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
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Organized
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Diversification
Classification
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BlackRock California Municipal Income Trust
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BFZ
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Delaware
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Diversified
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BlackRock Municipal 2030 Target Term Trust
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BTT
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Delaware
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Diversified
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BlackRock Municipal Income Investment Trust
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BBF
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Delaware
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Diversified
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BlackRock New York Municipal Income Trust
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BNY
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Delaware
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Diversified
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The Board of Trustees of the Trusts are collectively referred to throughout this report as the Board of Trustees or the
Board, and the trustees thereof are collectively referred to throughout this report as Trustees. The Trusts determine and make available for publication the net asset values (NAVs) of their Common Shares on a
daily basis.
The Trusts, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the Manager) or its affiliates,
are included in a complex of non-index fixed-income mutual funds and all BlackRock-advised closed-end funds referred to as the BlackRock Fixed-Income Complex.
2.
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SIGNIFICANT ACCOUNTING POLICIES
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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 is recorded on the ex-dividend date. Interest income, including amortization and accretion of premiums and discounts on debt securities, are recognized on an accrual basis.
Segregation and Collateralization: In cases where a Trust enters into certain investments (e.g. futures contracts) or certain borrowings (e.g. TOB Trust
transactions) that would be treated as senior securities for 1940 Act purposes, a Trust may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future
obligations under such investments or borrowings. Doing so allows the investment or borrowings to be excluded from treatment as a senior security. Furthermore, if required by an exchange or counterparty agreement, the Trusts may be
required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.
Distributions: Distributions 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 portion of distributions, if any, that exceeds a funds current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. 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 Board of Trustees of the Trusts (the 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, if 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.
Recent Accounting Standards: The Trusts have adopted
Financial Accounting Standards Board Accounting Standards Update 2017-08 to amend the amortization period for certain purchased callable debt securities held at a premium. Under the new standard, the
trusts have changed the amortization period for the premium on certain purchased callable debt securities with non-contingent call features to the earliest call date. In accordance with the transition
provisions of the standard, the Trusts applied the amendments on a modified retrospective basis beginning with the fiscal period ended January 31, 2020. The adjusted cost basis of securities at July 31, 2019 are as follows:
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BFZ
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$
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788,792,864
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BTT
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2,636,048,610
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BBF
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234,804,000
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BNY
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307,160,539
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This change in accounting policy has been made to comply with the newly issued accounting standard and had no impact on accumulated
earnings (loss) or the net asset value of the Trusts.
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NOTES TO FINANCIAL STATEMENTS
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51
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Notes to Financial Statements (unaudited) (continued)
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.
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INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS
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Investment Valuation Policies: The Trusts investments are valued at fair value (also referred to as market value within the financial statements)
as of the close of trading on the New York Stock Exchange (NYSE) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Trusts would receive to sell an asset or pay to transfer a liability in an orderly
transaction between market participants at the measurement date. The Trusts determine the fair values of their financial instruments using various independent dealers or pricing services under policies approved by the Board of Trustees of each Trust
(the Board). The BlackRock Global Valuation Methodologies Committee (the Global Valuation Committee) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function
for all financial instruments.
Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each Trusts
assets and liabilities:
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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.
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Investments in open-end U.S. mutual funds are valued at NAV each business day.
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Futures contracts traded on exchanges are valued at their last sale price.
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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.
Fair Value
Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial
statement purposes as follows:
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Level 1 Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that each
Trust has the ability to access
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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)
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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 and derivative financial instruments)
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The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority
to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of
the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within
Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately held companies or funds. There may not
be a secondary market, and/or there are a limited number of investors. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial
instruments and is not necessarily an indication of the risks associated with investing in those securities.
4.
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SECURITIES AND OTHER INVESTMENTS
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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 trusts may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a
month or more after the purchase or sale commitment is made. A trust may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement
date. Since the value of securities purchased may fluctuate prior to settlement, a trust may be required to pay more at settlement than the security is worth. In
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52
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2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS
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Notes to Financial Statements (unaudited) (continued)
addition, a trust is not entitled to any of
the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, a trust assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the
counterparty, a trusts maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions.
Municipal Bonds Transferred to TOB
Trusts: Certain trusts leverage their assets through the use of TOB Trust transactions. The trusts 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 trusts 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 trust provides the trust 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 trust may
withdraw a corresponding share of the municipal bonds from the TOB Trust. Other trusts managed by the investment adviser may also contribute municipal bonds to a TOB Trust into which a trust 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 trusts 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 trust, 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 trusts investment policies and restrictions expressly permit investments in inverse floating rate
securities, such as TOB Residuals, they restrict the ability of a trust to borrow money for purposes of making investments. Each trusts 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 trust. A trust 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 trusts Schedule 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 trusts 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 Trust 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 Trust 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 are:
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Interest
Expense
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Liquidity
Fees
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Other
Expense
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Total
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BFZ
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$
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925,241
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$
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341,910
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$
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103,126
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$
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1,370,277
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BTT
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1,705,590
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429,051
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360,575
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2,495,216
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BBF
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224,389
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71,393
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32,026
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327,808
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BNY
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237,214
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82,658
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23,261
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343,133
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For the six months ended January 31, 2020, the following table is a summary of each Trusts TOB Trusts:
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Underlying
Municipal Bonds
Transferred to
TOB Trusts (a)
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Liability for
TOB Trust
Certificates (b)
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Range of
Interest Rates
on TOB Trust
Certificates at
Period End
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Average
TOB Trust
Certificates
Outstanding
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Daily Weighted
Average Rate
of Interest and
Other Expenses
on TOB Trusts
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BFZ . . .
