UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

 

 

Investment Company Act file number 811-10543

 

Name of Fund: BlackRock Core Bond Trust (BHK)

 

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

 

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Core Bond Trust, 55 East 52nd Street, New York, NY 10055

 

Registrant’s telephone number, including area code: (800) 882-0052, Option 4

 

Date of fiscal year end: 08/31/2014

 

Date of reporting period: 08/31/2014

 

Item 1 – Report to Stockholders
 
 

AUGUST 31, 2014

ANNUAL REPORT  

BlackRock Core Bond Trust (BHK)

BlackRock Corporate High Yield Fund, Inc. (HYT)

BlackRock Income Opportunity Trust, Inc. (BNA)

BlackRock Income Trust, Inc. (BKT)

Not FDIC Insured • May Lose Value • No Bank Guarantee
     
 
  

Table of Contents

 
           Page    
Shareholder Letter
           3    
Annual Report:
                
Trust Summaries
           4    
The Benefits and Risks of Leveraging
           12    
Derivative Financial Instruments
           12    
Financial Statements:
                    
Schedules of Investments
           13    
Statements of Assets and Liabilities
           63    
Statements of Operations
           65    
Statements of Changes in Net Assets
           66    
Statements of Cash Flows
           68    
Financial Highlights
           70    
Notes to Financial Statements
           74    
Report of Independent Registered Public Accounting Firm
           94    
Important Tax Information
           95    
Disclosure of Investment Advisory Agreements
           96    
Automatic Dividend Reinvestment Plans
           100    
Officers and Trustees
           101    
Additional Information
           104    
2 ANNUAL REPORT AUGUST 31, 2014
 
  
Shareholder Letter 
   

Dear Shareholder,

The latter part of 2013 was a strong period for most risk assets such as equities and high yield bonds, despite the mixed tone of economic and financial news and uncertainty as to when and by how much the U.S. Federal Reserve would begin to gradually reduce (or “taper”) its asset purchase programs. Stock markets rallied in September when the Fed defied investors’ expectations with its decision to delay tapering. The momentum was disrupted temporarily, however, when the U.S. debt ceiling debate led to a partial government shutdown, roiling financial markets globally until a compromise was struck in mid-October. The remainder of 2013 was generally positive for developed market stocks, while fixed income and emerging market investments struggled as Fed tapering became increasingly imminent. When the central bank ultimately announced its tapering plans in mid-December, equity investors reacted positively, as this action signaled the Fed’s perception of real improvement in the economy.

Most asset classes moved higher in 2014 despite the pull back in Fed stimulus. The year got off to a rocky start, however, as a number of developing economies showed signs of stress while facing the onset of diminishing global liquidity. These risks, combined with disappointing U.S. economic data, caused equities to decline in January while bond markets found renewed strength from investors seeking relatively safer assets. Although these headwinds persisted, equities were back on the rise in February as investors were relieved by a one-year extension of the U.S. debt ceiling and market-friendly comments from the Fed’s new Chairwoman, Janet Yellen. While it was clear that U.S. economic data had softened, investors were assuaged by increasing evidence that the trend was temporary and weather-related, and continued to take on risk with the expectation that growth would pick up later in the year.

In the months that followed, interest rates trended lower and bond prices climbed higher in the modest growth environment. Financial markets exhibited a remarkably low level of volatility despite rising geopolitical risks and mixed global economic news. Tensions in Russia and Ukraine and signs of decelerating growth in China caused some turbulence, but markets were resilient as investors focused on signs of improvement in the U.S. recovery, stronger corporate earnings and increased merger-and-acquisition activity. Importantly, investors were comforted by reassurance from the Fed that no changes to short-term interest rates were on the horizon.

In the ongoing low-rate environment, investors looked to equities as a source of yield, pushing major indices to record levels. As stock prices continued to move higher, investors soon became wary of stretched valuations and a new theme emerged. Stocks that had experienced significant price appreciation in 2013, particularly growth and momentum names, broadly declined as investors fled to stocks with cheaper valuations. This rotation resulted in the strongest performers of 2013 struggling most in 2014, and vice versa. Especially hard hit were U.S. small cap and European stocks, where earnings growth had not kept pace with recent market gains. In contrast, emerging market stocks benefited from the trend after having suffered heavy selling pressure earlier in the year.

However, asset prices tend to be more vulnerable to bad news when investors believe valuations are high. Consequently, markets came under pressure in July as geopolitical turmoil intensified in Gaza, Iraq and Ukraine and financial troubles boiled over in Argentina and Portugal. Investors regained confidence in August and, although volatility ticked up, markets rebounded as low rates and an improving U.S. economy trumped full valuations and lingering geopolitical risks. Concurrently, a slowdown in Europe’s recovery fueled hopes for further monetary accommodation from the European Central Bank, driving global equities higher. Additionally, lower yields on European sovereign bonds made U.S. Treasuries more appealing by comparison, contributing to the persistence of low rates in the United States.

Despite a host of challenges, most asset classes generated solid returns for the six- and 12-month periods ended August 31, 2014, with equities generally outperforming fixed income. Emerging market equities delivered impressive gains. Developed markets also performed well, although the expensive U.S. small cap stocks lagged in 2014. Most fixed income assets produced positive results even as the Fed reduced its open-market purchases. Tax-exempt municipal bonds benefited from a favorable supply-and-demand environment. Short-term interest rates remained near zero, keeping yields on money market securities close to historic lows.

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

Sincerely,

  

Rob Kapito
President, BlackRock Advisors, LLC




 

Asset prices pushed higher over the period despite modest global growth, geopolitical risks and a shift toward tighter U.S. monetary policy.

Rob Kapito
President, BlackRock Advisors, LLC


Total Returns as of August 31, 2014

         6-month      12-month
U.S. large cap equities (S&P 500® Index)
           8.84 %           25.25 %  
U.S. small cap equities (Russell 2000® Index)
           (0.06 )           17.68   
International equities (MSCI Europe, Australasia, Far East Index)
           1.24            16.44   
Emerging market equities (MSCI Emerging Markets Index)
           14.52            19.98   
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)
           0.02            0.05   
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)
           4.35            7.07   
U.S. investment grade bonds (Barclays U.S. Aggregate Bond Index)
           2.74            5.66   
Tax-exempt municipal bonds (S&P Municipal Bond Index)
           4.21            10.55   
U.S. high yield bonds (Barclays U.S. Corporate High Yield 2% Issuer Capped Index)
           2.89            10.57   

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


  THIS PAGE NOT PART OF YOUR FUND REPORT 3
 
  
Trust Summary as of August 31, 2014 BlackRock Core Bond Trust

Trust Overview

BlackRock Core Bond Trust’s (BHK) (the “Trust”) investment objective is to provide current income and capital appreciation. The Trust seeks to achieve its investment objective by investing at least 75% of its assets in bonds that are investment grade quality at the time of investment. The Trust’s investments will include a broad range of bonds, including corporate bonds, US government and agency securities and mortgage-related securities. The Trust may invest directly in such securities or synthetically through the use of derivatives.

On June 6, 2014, the Boards of the Trust, BlackRock Income Opportunity Trust, Inc. (“BNA”) and BlackRock Income Trust, Inc. (“BKT”) approved the reorganizations of BKT and BNA with and into the Trust, with the Trust continuing as the surviving fund after the reorganizations. At a special meeting of shareholders on September 30, 2014, the shareholders of the Trust and BNA approved the reorganization of BNA with and into the Trust, which is expected to be completed in late 2014. The reorganization of BKT with and into the Trust was not approved by BKT shareholders. Consequently, the reorganization of BKT with and into the Trust will not be completed.

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

Portfolio Management Commentary

How did the Trust perform?

•    For the 12-month period ended August 31, 2014, the Trust returned 16.78% based on market price and 16.09% based on NAV. For the same period, the closed-end Lipper Corporate BBB-Rated Debt Funds (Leveraged) category posted an average return of 13.73% based on market price and 11.63% based on NAV. All returns reflect reinvestment of dividends. The Trust’s discount to NAV, which narrowed during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

What factors influenced performance?

•    In a generally positive environment for fixed income markets, spread sectors, including investment grade credit and securitized debt, performed well given strong market fundamentals as well as net negative supply, particularly in corporate credit securities. The largest contributors to the Trust’s performance were positions in corporate credit, specifically high yield, as well as capital securities and investment grade industrials. The Trust also benefited from exposure to US Treasuries and commercial mortgage-backed securities (“CMBS”), non-US dollar positions, sovereign-related debt and agency mortgage-backed securities (“MBS”) 30-year pass-throughs.
•    Based on the view that short-term rates would remain low, the Trust maintained a high level of leverage to augment income generation throughout the period.

Describe recent portfolio activity.

•    The Trust’s allocations remained consistent throughout the 12-month period, with its largest position in investment grade corporate credit, followed by allocations to high yield corporate credit and securitized credits, including CMBS and asset-backed securities (“ABS”).

Describe portfolio positioning at period end.

•    At period end, the Trust maintained diversified exposure to non-government spread sectors including investment grade credit, high yield credit, CMBS, ABS and non-agency residential MBS. The Trust also held exposure to government-related sectors including US Treasury securities, agency debt and agency MBS. The Trust ended the period with a long duration profile.

 
  The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.
4 ANNUAL REPORT AUGUST 31, 2014
 
  
  BlackRock Core Bond Trust

Trust Information

Symbol on New York Stock Exchange (“NYSE”)
     
BHK
Initial Offering Date
     
November 27, 2001
Current Distribution Rate on Closing Market Price as of August 31, 2014 ($13.64)1
     
6.64%
Current Monthly Distribution per Common Share2
     
$0.0755
Current Annualized Distribution per Common Share2
     
$0.9060
Economic Leverage as of August 31, 20143
     
29%
1 Current distribution rate on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. The current distribution rate may consist of income, net realized gains and/or a tax return of capital. Past performance does not guarantee future results.
2 The distribution rate is not constant and is subject to change.
3 Represents reverse repurchase agreements outstanding as a percentage of total managed assets, which is the total assets of the Trust (including any assets attributable to borrowings) minus the sum of liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Trust, please see The Benefits and Risks of Leveraging on page 12.

Market Price and Net Asset Value Per Share Summary




   
8/31/14
   
8/31/13
   
Change
   
High
   
Low
Market Price
        $ 13.64         $ 12.50            9.12 %        $ 14.00         $ 12.27   
Net Asset Value
        $ 15.24         $ 14.05            8.47 %        $ 15.24         $ 13.82   

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

Overview of the Trust’s Long-Term Investments

Portfolio Composition



   
8/31/14
   
8/31/13
Corporate Bonds
           56 %           58 %  
Non-Agency Mortgage-Backed Securities
           10             11    
U.S. Treasury Obligations
           10             8    
U.S. Government Sponsored Agency Securities
           9             10    
Preferred Securities
           8             5    
Asset-Backed Securities
           4             5    
Municipal Bonds
           2             2    
Foreign Agency Obligations
           1             1    

Credit Quality Allocation4



   
8/31/14
   
8/31/13
AAA/Aaa5
           24 %           14 %  
AA/Aa
           7             15    
A
           18             21    
BBB/Baa
           28             23    
BB/Ba
           13             12    
B
           7             13    
CCC/Caa
           1             1    
N/R
           2             1    
4 For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”) if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.
5 The investment advisor evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment advisor has deemed U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations as AAA/Aaa.
     

ANNUAL REPORT AUGUST 31, 2014 5
 
  
Trust Summary as of August 31, 2014 BlackRock Corporate High Yield Fund, Inc.

Trust Overview

BlackRock Corporate High Yield Fund, Inc.’s (HYT) (the “Trust”) primary investment objective is to provide shareholders with current income. The Trust’s secondary investment objective is to provide shareholders with capital appreciation. The Trust seeks to achieve its objectives by investing, under normal market conditions, at least 80% of its assets in domestic and foreign high yield securities, including high yield bonds (commonly referred to as “junk” bonds), corporate loans, convertible debt securities and preferred securities which are below investment grade quality. The Trust may invest directly in such securities or synthetically through the use of derivatives.

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

Portfolio Management Commentary

How did the Trust perform?

•    For the 12-month period ended August 31, 2014, the Trust returned 15.58% based on market price and 16.21% based on NAV. For the same period, the closed-end Lipper High Yield Funds (Leveraged) category posted an average return of 15.47% based on market price and 14.60% based on NAV. All returns reflect reinvestment of dividends. The Trust’s discount to NAV, which widened during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

What factors influenced performance?

•    The Trust benefited from its allocation to the equity of select high yield companies, which we prefer to higher beta CCC-rated bonds in this environment. In particular, equity positions in General Motors Co., Ally Financial, Inc., The Goodyear Tire & Rubber Co., American International Group, Inc. and American Capital Ltd. were notable contributors. Also adding to performance was issuer selection within high yield bonds and bank loans, with strong returns from Caesars Entertainment Resort Properties, LLC, TXU Corp., HD Supply, Inc. and Amaya Gaming.
•    The Trust’s limited exposure to bonds in the BB-rated quality range was a disadvantage as these bonds outperformed B-rated bonds, in which the Trust held a large allocation. The Trust’s exposure to bank loans detracted from results as the asset class underperformed high yield bonds during the period.

Describe recent portfolio activity.

•    After five years of a favorable high yield market, pricing differentials between sectors have compressed. In this environment, the Trust’s investment decisions were focused on bottom-up security selection over top-down sector allocation, The Trust held a broader than normal portfolio, allocated across roughly 500 issuers (versus the typical 250 to 300), although 25 names represented about one-third of portfolio exposure. The Trust maintained a low exposure to BB-rated bonds given their low coupons and greater sensitivity to rising interest rates, while maintaining non-benchmark exposure to bank loans and the equity of select high yield companies.

Describe portfolio positioning at period end.

•    At period end, the Trust held 75% of its total portfolio in corporate bonds, 12% in floating rate loan interests (bank loans) and 8% in common stocks, with the remainder invested in preferred stocks and other interests.

 
  The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.
6 ANNUAL REPORT AUGUST 31, 2014
 
  
  BlackRock Corporate High Yield Fund, Inc.

Trust Information

Symbol on NYSE
     
HYT
Initial Offering Date
     
May 30, 2003
Current Distribution Rate on Closing Market Price as of August 31, 2014 ($12.07)1
     
7.51%
Current Monthly Distribution per Common Share2
     
$0.0755
Current Annualized Distribution per Common Share2
     
$0.9060
Economic Leverage as of August 31, 20143
     
30%
1 Current distribution rate on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. The current distribution rate may consist of income, net realized gains and/or a tax return of capital. Past performance does not guarantee future results.
2 The distribution rate is not constant and is subject to change.
3 Represents bank borrowings as a percentage of total managed assets, which is the total assets of the Trust (including any assets attributable to borrowings) minus the sum of liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Trust, please see The Benefits and Risks of Leveraging on page 12.

Market Price and Net Asset Value Per Share Summary




   
8/31/14
   
8/31/13
   
Change
   
High
   
Low
Market Price
        $ 12.07         $ 11.37            6.16 %        $ 12.65         $ 11.34   
Net Asset Value
        $ 13.47         $ 12.62            6.74 %        $ 13.55         $ 12.62   

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

Overview of the Trust’s Long-Term Investments

Portfolio Composition



   
8/31/14
   
8/31/13

   
Corporate Bonds
           75 %           76 %  
Floating Rate Loan Interests
           12             14    
Common Stocks
           9             7    
Preferred Securities
           3             2    
Asset-Backed Securities
           1             1    

Credit Quality Allocation4



   
8/31/14
   
8/31/135
AA/Aa
           6              
A
           6           6  
BBB/Baa
           4 %           4 %  
BB/Ba
           33             28    
B
           38             46    
CCC/Caa
           13             10    
N/R
           12             12    
4 For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P or Moody’s if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.
5 Information has been revised to conform to current year presentation.
6 Representing less than 0.5% of the Trust’s long-term investments.
     

ANNUAL REPORT AUGUST 31, 2014 7
 
  
Trust Summary as of August 31, 2014 BlackRock Income Opportunity Trust, Inc.

Trust Overview

BlackRock Income Opportunity Trust, Inc.’s (BNA) (the “Trust”) investment objective is to provide current income and capital appreciation. The Trust seeks to achieve its investment objective by investing at least 75% of its assets in bonds that are investment grade quality at the time of investment. The Trust’s investments will include a broad range of bonds, including corporate bonds, US government and agency securities and mortgage-related securities. The Trust may invest directly in such securities or synthetically through the use of derivatives.

On June 6, 2014, the Boards of the Trust, BlackRock Core Bond Trust (“BHK”) and BlackRock Income Trust, Inc. (“BKT”) approved the reorganizations of the Trust and BKT with and into BHK, with BHK continuing as the surviving fund after the reorganizations. At a special meeting of shareholders on September 30, 2014, the shareholders of the Trust and BHK approved the reorganization of the Trust with and into BHK, which is expected to be completed in late 2014. The reorganization of BKT with and into BHK was not approved by BKT shareholders. Consequently, the reorganization of BKT with and into BHK will not be completed.

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

Portfolio Management Commentary

How did the Trust perform?

•    For the 12-month period ended August 31, 2014, the Trust returned 17.73% based on market price and 16.46% based on NAV. For the same period, the closed-end Lipper Corporate BBB-Rated Debt Funds (Leveraged) category posted an average return of 13.73% based on market price and 11.63% based on NAV. All returns reflect reinvestment of dividends. The Trust’s discount to NAV, which narrowed during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

What factors influenced performance?

•    The Trust benefited from the generally positive market environment, with positions in investment grade corporate credit and high yield being the largest contributors to returns. The Trust’s allocations to U.S. Treasuries and agency mortgage-backed securities (“MBS”) also contributed positively as the 10-year Treasury rate unexpectedly rallied lower during the period. (Bond prices rise when rates fall.) Exposure to securitized assets, including commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) also had a positive impact on performance.

•    As most fixed income sectors performed well during the period, the only detractor from the Trust’s performance was the cost of derivatives used to manage the Trust’s duration (sensitivity to interest rate movements).

Describe recent portfolio activity.

•    The Trust’s allocations remained consistent throughout the 12-month period, with its largest position in investment grade and high yield corporate credit, followed by allocations to securitized credits, specifically, ABS and CMBS.

Describe portfolio positioning at period end.

•    At period end, the Trust maintained diversified exposure to non-government spread sectors including investment grade credit, high yield credit, CMBS, ABS and non-agency residential MBS. The Trust also held exposure to government-related sectors including U.S. Treasury securities, agency debt and agency MBS. The Trust ended the period with a long duration profile.

 
  The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.
8 ANNUAL REPORT AUGUST 31, 2014
 
  
  BlackRock Income Opportunity Trust, Inc.

Trust Information

Symbol on NYSE
     
BNA
Initial Offering Date
     
December 20, 1991
Current Distribution Rate on Closing Market Price as of August 31, 2014 ($10.59)1
     
6.74%
Current Monthly Distribution per Common Share2
     
$0.0595
Current Annualized Distribution per Common Share2
     
$0.7140
Economic Leverage as of August 31, 20143
     
29%
1 Current distribution rate on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. The current distribution rate may consist of income, net realized gains and/or a tax return of capital. Past performance does not guarantee future results.
2 The distribution rate is not constant and is subject to change.
3 Represents reverse repurchase agreements outstanding as a percentage of total managed assets, which is the total assets of the Trust (including any assets attributable to borrowings) minus the sum of liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Trust, please see The Benefits and Risks of Leveraging on page 12.

Market Price and Net Asset Value Per Share Summary




   
8/31/14
   
8/31/13
   
Change
   
High
   
Low
Market Price
        $ 10.59         $ 9.64            9.85 %        $ 10.86         $ 9.54   
Net Asset Value
        $ 11.91         $ 10.96            8.67 %        $ 11.92         $ 10.79   

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

Overview of the Trust’s Long-Term Investments

Portfolio Composition



   
8/31/14
   
8/31/13
Corporate Bonds
           55 %           58 %  
Non-Agency Mortgage-Backed Securities
           11             11    
U.S. Treasury Obligations
           9             7    
U.S. Government Sponsored Agency Securities
           9             10    
Preferred Securities
           9             6    
Asset-Backed Securities
           4             5    
Municipal Bonds
           2             2    
Foreign Agency Obligations
           1             1    

Credit Quality Allocation4



   
8/31/14
   
8/31/13
AAA/Aaa5
           26 %           24 %  
AA/Aa
           5             4    
A
           20             21    
BBB/Baa
           22             24    
BB/Ba
           15             13    
B
           8             12    
CCC/Caa
           1             1    
N/R
           3             1    
4 For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P or Moody’s if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.
5 The investment advisor evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment advisor has deemed U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations as AAA/Aaa.
     

ANNUAL REPORT AUGUST 31, 2014 9
 
  
Trust Summary as of August 31, 2014 BlackRock Income Trust, Inc.

Trust Overview

BlackRock Income Trust, Inc.’s (BKT) (the “Trust”) investment objective is to manage a portfolio of high-quality securities to achieve both preservation of capital and high monthly income. The Trust seeks to achieve its investment objective by investing at least 65% of its assets in mortgage-backed securities. The Trust invests at least 80% of its assets in securities that are (i) issued or guaranteed by the US government or one of its agencies or instrumentalities or (ii) rated at the time of investment either AAA by S&P or Aaa by Moody’s. The Trust may invest directly in such securities or synthetically through the use of derivatives.

On June 6, 2014, the Boards of the Trust, BlackRock Income Opportunity Trust, Inc. (“BNA”) and BlackRock Core Bond Trust (“BHK”) approved the reorganizations of the Trust and BNA with and into BHK, with BHK continuing as the surviving fund after the reorganizations. At a special meeting of shareholders on September 30, 2014, the reorganization of the Trust with and into BHK was not approved by BKT shareholders. Consequently, the reorganization of BKT with and into BHK will not be completed.

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

Portfolio Management Commentary

How did the Trust perform?

•    For the 12-month period ended August 31, 2014, the Trust returned 7.12% based on market price and 6.05% based on NAV. For the same period, the closed-end Lipper US Mortgage Funds category posted an average return of 16.32% based on market price and 13.06% based on NAV. All returns reflect reinvestment of dividends. The Trust’s discount to NAV, which narrowed during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

What factors influenced performance?

•    Positive contributions to returns came from the Trust’s exposure to securitized assets, specifically, agency collateralized mortgage obligations (“CMOs”) and agency mortgage derivatives (including interest-only and principal-only securities). The Trust continued to benefit from exposure to Alt-A (riskier than prime, but less risky than subprime) and prime non-agency residential mortgage-backed securities (“MBS”), as well as commercial mortgage-backed securities (“CMBS”) as spreads tightened through most of the period.
•    The Trust uses interest rate derivatives including futures, options, swaps and swaptions, mainly for the purpose of managing duration, convexity (the rate at which duration changes in response to interest rate movements) and yield curve positioning. During the period, the Trust held short positions on U.S. Treasuries in order to manage the duration profile of the portfolio. These positions were beneficial to the Trust’s performance during certain periods of rising interest rates. However, for the period as a whole, the Trust’s derivatives holdings had a negative impact on returns.

Describe recent portfolio activity.

•    During the 12-month period, the Trust increased overall exposure to agency MBS, while reducing exposure to 30-year pass-through MBS in favor of agency CMO securities exhibiting attractive spreads, strong income and low convexity.

Describe portfolio positioning at period end.

•    As of period end, the Trust maintained exposure to high quality agency MBS with varying maturities and coupon rates. The Trust continued to favor agency CMOs, while holding low exposure to 15- and 30-year agency pass-through issues. The Trust continued to hold modest allocations in asset-backed securities (“ABS”), non-agency MBS and CMBS based on improving underlying fundamentals.

 
  The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.
10 ANNUAL REPORT AUGUST 31, 2014
 
  
  BlackRock Income Trust, Inc.

Trust Information

Symbol on NYSE
     
BKT
Initial Offering Date
     
July 22, 1988
Current Distribution Rate on Closing Market Price as of August 31, 2014 ($6.42)1
     
6.54%
Current Monthly Distribution per Common Share2
     
$0.035
Current Annualized Distribution per Common Share2
     
$0.420
Economic Leverage as of August 31, 20143
     
31%
1 Current distribution rate on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. The current distribution rate may consist of income, net realized gains and/or a tax return of capital. Past performance does not guarantee future results.
2 The distribution rate is not constant and is subject to change.
3 Represents reverse repurchase agreements outstanding as a percentage of total managed assets, which is the total assets of the Trust (including any assets attributable to borrowings) minus the sum of liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Trust, please see the Benefits and Risks of Leveraging on page 12.

Market Price and Net Asset Value Per Share Summary




   
8/31/14
   
8/31/13
   
Change
   
High
   
Low
Market Price
        $ 6.42         $ 6.40            0.31 %        $ 6.72         $ 6.31   
Net Asset Value
        $ 7.27         $ 7.32            (0.68 )%        $ 7.41         $ 7.21   

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

Overview of the Trust’s Long-Term Investments

Portfolio Composition



   
8/31/14
   
8/31/13
U.S. Government Sponsored Agency Securities
           97 %           96 %  
Non-Agency Mortgage-Backed Securities
           1             2    
U.S. Treasury Obligations
           1             1    
Asset-Backed Securities
           1             1    

Credit Quality Allocation4



   
8/31/14
   
8/31/13
AAA/Aaa5
           98 %           100 %  
AA
           1                
NR
           1                
4 For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P or Moody’s if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.
5 The investment advisor evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment advisor has deemed U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations as AAA/Aaa.
     

ANNUAL REPORT AUGUST 31, 2014 11
 
  
The Benefits and Risks of Leveraging    

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

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

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

However, in order to benefit Common Shareholders, the return on assets purchased with leverage proceeds must exceed the ongoing costs associated with the leverage. If interest and other costs of leverage exceed the Trust’s return on assets purchased with leverage proceeds, income to shareholders will be lower than if the Trust had not used leverage. Furthermore, the value of the Trust’s portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can influence the value of portfolio investments. In contrast, the


value of the Trust’s obligations under its leverage arrangement generally does not fluctuate in relation to interest rates. As a result, changes in interest rates can influence the Trust’s NAVs positively or negatively. Changes in the future direction of interest rates are very difficult to predict accurately, and there is no assurance that a Trust’s intended leveraging strategy will be successful.

Leverage also will generally cause greater changes in the Trusts’ NAVs, market prices and dividend rates than comparable portfolios without leverage. In a declining market, leverage is likely to cause a greater decline in the net asset value and market price of a Trust’s Common Shares than if the Trust were not leveraged. In addition, the Trust may be required to sell portfolio securities at inopportune times or at distressed values in order to comply with regulatory requirements applicable to the use of leverage or as required by the terms of leverage instruments, which may cause the Trust to incur losses. The use of leverage may limit the Trust’s ability to invest in certain types of securities or use certain types of hedging strategies. The Trust will incur expenses in connection with the use of leverage, all of which are borne by Common Shareholders and may reduce income to the Common Shares.

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

Under the Investment Company Act of 1940, as amended (the “1940 Act”), the Trust is permitted to issue debt up to 3313% of their total managed assets. A Trust may voluntarily elect to limit its leverage to less than the maximum amount permitted under the 1940 Act. In addition, a Trust may also be subject to certain asset coverage, leverage or portfolio composition requirements imposed by its credit facility, which may be more stringent than those imposed by the 1940 Act.

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



    

Derivative Financial Instruments

The Trusts may invest in various derivative financial instruments, including financial futures contracts, foreign currency exchange contracts, options and swaps, as specified in Note 4 of the Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market, equity, credit, interest rate, foreign currency exchange rate and/or other risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative financial instrument. The


Trusts’ ability to use a derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require a Trust to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation a Trust can realize on an investment, may result in lower dividends paid to shareholders and/or may cause a Trust to hold an investment that it might otherwise sell. The Trusts’ investments in these instruments are discussed in detail in the Notes to Financial Statements.


12 ANNUAL REPORT AUGUST 31, 2014
 
  
Schedule of Investments August 31, 2014 BlackRock Core Bond Trust (BHK)
(Percentages shown are based on Net Assets)
Asset-Backed Securities           Par
(000)
  Value
Asset-Backed Securities — 6.4%
AmeriCredit Automobile Receivables Trust, Series 2011-5, Class C, 3.44%, 10/08/17
     
USD
    400      $  409,335  
Apidos CDO XI, Series 2012-11A, Class D, 4.48%, 1/17/23 (a)(b)
     
 
    600       599,980  
Atrium CDO Corp., Series 9A, Class D, 3.74%, 2/28/24 (a)(b)
     
 
    750       716,947  
Babson CLO Ltd., Series 2012-1X, Class B, 2.73%, 4/15/22 (b)
     
 
    500       490,101  
Benefit Street Partners CLO III, Ltd., Series 2013-IIIA, Class C, 3.48%, 1/20/26 (a)(b)
     
 
    1,000       923,836  
Brookside Mill CLO, Ltd., Series 2013-1A, Class C1, 2.93%, 4/17/25 (a)(b)
     
 
    500       487,352  
CarMax Auto Owner Trust, Series 2012-1:
                           
Class B, 1.76%, 8/15/17
     
 
    210       213,025  
Class C, 2.20%, 10/16/17
     
 
    125       127,555  
Class D, 3.09%, 8/15/18
     
 
    155       158,080  
CenterPoint Energy Transition Bond Co. LLC, Series 2012-1, Class A3, 3.03%, 10/15/25
     
 
    1,105       1,119,618  
CIFC Funding 2014-IV, Ltd., Series 2014-4A, Class D, 3.64%, 10/17/26 (a)(b)(c)
     
 
    2,000       1,852,000  
CIFC Funding Ltd. (a)(b):
                           
Series 2012-1AR, Class B1R, 4.39%, 8/14/24
     
 
    750       743,850  
Series 2013-IA, Class B, 3.04%, 4/16/25
     
 
    500       489,156  
Series 2013-IA, Class C, 3.83%, 4/16/25
     
 
    500       477,036  
Countrywide Asset-Backed Certificates, Series 2006-13, Class 3AV2, 0.31%, 1/25/37 (b)
     
 
    860       809,636  
Dryden 34 Senior Loan Fund, Series 2014-34A, Class C, 3.03%, 10/15/26 (a)(b)
     
 
    2,000       1,960,000  
Ford Credit Floorplan Master Owner Trust, Series 2012-2:
                           
Class B, 2.32%, 1/15/19
     
 
    245       249,967  
Class C, 2.86%, 1/15/19
     
 
    105       108,453  
Class D, 3.50%, 1/15/19
     
 
    200       209,071  
Galaxy CLO Ltd., Series 2014-18A, Class C1, 3.23%, 10/15/26 (a)(b)
     
 
    1,625       1,592,500  
Galaxy XV CLO Ltd., Series 2013-15A, Class C, 2.83%, 4/15/25 (a)(b)
     
 
    500       485,323  
ING IM CLO Ltd., Series 2012-2A, Class C, 3.68%, 10/15/22 (a)(b)
     
 
    750       750,197  
Nelnet Student Loan Trust (b):
                           
Series 2006-1, Class A5, 0.34%, 8/23/27
     
 
    525       517,032  
Series 2008-3, Class A4, 1.88%, 11/25/24
     
 
    615       645,157  
Octagon Investment Partners XX Ltd., Series 2014-1A (a)(b):
                           
Class C, 3.04%, 8/12/26
     
 
    1,000       981,100  
Class D, 3.89%, 8/12/26
     
 
    1,000       959,900  
OZLM Funding III, Ltd., Series 2013-3A, Class B, 3.33%, 1/22/25 (a)(b)
     
 
    750       745,725  
OZLM VII Ltd., Series 2014-7A, Class C, 3.86%, 7/17/26 (a)(b)
     
 
    470       442,002  
Santander Drive Auto Receivables Trust:
                           
Series 2010-2, Class C, 3.89%, 7/17/17
     
 
    602       604,433  
Series 2010-B, Class C, 3.02%, 10/17/16 (a)
     
 
    40       39,879  
Series 2011-1, Class D, 4.01%, 2/15/17
     
 
    940       964,887  
Series 2012-1, Class B, 2.72%, 5/16/16
     
 
    96       95,898  
Series 2012-1, Class C, 3.78%, 11/15/17
     
 
    325       332,363  

 

Asset-Backed Securities           Par
(000)
  Value
Asset-Backed Securities (concluded)
SLM Private Credit Student Loan Trust, Series 2004-B, Class A2, 0.43%, 6/15/21 (b)
     
USD
    109      $  108,189  
SLM Private Education Loan Trust, Series 2012-A, Class A1, 1.56%, 8/15/25 (a)(b)
     
 
    190       192,298  
SLM Student Loan Trust:
                           
Series 2008-5, Class A3, 1.53%, 1/25/18 (b)
     
 
    416       418,953  
Series 2008-5, Class A4, 1.93%, 7/25/23 (b)
     
 
    615       642,133  
Series 2012-A, Class A2, 3.83%, 1/17/45 (a)
     
 
    345       361,818  
Series 2014-A, Class B, 3.50%, 11/15/44 (a)
     
 
    250       244,638  
Structured Asset Securities Corp., Series 2002-AL1, Class A2, 3.45%, 2/25/32
     
 
    1,019       1,014,172  
Symphony CLO VII, Ltd., Series 2011-7A, Class E, 3.84%, 7/28/21 (a)(b)
     
 
    750       723,920  
World Financial Network Credit Card Master Trust, Series 2012-C, Class C, 4.55%, 8/15/22
     
 
    1,180       1,231,459  
 
     
 
            26,238,974  
Interest Only Asset-Backed Securities — 0.1%
Sterling Bank Trust, Series 2004-2, Class Note, 2.08%, 3/30/30 (a)
     
 
    2,435       176,505  
Sterling Coofs Trust, Series 2004-1, Class A, 2.36%, 4/15/29 (a)
     
 
    4,974       341,984  
 
     
 
            518,489  
Total Asset-Backed Securities — 6.5%
      26,757,463  

Corporate Bonds
Aerospace & Defense — 0.6%
Huntington Ingalls Industries, Inc., 7.13%, 3/15/21
     
 
    230       250,125  
United Technologies Corp. (d):
                           
4.88%, 5/01/15
     
 
    1,125       1,158,807  
6.13%, 7/15/38
     
 
    700       911,721  
 
     
 
            2,320,653  
Airlines — 2.0%
                           
American Airlines Pass-Through Trust, Series 2013-2:
                           
Class A, 4.95%, 7/15/24
     
 
    2,223       2,395,331  
Class B, 5.60%, 1/15/22
     
 
    488       506,206  
Continental Airlines Pass-Through Trust:
                           
Series 2010-1, Class B, 6.00%, 7/12/20
     
 
    421       448,375  
Series 2012-3, Class C, 6.13%, 4/29/18
     
 
    500       530,000  
United Airlines Pass-Through Trust:
                           
Series 2013-1, Class A, 4.30%, 2/15/27
     
 
    2,000       2,050,000  
Series 2014-2, Class B, 4.63%, 3/03/24
     
 
    1,375       1,375,000  
US Airways Pass-Through Trust, Series 2012-1, Class C, 9.13%, 10/01/15
     
 
    1,084       1,143,747  
 
     
 
            8,448,659  
Auto Components — 0.8%
Icahn Enterprises LP/Icahn Enterprises Finance Corp.:
             
3.50%, 3/15/17
     
 
    91       91,569  
4.88%, 3/15/19
     
 
    1,330       1,366,575  
6.00%, 8/01/20
     
 
    953       1,017,327  
5.88%, 2/01/22
     
 
    911       949,718  
 
     
 
            3,425,189  


Portfolio Abbreviations

ABS
ADR
ADS
ARC
AUD
CAD
CLO
 
Asset-Backed Security
American Depositary Receipts
American Depositary Shares
Auction Rate Certificates
Australian Dollar
Canadian Dollar
Collateralized Loan Obligation
 
CMO
DIP
EUR
GBP
GO
LIBOR
OIS
 
Collateralized Mortgage Obligation
Debtor-In-Possession
Euro
British Pound
General Obligation Bonds
London Interbank Offered Rate
Overnight Indexed Swap
 
OTC
PIK
Radian
RB
S&P
USD
 
Over-the-Counter
Payment-In-Kind
Radian Guaranty, Inc.
Revenue Bonds
Standard and Poor’s
U.S. Dollar

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 13
 
  
Schedule of Investments (continued)  BlackRock Core Bond Trust (BHK)
(Percentages shown are based on Net Assets)
Corporate Bonds           Par
(000)
  Value
Automobiles — 1.1%
                           
Ford Motor Co., 4.75%, 1/15/43
     
USD
    2,250      $ 2,355,037  
General Motors Co., 6.25%, 10/02/43
     
 
    1,253       1,469,142  
Jaguar Land Rover Automotive PLC, 4.13%, 12/15/18 (a)
     
 
    750       761,250  
 
     
 
            4,585,429  
Banks — 4.1%
                           
Barclays Bank PLC, 7.63%, 11/21/22
     
 
    1,750       1,965,469  
CIT Group, Inc.:
                           
5.50%, 2/15/19 (a)
     
 
    398       429,343  
5.38%, 5/15/20
     
 
    1,650       1,786,125  
Depfa ACS Bank, 5.13%, 3/16/37 (a)
     
 
    3,775       4,515,768  
HSBC Bank Brasil SA — Banco Multiplo, 4.00%, 5/11/16 (a)
     
 
    1,400       1,442,000  
HSBC Bank PLC, 3.10%, 5/24/16 (a)
     
 
    700       728,813  
HSBC Holdings PLC:
                           
4.25%, 3/14/24
     
 
    1,010       1,048,506  
6.10%, 1/14/42
     
 
    305       396,442  
Rabobank Nederland:
                           
3.88%, 2/08/22
     
 
    1,390       1,487,167  
3.95%, 11/09/22
     
 
    1,500       1,542,769  
Wells Fargo & Co., 3.50%, 3/08/22 (d)
     
 
    1,390       1,447,846  
 
     
 
             16,790,248  
Building Products — 0.1%
Cemex SAB de CV, 5.88%, 3/25/19 (a)
     
 
    200       209,500  
Capital Markets — 3.6%
CDP Financial, Inc., 5.60%, 11/25/39 (a)(d)
     
 
    2,935       3,782,613  
The Goldman Sachs Group, Inc. (d):
                           
5.38%, 3/15/20
     
 
    1,220       1,378,362  
5.25%, 7/27/21
     
 
    3,165       3,566,778  
5.75%, 1/24/22
     
 
    1,800       2,088,945  
Morgan Stanley:
                           
4.20%, 11/20/14
     
 
    490       493,953  
4.00%, 7/24/15
     
 
    410       422,780  
6.25%, 8/28/17 (d)
     
 
    1,930       2,184,916  
Murray Street Investment Trust I, 4.65%, 3/09/17 (e)
     
 
    825       887,461  
 
     
 
            14,805,808  
Chemicals — 1.3%
                           
Axalta Coating Systems US Holdings, Inc./Axalta Coating Systems Dutch Holding BV, 7.38%, 5/01/21 (a)
     
 
    151       164,590  
Axiall Corp., 4.88%, 5/15/23
     
 
    152       152,190  
The Dow Chemical Co., 4.13%, 11/15/21
     
 
    350       374,869  
Huntsman International LLC, 4.88%, 11/15/20
     
 
    298       303,960  
Methanex Corp., 3.25%, 12/15/19
     
 
    2,074       2,127,341  
PetroLogistics LP/PetroLogistics Finance Corp., 6.25%, 4/01/20
     
 
    161       177,503  
Rockwood Specialties Group, Inc., 4.63%, 10/15/20
     
 
    1,800       1,872,000  
 
     
 
            5,172,453  
Commercial Services & Supplies — 1.0%
ADS Waste Holdings, Inc., 8.25%, 10/01/20
     
 
    246       261,990  
The ADT Corp., 4.88%, 7/15/42
     
 
    539       458,150  
Aviation Capital Group Corp. (a):
                           
4.63%, 1/31/18
     
 
    650       680,991  
7.13%, 10/15/20
     
 
    900       1,027,407  
Brand Energy & Infrastructure Services, Inc., 8.50%, 12/01/21 (a)
     
 
    217       225,680  
Mobile Mini, Inc., 7.88%, 12/01/20
     
 
    320       345,600  
United Rentals North America, Inc.:
                           
5.75%, 7/15/18
     
 
    194       204,185  
7.38%, 5/15/20
     
 
    385       419,650  
7.63%, 4/15/22
     
 
    452       507,370  
 
     
 
            4,131,023  

 

Corporate Bonds           Par
(000)
  Value
Communications Equipment — 1.2%
ADC Telecommunications, Inc., 3.50%, 7/15/15 (f)
     
USD
    4,330      $  4,373,300  
Zayo Group LLC/Zayo Capital, Inc., 8.13%, 1/01/20
     
 
    530       571,737  
 
     
 
            4,945,037  
Construction & Engineering — 0.1%
ABB Finance USA, Inc., 4.38%, 5/08/42
     
 
    192       201,970  
BlueLine Rental Finance Corp., 7.00%, 2/01/19 (a)
     
 
    96       101,520  
Safway Group Holding LLC/Safway Finance Corp., 7.00%, 5/15/18 (a)
     
 
    200       210,500  
 
     
 
            513,990  
Construction Materials — 1.0%
Allegion US Holding Co., Inc., 5.75%, 10/01/21
     
 
    446        467,185  
HD Supply, Inc.:
                           
8.13%, 4/15/19
     
 
    1,815       1,978,350  
7.50%, 7/15/20
     
 
    1,544       1,659,800  
Lafarge SA, 7.13%, 7/15/36
     
 
    135       154,575  
 
     
 
            4,259,910  
Consumer Finance — 0.8%
Discover Financial Services, 3.85%, 11/21/22
     
 
    250       256,017  
Ford Motor Credit Co. LLC:
                           
8.13%, 1/15/20
     
 
    1,265       1,605,981  
4.25%, 9/20/22
     
 
    800       854,769  
SLM Corp., 6.25%, 1/25/16
     
 
    661       700,660  
 
     
 
            3,417,427  
Containers & Packaging — 0.3%
Crown Americas LLC/Crown Americas Capital
Corp. III, 6.25%, 2/01/21
     
 
    91       97,143  
Sealed Air Corp. (a):
                           
6.50%, 12/01/20
     
 
    550       605,000  
8.38%, 9/15/21
     
 
    225       253,125  
Smurfit Kappa Acquisitions, 4.88%, 9/15/18 (a)
     
 
    410       425,375  
 
     
 
            1,380,643  
Diversified Consumer Services — 0.1%
APX Group, Inc., 6.38%, 12/01/19
     
 
    266       269,990  
Diversified Financial Services — 8.2%
Aircastle Ltd., 6.25%, 12/01/19
     
 
    708       766,410  
Ally Financial, Inc.:
                           
5.50%, 2/15/17
     
 
    1,500       1,601,250  
6.25%, 12/01/17
     
 
    160       176,200  
8.00%, 3/15/20
     
 
    560       680,400  
8.00%, 11/01/31
     
 
    300       388,125  
Bank of America Corp. (d):
                           
5.63%, 7/01/20
     
 
    1,100       1,260,607  
3.30%, 1/11/23
     
 
    4,990       4,948,513  
Capital One Financial Corp., 4.75%, 7/15/21
     
 
    960       1,065,695  
FMR LLC, 4.95%, 2/01/33 (a)
     
 
    1,150       1,278,895  
General Electric Capital Corp.:
                           
6.15%, 8/07/37 (d)
     
 
    2,150       2,737,885  
6.88%, 1/10/39
     
 
    135       186,937  
General Motors Financial Co., Inc., 4.25%, 5/15/23
     
 
    401       409,521  
IntercontinentalExchange Group, Inc., 4.00%, 10/15/23
     
 
    235       250,047  
Intesa Sanpaolo SpA, 5.02%, 6/26/24 (a)
     
 
    1,145       1,155,713  
Jefferies Finance LLC/JFIN Co-Issuer Corp., 7.38%, 4/01/20 (a)
     
 
    1,250       1,306,250  
JPMorgan Chase & Co. (d):
                           
3.70%, 1/20/15
     
 
    3,425       3,467,785  
6.30%, 4/23/19
     
 
    2,000       2,347,590  
JPMorgan Chase Bank NA, 6.00%, 10/01/17
     
 
    800       904,972  
Macquarie Bank Ltd., 10.25%, 6/20/57 (b)
     
 
    900       1,026,000  
Moody’s Corp., 4.50%, 9/01/22
     
 
    900       958,425  
Northern Trust Corp., 3.95%, 10/30/25
     
 
    4,000       4,185,768  


See Notes to Financial Statements.

14 ANNUAL REPORT AUGUST 31, 2014
 
  
Schedule of Investments (continued)  BlackRock Core Bond Trust (BHK)
(Percentages shown are based on Net Assets)
Corporate Bonds           Par
(000)
  Value
Diversified Financial Services (concluded)
Reynolds Group Issuer, Inc.:
                           
7.13%, 4/15/19
     
USD
    200      $  207,750  
7.88%, 8/15/19
     
 
    560       606,200  
5.75%, 10/15/20
     
 
    1,000       1,045,000  
6.88%, 2/15/21
     
 
    680       728,450  
 
     
 
            33,690,388  
Diversified Telecommunication Services — 3.1%
CenturyLink, Inc., Series V, 5.63%, 4/01/20
     
 
    400       423,000  
Level 3 Financing, Inc.:
                           
8.13%, 7/01/19
     
 
    698       755,585  
8.63%, 7/15/20
     
 
    650       719,875  
Telecom Italia Capital SA, 6.00%, 9/30/34
     
 
    1,550       1,550,000  
Verizon Communications, Inc. (d):
                           
3.50%, 11/01/21
     
 
    500        518,931  
6.40%, 2/15/38
     
 
    3,483       4,354,474  
6.55%, 9/15/43
     
 
    3,376       4,348,224  
Windstream Corp.:
                           
7.75%, 10/15/20
     
 
    100       107,750  
6.38%, 8/01/23
     
 
    20       20,050  
 
     
 
            12,797,889  
Electric Utilities — 4.6%
The Cleveland Electric Illuminating Co.:
                           
8.88%, 11/15/18
     
 
    121       152,411  
5.95%, 12/15/36
     
 
    217       256,681  
CMS Energy Corp., 5.05%, 3/15/22
     
 
    915       1,038,289  
ComEd Financing III, 6.35%, 3/15/33
     
 
    150       153,375  
Duke Energy Carolinas LLC:
                           
6.10%, 6/01/37
     
 
    315       399,506  
6.00%, 1/15/38 (d)
     
 
    825       1,069,758  
4.25%, 12/15/41 (d)
     
 
    375       388,681  
Duke Energy Florida, Inc., 6.40%, 6/15/38
     
 
    430       586,855  
E.ON International Finance BV, 6.65%, 4/30/38 (a)(d)
     
 
    1,525       1,978,501  
Electricite de France SA, 5.60%, 1/27/40 (a)(d)
     
 
    1,400       1,644,663  
Florida Power Corp., 6.35%, 9/15/37 (d)
     
 
    1,325       1,801,015  
Jersey Central Power & Light Co., 7.35%, 2/01/19
     
 
    245       294,263  
Ohio Power Co., Series D, 6.60%, 3/01/33
     
 
    1,500       1,975,527  
PacifiCorp, 6.25%, 10/15/37
     
 
    575       765,630  
Public Service Co. of Colorado, Series 17, 6.25%, 9/01/37 (d)
     
 
    1,200       1,618,200  
Southern California Edison Co.:
                           
5.63%, 2/01/36
     
 
    625       780,361  
Series A, 5.95%, 2/01/38 (d)
     
 
    1,075       1,382,361  
Virginia Electric and Power Co., Series A, 6.00%, 5/15/37 (d)
     
 
    2,000       2,575,904  
 
     
 
            18,861,981  
Energy Equipment & Services — 2.4%
Calfrac Holdings LP, 7.50%, 12/01/20 (a)
     
 
    470       499,375  
Ensco PLC:
                           
3.25%, 3/15/16
     
 
    160       165,675  
4.70%, 3/15/21 (d)
     
 
    1,745       1,899,766  
EOG Resources, Inc., 2.63%, 3/15/23 (d)
     
 
    1,902       1,850,779  
Genesis Energy LP/Genesis Energy Finance Corp., 5.75%, 2/15/21
     
 
    71       73,307  
GrafTech International Ltd., 6.38%, 11/15/20
     
 
    580       600,300  
Noble Holding International Ltd., 5.25%, 3/15/42
     
 
    350       369,052  
Peabody Energy Corp.:
                           
6.00%, 11/15/18
     
 
    1,251       1,288,530  
6.25%, 11/15/21
     
 
    1,239       1,234,354  
Seadrill Ltd., 6.13%, 9/15/17 (a)
     
 
    1,590       1,641,675  
Transocean, Inc., 6.50%, 11/15/20
     
 
    350       395,876  
 
     
 
            10,018,689  
Food & Staples Retailing — 0.1%
Rite Aid Corp., 6.75%, 6/15/21
     
 
    279       296,089  

 

Corporate Bonds           Par
(000)
  Value
Food Products — 0.5%
                           
Barry Callebaut Services NV, 5.50%, 6/15/23 (a)
     
USD
    593      $  626,000  
Kraft Foods Group, Inc., 5.00%, 6/04/42
     
 
    997       1,084,150  
Smithfield Foods, Inc., 5.88%, 8/01/21 (a)
     
 
    169       180,830  
 
     
 
            1,890,980  
Health Care Equipment & Supplies — 0.4%
Boston Scientific Corp., 6.25%, 11/15/15
     
 
    1,251       1,330,170  
Teleflex, Inc., 6.88%, 6/01/19
     
 
    385       407,137  
 
     
 
            1,737,307  
Health Care Providers & Services — 4.1%
Aviv Healthcare Properties LP/Aviv Healthcare Capital Corp., 7.75%, 2/15/19
     
 
    175        185,063  
CHS/Community Health Systems, Inc., 5.13%, 8/15/18
     
 
    400       416,000  
ConvaTec Healthcare E SA, 7.38%, 12/15/17 (a)
     
EUR
    494       681,925  
HCA Holdings, Inc., 7.75%, 5/15/21
     
USD
    140       152,600  
HCA, Inc.:
                           
3.75%, 3/15/19
     
 
    130       130,975  
6.50%, 2/15/20
     
 
    2,198       2,459,012  
4.75%, 5/01/23
     
 
    1,161       1,171,159  
Symbion, Inc., 8.00%, 6/15/16
     
 
    455       473,769  
Tenet Healthcare Corp.:
                           
6.25%, 11/01/18
     
 
    859       936,310  
6.00%, 10/01/20
     
 
    622       674,870  
4.50%, 4/01/21
     
 
    383       383,958  
4.38%, 10/01/21
     
 
    1,765       1,751,762  
8.13%, 4/01/22
     
 
    1,157       1,331,996  
UnitedHealth Group, Inc., 2.88%, 3/15/22 (d)
     
 
    2,000       2,007,922  
WellPoint, Inc., 4.65%, 1/15/43 (d)
     
 
    4,005       4,127,853  
 
     
 
            16,885,174  
Hotels, Restaurants & Leisure — 2.6%
MCE Finance Ltd., 5.00%, 2/15/21 (a)
     
 
    935       930,325  
Six Flags Entertainment Corp., 5.25%, 1/15/21 (a)
     
 
    865       875,812  
The Unique Pub Finance Co. PLC:
                           
Series A3, 6.54%, 3/30/21
     
GBP
    1,748       3,054,295  
Series A4, 5.66%, 6/30/27
     
 
    623       1,041,957  
Series M, 7.40%, 3/28/24
     
 
    1,500       2,543,706  
Series N, 6.46%, 3/30/32
     
 
    1,195       1,867,672  
Wynn Macau Ltd., 5.25%, 10/15/21 (a)
     
USD
    416       423,280  
 
     
 
            10,737,047  
Household Durables — 1.0%
Beazer Homes USA, Inc.:
                           
6.63%, 4/15/18
     
 
    580       613,350  
7.50%, 9/15/21
     
 
    166       174,300  
Standard Pacific Corp., 10.75%, 9/15/16
     
 
    2,100       2,446,500  
Taylor Morrison Communities, Inc./Monarch Communities, Inc., 5.25%, 4/15/21 (a)
     
 
    372       375,720  
Weyerhaeuser Real Estate Co. (a):
                           
4.38%, 6/15/19
     
 
    215       215,000  
5.88%, 6/15/24
     
 
    145       147,900  
 
     
 
            3,972,770  
Household Products — 0.1%
Spectrum Brands, Inc.:
                           
6.38%, 11/15/20
     
 
    200       215,000  
6.63%, 11/15/22
     
 
    275       297,688  
 
     
 
            512,688  
Independent Power and Renewable Electricity Producers — 0.4%
Calpine Corp. (a):
                           
6.00%, 1/15/22
     
 
    137       147,617  
5.88%, 1/15/24
     
 
    194       207,580  
NRG REMA LLC, Series C, 9.68%, 7/02/26
     
 
    1,037       1,130,330  
 
     
 
            1,485,527  
Industrial Conglomerates — 0.0%
Smiths Group PLC, 3.63%, 10/12/22 (a)
     
 
    180       179,997  


See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 15
 
  
Schedule of Investments (continued)  BlackRock Core Bond Trust (BHK)
(Percentages shown are based on Net Assets)
Corporate Bonds           Par
(000)
  Value
Insurance — 3.8%
                           
A-S Co-Issuer Subsidiary, Inc./A-S Merger Sub LLC, 7.88%, 12/15/20 (a)
     
USD
    613      $  652,845  
American International Group, Inc., 5.45%, 5/18/17 (d)
     
 
    800       886,638  
AXA SA, 5.25%, 4/16/40 (b)
     
EUR
    250       371,716  
Five Corners Funding Trust, 4.42%, 11/15/23 (a)
     
USD
    1,025       1,093,923  
Hartford Financial Services Group, Inc.:
                           
6.00%, 1/15/19
     
 
    345       396,877  
5.13%, 4/15/22
     
 
    930       1,062,591  
Liberty Mutual Group, Inc., 6.50%, 5/01/42 (a)
     
 
    1,000       1,241,191  
Lincoln National Corp., 6.25%, 2/15/20
     
 
    630       742,463  
Manulife Financial Corp., 3.40%, 9/17/15 (d)
     
 
    1,630       1,677,860  
MetLife, Inc., 6.40%, 12/15/36
     
 
    3,500       3,946,250  
Montpelier Re Holdings Ltd., 4.70%, 10/15/22
     
 
    450       471,476  
MPL 2 Acquisition Canco, Inc., 9.88%, 8/15/18 (a)
     
 
    340       362,950  
Muenchener Rueckversicherungs AG, 6.00%, 5/26/41 (b)
     
EUR
    200       318,679  
Prudential Financial, Inc. (d):
                           
7.38%, 6/15/19
     
USD
    250       307,456  
5.38%, 6/21/20
     
 
    250       286,330  
4.50%, 11/15/20
     
 
    450       493,949  
5.90%, 3/17/36
     
 
    500       606,992  
5.70%, 12/14/36
     
 
    675       807,066  
 
     
 
            15,727,252  
Internet Software & Services — 0.1%
Equinix, Inc., 4.88%, 4/01/20
     
 
    86       87,720  
VeriSign, Inc., 4.63%, 5/01/23
     
 
    345       338,963  
 
     
 
            426,683  
IT Services — 0.6%
                           
Ceridian HCM Holding, Inc., 11.00%, 3/15/21 (a)
     
 
    440       502,700  
First Data Corp. (a):
                           
7.38%, 6/15/19
     
 
    775       827,312  
6.75%, 11/01/20
     
 
    1,192       1,290,340  
 
     
 
            2,620,352  
Life Sciences Tools & Services — 0.1%
Agilent Technologies, Inc., 3.20%, 10/01/22
     
 
    250       245,713  
Marine — 0.3%
                           
Nakilat, Inc., Series A, 6.07%, 12/31/33 (a)
     
 
    1,050       1,181,250  
Media — 5.6%
                           
AMC Networks, Inc.:
                           
7.75%, 7/15/21
     
 
    320       353,200  
4.75%, 12/15/22
     
 
    343       347,287  
Cinemark USA, Inc., 5.13%, 12/15/22
     
 
    175       177,844  
Clear Channel Communications, Inc., 9.00%, 12/15/19
     
 
    305       315,675  
Clear Channel Worldwide Holdings, Inc., Series B, 6.50%, 11/15/22
     
 
    2,495       2,666,280  
Comcast Cable Communications Holdings, Inc., 9.46%, 11/15/22 (d)
     
 
    600       872,743  
Comcast Corp., 6.45%, 3/15/37 (d)
     
 
    790       1,035,153  
Cox Communications, Inc., 8.38%, 3/01/39 (a)
     
 
    1,740       2,529,285  
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc.:
                           
6.38%, 3/01/41
     
 
    260       322,932  
5.15%, 3/15/42
     
 
    700       753,675  
Gray Television, Inc., 7.50%, 10/01/20
     
 
    332       350,260  
Inmarsat Finance PLC, 4.88%, 5/15/22 (a)
     
 
    500       501,250  
The Interpublic Group of Cos., Inc., 3.75%, 2/15/23
     
 
    2,000       2,013,692  
Live Nation Entertainment, Inc., 7.00%, 9/01/20 (a)
     
 
    109       117,448  
NAI Entertainment Holdings/NAI Entertainment Holdings Finance Corp., 5.00%, 8/01/18 (a)
     
 
    292       300,030  
NBCUniversal Media LLC (d):
                           
5.15%, 4/30/20
     
 
    1,983       2,269,926  
4.38%, 4/01/21
     
 
    1,015       1,121,618  
News America, Inc., 7.63%, 11/30/28
     
 
    385       502,572  

 

Corporate Bonds           Par
(000)
  Value
Media (concluded)
                           
Omnicom Group, Inc., 3.63%, 5/01/22 (d)
     
USD
    2,355      $  2,421,649  
Sirius XM Holdings, Inc., 4.25%, 5/15/20 (a)
     
 
    559       547,820  
TCI Communications, Inc., 7.88%, 2/15/26
     
 
    610       851,142  
Time Warner, Inc.:
                           
4.70%, 1/15/21
     
 
    350       386,687  
6.10%, 7/15/40
     
 
    215       258,742  
Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH, 5.50%, 1/15/23 (a)
     
 
    255       260,738  
Univision Communications, Inc., 5.13%, 5/15/23 (a)
     
 
    1,153        1,207,767  
Virgin Media Secured Finance PLC, 5.38%, 4/15/21 (a)
     
 
    395       410,800  
 
     
 
            22,896,215  
Metals & Mining — 3.7%
                           
Alcoa, Inc., 5.40%, 4/15/21
     
 
    1,450       1,580,965  
ArcelorMittal:
                           
4.25%, 8/05/15
     
 
    173       176,676  
6.13%, 6/01/18
     
 
    384       418,080  
Commercial Metals Co., 4.88%, 5/15/23
     
 
    534       523,320  
Corp. Nacional del Cobre de Chile, 3.00%, 7/17/22 (a)
     
 
    1,565       1,538,340  
Freeport-McMoRan Copper & Gold, Inc.:
                           
3.55%, 3/01/22
     
 
    540       542,938  
5.45%, 3/15/43
     
 
    450       486,195  
New Gold, Inc., 6.25%, 11/15/22 (a)
     
 
    440       462,000  
Newcrest Finance Property Ltd., 4.45%, 11/15/21 (a)
     
 
    475       473,097  
Novelis, Inc., 8.75%, 12/15/20
     
 
    4,120       4,557,750  
Teck Resources, Ltd., 5.38%, 10/01/15
     
 
    2,359       2,469,288  
Wise Metals Group LLC/Wise Alloys Finance Corp., 8.75%, 12/15/18 (a)
     
 
    602       650,160  
Xstrata Canada Corp., 6.20%, 6/15/35
     
 
    1,250       1,402,748  
 
     
 
            15,281,557  
Multiline Retail — 0.3%
                           
Dufry Finance SCA, 5.50%, 10/15/20 (a)
     
 
    1,260       1,310,463  
Oil, Gas & Consumable Fuels — 10.8%
Access Midstream Partners LP/ACMP Finance Corp., 6.13%, 7/15/22
     
 
    400       435,000  
Anadarko Petroleum Corp., 5.95%, 9/15/16
     
 
    1,916       2,103,666  
Antero Resources Finance Corp., 5.38%, 11/01/21
     
 
    153       157,590  
Athlon Holdings LP/Athlon Finance Corp., 7.38%, 4/15/21
     
 
    159       172,515  
Bonanza Creek Energy, Inc., 6.75%, 4/15/21
     
 
    99       103,950  
Burlington Resources Finance Co., 7.40%, 12/01/31
     
 
    875       1,267,708  
Carrizo Oil & Gas, Inc., 7.50%, 9/15/20
     
 
    400       428,000  
Cenovus Energy, Inc., 6.75%, 11/15/39
     
 
    750       996,115  
Chesapeake Energy Corp., 5.75%, 3/15/23
     
 
    615       686,494  
ConocoPhillips Canada Funding Co., 5.95%, 10/15/36 (d)
     
 
    535       681,807  
Continental Resources, Inc.:
                           
5.00%, 9/15/22
     
 
    1,600       1,726,000  
4.50%, 4/15/23
     
 
    113       122,027  
Crestwood Midstream Partners LP/Crestwood Midstream Finance Corp., 6.13%, 3/01/22
     
 
    110       113,850  
Denbury Resources, Inc., 4.63%, 7/15/23
     
 
    623       601,195  
El Paso LLC, 7.80%, 8/01/31
     
 
    45       55,800  
El Paso Natural Gas Co., 8.38%, 6/15/32
     
 
    275       376,336  
Energy Transfer Partners LP, 7.50%, 7/01/38
     
 
    500       655,341  
Energy XXI Gulf Coast, Inc., 9.25%, 12/15/17
     
 
    455       482,300  
Enterprise Products Operating LLC, 6.13%, 10/15/39
     
 
    700       872,348  
KeySpan Gas East Corp., 5.82%, 4/01/41 (a)
     
 
    505       643,612  
Kinder Morgan Energy Partners LP:
                           
6.50%, 9/01/39 (d)
     
 
    3,000       3,514,896  
6.55%, 9/15/40
     
 
    110       129,327  
6.38%, 3/01/41
     
 
    150       175,240  


See Notes to Financial Statements.

