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: 811-22426
Name of Fund: BlackRock Taxable Municipal Bond Trust (BBN)
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Taxable
Municipal Bond Trust, 55 East 52nd Street, New York, NY 10055
Registrants telephone number, including area code: (800) 882-0052, Option 4
Date of fiscal year end: 07/31/2020
Date of reporting period: 07/31/2020
Item 1 |
Report to Stockholders |
|
JULY 31, 2020 |
2020 Annual Report |
BlackRock Taxable Municipal Bond Trust (BBN)
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Trusts shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from BlackRock or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
You may elect to receive all future reports in paper free of charge. If you hold accounts directly with BlackRock, you can call Computershare at (800) 699-1236 to request that you continue receiving paper copies of your shareholder reports. If you hold accounts through a financial intermediary, you can follow the instructions included with this disclosure, if applicable, or contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. Please note that not all financial intermediaries may offer this service. Your election to receive reports in paper will apply to all funds advised by BlackRock Advisors, LLC or its affiliates, or all funds held with your financial intermediary, as applicable.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive electronic delivery of shareholder reports and other communications by contacting your financial intermediary, if you hold accounts through a financial intermediary. Please note that not all financial intermediaries may offer this service.
Not FDIC Insured May Lose Value No Bank Guarantee |
BlackRock Taxable Municipal Bond Trusts (BBN) (the Trust) amounts and sources of distributions reported are estimates and are being provided pursuant to regulatory requirements and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon the Trusts investment experience during the year and may be subject to changes based on tax regulations. Shareholders will receive a Form 1099-DIV each calendar year that will inform them how to report these distributions for federal income tax purposes.
July 31, 2020
Total Fiscal Year to Date
Cumulative Distributions by Character |
Percentage of Fiscal Year to Date
Cumulative Distributions by Character |
|||||||||||||||||||||||||||||||||||||||
Net
Investment Income |
Net Realized
Capital Gains Short Term |
Net Realized
Capital Gains Long Term |
Return of
Capital |
Total Per
Common Share |
Net
Investment Income |
Net Realized
Capital Gains Short Term |
Net Realized
Capital Gains Long Term |
Return of
Capital |
Total Per
Common Share |
|||||||||||||||||||||||||||||||
BBN |
$ | 1.341600 | $ | | $ | | $ | | $ | 1.341600 | 100 | % | 0 | % | 0 | % | 0 | % | 100 | % |
Section 19(a) notices for the Trusts, as applicable, are available on the BlackRock website at blackrock.com.
2 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Dear Shareholder,
The last 12 months have been a time of sudden change in global financial markets, as a long period of growth and positive returns was interrupted in early 2020 by the emergence and spread of the coronavirus. For the first half of the reporting period, U.S. equities and bonds both delivered impressive returns, despite fears and doubts about the economy that were ultimately laid to rest with unprecedented monetary stimulus and a sluggish yet resolute performance from the U.S. economy. But as the threat from the coronavirus (or COVID-19) became more apparent throughout February and March 2020, countries around the world took economically disruptive countermeasures, causing a global recession and a sharp fall in equity prices. While markets have since recovered most of these losses as countries around the world adapt to life with the virus, lingering uncertainty about the depth and duration of the pandemic and an uptick in global infection rates tempered optimism late in the reporting period.
Returns for most securities were robust for the first half of the reporting period, as investors began to realize that the U.S. economy was maintaining the modest yet steady growth that had characterized this economic cycle. However, once stay-at-home orders and closures of non-essential businesses became widespread, many workers were laid off and unemployment claims spiked. The subsequent rapid decline in equity prices was followed by a slow recovery, and some economic indicators began to improve. U.S. large-capitalization stocks, which are often considered more resilient than smaller companies during market turbulence, advanced significantly. International equities from developed economies ended the 12-month reporting period with negative performance, while emerging market stocks posted a positive return.
The performance of different types of fixed-income securities diverged substantially due to a reduced investor appetite for risk. Treasuries benefited from the risk-off environment, and posted healthy returns, as the 10-year U.S. Treasury yield (which is inversely related to bond prices) fell to an all-time low. Investment-grade corporate bonds also delivered solid returns, while high-yield corporate returns were more modest due to credit concerns.
The U.S. Federal Reserve (the Fed) reduced interest rates three times in 2019, to support slowing economic growth. After the coronavirus outbreak, the Fed instituted two emergency rate cuts, pushing short-term interest rates close to zero. To stabilize credit markets, the Fed also implemented a new bond-buying program, as did several other central banks around the world, including the European Central Bank and the Bank of Japan.
Looking ahead, while coronavirus-related disruptions have clearly hindered worldwide economic growth, we believe that the global expansion is likely to continue once the outbreak subsides. Several risks remain, however, including a potential resurgence of the coronavirus amid loosened restrictions, policy fatigue among governments already deep into deficit spending, and structural damage to the financial system from lengthy economic interruptions.
Overall, we favor a moderately positive stance toward risk, and in particular toward credit given the extraordinary central bank measures taken in recent months. This support extends beyond investment-grade corporates and into high-yield, leading to attractive opportunities throughout the credit market. We believe that both U.S. Treasuries and sustainable investments can help provide portfolio resilience, and the disruption created by the coronavirus appears to be accelerating the shift toward sustainable investments. We remain neutral on equities overall while favoring European stocks, which are poised for cyclical upside as re-openings continue.
In this environment, our view is that investors need to think globally, extend their scope across a broad array of asset classes, and be nimble as market conditions change. We encourage you to talk with your financial advisor and visit blackrock.com for further insight about investing in todays markets.
Sincerely,
Rob Kapito
President, BlackRock Advisors, LLC
Rob Kapito
President, BlackRock Advisors, LLC
Total Returns as of July 31, 2020 | ||||
6-month | 12-month | |||
U.S. large cap equities
|
2.42% | 11.96% | ||
U.S. small cap equities
|
(7.61) | (4.59) | ||
International equities
|
(7.34) | (1.67) | ||
Emerging market equities
|
3.08 | 6.55 | ||
3-month Treasury bills
|
0.48 | 1.46 | ||
U.S. Treasury securities
|
9.92 | 15.55 | ||
U.S. investment grade bonds
|
5.69 | 10.12 | ||
Tax-exempt municipal bonds
|
1.75 | 4.89 | ||
U.S. high yield bonds
|
0.62 | 4.07 | ||
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index. |
3 | THIS PAGE IS NOT PART OF YOUR FUND REPORT |
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4 |
The Benefits and Risks of Leveraging
The Trust may utilize leverage to seek to enhance the distribution rate on, and net asset value (NAV) of, its common shares (Common Shares). However, there is no guarantee that these objectives can be achieved in all interest rate environments.
In general, the concept of leveraging is based on the premise that the financing cost of leverage, which is based on short-term interest rates, is normally lower than the income earned by the 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 Trusts shareholders benefit from the incremental net income. The interest earned on securities purchased with the proceeds from leverage (after paying the leverage costs) is paid to shareholders in the form of dividends, and the value of these portfolio holdings (less the leverage liability) is reflected in the per share NAV.
To illustrate these concepts, assume the Trusts 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 Trusts 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 Trusts financing cost of leverage is significantly lower than the income earned on the Trusts longer-term investments acquired from such leverage proceeds, and therefore the holders of Common Shares (Common Shareholders) are the beneficiaries of the incremental net income.
However, in order to benefit shareholders, the return on assets purchased with leverage proceeds must exceed the ongoing costs associated with the leverage. If interest and other costs of leverage exceed the Trusts return on assets purchased with leverage proceeds, income to shareholders is lower than if the Trust had not used leverage. Furthermore, the value of the Trusts portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can influence the value of portfolio investments. In contrast, the value of the Trusts obligations under its leverage arrangement generally does not fluctuate in relation to interest rates. As a result, changes in interest rates can influence the Trusts NAVs positively or negatively. Changes in the future direction of interest rates are very difficult to predict accurately, and there is no assurance that the Trusts intended leveraging strategy will be successful.
The use of leverage also generally causes greater changes in the Trusts NAV, market price and dividend rates than comparable portfolios without leverage. In a declining market, leverage is likely to cause a greater decline in the NAV and market price of the Trusts 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 Trusts ability to invest in certain types of securities or use certain types of hedging strategies. The Trust incurs expenses in connection with the use of leverage, all of which are borne by shareholders and may reduce income to the shareholders. Moreover, to the extent the calculation of the Trusts investment advisory fees includes assets purchased with the proceeds of leverage, the investment advisory fees payable to the Trusts investment adviser will be higher than if the Trust did not use leverage.
The Trust may utilize leverage through 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 331⁄3% of its total managed assets. The Trust may voluntarily elect to limit its leverage to less than the maximum amount permitted under the 1940 Act.
If the Trust segregates or designates on its books and records cash or liquid assets having a value not less than the value of the Trusts obligations under a reverse repurchase agreement (including accrued interest), then such transaction is not considered a senior security and is not subject to the foregoing limitations and requirements imposed by the 1940 Act.
Derivative Financial Instruments
The Trust may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other assets without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and 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 instrument. The Trusts successful use of a derivative financial instrument depends on the investment advisers ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Trust can realize on an investment and/or may result in lower distributions paid to shareholders. The Trusts investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.
THE BENEFITS AND RISKS OF LEVERAGING / DERIVATIVE FINANCIAL INSTRUMENTS | 5 |
Trust Summary as of July 31, 2020 | BlackRock Taxable Municipal Bond Trust |
Trust Overview
BlackRock Taxable Municipal Bond Trusts (BBN) (the Trust) primary investment objective is to seek high current income, with a secondary objective of capital appreciation. The Trust seeks to achieve its investment objectives by investing primarily in a portfolio of taxable municipal securities, including Build America Bonds (BABs), issued by state and local governments to finance capital projects such as public schools, roads, transportation infrastructure, bridges, ports and public buildings.
The Trust originally sought to achieve its investment objectives by investing primarily in a portfolio of BABs, which are taxable municipal securities issued pursuant to the American Recovery and Reinvestment Act of 2009. Given the uncertainty around the BABs program at the time of the Trusts launch in 2010, the Trusts initial public offering prospectus included a Contingent Review Provision. For any 24-month period, if there were no new issuances of BABs or other analogous taxable municipal securities, the Board of Trustees (the Board) would undertake an evaluation of potential actions with respect to the Trust. Under the Contingent Review Provision, such potential action may include changes to the Trusts non-fundamental investment policies to broaden its primary investment focus to include taxable municipal securities generally. The BABs program expired on December 31, 2010 and was not renewed. Accordingly, there have been no new issuances of BABs since that date.
Pursuant to the Contingent Review Provision, on June 12, 2015, the Board approved a proposal to amend the Trusts investment policy from Under normal market conditions, the Trust invests at least 80% of its managed assets in BABs to Under normal market conditions, the Trust invests at least 80% of its managed assets in taxable municipal securities, which include BABs, and to change the name of the Trust from BlackRock Build America Bond Trust to BlackRock Taxable Municipal Bond Trust. These changes became effective on August 25, 2015.
The Trust continues to maintain its other investment policies, including its ability to invest up to 20% of its managed assets in securities other than taxable municipal securities. Such other securities may include tax-exempt securities, U.S. Treasury securities, obligations of the U.S. Government, its agencies and instrumentalities and corporate bonds issued by issuers that have, in the Managers view, typically been associated with or sold in the municipal market. Bonds issued by private universities and hospitals or bonds sold to finance military housing developments are examples of such securities. The Trust also continues to invest at least 80% of its managed assets in securities that at the time of purchase are investment grade quality.
As used herein, managed assets means the total assets of the Trust (including any assets attributable to money borrowed for investment purposes) minus the sum of the Trusts accrued liabilities (other than money borrowed for investment purposes).
As of July 31, 2020, 67% of the Trusts portfolio are BABs. Like other taxable municipal securities, interest received on BABs is subject to U.S. tax and may be subject to state income tax. Issuers of direct pay BABs, however, are eligible to receive a subsidy from the U.S. Treasury of up to 35% of the interest paid on the BABs. This allowed such issuers to issue bonds that pay interest rates that were expected to be competitive with the rates typically paid by private bond issuers in the taxable fixed income market. While the U.S. Treasury subsidizes the interest paid on BABs, it does not guarantee the principal or interest payments on BABs, and there is no guarantee that the U.S. Treasury will not reduce or eliminate the subsidy for BABs in the future. Any interruption, delay, reduction and/or offset of the reimbursement from the U.S. Treasury may reduce the demand for direct pay BABs and/or potentially trigger extraordinary call features of the BABs. As of the date of this report, the subsidy that issuers of direct pay BABs receive from the U.S. Treasury has been reduced from its original level as the result of budgetary sequestration. The extraordinary call features of some BABs permit early redemption at par value, and the reduction in the subsidy issuers of direct pay BABs receive from the U.S. Treasury has resulted, and may continue to result, in early redemptions of some BABs at par value. Such early redemptions at par value may result in a potential loss in value for investors of such BABs, who may have purchased the securities at prices above par, and may require such investors to reinvest redemption proceeds in lower-yielding securities. As of the date of this report, the Trust did not own any BABs subject to a par value extraordinary call feature. Additionally, many BABs also have more typical call provisions that permit early redemption at a stated spread to an applicable prevailing U.S. Treasury rate. Early redemptions in accordance with these call provisions may likewise result in potential losses for the Trust and give rise to reinvestment risk, which could reduce the Trusts income and distributions.
No assurance can be given that the Trusts investment objectives will be achieved.
Trust Information
Symbol on New York Stock Exchange (NYSE) |
BBN | |
Initial Offering Date |
August 27, 2010 | |
Current Distribution Rate on Closing Market Price as of July 31, 2020 ($26.60)(a) |
5.04% | |
Current Monthly Distribution per Common Share(b) |
$0.1118 | |
Current Annualized Distribution per Common Share(b) |
$1.3416 | |
Leverage as of July 31, 2020(c) |
33% |
(a) |
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 return of capital. Past performance does not guarantee future results. |
(b) |
The distribution rate is not constant and is subject to change. |
(c) |
Represents reverse repurchase agreements 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 accrued liabilities (other than borrowings representing financial leverage). Does not reflect derivatives or other instruments that may give rise to economic leverage. For a discussion of leveraging techniques utilized by the Trust, please see The Benefits and Risks of Leveraging and Derivative Financial Instruments on page 5. |
6 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Trust Summary as of July 31, 2020 (continued) | BlackRock Taxable Municipal Bond Trust |
Taxable Municipal Bond Overview
Taxable municipal bonds typically trade at a spread (or additional yield) relative to U.S. Treasury bonds with similar maturities, but otherwise they generally track Treasuries price movements. U.S. Treasury yields decreased significantly (as prices rose) during the reporting period. With this favorable interest rate backdrop, the Bloomberg Barclays Taxable Municipal: U.S. Aggregate Eligible Index returned 15.01% for the 12-month period ended July 31, 2020.
Yield spreads on taxable municipal bonds finished the period markedly wider at the broad index level, which was a headwind for market performance. (Prices decrease as spreads rise.) The widening of yield spreads was driven primarily by the COVID-19 pandemic given that large parts of the world economy were shut down in an effort to contain the outbreak. These developments had a substantial impact on the markets in the form of high volatility and elevated selling pressure. Taxable municipal bond spreads widened significantly in March 2020 as a result, with an increase as much as 150 basis points (1.50%) at the index level. The effects were especially pronounced in the transportation and health care sectors, as well as for many tax-backed credits. After the Fed acted to support the economy and restore market functioning through a number of different programs, markets started to regain their footing and spreads retraced some of the widening. Liquidity conditions did not fully return to normal, however, and lower-quality issues while rebounding continued to lag on a relative basis.
As the markets began to function more normally again, taxable municipal bond supply returned to robust levels. The increase in supply is attributable to the combination of very low absolute interest rates and changes to the tax code from the Tax Cuts and Jobs Act of 2017. The new tax rules prevent municipalities from advance-refunding their previously issued tax-exempt debt with additional tax-exempt debt. However, due to the large drop in interest rates, municipalities found it advantageous to sell taxable municipal debt to advance-refund their outstanding tax-exempt securities. This practice grew rapidly starting in August 2019, and it remained at a high level through the close of the period (with the exception of March). Issuers also responded to the COVID-19 pandemic by turning to the taxable municipal market to bolster their balance sheets in a quick fashion, adding to the surge in supply. Investors at first appeared apprehensive that there would be sufficient demand to meet the higher supply. Still, demand remained resilient throughout the period (except during the March to early April 2020 timeframe) as the appeal of taxable municipal debt has widened in recent years to a much broader audience, especially overseas. Increased issuance also created the opportunity for investors to diversify by purchasing the debt of issuers that had either not previously issued taxable bonds or that had not in been in the market for several years.
Performance
Returns for the 12 months ended July 31, 2020 were as follows:
Returns Based On | ||||||||
Market Price | NAV | |||||||
BBN(a)(b) |
17.68 | % | 10.73 | % | ||||
Lipper General Bond Funds(c) |
(1.11 | ) | (1.89 | ) | ||||
Bloomberg Barclays Taxable Municipal: U.S. Aggregate Eligible Index(d) |
N/A | 15.01 |
(a) |
All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices. |
(b) |
The Trust moved from a discount to NAV to a premium during the period, which accounts for the difference between performance based on market price and performance based on NAV. |
(c) |
Average return. Returns reflect reinvestment of dividends and/or distributions at NAV on the ex-dividend date as calculated by Lipper. |
(d) |
An unlevered index. |
N/A Not applicable as the index does not have a market price.
Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.
Past performance is no guarantee of future results.
The following discussion relates to the Trusts absolute performance based on NAV:
The Trusts use of leverage contributed to performance by enhancing income and amplifying the effect of rising prices. Holdings in bonds on the longer end of the yield curve (ten years and above) were positive, as this area experienced the strongest price appreciation. An allocation to higher-quality securities, which held up relatively well in the sell-off, further boosted performance. The Trust gained an additional benefit from its holdings in Puerto Rico Sales Tax securities.
The Trust sought to manage interest rate risk using U.S. Treasury futures. Because Treasury yields fell, as prices rose, this strategy detracted from performance. Security selection in the state tax-backed, local tax-backed and education sectors also detracted, as did holdings in lower-rated issues.
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.
Market Price and Net Asset Value Per Share Summary
07/31/20 | 07/31/19 | Change | High | Low | ||||||||||||||||
Market Price |
$ | 26.60 | $ | 23.89 | 11.34 | % | $ | 26.89 | $ | 18.58 | ||||||||||
Net Asset Value |
25.48 | 24.32 | 4.77 | 27.97 | 22.57 |
TRUST SUMMARY | 7 |
Trust Summary as of July 31, 2020 (continued) | BlackRock Taxable Municipal Bond Trust |
Market Price and Net Asset Value History For the Past Five Years
Overview of the Trusts Total Investments*
SECTOR ALLOCATION
Sector | 07/31/20 | 07/31/19 | ||||||
Utilities |
22 | % | 27 | % | ||||
Transportation |
21 | 21 | ||||||
County/City/Special District/School District |
19 | 17 | ||||||
Education |
16 | 13 | ||||||
State |
12 | 11 | ||||||
Tobacco |
4 | 5 | ||||||
Health |
2 | | ||||||
Health Care Providers & Services |
2 | 4 | ||||||
Housing |
1 | 1 | ||||||
Corporate |
1 | 1 | ||||||
Diversified Financial Services |
| (a) | |
(a) |
Represents less than 1% of the Trusts total investments. |
For Trust compliance purposes, the Trusts sector classifications refer to one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
CALL/MATURITY SCHEDULE (c)
Percent of
Total Investments |
||||
Calendar Year Ended December 31, |
||||
2020 |
9 | % | ||
2021 |
3 | |||
2022 |
| (a) | ||
2023 |
| (a) | ||
2024 |
1 |
(c) |
Scheduled maturity dates and/or bonds that are subject to potential calls by issuers over the next five years. |
* |
Excludes short-term securities. |
CREDIT QUALITY ALLOCATION (b)
Credit Rating | 07/31/20 | 07/31/19 | ||||||
AAA/Aaa |
3 | % | 3 | % | ||||
AA/Aa |
40 | 47 | ||||||
A |
39 | 28 | ||||||
BBB/Baa |
8 | 11 | ||||||
BB/Ba |
2 | | ||||||
B |
4 | 5 | ||||||
C |
| 1 | ||||||
N/R |
4 | 5 |
(b) |
For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P Global Ratings or Moodys Investors Service (Moodys) 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. |
8 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
July 31, 2020 |
BlackRock Taxable Municipal Bond Trust (BBN) (Percentages shown are based on Net Assets) |
Security |
Par
(000) |
Value | ||||||
Corporate Bonds 6.8% |
|
|||||||
Diversified Financial Services 0.2% |
|
|||||||
Western Group Housing LP, 6.75%, 03/15/57(a)(b) |
$ | 2,458 | $ | 3,515,204 | ||||
|
|
|||||||
Education 3.5% | ||||||||
George Washington University, Series 2018, 4.13%, 09/15/48 |
7,191 | 9,750,764 | ||||||
Rensselaer Polytechnic Institute, Series 2018, 5.25%, 09/01/48(b) |
20,000 | 26,583,036 | ||||||
Wesleyan University, 4.78%, 07/01/16(b) |
11,000 | 13,918,372 | ||||||
|
|
|||||||
50,252,172 | ||||||||
Health Care Providers & Services 3.1% | ||||||||
Baptist Health Obligated Group, Series 2019, 4.10%, 12/01/49 |
14,900 | 15,559,147 | ||||||
Common Spirit Health, 3.82%, 10/01/49 |
7,750 | 8,735,391 | ||||||
Ochsner Clinic Foundation, 5.90%, 05/15/45 |
5,000 | 6,693,866 | ||||||
Peace Health Obligated Group, Series 2018, 4.79%, 11/15/48 |
5,065 | 6,960,306 | ||||||
Tower Health, 4.45%, 02/01/50 |
8,162 | 7,630,211 | ||||||
|
|
|||||||
45,578,921 | ||||||||
|
|
|||||||
Total Corporate Bonds 6.8%
|
|
99,346,297 | ||||||
|
|
|||||||
Municipal Bonds 141.2% |
|
|||||||
Arizona 2.4% |
|
|||||||
Salt River Project Agricultural Improvement & Power District, RB, Build America Bonds, Series A, 4.84%, 01/01/41(b) |
24,545 | 35,049,033 | ||||||
|
|
|||||||
California 25.8% | ||||||||
Bay Area Toll Authority, RB, Build America Bonds, San Francisco Toll Bridge: |
||||||||
Series S-1, 6.92%, 04/01/40(b) |
13,700 | 21,941,646 | ||||||
Series S-1, 7.04%, 04/01/50 |
1,015 | 1,896,324 | ||||||
Series S-3, 6.91%, 10/01/50(b) |
14,000 | 26,696,180 | ||||||
City of Riverside, RB, Series A, 3.86%, 06/01/45 |
8,265 | 8,691,722 | ||||||
City of San Francisco California, Public Utilities Commission Water Revenue, RB, Build America Bonds, Sub-Series E, 6.00%, 11/01/40(b) |
21,255 | 31,619,363 | ||||||
City of San Jose California, Refunding ARB, Norman Y Mineta San Jose International Airport SJC, Series B (AGM), 6.60%, 03/01/41(b) |
10,000 | 10,259,900 | ||||||
County of Alameda California Joint Powers Authority, RB, Build America Bonds, Recovery Zone, Series A, 7.05%, 12/01/44 |
11,000 | 18,720,020 | ||||||
County of Orange California Local Transportation Authority, Refunding RB, Build America Bonds, Series A, 6.91%, 02/15/41(b) |
5,000 | 7,821,150 | ||||||
County of Riverside California, RB, 3.82%, 02/15/38 |
11,450 | 13,130,860 | ||||||
County of Sonoma California, Refunding RB, Pension Obligation, Series A (GTD), 6.00%, 12/01/29(b) |
13,785 | 16,751,946 | ||||||