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$
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383,340,621
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$
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171,438,735
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0.90% 1.19%
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$
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148,620,870
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1.83
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%
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BTT . . .
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461,502,371
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261,819,915
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0.97% 1.09%
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261,819,915
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1.90
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BBF . . .
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76,452,792
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42,889,056
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0.94% 1.12%
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35,645,161
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1.83
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BNY . . .
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72,074,447
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38,865,798
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0.95% 1.09%
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37,264,278
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1.83
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(a)
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The municipal bonds transferred to a TOB Trust are generally high grade municipal bonds. In certain cases, when municipal
bonds transferred are lower grade municipal bonds, the TOB Trust transaction may include a credit enhancement feature that provides for the timely payment of principal and interest on the bonds to the TOB Trust by a credit
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NOTES TO FINANCIAL STATEMENTS
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53
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Notes to Financial Statements (unaudited) (continued)
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enhancement provider in the event of default of the municipal bond. The TOB Trust would be responsible for the payment of the credit enhancement fee and the trusts, as TOB Residuals holders, would be responsible for
reimbursement of any payments of principal and interest made by the credit enhancement provider. The maximum potential amounts owed by the trusts, for such reimbursements, as applicable, are included in the maximum potential amounts disclosed for
recourse TOB Trusts.
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(b)
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TOB Trusts may be structured on a non-recourse or recourse basis. When a Trust
invests in TOB Trusts on a non-recourse basis, the Liquidity Provider may be required to make a payment under the liquidity facility to allow the TOB Trust to repurchase TOB Trust Certificates. The Liquidity
Provider will be reimbursed from the liquidation of bonds held in the TOB Trust. If the trust invests in a TOB Trust on a recourse basis, the trust enters into a reimbursement agreement with the Liquidity Provider where the trust is required to
reimburse the Liquidity Provider for any shortfall between the amount paid by the Liquidity Provider and proceeds received from liquidation of municipal bonds held in the TOB Trust (the Liquidation Shortfall). As a result, if the trust
invests in a recourse TOB Trust, the trust will bear the risk of loss with respect to any Liquidation Shortfall. If multiple funds participate in any such TOB Trust, these losses will be shared ratably, including the maximum potential amounts owed
by the trust at January 31, 2020, in proportion to their participation in the TOB Trust. The recourse TOB Trusts are identified in the Schedule of Investments including the maximum potential amounts owed by the trust at January 31, 2020.
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5.
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DERIVATIVE FINANCIAL INSTRUMENTS
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The Trusts engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Trusts and/or to manage their exposure to
certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the
Schedules of Investments. These contracts may be transacted on an exchange or over-the-counter.
Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk) and changes
in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).
Futures contracts are agreements between the Trusts and
a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the
settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Trusts are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a
contracts size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts in
the Statements of Assets and Liabilities.
Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited, if any, is shown
as cash pledged for futures contracts in the Statements of Assets and Liabilities. Pursuant to the contract, the Trusts agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract
(variation margin). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statements of Assets and Liabilities. When the contract
is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. The use of futures
contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.
6.
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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.
For such services, each Trust, except BTT, pays the Manager a monthly fee at an annual rate equal
to the following percentages of the average weekly value of each Trusts managed assets.
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BFZ
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|
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BBF
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|
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BNY
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|
Investment advisory fees
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0.58
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%
|
|
|
0.57
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%
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|
|
0.60
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%
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For such services, BTT pays the Manager a monthly fee at an annual rate equal to 0.40% of the average daily value of the 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 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. Prior to December 1, 2019, this waiver was voluntary. For the six months ended January 31, 2020, the amounts waived were as follows:
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BFZ
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|
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BTT
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|
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BBF
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|
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BNY
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Amounts waived
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|
$
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843
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$
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1,771
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|
|
$
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1,199
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|
|
$
|
113
|
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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 January 31, 2020, there were no fees waived by the Manager pursuant to these arrangements.
