UNITEDSTATES
SECURITIESANDEXCHANGECOMMISSION
Washington,D.C.20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21280
Name of Fund: BlackRock Credit Allocation Income Trust III (BPP)
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: Anne F. Ackerley, Chief Executive Officer, BlackRock
Credit Allocation Income Trust III, 55 East 52nd Street, New York, NY 10055.
Registrant’s telephone number, including area code: (800) 882-0052, Option 4
Date of fiscal year end: 10/31/2009
Date of reporting period: 10/31/2009
Item 1 – Report to Stockholders
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EQUITIES FIXED INCOME REAL ESTATE LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS
Annual Report
OCTOBER 31, 2009
BlackRock Credit Allocation Income Trust I, Inc. (PSW)
BlackRock Credit Allocation Income Trust II, Inc. (PSY)
BlackRock Credit Allocation Income Trust III (BPP)
BlackRock Credit Allocation Income Trust IV (BTZ)
BlackRock Enhanced Capital and Income Fund, Inc. (CII)
BlackRock Floating Rate Income Trust (BGT)
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
Table of Contents | |
Page | |
Section 19(b) Disclosure | 2 |
Dear Shareholder | 3 |
Annual Report: | |
Fund Summaries | 4 |
The Benefits and Risks of Leveraging | 10 |
Derivative Financial Instruments | 10 |
Financial Statements: | |
Schedules of Investments | 11 |
Statements of Assets and Liabilities | 36 |
Statements of Operations | 37 |
Statements of Changes in Net Assets | 38 |
Statement of Cash Flows | 40 |
Financial Highlights | 41 |
Notes to Financial Statements | 47 |
Report of Independent Registered Public Accounting Firm | 58 |
Important Tax Information | 59 |
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements | 60 |
Automatic Dividend Reinvestment Plans | 64 |
Officers and Directors | 66 |
Additional Information | 69 |
Section 19(b) Disclosure
BlackRock Credit Allocation Income Trust IV (BTZ) and BlackRock Enhanced Capital and Income Fund, Inc. (CII) (collectively, the “Funds”), acting pursuant to
a Securities and Exchange Commission (“SEC”) exemptive order and with the approval of each Fund’s Board of Directors/Trustees (the “Board”), each have
adopted a plan, consistent with its investment objectives and policies to support a level distribution of income, capital gains and/or return of capital (“Plan”).
In accordance with the Plans, the Funds currently distribute the following fixed amounts per share on a monthly basis for BTZ and a quarterly basis for CII:
Exchange Symbol | Amount Per Common Share |
BTZ | $ 0.100 |
CII | $ 0.485 |
The fixed amounts distributed per share are subject to change at the discretion of each Fund’s Board. Under its Plan, each Fund will distribute all available
investment income to its shareholders, consistent with its primary investment objectives and as required by the Internal Revenue Code of 1986, as amended
(the “Code”). If sufficient investment income is not available on a monthly/quarterly basis, the Funds will distribute long-term capital gains and/or return of
capital to shareholders in order to maintain a level distribution. Each monthly/quarterly distribution to shareholders is expected to be at the fixed amount
established by the Board, except for extraordinary distributions and potential distribution rate increases or decreases to enable the Funds to comply with
the distribution requirements imposed by the Code.
Shareholders should not draw any conclusions about the Funds’ investment performance from the amount of these distributions or from the terms of the Plan.
Each Fund’s total return performance on net asset value is presented in its financial highlights table.
The Board may amend, suspend or terminate a Fund’s Plan without prior notice if it deems such actions to be in the best interests of the Fund or its share-
holders. The suspension or termination of the Plan could have the effect of creating a trading discount (if the Fund’s stock is trading at or above net asset
value) or widening an existing trading discount. The Funds are subject to risks that could have an adverse impact on their ability to maintain level distri-
butions. Examples of potential risks include, but are not limited to, economic downturns impacting the markets, decreased market volatility, companies sus-
pending or decreasing corporate dividend distributions and changes in the Code. Please refer to each Fund’s prospectus for a more complete description
of its risks.
Please refer to Additional Information for a cumulative summary of the Section 19(a) notices for each Fund’s current fiscal period. Section 19(a) notices for
the Funds, as applicable, are available on the BlackRock website www.blackrock.com.
2 ANNUAL REPORT OCTOBER 31, 2009
Dear Shareholder
Over the past 12 months, we have witnessed a seismic shift in market sentiment — from fear and pessimism during the worst economic decline and crisis
of confidence in financial markets since The Great Depression to increasing optimism amid emerging signs of recovery. The period began in the midst of an
intense deterioration in global economic activity and financial markets in the final months of 2008 and the early months of 2009. The collapse of confi-
dence resulted in massive government policy intervention on a global scale in the financial system and the economy. The tide turned dramatically in March
2009, however, on the back of new US government initiatives, as well as better-than-expected economic data and upside surprises in corporate earnings.
Not surprisingly, global equity markets endured extreme volatility over the past 12 months, starting with steep declines and heightened risk aversion in the
early part of the reporting period, which eventually gave way to an impressive rally that began in March. Although there have been fits and starts along the
way and a few modest corrections, the new bull market has pushed all major US indices well into positive territory for 2009. The experience in international
markets was similar to that in the United States. In particular, emerging markets (which were less affected by the global credit crunch and are experiencing
faster economic growth rates when compared to the developed world) have posted impressive gains since the rally began.
In fixed income markets, the flight-to-safety premium in Treasury securities prevailed during the equity market downturn, which drove yields sharply lower,
but concerns about deficit spending, debt issuance, inflation and dollar weakness have kept Treasury yields range bound in recent months. As economic
and market conditions began to improve in early 2009, near-zero interest rates on risk-free assets prompted many investors to reallocate money from cash
investments into higher-yielding and riskier non-Treasury assets. The high yield sector was the greatest beneficiary of this move, having decisively outpaced
all other taxable asset classes since the start of 2009. Similarly, the municipal bond market is on pace for its best performance year ever in 2009, following
one of its worst years in 2008. Investor demand remains strong for munis, helping to create a highly favorable technical backdrop. Municipal bond mutual
funds are seeing record inflows, reflecting the renewed investor interest in the asset class.
As a result of the rebound in sentiment and global market conditions, most major benchmark indexes are now in positive territory for both the
6- and 12-month periods.
Total Returns as of October 31, 2009 | 6-month | 12-month |
US equities (S&P 500 Index) | 20.04% | 9.80% |
Small cap US equities (Russell 2000 Index) | 16.21 | 6.46 |
International equities (MSCI Europe, Australasia, Far East Index) | 31.18 | 27.71 |
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index*) | (0.79) | 8.12 |
Taxable fixed income (Barclays Capital US Aggregate Bond Index) | 5.61 | 13.79 |
Tax-exempt fixed income (Barclays Capital Municipal Bond Index) | 4.99 | 13.60 |
High yield bonds (Barclays Capital US Corporate High Yield 2% Issuer Capped Index) | 27.72 | 48.65 |
* Formerly a Merrill Lynch index. | ||
Past performance is no guarantee of future results. Index performance shown for illustrative purposes only. You cannot invest directly in an index. |
The market environment has visibly improved since the beginning of the year, but a great deal of uncertainty and risk remain. Through periods of market
turbulence, as ever, BlackRock’s full resources are dedicated to the management of our clients’ assets. For additional market perspective and investment
insight, visit the most recent issue of our award-winning Shareholder® magazine at www.blackrock.com/shareholdermagazine. As always, we thank you
for entrusting BlackRock with your investments, and we look forward to continuing to serve you in the months and years ahead.
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Announcement to Shareholders
On December 1, 2009, BlackRock, Inc. and Barclays Global Investors, N.A. combined to form one of the world's preeminent investment management firms.
The new company, operating under the BlackRock name, manages $3.19 trillion in assets** and offers clients worldwide a full complement of active man-
agement, enhanced and index investment strategies and products, including individual and institutional separate accounts, mutual funds and other pooled
investment vehicles, and the industry-leading iShares platform of exchange traded funds.
** Data is as of September 30, 2009, is subject to change, and is based on a pro forma estimate of assets under management and other data at BlackRock, Inc.
and Barclays Global Investors.
THIS PAGE NOT PART OF YOUR FUND REPORT 3
Fund Summary as of October 31, 2009 BlackRock Credit Allocation Income Trust I, Inc.
Investment Objective
BlackRock Credit Allocation Income Trust I, Inc. (PSW) (formerly BlackRock Preferred and Corporate Income Strategies Fund, Inc.) (the “Fund”) seeks to
provide shareholders with high current income and capital appreciation. The Fund seeks to achieve its objectives by investing primarily in credit-related securi-
ties, including, but not limited to, investment grade corporate bonds, high yield bonds, bank loans, preferred securities or convertible bonds or derivatives with
economic characteristics similar to these credit-related securities.
Effective November 13, 2009, BlackRock Preferred and Corporate Income Strategies Fund, Inc. was renamed BlackRock Credit Allocation Income Trust I, Inc.
The Board approved a change to the Fund’s non-fundamental investment policies during the period. Please refer to page 70 in the Additional Information
section.
No assurance can be given that the Fund’s investment objective will be achieved.
Performance
For the 12 months ended October 31, 2009, the Fund returned 37.59% based on market price and 46.46% based on net asset value (“NAV”). For the
same period, the closed-end Lipper Income & Preferred Stock Funds category posted an average return of 39.55% on a market price basis and 40.36% on
a NAV basis. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which widened during the period, accounts for the difference between
performance based on price and performance based on NAV. Strong annual performance has been driven by the Fund’s positioning to fully capture the
near-term strength anticipated in the preferred sector during 2009. The Fund benefited from an overweight allocation to institutional hybrids (preferred secu-
rities available only over-the-counter to institutional investors) as the sector continued its dramatic outperformance during 2009 relative to retail preferred
securities, which are exchange traded. This position also served as a performance detractor when the preferred sector deteriorated during the fourth quarter
of 2008. Performance benefited from participation in several additional issuer-related tenders in preferred equity exchanges, along with an overweight in
the insurance sector. A generally large position in short-term securities proved beneficial as well — most notably during 2008 and into the first quarter
of 2009 — as it preserved NAV better than had the Fund been fully invested. Finally, the Fund notably reduced leverage in response to rating agency
methodology changes for preferred securities requiring greater collateral due to increased volatility in the sector, which detracted from performance.
