359   

6.31%3

  1-month MXIBTIIE   Deutsche Bank AG   N/A     8/11/25      MXN     6,393        (1,260            (1,260

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    55


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

      OTC Interest Rate Swaps (continued)

 

Fixed Rate   Floating
Rate
  Counterparty   Effective
Date
 

Expiration

Date

    Notional
Amount
(000)
    Value    

Premiums

Paid

(Received)

    Unrealized
Appreciation
(Depreciation)
 

6.31%3

  1-month MXIBTIIE   Bank of America N.A.   N/A     8/11/25        MXN        1,723      $ (361   $      $ (361

6.31%3

  1-month MXIBTIIE   Bank of America N.A.   N/A     8/11/25        MXN        1,723        (361            (361

Total

              $ 10,108      $ (76   $ 10,184   
             

 

 

 

1   Trust pays the floating rate and receives the fixed rate.

      

2   Forward swap.

      

3   Trust pays the fixed rate and receives the floating rate.

      

 

Transactions in Options Written for the Year Ended October 31, 2015
    Calls         Puts  
          Contracts     Notional
(000)1
    Premiums
Received
         Contracts     Notional
(000)1
    Premiums
Received
 

Outstanding options, beginning of year

                             40             $ 5,938   

Options written

      49        923,068      $ 51,419          30        24,535        117,553   

Options exercised

      (5     (408     (2,000                       

Options expired

             (408     (4,080       (52     (978     (14,439

Options closed

      (44     (9,668     (34,486       (18     (653     (7,396
   

 

 

 

Outstanding options, end of year

             912,584      $ 10,853                 22,904      $ 101,656   
   

 

 

 

1    Amount shown is in the currency in which the transaction was denominated.

       

 

 

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:

 

Assets — Derivative
Financial Instruments
        Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Currency
Exchange
Contracts
    Interest
Rate
Contracts
    Other
Contacts
    Total  

Financial futures contracts

   Net unrealized appreciation1                               $ 87,196             $ 87,196   

Forward foreign currency
exchange contracts

  

Unrealized appreciation on forward foreign currency exchange contracts

                       $ 599,010                      599,010   

Options purchased

   Investments at value — unaffiliated2;                          127,681        5,448               133,129   

Swaps — OTC

   Unrealized appreciation on OTC swaps; Swap premiums paid          $ 1,717,399                      17,328               1,734,727   

Swaps — centrally cleared

   Net unrealized appreciation1                                 764               764   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

            $ 1,717,399             $ 726,691      $ 110,736             $ 2,554,826   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                
Liabilities — Derivative
Financial Instruments
                                                      

Financial futures contracts

   Net unrealized depreciation1                               $ 12,183             $ 12,183   

Forward foreign currency
exchange contracts

  

Unrealized depreciation on forward foreign currency exchange contracts

                       $ 897,670                      897,670   

Options written

   Options written at value;                          104,666        1,004               105,670   

Swaps — OTC

   Unrealized depreciation on OTC swaps; Swap premiums received          $ 2,448,450                      7,220               2,455,670   

Swaps — centrally cleared

   Net unrealized depreciation1                                 1,326               1,326   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

            $ 2,448,450             $ 1,002,336      $ 21,733             $ 3,472,519   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1    Includes cumulative appreciation (depreciation) on financial futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

        

2    Includes options purchased at value as reported in the Schedule of Investments.

       

 

See Notes to Financial Statements.

 

                
56    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

For the year ended October 31, 2015, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

     Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contacts
     Total  

Net Realized Gain (Loss) From:

                   

Financial futures contracts

                                  $ (3,381,925            $ (3,381,925

Forward foreign currency exchange contracts

                          $ 2,391,008                         2,391,008   

Options purchased1

                            (49,482      (51,397              (100,879

Options written

                            8,969         12,602                 21,571   

Swaps

          $ 331,027                         (250,362              80,665   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

          $ 331,027               $ 2,350,495       $ (3,671,082            $ (989,560
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

1    Options purchased are included in net realized gain (loss) from investments.

       

     Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contacts
     Total  

Net Change in Unrealized Appreciation (Depreciation) on:

  

              

Financial futures contracts

                                  $ 769,706               $ 769,706   

Forward foreign currency exchange contracts

                          $ (329,633                      (329,634

Options purchased1

                            (8,712      18,025                 9,313   

Options written

                            7,341         (6,190              1,151   

Swaps

          $ 395,317                         92,850                 488,167   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

          $ 395,317               $ (331,005    $ 874,391               $ 938,703   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

1    Options purchased are included in net change in unrealized appreciation (depreciation) on investments.

       

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Financial futures contracts:

          

Average notional value of contracts — long

     $ 4,016,517   

Average notional value of contracts — short

     $ 144,348,055   
Forward foreign currency exchange contracts:     

Average amounts purchased — in USD

     $ 73,732,174   

Average amounts sold — in USD

     $ 25,546,509   
Options:     

Average value of option contracts purchased

     $ 37,833   

Average value of option contracts written

     $ 32,393   

Average notional value of swaption contracts purchased

     $ 394,723   

Average notional value of swaption contracts written

     $ 394,723   
Credit default swaps:     

Average notional value — buy protection

     $ 3,956,757   

Average notional value — sell protection

     $ 18,487,885   
Interest rate swaps:     

Average notional value — pays fixed rate

     $ 1,885,268   

Average notional value — receives fixed rate

     $ 10,434,220   

For more information about the Trust’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

 

Derivative Financial Instruments — Offsetting as of Period End

The Trust’s derivative assets and liabilities (by type) were as follows:

 

     Assets     Liabilities  
Derivative Financial Instruments:    

Financial futures contracts

  $ 14,042      $ 26,620   

Forward foreign currency exchange contracts

    599,010        897,670   

Options

    133,129 1      105,670   

Swaps — Centrally cleared

    299        187   

Swaps — OTC2

    1,734,727        2,455,670   
 

 

 

 

Total derivative assets and liabilities in the Statements of Assets and Liabilities

  $ 2,481,207     $ 3,485,817   
 

 

 

 

Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)

    (14,341 )     (26,807
 

 

 

 

Total derivative assets and liabilities subject to an MNA

  $ 2,466,866     $ 3,459,010   
 

 

 

 

1    Includes options purchased at value which is included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Schedules of Investments.

        

2    Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums paid/received in the Statements of Assets and Liabilities.

       

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    57


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

The following table presents the Trust’s derivative assets and liabilities by counterparty net of amounts available for offset under an Master Netting Agreement (“MNA”) and net of the related collateral received and pledged by the Trust:

 

Counterparty        Derivative Assets
Subject to an MNA
by Counterparty
    Derivatives
Available for
Offset1
    Non-cash Collateral
Received
    Cash Collateral
Received2
    Net
Amount of
Derivative
Assets3
 

Bank of America N.A.

    $ 1,043,927      $ (411,243          $ (632,684       

Barclays Bank PLC

      545,104        (545,104                     

BNP Paribas S.A.

      156        (156                     

Citibank N.A.

      209,844        (209,844                     

Credit Suisse International

      1,433        (1,433                     

Deutsche Bank AG

      124,766        (7,977                 $ 116,789   

Goldman Sachs International

      372,229        (372,229                     

HSBC Bank PLC

      5,812        (5,812                     

JPMorgan Chase Bank N.A.

      48,403        (16,377                   32,026   

Morgan Stanley & Co. International PLC

      14,860        (14,860                     

Morgan Stanley Capital Services LLC

      1,700        (30                   1,670   

Royal Bank of Scotland PLC

      68        (68                     

Standard Chartered Bank

      7,534        (7,156                   378   

State Street Bank and Trust Co.

      75,170                             75,170   

UBS AG

      15,860        (886                   14,974   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    $ 2,466,866      $ (1,593,175            $(632,684)      $ 241,007   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
           
          Derivative Liabilities
Subject to an MNA
by Counterparty
    Derivatives
Available for
Offset1
    Non-cash Collateral
Pledged
    Cash Collateral
Pledged
    Net
Amount of
Derivative
Liabilities4
 

Bank of America N.A.

    $ 411,243      $ (411,243                     

Barclays Bank PLC

      886,069        (545,104                 $ 340,965   

BNP Paribas S.A.

      1,884        (156                   1,728   

Citibank N.A.

      353,708        (209,844                   143,864   

Credit Suisse International

      3,110        (1,433                   1,677   

Deutsche Bank AG

      7,977        (7,977                     

Goldman Sachs International

      1,189,441        (372,229                   817,212   

HSBC Bank PLC

      9,227        (5,812                   3,415   

JPMorgan Chase Bank N.A.

      16,377        (16,377                     

Morgan Stanley & Co. International PLC

      562,713        (14,860                   547,853   

Morgan Stanley Capital Services LLC

      30        (30      

Royal Bank of Scotland PLC

      9,189        (68                   9,121   

Standard Chartered Bank

      7,156        (7,156                     

UBS AG

      886        (886                     
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    $ 3,459,010      $ (1,593,175                 $ 1,865,835   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1    The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

       

2    Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

       

3    Net amount represents the net amount receivable from the counterparty in the event of default.

       

4    Net amount represents the net amount payable due to the counterparty in the event of default.

       

 

See Notes to Financial Statements.

 

                
58    ANNUAL REPORT    OCTOBER 31, 2015   


Schedule of Investments (continued)

  

BlackRock Multi-Sector Income Trust (BIT)

 

 

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Trust’s policy regarding valuation of investments and derivative financial instruments refer to the Notes to Financial Statements.

The following tables summarize the Trust’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

     Level 1        Level 2        Level 3        Total  

Assets:

                
Investments:                 

Long-Term Investments:

                

Asset-Backed Securities

            $ 189,369,756         $ 65,179,443         $ 254,549,199   

Corporate Bonds

              399,988,252           515,294           400,503,546   

Floating Rate Loan Interests

              20,978,437           41,246,750           62,225,187   

Foreign Agency Obligations

              22,010,739                     22,010,739   

Non-Agency Mortgage-Backed Securities

              281,338,212           26,217,945           307,556,157   

Preferred Securities

  $ 17,787,571           142,755,956           1,833,459           162,376,986   

Short-Term Securities

    6,140,532                               6,140,532   

Options Purchased:

                

Interest Rate Contracts

              5,448                     5,448   

Currency Contracts

              127,681                     127,681   
 

 

 

 

Total

  $ 23,928,103         $ 1,056,574,481         $ 134,992,891         $ 1,215,495,475   
 

 

 

 
                
     Level 1        Level 2        Level 3        Total  
Derivative Financial Instruments1                 

Assets:

                

Credit contracts

            $ 1,440,189                   $ 1,440,189   

Foreign currency exchange contracts

              599,010                     599,010   

Interest rate contracts

  $ 87,196           18,080                     105,276   

Liabilities:

                

Credit contracts

              (24,004                  (24,004

Foreign currency exchange contracts

              (1,002,336                  (1,002,336

Interest rate contracts

    (12,183        (9,462                  (21,645
 

 

 

 

Total

  $ 75,013         $ 1,021,477                   $ 1,096,490   
 

 

 

 

1    Derivative financial instruments are swaps, financial futures contracts, forward foreign currency exchange contracts and options written. Swaps, financial futures contracts and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument and options written are shown at value.

        

The Trust may hold assets and/or liabilities in which the fair value approximates the carrying amount or face value, including accrued interest, for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

 

     Level 1        Level 2        Level 3        Total  

Assets:

                

Cash

  $ 1,711,034                             $ 1,711,034   

Cash pledged for centrally cleared swaps

    1,600                               1,600   

Cash pledged for financial futures contracts

    781,400                               781,400   

Foreign currency at value

    1,438,640                               1,438,640   

Cash pledged as collateral for reverse repurchase agreements

    1,881,755                               1,881,755   

Liabilities:

                

Reverse repurchase agreements

            $ (510,352,370                  (510,352,370

Cash received as collateral for OTC derivatives

              (660,000                  (660,000
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

  $ 5,814,429         $ (511,012,370                $ (505,197,941
 

 

 

      

 

 

      

 

 

      

 

 

 

During the year ended October 31, 2015, there were no transfers between Level 1 and Level 2.

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    59


Schedule of Investments (concluded)

  

BlackRock Multi-Sector Income Trust (BIT)

 

A reconciliation of Level 3 investments is presented when the Trust had a significant amount of Level 3 investments at the beginning and/or end of the period in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

 

     Asset-Backed
Securities
    Corporate
Bonds
    Floating Rate
Loan
Interests
   

Non-Agency

Mortgage-Backed

Securities

   

Preferred

Securities

    Total  

Assets:

           

Opening balance, as of October 31, 2014

  $ 12,930,162      $ 4,353,024      $ 26,369,600      $ 24,087,773             $ 67,740,559   

Transfers into Level 31

                  132,297             $ 1,824,664        1,956,961   

Transfers out of Level 32

    (951,300     (4,353,024            (4,595,625            (9,899,949

Accrued discounts/premiums

    279,548               (4,001     289,085               564,632   

Net realized gain (loss)

    70,117               16,846        955,111               1,042,074   

Net change in unrealized

appreciation (depreciation)3,4

    (3,230,594     (146     (79,769     (421,837     8,795        (3,723,551

Purchases

    61,421,265        515,440        22,040,000        10,563,459               94,540,164   

Sales

    (5,339,755            (7,228,223     (4,660,021            (17,227,999
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Closing Balance, as of October 31, 2015

  $ 65,179,443      $ 515,294      $ 41,246,750      $ 26,217,945      $ 1,833,459      $ 134,992,891   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation) on investments still held at October 31, 20154

  $ (3,139,132   $ (146   $ (45,169   $ (421,837   $ 8,795      $ (3,597,489
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1    As of October 31, 2015, the Trust used observable inputs in determining the value of certain investments. As of October 31, 2015, the Trust used significant unobservable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $1,956,961 were transferred from Level 2 to Level 3 in the disclosure hierarchy.

         

2    As October 31, 2015, the Trust used significant unobservable inputs in determining the value of certain investments. As of October 31, 2015, the Trust used observable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $ 9,899,949 were transferred from Level 3 to Level 2 in the disclosure hierarchy.

         

3    Included in the related net change in unrealized appreciation (depreciation) in the Statements of Operations.

       

4    Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at October 31, 2015 is generally due to investments no longer held or categorized as Level 3 at period end.

        

The Trust’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information could result in a significantly lower or higher value of such Level 3 investments.

 

See Notes to Financial Statements.