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54
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2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS
|
Notes to Financial Statements (unaudited) (continued)
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 January 31, 2020, the purchase and sale transactions and any net realized gains (losses) with an affiliated fund
in compliance with Rule 17a-7 under the 1940 Act were as follows:
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Purchases
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|
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Sales
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|
|
Net Realized
Gain (Loss)
|
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BTT
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$
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$
|
1,700,840
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|
|
$
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|
|
For the six months ended January 31, 2020, purchases and sales of investments, excluding short-term securities, were as follows:
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|
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BFZ
|
|
|
BTT
|
|
|
BBF
|
|
|
BNY
|
|
Purchases
|
|
$
|
179,932,939
|
|
|
$
|
92,332,002
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|
|
$
|
59,207,080
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|
|
$
|
24,112,982
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|
Sales
|
|
|
184,912,065
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|
|
|
76,292,827
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|
|
|
66,336,473
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|
|
|
21,229,102
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8.
|
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 each of the four years ended July 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 January 31, 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 July 31, 2019, the Trusts had non-expiring capital loss carryforwards
available to offset future realized capital gains as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BFZ
|
|
|
|
|
BTT
|
|
|
|
|
BBF
|
|
|
|
|
BNY
|
|
$
|
1,242,628
|
|
|
|
|
$
|
24,405,259
|
|
|
|
|
$
|
3,116,059
|
|
|
|
|
$
|
5,375,343
|
|
As of January 31, 2020, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal
income tax purposes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BFZ
|
|
|
BTT
|
|
|
BBF
|
|
|
BNY
|
|
Tax cost
|
|
$
|
612,866,865
|
|
|
$
|
2,386,695,407
|
|
|
$
|
184,754,391
|
|
|
$
|
266,015,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross unrealized appreciation
|
|
$
|
59,961,616
|
|
|
$
|
231,007,371
|
|
|
$
|
19,016,929
|
|
|
$
|
27,502,051
|
|
Gross unrealized depreciation
|
|
|
(1,655,084
|
)
|
|
|
(5,325,945
|
)
|
|
|
(476,388
|
)
|
|
|
(834,782
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized appreciation
|
|
$
|
58,306,532
|
|
|
$
|
225,681,426
|
|
|
$
|
18,540,541
|
|
|
$
|
26,667,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 each Trust and its 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
|
|
|
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
|
55
|
|
Notes to Financial Statements (unaudited) (continued)
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 BTT will achieve its investment objectives, including its investment objective of returning $25.00 per share. As BTT approaches its scheduled
termination date, it is expected that the maturity of BTTs portfolio securities will shorten, which is likely to reduce BTTs income and distributions to shareholders.
A Trust structures and sponsors the TOB Trusts in which it holds TOB Residuals and has certain duties and responsibilities, which may give rise to certain
additional risks including, but not limited to, compliance, securities law and operational risks.
Should short-term interest rates rise, the Trusts investments
in the TOB Trusts may adversely affect the Trusts net investment income and dividends to Common Shareholders. Also, fluctuations in the market value of municipal bonds deposited into the TOB Trust may adversely affect the Trusts NAVs per
share.
The SEC and various federal banking and housing agencies have adopted credit risk retention rules for securitizations (the Risk Retention Rules).
The Risk Retention Rules would require the sponsor of a TOB Trust to retain at least 5% of the credit risk of the underlying assets supporting the TOB Trusts municipal bonds. The Risk Retention Rules may adversely affect the Trusts
ability to engage in TOB Trust transactions or increase the costs of such transactions in certain circumstances.
TOB Trusts constitute an important component of the
municipal bond market. Any modifications or changes to rules governing TOB Trusts may adversely impact the municipal market and the Trusts, including through reduced demand for and liquidity of municipal bonds and increased financing costs for
municipal issuers. The ultimate impact of any potential modifications on the TOB Trust market and the overall municipal market is not yet certain.
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 the Trust could sell such investments if they were more widely traded and, as a result of such illiquidity, the 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.
A recent outbreak of respiratory disease caused by a novel coronavirus was first detected in China in December 2019 and has now been detected internationally. This
coronavirus has resulted in closing borders, quarantines, disruptions to supply chains and customer activity, as well as general concern and uncertainty. The impact of epidemics and pandemics such as the coronavirus, 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. The impact of the outbreak may be short term or may last for an extended period of time.
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.
A derivative contract may suffer a mark-to-market loss if the value of the contract
decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.
With exchange-traded futures, there is less counterparty credit risk to the Trusts since the exchange or clearinghouse, as counterparty to such instruments, guarantees
against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Trust does not have a
contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to
initial and variation margin that is held in a clearing brokers customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into
bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing brokers customers,
potentially resulting in losses to the Trusts.
Concentration Risk: BFZ and BNY invests a substantial amount of their assets in issuers located in a single
state or limited number of states. This may subject each 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 portfolios. Investment percentages in specific states or U.S. territories are presented in the Schedules of Investments.
As of period end, BFZ invested a significant portion of its assets in securities in the county, city, special district and school district sector. Changes in economic
conditions affecting such sector would have a greater impact on the Trusts and could affect the value, income and/or liquidity of positions in such securities.
The
Trusts invest a significant portion of their assets in fixed-income securities and/or use derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or
liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as interest rates rise. The Trusts may be subject to a greater risk of rising
interest rates due to the current period of historically low rates.
|
|
|
56
|
|
2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS
|
Notes to Financial Statements (unaudited) (continued)
10.
|
CAPITAL SHARE TRANSACTIONS
|
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 $0.10. The par value for each Trusts Preferred Shares outstanding is $0.10. The Board is authorized, however, to reclassify any unissued Common Shares to Preferred Shares without the approval of Common Shareholders.
