Statements of Changes in
Net Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BFO
|
|
|
|
|
|
BKK
|
|
|
|
Six Months Ended
06/30/20
(unaudited)
|
|
|
Year Ended
12/31/19
|
|
|
|
|
|
Six Months Ended
06/30/20
(unaudited)
|
|
|
Year Ended
12/31/19
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
1,381,331
|
|
|
$
|
1,711,134
|
|
|
|
|
|
|
$
|
3,459,389
|
|
|
$
|
7,244,647
|
|
Net realized gain
|
|
|
122,770
|
|
|
|
240,193
|
|
|
|
|
|
|
|
(83,457
|
)
|
|
|
(10,146
|
)
|
Net change in unrealized appreciation (depreciation)
|
|
|
(287,516
|
)
|
|
|
(552,955
|
)
|
|
|
|
|
|
|
(1,842,470
|
)
|
|
|
(688,724
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in net assets resulting from operations
|
|
|
1,216,585
|
|
|
|
1,398,372
|
|
|
|
|
|
|
|
1,533,462
|
|
|
|
6,545,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DISTRIBUTIONS TO SHAREHOLDERS(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in net assets resulting from distributions to shareholders
|
|
|
(80,894
|
)
|
|
|
(1,396,465
|
)
|
|
|
|
|
|
|
(1,214,198
|
)
|
|
|
(7,358,038
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL SHARE TRANSACTIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption of shares resulting from share repurchase program (including transaction costs)
|
|
|
(2,434,638
|
)
|
|
|
(1,295,031
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total decrease in net assets
|
|
|
(1,298,947
|
)
|
|
|
(1,293,124
|
)
|
|
|
|
|
|
|
319,264
|
|
|
|
(812,261
|
)
|
Beginning of period
|
|
|
79,905,212
|
|
|
|
81,198,336
|
|
|
|
|
|
|
|
305,094,228
|
|
|
|
305,906,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
78,606,265
|
|
|
$
|
79,905,212
|
|
|
|
|
|
|
$
|
305,413,492
|
|
|
$
|
305,094,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Distributions for annual periods determined in accordance with U.S. federal income tax regulations.
|
See notes to financial statements.
|
|
|
18
|
|
2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS
|
Financial Highlights
(For a share outstanding throughout each period)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BFO
|
|
|
|
Six Months Ended
06/30/20
(unaudited)
|
|
|
Year Ended
December 31,
2019
|
|
|
Period from
08/01/18
to 12/31/18
|
|
|
|
|
|
Year Ended July 31,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
$
|
14.60
|
|
|
$
|
14.60
|
|
|
$
|
14.71
|
|
|
|
|
|
|
$
|
15.05
|
|
|
$
|
15.50
|
|
|
$
|
15.37
|
|
|
$
|
15.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income(a)
|
|
|
0.27
|
|
|
|
0.31
|
|
|
|
0.11
|
|
|
|
|
|
|
|
0.31
|
|
|
|
0.37
|
|
|
|
0.46
|
|
|
|
0.42
|
|
Net realized and unrealized gain (loss)
|
|
|
(0.03
|
)
|
|
|
(0.06
|
)
|
|
|
(0.09
|
)
|
|
|
|
|
|
|
(0.32
|
)
|
|
|
(0.40
|
)
|
|
|
0.05
|
|
|
|
(0.03
|
)
|
Distributions to AMPS Shareholders from net investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.00
|
)(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) from investment operations
|
|
|
0.24
|
|
|
|
0.25
|
|
|
|
0.02
|
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
(0.03
|
)
|
|
|
0.51
|
|
|
|
0.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to Common Shareholders from net investment
income(c)
|
|
|
(0.02
|
)
|
|
|
(0.25
|
)
|
|
|
(0.13
|
)
|
|
|
|
|
|
|
(0.33
|
)
|
|
|
(0.42
|
)
|
|
|
(0.38
|
)
|
|
|
(0.44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period
|
|
$
|
14.82
|
|
|
$
|
14.60
|
|
|
$
|
14.60
|
|
|
|
|
|
|
$
|
14.71
|
|
|
$
|
15.05
|
|
|
$
|
15.50
|
|
|
$
|
15.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price, end of period
|
|
$
|
14.76
|
|
|
$
|
14.47
|
|
|
$
|
14.04
|
|
|
|
|
|
|
$
|
14.21
|
|
|
$
|
15.05
|
|
|
$
|
15.21
|
|
|
$
|
14.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Return Applicable to Common
Shareholders(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on net asset value
|
|
|
1.61
|
%(e)
|
|
|
1.76
|
%
|
|
|
0.17
|
%(e)
|
|
|
|
|
|
|
(0.02
|
)%
|
|
|
(0.20
|
)%
|
|
|
3.41
|
%
|
|
|
2.59
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on market price
|
|
|
2.11
|
%(e)
|
|
|
4.88
|
%
|
|
|
(0.29
|
)%(e)
|
|
|
|
|
|
|
(3.42
|
)%
|
|
|
1.70
|
%
|
|
|
5.24
|
%
|
|
|
0.62
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets Applicable to Common Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
0.62
|
%(f)(g)
|
|
|
0.68
|
%
|
|
|
0.63
|
%(f)(g)(h)
|
|
|
|
|
|
|
0.65
|
%(g)
|
|
|
0.64
|
%
|
|
|
0.64
|
%
|
|
|
0.68
|
%(i)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses after fees waived and/or reimbursed and paid indirectly
|
|
|
0.11
|
%(f)(g)
|
|
|
0.18
|
%
|
|
|
0.63
|
%(f)(g)(h)
|
|
|
|
|
|
|
0.65
|
%(g)
|
|
|
0.64
|
%
|
|
|
0.64
|
%
|
|
|
0.68
|
%(i)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense and
fees, and amortization of offering costs(j)
|
|
|
0.11
|
%(f)(g)
|
|
|
0.18
|
%(k)
|
|
|
0.63
|
%(f)(g)(h)(k)
|
|
|
|
|
|
|
0.65
|
%(g)(k)
|
|
|
0.64
|
%(k)
|
|
|
0.64
|
%(k)
|
|
|
0.68
|
%(i)(k)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
3.50
|
%(f)(g)
|
|
|
2.11
|
%
|
|
|
1.76
|
%(f)(g)
|
|
|
|
|
|
|
2.10
|
%(g)
|
|
|
2.43
|
%
|
|
|
3.00
|
%
|
|
|
2.69
|
%(i)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to Preferred Shareholders
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income to Common Shareholders
|
|
|
3.50
|
%(f)(g)
|
|
|
2.11
|
%
|
|
|
1.76
|
%(f)(g)
|
|
|
|
|
|
|
2.10
|
%(g)
|
|
|
2.43
|
%
|
|
|
3.00
|
%
|
|
|
2.69
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets applicable to Common Shareholders, end of period (000)
|
|
$
|
78,606
|
|
|
$
|
79,905
|
|
|
$
|
81,198
|
|
|
|
|
|
|
$
|
81,809
|
|
|
$
|
83,683
|
|
|
$
|
86,209
|
|
|
$
|
85,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings outstanding, end of period (000)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio turnover rate
|
|
|
50
|
%
|
|
|
20
|
%
|
|
|
8
|
%
|
|
|
|
|
|
|
16
|
%
|
|
|
|
%
|
|
|
7
|
%
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Based on average Common Shares outstanding.