 

                
60    ANNUAL REPORT    OCTOBER 31, 2015   


Statements of Assets and Liabilities     

 

October 31, 2015   BlackRock
Credit Allocation
Income Trust
(BTZ)
    BlackRock
Floating Rate
Income Trust
(BGT)
    BlackRock
Multi-Sector
Income Trust
(BIT)
 
     
Assets                        

Investments at value — unaffiliated1

  $ 2,198,242,197      $ 442,810,844      $ 1,209,354,943   

Investments at value — affiliated2

    610,104        1,094,113        6,140,532   

Cash

    1,697,637        948,823        1,711,034   
Cash pledged:      

Financial futures contracts

    4,302,780               781,400   

Centrally cleared swaps

    9,035,930               1,600   

Collateral — reverse repurchase agreements

    2,704,000               1,881,755   

Foreign currency at value3

    8,883        5,141        1,438,640   
Receivables:      

Interest

    29,339,749        1,699,729        10,710,297   

Investments sold

    794,525        6,399,408        19,929,530   

Dividends

    61,272               135,787   

Swaps

    51,769               102,675   

Reverse repurchase agreements

                  17,224,000   

Swap premiums paid

    263,606               277,222   
Unrealized appreciation on:      

OTC swaps

    1,312,144               1,457,505   

Forward foreign currency exchange contracts

           79,201        599,010   

Variation margin receivable on financial futures contracts

    715,208               14,042   

Variation margin receivable on centrally cleared swaps

                  299   

Prepaid expenses

    6,531        1,442        2,320   
 

 

 

 

Total assets

    2,249,146,335        453,038,701        1,271,762,591   
 

 

 

 
     
Liabilities                        

Cash received as collateral for OTC derivatives

    1,000,000               660,000   

Options written at value4

    21,225               105,670   

Reverse repurchase agreements

    685,715,941               510,352,370   
Payables:      

Investments purchased

    8,560,108        12,754,803        29,368,700   

Investment advisory fees

    1,172,646        282,167        838,509   

Officer’s and Trustees’ fees

    609,747        188,481        37,970   

Income dividends

    359,474        28,079        281,342   

Other accrued expenses

    266,647        186,966        237,796   

Swaps

    126,776               68,413   

Bank borrowings

           104,000,000          

Interest expense

           86,286          

Swap premiums received

    627,310               2,424,534   
Unrealized depreciation on:      

Forward foreign currency exchange contracts

           68,145        897,670   

OTC swaps

    905,197               31,136   

Variation margin payable on centrally cleared swaps

    498,178               187   

Variation margin payable on financial futures contracts

    160,317               26,620   

Commitments and contingencies

    5             5 
 

 

 

 

Total liabilities

    700,023,566        117,594,927        545,330,917   
 

 

 

 

Net Assets

  $ 1,549,122,769      $ 335,443,774      $ 726,431,674   
 

 

 

 
     

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    OCTOBER 31, 2015    61


Statements of Assets and Liabilities (concluded)     

 

October 31, 2015   BlackRock
Credit Allocation
Income Trust
(BTZ)
    BlackRock
Floating Rate
Income Trust
(BGT)
    BlackRock
Multi-Sector
Income Trust
(BIT)
 
     
Net Assets Consist of                        

Paid-in capital6,7,8

  $ 1,828,243,993      $ 427,370,162      $ 727,781,455   

Undistributed (distributions in excess of) net investment income

    1,190,408        82,859        (695,116

Accumulated net realized gain (loss)

    (333,358,869     (82,309,514     1,412,718   

Net unrealized appreciation (depreciation)

    53,047,237        (9,699,733     (2,067,383
 

 

 

 

Net Assets

  $ 1,549,122,769      $ 335,443,774      $ 726,431,674   
 

 

 

 

Net asset value

  $ 14.33      $ 14.18      $ 18.91   
 

 

 

 

1    Investments at cost — unaffiliated

  $ 2,131,712,752      $ 452,534,387      $ 1,212,750,395   

2    Investments at cost — affiliated

  $ 610,104      $ 1,094,113      $ 6,140,532   

3    Foreign currency at cost

  $ 9,216      $ 5,200      $ 1,443,404   

4    Premiums received

  $ 1,061,185             $ 112,509   

5    See Note 4 of the Notes to Financial Statements for details of commitments.

     

6    Par value per share

  $ 0.001      $ 0.001      $ 0.001   

7    Shares outstanding

    108,088,170        23,663,232        38,421,624   

8    Shares authorized

    unlimited        unlimited        unlimited   

 

 

See Notes to Financial Statements.      
                
62    ANNUAL REPORT    OCTOBER 31, 2015   


Statements of Operations     

 

Year Ended October 31, 2015   BlackRock
Credit Allocation
Income Trust
(BTZ)
    BlackRock
Floating Rate
Income Trust
(BGT)1
    BlackRock
Multi-Sector
Income Trust
(BIT)
 
     
Investment Income                        

Interest

  $ 117,361,043      $ 23,593,384      $ 71,789,994   

Dividends — unaffiliated

    4,586,641        80,495        3,244,037   

Dividends — affiliated

    7,660        420        23,186   
 

 

 

 

Total income

    121,955,344        23,674,299        75,057,217   
 

 

 

 
     
Expenses                        

Investment advisory

    14,578,884        3,539,981        10,663,400   

Professional

    311,849        181,373        254,123   

Accounting services

    174,298        56,119        101,246   

Transfer agent

    153,275        43,037        49,541   

Custodian

    134,103        155,701        151,559   

Officer and Trustees

    104,014        17,492        66,355   

Registration

    38,154        9,042        13,604   

Printing

    35,901        17,579        23,865   

Miscellaneous

    149,742        44,965        93,702   
 

 

 

 

Total expenses excluding interest expense

    15,680,220        4,065,289        11,417,395   

Interest expense

    2,966,675        1,223,715        4,167,700   
 

 

 

 

Total expenses

    18,646,895        5,289,004        15,585,095   
Less:      

Fees waived by the Manager

    (6,242     (556     (17,306

Fees paid indirectly

    (223            (178
 

 

 

 

Total expenses after fees waived and paid indirectly

    18,640,430        5,288,448        15,567,611   
 

 

 

 

Net investment income

    103,314,914        18,385,851        59,489,606   
 

 

 

 
     
Realized and Unrealized Gain (Loss)                        

Net realized gain (loss) from:

     

Investments

    (15,281,889     (7,912,142     (13,211,471

Financial futures contracts

    (901,072            (3,381,925

Foreign currency transactions

    (3,550     1,644,738        2,817,102   

Options written

    4,676,733               21,571   

Swaps

    (4,158,379     (43,669     80,665   
 

 

 

 
    (15,668,157     (6,311,073     (13,674,058
 

 

 

 
Net change in unrealized appreciation (depreciation) on:      

Investments

    (80,419,460     (2,044,475     (26,788,430

Financial futures contracts

    (3,241,507            769,706   

Foreign currency translations

    324        (98,096     (181,124

Options written

    (3,970,751            1,151   

Swaps

    (6,921,387            488,167   

Unfunded floating rate loan interests

           25,380          
 

 

 

 
    (94,552,781     (2,117,191     (25,710,530
 

 

 

 

Net realized and unrealized loss

    (110,220,938     (8,428,264     (39,384,588
 

 

 

 

Net Increase (Decrease) in Net Assets Resulting from Operations

  $ (6,906,024   $ 9,957,587      $ 20,105,018   
 

 

 

 

1    Consolidated Statement of Operations.

       

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    OCTOBER 31, 2015    63


Statements of Changes in Net Assets     

 

    BlackRock Credit Allocation
Income Trust (BTZ)
 
    Year Ended October 31,  
Increase (Decrease) in Net Assets:   2015     2014  
   
Operations                

Net investment income

  $ 103,314,914      $ 107,032,500   

Net realized gain (loss)

    (15,668,157     3,086,038   

Net change in unrealized appreciation (depreciation)

    (94,552,781     35,033,900   
 

 

 

 

Net increase (decrease) in net assets resulting from operations

    (6,906,024     145,152,438   
 

 

 

 
   
Distributions to Shareholders1                

From net investment income

    (97,419,415     (104,413,172

From return of capital

    (6,993,757       
 

 

 

 

Decrease in net assets resulting from distributions to shareholders

    (104,413,172     (104,413,172
 

 

 

 
   
Net Assets                

Total increase (decrease) in net assets

    (111,319,196     40,739,266   

Beginning of year

    1,660,441,965        1,619,702,699   
 

 

 

 

End of year

  $ 1,549,122,769      $ 1,660,441,965   
 

 

 

 

Undistributed net investment income, end of year

  $ 1,190,408      $ 290,393   
 

 

 

 

 

    BlackRock Floating Rate
Income Trust (BGT)2
 
    Year Ended October 31,  
Increase (Decrease) in Net Assets:   2015     2014  
   
Operations                

Net investment income

  $ 18,385,851      $ 19,977,444   

Net realized gain (loss)

    (6,311,073     7,113,737   

Net change in unrealized appreciation (depreciation)

    (2,117,191     (12,444,550
 

 

 

 

Net increase in net assets resulting from operations

    9,957,587        14,646,631   
 

 

 

 
   
Distributions to Shareholders1                

From net investment income

    (19,181,416     (19,919,709
 

 

 

 
   
Net Assets                

Total decrease in net assets

    (9,223,829     (5,273,078

Beginning of year

    344,667,603        349,940,681   
 

 

 

   

 

 

 

End of year

  $ 335,443,774      $ 344,667,603   
 

 

 

 

Undistributed net investment income, end of year

  $ 82,859      $ 984,527   
 

 

 

 

1    Distributions for annual periods determined in accordance with federal income tax regulations.

       

2    Consolidated Statements of Changes.

       

 

 

See Notes to Financial Statements.      
                
64    ANNUAL REPORT    OCTOBER 31, 2015   


Statements of Changes in Net Assets     

 

    BlackRock Multi-Sector
Income Trust (BIT)
 
    Year Ended October 31,  
Increase (Decrease) in Net Assets:   2015     2014  
   
Operations                

Net investment income

  $ 59,489,606      $ 62,745,166   

Net realized gain (loss)

    (13,674,058     2,105,011   

Net change in unrealized appreciation (depreciation)

    (25,710,530     24,407,361   
 

 

 

 

Net increase in net assets resulting from operations

    20,105,018        89,257,538   
 

 

 

 
   
Distributions to Shareholders1                

From net investment income

    (54,109,102     (53,805,642

From net realized gain

    (2,923,957       
 

 

 

 

Decrease in net assets resulting from distributions to shareholders

    (57,033,059     (53,805,642
 

 

 

 
   
Net Assets                

Total increase (decrease) in net assets

    (36,928,041     35,451,896   

Beginning of year

    763,359,715        727,907,819   
 

 

 

 

End of year

  $ 726,431,674      $ 763,359,715   
 

 

 

 

Undistributed (distributions in excess of) net investment income, end of year

  $ (695,116   $ 856,831   
 

 

 

 

1    Distributions for annual periods determined in accordance with federal income tax regulations.

       

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    OCTOBER 31, 2015    65


Statements of Cash Flows     

 

Year Ended October 31, 2015   BlackRock
Credit Allocation
Income Trust
(BTZ)
    BlackRock
Floating Rate
Income Trust
(BGT)1
    BlackRock
Multi-Sector
Income Trust
(BIT)
 
     
Cash Provided by Operating Activities                        

Net increase (decrease) in net assets resulting from operations

  $ (6,906,024   $ 9,957,587      $ 20,105,018   

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by operating activities:

     

Proceeds from sales of long-term investments

    584,772,810        242,818,020        425,246,507   

Purchases of long-term investments

    (491,608,965     (203,819,085     (253,370,370

Net proceeds from sales of short-term securities

    3,673,187        1,536,421        12,682,853   

Amortization of premium and accretion of discount on investments

    4,440,039        (460,334     (12,613,351

Net realized loss on investments and options written

    13,892,865        8,147,839        18,616,002   

Net unrealized loss on investments, options written, swaps, foreign currency translations and unfunded floating rate loan interests

    83,590,333        2,117,191        26,724,017   

Premiums paid on closing options written

    (5,024,060            (40,833

Premiums received from options written

    3,307,008               168,972   
(Increase) decrease in assets:      
Cash Pledged:      

Collateral — OTC derivatives

    500,000                 

Collateral — reverse repurchase agreements

    (2,704,000            (340,226

Centrally cleared swaps

    (3,885,930            1,023,400   

Financial futures contracts

    (3,949,780            217,600   
Receivables:      

Dividends

    7,591               46,875   

Interest

    2,245,686        213,428        2,508,931   

Swaps

    49,264               289,809   

Swap premiums paid

    250,282               (274,325

Variation margin receivable on financial futures contracts

    (441,646            194,753   

Variation margin receivable on centrally cleared swaps

    376,026               5,144   

Prepaid expenses

    (354     135        (84
Increase (decrease) in liabilities:      
Cash received:      

Collateral — reverse repurchase agreements

                  (873,000

Collateral — OTC derivatives

    260,000                 
Payables:      

Investment advisory fees

    (97,170     (20,305     (139,704

Interest expense

    213,250        (118,676     (211,183

Other accrued expenses

    (18,960     6,023        (15,500

Officer’s and Trustees’ fees

    24,441        562        28,857   

Swaps

    (1,195            (289,048

Other liabilities

                  (832,628

Variation margin payable on financial futures contracts

    (240,186            26,620   

Variation margin payable on centrally cleared swaps

    498,178               (78,387

Swap premiums received

    (235,154            1,881,795   
 

 

 

 

Net cash provided by operating activities

    182,987,536        60,378,806        240,688,514   
 

 

 

 
     
Cash Used for Financing Activities                        

Cash dividends paid to shareholders

    (104,462,536     (19,185,051     (56,943,992

Payments for bank borrowings

           (185,000,000       

Proceeds from bank borrowings

           144,000,000          

Increase in bank overdraft

    (26,363              

Net borrowing of reverse repurchase agreements

    (76,791,885            (182,450,532
 

 

 

 

Net cash used for financing activities

    (181,280,784     (60,185,051     (239,394,524
 

 

 

 
     
Cash Impact from Foreign Exchange Fluctuations                        

Cash impact from foreign exchange fluctuations

  $ (331   $ (37   $ 15,053   
 

 

 

 
     
Cash and Foreign Currency                        

Net increase in cash

    1,706,421        193,718        1,309,043   

Cash and foreign currency at beginning of year

    99        760,246        1,840,631   
 

 

 

 

Cash and foreign currency at end of year

  $ 1,706,520      $ 953,964      $ 3,149,674   
 

 

 

 
     
Supplemental Disclosure of Cash Flow Information                        

Cash paid during the year for interest expense

  $ 2,753,425      $ 1,342,391      $ 4,378,883   
 

 

 

 

1    Consolidated Statement of Cash Flows.

     

 

 

See Notes to Financial Statements.      
                
66    ANNUAL REPORT    OCTOBER 31, 2015   


Financial Highlights    BlackRock Credit Allocation Income Trust (BTZ)

 

    Year Ended October 31,  
    2015     2014     2013     2012     2011  
         
Per Share Operating Performance                                        

Net asset value, beginning of year

  $ 15.36      $ 14.99      $ 15.37      $ 13.94      $ 14.46   
 

 

 

 

Net investment income1

    0.96        0.99        0.97        0.94        0.88   

Net realized and unrealized gain (loss)

    (1.02     0.35        (0.37     1.43        (0.54

Distributions to Preferred Shareholders from net investment income

                                (0.01
 

 

 

 

Net increase (decrease) from investment operations

    (0.06     1.34        0.60        2.37        0.33   
 

 

 

 
Distributions to Common Shareholders:2          

From net investment income

    (0.91     (0.97     (0.98     (0.94     (0.85

From return of capital

    (0.06                            
 

 

 

 

Total distributions

    (0.97     (0.97     (0.98     (0.94     (0.85
 

 

 

 

Net asset value, end of year

  $ 14.33      $ 15.36      $ 14.99      $ 15.37      $ 13.94   
 

 

 

 

Market price, end of year

  $ 12.53      $ 13.54      $ 12.97      $ 14.23      $ 12.08   
 

 

 

 
         
Total Return Applicable to Common Shareholders3                                        

Based on net asset value

    0.48%        10.11%        4.86%        18.35%        3.28%   
 

 

 

 

Based on market price

    (0.33)%        12.18%        (2.01)%        26.44%        (0.60)%   
 

 

 

 
         
Ratios to Average Net Assets Applicable to Common Shareholders                                        

Total expenses

    1.16%        1.11%        1.15% 4      1.20% 5      1.09% 6 
 

 

 

 

Total expenses after fees waived and paid indirectly

    1.15%        1.11%        1.15% 4      1.20% 5      1.09% 6 
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense

    0.97%        0.96%        1.00% 4      1.07% 5      0.99% 6 
 

 

 

 

Net investment income

    6.40%        6.48%        6.43%        6.53%        6.25% 6 
 

 

 

 

Distributions to Preferred Shareholders

                                0.09%   
 

 

 

 

Net investment income to Common Shareholders

    6.40%        6.48%        6.43%        6.53%        6.16%   
 

 

 

 
         
Supplemental Data                                        

Net assets applicable to Common Shareholders, end of year (000)

  $  1,549,123      $  1,660,442      $  1,619,703      $  796,836      $  722,337   
 

 

 

 

Borrowings outstanding, end of year (000)

  $ 685,716      $ 759,752      $ 812,028      $ 373,716      $ 339,303   
 

 

 

 

Portfolio turnover rate

    19%        29%        43%        37%        54%   
 

 

 

 

 

  1  

Based on average shares outstanding.