Common Shares
For the periods shown, shares issued and outstanding
increased by the following amounts as a result of dividend reinvestment:
|
|
|
|
|
|
|
BBF
|
|
Six Months Ended January 31, 2020
|
|
|
1,507
|
|
Year Ended July 31, 2019
|
|
|
4,609
|
|
For the six months ended January 31, 2020 and year ended July 31, 2019, shares issued and outstanding remained constant for BFZ,
BTT and BNY.
BFZ, BBF and BNY participate in an open market share repurchase program (the Repurchase Program). From December 1, 2018 through
November 30, 2019, each of BFZ, BBF and BNY may repurchase up to 5% of its outstanding common shares under the Repurchase Program, based on common shares outstanding as of the close of business on November 30, 2018, subject to certain
conditions. From December 1, 2019 through November 30, 2020, each of BFZ, BBF and BNY may repurchase up to 5% of its outstanding common shares under the Repurchase Program, based on common shares outstanding as of the close of business on
November 30, 2019, subject to certain conditions. There is no assurance that each Trust will purchase shares in any particular amounts. For the six months ended January 31, 2020, BFZ, BBF and BNY did not repurchase any shares.
Preferred Shares
A Trusts Preferred Shares rank prior to its Common
Shares as to the payment of dividends by the Trust and distribution of assets upon dissolution or liquidation of the Trust. The 1940 Act prohibits the declaration of any dividend on Common Shares or the repurchase of Common Shares if the Trust fails
to maintain asset coverage of at least 200% of the liquidation preference of the its outstanding Preferred Shares. In addition, pursuant to the Preferred Shares governing instruments, a Trust is restricted from declaring and paying dividends
on classes of shares ranking junior to or on parity with its Preferred Shares or repurchasing such shares if the Trust fails to declare and pay dividends on the Preferred Shares, redeem any Preferred Shares required to be redeemed under the
Preferred Shares governing instruments or comply with the basic maintenance amount requirement of the ratings agencies rating the Preferred Shares.
Holders of
Preferred Shares have voting rights equal to the voting rights of holders of Common Shares (one vote per share) and vote together with holders of Common Shares (one vote per share) as a single class on certain matters. Holders of Preferred Shares,
voting as a separate class, are also entitled to (i) elect two members of the Board, (ii) elect the full Board if dividends on the Preferred Shares are not paid for a period of two years and (iii) a separate class vote to amend the
Preferred Share governing documents. In addition, the 1940 Act requires the approval of the holders of a majority of any outstanding Preferred Shares, voting as a separate class, to (a) adopt any plan of reorganization that would adversely
affect the Preferred Shares, (b) change a Trusts sub-classification as a closed-end investment company or change its fundamental investment restrictions or
(c) change its business so as to cease to be an investment company.
VRDP Shares
BBF has issued Series W-7 VRDP Shares, $100,000 liquidation preference per share, in one or more privately negotiated offerings to
qualified institutional buyers as defined pursuant to Rule 144A under the Securities Act of 1933, as amended (the Securities Act). The VRDP Shares include a liquidity feature and may be subject to a special rate period. As of period end,
the VRDP Shares outstanding were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue
Date
|
|
|
Shares
Issued
|
|
|
Aggregate
Principal
|
|
|
Maturity
Date
|
|
BBF
|
|
|
09/15/11
|
|
|
|
342
|
|
|
$
|
34,200,000
|
|
|
|
10/01/41
|
|
BBF
|
|
|
05/16/16
|
|
|
|
178
|
|
|
|
17,800,000
|
|
|
|
10/01/41
|
|
Redemption Terms: BBF is required to redeem its VRDP Shares on the maturity date, unless earlier redeemed or repurchased. Six
months prior to the maturity date, BBF is required to begin to segregate liquid assets with the Trusts custodian to fund the redemption. In addition, BBF is required to redeem certain of its outstanding VRDP Shares if it fails to comply with
certain asset coverage, basic maintenance amount or leverage requirements.
Subject to certain conditions, the VRDP Shares may also be redeemed, in whole or in part,
at any time at the option of BBF. The redemption price per VRDP Share is equal to the liquidation preference per share plus any outstanding unpaid dividends.
Liquidity Feature: VRDP Shares are subject to a fee agreement between the VRDP Trust and the liquidity provider that requires a per annum liquidity fee and, in
some cases, an upfront or initial commitment fee, payable to the liquidity provider. These fees, if applicable, are shown as liquidity fees in the Statements of Operations. As of period end, the fee agreement is set to expire, unless renewed or
terminated in advance, as follows:
|
|
|
|
|
|
|
BBF
|
|
Expiration Date
|
|
|
04/15/20
|
|
|
|
|
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
|
57
|
|
Notes to Financial Statements (unaudited) (continued)
The VRDP Shares are also subject to a
purchase agreement in connection with the liquidity feature. In the event a purchase agreement is not renewed or is terminated in advance, and VRDP Shares do not become subject to a purchase agreement with an alternate liquidity provider, the VRDP
Shares will be subject to mandatory purchase by the liquidity provider prior to the termination of the purchase agreement. In the event of such mandatory purchase, BBF is required to redeem the VRDP Shares six months after the purchase date.