|
(b)
|
Amount is greater than $(0.005) per share.
|
(c)
|
Distributions for annual periods determined in accordance with U.S. federal income tax regulations.
|
(d)
|
Total returns based on market price, which can be significantly greater or less than the net asset value, may result in
substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices.
|
(e)
|
Aggregate total return.
|
(g)
|
Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
06/30/20
(unaudited)
|
|
|
Year Ended
December 31,
2019
|
|
|
Period from
08/01/18
to 12/31/18
|
|
|
|
|
|
Year Ended July 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Investments in underlying funds
|
|
|
0.02
|
%
|
|
|
|
%
|
|
|
0.01
|
%
|
|
|
|
|
|
|
0.01
|
%
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(h)
|
Audit costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total
expenses would have been 0.68%.
|
(i)
|
Does not reflect the effect of distributions to Auction Market Preferred Shares (AMPS) Shareholders.
|
(j)
|
The total expense ratio after fees waived and paid indirectly and excluding interest expense, fees, amortization of
offering costs, liquidity and remarketing fees were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
06/30/20
(unaudited)
|
|
|
Year Ended
December 31,
2019
|
|
|
Period from
08/01/18
to 12/31/18
|
|
|
|
|
|
Year Ended July 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Expense ratios
|
|
|
0.11
|
%
|
|
|
0.18
|
%
|
|
|
0.63
|
%
|
|
|
|
|
|
|
0.65
|
%
|
|
|
0.64
|
%
|
|
|
0.64
|
%
|
|
|
0.67
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(k)
|
Interest expense and fees related to TOB Trusts. See Note 4 of the Notes to Financial Statements for details.
|
See notes to financial statements.
Financial Highlights (continued)
(For a share outstanding throughout each period)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BKK
|
|
|
|
Six Months Ended
06/30/20
(Unaudited)
|
|
|
Year Ended
December 31,
2019
|
|
|
Period from
05/01/2018
to 12/31/2018
|
|
|
|
|
|
Year Ended April 30,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
$
|
15.08
|
|
|
$
|
15.12
|
|
|
$
|
15.23
|
|
|
|
|
|
|
$
|
15.60
|
|
|
$
|
16.27
|
|
|
$
|
16.30
|
|
|
$
|
16.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income(a)
|
|
|
0.17
|
|
|
|
0.36
|
|
|
|
0.27
|
|
|
|
|
|
|
|
0.44
|
|
|
|
0.55
|
|
|
|
0.57
|
|
|
|
0.61
|
|
Net realized and unrealized gain (loss)
|
|
|
(0.10
|
)
|
|
|
(0.04
|
)
|
|
|
(0.11
|
)
|
|
|
|
|
|
|
(0.33
|
)
|
|
|
(0.66
|
)
|
|
|
(0.03
|
)
|
|
|
0.14
|
|
|
|
|
|
|
|
|
|
|
Distributions to AMPS Shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.00
|
)(b)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.00
|
)(b)
|
Net realized gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.00
|
)(b)
|
|
|
(0.00
|
)(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) from investment operations
|
|
|
0.07
|
|
|
|
0.32
|
|
|
|
0.16
|
|
|
|
|
|
|
|
0.11
|
|
|
|
(0.12
|
)
|
|
|
0.53
|
|
|
|
0.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to Common Shareholders(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From net investment income
|
|
|
(0.06
|
)
|
|
|
(0.36
|
)
|
|
|
(0.27
|
)
|
|
|
|
|
|
|
(0.48
|
)
|
|
|
(0.54
|
)
|
|
|
(0.56
|
)
|
|
|
(0.67
|
)
|
From net realized gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.00
|
)(b)
|
|
|
(0.01
|
)
|
|
|
(0.00
|
)(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions
|
|
|
(0.06
|
)
|
|
|
(0.36
|
)
|
|
|
(0.27
|
)
|
|
|
|
|
|
|
(0.48
|
)
|
|
|
(0.55
|
)
|
|
|
(0.56
|
)
|
|
|
(0.67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period
|
|
$
|
15.09
|
|
|
$
|
15.08
|
|
|
$
|
15.12
|
|
|
|
|
|
|
$
|
15.23
|
|
|
$
|
15.60
|
|
|
$
|
16.27
|
|
|
$
|
16.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price, end of period
|
|
$
|
15.02
|
|
|
$
|
14.89
|
|
|
$
|
14.76
|
|
|
|
|
|
|
$
|
15.16
|
|
|
$
|
15.73
|
|
|
$
|
16.14
|
|
|
$
|
16.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Return Applicable to Common
Shareholders(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on net asset value
|
|
|
0.47
|
%(e)
|
|
|
2.17
|
%
|
|
|
1.08
|
%(e)
|
|
|
|
|
|
|
0.76
|
%
|
|
|
(0.78
|
)%
|
|
|
3.39
|
%
|
|
|
4.67
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on market price
|
|
|
1.28
|
%(e)
|
|
|
3.34
|
%
|
|
|
(0.87
|
)%(e)
|
|
|
|
|
|
|
(0.54
|
)%
|
|
|
0.85
|
%
|
|
|
2.87
|
%
|
|
|
1.90
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets Applicable to Common Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
0.55
|
%(f)(g)
|
|
|
0.58
|
%
|
|
|
0.59
|
%(f)(h)
|
|
|
|
|
|
|
0.62
|
%(h)
|
|
|
0.67
|
%(i)
|
|
|
0.69
|
%(i)
|
|
|
0.72
|
%(i)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses after fees waived and/or reimbursed and paid indirectly
|
|
|
0.54
|
%(f)(g)
|
|
|
0.57
|
%
|
|
|
0.59
|
%(f)(h)
|
|
|
|
|
|
|
0.62
|
%(h)
|
|
|
0.67
|
%(i)
|
|
|
0.69
|
%(i)
|
|
|
0.72
|
%(i)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense and
fees, and amortization of offering costs(j)
|
|
|
0.54
|
%(f)(g)
|
|
|
0.57
|
%(k)
|
|
|
0.59
|
%(f)(h)(k)
|
|
|
|
|
|
|
0.60
|
%(h)(k)
|
|
|
0.65
|
%(i)(k)
|
|
|
0.68
|
%(i)(k)
|
|
|
0.71
|
%(i)(k)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
2.28
|
%(f)(g)
|
|
|
2.37
|
%
|
|
|
2.66
|
%(f)
|
|
|
|
|
|
|
2.81
|
%(h)
|
|
|
3.43
|
%(i)
|
|
|
3.54
|
%(i)
|
|
|
3.75
|
%(i)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to Preferred Shareholders
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
|
|
|
|
|
|
0.02
|
%
|
|
|
0.08
|
%
|
|
|
0.03
|
%
|
|
|
0.02
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income to Common Shareholders
|
|
|
2.28
|
%(f)
|
|
|
2.37
|
%
|
|
|
2.66
|
%(f)
|
|
|
|
|
|
|
2.79
|
%
|
|
|
3.35
|
%
|
|
|
3.51
|
%
|
|
|
3.73
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets applicable to Common Shareholders, end of period (000)
|
|
$
|
305,413
|
|
|
$
|
305,094
|
|
|
$
|
305,906
|
|
|
|
|
|
|
$
|
308,155
|
|
|
$
|
315,759
|
|
|
$
|
329,241
|
|
|
$
|
329,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Shares outstanding at $25,000 liquidation preference, end of period (000)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
11,328
|
|
|
$
|
34,578
|
|
|
$
|
53,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset coverage per Preferred Share at $25,000 liquidation preference, end of period (000)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
721,856
|
|
|
$
|
263,065
|
|
|
$
|
178,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings outstanding, end of period (000)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
3,750
|
|
|
$
|
3,750
|
|
|
$
|
3,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio turnover rate
|
|
|
36
|
%
|
|
|
6
|
%
|
|
|
8
|
%
|
|
|
|
|
|
|
9
|
%
|
|
|
8
|
%
|
|
|
4
|
%
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Based on average Common Shares outstanding.