 

  2  

Distributions for annual periods determined in accordance with federal income tax regulations.

 

  3  

Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

 

  4  

Includes reorganization costs associated with the Trust’s merger. Without these costs, total expenses, total expenses after fees waived and paid indirectly, and total expenses after fees waived and paid indirectly and excluding interest expense would have been 1.15%, 1.15% and 1.00%, respectively.

 

  5  

Includes reorganization costs associated with the Trust’s merger. Without these costs, total expenses, total expenses after fees waived and paid indirectly, and total expenses after fees waived and paid indirectly and excluding interest expense would have been 1.16%, 1.16% and 1.02%, respectively.

 

  6  

Does not reflect the effect of dividends to Preferred Shareholders.

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    OCTOBER 31, 2015    67


Financial Highlights    BlackRock Floating Rate Income Trust (BGT)

 

    Year Ended October 31,  
    20151     20141     20131     20121     2011  
         
Per Share Operating Performance                                        

Net asset value, beginning of year

  $ 14.57      $ 14.79      $ 14.52      $ 13.97      $ 14.48   
 

 

 

 

Net investment income2

    0.78        0.84        0.94        0.97        1.00   

Net realized and unrealized gain (loss)

    (0.36     (0.22     0.38        0.68        (0.42

Distributions to Preferred Shareholders from net investment income

                                (0.00 )3 
 

 

 

 

Net increase from investment operations

    0.42        0.62        1.32        1.65        0.58   
 

 

 

 

Distributions to Common Shareholder from net investment income4

    (0.81     (0.84     (1.05     (1.10     (1.09
 

 

 

 

Net asset value, end of year

  $ 14.18      $ 14.57      $ 14.79      $ 14.52      $ 13.97   
 

 

 

 

Market price, end of year

  $ 12.77      $ 13.18      $ 14.12      $ 15.07      $ 13.00   
 

 

 

 
         
Total Return Applicable to Common Shareholders5                                        

Based on net asset value

    3.54%        4.60%        9.37%        12.37%        4.03%   
 

 

 

 

Based on market price

    3.08%        (0.89)%        0.60%        25.33%        (3.46)%   
 

 

 

 
         
Ratios to Average Net Assets Applicable to Common Shareholders                                        

Total expenses

    1.55%        1.52%        1.57%        1.66%        1.73% 6 
 

 

 

 

Total expenses after fees waived and paid indirectly

    1.54%        1.52%        1.57%        1.61%        1.60% 6 
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense

    1.19%        1.18%        1.19%        1.25% 7      1.24% 6 
 

 

 

 

Net investment income

    5.37%        5.71%        6.39%        6.87%        6.95% 6 
 

 

 

 

Distributions to Preferred Shareholders

                                0.03%   
 

 

 

 

Net investment income to Common Shareholders

    5.37%        5.71%        6.39%        6.87%        6.92%   
 

 

 

 
         
Supplemental Data                                        

Net assets applicable to Common Shareholders, end of year (000)

  $ 335,444      $ 344,668      $ 349,941      $ 343,282      $ 329,831   
 

 

 

 

Borrowings outstanding, end of year (000)

  $  104,000      $  145,000      $  152,000      $  145,000      $  122,000   
 

 

 

 

Asset coverage, end of year per $1,000 of bank borrowings

  $ 4,225      $ 3,377      $ 3,302      $ 3,367        3,704   
 

 

 

 

Portfolio turnover rate

    42%        64%        72%        65%        89%   
 

 

 

 

 

  1   

Consolidated Financial Highlights.

 

  2   

Based on average shares outstanding.

 

  3   

Amount is greater than $(0.005) per share.

 

  4   

Distributions for annual periods determined in accordance with federal income tax regulations.

 

  5   

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.

 

  6   

Does not reflect the effect of dividends to Preferred Shareholders.

 

  7   

For the year ended October 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense and borrowing costs was 1.14%.

 

 

See Notes to Financial Statements.      
                
68    ANNUAL REPORT    OCTOBER 31, 2015   


Financial Highlights    BlackRock Multi-Sector Income Trust (BIT)

 

    Year Ended October 31,     Period
February 27, 20131
to October 31,
 
    2015     2014     2013  
     
Per Share Operating Performance                        

Net asset value, beginning of period

  $ 19.87      $ 18.95      $ 19.10 2 
 

 

 

 

Net investment income3

    1.55        1.62        1.02   

Net realized and unrealized gain (loss)

    (1.03     0.70        (0.35
 

 

 

 

Net increase (decrease) from investment operations

    0.52        2.32        0.67   
 

 

 

 
Distributions4:      

From net investment income

    (1.40     (1.40     (0.70

From net realized gain

    (0.08              

From return of capital

                  (0.12
 

 

 

 

Total distributions

    (1.48     (1.40     (0.82
 

 

 

 

Net asset value, end of period

  $ 18.91 5    $ 19.87      $ 18.95   
 

 

 

 

Market price, end of period

  $ 16.31      $ 17.79      $ 17.04   
 

 

 

 
     
Total Return6                        

Based on net asset value

    3.87% 5      13.40%        4.04% 7 
 

 

 

 

Based on market price

    0.06%        12.91%        (10.66)% 7 
 

 

 

 
     
Ratios to Average Net Assets                        

Total expenses

    2.09% 8      2.04%        1.67% 9 
 

 

 

 

Total expenses after fees waived and paid indirectly

    2.09% 8      2.04%        1.67% 9 
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense

    1.53% 8      1.52%        1.33% 9 
 

 

 

 

Net investment income

    7.97% 8      8.27%        8.05% 9 
 

 

 

 
     
Supplemental Data                        

Net assets, end of period (000)

  $ 726,432      $ 763,360      $ 727,908   
 

 

 

 

Borrowings outstanding, end of period (000)

  $  510,352      $  707,294      $  552,040   
 

 

 

 

Portfolio turnover rate

    21%        29%        77% 10 
 

 

 

 

 

  1   

Commencement of operations.

 

  2   

Net asset value, beginning of period, reflects a deduction of $0.90 per share sales charge from the initial offering price of $20.00 per share.

 

  3   

Based on average shares outstanding.

 

  4   

Distributions for annual periods determined in accordance with federal income tax regulations.

 

  5   

For financial reporting purposes, the market value of certain investments were adjusted as of report date. Accordingly, the net asset value (“NAV”) per share and total return performance based on net asset value presented herein are different than the information previously published on October 31, 2015.

 

  6   

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.

 

  7   

Aggregate total return.

 

  8   

Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01% for the year ended October 31, 2015.

 

  9   

Annualized.

 

  10  

Includes mortgage dollar roll transactions. Excluding these transactions, the portfolio turnover would have been 54%.

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    OCTOBER 31, 2015    69


Notes to Financial Statements     

 

1. Organization:

The following are registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as closed-end management investment companies and are referred to herein collectively as the “Trusts” or individually, a “Trust”:

 

Trust Name   Herein
Referred To As
   Organized      Diversification
Classification
 

BlackRock Credit Allocation Income Trust

  BTZ      Delaware         Non-diversified   

BlackRock Floating Rate Income Trust

  BGT      Delaware         Non-diversified   

BlackRock Multi-Sector Income Trust

  BIT      Delaware         Non-diversified   

The Boards of Trustees of the Trusts are collectively referred to throughout this report as the “Board of Trustees” or the “Board,” and the trustees thereof are collectively referred to throughout this report as “Trustees.” The Trusts determine and make available for publication the net asset values (“NAVs”) of their Common Shares on a daily basis.

The Trusts, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, are included in a complex of closed-end funds referred to as the Closed-End Complex.

Basis of Consolidation: The accompanying consolidated financial statements of BGT include the accounts of BGT Subsidiary, LLC (the “Taxable Subsidiary”). As of December 19, 2014, the Taxable Subsidiary, which was wholly owned by the Trust, was dissolved. The Taxable Subsidiary enabled BGT to hold an investment in an operating company 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.

Effective October 14, 2015, BIT formed the BIT Subsidiary, LLC (“BIT Subsidiary”). The BIT Subsidiary enables BIT to hold an investment in an operating company and satisfy RIC tax requirements. Income earned and gains realized on the investment held by the BIT Subsidiary are taxable to the subsidiary. BIT may invest up to 25% of its total assets in the BIT Subsidiary. The BIT Subsidiary held no investments from inception to October 31, 2015. The BIT Subsidiary is subject to the same investment policies and restrictions that apply to BIT.

2. Significant Accounting Policies:

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Trust is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Foreign Currency: Each Trust’s books and records are maintained in U.S. dollars. Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective date of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

Each Trust does not isolate changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statements of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. Each Trust reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for federal income tax purposes.

Segregation and Collateralization: In cases where a Trust enters into certain investments (e.g. financial futures contracts, forward foreign currency exchange contracts, options written and swaps), or certain borrowings (e.g., reverse repurchase transactions) that would be treated as “senior securities” for 1940 Act purposes, a Trust may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of the Trust’s future obligations under such investments or borrowings. Doing so allows the investment or borrowing to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Trust may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Trusts are informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

Distributions: Distributions from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend date. Portions of return of capital distributions under U.S. GAAP may be taxed at ordinary income rates. The character of distributions is determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. The portion of distributions that exceeds a Trust’s current and accumulated

 

                
70    ANNUAL REPORT    OCTOBER 31, 2015   


Notes to Financial Statements (continued)     

 

earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. Realized net capital gains can be offset by capital losses carried forward from prior years. However, certain Trusts have capital loss carryforwards from pre-2012 tax years that offset realized net capital gains but do not offset current and accumulated earnings and profits. Consequently, if distributions in any tax year are less than the Trust’s current earnings and profits but greater than net investment income and net realized capital gains (taxable income), distributions in excess of taxable income are not treated as non-taxable return of capital, but rather may be taxable to shareholders at ordinary income rates. Under certain circumstances, taxable excess distributions could be significant. See Note 8, Income Tax Information, for the tax character of each Trust’s distributions paid during the year.

Deferred Compensation Plan: Under the Deferred Compensation Plan (the “Plan”) approved by each Trust’s Board, the independent Trustees (“Independent Trustees”) may defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar amounts had been invested in common shares of certain other BlackRock Closed-End Funds selected by the Independent Trustees. This has the same economic effect for the Independent Trustees as if the Independent Trustees had invested the deferred amounts directly in certain other BlackRock Closed-End Funds.

The Plan is not funded and obligations thereunder represent general unsecured claims against the general assets of each Trust, if applicable. Deferred compensation liabilities are included in officer’s and trustees’ fees payable in the Statements of Assets and Liabilities and will remain as a liability of the Trusts until such amounts are distributed in accordance with the Plan.

Recent Accounting Standard: In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance will require expanded disclosure for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. It is effective for financial statements with fiscal years beginning on or after December 15, 2014 and for interim periods beginning after March 15, 2015. Management is evaluating the impact, if any, of this guidance on the Trusts’ financial statement disclosures.

Indemnifications: In the normal course of business, each Trust enters into contracts that contain a variety of representations that provide general indemnification. A Trust’s maximum exposure under these arrangements is unknown because it involves future potential claims against a Trust, which cannot be predicted with any certainty.

Other: Expenses directly related to a Trust are charged to that Trust. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods.

The Trusts have an arrangement with their custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statements of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges. Effective September 2015, the arrangement with their custodian for earning credits on uninvested cash balances has ceased and the custodian will be imposing fees on certain uninvested cash balances.

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Trusts’ investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time) (or if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the report date). U.S. GAAP defines fair value as the price the Trusts would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Trusts determine the fair values of their financial instruments using 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 provide oversight of the pricing function for the Trusts for all financial instruments.

Fair Value Inputs and Methodologies: The following methods (or “techniques”) and inputs are used to establish the fair value of each Trust’s assets and liabilities:

 

 

Equity investments traded on a recognized securities exchange are valued at the official close price each day, if available. For equity investments traded on more than one exchange, the official close 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.

 

 

Bond investments are valued on the basis of last available bid prices or current market quotations provided by dealers or pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more brokers or dealers as obtained from a pricing service. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments and calculated yield measures. Asset-backed and mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche-specific spread to the benchmark yield based on the unique attributes of the tranche. Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    71


Notes to Financial Statements (continued)     

 

 

business on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of business on the NYSE that may not be reflected in the computation of the Trusts’ net assets.

 

 

Municipal investments (including commitments to purchase such investments on a “when-issued” basis) are valued on the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments.

 

 

Investments in open-end registered investment companies are valued at NAV each business day.

 

 

Financial futures contracts traded on exchanges are valued at their last sale price.

 

 

Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of business on the NYSE. Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of business on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

 

 

Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that the prior day’s price no longer reflects the fair value of the option. Over-the-counter (“OTC”) options and options on swaps (“swaptions”) are valued by an independent pricing service using a mathematical model, which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.

 

 

Swap agreements are valued utilizing quotes received daily by the Trusts’ pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments.

 

 

Certain centrally cleared swaps are valued at the price determined by the relevant exchange or clearinghouse.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such instruments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each Trust might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant consistent with the principles of fair value measurement, which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. The market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and is adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of each Trust’s pricing vendors, regular reviews of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

 

 

Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that each Trust has the ability to access

 

 

Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

 

 

Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including each Trust’s own assumptions used in determining the fair value of investments and derivative financial instruments)

 

                
72    ANNUAL REPORT    OCTOBER 31, 2015   


Notes to Financial Statements (continued)     

 

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. The significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments are typically categorized as Level 3. The fair value hierarchy for each Trust’s investments and derivative instruments has been included in the Schedules of Investments.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with each Trust’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

4. Securities and Other Investments:

Asset-Backed and Mortgage-Backed Securities: Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, a Trust may subsequently have to reinvest the proceeds at lower interest rates. If a Trust has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

For mortgage pass through securities, 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”) include collateralized bond obligations (“CBOs”) and collateralized loan obligations (“CLOs”), which are types of asset-backed securities. A CDO is an entity that is backed by a diversified pool of debt securities (CBOs) or syndicated bank loans (CLOs). The cash flows of the CDO can be split into multiple segments, called “tranches,” which will vary in risk profile and yield. The riskiest segment is the subordinated or “equity” tranche. This tranche bears the greatest risk of defaults from the underlying assets in the CDO and serves to protect the other, more senior, tranches from default in all but the most severe circumstances. Since it is shielded from defaults by the more junior tranches, a “senior” tranche will typically have higher credit ratings and lower yields than their underlying securities, and often receive investment grade ratings from one or more of the nationally recognized rating agencies. Despite the protection from the more junior tranches, senior tranches can experience substantial losses due to actual defaults, increased sensitivity to future defaults and the disappearance of one or more protecting tranches as a result of changes in the credit profile of the underlying pool of assets.

Multiple Class Pass-Through Securities: Multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities, may be issued by Ginnie Mae, U.S. Government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through securities (the “Mortgage Assets”). The payments on these are used to make payments on the CMOs or multiple pass-through securities. Multiple class pass-through securities represent direct ownership interests in the Mortgage Assets. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    73


Notes to Financial Statements (continued)     

 

rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, the Trusts’ initial investment in the IOs may not be fully recouped.

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 Trusts and Trust Preferred Securities: Capital trusts and/or trust preferred securities are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics, or by an affiliated business trust of a corporation, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured as either fixed or adjustable coupon securities 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 the trust preferred securities as a dividend. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. Payments on these securities are treated as interest rather than dividends for federal income tax purposes. These securities generally are rated below that of the issuing company’s senior debt securities and are freely callable at the issuer’s option.

Preferred Stock: Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Warrants: Warrants entitle a Trust to purchase a specified number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date of the warrants, if any. If the price of the underlying stock does not rise above the exercise price before the warrant expires, the warrant generally expires without any value and a Trust will lose any amount it paid for the warrant. Thus, investments in warrants may involve more risk than investments in common stock. Warrants may trade in the same markets as their underlying stock; however, the price of the warrant does not necessarily move with the price of the underlying stock.