Immediately after such mandatory purchase, the VRDP Trust is required to begin to segregate liquid assets with its custodian to fund the redemption. There is no assurance BBF will replace such redeemed VRDP Shares with any other preferred shares or
other form of leverage.
Remarketing: BBF may incur remarketing fees on the aggregate principal amount of all its VRDP Shares, which, if any, are included in
remarketing fees on Preferred Shares in the Statements of Operations. During any special rate period (as described below), BBF may incur nominal or no remarketing fees.
Ratings: As of period end, the VRDP Shares were assigned the following long-term ratings:
|
|
|
|
|
|
|
|
|
|
|
Moodys
|
|
|
Fitch
|
|
BBF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
|
|
|
Aa1
|
|
|
|
AAA
|
|
Special Rate Period: BBF may commence a special rate period with respect to its VRDP Shares, during which the VRDP
Shares will not be subject to any remarketing and the dividend rate will be based on a predetermined methodology. During a special rate period, short-term ratings on VRDP Shares are withdrawn. BBFs special rate period has commenced on
October 22, 2015 and has a current expiration date of April 15, 2020.
Prior to the expiration date, the VRDP Trust and the VRDP Shares holder may mutually
agree to extend the special rate period. If a special rate period is not extended, the VRDP Shares will revert to remarketable securities upon the termination of the special rate period and will be remarketed and available for purchase by qualified
institutional investors.
During the special rate period: (i) the liquidity and fee agreements remain in effect, (ii) VRDP Shares remain subject to
mandatory redemption by the VRDP Trust on the maturity date, (iii) VRDP Shares will not be remarketed or subject to optional or mandatory tender events, (iv) the VRDP Trust is required to comply with the same asset coverage, basic
maintenance amount and leverage requirements for the VRDP Shares as is required when the VRDP Shares are not in a special rate period, (v) the VRDP Trust will pay dividends monthly based on the sum of an agreed upon reference rate and a
percentage per annum based on the long-term ratings assigned to the VRDP Shares and (vi) the VRDP Trust will pay nominal or no fees to the liquidity provider and remarketing agent.
If a VRDP Trust redeems its VRDP Shares prior to end of the special rate period and the VRDP Shares have long-term ratings above A1/A+ and its equivalent by all
ratings agencies then rating the VRDP Shares, then such redemption may be subject to a redemption premium payable to the holder of the VRDP Shares based on the time remaining in the special rate period, subject to certain exceptions for redemptions
that are required to comply with minimum asset coverage requirements.
Dividends: Except during the Special Rate Period as described above, dividends on the
VRDP Shares are payable monthly at a variable rate set weekly by the remarketing agent. Such dividend rates are generally based upon a spread over a base rate and cannot exceed a maximum rate. A change in the short-term credit rating of the
liquidity provider or the VRDP Shares may adversely affect the dividend rate paid on such shares, although the dividend rate paid on the VRDP Shares is not directly based upon either short-term rating. In the event of a failed remarketing, the
dividend rate of the VRDP Shares will be reset to a maximum rate. The maximum rate is determined based on, among other things, the long-term preferred share rating assigned to the VRDP Shares and the length of time that the VRDP Shares fail to be
remarketed.
For the six months ended January 31, 2020, the annualized dividend rate for the VRDP Shares was 2.13%.
VMTP Shares
BFZ and BNY (for purposes of this section, the VMTP
Trusts) have issued Series W-7 VMTP Shares, $100,000 liquidation preference per share, in one or more privately negotiated offerings to qualified institutional buyers as defined pursuant to Rule 144A
under the Securities Act The VMTP Shares are subject to certain restrictions on transfer, and VMTP Trusts may also be required to register the VMTP Shares for sale under the Securities Act under certain circumstances. As of period end, the VMTP
Shares outstanding and assigned long-term ratings were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue
Date
|
|
|
Shares
Issued
|
|
|
Aggregate
Principal
|
|
|
Term
Redemption
Date
|
|
|
Moodys
Rating
|
|
|
Fitch
Rating
|
|
BFZ
|
|
|
03/22/12
|
|
|
|
1,713
|
|
|
$
|
171,300,000
|
|
|
|
03/30/21
|
|
|
|
Aa2
|
|
|
|
AAA
|
|
BNY
|
|
|
03/22/12
|
|
|
|
945
|
|
|
|
94,500,000
|
|
|
|
03/30/21
|
|
|
|
Aa2
|
|
|
|
AAA
|
|
Redemption Terms: Each VMTP Trust is required to redeem its VMTP Shares on the term redemption date, unless earlier redeemed or
repurchased or unless extended. There is no assurance that a term will be extended further or that any VMTP Shares will be replaced with any other preferred shares or other form of leverage upon the redemption or repurchase of the VMTP Shares. Six
months prior to the term redemption date, a VMTP Trust is required to begin to segregate liquid assets with its custodian to fund the redemption. In addition, a VMTP Trust is required to redeem certain of its outstanding VMTP Shares if it fails to
comply with certain asset coverage, basic maintenance amount or leverage requirements.