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.
Fund Information | ||||||||
Symbol on New York Stock Exchange (“NYSE”) | PSW | |||||||
Initial Offering Date | August 1, 2003 | |||||||
Yield based on Closing Market Price as of October 31, 2009 ($8.24)1 | 8.74% | |||||||
Current Monthly Distribution per Common Share2 | $0.06 | |||||||
Current Annualized Distribution per Common Share2 | $0.72 | |||||||
Leverage as of October 31, 20093 | 32% | |||||||
1 Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. | ||||||||
Past performance does not guarantee future results. | ||||||||
2 The distribution is not constant and is subject to change. A portion of the distribution may be deemed a tax return of capital or net realized gain. | ||||||||
3 Represents reverse repurchase agreements and Auction Market Preferred Shares (“Preferred Shares”) as a percentage of total managed assets, | ||||||||
which is the total assets of the Fund (including any assets attributable to any borrowings and Preferred Shares) minus the sum of liabilities (other | ||||||||
than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of | ||||||||
Leveraging on page 10. | ||||||||
The table below summarizes the changes in the Fund’s market price and NAV per share: | ||||||||
10/31/09 | 10/31/08 | Change | High | Low | ||||
Market Price | $8.24 | $7.00 | 17.71% | $8.52 | $3.44 | |||
Net Asset Value | $9.31 | $7.43 | 25.30% | $9.31 | $4.55 | |||
The following unaudited charts show the portfolio composition and credit quality allocations of the Fund’s total investments: | ||||||||
Portfolio Composition | Credit Quality Allocations4 | |||||||
10/31/09 | 10/31/08 | 10/31/09 | 10/31/08 | |||||
Preferred Securities | 58% | 87% | AA/Aa | — | 14% | |||
Short-Term Securities | 29 | 11 | A/A | 26% | 36 | |||
Corporate Bonds | 13 | 2 | BBB/Baa | 62 | 36 | |||
BB/Ba | 8 | 4 | ||||||
B/B | 2 | — | ||||||
Not Rated | 2 | 10 | ||||||
4 Using the higher of Standard & Poor’s (“S&P’s”) or Moody’s Investor | ||||||||
Service (“Moody’s”) ratings. | ||||||||
4 | ANNUAL REPORT | OCTOBER 31, 2009 |
Fund Summary as of October 31, 2009 BlackRock Credit Allocation Income Trust II, Inc.
Investment Objective
BlackRock Credit Allocation Income Trust II, Inc. (PSY) (formerly BlackRock Preferred Income Strategies Fund, Inc.) (the “Fund”) seeks to provide share-
holders with current income and capital appreciation. The Fund seeks to achieve its objectives by investing primarily in credit-related securities, including,
but not limited to, investment grade corporate bonds, high yield bonds, bank loans, preferred securities or convertible bonds or derivatives with economic
characteristics similar to these credit-related securities.
Effective November 13, 2009, BlackRock Preferred Income Strategies Fund, Inc. was renamed BlackRock Credit Allocation Income Trust II, Inc.
The Board approved a change to the Fund’s non-fundamental investment policies during the period. Please refer to page 70 in the Additional Information
section.
No assurance can be given that the Fund’s investment objective will be achieved.
Performance
For the 12 months ended October 31, 2009, the Fund returned 29.37% based on market price and 48.36% based on NAV. For the same period, the
closed-end Lipper Income & Preferred Stock Funds category posted an average return of 39.55% on a market price basis and 40.36% on a NAV basis.
All returns reflect reinvestment of dividends. The Fund moved from a premium to a discount to NAV by year-end, which accounts for the difference between
performance based on price and performance based on NAV. Strong annual performance has been driven by the Fund’s positioning to fully capture the
near-term strength anticipated in the preferred sector during 2009. The Fund benefited from an overweight allocation to institutional hybrids (preferred secu-
rities available only over-the-counter to institutional investors) as the sector continued its dramatic outperformance during 2009 relative to retail preferred
securities, which are exchange traded. This position also served as a performance detractor when the preferred sector deteriorated during the fourth quarter
of 2008. Performance benefited from participation in several additional issuer-related tenders in preferred equity exchanges, along with an overweight in
the insurance sector. A generally large position in short-term securities proved beneficial as well — most notably during 2008 and into the first quarter
of 2009 — as it preserved NAV better than had the Fund been fully invested. Finally, the Fund notably reduced leverage in response to rating agency
methodology changes for preferred securities requiring greater collateral due to increased volatility in the sector, which detracted from performance.
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.
Fund Information | ||||||||
Symbol on NYSE | PSY | |||||||
Initial Offering Date | March 28, 2003 | |||||||
Yield on Closing Market Price as of October 31, 2009 ($8.90)1 | 10.11% | |||||||
Current Monthly Distribution per Common Share2 | $ 0.075 | |||||||
Current Annualized Distribution per Common Share2 | $ 0.900 | |||||||
Leverage as of October 31, 20093 | 30% | |||||||
1 Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. | ||||||||
Past performance does not guarantee future results. | ||||||||
2 The distribution is not constant and is subject to change. A portion of the distribution may be deemed a tax return of capital or net realized gain. | ||||||||
3 Represents reverse repurchase agreements and Preferred Shares as a percentage of total managed assets, which is the total assets of the Fund | ||||||||
(including any assets attributable to any borrowings and Preferred Shares) minus the sum of liabilities (other than borrowings representing financial | ||||||||
leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 10. | ||||||||
The table below summarizes the changes in the Fund’s market price and NAV per share: | ||||||||
10/31/09 | 10/31/08 | Change | High | Low | ||||
Market Price | $ 8.90 | $8.10 | 9.88% | $ 9.20 | $3.69 | |||
Net Asset Value | $10.03 | $7.96 | 26.01% | $10.03 | $4.60 | |||
The following unaudited charts show the portfolio composition and credit quality allocations of the Fund’s total investments: | ||||||||
Portfolio Composition | Credit Quality Allocations4 | |||||||
10/31/09 | 10/31/08 | 10/31/09 | 10/31/08 | |||||
Preferred Securities | 88% | 93% | AA/Aa | 1% | 15% | |||
Short-Term Securities | 9 | 4 | A/A | 26 | 34 | |||
Corporate Bonds | 3 | 3 | BBB/Baa | 56 | 28 | |||
BB/Ba | 14 | 6 | ||||||
B/B | 3 | — | ||||||
Not Rated | — | 17 | ||||||
4 Using the higher of S&P’s or Moody’s ratings. | ||||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 5 |
Fund Summary as of October 31, 2009 BlackRock Credit Allocation Income Trust III
Investment Objective
BlackRock Credit Allocation Income Trust III (BPP) (formerly BlackRock Preferred Opportunity Trust) (the “Fund”) seeks high current income consistent
with capital preservation. The Fund seeks to achieve its objectives by investing primarily in credit-related securities, including, but not limited to, investment
grade corporate bonds, high yield bonds, bank loans, preferred securities or convertible bonds or derivatives with economic characteristics similar to these
credit-related securities.
Effective November 13, 2009, BlackRock Preferred Opportunity Trust was renamed BlackRock Credit Allocation Income Trust III.
The Board approved a change to the Fund’s non-fundamental investment policies during the period. Please refer to page 70 in the Additional Information
section.
No assurance can be given that the Fund’s investment objective will be achieved.
Performance
For the 12 months ended October 31, 2009, the Fund returned 36.42% based on market price and 47.16% based on NAV. For the same period, the
closed-end Lipper Income & Preferred Stock Funds category posted an average return of 39.55% on a market price basis and 40.36% on a NAV basis. All
returns reflect reinvestment of dividends. The Fund’s discount to NAV, which widened during the period, accounts for the difference between performance
based on price and performance based on NAV. Strong annual performance has been driven by the Fund’s positioning to fully capture the near-term
strength anticipated in the preferred sector during 2009. The Fund benefited from an overweight allocation to institutional hybrids (preferred securities avail-
able only over-the-counter to institutional investors) as the sector continued its dramatic outperformance during 2009 relative to retail preferred securities,
which are exchange traded. This position also served as a performance detractor when the preferred sector deteriorated during the fourth quarter of 2008.
Performance benefited from participation in several additional issuer-related tenders in preferred equity exchanges, along with an overweight in the insur-
ance sector. A generally large position in short-term securities proved beneficial as well — most notably during 2008 and into the first quarter of 2009 —
as it preserved NAV better than had the Fund been fully invested. Finally, the Fund notably reduced leverage in response to rating agency methodology
changes for preferred securities requiring greater collateral due to increased volatility in the sector, which detracted from performance.
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.
Fund Information | ||||||||
Symbol on NYSE | BPP | |||||||
Initial Offering Date | February 28, 2003 | |||||||
Yield on Closing Market Price as of October 31, 2009 ($9.94)1 | 8.75% | |||||||
Current Monthly Distribution per Common Share2 | $0.0725 | |||||||
Current Annualized Distribution per Common Share2 | $0.8700 | |||||||
Leverage as of October 31, 20093 | 29% | |||||||
1 Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. | ||||||||
Past performance does not guarantee future results. | ||||||||
2 The distribution is not constant and is subject to change. A portion of the distribution may be deemed a tax return of capital or net realized gain. | ||||||||
3 Represents reverse repurchase agreements and Preferred Shares as a percentage of total managed assets, which is the total assets of the Fund | ||||||||
(including any assets attributable to any borrowings and Preferred Shares) minus the sum of liabilities (other than borrowings representing financial | ||||||||
leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 10. | ||||||||
The table below summarizes the changes in the Fund’s market price and NAV per share: | ||||||||
10/31/09 | 10/31/08 | Change | High | Low | ||||
Market Price | $ 9.94 | $8.51 | 16.80% | $10.35 | $4.00 | |||
Net Asset Value | $11.05 | $8.77 | 26.00% | $11.13 | $5.06 | |||
The following unaudited charts show the portfolio composition and credit quality allocations of the Fund’s total investments: | ||||||||
Portfolio Composition | Credit Quality Allocations4 | |||||||
10/31/09 | 10/31/08 | 10/31/09 | 10/31/08 | |||||
Preferred Securities | 69% | 90% | AA/Aa | 4% | 16% | |||
Short-Term Securities | 23 | 3 | A/A | 28 | 39 | |||
Corporate Bonds | 8 | 7 | BBB/Baa | 45 | 24 | |||
BB/Ba | 13 | 5 | ||||||
B | 5 | — | ||||||
CCC/Caa | 5 | — | ||||||
Not Rated | — | 16 | ||||||
4 Using the higher of S&P’s or Moody’s ratings. | ||||||||
6 | ANNUAL REPORT | OCTOBER 31, 2009 |
Fund Summary as of October 31, 2009 BlackRock Credit Allocation Income Trust IV
Investment Objective
BlackRock Credit Allocation Income Trust IV (BTZ) (formerly BlackRock Preferred and Equity Advantage Trust) (the “Fund”) seeks to achieve high
current income, current gains and capital appreciation. The Fund seeks to achieve its objectives by investing primarily in credit-related securities, including,
but not limited to, investment grade corporate bonds, high yield bonds, bank loans, preferred securities or convertible bonds or derivatives with economic char-
acteristics similar to these credit-related securities.