Floating Rate Loan Interests: Floating rate loan interests are typically issued to companies (the “borrower”) by banks, other financial institutions, or privately and publicly offered corporations (the “lender”). Floating rate loan interests are generally non-investment grade, often involve borrowers whose financial condition is troubled or uncertain and companies that are highly leveraged. The Trusts may invest in obligations of borrowers who are in bankruptcy proceedings. 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. 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 the Trusts’ investment policies.

When a Trust purchases a floating rate loan interest, it may receive a facility fee and when it sells a floating rate loan interest, it may pay a facility fee. On an ongoing basis, the Trusts may receive a commitment fee based on the undrawn portion of the underlying line of credit amount of a floating rate loan interest. Facility and commitment fees are typically amortized to income over the term of the loan or term of the commitment, respectively. Consent and amendment fees are recorded to income as earned. Prepayment penalty fees, which may be received by a Trust upon the prepayment of a floating rate loan interest by a borrower, are recorded as realized gains. A Trust may invest in multiple series or tranches of a loan. A different series or tranche may have varying terms and carry different associated risks.

Floating rate loan interests are usually freely callable at the borrower’s option. A Trust may invest in such loans in the form of participations in loans (“Participations”) or assignments (“Assignments”) of all or a portion of loans from third parties. Participations typically will result in the Trust having a contractual relationship only with the lender, not with the borrower. A Trust has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Participations, the Trust generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of offset against the borrower. A Trust may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, a Trust assumes the credit risk of both the borrower and the lender that is selling the Participation. The Trust’s investment in loan participation interests involves the risk of insolvency of the financial intermediaries who are parties to the transactions. In the event of the insolvency of the lender selling the Participation, a Trust may be treated as a general creditor of the lender and may not benefit from any offset between the lender and the borrower. Assignments typically result in the Trust having a direct contractual relationship with the borrower, and the Trust may enforce compliance by the borrower with the terms of the loan agreement.

 

                
74    ANNUAL REPORT    OCTOBER 31, 2015   


Notes to Financial Statements (continued)     

 

In connection with floating rate loan interests, the Trusts may also enter into unfunded floating rate loan interests (“commitments”). In connection with these commitments, a Trust earns a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is included in interest income in the Statements of Operations, is recognized ratably over the commitment period. Unfunded floating rate loan interests are marked-to-market daily, and any unrealized appreciation (depreciation) is included in the Statements of Assets and Liabilities and Statements of Operations. As of period end, the Trusts had no unfunded floating rate loan interests.

Forward Commitments and When-Issued Delayed Delivery Securities: Certain Trusts may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. A Trust may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, the Trust may be required to pay more at settlement than the security is worth. In addition, the Trust is not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, the Trust assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, a Trust’s maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions.

Commitments: Certain Trusts may enter into commitments, or agreements, to acquire an investment at a future date (subject to certain conditions) in connection with a potential public or non-public offering. Such agreements may obligate the Trust to make future cash payments. As of October 31, 2015, BTZ and BIT had an outstanding commitment of $16,315,000 and $3,100,000, respectively, in connection with the Chapter 11 case of Energy Future Holdings Corp., et al. These commitments are not included in the net assets of the Trusts as of October 31, 2015.

Reverse Repurchase Agreements: Reverse repurchase agreements are agreements with qualified third party broker dealers in which a Trust sells securities to a bank or broker-dealer and agrees to repurchase the same securities at a mutually agreed upon date and price. The Trust receives cash from the sale to use for other investment purposes. During the term of the reverse repurchase agreement, a Trust continues to receive the principal and interest payments on the securities sold. Certain agreements have no stated maturity and can be terminated by either party at any time. Interest on the value of the reverse repurchase agreements issued and outstanding is based upon competitive market rates determined at the time of issuance. A Trust may utilize reverse repurchase agreements when it is anticipated that the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction. Reverse repurchase agreements involve leverage risk. If a Trust suffers a loss on its investment of the transaction proceeds from a reverse repurchase agreement, a Trust would still be required to pay the full repurchase price. Further, a Trust remains subject to the risk that the market value of the securities repurchased declines below the repurchase price. In such cases, the Trust would be required to return a portion of the cash received from the transaction or provide additional securities to the counterparty.

Cash received in exchange for securities delivered plus accrued interest due to the counterparty is recorded as a liability in the Statements of Assets and Liabilities at face value including accrued interest. Due to the short-term nature of the reverse repurchase agreements, face value approximates fair value. Interest payments made by a Trust to the counterparties are recorded as a component of interest expense in the Statements of Operations. In periods of increased demand for the security, a Trust may receive a fee for use of the security by the counterparty, which may result in interest income to a Trust.

For the year ended October 31, 2015, the average amount of reverse repurchase agreements outstanding and the daily weighted average interest rates for the Trusts were as follows:

 

    

Average
Amount

Outstanding

    

Daily
Weighted

Average
Interest Rate

 

BTZ

  $ 736,929,193         0.40%   

BIT

  $ 586,411,240         0.71%   

Reverse repurchase transactions are entered into by a Trust under Master Repurchase Agreements (each, an “MRA”), which permit a Trust, under certain circumstances, including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables under the MRA with collateral held and/or posted to the counterparty and create one single net payment due to or from the Trust. With reverse repurchase transactions, typically a Trust and the counterparty under an MRA are permitted to sell, re-pledge, or use the collateral associated with the transaction. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Pursuant to the terms of the MRA, a Trust receives or posts securities as collateral with a market value in excess of the repurchase price to be paid or received by a Trust upon the maturity of the transaction. Upon a bankruptcy or insolvency of the MRA counterparty, a Trust is considered an unsecured creditor with respect to excess collateral and, as such, the return of excess collateral may be delayed.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    75


Notes to Financial Statements (continued)     

 

As of period end, the following table is a summary of the Trusts’ open reverse repurchase agreements by counterparty which are subject to offset under an MRA on a net basis:

 

BTZ                               
Counterparty   Reverse Repurchase
Agreements
    

Fair Value of Non-cash

Collateral Pledged
Including  Accrued
Interest1

    

Cash Collateral

Pledged

     Net Amount  

Barclays Capital Inc.

  $ 86,252,458       $ (86,252,458                

BNP Paribas Securities Corp.

    168,358,348         (168,358,348                

Credit Suisse Securities (USA) LLC

    43,524,342         (43,524,342                

Deutsche Bank AG London

    4,468,973         (4,468,973                

HSBC Securities (USA) Inc.

    20,130,965         (20,130,965                

RBC Capital Markets, LLC

    226,309,044         (226,309,044                

UBS Securities LLC

    136,671,811         (136,671,811                
 

 

 

 

Total

  $ 685,715,941       $ (685,715,941                
 

 

 

 
          
BIT                               
Counterparty   Reverse Repurchase
Agreements
    

Fair Value of Non-cash

Collateral Pledged
Including  Accrued
Interest1

    

Cash Collateral

Pledged

     Net  Amount2  

Barclays Bank PLC

  $ 7,973,535       $ (7,973,535                

Barclays Capital, Inc.

    62,951,346         (62,951,346                

BNP Paribas Securities Corp.

    56,402,395         (56,402,395                

Credit Suisse Securities (USA) LLC

    4,476,918         (4,476,918                

Deutsche Bank Securities, Inc.

    134,298,229         (134,298,229                

HSBC Securities (USA), Inc.

    2,910,617         (2,902,916            $ 7,701   

JPMorgan Securities LLC

    7,614,333         (7,614,333                

Morgan Stanley & Co. LLC

    5,387,452         (5,387,452                

RBC Capital Markets, LLC

    26,836,225         (26,836,225                

UBS Limited

    9,803,435         (9,803,435                

UBS Securities LLC

    191,697,885         (191,697,885                
 

 

 

 

Total

  $ 510,352,370       $ (510,344,669            $ 7,701   
 

 

 

 

 

  1   

Net collateral with a value of $724,630,737 for BTZ and $579,987,526 for BIT has been pledged in connection with open reverse repurchase agreements. Excess of net collateral pledged to the individual counterparty is not shown for financial reporting purposes.

 

  2   

Net amount reflects the net amount payable due to the counterparty in the event of default.

In the event the counterparty of securities under an MRA files for bankruptcy or becomes insolvent, a Trust’s use of the proceeds from the agreement may be restricted while the counterparty, or its trustee or receiver, determines whether or not to enforce a Trust’s obligation to repurchase the securities.

5. Derivative Financial Instruments:

The Trusts engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Trusts and/or to manage economically their exposure to certain risks such as credit risk, equity risk, interest rate risk or foreign currency exchange rate risk. These contracts may be transacted on an exchange or OTC.

Financial Futures Contracts: Certain Trusts invest in long and/or short positions in financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in interest rates (interest rate risk). Financial futures contracts are agreements between the Trusts and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date.

Upon entering into a financial futures contract, the Trusts are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Securities deposited as initial margin are designated on the Schedules of Investments and cash deposited, if any, is recorded on the Statements of Assets and Liabilities as cash pledged for financial futures contracts. Pursuant to the contract, the Trusts agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin. Variation margin is recorded by the Trusts as unrealized appreciation (depreciation) and, if applicable, as a receivable or payable for variation margin in the Statements of Assets and Liabilities.

When the contract is closed, the Trusts record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest or foreign currency exchange rates and the underlying assets.

 

                
76    ANNUAL REPORT    OCTOBER 31, 2015   


Notes to Financial Statements (continued)     

 

Forward Foreign Currency Exchange Contracts: Certain Trusts enter into forward foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to, or hedge exposure away from, 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 future date. Forward foreign currency exchange contracts, when used by the Trusts, help to manage the overall exposure to the currencies in which some of the investments held by the Trusts are denominated. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency. The contract is marked-to-market daily and the change in market value is recorded by the Trusts as an unrealized gain or loss. When the contract is closed, the Trusts record a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Options: Certain Trusts purchase and write call and put options to increase or decrease their exposure to underlying instruments including equity risk and/or interest rate 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. When the Trusts purchase (write) an option, an amount equal to the premium paid (received) by the Trusts is reflected as an asset (liability). The amount of the asset (liability) is subsequently marked-to-market to reflect the current market value of the option purchased (written). When an instrument is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the instrument acquired or deducted from (or added to) the proceeds of the instrument sold. When an option expires (or the Trusts enter into a closing transaction), the Trusts realize a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premiums received or paid). When the Trusts write a call option, such option is “covered,” meaning that the Trusts hold the underlying instrument subject to being called by the option counterparty. When the Trusts write a put option, such option is covered by cash in an amount sufficient to cover the obligation.

Options on swaps (“swaptions”) are similar to options on securities except that instead of selling or purchasing the right to buy or sell a security, the writer or purchaser of the swaptions is granting or buying 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.

Certain Trusts also purchase or sell listed or OTC foreign currency options, foreign currency futures and related options on foreign currency futures as a short or long hedge against possible variations in foreign exchange rates or to gain exposure to foreign currencies (foreign currency exchange rate risk). When foreign currency is purchased or sold through an exercise of a foreign currency option, the related premium paid (or received) is added to (or deducted from) the basis of the foreign currency acquired or deducted from (or added to) the proceeds of the foreign currency sold (receipts from the foreign currency purchased). Such transactions may be effected with respect to hedges on non-U.S. dollar denominated instruments owned by the Trusts but not yet delivered, or committed or anticipated to be purchased by the Trusts.

In purchasing and writing options, the Trusts bear the risk of an unfavorable change in the value of the underlying instrument or the risk that the Trusts may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Trusts purchasing or selling a security when it otherwise would not, or at a price different from the current market value.

Swaps: Certain Trusts enter into swap agreements in which the Trusts and a counterparty agree either 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”). Swaps are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation).

For OTC swaps, any upfront premiums paid are recorded as assets and any upfront fees received are recorded as liabilities and 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 OTC swap. Payments received or made by the Trusts for OTC swaps are recorded in the Statements of Operations as realized gains or losses, respectively. When an OTC swap is terminated, the Trusts will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Trusts’ basis in the contract, if any. Generally, the basis of the contract is the premium received or paid.

In a centrally cleared swap, immediately following execution of the swap agreement, the swap agreement is novated to a central counterparty (the “CCP”) and the Trusts’ counterparty on the swap agreement becomes the CCP. The Trusts are required to interface with the CCP through a broker. Upon entering into a centrally cleared swap, the Trusts are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated on the Schedules of Investments and cash deposited is recorded on the Statements of Assets and Liabilities as cash pledged for centrally cleared swaps. The daily change in valuation of centrally cleared swaps is recorded as a receivable or payable for variation margin in the Statements of Assets and Liabilities. Payments received from (paid to) the counterparty, including at termination, are recorded as realized gain (loss) in the Statements of Operations.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    77


Notes to Financial Statements (continued)     

 

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.

 

 

Credit default swaps — Certain Trusts enter into credit default swaps to manage their exposure to the market or certain sectors of the market, to reduce their risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which they are not otherwise exposed (credit risk). The Trusts may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps on single-name issuers are agreements in which the protection buyer pays fixed periodic payments to the seller in consideration for a guarantee 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 accelerators, repudiation, moratorium or restructuring). Credit default swaps on traded indexes are agreements in which the buyer pays fixed periodic payments to the seller in consideration for a guarantee from the seller to make a specific payment should a write-down, principal or interest shortfall or default of all or individual underlying securities included in the index occur. As a buyer, if an underlying credit event occurs, the Trusts will either (i) receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising the index, or (ii) receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index. As a seller (writer), if an underlying credit event occurs, the Trusts will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.

 

 

Forward interest rate swaps — Certain Trusts enter into forward interest rate swaps. In a forward swap, each Trust and the counterparty agree to make either periodic net payments beginning on a specified future effective date or a net payment at termination, unless terminated earlier.

 

 

Interest rate swaps — Certain Trusts enter into interest rate swaps to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate risk by economically hedging the value of the fixed rate bonds, which may decrease when interest rates rise (interest rate risk). Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, 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 swaps, the notional principal amount may decline (or amortize) over time.

Master Netting Arrangements: In order to better define the Trusts’ contractual rights and to secure rights that will help them mitigate their counterparty risk, the Trusts may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their counterparties. An ISDA Master Agreement is a bilateral agreement between each Trust and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, each Trust may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to terminate derivative contracts prior to maturity in the event the Trusts’ net assets decline by a stated percentage or the Trusts fail to meet the terms of their ISDA Master Agreements. The result would cause the Trusts to accelerate payment of any net liability owed to the counterparty.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Trust and the counterparty.

Cash collateral that has been pledged to cover obligations of the Trusts and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Trusts, if any, is noted in the Schedules of Investments. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount threshold (typically either $250,000 or $500,000) before a transfer is required, which is determined at the close of business of the Trusts. Any additional required collateral is delivered to/pledged by the Trusts on the next business day. Typically, a Trust’s counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. The Trusts generally agree not to use non-cash collateral that they receive 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, the Trusts may pay interest pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Trusts from their counterparties are not fully collateralized, the Trusts bear the risk of loss from counterparty non-performance. Likewise, to the extent the Trusts have delivered collateral to a counterparty and stand ready to perform under the terms of their agreement with such counterparty, the Trusts 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 to all derivative contracts.

 

                
78    ANNUAL REPORT    OCTOBER 31, 2015   


Notes to Financial Statements (continued)     

 

For financial reporting purposes, the Trusts do not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statements of Assets and Liabilities.

6. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”), for 1940 Act purposes.

Each Trust entered into an Investment Advisory Agreement with the Manager, the Trusts’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of each Trust’s portfolio and provides the necessary personnel, facilities, equipment and certain other services to the operations of each Trust. For such services, each Trust pays the Manager a monthly fee based on a percentage of BTZ’s and BGT’s average weekly (average daily for BIT’s) Managed Assets at the following annual rates:

 

BTZ

    0.62%   

BGT

    0.75%   

BIT

    0.80%   

“Managed Assets” means the total assets of the Trust (including any assets attributable to any borrowings) minus the sum of liabilities (other than borrowings representing financial leverage).

The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each Trust pays to the Manager indirectly through its investment in affiliated money market funds. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with each Trust’s investments in other affiliated investment companies, if any. These amounts are shown as fees waived by the Manager in the Statements of Operations.