Foothill-Eastern Transportation Corridor Agency, Refunding RB, Toll Road, Series A, 4.09%, 01/15/49 |
14,540 | 15,425,050 | ||||||
Inland Empire Tobacco Securitization Corp., Refunding RB, 3.68%, 06/01/38 |
9,425 | 9,934,233 | ||||||
Los Angeles Community College District California, GO, Build America Bonds, 6.60%, 08/01/42(b) |
10,000 | 17,330,600 | ||||||
Palomar Community College District, GO, Build America Bonds, Series B-1, 7.19%, 08/01/45 |
7,500 | 7,500,000 | ||||||
Rancho Water District Financing Authority, RB, Build America Bond, Series A, 6.34%, 08/01/40(b)(c) |
165 | 165,000 |
Security |
Par
(000) |
Value | ||||||
California (continued) | ||||||||
San Diego County Regional Airport Authority, ARB, Consolidated Rental Car Facility Project, Series B, 5.59%, 07/01/43 |
$ | 4,000 | $ | 4,234,520 | ||||
State of California, GO, Build America Bonds: |
||||||||
7.55%, 04/01/39 |
9,035 | 16,366,631 | ||||||
7.60%, 11/01/40 |
15,000 | 28,066,800 | ||||||
Various Purpose, 7.63%, 03/01/40 |
8,950 | 16,068,293 | ||||||
State of California Public Works Board, RB, Build America Bonds, Series G-2, 8.36%, 10/01/34 |
18,145 | 29,928,000 | ||||||
University of California, RB, Build America Bonds(b): |
||||||||
5.95%, 05/15/45 |
24,000 | 35,872,320 | ||||||
6.30%, 05/15/50 |
27,010 | 37,088,241 | ||||||
|
|
|||||||
375,508,799 | ||||||||
Colorado 3.6% | ||||||||
City & County of Denver Colorado School District No. 1, COP, Refunding, Denver Colorado Public Schools, Series B, 7.02%, 12/15/37 |
6,000 | 9,430,560 | ||||||
Regional Transportation District, COP, Build America Bonds, Series B, 7.67%, 06/01/40(b) |
23,000 | 38,262,800 | ||||||
State of Colorado, COP, Build America Bonds, Building Excellent Schools, Series E, 7.02%, 03/15/21(c) |
5,000 | 5,204,550 | ||||||
|
|
|||||||
52,897,910 | ||||||||
Connecticut 0.3% | ||||||||
Connecticut State Health & Educational Facilities Authority, Refunding RB, Series G-2, 4.25%, 07/01/27(a) |
5,055 | 5,035,589 | ||||||
|
|
|||||||
District of Columbia 3.3% | ||||||||
Metropolitan Washington Airports Authority Dulles Toll Road Revenue, ARB, Build America Bonds: |
||||||||
Series D, 8.00%, 10/01/47 |
10,750 | 16,711,950 | ||||||
Dulles Toll Road Revenue, 7.46%, 10/01/46 |
9,235 | 16,143,426 | ||||||
Washington Convention & Sports Authority, Refunding RB, Series C, 7.00%, 10/01/20(c) |
15,000 | 15,150,750 | ||||||
|
|
|||||||
48,006,126 | ||||||||
Florida 5.7% | ||||||||
City of Sunrise Florida Utility System, Refunding RB, Build America Bonds, Series B, 5.91%, 10/01/20(b)(c) |
23,000 | 23,191,820 | ||||||
County of Miami-Dade Florida Educational Facilities Authority, Refunding RB, Series B, 5.07%, 04/01/50 |
12,250 | 15,469,300 | ||||||
Excelsior Academies Inc, RB, Series C, 5.25%, 11/01/25 |
640 | 644,941 | ||||||
Florida Development Finance Corp., RB, Midtown Campus Properties, 7.00%, 12/01/48(a) |
4,500 | 4,212,315 | ||||||
Florida Development Finance Corp., Refunding RB, Nova South Eastern University Project, 4.11%, 04/01/50 |
15,000 | 15,542,850 | ||||||
Miami-Dade County Industrial Development Authority, RB, Excelsior Charter Academy Project, 5.25%, 11/01/25 |
255 | 256,958 | ||||||
Sumter Landing Community Development District, RB, Taxable Senior Recreational, Series 2016, 4.17%, 10/01/47 |
2,575 | 2,972,941 | ||||||
Town of Davie Florida Water & Sewer, RB, Build America Bonds, Series B (AGM), 6.85%, 10/01/20(c) |
2,500 | 2,524,550 | ||||||
Village Center Community Development District, Refunding RB, 5.02%, 11/01/36 |
13,500 | 17,505,180 | ||||||
|
|
|||||||
82,320,855 | ||||||||
Georgia 6.4% | ||||||||
Municipal Electric Authority of Georgia, Refunding RB, Build America Bonds, Series A: |
||||||||
6.64%, 04/01/57 |
26,656 | 40,525,117 | ||||||
6.66%, 04/01/57 |
24,635 | 37,974,852 | ||||||
7.06%, 04/01/57 |
9,851 | 14,624,401 | ||||||
|
|
|||||||
93,124,370 |
SCHEDULE OF INVESTMENTS | 9 |
Schedule of Investments (continued) July 31, 2020 |
BlackRock Taxable Municipal Bond Trust (BBN) (Percentages shown are based on Net Assets) |
Security |
Par
(000) |
Value | ||||||
Hawaii 2.1% | ||||||||
University of Hawaii, RB, Build America Bonds, Series B-1, 6.03%, 10/01/40(b) |
$ | 30,500 | $ | 30,736,375 | ||||
|
|
|||||||
Idaho 0.1% | ||||||||
Idaho Housing & Finance Association, RB, Hayden Canyon Charter School Project, Series B, 7.15%, 06/15/31 |
980 | 886,763 | ||||||
|
|
|||||||
Illinois 18.0% | ||||||||
Chicago Board of Education, GO: |
||||||||
Build America Bonds, 6.52%, 12/01/40 |
9,745 | 10,112,386 | ||||||
Taxable Build America Bonds, 6.04%, 12/01/29 |
12,935 | 13,234,186 | ||||||
Taxable Build America Bonds, 6.14%, 12/01/39 |
2,085 | 2,124,386 | ||||||
Taxable Qualified School Construction Bonds, 6.32%, 11/01/29 |
9,465 | 9,684,115 | ||||||
Chicago OHare International Airport, Refunding ARB, Build America Bonds, Series B: |
||||||||
OHare International Airport, General 3rd Lien, 6.85%, 01/01/38(b) |
30,110 | 30,214,482 | ||||||
6.40%, 01/01/40 |
1,500 | 2,292,045 | ||||||
Chicago Transit Authority, RB: |
||||||||
Build America Bonds, Series B, 6.20%, 12/01/40(b) |
16,015 | 22,104,223 | ||||||
Pension Funding, Series A, 6.90%, 12/01/40 |
4,075 | 5,762,417 | ||||||
Pension Funding, Series B, 6.90%, 12/01/40 |
4,900 | 6,929,041 | ||||||
City of Chicago Illinois, GO, Series B, 5.43%, 01/01/42 |
1,065 | 1,041,900 | ||||||
City of Chicago Illinois Wastewater Transmission, RB, Build America Bonds, Series B, 6.90%, 01/01/40(b) |
36,000 | 51,697,800 | ||||||
City of Chicago Illinois Waterworks Transmission, RB, Build America Bonds, 2nd Lien, Series B, 6.74%, 11/01/40 |
15,250 | 22,314,410 | ||||||
Illinois Finance Authority, RB, Carle Foundation, Series A, 5.75%, 08/15/34 |
5,000 | 5,232,100 | ||||||
Illinois Municipal Electric Agency, RB, Build America Bonds, Series A, 7.29%, 02/01/35(b) |
15,000 | 21,404,250 | ||||||
Northern Illinois Municipal Power Agency, RB, Build America Bonds, Prairie State Project, Series A, 7.82%, 01/01/40 |
5,000 | 8,198,050 | ||||||
State of Illinois, GO, Build America Bonds: |
||||||||
6.73%, 04/01/35 |
6,320 | 7,215,418 | ||||||
Pension, 7.35%, 07/01/35 |
35,855 | 42,152,931 | ||||||
|
|
|||||||
261,714,140 | ||||||||
Indiana 1.8% | ||||||||
Indiana Finance Authority, RB, Build America Bonds, Series B, 6.60%, 02/01/39 |
7,900 | 12,554,917 | ||||||
Indiana Municipal Power Agency, RB, Build America Bonds, Direct Payment, Series A, 5.59%, 01/01/42 |
10,000 | 13,804,300 | ||||||
|
|
|||||||
26,359,217 | ||||||||
Kentucky 1.2% | ||||||||
Westvaco Corp., RB, MeadWestvaco Corp., 7.67%, 01/15/27(a) |
13,800 | 17,735,208 | ||||||
|
|
|||||||
Louisiana 0.3% | ||||||||
Louisiana Local Government Environmental Facilities & Community Development Authority, Refunding RB, East Baton Rouge Sewerage Commission Project, 2.59%, 02/01/43(d) |
4,800 | 4,798,944 | ||||||
|
|
|||||||
Maryland 0.1% | ||||||||
Maryland Health & Higher Educational Facilities Authority, RB, Legends Charter School Project, Series B, 6.25%, 03/01/27(a) |
1,000 | 939,510 | ||||||
|
|
|||||||
Massachusetts 0.5% | ||||||||
Commonwealth of Massachusetts Transportation Fund Revenue, RB, Build America Bonds, Recovery Zone, Series B, 5.73%, 06/01/40(b) |
5,000 | 7,340,450 | ||||||
|
|
Security |
Par
(000) |
Value | ||||||
Michigan 3.3% | ||||||||
Michigan Finance Authority, RB, Series D,
|
$ | 7,500 | $ | 9,673,725 | ||||
Michigan State University, RB, Build America Bonds, General, Series A, 6.17%, 02/15/50 |
5,500 | 7,076,465 | ||||||
Michigan State University, Refunding RB, Taxable, Series A, 4.50%, 08/15/48 |
14,575 | 16,808,473 | ||||||
Michigan Tobacco Settlement Finance Authority, RB, Capital Appreciation Turbo Term Bonds, Series A, 7.31%, 06/01/34 |
14,580 | 14,834,129 | ||||||
|
|
|||||||
48,392,792 | ||||||||
Minnesota 1.4% | ||||||||
Southern Minnesota Municipal Power Agency, Refunding RB, Build America Bonds, Series A, 5.93%, 01/01/43 |
8,000 | 11,948,720 | ||||||
Western Minnesota Municipal Power Agency, RB, Build America Bonds, Series C, 6.77%, 01/01/46 |
5,000 | 8,378,600 | ||||||
|
|
|||||||
20,327,320 | ||||||||
Mississippi 0.5% | ||||||||
Mississippi Development Bank, RB, Build America Bonds, Garvee, Series B, 6.41%, 01/01/40 |
5,000 | 7,595,250 | ||||||
|
|
|||||||
Missouri 1.9% | ||||||||
Missouri Joint Municipal Electric Utility Commission, RB, Build America Bonds, Plum Point Project, Series A, 7.73%, 01/01/39 |
11,000 | 17,367,130 | ||||||
University of Missouri, RB, Build America Bonds, Curators of the University, Series A, 5.79%, 11/01/41(b) |
7,000 | 11,030,180 | ||||||
|
|
|||||||
28,397,310 | ||||||||
Nevada 0.4% | ||||||||
City of North Las Vegas Nevada, GO, Build America Bonds, 6.57%, 06/01/40 |
1,420 | 2,101,529 | ||||||
County of Clark Nevada Department of Aviation, ARB, Build America Bonds, Series C, 6.82%, 07/01/45 |
2,000 | 3,208,180 | ||||||
|
|
|||||||
5,309,709 | ||||||||
New Hampshire 0.4% | ||||||||
New Hampshire Business Finance Authority, Refunding RB, VA Kernersville Health Care Center Project, 2.87%, 07/01/35 |
5,100 | 5,301,348 | ||||||
|
|
|||||||
New Jersey 12.4% | ||||||||
County of Camden Improvement Authority, LRB, Build America Bonds, Cooper Medical School of Rowan University Project, Series A, 7.75%, 07/01/34(b) |
5,000 | 5,022,600 | ||||||
New Jersey EDA, RB, Series A
(NPFGC),
|
20,974 | 26,095,641 | ||||||
New Jersey Educational Facilities Authority, Refunding RB, The College of New Jersey Issue, 3.51%, 07/01/42 |
20,000 | 20,471,000 | ||||||
New Jersey State Housing & Mortgage Finance Agency, RB, M/F Housing, Series C (AGM), 6.65%, 11/01/44 |
14,360 | 14,387,715 | ||||||
New Jersey Transportation Trust Fund Authority, RB, Build America Bonds, Series C, 5.75%, 12/15/28 |
4,500 | 4,920,030 | ||||||
New Jersey Transportation Trust Fund Authority, Refunding RB, Transportation System, 4.13%, 06/15/42 |
29,355 | 29,448,055 | ||||||
State of New Jersey Turnpike Authority, RB, Build America Bonds: |
||||||||
Series A, 7.10%, 01/01/41(b) |
34,000 | 58,376,640 | ||||||
Series F, 7.41%, 01/01/40 |
6,790 | 11,966,017 | ||||||
The State of Rutgers University of New Jersey, RB, Rutgers University, Series P, 3.92%, 05/01/19 |
7,275 | 9,745,881 | ||||||
|
|
|||||||
180,433,579 | ||||||||
New York 11.4% | ||||||||
City of New York, GO, Build America Bonds, Series H-1, 6.25%, 06/01/35 |
5,000 | 5,017,300 |
10 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Schedule of Investments (continued) July 31, 2020 |
BlackRock Taxable Municipal Bond Trust (BBN) (Percentages shown are based on Net Assets) |
Security |
Par
(000) |
Value | ||||||
New York (continued) | ||||||||
City of New York Transitional Finance Authority Future Tax Secured Revenue, RB, Build America Bonds, Future Tax Secured, Sub-Series B-1, 5.57%, 11/01/38(b) |
$ | 19,000 | $ | 26,396,510 | ||||
County of Nassau New York Tobacco Settlement Corp., Refunding RB, Asset Backed, Series A-1, 6.83%, 06/01/21 |
8,250 | 8,265,604 | ||||||
Metropolitan Transportation Authority, RB: |
||||||||
Build America Bond, 7.13%, 11/15/30 |
15,000 | 15,104,850 | ||||||
Build America Bonds, 6.67%, 11/15/39 |
2,220 | 2,887,177 | ||||||
Build America Bonds, 7.34%, 11/15/39(b) |
13,245 | 21,669,482 | ||||||
Build America Bonds, Series C-1, 6.69%, 11/15/40(b) |
13,000 | 16,746,210 | ||||||
Metropolitan Transportation Authority, Refunding RB, Green Bond, Series C-2, 5.18%, 11/15/49 |
4,370 | 5,112,987 | ||||||
New York City Transitional Finance Authority Future Tax Secured Revenue, RB, Build America Bonds, Future Tax Secured, Sub-Series B-1, 5.93%, 11/01/36(b) |
6,060 | 6,136,659 | ||||||
Port Authority of New York & New Jersey, ARB: |
||||||||
192nd Series, 4.81%, 10/15/65 |
14,825 | 21,297,299 | ||||||
Consolidated, 160th Series, 5.65%, 11/01/40 |
2,750 | 3,967,343 | ||||||
Consolidated, 168th Series, 4.93%, 10/01/51 |
3,860 | 5,514,550 | ||||||
State of New York Dormitory Authority, RB, Build America Bonds, General Purpose, Series H, 5.39%, 03/15/40(b) |
15,000 | 21,212,250 | ||||||
State of New York Dormitory Authority, Refunding RB, Touro College & University, Series
B,
|
6,010 | 6,656,255 | ||||||
|
|
|||||||
165,984,476 | ||||||||
Ohio 7.4% | ||||||||
American Municipal Power, Inc., RB, Build America Bonds, Combined Hydroelectric Projects, Series B, 7.83%, 02/15/41 |
10,000 | 16,696,600 | ||||||
American Municipal Power, Inc., Refunding RB, Build America Bonds, Series B, 6.45%, 02/15/44 |
10,000 | 14,948,300 | ||||||
County of Franklin Ohio Convention Facilities Authority, RB, Build America Bonds, 6.64%, 12/01/42(b) |
30,575 | 49,884,335 | ||||||
Mariemont City School District, GO, Refunding, Build America Bonds, Series B, 6.55%, 12/01/20(b)(c) |
10,055 | 10,266,155 | ||||||
Ohio University, RB, General Receipts, Athens, 5.59%, 12/01/14 |
10,100 | 15,693,380 | ||||||
|
|
|||||||
107,488,770 | ||||||||
Oklahoma 0.4% | ||||||||
Oklahoma Municipal Power Authority, RB, Build America Bonds, 6.44%, 01/01/45(b) |
3,500 | 5,342,645 | ||||||
|
|
|||||||
Pennsylvania 4.0% | ||||||||
Commonwealth Financing Authority, RB, Series A: |
||||||||
Plancon Program, 3.86%, 06/01/38 |
2,210 | 2,631,425 | ||||||
Taxable Bond, 3.81%, 06/01/41 |
4,920 | 5,735,441 | ||||||
4.14%, 06/01/38 |
6,200 | 7,608,702 | ||||||
Pennsylvania Economic Development Financing Authority, RB, Build America Bonds, Series B, 6.53%, 06/15/39 |
23,050 | 32,174,573 | ||||||
Temple University-of The Commonwealth System of Higher Education, Refunding RB, First Series of 2020, 3.08%, 04/01/40 |
10,000 | 10,364,700 | ||||||
|
|
|||||||
58,514,841 | ||||||||
Puerto Rico 2.8% | ||||||||
Puerto Rico Commonwealth Aqueduct & Sewer Authority, Refunding RB, Senior Lien, Series B: |
||||||||
5.00%, 07/01/23 |
3,365 | 3,254,729 | ||||||
5.35%, 07/01/27 |
18,075 | 17,005,141 | ||||||
6.15%, 07/01/38 |
2,160 | 2,024,741 |
Security |
Par
(000) |
Value | ||||||
Puerto Rico (continued) | ||||||||
Puerto Rico Sales Tax Financing Corp. Sales Tax Revenue, RB, Restructured, Series A-2: |
||||||||
4.33%, 07/01/40 |
$ | 5,000 | $ | 5,200,550 | ||||
4.78%, 07/01/58 |
12,447 | 13,255,432 | ||||||
|
|
|||||||
40,740,593 | ||||||||
South Carolina 2.6% | ||||||||
South Carolina Public Service Authority, RB, Series F (AGM): |
||||||||
Build America Bonds, 6.45%, 01/01/50 |
11,290 | 18,050,000 | ||||||
Santee Cooper, 5.74%, 01/01/30 |
5,000 | 6,082,300 | ||||||
South Carolina Public Service Authority, Refunding RB, Series D, 4.77%, 12/01/45 |
10,085 | 13,430,094 | ||||||
|
|
|||||||
37,562,394 | ||||||||
Tennessee 4.0% | ||||||||
County of Memphis-Shelby Tennessee Industrial Development Board, Refunding, Tax Allocation Bonds, Subordinate Tax Increment, Series C, 7.00%, 07/01/45 |
5,800 | 5,975,856 | ||||||
Metropolitan Government of Nashville & Davidson County Convention Center Authority, RB, Build America Bonds, Series A2, 7.43%, 07/01/43(b) |
35,105 | 52,938,691 | ||||||
|
|
|||||||
58,914,547 | ||||||||
Texas 4.2% | ||||||||
City of Austin Texas, RB, Travis, Williams and Hays Counties, Rental Car Specialty
Facilities,
|
5,000 | 5,299,250 | ||||||
City of San Antonio Texas Customer Facility Charge Revenue, RB, 5.87%, 07/01/45(b) |
7,500 | 8,516,850 | ||||||
Dallas Area Rapid Transit, RB, Build America Bonds, Senior Lien, Series B, 5.02%, 12/01/48 |
2,500 | 3,843,725 | ||||||
Dallas-Fort Worth International Airport, Refunding RB, Series C, 3.09%, 11/01/40(d) |
10,155 | 10,251,371 | ||||||
North Texas Municipal Water District, RB, Build America Bonds, Series A, 6.01%, 09/01/40(b) |
10,000 | 10,043,100 | ||||||
Port Beaumont Navigation District, Refunding RB, Jefferson Gulf Coast, Series B, 6.00%, 01/01/25(a) |
1,085 | 1,090,598 | ||||||
Texas Private Activity Bond Surface Transportation Corp., RB, North Tarrant Express Managed Lanes Project, Series B, 3.92%, 12/31/49 |
20,000 | 22,061,200 | ||||||
|
|
|||||||
61,106,094 | ||||||||
Utah 2.4% | ||||||||
Utah Transit Authority, RB, Build America Bonds, Subordinated, 5.71%, 06/15/40(b) |
26,405 | 35,463,763 | ||||||
|
|
|||||||
Virginia 3.2% | ||||||||
Tobacco Settlement Financing Corp., Refunding RB, Series A-1, 6.71%, 06/01/46 |
31,990 | 32,073,814 | ||||||
Virginia Housing Development Authority, RB: |
||||||||
M/F Housing, Rental Housing Bonds, Series D, 3.64%, 06/01/45 |
8,435 | 9,129,538 | ||||||
Series F, 3.13%, 07/01/45 |
5,000 | 5,211,000 | ||||||
|
|
|||||||
46,414,352 | ||||||||
Washington 2.2% | ||||||||
Washington State Convention Center Public Facilities District, RB, Build America Bonds, Series B, 6.79%, 07/01/40 |
26,100 | 32,526,864 | ||||||
|
|
|||||||
West Virginia 3.9% | ||||||||
West Virginia Tobacco Settlement Finance Authority, RB, Series A, 7.47%, 06/01/47 |
29,400 | 30,647,442 | ||||||
West Virginia United Health System Obligated Group, Series 2018, 4.92%, 06/01/48 |
20,000 | 25,613,523 | ||||||
|
|
|||||||
56,260,965 |
SCHEDULE OF INVESTMENTS | 11 |
Schedule of Investments (continued) July 31, 2020 |
BlackRock Taxable Municipal Bond Trust (BBN) (Percentages shown are based on Net Assets) |
Security |
Par
(000) |
Value | ||||||
Wisconsin 0.8% | ||||||||
Public Finance Authority, RB: |
||||||||
Affinity Living Group, 6.75%, 11/01/24(a) |
$ | 3,580 | $ | 3,468,734 | ||||
Seattle Proton Center, Series A, 7.55%, 12/01/30(a) |
1,470 | 1,511,851 | ||||||
Seattle Proton Center, Series A, 7.63%, 12/01/48(a) |
5,310 | 5,090,431 | ||||||
Series B, 6.00%, 06/15/24 |
435 | 435,065 | ||||||
Public Finance Authority, Refunding RB, Ultimate Medical Academy Project, Series B, 6.13%, 10/01/49(a) |
1,470 | 1,412,229 | ||||||
|
|
|||||||
11,918,310 | ||||||||
|
|
|||||||
Total Municipal Bonds 141.2%
|
|
2,056,449,211 | ||||||
|
|
|||||||
Total Long-Term Investments 148.0%
|
|
2,155,795,508 | ||||||
|
|
|||||||
Shares | ||||||||
Short-Term Securities 0.4% | ||||||||
BlackRock Liquidity Funds, T-Fund, Institutional Class, 0.08%(e)(f) |
6,321,745 | 6,321,745 | ||||||
|
|
|||||||
Total Short-Term Securities 0.4%
|
|
6,321,745 | ||||||
|
|
|||||||
Total Investments 148.4%
|
|
2,162,117,253 | ||||||
Liabilities in Excess of Other Assets (48.4)% |
|
(705,313,070 | ) | |||||
|
|
|||||||
Net Assets 100.0% |
|
$ | 1,456,804,183 | |||||
|
|
(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) |
All or a portion of the security has been pledged as collateral in connection with outstanding reverse repurchase agreements. |
(c) |
U.S. Government securities held in escrow, are used to pay interest on this security as well as to retire the bond in full at the date indicated, typically at a premium to par. |
(d) |
When-issued security. |
(e) |
Annualized 7-day yield as of period end. |
(f) |
Investments in issuers considered to be an affiliate/affiliates of the Trust during the year ended July 31, 2020 for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows: |
Affiliated Issuer |
Shares
Held at 07/31/19 |
Shares
Purchased |
Shares
Sold |
Shares
Held at 07/31/20 |
Value at
07/31/20 |
Income |
Net
Realized Gain (Loss) (a) |
Change in
Unrealized Appreciation (Depreciation) |
||||||||||||||||||||||||
BlackRock Liquidity Funds, T-Fund, Institutional Class |
5,709,848 | 611,897 | (b) | | 6,321,745 | $ | 6,321,745 | $ | 168,272 | $ | 71 | $ | | |||||||||||||||||||
|
|
|
|
|
|
|
|
(a) |
Includes net capital gain distributions, if applicable. |
(b) |
Represents net shares purchased (sold). |
For Trust compliance purposes, the Trusts sector classifications refer to one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
Reverse Repurchase Agreements
Counterparty |
Interest
Rate (a) |
Trade
Date |
Maturity
Date (b) |
Face Value |
Face Value
Including Accrued Interest |
Type of Non-Cash
Underlying Collateral |
Remaining Contractual
Maturity of the Agreements (a) |
|||||||||||||||||
RBC Capital Markets LLC |
1.15 | % | 08/27/19 | Open | $ | 7,400,000 | $ | 7,527,927 | Municipal Bonds | Open/Demand | ||||||||||||||
RBC Capital Markets LLC |
1.15 | 08/28/19 | Open | 31,233,513 | 31,797,191 | Municipal Bonds | Open/Demand | |||||||||||||||||
RBC Capital Markets LLC |
1.15 | 08/28/19 | Open | 28,773,956 | 29,293,246 | Municipal Bonds | Open/Demand | |||||||||||||||||
RBC Capital Markets LLC |
1.15 | 08/28/19 | Open | 33,000,000 | 33,595,558 | Municipal Bonds | Open/Demand | |||||||||||||||||
RBC Capital Markets LLC |
1.15 | 08/28/19 | Open | 35,580,000 | 36,222,120 | Municipal Bonds | Open/Demand | |||||||||||||||||
RBC Capital Markets LLC |
1.15 | 08/28/19 | Open | 42,280,000 | 43,043,037 | Municipal Bonds | Open/Demand | |||||||||||||||||
RBC Capital Markets LLC |
1.15 | 12/19/19 | Open | 3,617,875 | 3,654,476 | Municipal Bonds | Open/Demand | |||||||||||||||||
Barclays Bank PLC |
1.05 | 03/10/20 | Open | 1,145,681 | 1,150,827 | Municipal Bonds | Open/Demand | |||||||||||||||||
Barclays Bank PLC |
1.05 | 03/10/20 | Open | 1,775,569 | 1,783,544 | Municipal Bonds | Open/Demand | |||||||||||||||||
Barclays Bank PLC |
1.05 | 03/10/20 | Open | 1,342,500 | 1,348,530 | Municipal Bonds | Open/Demand | |||||||||||||||||
Barclays Bank PLC |
1.10 | 04/08/20 | Open | 5,443,750 | 5,462,879 | Municipal Bonds | Open/Demand | |||||||||||||||||
Barclays Bank PLC |
1.15 | 04/08/20 | Open | 9,036,931 | 9,070,129 | Municipal Bonds | Open/Demand | |||||||||||||||||
Barclays Bank PLC |
1.50 | 04/15/20 | Open | 11,935,000 | 11,988,210 | Corporate Bonds | Open/Demand | |||||||||||||||||
Barclays Bank PLC |
1.65 | 04/15/20 | Open | 20,010,000 | 20,108,132 | Municipal Bonds | Open/Demand |
12 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Schedule of Investments (continued) July 31, 2020 |
BlackRock Taxable Municipal Bond Trust (BBN) |
Reverse Repurchase Agreements (continued)
Counterparty |
Interest
Rate (a) |
Trade
Date |
Maturity
Date (b) |
Face Value |
Face Value
Including Accrued Interest |
Type of Non-Cash
Underlying Collateral |
Remaining Contractual
Maturity of the Agreements (a) |
|||||||||||||||||
Barclays Bank PLC |
1.65 | % | 04/15/20 | Open | $ | 143,756 | $ | 144,461 | Municipal Bonds | Open/Demand | ||||||||||||||
RBC Capital Markets LLC |
1.80 | 05/05/20 | Open | 13,640,000 | 13,699,334 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.60 | 05/19/20 | Open | 3,268,750 | 3,272,727 | Corporate Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.67 | 05/19/20 | Open | 27,579,000 | 27,616,469 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.67 | 05/19/20 | Open | 2,769,000 | 2,772,762 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.67 | 05/19/20 | Open | 21,147,000 | 21,175,731 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.67 | 05/19/20 | Open | 20,634,000 | 20,662,034 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.67 | 05/19/20 | Open | 31,000,000 | 31,042,117 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.67 | 05/19/20 | Open | 31,774,500 | 31,817,669 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.67 | 05/19/20 | Open | 17,032,500 | 17,055,640 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.67 | 05/19/20 | Open | 8,745,000 | 8,756,881 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.67 | 05/19/20 | Open | 16,897,500 | 16,920,457 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.67 | 05/19/20 | Open | 7,987,500 | 7,998,352 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.67 | 05/19/20 | Open | 48,603,000 | 48,669,033 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.67 | 05/19/20 | Open | 9,785,000 | 9,798,294 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.72 | 05/19/20 | Open | 4,578,000 | 4,584,684 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.72 | 05/19/20 | Open | 9,535,000 | 9,548,921 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.72 | 05/19/20 | Open | 38,646,000 | 38,702,423 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.72 | 05/19/20 | Open | 24,882,000 | 24,918,328 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.72 | 05/19/20 | Open | 4,820,000 | 4,827,037 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.72 | 05/19/20 | Open | 6,447,500 | 6,456,913 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.72 | 05/19/20 | Open | 14,683,500 | 14,704,938 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.67 | 05/20/20 | Open | 21,161,000 | 21,189,750 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.67 | 05/20/20 | Open | 18,382,660 | 18,407,635 | Municipal Bonds | Open/Demand | |||||||||||||||||
Mitsubishi UFJ Securities (USA) Inc. |
0.67 | 05/20/20 | Open | 9,604,700 | 9,617,749 | Municipal Bonds | Open/Demand | |||||||||||||||||
Barclays Bank PLC |
0.65 | 06/25/20 | Open | 16,387,500 | 16,398,448 | Municipal Bonds | Open/Demand | |||||||||||||||||
RBC Capital Markets LLC |
1.15 | 06/29/20 | Open | 16,111,219 | 16,127,688 | Municipal Bonds | Open/Demand | |||||||||||||||||
RBC Capital Markets LLC |
1.15 | 06/29/20 | Open | 5,885,775 | 5,891,792 | Municipal Bonds | Open/Demand | |||||||||||||||||
RBC Capital Markets LLC |
1.15 | 06/29/20 | Open | 15,962,500 | 15,978,817 | Municipal Bonds | Open/Demand | |||||||||||||||||
RBC Capital Markets LLC |
1.15 | 06/29/20 | Open | 7,243,750 | 7,251,155 | Municipal Bonds | Open/Demand | |||||||||||||||||
|
|
|
|
|||||||||||||||||||||
$ | 707,912,385 | $ | 712,054,045 | |||||||||||||||||||||
|
|
|
|
(a) |
Variable rate security. Rate as of period end and maturity is the date the principal owed can be recovered through demand. |
(b) |
Certain agreements have no stated maturity and can be terminated by either party at any time. |
Derivative Financial Instruments Outstanding as of Period End
Futures Contracts
Description |
Number of
Contracts |
Expiration
Date |
Notional
Amount (000) |
Value
/
(Depreciation) |
||||||||||||
Short Contracts |
||||||||||||||||
10-Year U.S. Treasury Note |
380 | 09/21/20 | $ | 53,230 | $ | (226,146 | ) | |||||||||
Long U.S. Treasury Bond |
325 | 09/21/20 | 59,241 | (640,305 | ) | |||||||||||
|
|
|||||||||||||||
$ | (866,451 | ) | ||||||||||||||
|
|
Derivative Financial Instruments Categorized by Risk Exposure
As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows :
Commodity Contracts |
Credit Contracts |
Equity Contracts |
Foreign Currency Exchange Contracts |
Interest Rate Contracts |
Other Contracts |
Total | ||||||||||||||||||||||
Liabilities Derivative Financial Instruments |
||||||||||||||||||||||||||||
Futures contracts |
||||||||||||||||||||||||||||
Unrealized depreciation on futures contracts(a) . . . |
$ | | $ | | $ | | $ | | $ | 866,451 | $ | | $ | 866,451 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Net cumulative unrealized appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, are reported in the Schedule of Investments. In the Statement of Assets and Liabilities, only current days variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included accumulated earnings (loss). |
SCHEDULE OF INVESTMENTS | 13 |
Schedule of Investments (continued) July 31, 2020 |
BlackRock Taxable Municipal Bond Trust (BBN) |
Derivative Financial Instruments Categorized by Risk Exposure (continued)
For the year ended July 31, 2020, the effect of derivative financial instruments in the Statement of Operations was as follows:
Commodity Contracts |
Credit Contracts |
Equity Contracts |
Foreign Currency Exchange Contracts |
Interest Rate Contracts |
Other Contracts |
Total | ||||||||||||||||||||||
Net Realized Gain (Loss) from: |
||||||||||||||||||||||||||||
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
$ | | $ | | $ | | $ | | $ | (57,468,623 | ) | $ | | $ | (57,468,623 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net Change in Unrealized Appreciation (Depreciation) on: |
||||||||||||||||||||||||||||
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
$ | | $ | | $ | | $ | | $ | 4,242,897 | $ | | $ | 4,242,897 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Quarterly Balances of Outstanding Derivative Financial Instruments
Futures contracts: |
|
|||
Average notional value of contracts long |
$ | | (a) | |
Average notional value of contracts short |
227,278,078 |
(a) |
Derivative not held at any quarter-end. The risk exposure table serves as an indicator of activity during the period. |
For more information about the Trusts investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.