Effective November 13, 2009, BlackRock Preferred and Equity Advantage Trust was renamed BlackRock Credit Allocation Income Trust IV.
The Board approved a change to the Fund’s non-fundamental investment policies during the period. Please refer to page 70 in the Additional Information
section.
No assurance can be given that the Fund’s investment objective will be achieved.
Performance
For the 12 months ended October 31, 2009, the Fund returned 38.38% based on market price and 41.06% based on NAV. For the same period, the
closed-end Lipper Income & Preferred Stock Funds category posted an average return of 39.55% on a market price basis and 40.36% on a NAV basis. All
returns reflect reinvestment of dividends. The Fund’s discount to NAV, which widened during the period, accounts for the difference between performance
based on price and performance based on NAV. Strong annual performance has been driven by the Fund’s positioning to fully capture the near-term
strength anticipated in the preferred sector during 2009. The Fund benefited from an overweight allocation to institutional hybrids (preferred securities avail-
able only over-the-counter to institutional investors) as the sector continued its dramatic outperformance during 2009 relative to retail preferred securities,
which are exchange traded. This position also served as a performance detractor when the preferred sector deteriorated during the fourth quarter of 2008.
Performance benefited from participation in several additional issuer-related tenders in preferred equity exchanges, along with an overweight in the insur-
ance sector. A generally large position in short-term securities proved beneficial as well — most notably during 2008 and into the first quarter of 2009 —
as it preserved NAV better than had the Fund been fully invested. Finally, the Fund notably reduced leverage in response to rating agency methodology
changes for preferred securities requiring greater collateral due to increased volatility in the sector, which detracted from performance.
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.
Fund Information | ||||||||
Symbol on NYSE | BTZ | |||||||
Initial Offering Date | December 27, 2006 | |||||||
Yield on Closing Market Price as of October 31, 2009 ($10.96)1 | 10.95% | |||||||
Current Monthly Distribution per Common Share2 | $ 0.10 | |||||||
Current Annualized Distribution per Common Share2 | $ 1.20 | |||||||
Leverage as of October 31, 20093 | 31% | |||||||
1 Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. | ||||||||
Past performance does not guarantee future results. | ||||||||
2 The distribution is not constant and is subject to change. A portion of the distribution may be deemed a tax return of capital or net realized gain. | ||||||||
3 Represents reverse repurchase agreements and Preferred Shares as a percentage of total managed assets, which is the total assets of the Fund | ||||||||
(including any assets attributable to any borrowings and Preferred Shares) minus the sum of liabilities (other than borrowings representing financial | ||||||||
leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 10. | ||||||||
The table below summarizes the changes in the Fund’s market price and NAV per share: | ||||||||
10/31/09 | 10/31/08 | Change | High | Low | ||||
Market Price | $10.96 | $ 9.36 | 17.09% | $11.49 | $4.56 | |||
Net Asset Value | $12.64 | $10.59 | 19.36% | $12.69 | $6.89 | |||
The following unaudited charts show the portfolio composition of the Fund’s total investments and credit quality allocations of the | ||||||||
Fund’s total investments excluding Common Stocks: | ||||||||
Portfolio Composition | Credit Quality Allocations4 | |||||||
10/31/09 | 10/31/08 | 10/31/09 | 10/31/08 | |||||
Preferred Securities | 57% | 59% | AA/Aa | 4% | 15% | |||
Short-Term Securities | 33 | 21 | A/A | 33 | 37 | |||
Corporate Bonds | 4 | 4 | BBB/Baa | 53 | 30 | |||
Common Stocks | 6 | 16 | BB/Ba | 6 | 2 | |||
B/B | 4 | 16 | ||||||
4 Using the higher of S&P’s or Moody’s ratings. | ||||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 7 |
Fund Summary as of October 31, 2009 | BlackRock Enhanced Capital and Income Fund, Inc. |
Investment Objective | |
BlackRock Enhanced Capital and Income Fund, Inc. (CII) (the “Fund”) seeks to provide investors with a combination of current income and capital | |
appreciation. The Fund seeks to achieve its investment objective by investing primarily in a diversified portfolio of common stocks in an attempt to | |
generate current income and by employing a strategy of writing (selling) call options on equity indexes in an attempt to generate gains from option | |
premiums primarily on the S&P 500 Index. | |
The Board approved a change to the Fund’s option writing policy during the period. Please refer to page 70 in the Additional Information section. | |
No assurance can be given that the Fund’s investment objective will be achieved. | |
Performance | |
For the 12 months ended October 31, 2009, the Fund returned 29.88% based on market price and 22.01% based on NAV. For the same period, the | |
benchmark S&P 500 Citigroup Value Index returned 2.98% based on NAV. All returns reflect reinvestment of dividends. The Fund's discount to NAV, which | |
narrowed significantly during the period, accounts for the difference between performance based on price and performance based on NAV. The main con- | |
tributor to Fund performance relative to the S&P 500 Citigroup Value Index was the Option strategy that was implemented by the Fund. The option strategy | |
contributed almost 75% of the outperformance over the index. From an equity holdings standpoint, the main contributors were an underweight and stock | |
selection in financials, stock selection in health care and industrials, and overweights in the information technology and energy sectors. The main detractors | |
from performance for the one-year period included stock selection in materials and consumer staples, as well as an underweight in the consumer | |
discretionary sector. | |
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. |
Fund Information | |||||||
Symbol on NYSE | CII | ||||||
Initial Offering Date | April 30, 2004 | ||||||
Yield on Closing Market Price as of October 31, 2009 ($13.76)1 | 14.10% | ||||||
Current Quarterly Distribution per share2 | $ 0.485 | ||||||
Current Annualized Distribution per share2 | $ 1.940 | ||||||
1 Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. | |||||||
Past performance does not guarantee future results. | |||||||
2 The distribution is not constant and is subject to change. A portion of the distribution may be deemed a tax return of capital or net realized gain. | |||||||
The table below summarizes the changes in the Fund’s market price and NAV per share: | |||||||
10/31/09 | 10/31/08 | Change | High | Low | |||
Market Price | $13.76 | $12.37 | 11.24% | $15.70 | $ 7.92 | ||
Net Asset Value | $14.40 | $13.78 | 4.50% | $14.99 | $10.62 | ||
The following unaudited charts show the ten largest holdings and sector allocations of the Fund’s long-term investments: | |||||||
�� Ten Largest Holdings | Sector Allocations | ||||||
10/31/09 | 10/31/09 | 10/31/08 | |||||
The Travelers Cos., Inc. | 4% | Financials | 19% | 16% | |||
JPMorgan Chase & Co. | 3 | Information Technology | 17 | 15 | |||
LSI Corp. | 3 | Health Care | 13 | 4 | |||
Chevron Corp. | 3 | Consumer Staples | 12 | 23 | |||
Schering-Plough Corp. | 3 | Energy | 11 | 15 | |||
Bristol-Myers Squibb Co. | 3 | Industrials | 9 | 7 | |||
Exxon Mobil Corp. | 3 | Telecommunication Services | 7 | 6 | |||
Kimberly-Clark Corp. | 3 | Consumer Discretionary | 6 | 6 | |||
Kraft Foods, Inc. | 3 | Materials | 3 | 3 | |||
Time Warner, Inc. | 3 | Utilities | 3 | 5 | |||
For Fund compliance purposes, the Fund’s sector classifications refer | |||||||
to any one or more of the sector sub-classifications used by one or | |||||||
more widely recognized market indexes or ratings group indexes, | |||||||
and/or as defined by Fund management. This definition may not | |||||||
apply for purposes of this report, which may combine sector sub- | |||||||
classifications for reporting ease. | |||||||
8 | ANNUAL REPORT | OCTOBER 31, 2009 |
Fund Summary as of October 31, 2009 BlackRock Floating Rate Income Trust
Investment Objective
BlackRock Floating Rate Income Trust (BGT) (formerly BlackRock Global Floating Rate Income Trust) (the “Fund”) seeks to provide a high level of current
income and to seek the preservation of capital. The Fund seeks to achieve its objective by investing in a global portfolio of primarily floating and variable
rate securities.
No assurance can be given that the Fund’s investment objective will be achieved.
Performance
For the 12 months ended October 31, 2009, the Fund returned 54.14% based on market price and 39.51% based on NAV. For the same period, the
closed-end Lipper Loan Participation Funds category posted an average return of 39.76% on a market price basis and 25.60% on a NAV basis. All returns
reflect reinvestment of dividends. (The performance of the Lipper category does not necessarily correlate to that of the Fund, as the Lipper group comprises
both closed-end funds that employ leverage and continuously offered closed-end funds that do not. For this reporting period, those Lipper peers that do not
employ leverage were at a disadvantage given the market rally.) The Fund's discount to NAV, which narrowed during the period, accounts for the difference
between performance based on price and performance based on NAV. For the first two months of the reporting period, the high yield loan market was under
extreme pressure and lost 10.9%, as measured by the Credit Suisse Leveraged Loan Index. However, this brief period of underperformance was followed by the
market’s strongest results ever, as the sector gained more than 40% for the period January 1, 2009 to October 31, 2009. On average, market performance was
positive and the Fund’s reduction of leverage in response to higher collateral requirements imposed by the major rating agencies had a negative effect on
absolute performance. Relative to its Lipper peers, the Fund gained from both maintaining leverage and focusing on higher-quality sectors and structures, which
benefited most during the sharp rally in 2009. Conversely, the Fund’s cash position hurt performance during the period.
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.