16 ANNUAL REPORT AUGUST 31, 2014
 
  
Schedule of Investments (continued)  BlackRock Core Bond Trust (BHK)
(Percentages shown are based on Net Assets)
Corporate Bonds           Par
(000)
  Value
Oil, Gas & Consumable Fuels (concluded)
Kinder Morgan, Inc., 5.63%, 11/15/23 (a)
     
USD
    170      $  187,425  
Kodiak Oil & Gas Corp., 5.50%, 2/01/22
     
 
    106       111,830  
Linn Energy LLC/Linn Energy Finance Corp., 6.25%, 11/01/19
     
 
    237       244,703  
Marathon Petroleum Corp., 6.50%, 3/01/41
     
 
    997       1,254,328  
MarkWest Energy Partners LP/MarkWest Energy Finance Corp.:
                           
6.25%, 6/15/22
     
 
    73        78,475  
4.50%, 7/15/23
     
 
    25       25,406  
Memorial Production Partners LP/Memorial Production Finance Corp., 7.63%, 5/01/21
     
 
    212       219,950  
MidAmerican Energy Co., 5.80%, 10/15/36
     
 
    700       896,927  
MidAmerican Energy Holdings Co. (d):
                           
5.95%, 5/15/37
     
 
    800       992,971  
6.50%, 9/15/37
     
 
    3,400       4,485,691  
Nexen, Inc., 7.50%, 7/30/39
     
 
    1,000       1,412,478  
Pacific Drilling SA, 5.38%, 6/01/20 (a)
     
 
    368       358,800  
PBF Holding Co. LLC/PBF Finance Corp., 8.25%, 2/15/20
     
 
    47       50,643  
PDC Energy, Inc., 7.75%, 10/15/22
     
 
    260       284,700  
Pemex Project Funding Master Trust, 6.63%, 6/15/35
     
 
    1,995       2,458,837  
Petrobras International Finance Co.:
                           
3.88%, 1/27/16
     
 
    1,340       1,377,515  
5.75%, 1/20/20
     
 
    1,725       1,859,464  
Pioneer Natural Resources Co., 3.95%, 7/15/22
     
 
    350       366,893  
Premier Oil PLC, 5.00%, 6/09/18
     
 
    1,900       1,995,000  
Range Resources Corp.:
                           
5.75%, 6/01/21
     
 
    107       114,223  
5.00%, 8/15/22
     
 
    26       27,658  
5.00%, 3/15/23
     
 
    62       65,875  
Regency Energy Partners LP/Regency Energy Finance Corp., 4.50%, 11/01/23
     
 
    249       250,867  
RKI Exploration & Production LLC/RKI Finance Corp., 8.50%, 8/01/21 (a)
     
 
    118       126,850  
Rosetta Resources, Inc., 5.63%, 5/01/21
     
 
    357       365,479  
Sabine Pass Liquefaction LLC:
                           
5.63%, 2/01/21
     
 
    1,787       1,885,285  
6.25%, 3/15/22 (a)
     
 
    398       431,830  
5.63%, 4/15/23
     
 
    468       486,720  
SandRidge Energy, Inc.:
                           
8.75%, 1/15/20
     
 
    30       31,500  
7.50%, 2/15/23
     
 
    382       397,280  
Summit Midstream Holdings LLC/Summit Midstream Finance Corp., 7.50%, 7/01/21
     
 
    386       424,600  
Ultra Petroleum Corp., 5.75%, 12/15/18 (a)
     
 
    357       368,602  
Western Gas Partners LP, 5.38%, 6/01/21
     
 
    710       807,078  
Whiting Petroleum Corp., 5.00%, 3/15/19
     
 
    821       866,155  
The Williams Cos., Inc., Series A, 7.50%, 1/15/31
     
 
    2,500       2,977,077  
 
     
 
            44,790,232  
Paper & Forest Products — 0.3%
International Paper Co.:
                           
7.50%, 8/15/21
     
 
    75       95,630  
4.75%, 2/15/22
     
 
    420       464,268  
6.00%, 11/15/41
     
 
    435       522,873  
NewPage Corp., 11.38%, 12/31/14 (h)(i)
     
 
    397        
 
     
 
            1,082,771  
Pharmaceuticals — 1.0%
Forest Laboratories, Inc. (a):
                           
4.38%, 2/01/19
     
 
    228       245,604  
5.00%, 12/15/21
     
 
    379       417,936  
Grifols Worldwide Operations Ltd., 5.25%, 4/01/22 (a)
     
 
    200       205,500  
Jaguar Holding Co. II/Jaguar Merger Sub, Inc., 9.50%, 12/01/19 (a)
     
 
    520       565,500  
Salix Pharmaceuticals Ltd., 6.00%, 1/15/21 (a)
     
 
    162       175,770  

 

Corporate Bonds           Par
(000)
  Value
Pharmaceuticals (concluded)
Valeant Pharmaceuticals International, Inc. (a):
                           
6.75%, 8/15/18
     
USD
    1,321      $  1,413,470  
6.38%, 10/15/20
     
 
    575       601,594  
5.63%, 12/01/21
     
 
    376       382,110  
 
     
 
            4,007,484  
Real Estate Investment Trusts (REITs) — 1.1%
ARC Properties Operating Partnership LP/Clark Acquisition LLC, 4.60%, 2/06/24 (a)
     
 
    1,830        1,883,989  
Felcor Lodging LP, 5.63%, 3/01/23
     
 
    247       250,087  
Simon Property Group LP, 4.75%, 3/15/42
     
 
    835       915,342  
Ventas Realty LP/Ventas Capital Corp., 4.75%, 6/01/21
     
 
    275       303,112  
Vornado Realty LP, 5.00%, 1/15/22
     
 
    1,185       1,304,737  
 
     
 
            4,657,267  
Real Estate Management & Development — 0.9%
Lennar Corp., 4.75%, 11/15/22
     
 
    440       433,400  
Northwest Florida Timber Finance LLC, 4.75%, 3/04/29 (a)
     
 
    2,300       2,409,020  
Realogy Corp., 7.63%, 1/15/20 (a)(d)
     
 
    996       1,085,640  
 
     
 
            3,928,060  
Road & Rail — 0.7%
                           
Burlington Northern Santa Fe LLC, 5.75%, 5/01/40
     
 
    950       1,153,820  
The Hertz Corp.:
                           
4.25%, 4/01/18
     
 
    236       237,180  
5.88%, 10/15/20
     
 
    230       236,613  
7.38%, 1/15/21
     
 
    620       663,400  
6.25%, 10/15/22
     
 
    385       401,362  
 
     
 
            2,692,375  
Semiconductors & Semiconductor Equipment — 0.1%
NXP BV/NXP Funding LLC, 5.75%, 2/15/21 (a)
     
 
    470       493,500  
Software — 0.5%
                           
Nuance Communications, Inc., 5.38%, 8/15/20 (a)
     
 
    1,085       1,090,425  
Oracle Corp., 5.38%, 7/15/40
     
 
    775       909,880  
 
     
 
            2,000,305  
Specialty Retail — 0.6%
                           
The Home Depot, Inc., 5.88%, 12/16/36 (d)
     
 
    830       1,052,592  
QVC, Inc. (a):
                           
7.50%, 10/01/19
     
 
    395       412,325  
7.38%, 10/15/20
     
 
    975       1,042,187  
 
     
 
            2,507,104  
Textiles, Apparel & Luxury Goods — 0.3%
PVH Corp., 4.50%, 12/15/22
     
 
    490       486,325  
Springs Industries, Inc., 6.25%, 6/01/21
     
 
    402       404,010  
The William Carter Co., 5.25%, 8/15/21
     
 
    328       342,760  
 
     
 
            1,233,095  
Tobacco — 1.2%
                           
Altria Group, Inc.:
                           
9.95%, 11/10/38
     
 
    258       438,257  
10.20%, 2/06/39
     
 
    447       773,806  
5.38%, 1/31/44
     
 
    2,015       2,238,032  
Lorillard Tobacco Co., 7.00%, 8/04/41
     
 
    500       631,462  
Reynolds American, Inc., 4.75%, 11/01/42
     
 
    1,050       1,024,752  
 
     
 
            5,106,309  
Wireless Telecommunication Services — 2.2%
America Movil SAB de CV, 2.38%, 9/08/16
     
 
    795       814,318  
Crown Castle International Corp., 5.25%, 1/15/23
     
 
    465       480,257  
Crown Castle Towers LLC, 6.11%, 1/15/40 (a)
     
 
    1,560       1,824,400  
Digicel Group Ltd., 8.25%, 9/30/20 (a)
     
 
    460       496,800  
Digicel Ltd., 6.00%, 4/15/21 (a)
     
 
    750       772,500  
Rogers Communications, Inc., 7.50%, 8/15/38 (d)
     
 
    1,150       1,583,338  
SBA Tower Trust, 5.10%, 4/15/42 (a)
     
 
    360       382,507  


See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 17
 
  
Schedule of Investments (continued)  BlackRock Core Bond Trust (BHK)
(Percentages shown are based on Net Assets)
Corporate Bonds           Par
(000)
  Value
Wireless Telecommunication Services (concluded)
Sprint Communications, Inc. (a):
                           
9.00%, 11/15/18
     
USD
    530      $  630,038  
7.00%, 3/01/20
     
 
    888       990,120  
Sprint Corp., 7.88%, 9/15/23 (a)
     
 
    1,041       1,116,472  
 
     
 
            9,090,750  
Total Corporate Bonds — 79.8%
      329,021,222  

Foreign Agency Obligations
Brazilian Government International Bond, 5.00%, 1/27/45
     
 
    2,862        2,933,550  
Cyprus Government International Bond, 4.63%, 2/03/20
     
EUR
    605       790,965  
Iceland Government International Bond, 5.88%, 5/11/22
     
USD
    1,775       2,019,959  
Italian Republic, 5.38%, 6/15/33
     
 
    455       553,009  
Portugal Government International Bond, 5.13%, 10/15/24 (a)
     
 
    625       646,625  
Slovenia Government International Bond, 5.85%, 5/10/23 (a)
     
 
    432       488,592  
Total Foreign Agency Obligations — 1.8%
      7,432,700  

Municipal Bonds
City of Detroit Michigan, GO, Taxable Capital Improvement, Limited Tax, Series A-2, 8.00%, 4/01/15 (h)(i)
     
 
    1,525       427,153  
City of New York New York Municipal Water Finance Authority, Refunding RB, 2nd General Resolution:
                           
Series EE, 5.50%, 6/15/43
     
 
    465       549,756  
Series GG, Build America Bonds, 5.72%, 6/15/42
     
 
    700       904,106  
Water & Sewer System, Fiscal 2011, Series EE, 5.38%, 6/15/43
     
 
    385       450,900  
East Bay Municipal Utility District, RB, Build America Bonds, 5.87%, 6/01/40
     
 
    950       1,225,795  
Indianapolis Local Public Improvement Bond Bank, RB, Build America Bonds, 6.12%, 1/15/40
     
 
    1,275       1,665,953  
Metropolitan Transportation Authority, RB, Build America Bonds, Series C, 7.34%, 11/15/39
     
 
    625       952,231  
Municipal Electric Authority of Georgia Plant Vogtle Units 3 & 4, Refunding RB, Build America Bonds, Series A, 7.06%, 4/01/57
     
 
    1,000       1,156,240  
New York State Dormitory Authority, RB, Build America Bonds:
                           
5.63%, 3/15/39
     
 
    550       674,960  
5.60%, 3/15/40
     
 
    950       1,181,971  
Port Authority of New York & New Jersey, RB, Consolidated, 159th Series, 6.04%, 12/01/29
     
 
    385       486,694  
State of California, GO, Build America Bonds, Various Purpose:
                           
7.55%, 4/01/39
     
 
    140       211,474  
7.63%, 3/01/40
     
 
    860       1,299,451  
State of Illinois, GO, Pension, 5.10%, 6/01/33
     
 
    1,000       991,670  
University of California, RB, Build America Bonds, 5.95%, 5/15/45
     
 
    445       565,453  
Total Municipal Bonds — 3.1%
      12,743,807  
Non-Agency Mortgage-Backed Securities           Par
(000)
  Value
Collateralized Mortgage Obligations — 1.3%
Banc of America Funding Corp., Series 2007-2, Class 1A2, 6.00%, 3/25/37
     
USD
    660      $  556,822  
Countrywide Alternative Loan Trust:
                           
Series 2005-64CB, Class 1A15, 5.50%, 12/25/35
     
 
    1,037       982,209  
Series 2006-OA21, Class A1, 0.35%, 3/20/47 (b)
     
 
    675       546,760  
Countrywide Home Loan Mortgage Pass-Through Trust, Series 2006-OA5, Class 2A1, 0.36%, 4/25/46 (b)
     
 
    281       234,968  
Credit Suisse Mortgage Capital Certificates, Series 2011-2R, Class 2A1, 2.61%, 7/27/36 (a)(b)
     
 
    947       959,815  
GMAC Mortgage Corp. Loan Trust, Series 2005-AR3, Class 5A1, 5.06%, 6/19/35 (b)
     
 
    553       557,069  
GSR Mortgage Loan Trust:
                           
Series 2006-4F, Class 1A1, 5.00%, 5/25/36
     
 
    269       261,634  
Series 2007-4F, Class 3A1, 6.00%, 7/25/37
     
 
    442       402,073  
Homebanc Mortgage Trust, Series 2006-2, Class A1, 0.34%, 12/25/36 (b)
     
 
    455       400,434  
JP Morgan Mortgage Trust, Series 2006-S3, Class 1A12, 6.50%, 8/25/36
     
 
    161       143,803  
Merrill Lynch Mortgage Investors, Inc., Series 2006-A3, Class 3A1, 2.71%, 5/25/36 (b)
     
 
    535       439,681  
 
     
 
            5,485,268  
Commercial Mortgage-Backed Securities — 12.5%
Banc of America Merrill Lynch Commercial Mortgage Trust, Class A4:
                           
Series 2007-1, 5.45%, 1/15/49
     
 
    500       536,104  
Series 2007-2, 5.78%, 4/10/49 (b)
     
 
    750       818,490  
Bear Stearns Commercial Mortgage Securities, Series 2005-PWR9, Class A4A, 4.87%, 9/11/42
     
 
    663       681,893  
Citigroup Commercial Mortgage Trust (b):
                           
Series 2008-C7, Class A4, 6.34%, 12/10/49
     
 
    1,370       1,518,126  
Series 2013-GC15, Class B, 5.28%, 9/10/46
     
 
    3,590       3,980,118  
Series 2013-GC15, Class XA, 1.46%, 9/10/46
     
 
    13,171       925,360  
Citigroup/Deutsche Bank Commercial Mortgage Trust, Series 2006-CD3, Class AM, 5.65%, 10/15/48
     
 
    1,093       1,182,145  
Commercial Mortgage Trust:
                           
Series 2006-C7, Class AM, 5.97%, 6/10/46 (b)
     
 
    1,750       1,872,043  
Series 2013-CR11, Class B, 5.33%, 10/10/46 (b)
     
 
    3,495       3,881,061  
Series 2013-CR11, Class C, 5.34%, 10/10/46 (a)(b)
     
 
    3,260       3,514,371  
Series 2013-LC6, Class B, 3.74%, 1/10/46
     
 
    695       699,949  
Series 2013-LC6, Class D, 4.43%, 1/10/46 (a)(b)
     
 
    835       787,811  
Credit Suisse Commercial Mortgage Trust:
                           
Series 2006-C3, Class AM, 6.00%, 6/15/38 (b)
     
 
    1,000       1,072,522  
Series 2006-C5, Class AM, 5.34%, 12/15/39
     
 
    1,750       1,881,647  
Series 2010-RR2, Class 2A, 6.10%, 9/15/39 (a)(b)
     
 
    774       831,994  
Credit Suisse First Boston Mortgage Securities Corp., Series 2005-C3, Class AJ, 4.77%, 7/15/37
     
 
    705       718,278  
DBRR Trust, Series 2011-C32, Class A3A, 5.93%, 6/17/49 (a)(b)
     
 
    365       399,017  
Greenwich Capital Commercial Funding Corp., Series 2006-GG7, Class A4, 6.01%, 7/10/38 (b)
     
 
    1,128       1,201,678  
GS Mortgage Securities Corp. II, Series 2013-GC10, Class B, 3.68%, 2/10/46 (a)
     
 
    1,250       1,250,235  


See Notes to Financial Statements.

18 ANNUAL REPORT AUGUST 31, 2014
 
  
Schedule of Investments (continued)  BlackRock Core Bond Trust (BHK)
(Percentages shown are based on Net Assets)
Non-Agency Mortgage-Backed Securities           Par
(000)
  Value
Commercial Mortgage-Backed Securities (concluded)
Hilton USA Trust, Series 2013- HLT, 4.41%, 11/05/30
     
USD
    2,950      $  3,020,517  
JPMBB Commercial Mortgage Securities Trust, Series 2013-C15, Class D, 5.25%, 11/15/45 (a)(b)
     
 
    800       794,388  
JPMorgan Chase Commercial Mortgage Securities Corp., Series 2004-LN2, Class A2, 5.12%, 7/15/41
     
 
    105       105,659  
JPMorgan Chase Commercial Mortgage Securities Trust, Series 2006-CB14, Class AM, 5.62%, 12/12/44 (b)
     
 
    330       346,995  
LB-UBS Commercial Mortgage Trust (b):
                           
Series 2004-C8, Class C, 4.93%, 12/15/39
     
 
    1,385       1,391,847  
Series 2007-C6, Class A4, 5.86%, 7/15/40
     
 
    4,898       5,209,629  
Series 2007-C7, Class A3, 5.87%, 9/15/45
     
 
    1,100       1,223,175  
Morgan Stanley Capital I Trust, Series 2007-HQ11, Class A4, 5.45%, 2/12/44 (b)
     
 
    4,000       4,327,020  
RCMC LLC, Series 2012-CRE1, Class A, 5.62%, 11/15/44 (a)
     
 
    663       682,854  
Titan Europe PLC, Series 2007-1X, Class A, 0.81%, 1/20/17 (b)
     
GBP
    1,607       2,535,060  
Wachovia Bank Commercial Mortgage Trust, Series 2007-C33, Class A4, 6.14%, 2/15/51 (b)
     
USD
    2,185       2,369,737  
WF-RBS Commercial Mortgage Trust, Series 2012-C8:
                           
Class B, 4.31%, 8/15/45
     
 
    695       731,110  
Class C, 5.04%, 8/15/45 (b)
     
 
    895       958,596  
 
     
 
            51,449,429  
Interest Only Commercial Mortgage-Backed Securities — 0.8%
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2012-C5, Class XA, 2.02%, 8/15/45 (a)(b)
     
 
    15,528       1,369,235  
WF-RBS Commercial Mortgage Trust, Class XA (a)(b):
                           
Series 2012-C8, 2.38%, 8/15/45
     
 
    5,942       650,086  
Series 2012-C9, 2.39%, 11/15/45
     
 
    10,526       1,236,526  
 
     
 
            3,255,847  
Total Non-Agency Mortgage-Backed Securities — 14.6%
          60,190,544  

Preferred Securities
Capital Trusts
Banks — 0.7%
                           
BNP Paribas SA, 7.20% (a)(b)(g)
     
 
    1,000       1,167,500  
Wachovia Capital Trust III, 5.57% (b)(g)
     
 
    1,025       1,004,500  
Wells Fargo & Co., Series S, 5.90% (b)(g)
     
 
    795       832,763  
 
     
 
            3,004,763  
Capital Markets — 1.4%
                           
The Bank of New York Mellon Corp., Series D, 4.50% (b)(g)
     
 
    4,198       3,935,625  
Credit Suisse Group AG, 7.50%, (a)(b)(g)
     
 
    1,500       1,627,500  
State Street Capital Trust IV, 1.23%, 6/01/77 (b)
     
 
    70       60,462  
 
     
 
            5,623,587  
Diversified Financial Services — 4.5%
Citigroup, Inc., (b)(g):
                           
Series D, 5.35%
     
 
    1,050       1,002,612  
Series M, 6.30%
     
 
    2,000       2,035,000  
Credit Agricole SA, 7.88% (a)(b)(g)
     
 
    1,000       1,078,750  
General Electric Capital Corp., Series
B, 6.25% (b)(g)
  900       1,004,625  
JPMorgan Chase & Co. (b)(g):
                           
Series 1, 7.90%
     
 
    3,500       3,871,875  
Series Q, 5.15%
     
 
    1,500       1,460,625  
Series U, 6.13%
     
 
    500       511,250  
Series V, 5.00%
     
 
    3,000       2,974,968  
Preferred Securities           Par
(000)
  Value
Diversified Financial Services (concluded)
Morgan Stanley, Series H, 5.45% (b)(g)
     
USD
    875      $  890,313  
Societe Generale SA (a)(b)(g):
                           
6.00%
     
 
    2,860       2,731,300  
7.88%
     
 
    1,000       1,042,700  
 
     
 
            18,604,018  
Electric Utilities — 0.5%
                           
Electricite de France SA, 5.25% (a)(b)(g)
     
 
    2,100       2,168,250  
Insurance — 3.2%
                           
The Allstate Corp. (b):
                           
5.75%, 8/15/53
     
 
    1,000       1,070,000  
6.50%, 5/15/67
     
 
    1,950       2,137,687  
American International Group, Inc., 8.18%, 5/15/68 (b)
     
 
    970       1,336,175  
AXA SA, 6.46% (a)(b)(g)
     
 
    1,025       1,087,781  
Genworth Holdings, Inc., 6.15%, 11/15/66 (b)
     
 
    1,150       1,012,000  
Liberty Mutual Group, Inc., 7.00%, 3/15/67 (a)(b)
     
 
    975       1,035,938  
Lincoln National Corp., 6.05%, 4/20/67 (b)
     
 
    675       692,719  
Metlife Capital Trust IV, 7.88%, 12/15/67 (a)
     
 
    640       817,600  
Swiss Re Capital I LP, 6.85% (a)(b)(g)
     
 
    1,060       1,115,650  
Voya Financial, Inc., 5.65%, 5/15/53 (b)
     
 
    2,250       2,289,375  
XL Group PLC, Series E, 6.50% (b)(g)
     
 
    815       787,494  
 
     
 
            13,382,419  
Total Capital Trusts — 10.3%
     
 
            42,783,037  

Preferred Stocks
     
 
    Shares          
Banks — 1.2%
                           
U.S. Bancorp, 6.00% (b)(g)
     
 
    150,000       4,108,500  
Wells Fargo & Co., 5.85% (b)(g)
     
 
    37,500       977,625  
 
     
 
            5,086,125  
Capital Markets — 0.4%
                           
The Goldman Sachs Group, Inc., Series J,
5.50% (b)(g)
     
 
    46,000       1,126,080  
SCE Trust III, 5.75% (b)(g)
     
 
    12,657       336,423  
 
     
 
            1,462,503  
Total Preferred Stocks — 1.6%
     
 
            6,548,628  

Trust Preferred
Banks — 0.1%
                           
Citigroup Capital XIII, 7.88%, 10/30/40 (g)
     
 
    14,773       399,912  
Total Preferred Securities — 12.0%
     
 
            49,731,577  

U.S. Government Sponsored Agency Securities
Par
(000)
 
 
Agency Obligations — 2.5%
                           
Fannie Mae (d):
                           
0.00%, 10/09/19 (j)
     
USD
    7,055       6,244,458  
5.63%, 7/15/37
     
 
    775       1,057,629  
Federal Home Loan Bank (d):
                           
5.25%, 12/09/22
     
 
    675       813,789  
5.37%, 9/09/24
     
 
    1,075       1,318,743  
Resolution Funding Corp., 0.00%, 7/15/18–10/15/18 (j)
     
 
    1,050       989,331  
 
     
 
            10,423,950  


See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 19
 
  
Schedule of Investments (continued)  BlackRock Core Bond Trust (BHK)
(Percentages shown are based on Net Assets)
U.S. Government Sponsored Agency Securities
          Par
(000)
  Value
Collateralized Mortgage Obligations — 0.1%
Fannie Mae Mortgage-Backed Securities, Series 2005-5, Class PK, 5.00%, 12/25/34
     
USD
    257      $  272,626  
Commercial Mortgage-Backed Securities — 0.7%
Freddie Mac Mortgage-Backed Securities (b):
                           
Series 2013-K24, Class B, 3.62%, 11/25/45 (a)
     
 
    1,750       1,728,745  
Series K013, Class A2, 3.97%, 1/25/21
     
 
    940       1,027,152  
Series 2012-K706, Class C, 4.16%, 11/25/44 (a)
     
 
    165       170,352  
 
     
 
            2,926,249  
Interest Only Collateralized Mortgage Obligations — 1.8%
Fannie Mae Mortgage-Backed Securities:
                           
Series 2012-96, Class DI, 4.00%, 2/25/27
     
 
    6,075       670,295  
Series 2012-M9, Class X1, 4.23%, 12/25/17 (b)
     
 
    12,417       1,336,478  
Series 2012-47, Class NI, 4.50%, 4/25/42
     
 
    4,658       774,410  
Freddie Mac Mortgage-Backed Securities:
                           
Series K707, Class X1, 1.69%, 12/25/18 (b)
     
 
    2,468       143,038  
Series K710, Class X1, 1.91%, 5/25/19 (b)
     
 
    8,538       607,632  
Series 2611, Class QI, 5.50%, 9/15/32
     
 
    828       89,875  
Ginnie Mae Mortgage-Backed Securities (b):
                           
Series 2009-78, Class SD, 6.04%, 9/20/32
     
 
    4,846       933,409  
Series 2009-116, Class KS, 6.32%, 12/16/39
     
 
    2,369       367,790  
Series 2011-52, Class NS, 6.52%, 4/16/41
     
 
    13,067       2,397,384  
 
     
 
            7,320,311  
Mortgage-Backed Securities — 7.3%
             
Fannie Mae Mortgage-Backed Securities:
                           
3.00%, 9/01/44 (k)
     
 
    6,800       6,770,250  
4.00%, 12/01/41–9/01/44 (k)
     
 
    4,930       5,230,179  
4.50%, 7/01/41–9/01/44 (k)
     
 
    12,018       12,988,199  
5.00%, 8/01/34
     
 
    2,094       2,314,076  
5.50%, 6/01/38
     
 
    1,218       1,363,093  
6.00%, 12/01/38
     
 
    994       1,122,586  
Freddie Mac Mortgage-Backed Securities, 6.00%, 10/1/14–12/1/18
     
 
    237       246,041  
Ginnie Mae Mortgage-Backed Securities, 5.50%, 8/15/33
     
 
    63       69,746  
 
     
 
            30,104,170  
Total U.S. Government Sponsored Agency Securities — 12.4%
  51,047,306  
U.S. Treasury Obligations           Par
(000)
  Value
U.S. Treasury Bonds (d):
                           
8.13%, 8/15/21
     
USD
    1,550      $  2,171,575  
6.13%, 8/15/29
     
 
    5,000       7,135,155  
3.50%, 2/15/39
     
 
    330       359,030  
4.25%, 5/15/39
     
 
    3,045       3,722,037  
4.38%, 5/15/40
     
 
    6,375       7,965,760  
4.75%, 2/15/41
     
 
    1,630       2,158,477  
4.38%, 5/15/41
     
 
    800       1,003,250  
3.13%, 11/15/41
     
 
    9,930       10,078,950  
3.13%, 2/15/42
     
 
    6,268       6,354,185  
3.00%, 5/15/42
     
 
    2,730       2,699,287  
3.13%, 2/15/43
     
 
    2,337       2,358,405  
3.75%, 11/15/43
     
 
    1,065       1,205,113  
3.63%, 2/15/44
     
 
    6,500       7,194,687  
U.S. Treasury Notes (d):
                           
2.25%, 7/31/18
     
 
    495        511,861  
1.75%, 5/15/22
     
 
    156       151,759  
2.50%, 5/15/24
     
 
    3,450       3,499,403  
Total U.S. Treasury Obligations — 14.2%
    58,568,934  
Total Long-Term Investments
(Cost — $558,883,581) — 144.4%
     
 
            595,493,553  

Short-Term Securities
     
 
    Shares          
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.03% (l)(m)
     
 
    742,474       742,474  
Total Short-Term Securities
(Cost — $742,474) — 0.2%
     
 
            742,474  

Options Purchased
     
 
               
(Cost — $1,408,344) — 0.2%
     
 
            954,199  
Total Investments Before Options Written
(Cost — $561,034,399) — 144.8%
597,190,226  

Options Written
     
 
               
(Premiums Received — $3,343,622) — (0.6)%
(2,580,908
Total Investments, Net of Options Written — 144.2%
    594,609,318  
Liabilities in Excess of Other Assets — (44.2)%
    (182,530,906
Net Assets — 100.0%
     
 
           $ 412,078,412  


Notes to Schedule of Investments

(a)      
Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.
(b)      
Variable rate security. Rate shown is as of report date.
(c)      
When-issued security. Unsettled when-issued transactions were as follows:


Counterparty       Value   Unrealized
Appreciation
Morgan Stanley & Co. LLC
       $ 1,852,000        

(d)      
All or a portion of security has been pledged as collateral in connection with outstanding reverse repurchase agreements.
(e)      
Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date.
(f)      
Convertible security.
(g)      
Security is perpetual in nature and has no stated maturity date.
(h)      
Issuer filed for bankruptcy and/or is in default of principal and/or interest payments.
(i)      
Non-income producing security.
(j)      
Zero-coupon bond.

See Notes to Financial Statements.

20 ANNUAL REPORT AUGUST 31, 2014
 
  
Schedule of Investments (continued)  BlackRock Core Bond Trust (BHK)
 
(k)      
Represents or includes a TBA transaction. Unsettled TBA transactions as of August 31, 2014 were as follows:

Counterparty



 
Value
 
Unrealized
Appreciation

Credit Suisse Securities (USA) LLC
       $ 6,770,250      $ 105,187  
Goldman Sachs & Co.
       $ 2,114,388      $ 15,274  
J.P. Morgan Securities LLC
       $ 9,180,000      $ 25,234  

(l)      
Investments in issuers considered to be an affiliate of the Trust during the year ended August 31, 2014, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

Affiliate



 
Shares
Held at
August 31, 2013

 
Net
Activity

 
Shares
Held at
August 31, 2014

 
Income
BlackRock Liquidity Funds, TempFund, Institutional Class
        5,335,491       (4,593,017     742,474      $ 1,865  

(m)      
Represents the current yield as of report date.
     
Reverse repurchase agreements outstanding as of August 31, 2014 were as follows:

Counterparty



 
Interest
Rate

 
Trade
Date

 
Maturity
Date1

 
Face Value
 
Face Value
Including
Accrued
Interest

Merrill Lynch, Pierce, Fenner & Smith, Inc.
     
0.11%
 
4/02/13
 
Open
   $  875,812      $  877,052  
Merrill Lynch, Pierce, Fenner & Smith, Inc.
     
0.11%
 
4/02/13
 
Open
    1,097,844       1,099,397  
BNP Paribas Securities Corp.
     
0.11%
 
4/03/13
 
Open
    851,537       852,697  
Merrill Lynch, Pierce, Fenner & Smith, Inc.
     
0.09%
 
4/25/13
 
Open
    8,430,937       8,435,371  
BNP Paribas Securities Corp.
     
0.04%
 
4/29/13
 
Open
    1,039,000       1,039,318  
BNP Paribas Securities Corp.
     
0.08%
 
4/29/13
 
Open
    377,850       378,127  
BNP Paribas Securities Corp.
     
0.34%
 
5/24/13
 
Open
    1,342,000       1,347,894  
Barclays Capital, Inc.
     
0.60%
 
6/03/13
 
Open
    3,258,750       3,283,408  
Barclays Capital, Inc.
     
0.35%
 
6/24/13
 
Open
    3,334,398       3,348,467  
BNP Paribas Securities Corp.
     
0.07%
 
6/24/13
 
Open
    5,876,250       5,880,582  
BNP Paribas Securities Corp.
     
0.34%
 
9/30/13
 
Open
    3,569,000       3,580,326  
BNP Paribas Securities Corp.
     
0.36%
 
9/30/13
 
Open
    2,294,000       2,301,708  
BNP Paribas Securities Corp.
     
0.36%
 
9/30/13
 
Open
    871,000       873,927  
BNP Paribas Securities Corp.
     
0.36%
 
9/30/13
 
Open
    1,529,000       1,534,137  
BNP Paribas Securities Corp.
     
0.35%
 
10/22/13
 
Open
    4,540,900       4,554,718  
Credit Suisse Securities (USA) LLC
     
0.35%
 
10/22/13
 
Open
    2,125,413       2,131,880  
UBS Securities LLC
     
0.28%
 
2/10/14
 
Open
    3,373,000       3,378,299  
UBS Securities LLC
     
0.32%
 
2/10/14
 
Open
    2,369,000       2,373,254  
UBS Securities LLC
     
0.32%
 
2/10/14
 
Open
    1,348,000       1,350,420  
UBS Securities LLC
     
0.32%
 
2/10/14
 
Open
    2,289,000       2,293,110  
UBS Securities LLC
     
0.32%
 
2/10/14
 
Open
    1,355,000       1,357,433  
UBS Securities LLC
     
0.32%
 
2/10/14
 
Open
    1,416,000       1,418,542  
UBS Securities LLC
     
0.33%
 
2/10/14
 
Open
    1,073,000       1,074,987  
UBS Securities LLC
     
0.34%
 
2/10/14
 
Open
    1,233,000       1,235,352  
UBS Securities LLC
     
0.34%
 
2/10/14
 
Open
    3,805,000       3,812,259  
UBS Securities LLC
     
0.34%
 
2/10/14
 
Open
    1,410,000       1,412,690  
UBS Securities LLC
     
0.34%
 
2/10/14
 
Open
    1,139,000       1,141,173  
UBS Securities LLC
     
0.34%
 
2/10/14
 
Open
    827,000       828,578  
UBS Securities LLC
     
0.34%
 
2/10/14
 
Open
    1,853,000       1,856,535  
UBS Securities LLC
     
0.40%
 
2/10/14
 
Open
    496,000       497,113  
RBC Capital Markets, LLC
     
0.11%
 
3/13/14
 
Open
    1,464,000       1,464,699  
Deutsche Bank Securities, Inc.
     
0.07%
 
4/16/14
 
Open
    2,000,000       2,000,527  
Deutsche Bank Securities, Inc.
     
0.11%
 
4/16/14
 
Open
    6,100,000       6,102,555  
Deutsche Bank Securities, Inc.
     
0.34%
 
4/21/14
 
Open
    1,896,000       1,898,369  
UBS Securities LLC
     
0.32%
 
5/13/14
 
Open
    1,610,000       1,611,574  
UBS Securities LLC
     
0.34%
 
5/13/14
 
Open
    1,172,000       1,173,218  
UBS Securities LLC
     
0.34%
 
5/13/14
 
Open
    633,000       633,658  
UBS Securities LLC
     
0.40%
 
5/13/14
 
Open
    3,880,000       3,884,742  
Barclays Capital, Inc.
     
0.35%
 
5/14/14
 
Open
    534,000       534,571  
Barclays Capital, Inc.
     
0.35%
 
5/14/14
 
Open
    556,000       556,595  
Barclays Capital, Inc.
     
0.35%
 
5/14/14
 
Open
    354,000       354,379  
Barclays Capital, Inc.
     
0.35%
 
5/14/14
 
Open
    272,000       272,280  
Barclays Capital, Inc.
     
0.35%
 
5/14/14
 
Open
    979,000       980,037  
Barclays Capital, Inc.
     
0.35%
 
5/14/14
 
Open
    468,000       468,453  
Barclays Capital, Inc.
     
0.35%
 
5/14/14
 
Open
    294,000       294,303  
Barclays Capital, Inc.
     
0.35%
 
5/14/14
 
Open
    738,000       738,715  
BNP Paribas Securities Corp.
     
0.01%
 
5/20/14
 
Open
    7,043,750       7,044,971  
BNP Paribas Securities Corp.
     
0.08%
 
5/20/14
 
Open
    697,812       697,933  
Merrill Lynch, Pierce, Fenner & Smith, Inc.
     
0.05%
 
6/11/14
 
Open
    3,524,588       3,525,631  

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 21
 
  
Schedule of Investments (continued)  BlackRock Core Bond Trust (BHK)
 

       
Reverse repurchase agreements outstanding as of August 31, 2014 were as follows (concluded):

Counterparty



 
Interest
Rate

 
Trade
Date

 
Maturity
Date1

 
Face Value
 
Face Value
Including
Accrued
Interest

Barclays Capital, Inc.
     
(1.75)%
 
6/25/14
 
Open
   $  1,102,710      $  1,099,065  
Barclays Capital, Inc.
     
0.35%
 
6/26/14
 
Open
    2,981,250       2,983,192  
BNP Paribas Securities Corp.
     
0.08%
 
7/07/14
 
Open
    9,483,150       9,488,186  
BNP Paribas Securities Corp.
     
0.08%
 
7/07/14
 
Open
    2,535,487       2,535,797  
BNP Paribas Securities Corp.
     
0.33%
 
7/07/14
 
Open
    1,069,000       1,069,539  
BNP Paribas Securities Corp.
     
0.33%
 
7/07/14
 
Open
    1,823,000       1,823,919  
BNP Paribas Securities Corp.
     
0.33%
 
7/07/14
 
Open
    2,172,000       2,173,095  
BNP Paribas Securities Corp.
     
0.33%
 
7/07/14
 
Open
    968,000       968,488  
BNP Paribas Securities Corp.
     
0.33%
 
7/07/14
 
Open
    963,000       963,485  
BNP Paribas Securities Corp.
     
0.33%
 
7/07/14
 
Open
    1,884,000       1,884,950  
BNP Paribas Securities Corp.
     
0.34%
 
7/07/14
 
Open
    2,300,000       2,301,195  
BNP Paribas Securities Corp.
     
0.34%
 
7/07/14
 
Open
    490,000       490,255  
BNP Paribas Securities Corp.
     
0.35%
 
7/07/14
 
Open
    1,203,000       1,203,643  
BNP Paribas Securities Corp.
     
0.35%
 
7/07/14
 
Open
    834,000       834,446  
BNP Paribas Securities Corp.
     
0.35%
 
7/07/14
 
Open
    853,000       853,456  
Credit Suisse Securities (USA) LLC
     
0.35%
 
7/07/14
 
Open
    1,671,156       1,672,050  
Credit Suisse Securities (USA) LLC
     
0.35%
 
7/07/14
 
Open
    1,858,594       1,859,588  
Credit Suisse Securities (USA) LLC
     
0.35%
 
7/07/14
 
Open
    1,510,500       1,511,308  
Credit Suisse Securities (USA) LLC
     
0.35%
 
7/07/14
 
Open
    2,011,500       2,012,576  
Credit Suisse Securities (USA) LLC
     
0.35%
 
7/07/14
 
Open
    1,747,463       1,748,397  
Credit Suisse Securities (USA) LLC
     
0.35%
 
7/07/14
 
Open
    3,373,625       3,375,429  
BNP Paribas Securities Corp.
     
0.06%
 
7/08/14
 
Open
    6,898,125       6,898,539  
BNP Paribas Securities Corp.
     
0.09%
 
7/08/14
 
Open
    1,147,537       1,147,710  
BNP Paribas Securities Corp.
     
0.09%
 
7/08/14
 
Open
    516,038       516,115  
Credit Suisse Securities (USA) LLC
     
0.09%
 
7/23/14
 
Open
    2,225,000       2,225,217  
Credit Suisse Securities (USA) LLC
     
(0.03%)
 
8/14/14
 
Open
    3,497,438       3,497,385  
Credit Suisse Securities (USA) LLC
     
0.14%
 
8/12/14
 
9/11/14
    3,562,000       3,562,277  
BNP Paribas Securities Corp.
     
0.18%
 
8/15/14
 
9/11/14
    1,089,000       1,089,093  
Citigroup Global Markets, Inc.
     
0.16%
 
8/18/14
 
9/16/14
    6,726,000       6,726,418  
 
     
 
 
 
 
 
               
Total
     
 
 
 
 
 
   $ 168,111,414      $ 168,300,777  
1   Certain agreements have no stated maturity and can be terminated by either party at any time.

     
Financial futures contracts outstanding as of August 31, 2014 were as follows:

Contracts
Purchased
(Sold)


 
Issue
 
Exchange
 
Expiration
 
Notional
Value

 
 
Unrealized
Appreciation
(Depreciation)

 
48    
2-Year U.S. Treasury Note
 
Chicago Board of Trade
 
December 2014
 
USD
10,514,250      $ 4,903  
31    
Long U.S. Treasury Bond
 
Chicago Board of Trade
 
December 2014
 
USD
4,342,906       16,008  
109    
Ultra Long U.S. Treasury Bond
 
Chicago Board of Trade
 
December 2014
 
USD
16,949,500       130,137  
(129)    
5-Year U.S. Treasury Note
 
Chicago Board of Trade
 
December 2014
 
USD
15,329,836       (19,218
(272)    
10-Year U.S. Treasury Note
 
Chicago Board of Trade
 
December 2014
 
USD
34,212,500       (99,118
Total
   
 
 
 
 
 
 
 
       $ 32,712  

     
Forward foreign currency exchange contracts outstanding as of August 31, 2014 were as follows:

Currency Purchased

 
Currency Sold
 
Counterparty
 
Settlement
Date
 
Unrealized
Appreciation
(Depreciation)
EUR 220,000   USD 294,650   Bank of America N.A.   10/21/14    $ (5,496
USD 2,474,207   EUR 1,829,000   JPMorgan Chase Bank N.A.   10/21/14     70,282  
USD 11,289,315   GBP 6,607,000   Bank of America N.A.   10/21/14     324,965  
Total                    $ 389,751  

See Notes to Financial Statements.

22 ANNUAL REPORT AUGUST 31, 2014
 
  
Schedule of Investments (continued)  BlackRock Core Bond Trust (BHK)
 

     
OTC interest rate swaptions purchased as of August 31, 2014 were as follows:

Description



 
Counterparty
 
Put/
Call
 
Exercise
Rate
 
Pay/Receive
Exercise Rate
 
Floating Rate
Index
 
Expiration
Date
 
Notional
Amount
(000)
 
Market
Value
10-Year Interest Rate Swap
     
Credit Suisse International
 
Call
 
2.40%
 
Receive
 
3-month LIBOR
 
9/02/14
 
USD
  11,200    $ 1,654  
30-Year Interest Rate Swap
     
Deutsche Bank AG
 
Call
 
3.30%
 
Receive
 
3-month LIBOR
 
5/22/17
 
USD
  4,400     374,653  
10-Year Interest Rate Swap
     
Credit Suisse International
 
Put
 
3.45%
 
Pay
 
3-month LIBOR
 
9/02/14
 
USD
  67,100      
1-Year Interest Rate Swap
     
Bank of America N.A.
 
Put
 
0.60%
 
Pay
 
3-month LIBOR
 
10/02/14
 
USD
  11,850     27  
10-Year Interest Rate Swap
     
Barclays Bank PLC
 
Put
 
4.55%
 
Pay
 
3-month LIBOR
 
4/25/17
 
USD
  10,400     147,464  
10-Year Interest Rate Swap
     
JPMorgan Chase Bank N.A.
 
Put
 
4.60%
 
Pay
 
3-month LIBOR
 
4/28/17
 
USD
  10,400     141,661  
30-Year Interest Rate Swap
     
Deutsche Bank AG
 
Put
 
4.30%
 
Pay
 
3-month LIBOR
 
5/22/17
 
USD
  4,400     147,826  
10-Year Interest Rate Swap
     
Deutsche Bank AG
 
Put
 
4.50%
 
Pay
 
3-month LIBOR
 
5/22/18
 
USD
  6,000     140,914  
Total
     
 
 
 
 
 
 
 
 
 
 
 
 
 
       $  954,199  

     
OTC interest rate swaptions written as of August 31, 2014 were as follows:

Description



 
Counterparty
 
Put/
Call
 
Exercise
Rate
 
Pay/Receive
Exercise Rate
 
Floating Rate
Index
 
Expiration
Date
 
Notional
Amount
(000)
 
Market
Value
10-Year Interest Rate Swap
     
Credit Suisse International
 
Call
 
2.60%
 
Pay
 
3-month LIBOR
 
9/02/14
 
USD
  11,200    $ (104,844
10-Year Interest Rate Swap
     
Barclays Bank PLC
 
Call
 
3.26%
 
Pay
 
3-month LIBOR
 
11/14/14
 
USD
  6,200     (387,091
10-Year Interest Rate Swap
     
JPMorgan Chase Bank N.A.
 
Call
 
3.25%
 
Pay
 
3-month LIBOR
 
11/14/14
 
USD
  6,200     (384,337
10-Year Interest Rate Swap
     
Deutsche Bank AG
 
Call
 
2.85%
 
Pay
 
3-month LIBOR
 
11/17/14
 
USD
  7,500     (212,942
10-Year Interest Rate Swap
     
Deutsche Bank AG
 
Call
 
2.80%
 
Pay
 
3-month LIBOR
 
2/10/15
 
USD
  2,700     (67,086
10-Year Interest Rate Swap
     
JPMorgan Chase Bank N.A.
 
Call
 
2.50%
 
Pay
 
3-month LIBOR
 
5/22/15
 
USD
  12,000     (152,889
10-Year Interest Rate Swap
     
Deutsche Bank AG
 
Call
 
3.10%
 
Pay
 
3-month LIBOR
 
2/26/16
 
USD
  6,000     (241,173
10-Year Interest Rate Swap
     
Deutsche Bank AG
 
Call
 
3.15%
 
Pay
 
3-month LIBOR
 
3/17/16
 
USD
  6,000     (256,324
10-Year Interest Rate Swap
     
Credit Suisse International
 
Put
 
3.10%
 
Receive
 
3-month LIBOR
 
9/02/14
 
USD
  11,200      
10-Year Interest Rate Swap
     
Deutsche Bank AG
 
Put
 
2.80%
 
Receive
 
3-month LIBOR
 
9/15/14
 
USD
  3,700     (416
10-Year Interest Rate Swap
     
Barclays Bank PLC
 
Put
 
3.26%
 
Receive
 
3-month LIBOR
 
11/14/14
 
USD
  6,200     (1,983
10-Year Interest Rate Swap
     
JPMorgan Chase Bank N.A.
 
Put
 
3.25%
 
Receive
 
3-month LIBOR
 
11/14/14
 
USD
  6,200     (2,039
10-Year Interest Rate Swap
     
Deutsche Bank AG
 
Put
 
3.70%
 
Receive
 
3-month LIBOR
 
11/17/14
 
USD
  7,500     (256
10-Year Interest Rate Swap
     
Barclays Bank PLC
 
Put
 
3.15%
 
Receive
 
3-month LIBOR
 
11/24/14
 
USD
  5,000     (4,160
10-Year Interest Rate Swap
     
Deutsche Bank AG
 
Put
 
3.80%
 
Receive
 
3-month LIBOR
 
2/10/15
 
USD
  2,700     (1,494
10-Year Interest Rate Swap
     
Bank of America N.A.
 
Put
 
3.70%
 
Receive
 
3-month LIBOR
 
2/25/15
 
USD
  1,500     (1,497
10-Year Interest Rate Swap
     
Barclays Bank PLC
 
Put
 
3.65%
 
Receive
 
3-month LIBOR
 
4/15/15
 
USD
  1,100     (2,520
10-Year Interest Rate Swap
     
Citibank N.A.
 
Put
 
3.65%
 
Receive
 
3-month LIBOR
 
4/15/15
 
USD
  1,000     (2,291
10-Year Interest Rate Swap
     
Deutsche Bank AG
 
Put
 
3.65%
 
Receive
 
3-month LIBOR
 
4/15/15
 
USD
  900     (2,062
10-Year Interest Rate Swap
     
JPMorgan Chase Bank N.A.
 
Put
 
3.50%
 
Receive
 
3-month LIBOR
 
5/22/15
 
USD
  12,000     (56,968
10-Year Interest Rate Swap
     
Deutsche Bank AG
 
Put
 
4.15%
 
Receive
 
3-month LIBOR
 
2/26/16
 
USD
  6,000     (44,377
10-Year Interest Rate Swap
     
Citibank N.A.
 
Put
 
4.15%
 
Receive
 
3-month LIBOR
 
2/29/16
 
USD
  6,000     (44,771
10-Year Interest Rate Swap
     
Barclays Bank PLC
 
Put
 
4.05%
 
Receive
 
3-month LIBOR
 
4/18/16
 
USD
  1,700     (17,355
10-Year Interest Rate Swap
     
Deutsche Bank AG
 
Put
 
4.05%
 
Receive
 
3-month LIBOR
 
4/18/16
 
USD
  1,600     (16,335
10-Year Interest Rate Swap
     
Goldman Sachs Bank USA
 
Put
 
4.05%
 
Receive
 
3-month LIBOR
 
4/18/16
 
USD
  1,700     (17,355
10-Year Interest Rate Swap
     
BNP Paribas S.A.
 
Put
 
4.10%
 
Receive
 
3-month LIBOR
 
4/25/16
 
USD
  3,600     (35,272
10-Year Interest Rate Swap
     
Citibank N.A.
 
Put
 
4.05%
 
Receive
 
3-month LIBOR
 
4/25/16
 
USD
  5,000     (52,239
10-Year Interest Rate Swap
     
Barclays Bank PLC
 
Put
 
4.05%
 
Receive
 
3-month LIBOR
 
4/25/17
 
USD
  8,500     (191,317
10-Year Interest Rate Swap
     
JPMorgan Chase Bank N.A.
 
Put
 
4.10%
 
Receive
 
3-month LIBOR
 
4/28/17
 
USD
  8,500     (183,667
10-Year Interest Rate Swap
     
Deutsche Bank AG
 
Put
 
6.00%
 
Receive
 
3-month LIBOR
 
5/22/18
 
USD
  12,000     (95,848
Total
     
 
 
 
 
 
 
 
 
 
 
 
 
 
       $ (2,580,908

     
Centrally cleared interest rate swaps outstanding as of August 31, 2014 were as follows:

Fixed
Rate



 
Floating
Rate

 
Clearinghouse
 
Effective
Date

 
Expiration
Date

 
Notional
Amount
(000)

 
Unrealized
Appreciation
(Depreciation)

0.56%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
11/30/18
 
USD
    20,900    $  (45,712
1.69%1
     
3-month LIBOR
 
Chicago Mercantile
 
10/03/142
 
11/30/18
 
USD
    10,200     (35,979
3.97%1
     
3-month LIBOR
 
Chicago Mercantile
 
4/25/192
 
4/25/24
 
USD
    4,900     (144,799
2.77%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
4/29/24
 
USD
    400     (10,851
2.65%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
6/30/24
 
USD
    4,800     72,263  
2.62%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
7/01/24
 
USD
    500     6,132  
2.65%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
7/18/24
 
USD
    2,600     (38,543
2.59%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
7/22/24
 
USD
    2,300     21,390  
2.62%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
7/24/24
 
USD
    3,100     36,045  
2.63%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/07/24
 
USD
    1,000     12,859  
2.59%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/08/24
 
USD
    1,000     9,133  
2.59%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/08/24
 
USD
    1,000     8,815  
2.58%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/11/24
 
USD
    500     4,151  

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 23
 
  
Schedule of Investments (continued)  BlackRock Core Bond Trust (BHK)
 

       
Centrally cleared interest rate swaps outstanding as of August 31, 2014 were as follows (concluded):

Fixed
Rate



 
Floating
Rate

 
Clearinghouse
 
Effective
Date

 
Expiration
Date

 
Notional
Amount
(000)

 
Unrealized
Appreciation
(Depreciation)

2.58%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/11/24
 
USD
  500    $ 3,993  
2.57%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/11/24
 
USD
  500     3,335  
2.57%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/11/24
 
USD
  500     3,403  
2.55%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/12/24
 
USD
  500     2,506  
2.55%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/12/24
 
USD
  500     2,596  
2.56%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/22/24
 
USD
  4,200     26,140  
2.55%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/27/24
 
USD
  4,800     22,372  
2.49%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
9/02/24
 
USD
  500     (2,635
3.19%1
     
3-month LIBOR
 
Chicago Mercantile
 
4/22/152
 
4/22/25
 
USD
  2,400     102,245  
2.97%1
     
3-month LIBOR
 
Chicago Mercantile
 
6/03/152
 
6/03/25
 
USD
  1,100     21,179  
3.65%1
     
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
2/27/44
 
USD
  2,500     (299,000
3.65%1
     
3-month LIBOR
 
Chicago Mercantile
 
4/22/152
 
4/22/45
 
USD
  1,100     (110,336
3.47%1
     
3-month LIBOR
 
Chicago Mercantile
 
6/03/152
 
6/03/45
 
USD
  500     (29,810
 
     
 
 
 
 
 
 
 
 
 
           
Total
     
 
 
 
 
 
 
 
 
 
       $ (359,108
1   Trust pays the fixed rate and receives the floating rate.
2   Forward swap.

     
OTC credit default swaps — buy protection outstanding as of August 31, 2014 were as follows:


Issuer       Pay
Fixed
Rate
  Counterparty   Expiration
Date
  Notional
Amount
(000)
  Market
Value
  Premiums
Paid
  Unrealized
 Depreciation 
Radian Group, Inc.
     
5.00%
 
Citibank N.A.
 
6/20/15
 
USD
 
1,400
 
$(49,097)
 
$13,035
   $ (62,132
The New York Times Co.
     
1.00%
 
Barclays Bank PLC
 
12/20/16
 
USD
 
1,800
 
(19,418)
 
57,942
    (77,360
Australia & New Zealand Banking Group Ltd.
     
1.00%
 
Deutsche Bank AG
 
9/20/17
 
USD
 
1
 
(12)
 
9
    (21
Westpac Banking Corp.
     
1.00%
 
Deutsche Bank AG
 
9/20/17
 
USD
 
1
 
(12)
 
10
    (22
 
     
 
 
 
 
 
 
 
 
 
 
 
 
 
       
Total
     
 
 
 
 
 
 
 
 
 
 
$(68,539)
 
$ 70,996 
   $ (139,535
     
OTC credit default swaps — sold protection outstanding as of August 31, 2014 were as follows:


Issuer       Receive
Fixed
Rate
  Counterparty   Expiration
Date
  Credit
Rating3
  Notional
Amount
(000)4
  Market
Value
  Premiums
Received
  Unrealized
 Appreciation 
MetLife, Inc.
     
1.00%
 
Morgan Stanley Capital Services LLC
 
9/20/16
 
A-
 
USD
 
900
 
$14,483
   $ (30,429    $ 44,912  
MetLife, Inc.
     
1.00%
 
Deutsche Bank AG
 
9/20/16
 
A-
 
USD
 
730
 
11,745
    (25,168     36,913  
MetLife, Inc.
     
1.00%
 
Morgan Stanley Capital Services LLC
 
9/20/16
 
A-
 
USD
 
275
 
4,425
    (8,292     12,717  
MetLife, Inc.
     
1.00%
 
Goldman Sachs Bank USA
 
9/20/16
 
A-
 
USD
 
500
 
8,044
    (16,778     24,822  
MetLife, Inc.
     
1.00%
 
Credit Suisse International
 
9/20/16
 
A-
 
USD
 
535
 
8,607
    (20,171     28,778  
MetLife, Inc.
     
1.00%
 
Citibank N.A.
 
12/20/16
 
A-
 
USD
 
298
 
5,130
    (9,981     15,111  
MetLife, Inc.
     
1.00%
 
Citibank N.A.
 
12/20/16
 
A-
 
USD
 
285
 
4,895
    (10,366     15,261  
Total
     
 
 
 
 
 
 
 
 
 
 
 
 
$ 57,329
   $ (121,185    $  178,514  
3 Using S&P’s rating of the issuer.
4 The maximum potential amount the Trust may pay should a negative credit event take place as defined under the terms of the agreement.
     
For Trust compliance purposes, the Trust’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by investment advisor. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.
     
Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:
       
Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Trust has the ability to access
     
Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)
     
Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Trust’s own assumptions used in determining the fair value of investments and derivative financial instruments)
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

See Notes to Financial Statements.

24 ANNUAL REPORT AUGUST 31, 2014
 
  
Schedule of Investments (continued)  BlackRock Core Bond Trust (BHK)
 
       
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Trust’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Trust’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.
       
The following tables summarize the Trust’s investments and derivative financial instruments categorized in the disclosure hierarchy as of August 31, 2014:


        Level 1   Level 2   Level 3   Total
Assets:
                                   
Investments:
                                   
Long-Term Investments:
                                   
Asset-Backed Securities
             $ 20,001,624      $ 6,755,839      $ 26,757,463  
Corporate Bonds
              320,243,902       8,777,320       329,021,222  
Foreign Agency Obligations
              7,432,700             7,432,700  
Municipal Bonds
              12,743,807             12,743,807  
Non-Agency Mortgage-Backed Securities
              60,190,544             60,190,544  
Preferred Securities
       $ 6,948,540       42,783,037             49,731,577  
U.S. Government Sponsored Agency Securities
              51,047,306             51,047,306  
U.S. Treasury Obligations
              58,568,934             58,568,934  
Short-Term Securities
        742,474                   742,474  
Options Purchased:
                                   
Interest Rate Contracts
              954,199             954,199  
Total
       $  7,691,014      $  573,966,053      $ 15,533,159      $ 597,190,226  
                                     
                                     
        Level 1   Level 2   Level 3   Total
Derivative Financial Instruments1
                                   
Assets:
                                   
Credit contracts
             $ 178,514            $ 178,514  
Foreign currency exchange contracts
              395,247             395,247  
Interest rate contracts
       $ 151,048       358,557             509,605  
Liabilities:
                                   
Credit contracts
              (139,535           (139,535
Foreign currency exchange contracts
              (5,496           (5,496
Interest rate contracts
        (118,336     (3,298,573             (3,416,909
Total
       $  32,712      $  (2,511,286          $  (2,478,574
1 Derivative financial instruments are swaps, financial futures contracts, forward foreign currency exchange contracts and options written. Swaps, financial futures contracts and forward foreign currency exchange contracts are valued at the unrealized appreciation/depreciation on the instrument and options written are shown at value.
       
The Trust may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of August 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:


        Level 1   Level 2   Level 3   Total
Assets:
                                   
Cash
       $ 38,897                  $ 38,897  
Cash pledged for centrally cleared swaps
        516,000                   516,000  
Cash pledged as collateral for OTC derivatives
        1,200,000                   1,200,000  
Cash pledged for financial futures contracts
        122,000                   122,000  
Foreign currency at value
        15,884                   15,884  
Liabilities:
                                   
Cash received as collateral for reverse repurchase agreements
             $ (2,378,000           (2,378,000
Reverse repurchase agreements
              (168,300,777           (168,300,777
Total
       $  1,892,781      $ (170,678,777          $ (168,785,996
Total
       $  7,691,014      $  573,966,053      $ 15,533,159      $ 597,190,226  
       
There were no transfers between Level 1 and Level 2 during the year ended August 31, 2014.

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 25
 
  
Schedule of Investments (concluded)  BlackRock Core Bond Trust (BHK)
 
       
A reconciliation of Level 3 investments is presented when the Trust had a significant amount of Level 3 investments at the beginning and/or end of the period in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:


        Common
Stocks
  Asset-Backed
Securities
  Corporate
Bonds
  Total
Assets:
                                   
Opening Balance, as of August 31, 2013
       $ 137,600      $ 10,951,144      $ 6,284,125      $ 17,372,869  
Transfers into Level 3
                           
Transfers out of Level 31
              (5,953,535           (5,953,535
Accrued discounts/premiums
              (314,613           (314,613
Net realized gain
              46,225             46,225  
Net change in unrealized appreciation/depreciation2,3
        (137,600     254,774       228,086       345,260  
Purchases
              6,242,847       2,265,109       8,507,956  
Sales
              (4,471,003           (4,471,003
Closing Balance, as of August 31, 2014
             $ 6,755,839      $ 8,777,320      $ 15,533,159  
Net change in unrealized appreciation/depreciation on investments still held at August 31, 20143
             $ 254,380      $ 228,086      $ 482,466  
1 As of August 31, 2013, the Trust used significant unobservable inputs in determining the value of certain investments. As of August 31, 2014, the Trust used observable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $5,953,535 transferred from Level 3 to Level 2 in the disclosure hierarchy.
2 Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations.
3 Any difference between Net change in unrealized appreciation/depreciation and Net change in unrealized appreciation/depreciation on investments held as of August 31, 2014 is generally due to investments no longer held or categorized as Level 3 at period end.
       
The Trust’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information could results in a significantly lower or higher value of such Level 3 instruments.

See Notes to Financial Statements.

26 ANNUAL REPORT AUGUST 31, 2014
 
  
Consolidated Schedule of Investments August 31, 2014 BlackRock Corporate High Yield Fund, Inc. (HYT)
(Percentages shown are based on Net Assets)
Common Stocks            
Shares
  Value
Auto Components — 1.2%
                           
The Goodyear Tire & Rubber Co.
     
 
    792,356      $  20,577,485  
Lear Corp.
     
 
    1,032       104,366  
 
     
 
            20,681,851  
Banks — 0.5%
                           
Citigroup, Inc.
     
 
    161,430       8,337,859  
Capital Markets — 2.1%
                           
American Capital Ltd. (a)
     
 
    1,875,455       29,050,798  
E*Trade Financial Corp. (a)
     
 
    246,100       5,478,186  
Uranium Participation Corp. (a)
     
 
    176,860       852,337  
 
     
 
            35,381,321  
Chemicals — 0.8%
                           
Advanced Emissions Solutions, Inc. (a)
     
 
    168,580       3,673,358  
Huntsman Corp.
     
 
    373,192       10,035,133  
LyondellBasell Industries NV, Class A
     
 
    38       4,345  
 
     
 
            13,712,836  
Communications Equipment — 0.4%
       
Nokia OYJ — ADR
     
 
    877,870       7,347,772  
Containers & Packaging — 0.0%
                           
Smurfit Kappa Group PLC
     
 
    12,980       293,722  
Diversified Consumer Services — 0.4%
       
Cengage Thomson Learning (a)
     
 
    211,142       6,686,234  
Diversified Financial Services — 2.4%
       
Ally Financial, Inc.
     
 
    1,101,275       27,091,365  
Ally Financial, Inc. (a)
     
 
    142,289       3,500,309  
Kcad Holdings I Ltd. (a)
     
 
    1,563,279,160       10,677,197  
 
     
 
            41,268,871  
Diversified Telecommunication Services — 0.3%
Broadview Networks Holdings, Inc. (a)
     
 
    192,400       394,419  
Level 3 Communications, Inc. (a)
     
 
    115,920       5,211,763  
 
     
 
            5,606,182  
Electrical Equipment — 0.0%
                           
Medis Technologies Ltd. (a)
     
 
    365,353       4  
Energy Equipment & Services — 0.7%
Laricina Energy Ltd. (a)(b)
     
 
    211,764       6,787,433  
Osum Oil Sands Corp. (a)(b)
     
 
    400,000       4,863,423  
 
     
 
            11,650,856  
Health Care Providers & Services — 0.0%
HealthSouth Corp.
     
 
    1,468       57,825  
Insurance — 1.1%
                           
American International Group, Inc.
     
 
    316,865       17,763,452  
Media — 0.0%
                           
Clear Channel Outdoor Holdings, Inc., Class A
     
 
    47,653       330,712  
Metals & Mining — 0.1%
                           
African Minerals Ltd. (a)
     
 
    225,302       115,218  
Peninsula Energy Ltd. (a)
     
 
    39,828,291       892,743  
 
     
 
            1,007,961  
Oil, Gas & Consumable Fuels — 1.2%
African Petroleum Corp. Ltd. (a)
     
 
    331,833       52,686  
General Maritime Corp.
     
 
    953,381       17,637,548  
Seven Generations Energy Ltd. (a)(b)
     
 
    108,000       2,483,215  
 
     
 
            20,173,449  
Paper & Forest Products — 0.5%
Ainsworth Lumber Co. Ltd. (a)
     
 
    2,147,503       5,354,383  
Ainsworth Lumber Co. Ltd. (a)(c)
     
 
    614,940       1,532,684  
Western Forest Products, Inc.
     
 
    621,145       1,392,959  
 
     
 
            8,280,026  
Semiconductors & Semiconductor Equipment — 0.0%
SunPower Corp. (a)
     
 
    1,025       39,176  
Software — 0.7%
                           
Amaya Gaming Group, Inc.
     