Fair Value Hierarchy as of Period End
Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Trusts policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.
The following tables summarize the Trusts investments and derivative financial instruments categorized in the disclosure hierarchy:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
|
|||||||||||||||
Investments: |
|
|||||||||||||||
Long-Term Investments |
$ | | $ | 2,155,795,508 | $ | | $ | 2,155,795,508 | ||||||||
Short-Term Securities |
6,321,745 | | | 6,321,745 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 6,321,745 | $ | 2,155,795,508 | $ | | $ | 2,162,117,253 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Derivative Financial Instruments (a) |
|
|||||||||||||||
Liabilities: |
|
|||||||||||||||
Interest rate contracts |
$ | (866,451 | ) | $ | | $ | | $ | (866,451 | ) | ||||||
|
|
|
|
|
|
|
|
(a) |
Derivative financial instruments are futures contracts. Futures contracts are valued at the unrealized appreciation (depreciation) on the instrument. |
The breakdown of the Trusts investments into major categories is disclosed in the Schedule of Investments above.
The Trust may hold assets and/or liabilities in which the fair value approximates the carrying amount or face value, including accrued interest, for financial statement purposes. As of period end, reverse repurchase agreements payable of $712,054,045 is categorized as Level 2 within the disclosure hierarchy.
See notes to financial statements.
14 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Statement of Assets and Liabilities
July 31, 2020
See notes to financial statements.
FINANCIAL STATEMENTS | 15 |
Year Ended July 31, 2020
BBN | ||||
INVESTMENT INCOME |
|
|||
Interest unaffiliated |
$ | 110,043,786 | ||
Dividends affiliated |
168,272 | |||
|
|
|||
Total investment income |
110,212,058 | |||
|
|
|||
EXPENSES |
|
|||
Investment advisory |
12,059,792 | |||
Accounting services |
235,124 | |||
Professional |
171,772 | |||
Trustees and Officer |
103,406 | |||
Transfer agent |
99,509 | |||
Custodian |
35,187 | |||
Registration |
20,890 | |||
Printing and postage |
18,844 | |||
Miscellaneous |
25,175 | |||
|
|
|||
Total expenses excluding interest expense |
12,769,699 | |||
Interest expense |
14,914,798 | |||
|
|
|||
Total expenses |
27,684,497 | |||
Less fees waived and/or reimbursed by the Manager |
(16,121 | ) | ||
|
|
|||
Total expenses after fees waived and/or reimbursed |
27,668,376 | |||
|
|
|||
Net investment income |
82,543,682 | |||
|
|
|||
REALIZED AND UNREALIZED GAIN (LOSS) |
|
|||
Net realized gain (loss) from: |
|
|||
Investments unaffiliated |
3,021,213 | |||
Capital gain distributions from underlying funds affiliated |
71 | |||
Futures contracts |
(57,468,623 | ) | ||
|
|
|||
(54,447,339 | ) | |||
|
|
|||
Net change in unrealized appreciation (depreciation) on: |
|
|||
Futures contracts |
4,242,897 | |||
Investments unaffiliated |
111,052,540 | |||
|
|
|||
115,295,437 | ||||
|
|
|||
Net realized and unrealized gain |
60,848,098 | |||
|
|
|||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | 143,391,780 | ||
|
|
See notes to financial statements.
16 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Statements of Changes in Net Assets
(a) |
Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
FINANCIAL STATEMENTS | 17 |
Year Ended July 31, 2020
RECONCILIATION OF RESTRICTED AND UNRESTRICTED CASH TO THE STATEMENT OF ASSETS AND LIABILITIES
7/31/2020 | 7/31/2019 | |||||||
Cash pledged: |
|
|||||||
Futures contracts |
$2,138,000 | $ | 5,238,950 | |||||
|
|
|
|
|||||
$2,138,000 | $ | 5,238,950 | ||||||
|
|
|
|
See notes to financial statements.
18 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
(For a share outstanding throughout each period)
BBN | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of year |
$ | 24.32 | $ | 23.03 | $ | 23.45 | $ | 25.02 | $ | 22.48 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net investment income(a) |
1.44 | 1.38 | 1.47 | 1.58 | 1.63 | |||||||||||||||
Net realized and unrealized gain (loss) |
1.06 | 1.33 | (0.32 | ) | (1.57 | ) | 2.49 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net increase from investment operations |
2.50 | 2.71 | 1.15 | 0.01 | 4.12 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Distributions(b) |
||||||||||||||||||||
From net investment income |
(1.34 | ) | (1.41 | ) | (1.57 | ) | (1.58 | ) | (1.58 | ) | ||||||||||
From return of capital |
| (0.01 | ) | | | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total distributions |
(1.34 | ) | (1.42 | ) | (1.57 | ) | (1.58 | ) | (1.58 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net asset value, end of year |
$ | 25.48 | $ | 24.32 | $ | 23.03 | $ | 23.45 | $ | 25.02 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Market price, end of year |
$ | 26.60 | $ | 23.89 | $ | 21.99 | $ | 23.29 | $ | 24.43 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Return(c) |
|
|||||||||||||||||||
Based on net asset value |
10.73 | % | 12.60 | % | 5.23 | % | 0.45 | %(d) | 19.55 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Based on market price |
17.68 | % | 15.84 | % | 1.17 | % | 2.18 | % | 28.89 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ratios to Average Net Assets |
|
|||||||||||||||||||
Total expenses |
1.97 | % | 2.53 | % | 2.03 | % | 1.52 | % | 1.32 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total expenses after fees waived and/or reimbursed |
1.97 | % | 2.53 | % | 2.03 | % | 1.52 | % | 1.32 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total expenses after fees waived and/or reimbursed and excluding interest expense |
0.91 | % | 0.93 | % | 0.91 | % | 0.92 | % | 0.92 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net investment income |
5.88 | % | 6.02 | % | 6.27 | % | 6.79 | % | 7.08 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Supplemental Data |
|
|||||||||||||||||||
Net assets, end of year (000) |
$ | 1,456,804 | $ | 1,389,003 | $ | 1,315,521 | $ | 1,339,058 | $ | 1,428,924 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Borrowings outstanding, end of year (000) |
$ | 712,054 | $ | 799,955 | $ | 742,657 | $ | 729,035 | $ | 762,748 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Portfolio turnover rate |
15 | % | 7 | % | 8 | % | 7 | % | 10 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
(a) |
Based on average shares outstanding. |
(b) |
Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
(c) |
Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices. |
(d) |
The Trusts total return includes a reimbursement by an affiliate for a realized investment loss. Excluding this payment, the Trusts total return would have been 0.32%. |
See notes to financial statements.
FINANCIAL HIGHLIGHTS | 19 |
1. |
ORGANIZATION |
BlackRock Taxable Municipal Bond Trust (the Trust) is registered under the Investment Company Act of 1940, as amended (the 1940 Act). The Trust is registered as a diversified, closed-end management investment company. The Trust is organized as a Delaware statutory trust. The Trust determines and makes available for publication the net asset value (NAV) of its Common Shares on a daily basis.
The Trust, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the Manager) or its affiliates, is included in a complex of non-index fixed-income mutual funds and all BlackRock-advised closed-end funds referred to as the BlackRock Fixed-Income Complex.
2. |
SIGNIFICANT ACCOUNTING POLICIES |
The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Trust is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:
Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are executed. Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income and non-cash dividend income, if any, are recorded on the ex-dividend date. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on an accrual basis.
Segregation and Collateralization: In cases where the Trust enters into certain investments (e.g., futures contracts) or certain borrowings (e.g., reverse repurchase transactions) that would be treated as senior securities for 1940 Act purposes, the Trust may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments or borrowings. Doing so allows the investment or borrowings to be excluded from treatment as a senior security. Furthermore, if required by an exchange or counterparty agreement, the 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.
Distributions: Distributions from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The portion of distributions, if any, that exceeds a funds current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.
Deferred Compensation Plan: Under the Deferred Compensation Plan (the Plan) approved by the Board of Trustees of the Trust (the Board), the trustees who are not interested persons of the Trust, as defined in the 1940 Act (Independent Trustees), may defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar amounts had been invested in common shares of certain funds in the BlackRock Fixed-Income Complex selected by the Independent Trustees. This has the same economic effect for the Independent Trustees as if the Independent Trustees had invested the deferred amounts directly in certain funds in the BlackRock Fixed-Income Complex.
The Plan is not funded and obligations thereunder represent general unsecured claims against the general assets of the Trust, as applicable. Deferred compensation liabilities are included in the Trustees and Officers fees payable in the Statement of Assets and Liabilities and will remain as a liability of the Trust until such amounts are distributed in accordance with the Plan.
Recent Accounting Standards: The Trust has adopted Financial Accounting Standards Board Accounting Standards Update 2017-08 to amend the amortization period for certain purchased callable debt securities held at a premium. Under the new standard, the Trust has changed the amortization period for the premium on certain purchased callable debt securities with non-contingent call features to the earliest call date. In accordance with the transition provisions of the standard, the Trust applied the amendments on a modified retrospective basis beginning with the fiscal period ended July 31, 2020. The adjusted cost basis of securities at July 31, 2019 is $1,806,681,264.
This change in accounting policy has been made to comply with the newly issued accounting standard and had no impact on accumulated earnings (loss) or the net asset value of the Trust.
Indemnifications: In the normal course of business, the Trust enters into contracts that contain a variety of representations that provide general indemnification. The Trusts maximum exposure under these arrangements is unknown because it involves future potential claims against the Trust, which cannot be predicted with any certainty.
Other: Expenses directly related to the Trust are charged to the Trust. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods.
3. |
INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS |
Investment Valuation Policies: The Trusts investments are valued at fair value (also referred to as market value within the financial statements) as of the close of trading on the New York Stock Exchange (NYSE) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Trust would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Trust determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board. If a securitys market price is not readily available or does not otherwise accurately represent the fair value of the security, the security will be valued in accordance with a policy approved by the Board as reflecting fair value. The BlackRock
20 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
Global Valuation Methodologies Committee (the Global Valuation Committee) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.
Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Trusts assets and liabilities:
|
Fixed-income securities for which market quotations are readily available are generally valued using the last available bid prices or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more independent brokers or dealers as obtained from a third party pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but a fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), credit quality information, perceived market movements, news, and other relevant information. Certain fixed-income securities, including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value. |
|
Municipal investments (including commitments to purchase such investments on a when-issued basis) are valued on the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments. |
|
Investments in open-end U.S. mutual funds are valued at NAV each business day. |
|
Futures contracts are valued based on that days last reported settlement price on the exchange where the contract is traded. |
If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (Fair Valued Investments). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Trust might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arms-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.
Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:
|
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 marketcorroborated inputs) |
|
Level 3 Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Global Valuation Committees assumptions used in determining the fair value of investments 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. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately held companies or funds. There may not be a secondary market, and/or there are a limited number of investors. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.
4. |
SECURITIES AND OTHER INVESTMENTS |
Forward Commitments, When-Issued and Delayed Delivery Securities: The Trust 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 fund may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, the fund may be required to pay more at settlement than the security is worth. In addition, the fund is not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, the fund assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, the funds maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions.
NOTES TO FINANCIAL STATEMENTS | 21 |
Notes to Financial Statements (continued)
Reverse Repurchase Agreements: Reverse repurchase agreements are agreements with qualified third party broker dealers in which a fund sells securities to a bank or broker-dealer and agrees to repurchase the same securities at a mutually agreed upon date and price. A fund receives cash from the sale to use for other investment purposes. During the term of the reverse repurchase agreement, a fund continues to receive the principal and interest payments on the securities sold. Certain agreements have no stated maturity and can be terminated by either party at any time. Interest on the value of the reverse repurchase agreements issued and outstanding is based upon competitive market rates determined at the time of issuance. A fund may utilize reverse repurchase agreements when it is anticipated that the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction. Reverse repurchase agreements involve leverage risk. If a fund suffers a loss on its investment of the transaction proceeds from a reverse repurchase agreement, a fund would still be required to pay the full repurchase price. Further, a fund remains subject to the risk that the market value of the securities repurchased declines below the repurchase price. In such cases, a fund would be required to return a portion of the cash received from the transaction or provide additional securities to the counterparty.
Cash received in exchange for securities delivered plus accrued interest due to the counterparty is recorded as a liability in the Statement of Assets and Liabilities at face value including accrued interest. Due to the short-term nature of the reverse repurchase agreements, face value approximates fair value. Interest payments made by a fund to the counterparties are recorded as a component of interest expense in the Statement of Operations. In periods of increased demand for the security, a fund may receive a fee for the use of the security by the counterparty, which may result in interest income to a fund.
For the year ended July 31, 2020, the average amount of reverse repurchase agreements outstanding and the daily weighted average interest rate for the Trust were $788,011,780 and 1.89%, respectively.
Reverse repurchase transactions are entered into by a fund under Master Repurchase Agreements (each, an MRA), which permit a fund, 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 a fund. With reverse repurchase transactions, typically a fund and counterparty under an MRA are permitted to sell, re-pledge, or use the collateral associated with the transaction. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterpartys bankruptcy or insolvency. Pursuant to the terms of the MRA, a fund receives or posts securities and cash as collateral with a market value in excess of the repurchase price to be paid or received by a fund upon the maturity of the transaction. Upon a bankruptcy or insolvency of the MRA counterparty, a fund is considered an unsecured creditor with respect to excess collateral and, as such, the return of excess collateral may be delayed.
As of period end, the following table is a summary of the Trusts open reverse repurchase agreements by counterparty which are subject to offset under an MRA on a net basis:
Counterparty |
Reverse Repurchase Agreements |
Fair Value of Non-cash Collateral Pledged Including Accrued Interest (a) |
Cash Collateral Pledged/Received |
Net Amount | ||||||||||||
Barclays Bank PLC |
$ | (67,455,160 | ) | $ | 67,455,160 | $ | | $ | | |||||||
Mitsubishi UFJ Securities (USA) Inc |
(400,516,544 | ) | 400,516,544 | | | |||||||||||
RBC Capital Markets LLC |
(244,082,341 | ) | 244,082,341 | | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | (712,054,045 | ) | $ | 712,054,045 | $ | | $ | | ||||||||
|
|
|
|
|
|
|
|
(a) |
Net collateral, including accrued interest, with a value of $776,451,433 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, a funds use of the proceeds from the agreement may be restricted while the counterparty, or its trustee or receiver, determines whether or not to enforce a funds obligation to repurchase the securities.
5. |
DERIVATIVE FINANCIAL INSTRUMENTS |
The Trust engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Trust and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or over-the-counter (OTC).
Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk) and changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).
Futures contracts are agreements between the Trust and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Trust is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contracts size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts in the Statement of Assets and Liabilities.
Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, are shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Trust agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (variation margin). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.
22 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
6. |
INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Investment Advisory: The Trust entered into an Investment Advisory Agreement with the Manager, the Trusts investment adviser and an indirect, wholly-owned subsidiary of BlackRock, Inc. (BlackRock), to provide investment advisory and administrative services. The Manager is responsible for the management of the Trusts portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Trust.
For such services, the Trust pays the Manager a monthly fee at an annual rate equal to 0.55% of the average daily value of the Trusts managed assets.
For purposes of calculating this fee, managed assets are determined as total assets of the Trust (including any assets attributable to money borrowed for investment purposes) less the sum of its accrued liabilities (other than money borrowed for investment purposes).
Expense Waivers: The Manager contractually agreed to waive its investment advisory fees by the amount of investment advisory fees the Trust pays to the Manager indirectly through its investment in affiliated money market funds (the affiliated money market fund waiver) through June 30, 2022. The contractual agreement may be terminated upon 90 days notice by a majority of the Independent Trustees, or by a vote of a majority of the outstanding voting securities of the Trust. Prior to December 1, 2019, this waiver was voluntary. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended July 31, 2020, the amounts waived were $16,121.
The Manager contractually agreed to waive its investment advisory fee with respect to any portion of the Trusts assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through June 30, 2022. The agreement can be renewed for annual periods thereafter, and may be terminated on 90 days notice, each subject to approval by a majority of the Trusts Independent Trustees. For the year ended July 31, 2020, there were no fees waived and/or reimbursed by the Manager pursuant to this arrangement.
Trustees and Officers: Certain trustees and/or officers of the Trust are directors and/or officers of BlackRock or its affiliates. The Trust reimburses the Manager for a portion of the compensation paid to the Trusts Chief Compliance Officer, which is included in Trustees and Officer in the Statement of Operations.
7. |
PURCHASES AND SALES |
For the year ended July 31, 2020, purchases and sales of investments excluding short-term securities, were $323,637,088 and $443,507,809, respectively.
8. |
INCOME TAX INFORMATION |
It is the Trusts policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.
The 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 generally remains open for each of the four years ended July 31, 2020. The statutes of limitations on the Trusts state and local tax returns may remain open for an additional year depending upon the jurisdiction.
Management has analyzed tax laws and regulations and their application to the Trust as of July 31, 2020, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Trusts financial statements.
The tax character of distributions paid was as follows:
07/31/20 | 07/31/19 | |||||||
Ordinary income |
$ | 76,644,636 | $ | 80,316,892 | ||||
Return of capital |
| 716,926 | ||||||
|
|
|
|
|||||
$ | 76,644,636 | $ | 81,033,818 | |||||
|
|
|
|
As of period end, the tax components of accumulated earnings (loss) were as follows:
Undistributed ordinary income |
$ | 3,878,532 | ||
Non-expiring capital loss carryforwards(a) |
(106,034,695 | ) | ||
Net unrealized gains (losses)(b) |
469,405,313 | |||
|
|
|||
$ | 367,249,150 | |||
|
|
(a) |
Amounts available to offset future realized capital gains. |
(b) |
The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the realization for tax purposes of unrealized gains/losses on certain futures contracts, amortization methods for premiums on fixed income securities and the deferral of compensation to Trustees. |
As of July 31, 2020, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
Tax cost |
$ | 1,692,217,286 | ||
|
|
|||
Gross unrealized appreciation |
$ | 471,574,098 | ||
Gross unrealized depreciation |
(1,674,131 | ) | ||
|
|
|||
Net unrealized appreciation (depreciation) |
$ | 469,899,967 | ||
|
|
NOTES TO FINANCIAL STATEMENTS | 23 |
Notes to Financial Statements (continued)
9. |
PRINCIPAL RISKS |
Many municipalities insure repayment of their bonds, which may reduce the potential for loss due to credit risk. The market value of these bonds may fluctuate for other reasons, including market perception of the value of such insurance, and there is no guarantee that the insurer will meet its obligation.
Inventories of municipal bonds held by brokers and dealers may decrease, which would lessen their ability to make a market in these securities. Such a reduction in market making capacity could potentially decrease the Trusts ability to buy or sell bonds. As a result, the Trust may sell a security at a lower price, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative impact on performance. If the Trust needed to sell large blocks of bonds, those sales could further reduce the bonds prices and impact performance.
In the normal course of business, the Trust invests in securities or other instruments and may enter into certain transactions, and such activities subject the Trust to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, recessions, or other events could have a significant impact on the Trust and its investments.
The Trust may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force the Trust to reinvest in lower yielding securities. The Trust may also be exposed to reinvestment risk, which is the risk that income from the Trusts portfolio will decline if the Trust invests the proceeds from matured, traded or called fixed-income securities at market interest rates that are below the Trust portfolios current earnings rate.
The Trust may hold a significant amount of bonds subject to calls by the issuers at defined dates and prices. When bonds are called by issuers and the Trust reinvest the proceeds received, such investments may be in securities with lower yields than the bonds originally held, and correspondingly, could adversely impact the yield and total return performance of the Trust.
The BABs market is smaller, less diverse and less liquid than other types of municipal securities. Since the BABs program expired on December 31, 2010 and was not extended, BABs may be less actively traded, which may negatively affect the value of BABs held by the Trust.
The Trust may invest in BABs. Issuers of direct pay BABs held in the Trusts portfolio receive a subsidy from the U.S. Treasury with respect to interest payment on bonds. There is no assurance that an issuer will comply with the requirements to receive such subsidy or that such subsidy will not be reduced or terminated altogether in the future. As of period end, the subsidy that issuers of direct payment BABs receive from the U.S. Treasury has been reduced as the result of budgetary sequestration, which has resulted, and which may continue to result, in early redemptions of BABs at par value. The early redemption of BABs at par value may result in a potential loss in value for investors of such BABs, including the Trust, who may have purchased the securities at prices above par, and may require the Trust to reinvest redemption proceeds in lower-yielding securities which could reduce the Trusts income and distributions. Moreover, the elimination or reduction in subsidy from the federal government may adversely affect an issuers ability to repay or refinance BABs and the BABs credit ratings, which, in turn, may adversely affect the value of the BABs held by the Trust and the Trusts NAV.
The Trust may invest without limitation in illiquid or less liquid investments or investments in which no secondary market is readily available or which are otherwise illiquid, including private placement securities. The Trust may not be able to readily dispose of such investments at prices that approximate those at which the Trust could sell such investments if they were more widely traded and, as a result of such illiquidity, the Trust may have to sell other investments or engage in borrowing transactions if necessary to raise funds to meet its obligations. Limited liquidity can also affect the market price of investments, thereby adversely affecting the Trusts net asset value and ability to make dividend distributions. Privately issued debt securities are often of below investment grade quality, frequently are unrated and present many of the same risks as investing in below investment grade public debt securities.
An outbreak of respiratory disease caused by a novel coronavirus has developed into a global pandemic and has resulted in closing borders, quarantines, disruptions to supply chains and customer activity, as well as general concern and uncertainty. The impact of this pandemic, and other global health crises that may arise in the future, could affect the economies of many nations, individual companies and the market in general in ways that cannot necessarily be foreseen at the present time. This pandemic may result in substantial market volatility and may adversely impact the prices and liquidity of a funds investments. The duration of this pandemic and its effects cannot be determined with certainty.
Counterparty Credit Risk: The Trust may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Trust manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Trust to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Trusts exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Trust.
A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.
With exchange-traded futures, there is less counterparty credit risk to the Trust 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 Trust does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing
24 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
brokers customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing brokers customers, potentially resulting in losses to the Trust.
Concentration Risk: The Trust invests a substantial amount of its assets in issuers located in a single state or limited number of states. This may subject the Trust to the risk that economic, political or social issues impacting a particular state or group of states could have an adverse and disproportionate impact on the income from, or the value or liquidity of, the Trusts portfolio. Investment percentages in specific states or U.S. territories are presented in the Schedule of Investments.
The Trust invests a significant portion of its assets in fixed-income securities and/or uses derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as interest rates rise. The Trust may be subject to a greater risk of rising interest rates due to the current period of historically low rates.
LIBOR Transition Risk: The United Kingdoms Financial Conduct Authority announced a phase out of the London Interbank Offered Rate (LIBOR) by the end of 2021, and it is expected that LIBOR will cease to be published after that time. The Trust may be exposed to financial instruments tied to LIBOR to determine payment obligations, financing terms, hedging strategies or investment value. The transition process away from LIBOR might lead to increased volatility and illiquidity in markets for, and reduce the effectiveness of new hedges placed against, instruments whose terms currently include LIBOR. The ultimate effect of the LIBOR transition process on the Trust is uncertain.
10. |
CAPITAL SHARE TRANSACTIONS |
The Trust is authorized to issue an unlimited number of shares, all of which were initially classified as Common Shares. The par value for the Trusts Common Shares is $0.001. The Board is authorized, however, to reclassify any unissued Common Shares to Preferred Shares without the 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 July 31, | ||||
2020 |
42,857 | |||
2019 |
|
The Trust participates in an open market share repurchase program (the Repurchase Program). From December 1, 2018 through November 30, 2019, the Trust may repurchase up to 5% of its outstanding common shares under the Repurchase Program, based on common shares outstanding as of the close of business on November 30, 2018, subject to certain conditions. From December 1, 2019 through November 30, 2020, the Trust may repurchase up to 5% of its outstanding common shares under the Repurchase Program, based on common shares outstanding as of the close of business on November 30, 2019, subject to certain conditions. There is no assurance that the Trust will purchase shares in any particular amounts. For the year ended July 31, 2020, the Trust did not repurchase any shares.
11. |
SUBSEQUENT EVENTS |
Managements evaluation of the impact of all subsequent events on the Trusts financial statements was completed through the date the financial statements were issued and the following items were noted:
The Trust declared and paid distributions to Common Shareholders as follows:
Dividend Per
Common Share |
||||||||
Paid (a) | Declared (b) | |||||||
BBN |
$ | 0.111800 | $0.111800 |
(a) |
Net investment income dividend paid on August 31, 2020 to shareholders of record on August 14, 2020. |
(b) |
Net investment income dividend declared on September 1, 2020, payable to shareholders of record on September 15, 2020. |
NOTES TO FINANCIAL STATEMENTS | 25 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of BlackRock Taxable Municipal Bond Trust:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities of BlackRock Taxable Municipal Bond Trust (the Fund), including the schedule of investments, as of July 31, 2020, the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of July 31, 2020, and the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of July 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
Deloitte & Touche LLP
Boston, Massachusetts
September 22, 2020
We have served as the auditor of one or more BlackRock investment companies since 1992.
26 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Important Tax Information (unaudited)
For the fiscal year ended July 31, 2020, the Trust hereby designates the following maximum amounts allowable as interest-related dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations:
Trust |
Interest-Related
Dividends |
|||
BlackRock Taxable Municipal Bond Trust |
$ | 80,493,119 |
IMPORTANT TAX INFORMATION | 27 |
Disclosure of Investment Advisory Agreement
The Board of Trustees (the Board, the members of which are referred to as Board Members) of BlackRock Taxable Municipal Bond Trust (the Fund) met on April 16, 2020 (the April Meeting) and May 20-21, 2020 (the May Meeting) to consider the approval of the investment advisory agreement (the Advisory Agreement or the Agreement) between the Fund and BlackRock Advisors, LLC (the Manager or BlackRock), the Funds investment advisor.