Fund Information | ||||||||
Symbol on NYSE | BGT | |||||||
Initial Offering Date | August 30, 2004 | |||||||
Yield on Closing Market Price as of October 31, 2009 ($12.58)1 | 6.44% | |||||||
Current Monthly Distribution per Common Share2 | $0.0675 | |||||||
Current Annualized Distribution per Common Share2 | $0.8100 | |||||||
Leverage as of October 31, 20093 | 19% | |||||||
1 Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. | ||||||||
Past performance does not guarantee future results. | ||||||||
2 The distribution is not constant and is subject to change. A portion of the distribution may be deemed a tax return of capital or net realized gain. | ||||||||
3 Represents loan outstanding and Preferred Shares as a percentage of total managed assets, which is the total assets of the Fund (including any | ||||||||
assets attributable to any borrowings and Preferred Shares) minus the sum of liabilities (other than borrowings representing financial leverage). | ||||||||
For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 10. | ||||||||
The table below summarizes the changes in the Fund’s market price and NAV per share: | ||||||||
10/31/09 | 10/31/08 | Change | High | Low | ||||
Market Price | $12.58 | $ 9.63 | 30.63% | $12.98 | $6.88 | |||
Net Asset Value | $13.29 | $11.24 | 18.24% | $13.35 | $8.86 | |||
The following unaudited charts show the portfolio composition of the Fund’s long-term investments and credit quality allocations | ||||||||
of the Fund’s long-term investments excluding floating rate loan interests: | ||||||||
Portfolio Composition | Credit Quality Allocations4 | |||||||
10/31/09 | 10/31/08 | 10/31/09 | 10/31/08 | |||||
Floating Rate Loan Interests | 76% | 79% | AAA/Aaa | 16% | — | |||
Corporate Bonds | 20 | 14 | A/A | 4 | 20% | |||
Foreign Government Obligations | 3 | 7 | BBB/Baa | 27 | 30 | |||
Other Interests | 1 | — | BB/Ba | 17 | 16 | |||
B/B | 22 | 23 | ||||||
CCC/Caa | 6 | 10 | ||||||
C/C | 5 | — | ||||||
D | 1 | — | ||||||
Not Rated | 2 | 1 | ||||||
4 Using the higher of S&P’s or Moody’s ratings. | ||||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 9 |
The Benefits and Risks of Leveraging
The Funds may utilize leverage to seek to enhance the yield and NAV of their
Common Shares. However, these objectives cannot be achieved in all interest
rate environments.
The Funds may utilize leverage through borrowings, the issuance of
Preferred Shares or by entering into reverse repurchase agreements. In
general, the concept of leveraging is based on the premise that the cost of
assets to be obtained from leverage will be based on short-term interest
rates, which normally will be lower than the income earned by each Fund
on its longer-term portfolio investments. To the extent that the total assets
of each Fund (including the assets obtained from leverage) are invested in
higher-yielding portfolio investments, each Fund’s Common Shareholders
will benefit from the incremental net income.
The interest earned on securities purchased with the proceeds from lever-
age is paid to Common Shareholders in the form of dividends, and the
value of these portfolio holdings is reflected in the per share NAV of each
Fund’s Common Shares. However, in order to benefit Common Shareholders,
the yield curve must be positively sloped; that is, short-term interest rates
must be lower than long-term interest rates. If the yield curve becomes
negatively sloped, meaning short-term interest rates exceed long-term
interest rates, income to Common Shareholders will be lower than if the
Funds had not used leverage.
To illustrate these concepts, assume a Fund’s Common Shares capitalization
is $100 million and it borrows and/or issues Preferred Shares for an addi-
tional $50 million, creating a total value of $150 million available for invest-
ment in long-term securities. If prevailing short-term interest rates are 3%
and long-term interest rates are 6%, the yield curve has a strongly positive
slope. In this case, the Fund pays interest expense and/or dividends on
the $50 million of Preferred Shares based on the lower short-term interest
rates. At the same time, the securities purchased by the Fund with assets
received from the borrowings and/or issuance of Preferred Shares can earn
income based on long-term interest rates. In this case, the interest expense
and/or dividends paid to Preferred Shareholders are significantly lower
than the income earned on the Fund’s long-term investments, and there-
fore the Common Shareholders are the beneficiaries of the incremental
net income.
If short-term interest rates rise, narrowing the differential between short-
term and long-term interest rates, the incremental net income pickup on
the Common Shares will be reduced or eliminated completely. Furthermore,
if prevailing short-term interest rates rise above long-term interest rates of
6%, the yield curve has a negative slope. In this case, the Fund pays divi-
dends on the higher short-term interest rates whereas the Fund’s total port-
folio earns income based on lower long-term interest rates.
Furthermore, the value of a Fund’s portfolio investments generally varies
inversely with the direction of long-term interest rates, although other factors
can influence the value of portfolio investments. In contrast, the redemption
value of the Funds’ borrowings and/or Preferred Shares does not fluctuate
in relation to interest rates. As a result, changes in interest rates can influ-
ence the Funds’ NAV positively or negatively in addition to the impact on
Fund performance from leverage from borrowings.
The use of leverage may enhance opportunities for increased income to the
Funds and Common Shareholders, but as described above, it also creates
risks as short- or long-term interest rates fluctuate. Leverage also will gener-
ally cause greater changes to each Fund’s NAV, market price and dividend
rates than a comparable portfolio without leverage. If the income derived
from securities purchased with assets received from leverage exceeds the
cost of leverage, each Fund’s net income will be greater than if leverage had
not been used. Conversely, if the income from the securities purchased is
not sufficient to cover the cost of leverage, each Fund’s net income will be
less than if leverage had not been used, and therefore the amount available
for distribution to shareholders will be reduced. Each Fund 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 lever-
age or as required by the terms of leverage instruments which may cause
a Fund to incur losses. The use of leverage may limit each Fund’s ability to
invest in certain types of securities or use certain types of hedging strate-
gies, such as in the case of certain restrictions imposed by ratings agencies
that rate Preferred Shares issued by each Fund. Each Fund will incur
expenses in connection with the use of leverage, all of which are borne by
the Common Shareholders and may reduce income on the Common Shares.
Under the Investment Company Act of 1940, BGT is permitted to borrow
through a credit facility up to 33 1 / 3% of its total managed assets and the
Funds are permitted to issue Preferred Shares in an amount of up to 50%
of their total managed assets at the time of issuance. Under normal cir-
cumstances, each Fund anticipates that the total economic leverage from
Preferred Shares, reverse repurchase agreements and credit facility borrow-
ings will not exceed 50% of its total managed assets at the time such lever-
age is incurred. As of October 31, 2009, the Funds had economic leverage
from Preferred Shares, reverse repurchase agreements and/or credit facility
borrowings as a percentage of their total managed assets as follows:
Percent of | |
Leverage | |
PSW | 32% |
PSY | 30% |
BPP | 29% |
BTZ | 31% |
BGT | 19% |
Derivative Financial Instruments
The Funds may invest in various derivative instruments, including financial
futures contracts, swaps, foreign currency exchange contracts and options,
as specified in Note 2 of the Notes to Financial Statements, which consti-
tute forms of economic leverage. Such instruments are used to obtain
exposure to a market without owning or taking physical custody of securi-
ties or to hedge market, equity, credit, interest rate and/or foreign currency
exchange rate risks. Such derivative instruments involve risks, including the
imperfect correlation between the value of a derivative instrument and the
underlying asset, possible default of the counterparty to the transaction
and illiquidity of the derivative instrument. Each Fund’s ability to success-
fully use a derivative instrument depends on the investment advisor’s
ability to accurately predict pertinent market movements, which cannot be
assured. The use of derivative instruments may result in losses greater than
if they had not been used, may require the Funds to sell or purchase port-
folio securities at inopportune times or at distressed values, may limit the
amount of appreciation the Funds can realize on an investment or may
cause the Funds to hold a security that they might otherwise sell. The
Funds’ investments in these instruments are discussed in detail in the
Notes to Financial Statements.