 
    312,745       8,273,088  
HMH Holdings/EduMedia (a)
     
 
    206,188       3,958,809  
 
     
 
            12,231,897  

 

Common Stocks            
Shares
  Value
Trading Companies & Distributors — 0.2%
HD Supply Holdings, Inc. (a)
     
 
    115,400      $  3,204,658  
Total Common Stocks — 12.6%
          214,056,664  

Asset-Backed Securities
     
  
    Par
(000
        
Adams Mill CLO Ltd., Series 2014-1A, Class D1, 3.70%, 7/15/26 (c)(d)
     
USD
    500       475,900  
ALM Loan Funding, Series 2013-7RA (c)(d):
                           
Class C, 3.68%, 4/24/24
     
 
    2,840       2,714,705  
Class D, 5.23%, 4/24/24
     
 
    2,360       2,192,785  
ALM XIV Ltd., Series 2014-14A (c)(d):
                           
Class B, 3.18%, 7/28/26
     
 
    1,069       1,052,914  
Class C, 3.68%, 7/28/26
     
 
    750       711,900  
ALM XIV, Ltd., Series 2014-14A, Class D, 5.08%, 7/28/26 (c)(d)
     
 
    250       226,850  
Apidos CLO XVIII, Series 2014-18A, Class C, 3.88%, 7/22/26 (c)(d)
     
 
    550       534,160  
Atlas Senior Loan Fund V, Ltd., Series 2014-1A (c)(d):
                           
Class C, 3.26%, 7/16/26
     
 
    250       246,281  
Atlas Senior Loan Fund V, Ltd., Series 2014-1A (c)(d):
                           
Class D, 3.71%, 7/16/26
     
 
    250       232,497  
Avalon IV Capital, Ltd., Series 2012-1AR, Class CR, 3.08%, 4/17/23 (c)(d)
     
 
    850       850,425  
Benefit Street Partners CLO, Ltd., Series 2014-IVA, Class C, 3.68%, 7/20/26 (c)(d)
     
 
    500       467,857  
Carlyle Global Market Strategies CLO 2012-2, Ltd., Series 2012-2AR, Class ER, 6.33%, 7/20/23 (c)(d)
     
 
    580       575,531  
Cedar Funding, Ltd., Series 2014-3A (c)(d):
                           
Class C, 3.03%, 5/20/26
     
 
    800       784,000  
Class D, 3.78%, 5/20/26
     
 
    535       511,246  
CIFC Funding 2014-II, Ltd., Series 2014-2A, Class A3L, 3.10%, 5/24/26 (c)(d)
     
 
    500       487,923  
CIFC Funding Ltd., Series 2014-3A (c)(d):
                           
Class C1, 2.95%, 7/22/26
     
 
    500       484,898  
Class D, 3.55%, 7/22/26
     
 
    250       233,817  
Galaxy CLO Ltd., Series 2014-18A, Class C1, 3.23%, 10/15/26 (c)(d)
     
 
    500       490,000  
Gramercy Park CLO, Ltd., Series 2012-1AR, Class DR, 5.73%, 7/17/23 (c)(d)
     
 
    500       494,776  
Jamestown CLO IV Ltd., Series 2014-4A, Class C, 3.73%, 7/15/26 (c)(d)
     
 
    250       235,334  
LCM X LP, Series 10AR, Class ER, 5.73%, 4/15/22 (c)(d)
     
 
    1,000       981,918  
Madison Park Funding, Ltd. (c)(d):
                           
3.83%, 7/20/26
     
 
    500       476,927  
Series 2012-8AR, Class CR, 3.03%, 4/22/22
     
 
    500       500,000  
Series 2012-8AR, Class DR, 4.08%, 4/22/22
     
 
    250       250,000  
Neuberger Berman CLO XVII, Ltd., Series 2014-17A, Class D, 3.78%, 8/04/25 (c)(d)
     
 
    500       473,850  
Octagon Investment Partners XII, Ltd., Series 2012-1AR, Class ER, 5.74%, 5/05/23 (c)(d)
     
 
    1,200       1,191,359  
Octagon Investment Partners XX, Ltd., Series 2014-1A (c)(d):
                           
Class D, 3.89%, 8/12/26
     
 
    250       239,975  
Class E, 5.49%, 8/12/26
     
 
    250       233,150  
Palmer Square CLO, Ltd., Series 2014-1A (c)(d):
                           
Class B, 2.82%, 10/17/22
     
 
    1,100       1,074,330  
Class C, 4.12%, 10/17/22
     
 
    845       832,468  
Class D, 6.02%, 10/17/22
     
 
    590       584,247  
Steele Creek CLO 2014-1, Ltd., Series 2014-1A, Class B, 2.48%, 8/21/26 (c)(d)
     
 
    500       493,600  
TICP CLO II, Ltd., Series 2014-2A, Class A1A, 1.68%, 7/20/26 (c)(d)
     
 
    1,000       994,777  


See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 27
 
  
Consolidated Schedule of Investments (continued)  BlackRock Corporate High Yield Fund, Inc. (HYT)
(Percentages shown are based on Net Assets)
Asset-Backed Securities           Par
(000)
  Value
Venture CDO, Ltd., Series 2014-17A, Class C, 3.13%, 7/15/26 (c)(d)
     
USD
    500      $  486,603  
Venture XIII CLO, Ltd., Series 2013-13A, Class D, 3.78%, 6/10/25 (c)(d)
     
 
    1,000       945,555  
Washington Mill CLO, Ltd., Series 2014-1A (c)(d):
                           
Class C, 3.23%, 4/20/26
     
 
    515       510,475  
Class D, 3.68%, 4/20/26
     
 
    660       618,817  
WhiteHorse IX, Ltd., Series 2014-9A, Class C, 2.92%, 7/17/26 (c)(d)
     
 
    250       239,291  
WhiteHorse, Ltd., Series 2014-1A, Class C, 2.99%, 5/01/26 (c)(d)
     
 
    680       654,221  
Total Asset-Backed Securities — 1.5%
    25,785,362  

Corporate Bonds
     
  
                 
Aerospace & Defense — 1.4%
                           
B/E Aerospace, Inc., 5.25%, 4/01/22
     
 
    410       443,825  
CTP Transportation Products LLC/CTP Finance, Inc., 8.25%, 12/15/19 (c)
     
 
    1,095       1,179,863  
Huntington Ingalls Industries, Inc.:
                           
6.88%, 3/15/18
     
 
    1,015       1,072,094  
7.13%, 3/15/21
     
 
    1,405       1,527,937  
Meccanica Holdings USA, Inc., 6.25%, 7/15/19 (c)
     
 
    1,140       1,242,600  
TransDigm, Inc.:
                           
5.50%, 10/15/20
     
 
    2,490       2,490,000  
6.00%, 7/15/22 (c)
     
 
    9,680       9,849,400  
6.50%, 7/15/24 (c)
     
 
    6,048       6,199,200  
 
     
 
            24,004,919  
Air Freight & Logistics — 0.3%
               
CEVA Group PLC, 9.00%, 9/01/21 (c)
     
 
    844       852,440  
National Air Cargo Group, Inc.:
                           
12.38%, 8/16/15
     
 
    1,174       1,174,016  
12.38%, 9/02/15
     
 
    1,155       1,155,408  
XPO Logistics, Inc., 7.88%, 9/01/19 (c)
     
 
    1,400       1,456,000  
 
     
 
            4,637,864  
Airlines — 2.8%
                           
American Airlines Pass-Through Trust, Series 2013-2, Class C, 6.00%, 1/15/17 (c)
     
 
    6,420       6,644,700  
Continental Airlines Pass-Through Trust:
                           
Series 1997-4, Class B, 6.90%, 7/28/18
     
 
    333       351,015  
Series 2012-3, Class C, 6.13%, 4/29/18
     
 
    5,145       5,453,700  
Delta Air Lines Pass-Through Trust, Class B:
                           
Series 2009-1, 9.75%, 6/07/18
     
 
    864       977,172  
Series 2010-1, 6.38%, 7/02/17 (c)
     
 
    2,647       2,805,820  
US Airways Pass-Through Trust:
                           
Series 2011-1, Class C, 10.88%, 10/22/14
     
 
    1,449       1,470,877  
Series 2012-1, Class C, 9.13%, 10/01/15
     
 
    1,634       1,723,353  
Series 2012-2, Class C, 5.45%, 6/03/18
     
 
    5,720       5,820,100  
Series 2013-1, Class B, 5.38%, 11/15/21
     
 
    5,255       5,425,788  
Virgin Australia Trust, Series 2013-1 (c):
                           
Class C, 7.13%, 10/23/18
     
 
    8,395       8,772,804  
Class D, 8.50%, 10/23/16
     
 
    8,036       8,376,502  
 
     
 
            47,821,831  
Auto Components — 2.5%
                           
Affinia Group, Inc., 7.75%, 5/01/21
     
 
    3,109       3,202,270  
Autodis SA, 6.50%, 2/01/19
     
EUR
    265       364,096  
Brighthouse Group PLC, 7.88%, 5/15/18
     
GBP
    400       698,923  
CNH Industrial Finance Europe SA, 2.75%, 3/18/19
     
EUR
    1,527       2,028,251  
Dana Holding Corp., 6.75%, 2/15/21
     
USD
    200       213,500  
Delphi Corp., 6.13%, 5/15/21
     
 
    420       464,100  
Icahn Enterprises LP/Icahn Enterprises Finance Corp.:
                           
3.50%, 3/15/17
     
 
    352       354,200  
4.88%, 3/15/19
     
 
    8,850       9,093,375  
6.00%, 8/01/20
     
 
    2,973       3,173,678  
5.88%, 2/01/22
     
 
    2,797       2,915,873  
Corporate Bonds           Par
(000)
  Value
Auto Components (concluded)
           
IDQ Holdings, Inc., 11.50%, 4/01/17 (c)
     
USD
    2,155      $  2,348,950  
Rhino Bondco SpA, 7.25%, 11/15/20
     
EUR
    490       684,397  
Schaeffler Holding Finance BV:
                           
2.75%, 5/15/19
     
 
    2,035       2,680,979  
(6.88% Cash or 7.63% PIK), 6.88%,
8/15/18 (c)(e)
     
USD
    2,400       2,529,000  
(6.88% Cash), 6.88%, 8/15/18 (e)
     
EUR
    1,660       2,298,939  
Servus Luxembourg Holding SCA, 7.75%, 6/15/18
     
 
    706       989,775  
Titan International, Inc., 6.88%, 10/01/20
     
USD
    2,505       2,517,525  
UCI International, Inc., 8.63%, 2/15/19
     
 
    7,080       6,761,400  
 
     
 
            43,319,231  
Automobiles — 1.2%
                           
Chrysler Group LLC/CG Co-Issuer, Inc., Term Loan, 8.25%, 6/15/21
     
 
    2,920       3,263,100  
Ford Motor Co., 4.25%, 11/15/16 (f)
     
 
    160       323,800  
General Motors Co.:
                           
4.88%, 10/02/23
     
 
    940       1,005,800  
6.25%, 10/02/43
     
 
    7,410       8,688,225  
Jaguar Land Rover Automotive PLC:
                           
8.25%, 3/15/20
     
GBP
    2,269       4,181,238  
5.00%, 2/15/22
     
 
    1,555       2,600,896  
 
     
 
            20,063,059  
Banks — 1.2%
                           
Banco Bilbao Vizcaya Argentaria SA, 7.00% (d)(g)
     
EUR
    1,000       1,379,647  
Banco Espirito Santo SA:
                           
4.75%, 1/15/18
     
 
    1,900       2,504,978  
4.00%, 1/21/19
     
 
    100       129,255  
CIT Group, Inc.:
                           
5.25%, 3/15/18
     
USD
    4,320       4,611,600  
6.63%, 4/01/18 (c)
     
 
    1,400       1,561,000  
5.50%, 2/15/19 (c)
     
 
    6,919       7,463,871  
6.00%, 4/01/36
     
 
    2,800       2,814,000  
HSH Nordbank AG, 1.00%, 2/14/17 (d)
     
EUR
    608       651,105  
 
     
 
            21,115,456  
Beverages — 0.1%
                           
Hydra Dutch Holdings 2BV, 5.70%, 4/15/19 (d)
     
 
    1,355       1,753,696  
Biotechnology — 0.2%
                           
Laba Royalty Sub LLC, 9.00%, 5/15/29 (c)
     
USD
    2,630       2,656,300  
Building Products — 1.5%
                           
American Builders & Contractors Supply Co., Inc., 5.63%, 4/15/21 (c)
     
 
    1,715       1,745,013  
BMBG Bond Finance SCA, 5.20%, 10/15/20 (d)
     
EUR
    1,020       1,358,456  
Builders FirstSource, Inc., 7.63%, 6/01/21 (c)
     
USD
    2,058       2,150,610  
Building Materials Corp. of America, 6.75%, 5/01/21 (c)
     
 
    2,490       2,670,525  
Cemex Finance LLC, 6.00%, 4/01/24 (c)
     
 
    3,295       3,426,800  
Cemex SAB de CV, 5.88%, 3/25/19 (c)
     
 
    1,335       1,398,413  
CPG Merger Sub LLC, 8.00%, 10/01/21 (c)
     
 
    3,590       3,769,500  
Momentive Performance Materials, Inc., 8.88%, 10/15/20 (a)(h)
     
 
    1,068       1,001,250  
Ply Gem Industries, Inc., 6.50%, 2/01/22 (c)
     
 
    3,550       3,514,500  
USG Corp., 9.75%, 1/15/18
     
 
    3,935       4,633,462  
 
     
 
            25,668,529  
Capital Markets — 1.4%
                           
American Capital Ltd., 6.50%, 9/15/18 (c)
     
 
    3,840       4,032,000  
Blackstone CQP Holdco LP, 9.30%, 3/18/19
     
 
    16,121       16,443,093  
E*Trade Financial Corp. (f)(i):
                           
0.00%, 8/31/19 (c)
     
 
    1,206       2,604,206  
Series A, 0.00%, 8/31/19
     
 
    373       805,447  
 
     
 
            23,884,746  
Chemicals — 1.4%
                           
Axalta Coating Systems US Holdings, Inc./Axalta Coating Systems Dutch Holding BV:
                           
5.75%, 2/01/21
     
EUR
    500       696,393  
7.38%, 5/01/21 (c)
     
USD
    1,760       1,918,400  


See Notes to Financial Statements.

28 ANNUAL REPORT AUGUST 31, 2014
 
  
Consolidated Schedule of Investments (continued)  BlackRock Corporate High Yield Fund, Inc. (HYT)
(Percentages shown are based on Net Assets)
Corporate Bonds           Par
(000)
  Value
Chemicals (concluded)
                           
Axiall Corp., 4.88%, 5/15/23
     
USD
    629      $  629,786  
Basell Finance Co. BV, 8.10%, 3/15/27 (c)
     
 
    2,115       2,876,174  
Celanese US Holdings LLC:
                           
5.88%, 6/15/21
     
 
    1,848       2,028,180  
4.63%, 11/15/22
     
 
    1,565       1,592,387  
Huntsman International LLC:
                           
8.63%, 3/15/21
     
 
    945       1,037,138  
5.13%, 4/15/21
     
EUR
    1,779       2,453,224  
INEOS Finance PLC, 8.38%, 2/15/19 (c)
     
USD
    100       108,500  
INEOS Group Holdings SA:
                           
6.13%, 8/15/18 (c)
     
 
    2,125       2,194,062  
6.50%, 8/15/18
     
EUR
    378       517,265  
5.75%, 2/15/19
     
 
    506       684,804  
LSB Industries, Inc., 7.75%, 8/01/19
     
USD
    1,313       1,434,453  
Montichem Holdco SA, 5.25%, 6/15/21
     
EUR
    311       414,053  
Nexeo Solutions LLC/Nexeo Solutions Finance Corp., 8.38%, 3/01/18
     
USD
    510       512,550  
PetroLogistics LP/PetroLogistics Finance Corp., 6.25%, 4/01/20
     
 
    811       894,128  
PolyOne Corp.:
                           
7.38%, 9/15/20
     
 
    1,205       1,298,388  
5.25%, 3/15/23
     
 
    1,506       1,554,945  
Rockwood Specialties Group, Inc., 4.63%, 10/15/20
     
 
    1,596       1,659,840  
 
     
 
            24,504,670  
Commercial Services & Supplies — 3.0%
AA Bond Co., Ltd., 9.50%, 7/31/19
     
GBP
    996       1,834,983  
ADS Waste Holdings, Inc., 8.25%, 10/01/20
     
USD
    1,546       1,646,490  
ARAMARK Corp., 5.75%, 3/15/20
     
 
    3,608       3,779,380  
Aviation Capital Group Corp., 6.75%, 4/06/21 (c)
     
 
    3,002       3,391,597  
AWAS Aviation Capital Ltd., 7.00%, 10/17/16 (c)
     
 
    649       664,815  
Bilbao Luxembourg SA, (10.5% Cash or 11.25% PIK), 10.50%, 12/01/18 (e)
     
EUR
    400       568,809  
Brand Energy & Infrastructure Services, Inc., 8.50%, 12/01/21 (c)
     
USD
    3,057       3,179,280  
Covanta Holding Corp.:
                           
6.38%, 10/01/22
     
 
    2,970       3,185,325  
5.88%, 3/01/24
     
 
    1,180       1,221,300  
Jurassic Holdings III, Inc., 6.88%, 2/15/21 (c)
     
 
    2,738       2,799,605  
Mobile Mini, Inc., 7.88%, 12/01/20
     
 
    2,040       2,203,200  
Mustang Merger Corp., 8.50%, 8/15/21 (c)
     
 
    2,688       2,829,120  
United Rentals North America, Inc.:
                           
7.38%, 5/15/20
     
 
    1,890       2,060,100  
8.25%, 2/01/21
     
 
    2,168       2,384,800  
7.63%, 4/15/22
     
 
    9,095       10,209,137  
6.13%, 6/15/23
     
 
    1,055       1,126,212  
5.75%, 11/15/24
     
 
    5,256       5,505,660  
Verisure Holding AB:
                           
8.75%, 9/01/18
     
EUR
    790       1,105,533  
8.75%, 12/01/18
     
 
    673       943,536  
 
     
 
            50,638,882  
Communications Equipment — 2.1%
Alcatel-Lucent USA, Inc.:
                           
4.63%, 7/01/17 (c)
     
USD
    1,735       1,761,025  
6.75%, 11/15/20 (c)
     
 
    3,755       3,970,912  
6.45%, 3/15/29
     
 
    4,078       3,986,245  
Avaya, Inc. (c):
                           
7.00%, 4/01/19
     
 
    1,505       1,497,475  
10.50%, 3/01/21
     
 
    1,355       1,243,213  
CommScope, Inc. (c):
                           
5.00%, 6/15/21
     
 
    1,475       1,497,125  
5.50%, 6/15/24
     
 
    1,413       1,437,727  
Nokia OYJ, 5.00%, 10/26/17 (f)
     
EUR
    800       2,798,398  
Zayo Group LLC/Zayo Capital, Inc.:
                           
8.13%, 1/01/20
     
USD
    5,725       6,175,844  
10.13%, 7/01/20
     
 
    9,470       10,772,125  
 
     
 
            35,140,089  

 

Corporate Bonds           Par
(000)
  Value
Construction & Engineering — 0.8%
Aldesa Financial Services SA, 7.25%, 4/01/21
     
EUR
    960      $  1,290,051  
Astaldi SpA, 7.13%, 12/01/20
     
 
    2,654       3,752,322  
BlueLine Rental Finance Corp., 7.00%, 2/01/19 (c)
     
USD
    1,032       1,091,340  
H&E Equipment Services, Inc., 7.00%, 9/01/22
     
 
    2,462       2,689,735  
Novafives SAS:
                           
4.21%, 6/30/20 (d)
     
EUR
    455       600,537  
4.50%, 6/30/21
     
 
    320       426,561  
Safway Group Holding LLC/Safway Finance Corp., 7.00%, 5/15/18 (c)
     
USD
    2,852       3,001,730  
Weekley Homes LLC/Weekley Finance Corp., 6.00%, 2/01/23
     
 
    862       853,380  
 
     
 
            13,705,656  
Construction Materials — 2.4%
                           
HD Supply, Inc.:
                           
8.13%, 4/15/19
     
 
    13,109       14,288,810  
11.00%, 4/15/20
     
 
    9,123       10,559,872  
7.50%, 7/15/20
     
 
    12,975       13,948,125  
Kerneos Tech Group SAS:
                           
4.92%, 3/01/21 (d)
     
EUR
    194       257,989  
5.75%, 3/01/21
     
 
    262       358,025  
Officine MaccaFerri SpA, 5.75%, 6/01/21
     
 
    780       1,040,767  
 
     
 
            40,453,588  
Consumer Finance — 0.3%
                           
Ford Motor Credit Co. LLC:
                           
12.00%, 5/15/15
     
USD
    1,120       1,207,972  
6.63%, 8/15/17
     
 
    361       412,299  
8.13%, 1/15/20
     
 
    500       634,775  
IVS F. SpA, 7.13%, 4/01/20
     
EUR
    1,260       1,771,600  
Springleaf Finance Corp.:
                           
6.90%, 12/15/17
     
USD
    315       344,137  
7.75%, 10/01/21
     
 
    297       337,095  
8.25%, 10/01/23
     
 
    539       623,892  
 
     
 
            5,331,770  
Containers & Packaging — 1.5%
                           
Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc.:
                           
6.25%, 1/31/19 (c)
     
 
    1,504       1,519,040  
6.00%, 6/30/21 (c)
     
 
    1,825       1,806,750  
4.25%, 1/15/22
     
EUR
    1,855       2,406,910  
Ball Corp., 4.00%, 11/15/23
     
USD
    1,129       1,081,017  
Beverage Packaging Holdings Luxembourg II SA (c):
                           
5.63%, 12/15/16
     
 
    2,113       2,149,977  
6.00%, 6/15/17
     
 
    2,137       2,169,055  
Crown Americas LLC/Crown Americas Capital Corp. III, 6.25%, 2/01/21
     
 
    93       99,278  
Crown European Holdings SA, 4.00%, 7/15/22
     
EUR
    1,325       1,802,789  
Graphic Packaging International, Inc., 7.88%, 10/01/18
     
USD
    2,080       2,168,400  
Metsa Board OYJ, 4.00%, 3/13/19
     
EUR
    550       750,669  
OI European Group BV, 4.88%, 3/31/21
     
 
    1,057       1,496,356  
Pactiv LLC:
                           
7.95%, 12/15/25
     
USD
    4,267       4,597,692  
8.38%, 4/15/27
     
 
    553       595,858  
SGD Group SAS, 5.63%, 5/15/19
     
EUR
    405       540,206  
Tekni-Plex, Inc., 9.75%, 6/01/19 (c)
     
USD
    1,907       2,092,932  
 
     
 
            25,276,929  
Distributors — 0.4%
                           
VWR Funding, Inc., 7.25%, 9/15/17
     
 
    6,554       6,914,470  
Diversified Consumer Services — 0.5%
APX Group, Inc.:
                           
6.38%, 12/01/19
     
 
    580       588,700  
8.75%, 12/01/20
     
 
    599       596,005  
Garda World Security Corp., 7.25%, 11/15/21 (c)
     
 
    702       718,673  
Laureate Education, Inc., 9.25%, 9/01/19 (c)
     
 
    5,935       6,083,375  
 
     
 
            7,986,753  


See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 29
 
  
Consolidated Schedule of Investments (continued)  BlackRock Corporate High Yield Fund, Inc. (HYT)
(Percentages shown are based on Net Assets)
Corporate Bonds           Par
(000)
  Value
Diversified Financial Services — 4.7%
Aircastle Ltd., 6.25%, 12/01/19
     
USD
    1,795      $  1,943,088  
Ally Financial, Inc.:
                           
7.50%, 9/15/20
     
 
    1,141       1,364,921  
8.00%, 11/01/31
     
 
    20,980       27,136,117  
CE Energy AS, 7.00%, 2/01/21
     
EUR
    745       1,016,825  
Co-Operative Group Holdings, 6.88%, 7/08/20 (j)
     
GBP
    730       1,293,714  
DFC Finance Corp., 10.50%, 6/15/20 (c)
     
USD
    2,745       2,782,744  
Ford Motor Credit Co. LLC, 5.88%, 8/02/21
     
 
    200       235,032  
Gala Group Finance PLC, 8.88%, 9/01/18
     
GBP
    2,417       4,254,283  
Jarden Corp., 1.88%, 9/15/18 (f)
     
USD
    100       137,875  
Jefferies Finance LLC/JFIN Co-Issuer Corp. (c):
                           
7.38%, 4/01/20
     
 
    3,410       3,563,450  
6.88%, 4/15/22
     
 
    2,987       2,994,467  
JPMorgan Chase & Co., 6.75% (d)(g)
     
 
    5,674       6,092,457  
Lehman Brother Holding Escrow, 1.00%, 9/22/18
     
 
    430       86,000  
Lehman Brothers Holdings, Inc.:
                           
5.38%, 10/17/14
     
EUR
    350       94,276  
4.75%, 1/16/15
     
 
    1,890       509,090  
1.00%, 2/05/15
     
 
    3,950       1,012,070  
1.00%, 12/31/49
     
USD
    1,535       307,000  
Leucadia National Corp., 8.13%, 9/15/15
     
 
    4,503       4,801,324  
Reynolds Group Issuer, Inc.:
                           
7.13%, 4/15/19
     
 
    2,140       2,222,925  
9.00%, 4/15/19
     
 
    3,405       3,575,250  
7.88%, 8/15/19
     
 
    728       788,060  
9.88%, 8/15/19
     
 
    3,015       3,342,881  
5.75%, 10/15/20
     
 
    9,982       10,431,190  
8.25%, 2/15/21
     
 
    631       688,579  
 
     
 
            80,673,618  
Diversified Telecommunication Services — 3.7%
CenturyLink, Inc.:
                           
6.45%, 6/15/21
     
 
    1,125       1,231,875  
Series V, 5.63%, 4/01/20
     
 
    5,420       5,731,650  
Cequel Communications Holdings I LLC/Cequel Capital Corp., 5.13%, 12/15/21 (c)
     
 
    2,350       2,329,437  
Consolidated Communications Finance Co., 10.88%, 6/01/20
     
 
    1,915       2,211,825  
Frontier Communications Corp., 8.50%, 4/15/20
     
 
    2,900       3,371,250  
Level 3 Communications, Inc., 8.88%, 6/01/19
     
 
    1,780       1,922,400  
Level 3 Financing, Inc.:
                           
8.13%, 7/01/19
     
 
    7,665       8,297,362  
7.00%, 6/01/20
     
 
    2,395       2,580,612  
8.63%, 7/15/20
     
 
    8,235       9,120,262  
Telecom Italia SpA:
                           
6.13%, 11/15/16 (f)
     
EUR
    1,600       2,500,710  
6.38%, 6/24/19
     
GBP
    900       1,623,047  
4.88%, 9/25/20
     
EUR
    870       1,254,350  
4.50%, 1/25/21
     
 
    1,350       1,911,606  
5.88%, 5/19/23
     
GBP
    1,900       3,317,855  
Telefonica SA, Series TIT, 6.00%, 7/24/17 (f)
     
EUR
    900       1,208,926  
Telenet Finance V Luxembourg SCA:
                           
6.25%, 8/15/22
     
 
    1,362       1,941,716  
6.75%, 8/15/24
     
 
    1,982       2,912,826  
tw telecom holdings, Inc., 5.38%, 10/01/22
     
USD
    4,630       5,035,125  
Windstream Corp.:
                           
7.75%, 10/15/20
     
 
    1,648       1,775,720  
7.75%, 10/01/21
     
 
    1,720       1,874,800  
6.38%, 8/01/23
     
 
    315       315,788  
 
     
 
            62,469,142  
Electric Utilities — 0.4%
                           
Homer City Generation LP (e):
                           
8.14%, 10/01/19
     
 
    850       909,500  
8.73%, 10/01/26
     
 
    2,165       2,294,900  
Miran Mid-Atlantic Pass Through Trust:
                           
Series B, 9.13%, 6/30/17
     
 
    989       1,065,641  
Series C, 10.06%, 12/30/28
     
 
    2,237       2,513,806  
 
     
 
            6,783,847  

 

Corporate Bonds           Par
(000)
  Value
Electrical Equipment — 0.3%
                           
Belden, Inc., 5.50%, 4/15/23
     
EUR
    600      $  821,876  
International Wire Group Holdings, Inc., 8.50%, 10/15/17 (c)
     
USD
    1,421       1,531,127  
Rexel SA, 5.25%, 6/15/20 (c)
     
 
    205       209,100  
Techem Energy Metering Service GmbH & Co., 7.88%, 10/01/20
     
EUR
    210       306,282  
Trionista Holdco GmbH, 5.00%, 4/30/20
     
EUR
    1,511       2,058,885  
Trionista TopCo GmbH, 6.88%, 4/30/21
     
 
    418       587,677  
 
     
 
            5,514,947  
Electronic Equipment, Instruments & Components — 0.1%
CDW LLC/CDW Finance Corp., 8.50%, 4/01/19
     
USD
    102       109,650  
Jabil Circuit, Inc., 8.25%, 3/15/18
     
 
    1,310       1,542,525  
 
     
 
            1,652,175  
Energy Equipment & Services — 1.8%
Atwood Oceanics, Inc., 6.50%, 2/01/20
     
 
    780       826,800  
Calfrac Holdings LP, 7.50%, 12/01/20 (c)
     
 
    3,146       3,342,625  
CGG SA, 7.75%, 5/15/17
     
 
    499       505,238  
Gates Global LLC / Gates Global Co., 5.75%, 7/15/22
     
EUR
    110       140,227  
Genesis Energy LP/Genesis Energy Finance Corp., 5.75%, 2/15/21
     
USD
    283       292,198  
MEG Energy Corp. (c):
                           
6.50%, 3/15/21
     
 
    3,601       3,799,055  
7.00%, 3/31/24
     
 
    6,056       6,585,900  
Peabody Energy Corp.:
                           
6.00%, 11/15/18
     
 
    3,526       3,631,780  
6.25%, 11/15/21
     
 
    2,174       2,165,847  
7.88%, 11/01/26
     
 
    2,795       2,878,850  
Pioneer Energy Services Corp., 6.13%, 3/15/22 (c)
     
 
    528       537,240  
Precision Drilling Corp.:
                           
6.63%, 11/15/20
     
 
    425       450,500  
5.25%, 11/15/24 (c)
     
 
    4,147       4,147,000  
Rain CII Carbon LLC/CII Carbon Corp., 8.25%, 1/15/21 (c)
     
 
    1,361       1,429,050  
 
     
 
            30,732,310  
Food & Staples Retailing — 0.8%
                           
Bakkavor Finance 2 PLC:
                           
8.25%, 2/15/18
     
GBP
    1,427       2,511,177  
8.75%, 6/15/20
     
 
    795       1,432,004  
Brakes Capital, 7.13%, 12/15/18
     
 
    830       1,395,287  
Labeyrie Fine Foods SAS, 5.63%, 3/15/21
     
EUR
    250       341,627  
Premier Foods Finance PLC, 6.50%, 3/15/21
     
GBP
    159       258,685  
R&R Ice Cream PLC:
                           
4.75%, 5/15/20
     
EUR
    745       978,893  
5.50%, 5/15/20
     
GBP
    200       327,069  
9.25%, 5/15/18 (e)
     
EUR
    823       1,103,959  
Rite Aid Corp.:
                           
9.25%, 3/15/20
     
USD
    2,080       2,329,600  
6.75%, 6/15/21
     
 
    2,283       2,422,834  
 
     
 
            13,101,135  
Food Products — 0.7%
                           
Boparan Finance PLC:
                           
5.25%, 7/15/19
     
GBP
    405       643,913  
4.38%, 7/15/21
     
EUR
    440       555,047  
5.50%, 7/15/21
     
GBP
    625       984,523  
Findus Bondco SA:
                           
9.13%, 7/01/18
     
EUR
    830       1,183,278  
9.50%, 7/01/18
     
GBP
    465       833,728  
JBS Investments GmbH, 7.75%, 10/28/20 (c)
     
USD
    2,638       2,849,040  
Smithfield Foods, Inc.:
                           
5.88%, 8/01/21 (c)
     
 
    891       953,370  
6.63%, 8/15/22
     
 
    2,626       2,888,600  
Univeg Holding BV, 7.88%, 11/15/20
     
EUR
    595       773,982  
 
     
 
            11,665,481  


See Notes to Financial Statements.

30 ANNUAL REPORT AUGUST 31, 2014
 
  
Consolidated Schedule of Investments (continued)  BlackRock Corporate High Yield Fund, Inc. (HYT)
(Percentages shown are based on Net Assets)
Corporate Bonds           Par
(000)
  Value
Health Care Equipment & Supplies — 0.7%
3AB Optique Developpement SAS, 5.63%, 4/15/19
     
EUR
    900      $  1,141,166  
Biomet, Inc., 6.50%, 10/01/20
     
USD
    2,801       2,986,566  
DJO Finance LLC/DJO Finance Corp., 8.75%, 3/15/18
     
 
    2,106       2,237,625  
Fresenius Medical Care US Finance, Inc., 5.75%, 2/15/21 (c)
     
 
    1,580       1,714,300  
IDH Finance PLC:
                           
6.00%, 12/01/18
     
GBP
    614       1,060,106  
6.00%, 12/01/18 (c)
     
 
    200       345,311  
Teleflex, Inc., 6.88%, 6/01/19
     
USD
    1,635       1,729,012  
 
     
 
            11,214,086  
Health Care Providers & Services — 5.8%
Acadia Healthcare Co., Inc., 5.13%, 7/01/22 (c)
     
 
    1,145       1,156,450  
Alere, Inc.:
                           
7.25%, 7/01/18
     
 
    802       846,110  
8.63%, 10/01/18
     
 
    2,834       2,975,700  
Amsurg Corp., 5.63%, 7/15/22 (c)
     
 
    4,868       4,977,530  
Care UK Health & Social Care PLC, 5.56%, 7/15/19
     
GBP
    1,253       2,028,164  
CHS/Community Health Systems, Inc.:
                           
5.13%, 8/15/18
     
USD
    4,465       4,643,600  
6.88%, 2/01/22 (c)
     
 
    4,448       4,726,000  
ConvaTec Healthcare E SA, 7.38%, 12/15/17 (c)
     
EUR
    1,907       2,632,451  
Crown Newco 3 PLC, 7.00%, 2/15/18
     
GBP
    294       508,584  
DaVita HealthCare Partners, Inc., 5.13%, 7/15/24
     
USD
    5,166       5,240,261  
HCA Holdings, Inc., 7.75%, 5/15/21
     
 
    2,666       2,905,940  
HCA, Inc.:
                           
3.75%, 3/15/19
     
 
    2,911       2,932,833  
6.50%, 2/15/20
     
 
    9,730       10,885,437  
5.88%, 3/15/22
     
 
    3,565       3,876,937  
4.75%, 5/01/23
     
 
    1,487       1,500,011  
5.88%, 5/01/23
     
 
    4,096       4,362,240  
5.00%, 3/15/24
     
 
    1,250       1,273,438  
Hologic, Inc., 6.25%, 8/01/20
     
 
    6,719       7,088,545  
Kindred Healthcare, Inc., 6.38%, 4/15/22 (c)
     
 
    931       940,310  
MPH Acquisition Holdings LLC, 6.63%, 4/01/22 (c)
     
 
    1,280       1,339,200  
Omnicare, Inc., 3.75%, 4/01/42 (f)
     
 
    1,722       2,750,895  
Priory Group No. 3 PLC, 7.00%, 2/15/18 (c)
     
GBP
    2,017       3,489,162  
Symbion, Inc., 8.00%, 6/15/16
     
USD
    1,915       1,993,994  
Tenet Healthcare Corp.:
                           
6.25%, 11/01/18
     
 
    1,308       1,425,720  
5.00%, 3/01/19 (c)
     
 
    4,753       4,812,412  
4.75%, 6/01/20
     
 
    2,575       2,620,063  
6.00%, 10/01/20
     
 
    3,835       4,160,975  
4.50%, 4/01/21
     
 
    74       74,185  
4.38%, 10/01/21
     
 
    4,005       3,974,962  
8.13%, 4/01/22
     
 
    4,192       4,826,040  
Voyage Care Bondco PLC, 6.50%, 8/01/18
     
GBP
    786       1,344,025  
 
     
 
            98,312,174  
Health Care Technology — 0.0%
                           
IMS Health, Inc., 6.00%, 11/01/20 (c)
     
USD
    795       835,744  
Hotels, Restaurants & Leisure — 4.2%
Caesars Entertainment Operating Co., Inc., 9.00%, 2/15/20
     
 
    27,170       21,754,656  
Carlson Travel Holdings, Inc., (7.50% Cash or 8.25% PIK), 7.50%, 8/15/19 (c)(e)
     
 
    654       671,985  
CDW LLC/CDW Finance Corp., 6.00%, 8/15/22
     
 
    1,325       1,396,219  
Cedar Funding Ltd., 5.38%, 6/01/24 (c)
     
 
    1,070       1,075,350  
Cirsa Funding Luxembourg SA, 8.75%, 5/15/18
     
EUR
    3,382       4,599,311  
Enterprise Funding Ltd., Series ETI, 3.50%, 9/10/20 (f)
     
GBP
    400       675,681  
Enterprise Inns PLC, 6.50%, 12/06/18
     
 
    1,598       2,833,054  
Gamenet SpA, 7.25%, 8/01/18
     
EUR
    1,255       1,698,642  
Gategroup Finance Luxembourg SA, 6.75%, 3/01/19
     
 
    2,164       3,002,902  

 

Corporate Bonds           Par
(000)
  Value
Hotels, Restaurants & Leisure (concluded)
GLP Capital LP/GLP Financing II, Inc., 4.38%, 11/01/18
     
USD
    894      $  927,525  
Greektown Holdings LLC/Greektown Mothership Corp., 8.88%, 3/15/19 (c)
     
 
    1,220       1,250,500  
Intralot Capital Luxembourg SA, 6.00%, 5/15/21
     
EUR
    713       939,188  
Intralot Finance Luxembourg SA, 9.75%, 8/15/18
     
 
    2,140       3,184,423  
MCE Finance Ltd., 5.00%, 2/15/21 (c)
     
USD
    3,339       3,322,305  
Regal Entertainment Group, 5.75%, 2/01/25
     
 
    489       490,223  
Six Flags Entertainment Corp., 5.25%, 1/15/21 (c)
     
 
    3,247       3,287,587  
Snai SpA, 7.63%, 6/15/18
     
EUR
    1,025       1,451,176  
Station Casinos LLC, 7.50%, 3/01/21
     
USD
    5,095       5,502,600  
Travelport LLC/Travelport Holdings, Inc. (c):
                           
6.36%, 3/01/16 (d)
     
 
    473       473,108  
11.88%, 9/01/16
     
 
    188       188,122  
(11.38% Cash or 2.50% PIK), 13.88%, 3/01/16 (e)
     
 
    5,152       5,178,074  
Tropicana Entertainment LLC/Tropicana Finance Corp., 9.63%, 12/15/14 (a)(h)
     
 
    1,850        
The Unique Pub Finance Co. PLC, Series A3, 6.54%, 3/30/21
     
GBP
    2,208       3,858,057  
Vougeot Bidco PLC, 7.88%, 7/15/20
     
 
    920       1,596,130  
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., 5.38%, 3/15/22
     
USD
    689       723,450  
Wynn Macau Ltd., 5.25%, 10/15/21 (c)
     
 
    2,425       2,467,438  
 
     
 
            72,547,706  
Household Durables — 2.7%
                           
Ashton Woods USA LLC/Ashton Woods Finance Co., 6.88%, 2/15/21 (c)
     
 
    1,262       1,246,225  
Beazer Homes USA, Inc.:
                           
6.63%, 4/15/18
     
 
    215       227,362  
5.75%, 6/15/19
     
 
    3,638       3,610,715  
7.50%, 9/15/21
     
 
    2,710       2,845,500  
Brookfield Residential Properties, Inc., 6.50%, 12/15/20 (c)
     
 
    2,275       2,414,344  
Brookfield Residential Properties, Inc./Brookfield Residential US Corp., 6.13%, 7/01/22 (c)
     
 
    1,604       1,662,145  
K. Hovnanian Enterprises, Inc., 7.25%, 10/15/20 (c)
     
 
    4,360       4,687,000  
PulteGroup, Inc., 6.38%, 5/15/33
     
 
    1,050       1,050,000  
The Ryland Group, Inc., 6.63%, 5/01/20
     
 
    1,900       2,033,000  
Spie BondCo 3 SCA, 11.00%, 8/15/19
     
EUR
    878       1,286,387  
Standard Pacific Corp.:
                           
10.75%, 9/15/16
     
USD
    6,920       8,061,800  
8.38%, 1/15/21
     
 
    4,270       5,017,250  
Taylor Morrison Communities, Inc./Monarch Communities, Inc. (c):
                           
7.75%, 4/15/20
     
 
    1,650       1,786,125  
5.25%, 4/15/21
     
 
    1,484       1,498,840  
Weyerhaeuser Real Estate Co. (c):
                           
4.38%, 6/15/19
     
 
    2,270       2,270,000  
5.88%, 6/15/24
     
 
    1,540       1,570,800  
William Lyon Homes, Inc., 8.50%, 11/15/20
     
 
    4,579       5,059,795  
 
     
 
            46,327,288  
Household Products — 0.4%
                           
Ontex IV SA, 9.00%, 4/15/19
     
EUR
    1,163       1,640,028  
Spectrum Brands, Inc.:
                           
6.75%, 3/15/20
     
USD
    535       569,775  
6.38%, 11/15/20
     
 
    2,125       2,284,375  
6.63%, 11/15/22
     
 
    1,385       1,499,263  
 
     
 
            5,993,441  
Independent Power and Renewable Electricity Producers — 1.8%
Baytex Energy Corp. (c):
                           
5.13%, 6/01/21
     
 
    944       945,180  
5.63%, 6/01/24
     
 
    335       335,000  


See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 31
 
  
Consolidated Schedule of Investments (continued)  BlackRock Corporate High Yield Fund, Inc. (HYT)
(Percentages shown are based on Net Assets)
Corporate Bonds           Par
(000)
  Value
Independent Power and Renewable Electricity Producers (concluded)
Calpine Corp.:
                           
6.00%, 1/15/22 (c)
     
USD
    676      $  728,390  
5.38%, 1/15/23
     
 
    5,099       5,149,990  
5.88%, 1/15/24 (c)
     
 
    1,999       2,138,930  
5.75%, 1/15/25
     
 
    5,394       5,447,940  
NRG Energy, Inc.:
                           
7.63%, 1/15/18
     
 
    7,493       8,437,118  
6.25%, 5/01/24 (c)
     
 
    3,606       3,723,195  
NRG REMA LLC:
                           
Series B, 9.24%, 7/02/17
     
 
    117       125,097  
Series C, 9.68%, 7/02/26
     
 
    1,400       1,526,000  
QEP Resources, Inc., 5.38%, 10/01/22
     
 
    1,843       1,886,771  
 
     
 
            30,443,611  
Insurance — 1.2%
                           
A-S Co-Issuer Subsidiary, Inc./A-S Merger Sub LLC, 7.88%, 12/15/20 (c)
     
 
    6,232       6,637,080  
CNO Financial Group, Inc., 6.38%, 10/01/20 (c)
     
 
    1,244       1,331,080  
Galaxy Bidco Ltd., 6.38%, 11/15/20
     
GBP
    600       994,845  
Hockey Merger Sub 2, Inc., 7.88%, 10/01/21 (c)
     
USD
    3,920       4,125,800  
MPL 2 Acquisition Canco, Inc., 9.88%, 8/15/18 (c)
     
 
    3,650       3,896,375  
Pension Insurance Corp. PLC, 6.50%, 7/03/24
     
GBP
    775       1,325,833  
TMF Group Holding BV, 9.88%, 12/01/19
     
EUR
    1,140       1,621,780  
 
     
 
            19,932,793  
Internet Software & Services — 0.4%
Bankrate, Inc., 6.13%, 8/15/18 (c)
     
USD
    1,128       1,161,840  
Cerved Group SpA:
                           
6.38%, 1/15/20
     
EUR
    601       842,988  
8.00%, 1/15/21
     
 
    400       581,291  
Interactive Data Corp., 5.88%, 4/15/19 (c)
     
USD
    4,101       4,085,621  
 
     
 
            6,671,740  
IT Services — 4.7%
                           
Ceridian Corp., 8.88%, 7/15/19 (c)
     
 
    10,750       12,040,000  
Ceridian HCM Holding, Inc., 11.00%, 3/15/21 (c)
     
 
    13,854       15,828,195  
Ceridian LLC/Comdata, Inc., 8.13%, 11/15/17 (c)
     
 
    6,190       6,273,565  
Epicor Software Corp., 8.63%, 5/01/19
     
 
    3,077       3,300,083  
First Data Corp.:
                           
7.38%, 6/15/19 (c)
     
 
    8,670       9,255,225  
8.88%, 8/15/20 (c)
     
 
    2,745       2,992,050  
6.75%, 11/01/20 (c)
     
 
    4,293       4,647,172  
8.25%, 1/15/21 (c)
     
 
    1,394       1,519,460  
10.63%, 6/15/21
     
 
    2,111       2,448,760  
11.75%, 8/15/21
     
 
    5,966       7,054,795  
(8.75% Cash or 10.00% PIK), 8.75%, 1/15/22 (c)(e)
     
 
    365       399,675  
SunGard Data Systems, Inc.:
                           
7.38%, 11/15/18
     
 
    3,100       3,239,500  
6.63%, 11/01/19
     
 
    7,950       8,327,625  
WEX, Inc., 4.75%, 2/01/23 (c)
     
 
    2,728       2,618,880  
 
     
 
            79,944,985  
Machinery — 0.2%
                           
Galapagos Holding SA, 7.00%, 6/15/22
     
EUR
    475       610,502  
Galapagos SA, 5.38%, 6/15/21
     
 
    325       431,304  
Selecta Group BV, 6.50%, 6/15/20
     
 
    1,060       1,442,105  
SPX Corp., 6.88%, 9/01/17
     
USD
    980       1,080,450  
 
     
 
            3,564,361  
Media — 10.4%
                           
Adria Bidco BV, 7.88%, 11/15/20
     
EUR
    600       842,965  
Altice Financing SA, 6.50%, 1/15/22 (c)
     
USD
    2,410       2,536,525  
Altice SA:
                           
7.25%, 5/15/22
     
EUR
    2,010       2,800,373  
7.75%, 5/15/22 (c)
     
USD
    2,645       2,810,312  
AMC Networks, Inc.:
                           
7.75%, 7/15/21
     
 
    1,250       1,379,688  
4.75%, 12/15/22
     
 
    1,613       1,633,163  
Cablevision Systems Corp., 5.88%, 9/15/22
     
 
    3,070       3,116,050  

 

Corporate Bonds           Par
(000)
  Value
Media (continued)
                           
CBS Outdoor Americas Capital LLC/CBS Outdoor Americas Capital Corp. (c):
                           
5.25%, 2/15/22
     
USD
    650      $  664,625  
5.63%, 2/15/24
     
 
    983       1,012,490  
CCO Holdings LLC/CCO Holdings Capital Corp.:
                           
5.25%, 9/30/22
     
 
    3,986       4,045,790  
5.13%, 2/15/23
     
 
    4,230       4,208,850  
Cengage Learning Acquisitions, Inc., 11.50%, 4/15/20 (a)(c)(h)
     
 
    3,439        
Clear Channel Communications, Inc.:
                           
9.00%, 12/15/19
     
 
    3,789       3,921,615  
9.00%, 3/01/21
     
 
    1,407       1,459,763  
Clear Channel Worldwide Holdings, Inc.:
                           
7.63%, 3/15/20
     
 
    4,069       4,353,830  
6.50%, 11/15/22
     
 
    11,724       12,530,445  
Clearwire Communications LLC/Clearwire Finance, Inc., 8.25%, 12/01/40 (c)(f)
     
 
    4,706       5,341,310  
Columbus International, Inc., 7.38%, 3/30/21 (c)
     
 
    3,455       3,761,631  
DISH DBS Corp.:
                           
4.25%, 4/01/18
     
 
    3,209       3,285,214  
5.13%, 5/01/20
     
 
    4,652       4,768,300  
DreamWorks Animation SKG, Inc., 6.88%, 8/15/20 (c)
     
 
    901       955,060  
Gannett Co., Inc.:
                           
5.13%, 10/15/19 (c)
     
 
    857       878,425  
5.13%, 7/15/20
     
 
    506       517,385  
6.38%, 10/15/23 (c)
     
 
    1,314       1,396,125  
Gray Television, Inc., 7.50%, 10/01/20
     
 
    1,743       1,838,865  
Harron Communications LP/Harron Finance Corp., 9.13%, 4/01/20 (c)
     
 
    4,510       5,062,475  
Inmarsat Finance PLC, 4.88%, 5/15/22 (c)
     
 
    2,805       2,812,012  
Intelsat Jackson Holdings SA:
                           
6.63%, 12/15/22
     
 
    1,040       1,086,800  
5.50%, 8/01/23
     
 
    5,015       4,996,194  
Intelsat Luxembourg SA, 6.75%, 6/01/18
     
 
    5,500       5,761,250  
Level 3 Escrow II, Inc., 5.38%, 8/15/22 (c)
     
 
    4,875       4,899,375  
Live Nation Entertainment, Inc., 7.00%, 9/01/20 (c)
     
 
    987       1,063,493  
The McClatchy Co., 9.00%, 12/15/22
     
 
    1,934       2,175,750  
Midcontinent Communications & Midcontinent Finance Corp., 6.25%, 8/01/21 (c)
     
 
    3,901       4,027,782  
NAI Entertainment Holdings/NAI Entertainment Holdings Finance Corp., 5.00%, 8/01/18 (c)
     
 
    2,039       2,095,072  
NBCUniversal Enterprise, Inc., 5.25% (c)(g)
     
 
    400       417,000  
Nexstar Broadcasting, Inc., 6.88%, 11/15/20
     
 
    1,023       1,084,380  
Nielsen Finance LLC/Nielsen Finance Co., 5.00%, 4/15/22 (c)
     
 
    1,545       1,560,450  
Numericable Group SA:
                           
5.38%, 5/15/22
     
EUR
    890       1,239,463  
6.00%, 5/15/22 (c)
     
USD
    7,205       7,421,150  
5.63%, 5/15/24
     
EUR
    1,785       2,483,240  
6.25%, 5/15/24 (c)
     
USD
    1,285       1,325,156  
Play Finance 2 SA, 5.25%, 2/01/19
     
EUR
    1,070       1,465,678  
ProQuest LLC/ProQuest Notes Co., 9.00%, 10/15/18 (c)
     
USD
    1,009       1,049,360  
Radio One, Inc., 9.25%, 2/15/20 (c)
     
 
    2,686       2,793,440  
RCN Telecom Services LLC/RCN Capital Corp., 8.50%, 8/15/20 (c)
     
 
    1,450       1,547,875  
Sinclair Television Group, Inc., 5.63%, 8/01/24 (c)
     
 
    1,789       1,784,528  
Sirius XM Holdings, Inc. (c):
                           
4.25%, 5/15/20
     
 
    2,309       2,262,820  
5.75%, 8/01/21
     
 
    1,811       1,883,440  
Sterling Entertainment Corp., 10.00%, 12/15/19
     
 
    4,810       4,906,200  
Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH:
                           
7.50%, 3/15/19
     
EUR
    4,494       6,276,309  
5.50%, 1/15/23 (c)
     
USD
    2,550       2,607,375  
5.63%, 4/15/23
     
EUR
    208       295,911  


See Notes to Financial Statements.

32 ANNUAL REPORT AUGUST 31, 2014
 
  
Consolidated Schedule of Investments (continued)  BlackRock Corporate High Yield Fund, Inc. (HYT)
(Percentages shown are based on Net Assets)
Corporate Bonds           Par
(000)
  Value
Media (concluded)
                           
Unitymedia KabelBW GmbH:
                           
9.63%, 12/01/19
     
EUR
    100      $  139,794  
9.50%, 3/15/21
     
 
    2,061       3,053,327  
Univision Communications, Inc. (c):
                           
8.50%, 5/15/21
     
USD
    1,597       1,748,715  
5.13%, 5/15/23
     
 
    3,720       3,896,700  
UPCB Finance II Ltd., 6.38%, 7/01/20 (c)
     
EUR
    4,437       6,171,167  
Virgin Media Secured Finance PLC, 6.00%, 4/15/21
     
GBP
    5,502       9,556,603  
VTR Finance BV, 6.88%, 1/15/24 (c)
     
USD
    1,727       1,852,208  
Wave Holdco LLC/Wave Holdco Corp., 8.25%, 7/15/19 (c)(f)
     
 
    2,710       2,784,525  
WaveDivision Escrow LLC/WaveDivision Escrow Corp., 8.13%, 9/01/20 (c)
     
 
    2,248       2,450,320  
 
     
 
            178,096,136  
Metals & Mining — 3.5%
                           
Arch Coal, Inc.:
                           
7.00%, 6/15/19
     
 
    1,614       1,149,975  
7.25%, 10/01/20
     
 
    678       471,210  
7.25%, 6/15/21
     
 
    500       331,250  
Constellium NV:
                           
4.63%, 5/15/21
     
EUR
    1,270       1,735,465  
5.75%, 5/15/24 (c)
     
USD
    3,385       3,520,400  
Eco-Bat Finance PLC, 7.75%, 2/15/17
     
EUR
    2,090       2,814,809  
First Quantum Minerals Ltd. (c):
                           
6.75%, 2/15/20
     
USD
    1,954       2,027,275  
7.25%, 5/15/22
     
 
    583       615,065  
Global Brass & Copper, Inc., 9.50%, 6/01/19
     
 
    4,660       5,236,675  
Imperial Metals Corp., 7.00%, 3/15/19 (c)
     
 
    230       216,775  
Kaiser Aluminum Corp., 8.25%, 6/01/20
     
 
    1,240       1,384,150  
New Gold, Inc., 6.25%, 11/15/22 (c)
     
 
    112       117,600  
Novelis, Inc., 8.75%, 12/15/20
     
 
    12,130       13,418,813  
Ovako AB, 6.50%, 6/01/19
     
EUR
    935       1,240,829  
Peabody Energy Corp., 6.50%, 9/15/20
     
USD
    1,505       1,514,406  
Peninsula Energy Ltd., 11.00%, 12/14/14
     
 
    2,800       2,800,000  
Perstorp Holding AB, 8.75%, 5/15/17 (c)
     
 
    990       1,056,825  
Ryerson, Inc./Joseph T Ryerson & Son, Inc., 9.00%, 10/15/17
     
 
    1,740       1,853,100  
Steel Dynamics, Inc.:
                           
6.38%, 8/15/22
     
 
    1,345       1,439,150  
5.25%, 4/15/23
     
 
    1,168       1,185,520  
ThyssenKrupp AG, 3.13%, 10/25/19
     
EUR
    2,040       2,803,732  
Vedanta Resources PLC, 8.25%, 6/07/21 (c)
     
USD
    1,565       1,760,625  
Wise Metals Group LLC/Wise Alloys Finance Corp., 8.75%, 12/15/18 (c)
     
 
    10,804       11,668,320  
 
     
 
            60,361,969  
Multiline Retail — 1.1%
                           
CST Brands, Inc., 5.00%, 5/01/23
     
 
    2,083       2,083,000  
Debenhams PLC, 5.25%, 7/15/21
     
GBP
    1,155       1,898,299  
Dufry Finance SCA:
                           
5.50%, 10/15/20 (c)
     
USD
    1,927       2,004,176  
4.50%, 7/15/22
     
EUR
    670       918,580  
Hema Bondco I BV, 6.25%, 6/15/19
     
 
    2,105       2,791,820  
The Neiman Marcus Group Ltd., 8.00%, 10/15/21 (c)
     
USD
    7,817       8,432,589  
 
     
 
            18,128,464  
Oil, Gas & Consumable Fuels — 13.4%
Access Midstream Partners LP/ACMP Finance Corp.:
                           
5.88%, 4/15/21
     
 
    1,325       1,407,812  
6.13%, 7/15/22
     
 
    1,520       1,653,000  
4.88%, 5/15/23
     
 
    3,612       3,801,630  
4.88%, 3/15/24
     
 
    1,861       1,956,841  
American Energy-Permian Basin LLC/AEPB Finance Corp. (c):
                           
7.13%, 11/01/20
     
 
    1,700       1,649,000  
7.38%, 11/01/21
     
 
    1,455       1,418,625  

 

Corporate Bonds           Par
(000)
  Value
Oil, Gas & Consumable Fuels (continued)
Antero Resources Finance Corp., 5.38%, 11/01/21
     
USD
    1,942      $  2,000,260  
Athlon Holdings LP/Athlon Finance Corp.:
                           
7.38%, 4/15/21
     
 
    1,053       1,142,505  
6.00%, 5/01/22 (c)
     
 
    2,032       2,092,960  
Berry Petroleum Co., 6.38%, 9/15/22
     
 
    1,755       1,829,587  
Bonanza Creek Energy, Inc.:
                           
6.75%, 4/15/21
     
 
    637       668,850  
5.75%, 2/01/23
     
 
    3,616       3,652,160  
BreitBurn Energy Partners LP/BreitBurn Finance Corp., 7.88%, 4/15/22
     
 
    1,420       1,505,200  
Carrizo Oil & Gas, Inc., 7.50%, 9/15/20
     
 
    1,321       1,413,470  
Chaparral Energy, Inc., 7.63%, 11/15/22
     
 
    1,220       1,309,975  
Chesapeake Energy Corp.:
                           
6.63%, 8/15/20
     
 
    1,632       1,880,880  
6.88%, 11/15/20
     
 
    1,641       1,903,560  
6.13%, 2/15/21
     
 
    524       593,430  
5.75%, 3/15/23
     
 
    1,863       2,079,574  
Cimarex Energy Co., 4.38%, 6/01/24
     
 
    1,349       1,404,646  
Concho Resources, Inc.:
                           
7.00%, 1/15/21
     
 
    465       505,688  
5.50%, 10/01/22
     
 
    2,016       2,157,120  
5.50%, 4/01/23
     
 
    2,253       2,405,077  
CONSOL Energy, Inc., 5.88%, 4/15/22 (c)
     
 
    11,028       11,524,260  
Crestwood Midstream Partners LP/Crestwood Midstream Finance Corp., 6.13%, 3/01/22
     
 
    1,207       1,249,245  
CrownRock LP/CrownRock Finance, Inc., 7.13%, 4/15/21 (c)
     
 
    3,710       3,830,575  
Denbury Resources, Inc.:
                           
5.50%, 5/01/22
     
 
    1,481       1,518,025  
4.63%, 7/15/23
     
 
    1,745       1,683,925  
Diamondback Energy, Inc., 7.63%, 10/01/21 (c)
     
 
    2,449       2,681,655  
El Paso LLC:
                           
7.80%, 8/01/31
     
 
    2,547       3,158,280  
7.75%, 1/15/32
     
 
    5,669       7,100,422  
Energy Transfer Equity LP, 5.88%, 1/15/24
     
 
    7,967       8,415,144  
Energy XXI Gulf Coast, Inc.:
                           
9.25%, 12/15/17
     
 
    2,600       2,756,000  
7.75%, 6/15/19
     
 
    2,025       2,116,125  
6.88%, 3/15/24 (c)
     
 
    1,141       1,160,968  
EnQuest PLC, 7.00%, 4/15/22 (c)
     
 
    1,206       1,212,030  
EP Energy LLC/Everest Acquisition Finance, Inc., 6.88%, 5/01/19
     
 
    518       546,490  
EV Energy Partners LP/EV Energy Finance Corp., 8.00%, 4/15/19
     
 
    820       848,700  
EXCO Resources, Inc., 7.50%, 9/15/18
     
 
    1,290       1,277,100  
Gulfport Energy Corp., 7.75%, 11/01/20 (c)
     
 
    1,041       1,119,075  
Halcon Resources Corp.:
                           
9.75%, 7/15/20
     
 
    2,146       2,312,315  
8.88%, 5/15/21
     
 
    4,236       4,458,390  
9.25%, 2/15/22
     
 
    1,257       1,349,704  
Hilcorp Energy I LP/Hilcorp Finance Co. (c):
                           
7.63%, 4/15/21
     
 
    1,472       1,586,080  
5.00%, 12/01/24
     
 
    2,448       2,441,880  
Ithaca Energy, Inc., 8.13%, 7/01/19 (c)
     
 
    1,660       1,678,675  
Jones Energy Holdings LLC/Jones Energy Finance Corp., 6.75%, 4/01/22 (c)
     
 
    1,400       1,477,000  
Kinder Morgan, Inc. (c):
                           
5.00%, 2/15/21
     
 
    1,130       1,209,100  
5.63%, 11/15/23
     
 
    1,146       1,263,465  
Kodiak Oil & Gas Corp., 5.50%, 2/01/22
     
 
    892       941,060  
Laredo Petroleum, Inc., 7.38%, 5/01/22
     
 
    3,065       3,356,175  
Legacy Reserves LP/Legacy Reserves Finance Corp.:
                           
6.63%, 12/01/21
     
 
    843       853,538  
6.63%, 12/01/21 (c)
     
 
    1,390       1,407,375  
Lightstream Resources Ltd., 8.63%, 2/01/20 (c)
     
 
    1,441       1,491,435  


See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 33
 
  
Consolidated Schedule of Investments (continued)  BlackRock Corporate High Yield Fund, Inc. (HYT)
(Percentages shown are based on Net Assets)
Corporate Bonds           Par
(000)
  Value
Oil, Gas & Consumable Fuels (continued)
Linn Energy LLC/Linn Energy Finance Corp.:
                           
6.50%, 5/15/19
     
USD
    243      $  250,138  
6.25%, 11/01/19
     
 
    1,904       1,965,880  
8.63%, 4/15/20
     
 
    4,564       4,872,070  
7.75%, 2/01/21
     
 
    365       388,725  
MarkWest Energy Partners LP/MarkWest Energy Finance Corp.:
                           
6.25%, 6/15/22
     
 
    674       724,550  
4.50%, 7/15/23
     
 
    1,720       1,747,950  
Memorial Production Partners LP/Memorial Production Finance Corp., 7.63%, 5/01/21
     
 
    1,091       1,131,913  
Memorial Resource Development Corp., 5.88%, 7/01/22 (c)
     
 
    3,644       3,698,660  
Newfield Exploration Co., 6.88%, 2/01/20
     
 
    4,325       4,541,250  
NGPL PipeCo LLC (c):
                           
7.12%, 12/15/17
     
 
    3,130       3,239,550  
9.63%, 6/01/19
     
 
    891       973,418  
Northern Oil and Gas, Inc., 8.00%, 6/01/20
     
 
    835       876,750  
Oasis Petroleum, Inc., 6.50%, 11/01/21
     
 
    1,625       1,734,687  
Offshore Group Investment Ltd., 7.50%, 11/01/19
     
 
    2,521       2,577,722  
Pacific Drilling SA, 5.38%, 6/01/20 (c)
     
 
    2,069       2,017,275  
Parsley Energy LLC/Parsley Finance Corp., 7.50%, 2/15/22 (c)
     
 
    4,536       4,808,160  
PDC Energy, Inc., 7.75%, 10/15/22
     
 
    995       1,089,525  
Penn Virginia Corp., 8.50%, 5/01/20
     
 
    2,035       2,238,500  
Petrobras Global Finance BV, 3.00%, 1/15/19
     
 
    1,927       1,898,808  
Petroleum Geo-Services ASA, 7.38%, 12/15/18 (c)
     
 
    3,816       4,025,880  
QEP Resources, Inc., 5.25%, 5/01/23
     
 
    800       810,000  
Range Resources Corp.:
                           
6.75%, 8/01/20
     
 
    658       704,060  
5.75%, 6/01/21
     
 
    568       606,340  
5.00%, 8/15/22
     
 
    530       563,788  
5.00%, 3/15/23
     
 
    1,193       1,267,562  
Regency Energy Partners LP/Regency Energy Finance Corp.:
                           
5.75%, 9/01/20
     
 
    628       675,100  
4.50%, 11/01/23
     
 
    2,835       2,856,262  
RKI Exploration & Production LLC/RKI Finance Corp., 8.50%, 8/01/21 (c)
     
 
    460       494,500  
Rockies Express Pipeline LLC, 6.00%, 1/15/19 (c)
     
 
    2,524       2,681,750  
Rose Rock Midstream LP/Rose Rock Finance Corp., 5.63%, 7/15/22 (c)
     
 
    1,747       1,781,940  
Rosetta Resources, Inc.:
                           
5.63%, 5/01/21
     
 
    256       262,080  
5.88%, 6/01/24
     
 
    1,007       1,024,623  
Sabine Pass Liquefaction LLC:
                           
5.63%, 4/15/23
     
 
    1,908       1,984,320  
5.63%, 4/15/23 (c)
     
 
    3,087       3,210,480  
5.75%, 5/15/24 (c)
     
 
    3,005       3,125,200  
Sabine Pass LNG LP, 7.50%, 11/30/16
     
 
    8,155       8,858,369  
Sanchez Energy Corp., 6.13%, 1/15/23 (c)
     
 
    2,942       3,044,970  
SandRidge Energy, Inc.:
                           
8.75%, 1/15/20
     
 
    141       148,050  
7.50%, 3/15/21
     
 
    350       367,500  
7.50%, 2/15/23
     
 
    1,378       1,433,120  
Seven Generations Energy Ltd., 8.25%, 5/15/20 (c)
     
 
    5,098       5,607,800  
Seventy Seven Energy, Inc., 6.50%, 7/15/22 (c)
     
 
    1,133       1,166,990  
Seventy Seven Operating LLC, 6.63%, 11/15/19
     
 
    2,269       2,427,830  
SM Energy Co.:
                           
6.63%, 2/15/19
     
 
    1,174       1,226,830  
6.50%, 1/01/23
     
 
    951       1,031,835  
Summit Midstream Holdings LLC/Summit Midstream Finance Corp.:
                           
7.50%, 7/01/21
     
 
    1,566       1,722,600  
5.50%, 8/15/22
     
 
    1,711       1,745,220  

 

Corporate Bonds           Par
(000)
  Value
Oil, Gas & Consumable Fuels (concluded)
Targa Resources Partners LP/Targa Resources Partners Finance Corp., 6.38%, 8/01/22
     
USD
    3,852      $  4,179,420  
Tesoro Logistics LP/Tesoro Logistics Finance Corp., 5.88%, 10/01/20
     
 
    673        704,968  
Triangle USA Petroleum Corp., 6.75%, 7/15/22 (c)
     
 
    1,057       1,080,783  
Ultra Petroleum Corp., 5.75%, 12/15/18 (c)
     
 
    2,596       2,680,370  
Vanguard Natural Resources LLC/VNR Finance Corp., 7.88%, 4/01/20
     
 
    1,500       1,593,750  
Whiting Petroleum Corp.:
                           
5.00%, 3/15/19
     
 
    1,770       1,867,350  
5.75%, 3/15/21
     
 
    1,837       2,016,107  
The Williams Cos., Inc., 4.55%, 6/24/24
     
 
    940       946,616  
 
     
 
            229,155,955  
Paper & Forest Products — 0.2%
Clearwater Paper Corp., 4.50%, 2/01/23
     
 
    245       237,650  
Mercer International, Inc., 9.50%, 12/01/17
     
 
    1,175       1,246,969  
NewPage Corp., 11.38%, 12/31/14 (a)(h)
     
 
    10,925       1  
Pfleiderer GmbH, 7.88%, 8/01/19
     
EUR
    530       691,170  
Unifrax I LLC/Unifrax Holding Co., 7.50%, 2/15/19 (c)
     
USD
    1,335       1,375,050  
 
     
 
            3,550,840  
Pharmaceuticals — 2.1%
                           
Endo Finance LLC/Endo Finco, Inc. (c):
                           
7.25%, 1/15/22
     
 
    696       754,290  
5.38%, 1/15/23
     
 
    1,070       1,067,325  
Grifols Worldwide Operations Ltd., 5.25%, 4/01/22 (c)
  4,047       4,158,292  
Jaguar Holding Co. I, (9.38% Cash or 10.13% PIK), 9.38%, 10/15/17 (c)(e)
     
 
    1,320       1,357,950  
Jaguar Holding Co. II/Jaguar Merger Sub, Inc., 9.50%, 12/01/19 (c)
     
 
    3,596       3,910,650  
Mallinckrodt International Finance SA, 5.75%, 8/01/22 (c)
     
 
    4,760       4,861,150  
Pinnacle Merger Sub, Inc., 9.50%, 10/01/23 (c)
     
 
    755       828,613  
Salix Pharmaceuticals Ltd., 6.00%, 1/15/21 (c)
     
 
    1,162       1,260,770  
Valeant Pharmaceuticals International, Inc. (c):
                           
6.75%, 8/15/18
     
 
    9,461       10,123,270  
6.38%, 10/15/20
     
 
    2,970       3,107,363  
7.50%, 7/15/21
     
 
    1,375       1,498,750  
6.75%, 8/15/21
     
 
    2,241       2,355,851  
 
     
 
            35,284,274  
Professional Services — 0.2%
                           
Truven Health Analytics, Inc., 10.63%, 6/01/20
     
 
    2,840       3,053,000  
Real Estate Investment Trusts (REITs) — 0.6%
Felcor Lodging LP:
                           
6.75%, 6/01/19
     
 
    5,386       5,682,230  
5.63%, 3/01/23
     
 
    1,422       1,439,775  
Host Hotels & Resorts LP, 2.50%, 10/15/29 (c)(e)
     
 
    815       1,425,741  
iStar Financial, Inc.:
                           
4.00%, 11/01/17
     
 
    685       681,575  
5.00%, 7/01/19
     
 
    480       480,000  
Rayonier AM Products, Inc., 5.50%, 6/01/24 (c)
     
 
    414       405,720  
 
     
 
            10,115,041  
Real Estate Management & Development — 1.5%
Crescent Resources LLC/Crescent Ventures, Inc., 10.25%, 8/15/17 (c)
     
 
    4,515       4,966,500  
The Howard Hughes Corp., 6.88%, 10/01/21 (c)
     
 
    1,369       1,449,429  
Realogy Corp. (c):
                           
7.63%, 1/15/20
     
 
    842       917,780  
9.00%, 1/15/20
     
 
    1,269       1,418,108  
Realogy Group LLC/Realogy Co-Issuer Corp., 4.50%, 4/15/19 (c)
     
 
    5,542       5,542,000  
Rialto Holdings LLC/Rialto Corp., 7.00%, 12/01/18 (c)
     
 
    1,065       1,107,600  
RPG Byty Sro, 6.75%, 5/01/20
     
EUR
    1,146       1,550,960  


See Notes to Financial Statements.