Activities and Composition of the Board
On the date of the May Meeting, the Board consisted of ten individuals, eight of whom were not interested persons of the Fund as defined in the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Board Members). The Board Members are responsible for the oversight of the operations of the Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Co-Chairs of the Board are Independent Board Members. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Executive Committee, which also has one interested Board Member).
The Agreement
Consistent with the requirements of the 1940 Act, the Board considers the continuation of the Agreement on an annual basis. The Board has four quarterly meetings per year, each typically extending for two days, and additional in-person and telephonic meetings throughout the year, as needed. While the Board also has a fifth one-day meeting to consider specific information surrounding the renewal of the Agreement, the Boards consideration entails a year-long deliberative process whereby the Board and its committees assess BlackRocks services to the Fund. In particular, the Board assessed, among other things, the nature, extent and quality of the services provided to the Fund by BlackRock, BlackRocks personnel and affiliates, including (as applicable): investment management services; accounting oversight; administrative and shareholder services; oversight of the Funds service providers; risk management and oversight; and legal, regulatory and compliance services. Throughout the year, including during the contract renewal process, the Independent Board Members were advised by independent legal counsel, and met with independent legal counsel in various executive sessions outside of the presence of BlackRocks management.
During the year, the Board, acting directly and through its committees, considers information that is relevant to its annual consideration of the renewal of the Agreement, including the services and support provided by BlackRock to the Fund and its shareholders. BlackRock also furnished additional information to the Board in response to specific questions from the Board. This additional information is discussed further in the section titled Board Considerations in Approving the Agreement. Among the matters the Board considered were: (a) investment performance for one-year, three-year, five-year, and/or since inception periods, as applicable, against peer funds, applicable benchmarks, and other performance metrics, as applicable, as well as BlackRock senior managements and portfolio managers analyses of the reasons for any outperformance or underperformance relative to its peers, benchmarks, and other performance metrics, as applicable; (b) leverage management, as applicable; (c) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Fund for services; (d) Fund operating expenses and how BlackRock allocates expenses to the Fund; (e) the resources devoted to risk oversight of, and compliance reports relating to, implementation of the Funds investment objective, policies and restrictions, and meeting regulatory requirements; (f) BlackRocks and the Funds adherence to applicable compliance policies and procedures; (g) the nature, character and scope of non-investment management services provided by BlackRock and its affiliates and the estimated cost of such services; (h) BlackRocks and other service providers internal controls and risk and compliance oversight mechanisms; (i) BlackRocks implementation of the proxy voting policies approved by the Board; (j) execution quality of portfolio transactions; (k) BlackRocks implementation of the Funds valuation and liquidity procedures; (l) an analysis of management fees for products with similar investment mandates across the open-end fund, closed-end fund, sub-advised mutual fund, collective investment trust and institutional separate account product channels, as applicable, and the similarities and differences between these products and the services provided as compared to the Fund; (m) BlackRocks compensation methodology for its investment professionals and the incentives and accountability it creates, along with investment professionals investments in the fund(s) they manage; (n) periodic updates on BlackRocks business; and (o) the Funds market discount/premium compared to peer funds.
Board Considerations in Approving the Agreement
The Approval Process: Prior to the April Meeting, the Board requested and received materials specifically relating to the Agreement. The Independent Board Members are continuously engaged in a process with their independent legal counsel and BlackRock to review the nature and scope of the information provided to the Board to better assist its deliberations. The materials provided in connection with the April Meeting included, among other things: (a) information independently compiled and prepared by Broadridge Financial Solutions, Inc. (Broadridge), based on Lipper classifications, regarding the Funds fees and expenses as compared with a peer group of funds as determined by Broadridge (Expense Peers) and the investment performance of the Fund as compared with a peer group of funds (Performance Peers); (b) information on the composition of the Expense Peers and Performance Peers and a description of Broadridges methodology; (c) information on the estimated profits realized by BlackRock and its affiliates pursuant to the Agreement and a discussion of fall-out benefits to BlackRock and its affiliates; (d) a general analysis provided by BlackRock concerning investment management fees received in connection with other types of investment products, such as institutional accounts, sub-advised mutual funds, closed-end funds, and open-end funds, under similar investment mandates, as applicable; (e) a review of non-management fees; (f) the existence, impact and sharing of potential economies of scale, if any, with the Fund; (g) a summary of aggregate amounts paid by the Fund to BlackRock; and (h) various additional information requested by the Board as appropriate regarding BlackRocks and the Funds operations.
At the April Meeting, the Board reviewed materials relating to its consideration of the Agreement. As a result of the discussions that occurred during the April Meeting, and as a culmination of the Boards year-long deliberative process, the Board presented BlackRock with questions and requests for additional information. BlackRock responded to these questions and requests with additional written information in advance of the May Meeting. Topics covered included: (a) the methodology for measuring estimated fund profitability; (b) fund expenses and potential fee waivers; (c) differences in services provided and management fees between closed-end funds and other product channels; and (d) BlackRocks option overwrite strategy.
28 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Disclosure of Investment Advisory Agreement (continued)
At the May Meeting, the Board concluded its assessment of, among other things: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Fund as compared to its Performance Peers and to other metrics, as applicable; (c) the advisory fee and the estimated cost of the services and estimated profits realized by BlackRock and its affiliates from their relationship with the Fund; (d) the Funds fees and expenses compared to its Expense Peers; (e) the existence and sharing of potential economies of scale; (f) any fall-out benefits to BlackRock and its affiliates as a result of BlackRocks relationship with the Fund; and (g) other factors deemed relevant by the Board Members.
The Board also considered other matters it deemed important to the approval process, such as other payments made to BlackRock or its affiliates relating to securities lending and cash management, and BlackRocks services related to the valuation and pricing of Fund portfolio holdings. The Board noted the willingness of BlackRocks personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as determinative, and each Board Member may have attributed different weights to the various items considered.
A. Nature, Extent and Quality of the Services Provided by BlackRock: The Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services, and the resulting performance of the Fund. Throughout the year, the Board compared Fund performance to the performance of a comparable group of closed-end funds, relevant benchmarks, and performance metrics, as applicable. The Board met with BlackRocks senior management personnel responsible for investment activities, including the senior investment officers. The Board also reviewed the materials provided by the Funds portfolio management team discussing the Funds performance, investment strategies and outlook.
The Board considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and the Funds portfolio management team; research capabilities; investments by portfolio managers in the funds they manage; portfolio trading capabilities; use of technology; commitment to compliance; credit analysis capabilities; risk analysis and oversight capabilities; and the approach to training and retaining portfolio managers and other research, advisory and management personnel. The Board also considered BlackRocks overall risk management program, including the continued efforts of BlackRock and its affiliates to address cybersecurity risks and the role of BlackRocks Risk & Quantitative Analysis Group. The Board engaged in a review of BlackRocks compensation structure with respect to the Funds portfolio management team and BlackRocks ability to attract and retain high-quality talent and create performance incentives.
In addition to investment advisory services, the Board considered the nature and quality of the administrative and other non-investment advisory services provided to the Fund. BlackRock and its affiliates provide the Fund with certain administrative, shareholder and other services (in addition to any such services provided to the Fund by third-parties) and officers and other personnel as are necessary for the operations of the Fund. In particular, BlackRock and its affiliates provide the Fund with administrative services including, among others: (i) responsibility for disclosure documents, such as the prospectus and the statement of additional information in connection with the initial public offering and periodic shareholder reports; (ii) preparing communications with analysts to support secondary market trading of the Fund; (iii) oversight of daily accounting and pricing; (iv) responsibility for periodic filings with regulators and stock exchanges; (v) overseeing and coordinating the activities of third-party service providers including, among others, the Funds custodian, fund accountant, transfer agent, and auditor; (vi) organizing Board meetings and preparing the materials for such Board meetings; (vii) providing legal and compliance support; (viii) furnishing analytical and other support to assist the Board in its consideration of strategic issues such as the merger, consolidation or repurposing of certain closed-end funds; and (ix) performing or managing administrative functions necessary for the operation of the Fund, such as tax reporting, expense management, fulfilling regulatory filing requirements, and shareholder call center and other services. The Board reviewed the structure and duties of BlackRocks fund administration, shareholder services, and legal & compliance departments and considered BlackRocks policies and procedures for assuring compliance with applicable laws and regulations.
B. The Investment Performance of the Fund and BlackRock: The Board, including the Independent Board Members, also reviewed and considered the performance history of the Fund. In preparation for the April Meeting, the Board was provided with reports independently prepared by Broadridge, which included an analysis of the Funds performance as of December 31, 2019, as compared to its Performance Peers. The performance information is based on net asset value (NAV), and utilizes Lipper data. Lippers methodology calculates a funds total return assuming distributions are reinvested on the ex-date at a funds ex-date NAV. Broadridge ranks funds in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable. In connection with its review, the Board received and reviewed information regarding the investment performance of the Fund as compared to its Performance Peers and a custom peer group of funds as defined by BlackRock (Customized Peer Group) and a composite measuring a blend of total return and yield (Composite). The Board and its Performance Oversight Committee regularly review and meet with Fund management to discuss the performance of the Fund throughout the year.
In evaluating performance, the Board focused particular attention on funds with less favorable performance records. The Board also noted that while it found the data provided by Broadridge generally useful, it recognized the limitations of such data, including in particular, that notable differences may exist between a fund and its Performance Peers (for example, the investment objectives and strategies). Further, the Board recognized that the performance data reflects a snapshot of a period as of a particular date and that selecting a different performance period could produce significantly different results. The Board also acknowledged that long-term performance could be impacted by even one period of significant outperformance or underperformance, and that a single investment theme could have the ability to disproportionately affect long-term performance.
The Board noted that for each of the one-, three- and five-year periods reported, the Fund ranked in the first quartile against its Customized Peer Group Composite. The Board noted that BlackRock believes that the Customized Peer Group Composite is an appropriate performance metric for the Fund, and that BlackRock has explained its rationale for this belief to the Board.
C. Consideration of the Advisory/Management Fees and the Estimated Cost of the Services and Estimated Profits Realized by BlackRock and its Affiliates from their Relationship with the Fund: The Board, including the Independent Board Members, reviewed the Funds contractual management fee rate compared with those of its Expense Peers. The contractual management fee rate represents a combination of the advisory fee and any administrative fees, before taking into account any reimbursements or fee waivers. The Board also compared the Funds total expense ratio, as well as its actual management fee rate as a percentage of managed assets, which is the total assets of the Fund (including any assets attributable to money borrowed for investment purposes) minus the sum of the Funds accrued liabilities (other than money borrowed for investment purposes) to those of its Expense Peers. The total expense ratio represents a funds total net operating expenses, excluding any investment related expenses. The total expense ratio gives effect to any expense reimbursements or fee waivers, and the actual management fee rate gives effect to any
DISCLOSURE OF INVESTMENT ADVISORY AGREEMENT | 29 |
Disclosure of Investment Advisory Agreement (continued)
management fee reimbursements or waivers. The Board considered the services provided and the fees charged by BlackRock and its affiliates to other types of clients with similar investment mandates, as applicable, including institutional accounts and sub-advised mutual funds (including mutual funds sponsored by third parties).
The Board received and reviewed statements relating to BlackRocks financial condition. The Board reviewed BlackRocks profitability methodology and was also provided with an estimated profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to the Fund. The Board reviewed BlackRocks estimated profitability with respect to the Fund and other funds the Board currently oversees for the year ended December 31, 2019 compared to available aggregate estimated profitability data provided for the prior two years. The Board reviewed BlackRocks estimated profitability with respect to certain other U.S. fund complexes managed by the Manager and/or its affiliates. The Board reviewed BlackRocks assumptions and methodology of allocating expenses in the estimated profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. The Board thus recognized that calculating and comparing profitability at the individual fund level is difficult.
The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Board reviewed BlackRocks overall operating margin, in general, compared to that of certain other publicly traded asset management firms. The Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRocks expense management, and the relative product mix.
The Board considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreement and to continue to provide the high quality of services that is expected by the Board. The Board further considered factors including but not limited to BlackRocks commitment of time, assumption of risk, and liability profile in servicing the Fund, including in contrast to what is required of BlackRock with respect to other products with similar investment mandates across the open-end fund, closed-end fund, sub-advised mutual fund, collective investment trust, and institutional separate account product channels, as applicable.
The Board noted that the Funds contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio ranked in the first and second quartiles, respectively, relative to the Expense Peers.
D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of the Fund increase. The Board also considered the extent to which the Fund benefits from such economies of scale in a variety of ways, and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable the Fund to more fully participate in these economies of scale. The Board considered the Funds asset levels and whether the current fee was appropriate.
Based on the Boards review and consideration of the issue, the Board concluded that most closed-end funds do not have fund level breakpoints because closed-end funds generally do not experience substantial growth after the initial public offering. Closed-end funds are typically priced at scale at a funds inception.
E. Other Factors Deemed Relevant by the Board Members: The Board, including the Independent Board Members, also took into account other ancillary or fall-out benefits that BlackRock or its affiliates may derive from BlackRocks respective relationships with the Fund, both tangible and intangible, such as BlackRocks ability to leverage its investment professionals who manage other portfolios and its risk management personnel, an increase in BlackRocks profile in the investment advisory community, and the engagement of BlackRocks affiliates as service providers to the Fund, including for administrative, securities lending and cash management services. The Board also considered BlackRocks overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Board also noted that, subject to applicable law, BlackRock may use and benefit from third-party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts.
In connection with its consideration of the Agreement, the Board also received information regarding BlackRocks brokerage and soft dollar practices. The Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.
The Board noted the competitive nature of the closed-end fund marketplace, and that shareholders are able to sell their Fund shares in the secondary market if they believe that the Funds fees and expenses are too high or if they are dissatisfied with the performance of the Fund.
The Board also considered the various notable initiatives and projects BlackRock performed in connection with its closed-end fund product line. These initiatives included developing equity shelf programs; efforts to eliminate product overlap with fund mergers; ongoing services to manage leverage that has become increasingly complex; periodic evaluation of share repurchases and other support initiatives for certain BlackRock funds; and continued communication efforts with shareholders, fund analysts and financial advisers. With respect to the latter, the Independent Board Members noted BlackRocks continued commitment to supporting the secondary market for the common shares of its closed-end funds through a comprehensive secondary market communication program designed to raise investor and analyst awareness and understanding of closed-end funds. BlackRocks support services included, among other things: sponsoring and participating in conferences; communicating with closed-end fund analysts covering the BlackRock funds throughout the year; providing marketing and product updates for the closed-end funds; and maintaining and enhancing its closed-end fund website.
Conclusion
The Board, including the Independent Board Members, unanimously approved the continuation of the Advisory Agreement between the Manager and the Fund for a one-year term ending June 30, 2021. Based upon its evaluation of all of the aforementioned factors in their totality, as well as other information, the Board, including the Independent Board Members, was satisfied that the terms of the Agreement were fair and reasonable and in the best interest of the Fund and its shareholders. In arriving at its decision to approve the Agreement, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination.
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Trust Investment Objectives, Policies and Risks
Recent Changes
The following information is a summary of certain changes since July 31, 2019. This information may not reflect all of the changes that have occurred since you purchased the Trust.
During the Trusts most recent fiscal year, there were no material changes in the Trusts investment objectives or policies that have not been approved by shareholders or in the principal risk factors associated with investment in the Trust.
Investment Objectives and Policies
BlackRock Taxable Municipal Bond Trust (BBN)
The Trusts primary investment objective is to seek high current income, with a secondary objective of capital appreciation. There can be no assurance that the Trust will achieve its investment objectives. The Trusts investment objectives are not fundamental and may be changed by its Board of Trustees (the Board).
The Trust seeks to achieve its investment objectives by investing primarily in a portfolio of taxable municipal securities, including Build America Bonds (BABs), issued by state and local governments to finance capital projects such as public schools, roads, transportation infrastructure, bridges, ports and public buildings. The Trust believes there could be an opportunity to capitalize on the market for BABs by investing in taxable municipal issues at attractive market yields relative to the yields on equivalently rated corporate bonds. BlackRock Advisors, LLC (the Manager) will use its in-depth expertise in the municipal securities market to assemble the Trusts portfolio. As market conditions permit and based upon the Managers assessment of the interest rate environment, the Trust may opportunistically hedge its duration in an attempt to protect against the risk of rising interest rates, although no assurance can be given that this strategy will be successful. The Manager will not manage duration to a benchmark. Duration, in comparison to maturity (which is the date on which the issuer of a debt instrument is obligated to repay the principal amount), is a measure of the price volatility of a debt instrument as a result in changes in market rates of interest, based on the weighted average timing of the instruments expected principal and interest payments. Duration differs from maturity in that it takes into account a securitys yield, coupon payments and its principal payments in addition to the amount of time until the security finally matures. As the value of a security changes over time, so will its duration.
The Trust may invest in taxable municipal securities and tax-exempt municipal securities, including municipal bonds and notes, certificates of participation, other securities issued to finance and refinance public projects, and other related securities and derivative instruments creating exposure to municipal bonds, notes and securities. Under normal market conditions, the Trust will invest at least 80% of its Managed Assets in taxable municipal securities, which include BABs. This investment policy may be changed by the Board upon 60 days prior notice to shareholders. The Trust may invest up to 20% of its Managed Assets in securities other than taxable municipal securities. Such other securities include tax-exempt securities, U.S. Treasury securities, obligations of the U.S. Government, its agencies and instrumentalities and corporate bonds issued by issuers that have, in the Managers view, typically been associated with or sold in the municipal market. Managed Assets means the total assets of the Trust (including any assets attributable to money borrowed for investment purposes) minus the sum of the Trusts accrued liabilities (other than money borrowed for investment purposes). For the avoidance of doubt, assets attributable to money borrowed for investment purposes includes the portion of the Trusts assets in an issuer of tender option bonds of which the Trust owns the TOBs Residual (as defined below).
Under normal market conditions, the Trust will invest at least 80% of its Managed Assets in securities that at the time of investment are investment grade quality. Investment grade quality securities are securities rated within the four highest grades (Baa or BBB or better) by Moodys, S&P or Fitch or securities that are unrated but judged to be of comparable quality by the Manager. The Trust may invest up to 20% of its Managed Assets in securities that at the time of investment are rated below investment grade quality by Moodys, S&P or Fitch or that are unrated but judged to be of comparable quality by the Manager. Certain of the Trusts investments may be illiquid. Managed Assets means the total assets of the Trust (including any assets attributable to money borrowed for investment purposes) minus the sum of the Trusts accrued liabilities (other than money borrowed for investment purposes).
BABs are taxable municipal securities issued by state and local governments. Municipal securities include, among other things, bonds, notes, leases and certificates of participation. Municipal securities may be structured as callable or non-callable, may have payment forms that include fixed-coupon, variable rate and zero coupon, and may include capital appreciation bonds, floating rate securities, inverse floating rate securities (including TOBs Residuals), inflation-linked securities and other derivative instruments that replicate investment exposure to such securities. BABs, as municipal securities, may be structured in any of the foregoing ways and new versions of BABs may be offered in the future. The Trust may invest in any of these BABs or municipal securities, and may acquire them through investments in pooled vehicles, partnerships or other investment companies. The Trust may also purchase BABs and other municipal securities representing a wide range of sectors and purposes.
The Trust may purchase municipal securities that are additionally secured by insurance, bank credit agreements or escrow accounts. The credit quality of companies which provide these credit enhancements will affect the value of those securities. Although the insurance feature reduces certain financial risks, the premiums for insurance and the higher market price paid for insured obligations may reduce the Trusts income. Insurance generally will be obtained from insurers with a claims-paying ability rated Baa or BBB or better by Moodys, S&P or Fitch. The insurance feature does not guarantee the market value of the insured obligations or the net asset value of the common shares. The Trust may purchase insured securities and may purchase insurance for bonds in its portfolio.
The credit quality policies noted above apply only at the time a security is purchased, and the Trust is not required to dispose of a security in the event that a rating agency downgrades its assessment of the credit characteristics of a particular issue. In determining whether to retain or sell such a security, the Manager may consider such factors as its assessment of the credit quality of the issuer of such security, the price at which such security could be sold and the rating, if any, assigned to such security by other rating agencies.
The Trust may implement various temporary defensive strategies at times when the Manager determines that conditions in the markets or the termination of the Trust makes pursuing the Trusts basic investment strategy inconsistent with the best interests of its shareholders. These strategies may include investing all or a portion of the Trusts assets in U.S. Government obligations and high-quality, short-term debt securities that may be either tax-exempt or taxable.
TRUST INVESTMENT OBJECTIVES, POLICIES AND RISKS | 31 |
Trust Investment Objectives, Policies and Risks (continued)
The Trust may engage in various strategic transactions involving derivative instruments for hedging and risk management purposes or to enhance total return. Such derivative instruments may include, but are not limited to, financial futures contracts, swap contracts (including, but not limited to, credit default swaps), options on financial futures, options on swap contracts and other derivative instruments.
The Trust originally sought to achieve its investment objectives by investing primarily in a portfolio of BABs, which are taxable municipal securities issued pursuant to the American Recovery and Reinvestment Act of 2009. Given the uncertainty around the BABs program at the time of the Trusts launch in 2010, the Trusts initial public offering prospectus included a Contingent Review Provision. For any 24-month period, if there were no new issuances of BABs or other analogous taxable municipal securities, the Board would undertake an evaluation of potential actions with respect to the Trust (the Contingent Review Provision). Under the Contingent Review Provision, such potential action included changes to the Trusts non-fundamental investment policies to broaden its primary investment focus to include taxable municipal securities generally. The BABs program expired on December 31, 2010 and was not renewed. Accordingly, there have been no new issuances of BABs since that date. Pursuant to the Contingent Review Provision, on June 12, 2015, the Board approved a proposal to amend the Trusts 80% investment policy to include all taxable municipal securities, including BABs, and to change the name of the Trust, which changes became effective on August 25, 2015.
Leverage. The Trust may utilize leverage to seek to enhance the yield and net asset value of its common shares. However, this objective cannot be achieved in all interest rate environments. The Trust currently leverages its assets through the use of residual interest municipal tender option bonds (TOB Residuals), which are derivative interests in municipal bonds. The TOB Residuals in which the Trust will invest pay interest or income that, in the opinion of counsel to the issuer of such TOB Residuals, is exempt from regular U.S. federal income tax. The Trust may use combined economic leverage of up to 100% of its net assets (50% of its Managed Assets), all or a portion of which may be effected through the use of TOBs Residuals.
The Trust may utilize reverse repurchase agreements when it is anticipated that the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction.
The Trust may borrow through a credit facility.
The Trust may also borrow money as a temporary measure for extraordinary or emergency purposes, including the payment of dividends and the settlement of securities transactions which otherwise might require untimely dispositions of Trust securities.
Other Investment Policies. The Trust may invest up to 10% of its total assets in securities of other open- or closed-end investment companies (including exchange traded funds) that invest primarily in securities of the types in which the Trust may invest directly. The Trust may invest in investment companies that are advised by the Manager or its affiliates to the extent permitted by applicable law and/or pursuant to exemptive relief from the Securities and Exchange Commission.
During periods in which the Manager determines that it is temporarily unable to follow the Trusts investment strategy or that it is impractical to do so, the Trust may deviate from its investment strategy and invest all or any portion of its assets in cash, cash equivalents or short-term debt securities that may be either tax-exempt or taxable.
The Trust may invest up to 10% of its total assets in preferred interests of other investment funds, including those which may pay dividends that are exempt from regular Federal income tax.
The Trust may invest up to 20% of its Managed Assets in securities rated below investment grade such as those rated Ba or below by Moodys and BB or below by S&P or Fitch or in unrated securities determined by the Manager to be of comparable quality. These lower grade securities are commonly known as junk bonds. Securities rated below investment grade are judged to have speculative characteristics with respect to their interest and principal payments.
Risk Factors
This section contains a discussion of the general risks of investing in the Trust. The net asset value and market price of, and dividends paid on, the common shares will fluctuate with and be affected by, among other things, the risks more fully described below. As with any fund, there can be no guarantee that the Trust will meet its investment objective or that the Trusts performance will be positive for any period of time.
Investment and Market Discount Risk An investment in the Trusts common shares is subject to investment risk, including the possible loss of the entire amount that you invest. As with any stock, the price of the Trusts common shares will fluctuate with market conditions and other factors. If shares are sold, the price received may be more or less than the original investment. Common shares are designed for long-term investors and the Trust should not be treated as a trading vehicle. Shares of closed-end management investment companies frequently trade at a discount from their net asset value. This risk is separate and distinct from the risk that the Trusts net asset value could decrease as a result of its investment activities. At any point in time an investment in the Trusts common shares may be worth less than the original amount invested, even after taking into account distributions paid by the Trust. During periods in which the Trust may use leverage, the Trusts investment, market discount and certain other risks will be magnified.
Debt Securities Risk Debt securities, such as bonds, involve interest rate risk, credit risk, extension risk, and prepayment risk, among other things.
Interest Rate Risk The market value of bonds and other fixed-income securities changes in response to interest rate changes and other factors. 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 Trust may be subject to a greater risk of rising interest rates due to the current period of historically low rates. For example, if interest rates increase by 1%, assuming a current portfolio duration of ten years, and all other factors being equal, the value of the Trusts investments would be expected to decrease by 10%. The magnitude of these fluctuations in the market price of bonds and other fixed-income securities is generally greater for those securities with longer maturities. Fluctuations in the market price of the Trusts investments will not affect interest income derived from instruments already owned by the Trust, but will be reflected in the Trusts net asset value. The Trust may lose money if short-term or long-term interest rates rise sharply in a manner not anticipated by Trust management.
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Trust Investment Objectives, Policies and Risks (continued)
To the extent the Trust invests in debt securities that may be prepaid at the option of the obligor (such as mortgage-backed securities), the sensitivity of such securities to changes in interest rates may increase (to the detriment of the Trust) when interest rates rise. Moreover, because rates on certain floating rate debt securities typically reset only periodically, changes in prevailing interest rates (and particularly sudden and significant changes) can be expected to cause some fluctuations in the net asset value of the Trust to the extent that it invests in floating rate debt securities.
These basic principles of bond prices also apply to U.S. Government securities. A security backed by the full faith and credit of the U.S. Government is guaranteed only as to its stated interest rate and face value at maturity, not its current market price. Just like other fixed-income securities, government-guaranteed securities will fluctuate in value when interest rates change.
A general rise in interest rates has the potential to cause investors to move out of fixed-income securities on a large scale, which may increase redemptions from funds that hold large amounts of fixed-income securities. Heavy redemptions could cause the Trust to sell assets at inopportune times or at a loss or depressed value and could hurt the Trusts performance.
Credit Risk Credit risk refers to the possibility that the issuer of a debt security (i.e., the borrower) will not be able to make payments of interest and principal when due. Changes in an issuers credit rating or the markets perception of an issuers creditworthiness may also affect the value of the Trusts investment in that issuer. The degree of credit risk depends on both the financial condition of the issuer and the terms of the obligation.
Extension Risk When interest rates rise, certain obligations will be paid off by the obligor more slowly than anticipated, causing the value of these obligations to fall.
Prepayment Risk When interest rates fall, certain obligations will be paid off by the obligor more quickly than originally anticipated, and the Trust may have to invest the proceeds in securities with lower yields.
Build America Bonds Risk. Build America Bonds involve similar risks as municipal bonds, including credit and market risk. In particular, should a Build America Bonds issuer fail to continue to meet the applicable requirements imposed on the bonds as provided by the ARRA , it is possible that such issuer may not receive federal cash subsidy payments, impairing the issuers ability to make scheduled interest payments. The Build America Bond program expired on December 31, 2010 and no further issuance is permitted unless Congress renews the program. As a result, the number of available Build America Bonds is limited, which may negatively affect the value of the Build America Bonds. In addition, there can be no assurance that Build America Bonds will be actively traded. It is difficult to predict the extent to which a market for such bonds will continue, meaning that Build America Bonds may experience greater illiquidity than other municipal obligations. The Build America Bonds outstanding as of December 31, 2010 will continue to be eligible for the federal interest rate subsidy, which continues for the life of the Build America Bonds; however, no bonds issued following expiration of the Build America Bond program will be eligible for the U.S. federal tax subsidy.