|
(b)
|
Amount is greater than $(0.005) per share.
|
(c)
|
Distributions for annual periods determined in accordance with U.S. federal income tax regulations.
|
(d)
|
Total returns based on market price, which can be significantly greater or less than the net asset value, may result in
substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices.
|
(e)
|
Aggregate total return.
|
(g)
|
Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.02%.
|
(h)
|
Audit costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total
expenses would have been 0.60%.
|
(i)
|
Does not reflect the effect of distributions to AMPS Shareholders.
|
(j)
|
The total expense ratio after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees,
amortization of offering costs, liquidity and remarketing fees were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
06/30/20
(unaudited)
|
|
|
Year Ended
December 31,
2019
|
|
|
Period from
05/01/2018
to 12/31/2018
|
|
|
|
|
|
Year Ended April 30,
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|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Expense ratios
|
|
|
0.54
|
%
|
|
|
0.57
|
%
|
|
|
0.59
|
%
|
|
|
|
|
|
|
0.62
|
%
|
|
|
0.64
|
%
|
|
|
0.66
|
%
|
|
|
0.69
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(k)
|
Interest expense and fees related to TOB Trusts. See Note 4 of the Notes to Financial Statements for details.
|
See notes to financial statements.
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20
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|
2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS
|
Notes to Financial
Statements (unaudited)
The following are registered under the Investment Company Act of 1940, as amended (the 1940 Act), as closed-end
management investment companies and are referred to herein collectively as the Trusts, or individually as a Trust:
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Trust Name
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|
Herein Referred To As
|
|
Organized
|
|
Diversification
Classification
|
BlackRock Florida Municipal 2020 Term Trust
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|
BFO
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|
Delaware
|
|
Non-diversified
|
BlackRock Municipal 2020 Term Trust
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BKK
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|
Delaware
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|
Diversified
|
The Boards of Trustees of the Trusts are collectively referred to throughout this report as the Board, and the trustees
thereof are collectively referred to throughout this report as Trustees. The Trusts determine and make available for publication the net asset values (NAVs) of their Common Shares on a daily basis.
The Trusts, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the Manager) or its affiliates, are included in a
complex of non-index fixed-income mutual funds and all BlackRock-advised closed-end funds referred to as the BlackRock Fixed-Income Complex.
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP), which may
require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Trust is considered an investment company under U.S. GAAP and follows the accounting and reporting
guidance applicable to investment companies. Below is a summary of significant accounting policies:
Investment Transactions and Income Recognition: For
financial reporting purposes, investment transactions are recorded on the dates the transactions are executed. Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income and non-cash dividend income, if any, are recorded on the ex-dividend date. Interest income, including amortization and accretion of premiums and discounts on debt securities, is
recognized on an accrual basis.
Distributions: Distributions from net investment income are declared monthly and paid monthly. Distributions of capital gains
are recorded on the ex-dividend date and made at least annually. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S.
GAAP.
Deferred Compensation Plan: Under the Deferred Compensation Plan (the Plan) approved by each Trusts Board, the trustees who are not
interested persons of the Trusts, as defined in the 1940 Act (Independent Trustees), may defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar
amounts had been invested in common shares of certain funds in the BlackRock Fixed-Income Complex selected by the Independent Trustees. This has the same economic effect for the Independent Trustees as if the Independent Trustees had invested the
deferred amounts directly in certain funds in the BlackRock Fixed-Income Complex.
The Plan is not funded and obligations thereunder represent general unsecured
claims against the general assets of each Trust, as applicable. Deferred compensation liabilities are included in the Trustees and Officers 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.
Indemnifications: In the normal course of business, a Trust enters into contracts that
contain a variety of representations that provide general indemnification. A Trusts maximum exposure under these arrangements is unknown because it involves future potential claims against a Trust, which cannot be predicted with any certainty.
Other: Expenses directly related to a Trust are charged to that Trust. Other operating expenses shared by several funds, including other funds managed by the
Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods.
3.
|
INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS
|
Investment Valuation Policies: The Trusts investments are valued at fair value (also referred to as market value within the financial statements)
as of the close of trading on the New York Stock Exchange (NYSE) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Trusts would receive to sell an asset or pay to transfer a liability in an orderly
transaction between market participants at the measurement date. The Trusts determine the fair values of their financial instruments using various independent dealers or pricing services under policies approved by the Board. If a securitys
market price is not readily available or does not otherwise accurately represent the fair value of the security, the security will be valued in accordance with a policy approved by the Board as reflecting fair value. The BlackRock Global Valuation
Methodologies Committee (the Global Valuation Committee) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.
Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each Trusts assets and liabilities:
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Fixed-income securities for which market quotations are readily available are generally valued using the last available bid
prices or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more independent brokers or dealers as obtained from a third party
pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but a fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower
prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), credit
quality information, perceived market movements, news, and other relevant information. Certain fixed-income
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|
|
|
|
|
NOTES TO FINANCIAL STATEMENTS
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21
|
|
Notes to Financial Statements (unaudited) (continued)
|
securities, including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated
tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager
determines such method does not represent fair value.
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|
|
|
Municipal investments (including commitments to purchase such investments on a when-issued basis) are valued on
the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing
matrixes, market transactions in comparable investments and information with respect to various relationships between investments.
|
|
|
|
Investments in open-end U.S. mutual funds are valued at NAV each business day.
|
If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such
investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will
be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (Fair Valued Investments). The fair valuation approaches that may be used by the Global Valuation
Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair
value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each Trust might reasonably expect to receive or pay from the current sale or purchase of that asset or
liability in an arms-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the
principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.