34 ANNUAL REPORT AUGUST 31, 2014
 
  
Consolidated Schedule of Investments (continued)  BlackRock Corporate High Yield Fund, Inc. (HYT)
(Percentages shown are based on Net Assets)
Corporate Bonds           Par
(000)
  Value
Real Estate Management & Development (concluded)
     
Shea Homes LP/Shea Homes Funding Corp., 8.63%, 5/15/19
     
USD
    6,320      $  6,825,600  
Woodside Homes Co. LLC/Woodside Homes Finance, Inc., 6.75%, 12/15/21 (c)
     
 
    2,305       2,322,287  
 
     
 
            26,100,264  
Road & Rail — 1.0%
                           
EC Finance PLC, 5.13%, 7/15/21
     
EUR
    675       902,109  
Florida East Coast Holdings Corp. (c):
                           
6.75%, 5/01/19
     
USD
    3,372       3,557,460  
9.75%, 5/01/20
     
 
    1,520       1,607,400  
The Hertz Corp.:
                           
7.50%, 10/15/18
     
 
    3,220       3,360,875  
6.75%, 4/15/19
     
 
    1,615       1,693,731  
5.88%, 10/15/20
     
 
    370       380,638  
7.38%, 1/15/21
     
 
    2,360       2,525,200  
6.25%, 10/15/22
     
 
    1,475       1,537,687  
Watco Cos. LLC/Watco Finance Corp., 6.38%, 4/01/23 (c)
     
 
    1,093       1,117,593  
 
     
 
            16,682,693  
Semiconductors & Semiconductor Equipment — 0.5%
Micron Technology, Inc., 5.50%, 2/01/25 (c)
     
 
    4,645       4,703,063  
NXP BV/NXP Funding LLC (c):
                           
3.75%, 6/01/18
     
 
    2,235       2,246,175  
5.75%, 2/15/21
     
 
    2,065       2,168,250  
 
     
 
            9,117,488  
Software — 1.7%
                           
Audatex North America, Inc., 6.13%, 11/01/23 (c)
     
 
    1,350       1,431,000  
BMC Software Finance, Inc., 8.13%, 7/15/21 (c)
     
 
    2,672       2,698,720  
Igloo Holdings Corp., (8.25% Cash or 9.00% PIK), 8.25%, 12/15/17 (c)(e)
     
 
    1,636       1,676,900  
Infor Software Parent LLC/Infor Software Parent, Inc., (7.13% Cash or 7.88% PIK), 7.13%, 5/01/21 (c)(e)
  4,891       4,976,592  
Infor US, Inc., 9.38%, 4/01/19
     
 
    9,815       10,796,500  
Nuance Communications, Inc., 5.38%, 8/15/20 (c)
     
 
    5,035       5,060,175  
Sophia LP/Sophia Finance, Inc., 9.75%, 1/15/19 (c)
  2,437       2,650,238  
 
     
 
            29,290,125  
Specialty Retail — 1.9%
                           
Asbury Automotive Group, Inc., 8.38%, 11/15/20
     
 
    2,030       2,222,850  
DriveTime Automotive Group, Inc./DT Acceptance Corp., 8.00%, 6/01/21 (c)
     
 
    2,028       2,043,210  
The Hillman Group, Inc., 6.38%, 7/15/22 (c)
     
 
    1,438       1,434,405  
House of Fraser Funding PLC, 8.88%, 8/15/18 (c)
     
GBP
    1,532       2,709,279  
L Brands, Inc., 8.50%, 6/15/19
     
USD
    3,925       4,729,625  
Magnolia BC SA, 9.00%, 8/01/20
     
EUR
    1,077       1,425,822  
New Look Bondco I PLC, 8.75%, 5/14/18
     
GBP
    438       770,775  
Party City Holdings, Inc., 8.88%, 8/01/20
     
USD
    3,489       3,846,622  
PC Nextco Holdings LLC/PC Nextco Finance, Inc., (8.75% Cash or 9.50% PIK), 8.75%, 8/15/19 (c)(e)
     
 
    1,575       1,618,313  
Penske Automotive Group, Inc., 5.75%, 10/01/22
     
 
    1,775       1,837,125  
QVC, Inc. (c):
                           
7.50%, 10/01/19
     
 
    3,180       3,319,475  
7.38%, 10/15/20
     
 
    1,640       1,753,012  
Sally Holdings LLC/Sally Capital, Inc., 5.75%, 6/01/22
     
 
    2,359       2,488,745  
THOM Europe SAS, 7.38%, 7/15/19
     
EUR
    1,190       1,528,419  
Twin Set-Simona Barbieri SpA, 6.08%, 7/15/19 (d)
     
 
    649       820,861  
 
     
 
            32,548,538  
Textiles, Apparel & Luxury Goods — 0.5%
Levi Strauss & Co., 6.88%, 5/01/22
     
USD
    2,430       2,642,625  
Polymer Group, Inc., 6.88%, 6/01/19 (c)
     
 
    900       910,125  
PVH Corp., 4.50%, 12/15/22
     
 
    1,401       1,390,492  
Springs Industries, Inc., 6.25%, 6/01/21
     
 
    2,777       2,790,885  
The William Carter Co., 5.25%, 8/15/21
     
 
    1,398       1,460,910  
 
     
 
            9,195,037  

 

Corporate Bonds           Par
(000)
  Value
Thrifts & Mortgage Finance — 0.1%
Radian Group, Inc.:
                           
3.00%, 11/15/17 (f)
     
USD
    330      $  466,125  
2.25%, 3/01/19 (f)
     
 
    712       1,042,190  
5.50%, 6/01/19
     
 
    926       944,520  
 
     
 
            2,452,835  
Trading Companies & Distributors — 0.3%
Ashtead Capital, Inc., 6.50%, 7/15/22 (c)
     
 
    4,976       5,411,400  
Transportation Infrastructure — 0.4%
Aguila 3 SA:
                           
7.88%, 1/31/18 (c)
     
 
    3,894       4,049,760  
7.88%, 1/31/18
     
 
    150       156,000  
JCH Parent, Inc., (10.50% Cash or 11.25% PIK), 10.50%, 3/15/19 (c)(e)
     
 
    2,553       2,540,235  
 
     
 
            6,745,995  
Wireless Telecommunication Services — 5.5%
Crown Castle International Corp., 5.25%, 1/15/23
     
 
    4,871       5,030,818  
Digicel Group Ltd., (c):
                           
8.25%, 9/30/20
     
 
    3,495       3,774,600  
7.13%, 4/01/22
     
 
    6,215       6,448,062  
Digicel Ltd., 6.00%, 4/15/21 (c)
     
 
    7,619       7,847,570  
The Geo Group, Inc., 5.88%, 1/15/22
     
 
    2,220       2,269,950  
Phones4u Finance PLC:
                           
9.50%, 4/01/18
     
GBP
    1,694       2,875,572  
9.50%, 4/01/18 (c)
     
 
    2,015       3,420,470  
SBA Communications Corp., 4.88%, 7/15/22 (c)
     
USD
    3,280       3,230,800  
Sprint Capital Corp., 8.75%, 3/15/32
     
 
    1,330       1,482,950  
Sprint Communications, Inc. (c):
                           
9.00%, 11/15/18
     
 
    13,529       16,082,599  
7.00%, 3/01/20
     
 
    6,812       7,595,380  
Sprint Corp. (c):
                           
7.88%, 9/15/23
     
 
    4,899       5,254,178  
7.13%, 6/15/24
     
 
    4,577       4,668,540  
T-Mobile USA, Inc.:
                           
6.63%, 4/28/21
     
 
    5,880       6,188,700  
6.13%, 1/15/22
     
 
    367       380,304  
6.73%, 4/28/22
     
 
    6,145       6,482,975  
6.50%, 1/15/24
     
 
    2,638       2,743,520  
Wind Acquisition Finance SA:
                           
4.00%, 7/15/20
     
EUR
    4,549       6,007,044  
4.20%, 7/15/20 (d)
     
 
    2,115       2,789,425  
 
     
 
            94,573,457  
Total Corporate Bonds — 104.5%
    1,783,122,533  

Floating Rate Loan Interests (d)
  
Air Freight & Logistics — 0.2%
                           
CEVA Group PLC, Synthetic Line of Credit, 6.50%, 3/19/21
     
USD
    1,149       1,108,486  
CEVA Intercompany BV, Dutch Term Loan, 6.50%, 3/19/21
     
 
    1,208       1,179,874  
CEVA Logistics Canada ULC, Canadian Term Loan, 6.50%, 3/19/21
     
 
    208       203,427  
CEVA Logistics U.S. Holdings, Inc., Term Loan, 6.50%, 3/19/21
     
 
    1,667       1,627,412  
 
     
 
            4,119,199  
Airlines — 0.9%
                           
Delta Air Lines, Inc., 2018 Term Loan B1, 3.25%, 10/18/18
     
 
    2,355       2,332,041  
Northwest Airlines, Inc.:
                           
2.18%, 3/10/17
     
 
    5,315       5,169,162  
1.56%, 9/10/18
     
 
    7,307       6,965,484  
 
     
 
            14,466,687  
Auto Components — 0.6%
                           
Gates Global, Inc., Term Loan B, 4.25%, 7/05/21
     
 
    11,030       10,943,304  


See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 35
 
  
Consolidated Schedule of Investments (continued)  BlackRock Corporate High Yield Fund, Inc. (HYT)
(Percentages shown are based on Net Assets)
Floating Rate Loan Interests (d)           Par
(000)
  Value
Building Products — 0.1%
                           
Wilsonart LLC, Term Loan B, 4.00%, 10/31/19
     
USD
    2,315      $  2,283,896  
Capital Markets — 0.3%
                           
Affinion Group, Inc.:
                           
2nd Lien Term Loan, 8.50%, 10/12/18
     
 
    2,300       2,279,300  
Term Loan B, 6.75%, 4/30/18
     
 
    200       197,505  
American Capital Holdings, Inc., 2017 Term Loan, 3.50%, 8/22/17
     
 
    2,983       2,968,448  
 
     
 
            5,445,253  
Chemicals — 0.1%
                           
Axalta Coating Systems US Holdings, Inc., Term Loan, 3.75%, 2/01/20
     
 
    297       295,043  
OXEA Finance LLC, 2nd Lien Term Loan, 8.25%, 7/15/20
     
 
    1,615       1,617,697  
 
     
 
            1,912,740  
Commercial Services & Supplies — 0.3%
Brand Energy & Infrastructure Services, Inc., Term Loan B, 4.75%, 11/26/20
     
 
    1,446       1,444,230  
Catalent Pharma Solutions, Inc., Term Loan, 6.50%, 12/29/17
     
 
    838       841,706  
Spin Holdco, Inc., Term Loan B, 4.25%, 11/14/19
     
 
    2,633       2,610,823  
 
     
 
            4,896,759  
Communications Equipment — 1.0%
Amaya Holdings BV:
                           
1st Lien Term Loan, 5.00%, 8/01/21
     
 
    2,465       2,440,966  
2nd Lien Term Loan, 8.00%, 8/01/22
     
 
    6,800       6,880,784  
Zayo Group LLC/Zayo Capital, Inc., Term Loan B, 4.00%, 7/02/19
     
 
    6,981       6,950,643  
 
     
 
            16,272,393  
Construction Materials — 0.3%
                           
HD Supply, Inc., Term Loan B, 4.00%, 6/28/18
     
 
    4,827       4,800,237  
Containers & Packaging — 0.0%
                           
Tekni-Plex, Inc., Term Loan B, 4.75%, 8/25/19
     
 
    383       381,157  
Diversified Telecommunication Services — 0.3%
Hawaiian Telcom Communications, Inc., Term
Loan B, 5.00%, 6/06/19
     
 
    2,962       2,974,665  
Level 3 Financing, Inc., 2019 Term Loan, 4.00%, 8/01/19
     
 
    1,785       1,776,450  
 
     
 
            4,751,115  
Electric Utilities — 0.5%
                           
American Energy — Marcellus LLC, 1st Lien Term Loan, 5.25%, 8/04/20
     
 
    1,919       1,920,425  
American Energy — Utica LLC, 2nd Lien Term Loan, 5.50%, 9/30/18
     
 
    5,775       6,178,983  
Sandy Creek Energy Associates LP, Term Loan B, 5.00%, 11/06/20
     
 
    1,168       1,173,389  
 
     
 
            9,272,797  
Electrical Equipment — 0.3%
                           
Texas Competitive Electric Holdings Co. LLC, DIP Term Loan, 3.75%, 5/05/16
     
 
    5,613       5,645,863  
Energy Equipment & Services — 0.1%
Dynegy Holdings, Inc., Term Loan B2, 4.00%, 4/23/20
     
 
    995       993,090  
Food & Staples Retailing — 0.0%
                           
Rite Aid Corp., 2nd Lien Term Loan, 5.75%, 8/21/20
     
 
    600       606,498  
Health Care Providers & Services — 0.3%
CHS/Community Health Systems, Inc., Term Loan D, 4.25%, 1/27/21
     
 
    3,616       3,623,315  
Genesis HealthCare Corp., Term Loan B, 10.00%, 9/25/17
     
 
    1,235       1,253,846  
Surgery Center Holdings, Inc., 1st Lien Term Loan, 5.25%, 7/09/20 (k)
     
 
    966       964,926  
 
     
 
            5,842,087  

 

Floating Rate Loan Interests (d)           Par
(000)
  Value
Hotels, Restaurants & Leisure — 4.0%
Bally Technologies, Inc., Term Loan B, 4.25%, 11/25/20
     
USD
    1,903      $  1,899,242  
Boyd Gaming Corp., Term Loan B, 4.00%, 8/14/20
     
 
    2,336       2,318,452  
Bronco Midstream Funding LLC, Term Loan B, 5.00%, 8/17/20
     
 
    6,186       6,193,972  
Caesars Entertainment Operating Co., Inc.:
                           
Extended Term Loan B6, 6.95%, 3/01/17
     
 
    6,749       6,323,721  
Term Loan B7, 9.75%, 3/01/17
     
 
    6,803       6,570,644  
Caesars Entertainment Resort Properties LLC, Term Loan B, 7.00%, 10/12/20
     
 
    8,397       8,240,913  
Diamond Resorts Corporation, Term Loan, 5.50%, 5/09/21
     
 
    2,875       2,889,375  
ESH Hospitality, Inc., Term Loan, 5.00%, 6/24/19
     
 
    1,410       1,422,337  
Hilton Worldwide Finance LLC, Term Loan B2, 3.50%, 10/26/20
     
 
    3,241       3,219,659  
La Quinta Intermediate Holdings LLC, Term Loan B, 4.00%, 4/14/21
     
 
    5,545       5,536,120  
MGM Resorts International, Term Loan B, 3.50%, 12/20/19
     
 
    1,774       1,761,914  
Pinnacle Entertainment, Inc., Term Loan B2, 3.75%, 8/13/20
     
 
    2,438       2,425,399  
Playa Resorts Holding BV, Term Loan B, 4.00%, 8/06/19
     
 
    3,578       3,560,073  
Station Casinos LLC, Term Loan B, 4.25%, 3/02/20
     
 
    4,920       4,900,277  
Travelport Finance (Luxembourg) Sarl, 2014 Term Loan B, 6.00%, 9/02/21 (k)
     
 
    6,980       7,009,107  
Travelport LLC/Travelport Holdings, Inc.:
                           
2nd Lien PIK Term Loan 2, 4.00%, 12/01/16
     
 
    2,558       2,557,551  
2nd Lien Term Loan 1, 9.50%, 1/29/16
     
 
    547       557,224  
Refinancing Term Loan, 6.25%, 6/26/19
     
 
    1,267       1,285,702  
 
     
 
            68,671,682  
Independent Power and Renewable Electricity Producers — 0.2%
Energy Future Intermediate Holding Co LLC, DIP Term Loan, 4.25%, 6/19/16
     
 
    2,730       2,732,730  
Industrial Conglomerates — 0.4%
                           
Sequa Corp., Term Loan B, 5.25%, 6/19/17
     
 
    6,384       6,244,162  
Insurance — 0.1%
                           
Alliant Holdings I, Inc., Term Loan B, 4.25%, 12/20/19
     
 
    1,654       1,643,914  
Internet Software & Services — 0.2%
Interactive Data Corp., 2014 Term Loan, 4.75%, 5/02/21
     
 
    3,650       3,659,125  
IT Services — 1.0%
                           
Ceridian LLC:
                           
Term Loan B1, 4.16%, 5/09/17
     
 
    806       804,636  
Term Loan B2, 4.50%, 9/14/20
     
 
    841       839,662  
First Data Corp.:
                           
2018 Extended Term Loan, 3.66%, 3/23/18
     
 
    15,480       15,305,850  
2018 Term Loan, 3.66%, 9/24/18
     
 
    200       198,188  
 
     
 
            17,148,336  
Machinery — 1.3%
                           
Gardner Denver, Inc.:
                           
4.25%, 7/30/20
     
 
    7,253       7,240,169  
4.75%, 7/30/20
     
EUR
    7,421       9,779,347  
Hillman Group Inc. (The), Term Loan B, 4.50%, 6/30/21
     
USD
    425       424,821  
Rexnord LLC, 1st Lien Term Loan B, 4.00%, 8/21/20
     
 
    2,894       2,873,694  
Silver II US Holdings LLC, Term Loan, 4.00%, 12/13/19
     
 
    1,139       1,133,442  
 
     
 
            21,451,473  


See Notes to Financial Statements.

36 ANNUAL REPORT AUGUST 31, 2014
 
  
Consolidated Schedule of Investments (continued)  BlackRock Corporate High Yield Fund, Inc. (HYT)
(Percentages shown are based on Net Assets)
Floating Rate Loan Interests (d)           Par
(000)
  Value
Media — 1.0%
                           
Cengage Learning Acquisitions, Inc.:
                           
0.00%, 7/03/15 (a)(h)
     
USD
    10,469      $  1  
7.00%, 3/31/20
     
 
    5,120       5,150,711  
Charter Communications Operating LLC, Term Loan G, 4.25%, 7/24/21 (k)
     
 
    4,030       4,052,689  
Clear Channel Communications, Inc.:
                           
Term Loan B, 3.81%, 1/29/16
     
 
    747       741,681  
Term Loan D, 6.91%, 1/30/19
     
 
    4,098       4,035,163  
Getty Images, Inc., Term Loan B, 4.75%, 10/18/19
     
 
    75       70,926  
Media General, Inc., Delayed Draw Term Loan B, 4.25%, 7/31/20
     
 
    3,488       3,496,811  
Tribune Co., 2013 Term Loan, 4.00%, 12/27/20
     
 
    225       224,935  
 
     
 
            17,772,917  
Metals & Mining — 0.3%
                           
FMG Resources (August 2006) Property Ltd., Term Loan B, 3.75%, 6/30/19
     
 
    4,520       4,500,893  
Multiline Retail — 0.3%
                           
BJ’s Wholesale Club, Inc., 2nd Lien Term Loan, 8.50%, 3/26/20
     
 
    1,065       1,075,117  
J.C. Penney Corporation, Inc., New Term Loan, 5.00%, 6/20/19
     
 
    950       949,288  
The Neiman Marcus Group, Inc., 2020 Term Loan, 4.25%, 10/25/20
     
 
    2,595       2,573,956  
 
     
 
            4,598,361  
Oil, Gas & Consumable Fuels — 0.2%
Arch Coal, Inc., Term Loan B, 6.25%, 5/16/18
     
 
    1,711       1,663,612  
Obsidian Natural Gas Trust, Term Loan, 7.00%, 11/02/15
     
 
    2,093       2,097,939  
 
     
 
            3,761,551  
Pharmaceuticals — 0.7%
                           
Grifols Worldwide Operations USA, Inc., Term Loan B, 3.16%, 2/27/21
     
 
    4,773       4,736,667  
Mallinckrodt International Finance SA, Term Loan B, 3.50%, 3/19/21
     
 
    1,815       1,806,826  
Par Pharmaceutical Cos, Inc., Term Loan B2, 4.00%, 9/30/19
     
 
    3,940       3,905,748  
Pharmaceutical Product Development LLC, Term Loan B, 4.00%, 12/05/18
     
 
    1,377       1,375,619  
 
     
 
            11,824,860  
Professional Services — 0.3%
                           
Advantage Sales & Marketing, Inc.:
                           
1st Lien Term Loan, 4.25%, 7/23/21
     
 
    1,645       1,628,052  
2nd Lien Term Loan, 7.50%, 7/25/22
     
 
    2,495       2,495,524  
Delayed Draw Term Loan, 0.50%, 7/23/21 (k)
     
 
    55       54,268  
 
     
 
            4,177,844  
Real Estate Management & Development — 0.0%
Realogy Corp., Extended Letter of Credit, 4.40%, 10/10/16
     
 
    230       228,456  
Semiconductors & Semiconductor Equipment — 0.3%
Avago Technologies Cayman Ltd., Term Loan B, 3.75%, 5/06/21
     
 
    5,075       5,066,931  
Software — 0.4%
                           
BMC Software Finance, Inc., Term Loan, 5.00%, 9/10/20
     
 
    744       741,655  
GCA Services Group, Inc., 2nd Lien Term Loan, 9.25%, 10/22/20
     
 
    260       260,434  
Infor US, Inc., Term Loan B5, 3.75%, 6/03/20
     
 
    2,720       2,696,423  
Kronos, Inc., 2nd Lien Term Loan, 9.75%, 4/30/20
     
 
    3,445       3,530,750  
 
     
 
            7,229,262  
Textiles, Apparel & Luxury Goods — 0.4%
Ascend Performance Materials LLC, Term Loan B, 6.75%, 4/10/18
     
 
    6,134       6,041,805  
Total Floating Rate Loan Interests — 16.4%
     
 
            279,387,377  
Non-Agency Mortgage-Backed Securities   Par
(000)
  Value
Collateralized Mortgage Obligations — 0.2%
Hilton USA Trust, Series 2013-HLT, Class EFX, 5.61%, 11/05/30 (c)(d)
     
USD
    3,829      $  3,917,484  

Other Interests (l)
     
 
 
Beneficial
Interest
(000)
       
Auto Components — 0.0%
                           
Lear Corp. Escrow
     
 
    1,250       10,938  
Media — 0.0%
                           
Adelphia Escrow (a)
     
 
    4,000       40  
Adelphia Recovery Trust (a)
     
 
    5,017       2,508  
 
     
 
            2,548  
Total Other Interests — 0.0%
     
 
            13,486  

Preferred Securities
     
 
    Par
(000
       
Capital Markets — 0.4%
     
 
               
The Goldman Sachs Group, Inc., Series L, 5.70% (d)(g)
     
 
    5,978       6,171,305  
Diversified Financial Services — 1.4%
Bank of America Corp. (d)(g):
                           
Series U, 5.20%
     
 
    1,165       1,122,769  
Series V, 5.13%
     
 
    5,620       5,562,002  
Barclays PLC, 8.00% (d)(g)
     
 
    985       1,397,927  
Citigroup, Inc., Series D, 5.35% (d)(g)
     
 
    1,055       1,007,387  
JPMorgan Chase & Co. (d)(g):
                           
Series Q, 5.15%
     
 
    850       827,688  
Series U, 6.13%
     
 
    4,228       4,323,130  
Series V, 5.00%
     
 
    5,615       5,568,148  
Morgan Stanley, Series H, 5.45% (d)(g)
     
 
    4,815       4,899,262  
 
     
 
            24,708,313  
Total Capital Trusts — 1.8%
     
 
            30,879,618  

Preferred Stocks
     
 
    Shares          
Capital Markets — 0.4%
                           
RBS Capital Funding Trust, Series F, 6.25%
     
 
    93,975       2,277,954  
RBS Capital Funding Trust VII, 6.08%
     
 
    152,071       3,656,159  
State Street Corp., Series D, 5.90% (d)
     
 
    20,889       545,203  
 
     
 
            6,479,316  
Diversified Finance Services — 0.1%
Ally Financial, Inc., Series A, 8.50% (d)(g)
     
 
    41,694       1,136,995  
Media — 0.0%
                           
Emmis Communications Corp., Series A, 6.25%
     
 
    10,300       151,925  
Oil, Gas & Consumable Fuels — 0.4%
Chesapeake Energy Corp.:
                           
5.75% (e)(g)
     
 
    4,151       5,358,733  
5.75% (c)
     
 
    1,182       1,431,698  
 
     
 
            6,790,431  
Real Estate Management & Development — 0.1%
Concrete Investments II, 0.00%
     
 
    4,997       1,011,134  
Software — 1.3%
                           
Amaya Gaming Group, Inc., 0.00%
     
 
    19,851       22,866,140  
Total Preferred Stocks — 2.3%
     
 
            38,435,941  


See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 37
 
  
Consolidated Schedule of Investments (continued)  BlackRock Corporate High Yield Fund, Inc. (HYT)
(Percentages shown are based on Net Assets)
Trust Preferred           Par
(000)
  Value
Diversified Financial Services — 0.5%
GMAC Capital Trust I, Series 2, 8.13% (d)
     
 
    301,466      $  8,074,489  
Total Preferred Securities — 4.6%
77,390,048  

Warrants (m)
     
  
    Shares           
Media — 0.0%
                           
New Vision Holdings LLC (Expires 9/30/14)
     
 
    89,790       4,857  
Metals & Mining — 0.0%
                           
Peninsula Energy Ltd. (Expires 12/31/15)
     
 
    31,614,557       275,843  
Software — 0.0%
                           
HMH Holdings/EduMedia (Issued/exercisable 3/09/10, 19 Shares for 1 Warrant, Expires 6/22/19, Strike Price $42.27)
     
 
    6,494       30,206  
Total Warrants — 0.0%
     
 
            310,906  
Total Long-Term Investments
(Cost — $2,319,988,972) — 139.8%
 
2,383,983,860  

 

Short-Term Securities               Par
(000)
  Value
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.03% (n)(o)
         
 
    3,602,081      $ 3,602,081  
Total Short-Term Securities
(Cost — $3,602,081) — 0.2%
         
 
            3,602,081  

Options Purchased
         
  
                 
(Cost —$38,133) — 0.0%
         
 
             
Total Investments
(Cost — $2,323,629,186) — 140.0%
 
    2,387,585,941  
Liabilities in Excess of Other Assets — (40.0)%
    (682,163,841
Net Assets — 100.0%
         
 
           $ 1,705,422,100  


Notes to Schedule of Investments

(a)      
Non-income producing security.
(b)      
Security is held by a wholly owned subsidiary.
(c)      
Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.
(d)      
Variable rate security. Rate shown is as of report date.
(e)      
Convertible security.
(f)      
Represents a payment-in-kind security which may pay interest/dividends in additional par/shares and/or in cash. Rates shown are the current rate and possible payment rates.
(g)      
Security is perpetual in nature and has no stated maturity date.
(h)      
Issuer filed for bankruptcy and/or is in default of principal and/or interest payments.
(i)      
Zero-coupon bond.
(j)      
Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date.
(k)      
When-issued security. Unsettled when-issued transactions were as follows:


Counterparty       Value   Unrealized
Appreciation
(Depreciation)
Deutsche Bank Securities, Inc.
       $ 7,009,107      $ 116,357  
Goldman Sachs & Co.
       $ 4,052,689      $ 42,839  
Jefferies Co.
       $ 964,926      $ 3,623  
Merrill Lynch, Pierce, Fenner & Smith, Inc.
       $ 54,268      $ (433

(l)      
Other interests represent beneficial interests in liquidation trusts and other reorganization or private entities.
(m)      
Warrants entitle the Trust to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.
(n)      
Investments in issuers considered to be an affiliate of the Trust during the year ended August 31, 2014, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:


Affiliate



   
Shares
Held at
August 31, 2013

   
Net Activity
   
Shares
Held at
August 31, 2014

   
Income
   
BlackRock Liquidity Funds, TempFund, Institutional Class
           1,737,587            1,864,494            3,602,081         $ 987       
(o)      
Represents the current yield as of report date.
     
Financial futures contracts outstanding as of August 31, 2014 were as follows:


Contracts
Sold
      Issue   Exchange   Expiration   Notional
Value
  Unrealized
Depreciation
 
(662)      
S&P 500 E-Mini Index
 
Chicago Mercantile
 
September 2014
 
USD
    66,246,340      $ (886,781

See Notes to Financial Statements.

38 ANNUAL REPORT AUGUST 31, 2014
 
  
Consolidated Schedule of Investments (continued)  BlackRock Corporate High Yield Fund, Inc. (HYT)
 

     
Forward foreign currency exchange contracts outstanding as of August 31, 2014 were as follows:


Currency Purchased   Currency
Sold
  Counterparty   Settlement
Date
  Unrealized
Appreciation
(Depreciation)
 
EUR
229,000  
USD
304,213  
Citibank N.A.
 
10/21/14
   $ (3,230
EUR
600,000  
USD
802,889  
Goldman Sachs Bank USA
 
10/21/14
    (14,286
EUR
1,050,000  
USD
1,399,262  
Goldman Sachs Bank USA
 
10/21/14
    (19,206
EUR
90,000  
USD
120,103  
State Street Bank and Trust Co.
 
10/21/14
    (1,812
EUR
1,981,000  
USD
2,652,398  
State Street Bank and Trust Co.
 
10/21/14
    (48,694
EUR
800,000  
USD
1,068,796  
Toronto —Dominion Bank
 
10/21/14
    (17,325
EUR
900,000  
USD
1,205,825  
UBS AG
 
10/21/14
    (22,921
GBP
310,000  
USD
516,918  
Citibank N.A.
 
10/21/14
    (2,471
GBP
830,000  
USD
1,397,556  
JPMorgan Chase Bank N.A.
 
10/21/14
    (20,167
GBP
70,000  
USD
117,893  
Royal Bank of Scotland PLC
 
10/21/14
    (1,728
GBP
260,000  
USD
432,450  
State Street Bank and Trust Co.
 
10/21/14
    (979
GBP
300,000  
USD
505,665  
The Bank of New York Mellon
 
10/21/14
    (7,813
USD
726,096  
AUD
781,000  
Deutsche Bank AG
 
10/21/14
    (857
USD
2,378,698  
CAD
2,610,000  
Goldman Sachs Bank USA
 
10/21/14
    (19,029
USD
24,413,429  
CAD
26,710,000  
Toronto —Dominion Bank
 
10/21/14
    (124,229
USD
23,007,275  
CAD
24,783,000  
UBS AG
 
10/21/14
    239,893  
USD
1,053,819  
EUR
779,000  
Bank of America N.A.
 
10/21/14
    29,949  
USD
138,701  
EUR
103,000  
Bank of America N.A.
 
10/21/14
    3,324  
USD
169,836,971  
EUR
125,529,000  
Citibank N.A.
 
10/21/14
    4,849,397  
USD
18,888  
EUR
14,000  
Citibank N.A.
 
10/21/14
    487  
USD
73,806,865  
GBP
43,195,000  
Bank of America N.A.
 
10/21/14
    2,124,543  
Total
   
 
   
 
 
 
   $ 6,942,846  

     
OTC options purchased as of August 31, 2014 were as follows:

Description



 
Counterparty
 
Put/
Call

 
Strike
Price

 
Expiration
Date

 
Contracts
 
Market
Value

Marsico Parent Superholdco LLC
     
Goldman Sachs & Co.
 
Call
 
USD  942.86
 
12/14/19
 
39
     

     
OTC credit default swaps — sold protection outstanding as of August 31, 2014 were as follows:

Issuer

 
Receive
Fixed
Rate
 
Counterparty
 
Expiration
Date
 
Credit
Rating1
 
Notional
Amount
(000)2
 
Market
Value
 
Premiums
Paid
(Received)
 
 
Unrealized
Appreciation
CCO Holdings LLC   8.00%   Deutsche Bank AG   9/20/17   B   USD 8,180    $ 1,627,373          $ 1,627,373
Trionista Holdco GmbH   5.00%   Citibank N.A.   3/20/19   B+   EUR 340     48,723    $ 33,417       15,306
Trionista Holdco GmbH   5.00%   Citibank N.A.   3/20/19   B+   EUR 363     52,056     36,233       15,823
Trionista Holdco GmbH   5.00%   Citibank N.A.   3/20/19   B+   EUR 363     52,056     43,155       8,901
Trionista Holdco GmbH   5.00%   Citibank N.A.   3/20/19   B+   EUR 363     52,056     43,819       8,237
Level 3 Communications, Inc.   5.00%   Goldman Sachs International   6/20/19   B+   USD 5,000     613,269     (368,840     982,109
                                           
Total
                         $ 2,445,533    $ (212,216    $ 2,657,749
 
1   Using S&P’s rating of the issuer.
2   The maximum potential amount the Trust may pay should a negative credit event take place as defined under the terms of the agreement.

     
For Trust compliance purposes, the Trust’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by investment advisor. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.
     
Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:
       
Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Trust has the ability to access
     
Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)
     
Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Trust’s own assumptions used in determining the fair value of investments and derivative financial instruments)
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 39
 
  
Consolidated Schedule of Investments (continued)  BlackRock Corporate High Yield Fund, Inc. (HYT)
 
       
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Trust’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Trust’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.
       
The following tables summarize the Trust’s investments and derivative financial instruments categorized in the disclosure hierarchy as of August 31, 2014:


        Level 1   Level 2   Level 3   Total
Assets:
                                   
Investments:
                                   
Long-Term Investments:
                                   
Common Stocks
       $ 127,562,847      $ 29,597,540      $ 56,896,277      $ 214,056,664  
Asset-Backed Securities
              19,010,306       6,775,056       25,785,362  
Corporate Bonds
              1,753,987,515       29,135,018       1,783,122,533  
Floating Rate Loan Interests
              241,158,034       38,229,343       279,387,377  
Non-Agency Mortgage-Backed Securities
              3,917,484             3,917,484  
Other Interests
              2,508       10,978       13,486  
Preferred Securities
        21,201,458       55,177,456       1,011,134       77,390,048  
Warrants
        187,367       118,682       4,857       310,906  
Short-Term Securities
        3,602,081                   3,602,081  
Total
       $ 152,553,753      $ 2,102,969,525      $ 132,062,663      $ 2,387,585,941  
                                     
                                     
        Level 1   Level 2   Level 3   Total
Derivative Financial Instruments1
                                   
Assets:
                                   
Credit contracts
             $ 2,657,749            $ 2,657,749  
Foreign currency exchange contracts
              7,247,593             7,247,593  
Liabilities:
                                   
Equity contracts
       $ (886,781                 (886,781
Foreign currency exchange contracts
              (304,747           (304,747
Total
       $  (886,781    $  9,600,595            $  8,713,814  
 
                                   
1 Derivative financial instruments are swaps, financial futures contracts, and forward foreign currency exchange contracts, which are valued at the unrealized appreciation/depreciation on the instrument.
       
The Trust may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of August 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:


        Level 1   Level 2   Level 3   Total
Assets:
                                   
Cash pledged as collateral for OTC derivatives
       $ 1,970,000                  $ 1,970,000  
Cash pledged for financial futures contracts
        3,198,000                   3,198,000  
Foreign currency at value
        529,079                   529,079  
Liabilities:
                                   
Bank borrowings payable
             $ (723,000,000           (723,000,000
Bank overdraft
              (224,629           (224,629
Cash received as collateral for OTC derivatives
              (2,700,000           (2,700,000
Total
       $  5,697,079      $  (725,924,629          $  (720,227,550
Total
       $ 152,553,753      $ 2,102,969,525      $ 132,062,663      $ 2,387,585,941  

See Notes to Financial Statements.

40 ANNUAL REPORT AUGUST 31, 2014
 
  
Consolidated Schedule of Investments (continued)  BlackRock Corporate High Yield Fund, Inc. (HYT)
 

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


        Common
Stocks
  Asset-Backed
Securities
  Corporate
Bonds
  Floating
Rate Loan
Interests
  Other
Interests
  Preferred
Securities
  Warrants   Total
Assets:
                                                                   
Opening Balance, as of August 31, 2013
       $ 7,608,130      $ 2,824,497      $ 3,673,915      $ 13,072,578      $ 71            $ 66,028      $ 27,245,219  
Transfers into Level 31
                          1,453,195                         1,453,195  
Transfers out of Level 32
        (343,980     (2,251,497           (2,939,292                 (24,750     (5,559,519
Accrued discounts/premiums
              4,947       4,941       309,165                         319,053  
Net realized gain (loss)
        101,809       56,314       247,876       267,182       805                   673,986  
Net change in unrealized appreciation/ depreciation3,4
        (16,292,941     1,838       (8,532,758     994,223       10,637      $ (4,271     (59,239     (23,882,511
Purchases5
        79,917,869       8,047,835       36,555,676       39,840,744       270       1,015,405       22,818       165,400,617  
Sales
        (14,094,610     (1,908,878     (2,814,632     (14,768,452     (805                 (33,587,377
Closing Balance, as of August 31, 2014
       $ 56,896,277      $ 6,775,056      $ 29,135,018      $ 38,229,343      $ 10,978      $ 1,011,134      $ 4,857      $ 132,062,663  
Net change in unrealized appreciation/depreciation on investments still held at August 31, 20144
       $ (15,220,940    $ 1,838      $ (8,438,141    $ 1,071,903      $ 10,695      $ (4,271    $ (59,239    $ (22,638,155
1 As of August 31, 2013, the Trust used significant observable inputs in determining the value of certain investments. As of August 31, 2014, the Trust used unobservable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $1,453,195, transferred from Level 2 to Level 3 in the disclosure hierarchy.
2 As of August 31, 2013, the Trust used significant unobservable inputs in determining the value of certain investments. As of August 31, 2014, the Trust used observable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $5,215,538 transferred from Level 3 to Level 2 and $343,980 transferred from Level 3 to Level 1 in the disclosure hierarchy.
3 Included in the related net change in unrealized appreciation/depreciation in the Consolidated Statement of Operations.
4 Any difference between Net change in unrealized appreciation/depreciation and Net change in unrealized appreciation/depreciation on investments held as of August 31, 2014 is generally due to investments no longer held or categorized as Level 3 at period end.
5 Includes investments acquired in the reorganization.
       
The following table is a reconciliation of Level 3 derivative financial instruments for which significant unobservable inputs were used in determining fair value:


        Credit
Contracts
Assets:
           
Opening Balance, as of August 31, 2013
       $ 607,499  
Transfers into Level 3
         
Transfers out of Level 36
        (490,360
Accrued discounts/premiums
         
Net realized gain (loss)
         
Net change in unrealized appreciation/depreciation7
        (117,139
Purchases
         
Issues
         
Sales
         
Settlements
         
Closing Balance, as of August 31, 2014
       $  
Net change in unrealized appreciation/depreciation on investments still held at August 31, 20144
       $  
6 As of August 31, 2013, the Trust used significant unobservable inputs in determining the value of certain investments. As of August 31, 2014, the Trust used observable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $490,360 transferred from Level 3 to Level 2 in the disclosure hierarchy.
7 Included in the related net change in unrealized appreciation/depreciation in the Consolidated Statement of Operations.

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 41
 
  
Schedule of Investments (concluded)  BlackRock Corporate High Yield Fund, Inc. (HYT)
 

       
The following table summarizes the valuation techniques used and unobservable inputs developed by the Global Valuation Committee to determine the value of certain of the Trust’s Level 3 investments and derivative financial instruments as of August 31, 2014. The table does not include Level 3 investments and derivative financial instruments with values derived based upon unadjusted third party pricing information. A significant change in third party pricing information could result in a significantly lower or higher value of such Level 3 investments and derivative financial instruments. The value of Level 3 investments and derivative financial instruments derived using third party pricing information is $78,597,812.

    Value   Valuation Techniques   Unobservable Inputs   Range of
Unobservable
Inputs Utilized
Assets:
                               
Common Stocks    $ 12,626,410     Market Comparable Companies   2P (Proved and Probable) Reserves        
                +2C (Contingent) Resources Multiple3,4   CAD6 0.38x-0.60x
                PV-10 Multiple3   0.16x-0.28x
      17,637,548     Market Comparable Companies   Fleet Value Multiple   1.10x
      10,677,197     Market Comparable Companies   Offshore Last 12 Months EBITDA Multiple3   6.19x
                Offshore Current Fiscal Year EBITDA Multiple3   7.25x
                Onshore Last 12 Months EBITDA Multiple3   5.18x
                Onshore Current Fiscal Year EBITDA Multiple3   4.75x
                Discounted Operations Expected Sales Proceeds   $1507
      2,483,215     Cost2   N/A  
Corporate Bonds1     2,800,000     Cost2   N/A  
      4,906,200     Discounted Cash Flow   Internal Rate of Return5   10.00%
      2,329,424     Par   Call Price3  
Warrant     4,857     Estimated Recovery Value   Distribution Rate5   $0.0541
Total
   $ 53,464,581                          
1 For the year ended August 31, 2014, the valuation technique for certain investments classified as corporate bonds changed to utilizing par value or an income approach. Market information previously utilized to determine fair value under the market approach no longer applied to these investments; therefore, the par value or income approach is considered to be a more relevant measure of fair value for these investments.
2 The Trust fair values certain of its Level 3 investments using acquisition cost, although the transaction may not have occurred during the current reporting period. These investments are generally privately held investments. There may not be a secondary market, and/or there are a limited number of investors. The determination to fair value such investments at cost is based upon factors consistent with the principles of fair value measurement that are reasonably available to the Global Valuation Committee, or its delegate. Valuations are reviewed utilizing available market information to determine if the carrying value should be adjusted. Such market data may include, but is not limited to, observations of the trading multiples of public companies considered comparable to the private companies being valued, financial or operational information released by the company, and/or news or corporate events that affect the investment. Valuations may be adjusted to account for company-specific issues, the lack of liquidity inherent in a nonpublic investment and the fact that comparable public companies are not identical to the investments being fair valued by the Trust.
3 Increase in unobservable input may result in a significant increase to value, while a decrease in the unobservable input may result in a significant decrease to value.
4 Present value of estimated future oil and gas revenues, net of estimated direct expenses discounted at an annual discount of 10%.
5 Decrease in unobservable input may result in a significant increase to value, while an increase in the unobservable input may result in a significant decrease to value.
6 Canadian Dollar.
7 Amount is stated in millions.

See Notes to Financial Statements.

42 ANNUAL REPORT AUGUST 31, 2014
 
  
Schedule of Investments August 31, 2014 BlackRock Income Opportunity Trust, Inc. (BNA)
(Percentages shown are based on Net Assets)
Asset-Backed Securities           Par
(000)
  Value
Asset-Backed Securities — 6.3%
           
AmeriCredit Automobile Receivables Trust, Series 2011-5, Class C, 3.44%, 10/08/17
     
USD
    400      $  409,335  
Apidos CDO XI, Series 2012-11A, Class D, 4.48%, 1/17/23 (a)(b)
     
 
    600       599,980  
Atrium CDO Corp., Series 9A, Class D, 3.74%, 2/28/24 (a)(b)
     
 
    750       716,947  
Babson CLO Ltd., Series 2012-1X, Class B, 2.73%, 4/15/22 (b)
     
 
    500       490,101  
Brookside Mill CLO, Ltd., Series 2013-1A, Class C1, 2.93%, 4/17/25 (a)(b)
     
 
    500       487,352  
CarMax Auto Owner Trust, Series 2012-1:
                           
Class B, 1.76%, 8/15/17
     
 
    210       213,025  
Class C, 2.20%, 10/16/17
     
 
    125       127,555  
Class D, 3.09%, 8/15/18
     
 
    160       163,180  
CenterPoint Energy Transition Bond Co. LLC, Series 2012-1, Class A3, 3.03%, 10/15/25
     
 
    1,105       1,119,618  
CIFC Funding Ltd. (a)(b):
                           
Series 2012-1AR, Class B1R, 4.39%, 8/14/24
     
 
    750       743,850  
Series 2013-IA, Class B, 3.04%, 4/16/25
     
 
    500       489,155  
Series 2013-IA, Class C, 3.83%, 4/16/25
     
 
    500       477,036  
Ford Credit Floorplan Master Owner Trust, Series 2012-2:
                           
Class B, 2.32%, 1/15/19
     
 
    245       249,967  
Class C, 2.86%, 1/15/19
     
 
    105       108,453  
Class D, 3.50%, 1/15/19
     
 
    200       209,071  
Galaxy XV CLO Ltd., Series 2013-15A, Class C, 2.83%, 4/15/25 (a)(b)
     
 
    500       485,323  
ING IM CLO Ltd., Series 2012-2A, Class C, 3.68%, 10/15/22 (a)(b)
     
 
    750       750,197  
Nelnet Student Loan Trust (b):
                           
Series 2006-1, Class A5, 0.34%, 8/23/27
     
 
    525       517,032  
Series 2008-3, Class A4, 1.88%, 11/25/24
     
 
    620       650,402  
OZLM Funding III, Ltd., Series 2013-3A (a)(b):
                           
Class B, 3.33%, 1/22/25
     
 
    750       745,725  
Class C, 4.13%, 1/22/25
     
 
    500       482,096  
OZLM VIII, Ltd., Series 2014-8A, Class C, 3.78%, 10/17/26 (a)(b)(c)
     
 
    2,000       1,869,000  
Santander Drive Auto Receivables Trust:
                           
Series 2010-2, Class C, 3.89%, 7/17/17
     
 
    608       610,418  
Series 2010-B, Class C, 3.02%, 10/17/16 (a)
     
 
    40       39,610  
Series 2011-1, Class D, 4.01%, 2/15/17
     
 
    940       964,887  
Series 2012-1, Class B, 2.72%, 5/16/16
     
 
    96       95,898  
Series 2012-1, Class C, 3.78%, 11/15/17
     
 
    325       332,363  
Silver Spring CLO, Ltd., Series 2014-1A, Class D, 3.72%, 10/15/26 (a)(b)(c)
     
 
    2,250       2,119,050  
SLM Private Credit Student Loan Trust, Series 2004-B, Class A2, 0.43%, 6/15/21 (b)
     
 
    111       110,270  
SLM Private Education Loan Trust, Series 2012-A, Class A1, 1.56%, 8/15/25 (a)(b)
     
 
    190       192,298  
SLM Student Loan Trust:
                           
Series 2008-5, Class A3, 1.53%, 1/25/18 (b)
     
 
    424       427,088  
Series 2008-5, Class A4, 1.93%, 7/25/23 (b)
     
 
    630       657,795  
Series 2012-A, Class A2, 3.83%, 1/17/45 (a)
     
 
    345       361,818  
Series 2014-A, Class B, 3.50%, 11/15/44 (a)
     
 
    250       244,638  
Small Business Administration Participation Certificates, Series 1996-20K, Class 1, 6.95%, 11/01/16
     
 
    71       73,665  
Steele Creek CLO 2014-1, Ltd., Series 2014-1A, Class C, 3.43%, 8/21/26 (a)(b)
     
 
    2,500       2,459,250  
Symphony CLO VII, Ltd., Series 2011-7A, Class E, 3.84%, 7/28/21 (a)(b)
     
 
    750       723,920  
Venture CDO Ltd., 3.39%, 10/15/26 (a)(b)
     
 
    1,550       1,525,029  
Voya CLO Ltd., Series 2014-3A, Class C, 3.83%, 7/25/26 (a)(b)
     
 
    1,750       1,663,200  
World Financial Network Credit Card Master Trust, Series 2012-C, Class C, 4.55%, 8/15/22
     
 
    1,180       1,231,459  
 
     
 
            25,937,056  

 

Asset-Backed Securities           Par
(000)
  Value
Interest Only Asset-Backed Securities — 0.2%
     
Sterling Bank Trust, Series 2004-2, Class Note, 2.08%, 3/30/30 (a)
     
USD
    2,643      $  191,596  
Sterling Coofs Trust, Series 2004-1, Class A, 2.36%, 4/15/29 (a)
     
 
    4,974       341,985  
 
     
 
            533,581  
Total Asset-Backed Securities — 6.5%
            26,470,637  

Corporate Bonds
     
  
                 
Aerospace & Defense — 0.6%
                           
Huntington Ingalls Industries, Inc., 7.13%, 3/15/21
     
 
    230       250,125  
United Technologies Corp. (d):
                           
4.88%, 5/01/15
     
 
    1,250       1,287,564  
6.13%, 7/15/38
     
 
    750       976,843  
 
     
 
            2,514,532  
Airlines — 2.1%
                           
American Airlines Pass-Through Trust, Series 2013-2:
                           
Class A, 4.95%, 1/15/23
     
 
    2,224       2,396,348  
Class B, 5.60%, 7/15/20
     
 
    488       506,206  
Continental Airlines Pass-Through Trust:
                           
Series 2010-1, Class B, 6.00%, 1/12/19
     
 
    421       448,376  
Series 2012-3, Class C, 6.13%, 4/29/18
     
 
    500       530,000  
United Airlines Pass-Through Trust:
                           
Series 2013-1, Class A, 4.30%, 8/15/25
     
 
    2,000       2,050,000  
Series 2014-2, Class B, 4.63%, 9/03/22
     
 
    1,375       1,375,000  
US Airways Pass-Through Trust, Series 2012-1, Class C, 9.13%, 10/01/15
     
 
    1,084       1,143,747  
 
     
 
            8,449,677  
Auto Components — 0.8%
                           
Icahn Enterprises LP/Icahn Enterprises Finance Corp.:
                           
3.50%, 3/15/17
     
 
    91       91,569  
4.88%, 3/15/19
     
 
    1,330       1,366,575  
6.00%, 8/01/20
     
 
    953       1,017,327  
5.88%, 2/01/22
     
 
    667       695,348  
 
     
 
            3,170,819  
Automobiles — 1.0%
                           
Ford Motor Co., 4.75%, 1/15/43
     
 
    2,005       2,098,599  
General Motors Co., 6.25%, 10/02/43
     
 
    1,253       1,469,143  
Jaguar Land Rover Automotive PLC, 4.13%, 12/15/18 (a)
     
 
    750       761,250  
 
     
 
            4,328,992  
Banks — 4.2%
                           
Barclays Bank PLC, 7.63%, 11/21/22
     
 
    1,750       1,965,469  
CIT Group, Inc.:
                           
5.50%, 2/15/19 (a)
     
 
    398       429,343  
5.38%, 5/15/20
     
 
    1,650       1,786,125  
Depfa ACS Bank, 5.13%, 3/16/37 (a)
     
 
    4,150       4,964,354  
HSBC Bank Brasil SA — Banco Multiplo, 4.00%, 5/11/16 (a)(d)
     
 
    1,400       1,442,000  
HSBC Bank PLC, 3.10%, 5/24/16 (a)(d)
     
 
    695       723,608  
HSBC Holdings PLC:
                           
4.25%, 3/14/24
     
 
    1,010       1,048,506  
6.10%, 1/14/42 (d)
     
 
    305       396,442  
Rabobank Nederland (d):
                           
3.88%, 2/08/22
     
 
    1,390       1,487,167  
3.95%, 11/09/22
     
 
    1,500       1,542,769  
Wells Fargo & Co., 3.50%, 3/08/22 (d)
     
 
    1,390       1,447,846  
 
     
 
            17,233,629  
Building Products — 0.1%
                           
Cemex SAB de CV, 5.88%, 3/25/19 (a)
     
 
    200       209,500  


See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 43
 
  
Schedule of Investments (continued)  BlackRock Income Opportunity Trust, Inc. (BNA)
(Percentages shown are based on Net Assets)
Corporate Bonds           Par
(000)
  Value
Capital Markets — 3.7%
                           
CDP Financial, Inc., 5.60%, 11/25/39 (a)(d)
     
USD
    2,955      $  3,808,389  
The Goldman Sachs Group, Inc. (d):
                           
5.38%, 3/15/20
     
 
    1,215       1,372,713  
5.25%, 7/27/21
     
 
    3,175       3,578,047  
5.75%, 1/24/22
     
 
    1,815       2,106,353  
Lehman Brothers Holdings Inc., 6.50%, 7/19/17 (e)(f)
     
 
    225        
Morgan Stanley:
                           
4.20%, 11/20/14 (d)
     
 
    680       685,487  
4.00%, 7/24/15
     
 
    400       412,468  
6.25%, 8/28/17 (d)
     
 
    1,925       2,179,256  
Murray Street Investment Trust I, 4.65%, 3/09/17 (d)(g)
  820       882,082  
 
     
 
            15,024,795  
Chemicals — 1.3%
                           
Axalta Coating Systems US Holdings, Inc./Axalta Coating Systems Dutch Holding BV, 7.38%, 5/01/21 (a)
  151       164,590  
Axiall Corp., 4.88%, 5/15/23
     
 
    152       152,190  
The Dow Chemical Co., 4.13%, 11/15/21
     
 
    350       374,869  
Huntsman International LLC, 4.88%, 11/15/20
     
 
    297       302,940  
Methanex Corp., 3.25%, 12/15/19
     
 
    2,074       2,127,341  
PetroLogistics LP/PetroLogistics Finance Corp., 6.25%, 4/01/20
     
 
    161       177,503  
Rockwood Specialties Group, Inc., 4.63%, 10/15/20
     
 
    1,800       1,872,000  
 
     
 
            5,171,433  
Commercial Services & Supplies — 1.3%
           
ADS Waste Holdings, Inc., 8.25%, 10/01/20
     
 
    245       260,925  
The ADT Corp., 4.88%, 7/15/42
     
 
    539       458,150  
Aviation Capital Group Corp. (a):
                           
4.63%, 1/31/18
     
 
    650       680,991  
7.13%, 10/15/20
     
 
    900       1,027,408  
Brand Energy & Infrastructure Services, Inc., 8.50%, 12/01/21 (a)
     
 
    214       222,560  
Mobile Mini, Inc., 7.88%, 12/01/20
     
 
    1,320       1,425,600  
United Rentals North America, Inc.:
                           
5.75%, 7/15/18
     
 
    194       204,185  
7.38%, 5/15/20
     
 
    385       419,650  
7.63%, 4/15/22
     
 
    455       510,737  
 
     
 
            5,210,206  
Communications Equipment — 1.2%
             
ADC Telecommunications, Inc., 3.50%, 7/15/15 (h)
  4,340       4,383,400  
Zayo Group LLC/Zayo Capital, Inc., 8.13%, 1/01/20
     
 
    530       571,737  
 
     
 
            4,955,137  
Construction & Engineering — 0.1%
         
ABB Finance USA, Inc., 4.38%, 5/08/42
     
 
    194       204,073  
BlueLine Rental Finance Corp., 7.00%, 2/01/19 (a)
  96       101,520  
Safway Group Holding LLC/Safway Finance Corp., 7.00%, 5/15/18 (a)
     
 
    200       210,500  
 
     
 
            516,093  
Construction Materials — 1.1%
   
Allegion US Holding Co., Inc., 5.75%, 10/01/21
     
 
    448       469,280  
HD Supply, Inc.:
                           
8.13%, 4/15/19
     
 
    1,954       2,129,860  
7.50%, 7/15/20
     
 
    1,544       1,659,800  
Lafarge SA, 7.13%, 7/15/36
     
 
    135       154,575  
 
     
 
            4,413,515  
Consumer Finance — 0.9%
                           
Discover Financial Services, 3.85%, 11/21/22
     
 
    250       256,017  
Ford Motor Credit Co. LLC:
                           
6.63%, 8/15/17
     
 
    280       319,789  
8.13%, 1/15/20
     
 
    1,265       1,605,981  
4.25%, 9/20/22
     
 
    800       854,769  
SLM Corp., 6.25%, 1/25/16
     
 
    651       690,060  
 
     
 
            3,726,616  

 

Corporate Bonds           Par
(000)
  Value
Containers & Packaging — 0.3%
             
Crown Americas LLC/Crown Americas Capital Corp. III, 6.25%, 2/01/21
     
USD
    91      $  97,142  
Sealed Air Corp. (a):
                           
6.50%, 12/01/20
     
 
    550       605,000  
8.38%, 9/15/21
     
 
    225       253,125  
Smurfit Kappa Acquisitions, 4.88%, 9/15/18 (a)
     
 
    410       425,375  
 
     
 
            1,380,642  
Diversified Consumer Services — 0.4%
         
APX Group, Inc., 6.38%, 12/01/19
     
 
    269       273,035  
Service Corp. International, 4.50%, 11/15/20
     
 
    1,240       1,235,350  
 
     
 
            1,508,385  
Diversified Financial Services — 7.5%
             
Aircastle Ltd., 6.25%, 12/01/19
     
 
    705       763,162  
Ally Financial, Inc.:
                           
5.50%, 2/15/17
     
 
    1,500       1,601,250  
6.25%, 12/01/17
     
 
    160       176,200  
8.00%, 3/15/20
     
 
    560       680,400  
8.00%, 11/01/31
     
 
    300       388,125  
Bank of America Corp. (d):
                           
5.63%, 7/01/20
     
 
    1,100       1,260,607  
3.30%, 1/11/23
     
 
    5,010       4,968,347  
Capital One Financial Corp., 4.75%, 7/15/21
     
 
    975       1,082,347  
FMR LLC, 4.95%, 2/01/33 (a)(d)
     
 
    1,150       1,278,895  
General Electric Capital Corp., 6.75%, 3/15/32 (d)
     
 
    2,500       3,364,865  
General Motors Financial Co., Inc., 4.25%, 5/15/23
     
 
    406       414,627  
IntercontinentalExchange Group, Inc., 4.00%, 10/15/23
     
 
    235       250,047  
Intesa Sanpaolo SpA, 5.02%, 6/26/24 (a)
     
 
    1,145       1,155,713  
Jefferies Finance LLC/JFIN Co-Issuer Corp., 7.38%, 4/01/20 (a)
     
 
    1,250       1,306,250  
JPMorgan Chase & Co., 6.30%, 4/23/19 (d)
     
 
    1,375       1,613,968  
JPMorgan Chase Bank NA, 6.00%, 10/01/17 (d)
     
 
    800       904,972  
Macquarie Bank Ltd., 10.25%, 6/20/57 (b)
     
 
    900       1,026,000  
Moody’s Corp., 4.50%, 9/01/22
     
 
    900       958,425  
Northern Trust Corp., 3.95%, 10/30/25 (d)
     
 
    4,000       4,185,768  
Reynolds Group Issuer, Inc.:
                           
7.13%, 4/15/19
     
 
    200       207,750  
7.88%, 8/15/19
     
 
    560       606,200  
5.75%, 10/15/20
     
 
    1,000       1,045,000  
6.88%, 2/15/21
     
 
    1,255       1,344,419  
 
     
 
            30,583,337  
Diversified Telecommunication Services — 2.7%
 
CenturyLink, Inc., Series V, 5.63%, 4/01/20
     
 
    400       423,000  
Level 3 Financing, Inc.:
                           
8.13%, 7/01/19
     
 
    671       726,357  
8.63%, 7/15/20
     
 
    580       642,350  
Verizon Communications, Inc. (d):
                           
3.50%, 11/01/21
     
 
    500       518,931  
6.40%, 2/15/38
     
 
    3,396       4,245,706  
6.55%, 9/15/43
     
 
    3,375       4,346,935  
Windstream Corp., 7.88%, 11/01/17
     
 
    200       227,500  
 
     
 
            11,130,779  
Electric Utilities — 4.9%
                           
The Cleveland Electric Illuminating Co.:
                           
8.88%, 11/15/18
     
 
    121       152,411  
5.95%, 12/15/36
     
 
    217       256,681  
CMS Energy Corp., 5.05%, 3/15/22
     
 
    917       1,040,558  
ComEd Financing III, 6.35%, 3/15/33
     
 
    150       153,375  
Duke Energy Carolinas LLC:
                           
6.10%, 6/01/37
     
 
    325       412,188  
6.00%, 1/15/38 (d)
     
 
    850       1,102,175  
4.25%, 12/15/41 (d)
     
 
    375       388,681  
Duke Energy Florida, Inc., 6.40%, 6/15/38
     
 
    340       464,025  
E.ON International Finance BV, 6.65%, 4/30/38 (a)(d)
  1,575       2,043,370  
Electricite de France SA, 5.60%, 1/27/40 (a)(d)
     
 
    1,400       1,644,663  


See Notes to Financial Statements.