10 ANNUAL REPORT OCTOBER 31, 2009
Schedule of Investments October 31, 2009 | BlackRock Credit Allocation Income Trust I, Inc. (PSW) | ||||||||
(Percentages shown are based on Net Assets) | |||||||||
Par | Par | ||||||||
Corporate Bonds | (000) | Value | Capital Trusts | (000) | Value | ||||
Insurance — 2.5% | Multi-Utilities — 2.8% | ||||||||
Oil Insurance Ltd., 7.56% (a)(b)(c) | $ 1,000 | $ 706,200 | Dominion Resources Capital Trust I, | ||||||
QBE Insurance Group Ltd., 9.75%, 3/14/14 (a) | 1,484 | 1,695,246 | 7.83%, 12/01/27 (f) | $ 1,200 $ | 1,202,650 | ||||
2,401,446 | Dominion Resources, Inc., 7.50% (c) | 1,051 | 1,029,980 | ||||||
Puget Sound Energy, Inc. Series A, 6.97%, 6/01/67 (c) | 475 | 415,587 | |||||||
Media — 12.5% | |||||||||
COX Communications, Inc., 8.38%, 3/01/39 (a) | 10,000 | 11,988,640 | 2,648,217 | ||||||
Total Corporate Bonds — 15.0% | 14,390,086 | Oil, Gas & Consumable Fuels — 1.3% | |||||||
Enterprise Products Operating LLC, 8.38%, 8/01/66 (c) | 825 | 808,500 | |||||||
TransCanada PipeLines Ltd., 6.35%, 5/15/67 (c) | 500 | 465,397 | |||||||
Preferred Securities | 1,273,897 | ||||||||
Total Capital Trusts — 33.5% | 32,110,050 | ||||||||
Capital Trusts | |||||||||
Building Products — 0.7% | |||||||||
C8 Capital SPV Ltd., 6.64% (a)(b)(c) | 980 | 691,018 | Preferred Stocks | Shares | |||||
Capital Markets — 5.8% | Commercial Banks — 8.1% | ||||||||
Ameriprise Financial, Inc., 7.52%, 6/01/66 (c) | 1,900 | 1,615,000 | First Tennessee Bank NA, 3.90% (a)(c) | 1,176 | 589,838 | ||||
Lehman Brothers Holdings Capital Trust V, | HSBC USA, Inc.: | ||||||||
3.64% (b)(c)(d)(e) | 1,600 | 160 | Series D, 4.50% (c) | 35,000 | 734,300 | ||||
State Street Capital Trust III, 8.25% (b)(c) | 725 | 731,257 | Series H, 6.50% | 168,000 | 3,410,400 | ||||
State Street Capital Trust IV, 1.30%, 6/01/67 (c) | 4,740 | 3,180,090 | Provident Financial Group, Inc., 7.75% | 42,000 | 1,013,250 | ||||
5,526,507 | Royal Bank of Scotland Group Plc, Series M, 6.40% | 5,000 | 51,700 | ||||||
Commercial Banks — 3.3% | Santander Finance Preferred SA Unipersonal, 6.80% | 72,807 | 1,992,000 | ||||||
Bank of Ireland Capital Funding II, LP, 5.57% (a)(b)(c) | 429 | 188,760 | 7,791,488 | ||||||
Bank of Ireland Capital Funding III, LP, 6.11% (a)(b)(c) | 740 | 325,600 | Diversified Financial Services — 2.0% | ||||||
Barclays Bank Plc, 5.93% (a)(b)(c) | 500 | 390,000 | Cobank ACB, 7.00% (a) | 38,000 | 1,326,439 | ||||
First Empire Capital Trust II, 8.28%, 6/01/27 | 910 | 691,337 | ING Groep NV, 7.20% | 35 | 612,942 | ||||
National City Preferred Capital Trust I, 12.00% (b)(c) | 300 | 343,359 | |||||||
SMFG Preferred Capital USD 3 Ltd., 9.50% (a)(b)(c) | 875 | 948,675 | 1,939,381 | ||||||
Santander Perpetual SA Unipersonal, 6.67% (a)(b)(c) | 250 | 228,123 | Electric Utilities — 3.6% | ||||||
SunTrust Preferred Capital I, 5.85% (b)(c) | 135 | 88,087 | Alabama Power Co., 6.50% | 25,000 | 750,000 | ||||
3,203,941 | Entergy Arkansas, Inc., 6.45% | 28,800 | 609,301 | ||||||
Entergy Louisiana LLC, 6.95% | 22,650 | 2,119,747 | |||||||
Diversified Financial Services — 3.0% | |||||||||
Farm Credit Bank of Texas Series 1, 7.56% (b)(c) | 1,000 | 701,550 | 3,479,048 | ||||||
JPMorgan Chase Capital XXIII, 1.44%, 5/15/77 (c) | 3,085 | 2,172,873 | Insurance — 5.8% | ||||||
2,874,423 | Aspen Insurance Holdings Ltd., 7.40% (c) | 55,000 | 1,116,500 | ||||||
Axis Capital Holdings Ltd.: | |||||||||
Electric Utilities — 0.5% | Series A, 7.25% | 35,000 | 789,250 | ||||||
PPL Capital Funding, 6.70%, 3/30/67 (c) | 500 | 430,000 | Series B, 7.50% (c) | 9,000 | 673,875 | ||||
Insurance — 16.1% | Endurance Specialty Holdings Ltd. Series A, 7.75% | 35,200 | 770,880 | ||||||
AXA SA, 6.38% (a)(b)(c) | 3,585 | 3,038,287 | RenaissanceRe Holding Ltd. Series D, 6.60% | 110,000 | 2,267,100 | ||||
Ace Capital Trust II, 9.70%, 4/01/30 | 500 | 552,614 | 5,617,605 | ||||||
The Allstate Corp., 6.50%, 5/15/57 (c)(f) | 3,200 | 2,736,000 | |||||||
Chubb Corp., 6.38%, 3/29/67 (c)(g) | 500 | 453,750 | Real Estate Investment Trusts (REITs) — 7.4% | ||||||
Farmers Exchange Capital, 7.05%, 7/15/28 (a) | 500 | 428,271 | BRE Properties, Inc. Series D, 6.75% | 10,000 | 205,200 | ||||
Genworth Financial, Inc., 6.15%, 11/15/66 (c) | 750 | 502,500 | First Industrial Realty Trust, Inc., 6.24% (c) | 610 | 270,116 | ||||
Great West Life & Annuity Insurance Co., | HRPT Properties Trust: | ||||||||
7.15%, 5/16/46 (a)(c) | 500 | 415,000 | Series B, 8.75% | 97,917 | 2,257,966 | ||||
Liberty Mutual Group, Inc., 10.75%, 6/15/88 (a)(c) | 500 | 525,000 | Series C, 7.13% | 125,000 | 2,332,500 | ||||
Lincoln National Corp., 7.00%, 5/17/66 (c) | 500 | 410,000 | iStar Financial, Inc. Series I, 7.50% | 59,500 | 416,500 | ||||
MetLife, Inc., 6.40%, 12/15/66 (f) | 500 | 433,125 | Public Storage: | ||||||
Nationwide Life Global Funding I, 6.75%, 5/15/67 | 500 | 378,967 | Series F, 6.45% | 10,000 | 212,500 | ||||
Oil Casualty Insurance Ltd., 8.00%, 9/15/34 (a) | 915 | 576,450 | Series I, 7.25% | 40,000 | 954,000 | ||||
Progressive Corp., 6.70%, 6/15/67 (c) | 500 | 437,973 | Series M, 6.63% | 20,000 | 429,000 | ||||
Reinsurance Group of America, 6.75%, 12/15/65 (c) | 700 | 542,500 | 7,077,782 | ||||||
The Travelers Cos., Inc., 6.25%, 3/15/67 (c) | 500 | 450,000 | Wireless Telecommunication Services — 2.8% | ||||||
ZFS Finance (USA) Trust II, 6.45%, 12/15/65 (a)(c)(h) | 1,800 | 1,620,000 | Centaur Funding Corp., 9.08% (a) | 2,720 | 2,729,350 | ||||
ZFS Finance (USA) Trust IV, 5.88%, 5/09/32 (a)(c) | 146 | 118,040 | |||||||
ZFS Finance (USA) Trust V, 6.50%, 5/09/67 (a)(c) | 1,097 | 888,570 | Total Preferred Stocks — 29.7% | 28,634,654 | |||||
Zenith National Insurance Capital Trust I, | |||||||||
8.55%, 8/01/28 (a) | 1,000 | 955,000 | |||||||
15,462,047 | |||||||||
Portfolio Abbreviations | |||||||||
To simplify the listings of portfolio holdings in the Schedules of | ADR | American Depositary Receipts | MXN | Mexican New Peso | |||||
Investments, the names of many of the securities have been | EUR | Euro | USD | US Dollar | |||||
abbreviated according to the following list: | GBP | British Pound | |||||||
See Notes to Financial Statements. | |||||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 11 |
Schedule of Investments (continued) | BlackRock Credit Allocation Income Trust I, Inc. (PSW) | |||||||||||
(Percentages shown are based on Net Assets) | ||||||||||||
Shares | ||||||||||||
Trust Preferreds | (000) | Value | ||||||||||
Consumer Finance — 2.2% | • | For Fund compliance purposes, the Fund’s industry classifications refer to any one | ||||||||||
Capital One Capital II, 7.50%, 6/15/66 | 93 | $ 2,060,649 | or more of the industry sub-classifications used by one or more widely recognized | |||||||||
Electric Utilities — 1.3% | market indexes or ratings group indexes, and/or as defined by Fund management. | |||||||||||
PPL Energy Supply LLC, 7.00%, 7/15/46 | 49 | 1,263,610 | This definition may not apply for purposes of this report, which may combine indus- | |||||||||
Insurance — 2.0% | try sub-classifications for reporting ease. | |||||||||||
ABN AMRO North America Capital Funding Trust II, | • | Reverse repurchase agreements outstanding as of October 31, 2009 were | ||||||||||
2.87% (a)(b)(c) | 2 | 85,988 | as follows: | |||||||||
Lincoln National Capital VI Series F, 6.75%, 9/11/52 | 90 | 1,827,781 | ||||||||||
Interest | Trade | Maturity | Net Closing | Face | ||||||||
1,913,769 | ||||||||||||
Counterparty | Rate | Date | Date | Amount | Amount | |||||||
Total Trust Preferreds — 5.5% | 5,238,028 | |||||||||||
Barclays Bank Plc 0.75% | 10/16/09 | 11/16/09 | $4,975,252 | $ 4,972,041 | ||||||||
Total Preferred Securities — 68.7% | 65,982,732 | |||||||||||
Total Long Term Investments | • | Financial futures contracts purchased as of October 31, 2009 were as follows: | ||||||||||
(Cost — $94,148,823) — 83.7% | 80,372,818 | Expiration | Notional | Unrealized | ||||||||
Contracts | Issue | Date | Value | Appreciation | ||||||||
50 | 2-Year U.S. | |||||||||||
Treasury Bond December 2009 | $ 10,793,860 | $ 86,609 | ||||||||||
Short-Term Securities | Shares | 6 | 30-Year U.S. | |||||||||
BlackRock Liquidity Funds, TempFund, | Treasury Bond | December 2009 | $ 712,575 | 8,363 | ||||||||
Institutional Class, 0.18% (i)(j) | 33,286,296 | 33,286,296 | Total | $ 94,972 | ||||||||
Total Short-Term Securities | ||||||||||||
(Cost — $33,286,296) — 34.6% | 33,286,296 | • | Credit default swaps on single-name issue — buy protection outstanding as of | |||||||||
October 31, 2009 were as follows: | ||||||||||||