For investments in equity or debt issued by privately held companies or funds (Private Company or collectively, the Private Companies) and other
Fair Valued
Investments, the fair valuation approaches that are used by the Global Valuation Committee and third party pricing services utilize one or a combination
of, but not limited to, the following inputs.
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|
|
|
|
Standard Inputs Generally Considered By Third Party Pricing Services
|
Market approach
|
|
(i) recent market transactions, including subsequent
rounds of financing, in the underlying investment or comparable issuers;
(ii) recapitalizations and other transactions
across the capital structure; and
(iii) market multiples of comparable issuers.
|
Income approach
|
|
(i) future cash flows discounted to present and
adjusted as appropriate for liquidity, credit, and/or market risks;
(ii) quoted prices for similar investments or
assets in active markets; and
(iii) other risk factors, such as interest rates, yield curves,
volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates.
|
Cost approach
|
|
(i) audited or unaudited financial statements, investor
communications and financial or operational metrics issued by the Private Company;
(ii) changes in the valuation of
relevant indices or publicly traded companies comparable to the Private Company;
(iii) relevant news and
other public sources; and
(iv) known secondary market transactions in the Private Companys
interests and merger or acquisition activity in companies comparable to the Private Company.
|
Investments in series of preferred stock issued by Private Companies are typically valued utilizing market approach in determining the
enterprise value of the company. Such investments often contain rights and preferences that differ from other series of preferred and common stock of the same issuer. Valuation techniques such as an option pricing model (OPM), a
probability weighted expected return model (PWERM) or a hybrid of those techniques are used in allocating enterprise value of the company, as deemed appropriate under the circumstances. The use of OPM and PWERM techniques involve a
determination of the exit scenarios of the investment in order to appropriately allocate the enterprise value of the company among the various parts of its capital structure.
The Private Companies are not subject to the public company disclosure, timing, and reporting standards as other investments held by a Trust. Typically, the most recently
available information by a Private Company is as of a date that is earlier than the date a Trust is calculating its NAV. This factor may result in a difference between the value of the investment and the price a Trust could receive upon the sale of
the investment.
Fair Value Hierarchy: Various inputs are used in determining the fair value of investments. 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 marketcorroborated inputs)
|
|
|
|
Level 3 Unobservable inputs based on the best information available in the circumstances, to the extent
observable inputs are not available (including the Global Valuation Committees assumptions used in determining the fair value of investments)
|
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.
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|
|
22
|
|
2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS
|
Notes to Financial Statements (unaudited) (continued)
The inputs used to measure fair value may
fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by Private Companies.
There may not be a secondary market, and/or there are a limited number of investors. The categorization of a value determined for investments is based on the pricing transparency of the investments and is not necessarily an indication of the risks
associated with investing in those securities.
4.
|
SECURITIES AND OTHER INVESTMENTS
|
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.
Forward
Commitments, When-Issued and Delayed Delivery Securities: Certain funds may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a
month or more after the purchase or sale commitment is made. A fund may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement
date. Since the value of securities purchased may fluctuate prior to settlement, a fund may be required to pay more at settlement than the security is worth. In addition, a fund is not entitled to any of the interest earned prior to settlement. When
purchasing a security on a delayed delivery basis, a fund assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, a funds maximum amount of
loss is the unrealized appreciation of unsettled when-issued transactions.
Municipal Bonds Transferred to TOB Trusts: Certain funds leverage their assets
through the use of TOB Trust transactions. The funds transfer municipal bonds into a special purpose trust (a TOB Trust). A TOB Trust issues two classes of beneficial interests: short-term floating rate interests (TOB
Trust Certificates), which are sold to third party investors, and residual inverse floating rate interests (TOB Residuals), which are issued to the participating funds that contributed the municipal bonds to the TOB Trust. The TOB
Trust Certificates have interest rates that reset weekly and their holders have the option to tender such certificates to the TOB Trust for redemption at par and any accrued interest at each reset date. The TOB Residuals held by a fund provide the
fund with the right to cause the holders of a proportional share of the TOB Trust Certificates to tender their certificates to the TOB Trust at par plus accrued interest. The funds may withdraw a corresponding share of the municipal bonds from the
TOB Trust. Other funds managed by the investment adviser may also contribute municipal bonds to a TOB Trust into which a fund has contributed bonds. If multiple BlackRock-advised funds participate in the same TOB Trust, the economic rights and
obligations under the TOB Residuals will be shared among the funds ratably in proportion to their participation in the TOB Trust.
TOB Trusts are supported by a
liquidity facility provided by a third party bank or other financial institution (the Liquidity Provider) that allows the holders of the TOB Trust Certificates to tender their certificates in exchange for payment of par plus accrued
interest on any business day. The tendered TOB Trust Certificates are remarketed by a Remarketing Agent. In the event of a failed remarketing, the TOB Trust may draw upon a loan from the Liquidity Provider to purchase the tendered TOB Trust
Certificates. Any loans made by the Liquidity Provider will be secured by the purchased TOB Trust Certificates held by the TOB Trust and will be subject to an increased interest rate based on number of days the loan is outstanding.
The TOB Trust may be collapsed without the consent of a fund, upon the occurrence of a termination event, as defined in the TOB Trust agreement. Upon the occurrence of a
termination event, a TOB Trust would be liquidated with the proceeds applied first to any accrued fees owed to the trustee of the TOB Trust, the Remarketing Agent and the Liquidity Provider. Upon certain termination events, TOB Trust Certificates
holders will be paid before the TOB Residuals holders (i.e., the Trusts) whereas in other termination events, TOB Trust Certificates holders and TOB Residuals holders will be paid pro rata.
While a funds investment policies and restrictions expressly permit investments in inverse floating rate securities, such as TOB Residuals, they restrict the
ability of a fund to borrow money for purposes of making investments. Each funds transfer of the municipal bonds to a TOB Trust is considered a secured borrowing for financial reporting purposes. The cash received by the TOB Trust from the
sale of the TOB Trust Certificates, less certain transaction expenses, is paid to a fund. A fund typically invests the cash received in additional municipal bonds.
Accounting for TOB Trusts: The municipal bonds deposited into a TOB Trust are presented in a funds Schedules of Investments and the TOB Trust Certificates
are shown in Other Liabilities in the Statements of Assets and Liabilities. Any loans drawn by the TOB Trust pursuant to the liquidity facility to purchase tendered TOB Trust Certificates are shown as Loan for TOB Trust Certificates. The carrying
amount of a funds payable to the holder of the TOB Trust Certificates as reported in the Statements of Assets and Liabilities as TOB Trust Certificates approximates its fair value.