Subject to certain conditions, VMTP Shares may be redeemed, in whole or in
part, at any time at the option of the VMTP Trust. The redemption price per VMTP Share is equal to the liquidation preference per share plus any outstanding unpaid dividends.
|
|
|
58
|
|
2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS
|
Notes to Financial Statements (unaudited) (continued)
Dividends: Dividends on the VMTP
Shares are declared daily and payable monthly at a variable rate set weekly at a fixed rate spread to the Securities Industry and Financial Markets Association Municipal Swap Index or to a percentage of the
one-month LIBOR rate, as set forth in the VMTP Shares governing instrument. The fixed spread is determined based on the long-term preferred share rating assigned to the VMTP Shares by the ratings agencies then
rating the VMTP Shares.
The dividend rate on VMTP Shares is subject to a step-up spread if the VMTP Trust fails to comply
with certain provisions, including, among other things, the timely payment of dividends, redemptions or gross-up payments, and complying with certain asset coverage and leverage requirements.
For the six months ended January 31, 2020, the average annualized dividend rates for the VMTP Shares were as follows.
|
|
|
|
|
|
|
|
|
|
|
BFZ
|
|
|
BNY
|
|
Rate
|
|
|
2.00
|
%
|
|
|
2.00
|
%
|
RVMTP Shares
BTT has issued Series W-7 RVMTP Shares, $5,000,000 liquidation preference per share, in privately negotiated offerings to qualified institutional buyers as defined pursuant to Rule 144A under the Securities Act. The RVMTP Shares are
subject to certain restrictions on transfer outside of a remarketing. As of period end, the RVMTP Shares outstanding of BTT were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue
Date
|
|
|
Shares
Issued
|
|
|
Shares
Outstanding
|
|
|
Aggregate
Principal
|
|
|
Term
Redemption
Date
|
|
BTT
|
|
|
01/10/2013
|
|
|
|
50
|
|
|
|
50
|
|
|
$
|
250,000,000
|
|
|
|
12/31/2030
|
|
|
|
|
01/30/2013
|
|
|
|
50
|
|
|
|
50
|
|
|
|
250,000,000
|
|
|
|
12/31/2030
|
|
|
|
|
02/20/2013
|
|
|
|
50
|
|
|
|
50
|
|
|
|
250,000,000
|
|
|
|
12/31/2030
|
|
Redemption Terms: BTT is required to redeem its RVMTP Shares on the term redemption date or within six months of an unsuccessful
remarketing, unless earlier redeemed or repurchased. There is no assurance that RVMTP Shares will be replaced with any other preferred shares or other form of leverage upon the redemption or repurchase of the RVMTP Shares. In addition, BTT is
required to redeem certain of its outstanding RVMTP Shares if it fails to comply with certain asset coverage, basic maintenance amount or leverage requirements.
Subject to certain conditions, RVMTP Shares may be redeemed, in whole or in part, at any time at the option of BTT. The redemption price per RVMTP Share is equal to the
liquidation preference per share plus any outstanding unpaid dividends. The RVMTP Shares are subject to certain restrictions on transfer outside of a remarketing. The RVMTP Shares are subject to remarketing upon 90 days notice by holders of
the RVMTP Shares and 30 days notice by BTT. Each remarketing must be at least six months apart from the last remarketing. A holder of RVMTP Shares may submit notice of remarketing only if such holder requests a remarketing of at least the
lesser of (i) $100,000,000 of RVMTP Shares or (ii) all of the RVMTP Shares held by such holder.
Dividends: Dividends on the RVMTP Shares are declared
daily and payable monthly at a variable rate set weekly at a fixed rate spread to a percentage of the one-month LIBOR rate. The fixed rate spread may be adjusted at each remarketing or upon the agreement of
BTT and the then-holder(s) of the RVMTP Shares. In the event that all of the RVMTP Shares submitted for remarketing are not successfully remarketed, a failed remarketing would occur, and all holders would retain their RVMTP Shares. In the event of a
failed remarketing, the fixed rate spread would be set at the fixed rate spread applicable to such failed remarketing. BTT has the right to reject any fixed spread determined at a remarketing, and such rejection would result in a failed remarketing
and the fixed rate spread would be set at the fixed rate spread applicable to such failed remarketing. The fixed rate spread applicable due to a failed remarketing depends on whether the remarketing was pursuant to a mandatory or non-mandatory tender. In the case of a failed remarketing following a mandatory tender, the failed remarketing spread would be the sum of the last applicable spread in effect immediately prior to the failed
remarketing date for such failed remarketing plus 0.75%. In the case of a failed remarketing not associated with a mandatory tender, the failed remarketing spread would be the sum of the last applicable spread in effect immediately prior to the
failed remarketing date for such failed remarketing plus 0.25%.
For the six months ended January 31, 2019, the average annualized dividend rate for the RVMTP
Shares was 2.01%.