Total Investments (Cost — $127,435,119*) — 118.3% | 113,659,114 | |||||||||||
Other Assets Less Liabilities — 23.6% | 22,648,143 | Pay | Notional | |||||||||
Preferred Shares, at Redemption Value — (41.9)% | (40,258,949) | Fixed | Counter- | Amount | Unrealized | |||||||
Net Assets Applicable to Common Shares — 100.0% | $ 96,048,308 | Issuer | Rate | party | Expiration | (000) | Depreciation | |||||
* The cost and unrealized appreciation (depreciation) of investments as of October 31, | Nordstrom, Inc. 5.20% | Deutsche | June | |||||||||
2009, as computed for federal income tax purposes, were as follows: | Bank AG | 2014 | $ 1,000 | $ (168,952) | ||||||||
Aggregate cost | $ 127,460,901 | |||||||||||
Gross unrealized appreciation | $ 2,075,593 | |||||||||||
Gross unrealized depreciation | (15,877,380) | |||||||||||
Net unrealized depreciation | $ (13,801,787) | |||||||||||
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. | ||||||||||||
These securities may be resold in transactions exempt from registration to qualified | ||||||||||||
institutional investors. | ||||||||||||
(b) Security is perpetual in nature and has no stated maturity date. | ||||||||||||
(c) Variable rate security. Rate shown is as of report date. | ||||||||||||
(d) Non-income producing security. | ||||||||||||
(e) Issuer filed for bankruptcy and/or is in default of interest payments. | ||||||||||||
(f) All or a portion of the security has been pledged as collateral in connection with | ||||||||||||
open reverse repurchase agreements. | ||||||||||||
(g) All or a portion of the security has been pledged as collateral in connection with | ||||||||||||
open swaps. | ||||||||||||
(h) All or a portion of the security has been pledged as collateral in connection with | ||||||||||||
open financial futures contracts. | ||||||||||||
(i) Investments in companies considered to be an affiliate of the Fund, for purposes of | ||||||||||||
Section 2(a)(3) of the Investment Company Act of 1940, were as follows: | ||||||||||||
Net | ||||||||||||
Affiliate | Activity | Income | ||||||||||
BlackRock Liquidity Funds, TempFund, | ||||||||||||
Institutional Class | $ 33,286,296 | $ 73,357 | ||||||||||
BlackRock Liquidity Series, LLC | ||||||||||||
Cash Sweep Series | $(15,938,424) | $ 56,701 | ||||||||||
(j) Represents the current yield as of report date. | ||||||||||||
See Notes to Financial Statements. | ||||||||||||
12 | ANNUAL REPORT | OCTOBER 31, 2009 |
Schedule of Investments (concluded) | BlackRock Credit Allocation Income Trust I, Inc. (PSW) | ||||
• Fair Value Measurements — Various inputs are used in determining the fair value of | Other Financial | ||||
investments, which are as follows: | Valuation Inputs | Instruments1 | |||
• Level 1 — price quotations in active markets/exchanges for identical assets | Assets | Liabilities | |||
and liabilities | Level 1 | $ 94,972 | — | ||
• Level 2 — other observable inputs (including, but not limited to: quoted prices for | Level 2 | — | $ (168,952) | ||
similar assets or liabilities in markets that are active, quoted prices for identical | Level 3 | — | — | ||
or similar assets or liabilities in markets that are not active, inputs other than | Total | $ 94,972 | $ (168,952) | ||
quoted prices that are observable for the assets or liabilities (such as interest | |||||
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and | 1 Other financial instruments are financial futures contracts and swaps. Financial | ||||
default rates) or other market-corroborated inputs) | futures contracts and swaps are valued at the unrealized appreciation/depreci- | ||||
• Level 3 — unobservable inputs based on the best information available in the | ation on the instrument. | ||||
circumstances, to the extent observable inputs are not available (including the | The following is a reconciliation of investments for unobservable inputs (Level 3) | ||||
Fund’s own assumptions used in determining the fair value of investments) | used in determining fair value: | ||||
The inputs or methodology used for valuing securities are not necessarily an indica- | |||||
Investments in | |||||
tion of the risk associated with investing in those securities. For information about | |||||
Securities | |||||
the Fund’s policy regarding valuation of investments and other significant accounting | |||||
policies, please refer to Note 1 of the Notes to Financial Statements. | Capital Trusts | ||||
The following tables summarize the inputs used as of October 31, 2009 in | Balance, as of October 31, 2008 | — | |||
determining the fair valuation of the Fund’s investments: | Accrued discounts/premiums | — | |||
Realized gain (loss) | — | ||||
Investments in | Change in unrealized appreciation/depreciation | — | |||
Valuation Inputs | Securities | Net purchases (sales) | — | ||
Assets | Net transfers in/out Level 3 | $ 576,450 | |||
Level 1 | Balance, as of October 31, 2009 | $ 576,450 | |||
Long-Term Investments: | |||||
Preferred Stocks | $ 19,302,737 | ||||
Trust Preferreds | 5,152,040 | ||||
Short-Term Securities | 33,286,296 | ||||
Total Level 1 | 57,741,073 | ||||
Level 2 | |||||
Long-Term Investments: | |||||
Capital Trusts | 31,533,600 | ||||
Corporate Bonds | 14,390,086 | ||||
Preferred Stocks | 9,331,917 | ||||
Trust Preferreds | 85,988 | ||||
Total Level 2 | 55,341,591 | ||||
Level 3 | |||||
Long-Term Investments: | |||||
Capital Trusts | 576,450 | ||||
Total | $ 113,659,114 | ||||
See Notes to Financial Statements. | |||||
ANNUAL REPORT | OCTOBER 31, 2009 | 13 |
Schedule of Investments October 31, 2009 | BlackRock Credit Allocation Income Trust II, Inc. (PSY) | ||||||
(Percentages shown are based on Net Assets) | |||||||
Par | Par | ||||||
Corporate Bonds | (000) | Value | Capital Trusts | (000) | Value | ||
Insurance — 2.6% | Insurance (concluded) | ||||||
Oil Insurance Ltd., 7.56% (a)(b)(c) | $ 5,000 | $ 3,531,000 | Principal Life Insurance Co., 8.00%, 3/01/44 (a) $ | 6,325 | $ 5,663,683 | ||
QBE Insurance Group Ltd., 9.75%, 3/14/14 (a) | 5,967 | 6,816,396 | Progressive Corp., 6.70%, 6/15/67 (c)(f) | 2,000 | 1,751,894 | ||
Structured Asset Repackaged Trust, Series 2004-1, | Reinsurance Group of America, | ||||||
0.78%, 4/21/11 (a)(c) | 299 | 266,121 | 6.75%, 12/15/65 (c) | 3,000 | 2,325,000 | ||
Total Corporate Bonds — 2.6% | 10,613,517 | The Travelers Cos., Inc., 6.25%, 3/15/67 (c) | 3,000 | 2,700,000 | |||
ZFS Finance (USA) Trust IV, 5.88%, 5/09/32 (a)(c) | 379 | 306,418 | |||||
ZFS Finance (USA) Trust V, 6.50%, 5/09/67 (a)(c) | 4,312 | 3,492,720 | |||||
Preferred Securities | Zenith National Insurance Capital Trust I, | ||||||
8.55%, 8/01/28 (a) | 3,750 | 3,581,250 | |||||
85,641,493 | |||||||
Capital Trusts | |||||||
Multi-Utilities — 3.8% | |||||||
Building Products — 0.7% | Dominion Resources Capital Trust I, | ||||||
C8 Capital SPV Ltd., 6.64% (a)(b)(c) | 3,915 | 2,760,545 | 7.83%, 12/01/27 | 10,000 | 10,022,080 | ||
Capital Markets — 5.3% | Dominion Resources, Inc., 7.50% (c) | 5,449 | 5,340,020 | ||||
Ameriprise Financial, Inc., 7.52%, 6/01/66 (c) | 7,600 | 6,460,000 | 15,362,100 | ||||
Lehman Brothers Holdings Capital Trust V, | |||||||
3.64% (b)(c)(d)(e) | 6,400 | 640 | Oil, Gas & Consumable Fuels — 1.4% | ||||
State Street Capital Trust III, 8.25% (b)(c) | 2,920 | 2,945,200 | Enterprise Products Operating LLC, | ||||
State Street Capital Trust IV, 1.30%, 6/01/67 (c) | 18,235 | 12,233,953 | 8.38%, 8/01/66 (c) | 2,000 | 1,960,000 | ||
TransCanada PipeLines Ltd., 6.35%, 5/15/67 (c) | 4,000 | 3,723,180 | |||||
21,639,793 | |||||||
5,683,180 | |||||||
Commercial Banks — 12.0% | |||||||
ABN AMRO North America Holding, Preferred | Road & Rail — 0.9% | ||||||
Capital Repackaging Trust I, 6.52% (a)(b)(c) | 12,035 | 8,544,850 | BNSF Funding Trust I, 6.61%, 12/15/55 (c) | 3,750 | 3,548,437 | ||
Bank One Capital III, 8.75%, 9/01/30 | 2,000 | 2,252,786 | Total Capital Trusts — 49.3% | 201,733,947 | |||
Bank of Ireland Capital Funding II, LP, | |||||||
5.57% (a)(b)(c) | 1,715 | 754,600 | |||||
Bank of Ireland Capital Funding III, LP, | |||||||
6.11% (a)(b)(c) | 2,951 | 1,298,440 | Preferred Stocks | Shares | |||
Barclays Bank Plc, 5.93% (a)(b)(c) | 2,500 | 1,950,000 | Capital Markets — 0.0% | ||||
First Empire Capital Trust II, 8.28%, 6/01/27 | 3,630 | 2,757,751 | Deutsche Bank Contingent Capital Trust II, 6.55% | 530 | 10,817 | ||
HSBC America Capital Trust I, 7.81%, 12/15/26 (a) | 2,000 | 1,978,198 | |||||
HSBC Capital Funding LP/Jersey Channel Islands, | Commercial Banks — 8.3% | ||||||
