Filed Pursuant to Rule 424(b)(3)
Registration File No.: 333-262607
BLACKROCK CORE BOND TRUST
Supplement dated July 18, 2022 to the
Prospectus and Statement of Additional Information (SAI),
each dated February 9, 2022
This
supplement amends certain information in the Prospectus and SAI, each dated February 9, 2022, of BlackRock Core Bond Trust (the Trust). Unless otherwise indicated, all information included in the Prospectus and SAI that is not
inconsistent with the information set forth in this supplement remains unchanged. Capitalized terms not otherwise defined in this supplement have the same meanings as in the Prospectus and SAI, as applicable.
The following changes are made to the Trusts Prospectus and SAI, as applicable:
In light of Rule 18f-4 under the Investment Company Act of 1940, as amended, all references to segregating,
designating, earmarking, maintaining, setting aside or covering with cash or liquid assets with respect to derivatives transactions including, but not limited to, futures, swaps, options, foreign exchange transactions, forwards, short sales,
when-issued securities, forward commitments, reverse repurchase agreements and dollar rolls, as applicable, are deleted from the Trusts Prospectus and SAI.
The section of the Prospectus entitled The Trusts InvestmentsPortfolio Contents and TechniquesWhen-Issued and Forward Commitment
Securities is amended to add the following:
Rule 18f-4 under the Investment Company Act permits the
Trust to enter into when-issued or forward-settling securities (e.g., firm and standby commitments, including TBA commitments, and dollar rolls) and non-standard settlement cycle securities notwithstanding the
limitation on the issuance of senior securities in Section 18 of the Investment Company Act, provided that the Trust intends to physically settle the transaction and the transaction will settle within 35 days of its trade date (the
Delayed-Settlement Securities Provision). If a when-issued, forward-settling or non-standard settlement cycle security does not satisfy the Delayed-Settlement Securities Provision, then it is
treated as a derivatives transaction under Rule 18f-4. See Additional Risk FactorsRisk Factors in Strategic Transactions and DerivativesRule 18f-4
Under the Investment Company Act in the SAI.
The section of the Prospectus entitled LeverageReverse Repurchase Agreements is
amended to add the following:
In accordance with Rule 18f-4 under the Investment Company Act, when the Trust
engages in reverse repurchase agreements and similar financing transactions, the Trust may either (i) maintain asset coverage of at least 300% with respect to such transactions and any other borrowings in the aggregate, or (ii) treat such
transactions as derivatives transactions and comply with Rule 18f-4 with respect to such transactions. See Additional Risk FactorsRisk Factors in Strategic Transactions and
DerivativesRule 18f-4 Under the Investment Company Act in the SAI.
The section of the Prospectus
entitled LeverageDerivatives is amended to delete the paragraph discussing the SECs adoption of new regulations concerning the use of derivatives by registered investment companies and to add the following:
Under Rule 18f-4 under the Investment Company Act, among other things, the Trust must either use derivatives in a
limited manner or comply with an outer limit on fund leverage risk based on value-at-risk. See Additional Risk FactorsRisk Factors in Strategic
Transactions and DerivativesRule 18f-4 Under the Investment Company Act in the SAI.
The section of
the SAI entitled Investment Policies and TechniquesShort Sales is amended to add the following:
The Trust must comply with Rule 18f-4 under the Investment Company Act with respect to its short sale borrowings, which are considered derivatives transactions under the Rule. See Additional Risk FactorsRisk Factors in Strategic
Transactions and DerivativesRule 18f-4 Under the Investment Company Act below.
The section of the SAI entitled Investment Policies and TechniquesWhen-Issued and Forward
Commitment Securities is amended to add the following:
Rule 18f-4 under the Investment Company Act
permits the Trust to enter into when-issued or forward-settling securities (e.g., firm and standby commitments, including TBA commitments, and dollar rolls) and non-standard settlement cycle securities
notwithstanding the limitation on the issuance of senior securities in Section 18 of the Investment Company Act, provided that the Trust intends to physically settle the transaction and the transaction will settle within 35 days of its trade
date (the Delayed-Settlement Securities Provision). If a when-issued, forward-settling or non-standard settlement cycle security does not satisfy the Delayed-Settlement Securities Provision, then
it is treated as a derivatives transaction under Rule 18f-4. See Additional Risk FactorsRisk Factors in Strategic Transactions and DerivativesRule
18f-4 Under the Investment Company Act below.