Interest income, including amortization and accretion of premiums and discounts, from the underlying municipal bonds is recorded by a fund on an accrual basis. Interest
expense incurred on the TOB Trust transaction and other expenses related to remarketing, administration, trustee, liquidity and other services to a TOB Trust are shown as interest expense, fees and amortization of offering costs in the Statements of
Operations. Fees paid upon creation of the TOB Trust are recorded as debt issuance costs and are amortized to interest expense, fees and amortization of offering costs in the Statements of Operations to the expected maturity of the TOB Trust. In
connection with the restructurings of the TOB Trusts to non-bank sponsored TOB Trusts, a fund incurred non-recurring, legal and restructuring fees, which are recorded as
interest expense, fees and amortization of deferred offering costs in the Statements of Operations. Amounts recorded within interest expense, fees and amortization of offering costs in the Statements of Operations.
For the six months ended June 30, 2020, the Trusts did not hold TOB Trusts.
5.
|
INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
|
Investment Advisory: Each Trust entered into an Investment Advisory Agreement with the Manager, the Trusts investment adviser and an indirect, wholly-owned
subsidiary of BlackRock, Inc. (BlackRock), to provide investment advisory and administrative services. The Manager is responsible for the management of each Trusts portfolio and provides the personnel, facilities, equipment and
certain other services necessary to the operations of each Trust.
|
|
|
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
|
23
|
|
Notes to Financial Statements (unaudited) (continued)
For such services, each Trust pays the
Manager a monthly fee at an annual rate equal to 0.50% of the average weekly value of each Trusts managed assets.
For purposes of calculating these fees,
managed assets are determined as total assets of the Trust (including any assets attributable to money borrowed for investment purposes) less the sum of its accrued liabilities (other than money borrowed for investment purposes).
Expense Waivers: With respect to BFO, the Manager voluntarily agreed to waive the entirety of its investment advisory fees. This voluntary waiver may be reduced or
discontinued at any time without notice. For the six months ended June 30, 2020, the Manager waived $197,531 in investment advisory fees pursuant to this arrangement, which is included in fees waived and/or reimbursed by the Manager in the
Statements of Operations.
With respect to each Trust, the Manager contractually agreed to waive its investment advisory fees by the amount of investment advisory
fees each Trust pays to the Manager indirectly through its investment in affiliated money market funds (the affiliated money market fund waiver) through June 30, 2021. The contractual agreement may be terminated upon 90 days
notice by a majority of the Independent Trustees, or by a vote of a majority of the outstanding voting securities of a Trust. These amounts are included in fees waived and/or reimbursed by the Manager in the Statements of Operations. For the six
months ended June 30, 2020, the amounts waived were as follows:
|
|
|
|
|
|
|
|
|
|
|
BFO
|
|
|
BKK
|
|
Amounts waived
|
|
$
|
3,403
|
|
|
$
|
10,984
|
|
The Manager contractually agreed to waive its investment advisory fee with respect to any portion of each Trusts assets invested in
affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through June 30, 2021. The agreement can be renewed for annual periods thereafter, and may be terminated on 90
days notice, each subject to approval by a majority of the Trusts Independent Trustees. For the six months ended June 30, 2020, there were no fees waived by the Manager pursuant to these arrangements.
Trustees and Officers: Certain trustees and/or officers of the Trusts are directors and/or officers of BlackRock or its affiliates. The Trusts reimburse the
Manager for a portion of the compensation paid to the Trusts Chief Compliance Officer, which is included in Trustees and Officer in the Statements of Operations.
Other Transactions: The Trusts may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common
investment adviser, common officers, or common trustees. For the six months ended June 30, 2020, the purchase and sale transactions and any net realized gains (losses) with affiliated funds in compliance with Rule
17a-7 under the 1940 Act were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
Sales
|
|
|
Net Realized
Gain (Loss)
|
|
BFO
|
|
$
|
|
|
|
$
|
1,503,787
|
|
|
$
|
|
|
BKK
|
|
|
3,000,079
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2020, purchases and sales of investments, excluding short-term securities, were as follows:
|
|
|
|
|
|
|
|
|
|
|
BFO
|
|
|
BKK
|
|
Purchases
|
|
$
|
35,481,520
|
|
|
$
|
117,170,000
|
|
Sales
|
|
|
37,089,443
|
|
|
|
93,175,141
|
|
7.
|
INCOME TAX INFORMATION
|
It is each 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 its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.
Each Trust files U.S. federal
and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each Trusts U.S. federal tax returns generally remains open for the two years ended April 30, 2018 for BKK, the
two years ended July 31, 2018 for BFO, the period ended December 31, 2018 and the year ended December 31, 2019. The statutes of limitations on each Trusts state and local tax returns may remain open for an additional year
depending upon the jurisdiction.
Management has analyzed tax laws and regulations and their application to the Trusts as of June 30, 2020, inclusive of the open
tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Trusts financial statements.
As of December 31, 2019, the Trusts had non-expiring capital loss carryforwards available to offset future realized capital
gains as follows:
|
|
|
|
|
|
|
|
|
|
|
BFO
|
|
|
BKK
|
|
|
|
$
|
489,914
|
|
|
$
|
1,061,541
|
|
|
|
|
24
|
|
2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS
|
Notes to Financial Statements (unaudited) (continued)
As of June 30, 2020, gross unrealized
appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:
|
|
|
|
|
|
|
|
|
|
|
BFO
|
|
|
BKK
|
|
Tax cost
|
|
$
|
78,923,288
|
|
|
$
|
303,717,654
|
|
|
|
|
|
|
|
|
|
|
Gross unrealized appreciation
|
|
$
|
77,703
|
|
|
$
|
1,847,603
|
|
Gross unrealized depreciation
|
|
|
(1,076,917
|
)
|
|
|
(1,356,775
|
)
|
|
|
|
|
|
|
|
|
|
Net unrealized appreciation (depreciation)
|
|
$
|
(999,214
|
)
|
|
$
|
490,828
|
|
|
|
|
|
|
|
|
|
|
Many municipalities insure repayment of their bonds, which may reduce the potential for loss due to credit risk. The market value of these bonds may fluctuate for other
reasons, including market perception of the value of such insurance, and there is no guarantee that the insurer will meet its obligation.
Inventories of municipal
bonds held by brokers and dealers may decrease, which would lessen their ability to make a market in these securities. Such a reduction in market making capacity could potentially decrease a Trusts ability to buy or sell bonds. As a result, a
Trust may sell a security at a lower price, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative impact on performance. If a Trust needed to sell large blocks of bonds, those sales could
further reduce the bonds prices and impact performance.
In the normal course of business, certain Trusts invest in securities or other instruments and may
enter into certain transactions, and such activities subject each Trust to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other
instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation
or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Trusts and their investments.
Each Trust may be exposed to prepayment risk, which is the risk that
borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force each Trust to reinvest in lower yielding securities. Each Trust may also be exposed to reinvestment risk,
which is the risk that income from each Trusts portfolio will decline if each Trust invests the proceeds from matured, traded or called fixed-income securities at market interest rates that are below each Trust portfolios current
earnings rate.