10.18% (a)(b)(c)(f) | 4,835 | 5,753,650 | Barclays Bank Plc, 8.13% | 225,000 | 5,298,750 | ||
HSBC Finance Capital Trust IX, 5.91%, 11/30/35 (c) | 7,300 | 5,767,000 | First Tennessee Bank NA, 3.90% (a)(c) | 4,650 | 2,332,266 | ||
Lloyds Banking Group Plc, 6.66%, 11/21/49 (a)(c) | 5,000 | 3,250,000 | HSBC USA, Inc.: | ||||
National City Preferred Capital Trust I, 12.00% (b)(c) | 1,100 | 1,258,983 | Series D, 4.50% (c)(g) | 131,700 | 2,763,066 | ||
NationsBank Capital Trust III, 0.83%, 1/15/27 (c) | 13,470 | 8,627,037 | Series H, 6.50% | 120,000 | 2,436,000 | ||
SMFG Preferred Capital USD 3 Ltd., 9.50% (a)(b)(c) | 3,550 | 3,848,910 | Provident Financial Group, Inc., 7.75% | 166,800 | 4,024,050 | ||
Santander Perpetual SA Unipersonal, | Royal Bank of Scotland Group Plc, Series M, 6.40% | 15,000 | 155,100 | ||||
6.67%, 10/29/49 (a)(b)(c) | 1,125 | 1,026,555 | SG Preferred Capital II, 6.30% (a)(c) | 23,000 | 13,800,000 | ||
SunTrust Preferred Capital I, 5.85% (b)(c) | 307 | 200,318 | Santander Finance Preferred SA Unipersonal, 6.80% | 117,094 | 3,203,692 | ||
49,269,078 | 34,012,924 | ||||||
Diversified Financial Services — 3.7% | Diversified Financial Services — 1.9% | ||||||
AgFirst Farm Credit Bank, 8.39%, 12/15/16 (c) | 4,000 | 3,041,668 | Cobank ACB, 7.00% (a)(b) | 152,000 | 5,305,758 | ||
Farm Credit Bank of Texas, Series 1, 7.56% (b)(c) | 2,500 | 1,753,875 | ING Groep NV, 7.20% | 140 | 2,451,769 | ||
ING Capital Funding Trust III, 8.44% (b)(c) | 6,066 | 5,171,265 | 7,757,527 | ||||
JPMorgan Chase Capital XXIII, 1.44%, 5/15/77 (c) | 7,500 | 5,282,513 | Electric Utilities — 3.4% | ||||
15,249,321 | Alabama Power Co.: | ||||||
Electric Utilities — 0.6% | 5.83% | 14,000 | 349,300 | ||||
PPL Capital Funding, 6.70%, 3/30/67 (c) | 3,000 | 2,580,000 | 6.50% | 145,000 | 4,350,000 | ||
Entergy Arkansas, Inc., 6.45% | 114,400 | 2,420,281 | |||||
Insurance — 20.9% | Entergy Louisiana LLC, 6.95% | 49,850 | 4,665,314 | ||||
AON Corp., 8.21%, 1/01/27 | 2,500 | 2,475,000 | Interstate Power & Light Co., Series B, 8.38% | 80,000 | 2,220,000 | ||
AXA SA, 6.38% (a)(b)(c) | 13,470 | 11,415,825 | |||||
Ace Capital Trust II, 9.70%, 4/01/30 | 5,000 | 5,526,140 | 14,004,895 | ||||
The Allstate Corp., 6.50%, 5/15/57 (c) | 12,775 | 10,922,625 | Insurance — 12.5% | ||||
Chubb Corp., 6.38%, 3/29/67 (c) | 2,000 | 1,815,000 | Aspen Insurance Holdings Ltd., 7.40% (c) | 194,000 | 3,938,200 | ||
Farmers Exchange Capital, 7.05%, 7/15/28 (a) | 2,500 | 2,141,357 | Axis Capital Holdings Ltd.: | ||||
GE Global Insurance Holding Corp., 7.75%, 6/15/30 | 10,000 | 10,207,480 | Series A, 7.25% | 129,300 | 2,915,715 | ||
Genworth Financial, Inc., 6.15%, 11/15/66 (c) | 3,000 | 2,010,000 | Series B, 7.50% (c) | 36,000 | 2,695,500 | ||
Liberty Mutual Group, Inc., 10.75%, 6/15/88 (a)(c) | 2,925 | 3,071,250 | Endurance Specialty Holdings Ltd., Series A, 7.75% | 139,200 | 3,048,480 | ||
Lincoln National Corp., 7.00%, 5/17/66 (c) | 3,350 | 2,747,000 | MetLife, Inc., Series B, 6.50% | 904,400 | 19,652,612 | ||
MetLife, Inc., 6.40%, 12/15/66 | 6,825 | 5,912,156 | Prudential Plc, 6.50% | 92,400 | 1,931,160 | ||
Nationwide Life Global Funding I, 6.75%, 5/15/67 | 7,000 | 5,305,545 | RenaissanceRe Holding Ltd., Series D, 6.60% | 435,000 | 8,965,350 | ||
Oil Casualty Insurance Ltd., 8.00%, 9/15/34 (a) | 3,605 | 2,271,150 | Zurich RegCaPS Funding Trust, 6.58% (a)(c) | 9,800 | 7,699,125 | ||
50,846,142 | |||||||
See Notes to Financial Statements. | |||||||
14 | ANNUAL REPORT | OCTOBER 31, 2009 |
Schedule of Investments (continued) | BlackRock Credit Allocation Income Trust II, Inc. (PSY) | |||||||||||
(Percentages shown are based on Net Assets) | ||||||||||||
Preferred Stocks | Shares | Value | Short-Term Securities | Shares | Value | |||||||
Multi-Utilities — 0.9% | BlackRock Liquidity Funds, TempFund, | |||||||||||
Pacific Gas & Electric Co., Series A, 6.00% | 140,000 | $ 3,738,000 | Institutional Class, 0.18% (h)(i) | 41,019,397 | $ 41,019,397 | |||||||
Real Estate Investment Trusts (REITs) — 5.3% | Total Short-Term Securities | |||||||||||
BRE Properties, Inc., Series D, 6.75% | 35,000 | 718,200 | (Cost — $41,019,397) — 10.0% | 41,019,397 | ||||||||
Developers Diversified Realty Corp., 8.00% | 400,000 | 7,156,000 | Total Investments (Cost — $524,066,199*) — 107.5% | 440,148,651 | ||||||||
First Industrial Realty Trust, Inc., 6.24% (c) | 2,390 | 1,058,322 | Other Assets Less Liabilities — 33.8% | 138,235,005 | ||||||||
Firstar Realty LLC, 8.88% (a) | 4,000 | 3,412,500 | Preferred Shares, at Redemption Value — (41.3)% | (169,090,727) | ||||||||
Kimco Realty Corp., Series F, 6.65% | 50,000 | 1,011,500 | ||||||||||
Public Storage: | Net Assets Applicable to Common Shares — 100.0% | $ 409,292,929 | ||||||||||
Series F, 6.45% | 40,000 | 850,000 | * The cost and unrealized appreciation (depreciation) of investments as of October 31, | |||||||||
Series I, 7.25% | 160,000 | 3,816,000 | 2009, as computed for federal income tax purposes, were as follows: | |||||||||
Series M, 6.63% | 71,900 | 1,542,255 | ||||||||||
Regency Centers Corp., Series D, 7.25% | 100,000 | 2,175,000 | Aggregate cost | $ 525,840,523 | ||||||||
21,739,777 | Gross unrealized appreciation | $ 9,977,374 | ||||||||||
Gross unrealized depreciation | (95,669,246) | |||||||||||
Wireless Telecommunication Services — 0.6% | ||||||||||||
Centaur Funding Corp., 9.08% (a) | 2,423 | 2,431,329 | Net unrealized depreciation | $ (85,691,872) | ||||||||
Total Preferred Stocks — 32.9% | 134,541,411 | (a) Security exempt from registration under Rule 144A of the Securities Act of 1933. | ||||||||||
These securities may be resold in transactions exempt from registration to qualified | ||||||||||||
institutional investors. | ||||||||||||
Shares | (b) Security is perpetual in nature and has no stated maturity date. | |||||||||||
Trust Preferreds | (000) | (c) Variable rate security. Rate shown is as of report date. | ||||||||||
Communications Equipment — 0.4% | (d) Non-income producing security. | |||||||||||
Corporate-Backed Trust Certificates, Motorola | ||||||||||||
Debenture Backed Series 2002-14, | (e) Issuer filed for bankruptcy and/or is in default of interest payments. | |||||||||||
8.38%, 11/15/28 | 80 | 1,778,167 | (f) All or a portion of security held as collateral in connection with open reverse repur- | |||||||||
Consumer Finance — 3.6% | chase agreements. | |||||||||||
Capital One Capital II, 7.50%, 6/15/66 | 668 | 14,799,807 | (g) All or a portion of security has been pledged as collateral in connection with open | |||||||||
Electric Utilities — 2.3% | financial futures contracts. | |||||||||||
Georgia Power Co., Series O, 1.48%, 4/15/33 | 50 | 1,229,393 | (h) Investments in companies considered to be an affiliate of the Fund, for purposes of | |||||||||
HECO Capital Trust III, 6.50%, 3/18/34 | 50 | 1,167,634 | Section 2(a)(3) of the Investment Company Act of 1940, were as follows: | |||||||||
National Rural Utilities Cooperative Finance Corp., | ||||||||||||
6.75%, 2/15/43 | 50 | 1,236,387 | Net | |||||||||
PPL Energy Supply LLC, 7.00%, 7/15/46 | 233 | 5,970,175 | Affiliate | Activity | Income | |||||||
9,603,589 | BlackRock Liquidity Funds, TempFund, | |||||||||||
Gas Utilities — 3.7% | Institutional Class | $ 41,019,397 | $ 70,651 | |||||||||
Southwest Gas Capital II, 7.70%, 9/15/43 | 605 | 14,940,766 | BlackRock Liquidity Series, LLC | |||||||||
Cash Sweep Series | $(28,803,004) | $ 80,088 | ||||||||||
Insurance — 2.7% | ||||||||||||
ABN AMRO North America Capital Funding Trust II, | (i) Represents the current yield as of report date. | |||||||||||
2.87% (a)(b)(c) | 11 | 477,570 | • | For Fund compliance purposes, the Fund’s industry classifications refer to any one | ||||||||
Lincoln National Capital VI, Series F, | or more of the industry sub-classifications used by one or more widely recognized | |||||||||||
6.75%, 9/11/52 | 200 | 4,061,735 | market indexes or ratings group indexes, and/or as defined by Fund management. | |||||||||
W.R. Berkley Capital Trust II, 6.75%, 7/26/45 | 295 | 6,578,745 | This definition may not apply for purposes of this report, which may combine indus- | |||||||||
11,118,050 | try sub-classifications for reporting ease. | |||||||||||
Total Trust Preferreds — 12.7% | 52,240,379 | • | Reverse repurchase agreements outstanding as of October 31, 2009 were as follows: | |||||||||
Total Preferred Securities — 94.9% | 388,515,737 | Interest | Trade | Maturity | Net Closing | Face | ||||||
Total Long-Term Investments | Counterparty | Rate | Date | Date | Amount | Amount | ||||||