The section of the SAI entitled Investment Policies
and TechniquesDollar Roll Transactions is amended to add the following:
Rule 18f-4 under the
Investment Company Act permits the Trust to enter into when-issued or forward-settling securities (e.g., dollar rolls and firm and standby commitments, including TBA commitments) and non-standard settlement
cycle securities notwithstanding the limitation on the issuance of senior securities in Section 18 of the Investment Company Act, provided that the transaction meets the Delayed-Settlement Securities Provision (as defined above under
When-Issued and Forward Commitment Securities). If a when-issued, forward-settling or non-standard settlement cycle security does not satisfy the Delayed-Settlement Securities Provision, then
it is treated as a derivatives transaction under Rule 18f-4. See Additional Risk FactorsRisk Factors in Strategic Transactions and DerivativesRule
18f-4 Under the Investment Company Act below.
The section of the SAI entitled Other Investment
Policies and TechniquesReverse Repurchase Agreements is amended to add the following:
In accordance with Rule 18f-4 under the Investment Company Act, when the Trust engages in reverse repurchase agreements and similar financing transactions, the Trust may either (i) maintain asset coverage of at least 300% with respect
to such transactions and any other borrowings in the aggregate, or (ii) treat such transactions as derivatives transactions and comply with Rule 18f-4 with respect to such transactions. See
Additional Risk FactorsRisk Factors in Strategic Transactions and DerivativesRule 18f-4 Under the Investment Company Act below.
The first paragraph and the bullet point list of risks following the first paragraph in the section of the SAI entitled Additional Risk
FactorsRisk Factors in Strategic Transactions and Derivatives are deleted in their entirety and replaced with the following:
The
Trusts use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in securities and other traditional investments. There are significant risks that apply generally to
derivatives transactions, including:
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Correlation Riskthe risk that changes in the value of a derivative will not match the changes in the
value of the portfolio holdings that are being hedged or of the particular market or security to which the Trust seeks exposure. There are a number of factors which may prevent a derivative instrument from achieving the desired correlation (or
inverse correlation) with an underlying asset, rate or index, such as the impact of fees, expenses and transaction costs, the timing of pricing, and disruptions or illiquidity in the markets for such derivative instrument. |
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Counterparty Riskthe risk that the counterparty in a derivative transaction will be unable to honor
its financial obligation to the Trust. In particular, derivatives traded in OTC markets often are not guaranteed by an exchange or clearing corporation and often do not require payment of margin, and to the extent that the Trust has unrealized gains
in such instruments or has deposited collateral with its |
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counterparties the Trust is at risk that its counterparties will become bankrupt or otherwise fail to honor their obligations. The Trust will typically attempt to minimize counterparty risk by
engaging in OTC derivatives transactions only with creditworthy entities that have substantial capital or that have provided the Trust with a third-party guaranty or other credit support. |
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Credit Riskthe risk that the reference entity in a credit default swap or similar derivative will
not be able to honor its financial obligations. |
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Currency Riskthe risk that changes in the exchange rate between two currencies will adversely affect
the value (in U.S. dollar terms) of an investment. |
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Illiquidity Riskthe risk that certain securities or instruments may be difficult or impossible to
sell at the time or at the price desired by the counterparty in connection with payments of margin, collateral, or settlement payments. There can be no assurance that the Trust will be able to unwind or offset a derivative at its desired price, in a
secondary market or otherwise. It may, therefore, not be possible for the Trust to unwind its position in a derivative without incurring substantial losses (if at all). The absence of liquidity may also make it more difficult for the Trust to
ascertain a market value for such instruments. Although both OTC and exchange-traded derivatives markets may experience a lack of liquidity, certain derivatives traded in OTC markets, including swaps and OTC options, involve substantial illiquidity
risk. The Trust will, therefore, acquire illiquid OTC derivatives (i) if the agreement pursuant to which the instrument is purchased contains a formula price at which the instrument may be terminated or sold, or (ii) for which the Advisor
anticipates the Trust can receive on each business day at least two independent bids or offers, unless a quotation from only one dealer is available, in which case that dealers quotation may be used. The illiquidity of the derivatives markets
may be due to various factors, including congestion, disorderly markets, limitations on deliverable supplies, the participation of speculators, government regulation and intervention, and technical and operational or system failures. In addition,
the liquidity of a secondary market in an exchange-traded derivative contract may be adversely affected by daily price fluctuation limits established by the exchanges which limit the amount of fluctuation in an exchange-traded contract
price during a single trading day. Once the daily limit has been reached in the contract, no trades may be entered into at a price beyond the limit, thus preventing the liquidation of open positions. Prices have in the past moved beyond the daily
limit on a number of consecutive trading days. If it is not possible to close an open derivative position entered into by the Trust, the Trust would continue to be required to make daily cash payments of variation margin in the event of adverse
price movements. In such a situation, if the Trust has insufficient cash, it may have to sell portfolio securities to meet daily variation margin requirements at a time when it may be disadvantageous to do so. |
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Index Riskif the derivative is linked to the performance of an index, it will be subject to the
risks associated with changes in that index. If the index changes, the Trust could receive lower interest payments or experience a reduction in the value of the derivative to below the price that the Trust paid for such derivative.