Municipal Securities Risks Municipal securities risks include the ability of the issuer to repay the obligation, the relative lack of information about certain issuers of municipal securities, and the possibility of future legislative changes which could affect the market for and value of municipal securities. These risks include:
General Obligation Bonds Risks Timely payments depend on the issuers credit quality, ability to raise tax revenues and ability to maintain an adequate tax base.
Revenue Bonds Risks These payments depend on the money earned by the particular facility or class of facilities, or the amount of revenues derived from another source.
Private Activity Bonds Risks Municipalities and other public authorities issue private activity bonds to finance development of industrial facilities for use by a private enterprise. The private enterprise pays the principal and interest on the bond, and the issuer does not pledge its faith, credit and taxing power for repayment. The Trusts investments may consist of private activity bonds that may subject certain shareholders to an alternative minimum tax.
Moral Obligation Bonds Risks Moral obligation bonds are generally issued by special purpose public authorities of a state or municipality. If the issuer is unable to meet its obligations, repayment of these bonds becomes a moral commitment, but not a legal obligation, of the state or municipality.
Municipal Notes Risks Municipal notes are shorter term municipal debt obligations. If there is a shortfall in the anticipated proceeds, the notes may not be fully repaid and the Trust may lose money.
Municipal Lease Obligations Risks In a municipal lease obligation, the issuer agrees to make payments when due on the lease obligation. Although the issuer does not pledge its unlimited taxing power for payment of the lease obligation, the lease obligation is secured by the leased property.
Tax-Exempt Status Risk The Trust and its investment manager will rely on the opinion of issuers bond counsel and, in the case of derivative securities, sponsors counsel, on the tax-exempt status of interest on municipal bonds and payments under derivative securities. Neither the Trust nor its investment manager will independently review the bases for those tax opinions, which may ultimately be determined to be incorrect and subject the Trust and its shareholders to substantial tax liabilities.
Reinvestment Risk. Reinvestment risk is the risk that income from the Trusts portfolio will decline if and when the Trust invests the proceeds from matured, traded or called municipal securities at market interest rates that are below the portfolios current earnings rate. A decline in income could affect the common shares market price or your overall returns.
Insurance Risk Insurance guarantees that interest payments on a municipal security will be made on time and that the principal will be repaid when the security matures. However, insurance does not protect against losses caused by declines in a municipal securitys value. The Trust cannot be certain that any insurance company will make the payments it guarantees. If a municipal securitys insurer fails to fulfill its obligations or loses its credit rating, the value of the security could drop.
Junk Bonds Risk Although junk bonds generally pay higher rates of interest than investment grade bonds, junk bonds are high risk investments that are considered speculative and may cause income and principal losses for the Trust.
TRUST INVESTMENT OBJECTIVES, POLICIES AND RISKS | 33 |
Trust Investment Objectives, Policies and Risks (continued)
Zero Coupon Securities Risk While interest payments are not made on such securities, holders of such securities are deemed to have received income (phantom income) annually, notwithstanding that cash may not be received currently. The effect of owning instruments that do not make current interest payments is that a fixed yield is earned not only on the original investment but also, in effect, on all discount accretion during the life of the obligations. This implicit reinvestment of earnings at a fixed rate eliminates the risk of being unable to invest distributions at a rate as high as the implicit yield on the zero coupon bond, but at the same time eliminates the holders ability to reinvest at higher rates in the future. For this reason, some of these securities may be subject to substantially greater price fluctuations during periods of changing market interest rates than are comparable securities that pay interest currently. Longer term zero coupon bonds are more exposed to interest rate risk than shorter term zero coupon bonds. These investments benefit the issuer by mitigating its need for cash to meet debt service, but also require a higher rate of return to attract investors who are willing to defer receipt of cash.
When-Issued and Delayed Delivery Securities and Forward Commitments Risk When-issued and delayed delivery securities and forward commitments involve the risk that the security the Trust buys will lose value prior to its delivery. There also is the risk that the security will not be issued or that the other party to the transaction will not meet its obligation. If this occurs, the Trust may lose both the investment opportunity for the assets it set aside to pay for the security and any gain in the securitys price.
Indexed and Inverse Securities Risk Indexed and inverse securities provide a potential return based on a particular index of value or interest rates. The Trusts return on these securities will be subject to risk with respect to the value of the particular index. These securities are subject to leverage risk and correlation risk. Certain indexed and inverse securities have greater sensitivity to changes in interest rates or index levels than other securities, and the Trusts investment in such instruments may decline significantly in value if interest rates or index levels move in a way Trust management does not anticipate.
U.S. Government Obligations Risk Certain securities in which the Trust may invest, including securities issued by certain U.S. Government agencies and U.S. Government sponsored enterprises, are not guaranteed by the U.S. Government or supported by the full faith and credit of the United States.
Economic Sector and Geographic Risk. The Trust, as a fundamental policy, may not invest 25% or more of the value of its Managed Assets in any one industry. However, this limitation does not apply to securities of the U.S. Government, any state government or their respective agencies, or instrumentalities and securities backed by the credit of any federal or state governmental entity. As such, the Trust may invest 25% of more of its Managed Assets in municipal securities of issuers in the same state (or U.S. Territory) or in the same economic sector. If the Trust does so, this may make it more susceptible to adverse economic, political or regulatory occurrences affecting a particular state or economic sector.
Repurchase Agreements and Purchase and Sale Contracts Risk If the other party to a repurchase agreement or purchase and sale contract defaults on its obligation under the agreement, the Trust may suffer delays and incur costs or lose money in exercising its rights under the agreement. If the seller fails to repurchase the security in either situation and the market value of the security declines, the Trust may lose money.
Leverage Risk The Trust utilizes leverage for investment purposes by entering into reverse repurchase agreements and derivative instruments with leverage embedded in then, such as TOB Residuals. The Trusts use of leverage may increase or decrease from time to time in its discretion and the Trust may, in the future, determine not to use leverage.
The use of leverage creates an opportunity for increased common share net investment income dividends, but also creates risks for the holders of common shares. The Trust cannot assure you that the use of leverage will result in a higher yield on the common shares. Any leveraging strategy the Trust employs may not be successful.
Leverage involves risks and special considerations for common shareholders, including:
|
the likelihood of greater volatility of net asset value, market price and dividend rate of the common shares than a comparable portfolio without leverage; |
|
the risk that fluctuations in interest rates or dividend rates on any leverage that the Trust must pay will reduce the return to the common shareholders; |
|
the effect of leverage in a declining market, which is likely to cause a greater decline in the net asset value of the common shares than if the Trust were not leveraged, which may result in a greater decline in the market price of the common shares; |
|
leverage may increase operating costs, which may reduce total return. |
Any decline in the net asset value of the Trusts investments will be borne entirely by the holders of common shares. Therefore, if the market value of the Trusts portfolio declines, leverage will result in a greater decrease in net asset value to the holders of common shares than if the Trust were not leveraged. This greater net asset value decrease will also tend to cause a greater decline in the market price for the common shares.
Tender Option Bonds Risk The Trusts participation in tender option bond transactions may reduce the Trusts returns and/or increase volatility. Investments in tender option bond transactions expose the Trust to counterparty risk and leverage risk. An investment in a tender option bond transaction typically will involve greater risk than an investment in a municipal fixed rate security, including the risk of loss of principal. Distributions on TOB Residuals will bear an inverse relationship to short-term municipal security interest rates. Distributions on TOB Residuals paid to the Trust will be reduced or, in the extreme, eliminated as short-term municipal interest rates rise and will increase when short-term municipal interest rates fall. TOB Residuals generally will underperform the market for fixed rate municipal securities in a rising interest rate environment. The Trust may invest special purpose trusts formed for the purpose of holding municipal bonds contributed by one or more funds (TOB Trusts) on either a non-recourse or recourse basis. If the Trust invests in a TOB Trust on a recourse basis, it could suffer losses in excess of the value of its TOB Residuals.
Reverse Repurchase Agreements Risk Reverse repurchase agreements involve the sale of securities held by the Trust with an agreement to repurchase the securities at an agreed-upon price, date and interest payment. Reverse repurchase agreements involve the risk that the other party may fail to return the securities in a timely manner or at all. The Trust could lose money if it is unable to recover the securities and the value of the collateral held by the Trust, including the value of the investments made with cash collateral, is less than the value of the securities. These events could also trigger adverse tax consequences for the Trust. In addition, reverse repurchase agreements involve the risk that the interest income earned in the investment of the proceeds will be less than the interest expense.
34 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Trust Investment Objectives, Policies and Risks (continued)
Illiquid Investments Risk The Trust may invest without limitation in illiquid or less liquid investments or investments in which no secondary market is readily available or which are otherwise illiquid, including private placement securities. The Trust may not be able to readily dispose of such investments at prices that approximate those at which the Trust could sell such investments if they were more widely traded and, as a result of such illiquidity, the Trust may have to sell other investments or engage in borrowing transactions if necessary to raise cash to meet its obligations. Limited liquidity can also affect the market price of investments, thereby adversely affecting the Trusts net asset value and ability to make dividend distributions. The financial markets in general, and certain segments of the mortgage-related securities markets in particular, have in recent years experienced periods of extreme secondary market supply and demand imbalance, resulting in a loss of liquidity during which market prices were suddenly and substantially below traditional measures of intrinsic value. During such periods, some investments could be sold only at arbitrary prices and with substantial losses. Periods of such market dislocation may occur again at any time. Privately issued debt securities are often of below investment grade quality, frequently are unrated and present many of the same risks as investing in below investment grade public debt securities.
Investment Companies and ETFs Risk Subject to the limitations set forth in the Investment Company Act of 1940, as amended (the 1940 Act), or as otherwise limited by the SEC, the Trust may acquire shares in other investment companies and in exchange-traded Trusts (ETFs), some of which may be affiliated investment companies. The market value of the shares of other investment companies and ETFs may differ from their net asset value. As an investor in investment companies and ETFs, the Trust would bear its ratable share of that entitys expenses, including its investment advisory and administration fees, while continuing to pay its own advisory and administration fees and other expenses (to the extent not offset by the Manager through waivers). As a result, shareholders will be absorbing duplicate levels of fees with respect to investments in other investment companies and ETFs (to the extent not offset by the Manager through waivers).
The securities of other investment companies and ETFs in which the Trust may invest may be leveraged. As a result, the Trust may be indirectly exposed to leverage through an investment in such securities. An investment in securities of other investment companies and ETFs that use leverage may expose the Trust to higher volatility in the market value of such securities and the possibility that the Trusts long-term returns on such securities (and, indirectly, the long-term returns of shares of the Trust) will be diminished.
As with other investments, investments in other investment companies, including ETFs, are subject to market and selection risk. To the extent the Trust is held by an affiliated Trust, the ability of the Trust itself to hold other investment companies may be limited.
Derivatives Risk The Trusts use of derivatives may increase its costs, reduce the Trusts returns and/or increase volatility. Derivatives involve significant risks, including:
Volatility Risk Volatility is defined as the characteristic of a security, an index or a market to fluctuate significantly in price within a short time period. A risk of the Trusts use of derivatives is that the fluctuations in their values may not correlate with the overall securities markets.
Counterparty Risk Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation.
Market and Illiquidity Risk The possible lack of a liquid secondary market for derivatives and the resulting inability of the Trust to sell or otherwise close a derivatives position could expose the Trust to losses and could make derivatives more difficult for the Trust to value accurately.
Valuation Risk Valuation may be more difficult in times of market turmoil since many investors and market makers may be reluctant to purchase complex instruments or quote prices for them.
Hedging Risk Hedges are sometimes subject to imperfect matching between the derivative and the underlying security, and there can be no assurance that the Trusts hedging transactions will be effective. The use of hedging may result in certain adverse tax consequences.
Tax Risk Certain aspects of the tax treatment of derivative instruments, including swap agreements and commodity-linked derivative instruments, are currently unclear and may be affected by changes in legislation, regulations or other legally binding authority. Such treatment may be less favorable than that given to a direct investment in an underlying asset and may adversely affect the timing, character and amount of income the Trust realizes from its investments.
Regulatory Risk Derivative contracts, including, without limitation, swaps, currency forwards and non-deliverable forwards, are subject to regulation under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) in the United States and under comparable regimes in Europe, Asia and other non-U.S. jurisdictions. Under the Dodd-Frank Act, certain derivatives are subject to margin requirements and swap dealers are required to collect margin from the Trust with respect to such derivatives. Specifically, regulations are now in effect that require swap dealers to post and collect variation margin (comprised of specified liquid instruments and subject to a required haircut) in connection with trading of OTC swaps with the Trust. Shares of investment companies (other than certain money market funds) may not be posted as collateral under these regulations. Requirements for posting of initial margin in connection with OTC swaps will be phased-in through at least 2021. In addition, regulations adopted by global prudential regulators that are now in effect require certain bank-regulated counterparties and certain of their affiliates to include in certain financial contracts, including many derivatives contracts, terms that delay or restrict the rights of counterparties, such as the Trust, to terminate such contracts, foreclose upon collateral, exercise other default rights or restrict transfers of credit support in the event that the counterparty and/or its affiliates are subject to certain types of resolution or insolvency proceedings. The implementation of these requirements with respect to derivatives, as well as regulations under the Dodd-Frank Act regarding clearing, mandatory trading and margining of other derivatives, may increase the costs and risks to the Trust of trading in these instruments and, as a result, may affect returns to investors in the Trust.
TRUST INVESTMENT OBJECTIVES, POLICIES AND RISKS | 35 |
Trust Investment Objectives, Policies and Risks (continued)
In November 2019, the SEC proposed new regulations governing the use of derivatives by registered investment companies. If adopted as proposed, new Rule 18f-4 would impose limits on the amount of derivatives a fund could enter into, eliminate the asset segregation framework currently used by funds to comply with Section 18 of the 1940 Act, treat derivatives as senior securities so that a failure to comply with the proposed limits would result in a statutory violation and require funds whose use of derivatives is more than a limited specified exposure amount to establish and maintain a comprehensive derivatives risk management program and appoint a derivatives risk manager.
Market Risk and Selection Risk Market risk is the risk that one or more markets in which the Trust invests will go down in value, including the possibility that the markets will go down sharply and unpredictably. The value of a security or other asset may decline due to changes in general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or factors that affect a particular issuer or issuers, exchange, country, group of countries, region, market, industry, group of industries, sector or asset class. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues like pandemics or epidemics, recessions, or other events could have a significant impact on the Trust and its investments. Selection risk is the risk that the securities selected by Trust management will underperform the markets, the relevant indices or the securities selected by other funds with similar investment objectives and investment strategies. This means you may lose money.
A recent outbreak of an infectious coronavirus has developed into a global pandemic that has resulted in numerous disruptions in the market and has had significant economic impact leaving general concern and uncertainty. The impact of this coronavirus, and other epidemics and pandemics that may arise in the future, could affect the economies of many nations, individual companies and the market in general ways that cannot necessarily be foreseen at the present time.
36 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Automatic Dividend Reinvestment Plan
Pursuant to the Trusts Dividend Reinvestment Plan (the Reinvestment Plan), Common Shareholders are automatically enrolled to have all distributions of dividends and capital gains and other distributions reinvested by Computershare Trust Company, N.A. (the Reinvestment Plan Agent) in the Trusts Common Shares pursuant to the Reinvestment Plan. Shareholders who do not participate in the Reinvestment Plan will receive all distributions in cash paid by check and mailed directly to the shareholders of record (or if the shares are held in street name or other nominee name, then to the nominee) by the Reinvestment Plan Agent, which serves as agent for the shareholders in administering the Reinvestment Plan.
After the Trust declares a dividend or determines to make a capital gain or other 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 Trust (newly issued shares) or (ii) by purchase of outstanding shares on the open market or on the Trusts 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 participants 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.
You may elect not to participate in the Reinvestment Plan and to receive all dividends in cash by contacting the Reinvestment Plan Agent, at the address set forth below.
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 Agents fees for the handling of the reinvestment of distributions will be paid by the Trust. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Reinvestment Plan Agents open-market purchases in connection with the reinvestment of all distributions. The automatic reinvestment of all distributions will not relieve participants of any U.S. federal, state or local income tax that may be payable on such dividends or distributions.
The Trust reserves the right to amend or terminate the Reinvestment Plan. There is no direct service charge to participants in the Reinvestment Plan; however, the 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 sold brokerage commission fee. All correspondence concerning the Reinvestment Plan should be directed to Computershare Trust Company, N.A. through the internet at computershare.com/blackrock, or in writing to Computershare, P.O. Box 505000, Louisville, KY 40233, Telephone: (800) 699-1236. Overnight correspondence should be directed to the Reinvestment Plan Agent at Computershare, 462 South 4th Street, Suite 1600, Louisville, KY 40202.
AUTOMATIC DIVIDEND REINVESTMENT PLAN | 37 |
Trustee and Officer Information
Independent Trustees (a) | ||||||||
Name
Year of Birth (b) |
Position(s) Held
(Length of Service) (c) |
Principal Occupation(s) During Past Five Years |
Number of BlackRock-Advised
Registered Investment Companies (RICs) Consisting of Investment Portfolios (Portfolios) Overseen (d) |
Public Company and Other
Investment Company Directorships Held During Past Five Years |
||||
Richard E. Cavanagh
1946 |
Co-Chair of the Board and Trustee
(Since 2007) |
Director, The Guardian Life Insurance Company of America since 1998; Board Chair, Volunteers of America (a not-for-profit organization) from 2015 to 2018 (board member since 2009); Director, Arch Chemicals (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 and Executive Dean from 1987 to 1995; President and Chief Executive Officer, The Conference Board, Inc. (global business research organization) from 1995 to 2007. | 86 RICs consisting of 110 Portfolios | None | ||||
Karen P. Robards
1950 |
Co-Chair of the Board and Trustee
(Since 2007) |
Principal of Robards & Company, LLC (consulting and private investing) since 1987; Co-founder and Director of the Cooke Center for Learning and Development (a not-for-profit organization) since 1987; Director of Enable Injections, LLC (medical devices) since 2019; Investment Banker at Morgan Stanley from 1976 to 1987. | 86 RICs consisting of 110 Portfolios | Greenhill & Co., Inc.; AtriCure, Inc. (medical devices) from 2000 until 2017 | ||||
Michael J. Castellano
1946 |
Trustee
(Since 2011) |
Chief Financial Officer of Lazard Group LLC from 2001 to 2011; Chief Financial Officer of Lazard Ltd from 2004 to 2011; Director, Support Our Aging Religious (non-profit) from 2009 to June 2015 and since 2017; Director, National Advisory Board of Church Management at Villanova University since 2010; Trustee, Domestic Church Media Foundation since 2012; Director, CircleBlack Inc. (financial technology company) since 2015. | 86 RICs consisting of 110 Portfolios | None | ||||
Cynthia L. Egan
1955 |
Trustee
(Since 2016) |
Advisor, U.S. Department of the Treasury from 2014 to 2015; President, Retirement Plan Services, for T. Rowe Price Group, Inc. from 2007 to 2012; executive positions within Fidelity Investments from 1989 to 2007. | 86 RICs consisting of 110 Portfolios | Unum (insurance); The Hanover Insurance Group (insurance); Envestnet (investment platform) from 2013 until 2016 | ||||
Frank J. Fabozzi (d)
1948 |
Trustee
(Since 2007) |
Editor of The Journal of Portfolio Management since 1986; Professor of Finance, EDHEC Business School (France) since 2011; Visiting Professor, Princeton University for the 2013 to 2014 academic year and Spring 2017 semester; Professor in the Practice of Finance, Yale University School of Management from 1994 to 2011 and currently a Teaching Fellow in Yales Executive Programs; Board Member, BlackRock Equity-Liquidity Funds from 2014 to 2016; affiliated professor Karlsruhe Institute of Technology from 2008 to 2011; Visiting Professor, Rutgers University for the Spring 2019 semester; Visiting Professor, New York University for the 2019 academic year. | 87 RICs consisting of 111 Portfolios | None | ||||
R. Glenn Hubbard
1958 |
Trustee
(Since 2007) |
Dean, Columbia Business School from 2004 to 2019; Faculty member, Columbia Business School since 1988. | 86 RICs consisting of 110 Portfolios | ADP (data and information services); Metropolitan Life Insurance Company (insurance); KKR Financial Corporation (finance) from 2004 until 2014 |
38 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Trustee and Officer Information (continued)
Independent Trustees (a) (continued) | ||||||||
Name
Year of Birth (b) |
Position(s) Held
(Length of Service) (c) |
Principal Occupation(s) During Past Five Years |
Number of BlackRock-Advised
Registered Investment Companies (RICs) Consisting of Investment Portfolios (Portfolios) Overseen (d) |
Public Company and Other
Investment Company Directorships Held During Past Five Years |
||||
W. Carl Kester (d)
1951 |
Trustee
(Since 2007) |
George Fisher Baker Jr. Professor of Business Administration, Harvard Business School since 2008; Deputy Dean for Academic Affairs from 2006 to 2010; Chairman of the Finance Unit, from 2005 to 2006; Senior Associate Dean and Chairman of the MBA Program from 1999 to 2005; Member of the faculty of Harvard Business School since 1981. | 87 RICs consisting of 111 Portfolios | None | ||||
Catherine A. Lynch (d)
1961 |
Trustee
(Since 2016) |
Chief Executive Officer, Chief Investment Officer and various other positions, National Railroad Retirement Investment Trust from 2003 to 2016; Associate Vice President for Treasury Management, The George Washington University from 1999 to 2003; Assistant Treasurer, Episcopal Church of America from 1995 to 1999. | 87 RICs consisting of 111 Portfolios | None | ||||
Interested Trustees (a)(e) | ||||||||
Name
Year of Birth (b) |
Position(s) Held
(Length of Service) (c) |
Principal Occupation(s) During Past Five Years |
Number of BlackRock-Advised
Registered Investment Companies (RICs) Consisting of Investment Portfolios (Portfolios) Overseen (d) |
Public Company and Other
Investment Company Directorships Held During Past Five Years |
||||
Robert Fairbairn
1965 |
Trustee
(Since 2018) |
Vice Chairman of BlackRock, Inc. since 2019; Member of BlackRocks Global Executive and Global Operating Committees; Co-Chair of BlackRocks Human Capital Committee; Senior Managing Director of BlackRock, Inc. from 2010 to 2019; oversaw BlackRocks Strategic Partner Program and Strategic Product Management Group from 2012 to 2019; Member of the Board of Managers of BlackRock Investments, LLC from 2011 to 2018; Global Head of BlackRocks Retail and iShares® businesses from 2012 to 2016. | 122 RICs consisting of 265 Portfolios | None | ||||
John M. Perlowski (d)
1964 |
Trustee
(Since 2015); President and Chief Executive Officer (Since 2010) |
Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Accounting and Product Services since 2009; Advisory Director of Family Resource Network (charitable foundation) since 2009. | 123 RICs consisting of 266 Portfolios | None | ||||
(a) The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, New York 10055. (b) Each Independent Trustee holds office until his or her successor is duly elected and qualifies or until his or her earlier death, resignation, retirement or removal as provided by the Trusts by-laws or charter or statute, or until December 31 of the year in which he or she turns 75. Trustees who are interested persons, as defined in the Investment Company Act serve until their successor is duly elected and qualifies or until their earlier death, resignation, retirement or removal as provided by the Trusts by-laws or statute, or until December 31 of the year in which they turn 72. The Board may determine to extend the terms of Independent Trustees on a case-by-case basis, as appropriate. (c) Following the combination of Merrill Lynch Investment Managers, L.P. (MLIM) and BlackRock, Inc. in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. Certain Independent 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; R. Glenn Hubbard, 2004; W. Carl Kester, 1995; and Karen P. Robards, 1998. (d) Dr. Fabozzi, Dr. Kester, Ms. Lynch and Mr. Perlowski are also trustees of the BlackRock Credit Strategies Fund. (e) Mr. Fairbairn and Mr. Perlowski are both interested persons, as defined in the Investment Company Act 1940 Act, of the Trust based on their positions with BlackRock, Inc. and its affiliates. Mr. Fairbairn and Mr. Perlowski are also board members of the BlackRock Multi-Asset Complex. |
TRUSTEE AND OFFICER INFORMATION | 39 |
Trustee and Officer Information (continued)
Officers Who Are Not Trustees (a) | ||||
Name
Year of Birth (b) |
Position(s) Held
(Length of Service) |
Principal Occupation(s) During Past Five Years | ||
Jonathan Diorio
1980 |
Vice President
(Since 2015) |
Managing Director of BlackRock, Inc. since 2015; Director of BlackRock, Inc. from 2011 to 2015. | ||
Neal J. Andrews
1966 |
Chief Financial Officer
(Since 2007) |
Chief Financial Officer of the iShares® exchange traded funds from 2019 to 2020; Managing Director of BlackRock, Inc. since 2006. | ||
Jay M. Fife
1970 |
Treasurer
(Since 2007) |
Managing Director of BlackRock, Inc. since 2007. | ||
Charles Park
1967 |
Chief Compliance Officer
(Since 2014) |
Anti-Money Laundering Compliance Officer for certain BlackRock-advised Funds from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the BlackRock Multi-Asset Complex and the BlackRock Fixed-Income 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) |
Managing Director of BlackRock, Inc. since 2018; Director of BlackRock, Inc. from 2009 to 2017. | ||
(a) The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, New York 10055. (b) Officers of the Trust serve at the pleasure of the Board. |
Investment Adviser
BlackRock Advisors, LLC
Wilmington, DE 19809
Accounting Agent and Custodian
State Street Bank and Trust Company
Boston, MA 02111
Transfer Agent
Computershare Trust Company, N.A.
Canton, MA 02021
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Boston, MA 02116
Legal Counsel
Willkie Farr & Gallagher LLP
New York, NY 10019
Address of the Trust
100 Bellevue Parkway
Wilmington, DE 19809
40 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Proxy Results
The Annual Meeting of Shareholders was held on July 27, 2020 for shareholders of record on May 29, 2020, to elect trustee nominees for the Trust. There were no broker non-votes with regard to the Trust.
Shareholders elected the Class I Trustees as follows:
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Michael J. Castellano | R. Glenn Hubbard | John M. Perlowski | W. Carl Kester | ||||||||||||||||||||||||||||
Votes For | Votes Withheld | Votes For | Votes Withheld | Votes For | Votes Withheld | Votes For | Votes Withheld | |||||||||||||||||||||||||
BBN |
47,472,598 | 774,250 | 47,429,285 | 817,563 | 47,493,701 | 753,147 | 47,454,934 | 791,914 |
For the Trust 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, Cynthia L. Egan, Robert Fairbairn, Catherine A. Lynch, Karen P. Robards and Frank J. Fabozzi.
Trust Certification
The Trust is listed for trading on the NYSE and has filed with the NYSE its annual chief executive officer certification regarding compliance with the NYSEs listing standards. The Trust filed with the SEC the certification of its chief executive officer and chief financial officer required by section 302 of the Sarbanes-Oxley Act.
Dividend Policy
The Trusts dividend policy is to distribute all or a portion of its net investment income to its shareholders on a monthly basis. In order to provide shareholders with a more stable level of distributions, the Trust may at times pay out less than the entire amount of net investment income earned in any particular month/quarter and may at times in any particular month/quarter pay out such accumulated but undistributed income in addition to net investment income earned in that month/quarter. As a result, the distributions paid by the Trust for any particular month/quarter may be more or less than the amount of net investment income earned by the Trust during such month/quarter. The Trusts current accumulated but undistributed net investment income, if any, is disclosed as accumulated earnings (loss) in the Statement of Assets and Liabilities, which comprises part of the financial information included in this report.