The Trusts may hold a significant amount of bonds subject to calls by the issuers at defined dates and prices. When bonds are called by issuers and
the Trusts reinvest the proceeds received, such investments may be in securities with lower yields than the bonds originally held, and correspondingly, could adversely impact the yield and total return performance of a Trust.
There is no assurance that each Trust will achieve its investment objectives, including its investment objective of returning $15.00 per share. As each Trust approaches
its scheduled termination date, it is expected that the maturity of each Trusts portfolio securities will shorten, which is likely to reduce each Trusts income and distributions to shareholders. BFOs NAV was below $15.00 per Common
Share on June 30, 2020. It is not anticipated that BFO will achieve its investment objective of returning $15.00 per Common Share on or about December 31, 2020.
Each Trust may invest without limitation in illiquid or less liquid investments or investments in which no secondary market is readily available or which are otherwise
illiquid, including private placement securities. A Trust may not be able to readily dispose of such investments at prices that approximate those at which a Trust could sell such investments if they were more widely traded and, as a result of such
illiquidity, a Trust may have to sell other investments or engage in borrowing transactions if necessary to raise funds to meet its obligations. Limited liquidity can also affect the market price of investments, thereby adversely affecting a
Trusts net asset value and ability to make dividend distributions. Privately issued debt securities are often of below investment grade quality, frequently are unrated and present many of the same risks as investing in below investment grade
public debt securities.
An outbreak of respiratory disease caused by a novel coronavirus has developed into a global pandemic and has resulted in closing borders,
quarantines, disruptions to supply chains and customer activity, as well as general concern and uncertainty. The impact of this pandemic, and other global health crises that may arise in the future, could affect the economies of many nations,
individual companies and the market in general in ways that cannot necessarily be foreseen at the present time. This pandemic may result in substantial market volatility and may adversely impact the prices and liquidity of a funds investments.
The duration of this pandemic and its effects cannot be determined with certainty.
Counterparty Credit Risk: The Trusts may be exposed to counterparty credit
risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Trusts manage counterparty credit risk by entering into transactions only with counterparties that the Manager
believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Trusts to market, issuer and counterparty credit risks, consist
principally of financial instruments and receivables due from counterparties. The extent of the Trusts exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the
Statements of Assets and Liabilities, less any collateral held by the Trusts.
Concentration Risk: BFO invests a substantial amount of its assets in issuers
located in a single state or limited number of states. This may subject the Trust to the risk that economic, political or social issues impacting a particular state or group of states could have an adverse and disproportionate impact on the income
from, or the value or liquidity of, the Trusts respective portfolio. Investment percentages in specific states or U.S. territories are presented in the Schedules of Investments.
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NOTES TO FINANCIAL STATEMENTS
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25
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Notes to Financial Statements (unaudited) (continued)
Certain Trusts invest a significant portion
of their assets in fixed-income securities and/or use derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk
that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as interest rates rise. The Trusts may be subject to a greater risk of rising interest rates due to the current period of historically low
rates.
9.
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CAPITAL SHARE TRANSACTIONS
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Each Trust is authorized to issue an unlimited number of shares, all of which were initially classified as Common Shares. The par value for each Trusts Common
Shares is $0.001.
On April 29, 2019, the Board of Trustees authorized BFO to participate in an open market share repurchase program (the Repurchase
Program). Under the Repurchase Program, BFO may repurchase up to 20% of its outstanding common shares, based on common shares outstanding on March 31, 2019, in open market transactions through the earlier of (i) November 30,
2020 or (ii) BFOs adoption of a plan of termination, subject to certain conditions. There is no assurance that BFO will purchase shares in any particular amounts.
The total cost of the shares repurchased is reflected in BFOs Statements of Changes in Net Assets. For the periods shown, shares repurchased and cost, including
transaction costs were as follows:
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Shares
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Amount
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June 30, 2020
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168,099
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$
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2,434,638
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December 31, 2019
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89,443
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1,295,031
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For the six months ended June 30, 2020 and the year ended December 31, 2019 for BKK, shares issued and outstanding remained
constant.
Managements 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:
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Common Dividend
Per Share
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Paid (a)
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Declared (b)
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BFO
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$
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0.002500
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$
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0.002500
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BKK
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0.010000
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0.010000
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(a)
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Net investment income dividend paid on August 3, 2020, to Common Shareholders of record on July 15, 2020.
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(b)
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Net investment income dividend declared on August 3, 2020, payable to shareholders of record August 14, 2020.
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26
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2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS
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Disclosure of Investment Advisory Agreements
The Boards of Trustees (together, the Board, the members of which are referred to as
Board Members) of BlackRock Florida Municipal 2020 Term Trust (BFO) and BlackRock Municipal 2020 Term Trust (BKK and together with BFO, the Funds and each, a Fund) met on April 16,
2020 (the April Meeting) and May 20-21, 2020 (the May Meeting) to consider the approval of the investment advisory agreements (the Advisory Agreements or the
Agreements) between each Fund and BlackRock Advisors, LLC (the Manager or BlackRock), each Funds investment advisor.
Activities and Composition of the Board
On the date of the May Meeting, the
Board consisted of ten individuals, eight of whom were not interested persons of each Fund as defined in the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Board Members). The Board
Members are responsible for the oversight of the operations of each Fund 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 Co-Chairs of the Board are Independent Board Members. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a
Compliance Committee, a Performance Oversight Committee and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Executive Committee, which also has one interested
Board Member).
The Agreements
Consistent with the requirements of the
1940 Act, the Board considers the continuation of the Agreements on an annual basis. The Board has four quarterly meetings per year, each typically extending for two days, and additional in-person and
telephonic meetings throughout the year, as needed. While the Board also has a fifth one-day meeting to consider specific information surrounding the renewal of the Agreements, the Boards consideration
entails a year-long deliberative process whereby the Board and its committees assess BlackRocks services to each Fund. In particular, the Board assessed, among other things, the nature, extent and quality of the services provided to each Fund
by BlackRock, BlackRocks personnel and affiliates, including (as applicable): investment management services; accounting oversight; administrative and shareholder services; oversight of each Funds service providers; risk management and
oversight; and legal, regulatory and compliance services. Throughout the year, including during the contract renewal process, the Independent Board Members were advised by independent legal counsel, and met with independent legal counsel in various
executive sessions outside of the presence of BlackRocks management.