44 ANNUAL REPORT AUGUST 31, 2014
 
  
Schedule of Investments (continued)  BlackRock Income Opportunity Trust, Inc. (BNA)
(Percentages shown are based on Net Assets)
Corporate Bonds           Par
(000)
  Value
Electric Utilities (concluded)
                           
Florida Power Corp., 6.35%, 9/15/37 (d)
     
USD
    1,450      $  1,970,923  
Georgia Power Co., 3.00%, 4/15/16 (d)
     
 
    800       829,505  
Jersey Central Power & Light Co., 7.35%, 2/01/19
     
 
    245       294,263  
Ohio Power Co., Series D, 6.60%, 3/01/33
     
 
    1,500       1,975,527  
PacifiCorp, 6.25%, 10/15/37 (d)
     
 
    650       865,495  
Public Service Co. of Colorado, Series 17, 6.25%, 9/01/37 (d)
     
 
    1,350       1,820,475  
Southern California Edison Co. (d):
                           
5.63%, 2/01/36
     
 
    675       842,789  
Series A, 5.95%, 2/01/38
     
 
    1,100       1,414,509  
Virginia Electric and Power Co., Series A, 6.00%, 5/15/37 (d)
     
 
    1,920       2,472,868  
 
     
 
            20,144,481  
Energy Equipment & Services — 2.6%
         
Calfrac Holdings LP, 7.50%, 12/01/20 (a)
     
 
    470       499,375  
Ensco PLC:
                           
3.25%, 3/15/16
     
 
    160       165,675  
4.70%, 3/15/21 (d)
     
 
    1,745       1,899,766  
EOG Resources, Inc., 2.63%, 3/15/23 (d)
     
 
    1,898       1,846,887  
Genesis Energy LP/Genesis Energy Finance Corp., 5.75%, 2/15/21
     
 
    71       73,307  
GrafTech International Ltd., 6.38%, 11/15/20
     
 
    580       600,300  
MEG Energy Corp., 6.50%, 3/15/21 (a)
     
 
    560       590,800  
Noble Holding International Ltd., 5.25%, 3/15/42
     
 
    350       369,052  
Peabody Energy Corp.:
                           
6.00%, 11/15/18
     
 
    1,256       1,293,680  
6.25%, 11/15/21 (d)
     
 
    1,244       1,239,335  
Seadrill Ltd., 6.13%, 9/15/17 (a)
     
 
    1,590       1,641,675  
Transocean, Inc., 6.50%, 11/15/20
     
 
    350       395,876  
 
     
 
            10,615,728  
Food & Staples Retailing — 0.1%
         
Rite Aid Corp., 6.75%, 6/15/21
     
 
    279       296,089  
Food Products — 0.5%
                           
Barry Callebaut Services NV, 5.50%, 6/15/23 (a)
     
 
    700       738,955  
Kraft Foods Group, Inc., 5.00%, 6/04/42
     
 
    997       1,084,150  
Smithfield Foods, Inc., 5.88%, 8/01/21 (a)
     
 
    169       180,830  
 
     
 
            2,003,935  
Health Care Equipment & Supplies — 0.4%
         
Boston Scientific Corp., 6.25%, 11/15/15
     
 
    1,260       1,339,739  
Teleflex, Inc., 6.88%, 6/01/19
     
 
    385       407,138  
 
     
 
            1,746,877  
Health Care Providers & Services — 4.1%
         
Aviv Healthcare Properties LP/Aviv Healthcare Capital Corp., 7.75%, 2/15/19
     
 
    535       565,762  
CHS/Community Health Systems, Inc., 5.13%, 8/15/18
     
 
    400       416,000  
ConvaTec Healthcare E SA, 7.38%, 12/15/17 (a)
     
EUR
    494       681,925  
HCA Holdings, Inc., 7.75%, 5/15/21
     
USD
    143       155,870  
HCA, Inc.:
                           
3.75%, 3/15/19
     
 
    134       135,005  
6.50%, 2/15/20
     
 
    2,124       2,376,225  
4.75%, 5/01/23
     
 
    1,161       1,171,159  
Symbion, Inc., 8.00%, 6/15/16
     
 
    455       473,769  
Tenet Healthcare Corp.:
                           
6.25%, 11/01/18
     
 
    750       817,500  
6.00%, 10/01/20
     
 
    622       674,870  
4.50%, 4/01/21
     
 
    383       383,958  
4.38%, 10/01/21
     
 
    1,765       1,751,762  
8.13%, 4/01/22
     
 
    1,160       1,335,450  
UnitedHealth Group, Inc., 2.88%, 3/15/22 (d)
     
 
    2,000       2,007,922  
WellPoint, Inc., 4.65%, 1/15/43 (d)
     
 
    3,995       4,117,547  
 
     
 
            17,064,724  

 

Corporate Bonds           Par
(000)
  Value
Hotels, Restaurants & Leisure — 3.1%
           
Caesars Entertainment Resort Properties LLC/Caesars Entertainment Resort Property, 8.00%, 10/01/20 (a)
     
USD
    2,120      $  2,104,100  
MCE Finance Ltd., 5.00%, 2/15/21 (a)
     
 
    941       936,295  
Six Flags Entertainment Corp., 5.25%, 1/15/21 (a)
     
 
    859       869,737  
The Unique Pub Finance Co. PLC:
                           
Series A3, 6.54%, 3/30/21
     
GBP
    1,748       3,054,295  
Series A4, 5.66%, 6/30/27
     
 
    623       1,041,957  
Series M, 7.40%, 3/28/24
     
 
    1,500       2,543,706  
Series N, 6.46%, 3/30/32
     
 
    1,195       1,867,672  
Wynn Macau Ltd., 5.25%, 10/15/21 (a)
     
USD
    416       423,280  
 
     
 
            12,841,042  
Household Durables — 0.2%
                           
Taylor Morrison Communities, Inc./Monarch Communities, Inc., 5.25%, 4/15/21 (a)
     
 
    374       377,740  
Weyerhaeuser Real Estate Co. (a):
                           
4.38%, 6/15/19
     
 
    215       215,000  
5.88%, 6/15/24
     
 
    145       147,900  
 
     
 
            740,640  
Household Products — 0.1%
                           
Spectrum Brands, Inc.:
                           
6.38%, 11/15/20
     
 
    200       215,000  
6.63%, 11/15/22
     
 
    275       297,687  
 
     
 
            512,687  
Independent Power and Renewable Electricity Producers — 0.2%
Calpine Corp., 6.00%, 1/15/22 (a)
     
 
    137       147,617  
NRG REMA LLC, Series C, 9.68%, 7/02/26
     
 
    500       545,000  
 
     
 
            692,617  
Industrial Conglomerates — 0.0%
         
Smiths Group PLC, 3.63%, 10/12/22 (a)
     
 
    180       179,997  
Insurance — 3.1%
                           
A-S Co-Issuer Subsidiary, Inc./A-S Merger Sub LLC, 7.88%, 12/15/20 (a)
     
 
    608       647,520  
American International Group, Inc., 5.45%, 5/18/17 (d)
     
 
    800       886,638  
AXA SA, 5.25%, 4/16/40 (b)
     
EUR
    250       371,716  
Five Corners Funding Trust, 4.42%, 11/15/23 (a)
     
USD
    1,025       1,093,923  
Hartford Financial Services Group, Inc.:
                           
6.00%, 1/15/19
     
 
    345       396,877  
5.13%, 4/15/22
     
 
    930       1,062,591  
Liberty Mutual Group, Inc., 6.50%, 5/01/42 (a)
     
 
    1,000       1,241,191  
Lincoln National Corp., 6.25%, 2/15/20
     
 
    630       742,463  
Manulife Financial Corp., 3.40%, 9/17/15 (d)
     
 
    1,625       1,672,713  
Montpelier Re Holdings Ltd., 4.70%, 10/15/22
     
 
    450       471,476  
MPL 2 Acquisition Canco, Inc., 9.88%, 8/15/18 (a)
     
 
    340       362,950  
Muenchener Rueckversicherungs AG, 6.00%, 5/26/41 (b)
     
EUR
    200       318,679  
Prudential Financial, Inc. (d):
                           
4.75%, 9/17/15
     
USD
    1,220       1,271,029  
7.38%, 6/15/19
     
 
    300       368,947  
5.38%, 6/21/20
     
 
    250       286,330  
4.50%, 11/15/20
     
 
    400       439,066  
5.70%, 12/14/36
     
 
    950       1,135,871  
 
     
 
            12,769,980  
Internet Software & Services — 0.1%
         
Equinix, Inc., 4.88%, 4/01/20
     
 
    87       88,740  
VeriSign, Inc., 4.63%, 5/01/23
     
 
    345       338,962  
 
     
 
            427,702  
IT Services — 0.6%
                           
First Data Corp. (a):
                           
7.38%, 6/15/19
     
 
    205       218,837  
8.88%, 8/15/20
     
 
    1,000       1,090,000  
6.75%, 11/01/20
     
 
    1,192       1,290,340  
 
     
 
            2,599,177  


See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 45
 
  
Schedule of Investments (continued)  BlackRock Income Opportunity Trust, Inc. (BNA)
(Percentages shown are based on Net Assets)
Corporate Bonds           Par
(000)
  Value
Life Sciences Tools & Services — 0.1%
           
Agilent Technologies, Inc., 3.20%, 10/01/22
     
USD
    250      $  245,713  
Marine — 0.3%
                           
Nakilat, Inc., Series A, 6.07%, 12/31/33 (a)(d)
     
 
    1,100       1,237,500  
Media — 5.7%
                           
AMC Networks, Inc.:
                           
7.75%, 7/15/21
     
 
    320       353,200  
4.75%, 12/15/22
     
 
    343       347,287  
Cinemark USA, Inc., 5.13%, 12/15/22
     
 
    175       177,844  
Clear Channel Communications, Inc., 9.00%, 12/15/19
     
 
    306       316,710  
Clear Channel Worldwide Holdings, Inc., Series B, 6.50%, 11/15/22
     
 
    2,485       2,655,595  
Comcast Cable Communications Holdings, Inc., 9.46%, 11/15/22 (d)
     
 
    2,000       2,909,144  
COX Communications, Inc.,
                           
6.95%, 6/01/38 (a)
     
 
    1,000       1,256,441  
8.38%, 3/01/39 (a)
     
 
    1,735       2,522,017  
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc.:
                           
6.38%, 3/01/41
     
 
    260       322,932  
5.15%, 3/15/42
     
 
    700       753,675  
Gray Television, Inc., 7.50%, 10/01/20
     
 
    334       352,370  
Inmarsat Finance PLC, 4.88%, 5/15/22 (a)
     
 
    500       501,250  
Intelsat Jackson Holdings SA, 5.50%, 8/01/23
     
 
    700       697,375  
Live Nation Entertainment, Inc., 7.00%, 9/01/20 (a)
     
 
    109       117,448  
NAI Entertainment Holdings/NAI Entertainment Holdings Finance Corp., 5.00%, 8/01/18 (a)
     
 
    345       354,487  
NBCUniversal Media LLC (d):
                           
5.15%, 4/30/20
     
 
    1,974       2,259,624  
4.38%, 4/01/21
     
 
    1,015       1,121,618  
Omnicom Group, Inc., 3.63%, 5/01/22 (d)
     
 
    2,355       2,421,649  
Sirius XM Holdings, Inc., 4.25%, 5/15/20 (a)
     
 
    334       327,320  
Time Warner, Inc.:
                           
4.70%, 1/15/21
     
 
    1,000       1,104,821  
6.10%, 7/15/40
     
 
    615       740,123  
Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH, 5.50%, 1/15/23 (a)
     
 
    250       255,625  
Univision Communications, Inc., 5.13%, 5/15/23 (a)
     
 
    1,153       1,207,767  
Virgin Media Secured Finance PLC, 5.38%, 4/15/21 (a)
     
 
    395       410,800  
 
     
 
            23,487,122  
Metals & Mining — 3.8%
                           
Alcoa, Inc., 5.40%, 4/15/21
     
 
    1,450       1,580,965  
ArcelorMittal:
                           
4.25%, 8/05/15
     
 
    174       177,698  
6.13%, 6/01/18
     
 
    386       420,257  
Commercial Metals Co., 4.88%, 5/15/23
     
 
    561       549,780  
Corp. Nacional del Cobre de Chile, 3.00%, 7/17/22 (a)(d)
     
 
    1,566       1,539,323  
FMG Resources August 2006 Property Ltd., 6.00%, 4/01/17 (a)
     
 
    105       109,463  
Freeport-McMoRan Copper & Gold, Inc.:
                           
3.55%, 3/01/22
     
 
    540       542,938  
5.45%, 3/15/43
     
 
    450       486,195  
New Gold, Inc., 6.25%, 11/15/22 (a)
     
 
    435       456,750  
Newcrest Finance Property Ltd., 4.45%, 11/15/21 (a)
     
 
    475       473,097  
Novelis, Inc., 8.75%, 12/15/20
     
 
    4,105       4,541,156  
Teck Resources, Ltd., 5.38%, 10/01/15
     
 
    2,350       2,459,867  
Wise Metals Group LLC/Wise Alloys Finance Corp., 8.75%, 12/15/18 (a)
     
 
    598       645,840  
Xstrata Canada Corp., 6.20%, 6/15/35
     
 
    1,550       1,739,407  
 
     
 
            15,722,736  
Multiline Retail — 0.3%
                           
Dufry Finance SCA, 5.50%, 10/15/20 (a)
     
 
    1,260       1,310,463  

 

Corporate Bonds           Par
(000)
  Value
Oil, Gas & Consumable Fuels — 10.3%
         
Access Midstream Partners LP/ACMP Finance Corp., 6.13%, 7/15/22
     
USD
    400      $  435,000  
Anadarko Petroleum Corp., 5.95%, 9/15/16
     
 
    1,916       2,103,666  
Antero Resources Finance Corp., 5.38%, 11/01/21
     
 
    153       157,590  
Athlon Holdings LP/Athlon Finance Corp., 7.38%, 4/15/21
     
 
    159       172,515  
Bonanza Creek Energy, Inc., 6.75%, 4/15/21
     
 
    99       103,950  
Burlington Resources Finance Co., 7.40%, 12/01/31 (d)
     
 
    950       1,376,369  
Carrizo Oil & Gas, Inc., 7.50%, 9/15/20
     
 
    400       428,000  
Cenovus Energy, Inc., 6.75%, 11/15/39
     
 
    750       996,115  
Chesapeake Energy Corp., 5.75%, 3/15/23
     
 
    615       686,494  
ConocoPhillips Canada Funding Co., 5.95%, 10/15/36
     
 
    150       191,161  
Continental Resources, Inc.:
                           
5.00%, 9/15/22 (d)
     
 
    1,600       1,726,000  
4.50%, 4/15/23
     
 
    114       123,107  
Denbury Resources, Inc., 4.63%, 7/15/23
     
 
    627       605,055  
El Paso LLC, 7.80%, 8/01/31
     
 
    45       55,800  
El Paso Natural Gas Co., 8.38%, 6/15/32
     
 
    275       376,336  
Energy Transfer Partners LP, 7.50%, 7/01/38
     
 
    500       655,341  
Energy XXI Gulf Coast, Inc., 9.25%, 12/15/17
     
 
    455       482,300  
Enterprise Products Operating LLC, 6.13%, 10/15/39
     
 
    700       872,348  
KeySpan Gas East Corp., 5.82%, 4/01/41 (a)(d)
     
 
    505       643,612  
Kinder Morgan Energy Partners LP:
                           
6.50%, 9/01/39
     
 
    3,000       3,514,896  
6.55%, 9/15/40
     
 
    110       129,327  
6.38%, 3/01/41
     
 
    160       186,923  
Kinder Morgan, Inc., 5.63%, 11/15/23 (a)
     
 
    170       187,425  
Kodiak Oil & Gas Corp., 5.50%, 2/01/22
     
 
    106       111,830  
Linn Energy LLC/Linn Energy Finance Corp., 6.25%, 11/01/19
     
 
    237       244,703  
Marathon Petroleum Corp., 6.50%, 3/01/41
     
 
    1,052       1,323,523  
MarkWest Energy Partners LP/MarkWest Energy Finance Corp.:
                           
6.25%, 6/15/22
     
 
    33       35,475  
4.50%, 7/15/23
     
 
    10       10,163  
Memorial Production Partners LP/Memorial Production Finance Corp., 7.63%, 5/01/21
     
 
    212       219,950  
MidAmerican Energy Co., 5.80%, 10/15/36 (d)
     
 
    800       1,025,059  
MidAmerican Energy Holdings Co.:
                           
5.95%, 5/15/37
     
 
    950       1,179,153  
6.50%, 9/15/37
     
 
    2,115       2,790,364  
Nexen, Inc.:
                           
6.40%, 5/15/37
     
 
    400       499,621  
7.50%, 7/30/39
     
 
    670       946,360  
Pacific Drilling SA, 5.38%, 6/01/20 (a)
     
 
    370       360,750  
PBF Holding Co. LLC/PBF Finance Corp., 8.25%, 2/15/20
     
 
    47       50,643  
PDC Energy, Inc., 7.75%, 10/15/22
     
 
    260       284,700  
Pemex Project Funding Master Trust, 6.63%, 6/15/35
     
 
    2,005       2,471,162  
Petrobras International Finance Co.:
                           
3.88%, 1/27/16
     
 
    1,335       1,372,375  
5.75%, 1/20/20
     
 
    1,760       1,897,192  
Pioneer Natural Resources Co., 3.95%, 7/15/22
     
 
    350       366,893  
Premier Oil PLC, 5.00%, 6/09/18
     
 
    1,900       1,995,000  
Range Resources Corp.:
                           
5.75%, 6/01/21
     
 
    106       113,155  
5.00%, 8/15/22
     
 
    27       28,721  
5.00%, 3/15/23
     
 
    63       66,938  
Regency Energy Partners LP/Regency Energy Finance Corp., 4.50%, 11/01/23
     
 
    249       250,867  
RKI Exploration & Production LLC/RKI Finance Corp., 8.50%, 8/01/21 (a)
     
 
    118       126,850  
Rosetta Resources, Inc., 5.63%, 5/01/21
     
 
    239       244,676  


See Notes to Financial Statements.

46 ANNUAL REPORT AUGUST 31, 2014
 
  
Schedule of Investments (continued)  BlackRock Income Opportunity Trust, Inc. (BNA)
(Percentages shown are based on Net Assets)
Corporate Bonds           Par
(000)
  Value
Oil, Gas & Consumable Fuels (concluded)
       
Sabine Pass Liquefaction LLC:
                           
5.63%, 2/01/21
     
USD
    1,791      $  1,889,505  
6.25%, 3/15/22 (a)
     
 
    398       431,830  
5.63%, 4/15/23
     
 
    469       487,760  
SandRidge Energy, Inc.:
                           
8.75%, 1/15/20
     
 
    18       18,900  
7.50%, 2/15/23
     
 
    238       247,520  
Summit Midstream Holdings LLC/Summit Midstream Finance Corp., 7.50%, 7/01/21
     
 
    388       426,800  
Western Gas Partners LP, 5.38%, 6/01/21
     
 
    715       812,762  
Whiting Petroleum Corp., 5.00%, 3/15/19
     
 
    821       866,155  
The Williams Cos., Inc., Series A, 7.50%, 1/15/31
     
 
    2,500       2,977,077  
 
     
 
            42,383,762  
Paper & Forest Products — 0.3%
             
International Paper Co.:
                           
7.50%, 8/15/21
     
 
    75       95,630  
4.75%, 2/15/22
     
 
    420       464,268  
6.00%, 11/15/41
     
 
    435       522,873  
NewPage Corp., 11.38%, 12/31/14 (e)(f)
     
 
    1,144        
 
     
 
            1,082,771  
Pharmaceuticals — 0.9%
                           
Forest Laboratories, Inc. (a):
                           
4.38%, 2/01/19
     
 
    228       245,604  
5.00%, 12/15/21
     
 
    379       417,937  
Jaguar Holding Co. II/Jaguar Merger Sub, Inc., 9.50%, 12/01/19 (a)
     
 
    520       565,500  
Salix Pharmaceuticals Ltd., 6.00%, 1/15/21 (a)
     
 
    162       175,770  
Valeant Pharmaceuticals International, Inc. (a):
                           
6.75%, 8/15/18
     
 
    1,322       1,414,540  
6.38%, 10/15/20
     
 
    575       601,594  
5.63%, 12/01/21
     
 
    378       384,142  
 
     
 
            3,805,087  
Real Estate Investment Trusts (REITs) — 0.7%
       
Felcor Lodging LP, 5.63%, 3/01/23
     
 
    247       250,087  
Simon Property Group LP, 4.75%, 3/15/42 (d)
     
 
    835       915,342  
Ventas Realty LP/Ventas Capital Corp., 4.75%, 6/01/21
  275       303,112  
Vornado Realty LP, 5.00%, 1/15/22
     
 
    1,190       1,310,242  
 
     
 
            2,778,783  
Real Estate Management & Development — 1.0%
         
Lennar Corp., 4.75%, 11/15/22
     
 
    440       433,400  
Northwest Florida Timber Finance LLC, 4.75%, 3/04/29 (a)
     
 
    2,300       2,409,020  
Realogy Corp., 7.63%, 1/15/20 (a)(d)
     
 
    997       1,086,730  
 
     
 
            3,929,150  
Road & Rail — 0.9%
                           
Burlington Northern Santa Fe LLC, 5.75%, 5/01/40
     
 
    940       1,141,674  
The Hertz Corp.:
                           
4.25%, 4/01/18
     
 
    237       238,185  
5.88%, 10/15/20
     
 
    230       236,613  
7.38%, 1/15/21
     
 
    1,450       1,551,500  
6.25%, 10/15/22
     
 
    385       401,362  
 
     
 
            3,569,334  
Semiconductors & Semiconductor Equipment — 0.1%
NXP BV/NXP Funding LLC, 5.75%, 2/15/21 (a)
     
 
    470       493,500  
Software — 0.5%
                           
Nuance Communications, Inc., 5.38%, 8/15/20 (a)
  1,085       1,090,425  
Oracle Corp., 5.38%, 7/15/40 (d)
     
 
    800       939,231  
 
     
 
            2,029,656  
Specialty Retail — 0.6%
                           
The Home Depot, Inc., 5.88%, 12/16/36 (d)
     
 
    830       1,052,592  
QVC, Inc. (a):
                           
7.50%, 10/01/19
     
 
    395       412,325  
7.38%, 10/15/20
     
 
    975       1,042,187  
 
     
 
            2,507,104  

 

Corporate Bonds           Par
(000)
  Value
Textiles, Apparel & Luxury Goods — 0.3%
         
PVH Corp., 4.50%, 12/15/22
     
USD
    487      $  483,347  
Springs Industries, Inc., 6.25%, 6/01/21
     
 
    404       406,020  
The William Carter Co., 5.25%, 8/15/21
     
 
    329       343,805  
 
     
 
            1,233,172  
Tobacco — 1.2%
                           
Altria Group, Inc.:
                           
9.95%, 11/10/38
     
 
    258       438,257  
10.20%, 2/06/39
     
 
    447       773,806  
5.38%, 1/31/44 (d)
     
 
    2,015       2,238,032  
Lorillard Tobacco Co., 7.00%, 8/04/41
     
 
    500       631,462  
Reynolds American, Inc., 4.75%, 11/01/42
     
 
    1,050       1,024,752  
 
     
 
            5,106,309  
Wireless Telecommunication Services — 2.4%
 
America Movil SAB de CV, 2.38%, 9/08/16
     
 
    800       819,440  
Crown Castle International Corp., 5.25%, 1/15/23
     
 
    465       480,257  
Crown Castle Towers LLC, 6.11%, 1/15/20 (a)
     
 
    1,595       1,865,332  
Digicel Group Ltd., 8.25%, 9/30/20 (a)
     
 
    405       437,400  
Digicel Ltd., 6.00%, 4/15/21 (a)
     
 
    800       824,000  
Rogers Communications, Inc., 7.50%, 8/15/38
     
 
    1,175       1,617,759  
SBA Tower Trust, 5.10%, 4/15/17 (a)
     
 
    360       382,507  
Softbank Corp., 4.50%, 4/15/20 (a)
     
 
    550       559,625  
Sprint Capital Corp., 8.75%, 3/15/32
     
 
    350       390,250  
Sprint Communications, Inc. (a):
                           
9.00%, 11/15/18
     
 
    530       630,037  
7.00%, 3/01/20
     
 
    872       972,280  
Sprint Corp., 7.88%, 9/15/23 (a)
     
 
    850       911,625  
 
     
 
            9,890,512  
Total Corporate Bonds — 78.7%
  322,976,437  

Foreign Agency Obligations
     
  
                 
Brazilian Government International Bond, 5.00%, 1/27/45
     
 
    2,862       2,933,550  
Cyprus Government International Bond, 4.63%, 2/03/20
     
EUR
    605       790,965  
Iceland Government International Bond, 5.88%, 5/11/22
     
USD
    1,780       2,025,649  
Italian Republic, 5.38%, 6/15/33
     
 
    470       571,240  
Portugal Government International Bond, 5.13%, 10/15/24 (a)
     
 
    625       646,625  
Slovenia Government International Bond, 5.85%, 5/10/23 (a)
     
 
    432       488,592  
Total Foreign Agency Obligations — 1.8%
    7,456,621  

Municipal Bonds
     
  
                 
City of Detroit Michigan, GO, Taxable Capital Improvement, Limited Tax, Series A-2, 8.00%, 4/01/15 (e)(f)
     
 
    1,525       427,153  
City of New York New York Municipal Water Finance Authority, Refunding RB, 2nd General Resolution:
                           
Series EE, 5.50%, 6/15/43
     
 
    465       549,756  
Series GG, Build America Bonds, 5.72%, 6/15/42
     
 
    690       891,190  
Water & Sewer System, Fiscal 2011, Series EE, 5.38%, 6/15/43
     
 
    385       450,900  
East Bay Municipal Utility District, RB, Build America Bonds, 5.87%, 6/01/40
     
 
    950       1,225,795  
Indianapolis Local Public Improvement Bond Bank, RB, Build America Bonds, 6.12%, 1/15/40
     
 
    1,260       1,646,354  
Metropolitan Transportation Authority, RB, Build America Bonds, Series C, 7.34%, 11/15/39
     
 
    670       1,020,792  


See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 47
 
  
Schedule of Investments (continued)  BlackRock Income Opportunity Trust, Inc. (BNA)
(Percentages shown are based on Net Assets)
Municipal Bonds           Par
(000)
  Value
Municipal Electric Authority of Georgia Plant Vogtle Units 3 & 4, Refunding RB, Build America Bonds, Series A, 7.06%, 4/01/57
     
USD
    1,000      $  1,156,240  
New York State Dormitory Authority, RB, Build America Bonds:
                           
5.63%, 3/15/39
     
 
    550       674,960  
5.60%, 3/15/40
     
 
    950       1,181,971  
Port Authority of New York & New Jersey, RB, Consolidated, 159th Series, 6.04%, 12/01/29
     
 
    395       499,335  
State of California, GO, Build America Bonds, Various Purpose:
                           
7.55%, 4/01/39
     
 
    140       211,474  
7.63%, 3/01/40
     
 
    860       1,299,451  
State of Illinois, GO, Pension, 5.10%, 6/01/33
     
 
    1,000       991,670  
University of California, RB, Build America Bonds, 5.95%, 5/15/45
     
 
    440       559,099  
Total Municipal Bonds — 3.1%
        12,786,140  

Non-Agency Mortgage-Backed Securities
    
Collateralized Mortgage Obligations — 1.4%
     
Banc of America Funding Corp., Series 2007-2, Class 1A2, 6.00%, 3/25/37
     
 
    660       556,822  
Collateralized Mortgage Obligation Trust, Series 40, Class R, 0.58%, 4/01/18
     
 
    16       16  
Countrywide Alternative Loan Trust:
                           
Series 2005-64CB, Class 1A15, 5.50%, 12/25/35
     
 
    1,102       1,043,597  
Series 2006-OA21, Class A1, 0.35%, 3/20/47 (b)
     
 
    727       588,819  
Countrywide Home Loan Mortgage Pass-Through Trust, Series 2006-OA5, Class 2A1, 0.36%, 4/25/46 (b)
     
 
    293       245,184  
Credit Suisse Mortgage Capital Certificates, Series 2011-2R, Class 2A1, 2.61%, 7/27/36 (a)(b)
     
 
    956       968,283  
GMAC Mortgage Corp. Loan Trust, Series 2005-AR3, Class 5A1, 5.06%, 6/19/35 (b)
     
 
    550       554,671  
Homebanc Mortgage Trust, Series 2006-2, Class A1, 0.34%, 12/25/36 (b)
     
 
    463       408,135  
Merrill Lynch Mortgage Investors, Inc., Series 2006-A3, Class 3A1, 2.71%, 5/25/36 (b)
     
 
    551       452,613  
Residential Funding Securities LLC, Series 2003-RM2, Class AI5, 8.50%, 5/25/33
     
 
    637       674,931  
WaMu Mortgage Pass-Through Certificates, Series 2007-OA4, Class 1A, 0.89%, 5/25/47 (b)
     
 
    307       272,371  
 
     
 
            5,765,442  
Commercial Mortgage-Backed Securities — 12.9%
 
Banc of America Merrill Lynch Commercial Mortgage Trust:
                           
Series 2006-6, Class A2, 5.31%, 10/10/45
     
 
    147       147,851  
Series 2007-1, Class A4, 5.45%, 1/15/49
     
 
    500       536,104  
Series 2007-2, Class A4, 5.78%, 4/10/49 (b)
     
 
    750       818,490  
Bear Stearns Commercial Mortgage Securities, Series 2005-PWR9, Class A4A, 4.87%, 9/11/42
     
 
    663       681,893  
Citigroup Commercial Mortgage Trust (b):
                           
Series 2008-C7, Class A4, 6.34%, 12/10/49
     
 
    1,200       1,329,745  
Series 2013-GC15, Class B, 5.28%, 9/10/46
     
 
    3,593       3,983,444  
Series 2013-GC15, Class XA, 1.46%, 9/10/46
     
 
    13,194       926,954  
Citigroup/Deutsche Bank Commercial Mortgage Trust, Series 2006-CD3, Class AM, 5.65%, 10/15/48
     
 
    1,100       1,189,716  
Commercial Mortgage Loan Trust, Series 2008-LS1, Class A4B, 6.21%, 12/10/49 (b)
     
 
    1,421       1,545,188  
Non-Agency Mortgage-Backed Securities Par
(000)
  Value
Commercial Mortgage-Backed Securities (concluded)
 
Commercial Mortgage Trust:
                           
Series 2006-C7, Class AM, 5.97%, 6/10/46 (b)
     
USD
    1,750      $  1,872,043  
Series 2013-CR11, Class B, 5.33%, 10/10/46 (b)
     
 
    3,505       3,892,166  
Series 2013-CR11, Class C, 5.34%, 10/10/46 (a)(b)
     
 
    3,271       3,526,230  
Series 2013-LC6, Class B, 3.74%, 1/10/46
     
 
    695       699,949  
Series 2013-LC6, Class D, 4.43%, 1/10/46 (a)(b)
     
 
    835       787,811  
Credit Suisse Commercial Mortgage Trust:
                           
Series 2006-C3, Class AM, 6.00%, 6/15/38 (b)
     
 
    1,000       1,072,522  
Series 2006-C5, Class AM, 5.34%, 12/15/39
     
 
    1,750       1,881,647  
Series 2010-RR2, Class 2A, 6.10%, 9/15/39 (a)(b)
     
 
    774       831,994  
Credit Suisse First Boston Mortgage Securities Corp., Series 2005-C3, Class AJ, 4.77%, 7/15/37
     
 
    705       718,278  
DBRR Trust, Series 2011-C32, Class A3A, 5.93%, 6/17/49 (a)(b)
     
 
    365       399,017  
Greenwich Capital Commercial Funding Corp., Series 2006-GG7, Class A4, 6.01%, 7/10/38 (b)
     
 
    1,132       1,205,804  
GS Mortgage Securities Corp. II, Series 2013-GC10, Class B, 3.68%, 2/10/46 (a)
     
 
    1,255       1,255,236  
Hilton USA Trust, Series 2013- HLT, 4.41%, 11/05/30
     
 
    2,950       3,020,517  
JPMBB Commercial Mortgage Securities Trust, Series 2013-C15, Class D, 5.25%, 11/15/45 (a)(b)
     
 
    800       794,388  
JPMorgan Chase Commercial Mortgage Securities Corp., Series 2004-LN2, Class A2, 5.12%, 7/15/41
     
 
    105       105,659  
JPMorgan Chase Commercial Mortgage Securities Trust, Series 2006-CB14, Class AM, 5.62%, 12/12/44 (b)
     
 
    330       346,995  
LB-UBS Commercial Mortgage Trust (b):
                           
Series 2004-C8, Class C, 4.93%, 12/15/39
     
 
    1,385       1,391,847  
Series 2007-C6, Class A4, 5.86%, 7/15/40
     
 
    4,921       5,233,668  
Series 2007-C7, Class A3, 5.87%, 9/15/45
     
 
    1,100       1,223,175  
Morgan Stanley Capital I Trust, Series 2007-HQ11, Class A4, 5.45%, 2/12/44 (b)
     
 
    4,000       4,327,020  
RCMC LLC, Series 2012-CRE1, Class A, 5.62%, 11/15/44 (a)
     
 
    659       679,405  
Titan Europe PLC, Series 2007-1X, Class A, 0.81%, 1/20/17 (b)
     
GBP
    1,607       2,535,059  
Wachovia Bank Commercial Mortgage Trust, Series 2007-C33, Class A4, 6.14%, 2/15/51 (b)
     
USD
    2,285       2,478,192  
WF-RBS Commercial Mortgage Trust, Series 2012-C8:
                           
Class B, 4.31%, 8/15/45
     
 
    700       736,370  
Class C, 5.04%, 8/15/45 (b)
     
 
    900       963,951  
 
     
 
            53,138,328  
Interest Only Collateralized Mortgage Obligations — 0.0%
GSMPS Mortgage Loan Trust, Series 1998-5, 0.00%, 6/19/27 (a)(b)
     
 
    1,488       15  
Interest Only Commercial Mortgage-Backed Securities — 0.8%
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2012-C5, Class XA, 2.02%, 8/15/45 (a)(b)
     
 
    15,562       1,372,238  
WF-RBS Commercial Mortgage Trust, Class XA (a)(b):
                           
Series 2012-C8, 2.37%, 8/15/45
     
 
    5,957       651,685  
Series 2012-C9, 2.39%, 11/15/45
     
 
    10,497       1,233,122  
 
     
 
            3,257,045  
Total Non-Agency Mortgage-Backed Securities — 15.1%
  62,160,830  


See Notes to Financial Statements.

48 ANNUAL REPORT AUGUST 31, 2014
 
  
Schedule of Investments (continued)  BlackRock Income Opportunity Trust, Inc. (BNA)
(Percentages shown are based on Net Assets)
Preferred Securities           Par
(000)
  Value
Capital Trusts
     
 
               
Banks — 0.7%
                           
BNP Paribas SA, 7.20% (a)(b)(i)
     
USD
    1,000      $  1,167,500  
Wachovia Capital Trust III, 5.57% (b)(i)
     
 
    1,025       1,004,500  
Wells Fargo & Co., Series S, 5.90% (b)(i)
     
 
    795       832,763  
 
     
 
            3,004,763  
Capital Markets — 1.4%
                           
The Bank of New York Mellon Corp., Series D, 4.50% (b)(i)
     
 
    4,202       3,939,375  
Credit Suisse Group AG, 7.50% (a)(b)(i)
     
 
    1,500       1,627,500  
State Street Capital Trust IV, 1.23%, 6/15/37 (b)
     
 
    70       60,462  
 
     
 
            5,627,337  
Diversified Financial Services — 4.4%
     
Citigroup, Inc., Series D, 5.35% (b)(i)
     
 
    1,050       1,002,612  
Citigroup, Inc., Series M, 6.30% (b)(i)
     
 
    2,000       2,035,000  
Credit Agricole SA, 7.88% (a)(b)(i)
     
 
    1,000       1,078,750  
General Electric Capital Corp., Series B, 6.25% (b)(i)
     
 
    900       1,004,625  
JPMorgan Chase & Co.:
                           
Series 1, 7.90% (b)(i)
     
 
    3,500       3,871,875  
Series Q, 5.15% (b)(i)
     
 
    1,500       1,460,625  
Series V, 5.00% (b)(i)
     
 
    3,000       2,974,968  
Morgan Stanley, Series H, 5.45% (b)(i)
     
 
    875       890,313  
Societe Generale SA (a)(b)(i):
                           
6.00%
     
 
    2,860       2,731,300  
7.88%
     
 
    1,000       1,042,700  
 
     
 
            18,092,768  
Electric Utilities — 0.5%
                           
Electricite de France SA, 5.25% (a)(b)(i)
     
 
    2,100       2,168,250  
Insurance — 4.3%
                           
The Allstate Corp.,
                           
5.75%, 8/15/53 (b)
     
 
    1,000       1,070,000  
6.50%, 5/15/57 (b)(d)
     
 
    2,150       2,356,937  
American International Group, Inc., 8.18%, 5/15/58 (b)
     
 
    970       1,336,175  
AXA SA, 6.46% (a)(b)(i)
     
 
    1,025       1,087,781  
Genworth Holdings, Inc., 6.15%, 11/15/66 (b)
     
 
    1,150       1,012,000  
Liberty Mutual Group, Inc., 7.00%, 3/07/37 (a)(b)
     
 
    975       1,035,937  
Lincoln National Corp., 6.05%, 4/20/67 (b)
     
 
    750       769,688  
Metlife Capital Trust IV, 7.88%, 12/15/37 (a)
     
 
    645       823,988  
MetLife, Inc., 6.40%, 12/15/36
     
 
    3,500       3,946,250  
Swiss Re Capital I LP, 6.85% (a)(b)(d)(i)
     
 
    1,060       1,115,650  
Voya Financial, Inc., 5.65%, 5/15/53 (b)
     
 
    2,250       2,289,375  
XL Group PLC, Series E, 6.50% (b)(i)
     
 
    810       782,663  
 
     
 
            17,626,444  
Total Capital Trusts — 11.3%
        46,519,562  

Preferred Stocks
     
  
    Shares           
Banks — 1.3%
                           
U.S. Bancorp, 6.00% (b)
     
 
    150,000       4,108,500  
Wells Fargo & Co., 5.85% (b)
     
 
    38       977,625  
 
     
 
            5,086,125  
Capital Markets — 0.4%
                           
The Goldman Sachs Group, Inc., Series J, 0.00% (b)
     
 
    46,000       1,126,080  
SCE Trust III, 0.00% (b)
     
 
    12,657       336,423  
 
     
 
            1,462,503  
Thrifts & Mortgage Finance — 0.0%
         
Fannie Mae, Series S, 8.25% (b)
     
 
    10,000       110,000  
Total Preferred Stocks — 1.7%
          6,658,628  
Trust Preferred — 0.1%           Par
(000)
  Value
Banks — 0.1%
                           
Citigroup Capital XIII, 7.88% 10/30/40 (i)
     
USD
    14,810      $  400,913  
Total Preferred Securities — 13.1%
        53,579,103  

US Government Sponsored Agency Securities
        
Agency Obligations — 3.3%
                           
Fannie Mae (d):
                           
0.00%, 10/09/19 (j)
     
 
    7,305       6,465,736  
5.63%, 7/15/37
     
 
    825       1,125,863  
Federal Home Loan Bank (d):
                           
5.25%, 12/09/22
     
 
    700       843,929  
5.37%, 9/09/24
     
 
    1,100       1,349,412  
Resolution Funding Corp., 0.00%, 4/15/30 (j)
     
 
    6,055       3,672,660  
 
     
 
            13,457,600  
Collateralized Mortgage Obligations — 0.1%
       
Fannie Mae Mortgage-Backed Securities:
                           
Series 2005-5, Class PK, 5.00%, 12/25/34
     
 
    273       289,490  
Series 1991-87, Class S, 26.27%, 8/25/21 (b)
     
 
    10       14,705  
Series G-49, Class S, 1,018.68%, 12/25/21 (b)
     
 
    (k)      286  
Series G-17, Class S, 1,064.92%, 6/25/21 (b)
     
 
    49       767  
Series G-33, Class PV, 1,078.42%, 10/25/21
     
 
    49       488  
Series G-07, Class S, 1,127.09%, 3/25/21 (b)
     
 
    (k)      842  
Series 1991-46, Class S, 2,483.51%, 5/25/21 (b)
     
 
    26       1,559  
Freddie Mac Mortgage-Backed Securities:
                           
Series 0173, Class R, 9.00%, 11/15/21
     
 
    3       3  
Series 0173, Class RS, 9.50%, 1/15/21–11/15/21 (b)
     
 
    (k)      4  
Series 0075, Class RS, 50.25%, 1/15/21 (b)
     
 
    (k)      1  
Series 1057, Class J, 1,008.00%, 3/15/21
     
 
    20       272  
Series 0019, Class R, 16,324.45%, 3/15/20 (b)
     
 
    1       208  
 
     
 
            308,625  
Commercial Mortgage-Backed Securities — 0.7%
 
Freddie Mac Mortgage-Backed Securities (b):
                           
Series 2013-K24, Class B, 3.62%, 11/25/45 (a)
     
 
    1,750       1,728,745  
Series K013, Class A2, 3.97%, 1/25/21
     
 
    930       1,016,225  
Series 2012-K706, Class C, 4.16%, 11/25/44 (a)
     
 
    170       175,514  
 
     
 
            2,920,484  
Interest Only Collateralized Mortgage Obligations — 1.8%
 
Fannie Mae Mortgage-Backed Securities:
                           
Series 1997-50, Class SI, 1.20%, 4/25/23 (b)
     
 
    88       2,803  
Series 2012-96, Class DI, 4.00%, 2/25/27
     
 
    6,075       670,295  
Series 2012-M9, Class X1, 4.23%, 12/25/17 (b)
     
 
    12,519       1,347,498  
Series 2012-47, Class NI, 4.50%, 4/25/42
     
 
    4,646       772,445  
Series 089, Class 2, 8.00%, 10/25/18
     
 
    1       109  
Series 007, Class 2, 8.50%, 4/25/17
     
 
    1       77  
Series G92-05, Class H, 9.00%, 1/25/22
     
 
    10       960  
Series 094, Class 2, 9.50%, 8/25/21
     
 
    1       126  
Series 1990-136, Class S, 19.92%, 11/25/20 (b)
     
 
    3,187       4,471  
Series 1991-139, Class PT, 648.35%, 10/25/21
     
 
    55       564  
Series 1991-099, Class L, 930.00%, 8/25/21
     
 
    24       304  
Series 1990-123, Class M, 1,009.50%, 10/25/20
     
 
    5       71  
Series G-10, Class S, 1,090.36%, 5/25/21 (b)
     
 
    134       3,275  
Series G-12, Class S, 1,157.49%, 5/25/21 (b)
     
 
    96       1,898  


See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 49
 
  
Schedule of Investments (continued)  BlackRock Income Opportunity Trust, Inc. (BNA)
(Percentages shown are based on Net Assets)
U.S. Government Sponsored Agency Securities
Par
(000)
  Value
Interest Only Collateralized Mortgage Obligations (concluded)
Freddie Mac Mortgage-Backed Securities:
                           
Series K707, Class X1, 1.69%, 12/25/18 (b)
     
USD
    2,482      $  143,836  
Series K710, Class X1, 1.91%, 5/25/19 (b)
     
 
    8,558       609,036  
Series 2611, Class QI, 5.50%, 9/15/32
     
 
    828       89,875  
Series 1254, Class Z, 8.50%, 4/15/22
     
 
    32       8,174  
Series 1043, Class H, 44.31%, 2/15/21 (b)
     
 
    2,421       4,730  
Series 1054, Class I, 868.00%, 3/15/21 (b)
     
 
    18       344  
Series 0176, Class M, 1,010.00%, 7/15/21
     
 
    8       147  
Series 1056, Class KD, 1,084.50%, 3/15/21
     
 
    13       211  
Series 1148, Class E, 1,178.74%, 10/15/21 (b)
     
 
    36        639  
Series 0200, Class R, 198,052.82%, 12/15/22 (b)
     
 
    (k)      317  
Ginnie Mae Mortgage-Backed Securities (b):
                           
Series 2009-78, Class SD, 6.04%, 9/20/32
     
 
    4,817       927,776  
Series 2009-116, Class KS, 6.32%, 12/16/39
     
 
    2,386       370,399  
Series 2011-52, Class NS, 6.52%, 4/16/41
     
 
    13,067       2,397,384  
 
     
 
            7,357,764  
Mortgage-Backed Securities — 7.3%
           
Fannie Mae Mortgage-Backed Securities:
                           
3.00%, 9/01/44 (l)
     
 
    6,800       6,770,250  
4.00%, 12/01/41–9/01/44 (l)
     
 
    4,940       5,240,778  
4.50%, 7/01/41–9/01/44 (l)
     
 
    12,018       12,988,199  
5.00%, 8/01/34
     
 
    2,093       2,312,704  
5.50%, 7/01/16–6/01/38
     
 
    1,254       1,402,461  
6.00%, 3/01/16–12/01/38
     
 
    1,053       1,183,731  
Ginnie Mae Mortgage-Backed Securities, 8.00%, 7/15/24
     
 
    (k)      303  
 
     
 
            29,898,426  
Principal Only Collateralized Mortgage Obligations — 0.0%
 
Fannie Mae Mortgage-Backed Securities:
                           
Series 228, Class 1, 0.00%, 2/25/23–6/25/23
     
 
    11       10,050  
Series 1993-51, Class E, 0.01%, 2/25/23
     
 
    16       14,900  
 
     
 
            24,950  
Total U.S. Government Sponsored Agency Securities — 13.2%
53,967,849  

U.S. Treasury Obligations
     
  
    Par
(000)
   
Value
U.S. Treasury Bonds:
                           
6.13%, 8/15/29 (d)
     
USD
    2,500      $ 3,567,577  
5.38%, 2/15/31 (d)
     
 
    375       505,840  
3.50%, 2/15/39 (d)
     
 
    2,865       3,117,031  
U.S. Treasury Obligations           Par
(000)
  Value
U.S. Treasury Bonds (concluded):
                           
4.38%, 5/15/40 (d)
     
USD
    8,225      $ 10,277,392  
4.75%, 2/15/41 (d)
     
 
    1,621       2,146,559  
4.38%, 5/15/41 (d)
     
 
    805       1,009,520  
3.13%, 11/15/41 (d)
     
 
    9,925       10,073,956  
3.13%, 2/15/42 (d)
     
 
    2,368       2,400,560  
3.00%, 5/15/42 (d)
     
 
    2,730       2,699,288  
3.13%, 2/15/43 (d)
     
 
    2,344       2,365,470  
3.75%, 11/15/43
     
 
    1,065       1,205,114  
3.63%, 2/15/44 (d)
     
 
    5,000       5,534,375  
3.38%, 5/15/44
     
 
    2,000       2,115,000  
U.S. Treasury Notes (d):
                           
1.50%, 1/31/19
     
 
    5,100       5,096,415  
1.75%, 5/15/22
     
 
    152       147,867  
2.50%, 5/15/24
     
 
    2,450       2,485,028  
Total U.S. Treasury Obligations — 13.3%
  54,746,992  
Total Long-Term Investments
(Cost — $557,866,610) — 144.8%
594,144,609  

Short-Term Securities
     
 
    Shares          
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.03% (m)(n)
     
 
    3,425,318       3,425,318  
Total Short-Term Securities
(Cost — $3,425,318) — 0.8%
    3,425,318  

Options Purchased
     
  
                 
(Cost — $1,408,661) — 0.2%
          954,199  
Total Investments Before Options Written
(Cost — $562,700,589) — 145.8%
  598,524,126  

Options Written
     
  
                 
(Premiums Received — $3,351,152) — (0.6)%
  (2,588,336
Total Investments, Net of Options Written
(Cost — $559,349,437) — 145.2%
    595,935,790  
Liabilities in Excess of Other Assets — (45.2)%
  (185,433,229
Net Assets — 100.0%
     
 
           $ 410,502,561  


Notes to Schedule of Investments

(a)      
Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.
(b)      
Variable rate security. Rate shown is as of report date.
(c)      
When-issued security. Unsettled when-issued transactions were as follows:

Counterparty       Value   Unrealized
Appreciation
Bank of America N.A.
       $ 1,869,000        
Barclays Capital, Inc.
       $ 2,119,050        

(d)      
All or a portion of security has been pledged as collateral in connection with outstanding reverse repurchase agreements.
(e)      
Issuer filed for bankruptcy and/or is in default of principal and/or interest payments.
(f)      
Non-income producing security.
(g)      
Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date.
(h)      
Convertible security.

See Notes to Financial Statements.

50 ANNUAL REPORT AUGUST 31, 2014
 
  
Schedule of Investments (continued)  BlackRock Income Opportunity Trust, Inc. (BNA)
 
(i)      
Security is perpetual in nature and has no stated maturity date.
(j)      
Zero-coupon bond.
(k)      
Amount is less than $500.
(l)      
Represents or includes a TBA transaction. Unsettled TBA transactions as of August 31, 2014 were as follows:

Counterparty       Value   Unrealized
Appreciation
(Depreciation)
Credit Suisse Securities (USA) LLC
       $ 6,770,250      $ 105,188  
Goldman Sachs & Co.
       $ 2,124,987      $ 15,351  
J.P. Morgan Securities LLC
       $ 9,180,000      $ 25,234  

(m)      
Investments in issuers considered to be an affiliate of the Trust during the year ended August 31, 2014, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

Affiliate       Shares
Held at
August 31, 2013
  Net
Activity
  Shares
Held at
August 31, 2014
  Income
BlackRock Liquidity Funds, TempFund, Institutional Class
        6,904,938       (3,479,620     3,425,318      $ 1,754  

(n)      
Represents the current yield as of report date.
     
Reverse repurchase agreements outstanding as of August 31, 2014 were as follows:

Counterparty



 
Interest
Rate

 
Trade
Date

 
Maturity
Date1

 
Face Value
 
Face Value
Including
Accrued
Interest

Credit Suisse Securities (USA) LLC
     
0.35%
 
2/01/13
 
Open
   $  1,793,610      $  1,803,672  
Credit Suisse Securities (USA) LLC
     
0.35%
 
2/01/13
 
Open
    1,937,250       1,948,117  
Merrill Lynch, Pierce, Fenner & Smith Inc.
     
0.11%
 
4/02/13
 
Open
    6,446,662       6,455,786  
Merrill Lynch, Pierce, Fenner & Smith Inc.
     
0.11%
 
4/02/13
 
Open
    908,250       909,535  
Credit Suisse Securities (USA) LLC
     
0.35%
 
4/03/13
 
Open
    1,967,006       1,976,855  
Credit Suisse Securities (USA) LLC
     
0.35%
 
4/03/13
 
Open
    1,460,625       1,467,938  
Credit Suisse Securities (USA) LLC
     
0.35%
 
4/03/13
 
Open
    1,232,000       1,238,169  
Credit Suisse Securities (USA) LLC
     
0.35%
 
4/03/13
 
Open
    1,751,625       1,760,395  
Credit Suisse Securities (USA) LLC
     
0.35%
 
4/03/13
 
Open
    599,688       602,690  
Credit Suisse Securities (USA) LLC
     
0.35%
 
4/03/13
 
Open
    1,363,838       1,370,666  
Credit Suisse Securities (USA) LLC
     
0.35%
 
4/03/13
 
Open
    1,505,318       1,512,855  
Credit Suisse Securities (USA) LLC
     
0.35%
 
4/03/13
 
Open
    1,372,250       1,379,121  
Credit Suisse Securities (USA) LLC
     
0.35%
 
4/03/13
 
Open
    1,600,156       1,608,168  
Credit Suisse Securities (USA) LLC
     
0.35%
 
4/03/13
 
Open
    1,317,750       1,324,348  
Credit Suisse Securities (USA) LLC
     
0.35%
 
4/03/13
 
Open
    262,813       264,128  
Credit Suisse Securities (USA) LLC
     
0.35%
 
4/03/13
 
Open
    1,359,375       1,366,181  
Credit Suisse Securities (USA) LLC
     
0.35%
 
4/03/13
 
Open
    1,284,050       1,290,479  
Credit Suisse Securities (USA) LLC
     
0.35%
 
4/03/13
 
Open
    361,875       363,687  
Credit Suisse Securities (USA) LLC
     
0.35%
 
4/03/13
 
Open
    411,500       413,560  
Merrill Lynch, Pierce, Fenner & Smith Inc.
     
0.09%
 
4/25/13
 
Open
    10,877,562       10,883,283  
Merrill Lynch, Pierce, Fenner & Smith Inc.
     
0.08%
 
4/25/13
 
Open
    3,262,519       3,264,991  
Merrill Lynch, Pierce, Fenner & Smith Inc.
     
0.07%
 
4/25/13
 
Open
    3,560,880       3,563,923  
BNP Paribas Securities Corp.
     
0.04%
 
4/29/13
 
Open
    1,045,494       1,045,813  
BNP Paribas Securities Corp.
     
0.07%
 
4/29/13
 
Open
    2,212,665       2,213,797  
Barclays Capital, Inc.
     
0.35%
 
6/24/13
 
Open
    3,344,932       3,359,047  
BNP Paribas Securities Corp.
     
0.06%
 
6/24/13
 
Open
    493,594       493,806  
BNP Paribas Securities Corp.
     
0.11%
 
6/24/13
 
Open
    1,077,656       1,078,795  
BNP Paribas Securities Corp.
     
0.32%
 
6/24/13
 
Open
    2,886,000       2,897,134  
BNP Paribas Securities Corp.
     
0.34%
 
9/30/13
 
Open
    3,568,000       3,579,322  
BNP Paribas Securities Corp.
     
0.34%
 
10/22/13
 
Open
    1,825,000       1,830,395  
BNP Paribas Securities Corp.
     
0.35%
 
10/22/13
 
Open
    4,559,100       4,572,974  
Credit Suisse Securities (USA) LLC
     
0.35%
 
10/22/13
 
Open
    2,119,906       2,126,357  
Deutsche Bank Securities, Inc.
     
0.35%
 
10/31/13
 
Open
    3,829,000       3,840,354  
UBS Securities LLC
     
0.28%
 
2/10/14
 
Open
    3,396,000       3,401,335  
UBS Securities LLC
     
0.32%
 
2/10/14
 
Open
    696,000       697,250  
UBS Securities LLC
     
0.32%
 
2/10/14
 
Open
    343,000       343,616  
UBS Securities LLC
     
0.32%
 
2/10/14
 
Open
    1,355,000       1,357,433  
UBS Securities LLC
     
0.32%
 
2/10/14
 
Open
    1,416,000       1,418,543  
UBS Securities LLC
     
0.33%
 
2/10/14
 
Open
    1,349,000       1,351,498  
UBS Securities LLC
     
0.33%
 
2/10/14
 
Open
    1,124,000       1,126,081  
UBS Securities LLC
     
0.34%
 
2/10/14
 
Open
    779,000       780,486  
UBS Securities LLC
     
0.34%
 
2/10/14
 
Open
    753,000       754,437  
UBS Securities LLC
     
0.34%
 
2/10/14
 
Open
    3,716,000       3,723,089  

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 51
 
  
Schedule of Investments (continued)  BlackRock Income Opportunity Trust, Inc. (BNA)
 

       
Reverse repurchase agreements outstanding as of August 31, 2014 were as follows (concluded):

Counterparty



 
Interest
Rate

 
Trade
Date

 
Maturity
Date1

 
Face Value
 
Face Value
Including
Accrued
Interest

UBS Securities LLC
     
0.34%
 
2/10/14
 
Open
   $ 844,000      $ 845,610  
UBS Securities LLC
     
0.34%
 
2/10/14
 
Open
    886,000       887,690  
UBS Securities LLC
     
0.35%
 
2/10/14
 
Open
    995,000       996,954  
UBS Securities LLC
     
0.40%
 
2/10/14
 
Open
    496,000       497,113  
RBC Capital Markets, LLC
     
0.11%
 
3/13/14
 
Open
    5,037,500       5,039,907  
Deutsche Bank Securities, Inc.
     
0.11%
 
4/16/14
 
Open
    1,300,000       1,300,545  
Deutsche Bank Securities, Inc.
     
0.34%
 
4/21/14
 
Open
    2,090,000       2,092,612  
Deutsche Bank Securities, Inc.
     
0.34%
 
5/13/14
 
Open
    931,000       931,967  
Deutsche Bank Securities, Inc.
     
0.34%
 
5/13/14
 
Open
    670,000       670,696  
Deutsche Bank Securities, Inc.
     
0.34%
 
5/13/14
 
Open
    873,000       873,907  
UBS Securities LLC
     
0.32%
 
5/14/14
 
Open
    1,605,000       1,606,569  
UBS Securities LLC
     
0.34%
 
5/14/14
 
Open
    845,000       845,878  
UBS Securities LLC
     
0.34%
 
5/14/14
 
Open
    793,000       793,824  
UBS Securities LLC
     
0.34%
 
5/14/14
 
Open
    1,172,000       1,173,218  
UBS Securities LLC
     
0.35%
 
5/14/14
 
Open
    832,000       832,890  
UBS Securities LLC
     
0.37%
 
5/14/14
 
Open
    1,109,000       1,110,254  
UBS Securities LLC
     
0.40%
 
5/14/14
 
Open
    3,870,000       3,874,730  
Barclays Capital, Inc.
     
0.35%
 
5/14/14
 
Open
    1,008,000       1,009,709  
Barclays Capital, Inc.
     
0.35%
 
5/14/14
 
Open
    1,252,000       1,253,289  
Barclays Capital, Inc.
     
0.35%
 
5/14/14
 
Open
    354,000       354,397  
Barclays Capital, Inc.
     
0.35%
 
5/14/14
 
Open
    1,782,000       1,783,834  
BNP Paribas Securities Corp.
     
0.01%
 
5/20/14
 
Open
    3,521,875       3,522,485  
Barclays Capital, Inc.
    (
1.75)%
 
6/25/14
 
Open
    1,107,160       1,103,500  
Deutsche Bank Securities, Inc.
     
0.07%
 
7/3/14
 
Open
    2,431,625       2,431,260  
BNP Paribas Securities Corp.
     
0.08%
 
7/7/14
 
Open
    9,478,375       9,479,533  
BNP Paribas Securities Corp.
     
0.08%
 
7/7/14
 
Open
    2,535,488       2,535,797  
BNP Paribas Securities Corp.
     
0.10%
 
7/7/14
 
Open
    145,540       145,562  
BNP Paribas Securities Corp.
     
0.32%
 
7/7/14
 
Open
    2,282,000       2,283,116  
BNP Paribas Securities Corp.
     
0.32%
 
7/7/14
 
Open
    490,000       490,240  
BNP Paribas Securities Corp.
     
0.33%
 
7/7/14
 
Open
    2,300,000       2,301,160  
BNP Paribas Securities Corp.
     
0.33%
 
7/7/14
 
Open
    968,000       968,488  
BNP Paribas Securities Corp.
     
0.33%
 
7/7/14
 
Open
    2,780,000       2,781,402  
BNP Paribas Securities Corp.
     
0.34%
 
7/7/14
 
Open
    2,162,000       2,163,123  
BNP Paribas Securities Corp.
     
0.34%
 
7/7/14
 
Open
    1,069,000       1,069,555  
BNP Paribas Securities Corp.
     
0.34%
 
7/7/14
 
Open
    853,000       853,443  
BNP Paribas Securities Corp.
     
0.34%
 
7/7/14
 
Open
    1,823,000       1,823,947  
BNP Paribas Securities Corp.
     
0.09%
 
7/8/14
 
Open
    5,112,750       5,113,364  
BNP Paribas Securities Corp.
     
0.08%
 
7/8/14
 
Open
    1,935,000       1,935,290  
RBC Capital Markets, LLC
     
0.34%
 
7/17/14
 
Open
    1,656,000       1,656,719  
Credit Suisse Securities (USA) LLC
     
0.14%
 
8/12/14
 
9/11/14
    11,372,000       11,372,885  
Total
     
 
 
 
 
 
   $ 171,292,262      $ 171,566,571  
1   Certain agreements have no stated maturity and can be terminated by either party at any time.

     
Financial futures contracts outstanding as of August 31, 2014 were as follows:

Contracts
Purchased/
(Sold)
  Issue   Exchange   Expiration   Notional
Value
    Unrealized
Appreciation
(Depreciation)
65  
Long U.S. Treasury Bond
 
Chicago Board of Trade
 
December 2014
 
USD
    9,106,094     $ 33,565
120  
Ultra Long U.S. Treasury Bond
 
Chicago Board of Trade
 
December 2014
 
USD
    18,660,000    
143,270
48  
2-Year U.S. Treasury Note
 
Chicago Board of Trade
 
December 2014
 
USD
    10,514,250    
4,903
(186)  
5-Year U.S. Treasury Note
 
Chicago Board of Trade
 
December 2014
 
USD
    22,103,484    
(27,711)
(242)  
10-Year U.S. Treasury Note
 
Chicago Board of Trade
 
December 2014
 
USD
    30,439,063    
(88,508)
Total
 
 
 
 
 
 
 
 
          $ 65,519

     
Forward foreign currency exchange contracts outstanding as of August 31, 2014 were as follows:

Currency Purchased


Currency Sold
 
Counterparty
 
Settlement
Date

 
Unrealized
Appreciation

USD
2,467,443  
EUR
1,824,000  
JPMorgan Chase Bank N.A.
 
10/21/14
   $ 70,090
USD
11,244,889  
GBP
6,581,000  
Bank of America N.A.
 
10/21/14
    323,686
Total
   
 
   
 
 
 
   $ 393,776

See Notes to Financial Statements.

52 ANNUAL REPORT AUGUST 31, 2014
 
  
Schedule of Investments (continued)  BlackRock Income Opportunity Trust, Inc. (BNA)
 

     
OTC interest rate swaptions purchased as of August 31, 2014 were as follows:

Description

 
Counterparty
 
Put/
Call
 
Exercise
Rate
 
Pay/Receive
Exercise Rate
 
Floating Rate
Index
 
Expiration
Date
 
Notional
Amount
(000)
 
Market
Value
10-Year Interest Rate Swap
 
Credit Suisse International
 
Call
 
2.40%
 
Receive
 
3-month LIBOR
 
9/02/14
  USD   11,200    $ 1,654
30-Year Interest Rate Swap
 
Deutsche Bank AG
 
Call
 
3.30%
 
Receive
 
3-month LIBOR
 
5/22/17
  USD   4,400     374,653
10-Year Interest Rate Swap
 
Credit Suisse International
 
Put
 
3.45%
 
Pay
 
3-month LIBOR
 
9/02/14
  USD   67,200    
1-Year Interest Rate Swap
 
Bank of America N.A.
 
Put
 
0.60%
 
Pay
 
3-month LIBOR
 
10/02/14
  USD   11,950     27
10-Year Interest Rate Swap
 
Barclays Bank PLC
 
Put
 
4.55%
 
Pay
 
3-month LIBOR
 
4/25/17
  USD   10,400     147,464
10-Year Interest Rate Swap
 
JPMorgan Chase Bank N.A.
 
Put
 
4.60%
 
Pay
 
3-month LIBOR
 
4/28/17
  USD   10,400     141,661
30-Year Interest Rate Swap
 
Deutsche Bank AG
 
Put
 
4.30%
 
Pay
 
3-month LIBOR
 
5/22/17
  USD   4,400     147,826
10-Year Interest Rate Swap
 
Deutsche Bank AG
 
Put
 
4.50%
 
Pay
 
3-month LIBOR
 
5/22/18
  USD   6,000     140,914
Total
 
 
 
 
 
 
 
 
 
 
 
 
           $  954,199

     
OTC interest rate swaptions written as of August 31, 2014 were as follows:

Description

 
Counterparty
 
Put/
Call
 
Exercise
Rate
 
Pay/Receive
Exercise Rate
 
Floating Rate
Index
 
Expiration
Date
 
Notional
Amount
(000)
 
Market
Value
 
10-Year Interest Rate Swap
 
Credit Suisse International
 
Call
 
2.60%
 
Pay
 
3-month LIBOR
 
9/02/14
  USD   11,200    $ (104,844
10-Year Interest Rate Swap
 
JPMorgan Chase Bank N.A.
 
Call
 
3.25%
 
Pay
 
3-month LIBOR
 
11/14/14
  USD   6,300     (390,536
10-Year Interest Rate Swap
 
Barclays Bank PLC
 
Call
 
3.26%
 
Pay
 
3-month LIBOR
 
11/14/14
  USD   6,300     (393,335
10-Year Interest Rate Swap
 
Deutsche Bank AG
 
Call
 
2.85%
 
Pay
 
3-month LIBOR
 
11/17/14
  USD   7,500     (212,942
10-Year Interest Rate Swap
 
Deutsche Bank AG
 
Call
 
2.80%
 
Pay
 
3-month LIBOR
 
2/10/15
  USD   2,500     (62,117
10-Year Interest Rate Swap
 
JPMorgan Chase Bank N.A.
 
Call
 
2.50%
 
Pay
 
3-month LIBOR
 
5/22/15
  USD   12,000     (152,889
10-Year Interest Rate Swap
 
Deutsche Bank AG
 
Call
 
3.10%
 
Pay
 
3-month LIBOR
 
2/26/16
  USD   6,000     (241,173
10-Year Interest Rate Swap
 
Deutsche Bank AG
 
Call
 
3.15%
 
Pay
 
3-month LIBOR
 
3/17/16
  USD   6,000     (256,324
10-Year Interest Rate Swap
 
Credit Suisse International
 
Put
 
3.10%
 
Receive
 
3-month LIBOR
 
9/02/14
  USD   11,200      
10-Year Interest Rate Swap
 
Deutsche Bank AG
 
Put
 
2.80%
 
Receive
 
3-month LIBOR
 
9/15/14
  USD   3,700     (416
10-Year Interest Rate Swap
 
JPMorgan Chase Bank N.A.
 