The Manager provided investment management and other services to the Taxable Subsidiary. The Manager did not receive separate compensation from the Taxable Subsidiary for providing investment management or administrative services. However, BGT paid the Manager based on BGT’s net assets, which included the assets of the Taxable Subsidiary.

The Manager entered into a sub-advisory agreement with BlackRock (Singapore) Limited (“BRS”), an affiliate of the Manager, to serve as sub-advisor for BIT. The Manager pays BRS, for services it provides, a monthly fee that is a percentage of the investment advisory fees paid by BIT to the Manager.

Certain officers and/or Trustees of the Trusts are officers and/or directors of BlackRock or its affiliates. The Trusts reimburse the Manager for a portion of the compensation paid to the Trusts’ Chief Compliance Officer, which is included in officer and trustees in the Statements of Operations.

The Trusts may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees. For the year ended October 31, 2015, the purchase and sale transactions with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act for BIT were $58,980 and $266,279, respectively.

7. Purchases and Sales:

For the year ended October 31, 2015, purchases and sales of investments, including paydowns and excluding short-term securities, were as follows:

 

Purchases

  BTZ      BGT      BIT  

Non-U.S. Government Securities

  $ 374,521,179       $ 199,814,591       $ 279,167,334   

U.S. Government Securities

    75,193,957                 
 

 

 

 

Total Purchases

  $ 449,715,136       $ 199,814,591       $ 279,167,334   
 

 

 

 
       

Sales

  BTZ      BGT      BIT  

Non-U.S. Government Securities

  $ 457,390,174       $ 241,069,741       $ 439,364,452   

U.S. Government Securities

    95,393,614                 
 

 

 

 

Total Sales

  $ 552,783,788       $ 241,069,741       $ 439,364,452   
 

 

 

 

8. Income Tax Information:

It is the Trusts’ policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of their taxable income to their shareholders. Therefore, no federal income tax provision is required, except with respect to any taxes related to the Taxable Subsidiaries.

Each Trust files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on BTZ’s and BGT’s U.S. federal tax returns remains open for each of the four years ended October 31, 2015. The statute of limitations on BIT’s U.S. federal tax returns remains open for the period ended October 31, 2013 and the two years ended October 31, 2015. The statutes of limitations on the Trusts’ state and local tax returns may remain open for an additional year depending upon the jurisdiction.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    79


Notes to Financial Statements (continued)     

 

Management has analyzed tax laws and regulations and their application to the Trusts as of October 31, 2015, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Trusts’ financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to foreign currency transactions, amortization and accretion methods on fixed income securities, the characterization of expenses and income from a wholly owned subsidiary, the classification of investments, the accounting for swap agreements, income recognized from pass-through entities, and the expiration of capital loss carryforward were reclassified to the following accounts:

 

     BTZ      BGT      BIT  

Paid-in capital

  $ (56,798,160    $ (1,694,797        

Undistributed (distributions in excess of) net investment income

  $ (4,995,484    $ (106,103    $ (6,932,451

Accumulated net realized gain (loss)

  $ 61,793,644       $ 1,800,900       $ 6,932,451   

The tax character of distributions paid was as follows:

 

             BTZ      BGT      BIT  

Ordinary income

    10/31/2015       $ 97,419,415       $ 19,181,416       $ 55,119,342   
    10/31/2014         104,413,172         19,919,709         53,805,642   

Long-term capital gain

    10/31/2015                         1,913,717   

Return of capital

    10/31/2015         6,993,757                   
 

 

 

 

Total

    10/31/2015       $ 104,413,172       $ 19,181,416       $ 57,033,059   
 

 

 

 
    10/31/2014       $ 104,413,172       $ 19,919,709       $ 53,805,642   
 

 

 

 

As of period end, the tax components of accumulated net earnings (losses) were as follows:

 

     BTZ      BGT      BIT  

Undistributed ordinary income

          $ 1,664,487       $ 7,956,451   

Capital loss carryforwards

  $ (335,989,171      (82,278,116      (13,616,248

Net unrealized gains (losses)1

    56,867,947         (11,312,759      4,310,016   
 

 

 

 

Total

  $ (279,121,224    $ (91,926,388    $ (1,349,781
 

 

 

 

 

  1  

The difference between book-basis and tax-basis net unrealized gains (losses) was attributable primarily to the tax deferral of losses on wash sales and straddles, amortization and accretion methods of premiums and discounts on fixed income securities, the accrual of income on securities in default, the realization for tax purposes of unrealized gains on investments in passive foreign investment companies, the realization for tax purposes of unrealized gains/losses on certain futures, options, and foreign currency contracts, the timing and recognition of partnership income, the accounting for swap agreements, the classification of investments and the deferral of compensation to trustees.

As of period end, the Trusts had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:

 

Expires October 31,   BTZ      BGT      BIT  

No expiration date2

  $ 14,123,812       $ 5,826,539       $ 13,616,248   

2016

    121,634,930         14,130,109           

2017

    158,120,431         45,385,443           

2018

    31,756,723         16,526,601           

2019

    10,353,275         409,424           
 

 

 

 

Total

  $ 335,989,171       $ 82,278,116       $ 13,616,248   
 

 

 

 

 

  2  

Must be utilized prior to losses subject to expiration.

As of period end, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

 

     BTZ      BGT      BIT  

Tax cost

  $ 2,131,938,665       $ 455,044,256       $ 1,211,101,013   
 

 

 

 

Gross unrealized appreciation

  $ 116,958,242       $ 2,291,123       $ 23,978,864   

Gross unrealized depreciation

    (50,044,606      (13,430,422      (19,584,402
 

 

 

 

Net unrealized appreciation (depreciation)

  $ 66,913,636       $ (11,139,299    $ 4,394,462   
 

 

 

 

9. Bank Borrowings:

BGT is party to a senior committed secured, 360-day rolling line of credit facility and a separate security agreement (the “SSB Agreement”) with State Street Bank and Trust Company (“SSB”). SSB may elect to terminate its commitment upon 360-days written notice to BGT. As of period end, BGT has not received any notice to terminate. BGT has granted a security interest in substantially all of its assets to SSB.

The SSB Agreement allows for a maximum commitment amount of $172,000,000.

 

                
80    ANNUAL REPORT    OCTOBER 31, 2015   


Notes to Financial Statements (continued)     

 

Advances will be made by SSB to BGT, at BGT’s option of (a) the higher of (i) 0.80% above the Fed Funds rate and (ii) 0.80% above the Overnight LIBOR or (b) 0.80% above 7-day, 30-day, 60-day or 90-day LIBOR.

In addition, BGT pays a facility fee and utilization fee (based on the daily unused portion of the commitment). The commitment fees are waived if BGT meets certain conditions. The fees associated with each of the agreements are included in the Statements of Operations as borrowing costs, if any. Advances to BGT as of period end are shown in the Statements of Assets and Liabilities as bank borrowings payable. Based on the short-term nature of the borrowings under the line of credit and the variable interest rate, the carrying amount of the borrowings approximates fair value.

BGT may not declare dividends or make other distributions on shares or purchase any such shares if, at the time of the declaration, distribution or purchase, asset coverage with respect to the outstanding short-term borrowings is less than 300%.

For year ended October 31, 2015, the average amount of bank borrowings and daily weighted average interest rates for BGT with loans under the revolving credit agreements, were $129,575,342 and 0.94%, respectively.

10. Principal Risks:

In the normal course of business, the Trusts invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer to meet all its obligations, including the ability to pay principal and interest when due (issuer credit risk). The value of securities held by the Trusts may decline in response to certain events, including those directly involving the issuers of securities owned by the Trusts. Changes arising from the general economy, the overall market and local, regional or global political or/and social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

The Trusts 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 the Trusts to reinvest in lower yielding securities. The Trusts may also be exposed to reinvestment risk, which is the risk that income from the Trusts’ portfolios will decline if the Trusts invest the proceeds from matured, traded or called fixed income securities at market interest rates that are below the Trusts portfolios’ current earnings rate.

Counterparty Credit Risk: Similar to issuer credit risk, the Trusts may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Trusts manage counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Trusts to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Trusts’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Trusts.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

A Trust’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by such Trust.

For OTC options purchased, each Trust bears the risk of loss in the amount of the premiums paid plus the positive change in market values net of any collateral held by the Trusts should the counterparty fail to perform under the contracts. Options written by the Trusts do not typically give rise to counterparty credit risk, as options written generally obligate the Trusts, and not the counterparty, to perform. The Trusts may be exposed to counterparty credit risk with respect to options written to the extent the Trusts deposit collateral with their counterparty to a written option.

With exchange-traded options purchased and futures and centrally cleared swaps, there is less counterparty credit risk to the Trusts since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Trust does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Trusts.

Concentration Risk:

As of period end, BIT invested a significant portion of its assets in securities in the financials sector. Changes in economic conditions affecting such sector would have a greater impact on the Trust and could affect the value, income and/or liquidity of positions in such securities.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    81


Notes to Financial Statements (concluded)     

 

Certain Trusts may invest in securities that are rated below investment grade quality (sometimes called “junk bonds”), which are predominantly speculative, have greater credit risk and generally are less liquid and have more volatile prices than higher quality securities.

The Trusts invest a significant portion of their assets in fixed-income securities and/or use derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as interest rates rise. The Trusts may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

Certain Trusts invest a significant portion of their assets in securities backed by commercial or residential mortgage loans or in issuers that hold mortgage and other asset-backed securities. Investment percentages in these securities are presented in the Schedules of Investments. Changes in economic conditions, including delinquencies and/or defaults on assets underlying these securities, can affect the value, income and/or liquidity of such positions.

11. Capital Share Transactions:

The Trusts are each authorized to issue an unlimited number of $0.001 par value shares, which may be issued as either Common Shares or Preferred Shares.

Common Shares

Shares issued and outstanding remained constant during the years ended October 31, 2015 and October 31, 2014, respectively, for each Trust.

12. Subsequent Events:

Management’s evaluation of the impact of all subsequent events on the Trusts’ financial statements was completed through the date the financial statements were issued and the following items were noted:

The Trusts paid a net investment income dividend in the following amounts per share on November 30, 2015 to shareholders of record on November 16, 2015:

 

     Common
Dividend
Per Share
 

BTZ

  $ 0.0805   

BGT

  $ 0.0583   

BIT

  $ 0.1167   

Additionally, the Trusts declared a net investment income dividend on December 1, 2015 payable to Common Shareholders of record on December 18, 2015 for the same amounts noted above.

Additionally, the Trusts declared a distribution in the following amounts per share on December 18, 2015 payable to Common Shareholders of record on December 31, 2015 as follows:

 

     Common
Dividend
Per Share
 

BTZ

  $ 0.080500   

BGT

  $ 0.058300   

BIT1

  $ 0.202589   

 

  1   

Includes special distribution of $0.085889.

 

                
82    ANNUAL REPORT    OCTOBER 31, 2015   


Report of Independent Registered Public Accounting Firm     

 

To the Board of Trustees and Shareholders of BlackRock Credit Allocation Income Trust, BlackRock Floating Rate Income Trust and BlackRock Multi-Sector Income Trust:

We have audited the accompanying statement of assets and liabilities of BlackRock Credit Allocation Income Trust, including the schedule of investments, as of October 31, 2015, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. We have also audited the accompanying statement of assets and liabilities of BlackRock Floating Rate Income Trust, including the schedule of investments, as of October 31, 2015, and the related consolidated statements of operations and cash flows for the year then ended, the consolidated statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended (consolidated financial highlights for each of the four years ended October 31, 2015). We have also audited the accompanying statement of assets and liabilities of BlackRock Multi-Sector Income Trust (collectively with the aforementioned funds above, the “Trusts”), including the schedule of investments, as of October 31, 2015, and the related statements of operations and cash flows for the year then ended, and the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the two years ended October 31, 2015, and the financial highlights for the period February 27, 2013 (commencement of operations) to October 31, 2013. These financial statements and financial highlights are the responsibility of the Trusts’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trusts are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trusts’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2015, by correspondence with the custodians, brokers and agent banks; where replies were not received from brokers or agent banks, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BlackRock Credit Allocation Income Trust as of October 31, 2015, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, the financial position of BlackRock Floating Rate Income Trust as of October 31, 2015, the results of its consolidated operations and its consolidated cash flows for the year then ended, the changes in its consolidated net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended (consolidated financial highlights for each of the four years ended October 31, 2015), and the financial position of BlackRock Multi-Sector Income Trust as of October 31, 2015, the results of its operations and its cash flows for the year then ended, and the changes in net assets for each of the two years in the period then ended, and financial highlights for each of the two years ended October 31, 2015, and the financial highlights for the period February 27, 2013 (commencement of operations) to October 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Boston, Massachusetts

December 23, 2015

 

Important Tax Information (Unaudited)

During the fiscal year ended October 31, 2015, the following information is provided with respect to the ordinary income distributions paid by the Trusts:

 

     Payable Dates     BTZ     BGT     BIT  

Qualified Dividend Income for Individuals1

    November 2014 - January 2015        6.66%               15.56%   
      February 2015 - October 2015        10.48%               9.23%   

Dividends Qualifying for the Dividend Received Deduction for Corporations1

    November 2014 - January 2015        5.44%               12.80%   
      February 2015 - October 2015        8.28%               5.79%   

Interest-Related Dividends and Qualified Short-Term Gains for Non-U.S. Residents2

    November 2014 - January 2015        75.27%        65.94%        54.49%   
      February 2015 - October 2015        72.45%        82.72%        52.27%   

 

  1   

The Trusts hereby designate the percentage indicated or the maximum amount allowable by law.

 

  2   

Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations.

Additionally, BIT distributed long-term capital gains of $0.049808 per share to shareholders of record on December 31, 2014.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    83


Disclosure of Investment Advisory Agreements and Sub-Advisory Agreement

 

The Board of Trustees (each, a “Board,” collectively, the “Boards,” and the members of which are referred to as “Board Members”) of BlackRock Credit Allocation Income Trust (“BTZ”), BlackRock Floating Rate Income Trust (“BGT”) and BlackRock Multi-Sector Income Trust (“BIT,” and together with BGT and BTZ, each a “Trust,” and, collectively, the “Trusts”) met in person on April 30, 2015 (the “April Meeting”) and June 11-12, 2015 (the “June Meeting”) to consider the approval of each Trust’s investment advisory agreement (each, an “Advisory Agreement,” and, collectively, the “Advisory Agreements”) with BlackRock Advisors, LLC (the “Manager”), each Trust’s investment advisor. The Board of BIT also considered the approval of the sub-advisory agreement (the “BSL Sub-Advisory Agreement”) among the Manager, BlackRock (Singapore) Limited (the “BSL Sub-Advisor”), and BIT. The Manager and the BSL Sub-Advisor are referred to herein as “BlackRock.” The Advisory Agreements and the BSL Sub-Advisory Agreement are referred to herein as the “Agreements.”

Activities and Composition of the Board

On the date of the April and June Meetings, the Board of each Trust consisted of eleven individuals, nine of whom were not “interested persons” of such Trust as defined in the Investment Company Act of 1940 (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Trust and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chairman of each Board is an Independent Board Member. Each Board has established six standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee, an Executive Committee, and a Leverage Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Executive Committee and the Leverage Committee, each of which also has one interested Board Member).

The Agreements

Pursuant to the 1940 Act, each Board is required to consider the continuation of its Advisory Agreement, and with respect to BIT, its BSL Sub-Advisory Agreement, on an annual basis. The Boards have four quarterly meetings per year, each extending over two days, a fifth one-day meeting to consider specific information surrounding the consideration of renewing the Agreements and additional in-person and telephonic meetings as needed. In connection with this year-long deliberative process, the Boards assessed, among other things, the nature, extent and quality of the services provided to the Trusts by BlackRock, BlackRock’s personnel and affiliates, including, as applicable; investment management services, administrative, and shareholder services; the oversight of fund service providers; marketing services; risk oversight; compliance; and ability to meet applicable legal and regulatory requirements.