During the year, the Board, acting directly and through its committees, considers
information that is relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by BlackRock to each Fund and its shareholders. BlackRock also furnished additional information to the Board in
response to specific questions from the Board. This additional information is discussed further in the section titled Board Considerations in Approving the Agreements. Among the matters the Board 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 other performance metrics, as applicable, as well as BlackRock
senior managements and portfolio managers analyses of the reasons for any outperformance or underperformance relative to its peers, benchmarks, and other performance metrics, as applicable; (b) leverage management, as applicable;
(c) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by each Fund for services; (d) Fund operating expenses and how BlackRock allocates expenses to each Fund; (e) the
resources devoted to risk oversight of, and compliance reports relating to, implementation of each Funds investment objective, policies and restrictions, and meeting regulatory requirements; (f) BlackRocks and each Funds
adherence to applicable compliance policies and procedures; (g) the nature, character and scope of non-investment management services provided by BlackRock and its affiliates and the estimated cost of
such services; (h) BlackRocks and other service providers internal controls and risk and compliance oversight mechanisms; (i) BlackRocks implementation of the proxy voting policies approved by the Board;
(j) execution quality of portfolio transactions; (k) BlackRocks implementation of each Funds valuation and liquidity procedures; (l) an analysis of management fees for products with similar investment mandates across the open-end fund, closed-end fund, sub-advised mutual fund, collective investment trust and institutional separate account product
channels, as applicable, and the similarities and differences between these products and the services provided as compared to each Fund; (m) BlackRocks compensation methodology for its investment professionals and the incentives and
accountability it creates, along with investment professionals investments in the fund(s) they manage; (n) periodic updates on BlackRocks business; and (o) each Funds market discount/premium compared to peer funds.
Board Considerations in Approving the Agreements
The Approval
Process: Prior to the April Meeting, the Board requested and received materials specifically relating to the Agreements. The Independent Board Members are continuously engaged in a process with their independent legal counsel and BlackRock
to review the nature and scope of the information provided to the Board to better assist its deliberations. The materials provided in connection with the April Meeting included, among other things: (a) information independently compiled and
prepared by Broadridge Financial Solutions, Inc. (Broadridge), based on Lipper classifications, regarding each Funds fees and expenses as compared with a peer group of funds as determined by Broadridge (Expense Peers)
and the investment performance of each Fund as compared with a peer group of funds (Performance Peers); (b) information on the composition of the Expense Peers and Performance Peers and a description of Broadridges methodology;
(c) information on the estimated profits realized by BlackRock and its affiliates pursuant to the Agreements and a discussion of fall-out benefits to BlackRock and its affiliates; (d) a general
analysis provided by BlackRock concerning investment management fees received in connection with other types of investment products, such as institutional accounts, sub-advised mutual funds, closed-end funds, and open-end funds, under similar investment mandates, as applicable; (e) a review of non-management fees;
(f) the existence, impact and sharing of potential economies of scale, if any, with each Fund; (g) a summary of aggregate amounts paid by each Fund to BlackRock; and (h) various additional information requested by the Board as
appropriate regarding BlackRocks and each Funds operations.
At the April Meeting, the Board reviewed materials relating to its 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 Board presented BlackRock with questions and requests for additional information.
BlackRock responded to these questions and requests with additional written information in advance of the May Meeting. Topics covered included: (a) the methodology for measuring estimated fund profitability; (b) fund expenses and potential
fee waivers; (c) differences in services provided and management fees between closed-end funds and other product channels; and (d) BlackRocks option overwrite strategy.
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DISCLOSURE OF INVESTMENT ADVISORY AGREEMENTS
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27
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Disclosure of Investment Advisory Agreements (continued)
At the May Meeting, the Board concluded its
assessment of, among other things: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of each Fund as compared to its Performance Peers and to other metrics, as applicable; (c) the
advisory fee and the estimated cost of the services and estimated profits realized by BlackRock and its affiliates from their relationship with each Fund; (d) each Funds fees and expenses compared to its Expense Peers; (e) the
existence and sharing of potential economies of scale; (f) any fall-out benefits to BlackRock and its affiliates as a result of BlackRocks relationship with each Fund; and (g) other factors
deemed relevant by the Board Members.
The Board also considered other matters it deemed important to the approval process, such as other payments made to BlackRock
or its affiliates relating to securities lending and cash management, and BlackRocks services related to the valuation and pricing of Fund portfolio holdings. The Board noted the willingness of BlackRocks personnel to engage in open,
candid discussions with the Board. The Board did not identify any particular information as determinative, and each Board Member may have attributed different weights to the various items considered.
A. Nature, Extent and Quality of the Services Provided by BlackRock: The Board, including the Independent Board Members, reviewed the nature, extent and quality of
services provided by BlackRock, including the investment advisory services, and the resulting performance of each Fund. Throughout the year, the Board compared Fund performance to the performance of a comparable group of closed-end funds, relevant benchmarks, and performance metrics, as applicable. The Board met with BlackRocks senior management personnel responsible for investment activities, including the senior investment
officers. The Board also reviewed the materials provided by each Funds portfolio management team discussing each Funds performance, investment strategies and outlook.
The Board considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and each Funds
portfolio management team; 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 Board also considered BlackRocks overall risk management program, including the continued efforts of
BlackRock and its affiliates to address cybersecurity risks and the role of BlackRocks Risk & Quantitative Analysis Group. The Board engaged in a review of BlackRocks compensation structure with respect to each Funds
portfolio management team and BlackRocks ability to attract and retain high-quality talent and create performance incentives.
In addition to investment
advisory services, the Board considered the nature and quality of the administrative and other non-investment advisory services provided to each Fund. BlackRock and its affiliates provide each Fund with
certain administrative, shareholder and other services (in addition to any such services provided to each Fund by third-parties) and officers and other personnel as are necessary for the operations of each Fund. In particular, BlackRock and its
affiliates provide each Fund with administrative services including, among others: (i) responsibility for 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 each Fund; (iii) oversight of daily accounting and pricing; (iv) responsibility for periodic filings with regulators
and stock exchanges; (v) overseeing and coordinating the activities of third-party service providers including, among others, each Funds custodian, fund accountant, transfer agent, and auditor; (vi) organizing Board meetings and
preparing the materials for such Board meetings; (vii) providing legal and compliance support; (viii) furnishing analytical and other support to assist the Board in its consideration of strategic issues such as the merger, consolidation or
repurposing of certain closed-end funds; and (ix) performing or managing administrative functions necessary for the operation of each Fund, such as tax reporting, expense management, fulfilling regulatory
filing requirements, and shareholder call center and other services. The Board reviewed the structure and duties of BlackRocks fund administration, shareholder services, and legal & compliance departments and considered
BlackRocks policies and procedures for assuring compliance with applicable laws and regulations.
B. The Investment Performance of each Fund and
BlackRock: The Board, including the Independent Board Members, also reviewed and considered the performance history of each Fund. In preparation for the April Meeting, the Board was provided with reports independently prepared by Broadridge,
which included an analysis of each Funds performance as of December 31, 2019, as compared to its Performance Peers. The performance information is based on net asset value (NAV), and utilizes Lipper data. Lippers methodology
calculates a funds total return assuming distributions are reinvested on the ex-date at a funds ex-date NAV. Broadridge ranks funds in quartiles, ranging
from first to fourth, where first is the most desirable quartile position and fourth is the least desirable. In connection with its review, the Board received and reviewed information regarding the investment performance of each Fund as compared to
its Performance Peers and a composite measuring a blend of total return and yield (Composite). The Board and its Performance Oversight Committee regularly review and meet with Fund management to discuss the performance of each Fund
throughout the year.