General Information
The Trust does not make available copies of its Statement of Additional Information because the Trusts shares are not continuously offered, which means that the Statement of Additional Information of the Trust has not been updated after completion of the Trusts offerings and the information contained in the Trusts Statement of Additional Information may have become outdated.
Except if noted otherwise herein, there were no changes to the Trusts charter or by-laws that would delay or prevent a change of control of the Trust that were not approved by the shareholders. Except if noted otherwise herein, there have been no changes in the persons who are primarily responsible for the day-to-day management of the Trusts portfolios.
In accordance with Section 23(c) of the Investment Company Act of 1940, the Trust may from time to time purchase shares of its common stock in the open market or in private transactions.
Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding the Trust may be found on BlackRocks website, which can be accessed at blackrock.com. Any reference to BlackRocks website in this report is intended to allow investors public access to information regarding the Trust and does not, and is not intended to, incorporate BlackRocks website in this report.
Electronic Delivery
Shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual shareholder reports by enrolling in the electronic delivery program. Electronic copies of shareholder reports are available on BlackRocks website.
To enroll in electronic delivery:
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial advisor. Please note that not all investment advisers, banks or brokerages may offer this service.
Householding
The Trust 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 Trust at (800) 882-0052.
ADDITIONAL INFORMATION | 41 |
Additional Information (continued)
Availability of Quarterly Schedule of Investments
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Trusts Forms N-PORT and N-Q are available on the SECs website at sec.gov.
Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to portfolio securities is available upon request and without charge (1) by calling (800) 882-0052; (2) at blackrock.com; and (3) on the SECs website at sec.gov.
Availability of Proxy Voting Record
Information about how the Trust voted proxies relating to securities held in the Trusts portfolio during the most recent 12-month period ended June 30 is available upon request and without charge (1) at blackrock.com; or by calling (800) 882-0052; and (2) on the SECs website at sec.gov.
Availability of Trust Updates
BlackRock will update performance and certain other data for the Trust on a monthly basis on its website in the Closed-end Funds section of blackrock.com as well as certain other material information as necessary from time to time. Investors and others are advised to check the website for updated performance information and the release of other material information about the Trust. This reference to BlackRocks website is intended to allow investors public access to information regarding the Trust and does not, and is not intended to, incorporate BlackRocks website in this report.
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, Clients) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.
If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.
Glossary of Terms Used in this Report
Portfolio Abbreviations | ||
AGM | Assured Guaranty Municipal Corp. | |
ARB | Airport Revenue Bonds | |
COP | Certificates of Participation | |
EDA | Economic Development Authority | |
GO | General Obligation Bonds | |
GTD | Guaranteed | |
HFA | Housing Finance Agency | |
ISD | Independent School District | |
LRB | Lease Revenue Bonds |
Portfolio Abbreviations (continued) | ||
M/F | Multi-Family | |
NPFGC | National Public Finance Guarantee Corp. | |
PSF-GTD | Permanent School Fund Guaranteed | |
RB | Revenue Bonds |
42 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Want to know more?
blackrock.com | 800-882-0052
This report is intended for current holders. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. The Trust has leveraged its 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.
TAXMB-7/20-AR
|
|
Item 3 |
Audit Committee Financial Expert The registrants 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
Catherine A. Lynch
Karen P. Robards
The registrants board of directors has determined that Karen P. Robards qualifies as an audit committee financial expert pursuant to Item 3(c)(4) of Form N-CSR.
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 of a person 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.
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 Fees | |||||||||||||
Entity Name | Current | Previous | Current | Previous | Current | Previous | Current | Previous |
2
Fiscal Year
End |
Fiscal Year
End |
Fiscal Year
End |
Fiscal Year
End |
Fiscal Year
End |
Fiscal Year
End |
Fiscal Year
End |
Fiscal Year
End |
|||||||||||||||||||||||||||||||||
BlackRock Taxable
Municipal Bond Trust |
$35,700 | $35,700 | $0 | $0 | $14,900 | $15,400 | $0 | $0 |
The following table presents fees billed by D&T that were required to be approved by the registrants 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 (Affiliated 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 |
$1,984,000 | $2,050,500 |
1 The nature of the services includes assurance and related services reasonably related to the performance of the audit or review of financial statements not included in Audit Fees, including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters, out-of-pocket expenses and internal control reviews not required by regulators.
2 The nature of the services includes tax compliance and/or tax preparation, including services relating to the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews, taxable income and tax distribution calculations.
3 Non-audit fees of $1,984,000 and $2,050,500 for the current fiscal year and previous fiscal year, respectively, were paid to the Funds principal accountant in their entirety by BlackRock, in connection with services provided to the Affiliated Service Providers of the Fund and of certain other funds sponsored and advised by BlackRock or its affiliates for a service organization review and an accounting research tool subscription. These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.
(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 Affiliated 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 SECs 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 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
3
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, defined as the sum of the fees shown under Audit-Related Fees, Tax Fees and All Other Fees, paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Affiliated Service Providers were:
Entity Name |
Current Fiscal
Year End |
Previous Fiscal
Year End |
|||||||||||||
BlackRock Taxable Municipal Bond Trust |
$14,900 | $15,400 |
Additionally, the amounts billed by D&T in connection with services provided to the Affiliated Service Providers of the Fund and of other funds sponsored or advised by BlackRock or its affiliates during the current and previous fiscal years for a service organization review and an accounting research tool subscription were:
Current Fiscal Year End |
Previous Fiscal Year End |
|
$1,984,000 |
$2,050,500 |
These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.
(h) The Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser, and the Affiliated 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 accountants independence.
Item 5 |
Audit Committee of Listed Registrant |
(a) |
The following individuals are members of the registrants 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
Catherine A. Lynch
Karen P. Robards
(b) |
Not Applicable |
4
Item 6 |
Investments |
(a) The registrants 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.
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 Funds portfolio securities to the Investment Adviser pursuant to the Investment Advisers 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 Funds 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 Advisers 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 Advisers 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 Advisers Portfolio Management Group and/or the Investment Advisers Legal and Compliance Department and concluding that the vote cast is in its clients best interest notwithstanding the conflict. A copy of the Funds Proxy Voting Policy and Procedures are attached as Exhibit 99.PROXYPOL, a copy of the Funds Global Corporate Governance & Engagement Principles are attached as Exhibit 99.GLOBAL.CORP.GOV and a copy of the Funds Corporate Governance and Proxy Voting Guidelines for U.S. Securities are attached as Exhibit 99.US.CORP.GOV. 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 SECs website at http://www.sec.gov. |
Item 8 |
Portfolio Managers of Closed-End Management Investment Companies |
(a)(1) As of the date of filing this Report:
The registrant is managed by a team of investment professionals comprised of Peter J. Hayes, Managing Director at BlackRock, Theodore R. Jaeckel, Jr., CFA, Managing Director at BlackRock, Michael A. Kalinoski, CFA, Director at BlackRock and Christian Romaglino, Director at BlackRock. Each is a member of BlackRocks municipal tax-exempt management group. Each is jointly responsible for the day-to-day management of the registrants portfolio, which includes setting the registrants overall investment strategy, overseeing the management of the registrant and/or selection of its investments. Messrs. Hayes, Jaeckel and Kalinoski have been members of the registrants portfolio management team since 2010, and Mr. Romaglino has been a member of the registrants portfolio management team since 2017.
5
Portfolio Manager | Biography | |
Peter J. Hayes |
Managing Director of BlackRock since 2006; Head of Municipal Bonds within BlackRocks Fixed Income Portfolio Management Group since 2006; Managing Director of Merrill Lynch Investment Managers, L.P. (MLIM) from 2000 to 2006. | |
Theodore R. Jaeckel, Jr., CFA |
Managing Director of BlackRock since 2006; Managing Director of MLIM from 2005 to 2006; Director of MLIM from 1997 to 2005. | |
Michael A. Kalinoski, CFA |
Director of BlackRock, Inc. since 2006; Director of MLIM from 1999 to 2006. | |
Christian Romaglino |
Director of BlackRock since 2017, Portfolio Manager for the Municipal Mutual Fund Desk within BlackRocks Global Fixed Income Group since 2017; Portfolio Manager of Brown Brothers Harriman from 2007 to 2017. |
(a)(2) As of July 31, 2020:
(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 |
||||||||||||||||||||||||
Peter J. Hayes |
4 | 0 | 1 | 0 | 0 | 0 | ||||||||||||||||||||||||
$14.18 Billion | $0 | $9.58 Million | $0 | $0 | $0 | |||||||||||||||||||||||||
Theodore R. Jaeckel, Jr., CFA |
33 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
$26.43 Billion | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||||||
Michael A. Kalinoski, CFA |
16 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
$33.01 Billion | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||||||
Christian Romaglino |
12 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
$4.61 Billion | $0 | $0 | $0 | $0 | $0 |
(iv) Portfolio Manager Potential Material Conflicts of Interest
BlackRock has built a professional working environment, firm-wide compliance culture and compliance procedures and systems designed to protect against potential incentives that may favor one account over another. BlackRock has adopted policies and procedures that address the allocation of investment opportunities, execution of portfolio transactions, personal trading by employees and other potential conflicts of interest that are designed to ensure that all client accounts are treated equitably over time. Nevertheless, BlackRock furnishes investment management and advisory services to numerous clients in addition to the Fund, and BlackRock may, consistent with applicable law, make investment recommendations to other clients or accounts (including accounts which are hedge funds or have performance or higher fees paid to BlackRock, or in which portfolio managers have a personal interest in the receipt of such fees), which may be the same as or different from those made to the Fund. In addition, BlackRock, Inc., its affiliates and significant shareholders and any officer, director, shareholder or employee may or may not have an interest in the securities
6
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 a portfolio manager 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. Such portfolio managers may therefore be entitled to receive a portion of any incentive fees earned on such accounts. Currently, the portfolio managers of this Fund are not entitled to receive a portion of incentive fees of other 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.
(a)(3) As of July 31, 2020:
Portfolio Manager Compensation Overview
The discussion below describes the portfolio managers compensation as of July 31, 2020.
BlackRocks 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 managers group within BlackRock, the investment performance, including risk-adjusted returns, of the firms assets under management or supervision by that portfolio manager relative to predetermined benchmarks, and the individuals performance and contribution to the overall performance of these portfolios and BlackRock. In most cases, these benchmarks are the same as
7
the benchmark or benchmarks against which the performance of the Funds or other accounts managed by the portfolio managers are measured. Among other things, BlackRocks Chief Investment Officers make a subjective determination with respect to each portfolio managers 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 Managers | Applicable Benchmarks | |
Peter Hayes |
A combination of market-based indices (e.g., Standard & Poors Municipal Bond Index), certain customized indices and certain fund industry peer groups. Due to Portfolio Manager Peter Hayes unique position (Portfolio Manager and Chief Investment Officer of Tax Exempt Fixed Income) his compensation does not solely reflect his role as PM of the funds managed by him. The performance of his fund(s) is included in consideration of his incentive compensation but given his unique role it is not the sole driver of compensation. | |
Theodore R. Jaeckel, Jr., CFA Michael Kalinoski, CFA Christian Romaglino |
A combination of market-based indices (e.g., Standard & Poors Municipal Bond Index), certain customized indices and certain fund industry peer groups. |
Distribution of Discretionary Incentive Compensation. Discretionary incentive compensation is distributed to portfolio managers in a combination of cash, deferred BlackRock, Inc. stock awards, and/or deferred cash awards that notionally track the return of certain BlackRock investment products.
Portfolio managers receive their annual discretionary incentive compensation in the form of cash. Portfolio managers whose total compensation is above a specified threshold also receive deferred BlackRock, Inc. stock awards annually as part of their discretionary incentive compensation. Paying a portion of discretionary incentive compensation in the form of deferred BlackRock, Inc. stock puts compensation earned by a portfolio manager for a given year at risk based on BlackRocks ability to sustain and improve its performance over future periods. In some cases, additional deferred BlackRock, Inc. stock may be granted to certain key employees as part of a long-term incentive award to aid in retention, align interests with long-term shareholders and motivate performance. Deferred BlackRock, Inc. stock awards are generally granted in the form of BlackRock, Inc. restricted stock units that vest pursuant to the terms of the applicable plan and, once vested, settle in BlackRock, Inc. common stock. The portfolio managers of this Fund have deferred BlackRock, Inc. stock awards.
For certain portfolio managers, a portion of the discretionary incentive compensation is also distributed in the form of deferred cash awards that notionally track the returns of select BlackRock
8
investment products they manage, which provides direct alignment of portfolio manager discretionary incentive compensation with investment product results. Deferred cash awards vest ratably over a number of years and, once vested, settle in the form of cash. Only portfolio managers who manage specified products and whose total compensation is above a specified threshold are eligible to participate in the deferred cash award 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 ($285,000 for 2020). 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 July 31, 2020.
Portfolio Manager |
Dollar Range of Equity Securities of the Fund Beneficially Owned |
|
Peter J. Hayes |
$50,001-$100,000 | |
Theodore R. Jaeckel, Jr., CFA |
$10,001 - $50,000 | |
Michael A. Kalinoski, CFA |
$10,001 - $50,000 | |
Christian Romaglino |
$10,001 - $50,000 |
(b) Not Applicable
Item 9 |
Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers Not Applicable due to no such purchases during the period covered by this report. |
Item 10 |
Submission of Matters to a Vote of Security Holders There have been no material changes to these procedures. |
9
Item 11 |
Controls and Procedures |
(a) The registrants principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrants 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 registrants internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrants internal control over financial reporting.
Item 12 |
Disclosure of Securities Lending Activities for Closed-End Management Investment Companies Not Applicable |
Item 13 |
Exhibits attached hereto |
(a)(1) Code of Ethics See Item 2
(a)(2) Section 302 Certifications are attached
(a)(3) Not Applicable
(a)(4) Not Applicable
(b) Section 906 Certifications are attached
10
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 Taxable Municipal Bond Trust
By: | /s/ John M. Perlowski | |
John M. Perlowski | ||
Chief Executive Officer (principal executive officer) of | ||
BlackRock Taxable Municipal Bond Trust |
Date: October 2, 2020
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 Taxable Municipal Bond Trust |
Date: October 2, 2020
By: | /s/ Neal J. Andrews | |
Neal J. Andrews | ||
Chief Financial Officer (principal financial officer) of | ||
BlackRock Taxable Municipal Bond Trust |
Date: October 2, 2020
11
EX-99. CERT
CERTIFICATION PURSUANT TO RULE 30a-2(a) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John M. Perlowski, Chief Executive Officer (principal executive officer) of BlackRock Taxable Municipal Bond Trust, certify that:
1. I have reviewed this report on Form N-CSR of BlackRock Taxable Municipal Bond Trust;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
d) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: October 2, 2020 |
/s/ John M. Perlowski |
John M. Perlowski |
Chief Executive Officer (principal executive officer) of BlackRock Taxable Municipal Bond Trust |
EX-99. CERT
CERTIFICATION PURSUANT TO RULE 30a-2(a) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Neal J. Andrews, Chief Financial Officer (principal financial officer) of BlackRock Taxable Municipal Bond Trust, certify that:
1. I have reviewed this report on Form N-CSR of BlackRock Taxable Municipal Bond Trust;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
d) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: October 2, 2020 |
/s/ Neal J. Andrews |
Neal J. Andrews |
Chief Financial Officer (principal financial officer) of |
BlackRock Taxable Municipal Bond Trust |
Exhibit 99.906CERT
Certification Pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. § 1350, the undersigned officer of BlackRock Taxable Municipal Bond Trust (the Registrant), hereby certifies, to the best of his knowledge, that the Registrants Report on Form N-CSR for the period ended July 31, 2020 (the Report) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: October 2, 2020 |
/s/ John M. Perlowski |
John M. Perlowski |
Chief Executive Officer (principal executive officer) of |
BlackRock Taxable Municipal Bond Trust |
Pursuant to 18 U.S.C. § 1350, the undersigned officer of BlackRock Taxable Municipal Bond Trust (the Registrant), hereby certifies, to the best of his knowledge, that the Registrants Report on Form N-CSR for the period ended July 31, 2020 (the Report) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: October 2, 2020 |
/s/ Neal J. Andrews |
Neal J. Andrews |
Chief Financial Officer (principal financial officer) of |
BlackRock Taxable Municipal Bond Trust |
This certification is being furnished pursuant to Rule 30a-2(b) under the Investment Company Act of 1940, as amended, and 18 U.S.C. § 1350 and is not being filed as part of the Form N-CSR with the Securities and Exchange Commission.
Closed-End Fund Proxy Voting Policy
October 1, 2020
Closed-End Fund Proxy Voting Policy
Procedures Governing Delegation of Proxy Voting to Fund Adviser
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Effective Date: October 1, 2020
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Appliesto the following types of Funds registered under the 1940 Act: ☐ Open-End Mutual Funds (including money market funds) ☐ Money Market Funds Only ☐ iShares and BlackRock ETFs ☒ Closed-End Funds ☐ Other
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The Boards of Trustees/Directors (the Directors) of the closed-end funds advised by BlackRock Advisors, LLC (BlackRock) (the Funds) have the responsibility for the oversight of voting proxies relating to portfolio securities of the Funds, and have determined that it is in the best interests of the Funds and their shareholders to delegate that responsibility to BlackRock as part of BlackRocks authority to manage, acquire and dispose of account assets, all as contemplated by the Funds respective investment management agreements.
BlackRock has adopted guidelines and procedures (together and as from time to time amended, the BlackRock Proxy Voting Guidelines) governing proxy voting by accounts managed by BlackRock. BlackRock will cast votes on behalf of each of the Funds on specific proxy issues in respect of securities held by each such Fund in accordance with the BlackRock Proxy Voting Guidelines; provided, however, that in the case of underlying closed-end funds (including business development companies and other similarly-situated asset pools) held by the Funds that have, or are proposing to adopt, a classified board structure, BlackRock will typically (a) vote in favor of proposals to adopt classification and against proposals to eliminate classification, and (b) not vote against directors as a result of their adoption of a classified board structure.
BlackRock will report on an annual basis to the Directors on (1) a summary of all proxy votes that BlackRock has made on behalf of the Funds in the preceding year together with a representation that all votes were in accordance with the BlackRock Proxy Voting Guidelines (as modified pursuant to the immediately preceding paragraph), and (2) any changes to the BlackRock Proxy Voting Guidelines that have not previously been reported.
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Public | Page 1 of 1 |
BlackRock
Investment
Stewardship
Global Corporate Governance &
Engagement Principles
January 2020
If you would like additional information, please contact: ContactStewardship@blackrock.com |
BLACKROCK
BlackRocks purpose is to help more and more people experience financial well-being. As a fiduciary to our clients, we provide the investment and technology solutions they need when planning for their most important goals. We manage assets on behalf of institutional and individual clients, across a full spectrum of investment strategies, asset classes and regions. Our client base includes pension plans, endowments, foundations, charities, official institutions, insurers and other financial institutions, as well as individuals around the world.
Philosophy on corporate governance
BlackRock Investment Stewardship (BIS) activities are focused on maximizing long-term value for our clients. BIS does this through engagement with boards and management of investee companies and, for those clients who have given us authority, through voting at shareholder meetings.
We believe that there are certain fundamental rights attached to shareholding. Companies and their boards should be accountable to shareholders and structured with appropriate checks and balances to ensure that they operate in shareholders best interests. Effective voting rights are central to the rights of ownership and there should be one vote for one share. Shareholders should have the right to elect, remove and nominate directors, approve the appointment of the auditor and to amend the corporate charter or by-laws. Shareholders should be able to vote on matters that are material to the protection of their investment, including but not limited to, changes to the purpose of the business, dilution levels and pre-emptive rights, and the distribution of income and capital structure. In order to make informed decisions, we believe that shareholders have the right to sufficient and timely information.
Our primary focus is on the performance of the board of directors. As the agent of shareholders, the board should set the companys strategic aims within a framework of prudent and effective controls, which enables risk to be assessed and managed. The board should provide direction and leadership to management and oversee managements performance. Our starting position is to be supportive of boards in their oversight efforts on shareholders behalf and we would generally expect to support the items of business they put to a vote at shareholder meetings. Votes cast against or withheld from resolutions proposed by the board are a signal that we are concerned that the directors or management have either not acted in the best interests of shareholders or have not responded adequately to shareholder concerns. We assess voting matters on a case-by-case basis and in light of each companys unique circumstances taking into consideration regional best practices and long-term value creation.
These principles set out our approach to engaging with companies, provide guidance on our position on corporate governance and outline how our views might be reflected in our voting decisions. Corporate governance practices can vary internationally, so our expectations in relation to individual companies are based on the legal and regulatory framework of each local market. However, we believe there are overarching principles of corporate governance that apply globally and provide a framework for more detailed, market-specific assessments.
We believe BlackRock has a responsibility in relation to monitoring and providing feedback to companies, sometimes known as stewardship. These ownership responsibilities include engaging with management or board members on corporate governance matters, voting proxies in the best long-term economic interests of our clients, and engaging with regulatory bodies to ensure a sound policy framework consistent with promoting long-term shareholder value creation. We also believe in the responsibility to our clients to have appropriate resources and oversight structures. Our approach is set out in the section below titled BlackRocks oversight of its investment stewardship activities and is further detailed in a team profile on our website.
Corporate governance, engagement and voting
We recognize that accepted standards of corporate governance differ between markets, but we believe there are sufficient common threads globally to identify an overarching set of principles. The objective of our investment stewardship activities is the protection and enhancement of the value of our clients investments in public corporations. Thus, these principles focus on practices and structures that we consider to be supportive of long-term value creation. We discuss below the principles under six key themes. In our regional and market-specific voting guidelines we explain how these principles inform our voting decisions in relation to specific resolutions that may appear on the agenda of a shareholder meeting in the relevant market.
The six key themes are:
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Boards and directors |
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Auditors and audit-related issues |
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Capital structure, mergers, asset sales and other special transactions |
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Compensation and benefits |
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Environmental and social issues |
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General corporate governance matters and shareholder protections |
At a minimum, we expect companies to observe the accepted corporate governance standards in their domestic market or to explain why doing so is not in the interests of shareholders. Where company reporting and disclosure is inadequate or the approach taken is inconsistent with our view of what is in the best interests of shareholders, we will engage with the company and/or use our vote to encourage a change in practice. In making voting decisions, we perform independent research and analysis, such as reviewing relevant information published by the company and apply our voting guidelines to achieve the outcome we believe best protects our clients long-term economic interests. We also work closely with our active portfolio managers, and may take into account internal and external research.
BlackRock views engagement as an important activity; engagement provides us with the opportunity to improve our understanding of the challenges and opportunities that investee companies are facing and their governance structures. Engagement also allows us to share our philosophy and approach to investment and corporate governance with companies to enhance their understanding of our objectives. Our engagements often focus on providing our feedback on company disclosures, particularly where we believe they could be enhanced. There are a range of approaches we may take in engaging companies depending on the nature of the issue under consideration, the company and the market.
BlackRocks engagements emphasize direct dialogue with corporate leadership on the governance issues identified in these principles that have a material impact on financial performance. These engagements enable us to cast informed votes aligned with clients long-term economic interests. We generally prefer to engage in the first instance where we have concerns and give management time to address or resolve the issue. As a long-term investor, we are patient and persistent in working with our portfolio companies to have an open dialogue and develop mutual understanding of governance matters, to promote the adoption of best practices and to assess the merits of a companys approach to its governance. We monitor the companies in which we invest and engage with them constructively and privately where we believe doing so helps protect shareholders interests. We do not try to micro-manage companies, or tell management and boards what to do. We present our views as a long-term shareholder and listen to companies responses. The materiality and immediacy of a given issue will generally determine the level of our engagement and whom we seek to engage at the company, which could be management representatives or board directors.
The performance of the board is critical to the economic success of the company and to the protection of shareholders interests. Board members serve as agents of shareholders in overseeing the strategic direction and operation of the company. For this reason, BlackRock focuses on directors in many of our engagements and sees the election of directors as one of our most important responsibilities in the proxy voting context.
We expect the board of directors to promote and protect shareholder interests by:
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establishing an appropriate corporate governance structure |
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supporting and overseeing management in setting long-term strategic goals, applicable measures of value-creation and milestones that will demonstrate progress, and steps taken if any obstacles are anticipated or incurred |
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ensuring the integrity of financial statements |
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making independent decisions regarding mergers, acquisitions and disposals |
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establishing appropriate executive compensation structures |
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addressing business issues, including environmental and social issues, when they have the potential to materially impact company reputation and performance |
There should be clear definitions of the role of the board, the committees of the board and senior management such that the responsibilities of each are well understood and accepted. Companies should report publicly the approach taken to governance (including in relation to board structure) and why this approach is in the best interest of shareholders. We will seek to engage with the appropriate directors where we have concerns about the performance of the board or the company, the broad strategy of the company, or the performance of individual board members. We believe that when a company is not effectively addressing a material issue, its directors should be held accountable.
BlackRock believes that directors should stand for re-election on a regular basis. We assess directors nominated for election or re-election in the context of the composition of the board as a whole. There should be detailed disclosure of the relevant credentials of the individual directors in order for shareholders to assess the caliber of an individual nominee. We expect there to be a sufficient number of independent directors on the board to ensure the protection of the interests of all shareholders. Common impediments to independence may include but are not limited to:
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current or former employment at the company or a subsidiary within the past several years |
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being, or representing, a shareholder with a substantial shareholding in the company |
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interlocking directorships |
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having any other interest, business or other relationship which could, or could reasonably be perceived to, materially interfere with the directors ability to act in the best interests of the company |
BlackRock believes that the operation of the board is enhanced when there is a clearly independent, senior non-executive director to chair it or, where the chairman is also the CEO (or is otherwise not independent), an independent lead director. The role of this director is to enhance the effectiveness of the independent members of the board through shaping the agenda, ensuring adequate information is provided to the board and encouraging independent participation in board deliberations. The lead independent board director should be available to shareholders in those situations where a director is best placed to explain and justify a companys approach.
To ensure that the board remains effective, regular reviews of board performance should be carried out and assessments made of gaps in skills or experience amongst the members. BlackRock believes it is beneficial for new directors to be brought onto the board periodically to refresh the groups thinking and to ensure both continuity and adequate succession planning. In identifying potential candidates, boards should take into consideration the multiple dimensions of diversity, including personal factors such as gender, ethnicity, and age; as well as professional characteristics, such as a directors industry, area of expertise, and geographic location. The board should review these dimensions of the current directors and
how they might be augmented by incoming directors. We believe that directors are in the best position to assess the optimal size for the board, but we would be concerned if a board seemed too small to have an appropriate balance of directors or too large to be effective.
There are matters for which the board has responsibility that may involve a conflict of interest for executives or for affiliated directors. BlackRock believes that shareholders interests are best served when the board forms committees of fully independent directors to deal with such matters. In many markets, these committees of the board specialize in audit, director nominations and compensation matters. An ad hoc committee might also be formed to decide on a special transaction, particularly one with a related party or to investigate a significant adverse event.
Auditors and audit-related issues
Comprehensive disclosure provides investors with a sense of the companys long-term operational risk management practices and, more broadly, the quality of the boards oversight. In the absence of robust disclosures, we may reasonably conclude that companies are not adequately managing risk.
BlackRock recognizes the critical importance of financial statements, which should provide a true and fair picture of a companys financial condition. We will hold the members of the audit committee or equivalent responsible for overseeing the management of the audit function. We take particular note of cases involving significant financial restatements or ad hoc notifications of material financial weakness.
The integrity of financial statements depends on the auditor being free of any impediments to being an effective check on management. To that end, we believe it is important that auditors are, and are seen to be, independent. Where the audit firm provides services to the company in addition to the audit, the fees earned should be disclosed and explained. Audit committees should have in place a procedure for assessing annually the independence of the auditor.