Put
 
3.25%
 
Receive
 
3-month LIBOR
 
11/14/14
  USD   6,300     (2,072
10-Year Interest Rate Swap
 
Barclays Bank PLC
 
Put
 
3.26%
 
Receive
 
3-month LIBOR
 
11/14/14
  USD   6,300     (2,015
10-Year Interest Rate Swap
 
Deutsche Bank AG
 
Put
 
3.70%
 
Receive
 
3-month LIBOR
 
11/17/14
  USD   7,500     (256
10-Year Interest Rate Swap
 
Barclays Bank PLC
 
Put
 
3.15%
 
Receive
 
3-month LIBOR
 
11/24/14
  USD   5,000     (4,160
10-Year Interest Rate Swap
 
Deutsche Bank AG
 
Put
 
3.80%
 
Receive
 
3-month LIBOR
 
2/10/15
  USD   2,500     (1,384
10-Year Interest Rate Swap
 
Bank of America N.A.
 
Put
 
3.70%
 
Receive
 
3-month LIBOR
 
2/25/15
  USD   1,500     (1,497
10-Year Interest Rate Swap
 
Barclays Bank PLC
 
Put
 
3.65%
 
Receive
 
3-month LIBOR
 
4/15/15
  USD   1,100     (2,520
10-Year Interest Rate Swap
 
Deutsche Bank AG
 
Put
 
3.65%
 
Receive
 
3-month LIBOR
 
4/15/15
  USD   900     (2,062
10-Year Interest Rate Swap
 
Citibank N.A.
 
Put
 
3.65%
 
Receive
 
3-month LIBOR
 
4/15/15
  USD   1,000     (2,291
10-Year Interest Rate Swap
 
JPMorgan Chase Bank N.A.
 
Put
 
3.50%
 
Receive
 
3-month LIBOR
 
5/22/15
  USD   12,000     (56,968
10-Year Interest Rate Swap
 
Deutsche Bank AG
 
Put
 
4.15%
 
Receive
 
3-month LIBOR
 
2/26/16
  USD   6,000     (44,377
10-Year Interest Rate Swap
 
Citibank N.A.
 
Put
 
4.15%
 
Receive
 
3-month LIBOR
 
2/29/16
  USD   6,000     (44,771
10-Year Interest Rate Swap
 
Deutsche Bank AG
 
Put
 
4.05%
 
Receive
 
3-month LIBOR
 
4/18/16
  USD   1,600     (16,335
10-Year Interest Rate Swap
 
Barclays Bank PLC
 
Put
 
4.05%
 
Receive
 
3-month LIBOR
 
4/18/16
  USD   1,700     (17,355
10-Year Interest Rate Swap
 
Goldman Sachs Bank USA
 
Put
 
4.05%
 
Receive
 
3-month LIBOR
 
4/18/16
  USD   1,700     (17,355
10-Year Interest Rate Swap
 
Citibank N.A.
 
Put
 
4.05%
 
Receive
 
3-month LIBOR
 
4/25/16
  USD   5,000     (52,239
10-Year Interest Rate Swap
 
BNP Paribas S.A.
 
Put
 
4.10%
 
Receive
 
3-month LIBOR
 
4/25/16
  USD   3,600     (35,272
10-Year Interest Rate Swap
 
Barclays Bank PLC
 
Put
 
4.05%
 
Receive
 
3-month LIBOR
 
4/25/17
  USD   8,500     (191,317
10-Year Interest Rate Swap
 
JPMorgan Chase Bank N.A.
 
Put
 
4.10%
 
Receive
 
3-month LIBOR
 
4/28/17
  USD   8,500     (183,667
10-Year Interest Rate Swap
 
Deutsche Bank AG
 
Put
 
6.00%
 
Receive
 
3-month LIBOR
 
5/22/18
  USD   12,000     (95,847
Total
 
 
 
 
 
 
 
 
 
 
 
 
           $ (2,588,336

     
Centrally cleared interest rate swaps outstanding as of August 31, 2014 were as follows:

Fixed
Rate
  Floating
Rate
  Clearinghouse   Effective
Date
  Expiration
Date
  Notional
Amount
(000)
  Unrealized
Appreciation
(Depreciation)
 
0.56%1
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
6/25/15
 
USD
  20,900    $  (45,712
1.69%1
 
3-month LIBOR
 
Chicago Mercantile
 
10/03/142
 
11/30/18
 
USD
  10,300     (36,331
3.97%1
 
3-month LIBOR
 
Chicago Mercantile
 
4/25/192
 
4/25/24
 
USD
  4,900     (144,799
2.77%1
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
4/29/24
 
USD
  400     (10,851
2.65%2
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
6/30/24
 
USD
  4,800     72,263  
2.62%2
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
7/01/24
 
USD
  500     6,132  
2.65%1
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
7/18/24
 
USD
  2,600     (38,543
2.59%2
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
7/22/24
 
USD
  2,300     21,390  
2.62%3
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
7/24/24
 
USD
  3,100     36,045  
2.63%3
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/07/24
 
USD
  1,000     12,859  
2.59%3
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/08/24
 
USD
  1,000     9,132  
2.59%3
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/08/24
 
USD
  1,000     8,815  
2.58%3
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/11/24
 
USD
  500     4,151  

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 53
 
  
Schedule of Investments (continued)  BlackRock Income Opportunity Trust, Inc. (BNA)
 

       
Centrally cleared interest rate swaps outstanding as of August 31, 2014 were as follows (concluded):

Fixed
Rate
  Floating
Rate
  Clearinghouse   Effective
Date
  Expiration
Date
  Notional
Amount
(000)
  Unrealized
Appreciation
(Depreciation)
 
2.58%3
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/11/24
 
USD
  500    $ 3,993  
2.57%3
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/11/24
 
USD
  500     3,335  
2.57%3
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/11/24
 
USD
  500     3,403  
2.55%3
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/12/24
 
USD
  500     2,506  
2.55%3
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/12/24
 
USD
  500     2,596  
2.56%3
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/22/24
 
USD
  4,300     26,762  
2.55%3
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
8/27/24
 
USD
  4,800     22,372  
2.49%3
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
9/02/24
 
USD
  500     (2,634
3.19%3
 
3-month LIBOR
 
Chicago Mercantile
 
4/22/152
 
4/22/25
 
USD
  2,400     102,245  
2.97%3
 
3-month LIBOR
 
Chicago Mercantile
 
6/03/152
 
6/03/25
 
USD
  1,100     21,179  
3.65%1
 
3-month LIBOR
 
Chicago Mercantile
 
N/A
 
2/27/44
 
USD
  2,500     (299,000
3.65%1
 
3-month LIBOR
 
Chicago Mercantile
 
4/22/152
 
4/22/45
 
USD
  1,100     (110,336
3.47%1
 
3-month LIBOR
 
Chicago Mercantile
 
6/03/152
 
6/03/45
 
USD
  500     (29,810
Total
 
 
 
 
 
 
 
 
 
 
       $ (358,838
1 Trust pays the fixed rate and receives the floating rate.
2 Forward swap.
3 Trust receives the fixed rate and pays the floating rate.

     
OTC credit default swaps — buy protection outstanding as of August 31, 2014 were as follows:

Issuer

 
Pay
Fixed
Rate
 
Counterparty
 
Expiration
Date
 
Notional
Amount
(000)
 
Market
Value
 
Premiums
Paid  
 
Unrealized
Depreciation
 
Radian Group, Inc.
  5.00
Citibank N.A.
  6/20/15   USD   1,400    $ (49,098    $ 13,035   $ (62,133
The New York Times Co.
  1.00
Barclays Bank PLC
  12/20/16   USD   1,800     (19,416     57,942  
(77,358
 
     
 
                           
 
 
Total
     
 
               $ (68,514    $  70,977   $ (139,491

     
OTC credit default swaps — sold protection outstanding as of August 31, 2014 were as follows:

Issuer

 
Receive
Fixed
Rate
 
Counterparty
 
Expiration
Date
 
Credit
Rating4
 
Notional
Amount
(000)5
 
Market
Value
 
Premiums
Received
 
Unrealized
Appreciation
MetLife, Inc.
 
1.00%
 
Morgan Stanley Capital Services LLC
 
9/20/16
 
A-
 
USD
910
   $ 14,641    $ (30,767    $ 45,408
MetLife, Inc.
 
1.00%
 
Deutsche Bank AG
 
9/20/16
 
A-
 
USD
730
    11,745     (25,168     36,913
MetLife, Inc.
 
1.00%
 
Morgan Stanley Capital Services LLC
 
9/20/16
 
A-
 
USD
275
    4,424     (8,293     12,717
MetLife, Inc.
 
1.00%
 
Goldman Sachs Bank USA
 
9/20/16
 
A-
 
USD
500
    8,044     (16,778     24,822
MetLife, Inc.
 
1.00%
 
Credit Suisse International
 
9/20/16
 
A-
 
USD
545
    8,768     (20,548     29,316
MetLife, Inc.
 
1.00%
 
Citibank N.A.
 
12/20/16
 
A-
 
USD
298
    5,130     (9,981     15,111
MetLife, Inc.
 
1.00%
 
Citibank N.A.
 
12/20/16
 
A-
 
USD
290
    4,981     (10,642     15,623
 
 
 
 
 
 
 
 
 
 
 
 
                   
Total
 
 
 
 
 
 
 
 
 
 
 
   $  57,733    $ (122,177    $  179,910
4   Using S&P’s rating of the issuer.
5   The maximum potential amount the Trust may pay should a negative credit event take place as defined under terms of the agreements.

     
For Trust compliance purposes, the Trust’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by investment advisor. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.
     
Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:
       
Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Trust has the ability to access
     
Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)
     
Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Trust’s own assumptions used in determining the fair value of investments and derivative financial instruments)
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

See Notes to Financial Statements.

54 ANNUAL REPORT AUGUST 31, 2014
 
  
Schedule of Investments (continued)  BlackRock Income Opportunity Trust, Inc. (BNA)
 
       
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Trust’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Trust’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.
       
The following tables summarize the Trust’s investments and derivative financial instruments categorized in the disclosure hierarchy as of August 31, 2014:

        Level 1   Level 2   Level 3   Total
Assets:
                                   
Investments:
                                   
Long-Term Investments:
                                   
Asset-Backed Securities
             $ 17,676,727      $ 8,793,910      $ 26,470,637  
Corporate Bonds
              314,189,017       8,787,420       322,976,437  
Foreign Agency Obligations
              7,456,621             7,456,621  
Municipal Bonds
              12,786,140             12,786,140  
Non-Agency Mortgage-Backed Securities
              62,160,814       16       62,160,830  
Preferred Securities
       $ 7,059,541       46,519,562             53,579,103  
U.S. Government Sponsored Agency Securities
              53,967,316       533       53,967,849  
U.S. Treasury Obligations
              54,746,992             54,746,992  
Short-Term Securities
        3,425,318                   3,425,318  
Options Purchased:
                                   
Interest Rate Contracts
              954,199             954,199  
Total
       $ 10,484,859      $ 570,457,388      $ 17,581,879      $  598,524,126  

        Level 1   Level 2   Level 3   Total
Derivative Financial Instruments1
                                   
Assets:
                                   
Credit contracts
             $ 179,910            $ 179,910  
Foreign currency exchange contracts
              393,776             393,776  
Interest rate contracts
       $ 181,738       359,178             540,916  
Liabilities:
                                   
Credit contracts
              (139,491           (139,491
Interest rate contracts
        (116,219     (3,306,352           (3,422,571
Total
       $  65,519      $  (2,512,979          $  (2,447,460
1 Derivative financial instruments are swaps, financial futures contracts, forward foreign currency exchange contracts, and options written. Swaps, financial futures contracts and foreign currency exchange contracts are valued at the unrealized appreciation/depreciation on the instrument and options written are shown at value.
       
There were no transfers between Level 1 and Level 2 during the year ended August 31, 2014.
       
The Trust may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of August 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

        Level 1   Level 2   Level 3   Total
Assets:
                                   
Cash pledged for centrally cleared swaps
       $ 515,000                  $ 515,000  
Cash pledged as collateral for reverse repurchase agreements
        1,984,142                   1,984,142  
Cash pledged as collateral for OTC derivatives
        590,000                   590,000  
Cash pledged for financial futures contracts
        226,000                   226,000  
Foreign currency at value
        304,703                   304,703  
Liabilities:
                                   
Bank overdraft
             $ (48,720           (48,720
Cash received as collateral for reverse repurchase agreements
              (2,162,000           (2,162,000
Reverse repurchase agreements
              (171,566,571           (171,566,571
Total
       $  3,619,845      $ (173,777,291          $ (170,157,446

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 55
 
  
Schedule of Investments (concluded)  BlackRock Income Opportunity Trust, Inc. (BNA)
 

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

        Common
Stocks
  Asset-Backed
Securities
  Corporate
Bonds
  Non-Agency
Mortgage-Backed
Securities
  US Government
Sponsored
Agency Securities
  Total
Assets:
                                                   
Opening Balance, as of August 31, 2013
       $ 396,800      $ 10,488,482      $ 6,294,250      $ 25      $ 717      $ 17,180,274  
Transfers into Level 3
                                       
Transfers out of Level 31
              (6,442,285                       (6,442,285
Accrued discounts/premiums
              (326,626                 (1     (326,627
Net realized gain
        430,152       37,567                         467,719  
Net change in unrealized appreciation/depreciation2,3
        (396,800     289,291       228,061       (9     (183     120,360  
Purchases
              8,243,356       2,265,109                   10,508,465  
Sales
        (430,152     (3,495,875                       (3,926,027
Closing Balance, as of August 31, 2014
             $ 8,793,910      $ 8,787,420      $ 16      $ 533      $ 17,581,879  
Net change in unrealized appreciation/depreciation on investments held as of August 31, 20143
             $ 284,059      $ 228,061      $ (9    $ (183    $ 511,928  
1 As of August 31, 2013, the Trust used significant unobservable inputs in determining the value of certain investments. As of August 31, 2014, the Trust used observable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $6,442,285 transferred from Level 3 to Level 2 in the disclosure hierarchy.
2 Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations.
3 Any difference between Net change in unrealized appreciation/depreciation and Net change in unrealized appreciation/depreciation on investments held as of August 31, 2014 is generally due to investments no longer held or categorized as level 3 at period end.
       
The Trust’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information inputs could result in a significantly lower or higher value of such Level 3 investments.

See Notes to Financial Statements.

56 ANNUAL REPORT AUGUST 31, 2014
 
  
Schedule of Investments August 31, 2014 BlackRock Income Trust, Inc. (BKT)
(Percentages shown are based on Net Assets)
Asset-Backed Securities   Par
(000)
  Value
Asset Backed Securities — 0.8%
                   
First Franklin Mortgage Loan Trust, Series 2005-FF2, Class M2, 0.82%, 3/25/35 (a)
       $  1,600      $  1,598,261  
Securitized Asset Backed Receivables LLC Trust, Series 2005-OP2, Class M1, 0.59%, 10/25/35 (a)
        1,875       1,636,687  
Small Business Administration Participation Certificates, Class 1:
                   
Series 1996-20E, 7.60%, 5/01/16
        41       42,525  
Series 1996-20G, 7.70%, 7/01/16
        40       41,645  
Series 1996-20H, 7.25%, 8/01/16
        47       48,339  
Series 1996-20K, 6.95%, 11/01/16
        134       139,480  
Series 1997-20C, 7.15%, 3/01/17
        51       53,476  
 
                3,560,413  
Interest Only Asset Backed Securities — 0.1%
         
Small Business Administration, Series 2000-1, 1.00%, 4/01/15
        603       5,275  
Sterling Bank Trust, Series 2004-2, Class Note, 2.08%, 3/30/30 (b)
        2,704       196,016  
Sterling Coofs Trust, Series 2004-1, Class A, 2.00%, 4/15/29 (b)
        6,190       425,581  
 
                626,872  
Total Asset-Backed Securities — 0.9%
                4,187,285  

Non-Agency Mortgage-Backed Securities
      
Collateralized Mortgage Obligations — 1.0%
         
Collateralized Mortgage Obligation Trust, Series 40, Class R, 580.48%, 4/01/18
        34       35  
Deutsche Securities, Inc. Mortgage Alternate Loan Trust, Series 2006-AR5, Class 22A, 5.50%, 10/25/21
        433       424,399  
Homebanc Mortgage Trust, Series 2005-4, Class A1, 0.43%, 10/25/35 (a)
        2,367       2,125,706  
Kidder Peabody Acceptance Corp., Series 1993-1, Class A6, 16.33%,
8/25/23 (a)
        44       49,217  
Residential Funding Securities LLC, Series 2003-RM2, Class AI5, 8.50%, 5/25/33
        892       944,903  
Structured Adjustable Rate Mortgage Loan Trust, Series 2004-11, Class A, 2.53%, 8/25/34 (a)
        1,039       1,040,706  
 
                4,584,966  
Commercial Mortgage-Backed Securities — 0.5%
     
Credit Suisse Commercial Mortgage Trust, Series 2007-C2, Class A3, 5.54%, 1/15/49 (a)
        2,420       2,626,559  
Interest Only Collateralized Mortgage Obligations — 0.7%
 
Bank of America Mortgage Securities, Inc., Series 2003-3, Class 1A, 0.00%, 5/25/33 (a)
        25,607       240,012  
CitiMortgage Alternative Loan Trust, Series 2007-A5, Class 1A7, 6.00%, 5/25/37
        643       160,321  
First Boston Mortgage Securities Corp., Series C, 10.97%, 4/25/17
        5       321  
GSMPS Mortgage Loan Trust, Series 1998-5, 0.00%, 6/19/27 (a)(b)
        2,959       30  
IndyMac INDX Mortgage Loan Trust, Series 2006-AR33, Class 4AX, 0.17%, 1/25/37
        66,451       172,173  
MASTR Adjustable Rate Mortgages Trust, Series 2004-3, Class 3AX, 0.98%, 4/25/34 (c)
        7,398       82,074  
MASTR Alternative Loans Trust, Series 2003-9, Class 15X2, 6.00%, 1/25/19
        228       28,695  
Non-Agency Mortgage-Backed Securities Par
(000)
  Value
Interest Only Collateralized Mortgage Obligations (concluded)
Morgan Stanley Mortgage Loan Trust, Series 2004-3, Class 1AX, 5.00%, 5/25/19
       $  226      $  15,653  
Sequoia Mortgage Trust, Series 2005-2, Class XA, 0.00%, 3/20/35 (a)
        34,199       550,389  
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-7, Class 3AS, 4.70%, 8/25/36 (a)
        17,034       2,076,051  
Vendee Mortgage Trust, Series 1999-2, Class 1, 0.00%, 5/15/29 (a)
        37,576       38  
 
                3,325,757  
Principal Only Collateralized Mortgage Obligations — 0.2%
Countrywide Home Loan Mortgage Pass-Through Trust (d):
                   
Series 2003-J5, 0.00%, 7/25/33
        202       179,334  
Series 2003-J8, 0.00%, 9/25/23
        121       108,358  
Drexel Burnham Lambert CMO Trust, Class 1 (d):
                   
Series K, 0.00%, 9/23/17
        3       2,661  
Series V, 0.00%, 9/01/18
        3       3,018  
Residential Asset Securitization Trust, Series 2005-A15, Class 1A8, 0.00%, 2/25/36 (d)
        515       340,438  
Structured Mortgage Asset Residential Trust, Series 1993-3C, Class CX, 0.00%, 4/25/24 (d)
        6       5,291  
Washington Mutual Alternative Mortgage Pass-Through Certificates, Series 2005-9, Class CP, 0.00%, 11/25/35 (d)
        222       156,689  
 
                795,789  
Total Non-Agency Mortgage-Backed Securities — 2.4%
  11,333,071  

U.S. Government Sponsored Agency Securities
        
Agency Obligations — 2.5%
                   
Federal Housing Administration:
                   
USGI Projects, Series 99, 7.43%, 6/01/21–10/01/23
        3,590       3,491,131  
Reilly Projects, Series 41, 8.28%, 3/01/20
        122       120,396  
Resolution Funding Corp., 0.00%, 4/15/30 (d)
        13,000       7,885,150  
 
                11,496,677  
Collateralized Mortgage Obligations — 63.1%
 
Fannie Mae Mortgage-Backed Securities:
                   
Series 2014-28, Class BD, 3.50%, 1/25/42–8/25/43
        24,285       25,194,360  
Series 2011-117, Class CP, 4.00%, 12/25/40–11/25/41
        17,410       18,993,586  
Series 2011-99, Class CB, 4.50%, 10/25/41
        43,000       48,350,232  
Series 2010-47, Class JB, 5.00%, 5/25/30
        10,000       11,244,100  
Series 2003-135, Class PB, 6.00%, 1/25/34
        12,264       13,757,449  
Series 2004-31, Class ZG, 7.50%, 5/25/34
        3,969       4,610,998  
Series 1993-247, Class SN, 10.00%, 12/25/23 (a)
        191       234,620  
Series 2005-73, Class DS, 17.15%, 8/25/35 (a)
        1,419       1,772,474  
Series 1991-87, Class S, 26.27%, 8/25/21 (a)
        22       32,131  
Series G-49, Class S, 1,018.68%, 12/25/21 (a)
        (e)      613  
Series G-17, Class S, 1,064.92%, 6/25/21 (a)
        105       1,647  
Series G-33, Class PV, 1,078.42%, 10/25/21
        106       1,048  
Series G-07, Class S, 1,127.09%, 3/25/21 (a)
        (e)      1,809  
Series 1991-46, Class S, 2,483.51%, 5/25/21 (a)
        55       3,347  


See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 57
 
  
Schedule of Investments (continued)  BlackRock Income Trust, Inc. (BKT)
(Percentages shown are based on Net Assets)
U.S. Government Sponsored Agency Securities Par
(000)
  Value
Collateralized Mortgage Obligations (concluded)
     
Freddie Mac Mortgage-Backed Securities:
                   
Series T-11, Class A9, 2.87%, 1/25/28 (a)
       $ 1,403      $  1,447,887  
Series 4242, Class PA, 3.50%, 5/15/41
        9,109       9,540,411  
Series 4016, Class BX, 4.00%, 11/15/40–9/15/41
        26,292       27,779,550  
Series 4316, Class VB, 4.50%, 8/15/32–3/15/34
        20,787       23,135,875  
Series 3856, Class PB, 5.00%, 5/15/41
        10,000       11,624,290  
Series 2927, Class BZ, 5.50%, 5/15/23–2/15/35
        11,076       12,163,196  
Series 2542, Class UC, 6.00%, 12/15/22
        3,266       3,606,946  
Series 0040, Class K, 6.50%, 8/17/24
        187       210,787  
Series 2218, Class Z, 8.50%, 3/15/20–3/15/30
        3,112       3,657,807  
Series 0173, Class R, 9.00%, 11/15/21
        7       7  
Series 0173, Class RS, 9.34%, 11/15/21 (a)
        (e)      7  
Series 0075, Class R, 9.50%, 1/15/21
        (e)      1  
Series 2861, Class AX, 10.57%, 9/15/34 (a)
        51       54,099  
Series 1160, Class F, 39.50%, 10/15/21 (a)
        11       20,973  
Series 0075, Class RS, 50.25%, 1/15/21 (a)
        (e)      1  
Series 1057, Class J, 1,008.00%, 3/15/21
        43       584  
Series 0192, Class U, 1,009.03%, 2/15/22 (a)
        1       23  
Series 0019, Class R, 16,324.45%, 3/15/20 (a)
        3       447  
Ginnie Mae Mortgage-Backed Securities:
                   
Series 2010-099, Class JM, 3.75%, 12/20/38
        19,300       20,154,295  
Series 2011-88, Class PY, 4.00%, 1/20/39–6/20/41
        51,891       54,908,163  
Series 2004-89, Class PE, 6.00%, 10/20/34
        679       716,320  
Series 1996-5, Class Z, 7.00%, 5/16/26
        307       343,897  
 
                293,563,980  
Interest Only Collateralized Mortgage Obligations — 4.2%
 
Fannie Mae Mortgage-Backed Securities:
                   
Series 1997-50, Class SI, 1.20%, 4/25/23 (a)
        176       5,606  
Series G92-60, Class SB, 1.60%, 10/25/22 (a)
        114       3,997  
Series 2013-45, Class EI, 4.00%, 2/25/27–4/25/43
        24,799       3,243,298  
Series 2010-74, Class DI, 5.00%, 12/25/39
        12,454       1,137,288  
Series 1997-90, Class M, 6.00%, 1/25/28
        2,554       457,468  
Series 1999-W4, 6.50%, 12/25/28
        170       27,966  
Series 2011-124, Class GS, 6.55%, 3/25/37 (a)
        16,672       2,334,914  
Series 1993-199, Class SB, 7.22%, 10/25/23 (a)
        203       16,534  
Series 089, Class 2, 8.00%, 10/25/18
        3       234  
Series 007, Class 2, 8.50%, 4/25/17
        2       166  
Series G92-05, Class H, 9.00%, 1/25/22
        27       2,469  
Series 094, Class 2, 9.50%, 8/25/21
        1       271  
Series 1990-136, Class S, 19.92%, 11/25/20 (a)
        6,843       9,599  
Series 1991-139, Class PT, 648.35%, 10/25/21
        118       1,211  
Series 1991-099, Class L, 930.00%, 8/25/21
        51       652  
Series 1990-123, Class M, 1,009.50%, 10/25/20
        11       152  
Series G92-12, Class C, 1,016.90%, 2/25/22
        101       1,030  
Series G-10, Class S, 1,090.36%, 5/25/21 (a)
        288       7,031  
Series G-12, Class S, 1,157.49%, 5/25/21 (a)
        205       4,074  

 

U.S. Government Sponsored Agency Securities Par
(000)
  Value
Interest Only Collateralized Mortgage Obligations (concluded)
 
Freddie Mac Mortgage-Backed Securities:
                   
Series 2559, 0.50%, 8/15/30 (a)
       $ 79      $ 968  
Series 3744, Class PI, 4.00%, 1/15/35–6/15/39
        42,473       4,722,955  
Series 4026, 4.50%, 4/15/32
        5,107       880,171  
Series 2611, Class QI, 5.50%, 9/15/32
        1,512       164,035  
Series 1043, Class H, 44.31%, 2/15/21 (a)
        5,199       10,156  
Series 1054, Class I, 868.03%, 3/15/21 (a)
        40       738  
Series 0176, Class M, 1,010.00%, 7/15/21
        17       316  
Series 1056, Class KD, 1,084.50%, 3/15/21
        28       452  
Series 1148, Class E, 1,178.74%, 10/15/21 (a)
        77       1,372  
Series 0200, Class R, 198,052.81%, 12/15/22 (a)
        1       682  
Ginnie Mae Mortgage-Backed Securities (a):
                   
Series 2009-116, Class KS, 6.32%, 12/16/39
        2,756       427,784  
Series 2011-52, Class MJ, 6.49%, 4/20/41
        15,479       3,078,266  
Series 2011-52, Class NS, 6.52%, 4/16/41
        17,234       3,161,893  
 
                19,703,748  
Mortgage-Backed Securities — 86.3%
           
Fannie Mae Mortgage-Backed Securities:
                   
3.00%, 1/01/43 (f)
        28,523       28,482,853  
3.50%, 10/01/42–9/01/44 (f)(g)
        35,277       36,351,638  
4.00%, 1/01/41–9/01/42 (f)
        33,413       35,455,671  
4.50%, 8/01/25–9/01/44 (f)(g)
        98,139       106,990,282  
5.00%, 1/01/23–9/01/44 (f)(g)
        77,766       86,183,840  
5.50%, 9/01/29–10/01/39 (f)(g)
        37,743       41,578,939  
5.97%, 8/01/16
        2,931       3,155,417  
6.00%, 9/01/44–10/01/44 (g)
        43,600       49,128,343  
6.50%, 12/01/37–10/01/39 (f)
        11,303       12,788,854  
7.50%, 2/01/22
        (e)      63  
9.50%, 1/01/19–9/01/19
        2       1,873  
Freddie Mac Mortgage-Backed Securities:
                   
2.48%, 1/01/35 (a)
        184       186,558  
2.51%, 11/01/17 (a)
        8       8,368  
2.55%, 10/01/34 (a)
        200       200,289  
5.00%, 2/01/22–4/01/22
        335       363,812  
9.00%, 9/01/20
        19       20,685  
Ginnie Mae Mortgage-Backed Securities:
                   
7.50%, 8/15/21–12/15/23
        119       125,752  
8.00%, 10/15/22–8/15/27
        52       56,322  
9.00%, 4/15/20–9/15/21
        4       4,415  
 
                401,083,974  
Principal Only Collateralized Mortgage Obligations — 0.3%
 
Fannie Mae Mortgage-Backed Securities (d):
                   
Series 1999-W4, 0.00%, 2/25/29
        94       86,346  
Series 2002-13, Class PR, 0.00%, 2/25/21–3/25/32
        346       326,394  
Freddie Mac Mortgage-Backed Securities, 0.00%, 11/15/22–11/15/28 (d)
        822       768,398  
 
                1,181,138  
Total U.S. Government Sponsored Agency Securities — 156.4%
727,029,517  

U.S. Treasury Obligations
                     
U.S. Treasury Notes:
                   
1.63%, 8/31/19 (h)
        4,780       4,779,254  
1.00%, 11/30/19 (f)
        2,965       2,858,678  
1.63%, 11/15/22
        780       746,607  
2.50%, 5/15/24
        1,440       1,460,588  
Total U.S. Treasury Obligations — 2.1%
          9,845,127  
Total Long-Term Investments
(Cost — $747,376,081) — 161.8%
  752,395,000  


See Notes to Financial Statements.

58 ANNUAL REPORT AUGUST 31, 2014
 
  
Schedule of Investments (continued)  BlackRock Income Trust, Inc. (BKT)
(Percentages shown are based on Net Assets)
Short-Term Securities    
Shares
  Value
Money Market Funds — 1.7%
                   
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.03% (i)(j)
        8,012,499      $ 8,012,499  
 
        Par
(000)
         
Borrowed Bond Agreement — 0.2%
                   
Credit Suisse Securities (USA) LLC, 0.06%, Open (Purchased on 7/23/14 to be repurchased at $837,054, collateralized by U.S. Treasury Bonds, 2.75%, par and fair values of $917,000 and $859,687, respectively)
      $ 837       837,000  
Total Short-Term Securities
(Cost — $8,849,499) — 1.9%
                8,849,499  
Total Investments Before Borrowed Bonds and TBA Sale Commitments
(Cost — $756,225,580) — 163.7%
                761,244,499  
Borrowed Bonds   Par
(000)
  Value
U.S. Treasury Bonds, 2.75%, 11/15/42
       $ 917      $ (859,687
Total Borrowed Bonds
(Proceeds — $842,347) — (0.2)%
                (859,687

TBA Sale Commitments (g)
                   
Fannie Mae Mortgage-Backed Securities:
                   
4.50%, 9/01/29
        4,700       (4,966,395
5.00%, 9/01/29 — 10/01/44
        26,100       (28,742,926
6.00%, 9/01/44
        21,800       (24,586,312
Total TBA Sale Commitments
(Proceeds — $58,228,891) — (12.5)%
                (58,295,633
Total Investments, Net of Borrowed Bonds and
TBA Sale Commitments — 151.0%
702,089,179  
Liabilities in Excess of Other Assets — (51.0)%
  (237,156,666
Net Assets — 100.0%
               $ 464,932,513  


Notes to Schedule of Investments

(a)      
Variable rate security. Rate shown is as of report date.
(b)      
Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.
(c)      
Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date.
(d)      
Zero-coupon bond.
(e)      
Amount is less than $500.
(f)      
All or a portion of security has been pledged as collateral in connection with outstanding reverse repurchase agreements.
(g)      
Represents or includes a TBA transaction. Unsettled TBA transactions as of August 31, 2014 were as follows:

Counterparty       Value   Unrealized
Appreciation/
(Depreciation)
Credit Suisse Securities (USA) LLC
       $ 21,789,416      $ 138,229  
Deutsche Bank Securities, Inc.
       $ 7,075,105      $ (1,653
Goldman Sachs & Co.
       $ 1,303,031      $ 7,594  
J.P. Morgan Securities LLC
       $ 1,322,203      $ 5,074  

(h)      
When-issued security. Unsettled when-issued transactions were as follows:

Counterparty



 
Value
 
Unrealized
Appreciation

J.P. Morgan Securities LLC
       $ 4,779,254      $ 7,097  

(i)      
Investments in issuers considered to be an affiliate of the Trust during the year ended August 31, 2014, for purposes of Section 2(a)(3) of the 1940 Act were as follows:

Affiliate

 
Shares
Held at
August 31, 2013

 
Net
Activity

 
Shares
Held at
August 31, 2014

 
Income
 
BlackRock Liquidity Funds, TempFund, Institutional Class
    14,996,794       (6,984,295     8,012,499      $ 3,704    

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

     
Reverse repurchase agreements outstanding as of August 31, 2014 were as follows:

Counterparty

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

Interest
Credit Suisse Securities (USA) LLC
 
0.15%
 
12/10/13
 
Open
   $ 17,914,714    $ 17,929,673  
BNP Paribas Securities Corp.
 
0.09%
 
7/07/14
 
Open
    2,831,575     2,831,964  
Credit Suisse Securities (USA) LLC
 
0.14%
 
8/12/14
 
9/11/14
    153,535,000     153,546,942  
Credit Suisse Securities (USA) LLC
 
0.14%
 
8/12/14
 
9/11/14
    31,104,000     31,106,419  
 
 
 
 
 
 
 
             
Total
 
 
 
 
 
 
   $ 205,385,289    $ 205,414,998  
1   Certain agreements have no stated maturity and can be terminated by either party at any time.

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 59
 
  
Schedule of Investments (continued)  BlackRock Income Trust, Inc. (BKT)
 

     
Financial futures contracts outstanding as of August 31, 2014 were as follows:
Contracts
Sold
  Issue   Exchange   Expiration   Notional
Value
  Unrealized
Appreciation
(Depreciation)
(41)     90-Day Euro-Dollar   Chicago Mercantile   September 2014   $10,225,913   $(42,315)
(164)     2-Year U.S. Treasury Note   Chicago Board of Trade   December 2014   $35,923,688   (20,277)
(52)     5-Year U.S. Treasury Note   Chicago Board of Trade   December 2014   $ 6,179,469   (7,747)
(200)     10-Year U.S. Treasury Note   Chicago Board of Trade   December 2014   $25,156,250   (6,433)
(641)     Long U.S. Treasury Bond   Chicago Board of Trade   December 2014   $89,800,094   (601,120)
(85)     Ultra Long U.S. Treasury Bond   Chicago Board of Trade   December 2014   $13,217,500   (101,721)
(41)     90-Day Euro-Dollar   Chicago Mercantile   December 2014   $10,223,862   (48,196)
(41)     90-Day Euro-Dollar   Chicago Mercantile   March 2015   $10,213,612   (43,759)
(12)     90-Day Euro-Dollar   Chicago Mercantile   June 2015   $ 2,983,800   (2,123)
(12)     90-Day Euro-Dollar   Chicago Mercantile   December 2015   $ 2,970,150   4,927 
(12)     90-Day Euro-Dollar   Chicago Mercantile   March 2016   $ 2,962,800   8,302 
Total
                    $ (860,462)
                       

     
Centrally cleared interest rate swaps outstanding as of August 31, 2014 were as follows:
Fixed
Rate
      Floating
Rate
  Clearinghouse   Expiration
Date
  Notional
Amount
(000)
  Unrealized
Appreciation
 
0.46%1
     
3-month LIBOR
 
Chicago Mercantile
 
6/11/15
 
$100
 
$141
 

     
OTC interest rate swaps outstanding as of August 31, 2014 were as follows:
Fixed
Rate
      Floating
Rate
  Counterparty   Expiration
Date
  Notional
Amount
(000)
  Market
Value
  Premiums
Received
  Unrealized
Appreciation
(Depreciation)
4.88%1
     
3-month LIBOR
 
UBS AG
 
3/21/15
 
USD
 
25,000
 
$626,334 
     
$626,334 
4.87%1
     
3-month LIBOR
 
Goldman Sachs Bank USA
 
1/25/16
 
USD
 
5,500
 
335,111 
     
335,111 
2.81%1
     
3-month LIBOR
 
Citibank N.A.
 
2/06/16
 
USD
 
20,000
 
661,695 
     
661,695 
5.72%1
     
3-month LIBOR
 
JPMorgan Chase Bank N.A.
 
7/14/16
 
USD
 
5,400
 
506,017 
     
506,017 
4.31%2
     
3-month LIBOR
 
Deutsche Bank AG
 
10/01/18
 
USD
 
60,000
 
(6,648,452)
     
(6,648,452)
3.43%1
     
3-month LIBOR
 
JPMorgan Chase Bank N.A.
 
3/28/21
 
USD
 
6,000
 
502,799 
   $ (183,998
686,797 
5.41%1
     
3-month LIBOR
 
JPMorgan Chase Bank N.A.
 
8/15/22
 
USD
 
9,565
 
2,216,240 
     
2,216,240 
 
     
 
 
 
 
 
 
 
 
 
 
 
       
 
Total
     
 
 
 
 
 
 
 
 
 
 
$(1,800,256)
   $ (183,998
$(1,616,258)
1   Trust pays the floating rate and receives the fixed rate.
2   Trust pays the fixed rate and receives the floating rate.

     
For Trust compliance purposes, the Trust’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by investment advisor. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.
     
Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:
         
Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Trust has the ability to access
         
Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)
         
Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Trust’s own assumptions used in determining the fair value of investments and derivative financial instruments)

       
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

 

       
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Trust’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Trust’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

See Notes to Financial Statements.

60 ANNUAL REPORT AUGUST 31, 2014
 
  
Schedule of Investments (continued)  BlackRock Income Trust, Inc. (BKT)
 
       
The following tables summarize the Trust’s investments and derivative financial instruments categorized in the disclosure hierarchy as of August 31, 2014:

        Level 1   Level 2   Level 3   Total
Assets:
                                   
Investments:
                                   
Long-Term Investments:
                                   
Asset-Backed Securities
             $ 3,560,413      $ 626,872      $ 4,187,285  
Non-Agency Mortgage-Backed Securities
              8,624,522       2,708,549       11,333,071  
U.S. Government Sponsored Agency Securities
              723,416,845       3,612,672       727,029,517  
U.S. Treasury Obligations
              9,845,127             9,845,127  
Short-Term Securities:
                                   
Money Market Funds
       $ 8,012,499                   8,012,499  
Borrowed Bond Agreement
              837,000             837,000  
Liabilities:
                                   
Investments:
                                   
Borrowed Bonds
              (859,687           (859,687
TBA Sale Commitments
              (58,295,633           (58,295,633
Total
       $  8,012,499      $  687,128,587      $ 6,948,093      $  702,089,179  

        Level 1   Level 2   Level 3   Total
Derivative Financial Instruments1
                                   
Assets:
                                   
Interest rate contracts
       $ 13,229      $ 5,032,335            $ 5,045,564  
Liabilities:
                                   
Interest rate contracts
        (873,691     (6,648,452          $ (7,522,143
Total
       $  (860,462    $  (1,616,117          $  (2,476,579
1   Derivative financial instruments are swaps and financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

There were no transfers between Level 1 and Level 2 during the year ended August 31, 2014.

 

The Trust may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of August 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

        Level 1   Level 2   Level 3   Total
Assets:
                                   
Cash pledged as collateral for OTC derivatives
       $ 7,700,000                  $ 7,700,000  
Cash pledged as collateral for reverse repurchase agreements
        173,000                   173,000  
Cash pledged for financial futures contracts
        2,009,000                   2,009,000  
Cash pledged for centrally cleared swaps
        10,000                   10,000  
Liabilities:
                                   
Bank overdraft
             $ (79          $ (79
Cash received as collateral for OTC derivatives
              (5,260,000           (5,260,000
Reverse repurchase agreements
              (205,414,998           (205,414,998
Total
       $  9,892,000      $ (210,675,077          $ (200,783,077

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 61
 
  
Schedule of Investments (concluded)  BlackRock Income Trust, Inc. (BKT)
 

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

        Asset-Backed
Securities
  Non-Agency
Mortgage-Backed
Securities
  US Government
Sponsored Agency
Securities
  Total
Assets:
                                   
Opening Balance, as of August 31, 2013
       $ 695,051      $ 2,808,305      $ 7,314,558      $ 10,817,914  
Transfers into Level 3
                           
Transfers out of Level 31
                    (3,143,245     (3,143,245
Accrued discounts/premiums
        (371,145           (13,012     (384,157
Net realized gain (loss)
              10       (16,767     (16,757
Net change in unrealized appreciation/depreciation2,3
        302,966       (99,756     16,958       220,168  
Purchases
                           
Sales
              (10     (545,822     (545,832
Closing Balance, as of August 31, 2014
       $ 626,872      $ 2,708,549      $ 3,612,672      $ 6,948,093  
Net change in unrealized appreciation/depreciation on investments held as of August 31, 20143
       $ 302,966      $ (99,756    $ 16,958      $ 220,168  
1   As of August 31, 2013, the Trust used significant unobservable inputs in determining the value of certain investments. As of August 31, 2014, the Fund used observable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $3,143,245 transferred from Level 3 to Level 2 in the disclosure hierarchy.
2   Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations.
3   Any difference between Net change in unrealized appreciation/depreciation and Net change in unrealized appreciation/depreciation on investments held as of August 31, 2014 is generally due to investments no longer held or categorized as level 3 at period end.

Certain of the Trust’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information inputs could result in a significantly lower or higher value of such Level 3 investments.

See Notes to Financial Statements.

62 ANNUAL REPORT AUGUST 31, 2014
 
  
Statements of Assets and Liabilities  
August 31, 2014          BlackRock
Core Bond
Trust
(BHK)
     BlackRock
Corporate
High Yield
Fund, Inc.
(HYT)*
     BlackRock
Income
Opportunity
Trust, Inc.
(BNA)
     BlackRock
Income
Trust, Inc.
(BKT)
Assets
Investments at value — unaffiliated1
        $   596,447,752         $ 2,383,983,860         $   595,098,808         $   753,232,000   
Investments at value — affiliated2
           742,474            3,602,081            3,425,318            8,012,499   
Cash
           38,897                                       
Cash pledged for financial futures contracts
           122,000            3,198,000            226,000            2,009,000   
Cash pledged as collateral for reverse repurchase agreements
                                   1,984,142            173,000   
Cash pledged as collateral for OTC derivatives
           1,200,000            1,970,000            590,000            7,700,000   
Cash pledged for centrally cleared swaps
           516,000                        515,000            10,000   
Interest receivable
           6,452,194            33,200,680            6,565,872            2,657,275   
TBA sale commitments receivable
                                               58,228,891   
Investments sold receivable
           177,530            17,388,648            522,868            102,629   
Unrealized appreciation on OTC derivatives
           178,514            2,657,749            179,910            5,032,194   
Dividends receivable
           13,711            98,107            13,711               
Swaps receivable
           6,521            202,777            6,335            812,964   
Swap premiums paid
           70,996            156,624            70,977               
Variation margin receivable on financial futures contracts
           20,000                        18,125            156,594   
Unrealized appreciation on forward foreign currency exchange contracts
           395,247            7,247,593            393,776               
Principal paydowns receivable
                                               35,506   
Foreign currency at value3
           15,884            529,079            304,703               
Variation margin receivable on centrally cleared swaps
                                               20    
Deferred offering costs
                       115,121                           
Prepaid expenses
           7,068            29,658            7,031            10,927   
Total assets
           606,404,788            2,454,379,977            609,922,576            838,173,499   
                                     
Liabilities
Bank overdraft
                       224,629            48,720            79    
Cash received as collateral for reverse repurchase agreements
           2,378,000                        2,162,000               
Cash received as collateral for OTC derivatives
                       2,700,000                        5,260,000   
Borrowed bonds at value4
                                               859,687   
Options written at value5
           2,580,908                        2,588,336               
Bank borrowings payable
                       723,000,000                           
Reverse repurchase agreements
           168,300,777                        171,566,571            205,414,998   
Investments purchased payable
           19,789,437            18,869,689            21,936,026            94,483,764   
TBA sale commitments at value6
                                               58,295,633   
Unrealized depreciation on OTC derivatives
           139,535                        139,491            6,648,452   
Swap premiums received
           121,185            368,840            122,177            183,998   
Unrealized depreciation on forward foreign currency exchange contracts
           5,496            304,747                           
Investment advisory fees payable
           252,975            1,228,637            206,443            256,171   
Swaps payable
           18,099                        18,097            1,127,872   
Interest expense payable
                       558,092                        17,393   
Officer’s and Trustees fees payable
           62,798            403,461            139,422            154,203   
Income dividends payable
           50,924            437,048            70,420            65,466   
Variation margin payable on financial futures contracts
           40,558            155,496            51,432            13,606   
Variation margin payable on centrally cleared swaps
           3,203                        1,758               
Administration fees payable
                                   34,455            59,239   
Reorganization costs payable
           180,616            13,125            77,383            222,279   
Offering costs payable
                       144,142                           
Other liabilities
           240,760                        101,591               
Other accrued expenses payable
           161,105            549,971            155,693            178,146   
Total liabilities
           194,326,376            748,957,877            199,420,015            373,240,986   
Net Assets
        $ 412,078,412         $ 1,705,422,100         $ 410,502,561         $ 464,932,513   
 1   Investments at cost — unaffiliated
        $ 560,291,925         $ 2,320,027,105         $ 559,275,271         $ 748,213,081   
 2   Investments at cost — affiliated
        $ 742,474         $ 3,602,081         $ 3,425,318         $ 8,012,499   
 3   Foreign currency at cost
        $ 13,065         $ 531,034         $ 307,617               
 4   Proceeds received from borrowed bonds
                                            $ 842,347   
 5   Premiums received
        $ 3,343,622         $          $ 3,351,152               
 6   Proceeds from TBA sale commitments
                                            $ 58,228,891   

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 63
 
  
Statements of Assets and Liabilities (concluded)  
August 31, 2014          BlackRock
Core Bond
Trust
(BHK)
     BlackRock
Corporate
High Yield
Fund, Inc.
(HYT)*
     BlackRock
Income
Opportunity
Trust, Inc.
(BNA)
     BlackRock
Income
Trust, Inc.
(BKT)
Net Assets Consist of
Paid-in capital7,8,9
        $   378,734,616         $ 1,788,506,929         $   385,469,263         $   478,274,443   
Undistributed net investment income
           2,988,893            1,526,183            2,921,368            9,245,640   
Accumulated net realized loss
           (6,665,710 )           (157,363,092 )           (14,609,287 )           (25,045,827 )  
Net unrealized appreciation/depreciation
           37,020,613            72,752,080            36,721,217            2,458,257   
Net Assets
        $ 412,078,412         $ 1,705,422,100         $ 410,502,561         $ 464,932,513   
Net asset value per share
        $ 15.24         $ 13.47         $ 11.91         $ 7.27   
 7   Par Value
        $ 0.001         $ 0.100         $ 0.010         $ 0.010   
 8   Shares outstanding
           27,041,847            126,599,668            34,456,370            63,942,535   
 9   Shares authorized
           unlimited             200 million             200 million             200 million    
 *
Consolidated Statement of Assets and Liabilities

See Notes to Financial Statements.

64 ANNUAL REPORT AUGUST 31, 2014
 
  
Statements of Operations  
Year Ended August 31, 2014          BlackRock
Core Bond
Trust
(BHK)
     BlackRock
Corporate
High Yield
Fund, Inc.
(HYT)1
     BlackRock
Income
Opportunity
Trust, Inc.
(BNA)
     BlackRock
Income
Trust, Inc.
(BKT)
Investment Income
Interest
        $  27,122,967         $ 121,549,309         $ 26,967,255         $ 26,885,874   
Dividends — unaffiliated
           308,188            2,880,665            310,486               
Dividends — affiliated
           1,865            987             1,754            3,704   
Total income
           27,433,020            124,430,961            27,279,495            26,889,578   
                                     
Expenses
Investment advisory
           3,100,274            12,173,549            2,353,384            3,033,540   
Administration
                                   392,231            700,048   
Professional
           118,462            340,094            94,161            86,488   
Transfer agent
           56,173            220,351            63,657            110,593   
Custodian
           46,807            272,008            48,052            53,307   
Accounting services
           58,279            194,538            58,010            67,315   
Officer and Trustees
           44,767            189,644            55,589            65,385   
Reorganization
           226,142            62,381            377,383            267,805   
Printing
           19,029            39,487            18,984            20,373   
Registration
           9,010            33,224            11,456            21,191   
Offering
                       29,671                           
Miscellaneous
           85,119            258,408            77,828            52,115   
Total expenses excluding interest expense and income tax
           3,764,062            13,813,355            3,550,735            4,478,160   
Interest expense
           410,344            5,305,355            420,378            302,522   
Income tax
                       65,185                           
Total expenses
           4,174,406            19,183,895            3,971,113            4,780,682   
Less fees paid indirectly
           (24 )           (300 )           (190 )           (109 )  
Less fees waived by Manager
           (172,812 )           (1,724 )           (3,720 )           (7,128 )  
Less reorganization costs reimbursed by Manager
                                   (300,000 )              
Total expenses after fees waived
           4,001,570            19,181,871            3,667,203            4,773,445   
Net investment income
           23,431,450            105,249,090            23,612,292            22,116,133   
                                     
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
                                                                                
Investments
           3,820,509            58,972,474            4,214,581            1,490,649   
Litigation proceeds
           332,281            8,518            46,780               
Financial futures contracts
           1,224,968            (3,219,276 )           1,403,516            (11,396,693 )  
Foreign currency transactions
           (1,158,403 )           (3,086,490 )           (1,284,711 )              
Options written
           522,931            191,073            524,192               
Swaps
           (1,490,123 )           (7,879,332 )           (1,443,580 )           503,189   
 
           3,252,163            44,986,967            3,460,778            (9,402,855 )  
Net change in unrealized appreciation/depreciation on:
                                                                                
Investments
           29,187,619            24,844,722            29,388,333            12,701,073   
Financial futures contracts
           (195,226 )           (10,931 )           (153,120 )           157,699   
Foreign currency translations
           461,808            5,205,406            507,997               
Options written
           1,293,405            24,288            1,296,453               
Swaps
           (765,497 )           1,770,558            (813,520 )           (865,533 )  
Borrowed bonds
                                               (98,864 )  
Unfunded floating rate loan interests
                       (12,443 )                          
 
           29,982,109            31,821,600            30,226,143            11,894,375   
Net realized and unrealized gain
           33,234,272            76,808,567            33,686,921            2,491,520   
Net Increase in Net Assets Resulting from Operations
        $ 56,665,722         $ 182,057,657         $  57,299,213         $ 24,607,653   
1   Consolidated Statement of Operations.

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 65
 
  
Statements of Changes in Net Assets  
         BlackRock
Core Bond Trust (BHK)

   
         Year Ended August 31,
   
Increase (Decrease) in Net Assets:          2014      2013
Operations
Net investment income
        $ 23,431,450         $ 24,077,362   
Net realized gain
           3,252,163            1,698,305   
Net change in unrealized appreciation/depreciation
           29,982,109            (31,803,836 )  
Net increase (decrease) in net assets resulting from operations
           56,665,722            (6,028,169 )  
                     
Dividends to Shareholders From1
Net investment income
           (24,499,913 )           (25,416,860 )  
                     
Capital Share Transactions
Reinvestment of dividends
                       221,789   
                     
Net Assets
Total increase (decrease) in net assets
           32,165,809            (31,223,240 )  
Beginning of year
           379,912,603            411,135,843   
End of year
        $   412,078,412         $   379,912,603   
Undistributed net investment income, end of year
        $ 2,988,893         $ 5,180,547   

Consolidated Statements of Changes in Net Assets

         BlackRock Corporate
High Yield Fund Inc. (HYT)

   
         Year Ended August 31,
   
Increase (Decrease) in Net Assets:          2014      2013
Operations
Net investment income
        $ 105,249,090         $ 35,346,627   
Net realized gain
           44,986,967            23,080,390   
Net change in unrealized appreciation/depreciation
           31,821,600            (8,840,108 )  
Net increase in net assets resulting from operations
           182,057,657            49,586,909   
                     
Dividends to Shareholders From1
Net investment income
           (101,824,719 )           (39,195,248 )  
                     
Capital Share Transactions
Net proceeds from the issuance of shares due to reorganization
           1,178,342,562               
Reinvestment of dividends
                       499,916   
Net increase in net assets derived from capital share transactions
           1,178,342,562            499,916   
                     
Net Assets
Total increase in net assets
           1,258,575,500            10,891,577   
Beginning of year
           446,846,600            435,955,023   
End of year
        $ 1,705,422,100         $   446,846,600   
Undistributed net investment income, end of year
        $ 1,526,183         $ 3,902,307   
1 Dividends for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.

66 ANNUAL REPORT AUGUST 31, 2014
 
  
Statements of Changes in Net Assets  
         BlackRock Income
Opportunity Trust, Inc. (BNA)

   
         Year Ended August 31,
   
Increase (Decrease) in Net Assets:          2014      2013
Operations
Net investment income
        $   23,612,292         $ 23,559,363   
Net realized gain
           3,460,778            3,918,608   
Net change in unrealized appreciation/depreciation
           30,226,143            (34,000,708 )  
Net increase (decrease) in net assets resulting from operations
           57,299,213            (6,522,737 )  
                     
Dividends to Shareholders From1
Net investment income
           (24,601,850 )           (23,740,439 )  
                     
Net Assets
Total increase (decrease) in net assets
           32,697,363            (30,263,176 )  
Beginning of year
           377,805,198            408,068,374   
End of year
        $   410,502,561         $   377,805,198   
Undistributed net investment income, end of year
        $ 2,921,368         $ 5,082,132   
                     
         BlackRock
Income Trust, Inc. (BKT)

   
         Year Ended August 31,
   
Increase (Decrease) in Net Assets:          2014      2013
Operations
Net investment income
        $ 22,116,133         $ 20,368,194   
Net realized gain (loss)
           (9,402,855 )           516,801   
Net change in unrealized appreciation/depreciation
           11,894,375            (30,160,300 )  
Net increase (decrease) in net assets resulting from operations
           24,607,653            (9,275,305 )  
                     
Dividends to Shareholders From1
Net investment income
           (27,623,179 )           (30,628,476 )  
                     
Net Assets
Total decrease in net assets
           (3,015,526 )           (39,903,781 )  
Beginning of year
           467,948,039            507,851,820   
End of year
        $   464,932,513         $   467,948,039   
Undistributed net investment income, end of year
        $ 9,245,640         $ 10,875,865   
1 Dividends for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 67
 
  
Statements of Cash Flows  
Year Ended August 31, 2014          BlackRock
Core Bond
Trust
(BHK)
     BlackRock
Corporate
High Yield
Fund, Inc.
(HYT)1
     BlackRock
Income
Opportunity
Trust, Inc.
(BNA)
     BlackRock
Income Trust,
Inc.
(BKT)
Cash Provided by Operating Activities
Net increase in net assets resulting from operations
        $ 56,665,722         $ 182,057,657         $ 57,299,213         $ 24,607,653   
Adjustments to reconcile net increase in net assets resulting from operations
to net cash provided by operating activities:
                                                                                
(Increase) decrease in interest receivable
           (30,919 )           (703,126 )2           (294,338 )           63,953   
(Increase) decrease in swaps receivable
           6,680            (75,734 )           6,901            13,683   
Decrease in other assets
           29,378                        96,026            16,208   
(Increase) decrease in prepaid expenses
           5,561            (20,508 )2           5,672            4,713   
(Increase) decrease in dividends receivable
           (13,711 )           54,081 2           (13,711 )              
(Increase) decrease in variation margin receivable on financial futures contracts
           167,771            2,015            181,121            (156,594 )  
(Increase) decrease in variation margin receivable on centrally cleared swaps
           12,768                        12,678            (20 )  
(Increase) decrease in cash pledged as collateral for financial futures contracts
           165,000            (2,452,000 )2           227,000            388,000   
Increase in cash pledged as collateral for centrally cleared swaps
           (96,000 )                       (95,000 )              
Increase in cash pledged as collateral for OTC derivatives
           (510,000 )           (770,000 )           (20,000 )           (4,800,000 )  
Decrease in cash pledged for reverse repurchase agreements
           5,147,000                        5,938,858            1,887,000   
(Increase) decrease in swaps premiums paid
           112,245            (57,867 )2           41,242               
Increase (decrease) in investment advisory fees payable
           8,010            (483,334 )2           14,323            (1,780 )  
Increase (decrease) in interest expense payable
           (21,848 )           (187,946 )2           83,898            (6,722 )  
Increase (decrease) in other accrued expenses payable
           4,616            (165,690 )2           2,444            18,698   
Increase (decrease) in variation margin payable on financial futures contracts
           40,558            155,496 2           51,432            (226,600 )  
Increase (decrease) in variation margin payable on centrally cleared swaps
           3,203                        1,758            (12 )  
Decrease in swaps payable
           (19,643 )           (3,202 )           (20,545 )           (11,704 )  
Decrease in swaps premium received
           (57,765 )           (5,210,403 )2           (58,183 )           (27,779 )  
Increase in Officer’s and Trustees’ fees payable
           7,613            272,882 2           35,416            41,252   
Decrease in other liabilities
                       (457,953 )           (777,755 )              
Increase (decrease) in reorganization costs payable
           180,616            13,125 2           77,383            222,279   
Increase (decrease) in administration fees payable
                                   2,366            (558 )  
Increase in cash received as collateral for reverse repurchase agreements
           2,378,000                        2,162,000               
Increase (decrease) in cash received as collateral for over the counter swaps
           (1,400,000 )           200,000            (1,500,000 )           740,000   
Net realized gain on investments and written options
           (3,238,825 )           (51,356,670 )           (3,510,291 )           (16,048 )  
Net unrealized gain on investments, swaps and foreign
currency translation
           (30,562,253 )           (31,832,531 )           (30,859,938 )           (11,842,664 )  
Amortization of premium and accretion of discount on investments
           3,243,278            2,132,662            3,471,683            7,165,810   
Premiums received from options written
           5,119,437            814,307            5,133,210               
Proceeds from sales and principal paydowns of long-term investments
           468,282,943            1,254,120,378 2           457,271,613            1,869,423,066   
Purchases of long-term investments
           (479,287,857 )           (1,267,592,400 )2           (470,884,125 )           (1,923,902,877 )  
Net proceeds from sales of short-term securities
           4,593,017            12,063,421 2           3,479,620            6,994,374   
Premiums (paid) received on closing options written
           (2,054,956 )           (1,056,096 )           (2,061,900 )              
Net cash provided by operating activities
           28,879,639            89,460,564            25,500,071            (29,406,669 )  
                                     
Cash Used for Financing Activities
Proceeds from bank borrowings
                       619,000,000                           
Payments on bank borrowings
                       (609,000,000 )                          
Payments for offering costs
                       (650 )                          
Amortization of deferred offering costs
                       29,671                           
Net borrowing of reverse repurchase agreements
           (4,214,736 )                       (723,585 )           57,070,372   
Cash dividends paid to shareholders
           (24,507,270 )           (101,838,846 )           (24,588,799 )           (27,648,213 )  
Increase (decrease) in bank overdraft
           (157,427 )           224,629            48,720            (15,490 )  
Net cash used for financing activities
           (28,879,433 )           (91,585,196 )           (25,263,664 )           29,406,669   
 

See Notes to Financial Statements.

68 ANNUAL REPORT AUGUST 31, 2014
 
  
Statements of Cash Flows (concluded)  
Year Ended August 31, 2014          BlackRock
Core Bond
Trust
(BHK)
     BlackRock
Corporate
High Yield
Fund, Inc.
(HYT)1
     BlackRock
Income
Opportunity
Trust, Inc.
(BNA)
     BlackRock
Income Trust,
Inc.
(BKT)
Cash Impact from Foreign Exchange Fluctuations
Cash impact from foreign exchange fluctuations
        $ 1,790         $ (4,222 )        $ (3,922 )              
                                     
Cash and Foreign Currency
Net increase (decrease) in cash and foreign currency
           1,996            (2,128,854 )           232,485               
Cash and foreign currency at beginning of year
           52,785            2,657,933 3           72,218               
Cash and foreign currency at end of year
        $ 54,781         $ 529,079         $ 304,703               
                                     
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest
        $      432,192         $ 5,493,301         $      336,480         $      309,244   
                                     
Non-cash Financing Activities
Fair value of investments acquired through reorganization
                    $ 1,691,534,575                           
Capital shares issued in reorganization
                    $ 1,178,342,562                           
 
1 Consolidated Statement of Cash Flows.
2 Includes assets and liabilities acquired in reorganization.
3 Includes cash and foreign currency acquired in reorganization of $2,642,772.

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 69
 
  
Financial Highlights  BlackRock Core Bond Trust (BHK)
         Year Ended August 31,

   
         2014      2013      2012      2011      2010
Per Share Operating Performance
Net asset value, beginning of year
        $ 14.05         $ 15.21         $ 13.78         $ 14.19         $ 12.56   
Net investment income1
           0.87            0.89            0.88            0.83            0.87   
Net realized and unrealized gain (loss)
           1.23            (1.11 )           1.37            (0.36 )           1.76   
Net increase (decrease) from investment operations
           2.10            (0.22 )           2.25            0.47            2.63   
Dividends from net investment income2
           (0.91 )           (0.94 )           (0.82 )           (0.88 )           (1.00 )  
Net asset value, end of year
        $ 15.24         $ 14.05         $ 15.21         $ 13.78         $ 14.19   
Market price, end of year
        $ 13.64         $ 12.50         $ 15.41         $ 12.69         $ 13.92   
                                             
Total Return3
Based on net asset value
           16.09% 4           (1.42)%             17.06%            4.02%            22.44%   
Based on market price
           16.78%            (13.43)%             28.78%            (2.35)%             25.93%   
                                             
Ratio to Average Net Assets
Total expenses
           1.06% 5           1.03%            0.95%            1.02%            1.18%   
Total expenses after fees waived and paid indirectly
           1.02% 5           0.98%            0.94%            1.02%            1.18%   
Total expenses after fees waived and paid indirectly and excluding interest expense
           0.91% 5           0.86%            0.86%            0.93%            0.95%   
Net investment income
           5.94%            5.92%            6.13%            6.05%            6.62%   
                                             
Supplemental Data
Net assets, end of year (000)
        $   412,078         $   379,913         $   411,136         $   372,295         $   383,540   
Borrowings outstanding, end of year (000)
        $ 168,301         $ 172,537         $ 182,679         $ 152,301         $ 168,938   
Average borrowings outstanding, during the year (000)
        $ 169,493         $ 187,038         $ 143,234         $ 151,080         $ 162,760   
Portfolio turnover rate6
           82%            100%            290%            824%            641%   
Asset coverage, end of year per $1,000
        $ 3,448         $ 3,202         $ 3,251         $ 3,444         $ 3,270   
 1   Based on average shares outstanding.
 2   Dividends for annual periods determined in accordance with federal income tax regulations.
 3   Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.
 4   Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 16.01%.
 5   Includes reorganization costs. Without these costs, total expenses, total expenses after fees waived and paid indirectly, and total expenses after fees waived and paid indirectly and excluding interest expense would have been 1.00 %, 0.96% and 0.85%, respectively.
 6   Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover is as follows:
         Year Ended August 31,
   
         2014
   
2013
   
2012
   
2011
   
2010
Portfolio turnover (excluding mortgage dollar roll transactions)
     
48%
  
63%
  
237%
  
544%
  
534%

See Notes to Financial Statements.