The Boards, acting directly and through their respective committees, consider at each of their meetings, and from time to time as appropriate, factors that are relevant to their annual consideration of the renewal of the Agreements, including the services and support provided by BlackRock to the Trusts and their shareholders. Among the matters the Boards considered were: (a) investment performance for one-year, three-year, five-year and/or since inception periods, as applicable, against peer funds, applicable benchmarks, and performance metrics, as applicable, as well as senior management’s and portfolio managers’ analysis of the reasons for any over-performance or underperformance relative to its peers, benchmarks, and other performance metrics, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Trusts for services such as call center; (c) Trust operating expenses and how BlackRock allocates expenses to the Trusts; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of the Trusts’ investment objective(s), policies and restrictions, and meeting new regulatory requirements; (e) the Trusts’ compliance with its compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Boards; (i) execution quality of portfolio transactions; (j) BlackRock’s implementation of the Trusts’ valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment mandates across the open-end fund, closed-end fund and institutional account product channels, as applicable, and the similarities and differences between these products and the services provided as compared to the Trusts; (l) BlackRock’s compensation methodology for its investment professionals and the incentives it creates, along with investment professionals’ investments in the fund(s) they manage; and (m) periodic updates on BlackRock’s business.

The Boards have engaged in an ongoing strategic review with BlackRock of opportunities to consolidate funds and of BlackRock’s commitment to investment performance. BlackRock also furnished information to the Boards in response to specific questions. These questions covered issues such as: BlackRock’s profitability; investment performance; funds trading at a discount; subadvisory and advisory relationships with other clients (including mutual funds sponsored by third parties); fund size; portfolio manager’s investments in the funds they manage; and management fee levels and breakpoints. The Boards further discussed with BlackRock: BlackRock’s management structure; portfolio turnover; BlackRock’s portfolio manager compensation and performance accountability; marketing support for the funds; services provided to the funds by BlackRock affiliates; and BlackRock’s oversight of relationships with third party service providers.

The Board of each of BTZ and BGT considered BlackRock’s efforts during the past year with regard to the redemption of outstanding auction rate preferred securities (“AMPS”). As of the date of this report, each of BTZ and BGT has redeemed 100% of its outstanding AMPS.

 

                
84    ANNUAL REPORT    OCTOBER 31, 2015   


Disclosure of Investment Advisory Agreements and Sub-Advisory Agreement (continued)

 

Board Considerations in Approving the Agreements

The Approval Process: Prior to the April Meeting, the Boards requested and received materials specifically relating to the Agreements. The Boards are continuously engaged in a process with their independent legal counsel and BlackRock to review the nature and scope of the information provided to better assist its deliberations. The materials provided in connection with the April Meeting included (a) information independently compiled and prepared by Lipper, Inc. (“Lipper”) on Trust fees and expenses as compared with a peer group of funds as determined by Lipper (“Expense Peers”) and the investment performance of each Trust as compared with a peer group of funds as determined by Lipper1 and, with respect to BTZ and BGT, a customized peer group selected by BlackRock; (b) information on the profits realized by BlackRock and its affiliates pursuant to the Agreements and a discussion of fall-out benefits to BlackRock and its affiliates; (c) a general analysis provided by BlackRock concerning investment management fees charged to other clients, such as institutional clients, sub-advised mutual funds, and open-end funds, under similar investment mandates, as applicable; (d) review of non-management fees; (e) the existence, impact and sharing of potential economies of scale; (f) a summary of aggregate amounts paid by each Trust to BlackRock and (g) if applicable, a comparison of management fees to similar BlackRock closed-end funds, as classified by Lipper.

At the April Meeting, the Boards reviewed materials relating to their consideration of the Agreements. As a result of the discussions that occurred during the April Meeting, and as a culmination of the Boards’ year-long deliberative process, the Boards presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the June Meeting.

At the June Meeting, each Board, including the Independent Board Members, unanimously approved the continuation of the Advisory Agreement between the Manager and its Trust for a one-year term ending June 30, 2016. The Board of BIT, including the Independent Board Members, also unanimously approved the continuation of the BSL Sub-Advisory Agreement among the Manager, the BSL Sub-Adviser and BIT for a one-year term ending June 30, 2016. In approving the continuation of the Agreements, the Boards considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Trusts and BlackRock; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with the Trusts; (d) the Trusts’ costs to investors compared to the costs of Expense Peers and performance compared to the relevant performance comparison as previously discussed; (e) the sharing of potential economies of scale; (f) fall-out benefits to BlackRock and its affiliates as a result of its relationship with the Trusts; and (g) other factors deemed relevant by the Board Members.

The Boards also considered other matters they deemed important to the approval process, such as payments made to BlackRock or its affiliates relating to securities lending and cash management, services related to the valuation and pricing of Trust portfolio holdings, direct and indirect benefits to BlackRock and its affiliates from their relationship with the Trusts and advice from independent legal counsel with respect to the review process and materials submitted for the Boards’ review. The Boards noted the willingness of BlackRock personnel to engage in open, candid discussions with the Boards. The Boards did not identify any particular information as determinative, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock: The Boards, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of the Trusts. Throughout the year, the Boards compared the Trusts’ performance to the performance of a comparable group of closed-end funds, relevant benchmark, and performance metrics, as applicable. The Boards met with BlackRock’s senior management personnel responsible for investment activities, including the senior investment officers. Each Board also reviewed the materials provided by its Trust’s portfolio management team discussing the Trust’s performance and the Trust’s investment objective(s), strategies and outlook.

The Boards considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and their Trusts’ portfolio management teams; BlackRock’s research capabilities; investments by portfolio managers in the funds they manage; portfolio trading capabilities; use of technology; commitment to compliance; credit analysis capabilities; risk analysis and oversight capabilities; and the approach to training and retaining portfolio managers and other research, advisory and management personnel. The Boards engaged in a review of BlackRock’s compensation structure with respect to the Trusts’ portfolio management teams and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to advisory services, the Boards considered the quality of the administrative and other non-investment advisory services provided to the Trusts. BlackRock and its affiliates provide the Trusts with certain services (in addition to any such services provided to the Trusts by third parties) and officers and other personnel as are necessary for the operations of the Trusts. In particular, BlackRock and its affiliates provide the Trusts with the following administrative services including, among others: (i) preparing disclosure documents, such as the prospectus and the statement of additional information in connection with the initial public offering and periodic shareholder reports; (ii) preparing communications with analysts to support secondary market trading of the Trusts; (iii) oversight of daily accounting and pricing; (iv) preparing periodic filings with regulators and stock exchanges; (v) overseeing and coordinating the activities of other service providers; (vi) organizing Board meetings and preparing the materials for such Board meetings; (vii) providing legal and compliance support; (viii) furnishing analytical and other support to assist the Boards in their consideration of strategic issues such as the merger, consolidation or repurposing of certain closed-end funds; and (ix) performing other administrative functions necessary for the operation of the

 

  1   

Funds are ranked by Lipper in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    85


Disclosure of Investment Advisory Agreements and Sub-Advisory Agreement (continued)

 

Trusts, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Boards reviewed the structure and duties of BlackRock’s fund administration, shareholder services, legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Trusts and BlackRock: Each Board, including the Independent Board Members, also reviewed and considered the performance history of its Trust. In preparation for the April Meeting, the Boards worked with their independent legal counsel, BlackRock and Lipper to develop a template for, and were provided with reports independently prepared by Lipper, which included a comprehensive analysis of each Trust’s performance. The Boards also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock. In connection with its review, each Board received and reviewed information regarding the investment performance, based on net asset value (NAV), of its Trust as compared to other funds in its applicable Lipper category and, with respect to BTZ and BGT, the customized peer group selected by BlackRock. The Boards were provided with a description of the methodology used by Lipper to select peer funds and periodically meets with Lipper representatives to review its methodology. Each Board and its Performance Oversight Committee regularly review, and meet with Trust management to discuss, the performance of its Trust throughout the year.

In evaluating performance, the Boards recognized that the performance data reflects a snapshot of a period or as of a particular date and that selecting a different performance period could produce significantly different results. Further, the Boards recognized that it is possible that long-term performance can be adversely affected by even one period of significant underperformance so that a single investment decision or theme has the ability to affect long-term performance disproportionately.

The Board of BTZ noted that for the one-, three- and five-year periods reported, BTZ ranked in the second, first and first quartiles, respectively, against its Customized Lipper Peer Group. BlackRock believes that the Customized Lipper Peer Group is an appropriate performance metric for BTZ.

The Board of BGT noted that for the one-, three- and five-year periods reported, BGT ranked in the first, second and third quartiles, respectively, against its Customized Lipper Peer Group. BlackRock believes that the Customized Lipper Peer Group is an appropriate performance metric for BGT.

The Board of BIT noted that for the one-year and since-inception periods reported, BIT ranked in the second and first quartiles, respectively, against its Lipper Performance Universe.

C. Consideration of the Advisory/Management Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Trusts: Each Board, including the Independent Board Members, reviewed its Trust’s contractual management fee rate compared with the other funds in its Lipper category. The contractual management fee rate represents a combination of the advisory fee and any administrative fees, before taking into account any reimbursements or fee waivers. Each Board also compared its Trust’s total expense ratio, as well as its actual management fee rate as a percentage of total assets, to those of other funds in its Lipper category. The total expense ratio represents a fund’s total net operating expenses, excluding any investment related expenses. The total expense ratio gives effect to any expense reimbursements or fee waivers that benefit a fund, and the actual management fee rate gives effect to any management fee reimbursements or waivers that benefit a fund. The Boards considered the services provided and the fees charged by BlackRock and its affiliates to other types of clients with similar investment mandates, as applicable, including institutional accounts and sub-advised mutual funds.

The Boards received and reviewed statements relating to BlackRock’s financial condition. The Boards reviewed BlackRock’s profitability methodology and were also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to the Trusts. The Boards reviewed BlackRock’s profitability with respect to the Trusts and other funds the Boards currently oversee for the year ended December 31, 2014 compared to available aggregate profitability data provided for the prior two years. The Boards reviewed BlackRock’s profitability with respect to certain other U.S. fund complexes managed by the Manager and/or its affiliates. The Boards reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Boards recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. As a result, calculating and comparing profitability at individual fund levels is difficult.

The Boards noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Boards reviewed BlackRock’s overall operating margin, in general, compared to that of certain other publicly-traded asset management firms. The Boards considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

In addition, the Boards considered the cost of the services provided to the Trusts by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management of the Trusts and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Boards reviewed BlackRock’s methodology in allocating its costs to the management of the Trusts. The Boards may periodically receive and review information from independent third parties as part of their annual evaluation. BlackRock retained an independent third party to evaluate its cost allocation methodologies in the context of BlackRock’s 1940 Act Fund business. The Boards considered the results of that evaluation in connection with BlackRock’s profitability reporting. The Boards also considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreements and to continue to provide the high quality of services that is expected by the Boards. The Boards further considered

 

                
86    ANNUAL REPORT    OCTOBER 31, 2015   


Disclosure of Investment Advisory Agreements and Sub-Advisory Agreement (concluded)

 

factors including but not limited to BlackRock’s commitment of time, assumption of risk and liability profile in servicing the Trusts in contrast to what is required of BlackRock with respect to other products with similar investment mandates across the open-end fund, ETF, closed-end fund, sub-advised mutual fund and institutional account product channels, as applicable.

The Board of BTZ noted that BTZ’s contractual management fee rate ranked in the fourth quartile, and that the actual management fee rate and total expense ratio ranked in the fourth and second quartiles, respectively, relative to the Trust’s Expense Peers. The Board of BTZ also noted, however, that given the comparability limitations of the Trust’s Expense Peers, BlackRock provided the Board a supplemental customized peer group consisting of funds that are generally similar to BTZ.

The Board of BGT noted that BGT’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Trust’s Expense Peers.

The Board of BIT noted that BIT’s contractual management fee rate ranked in the third quartile, and that the actual management fee rate and total expense ratio ranked in the second and fourth quartiles, respectively, relative to the Trust’s Expense Peers.

D. Economies of Scale: Each Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of its Trust increase. Each Board also considered the extent to which its Trust benefits from such economies and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable the Trust to participate in these economies of scale, for example through the use of breakpoints in the advisory fee based upon the asset level of the Trust.

Based on the Boards’ review and consideration of the issue, the Boards concluded that most closed-end funds do not have fund level breakpoints because closed-end funds generally do not experience substantial growth after the initial public offering. They are typically priced at scale at a fund’s inception.

E. Other Factors Deemed Relevant by the Board Members: The Boards, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from their respective relationships with the Trusts, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Trusts, including securities lending and cash management services. The Boards also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Boards also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts. The Boards further noted that it had considered the investment by BlackRock’s funds in exchange traded funds (i.e., ETFs) without any offset against the management fees payable by the funds to BlackRock.

In connection with its consideration of the Agreements, the Boards also received information regarding BlackRock’s brokerage and soft dollar practices. The Boards received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

The Boards noted the competitive nature of the closed-end fund marketplace, and that shareholders are able to sell their Trust shares in the secondary market if they believe that the Trust’s fees and expenses are too high or if they are dissatisfied with the performance of the Trust.

The Boards also considered the various notable initiatives and projects BlackRock performed in connection with its closed-end fund product line. These initiatives included the redemption of AMPS for the BlackRock closed-end funds with AMPS outstanding; developing equity shelf programs; efforts to eliminate product overlap with fund mergers; ongoing services to manage leverage that has become increasingly complex; share repurchases and other support initiatives for certain BlackRock funds; and continued communications efforts with shareholders, fund analysts and financial advisers. With respect to the latter, the Independent Board Members noted BlackRock’s continued commitment to supporting the secondary market for the common shares of its closed-end funds through a comprehensive secondary market communication program designed to raise investor and analyst awareness and understanding of closed-end funds. BlackRock’s support services included, among other things: continuing communications concerning the redemption efforts related to AMPS; sponsoring and participating in conferences; communicating with closed-end fund analysts covering the BlackRock funds throughout the year; providing marketing and product updates for the closed-end funds; and maintaining and enhancing its closed-end fund website.

Conclusion

Each Board, including the Independent Board Members, unanimously approved the continuation of the Advisory Agreement between the Manager and its Trust for a one-year term ending June 30, 2016. The Board of BIT, including the Independent Board Members, also unanimously approved the continuation of the BSL Sub-Advisory Agreement among the Manager, the BSL Sub-Adviser and BIT for a one-year term ending June 30, 2016. Based upon its evaluation of all of the aforementioned factors in their totality, each Board, including the Independent Board Members, was satisfied that the terms of the Agreement were fair and reasonable and in the best interest of its Trust and its shareholders. In arriving at its decision to approve the Agreement for its Trust, 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. The contractual fee arrangements for the Trusts reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    87


Automatic Dividend Reinvestment Plan     

 

Pursuant to each Trust’s Dividend Reinvestment Plan (the “Reinvestment Plan”), Common Shareholders are automatically enrolled to have all distributions of dividends and capital gains reinvested by Computershare Trust Company, N.A. (the “Reinvestment Plan Agent”) in the respective Trust’s shares pursuant to the Reinvestment Plan. Shareholders who do not participate in the Reinvestment Plan will receive all distributions in cash paid by check and mailed directly to the shareholders of record (or if the shares are held in street name or other nominee name, then to the nominee) by the Reinvestment Plan Agent, which serves as agent for the shareholders in administering the Reinvestment Plan.