Capital structure, mergers, asset sales and other special transactions
The capital structure of a company is critical to its owners, the shareholders, as it impacts the value of their investment and the priority of their interest in the company relative to that of other equity or debt investors. Pre-emptive rights are a key protection for shareholders against the dilution of their interests.
Effective voting rights are central to the rights of ownership and we believe strongly in one vote for one share as a guiding principle that supports good corporate governance. Shareholders, as the residual claimants, have the strongest interest in protecting company value, and voting power should match economic exposure.
We are concerned that the creation of a dual share class may result in an over-concentration of power in the hands of a few shareholders, thus disenfranchising other shareholders and amplifying the potential conflict of interest, which the one share, one vote principle is designed to mitigate. However, we recognize that in certain circumstances, companies may have a valid argument for dual-class listings, at least for a limited period of time. We believe that such companies should review these dual-class structures on a regular basis or as company circumstances change. Additionally, they should receive shareholder approval of their capital structure on a periodic basis via a management proposal in the companys proxy. The proposal should give unaffiliated shareholders the opportunity to affirm the current structure or establish mechanisms to end or phase out controlling structures at the appropriate time, while minimizing costs to shareholders.
In assessing mergers, asset sales or other special transactions, BlackRocks primary consideration is the long-term economic interests of shareholders. Boards proposing a transaction need to clearly explain the economic and strategic rationale behind it. We will review a proposed transaction to determine the degree to which it enhances long-term shareholder value. We would prefer that proposed transactions have the unanimous support of the board and have been negotiated at arms length. We may seek reassurance from the board that executives and/or board members financial interests in a given transaction have not adversely affected their ability to place shareholders interests before their own. Where the transaction involves related parties, we would expect the recommendation to support it to come from the independent directors and it is good practice to be approved by a separate vote of the non-conflicted shareholders.
BlackRock believes that shareholders have a right to dispose of company shares in the open market without unnecessary restriction. In our view, corporate mechanisms designed to limit shareholders ability to sell their shares are contrary to
basic property rights. Such mechanisms can serve to protect and entrench interests other than those of the shareholders. We believe that shareholders are broadly capable of making decisions in their own best interests. We expect any so-called shareholder rights plans proposed by a board to be subject to shareholder approval upon introduction and periodically thereafter for continuation.
BlackRock expects a companys board of directors to put in place a compensation structure that incentivizes and rewards executives appropriately and is aligned with shareholder interests, particularly generating sustainable long-term shareholder returns. We would expect the compensation committee to take into account the specific circumstances of the company and the key individuals the board is trying to incentivize. We encourage companies to ensure that their compensation plans incorporate appropriate and challenging performance conditions consistent with corporate strategy and market practice. We use third party research, in addition to our own analysis, to evaluate existing and proposed compensation structures. We hold members of the compensation committee or equivalent board members accountable for poor compensation practices or structures.
BlackRock believes that there should be a clear link between variable pay and company performance that drives shareholder returns. We are not supportive of one-off or special bonuses unrelated to company or individual performance. We acknowledge that the use of peer group evaluation by compensation committees can help ensure competitive pay; however, we are concerned when increases in total compensation at a company are justified solely on peer benchmarking rather than outperformance. We support incentive plans that foster the sustainable achievement of results relative to competitors. The vesting timeframes associated with incentive plans should facilitate a focus on long-term value creation. We believe consideration should be given to building claw back provisions into incentive plans such that executives would be required to forgo rewards when they are not justified by actual performance. Compensation committees should guard against contractual arrangements that would entitle executives to material compensation for early termination of their contract. Finally, pension contributions and other deferred compensation arrangements should be reasonable in light of market practice.
Non-executive directors should be compensated in a manner that is commensurate with the time and effort expended in fulfilling their professional responsibilities. Additionally, these compensation arrangements should not risk compromising their independence or aligning their interests too closely with those of the management, whom they are charged with overseeing.
Environmental and social issues
Our fiduciary duty to clients is to protect and enhance their economic interest in the companies in which we invest on their behalf. It is within this context that we undertake our corporate governance activities. We believe that well-managed companies will deal effectively with the material environmental and social (E&S) factors relevant to their businesses. Robust disclosure is essential for investors to effectively gauge companies business practices and planning related to E&S risks and opportunities.
BlackRock expects companies to issue reports aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and the standards put forward by the Sustainability Accounting Standards Board (SASB). We view the SASB and TCFD frameworks as complementary in achieving the goal of disclosing more financially material information, particularly as it relates to industry-specific metrics and target setting. TCFDs recommendations provide an overarching framework for disclosure on the business implications of climate change, and potentially other E&S factors. We find SASBs industry-specific guidance (as identified in its materiality map) beneficial in helping companies identify and discuss their governance, risk assessments, and performance against these key performance indicators (KPIs). Any global standards adopted, peer group benchmarking undertaken, and verification processes in place should also be disclosed and discussed in this context.
BlackRock has been engaging with companies for several years on disclosure of material E&S factors. Given the increased understanding of sustainability risks and opportunities, and the need for better information to assess them, we specifically ask companies to:
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publish a disclosure in line with industry-specific SASB guidelines by year-end, if they have not already done so, or disclose a similar set of data in a way that is relevant to their particular business; and |
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disclose climate-related risks in line with the TCFDs recommendations, if they have not already done so. This should include the companys plan for operating under a scenario where the Paris Agreements goal of limiting global warming to less than two degrees is fully realized, as expressed by the TCFD guidelines. |
See our commentary on our approach to engagement on TCFD and SASB aligned reporting for greater detail of our expectations.
We will use these disclosures and our engagements to ascertain whether companies are properly managing and overseeing these risks within their business and adequately planning for the future. In the absence of robust disclosures, investors, including BlackRock, will increasingly conclude that companies are not adequately managing risk.
We believe that when a company is not effectively addressing a material issue, its directors should be held accountable. We will generally engage directly with the board or management of a company when we identify issues. We may vote against the election of directors where we have concerns that a company might not be dealing with E&S factors appropriately. Sometimes we may reflect such concerns by supporting a shareholder proposal on the issue, where there seems to be either a significant potential threat or realized harm to shareholders interests caused by poor management of material E&S factors.
In deciding our course of action, we will assess the companys disclosures and the nature of our engagement with the company on the issue over time, including whether:
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The company has already taken sufficient steps to address the concern |
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The company is in the process of actively implementing a response |
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There is a clear and material economic disadvantage to the company in the near-term if the issue is not addressed in the manner requested by the shareholder proposal |
We do not see it as our role to make social or political judgments on behalf of clients. Our consideration of these E&S factors is consistent with protecting the long-term economic interest of our clients assets. We expect investee companies to comply, at a minimum, with the laws and regulations of the jurisdictions in which they operate. They should explain how they manage situations where local laws or regulations that significantly impact the companys operations are contradictory or ambiguous to global norms.
Climate risk
Within the framework laid out above, as well as our guidance on How BlackRock Investment Stewardship engages on climate risk, we believe that climate presents significant investment risks and opportunities that may impact the long-term financial sustainability of companies. We believe that the reporting frameworks developed by TCFD and SASB provide useful guidance to companies on identifying, managing, and reporting on climate-related risks and opportunities.
We expect companies to help their investors understand how the company may be impacted by climate risk, in the context of its ability to realize a long-term strategy and generate value over time. We expect companies to convey their governance around this issue through their corporate disclosures aligned with TCFD and SASB. For companies in sectors that are significantly exposed to climate-related risk, we expect the whole board to have demonstrable fluency in how climate risk affects the business and how management approaches assessing, adapting to, and mitigating that risk.
Where a company receives a shareholder proposal related to climate risk, in addition to the factors laid out above, our assessment will take into account the robustness of the companys existing disclosures as well as our understanding of its management of the issues as revealed through our engagements with the company and board members over time. In certain instances, we may disagree with the details of a climate-related shareholder proposal but agree that the company in question has not made sufficient progress on climate-related disclosures. In these instances, we may not support the proposal, but may vote against the election of relevant directors.
General corporate governance matters and shareholder protections
BlackRock believes that shareholders have a right to timely and detailed information on the financial performance and viability of the companies in which they invest. In addition, companies should also publish information on the governance structures in place and the rights of shareholders to influence these. The reporting and disclosure provided by companies help shareholders assess whether their economic interests have been protected and the quality of the boards oversight of management. We believe shareholders should have the right to vote on key corporate governance matters, including changes to governance mechanisms, to submit proposals to the shareholders meeting and to call special meetings of shareholders.
BlackRocks oversight of its investment
stewardship activities
Oversight
We hold ourselves to a very high standard in our investment stewardship activities, including proxy voting. This function is executed by a team called BlackRock Investment Stewardship (BIS) which is comprised of BlackRock employees who do not have other responsibilities other than their roles in BIS. BIS is considered an investment function. The team does not have sales responsibilities.
BlackRock maintains three regional advisory committees (Stewardship Advisory Committees) for (a) the Americas; (b) Europe, the Middle East and Africa (EMEA); and (c) Asia-Pacific, generally consisting of senior BlackRock investment professionals and/or senior employees with practical boardroom experience. The regional Stewardship Advisory Committees review and advise on amendments to the proxy voting guidelines covering markets within each respective region (Guidelines).
In addition to the regional Stewardship Advisory Committees, the Investment Stewardship Global Oversight Committee (Global Committee) is a risk-focused committee, comprised of senior representatives from various BlackRock investment teams, BlackRocks Deputy General Counsel, the Global Head of Investment Stewardship (Global Head), and other senior executives with relevant experience and team oversight.
The Global Head has primary oversight of the activities of BIS, including voting in accordance with the Guidelines, which require the application of professional judgment and consideration of each companys unique circumstances. The Global Committee reviews and approves amendments to these Global Corporate Governance & Engagement Principles. The Global Committee also reviews and approves amendments to the regional Guidelines, as proposed by the regional Stewardship Advisory Committees.
In addition, the Global Committee receives and reviews periodic reports regarding the votes cast by BIS, as well as regular updates on material process issues, procedural changes and other risk oversight considerations. The Global Committee reviews these reports in an oversight capacity as informed by the BIS corporate governance engagement program and Guidelines.
BIS carries out engagement with companies, monitors and executes proxy votes, and conducts vote operations (including maintaining records of votes cast) in a manner consistent with the relevant Guidelines. BIS also conducts research on corporate governance issues and participates in industry discussions to keep abreast of important developments in the corporate governance field. BIS may utilize third parties for certain of the foregoing activities and performs oversight of those third parties. BIS may raise complicated or particularly controversial matters for internal discussion with the relevant investment teams and/or refer such matters to the appropriate regional Stewardship Advisory Committees for review, discussion and guidance prior to making a voting decision.
We carefully consider proxies submitted to funds and other fiduciary account(s) (Fund or Funds) for which we have voting authority. BlackRock votes (or refrains from voting) proxies for each Fund for which we have voting authority based on our evaluation of the best long-term economic interests of shareholders, in the exercise of our independent business judgment, and without regard to the relationship of the issuer of the proxy (or any shareholder proponent or dissident shareholder) to the Fund, the Funds affiliates (if any), BlackRock or BlackRocks affiliates, or BlackRock employees (see Conflicts management policies and procedures, below).
When exercising voting rights, BlackRock will normally vote on specific proxy issues in accordance with the Guidelines for the relevant market. The Guidelines are reviewed regularly and are amended consistent with changes in the local market practice, as developments in corporate governance occur, or as otherwise deemed advisable by BlackRocks Stewardship Advisory Committees. BIS may, in the exercise of their professional judgment, conclude that the Guidelines do not cover the specific matter upon which a proxy vote is required or that an exception to the Guidelines would be in the best long-term economic interests of BlackRocks clients.
In the uncommon circumstance of there being a vote with respect to fixed income securities or the securities of privately held issuers, the decision generally will be made by a Funds portfolio managers and/or BIS based on their assessment of the particular transactions or other matters at issue.
In certain markets, proxy voting involves logistical issues which can affect BlackRocks ability to vote such proxies, as well as the desirability of voting such proxies. These issues include but are not limited to: (i) untimely notice of shareholder meetings; (ii) restrictions on a foreigners ability to exercise votes; (iii) requirements to vote proxies in person; (iv) share-blocking (requirements that investors who exercise their voting rights surrender the right to dispose of their holdings for some specified period in proximity to the shareholder meeting); (v) potential difficulties in translating the proxy; (vi) regulatory constraints; and (vii) requirements to provide local agents with unrestricted powers of attorney to facilitate voting instructions. We are not supportive of impediments to the exercise of voting rights such as shareblocking or overly burdensome administrative requirements.
As a consequence, BlackRock votes proxies on a best-efforts basis. In addition, BIS may determine that it is generally in the best interests of BlackRocks clients not to vote proxies if the costs (including but not limited to opportunity costs associated with shareblocking constraints) associated with exercising a vote are expected to outweigh the benefit the client would derive by voting on the proposal.
Portfolio managers have full discretion to vote the shares in the Funds they manage based on their analysis of the economic impact of a particular ballot item. Portfolio managers may from time to time reach differing views on how best to maximize economic value with respect to a particular investment. Therefore, portfolio managers may, and sometimes do, vote shares in the Funds under their management differently from one another. However, because BlackRocks clients are mostly long-term investors with long-term economic goals, ballots are frequently cast in a uniform manner.
Conflicts management policies and procedures
BIS maintains the following policies and procedures that seek to prevent undue influence on BlackRocks proxy voting activity. Such influence might stem from any relationship between the investee company (or any shareholder proponent or dissident shareholder) and BlackRock, BlackRocks affiliates, a Fund or a Funds affiliates, or BlackRock employees. The following are examples of sources of perceived or potential conflicts of interest:
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BlackRock clients who may be issuers of securities or proponents of shareholder resolutions |
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BlackRock business partners or third parties who may be issuers of securities or proponents of shareholder resolutions |
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BlackRock employees who may sit on the boards of public companies held in Funds managed by BlackRock |
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Significant BlackRock, Inc. investors who may be issuers of securities held in Funds managed by BlackRock |
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Securities of BlackRock, Inc. or BlackRock investment funds held in Funds managed by BlackRock |
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BlackRock, Inc. board members who serve as senior executives of public companies held in Funds managed by BlackRock |
BlackRock has taken certain steps to mitigate perceived or potential conflicts including, but not limited to, the following:
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Adopted the Guidelines which are designed to protect and enhance the economic value of the companies in which BlackRock invests on behalf of clients. |
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Established a reporting structure that separates BIS from employees with sales, vendor management or business partnership roles. In addition, BlackRock seeks to ensure that all engagements with corporate issuers, dissident shareholders or shareholder proponents are managed consistently and without regard to BlackRocks relationship with such parties. Clients or business partners are not given special treatment or differentiated access to BIS. BIS prioritizes engagements based on factors including but not limited to our need for additional information to make a voting decision or our view on the likelihood that an engagement could lead to positive outcome(s) over time for the economic value of the company. Within the normal course of business, BIS may engage directly with BlackRock clients, business partners and/or third parties, and/or with employees with sales, vendor management or business partnership roles, in discussions regarding our approach to stewardship, general corporate governance matters, client reporting needs, and/or to otherwise ensure that proxy-related client service levels are met. |
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Determined to engage, in certain instances, an independent fiduciary to vote proxies as a further safeguard to avoid potential conflicts of interest, to satisfy regulatory compliance requirements, or as may be otherwise required by applicable law. In such circumstances, the independent fiduciary provides BlackRocks proxy voting agent with instructions, in accordance with the Guidelines, as to how to vote such proxies, and BlackRocks proxy voting agent votes the proxy in accordance with the independent fiduciarys determination. BlackRock uses an independent fiduciary to vote proxies of (i) any company that is affiliated with BlackRock, Inc., (ii) any public company that includes BlackRock employees on its board of directors, (iii) The PNC Financial Services Group, Inc., (iv) any public company of which a BlackRock, Inc. board member serves as a senior executive, and (v) companies when legal or regulatory requirements compel BlackRock to use an independent fiduciary. In selecting an independent fiduciary, we assess several characteristics, including but not limited to: independence, an ability to analyze proxy issues and vote in the best economic interest of our clients, reputation for reliability and integrity, and operational capacity to accurately deliver the assigned votes in a timely manner. We may engage more than one independent fiduciary, in part in order to mitigate potential or perceived conflicts of interest at an independent fiduciary. The Global Committee appoints and reviews the performance of the independent fiduciar(ies), generally on an annual basis. |
When so authorized, BlackRock acts as a securities lending agent on behalf of Funds. With regard to the relationship between securities lending and proxy voting, BlackRocks approach is driven by our clients economic interests. The decision whether to recall securities on loan to vote is based on a formal analysis of the revenue producing value to clients of loans, against the assessed economic value of casting votes. Generally, we expect that the likely economic value to clients of casting votes would be less than the securities lending income, either because, in our assessment, the resolutions being voted on will not have significant economic consequences or because the outcome would not be affected by BlackRock recalling loaned securities in order to vote. BlackRock also may, in our discretion, determine that the value of voting outweighs the cost of recalling shares, and thus recall shares to vote in that instance.
Periodically, BlackRock reviews our process for determining whether to recall securities on loan in order to vote and may modify it as necessary.
The issue-specific Guidelines published for each region/country in which we vote are intended to summarize BlackRocks general philosophy and approach to issues that may commonly arise in the proxy voting context in each market where we invest. These Guidelines are not intended to be exhaustive. BIS applies the Guidelines on a case-by-case basis, in the context of the individual circumstances of each company and the specific issue under review. As such, these Guidelines do not indicate how BIS will vote in every instance. Rather, they share our view about corporate governance issues generally, and provide insight into how we typically approach issues that commonly arise on corporate ballots.
Reporting and vote transparency
We inform clients about our engagement and voting policies and activities through direct communication and through disclosure on our website. Each year we publish an annual report, an annual engagement and voting statistics report, and our full voting record to our website. On a quarterly basis, we publish regional reports which provide an overview of our investment stewardship engagement and voting activities during the quarter, including market developments, speaking engagements, and engagement and voting statistics. Additionally, we make public our market-specific voting guidelines for the benefit of clients and companies with whom we engage.
This document is provided for information purposes only and must not be relied upon as a forecast, research, or investment advice. BlackRock is not making any recommendation or soliciting any action based upon the information contained herein and nothing in this document should be construed as constituting an offer to sell, or a solicitation of any offer to buy, securities in any jurisdiction to any person. This information provided herein does not constitute financial, tax, legal or accounting advice, you should consult your own advisers on such matters.
The information and opinions contained in this document are as of January 2020 unless it is stated otherwise and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Although such information is believed to be reliable for the purposes used herein, BlackRock does not assume any responsibility for the accuracy or completeness of such information. Reliance upon information in this material is at the sole discretion of the reader. Certain information contained herein represents or is based upon forward-looking statements or information. BlackRock and its affiliates believe that such statements and information are based upon reasonable estimates and assumptions. However, forward-looking statements are inherently uncertain, and factors may cause events or results to differ from those projected. Therefore, undue reliance should not be placed on such forward-looking statements and information.
Prepared by BlackRock, Inc.
©2020 BlackRock, Inc. All rights reserved.
BlackRock
Investment
Stewardship
Corporate governance and proxy voting
guidelines for U.S. securities
January 2020
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If you would like additional information, please contact:
ContactStewardship@blackrock.com
BLACKROCK
These guidelines should be read in conjunction with the BlackRock Investment Stewardship Global Corporate Governance Guidelines & Engagement Principles.
BlackRock, Inc. and its subsidiaries (collectively, BlackRock) seek to make proxy voting decisions in the manner most likely to protect and enhance the economic value of the securities held in client accounts. The following issue-specific proxy voting guidelines (the Guidelines) are intended to summarize BlackRock Investment Stewardships general philosophy and approach to corporate governance issues that most commonly arise in proxy voting for U.S. securities. These Guidelines are not intended to limit the analysis of individual issues at specific companies and are not intended to provide a guide to how BlackRock will vote in every instance. Rather, they share our view about corporate governance issues generally, and provide insight into how we typically approach issues that commonly arise on corporate ballots, as well as our expectations of boards of directors. They are applied with discretion, taking into consideration the range of issues and facts specific to the company and the individual ballot item.
These guidelines are divided into eight key themes which group together the issues that frequently appear on the agenda of annual and extraordinary meetings of shareholders:
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Boards and directors |
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Auditors and audit-related issues |
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Capital structure |
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Mergers, asset sales, and other special transactions |
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Executive compensation |
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Environmental and social issues |
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General corporate governance matters |
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Shareholder protections |
Director elections
In general, BlackRock supports the election of directors as recommended by the board in uncontested elections. However, we believe that when a company is not effectively addressing a material issue, its directors should be held accountable. We may withhold votes from directors or members of particular board committees in certain situations, as indicated below.
Independence
We expect a majority of the directors on the board to be independent. In addition, all members of key committees, including audit, compensation, and nominating / governance committees, should be independent. Our view of independence may vary slightly from listing standards.
In particular, common impediments to independence in the U.S. may include:
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Employment as a senior executive by the company or a subsidiary within the past five years |
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An equity ownership in the company in excess of 20% |
BLACKROCK | Corporate governance and proxy voting guidelines for U.S. securities | 3 |
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Having any other interest, business, or relationship which could, or could reasonably be perceived to, materially interfere with the directors ability to act in the best interests of the company |
We may vote against directors serving on key committees that we do not consider to be independent.
When evaluating controlled companies, as defined by the U.S. stock exchanges, we will only vote against insiders or affiliates who sit on the audit committee, but not other key committees.
Oversight
We expect the board to exercise appropriate oversight over management and business activities of the company. We will consider voting against committee members and / or individual directors in the following circumstances:
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Where the board has failed to exercise oversight with regard to accounting practices or audit oversight, we will consider voting against the current audit committee, and any other members of the board who may be responsible. For example, this may apply to members of the audit committee during a period when the board failed to facilitate quality, independent auditing if substantial accounting irregularities suggest insufficient oversight by that committee |
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Members of the compensation committee during a period in which executive compensation appears excessive relative to performance and peers, and where we believe the compensation committee has not already substantially addressed this issue |
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The chair of the nominating / governance committee, or where no chair exists, the nominating / governance committee member with the longest tenure, where the board is not comprised of a majority of independent directors. However, this would not apply in the case of a controlled company |
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Where it appears the director has acted (at the company or at other companies) in a manner that compromises his / her reliability to represent the best long-term economic interests of shareholders |
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Where a director has a pattern of poor attendance at combined board and applicable key committee meetings. Excluding exigent circumstances, BlackRock generally considers attendance at less than 75% of the combined board and applicable key committee meetings by a board member to be poor attendance |
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Where a director serves on an excess number of boards, which may limit his / her capacity to focus on each boards requirements. The following illustrates the maximum number of boards on which a director may serve, before he / she is considered to be over-committed: |
Public Company CEO
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# Outside Public Boards*
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Total # of Public Boards
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Director A
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✓
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1
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2
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Director B
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3
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4
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*In addition to the company under review |
Responsiveness to shareholders
We expect a board to be engaged and responsive to its shareholders. Where we believe a board has not substantially addressed shareholder concerns, we may vote against the appropriate committees and / or individual directors. The following illustrates common circumstances:
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The independent chair or lead independent director, members of the nominating / governance committee, and / or the longest tenured director(s), where we observe a lack of board responsiveness to shareholders, evidence of board entrenchment, and / or failure to promote adequate board succession planning |
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The chair of the nominating / governance committee, or where no chair exists, the nominating / governance committee member with the longest tenure, where board member(s) at the most recent election of directors have |
BLACKROCK | Corporate governance and proxy voting guidelines for U.S. securities | 4 |
received withhold votes from more than 30% of shares voted and the board has not taken appropriate action to respond to shareholder concerns. This may not apply in cases where BlackRock did not support the initial withhold vote |
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The independent chair or lead independent director and / or members of the nominating / governance committee, where a board fails to implement shareholder proposals that receive a majority of votes cast at a prior shareholder meeting, and the proposals, in our view, have a direct and substantial impact on shareholders fundamental rights or long-term economic interests |
Shareholder rights
We expect a board to act with integrity and to uphold governance best practices. Where we believe a board has not acted in the best interests of its shareholders, we may vote against the appropriate committees and / or individual directors. The following illustrates common circumstances:
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The independent chair or lead independent director and members of the governance committee, where a board implements or renews a poison pill without shareholder approval |
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The independent chair or lead independent director and members of the governance committee, where a board amends the charter / articles / bylaws such that the effect may be to entrench directors or to significantly reduce shareholder rights |
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Members of the compensation committee where the company has repriced options without shareholder approval |
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If a board maintains a classified structure, it is possible that the director(s) with whom we have a particular concern may not be subject to election in the year that the concern arises. In such situations, if we have a concern regarding a committee or committee chair that is not up for re-election, we will generally register our concern by withholding votes from all available members of the relevant committee |
Board composition and effectiveness
We encourage boards to periodically renew their membership to ensure relevant skills and experience within the boardroom. To this end, regular performance reviews and skills assessments should be conducted by the nominating / governance committee.
Furthermore, we expect boards to be comprised of a diverse selection of individuals who bring their personal and professional experiences to bear in order to create a constructive debate of competing views and opinions in the boardroom. We recognize that diversity has multiple dimensions. In identifying potential candidates, boards should take into consideration the full breadth of diversity including personal factors, such as gender, ethnicity, and age; as well as professional characteristics, such as a directors industry, area of expertise, and geographic location. In addition to other elements of diversity, we encourage companies to have at least two women directors on their board. Our publicly available commentary explains our approach to engaging on board diversity.
We encourage boards to disclose their views on:
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The mix of competencies, experience, and other qualities required to effectively oversee and guide management in light of the stated long-term strategy of the company |
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The process by which candidates are identified and selected, including whether professional firms or other sources outside of incumbent directors networks have been engaged to identify and / or assess candidates |
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The process by which boards evaluate themselves and any significant outcomes of the evaluation process, without divulging inappropriate and / or sensitive details |
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The consideration given to board diversity, including, but not limited to, gender, ethnicity, race, age, experience, geographic location, skills, and perspective in the nomination process |
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While we support regular board refreshment, we are not opposed in principle to long-tenured directors, nor do we believe that long board tenure is necessarily an impediment to director independence. A variety of director tenures within the boardroom can be beneficial to ensure board quality and continuity of experience.
Our primary concern is that board members are able to contribute effectively as corporate strategy evolves and business conditions change, and that all directors, regardless of tenure, demonstrate appropriate responsiveness to shareholders. We acknowledge that no single person can be expected to bring all relevant skill sets to a board; at the same time, we generally do not believe it is necessary or appropriate to have any particular director on the board solely by virtue of a singular background or specific area of expertise.
Where boards find that age limits or term limits are the most efficient and objective mechanism for ensuring periodic board refreshment, we generally defer to the boards determination in setting such limits.
To the extent that we believe that a company has not adequately accounted for diversity in its board composition within a reasonable timeframe, we may vote against the nominating / governance committee for an apparent lack of commitment to board effectiveness.
Board size
We typically defer to the board in setting the appropriate size and believe directors are generally in the best position to assess the optimal board size to ensure effectiveness. However, we may oppose boards that appear too small to allow for effective shareholder representation or too large to function efficiently.
CEO and management succession planning
There should be a robust CEO and senior management succession plan in place at the board level that is reviewed and updated on a regular basis. We expect succession planning to cover both long-term planning consistent with the strategic direction of the company and identified leadership needs over time, as well as short-term planning in the event of an unanticipated executive departure. We encourage the company to explain its executive succession planning process, including where accountability lies within the boardroom for this task, without prematurely divulging sensitive information commonly associated with this exercise.
Classified board of directors / staggered terms
We believe that directors should be re-elected annually and that classification of the board generally limits shareholders rights to regularly evaluate a boards performance and select directors. While we will typically support proposals requesting board de-classification, we may make exceptions, should the board articulate an appropriate strategic rationale for a classified board structure, such as when a company needs consistency and stability during a time of transition, e.g. newly public companies or companies undergoing a strategic restructuring. A classified board structure may also be justified at non-operating companies, e.g. closed-end funds or business development companies (BDC)1, in certain circumstances. We would, however, expect boards with a classified structure to periodically review the rationale for such structure and consider when annual elections might be appropriate.