70 ANNUAL REPORT AUGUST 31, 2014
 
  
Financial Highlights  BlackRock Corporate High Yield Fund, Inc. (HYT)
         Year Ended August 31,

   
         20141      20131      20121      2011      2010
Per Share Operating Performance
Net asset value, beginning of year
        $ 12.62         $ 12.32         $ 11.49         $ 11.38         $ 9.68   
Net investment income2
           0.98            1.00            1.04            1.06            1.05   
Net realized and unrealized gain
           0.91            0.41            0.83            0.05            1.67   
Net increase (decrease) from investment operations
           1.89            1.41            1.87            1.11            2.72   
Dividends from net investment income3
           (1.04 )           (1.11 )           (1.04 )           (1.00 )           (1.02 )  
Net asset value, end of year
        $ 13.47         $ 12.62         $ 12.32         $ 11.49         $ 11.38   
Market price, end of year
        $ 12.07         $ 11.37         $ 12.96         $ 11.21         $ 11.19   
                                             
Total Return4
Based on net asset value
           16.21%            11.90%            17.14%            9.95%            29.26%   
Based on market price
           15.58%            (4.16)%             26.30%            9.09%            29.92%   
                                             
Ratio to Average Net Assets
Total expenses
           1.35% 5           1.54% 6           1.51%            1.41%            1.34%   
Total expenses after fees waived and paid indirectly
           1.35% 5           1.54% 6           1.51%            1.41%            1.34%   
Total expenses after fees waived and paid indirectly and excluding interest expense and income tax
           0.98% 5           1.16% 6,7           1.19% 8           1.12%            1.09%   
Net investment income
           7.40%            7.83%            8.84%            8.80%            9.52%   
                                             
Supplemental Data
Net assets, end of year (000)
        $ 1,705,422         $   446,847         $   435,955         $   405,697         $   401,760   
Borrowings outstanding, end of year (000)
        $ 723,000         $ 191,000         $ 181,000         $ 130,000         $ 89,000   
Average borrowings outstanding, during the year (000)
        $ 584,041         $ 180,436         $ 142,342         $ 115,512         $ 76,356   
Portfolio turnover rate
           64%            77%            61%            87%            85%   
Asset coverage, end of year per $1,000
        $ 3,359         $ 3,340         $ 3,409         $ 4,121         $ 5,514   
 1   Consolidated Financial Highlights.
 2   Based on average shares outstanding.
 3   Dividends for annual periods determined in accordance with federal income tax regulations.
 4   Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.
 5   Includes reorganization costs. Without these costs, total expenses, total expenses after fees waived and paid indirectly, and total expenses after fees waived and paid indirectly and excluding interest expense would have been 1.34 %, 1.34% and 0.97%, respectively.
 6   Includes reorganization costs. Without these costs, total expenses, total expenses after fees waived and paid indirectly, and total expenses after fees waived and paid indirectly and excluding interest expense would have been 1.50 %, 1.50% and 1.12%, respectively.
 7   For the year ended August 31, 2013, the total expense ratio after fees waived and paid indirectly and excluding interest expense, borrowing costs and income tax was 1.15%.
 8   For the year ended August 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense and borrowing costs was 1.09%.

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 71
 
  
Financial Highlights  BlackRock Income Opportunity Trust, Inc. (BNA)
         Year Ended August 31,

   
         2014      2013      2012      2011      2010
Per Share Operating Performance
Net asset value, beginning of year
        $ 10.96         $ 11.84         $ 10.77         $ 11.07         $ 10.02   
Net investment income1
           0.69            0.68            0.67            0.63            0.59   
Net realized and unrealized gain (loss)
           0.97            (0.87 )           1.05            (0.28 )           1.25   
Net increase (decrease) from investment operations
           1.66            (0.19 )           1.72            0.35            1.84   
Dividends from net investment income2
           (0.71 )           (0.69 )           (0.65 )           (0.65 )           (0.79 )  
Net asset value, end of year
        $ 11.91         $ 10.96         $ 11.84         $ 10.77         $ 11.07   
Market price, end of year
        $ 10.59         $ 9.64         $ 11.58         $ 9.85         $ 10.56   
                                             
Total Return3
Based on net asset value
           16.46%            (1.47)%             16.81%            3.91%            19.83%   
Based on market price
           17.73%            (11.39)%             24.92%            (0.37)%             18.69%   
                                             
Ratio to Average Net Assets
Total expenses
           1.01% 4           0.93%            0.90%            0.95%            1.09%   
Total expenses after fees waived and paid indirectly
           0.93% 4           0.93%            0.90%            0.95%            1.09%   
Total expenses after fees waived and paid indirectly and excluding interest expense
           0.83% 4           0.81%            0.82%            0.85%            0.86%   
Net investment income
           6.02%            5.82%            5.97%            5.94%            5.81%   
                                             
Supplemental Data
Net assets end of year (000)
        $   410,503         $   377,805         $   408,068         $   371,175         $   381,379   
Borrowings outstanding, end of year (000)
        $ 171,567         $ 172,206         $ 188,055         $ 154,883         $ 157,776   
Average borrowings outstanding, during the year (000)
        $ 174,069         $ 185,003         $ 151,411         $ 148,617         $ 151,700   
Portfolio turnover rate5
           80%            101%            285%            774%            720%   
Asset coverage, end of year per $1,000
        $ 3,393         $ 3,194         $ 3,170         $ 3,396         $ 3,417   
 1   Based on average shares outstanding.
 2   Dividends for annual periods determined in accordance with federal income tax regulations.
 3   Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.
 4   Includes reorganization costs. Without these costs, total expenses, total expenses after fees waived and paid indirectly, and total expenses after fees waived and paid indirectly and excluding interest expense would have been 0.92%, 0.84% and 0.73%, respectively.
 5   Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover is as follows:
         Year Ended August 31,
  
         2014
   
2013
   
2012
   
2011
   
2010
Portfolio turnover (excluding mortgage dollar roll transactions)
     
46%
  
63%
  
231%
  
492%
  
608%

See Notes to Financial Statements.

72 ANNUAL REPORT AUGUST 31, 2014
 
  
Financial Highlights  BlackRock Income Trust, Inc. (BKT)
         Year Ended August 31,
   
         2014      2013      2012      2011      2010
Per Share Operating Performance
Net asset value, beginning of year
        $ 7.32         $ 7.94         $ 7.96         $ 7.76         $ 7.12   
Net investment income1
           0.35            0.32            0.39            0.35            0.20   
Net realized and unrealized gain (loss)
           0.03            (0.46 )           0.06            0.19            0.73   
Net increase (decrease) from investment operations
           0.38            (0.14 )           0.45            0.54            0.93   
Dividends and distributions from:2
                                                                                                    
Net investment income
           (0.43 )           (0.48 )           (0.27 )           (0.34 )           (0.26 )  
Net realized gain
                                   (0.20 )                       (0.03 )  
Total dividends and distributions
           (0.43 )           (0.48 )           (0.47 )           (0.34 )           (0.29 )  
Net asset value, end of year
        $ 7.27         $ 7.32         $ 7.94         $ 7.96         $ 7.76   
Market price, end of year
        $ 6.42         $ 6.40         $ 7.63         $ 7.18         $ 6.95   
                                             
Total Return3  
Based on net asset value
           6.05%            (1.45)%             6.24%            7.70%            13.86%   
Based on market price
           7.12%            (10.34)%             13.19%            8.47%            11.19%   
                                             
Ratio to Average Net Assets
Total expenses
           1.02% 4           1.00%            0.97%            1.06%            1.05%   
Total expenses after fees waived and paid indirectly
           1.02% 4           1.00%            0.97%            1.05%            1.02%   
Total expenses after fees waived and paid indirectly and excluding interest expense
           0.96% 4           0.90%            0.90%            0.94%            0.92%   
Net investment income
           4.74%            4.18%            4.86%            4.43%            2.72%   
                                             
Supplemental Data
Net assets end of year (000)
        $   464,933         $   467,948         $   507,852         $   508,765         $   496,260   
Borrowings outstanding, end of year (000)
        $ 205,415         $ 148,344         $ 119,706         $ 233,676         $ 106,985   
Average borrowings outstanding, during the year (000)
        $ 197,388         $ 188,924         $ 183,890         $ 116,771         $ 23,316   
Portfolio turnover rate5
           256%            358%            487%            899%            883%   
Asset coverage, end of year per $1,000
        $ 3,263         $ 4,154         $ 5,242         $ 3,177         $ 5,639   
 1   Based on average shares outstanding.
 2   Dividends and distributions for annual periods determined in accordance with federal income tax regulations.
 3   Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.
 4   Includes reorganization costs. Without these costs, total expenses, total expenses after fees waived and paid indirectly, and total expenses after fees waived and paid indirectly and excluding interest expense would have been 0.97%, 0.97% and 0.90%, respectively.
 5   Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover is as follows:
         Year Ended August 31,
         2014
   
2013
   
2012
   
2011
   
2010
Portfolio turnover (excluding mortgage dollar roll transactions)
     
125%
  
196%
  
230%
  
387%
  
207%

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2014 73
 
  
Notes to Financial Statements  

1. Organization:

BlackRock Core Bond Trust (“BHK”), BlackRock Corporate High Yield Fund, Inc. (formerly known as BlackRock Corporate High Yield Fund VI, Inc.) (“HYT”), BlackRock Income Opportunity Trust, Inc. (“BNA”) and BlackRock Income Trust, Inc. (“BKT”) (collectively, the “Trusts” or individually as a “Trust”) are registered under the 1940 Act, as diversified, closed-end management investment companies. HYT, BNA and BKT are organized as Maryland corporations. BHK is organized as a Delaware statutory trust. The Boards of Directors and Board of Trustees of the Trusts are collectively referred to throughout this report as the “Board of Trustees” or the “Board”, and the directors/trustees thereof are collectively referred to throughout this report as “Trustees”. The Trusts determine and make available for publication the NAVs of their Common Shares on a daily basis.

Reorganizations: The Board and shareholders of HYT and the Board and shareholders of each of BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Income Shares (HIS) and BlackRock High Yield Trust (BHY) (individually a “HYT Target” and collectively the “HYT Target Funds”) approved the reorganizations of each HYT Target Fund into the Trust pursuant to which the Trust acquired substantially all of the assets and substantially all of the liabilities of each HYT Target Fund in exchange for an equal aggregate value of newly-issued shares of the Trust. On February 28, 2014, the Trust changed its name from BlackRock Corporate High Yield Fund VI, Inc. to BlackRock Corporate High Yield Fund, Inc.

Each Common Shareholder of HYT Target received Common Shares of HYT in an amount equal to the aggregate net asset value of such shareholder’s Target Fund shares, as determined at the close of business on November 15, 2013, less the costs of the Target Fund’s reorganization. Cash was distributed for any fractional shares.

The reorganizations were accomplished by a tax-free exchange of shares of HYT in the following amounts and at the following conversion ratios:


Target Fund



   
Shares Prior to
Reorganization

   
Conversion
Ratio

   
Shares of
HYT

COY
           35,027,459            0.59633674            20,888,115   
CYE
           37,552,995            0.61218457            22,989,338   
HYV
           33,015,111            1.02665810            33,895,222   
HIS
           54,848,390            0.17536312            9,618,090   
BHY
           6,431,296            0.58941105            3,790,663   

Each HYT Target’s net assets and composition of net assets on November 15, 2013, the valuation date of the reorganization, were as follows:


         Target Funds
   



   
COY
   
CYE
   
HYV
   
HIS
   
BHY
Net assets
        $ 269,933,969         $ 297,104,927         $ 438,025,175         $ 124,291,816         $ 48,986,675   
Paid-in capital
        $ 305,529,497         $ 325,149,382         $ 469,523,241         $ 151,358,421         $ 57,800,581   
Distributions in excess of net investment income
        $ (1,185,651 )        $ (1,350,006 )        $ (1,971,210 )        $ (754,598 )        $ (176,691 )  
Accumulated net realized loss
        $ (41,042,210 )        $ (35,328,795 )        $ (45,260,726 )        $ (28,812,095 )        $ (11,055,877 )  
Net unrealized appreciation
        $ 6,632,333         $ 8,634,346         $ 15,733,870         $ 2,500,088         $ 2,418,662   

For financial reporting purposes, assets received and shares issued by HYT were recorded at fair value. However, the cost basis of the investments received from the HYT Target were carried forward to align ongoing reporting of HYT’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.

The net assets of HYT before the acquisition were $457,705,742. The aggregate net assets of HYT immediately after the acquisition amounted to $1,636,048,304. Each HYT Target’s fair value and cost of investments and derivative financial instruments prior to the reorganization were as follows:


Target Fund



   
Fair Value of
Investments

   
Cost of
Investments

COY
        $ 390,967,349         $ 384,382,845   
CYE
        $ 426,116,528         $ 417,548,014   
HYV
        $ 635,374,976         $ 619,705,167   
HIS
        $ 168,353,486         $ 165,699,553   
BHY
        $ 69,538,358         $ 67,121,555   

The purpose of these transactions was to combine six funds managed by BlackRock Advisors, LLC (the “Manager”) with the same or substantially similar (but not identical) investment objectives, investment policies, strategies, risks and restrictions. Each reorganization was a tax-free event and was effective on November 18, 2013.

74 ANNUAL REPORT AUGUST 31, 2014
 
  
Notes to Financial Statements (continued)  

Assuming the acquisition had been completed on September 1, 2013 the beginning of the fiscal reporting period of HYT, the pro forma results of operations for the year ended August 31, 2014, are as follows:

•  
  Net investment income: $124,066,786
•  
  Net realized and change in unrealized gain/loss on investments: $114,665,188
•  
  Net increase/decrease in net assets resulting from operations: $238,731,974

Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of the Target Funds that have been included in HYT’s Consolidated Statement of Operations since November 18, 2013.

Reorganization costs incurred in connection with the reorganizations were expensed by HYT.

On June 6, 2014, the Boards of BHK, BNA and BKT approved the reorganizations of BKT and BNA with and into BHK, with BHK continuing as the surviving fund after the reorganizations. At a special meeting of shareholders on September 30, 2014, the shareholders of BHK and BNA approved the reorganization of BNA with and into BHK, which is expected to be completed in late 2014. The reorganization of BKT with and into BHK was not approved by BKT shareholders. Consequently, the reorganization of BKT with and into BHK will not be completed. Regardless of whether the reorganizations are completed, the costs associated with the proposed reorganizations, including the costs associated with the shareholder meeting, will be borne directly by the respective Trust incurring the expense or allocated among BHK, BNA and BKT proportionately or on another reasonable basis, as appropriate. The Manager has agreed to pay $300,000 of BNA’s reorganization costs, which is shown as reorganization costs reimbursed by Manager in the Statements of Operations.

Basis of Consolidation: HYT’s accompanying consolidated financial statements include the accounts of BLK HYT (Luxembourg) Investments, S.a.r.l., BLK HYV (Luxembourg) Investments, S.a.r.l., BLK COY (Luxembourg) Investments, S.a.r.l. and BLK CYE (Luxembourg) Investments, S.a.r.l. (the “Taxable Subsidiaries”), all of which are wholly owned Taxable Subsidiaries of HYT which hold shares of private Canadian companies, Laricina Energy Ltd. and Osum Oil Sands Corp. Such shares are held in the Taxable Subsidiaries in order to realize benefits under the Double Tax Avoidance Convention between Canada and Luxembourg, the result of which is gains on the sale of such shares will not be subject to capital gains taxes in Canada. Income earned on the investments held by the Taxable Subsidiaries may be taxable to such subsidiaries in Luxembourg. A tax provision, if any, is included in expenses in the Consolidated Statements of Operations. A tax provision for realized and unrealized gain, if any, is included as a reduction of realized and/or unrealized gain (loss) in the Consolidated Statements of Operations. The net assets of the Taxable Subsidiaries at August 31, 2014 were $14,152,153 or 0.8% of HYT’s consolidated net assets. Intercompany accounts and transactions, if any, have been eliminated. The Taxable Subsidiaries are subject to the same investment policies and restrictions that apply to the Trust.

2. Significant Accounting Policies:

The Trusts’ 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 and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Trusts:

Valuation: 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 value of their financial instruments at market value using independent dealers or pricing services under policies approved by the Board. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Trusts for all financial instruments.

Bond investments are valued on the basis of last available bid prices or current market quotations provided by dealers or pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more brokers or dealers as obtained from a pricing service. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments and calculated yield measures. Asset-backed and mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche-specific spread to the benchmark yield based on the unique attributes of the tranche. Financial futures contracts traded on exchanges are valued at their last sale price. To-be-announced (“TBA”) commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services. Swap agreements are valued utilizing quotes

ANNUAL REPORT AUGUST 31, 2014 75
 
  
Notes to Financial Statements (continued)  


received daily by the Trusts’ pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments. Certain centrally cleared swaps are valued at the price determined by the relevant exchange or clearinghouse. Investments in open-end registered investment companies are valued at NAV each business day.

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.

Equity investments traded on a recognized securities exchange or the NASDAQ Stock Market (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid (long positions) or ask (short positions) price.

Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of business on the New York Stock Exchange (“NYSE”). Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of business on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that the prior day’s price no longer reflects the fair value of the option. Over-the-counter (“OTC”) options and swaptions are valued by an independent pricing service using a mathematical model, which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.

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 Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that each Trust might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant consistent with the principles of fair value measurement, which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. The market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and is adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Trusts’ pricing vendors, regular reviews of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of business on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of business on the NYSE that may not be reflected in the computation of each Trust’s net assets. If events (e.g., a company announcement, market volatility or a natural disaster) occur during such periods that are expected to materially affect the value of such instruments, those instruments may be Fair Value Assets and be valued at their fair value, as determined in good faith by the Global Valuation Committee, or its delegate, using a pricing service and/or policies approved by the Board. Each business day, the Trusts use a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and OTC options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of business on the NYSE, which follows the close of the local markets.

Foreign Currency: The Trusts’ books and records are maintained in U.S. dollars. Purchases and sales of investment securities are recorded at the rates of exchange prevailing on the respective date of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the Trusts’ investments denominated in that currency will lose value because that currency is worth fewer U.S. dollars; the opposite effect occurs if the U.S. dollar falls in relative value.

76 ANNUAL REPORT AUGUST 31, 2014
 
  
Notes to Financial Statements (continued)  

The Trusts do not isolate the portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in foreign currency exchange rates on investments are not segregated in the Statements of Operations from the effects of changes in market prices of those investments but are included as a component of net realized and unrealized gain (loss) from investments. The Trusts report realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for federal income tax purposes.

Segregation and Collateralization: In cases where a Trust enters into certain investments (e.g., dollar rolls, TBA sale commitments, financial futures contracts, forward foreign currency exchange contracts, options written, swaps and short sales) or certain borrowings (e.g., reverse repurchase transactions) that would be “senior securities” for 1940 Act purposes, each Trust may segregate or designate on its books and records cash or liquid securities having a market value at least equal to the amount of each Trust’s future obligations under such investments or borrowings. Doing so allows the investment or borrowing to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, each Trust may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Trusts are informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

Dividends and Distributions: Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend date. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.

Deferred Compensation Plan: Under the Deferred Compensation Plan (the “Plan”) approved by each Trust’s Board, the independent Trustees (“Independent Trustees”) may defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar amounts had been invested in common shares of certain other BlackRock Closed-End Funds selected by the Independent Trustees. This has the same economic effect for the Independent Trustees as if the Independent Trustees had invested the deferred amounts directly in certain other BlackRock Closed-End Funds.

The Plan is not funded and obligations thereunder represent general unsecured claims against the general assets of each Trust. Deferred compensation liabilities are included in officer’s and trustees’ fees payable in the Statements of Assets and Liabilities and will remain as a liability of the Trusts until such amounts are distributed in accordance with the Plan.

Recent Accounting Standard: In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance will require expanded disclosure for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. It is effective for financial statements with fiscal years beginning on or after December 15, 2014 and interim periods within those fiscal years. Management is evaluating the impact, if any, of this guidance on the Funds’ financial statement disclosures.

Other: Expenses directly related to a Trust are charged to that Trust. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods.

The Trusts have an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statements of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.

3. Securities and Other Investments:

Asset-Backed and Mortgage-Backed Securities: Certain Trusts may invest in asset-backed securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the

ANNUAL REPORT AUGUST 31, 2014 77
 
  
Notes to Financial Statements (continued)  


obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security subject to such a prepayment feature will have the effect of shortening the maturity of the security. In addition, the Trusts may subsequently have to reinvest the proceeds at lower interest rates. If the Trusts have purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

Certain Trusts may purchase certain mortgage pass-through securities. There are a number of important differences among the agencies and instrumentalities of the U.S. government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the Treasury.

Collateralized Debt Obligations: Certain Trusts may invest in collateralized debt obligations (“CDOs”), which include collateralized bond obligations (“CBOs”) and collateralized loan obligations (“CLOs”). CBOs and CLOs are types of asset-backed securities. A CDO is an entity that is backed by a diversified pool of debt securities (CBOs) or syndicated bank loans (CLOs). The cash flows of the CDO can be split into multiple segments, called “tranches,” which will vary in risk profile and yield. The riskiest segment is the subordinated or “equity” tranche. This tranche bears the greatest risk of defaults from the underlying assets in the CDO and serves to protect the other, more senior, tranches from default in all but the most severe circumstances. Since it is shielded from defaults by the more junior tranches, a “senior” tranche will typically have higher credit ratings and lower yields than their underlying securities, and often receive investment grade ratings from one or more of the nationally recognized rating agencies. Despite the protection from the more junior tranches, senior tranches can experience substantial losses due to actual defaults, increased sensitivity to future defaults and the disappearance of one or more protecting tranches as a result of changes in the credit profile of the underlying pool of assets.

Multiple Class Pass-Through Securities: Certain Trusts may invest in multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities. These multiple class securities may be issued by Ginnie Mae, U.S. government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by, and multiple class pass-through securities represent direct ownership interests in, a pool of residential or commercial mortgage loans or mortgage pass-through securities (the “Mortgage Assets”), the payments on which are used to make payments on the CMOs or multiple pass-through securities. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated pre-payments of principal, the Trusts may not fully recoup their initial investment in IOs.

Stripped Mortgage-Backed Securities: Certain Trusts may invest in stripped mortgage-backed securities issued by the U.S. government, its agencies and instrumentalities. Stripped mortgage-backed securities are usually structured with two classes that receive different proportions of the interest (IOs) and principal (POs) distributions on a pool of Mortgage Assets. The Trusts also may invest in stripped mortgage-backed securities that are privately issued.

Zero-Coupon Bonds: Certain Trusts may invest in zero-coupon bonds, which are normally issued at a significant discount from face value and do not provide for periodic interest payments. Zero-coupon bonds may experience greater volatility in market value than similar maturity debt obligations which provide for regular interest payments.

Capital Trusts and Trust Preferred Securities: Certain Trusts may invest in capital trusts and/or trust preferred securities. These securities are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics, or by an affiliated business trust of a corporation, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured as either fixed or adjustable coupon securities that can have either a perpetual or stated maturity date. For trust preferred securities, the issuing bank or corporation will pay interest to the trust, which will then be distributed to holders of the trust preferred securities as a dividend. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. Payments on these securities are treated as interest rather than dividends for federal income tax purposes. These securities generally are rated below that of the issuing company’s senior debt securities and are freely callable at the issuer’s option.

78 ANNUAL REPORT AUGUST 31, 2014
 
  
Notes to Financial Statements (continued)  

Preferred Stock: Certain Trusts may invest in preferred stock. Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Floating Rate Loan Interests: Certain Trusts may invest in floating rate loan interests. The floating rate loan interests held by the Trusts are typically issued to companies (the “borrower”) by banks, other financial institutions, and privately and publicly offered corporations (the “lender”). Floating rate loan interests are generally non-investment grade, often involve borrowers whose financial condition is troubled or uncertain and companies that are highly leveraged. The Trusts may invest in obligations of borrowers who are in bankruptcy proceedings. Floating rate loan interests may include fully funded term loans or revolving lines of credit. Floating rate loan interests are typically senior in the corporate capital structure of the borrower. Floating rate loan interests generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. The base lending rates are generally the lending rate offered by one or more European banks, such as the London Interbank Offered Rate (“LIBOR”), the prime rate offered by one or more U.S. banks or the certificate of deposit rate. Floating rate loan interests may involve foreign borrowers, and investments may be denominated in foreign currencies. The Trusts consider these investments to be investments in debt securities for purposes of their investment policies.

When a Trust purchases a floating rate loan interest it may receive a facility fee and when it sells a floating rate loan interest it may pay a facility fee. On an ongoing basis, the Trusts may receive a commitment fee based on the undrawn portion of the underlying line of credit amount of a floating rate loan interest. Facility and commitment fees are typically amortized to income over the term of the loan or term of the commitment, respectively. Consent and amendment fees are recorded to income as earned. Prepayment penalty fees, which may be received by the Trusts upon the prepayment of a floating rate loan interest by a borrower, are recorded as realized gains. The Trusts may invest in multiple series or tranches of a loan. A different series or tranche may have varying terms and carry different associated risks.

Floating rate loan interests are usually freely callable at the borrower’s option. The Trusts may invest in such loans in the form of participations in loans (“Participations”) or assignments (“Assignments”) of all or a portion of loans from third parties. Participations typically will result in the Trusts having a contractual relationship only with the lender, not with the borrower. The Trusts will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Participations, the Trusts generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of offset against the borrower, and the Trusts may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, the Trusts will assume the credit risk of both the borrower and the lender that is selling the Participation. The Trusts’ investment in loan participation interests involves the risk of insolvency of the financial intermediaries who are parties to the transactions. In the event of the insolvency of the lender selling the Participation, the Trusts may be treated as a general creditor of the lender and may not benefit from any offset between the lender and the borrower. Assignments typically result in the Trusts having a direct contractual relationship with the borrower, and the Trusts may enforce compliance by the borrower with the terms of the loan agreement.

In connection with floating rate loan interests, the Trusts may also enter into unfunded loan commitments (“commitments”). In connection with these commitments, the Trusts earn a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is included in interest income in the Statements of Operations, is recognized ratably over the commitment period. Commitment fees received in advance and unrecognized are recorded in the Statements of Assets and Liabilities as deferred income. Unfunded floating rate loan interests are marked-to-market daily, and any unrealized appreciation or depreciation is included in the Statements of Assets and Liabilities and Statements of Operations. As of August 31, 2014 the Trusts had no outstanding unfunded floating rate loan interests.

Forward Commitments and When-Issued Delayed Delivery Securities: Certain Trusts may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. The Trusts may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, the Trusts may be required to pay more at settlement than the security is worth. In addition, the Trusts are not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, the Trusts assume 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, the Trusts’ maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions, which is shown in the Schedules of Investments.

TBA Commitments: Certain Trusts may enter into TBA commitments. TBA commitments are forward agreements for the purchase or sale of mortgage-backed securities for a fixed price, with payment and delivery on an agreed upon future settlement date. The specific securities to be delivered are not identified at the trade date. However, delivered securities must meet specified terms, including issuer, rate and mortgage terms. When entering into TBA

ANNUAL REPORT AUGUST 31, 2014 79
 
  
Notes to Financial Statements (continued)  


commitments, the Trusts may take possession of or deliver the underlying mortgage-backed securities but can extend the settlement or roll the transaction. TBA commitments involve a risk of loss if the value of the security to be purchased or sold declines or increases, respectively, prior to settlement date.

Mortgage Dollar Roll Transactions: Certain Trusts may sell TBA mortgage-backed securities and simultaneously contract to repurchase substantially similar (i.e., same type, coupon and maturity) securities on a specific future date at an agreed upon price. During the period between the sale and repurchase, the Trusts will not be entitled to receive interest and principal payments on the securities sold. The Trusts account for mortgage dollar roll transactions as purchases and sales and realizes gains and losses on these transactions. These transactions may increase the Trusts’ portfolio turnover rate. Mortgage dollar rolls involve the risk that the market value of the securities that the Trusts are required to purchase may decline below the agreed upon repurchase price of those securities.

Borrowed Bond Agreements: Certain Trusts may enter into borrowed bond agreements. In a borrowed bond agreement, the Trusts borrow a bond from a counterparty in exchange for cash collateral. The borrowed bond agreement contains a commitment that the security and the cash will be returned to the counterparty and the Trusts, respectively, at a mutually agreed upon date. Certain agreements have no stated maturity and can be terminated by either party at any time. Borrowed bond agreements are entered into primarily in connection with short sales of bonds. Earnings on cash collateral and compensation to the lender of the bond are based on agreed upon rates between the Trusts and the counterparty. The value of the underlying cash collateral approximates the market value and accrued interest of the borrowed bond. To the extent that a borrowed bond transaction exceeds one business day, the value of the cash collateral in the possession of the counterparty is monitored on a daily basis to ensure the adequacy of the collateral. As the market value of the borrowed bond changes, the cash collateral is periodically increased or decreased with a frequency and in amounts prescribed in the borrowed bond agreement. Full realization of the collateral by the Trusts may be limited if the value of an investment purchased with the cash collateral by the lender decreases. The Trusts may also experience delays in gaining access to the collateral.

Reverse Repurchase Agreements: Certain Trusts may enter into reverse repurchase agreements with qualified third party broker-dealers. In a reverse repurchase agreement, the Trusts sell securities to a bank or broker-dealer and agree to repurchase the same securities at a mutually agreed upon date and price. During the term of the reverse repurchase agreement, the Trusts continue to receive the principal and interest payments on the securities sold. Certain agreements have no stated maturity and can be terminated by either party at any time. Interest on the value of the reverse repurchase agreements issued and outstanding is based upon competitive market rates determined at the time of issuance. The Trusts may utilize reverse repurchase agreements when it is anticipated that the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction. Reverse repurchase agreements involve leverage risk and also the risk that the market value of the securities to be repurchased may decline below the repurchase price.

For financial reporting purposes, cash received in exchange for securities delivered plus accrued interest due to the counterparty is recorded as a liability in the Statements of Assets and Liabilities at face value including accrued interest. Due to the short term nature of the reverse repurchase agreements, face value approximates fair value. Interest payments made by the Trusts to the counterparties are recorded as a component of interest expense in the Statements of Operations. In periods of increased demand for the security, the Trusts may receive a fee for use of the security by the counterparty, which may result in interest income to the Trusts.

For the year ended August 31, 2014, the daily weighted average interest rates from reverse repurchase agreements were as follows:





   
Daily Weighted
Average
Interest Rate

BHK
     
0.24%
BNA
     
0.24%
BKT
     
0.15%

Reverse repurchase transactions and borrowed bond agreements are entered into by the Trusts under Master Repurchase Agreements (“MRA”), which permit the Trusts, under certain circumstances, including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables under the MRA with collateral held and/or posted to the counterparty and create one single net payment due to or from the Trusts. With reverse repurchase transactions and borrowed bond agreements, typically the Trusts and the counterparties are permitted to sell, re-pledge, or use the collateral associated with the transaction. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Pursuant to the terms of the MRA, the Trusts receive or post securities as collateral with a market value in excess of the repurchase price to be paid or received by the Trusts upon the maturity of the transaction. Upon a bankruptcy or insolvency of the MRA counterparty, the Trusts are considered an unsecured creditor with respect to excess collateral and, as such, the return of excess collateral may be delayed.

80 ANNUAL REPORT AUGUST 31, 2014
 
  
Notes to Financial Statements (continued)  

The following table is a summary of the Trusts’ open repurchase agreements and borrowed bond agreements by counterparty which are subject to offset under an MRA on a net basis as of August 31, 2014:


BHK


Counterparty



   
Reverse
Repurchase
Agreements

   
Fair Value of
Non-cash Collateral
Pledged Including
Accrued Interest1

   
Cash
Collateral
Pledged/Received

   
Net
Amount

Barclays Capital, Inc.
        $ 14,913,465         $ (14,913,465 )                          
BNP Paribas Securities Corp.
           66,328,249            (66,328,249 )                          
Citigroup Global Markets, Inc.
           6,726,418            (6,726,418 )                                        
Credit Suisse Securities (USA) LLC
           23,596,107            (23,596,107 )                          
Deutsche Bank Securities, Inc.
           10,001,451            (10,001,451 )                          
Merrill Lynch, Pierce, Fenner & Smith, Inc.
           13,937,451            (13,937,451 )                          
RBC Capital Markets, LLC
           1,464,699            (1,464,699 )                                        
UBS Securities LLC
           31,332,937            (31,332,937 )                          
Total
        $ 168,300,777         $ (168,300,777 )                          
1 Net collateral with a value of $176,020,238 has been pledged/received in connection with open reverse repurchase agreements. Excess of net collateral pledged to the individual counterparty is not shown for financial reporting purposes.

BNA


Counterparty



   
Reverse
Repurchase
Agreements

   
Fair Value of
Non-cash Collateral
Pledged Including
Accrued Interest2

   
Cash
Collateral
Pledged/Received

   
Net
Amount

Barclays Capital, Inc.
        $ 8,863,776         $ (8,863,776 )                          
BNP Paribas Securities Corp.
           55,178,541            (55,178,541 )                          
Credit Suisse Securities (USA) LLC
           35,190,271            (35,190,271 )                          
Deutsche Bank Securities, Inc.
           12,141,341            (12,141,341 )                          
Merrill Lynch, Pierce, Fenner & Smith, Inc.
           25,077,518            (25,077,518 )                          
RBC Capital Markets, LLC
           6,696,626            (6,696,626 )                          
UBS Securities LLC
           28,418,498            (28,418,498 )                          
Total
        $ 171,566,571         $ (171,566,571 )                          
2 Net collateral with a value of $179,439,228 has been pledged/received in connection with open reverse repurchase agreements. Excess of net collateral pledged to the individual counterparty is not shown for financial reporting purposes.

BKT


Counterparty



 
Borrowed
Bonds
Agreements3
 
Reverse
Repurchase
Agreements
 
Borrowed
Bonds at
Value
including
Accrued
Interest4
 
Net Amount
before
Collateral

Non-cash
Collateral
Received
 
Cash
Collateral
Received
 
Non-cash
Collateral
Pledged
 
Cash
Collateral
Pledged
 
Net Collateral
(Received) /
Pledged5
 
Net Exposure
Due (to) / from
Counterparty
 
BNP Paribas Securities
Corp.
             $ (2,831,964          $ (2,831,964
 
 
$2,831,964
 
 
$2,831,964
 
 
Credit Suisse Securities
(USA) LLC
       $ 837,000      $ (202,583,034    $ (877,080    $ (202,623,114
 
 
202,623,114
 
 
202,623,114
 
 
Total
       $ 837,000      $ (205,414,998    $ (877,080    $ (205,455,078
 
 
$205,455,078
 
 
$205,455,078
 
 
3 Included in Investments at value-unaffiliated in the Statements of Assets and Liabilities.
4 Includes accrued interest on borrowed bonds in the amount of $17,393 which is included in interest expense payable in the Statements of Assets and Liabilities.
5 Net collateral with a value of $212,428,256 has been pledged/received in connection with open reverse repurchase agreements. Excess of net collateral pledged to the individual counterparty is not shown for financial reporting purposes.

In the event the counterparty of securities under an MRA files for bankruptcy or becomes insolvent, the Trusts’ use of the proceeds from the agreement may be restricted while the counterparty, or its trustee or receiver, determines whether or not to enforce the Trusts’ obligation to repurchase the securities.

ANNUAL REPORT AUGUST 31, 2014 81
 
  
Notes to Financial Statements (continued)  

Short Sales: Certain Trusts may enter into short sale transactions in which the Trusts sell a security they do not hold in anticipation of a decline in the market price of that security. When the Trusts make a short sale, they will borrow the security sold short (borrowed bond) and deliver the security to the counterparty to which they sold the security short. An amount equal to the proceeds received by the Trusts is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the market value of the short sale. The Trusts are required to repay the counterparty interest on the security sold short, which is shown as interest expense in the Statements of Operations. The Trusts are exposed to market risk based on the amount, if any, that the market value of the security increases beyond the market value at which the position was sold. Thus, a short sale of a security involves the risk that instead of declining, the price of the security sold short will rise. The short sale of securities involves the possibility of a theoretically unlimited loss since there is a theoretically unlimited potential for the market price of the security sold short to increase. A gain, limited to the price at which the Trusts sold the security short, or a loss, unlimited as to the dollar amount, will be recognized upon the termination of a short sale if the market price is either less than or greater than the proceeds originally received. There is no assurance the Trusts will be able to close out a short position at a particular time or at an acceptable price.

4. Derivative Financial Instruments:

The Trusts engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Trusts and/or to economically hedge their exposure to certain risks such as credit risk, equity risk, interest rate risk and foreign currency exchange rate risk. These contracts may be transacted on an exchange or OTC.

Financial Futures Contracts: The Trusts purchase and/or sell financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk). Financial futures contracts are agreements between the Trusts and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date.

Upon entering into a financial futures contract, the Trusts are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Securities deposited as initial margin are designated on the Schedules of Investments and cash deposited, if any, is recorded on the Statements of Assets and Liabilities as cash pledged for financial futures contracts. Pursuant to the contract, the Trusts agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin. Variation margin is recorded by the Trusts as unrealized appreciation or depreciation and, if applicable, as a receivable or payable for variation margin in the Statements of Assets and Liabilities.

When the contract is closed, the Trusts record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest or foreign currency exchange rates and the underlying assets.

Forward Foreign Currency Exchange Contracts: The Trusts enter into forward foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to, or hedge exposure away from, foreign currencies (foreign currency exchange rate risk). A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Forward foreign currency exchange contracts, when used by the Trusts, help to manage the overall exposure to the currencies in which some of the investments held by the Trusts are denominated. The contract is marked-to-market daily and the change in market value is recorded by the Trusts as an unrealized gain or loss. When the contract is closed, the Trusts record a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Options: The Trusts purchase and write call and put options to increase or decrease their exposure to underlying instruments (including equity risk and interest rate risk) and/or, in the case of options written, to generate gains from options premiums. A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised) the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. When the Trusts purchase (write) an option, an amount equal to the premium paid (received) by the Trusts is reflected as an asset (liability). The amount of the asset (liability) is subsequently marked-to-market to reflect the current market value of the option purchased (written). When an instrument is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the instrument acquired or deducted from (or added to) the proceeds of the instrument sold. When an option expires (or the Trusts enter into a closing transaction), the Trusts realize a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premiums received or paid). When the Trusts write a call option, such option is “covered,” meaning that the Trusts hold the underlying instrument subject to being called by the option counterparty. When the Trusts write a put option, such option is covered by cash in an amount sufficient to cover the obligation.

82 ANNUAL REPORT AUGUST 31, 2014
 
  
Notes to Financial Statements (continued)  

Options on swaps (“swaptions”) are similar to options on securities except that instead of selling or purchasing the right to buy or sell a security, the writer or purchaser of the swaptions is granting or buying the right to enter into a previously agreed upon interest rate or credit default swap agreement (interest rate risk and/or credit risk) at any time before the expiration of the option.

The Trusts also purchase or sell listed or OTC foreign currency options, foreign currency futures and related options on foreign currency futures as a short or long hedge against possible variations in foreign exchange rates or to gain exposure to foreign currencies (foreign currency exchange rate risk). When foreign currency is purchased or sold through an exercise of a foreign currency option, the related premium paid (or received) is added to (or deducted from) the basis of the foreign currency acquired or deducted from (or added to) the proceeds of the foreign currency sold (receipts from the foreign currency purchased). Such transactions may be effected with respect to hedges on non-U.S. dollar denominated instruments owned by the Trusts but not yet delivered, or committed or anticipated to be purchased by the Trusts.

In purchasing and writing options, the Trusts bear the risk of an unfavorable change in the value of the underlying instrument or the risk that the Trusts may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Trusts purchasing or selling a security when it otherwise would not, or at a price different from the current market value.

Transactions in options written for the year ended August 31, 2014, were as follows:

         Calls
   
     Puts
   



   
Contracts
   
Notional
(000)1

   
Premiums
Received

   
   
Contracts
   
Notional
(000)1

   
Premiums
Received

BHK
                                                                                                                       
Outstanding options, beginning of year
                    $ 30,700         $ 66,601                        $ 55,300         $ 735,472   
Options written
                       128,200            1,952,235                           156,800            3,167,202   
Options closed
                       (101,100 )           (1,063,035 )                          (98,500 )           (1,514,853 )  
Outstanding options, end of year
                    $ 57,800         $ 955,801                        $ 113,600         $ 2,387,821   
HYT
                                                                                                                       
Outstanding options, beginning of year
                                                  3,595                     $ 432,862   
Options written
                                                  19,250                        814,307   
Options expired
                                                  (9,295 )                       (804,727 )  
Options closed
                                                  (13,550 )                       (442,442 )  
Outstanding options, end of year
                                                                             
BNA
                                                                                                                       
Outstanding options, beginning of year
                    $ 30,900         $ 67,034                        $ 55,500         $ 737,000   
Options written
                       128,400            1,959,254                           156,900            3,173,955   
Options closed
                       (101,500 )           (1,066,688 )                          (98,800 )           (1,519,403 )  
Outstanding options, end of year
                    $ 57,800         $ 959,600                        $ 113,600         $ 2,391,552   

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

Swaps: The Trusts enter into swap agreements in which the Trusts and a counterparty agree either to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract (“OTC swaps”) or centrally cleared (“centrally cleared swaps”). Swaps are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation).

For OTC swaps, any upfront premiums paid are recorded as assets and any upfront fees received are recorded as liabilities and are shown as swap premiums paid and swap premiums received, respectively, in the Statements of Assets and Liabilities and amortized over the term of the OTC swap. Payments received or made by the Trusts for OTC swaps are recorded in the Statements of Operations as realized gains or losses, respectively. When an OTC swap is terminated, the Trusts will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Trusts’ basis in the contract, if any. Generally, the basis of the contract is the premium received or paid.

In a centrally cleared swap, immediately following execution of the swap agreement, the swap agreement is novated to a central counterparty (the “CCP”) and the Trusts’ counterparty on the swap agreement becomes the CCP. The Trusts are required to interface with the CCP through a broker. Upon entering into a centrally cleared swap, the Trusts are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated on the Schedules of Investments and cash deposited is recorded on the Statements of Assets and Liabilities as cash pledged for centrally cleared swaps. The daily change in valuation of centrally cleared swaps is recorded as a receivable or payable for variation margin in the Statements of Assets and Liabilities. Payments received from (paid to) the counterparty, including at termination, are recorded as realized gain (loss) in the Statements of Operations.

Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Statements of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.

ANNUAL REPORT AUGUST 31, 2014 83
 
  
Notes to Financial Statements (continued)  
•  
  Credit default swaps — The Trusts enter into credit default swaps to manage their exposure to the market or certain sectors of the market, to reduce their risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which they are not otherwise exposed (credit risk). The Trusts may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps on single-name issuers are agreements in which the protection buyer pays fixed periodic payments to the seller in consideration for a guarantee from the protection seller to make a specific payment should a negative credit event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation accelerators, repudiation, moratorium or restructuring). Credit default swaps on traded indexes are agreements in which the buyer pays fixed periodic payments to the seller in consideration for a guarantee from the seller to make a specific payment should a write-down, principal or interest shortfall or default of all or individual underlying securities included in the index occur. As a buyer, if an underlying credit event occurs, the Trusts will either (i) receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising the index, or (ii) receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index. As a seller (writer), if an underlying credit event occurs, the Trusts will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.
•  
  Total return swaps — The Trusts enter into total return swaps to obtain exposure to a security or market without owning such security or investing directly in that market or to transfer the risk/return of one market (e.g., fixed income) to another market (e.g., equity or commodity prices) (equity risk, commodity price risk and/or interest rate risk). Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (coupons plus capital gains/losses) of an underlying instrument in exchange for fixed or floating rate interest payments. To the extent the total return of the instrument or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Trusts will receive a payment from or make a payment to the counterparty.
•  
  Interest rate swaps — The Trusts enter into interest rate swaps to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate risk by economically hedging the value of the fixed rate bonds, which may decrease when interest rates rise (interest rate risk). Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time. Interest rate floors, which are a type of interest rate swap, are agreements in which one party agrees to make payments to the other party to the extent that interest rates fall below a specified rate or floor in return for a premium. In more complex swaps, the notional principal amount may decline (or amortize) over time.
•  
  Forward interest rate swaps — The Trusts may enter into forward interest rate swaps and forward total return swaps. In a forward swap, each Trust and the counterparty agree to make either periodic net payments beginning on a specified future effective date or a net payment at termination, unless terminated earlier.

The following is a summary of the Trusts’ derivative financial instruments categorized by risk exposure:


Fair Values of Derivative Financial Instruments as of August 31, 2014

        Value
 
        BHK
 
  HYT
 
  BNA
 
  BKT
 



 
Statements of Assets
and Liabilities Location
 
Derivative
Assets
 
Derivative
Liabilities





Derivative
Assets
 
Derivative
Liabilities
 

 
Derivative
Assets
 
Derivative
Liabilities
 

 
Derivative
Assets
 
Derivative
Liabilities
Interest rate contracts
     
Net unrealized appreciation/ depreciation1; Unrealized appreciation/depreciation on OTC swaps; Swaps premiums paid/received; Investments at value-unaffiliated2; Options written at value
   $ 1,463,804      $ 3,414,537                                  $ 1,495,115      $ 3,420,200              $ 5,045,564      $ 7,706,141  
Foreign currency
exchange contracts
     
Unrealized appreciation/ depreciation on forward foreign currency exchange contracts
    395,247       5,496              $ 7,247,593      $ 304,747               393,776                            
Credit contracts
     
Unrealized appreciation/ depreciation on OTC swaps; Swap premiums paid/received
    249,510       260,720               2,814,373       368,840               250,887       261,668                      
Equity contracts
     
Net unrealized appreciation/ depreciation1
                              886,781                                          
Total
     
 
   $ 2,108,561      $ 3,680,753              $ 10,061,966      $ 1,560,368              $ 2,139,778      $ 3,681,868              $ 5,045,564      $ 7,706,141  
 
     
 
                                                                                       

1 Includes cumulative appreciation/depreciation on financial futures contracts as and centrally cleared swaps as reported in the Schedules of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities .
2 Includes options purchased at value as reported in the Schedules of Investments.
84 ANNUAL REPORT AUGUST 31, 2014
 
  
Notes to Financial Statements (continued) 

The Effect of Derivative Financial Instruments in the Statements of Operations
Year ended August 31, 2014


      Net Realized Gain (Loss) From
  Net Change in Unrealized
Appreciation/Depreciation on

 



 
BHK
 
HYT
 
BHK
 
HYT
Interest rate contracts:
                                   
Financial futures contracts
       $ 1,224,968      $ (910,267    $ (195,226    $ (4,972
Swaps
        (1,450,115           (773,713      
Options1
        274,352             437,577        
Foreign currency exchange contracts:
                                   
Foreign currency transactions/translations
        (1,337,997     (1,730,097     463,069       5,340,324  
Credit contracts:
                                   
Swaps
        (40,008     (7,879,332     8,216       1,770,558  
Equity contracts:
                                   
Financial futures contracts
              (2,309,009           (5,959
Options1
              (8,681,688           (282,619
Total
       $ (1,328,800    $ (21,510,393    $ (60,077    $ 6,817,332  

The Effect of Derivative Financial Instruments in the Statements of Operations
Year ended August 31, 2014


      Net Realized Gain (Loss) From
  Net Change in Unrealized
Appreciation/Depreciation on

 



 
BNA
 
BKT
 
BNA
 
BKT
Interest rate contracts:
                                   
Financial futures contracts
       $ 1,403,516      $ (11,396,693    $ (153,120    $ 157,699  
Swaps
        (1,403,606     503,189       (821,493     (865,533
Options1
        275,605             440,309        
Foreign currency exchange contracts:
                                   
Foreign currency transactions/translations
        (1,491,967           515,078        
Credit contracts:
                                   
Swaps
        (39,974           7,973        
Total
       $ (1,256,426    $ (10,893,504    $ (11,253    $ (707,834

1 Options purchased are included in the net realized gain (loss) from investments and net change in unrealized appreciation/depreciation on investments.

For the year ended August 31, 2014, the average quarterly balances of outstanding derivative financial instruments were as follows:





 
BHK
 
HYT
 
BNA
 
BKT
Financial futures contracts:
                                   
Average number of contracts purchased
        492       28 2      486       92  
Average number of contracts sold
        465       719       475       1,371  
Average notional value of contracts purchased
       $ 78,605,312      $ 2,303,193 2     $ 78,460,026      $ 10,957,840  
Average notional value of contracts sold
       $ 64,088,264      $ 74,194,972      $ 65,243,943      $ 215,862,154  
Forward foreign currency exchange contracts:
                                   
Average number of contracts — US dollars purchased
        3       18       3        
Average number of contracts — US dollars sold
        1       6       1        
Average US dollar amounts purchased
       $ 14,538,535      $ 249,460,801      $ 15,234,500      $  
Average US dollar amounts sold
       $ 724,647      $ 4,418,150      $ 648,999      $  
Options:
                                   
Average number of option contracts purchased
              2,054              
Average number of option contracts written
              4,813 2             
Average notional amount of option contracts purchased
             $ 35,787,522              
Average notional amount of option contracts written
             $ 87,723,750 2             
Average number of swaption contracts purchased
        8             8        
Average number of swaption contracts written
        23             23        
Average notional amount of swaption contracts purchased
       $ 118,800,000            $ 119,050,000        
Average notional amount of swaption contracts written
       $ 154,925,000            $ 155,225,000        
Credit default swaps:
                                   
Average number of contracts — buy protection
        4       5       2        
Average number of contracts — sell protection
        7       39       7        
Average notional amount — buy protection
       $ 3,201,000      $ 1,598,949      $ 3,200,000        
Average notional amount — sell protection
       $ 3,991,250      $ 38,477,627      $ 4,016,250        
Interest rate swaps:
                                   
Average number of contracts — pays fixed rate
        8             8       1  
Average number of contracts — receives fixed rate
        7             7       7  
Average notional amount — pays fixed rate
       $ 82,675,000            $ 82,800,000      $ 60,000,000  
Average notional amount — receives fixed rate
       $ 14,225,000            $ 14,250,000      $ 71,565,000  
2 Average amounts for the period are shown due to limited outstanding derivative financial instruments as of each quarter.
ANNUAL REPORT AUGUST 31, 2014 85
 
  
Notes to Financial Statements (continued) 

Counterparty Credit Risk: 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.

The Trusts’ risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by such Trust. For OTC options purchased, each Trust bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by such Trust should the counterparty fail to perform under the contracts. Options written by the Trusts do not typically give rise to counterparty credit risk, as options written generally obligate the Trusts, and not the counterparty, to perform.

With exchange-traded purchased options and futures and centrally cleared swaps, there is less counterparty credit risk to the Trusts since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Trusts do not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Trusts.

In order to better define their contractual rights and to secure rights that will help the Trusts mitigate their counterparty risk, the Trusts may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its counterparties. An ISDA Master Agreement is a bilateral agreement between each Trust and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, each Trust may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to terminate derivative contracts prior to maturity in the event the Trusts’ net assets decline by a stated percentage or the Trusts fail to meet the terms of its ISDA Master Agreements. The result would cause the Trusts to accelerate payment of any net liability owed to the counterparty.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Trusts and the counterparty.

Cash collateral that has been pledged to cover obligations of the Trusts and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Trusts, if any, is noted in the Schedules of Investments. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount threshold (e.g., $500,000) before a transfer is required, which is determined at the close of business of the Trusts. Any additional required collateral is delivered to/pledged by the Trusts on the next business day. Typically, the Trusts and counterparties are not permitted to sell, re-pledge or use the collateral they receive. To the extent amounts due to the Trusts from their counterparties are not fully collateralized, the Trusts bear the risk of loss from counterparty non-performance. Likewise, to the extent the Trusts have delivered collateral to a counterparty and stands ready to perform under the terms of its agreement with such counterparty, the Trusts bear the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral.

For financial reporting purposes, the Trusts do not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statements of Assets and Liabilities.

86 ANNUAL REPORT AUGUST 31, 2014
 
  
Notes to Financial Statements (continued) 

As of August 31, 2014, the Trusts’ derivative assets and liabilities (by type) are as follows:


      BHK
  HYT
 



 
Assets
 
Liabilities
 
Assets
 
Liabilities
Derivative Financial Instruments:
                                   
Financial futures contracts
       $ 20,000      $ 40,558            $ 155,496  
Forward foreign currency exchange contracts
        395,247       5,496      $ 7,247,593       304,747  
Options1
        954,199       2,580,908              
Swaps — Centrally cleared
              3,203              
Swaps — OTC2
        249,510       260,720       2,814,373       368,840  
Total derivative assets and liabilities in the Statements of Assets and Liabilities
       $ 1,618,956      $ 2,890,885      $ 10,061,966      $ 829,083  
Derivatives not subject to a master netting agreement or similar agreement (“MNA”)
        (20,000     (43,761           (155,496
Total derivative assets and liabilities subject to an MNA
       $ 1,598,956      $ 2,847,124      $ 10,061,966      $ 673,587  
 
                                   

      BNA
  BKT
 



 
Assets
 
Liabilities
 
Assets
 
Liabilities
Derivative Financial Instruments:
                                   
Financial futures contracts
       $ 18,125      $ 51,432      $ 156,594      $ 13,606  
Forward foreign currency exchange contracts
        393,776                    
Options1
        954,199       2,588,336              
Swaps — Centrally cleared
              1,758       20        
Swaps — OTC2
        250,887       261,668       5,032,194       6,832,450  
Total derivative assets and liabilities in the Statements of Assets and Liabilities
       $ 1,616,987      $ 2,903,194      $ 5,188,808      $ 6,846,056  
Derivatives not subject to an MNA
        (18,125     (53,190     (156,614     (13,606
Total derivative assets and liabilities subject to an MNA
       $ 1,598,862      $ 2,850,004      $ 5,032,194      $ 6,832,450  
 
                                   
1 Includes options purchased at value which is included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Schedules of Investments.
2 Includes unrealized appreciation/depreciation on OTC swaps and swap premiums paid/received in the Statements of Assets and Liabilities.

The following tables present the Trusts’ derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Trusts as of August 31, 2014:


BHK



 

 

 

 

 

Counterparty



 
Derivative Assets
Subject to an MNA
by Counterparty

 
Derivatives
Available
for Offset3

 
Non-cash
Collateral
Received

 
Cash
Collateral
Received

 
Net Amount
of Derivative
Assets4

Bank of America N.A.  
       $ 324,992      $ (6,993                $ 317,999  
Barclays Bank PLC
        205,406       (205,406                  
Citibank N.A.
        43,407       (43,407                  
Credit Suisse International
        30,432       (30,432                  
Deutsche Bank AG
        700,325       (700,325                  
Goldman Sachs Bank USA
        24,822       (24,822                  
JPMorgan Chase Bank N.A.
        211,943       (211,943                  
Morgan Stanley Capital Services LLC
        57,629       (38,721                 18,908  
Total
       $ 1,598,956      $ (1,262,049                $ 336,907  

BHK



 

 

 

 

 

Counterparty



 
Derivative Liabilities
Subject to an MNA
by Counterparty

 
Derivatives
Available
for Offset3

 
Non-cash
Collateral
Pledged

 
Cash
Collateral
Pledged5

 
Net Amount
of Derivative
Liabilities6

Bank of America N.A. 
       $ 6,993      $ (6,993                  
Barclays Bank PLC
        681,786       (205,406          $ (476,380      
BNP Paribas S.A.
        35,272                        $ 35,272  
Citibank N.A.
        181,780       (43,407                 138,373  
Credit Suisse International
        125,015       (30,432                 94,583  
Deutsche Bank AG
        963,524       (700,325                 263,199  
Goldman Sachs Bank USA
        34,133       (24,822                 9,311  
JPMorgan Chase Bank N.A.
        779,900       (211,943           (567,957      
Morgan Stanley Capital Services LLC
        38,721       (38,721                  
Total
       $ 2,847,124      $ (1,262,049          $ (1,044,337    $ 540,738  

3 The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.
4 Net amount represents the net amount receivable from the counterparty in the event of default.
5 Excess of collateral pledged to the individual counterparty is not shown for financial reporting purposes.
6 Net amount represents the net amount payable due to the counterparty in the event of default.
ANNUAL REPORT AUGUST 31, 2014 87
 
  
Notes to Financial Statements (continued) 

HYT



 

 

 

 

 

Counterparty



 
Derivative Assets
Subject to an MNA
by Counterparty

 
Derivatives
Available
for Offset1

 
Non-cash
Collateral
Received

 
Cash
Collateral
Received2

 
Net Amount
of Derivative
Assets3

Bank of America N.A.
       $ 2,157,816                        $ 2,157,816  
Citibank N.A.
        5,054,775      $ (5,701                 5,049,074  
Deutsche Bank AG
        1,627,373       (857          $ (1,626,516      
Goldman Sachs International
        982,109       (368,840           (613,269      
UBS AG
        239,893       (22,921                 216,972  
Total
       $ 10,061,966      $ (398,319          $ (2,239,785    $ 7,423,862  

HYT



 

 

 

 

 

Counterparty



 
Derivative Liabilities
Subject to an MNA
by Counterparty

 
Derivatives
Available
for Offset1

 
Non-cash
Collateral
Pledged

 
Cash
Collateral
Pledged

 
Net Amount
of Derivative
Liabilities4

Citibank N.A.
       $ 5,701      $ (5,701                  
Deutsche Bank AG
        857       (857                  
Goldman Sachs Bank USA
        52,521                        $ 52,521  
Goldman Sachs International
        368,840       (368,840                  
JPMorgan Chase Bank N.A.
        20,167                         20,167  
Royal Bank of Scotland PLC
        1,728                         1,728  
State Street Bank and Trust Co.
        51,485                         51,485  
The Bank of New York Mellon
        7,813                         7,813  
Toronto — Dominion Bank
        141,554                         141,554  
UBS AG
        22,921       (22,921                  
Total
       $ 673,587      $ (398,319                $ 275,268  

BNA



 

 

 

 

 

Counterparty



 
Derivative Assets
Subject to an MNA
by Counterparty

 
Derivatives
Available
for Offset1

 
Non-cash
Collateral
Received

 
Cash
Collateral
Received

 
Net Amount
of Derivative
Assets3

Bank of America N.A.
       $ 323,713      $ (1,497                $ 322,216  
Barclays Bank PLC
        205,406       (205,406                  
Citibank N.A.
        43,769       (43,769                  
Credit Suisse International
        30,970       (30,970                  
Deutsche Bank AG
        700,306       (700,306                  
Goldman Sachs Bank USA
        24,822       (24,822                  
JPMorgan Chase Bank N.A.
        211,751       (211,751                  
Morgan Stanley Capital Services LLC
        58,125       (39,060                 19,065  
Total
       $ 1,598,862      $ (1,257,581                $ 341,281  

BNA



 

 

 

 

 

Counterparty



 
Derivative Liabilities
Subject to an MNA
by Counterparty

 
Derivatives
Available
for Offset1

 
Non-cash
Collateral
Pledged

 
Cash
Collateral
Pledged5

 
Net Amount
of Derivative
Liabilities4

Bank of America N.A.
       $ 1,497      $ (1,497                  
Barclays Bank PLC
        688,060       (205,406          $ (20,000    $ 462,654  
BNP Paribas S.A.
        35,272                         35,272  
Citibank N.A.
        182,057       (43,769                 138,288  
Credit Suisse International
        125,392       (30,970                 94,422  
Deutsche Bank AG
        958,401       (700,306                 258,095  
Goldman Sachs Bank USA
        34,133       (24,822                 9,311  
JPMorgan Chase Bank N.A.
        786,132       (211,751           (570,000     4,381  
Morgan Stanley Capital Services LLC
        39,060       (39,060                  
Total
       $ 2,850,004      $ (1,257,581          $ (590,000    $ 1,002,423  

1 The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.
2 Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.
3 Net amount represents the net amount receivable from the counterparty in the event of default.
4 Net amount represents the net amount payable due to the counterparty in the event of default.
5 Excess of collateral pledged to the individual counterparty is not shown for financial reporting purposes.
88 ANNUAL REPORT AUGUST 31, 2014
 
  
Notes to Financial Statements (continued) 

BKT



 

 

 

 

 

Counterparty



 
Derivative Assets
Subject to an MNA
by Counterparty

 
Derivatives
Available
for Offset1

 
Non-cash
Collateral
Received2

 
Cash
Collateral
Received2

 
Net Amount
of Derivative
Assets

Citibank N.A.
       $ 661,695                  $ (661,695      
Goldman Sachs Bank USA
        335,111                   (335,111      
JPMorgan Chase Bank N.A.
        3,409,054      $ (183,998           (3,225,056      
UBS AG
        626,334            $ (626,334            
Total
       $ 5,032,194      $ (183,998     (626,334    $ (4,221,862      

BKT



 

 

 

 

 

Counterparty



 
Derivative Liabilities
Subject to an MNA
by Counterparty

 
Derivatives
Available
for Offset1

 
Non-cash
Collateral
Pledged

 
Cash
Collateral
Pledged3

 
Net Amount
of Derivative
Liabilities

Deutsche Bank AG
       $ 6,648,452                  $ (6,648,452      
JPMorgan Chase Bank N.A.
        183,998      $ (183,998                  
Total
       $ 6,832,450      $ (183,998          $ (6,648,452      

1 The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.
2 Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.
3 Excess of collateral pledged to the individual counterparty is not shown for financial reporting purposes.

5. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate, for 1940 Act purposes, BlackRock, Inc. (“BlackRock”).

Each Trust entered into an Investment Advisory Agreement with the Manager, the Trusts’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory services for each Trust and administration services for BHK and HYT.

The following Trust’s investment advisory fee paid to the Manager is computed weekly and payable monthly based on an annual rate of it’s average total assets (including any assets attributable to borrowings) minus the sum of total liabilities (other than debt representing financial leverage):


BHK
     
0.55%

The following Trust’s investment advisory fee paid to the Manager is computed daily and payable monthly based on an annual rate of it’s average total assets (including any assets attributable to borrowings) minus the sum of total liabilities (other than debt representing financial leverage):


HYT
     
0.60%

Prior to November 18, 2013, HYT paid the Manager an investment advisory fee computed and paid monthly based on an annual rate of 0.70%.

The following Trusts’ investment advisory fee paid to the Manager is computed weekly and payable monthly based on an annual rate of each Trust’s average net assets:


BNA
     
0.60%
BKT
     
0.65%

BNA and BKT each have an Administration Agreement with the Manager. The administration fee paid to the Manager is computed weekly and payable monthly based on an annual rate, 0.10% for BNA, and 0.15% for BKT, of each Trust’s average net assets.

The Manager voluntarily agreed to waive a portion of investment advisory fee with respect to BHK at an annual rate of 0.03%, as a percentage of average weekly net assets. This voluntary waiver may be reduced or discontinued at any time without notice. For the year ended August 31, 2014, the Manager waived $169,106, which is included in fees waived by Manager in the Statements of Operations for BHK.

The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each Trust pays to the Manager indirectly through its investment in affiliated money market funds. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with each Trust’s investment in other affiliated investment companies, if any. These amounts are included in fees waived by Manager in the Statements of Operations. For the year ended August 31, 2014, the amounts waived were as follows:


BHK
     
$3,706
HYT
     
$1,724
BNA
     
$3,720
BKT
     
$7,128
ANNUAL REPORT AUGUST 31, 2014 89
 
  
Notes to Financial Statements (continued) 

The Manager provides investment management and other services to the Taxable Subsidiaries. The Manager does not receive separate compensation from the Taxable Subsidiaries for providing investment management or administrative services. However, HYT pays the Manager based on the HYT’s net assets, which includes the assets of the Taxable Subsidiaries.

Prior to July 1, 2014, BlackRock Financial Management, Inc. (“BFM”), an affiliate of the Manager, served as a sub-advisor to each Trust pursuant to sub-advisory agreements with the Manager, and received for its services a monthly fee from the Manager at an annual rate equal to a percentage of the investment advisory fees paid by each Trust to the Manager under the Investment Advisory Agreements. Effective July 1, 2014, the sub-advisory agreements between the Manager and BFM, with respect to each Trust, expired.

Certain officers and/or Trustees of the Trusts are officers and/or directors of BlackRock or its affiliates. The Trusts reimburse the Manager for a portion of the compensation paid to the Trusts’ Chief Compliance Officer, which is included in Officer and Trustees in the Statements of Operations.

The Trusts may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees. For the year ended August 31, 2014, the purchase and sale transactions with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:





 
HYT
 
BNA
Sales
       $ 608,065      $ 15,881  

6. Purchases and Sales:

Purchases and sales of investments including paydowns, mortgage dollar roll and TBA transactions and excluding short-term securities for the year ended August 31, 2014 were as follows:


Purchases





 
BHK
 
HYT
 
BNA
 
BKT
Non-U.S. Government Securities
       $ 462,182,025      $ 1,253,498,361      $ 453,201,516      $ 1,712,583,875  
U.S. Government Securities
        18,677,813             19,816,559       63,320,043  
Total Purchases
       $ 480,859,838      $ 1,253,498,361      $ 473,018,075      $ 1,775,903,918  

Sales





 
BHK
 
HYT
 
BNA
 
BKT
Non-U.S. Government Securities (includes paydowns)
       $ 455,346,251      $ 1,260,736,919      $ 444,466,865      $ 1,675,437,631  
U.S. Government Securities
        10,737,091             9,506,669       66,814,601  
Total Sales
       $ 466,083,342      $ 1,260,736,919      $ 453,973,534      $ 1,742,252,232  

Purchases and sales related to mortgage dollar rolls for the year ended August 31, 2014 were as follows:





 
BHK
 
          HYT          
 
BNA
 
BKT
Purchases
       $ 190,983,903            $ 191,002,019      $ 887,952,427  
Sales
       $ 191,490,455            $ 191,508,600      $ 888,423,017  

7. Income Tax Information:

It is each Trust’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of their taxable income to their shareholders. Therefore, no 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 the Trusts’ U.S. federal tax returns remains open for each of the four years ended August 31, 2014. The statutes of limitations on each Trust’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Trusts’ facts and circumstances and does not believe that there are any uncertain tax positions that require recognition of a tax liability.