After the Trusts declare a dividend or determine to make a capital gain distribution, the Reinvestment Plan Agent will acquire shares for the participants’ accounts, depending upon the following circumstances, either (i) through receipt of unissued but authorized shares from the Trusts (“newly issued shares”) or (ii) by purchase of outstanding shares on the open market or on the Trust’s primary exchange (“open-market purchases”). If, on the dividend payment date, the net asset value per share (“NAV”) is equal to or less than the market price per share plus estimated brokerage commissions (such condition often referred to as a “market premium”), the Reinvestment Plan Agent will invest the dividend amount in newly issued shares acquired on behalf of the participants. The number of newly issued shares to be credited to each participant’s account will be determined by dividing the dollar amount of the dividend by the NAV on the date the shares are issued. However, if the NAV is less than 95% of the market price on the dividend payment date, the dollar amount of the dividend will be divided by 95% of the market price on the dividend payment date. If, on the dividend payment date, the NAV is greater than the market price per share plus estimated brokerage commissions (such condition often referred to as a “market discount”), the Reinvestment Plan Agent will invest the dividend amount in shares acquired on behalf of the participants in open-market purchases. If the Reinvestment Plan Agent is unable to invest the full dividend amount in open-market purchases, or if the market discount shifts to a market premium during the purchase period, the Reinvestment Plan Agent will invest any un-invested portion in newly issued shares. Investments in

newly issued shares made in this manner would be made pursuant to the same process described above and the date of issue for such newly issued shares will substitute for the dividend payment date.

Participation in the Reinvestment Plan is completely voluntary and may be terminated or resumed at any time without penalty by notice if received and processed by the Reinvestment Plan Agent prior to the dividend record date. Additionally, the Reinvestment Plan Agent seeks to process notices received after the record date but prior to the payable date and such notices often will become effective by the payable date. Where late notices are not processed by the applicable payable date, such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution.

The Reinvestment Plan Agent’s fees for the handling of the reinvestment of distributions will be paid by each Trust. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Reinvestment Plan Agent’s open market purchases in connection with the reinvestment of all distributions. The automatic reinvestment of all distributions will not relieve participants of any federal income tax that may be payable on such dividends or distributions.

Each Trust reserves the right to amend or terminate the Reinvestment Plan. There is no direct service charge to participants in the Reinvestment Plan; however, each Trust reserves the right to amend the Reinvestment Plan to include a service charge payable by the participants. Participants that request a sale of shares are subject to a $2.50 sales fee and a $0.15 per share fee. Per share fees include any applicable brokerage commissions the Reinvestment Plan Agent is required to pay. All correspondence concerning the Reinvestment Plan should be directed to Computershare Trust Company, N.A. through the internet at http://www.computershare.com/blackrock, or in writing to Computershare, P.O. Box 30170, College Station TX 77842-3170, Telephone: (800) 699-1236. Overnight correspondence should be directed to the Reinvestment Plan Agent at Computershare, 211 Quality Circle, Suite 210, College Station, TX 77845.

 

 

                
88    ANNUAL REPORT    OCTOBER 31, 2015   


Officers and Trustees     

 

Name, Address1
and Year of Birth
 

Position(s)

Held with
Trusts

  Length
of Time
Served as a
Trustee3
  Principal Occupation(s) During Past Five Years   Number of BlackRock-
Advised Registered
Investment Companies
(“RICs”) Consisting of
Investment Portfolios
(“Portfolios”) Overseen4
  Public
Directorships
Independent Trustees2               

Richard E. Cavanagh

 

1946

  Chair of the Board and Trustee  

Since

2007

  Trustee, Aircraft Finance Trust from 1999 to 2009; Director, The Guardian Life Insurance Company of America since 1998; Director, Arch Chemical (chemical and allied products) from 1999 to 2011; Trustee, Educational Testing Service from 1997 to 2009 and Chairman thereof from 2005 to 2009; Senior Advisor, The Fremont Group since 2008 and Director thereof since 1996; Faculty Member/Adjunct Lecturer, Harvard University since 2007; President and Chief Executive Officer, The Conference Board, Inc. (global business research organization) from 1995 to 2007.  

75 RICs consisting of

75 Portfolios

  None

Karen P. Robards

 

1950

  Vice Chairperson of the Board, Chairperson of the Audit Committee and Trustee  

Since

2007

  Partner of Robards & Company, LLC (financial advisory firm) since 1987; Co-founder and Director of the Cooke Center for Learning and Development (a not-for-profit organization) since 1987; Director of Care Investment Trust, Inc. (health care real estate investment trust) from 2007 to 2010; Investment Banker at Morgan Stanley from 1976 to 1987.  

75 RICs consisting of

75 Portfolios

  AtriCure, Inc. (medical devices); Greenhill & Co., Inc.

Michael J. Castellano

 

1946

  Trustee and Member of the Audit Committee  

Since

2011

  Chief Financial Officer of Lazard Group LLC from 2001 to 2011; Chief Financial Officer of Lazard Ltd from 2004 to 2011; Director, Support Our Aging Religious (non-profit) from 2009 to June 2015; Director, National Advisory Board of Church Management at Villanova University since 2010; Trustee, Domestic Church Media Foundation since 2012; Director, CircleBlack Inc. (financial technology company). since 2015.  

75 RICs consisting of

75 Portfolios

  None

Frank J. Fabozzi4

 

1948

  Trustee and Member of the Audit Committee  

Since

2007

  Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Visiting Professor, Princeton University from 2013 to 2014; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011.  

108 RICs consisting of

235 Portfolios

  None

Kathleen F. Feldstein

 

1941

  Trustee  

Since

2007

  President of Economics Studies, Inc. (private economic consulting firm) since 1987; Chair, Board of Trustees, McLean Hospital from 2000 to 2008 and Trustee Emeritus thereof since 2008; Member of the Board of Partners Community Healthcare, Inc. from 2005 to 2009; Member of the Corporation of Partners HealthCare since 1995; Trustee, Museum of Fine Arts, Boston since 1992; Member of the Visiting Committee to the Harvard University Art Museum since 2003; Director, Catholic Charities of Boston since 2009.  

75 RICs consisting of

75 Portfolios

  The McClatchy Company (publishing)

James T. Flynn

 

1939

  Trustee and Member of the Audit Committee  

Since

2007

  Chief Financial Officer of JPMorgan & Co., Inc. from 1990 to 1995.  

75 RICs consisting of

75 Portfolios

  None

Jerrold B. Harris

 

1942

  Trustee  

Since

2007

  Trustee, Ursinus College from 2000 to 2012; Director, Waterfowl Chesapeake (conservation) since 2014; Director, Ducks Unlimited, Inc. (conservation) since 2013; Director, Troemner LLC (scientific equipment) since 2000; Director of Delta Waterfowl Foundation from 2010 to 2012; President and Chief Executive Officer, VWR Scientific Products Corporation from 1990 to 1999.  

75 RICs consisting of

75 Portfolios

  BlackRock Capital Investment Corp. (business development company)

R. Glenn Hubbard

 

1958

  Trustee   Since
2007
  Dean, Columbia Business School since 2004; Faculty member, Columbia Business School since 1988.  

75 RICs consisting of

75 Portfolios

  ADP (data and information services); Metropolitan Life Insurance Company (insurance)

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    89


Officers and Trustees (continued)     

 

Name, Address1
and Year of Birth
 

Position(s)

Held with
Trust

  Length
of Time
Served as a
Trustee3
  Principal Occupation(s) During Past Five Years   Number of BlackRock-
Advised Registered
Investment Companies
(“RICs”) Consisting of
Investment Portfolios
(“Portfolios”) Overseen4
  Public
Directorships
Independent Trustees2 (concluded)                    

W. Carl Kester

 

1951

  Trustee and Member of the Audit Committee  

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.  

75 RICs consisting of

75 Portfolios

  None
 

1   The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.

 

2   Independent Trustees serve until their resignation, retirement, removal or death, or until December 31 of the year in which they turn 74. The maximum age limitation may be waived as to any Trustee by action of a majority of the Trustees upon finding of good cause thereof. The Board of Trustees has unanimously approved further extending the mandatory retirement age for Mr. James T. Flynn until December 31, 2015, which the Board of Trustees believes is in the best interest of shareholders.

 

3   Date shown is the earliest date a person has served for the Funds in the Closed-End Complex. Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock (“BlackRock”) in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. As a result, although the chart shows certain Trustees as joining the Trusts board in 2007, those Trustees first became members of the boards of other legacy MLIM or legacy BlackRock funds as follows: Richard E. Cavanagh, 1994; Frank J. Fabozzi, 1988; Kathleen F. Feldstein, 2005; James T. Flynn, 1996; Jerrold B. Harris, 1999; R. Glenn Hubbard, 2004; W. Carl Kester, 1995 and Karen P. Robards, 1998.

 

4   For purposes of this chart, “RICs” refers to investment companies registered under the 1940 Act and “Portfolios” refers to the investment programs of the BlackRock-advised funds. The Closed-End Complex is comprised of 75 RICs. Mr. Perlowski, Dr. Fabozzi and Ms. Novick are also board members of a complex of BlackRock registered open-end funds. Mr. Perlowski is also a board member of the BlackRock Equity-Bond Complex, and Ms. Novick and Dr. Fabozzi are also board members of the BlackRock Equity-Liquidity Complex.

Interested Trustees5               

Barbara G. Novick

1960

  Trustee  

Since

2014

  Vice Chairman of BlackRock since 2006; Chair of BlackRock’s Government Relations Steering Committee since 2009; Head of the Global Client Group of BlackRock, Inc. from 1988 to 2008.   108 RICs consisting of 235 Portfolios   None

John M. Perlowski

1964

  Director, President and Chief Executive Officer  

Since

2014

  Managing Director of BlackRock since 2009; Head of BlackRock Global Fund Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.   136 RICs consisting of 333 Portfolios   None
 

5   Mr. Perlowski and Ms. Novick are both “interested persons,” as defined in the 1940 Act, of the Trusts based on their positions with BlackRock and its affiliate. Mr. Perlowski and Ms. Novick are also board members of a complex of BlackRock registered open-end funds. Mr. Perlowski is also a board member of the BlackRock Equity-Bond Complex and the BlackRock Equity-Liquidity Complex, and Ms. Novick is a board member of the BlackRock Equity-Liquidity Complex. Interested Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The maximum age limitation may be waived as to any Trustee by action of a majority of the Trustees upon a finding of good cause thereof.

 

                
90    ANNUAL REPORT    OCTOBER 31, 2015   


Officers and Trustees (concluded)     

 

 

Name, Address1
and Year of Birth
  Position(s)
Held with
the Trusts
  Length of
Time Served
as a Trustee
  Principal Occupation(s) During Past Five Years
Officers2               

John M. Perlowski

 

1964

  Director, President and Chief Executive Officer   Since
2011
  Managing Director of BlackRock since 2009; Head of BlackRock Global Fund Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.

Jonathan Diorio

 

1980

  Vice President   Since
2015
  Managing Director of BlackRock, Inc. since 2015; Director of BlackRock, Inc. from 2011 to 2015; Director of Deutsche Asset & Wealth Management from 2009 to 2011.

Neal Andrews

 

1966

  Chief Financial Officer   Since
2007
  Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.

Jay Fife

 

1970

  Treasurer   Since
2007
  Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.

Charles Park

 

1967

  Chief Compliance Officer   Since
2014
  Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.

Janey Ahn

 

1975

  Secretary   Since
2012
  Director of BlackRock since 2009; Vice President of BlackRock from 2008 to 2009; Assistant Secretary of the Funds from 2008 to 2012.
 

1    The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.

   

2    Officers of the Trusts serve at the pleasure of the Board.

 

Effective September 18, 2015, Robert W. Crothers resigned as a Vice President of the Trust and Jonathan Diorio became a Vice President of the Trust.

 

       

Investment Advisor

BlackRock Advisors, LLC

Wilmington, DE 19809

 

Accounting Agent and Custodian

State Street Bank and Trust Company

Boston, MA 02110

 

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

Boston, MA 02116

 

Address of the Trusts

100 Bellevue Parkway

Wilmington, DE 19809

Sub-Advisor

BlackRock (Singapore) Limited1

079912 Singapore

 

Transfer Agent

Common Shares

Computershare Trust Company, N.A.

Canton, MA 02021

 

Legal Counsel

Skadden, Arps, Slate, Meagher & Flom LLP

Boston, MA 02116

 

 

  1   

For BIT.

 

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    91


Additional Information     

 

Proxy Results

The Annual Meeting of Shareholders was held on July 29, 2015 for shareholders of record on June 1, 2015, to elect trustee nominees for each Trust. There were no broker non-votes with regard to any of the Trusts.

Approved the Trustees as follows:

 

     

Frank J. Fabozzi1

  

James T. Flynn1

  

Barbara G. Novick2

      Votes For   

Votes

Withheld

   Abstain    Votes For   

Votes

Withheld

   Abstain    Votes For   

Votes

Withheld

   Abstain

BTZ

   97,729,005    3,011,305    0    97,771,431    2,968,879    0    97,883,516    2,856,794    0

BGT

   21,212,760       617,044    0    21,245,597       584,207    0    21,186,055       643,749    0

BIT

   33,657,340       484,844    0    33,641,342       500,842    0    33,660,293       481,891    0
    

John M. Perlowski3

  

Karen P. Robards1

    
      Votes For   

Votes

Withheld

   Abstain    Votes For   

Votes

Withheld

   Abstain               

BTZ

   97,846,652    2,893,658    0    97,846,326    2,893,984    0         

BGT

   21,216,604       613,200    0    21,185,429       644,375    0         

BIT

   33,664,094       478,090    0    33,681,228       460,956    0               

For the Trusts listed above, Trustees whose term of office continued after the Annual Meeting of Shareholders because they were not up for election are Michael J. Castellano, Richard E. Cavanagh, Kathleen F. Feldstein, Jerrold B. Harris, R. Glenn Hubbard and W. Carl Kester.

 

  1   

Class II

 

  2   

Class III

 

  3   

Class I

 

Trust Certification

Each Trust is listed for trading on the NYSE and have filed with the NYSE their annual chief executive officer certification regarding compliance with the NYSE’s listing standards. The Trusts filed with the SEC the certification of their chief executive officer and chief financial officer required by section 302 of the Sarbanes-Oxley Act.

 

Dividend Policy

Each Trust’s dividend policy is to distribute all or a portion of its net investment income to its shareholders on a monthly basis. In order to provide shareholders with a more stable level of dividend distributions, the distributions paid by the Trusts for any particular month may be more or less than the amount of net investment income earned by the Trusts during such month. The portion of distributions that exceeds a Trust’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a nontaxable return of capital. Distributions in excess of a Trust’s taxable income and net capital gains, but not in excess of a Trust’s earnings and profits, will be taxable to shareholders as ordinary income and will not constitute a nontaxable return of capital. The Trusts’ current accumulated but undistributed net investment income, if any, is disclosed in the Statements of Assets and Liabilities, which comprises part of the financial information included in this report.

 

                
92    ANNUAL REPORT    OCTOBER 31, 2015   


Additional Information (continued)     

 

 

General Information

The Trusts do not make available copies of their Statements of Additional Information because the Trusts’ shares are not continuously offered, which means that the Statement of Additional Information of each Trust has not been updated after completion of the respective Trust’s offerings and the information contained in each Trust’s Statement of Additional Information may have become outdated.

During the period there were no material changes in the Trusts’ investment objectives or policies or to the Trusts’ charters or by-laws that would delay or prevent a change of control of the Trusts that were not approved by the shareholders or in the principal risk factors associated with investment in the Trusts. There have been no changes in the persons who are primarily responsible for the day-to-day management of the Trusts’ portfolios.

Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding the Trusts may be found on BlackRock’s website, which can be accessed at http://www.blackrock.com. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Trusts and does not, and is not intended to, incorporate BlackRock’s website in this report.

Electronic Delivery

Shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual shareholder reports by enrolling in the electronic delivery program. Electronic copies of shareholder reports are available on BlackRock’s website.

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.

Householding

The Trusts will mail only one copy of shareholder documents, including annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Trusts at (800) 882-0052.

Availability of Quarterly Schedule of Investments

The Trusts file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trusts’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Trusts’ Forms N-Q may also be obtained upon request and without charge by calling (800) 882-0052.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Trusts use to determine how to vote proxies relating to portfolio securities is available upon request and without charge (1) by calling (800) 882-0052; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Trusts voted proxies relating to securities held in the Trusts’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 882-0052 and (2) on the SEC’s website at http://www.sec.gov.

Availability of Trust Updates

BlackRock will update performance and certain other data for the Trusts on a monthly basis on its website in the “Closed-end Funds” section of http://www.blackrock.com as well as certain other material information as necessary from time to time. Investors and others are advised to check the website for updated performance information and the release of other material information about the Trusts. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Trusts and does not, and is not intended to, incorporate BlackRock’s website in this report.