Remarketing: In the event of a failed remarketing that is not subsequently cured, BTT will be required to redeem the RVMTP Shares subject to
such failed remarketing on a date that is approximately six months from the remarketing date for such failed remarketing, provided that no redemption of any RVMTP Share may occur within one year of the date of issuance of such RVMTP Share. At the
date of issuance and as of period end, the RVMTP Shares were assigned long-term ratings of Aa1 from Moodys and AAA from Fitch. The dividend rate on the RVMTP Shares is subject to a step-up spread if BTT
fails to comply with certain provisions, including, among other things, the timely payment of dividends, redemptions or gross-up payments, and complying with certain asset coverage and leverage requirements.
During the six months ended January 31, 2020, no RVMTP Shares were tendered for remarketing.
For the six months ended January 31, 2020, RVMTP Shares issued and outstanding of BTT remained constant.
Offering Costs: The Trusts incurred costs in connection with the issuance of VRDP, VMTP and RVMTP Shares, which were recorded as a direct deduction from the
carrying value of the related debt liability and will be amortized over the life of the VRDP, VMTP and RVMTP Shares with the exception of upfront fees paid by BBF to the liquidity provider which, if any, were amortized over the life of the liquidity
agreement. Amortization of these costs is included in interest expense, fees and amortization of offering costs in the Statements of Operations.
Financial
Reporting: The VRDP, VMTP and RVMTP Shares are considered debt of the issuer; therefore, the liquidation preference, which approximates fair value of the VRDP, VMTP and RVMTP Shares, is recorded as a liability in the Statements of Assets and
Liabilities net of deferred offering costs. Unpaid dividends are included in
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NOTES TO FINANCIAL STATEMENTS
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59
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Notes to Financial Statements (unaudited) (continued)
interest expense and fees payable in the
Statements of Assets and Liabilities, and the dividends accrued and paid on the VRDP, VMTP and RVMTP Shares are included as a component of interest expense, fees and amortization of offering costs in the Statements of Operations. The VRDP, VMTP and
RVMTP Shares are treated as equity for tax purposes. Dividends paid to holders of the VRDP, VMTP and RVMTP Shares are generally classified as tax-exempt income for
tax-reporting purposes. Dividends and amortization of deferred offering costs on VRDP, VMTP and RVMTP Shares are included in interest expense, fees and amortization of offering costs in the Statements of
Operations.
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Dividends
Accrued
|
|
|
Deferred
Offering Costs
Amortization
|
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BFZ
|
|
$
|
1,714,280
|
|
|
$
|
|
|
BTT
|
|
|
7,543,340
|
|
|
|
15,764
|
|
BBF
|
|
|
554,515
|
|
|
|
3,080
|
|
BNY
|
|
|
945,706
|
|
|
|
|
|
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.
The Trusts declared and paid distributions to Common Shareholders and Preferred Shareholders as follows:
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|
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Common Dividend
Per Share
|
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|
|
|
|
Preferred Shares (c)
|
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|
Paid
(a)
|
|
|
Declared
(b)
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|
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Shares
|
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|
Series
|
|
|
Declared
|
|
BFZ
|
|
$
|
0.038000
|
|
|
$
|
0.038000
|
|
|
|
|
|
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|
VMTP
|
|
|
|
W-7
|
|
|
$
|
248,713
|
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BTT
|
|
|
0.062400
|
|
|
|
0.062400
|
|
|
|
|
|
|
|
RVMTP
|
|
|
|
W-7
|
|
|
|
1,077,099
|
|
BBF
|
|
|
0.050500
|
|
|
|
0.050500
|
|
|
|
|
|
|
|
VRDP
|
|
|
|
W-7
|
|
|
|
77,338
|
|
BNY
|
|
|
0.046000
|
|
|
|
0.048000
|
|
|
|
|
|
|
|
VMTP
|
|
|
|
W-7
|
|
|
|
137,206
|
|
|
(a)
|
Net investment income dividend paid on March 2, 2020 to Common Shareholders of record on February 14, 2020.
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(b)
|
Net investment income dividend declared on March 2, 2020, payable to Common Shareholders of record on March 16,
2020.
|
|
|
(c)
|
Dividends declared for period February 1, 2020 to February 29, 2020.
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60
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2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS
|
Trust Certification
The Trusts are listed for trading on the NYSE and have
filed with the NYSE their annual chief executive officer certification regarding compliance with the NYSEs listing standards. The Trusts filed with the SEC the certification of its chief executive officer and chief financial officer required
by section 302 of the Sarbanes-Oxley Act.
Dividend Policy
Each
Trusts dividend policy is to distribute all or a portion of its net investment income to its shareholders on a monthly basis. In order to provide shareholders with a more stable level of distributions, the Trusts may at times pay out less than
the entire amount of net investment income earned in any particular month and may at times in any particular month pay out such accumulated but undistributed income in addition to net investment income earned in that month. As a result, the
distributions paid by the Trusts for any particular month may be more or less than the amount of net investment income earned by the Trusts during such month. The Trusts current accumulated but undistributed net investment income, if any, is
disclosed as accumulated earnings (loss) in the Statements of Assets and Liabilities, which comprises part of the financial information included in this report.
General Information
The Trusts do not make available copies of their
Statements of Additional Information because the Trusts shares are not continuously offered, which means that the Statement of Additional Information of each Trust has not been updated after completion of the respective Trusts offerings
and the information contained in each Trusts Statement of Additional Information may have become outdated.