90 ANNUAL REPORT AUGUST 31, 2014
 
  
Notes to Financial Statements (continued) 

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of August 31, 2014 the following permanent differences attributable to the accounting for swap agreements, amortization methods on fixed income securities, the classification of settlement proceeds, foreign currency transactions, non-deductible expenses, limitations on the utilization of capital loss carryforwards, income recognized from investments in partnerships, net paydowns losses and dividends recognized for tax purposes were reclassified to the following accounts:





 
BHK
 
HYT
 
BNA
 
BKT
Paid-in capital
       $ (226,142    $ (27,300,771    $ (77,383    $ (267,805
Undistributed net investment income
       $ (1,123,191    $ (362,339    $ (1,171,206    $ 3,876,821  
Undistributed net realized loss
       $ 1,349,333      $ 27,663,110      $ 1,248,589      $ (3,609,016

The tax character of distributions paid was as follows:





 

 
BHK
 
HYT
 
BNA
 
BKT
Ordinary income
        8/31/14      $ 24,499,913      $ 101,824,719      $ 24,601,850      $ 27,623,179  
 
        8/31/13      $ 25,416,860      $ 39,195,248      $ 23,740,439      $ 30,628,476  
Total
        8/31/14      $ 24,499,913      $ 101,824,719      $ 24,601,850      $ 27,623,179  
 
        8/31/13      $ 25,416,860      $ 39,195,248      $ 23,740,439       30,628,476  

As of August 31, 2014, the tax components of accumulated net earnings (losses) were as follows:





 
BHK
 
HYT
 
BNA
 
BKT
Undistributed ordinary income
       $ 3,384,596      $ 14,048,854      $ 3,388,834      $ 9,391,147  
Capital loss carryforwards
        (5,935,470     (160,563,172     (13,935,671     (15,439,200
Net unrealized gains1
        35,894,670       63,429,489       35,580,135       3,128,666  
Qualified late-year loss2
                          (10,422,543
Total
       $ 33,343,796      $ (83,084,829    $ 25,033,298      $ (13,341,930
 
                                   
1 The differences between book-basis and tax-basis net unrealized gains were attributable primarily to the tax deferral of losses on wash sales, amortization methods for premiums and discounts on fixed income securities, the accrual of income on securities in default, the realization for tax purposes of unrealized gains/losses on certain futures and foreign currency contracts, the accounting for swap agreements, the realization for tax of unrealized gains investments in passive foreign investment companies, the investment in a wholly owned subsidiary, dividends recognized for tax purposes, the classification of investments and the deferral of compensation to trustees.
2 The Trust has elected to defer certain qualified late year losses and recognize such losses in the next taxable year.

As of August 31, 2014, the Trusts had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:


Expires July 31,



 
BHK
 
HYT
 
BNA
 
BKT
2015
             $ 5,594,580              
2016
              4,056,597              
2017
       $ 5,935,470       95,246,388      $ 2,971,033        
2018
              55,665,607       10,964,638        
No expiration date3
                         $ 15,439,200  
Total
       $ 5,935,470      $ 160,563,172      $ 13,935,671      $ 15,439,200  
 
                                   
3 Must be utilized prior to losses subject to expiration.

During the year ended August 31, 2014, the Trusts listed below utilized the following amounts of their respective capital loss carryforwards:

BHK


 
HYT
 
BNA
$4,422,075
     
$45,974,238
 
$4,589,943

As of August 31, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:





 
BHK
 
HYT
 
BNA
 
BKT
 
Tax cost
       $ 561,453,510      $ 2,328,993,637      $ 563,020,008      $ 756,270,127  
Gross unrealized appreciation
       $ 40,700,073      $ 119,249,661      $ 41,570,516      $ 29,865,577  
Gross unrealized depreciation
        (4,963,357     (60,657,357     (6,066,398     (24,891,205
Net unrealized appreciation
       $ 35,736,716      $ 58,592,304      $ 35,504,118      $ 4,974,372  
 
                                   
ANNUAL REPORT AUGUST 31, 2014 91
 
  
Notes to Financial Statements (continued) 

8. Borrowings:

HYT is party to a senior committed secured, 360-day rolling line of credit facility and a separate security agreement (the “SSB Agreement”) with State Street Bank and Trust Company (“SSB”). SSB may elect to terminate its commitment upon 360-days written notice to HYT. HYT has granted a security interest in substantially all of its assets to SSB.

The SSB Agreement allows for a maximum commitment amount of $798,000,000 for HYT.

Advances will be made by SSB to HYT, at the HYT’s option of (a) the higher of (i) 0.80% above the Fed Funds rate and (ii) 0.80% above the Overnight LIBOR or (b) 0.80% above 7-day, 30-day, 60-day or 90-day LIBOR.

In addition, HYT pays a facility fee and utilization fee (based on the daily unused portion of the commitments). The commitment fees are waived if HYT meets certain conditions. The fees associated with the agreement, if any, is included in the Statements of Operations as borrowing costs. Advances to HYT as of August 31, 2014 are shown in the Statements of Assets and Liabilities as bank borrowings payable. Based on the short-term nature of the borrowings under the line of credit and the variable interest rate, the carrying amount of the borrowings approximates fair value.

HYT may not declare dividends or make other distributions on shares or purchase any such shares if, at the time of the declaration, distribution or purchase, asset coverage with respect to the outstanding short-term borrowings is less than 300%.

For the year ended August 31, 2014, the daily weighted average interest rates for HYT with loans under the revolving credit agreements was 0.91%.

9. Concentration, Market and Credit Risk:

In the normal course of business, the Trusts invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Trusts may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Trusts; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Trusts may be exposed to counterparty credit risk, or the risk that an entity with which the Trusts have unsettled or open transactions may fail to or be unable to perform on its commitments. The Trusts manage counterparty credit risk by entering into transactions only with counterparties that they believe 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 generally approximated by their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Trusts.

The Trusts invest a significant portion of its assets in fixed-income securities and/or uses derivatives tied to the fixed-income markets. See the Schedules of Investments for these securities and/or derivatives. Changes in market interest rates or economic conditions, including the Federal Reserve’s decision in December 2013 to taper its quantitative easing policy, 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 Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

Certain Trusts invest a significant portion of their assets in securities backed by commercial or residential mortgage loans or in issuers that hold mortgage and other asset-backed securities. Please see the Schedules of Investments for these securities. Changes in economic conditions, including delinquencies and/or defaults on assets underlying these securities, can affect the value, income and/or liquidity of such positions.

10. Capital Share Transactions:

BHK is authorized to issue an unlimited number of shares, par value $0.001, all of which were initially classified as Common Shares. BNA and BKT are authorized to issue 200 million shares, par value $0.01, all of which were initially classified as Common Shares. HYT is authorized to issue 200 million shares, par value $0.10, all of which were initially classified as Common Shares. The Board is authorized, however, to reclassify any unissued shares without approval of Common Shareholders.

For the years shown, shares issued and outstanding increased by the following amounts as a result of dividend reinvestment:


Year Ended August 31,



 
BHK
 
HYT
2014
               
2013
        14,416       39,051  

Shares issued and outstanding increased 91,181,428 due to the reorganization during the year ended August 31, 2014 for HYT.

Shares issued and outstanding remained constant during the year ended August 31, 2014 and the year ended August 31, 2013 for BNA and BKT.

92 ANNUAL REPORT AUGUST 31, 2014
 
  
Notes to Financial Statements (concluded) 

During the current reporting period, HYT filed an initial registration statement with the U.S. Securities and Exchange Commission (“SEC”) allowing it to issue additional Common Shares through an equity shelf program (a “Shelf Offering”), which is not yet effective. HYT may not sell any Common Shares in the Shelf Offering until the registration statement filed with the SEC is effective. Under the Shelf Offering, HYT, subject to market conditions, may raise additional equity capital from time to time in varying amounts and utilizing various offering methods at a net price at or above HYT’s net asset value (“NAV”) per Common Share (calculated within 48 hours of pricing). Please see Additional Information — Shelf Offering Program for additional information about the Shelf Offering.

Costs incurred by HYT in connection with the Shelf Offering are recorded as a deferred charge and amortized over 12 months.

11. Subsequent Events:

Management has evaluated the impact of all subsequent events on the Trusts’ through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

The Trusts paid a net investment income dividend on September 30, 2014 to shareholders of record on September 15, 2014 as follows:





 
Common Dividend
Per Share

BHK
     
$0.0755
HYT
     
$0.0755
BNA
     
$0.0595
BKT
     
$0.0350

Additionally, the Trusts declared a net investment income dividend on October 1, 2014 payable to shareholders of record on October 15, 2014 for the same amounts noted above.

At a special meeting of shareholders on September 30, 2014, the shareholders of the BHK and BNA approved its respective reorganization. On October 16, 2014, the Manager announced special distributions in connection with the reorganization. BHK and BNA will pay an income distribution on October 31, 2014 to shareholders of record as of October 27, 2014 as follows:





 
Distribution
Per Share

BHK
     
$0.1700
BNA
     
$0.1650

At a special meeting of shareholders on September 30, 2014, the reorganization of BKT with and into BHK was not approved by BKT shareholders. Consequently, the reorganization of BKT with and into BHK will not be completed.

ANNUAL REPORT AUGUST 31, 2014 93
 
  
Report of Independent Registered Public Accounting Firm 

To the Shareholders and Board of Trustees/Directors of BlackRock Core Bond Trust,
BlackRock Corporate High Yield Fund, Inc. (formerly known as BlackRock Corporate High Yield Fund VI, Inc.),
BlackRock Income Opportunity Trust, Inc., BlackRock Income Trust, Inc.:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of BlackRock Core Bond Trust, BlackRock Income Opportunity Trust, Inc., and BlackRock Income Trust, Inc. (collectively the “Funds”) as of August 31, 2014, and the related statements of operations and cash flows for the year then ended, and the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the years in the five-year period then ended. We have also audited the consolidated statement of assets and liabilities, including the consolidated schedule of investments of BlackRock Corporate High Yield Fund, Inc., (collectively with the Funds mentioned above, the “Trusts”) as of August 31, 2014, and the related consolidated statements of operations and cash flows for the year then ended, the consolidated statements of changes in net assets for each of the two years in the period then ended, and the consolidated financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Trusts’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trusts are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trusts’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2014, by correspondence with the custodian, brokers, and agent banks; where replies were not received from brokers or agent banks, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial positions of BlackRock Core Bond Trust, BlackRock Income Opportunity Trust, Inc., and BlackRock Income Trust, Inc., the results of their operations and their cash flows for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each the years in the five-year period then ended, and the consolidated financial position of BlackRock Corporate High Yield Fund, Inc., as of August 31, 2014, the consolidated results of its operations and its cash flows for the year then ended, the consolidated changes in its net assets for each of the two years in the period then ended, and its consolidated financial highlights for each of the years in the five-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the financial statements, on June 6, 2014, the Board of BlackRock Core Bond Trust and the Boards of BlackRock Income Opportunity Trust, Inc., and BlackRock Income Trust, Inc. (each individually, a “Target Fund”) approved the reorganizations of each Target Fund into BlackRock Core Bond Trust (“the Surviving Fund”). As discussed in Note 11, on September 30, 2014, the shareholders of BlackRock Core Bond Trust and BlackRock Income Opportunities Trust, Inc., approved their respective reorganization.

Deloitte & Touche LLP
Boston, Massachusetts
October 24, 2014

94 ANNUAL REPORT AUGUST 31, 2014
 
  
Important Tax Information (Unaudited) 

The following information is provided with respect to the ordinary income distributions paid by the Trusts during the fiscal year ended August 31, 2014.






   
Payable Dates
   
BHK
   
HYT
   
BNA
   
BKT
Interest-Related Dividends for Non-US Residents1
     
September 2013 – January 2014
        85.83 %           75.19 %           84.00 %           91.80 %  
 
     
February 2014 – August 2014
        78.02 %           72.93 %           80.05 %           96.26 %  
Qualified Dividend Income for Individuals
     
September 2013 – January 2014
                    1.19 %                          
 
     
February 2014 – August 2014
        8.07 %           5.60 %           8.98 %              
Dividends Qualifying for the Dividend Received Deduction for Corporations
     
September 2013 – January 2014
                    0.99 %                          
 
     
February 2014 – August 2014
        3.58 %           3.23 %           6.51 %              
Federal Obligation Interest2
     
September 2013 – August 2014
        6.02 %                       5.53 %              
1 Represents the portion of the taxable ordinary income dividends eligible for exemption from US withholding tax for nonresident aliens and foreign corporations.
2 The law varies in each state as to whether and what percentage of dividend income attributable to federal obligations is exempt from state income tax. We recommend that you consult your tax advisor to determine if any portion of the dividends you received is exempt from state income taxes.
ANNUAL REPORT AUGUST 31, 2014 95
 
  
Disclosure of Investment Advisory Agreements 

The Board of Directors or Trustees, as applicable (each, a “Board,” collectively, the “Boards,” and the members of which are referred to as “Board Members”) of BlackRock Core Bond Trust (“BHK”), BlackRock Corporate High Yield Fund, Inc. (“HYT”), BlackRock Income Opportunity Trust, Inc. (“BNA”) and BlackRock Income Trust, Inc. (“BKT” and together with BHK, HYT and BNA, each a “Fund,” and, collectively, the “Funds”) met in person on May 9, 2014 (the “May Meeting”) and June 5-6, 2014 (the “June Meeting”) to consider the approval of each Fund’s investment advisory agreement (each, an “Advisory Agreement,” and, collectively, the “Advisory Agreements”) with BlackRock Advisors, LLC (the “Manager”), each Fund’s investment advisor. At the June Meeting, it was noted that the sub-advisory agreement among the Manager, BlackRock Financial Management, Inc. and each Fund would expire effective July 1, 2014. It was also noted that the non-renewal of each Fund’s sub-advisory agreement would not result in any change in the nature or quality of services provided to such Fund, or in the portfolio management team that serves such Fund. The Manager is referred to herein as “BlackRock.”

Activities and Composition of the Board

Each Board consists of eleven individuals, nine of whom are not “interested persons” of such Fund as defined in the Investment Company Act of 1940 (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Funds and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chairman of each Board is an Independent Board Member. Each Board has established six standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee, an Executive Committee, and a Leverage Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Executive Committee and the Leverage Committee, each of which also has one interested Board Member).

The Advisory Agreements

Pursuant to the 1940 Act, the Boards are required to consider the continuation of the Advisory Agreements on an annual basis. The Boards have four quarterly meetings per year, each extending over two days, and a fifth one-day meeting to consider specific information surrounding the consideration of renewing the Advisory Agreements. In connection with this process, the Boards assessed, among other things, the nature, scope and quality of the services provided to the Funds by BlackRock, its personnel and its affiliates, including, as applicable, investment management, administrative, and shareholder services; oversight of fund service providers; marketing services; risk oversight; compliance and assistance in meeting applicable legal and regulatory requirements.

The Boards, acting directly and through their respective committees, consider at each of their meetings, and from time to time as appropriate, factors that are relevant to their annual consideration of the renewal of the Advisory Agreements, including the services and support provided by BlackRock to the Funds and their shareholders. Among the matters the Boards considered were: (a) investment performance for one-year, three-year, five-year and/or since inception periods, as applicable, against peer funds, and applicable benchmarks, if any, as well as senior management’s and portfolio managers’ analysis of the reasons for any over-performance or underperformance against their peers and/or benchmark, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Funds for services such as call center; (c) Fund operating expenses and how BlackRock allocates expenses to the Funds; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of the Funds’ investment objective, policies and restrictions, and meeting new regulatory requirements; (e) the Funds’ compliance with their Code of Ethics and other compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Boards; (i) execution quality of portfolio transactions; (j) BlackRock’s implementation of the Funds’ valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment objectives across the open-end fund, closed-end fund and institutional account product channels, as applicable; (l) BlackRock’s compensation methodology for its investment professionals and the incentives it creates; and (m) periodic updates on BlackRock’s business.

The Boards have engaged in an ongoing strategic review with BlackRock of opportunities to consolidate funds and of BlackRock’s commitment to investment performance. BlackRock also furnished information to the Boards in response to specific questions. These questions covered issues such as: BlackRock’s profitability; investment performance; subadvisory and advisory relationships with other clients (including mutual funds sponsored by third parties); investment professional investment in funds they manage; and management fee levels and breakpoints. The Boards further discussed with BlackRock: BlackRock’s management structure; portfolio turnover; BlackRock’s portfolio manager compensation and performance accountability; marketing support for the Funds; services provided to the Funds by BlackRock affiliates; and BlackRock’s oversight of relationships with third party service providers.

Board Considerations in Approving the Advisory Agreements

The Approval Process: Prior to the May Meeting, the Boards requested and received materials specifically relating to the Advisory Agreements. The Boards are continuously engaged in a process with their independent legal counsel and BlackRock to review the nature and scope of the information provided to better assist their deliberations. The materials provided in connection with the May Meeting included (a) information independently compiled and prepared by Lipper, Inc. (“Lipper”) on Fund fees and expenses as compared with a peer group of funds as determined by Lipper (“Expense Peers”) and the investment performance of the Funds as compared with a peer group of funds as determined by Lipper1, as well as the investment performance of each of

1 Funds are ranked by Lipper in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable.
96 ANNUAL REPORT AUGUST 31, 2014
 
  
Disclosure of Investment Advisory Agreements (continued) 

BHK, BNA and BKT as compared with its custom benchmark; (b) information on the profits realized by BlackRock and its affiliates pursuant to the Advisory Agreements and a discussion of fall-out benefits to BlackRock and its affiliates; (c) a general analysis provided by BlackRock concerning investment management fees charged to other clients, such as institutional clients and open-end funds, under similar investment mandates, as applicable; (d) review of non-management fees; (e) the existence, impact and sharing of potential economies of scale; (f) a summary of aggregate amounts paid by each Fund to BlackRock and (g) if applicable, a comparison of management fees to similar BlackRock closed-end funds, as classified by Lipper.

At the May Meeting, the Boards reviewed materials relating to their consideration of the Advisory Agreements. As a result of the discussions that occurred during the May Meeting, and as a culmination of the Boards’ year-long deliberative process, the Boards presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the June Meeting.

At the June Meeting, each Board, including the Independent Board Members, unanimously approved the continuation of the Advisory Agreements between the Manager and its Fund for a one-year term ending June 30, 2015. In approving the continuation of the Advisory Agreements, the Boards considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Funds and BlackRock; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with the Funds; (d) the Funds’ costs to investors compared to the costs of Expense Peers and performance compared to the relevant performance comparison as previously discussed; (e) economies of scale; (f) fall-out benefits to BlackRock and its affiliates as a result of its relationship with the Funds; and (g) other factors deemed relevant by the Board Members.

The Boards also considered other matters they deemed important to the approval process, such as payments made to BlackRock or its affiliates relating to securities lending, services related to the valuation and pricing of Fund portfolio holdings, direct and indirect benefits to BlackRock and its affiliates from their relationship with the Funds and advice from independent legal counsel with respect to the review process and materials submitted for the Boards’ review. The Boards noted the willingness of BlackRock personnel to engage in open, candid discussions with the Boards. The Boards did not identify any particular information as determinative, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock: The Boards, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of the Funds. Throughout the year, each Board compared its Fund’s performance to the performance of a comparable group of closed-end funds and/or the performance of a relevant benchmark, as applicable. The Boards met with BlackRock’s senior management personnel responsible for investment activities, including the senior investment officers. Each Board also reviewed the materials provided by its Fund’s portfolio management team discussing the Fund’s performance and the Fund’s investment objective, strategies and outlook.

The Boards considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and their Funds’ portfolio management teams; investments by portfolio managers in the funds they manage; portfolio trading capabilities; use of technology; commitment to compliance; credit analysis capabilities; risk analysis and oversight capabilities; and the approach to training and retaining portfolio managers and other research, advisory and management personnel. The Boards engaged in a review of BlackRock’s compensation structure with respect to the Funds’ portfolio management teams and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to advisory services, the Boards considered the quality of the administrative and other non-investment advisory services provided to the Funds. BlackRock and its affiliates provide the Funds with certain services (in addition to any such services provided to the Funds by third parties) and officers and other personnel as are necessary for the operations of the Funds. In particular, BlackRock and its affiliates provide the Funds with the following administrative services including, among others: (i) preparing disclosure documents, such as the prospectus and the statement of additional information in connection with the initial public offering and periodic shareholder reports; (ii) preparing communications with analysts to support secondary market trading of the Funds; (iii) oversight of daily accounting and pricing; (iv) preparing periodic filings with regulators and stock exchanges; (v) overseeing and coordinating the activities of other service providers; (vi) organizing Board meetings and preparing the materials for such Board meetings; (vii) providing legal and compliance support; (viii) furnishing analytical and other support to assist the Board in its consideration of strategic issues such as the merger or consolidation of certain closed-end funds; and (ix) performing other administrative functions necessary for the operation of the Funds, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Boards reviewed the structure and duties of BlackRock’s fund administration, shareholder services, legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Funds and BlackRock: Each Board, including the Independent Board Members, also reviewed and considered the performance history of its Fund. In preparation for the May Meeting, the Boards worked with their independent legal counsel, BlackRock and Lipper to develop a template for, and were provided with reports independently prepared by Lipper, which included a comprehensive analysis of each Fund’s performance. The Boards also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper’s rankings. In connection with its review, each Board received and reviewed information regarding the investment performance, based on net asset value (NAV), of its Fund as compared to other funds in that Fund’s applicable Lipper category, and with respect to BHK, BNA and BKT, the investment performance of the Fund as compared with its respective custom benchmark. The Boards were provided with a description of the methodology used by Lipper to select peer funds and periodically meets with Lipper representatives to review its methodology. Each Board and its Performance Oversight Committee regularly review, and meet with Fund management to discuss, the performance of its Fund throughout the year.

ANNUAL REPORT AUGUST 31, 2014 97
 
  
Disclosure of Investment Advisory Agreements (continued) 

The Board of each of BHK, BNA and BKT noted that for each of the one-, three- and five-year periods reported, its respective Fund’s performance exceeded its customized benchmark. BlackRock believes that performance relative to the customized benchmark is an appropriate performance metric for BHK, BNA and BKT.

The Board of HYT noted that for the one-, three- and five-year periods reported, HYT ranked in the first, second and first quartiles, respectively, against its Lipper Performance Universe.

C. Consideration of the Advisory/Management Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Funds: The Board, including the Independent Board Members, reviewed its Fund’s contractual management fee rate compared with the other funds in its Lipper category. The contractual management fee rate represents a combination of the advisory fee and any administrative fees, before taking into account any reimbursements or fee waivers. The Board also compared the Fund’s total expense ratio, as well as its actual management fee rate, to those of other funds in its Lipper category. The total expense ratio represents a fund’s total net operating expenses, excluding any investment related expenses. The total expense ratio gives effect to any expense reimbursements or fee waivers that benefit a fund, and the actual management fee rate gives effect to any management fee reimbursements or waivers that benefit a fund. The Boards considered the services provided and the fees charged by BlackRock and its affiliates to other types of clients with similar investment mandates, as applicable, including institutional accounts.

The Boards received and reviewed statements relating to BlackRock’s financial condition. The Boards were also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to the Funds. The Boards reviewed BlackRock’s profitability with respect to the Funds and other funds the Boards currently oversee for the year ended December 31, 2013 compared to available aggregate profitability data provided for the prior two years. The Boards reviewed BlackRock’s profitability with respect to certain other fund complexes managed by the Manager and/or its affiliates. The Boards reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Boards recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. As a result, calculating and comparing profitability at individual fund levels is difficult.

The Boards noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Boards reviewed BlackRock’s overall operating margin, in general, compared to that of certain other publicly-traded asset management firms. The Boards considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

In addition, the Boards considered the cost of the services provided to the Funds by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management of the Funds and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Boards reviewed BlackRock’s methodology in allocating its costs to the management of the Funds. The Boards also considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Advisory Agreements and to continue to provide the high quality of services that is expected by the Boards. The Boards further considered factors including but not limited to BlackRock’s commitment of time, assumption of risk and liability profile in servicing the Funds in contrast to what is required of BlackRock with respect to other products with similar investment objectives across the open-end fund, ETF, closed-end fund and institutional account product channels, as applicable.

The Board of BHK noted that BHK’s contractual management fee rate ranked in the second quartile, and that the actual management fee rate and total expense ratio each ranked in the second quartile, relative to BHK’s Expense Peers. BHK’s Board also noted that BlackRock had voluntarily agreed to waive a portion of the advisory fee payable by BHK, which was implemented on June 1, 2012. After discussions between the Board of BHK, including the Independent Board Members, and BlackRock, BHK’s Board and BlackRock agreed to a continuation of the voluntary advisory fee waiver, which will result in savings to shareholders.

The Board of each of HYT and BKT noted that its respective Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Fund’s Expense Peers.

The Board of BNA noted that BNA’s contractual management fee rate ranked in the fourth quartile, and that the actual management fee rate and total expense ratio each ranked in the second quartile, relative to BNA’s Expense Peers.

D. Economies of Scale: Each Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of its Fund increase. Each Board also considered the extent to which its Fund benefits from such economies and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable the Fund to participate in these economies of scale, for example through the use of breakpoints in the advisory fee based upon the asset level of the Fund.

Based on the Boards’ review and consideration of the issue, the Boards concluded that most closed-end funds do not have fund level breakpoints because closed-end funds generally do not experience substantial growth after the initial public offering. They are typically priced at scale at a fund’s inception.

98 ANNUAL REPORT AUGUST 31, 2014
 
  
Disclosure of Investment Advisory Agreements (concluded) 

E. Other Factors Deemed Relevant by the Board Members: The Boards, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from their respective relationships with the Funds, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Funds, including securities lending and cash management services. The Boards also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Boards also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts. The Boards further noted that it had considered the investment by BlackRock’s funds in exchange traded funds (i.e., ETFs) without any offset against the management fees payable by the funds to BlackRock.

In connection with its consideration of the Advisory Agreements, the Boards also received information regarding BlackRock’s brokerage and soft dollar practices. The Boards received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

The Boards noted the competitive nature of the closed-end fund marketplace, and that shareholders are able to sell their Fund shares in the secondary market if they believe that their Fund’s fees and expenses are too high or if they are dissatisfied with the performance of their Fund.

The Boards also considered the various notable initiatives and projects BlackRock performed in connection with its closed-end fund product line. These initiatives included completion of the refinancing of auction rate preferred securities; developing equity shelf programs; efforts to eliminate product overlap with fund mergers; ongoing services to manage leverage that has become increasingly complex; share repurchases and other support initiatives for certain BlackRock funds; and continued communications efforts with shareholders, fund analysts and financial advisers. With respect to the latter, the Independent Board Members noted BlackRock’s continued commitment to supporting the secondary market for the common shares of its closed-end funds through a comprehensive secondary market communication program designed to raise investor and analyst awareness and understanding of closed-end funds. BlackRock’s support services included, among other things: continuing communications concerning the refinancing efforts related to auction rate preferred securities; sponsoring and participating in conferences; communicating with closed-end fund analysts covering the BlackRock funds throughout the year; providing marketing and product updates for the closed-end funds; and maintaining and enhancing its closed-end fund website.

Conclusion

Each Board, including the Independent Board Members, unanimously approved the continuation of the Advisory Agreements between the Manager and its Fund for a one-year term ending June 30, 2015. Based upon their evaluation of all of the aforementioned factors in their totality, the Boards, including the Independent Board Members, were satisfied that the terms of the Advisory Agreements were fair and reasonable and in the best interest of the Funds and their shareholders. In arriving at their decision to approve the Advisory Agreements, the Boards did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination. The contractual fee arrangements for the Funds reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.     

ANNUAL REPORT AUGUST 31, 2014 99
 
  
Automatic Dividend Reinvestment Plans 

Pursuant to each Trust’s Dividend Reinvestment Plan (the “Reinvestment Plan”), Common Shareholders are automatically enrolled to have all distributions of dividends and capital gains reinvested by Computershare Trust Company, N.A. (the “Reinvestment Plan Agent”) in the respective Trust’s shares pursuant to the Reinvestment Plan. Shareholders who do not participate in the Reinvestment Plan will receive all distributions in cash paid by check and mailed directly to the shareholders of record (or if the shares are held in street or other nominee name, then to the nominee) by the Reinvestment Plan Agent, which serves as agent for the shareholders in administering the Reinvestment Plan.

After the Trusts declare a dividend or determine to make a capital gain distribution, the Reinvestment Plan Agent will acquire shares for the participants’ accounts, depending upon the following circumstances, either (i) through receipt of unissued but authorized shares from the Trusts (“newly issued shares”) or (ii) by purchase of outstanding shares on the open market or on the Trust’s primary exchange (“open-market purchases”). If, on the dividend payment date, the net asset value per share (“NAV”) is equal to or less than the market price per share plus estimated brokerage commissions (such condition often referred to as a “market premium”), the Reinvestment Plan Agent will invest the dividend amount in newly issued shares acquired on behalf of the participants. The number of newly issued shares to be credited to each participant’s account will be determined by dividing the dollar amount of the dividend by the NAV on the date the shares are issued. However, if the NAV is less than 95% of the market price on the dividend payment date, the dollar amount of the dividend will be divided by 95% of the market price on the dividend payment date. If, on the dividend payment date, the NAV is greater than the market price per share plus estimated brokerage commissions (such condition often referred to as a “market discount”), the Reinvestment Plan Agent will invest the dividend amount in shares acquired on behalf of the participants in open-market purchases. If the Reinvestment Plan Agent is unable to invest the full dividend amount in open-market purchases, or if the market discount shifts to a market premium during the purchase period, the Reinvestment Plan Agent will invest any un-invested portion in newly issued shares. Investments in newly issued shares made in this manner would be made pursuant to the same process described above and the date of issue for such newly issued shares will substitute for the dividend payment date.


Participation in the Reinvestment Plan is completely voluntary and may be terminated or resumed at any time without penalty by notice if received and processed by the Reinvestment Plan Agent prior to the dividend record date. Additionally, the Reinvestment Plan Agent seeks to process notices received after the record date but prior to the payable date and such notices often will become effective by the payable date. Where late notices are not processed by the applicable payable date, such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution.

The Reinvestment Plan Agent’s fees for the handling of the reinvestment of dividends and distributions will be paid by each Trust. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Reinvestment Plan Agent’s open market purchases in connection with the reinvestment of dividends and distributions. The automatic reinvestment of dividends and distributions will not relieve participants of any federal income tax that may be payable on such dividends or distributions.

Each Trust reserves the right to amend or terminate the Reinvestment Plan. There is no direct service charge to participants in the Reinvestment Plan. However, each Trust reserves the right to amend the Reinvestment Plan to include a service charge payable by the participants. Participants that request a sale of shares are subject to a $2.50 sales fee and a $0.15 per share fee. Per share fees include any applicable brokerage commissions the Reinvestment Plan Agent is required to pay. All correspondence concerning the Reinvestment Plan should be directed to Computershare Trust Company, N.A. through the internet at http://www.computershare.com/blackrock, or in writing to Computershare, P.O. Box 30170, College Station, TX 77842-3170, Telephone: (800) 699-1236. Overnight correspondence should be directed to the Reinvestment Plan Agent at Computershare, 211 Quality Circle, Suite 210, College Station, TX 77845.


100 ANNUAL REPORT AUGUST 31, 2014
 
  
Officers and Trustees  

Name, Address1
and Year of Birth
   Position(s)
Held with
Trusts
   Length
of Time
Served as
a Trustee3
   Principal Occupation(s) During Past Five Years    Number of BlackRock-
Advised Registered
Investment Companies
(“RICs”) Consisting of
Investment Portfolios
(“Portfolios”) Overseen
   Public
Directorships
Independent Trustees2
Richard E. Cavanagh
1946
 
Chairman of
the Board
and Trustee
  
Since
2007
  
Trustee, Aircraft Finance Trust from 1999 to 2009; Director, The Guardian Life Insurance Company of America since 1998; Director, Arch Chemical (chemical and allied products) from 1999 to 2011; Trustee, Educational Testing Service from 1997 to 2009 and Chairman thereof from 2005 to 2009; Senior Advisor, The Fremont Group since 2008 and Director thereof since 1996; Faculty Member/Adjunct Lecturer, Harvard University since 2007; President and Chief Executive Officer, The Conference Board, Inc. (global business research organization) from 1995 to 2007.
  
82 RICs consisting of
82 Portfolios
  
None
 
Karen P. Robards
1950
 
Vice Chairperson of the Board, Chairperson of the Audit Committee
and Trustee
  
Since
2007
  
Partner of Robards & Company, LLC (financial advisory firm) since 1987; Co-founder and Director of the Cooke Center for Learning and Development (a not-for-profit organization) since 1987; Director of Care Investment Trust, Inc. (health care real estate investment trust) from 2007 to 2010; Investment Banker at Morgan Stanley from 1976 to 1987.
  
82 RICs consisting of
82 Portfolios
  
AtriCure, Inc.
(medical devices); Greenhill & Co., Inc.
 
Michael J. Castellano
1946
 
Trustee and Member of the Audit Committee
  
Since
2011
  
Chief Financial Officer of Lazard Group LLC from 2001 to 2011; Chief Financial Officer of Lazard Ltd from 2004 to 2011; Director, Support Our Aging Religious (non-profit) since 2009; Director, National Advisory Board of Church Management at Villanova University since 2010; Trustee, Domestic Church Media Foundation since 2012.
  
82 RICs consisting of
82 Portfolios
  
None
 
Frank J. Fabozzi4
1948
 
Trustee and Member of the Audit Committee
  
Since
2007
  
Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011; Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006.
  
115 RICs consisting of
237 Portfolios
  
None
 
Kathleen F. Feldstein
1941
 
Trustee
  
Since
2007
  
President of Economics Studies, Inc. (private economic consulting firm) since 1987; Chair, Board of Trustees, McLean Hospital from 2000 to 2008 and Trustee Emeritus thereof since 2008; Member of the Board of Partners Community Healthcare, Inc. from 2005 to 2009; Member of the Corporation of Partners HealthCare since 1995; Trustee, Museum of Fine Arts, Boston since 1992; Member of the Visiting Committee to the Harvard University Art Museum since 2003; Director, Catholic Charities of Boston since 2009.
  
82 RICs consisting of
82 Portfolios
  
The McClatchy Company (publishing)
 
James T. Flynn
1939
 
Trustee and Member of the Audit Committee
  
Since
2007
  
Chief Financial Officer of JPMorgan & Co., Inc. from 1990 to 1995.
  
82 RICs consisting of
82 Portfolios
  
None
 
Jerrold B. Harris
1942
 
Trustee
  
Since
2007
  
Trustee, Ursinus College since 2000; Director, Ducks Unlimited, Inc. (conservations) since 2013; Director, Troemner LLC (scientific equipment) since 2000; Director of Delta Waterfowl Foundation from 2010 to 2012; President and Chief Executive Officer, VWR Scientific Products Corporation from 1990 to 1999.
  
82 RICs consisting of
82 Portfolios
  
BlackRock Kelso Capital Corp. (business development company)
 
R. Glenn Hubbard
1958
 
Trustee
  
Since
2007
  
Dean, Columbia Business School since 2004; Faculty member, Columbia Business School since 1988.
  
82 RICs consisting of
82 Portfolios
  
ADP (data and information services); Metropolitan Life Insurance Company (insurance)
ANNUAL REPORT AUGUST 31, 2014 101
 
  
Officers and Trustees (continued)  
Name, Address1
and Year of Birth
   Position(s)
Held with
Trusts
   Length
of Time
Served as
a Trustee3
   Principal Occupation(s) During Past Five Years    Number of BlackRock-
Advised Registered
Investment Companies
(“RICs”) Consisting of
Investment Portfolios
(“Portfolios”) Overseen
   Public
Directorships
Independent Trustees2 (concluded)
 
W. Carl Kester
1951
 
Trustee and Member of the Audit Committee
  
Since
2007
  
George Fisher Baker Jr. Professor of Business Administration, Harvard Business School since 2008; Deputy Dean for Academic Affairs from 2006 to 2010; Chairman of the Finance Unit, 2005 to 2006; Senior Associate Dean and Chairman of the MBA Program from 1999 to 2005; Member of the faculty of Harvard Business School since 1981.
  
82 RICs consisting of
82 Portfolios
  
None
 
 
    
1  The address of each Trustee is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
 
    
2  Independent Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 74. The maximum age limitation may be waived as to any Trustee by action of a majority of the Trustees upon finding good cause thereof. In 2013, the Board of Trustees unanimously approved extending the mandatory retirement age for James T. Flynn by one additional year, which the Board believed would be in the best interest of shareholders. Mr. Flynn can serve until December 31 of the year in which he turns 75. Mr. Flynn turns 75 in 2014.
 
    
3  Date shown is the earliest date a person has served for the Trusts covered by this annual report. Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. (“BlackRock”) in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. As a result, although the chart shows certain Trustees as joining the Trusts’ board in 2007, those Trustees first became members of the boards of other legacy MLIM or legacy BlackRock funds as follows: Richard E. Cavanagh, 1994; Frank J. Fabozzi, 1988; Kathleen F. Feldstein, 2005; James T. Flynn, 1996; Jerrold B. Harris, 1999; R. Glenn Hubbard, 2004; W. Carl Kester, 1995 and Karen P. Robards, 1998.
 
    
4  Dr. Fabozzi is also a board member of the BlackRock Equity-Liquidity Complex.
 
                                                          
Interested Trustees5
 
  
 
Paul L. Audet
1953
 
Trustee
  
Since
2011
  
Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.
  
144 RICs consisting of
330 Portfolios
  
None
 
Henry Gabbay
1947
 
Trustee
  
Since
2007
  
Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly BlackRock Bond Allocation Target Shares) from 2005 to 2007; Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.
  
144 RICs consisting of
330 Portfolios
  
None
 
 
    
5  Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Trusts based on his position with BlackRock and its affiliates as well as his ownership of BlackRock securities. Mr. Gabbay is an “interested person” of the Trusts based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of two complexes of BlackRock registered open-end funds, the BlackRock Equity-Liquidity Complex and the BlackRock Equity-Bond Complex. Interested Trustees of the BlackRock Closed-End Complex serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The maximum age limitation may be waived as to any Trustee by action of a majority of the Trustees upon finding a good cause thereof.
102 ANNUAL REPORT AUGUST 31, 2014
 
  
Officers and Trustees (concluded)  

Name, Address1
and Year of Birth
         Position(s)
Held with
Trusts
     Length of
Time Served
     Principal Occupation(s) During Past Five Years
Officers2
 
John M. Perlowski
1964
     
President and Chief Executive Officer
  
Since
2011
  
Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.
 
Brendan Kyne
1977
     
Vice
President
  
Since
2009
  
Managing Director of BlackRock, Inc. since 2010; Director of BlackRock, Inc. from 2008 to 2009; Head of Americas Product Development for BlackRock since 2013, Head of Product Development and Management for BlackRock’s U.S. Retail Group from 2009 to 2013 and Co-head thereof from 2007 to 2009; Vice President of BlackRock, Inc. from 2005 to 2008.
 
Robert W. Crothers
1981
     
Vice
President
  
Since
2012
  
Director of BlackRock since 2011; Vice President of BlackRock from 2008 to 2010.
 
Neal Andrews
1966
     
Chief
Financial
Officer
  
Since
2007
  
Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
 
Jay Fife
1970
     
Treasurer
  
Since
2007
  
Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
 
Charles Park
1967
     
Chief Compliance Officer and Anti-Money Laundering Officer
  
Since
2014
  
Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
 
Janey Ahn
1975
     
Secretary
  
Since
2012
  
Director of BlackRock since 2009; Vice President of BlackRock from 2008 to 2009; Assistant Secretary of the Funds from 2008 to 2012.
 
        
1  The address of each Officer is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
 
        
2  Officers of the Trusts serve at the pleasure of the Boards.
Effective June 6, 2014, Brian Kindelan resigned as Chief Compliance Officer and Anti-Money Laundering Officer of the Trusts and Charles Park became Chief Compliance Officer and Anti-Money Laundering Officer of the Trusts.
     



              
Investment Advisor
BlackRock Advisors, LLC
Wilmington, DE 19809
 
Transfer Agent
Computershare Trust
Company, N.A.
Canton, MA 02021
     
Custodian and Accounting Agent
State Street Bank and Trust Company
Boston, MA 02110
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
New York, NY 10036
  
Independent Registered
Public Accounting Firm
Deloitte & Touche LLP
Boston, MA 02116
  
Address of the Trusts
100 Bellevue Parkway
Wilmington, DE 19809
  
ANNUAL REPORT AUGUST 31, 2014 103
 
  
Additional Information  

Proxy Results

The Annual Meeting of Shareholders was held on July 30, 2014 for shareholders of record on June 3, 2014, to elect trustee/director nominees for each Trust/Fund. There were no broker non-votes with regard to any of the Trusts/Funds.

Approved the Class I Trustees as follows:


         Paul L. Audet
    Michael J. Castellano
  R. Glenn Hubbard



   
Votes For
   
Votes
Withheld

   
Abstain
   
Votes For
   
Votes
Withheld

   
Abstain
   
Votes For
   
Votes
Withheld

   
Abstain
BHK
           20,228,799            875,766            0             20,255,029            849,536            0             20,237,030            867,535            0    
BNA
           25,070,856            2,044,610            0             25,060,735            2,054,731            0             25,065,822            2,049,644            0    
BKT
           45,954,235            4,539,165            0             46,035,529            4,457,871            0             45,985,101            4,508,299            0    


         W. Carl Kester



   
Votes For
   
Votes
Withheld

   
Abstain
BHK
           20,235,184            869,381            0    
BNA
           25,098,245            2,017,221            0    
BKT
           46,005,939            4,487,461            0    

For the Trusts listed above, Trustees whose term of office continued after the Annual Meeting of Shareholders because they were not up for election are Richard E. Cavanagh, Frank J. Fabozzi, Kathleen F. Feldstein, James T. Flynn, Henry Gabbay, Jerrold B. Harris and Karen P. Robards.

Approved the Trustees as follows:


   Paul L. Audet
   Michael J. Castellano
  
Richard E. Cavanagh

  
Votes For
  
Votes
Withheld

  
Abstain
  
Votes For
  
Votes
Withheld

  
Abstain
  
Votes For
  
Votes
Withheld

  
Abstain
HYT
     100,486,404        1,881,425        0         88,240,203        14,127,626        0         100,551,424        1,816,405        0   
                                                                         
   Frank J. Fabozzi
   Kathleen F. Feldstein
  
James T. Flynn

  
Votes For
  
Votes
Withheld

  
Abstain
  
Votes For
  
Votes
Withheld

  
Abstain
  
Votes For
  
Votes
Withheld

  
Abstain
HYT
     88,179,722        14,188,107        0         100,347,600        2,020,229        0         88,210,381        14,157,448        0   
                                                                         
   Henry Gabbay
   Jerrold B. Harris
  
R. Glenn Hubbard

  
Votes For
  
Votes
Withheld

  
Abstain
  
Votes For
  
Votes
Withheld

  
Abstain
  
Votes For
  
Votes
Withheld

  
Abstain
HYT
     100,482,188        1,885,641        0         100,453,262        1,914,567        0         100,518,696        1,849,133        0   
                                                                         
   W. Carl Kester
   Karen P. Robards
  

  
Votes For
  
Votes
Withheld

  
Abstain
  
Votes For
  
Votes
Withheld

  
Abstain
HYT
     88,297,842        14,069,987        0         88,258,695        14,109,134        0   
                                                 

Trust Certification

Certain Trusts are listed for trading on the NYSE and have filed with the NYSE their annual chief executive officer certification regarding compliance with the NYSE’s listing standards. The Trusts filed with the SEC


the certification of their chief executive officer and chief financial officer required by section 302 of the Sarbanes-Oxley Act.


104 ANNUAL REPORT AUGUST 31, 2014
 
  
Additional Information (continued)  

Dividend Policy

Each Trust’s dividend policy is to distribute all or a portion of its net investment income to its shareholders on a monthly basis. In order to provide shareholders with a more stable level of dividend distributions, the dividends paid by the Trusts for any particular month may be more or less than the amount of net investment income earned by the Trusts during such month. The portion of dividend distributions that exceeds a Trust’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a nontaxable return on capital. Dividend


distributions in excess of a Trust’s taxable income and net capital gains, but not in excess of a Trust’s earnings and profits, will be taxable to shareholders as ordinary income and will not constitute a nontaxable return of capital. The Trusts’ current accumulated but undistributed net investment income, if any, is disclosed in the Statements of Assets and Liabilities, which comprises part of the financial information included in this report.


    

General Information

The Trusts do not make available copies of their Statements of Additional Information because the Trusts’ shares are not continuously offered, which means that the Statement of Additional Information of each Trust has not been updated after completion of the respective Trust’s offerings and the information contained in each Trust’s Statement of Additional Information may have become outdated.

During the period, there were no material changes in the Trusts’ investment objectives or policies or to the Trusts’ charter or by-laws that would delay or prevent a change of control of the Trusts that were not approved by shareholders or in the principal risk factors associated with investment in the Trusts. There have been no changes in the persons who are primarily responsible for the day-to-day management of the Trusts’ portfolios.

Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding the Trusts may be found on BlackRock’s website, which can be accessed at http://www.blackrock.com. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Trusts and does not, and is not intended to, incorporate BlackRock’s website in this report.

Electronic Delivery

Electronic copies of most financial reports are available on the Trusts’ website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports by enrolling in the Trusts’ electronic delivery program.


Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

Please contact your financial advisor to enroll. Please note that not all investment advisors, banks or brokerages may offer this service.

Householding

The Trusts will mail only one copy of shareholder documents, including annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Trusts at (800) 882-0052.

Availability of Quarterly Schedule of Investments

The Trusts file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trusts’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Trusts’ Forms N-Q may also be obtained upon request and without charge by calling (800) 882-0052.


ANNUAL REPORT AUGUST 31, 2014 105
 
  
Additional Information (continued)  

General Information (concluded)

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 (1) without charge, upon request, by calling (800) 882-0052; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Trusts voted proxies relating to securities held in the Trusts’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 882-0052 and (2) on the SEC’s website at http://www.sec.gov.


Availability of Trust Updates

BlackRock will update performance and certain other data for the Trusts on a monthly basis on its website in the “Closed-end Funds” section of http://www.blackrock.com as well as certain other material information as necessary from time to time. Investors and others are advised to periodically check the website for updated performance information and the release of other material information about the Trusts. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Trusts and does not, and is not intended to, incorporate BlackRock’s website in this report.


    

Shelf Offering Program

From time-to-time, each Trust may seek to raise additional equity capital through an equity shelf program (a “Shelf Offering”). In a Shelf Offering, a Trust may, subject to market conditions, raise additional equity capital by issuing new Common Shares from time to time in varying amounts at a net price at or above the Trust’s net asset value (“NAV”) per Common Share (calculated within 48 hours of pricing). While any such Shelf Offering may allow a Trust to pursue additional investment opportunities without the need to sell existing portfolio investments, it could also entail risks — including that the issuance of additional Common Shares may limit the extent to which the Common Shares are able to trade at a premium to NAV in the secondary market. Each Trust, other than HYT, has not filed a registration statement with respect to any Shelf Offerings. This report is not an offer to sell Trust Common Shares and is not a solicitation of an offer to buy Trust Common Shares. If a Trust files a registration with respect to any Shelf Offering, the prospectus contained therein will contain more complete information about the Trust and should be read carefully before investing.


On June 11, 2014, HYT filed a registration statement with the SEC to issue additional HYT Common Shares through a Shelf Offering, which is not yet effective. HYT may not sell any HYT Common Shares in a Shelf Offering until the registration statement filed with the SEC is effective. This report and the preliminary prospectus are not offers to sell HYT Common Shares and are not solicitations of an offer to buy HYT Common Shares in any jurisdiction where the offers or sales are not permitted. The preliminary prospectus contains more complete information about HYT’s Shelf Offering and should be read carefully before investing. The information in the preliminary prospectus for HYT is not complete and may be amended or changed. A copy of the final prospectus for HYT can be obtained from BlackRock at http:// www.blackrock.com, when available.


106 ANNUAL REPORT AUGUST 31, 2014
 
  
Additional Information (concluded)  

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.


ANNUAL REPORT AUGUST 31, 2014 107
 
  

This report is intended for existing shareholders. 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.


 
                    

CEFBHK-8/14-AR
          
 
   
 
  
Item 2 – Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.  During the period covered by this report, there have been no amendments to or waivers granted under the code of ethics. A copy of the code of ethics is available without charge at www.blackrock.com.
Item 3 – Audit Committee Financial Expert – The registrant’s board of directors (the “board of directors”), has determined that (i) the registrant has the following audit committee financial experts serving on its audit committee and (ii) each audit committee financial expert is independent:

  Michael Castellano
  Frank J. Fabozzi
James T. Flynn
W. Carl Kester
Karen P. Robards
   
  The registrant’s board of directors has determined that W. Carl Kester and Karen P. Robards qualify as financial experts pursuant to Item 3(c)(4) of Form N-CSR.  
   
  Prof. Kester has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions.  Prof. Kester has been involved in providing valuation and other financial consulting services to corporate clients since 1978.  Prof. Kester’s financial consulting services present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements.    

Ms. Robards has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions.  Ms. Robards has been President of Robards & Company, a financial advisory firm, since 1987.  Ms. Robards was formerly an investment banker for more than 10 years where she was responsible for evaluating and assessing the performance of companies based on their financial results.  Ms. Robards has over 30 years of experience analyzing financial statements.  She also is a member of the audit committee of one publicly held company and a non-profit organization.

Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert.  The designation or identification as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification.  The designation or identification of a person as an audit committee financial expert does not affect the duties, obligations, or liability of any other member of the audit committee or board of directors.

 

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Item 4 – Principal Accountant Fees and Services

The following table presents fees billed by Deloitte & Touche LLP (“D&T”) in each of the last two fiscal years for the services rendered to the Fund:

  (a) Audit Fees (b) Audit-Related Fees1 (c) Tax Fees2 (d) All Other Fees3
Entity Name Current Fiscal Year End Previous Fiscal Year End Current Fiscal Year End Previous Fiscal Year End Current Fiscal Year End Previous Fiscal Year End Current Fiscal Year End Previous Fiscal Year End
BlackRock Core Bond Trust $66,938 $66,063 $0 $0 $14,600 $14,600 $0 $0

 

The following table presents fees billed by D&T that were required to be approved by the registrant’s audit committee (the “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock Advisors, LLC (“Investment Adviser” or “BlackRock”) and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund (“Fund Service Providers”):

  Current Fiscal Year End Previous Fiscal Year End
(b) Audit-Related Fees1 $0 $0
(c) Tax Fees2 $0 $0
(d) All Other Fees3 $2,555,000 $2,865,000

1 The nature of the services includes assurance and related services reasonably related to the performance of the audit of financial statements not included in Audit Fees.

2 The nature of the services includes tax compliance, tax advice and tax planning.

3 Aggregate fees borne by BlackRock in connection with the review of compliance procedures and attestation thereto performed by D&T with respect to all of the registered closed-end funds and some of the registered open-end funds advised by BlackRock.

(e)(1) Audit Committee Pre-Approval Policies and Procedures:

The Committee has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the Investment Adviser and Fund Service Providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are (a) consistent with the SEC’s auditor independence rules and (b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operations or financial reporting of the registrant will only be deemed pre-approved provided that any individual project does not exceed $10,000 attributable to the registrant or $50,000 per project. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels.

 

Any proposed services exceeding the pre-approved cost levels will require specific pre-approval by the Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved
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subject to general pre-approval at the next regularly scheduled in-person board meeting. At this meeting, an analysis of such services is presented to the Committee for ratification. The Committee may delegate to the Committee Chairman the authority to approve the provision of and fees for any specific engagement of permitted non-audit services, including services exceeding pre-approved cost levels.

(e)(2) None of the services described in each of Items 4(b) through (d) were approved by the Committee pursuant to the de minimis exception in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not Applicable

(g) The aggregate non-audit fees paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Fund Service Providers were:
Entity Name Current Fiscal Year End Previous Fiscal Year End
BlackRock Core Bond Trust $14,600 $14,600

 

Additionally, SSAE 16 Review (Formerly, SAS No. 70) fees for the current and previous fiscal years of $2,555,000 and $2,865,000, respectively, were billed by D&T to the Investment Adviser.
(h) The Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser, and the Fund Service Providers that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

 

Item 5 – Audit Committee of Listed Registrants
(a)The following individuals are members of the registrant’s separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)):

Michael Castellano

Frank J. Fabozzi
James T. Flynn
W. Carl Kester
Karen P. Robards

 

(b)Not Applicable
Item 6 – Investments
  (a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.
  (b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.

 

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Item 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – The board of directors has delegated the voting of proxies for the Fund’s portfolio securities to the Investment Adviser pursuant to the Investment Adviser’s proxy voting guidelines. Under these guidelines, the Investment Adviser will vote proxies related to Fund securities in the best interests of the Fund and its stockholders. From time to time, a vote may present a conflict between the interests of the Fund’s stockholders, on the one hand, and those of the Investment Adviser, or any affiliated person of the Fund or the Investment Adviser, on the other. In such event, provided that the Investment Adviser’s Equity Investment Policy Oversight Committee, or a sub-committee thereof (the “Oversight Committee”) is aware of the real or potential conflict or material non-routine matter and if the Oversight Committee does not reasonably believe it is able to follow its general voting guidelines (or if the particular proxy matter is not addressed in the guidelines) and vote impartially, the Oversight Committee may retain an independent fiduciary to advise the Oversight Committee on how to vote or to cast votes on behalf of the Investment Adviser’s clients. If the Investment Adviser determines not to retain an independent fiduciary, or does not desire to follow the advice of such independent fiduciary, the Oversight Committee shall determine how to vote the proxy after consulting with the Investment Adviser’s Portfolio Management Group and/or the Investment Adviser’s Legal and Compliance Department and concluding that the vote cast is in its client’s best interest notwithstanding the conflict. A copy of the Fund’s Proxy Voting Policy and Procedures are attached as Exhibit 99.PROXYPOL. Information on how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, (i) at www.blackrock.com and (ii) on the SEC’s website at http://www.sec.gov.
Item 8 –   Portfolio Managers of Closed-End Management Investment Companies – as of August 31, 2014.
  (a)(1) The registrant is managed by a team of investment professionals comprised of Tom Musmanno, Managing Director at BlackRock, and James E. Keenan, Managing Director at BlackRock.  Messrs. Musmanno and Keenan are the Fund’s co-portfolio managers and are responsible for the day-to-day management of the Fund’s portfolio, which includes setting the Fund’s overall investment strategy, overseeing the management of the Fund and/or selection of its investments.  Mr. Musmanno has been a member of the Fund’s portfolio management team since 2012. Mr. Keenan has been a member of the Fund’s portfolio management team since 2007.
Portfolio Manager Biography
Tom Musmanno Managing Director of BlackRock since 2010; Director of BlackRock from 2006 to 2009.
James E. Keenan Managing Director of BlackRock since 2008 and Head of the Leveraged Finance Portfolio team; Director of BlackRock from 2006 to 2007; Vice President of BlackRock from 2004 to 2005.


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(a)(2)As of August 31, 2014:

 

 

(ii) Number of Other Accounts Managed

and Assets by Account Type

(iii) Number of Other Accounts and

Assets for Which Advisory Fee is

Performance-Based

(i) Name of

Portfolio Manager

Other

Registered

Investment

Companies

Other Pooled

Investment

Vehicles

Other

Accounts

Other

Registered

Investment

Companies

Other Pooled

Investment

Vehicles

Other

Accounts

Tom Musmanno 12 14 169 0 2 0
  $8.04 Billion $4.68 Billion $48.63 Billion $0 $1.97 Billion 0
James E. Keenan 14 26 17 0 3 4
  $22.78 Billion

$9.92 Billion

$6.06 Billion $0 $27.56 Million $586.9 Million
(iv)Portfolio Manager Potential Material Conflicts of Interest

BlackRock has built a professional working environment, firm-wide compliance culture and compliance procedures and systems designed to protect against potential incentives that may favor one account over another. BlackRock has adopted policies and procedures that address the allocation of investment opportunities, execution of portfolio transactions, personal trading by employees and other potential conflicts of interest that are designed to ensure that all client accounts are treated equitably over time. Nevertheless, BlackRock furnishes investment management and advisory services to numerous clients in addition to the Fund, and BlackRock may, consistent with applicable law, make investment recommendations to other clients or accounts (including accounts which are hedge funds or have performance or higher fees paid to BlackRock, or in which portfolio managers have a personal interest in the receipt of such fees), which may be the same as or different from those made to the Fund.  In addition, BlackRock, Inc., its affiliates and significant shareholders and any officer, director, shareholder or employee may or may not have an interest in the securities whose purchase and sale BlackRock recommends to the Fund.  BlackRock, Inc., or any of its affiliates or significant shareholders, or any officer, director, shareholder, employee or any member of their families may take different actions than those recommended to the Fund by BlackRock with respect to the same securities.  Moreover, BlackRock may refrain from rendering any advice or services concerning securities of companies of which any of BlackRock, Inc.’s (or its affiliates’ or significant shareholders’) officers, directors or employees are directors or officers, or companies as to which BlackRock, Inc. or any of its affiliates or significant shareholders or the officers, directors and employees of any of them has any substantial economic interest or possesses material non-public information.  Certain portfolio managers also may manage accounts whose investment strategies may at times be opposed to the strategy utilized for a fund.  It should also be noted that Mr. Keenan may be managing hedge fund and/or long only accounts, or may be part of a team managing hedge fund and/or long only accounts, subject to incentive fees. Mr. Keenan may therefore be entitled to receive a portion of any incentive fees earned on such accounts.

 

As a fiduciary, BlackRock owes a duty of loyalty to its clients and must treat each client fairly.  When BlackRock purchases or sells securities for more than one account, the trades must be allocated in a manner consistent with its fiduciary duties.  BlackRock attempts to allocate investments in a fair and equitable manner among client accounts, with no account receiving preferential treatment.  To this end, BlackRock, Inc. has adopted policies that are intended to ensure reasonable efficiency in client transactions and provide BlackRock with sufficient flexibility to allocate investments in a manner that is consistent with the particular investment discipline and client base, as appropriate.

 

6
 
(a)(3)As of August 31, 2014:

Portfolio Manager Compensation Overview

 

The discussion below describes the portfolio managers’ compensation as of August 31, 2014.

 

BlackRock’s financial arrangements with its portfolio managers, its competitive compensation and its career path emphasis at all levels reflect the value senior management places on key resources. Compensation may include a variety of components and may vary from year to year based on a number of factors. The principal components of compensation include a base salary, a performance-based discretionary bonus, participation in various benefits programs and one or more of the incentive compensation programs established by BlackRock.

 

Base compensation. Generally, portfolio managers receive base compensation based on their position with the firm.

 

Discretionary Incentive Compensation

 

Discretionary incentive compensation is a function of several components: the performance of BlackRock, Inc., the performance of the portfolio manager’s group within BlackRock, the investment performance, including risk-adjusted returns, of the firm’s assets under management or supervision by that portfolio manager relative to predetermined benchmarks, and the individual’s performance and contribution to the overall performance of these portfolios and BlackRock.  In most cases, these benchmarks are the same as the benchmark or benchmarks against which the performance of the Funds or other accounts managed by the portfolio managers are measured.  Among other things, BlackRock’s Chief Investment Officers make a subjective determination with respect to each portfolio manager’s compensation based on the performance of the Funds and other accounts managed by each portfolio manager relative to the various benchmarks.  Performance of fixed income funds is measured on a pre-tax and/or after-tax basis over various time periods including 1-, 3- and 5- year periods, as applicable. With respect to these portfolio managers, such benchmarks for the Fund and other accounts are:

 

Portfolio Manager Benchmark
James E. Keenan A combination of market-based indices (e.g., The Barclays U.S. Corporate High Yield 2% Issuer Cap Index), certain customized indices and certain fund industry peer groups.
Tom Musmanno

A combination of market-based indices (e.g., Bank of America Merrill Lynch U.S. Corporate & Government Index, 1-3 Years), certain customized indices and certain fund industry peer groups.

 

 

Distribution of Discretionary Incentive Compensation. Discretionary incentive compensation is distributed to portfolio managers in a combination of cash and BlackRock, Inc. restricted stock units which vest ratably over a number of years. For some portfolio managers, discretionary incentive compensation is also distributed in deferred cash awards that notionally track the returns of select BlackRock investment products they manage and that vest ratably over a number of years. The BlackRock, Inc. restricted stock units, upon vesting, will be settled in BlackRock, Inc. common stock. Typically, the cash portion of the discretionary incentive compensation, when combined with base salary, represents more than 60% of total compensation for the portfolio managers. Paying a portion of discretionary incentive compensation in BlackRock,

 

7
 

Inc. stock puts compensation earned by a portfolio manager for a given year “at risk” based on BlackRock’s ability to sustain and improve its performance over future periods. Providing a portion of discretionary incentive compensation in deferred cash awards that notionally track the BlackRock investment products they manage provides direct alignment with investment product results.

 

Long-Term Incentive Plan Awards — From time to time long-term incentive equity awards are granted to certain key employees to aid in retention, align their interests with long-term shareholder interests and motivate performance.  Equity awards are generally granted in the form of BlackRock, Inc. restricted stock units that, once vested, settle in BlackRock, Inc. common stock. Messrs. Keenan and Musmanno have unvested long-term incentive awards.

 

Deferred Compensation Program — A portion of the compensation paid to eligible United States-based BlackRock employees may be voluntarily deferred at their election for defined periods of time into an account that tracks the performance of certain of the firm’s investment products. Any portfolio manager who is either a managing director or director at BlackRock with compensation above a specified threshold is eligible to participate in the deferred compensation program.

 

Other Compensation Benefits. In addition to base salary and discretionary incentive compensation, portfolio managers may be eligible to receive or participate in one or more of the following:

 

Incentive Savings Plans — BlackRock, Inc. has created a variety of incentive savings plans in which BlackRock, Inc. employees are eligible to participate, including a 401(k) plan, the BlackRock Retirement Savings Plan (RSP), and the BlackRock Employee Stock Purchase Plan (ESPP). The employer contribution components of the RSP include a company match equal to 50% of the first 8% of eligible pay contributed to the plan capped at $5,000 per year, and a company retirement contribution equal to 3-5% of eligible compensation up to the Internal Revenue Service limit ($260,000 for 2014).  The RSP offers a range of investment options, including registered investment companies and collective investment funds managed by the firm. BlackRock, Inc. contributions follow the investment direction set by participants for their own contributions or, absent participant investment direction, are invested into a target date fund that corresponds to, or is closest to, the year in which the participant attains age 65.  The ESPP allows for investment in BlackRock, Inc. common stock at a 5% discount on the fair market value of the stock on the purchase date.  Annual participation in the ESPP is limited to the purchase of 1,000 shares of common stock or a dollar value of $25,000 based on its fair market value on the purchase date.  All of the eligible portfolio managers are eligible to participate in these plans.

 

 

(a)(4)Beneficial Ownership of Securities – As of August 31, 2014.
Portfolio Manager Dollar Range of Equity Securities of the Fund Beneficially Owned
Tom Musmanno None
James E. Keenan None

 

(b) Not Applicable
8
 
Item 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable due to no such purchases during the period covered by this report.
Item 10 – Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.
Item 11 – Controls and Procedures

(a) – The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended.

(b) – There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12 – Exhibits attached hereto
(a)(1) – Code of Ethics – See Item 2
(a)(2) – Certifications – Attached hereto

(a)(3) – Not Applicable

(b) – Certifications – Attached hereto

 

9
 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

BlackRock Core Bond Trust

 

By: /s/ John M. Perlowski
  John M. Perlowski
  Chief Executive Officer (principal executive officer) of
BlackRock Core Bond Trust

 

Date: November 3, 2014

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By: /s/ John M. Perlowski
  John M. Perlowski
  Chief Executive Officer (principal executive officer) of
BlackRock Core Bond Trust

 

Date: November 3, 2014

 

By: /s/ Neal J. Andrews
  Neal J. Andrews
  Chief Financial Officer (principal financial officer) of
BlackRock Core Bond Trust

 

Date: November 3, 2014

 

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