 

                
   ANNUAL REPORT    OCTOBER 31, 2015    93


Additional Information (concluded)     

 

 

Section 19(a) Notice

These amounts and sources of distributions reported are estimates and are being provided to you pursuant to regulatory requirements and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon each Trust’s investment experience during the remainder of the fiscal year and may be subject to changes based on tax regulations. Each Trust will provide a Form 1099-DIV each calendar year that will tell you how to report these distributions for federal income tax purposes.

October 31, 2015

 

    Total Cumulative Distributions
for the Fiscal  Year-to-Date
    % Breakdown of the Total Cumulative
Distributions for the Fiscal Year-to-Date
 
     Net Investment
Income
    Net Realized
Capital Gains
    Return of
Capital
    Total Per
Common Share
    Net Investment
Income
    Net Realized
Capital Gains
    Return of
Capital
    Total Per
Common Share
 

BTZ

  $ 0.0805                    $ 0.0805        100     0     0     100

BIT

  $ 0.1167                    $ 0.1167        100     0     0     100

The Trusts estimate that they have distributed more than the amount of earned income and net realized gains; therefore, a portion of the distribution may be a return of capital. A return of capital may occur, for example, when some or all of the shareholder’s investment in the Trusts are returned to the shareholder. A return of capital does not necessarily reflect the Trusts’ investment performance and should not be confused with ‘yield’ or ‘income.’ When distributions exceed total return performance, the difference will incrementally reduce the Trusts’ net asset value per share.

Section 19(a) notices for the Trusts, as applicable, are available on the BlackRock website at http://www.blackrock.com.

 

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

 

                
94    ANNUAL REPORT    OCTOBER 31, 2015   


This report is intended for current holders. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. The Trusts have leveraged their Common Shares, which creates risks for Common Shareholders, including the likelihood of greater volatility of net asset value and market price of the Common Shares, and the risk that fluctuations in short-term interest rates may reduce the Common Shares’ yield. Statements and other information herein are as dated and are subject to change.

 

LOGO

 

CE-CAFRI-3-10/15-AR    LOGO


Item 2 – Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. During the period covered by this report, the code of ethics was amended to update certain information and to make other non-material changes. During the period covered by this report, there have been no waivers granted under the code of ethics. The registrant undertakes to provide a copy of the code of ethics to any person upon request, without charge, by calling 1-800-882-0052, option 4.

 

Item 3 – Audit Committee Financial Expert – The registrant’s board of directors (the “board of directors”), has determined that (i) the registrant has the following audit committee financial experts serving on its audit committee and (ii) each audit committee financial expert is independent:

Michael Castellano

Frank J. Fabozzi

James T. Flynn

W. Carl Kester

Karen P. Robards

The registrant’s board of directors has determined that W. Carl Kester and Karen P. Robards qualify as financial experts pursuant to Item 3(c)(4) of Form N-CSR.

Prof. Kester has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Prof. Kester has been involved in providing valuation and other financial consulting services to corporate clients since 1978. Prof. Kester’s financial consulting services present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements.

Ms. Robards has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Ms. Robards has been President of Robards & Company, a financial advisory firm, since 1987. Ms. Robards was formerly an investment banker for more than 10 years where she was responsible for evaluating and assessing the performance of companies based on their financial results. Ms. Robards has over 30 years of experience analyzing financial statements. She also is a member of the audit committee of one publicly held company and a non-profit organization.

Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification. The designation or identification of a person as an audit committee financial expert does not affect the duties, obligations, or liability of any other member of the audit committee or board of directors.

 

2


Item 4 – Principal Accountant Fees and Services

The following table presents fees billed by Deloitte & Touche LLP (“D&T”) in each of the last two fiscal years for the services rendered to the Fund:

 

    

 

(a) Audit Fees

  (b) Audit-Related Fees1   (c) Tax Fees2   (d) All Other Fees3

Entity Name

  Current
Fiscal Year 
End
  Previous
Fiscal Year 
End
  Current
Fiscal Year 
End
  Previous
Fiscal Year 
End
  Current
Fiscal Year 
End
  Previous
Fiscal Year 
End
  Current
Fiscal Year 
End
  Previous
Fiscal Year 
End
BlackRock Floating Rate Income Trust   $74,913   $65,941   $0   $0   $14,484   $22,950   $0   $0

The following table presents fees billed by D&T that were required to be approved by the registrant’s audit committee (the “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock Advisors, LLC (“Investment Adviser” or “BlackRock”) and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund (“Fund Service Providers”):

 

     Current Fiscal Year End   Previous Fiscal Year End

(b) Audit-Related Fees1

  $0   $0

(c) Tax Fees2

  $0   $0

(d) All Other Fees3

  $2,391,000   $2,555,000
  1  The nature of the services includes assurance and related services reasonably related to the performance of the audit of financial statements not included in Audit Fees.
  2  The nature of the services includes tax compliance, tax advice and tax planning.
  3  Aggregate fees borne by BlackRock in connection with the review of compliance procedures and attestation thereto performed by D&T with respect to all of the registered closed-end funds and some of the registered open-end funds advised by BlackRock.

(e)(1) Audit Committee Pre-Approval Policies and Procedures:

The Committee has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the Investment Adviser and Fund Service Providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are (a) consistent with the SEC’s auditor independence rules and (b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operations or financial reporting of the registrant will only be deemed pre-approved provided that any individual project does not exceed $10,000 attributable to the registrant or $50,000 per project. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels.

Any proposed services exceeding the pre-approved cost levels will require specific pre-approval by the Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved

 

3


subject to general pre-approval at the next regularly scheduled in-person board meeting. At this meeting, an analysis of such services is presented to the Committee for ratification. The Committee may delegate to the Committee Chairman the authority to approve the provision of and fees for any specific engagement of permitted non-audit services, including services exceeding pre-approved cost levels.

(e)(2) None of the services described in each of Items 4(b) through (d) were approved by the Committee pursuant to the de minimis exception in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not Applicable

(g) The aggregate non-audit fees paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Fund Service Providers were:

 

    Entity Name   Current Fiscal Year    
End    
  Previous Fiscal Year    
End    
    
  BlackRock Floating Rate Income Trust   $14,484       $22,950       

Additionally, SSAE 16 Review (Formerly, SAS No. 70) fees for the current and previous fiscal years of $2,391,000 and $2,555,000, respectively, were billed by D&T to the Investment Adviser.

(h) The Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser, and the Fund Service Providers that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

 

Item 5 – Audit Committee of Listed Registrants

 

  (a) The following individuals are members of the registrant’s separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)):

Michael Castellano

Frank J. Fabozzi

James T. Flynn

W. Carl Kester

Karen P. Robards

 

  (b) Not Applicable

 

Item 6 – Investments

(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.

(b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.

 

4


Item 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – The board of directors has delegated the voting of proxies for the Fund’s portfolio securities to the Investment Adviser pursuant to the Investment Adviser’s proxy voting guidelines. Under these guidelines, the Investment Adviser will vote proxies related to Fund securities in the best interests of the Fund and its stockholders. From time to time, a vote may present a conflict between the interests of the Fund’s stockholders, on the one hand, and those of the Investment Adviser, or any affiliated person of the Fund or the Investment Adviser, on the other. In such event, provided that the Investment Adviser’s Equity Investment Policy Oversight Committee, or a sub-committee thereof (the “Oversight Committee”) is aware of the real or potential conflict or material non-routine matter and if the Oversight Committee does not reasonably believe it is able to follow its general voting guidelines (or if the particular proxy matter is not addressed in the guidelines) and vote impartially, the Oversight Committee may retain an independent fiduciary to advise the Oversight Committee on how to vote or to cast votes on behalf of the Investment Adviser’s clients. If the Investment Adviser determines not to retain an independent fiduciary, or does not desire to follow the advice of such independent fiduciary, the Oversight Committee shall determine how to vote the proxy after consulting with the Investment Adviser’s Portfolio Management Group and/or the Investment Adviser’s Legal and Compliance Department and concluding that the vote cast is in its client’s best interest notwithstanding the conflict. A copy of the Fund’s Proxy Voting Policy and Procedures are attached as Exhibit 99.PROXYPOL. Information on how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, (i) at www.blackrock.com and (ii) on the SEC’s website at http://www.sec.gov.

 

Item 8 – Portfolio Managers of Closed-End Management Investment Companies – as of October 31, 2015.

 

  (a)(1) The registrant is managed by a team of investment professionals comprised of Leland T. Hart, Managing Director at BlackRock, James E. Keenan, Managing Director at BlackRock and C. Adrian Marshall, CFA, Director at BlackRock. Messrs. Hart, Keenan and Marshall are the Fund’s co-portfolio managers and are responsible for the day-to-day management of the Fund’s portfolio and the selection of its investments. Mr. Keenan has been a member of the Fund’s management team since 2007. Messrs. Hart and Marshall have been members of the Fund’s management team since 2009.

 

    Portfolio Manager    Biography
  Leland T. Hart    Managing Director of BlackRock since 2009; Partner of R3 Capital Partners (“R3”) in 2009; Managing Director of R3 from 2008 - 2009; Managing Director of Lehman Brothers from 2006 to 2008; Executive Director of Lehman Brothers from 2003 to 2006.
  James E. Keenan    Managing Director of BlackRock since 2008 and Head of the Leveraged Finance Portfolio team; Director of BlackRock from 2006 to 2007; Vice President of BlackRock, Inc. from 2004 to 2005.
  C. Adrian Marshall, CFA    Director of BlackRock since 2007; Vice President of BlackRock, Inc. from 2004 to 2007.

 

5


(a)(2) As of October 31, 2015:

 

          

(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

  

Leland T. Hart

   6        23        12        0        5        0    
        $5.06 Billion        $6.97 Billion        $899.3 Million        $0        $21.62 Million        $0    
  

James E. Keenan

   12        29        17        0        1        4    
        $26.57 Billion        $13.76 Billion        $6.81 Billion        $0        $0.31 Million        $788.2 Million    
  

C. Adrian Marshall, CFA

   6        23        15        0        4        0    
        $5.06 Billion        $6.93 Billion        $1.43 Billion        $0        $1.23 Million        $0    

 

  (iv) Portfolio Manager Potential Material Conflicts of Interest

BlackRock has built a professional working environment, firm-wide compliance culture and compliance procedures and systems designed to protect against potential incentives that may favor one account over another. BlackRock has adopted policies and procedures that address the allocation of investment opportunities, execution of portfolio transactions, personal trading by employees and other potential conflicts of interest that are designed to ensure that all client accounts are treated equitably over time. Nevertheless, BlackRock furnishes investment management and advisory services to numerous clients in addition to the Fund, and BlackRock may, consistent with applicable law, make investment recommendations to other clients or accounts (including accounts which are hedge funds or have performance or higher fees paid to BlackRock, or in which portfolio managers have a personal interest in the receipt of such fees), which may be the same as or different from those made to the Fund. In addition, BlackRock, Inc., its affiliates and significant shareholders and any officer, director, shareholder or employee may or may not have an interest in the securities whose purchase and sale BlackRock recommends to the Fund. BlackRock, Inc., or any of its affiliates or significant shareholders, or any officer, director, shareholder, employee or any member of their families may take different actions than those recommended to the Fund by BlackRock with respect to the same securities. Moreover, BlackRock may refrain from rendering any advice or services concerning securities of companies of which any of BlackRock, Inc.’s (or its affiliates’ or significant shareholders’) officers, directors or employees are directors or officers, or companies as to which BlackRock, Inc. or any of its affiliates or significant shareholders or the officers, directors and employees of any of them has any substantial economic interest or possesses material non-public information. Certain portfolio managers also may manage accounts whose investment strategies may at times be opposed to the strategy utilized for a fund. It should also be noted that Messrs. Hart, Keenan and Marshall 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. Hart, Keenan and Marshall 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.

 

6


  (a)(3) As of October 31, 2015:

Portfolio Manager Compensation Overview

The discussion below describes the portfolio managers’ compensation as of October 31, 2015.

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
 

Leland Hart

Adrian Marshall, CFA

   A combination of market-based indices (e.g., S&P Leveraged All Loan Index), certain customized indices and certain fund industry peer groups.
  James Kennan    A combination of market-based indices (e.g., The Barclays U.S. Corporate High Yield 2% Issuer Cap Index), certain customized indices and certain fund industry peer groups.

Distribution of Discretionary Incentive Compensation. Discretionary incentive compensation is distributed to portfolio managers in a combination of cash and BlackRock, Inc. restricted stock units which vest ratably over a number of years. For some portfolio managers, discretionary incentive compensation is also distributed in deferred cash awards that notionally track the returns of select BlackRock investment products they manage and that vest ratably over a number of years. The BlackRock, Inc. restricted stock units, upon vesting, will be settled in BlackRock, Inc. common stock. Typically, the cash portion of the discretionary incentive compensation, when combined with base salary, represents more than 60% of total compensation for

 

7


the portfolio managers. Paying a portion of discretionary incentive compensation in BlackRock, Inc. stock puts compensation earned by a portfolio manager for a given year “at risk” based on BlackRock’s ability to sustain and improve its performance over future periods. Providing a portion of discretionary incentive compensation in deferred cash awards that notionally track the BlackRock investment products they manage provides direct alignment with investment product results.

Long-Term Incentive Plan Awards — From time to time long-term incentive equity awards are granted to certain key employees to aid in retention, align their interests with long-term shareholder interests and motivate performance. Equity awards are generally granted in the form of BlackRock, Inc. restricted stock units that, once vested, settle in BlackRock, Inc. common stock. The portfolio managers of this Fund have unvested long-term incentive awards.

Deferred Compensation Program — A portion of the compensation paid to eligible United States-based BlackRock employees may be voluntarily deferred at their election for defined periods of time into an account that tracks the performance of certain of the firm’s investment products. Any portfolio manager who is either a managing director or director at BlackRock with compensation above a specified threshold is eligible to participate in the deferred compensation program.

Other Compensation Benefits.  In addition to base salary and discretionary incentive compensation, portfolio managers may be eligible to receive or participate in one or more of the following:

Incentive Savings Plans — BlackRock, Inc. has created a variety of incentive savings plans in which BlackRock, Inc. employees are eligible to participate, including a 401(k) plan, the BlackRock Retirement Savings Plan (RSP), and the BlackRock Employee Stock Purchase Plan (ESPP). The employer contribution components of the RSP include a company match equal to 50% of the first 8% of eligible pay contributed to the plan capped at $5,000 per year, and a company retirement contribution equal to 3-5% of eligible compensation up to the Internal Revenue Service limit ($265,000 for 2015). 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 October 31, 2015.

 

    Portfolio Manager   

Dollar Range of Equity Securities

of the Fund Beneficially Owned

    
  Leland T. Hart    $100,001 - $500,000   
  James E. Keenan    None   
  C. Adrian Marshall, CFA    None   

 

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(b) Not Applicable

 

Item 9 –  Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable due to no such purchases during the period covered by this report.

 

Item 10 –  Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.

 

Item 11 –  Controls and Procedures

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

(b) – There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 12 – Exhibits attached hereto

(a)(1) – Code of Ethics – See Item 2

(a)(2) – Certifications – Attached hereto

(a)(3) – Not Applicable

(b) – Certifications – Attached hereto

 

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

 

   BlackRock Floating Rate Income Trust      
   By:       

/s/ John M. Perlowski

     
      John M. Perlowski      
     

Chief Executive Officer (principal executive officer) of

BlackRock Floating Rate Income Trust

Date: January 4, 2016

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

 

   By:       

/s/ John M. Perlowski

     
      John M. Perlowski      
     

Chief Executive Officer (principal executive officer) of

BlackRock Floating Rate Income Trust

Date: January 4, 2016

 

   By:       

/s/ Neal J. Andrews

     
      Neal J. Andrews      
     

Chief Financial Officer (principal financial officer) of

BlackRock Floating Rate Income Trust

Date: January 4, 2016

 

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