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Legal Riskthe risk of insufficient documentation, insufficient capacity or authority of
counterparty, or legality or enforceability of a contract. |
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Leverage Riskthe risk that the Trusts derivatives transactions can magnify the Trusts
gains and losses. Relatively small market movements may result in large changes in the value of a derivatives position and can result in losses that greatly exceed the amount originally invested. |
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Market Riskthe risk that changes in the value of one or more markets or changes with respect to the
value of the underlying asset will adversely affect the value of a derivative. In the event of an adverse movement, the Trust may be required to pay substantial additional margin to maintain its position or the Trusts returns may be adversely
affected. |
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Operational Riskthe risk related to potential operational issues, including documentation issues,
settlement issues, systems failures, inadequate controls and human error. |
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Valuation Riskthe risk that valuation sources for a derivative will not be readily available in the
market. This is possible especially in times of market distress, since many market participants may be reluctant to purchase complex instruments or quote prices for them. |
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Volatility Riskthe risk that the value of derivatives will fluctuate significantly within a short
time period. |
The section of the SAI entitled Additional Risk FactorsRisk Factors in Strategic Transactions and
Derivatives is amended to add the following sub-section:
Rule
18f-4 Under the Investment Company Act. Rule 18f-4 under the Investment Company Act permits the Trust to enter into Derivatives Transactions (as defined below) and
certain other transactions notwithstanding the restrictions on the issuance of senior securities under Section 18 of the Investment Company Act. Section 18 of the Investment Company Act, among other things, prohibits closed-end funds, including the Trust, from issuing or selling any senior security representing indebtedness (unless the fund maintains 300% asset coverage) or any senior security
representing stock (unless the fund maintains 200% asset coverage).
Under Rule 18f-4,
Derivatives Transactions include the following: (1) any swap, security-based swap (including a contract for differences), futures contract, forward contract, option (excluding purchased options), any combination of the foregoing, or
any similar instrument, under which the Trust is or may be required to make any payment or delivery of cash or other assets during the life of the instrument or at maturity or early termination, whether as margin or settlement payment or otherwise;
(2) any short sale borrowing; (3) reverse repurchase agreements and similar financing transactions (e.g., recourse and non-recourse tender option bonds, and borrowed bonds), if the Trust elects to
treat these transactions as Derivatives Transactions under Rule 18f-4; and (4) when-issued or forward-settling securities (e.g., firm and standby commitments, including to-be-announced (TBA) commitments, and dollar rolls) and non-standard settlement cycle securities, unless such transactions meet the Delayed-Settlement
Securities Provision (as defined above under Investment Policies and TechniquesWhen-Issued and Forward Commitment Securities).
Unless
the Trust is relying on the Limited Derivatives User Exception (as defined below), the Trust must comply with Rule 18f-4 with respect to its Derivatives Transactions. Rule
18f-4, among other things, requires the Trust to adopt and implement a comprehensive written derivatives risk management program (DRMP) and comply with a relative or absolute limit on fund leverage
risk calculated based on value-at-risk (VaR). The DRMP is administered by a derivatives risk manager, who is appointed by the Trusts Board
of Trustees (the Board), including a majority of the Trustees who are not interested persons (as defined in the Investment Company Act) (the Independent Trustees), and periodically reviews the DRMP and reports to
the Board.
Rule 18f-4 provides an exception from the DRMP, VaR limit and certain other requirements if the
Trusts derivatives exposure is limited to 10% of its net assets (as calculated in accordance with Rule 18f-4) and the Trust adopts and implements written policies and procedures reasonably
designed to manage its derivatives risks (the Limited Derivatives User Exception).
Investors should retain this supplement
for future reference.
PRSAI-BHK-0722SUP
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