In evaluating performance, the Board focused particular attention on funds with less favorable performance records. The Board also noted that
while it found the data provided by Broadridge generally useful, it recognized the limitations of such data, including in particular, that notable differences may exist between a fund and its Performance Peers (for example, the investment objectives
and strategies). Further, the Board recognized that the performance data reflects a snapshot of a period as of a particular date and that selecting a different performance period could produce significantly different results. The Board also
acknowledged that long-term performance could be impacted by even one period of significant outperformance or underperformance, and that a single investment theme could have the ability to disproportionately affect long-term performance.
The Board noted that for each of the one-, three- and five-year periods reported, BFO ranked in the fourth quartile against its
Performance Peer Composite. The Board noted that BlackRock believes that the Performance Peer Composite is an appropriate performance metric for BFO, and that BlackRock has explained its rationale for this belief to the Board. The Board noted that
BFO has a targeted maturity, and that the Performance Peers generally do not have a similar targeted maturity.
The Board noted that for the one-, three- and five-year periods reported, BKK ranked in the third, third and fourth quartiles, respectively, against its Performance Peer Composite. The Board noted that BlackRock believes that the Performance
Peer Composite is an appropriate performance metric for BKK, and that BlackRock has explained its rationale for this belief to the Board. The Board noted that BKK has a targeted maturity, and that the Performance Peers generally do not have a
similar targeted maturity.
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28
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2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS
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Disclosure of Investment Advisory Agreements (continued)
C. Consideration of the
Advisory/Management Fees and the Estimated Cost of the Services and Estimated Profits Realized by BlackRock and its Affiliates from their Relationship with each Fund: The Board, including the Independent Board Members, reviewed each Funds
contractual management fee rate compared with those of its Expense Peers. 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. The
Board also compared each Funds total expense ratio, as well as its actual management fee rate as a percentage of managed assets, which is the total assets of each Fund (including any assets attributable to money borrowed for investment
purposes) minus the sum of each Funds accrued liabilities (other than money borrowed for investment purposes) to those of its Expense Peers. The total expense ratio represents a funds total net operating expenses, excluding any
investment related expenses. The total expense ratio gives effect to any expense reimbursements or fee waivers, and the actual management fee rate gives effect to any management fee reimbursements or waivers. The Board considered the services
provided and the fees charged by BlackRock and its affiliates to other types of clients with similar investment mandates, as applicable, including institutional accounts and sub-advised mutual funds (including
mutual funds sponsored by third parties).
The Board received and reviewed statements relating to BlackRocks financial condition. The Board reviewed
BlackRocks profitability methodology and was also provided with an estimated profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to each Fund. The Board reviewed
BlackRocks estimated profitability with respect to each Fund and other funds the Board currently oversees for the year ended December 31, 2019 compared to available aggregate estimated profitability data provided for the prior two years.
The Board reviewed BlackRocks estimated profitability with respect to certain other U.S. fund complexes managed by the Manager and/or its affiliates. The Board reviewed BlackRocks assumptions and methodology of allocating expenses in the
estimated profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense
reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. The Board thus recognized that calculating and comparing profitability at the individual fund level is difficult.
The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Board reviewed BlackRocks overall
operating margin, in general, compared to that of certain other publicly traded asset management firms. The Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock,
BlackRocks expense management, and the relative product mix.
The Board 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 Board. The Board further considered factors including but not limited to
BlackRocks commitment of time, assumption of risk, and liability profile in servicing each Fund, including in contrast to what is required of BlackRock with respect to other products with similar investment mandates across the open-end fund, closed-end fund, sub-advised mutual fund, collective investment trust, and institutional separate account product
channels, as applicable.
The Board noted that BFOs contractual management fee rate ranked in the first quartile, and that the actual management fee rate and
total expense ratio each ranked in the first quartile relative to the Expense Peers. The Board also noted that BlackRock and the Board agreed to voluntarily waive the entirety of BFOs advisory fee effective January 1, 2019.
The Board noted that BKKs contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked
in the first quartile relative to the Expense Peers.
D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which
economies of scale might be realized as the assets of each Fund increase. The Board also considered the extent to which each Fund benefits from such economies of scale in a variety of ways, and whether there should be changes in the advisory fee
rate or breakpoint structure in order to enable each Fund to more fully participate in these economies of scale. The Board considered each Funds asset levels and whether the current fee was appropriate.
Based on the Boards review and consideration of the issue, the Board concluded that most closed-end funds do not have fund
level breakpoints because closed-end funds generally do not experience substantial growth after the initial public offering. Closed-end funds are typically priced at
scale at a funds inception.
E. Other Factors Deemed Relevant by the Board Members: The Board, including the Independent Board Members, also took into
account other ancillary or fall-out benefits that BlackRock or its affiliates may derive from BlackRocks respective relationships with each Fund, both tangible and intangible, such as
BlackRocks ability to leverage its investment professionals who manage other portfolios and its risk management personnel, an increase in BlackRocks profile in the investment advisory community, and the engagement of BlackRocks
affiliates as service providers to each Fund, including for administrative, securities lending and cash management services. The Board also considered BlackRocks overall operations and its efforts to expand the scale of, and improve the
quality of, its operations. The Board also noted that, subject to applicable law, 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.
In connection with its consideration of the Agreements, the Board also received information regarding BlackRocks brokerage
and soft dollar practices. The Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.
The Board noted the competitive nature of the closed-end fund marketplace, and that shareholders are able to sell their Fund
shares in the secondary market if they believe that each Funds fees and expenses are too high or if they are dissatisfied with the performance of each Fund.
The Board also considered the various notable initiatives and projects BlackRock performed in connection with its closed-end fund
product line. These initiatives included developing equity shelf programs; efforts to eliminate product overlap with fund mergers; ongoing services to manage leverage that has become increasingly complex; periodic evaluation of share repurchases and
other support initiatives for certain BlackRock funds; and continued communication efforts with shareholders, fund analysts and financial advisers. With respect to the latter, the Independent Board Members noted BlackRocks 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. BlackRocks support services included, among other things: sponsoring and participating in conferences; communicating with
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DISCLOSURE OF INVESTMENT ADVISORY AGREEMENTS
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29
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Disclosure of Investment Advisory Agreements (continued)
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
The Board, including the Independent Board Members, unanimously
approved the continuation of the Advisory Agreements between the Manager and each Fund for a one-year term ending June 30, 2021. Based upon its evaluation of all of the aforementioned factors in their
totality, as well as other information, the Board, including the Independent Board Members, was satisfied that the terms of the Agreements were fair and reasonable and in the best interest of each Fund and its shareholders. In arriving at its
decision to approve the Agreements, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have
attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination.
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30
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2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS
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