Without a voting mechanism to immediately address concerns of a specific director, we may choose to vote against or withhold votes from the available slate of directors by default (see Shareholder rights for additional detail).
Contested director elections
The details of contested elections, or proxy contests, are assessed on a case-by-case basis. We evaluate a number of factors, which may include: the qualifications of the dissident and management candidates; the validity of the concerns identified by the dissident; the viability of both the dissidents and managements plans; the likelihood that the dissidents
1A business development company (BDC) is a special investment vehicle under the Investment Company Act of 1940 that is designed to facilitate capital formation for small and middle-market companies.
BLACKROCK | Corporate governance and proxy voting guidelines for U.S. securities | 6 |
solutions will produce the desired change; and whether the dissident represents the best option for enhancing long-term shareholder value.
Cumulative voting
We believe that a majority vote standard is in the best long-term interest of shareholders. It ensures director accountability via the requirement to be elected by more than half of the votes cast. As such, we will generally oppose proposals requesting the adoption of cumulative voting, which may disproportionately aggregate votes on certain issues or director candidates.
Director compensation and equity programs
We believe that compensation for directors should be structured to attract and retain the best possible directors, while also aligning their interests with those of shareholders. We believe director compensation packages that are based on the companys long-term value creation and include some form of long-term equity compensation are more likely to meet this goal. In addition, we expect directors to build meaningful share ownership over time.
Majority vote requirements
BlackRock believes that directors should generally be elected by a majority of the shares voted and will normally support proposals seeking to introduce bylaws requiring a majority vote standard for director elections. Majority voting standards assist in ensuring that directors who are not broadly supported by shareholders are not elected to serve as their representatives. Some companies with a plurality voting standard have adopted a resignation policy for directors who do not receive support from at least a majority of votes cast. Where we believe that the company already has a sufficiently robust majority voting process in place, we may not support a shareholder proposal seeking an alternative mechanism.
Risk oversight
Companies should have an established process for identifying, monitoring, and managing key risks. Independent directors should have ready access to relevant management information and outside advice, as appropriate, to ensure they can properly oversee risk management. We encourage companies to provide transparency around risk measurement, mitigation, and reporting to the board. We are particularly interested in understanding how risk oversight processes evolve in response to changes in corporate strategy and / or shifts in the business and related risk environment. Comprehensive disclosure provides investors with a sense of the companys long-term operational risk management practices and, more broadly, the quality of the boards oversight. In the absence of robust disclosures, we may reasonably conclude that companies are not adequately managing risk.
Separation of chairman and CEO
We believe that independent leadership is important in the boardroom. In the U.S. there are two commonly accepted structures for independent board leadership: 1) an independent chairman; or 2) a lead independent director when the roles of chairman and CEO are combined.
In the absence of a significant governance concern, we defer to boards to designate the most appropriate leadership structure to ensure adequate balance and independence.
In the event that the board chooses a combined chair / CEO model, we generally support the designation of a lead independent director if they have the power to: 1) provide formal input into board meeting agendas; 2) call meetings of the independent directors; and 3) preside at meetings of independent directors. Furthermore, while we anticipate that most directors will be elected annually, we believe an element of continuity is important for this role for an extended period of time to provide appropriate leadership balance to the chair / CEO.
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The following table illustrates examples of responsibilities under each board leadership model:
Combined Chair / CEO Model | Separate Chair Model | |||||
Chair /CEO | Lead Director | Chair | ||||
Board Meetings |
Authority to call full meetings of the board of directors |
Attends full meetings of the board of directors
Authority to call meetings of independent directors
Briefs CEO on issues arising from executive sessions
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Authority to call full meetings of the board of directors | |||
Agenda |
Primary responsibility for shaping board agendas, consulting with the lead director
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Collaborates with chair / CEO to set board agenda and board information | Primary responsibility for shaping board agendas, in conjunction with CEO | |||
Board Communications |
Communicates with all directors on key issues and concerns outside of full board meetings |
Facilitates discussion among independent directors on key issues and concerns outside of full board meetings, including contributing to the oversight of CEO and management succession planning
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Facilitates discussion among independent directors on key issues and concerns outside of full board meetings, including contributing to the oversight of CEO and management succession planning
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Auditors and audit-related issues
BlackRock recognizes the critical importance of financial statements to provide a complete and accurate portrayal of a companys financial condition. Consistent with our approach to voting on boards of directors, we seek to hold the audit committee of the board responsible for overseeing the management of the audit function at a company, and may withhold votes from the audit committee members where the board has failed to facilitate quality, independent auditing. We look to the audit committee report for insight into the scope of the audit committee responsibilities, including an overview of audit committee processes, issues on the audit committee agenda, and key decisions taken by the audit committee. We take particular note of cases involving significant financial restatements or material weakness disclosures, and we expect timely disclosure and remediation of accounting irregularities.
The integrity of financial statements depends on the auditor effectively fulfilling its role. To that end, we favor an independent auditor. In addition, to the extent that an auditor fails to reasonably identify and address issues that eventually lead to a significant financial restatement, or the audit firm has violated standards of practice that protect the interests of shareholders, we may also vote against ratification.
From time to time, shareholder proposals may be presented to promote auditor independence or the rotation of audit firms. We may support these proposals when they are consistent with our views as described above.
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Equal voting rights
BlackRock believes that shareholders should be entitled to voting rights in proportion to their economic interests. We believe that companies that look to add or already have dual or multiple class share structures should review these structures on a regular basis or as company circumstances change. Companies should receive shareholder approval of their capital structure on a periodic basis via a management proposal on the companys proxy. The proposal should give unaffiliated shareholders the opportunity to affirm the current structure or establish mechanisms to end or phase out controlling structures at the appropriate time, while minimizing costs to shareholders.
Blank check preferred stock
We frequently oppose proposals requesting authorization of a class of preferred stock with unspecified voting, conversion, dividend distribution, and other rights (blank check preferred stock) because they may serve as a transfer of authority from shareholders to the board and as a possible entrenchment device. We generally view the boards discretion to establish voting rights on a when-issued basis as a potential anti-takeover device, as it affords the board the ability to place a block of stock with an investor sympathetic to management, thereby foiling a takeover bid without a shareholder vote.
Nonetheless, we may support the proposal where the company:
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Appears to have a legitimate financing motive for requesting blank check authority |
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Has committed publicly that blank check preferred shares will not be used for anti-takeover purposes |
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Has a history of using blank check preferred stock for financings |
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Has blank check preferred stock previously outstanding such that an increase would not necessarily provide further anti-takeover protection but may provide greater financing flexibility |
Increase in authorized common shares
BlackRock considers industry-specific norms in our analysis of these proposals, as well as a companys history with respect to the use of its common shares. Generally, we are predisposed to support a company if the board believes additional common shares are necessary to carry out the firms business. The most substantial concern we might have with an increase is the possibility of use of common shares to fund a poison pill plan that is not in the economic interests of shareholders.
Increase or issuance of preferred stock
We generally support proposals to increase or issue preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock where the terms of the preferred stock appear reasonable.
Stock splits
We generally support stock splits that are not likely to negatively affect the ability to trade shares or the economic value of a share. We generally support reverse stock splits that are designed to avoid delisting or to facilitate trading in the stock, where the reverse split will not have a negative impact on share value (e.g. one class is reduced while others remain at pre-split levels). In the event of a proposal for a reverse split that would not also proportionately reduce the companys authorized stock, we apply the same analysis we would use for a proposal to increase authorized stock.
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Mergers, asset sales, and other special transactions
BlackRocks primary concern is the best long-term economic interests of shareholders. While merger, asset sales, and other special transaction proposals vary widely in scope and substance, we closely examine certain salient features in our analyses, such as:
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The degree to which the proposed transaction represents a premium to the companys trading price. We consider the share price over multiple time periods prior to the date of the merger announcement. In most cases, business combinations should provide a premium. We may consider comparable transaction analyses provided by the parties financial advisors and our own valuation assessments. For companies facing insolvency or bankruptcy, a premium may not apply |
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There should be clear strategic, operational, and / or financial rationale for the combination |
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Unanimous board approval and arms-length negotiations are preferred. We will consider whether the transaction involves a dissenting board or does not appear to be the result of an arms-length bidding process. We may also consider whether executive and / or board members financial interests in a given transaction appear likely to affect their ability to place shareholders interests before their own |
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We prefer transaction proposals that include the fairness opinion of a reputable financial advisor assessing the value of the transaction to shareholders in comparison to recent similar transactions |
Poison pill plans
Where a poison pill is put to a shareholder vote by management, our policy is to examine these plans individually. Although we oppose most plans, we may support plans that include a reasonable qualifying offer clause. Such clauses typically require shareholder ratification of the pill and stipulate a sunset provision whereby the pill expires unless it is renewed. These clauses also tend to specify that an all cash bid for all shares that includes a fairness opinion and evidence of financing does not trigger the pill, but forces either a special meeting at which the offer is put to a shareholder vote, or the board to seek the written consent of shareholders where shareholders could rescind the pill at their discretion. We may also support a pill where it is the only effective method for protecting tax or other economic benefits that may be associated with limiting the ownership changes of individual shareholders.
We generally vote in favor of shareholder proposals to rescind poison pills.
Reimbursement of expenses for successful shareholder campaigns
We generally do not support shareholder proposals seeking the reimbursement of proxy contest expenses, even in situations where we support the shareholder campaign. We believe that introducing the possibility of such reimbursement may incentivize disruptive and unnecessary shareholder campaigns.
We note that there are both management and shareholder proposals related to executive compensation. We generally vote on these proposals as described below, except that we typically oppose shareholder proposals on issues where the company already has a reasonable policy in place that we believe is sufficient to address the issue. We may also oppose a shareholder proposal regarding executive compensation if the companys history suggests that the issue raised is not likely to present a problem for that company.
Advisory resolutions on executive compensation (Say on Pay)
In cases where there is a Say on Pay vote, BlackRock will respond to the proposal as informed by our evaluation of compensation practices at that particular company and in a manner that appropriately addresses the specific question
BLACKROCK | Corporate governance and proxy voting guidelines for U.S. securities | 10 |
posed to shareholders. In a commentary on our website, entitled BlackRock Investment Stewardships approach to executive compensation, we explain our beliefs and expectations related to executive compensation practices, our Say on Pay analysis framework, and our typical approach to engagement and voting on Say on Pay.
Advisory votes on the frequency of Say on Pay resolutions
BlackRock will generally support triennial pay frequency votes, but we defer to the board to determine the appropriate timeframe upon which pay should be reviewed. In evaluating pay, we believe that the compensation committee is responsible for constructing a plan that appropriately incentivizes executives for long-term value creation, utilizing relevant metrics and structure to ensure overall pay and performance alignment. In a similar vein, we defer to the board to establish the most appropriate timeframe for review of pay structure, absent a change in strategy that would suggest otherwise.
However, we may support an annual pay frequency vote in some situations, for example, where we conclude that a company has failed to align pay with performance. In these circumstances, we will also consider voting against the compensation committee members.
Claw back proposals
We generally favor recoupment from any senior executive whose compensation was based on faulty financial reporting or deceptive business practices. In addition to fraudulent acts, we also favor recoupment from any senior executive whose behavior caused direct financial harm to shareholders, reputational risk to the company, or resulted in a criminal investigation, even if such actions did not ultimately result in a material restatement of past results. This includes, but is not limited to, settlement agreements arising from such behavior and paid for directly by the company. We typically support shareholder proposals on these matters unless the company already has a robust claw back policy that sufficiently addresses our concerns.
Employee stock purchase plans
We believe these plans can provide performance incentives and help align employees interests with those of shareholders. The most common form of employee stock purchase plan (ESPP) qualifies for favorable tax treatment under Section 423 of the Internal Revenue Code. We will typically support qualified ESPP proposals.
Equity compensation plans
BlackRock supports equity plans that align the economic interests of directors, managers, and other employees with those of shareholders. We believe that boards should establish policies prohibiting the use of equity awards in a manner that could disrupt the intended alignment with shareholder interests (e.g. the use of stock as collateral for a loan; the use of stock in a margin account; the use of stock [or an unvested award] in hedging or derivative transactions). We may support shareholder proposals requesting the establishment of such policies.
Our evaluation of equity compensation plans is based on a companys executive pay and performance relative to peers and whether the plan plays a significant role in a pay-for-performance disconnect. We generally oppose plans that contain evergreen provisions, which allow for the unlimited increase of shares reserved without requiring further shareholder approval after a reasonable time period. We also generally oppose plans that allow for repricing without shareholder approval. We may also oppose plans that provide for the acceleration of vesting of equity awards even in situations where an actual change of control may not occur. We encourage companies to structure their change of control provisions to require the termination of the covered employee before acceleration or special payments are triggered.
Golden parachutes
We generally view golden parachutes as encouragement to management to consider transactions that might be beneficial to shareholders. However, a large potential pay-out under a golden parachute arrangement also presents the risk of motivating a management team to support a sub-optimal sale price for a company.
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When determining whether to support or oppose an advisory vote on a golden parachute plan, we normally support the plan unless it appears to result in payments that are excessive or detrimental to shareholders. In evaluating golden parachute plans, BlackRock may consider several factors, including:
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Whether we believe that the triggering event is in the best interest of shareholders |
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Whether management attempted to maximize shareholder value in the triggering event |
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The percentage of total premium or transaction value that will be transferred to the management team, rather than shareholders, as a result of the golden parachute payment |
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Whether excessively large excise tax gross-up payments are part of the pay-out |
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Whether the pay package that serves as the basis for calculating the golden parachute payment was reasonable in light of performance and peers |
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Whether the golden parachute payment will have the effect of rewarding a management team that has failed to effectively manage the company |
It may be difficult to anticipate the results of a plan until after it has been triggered; as a result, BlackRock may vote against a golden parachute proposal even if the golden parachute plan under review was approved by shareholders when it was implemented.
We may support shareholder proposals requesting that implementation of such arrangements require shareholder approval. We generally support proposals requiring shareholder approval of plans that exceed 2.99 times an executives current salary and bonus, including equity compensation.
Option exchanges
We believe that there may be legitimate instances where underwater options create an overhang on a companys capital structure and a repricing or option exchange may be warranted. We will evaluate these instances on a case-by-case basis. BlackRock may support a request to reprice or exchange underwater options under the following circumstances:
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The company has experienced significant stock price decline as a result of macroeconomic trends, not individual company performance |
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Directors and executive officers are excluded; the exchange is value neutral or value creative to shareholders; tax, accounting, and other technical considerations have been fully contemplated |
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There is clear evidence that absent repricing, the company will suffer serious employee incentive or retention and recruiting problems |
BlackRock may also support a request to exchange underwater options in other circumstances, if we determine that the exchange is in the best interest of shareholders.
Pay-for-Performance plans
In order for executive compensation exceeding $1 million USD to qualify for federal tax deductions, related to Section 162(m) of the Internal Revenue Code of 1986, the Omnibus Budget Reconciliation Act (OBRA) requires companies to link compensation for the companys top five executives to disclosed performance goals and submit the plans for shareholder approval. The law further requires that a compensation committee comprised solely of outside directors administer these plans. Because the primary objective of these proposals is to preserve the deductibility of such compensation, we generally favor approval in order to preserve net income.
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Supplemental executive retirement plans
BlackRock may support shareholder proposals requesting to put extraordinary benefits contained in Supplemental Executive Retirement Plans (SERP) agreements to a shareholder vote unless the companys executive pension plans do not contain excessive benefits beyond what is offered under employee-wide plans.
Environmental and social issues
Our fiduciary duty to clients is to protect and enhance their economic interest in the companies in which we invest on their behalf. It is within this context that we undertake our corporate governance activities. We believe that well-managed companies will deal effectively with the material environmental and social (E&S) factors relevant to their businesses. Robust disclosure is essential for investors to effectively gauge companies business practices and planning related to E&S risks and opportunities.
BlackRock expects companies to issue reports aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and the standards put forward by the Sustainability Accounting Standards Board (SASB). We view the SASB and TCFD frameworks as complementary in achieving the goal of disclosing more financially material information, particularly as it relates to industry-specific metrics and target setting. TCFDs recommendations provide an overarching framework for disclosure on the business implications of climate change, and potentially other E&S factors. We find SASBs industry-specific guidance (as identified in its materiality map) beneficial in helping companies identify and discuss their governance, risk assessments, and performance against these key performance indicators (KPIs). Any global standards adopted, peer group benchmarking undertaken, and verification process in place should also be disclosed and discussed in this context.
BlackRock has been engaging with companies for several years on disclosure of material E&S factors. Given the increased understanding of sustainability risks and opportunities, and the need for better information to assess them, we specifically ask companies to:
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Publish disclosures in line with industry specific SASB guidelines by year-end, if they have not already done so, or disclose a similar set of data in a way that is relevant to their particular business; and |
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Disclose climate-related risks in line with the TCFDs recommendations, if they have not already done so. This should include the companys plan for operating under a scenario where the Paris Agreements goal of limiting global warming to less than two degrees is fully realized, as expressed by the TCFD guidelines. |
See our commentary on our approach to engagement on TCFD and SASB aligned reporting for greater detail of our expectations.
We will use these disclosures and our engagements to ascertain whether companies are properly managing and overseeing these risks within their business and adequately planning for the future. In the absence of robust disclosures, investors, including BlackRock, will increasingly conclude that companies are not adequately managing risk.
We believe that when a company is not effectively addressing a material issue, its directors should be held accountable. We will generally engage directly with the board or management of a company when we identify issues. We may vote against the election of directors where we have concerns that a company might not be dealing with E&S factors appropriately. Sometimes we may reflect such concerns by supporting a shareholder proposal on the issue, where there seems to be either a significant potential threat or realized harm to shareholders interests caused by poor management of material E&S factors. In deciding our course of action, we will assess the nature of our engagement with the company on the issue over time, including whether:
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The company has already taken sufficient steps to address the concern |
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The company is in the process of actively implementing a response |
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There is a clear and material economic disadvantage to the company in the near-term if the issue is not addressed in the manner requested by the shareholder proposal |
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We do not see it as our role to make social, ethical, or political judgments on behalf of clients, but rather, to protect their long-term economic interests as shareholders. We expect investee companies to comply, at a minimum, with the laws and regulations of the jurisdictions in which they operate. They should explain how they manage situations where such laws or regulations are contradictory or ambiguous.
Climate risk
Within the framework laid out above, as well as our guidance on How BlackRock Investment Stewardship engages on climate risk, we believe that climate presents significant investment risks and opportunities that may impact the long-term financial sustainability of companies. We believe that the reporting frameworks developed by TCFD and SASB provide useful guidance to companies on identifying, managing, and reporting on climate-related risks and opportunities.
We expect companies to help their investors understand how the company may be impacted by climate risk, in the context of its ability to realize a long-term strategy and generate value over time. We expect companies to convey their governance around this issue through their corporate disclosures aligned with TCFD and SASB. For companies in sectors that are significantly exposed to climate-related risk, we expect the whole board to have demonstrable fluency in how climate risk affects the business and how management approaches assessing, adapting to, and mitigating that risk.
Where a company receives a shareholder proposal related to climate risk, in addition to the factors laid out above, our assessment will take into account the robustness of the companys existing disclosures as well as our understanding of its management of the issues as revealed through our engagements with the company and board members over time. In certain instances, we may disagree with the details of a climate-related shareholder proposal but agree that the company in question has not made sufficient progress on climate-related disclosures. In these instances, we may not support the proposal, but may vote against the election of relevant directors.
Corporate political activities
Companies may engage in certain political activities, within legal and regulatory limits, in order to influence public policy consistent with the companies values and strategies, and thus serve shareholders best long-term economic interests. These activities can create risks, including: the potential for allegations of corruption; the potential for reputational issues associated with a candidate, party, or issue; and risks that arise from the complex legal, regulatory, and compliance considerations associated with corporate political activity. We believe that companies which choose to engage in political activities should develop and maintain robust processes to guide these activities and to mitigate risks, including a level of board oversight.
When presented with shareholder proposals requesting increased disclosure on corporate political activities, we may consider the political activities of that company and its peers, the existing level of disclosure, and our view regarding the associated risks. We generally believe that it is the duty of boards and management to determine the appropriate level of disclosure of all types of corporate activity, and we are generally not supportive of proposals that are overly prescriptive in nature. We may decide to support a shareholder proposal requesting additional reporting of corporate political activities where there seems to be either a significant potential threat or actual harm to shareholders interests, and where we believe the company has not already provided shareholders with sufficient information to assess the companys management of the risk.
Finally, we believe that it is not the role of shareholders to suggest or approve corporate political activities; therefore we generally do not support proposals requesting a shareholder vote on political activities or expenditures.
General corporate governance matters
Adjourn meeting to solicit additional votes
We generally support such proposals unless the agenda contains items that we judge to be detrimental to shareholders best long-term economic interests.
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Bundled proposals
We believe that shareholders should have the opportunity to review substantial governance changes individually without having to accept bundled proposals. Where several measures are grouped into one proposal, BlackRock may reject certain positive changes when linked with proposals that generally contradict or impede the rights and economic interests of shareholders.
Exclusive forum provisions
BlackRock generally supports proposals to seek exclusive forum for certain shareholder litigation. In cases where a board unilaterally adopts exclusive forum provisions that we consider unfavorable to the interests of shareholders, we will vote against the independent chair or lead independent director and members of the governance committee.
Multi-jurisdictional companies
Where a company is listed on multiple exchanges or incorporated in a country different from its primary listing, we will seek to apply the most relevant market guideline(s) to our analysis of the companys governance structure and specific proposals on the shareholder meeting agenda. In doing so, we typically consider the governance standards of the companys primary listing, the market standards by which the company governs itself, and the market context of each specific proposal on the agenda. If the relevant standards are silent on the issue under consideration, we will use our professional judgment as to what voting outcome would best protect the long-term economic interests of investors. We expect that companies will disclose the rationale for their selection of primary listing, country of incorporation, and choice of governance structures, in particular where there is conflict between relevant market governance practices.
Other business
We oppose giving companies our proxy to vote on matters where we are not given the opportunity to review and understand those measures and carry out an appropriate level of shareholder oversight.
Reincorporation
Proposals to reincorporate from one state or country to another are most frequently motivated by considerations of anti-takeover protections, legal advantages, and / or cost savings. We will evaluate, on a case-by-case basis, the economic and strategic rationale behind the companys proposal to reincorporate. In all instances, we will evaluate the changes to shareholder protection under the new charter / articles / bylaws to assess whether the move increases or decreases shareholder protections. Where we find that shareholder protections are diminished, we may support reincorporation if we determine that the overall benefits outweigh the diminished rights.
IPO governance
We expect boards to consider and disclose how the corporate governance structures adopted upon initial public offering (IPO) are in shareholders best long-term interests. We also expect boards to conduct a regular review of corporate governance and control structures, such that boards might evolve foundational corporate governance structures as company circumstances change, without undue costs and disruption to shareholders. In our letter on unequal voting structures, we articulate our view that one vote for one share is the preferred structure for publicly-traded companies. We also recognize the potential benefits of dual class shares to newly public companies as they establish themselves; however, we believe that these structures should have a specific and limited duration. We will generally engage new companies on topics such as classified boards and supermajority vote provisions to amend bylaws, as we believe that such arrangements may not be in the best interest of shareholders in the long-term.
We will typically apply a one-year grace period for the application of certain director-related guidelines (including, but not limited to, director independence and over-boarding considerations), during which we expect boards to take steps to bring corporate governance standards in line with our expectations.
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Further, if a company qualifies as an emerging growth company (an EGC) under the Jumpstart Our Business Startups Act of 2012 (the JOBS Act), we will give consideration to the NYSE and NASDAQ governance exemptions granted under the JOBS Act for the duration such a company is categorized as an EGC. We expect an EGC to have a totally independent audit committee by the first anniversary of its IPO, with our standard approach to voting on auditors and audit-related issues applicable in full for an EGC on the first anniversary of its IPO.
Amendment to charter / articles / bylaws
We believe that shareholders should have the right to vote on key corporate governance matters, including on changes to governance mechanisms and amendments to the charter / articles / bylaws. We may vote against certain directors where changes to governing documents are not put to a shareholder vote within a reasonable period of time, in particular if those changes have the potential to impact shareholder rights (see Director elections herein). In cases where a boards unilateral adoption of changes to the charter / articles / bylaws promotes cost and operational efficiency benefits for the company and its shareholders, we may support such action if it does not have a negative effect on shareholder rights or the companys corporate governance structure.
When voting on a management or shareholder proposal to make changes to the charter / articles / bylaws, we will consider in part the companys and / or proponents publicly stated rationale for the changes, the companys governance profile and history, relevant jurisdictional laws, and situational or contextual circumstances which may have motivated the proposed changes, among other factors. We will typically support changes to the charter / articles / bylaws where the benefits to shareholders, including the costs of failing to make those changes, demonstrably outweigh the costs or risks of making such changes.
Proxy access
We believe that long-term shareholders should have the opportunity, when necessary and under reasonable conditions, to nominate directors on the companys proxy card.
In our view, securing the right of shareholders to nominate directors without engaging in a control contest can enhance shareholders ability to meaningfully participate in the director election process, stimulate board attention to shareholder interests, and provide shareholders an effective means of directing that attention where it is lacking. Proxy access mechanisms should provide shareholders with a reasonable opportunity to use this right without stipulating overly restrictive or onerous parameters for use, and also provide assurances that the mechanism will not be subject to abuse by short-term investors, investors without a substantial investment in the company, or investors seeking to take control of the board.
In general, we support market-standardized proxy access proposals, which allow a shareholder (or group of up to 20 shareholders) holding three percent of a companys outstanding shares for at least three years the right to nominate the greater of up to two directors or 20% of the board. Where a standardized proxy access provision exists, we will generally oppose shareholder proposals requesting outlier thresholds.
Right to act by written consent
In exceptional circumstances and with sufficiently broad support, shareholders should have the opportunity to raise issues of substantial importance without having to wait for management to schedule a meeting. We therefore believe that shareholders should have the right to solicit votes by written consent provided that: 1) there are reasonable requirements to initiate the consent solicitation process (in order to avoid the waste of corporate resources in addressing narrowly supported interests); and 2) shareholders receive a minimum of 50% of outstanding shares to effectuate the action by written consent. We may oppose shareholder proposals requesting the right to act by written consent in cases where the proposal is structured for the benefit of a dominant shareholder to the exclusion of others, or if the proposal is written to discourage the board from incorporating appropriate mechanisms to avoid the waste of corporate resources when establishing a right to act by written consent. Additionally, we may oppose shareholder proposals requesting the right to act by written consent if the company already provides a shareholder right to call a special meeting that we believe offers
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shareholders a reasonable opportunity to raise issues of substantial importance without having to wait for management to schedule a meeting.
Right to call a special meeting
In exceptional circumstances and with sufficiently broad support, shareholders should have the opportunity to raise issues of substantial importance without having to wait for management to schedule a meeting. We therefore believe that shareholders should have the right to call a special meeting in cases where a reasonably high proportion of shareholders (typically a minimum of 15% but no higher than 25%) are required to agree to such a meeting before it is called, in order to avoid the waste of corporate resources in addressing narrowly supported interests. However, we may oppose this right in cases where the proposal is structured for the benefit of a dominant shareholder to the exclusion of others. We generally believe that a right to act via written consent is not a sufficient alternative to the right to call a special meeting.
Simple majority voting
We generally favor a simple majority voting requirement to pass proposals. Therefore, we will support the reduction or the elimination of supermajority voting requirements to the extent that we determine shareholders ability to protect their economic interests is improved. Nonetheless, in situations where there is a substantial or dominant shareholder, supermajority voting may be protective of public shareholder interests and we may support supermajority requirements in those situations.
This document is provided for information or educational purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.
The information and opinions contained in this document are as of January 2020 unless it is stated otherwise and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all inclusive and are not guaranteed as to accuracy.
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