During the period, there were no material changes in
the Trusts investment objectives or policies or to the Trusts charters or by-laws that would delay or prevent a change of control of the Trusts that were not approved by the shareholders or in the principal risk factors associated with
investment in the Trusts. There have been no changes in the persons who are primarily responsible for the day-to-day management of the Trusts portfolios.
In
accordance with Section 23(c) of the Investment Company Act of 1940, each Trust may from time to time purchase shares of its common stock in the open market or in private transactions.
Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding the Trusts may be found on BlackRocks website, which
can be accessed at blackrock.com. Any reference to BlackRocks website in this report is intended to allow investors public access to information regarding the Trusts and does not, and is not intended to, incorporate BlackRocks
website in this report.
Electronic Delivery
Shareholders can sign up
for e-mail notifications of quarterly statements, annual and semi-annual shareholder reports by enrolling in the electronic delivery program. Electronic copies of shareholder reports are available on BlackRocks website.
To enroll in electronic delivery:
Shareholders Who Hold Accounts with
Investment Advisers, Banks or Brokerages:
Please contact your financial advisor. Please note that not all investment advisers, banks or brokerages may offer this
service.
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62
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2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS
|
Additional Information (continued)
Householding
The Trusts will mail only one copy of shareholder documents, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same
address. This practice is commonly called householding and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you
instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Trusts at (800) 882-0052.
Availability of Quarterly Schedule of Investments
The Trusts file their
complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The
Trusts Forms N-PORT and N-Q are available on the SECs website at sec.gov. The Trusts Forms N-PORT may also be obtained upon request and without charge by calling (800) 882-0052.
Availability of Proxy Voting Policies and Procedures
A description of the
policies and procedures that the Trusts use to determine how to vote proxies relating to portfolio securities is available upon request and without charge (1) by calling (800) 882-0052; (2) at blackrock.com; and (3) on the
SECs website at sec.gov.
Availability of Proxy Voting Record
Information about how the Trusts voted proxies relating to securities held in the Trusts portfolios during the most recent 12-month period ended June 30 is
available upon request and without charge (1) at blackrock.com; or by calling (800) 882-0052; and (2) on the SECs website at sec.gov.
Availability of Trust Updates
BlackRock will update performance and certain
other data for the Trusts on a monthly basis on its website in the Closed-end Funds section of blackrock.com as well as certain other material information as necessary from time to time. Investors and others are advised to check
the website for updated performance information and the release of other material information about the Trusts. This reference to BlackRocks website is intended to allow investors public access to information regarding the Trusts and does not,
and is not intended to, incorporate BlackRocks website in this report.
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, Clients) and to safeguarding
their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.
If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights
beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public
information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your
transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary
to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest
to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards
that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.
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ADDITIONAL INFORMATION
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63
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Glossary of Terms Used in this Report
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Portfolio Abbreviations
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AGC
|
|
Assured Guarantee Corp.
|
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AGM
|
|
Assured Guaranty Municipal Corp.
|
|
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AMBAC
|
|
American Municipal Bond Assurance Corp.
|
|
|
AMT
|
|
Alternative Minimum Tax (subject to)
|
|
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ARB
|
|
Airport Revenue Bonds
|
|
|
BAM
|
|
Build America Mutual Assurance Co.
|
|
|
CAB
|
|
Capital Appreciation Bonds
|
|
|
COP
|
|
Certificates of Participation
|
|
|
EDA
|
|
Economic Development Authority
|
|
|
EDC
|
|
Economic Development Corp.
|
|
|
FHA
|
|
Federal Housing Administration
|
|
|
GARB
|
|
General Airport Revenue Bonds
|
|
|
GO
|
|
General Obligation Bonds
|
|
|
GTD
|
|
Guaranteed
|
|
|
HFA
|
|
Housing Finance Agency
|
|
|
IDA
|
|
Industrial Development Authority
|
|
|
IDB
|
|
Industrial Development Board
|
|
|
ISD
|
|
Independent School District
|
|
|
LRB
|
|
Lease Revenue Bonds
|
|
|
M/F
|
|
Multi-Family
|
|
|
NPFGC
|
|
National Public Finance Guarantee Corp.
|
|
|
PILOT
|
|
Payment in Lieu of Taxes
|
|
|
PSF-GTD
|
|
Permanent School Fund Guaranteed
|
|
|
RB
|
|
Revenue Bonds
|
|
|
S/F
|
|
Single-Family
|
|
|
SRF
|
|
State Revolving Fund
|
|
|
SONYMA
|
|
State of New York Mortgage Agency
|
|
|
|
64
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2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS
|
Want to know more?
blackrock.com | 877-275-1255 (1-877-ASK-1BLK)
This report is intended for current holders. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future
performance. The Trusts have leveraged their Common Shares, which creates risks for Common Shareholders, including the likelihood of greater volatility of net asset value and market price of the Common Shares, and the risk that fluctuations in
short-term interest rates may reduce the Common Shares yield. Statements and other information herein are as dated and are subject to change.
CEF-BK6-1/20-SAR