(Cost — $483,046,802) — 97.5% | 399,129,254 | Barclays Bank Plc | 0.75% | 10/16/09 | 11/16/09 $ 9,516,732 | $ 9,510,590 | ||||||
• | Financial futures contracts purchased as of October 31, 2009 were as follows: | |||||||||||
Expiration | Notional | Unrealized | ||||||||||
Contracts | Issue | Date | Amount | Appreciation | ||||||||
25 | 30-Year U.S. | |||||||||||
Treasury Bonds December 2009 | $2,969,061 | $ 34,845 | ||||||||||
• | Credit default swaps on single-name issue — buy protection outstanding as of | |||||||||||
October 31, 2009 were as follows: | ||||||||||||
Pay | Notional | |||||||||||
Fixed | Counter- | Amount | Unrealized | |||||||||
Issuer | Rate | party | Expiration | (000) | Depreciation | |||||||
Nordstrom, Inc. | 5.20% | Deutsche | June | |||||||||
Bank AG | 2014 | $ 2,000 | $ (337,904) | |||||||||
See Notes to Financial Statements. | ||||||||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 15 |
Schedule of Investments (concluded) | BlackRock Credit Allocation Income Trust II, Inc. (PSY) | |||||
• Fair Value Measurements — Various inputs are used in determining the fair value of | The following tables summarize the inputs used as of October 31, 2009 in | |||||
investments, which are as follows: | determining the fair valuation of the Fund’s investments: | |||||
• Level 1 — price quotations in active markets/exchanges for identical assets | Investments in | |||||
and liabilities | Valuation Inputs | Securities | ||||
• Level 2 — other observable inputs (including, but not limited to: quoted prices for | Assets | |||||
similar assets or liabilities in markets that are active, quoted prices for identical | Level 1 | |||||
or similar assets or liabilities in markets that are not active, inputs other than | Long-Term Investments: | |||||
quoted prices that are observable for the assets or liabilities (such as interest | Preferred Stocks | $ 84,696,966 | ||||
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and | Trust Preferreds | 51,762,809 | ||||
default rates) or other market-corroborated inputs) | Short-Term Securities | 41,019,397 | ||||
• Level 3 — unobservable inputs based on the best information available in the | Total Level 1 | 177,479,172 | ||||
circumstances, to the extent observable inputs are not available (including the | Level 2 | |||||
Fund’s own assumptions used in determining the fair value of investments) | Long-Term Investments: | |||||
The inputs or methodology used for valuing securities are not necessarily an indica- | Capital Trusts | 199,462,797 | ||||
tion of the risk associated with investing in those securities. For information about | Corporate Bonds | 10,347,396 | ||||
the Fund’s policy regarding valuation of investments and other significant accounting | Preferred Stocks | 36,044,445 | ||||
policies, please refer to Note 1 of the Notes to Financial Statements. | Trust Preferreds | 477,570 | ||||
Total Level 2 | 246,332,208 | |||||
Level 3 | ||||||
Long-Term Investments: | ||||||
Capital Trusts | 2,271,150 | |||||
Corporate Bonds | 266,121 | |||||
Preferred Stocks | 13,800,000 | |||||
Total Level 3 | 16,337,271 | |||||
Total | $ 440,148,651 | |||||
Other Financial | ||||||
Valuation Inputs | Instruments1 | |||||
Assets | Liabilities | |||||
Level 1 | $ 34,845 | — | ||||
Level 2 | — | $ (337,904) | ||||
Level 3 | — | — | ||||
Total | $ 34,845 | $ (337,904) | ||||
1 Other financial instruments are financial futures contracts and swaps. Financial | ||||||
futures contracts and swaps are valued at the unrealized appreciation/ | ||||||
depreciation on the instrument. | ||||||
The following is a reconciliation of investments for unobservable inputs (Level 3) used in determining fair value: | ||||||
Investments in Securities | ||||||
Capital | Corporate | Preferred | ||||
Trusts | Bonds | Stocks | Total | |||
Balance, as of October 31, 2008 | — | — | — | — | ||
Accrued discounts/premiums | — | — | — | — | ||
Realized gain (loss) | — | — | — | — | ||
Change in unrealized appreciation/depreciation | — | — | — | — | ||
Net purchases (sales) | — | — | — | — | ||
Net transfers in/out of Level 3 | $ 2,271,150 | $ 266,121 | $ 13,800,000 | $ 16,337,271 | ||
Balance, as of October 31, 2009 | $ 2,271,150 | $ 266,121 | $ 13,800,000 | $ 16,337,271 | ||
See Notes to Financial Statements. | ||||||
16 | ANNUAL REPORT | OCTOBER 31, 2009 |
Schedule of Investments October 31, 2009 | BlackRock Credit Allocation Income Trust III (BPP) | ||||||
(Percentages shown are based on Net Assets) | |||||||
Par | Par | ||||||
Corporate Bonds | (000) | Value | Capital Trusts | (000) | Value | ||
Commercial Banks — 0.5% | Insurance — 12.2% | ||||||
RESPARCS Funding LP I, 8.00% (a)(b)(c) | $ 4,000 | $ 1,000,000 | AXA SA, 6.38% (a)(d)(e) | $ 7,150 | $ 6,059,625 | ||
Containers & Packaging — 0.1% | The Allstate Corp., 6.50%, 5/15/57 (e) | 6,350 | 5,429,250 | ||||
Impress Holdings BV, 3.41%, 9/15/13 (d)(e) | 240 | 228,300 | Chubb Corp., 6.38%, 3/29/67 (e)(h) | 900 | 816,750 | ||
Genworth Financial, Inc., 6.15%, 11/15/66 (e) | 1,475 | 988,250 | |||||
Hotels, Restaurants & Leisure — 0.0% | Liberty Mutual Group, Inc., 10.75%, 6/15/88 (d)(e) | 900 | 945,000 | ||||
Greektown Holdings, LLC, 10.75%, 12/01/13 (b)(c)(d) | 362 | 72,400 | Lincoln National Corp., 7.00%, 5/17/66 (e) | 900 | 738,000 | ||
Insurance — 5.2% | MetLife, Inc., 6.40%, 12/15/66 | 900 | 779,625 | ||||
Kingsway America, Inc., 7.50%, 2/01/14 | 9,000 | 7,200,000 | Nationwide Life Global Funding I, 6.75%, 5/15/67 | 900 | 682,141 | ||
QBE Insurance Group Ltd., 9.75%, 3/14/14 (d) | 2,975 | 3,398,488 | Progressive Corp., 6.70%, 6/15/67 (e) | 900 | 788,352 | ||
Reinsurance Group of America, 6.75%, 12/15/65 (e) | 1,300 | 1,007,500 | |||||
10,598,488 | The Travelers Cos., Inc., 6.25%, 3/15/67 (e)(h) | 900 | 810,000 | ||||
Machinery — 0.2% | White Mountains Re Group Ltd., 7.51% (a)(d)(e) | 2,600 | 2,147,808 | ||||
AGY Holding Corp., 11.00%, 11/15/14 | 460 | 374,900 | ZFS Finance (USA) Trust IV, 5.88%, 5/09/32 (d)(e) | 190 | 153,613 | ||
ZFS Finance (USA) Trust V, 6.50%, 5/09/67 (d)(e) | 2,209 | 1,789,290 | |||||
Media — 1.7% | |||||||
Zenith National Insurance Capital Trust I, | |||||||
CMP Susquehanna Corp., 4.75%, 5/15/14 (d) | 9 | 180 | |||||
8.55%, 8/01/28 (d) | 1,800 | 1,719,000 | |||||
Comcast Holdings Corp., 2.00%, 11/15/29 (f) | 110 | 3,089,285 | |||||
Local Insight Regatta Hldgs, Inc., 11.00%, 12/01/17 | 700 | 343,000 | 24,854,204 | ||||
3,432,465 | Multi-Utilities — 0.4% | ||||||
Puget Sound Energy, Inc., Series A, 6.97%, 6/01/67 (e) | 925 | 809,301 | |||||
Oil, Gas & Consumable Fuels — 0.0% | |||||||
EXCO Resources, Inc., 7.25%, 1/15/11 | 75 | 74,625 | Oil, Gas & Consumable Fuels — 0.4% | ||||
TransCanada PipeLines Ltd., 6.35%, 5/15/67 (e) | 900 | 837,716 | |||||
Paper & Forest Products — 0.5% | |||||||
International Paper Co., 8.70%, 6/15/38 | 900 | 1,037,019 | Total Capital Trusts — 31.9% | 65,062,367 | |||
Professional Services — 0.1% | |||||||
FTI Consulting, Inc., 7.75%, 10/01/16 | 100 | 100,500 | |||||
Specialty Retail — 0.0% | Preferred Stocks | Shares | |||||
Lazy Days’ R.V. Center, Inc., 11.75%, 5/15/12 (b)(c) | 1,182 | 11,820 | |||||
Capital Markets — 0.0% | |||||||
Total Corporate Bonds — 8.3% | 16,930,517 | Lehman Brothers Holdings Inc., Series D, 5.67% (b)(c) | 31,100 | 9,641 | |||
Commercial Banks — 8.6% | |||||||
Banesto Holdings, Ltd. Series A, 10.50% (d) | 30,000 | 669,375 | |||||
Preferred Securities | Barclays Bank Plc, 8.13% | 100,000 | 2,355,000 | ||||
First Republic Preferred Capital Corp., 7.25% | 117,045 | 2,130,219 | |||||
Capital Trusts | HSBC USA, Inc., Series H, 6.50% | 330,000 | 6,699,000 | ||||
Royal Bank of Scotland Group Plc, Series M, 6.40% | 10,000 | 103,400 | |||||
Building Products — 0.7% | Santander Finance Preferred SA Unipersonal 6.80% | 38,500 | 1,053,360 | ||||
C8 Capital SPV Ltd., 6.64% (a)(d)(e) | 1,945 | 1,371,458 | Union Planter Preferred Funding Corp., 7.75% (d) | 60 | 4,550,625 | ||
Capital Markets — 3.9% | 17,560,979 | ||||||
State Street Capital Trust III, 8.25% (a)(e) | 1,385 | 1,396,952 | |||||
Diversified Financial Services — 2.3% | |||||||
State Street Capital Trust IV, 1.30%, 6/01/67 (e) | 9,675 | 6,491,006 | ING Groep NV, 7.20% | 70 | 1,225,885 | ||
7,887,958 | JPMorgan Chase & Co., Series E, 6.15% | 75,000 | 3,531,750 | ||||
Commercial Banks — 9.4% | 4,757,635 | ||||||
Bank of Ireland Capital Funding II, LP, 5.57% (a)(d)(e) | 854 | 375,760 | Electric Utilities — 0.7% | ||||
Bank of Ireland Capital Funding III, LP, 6.11% (a)(d)(e) | 1,471 | 647,240 | Alabama Power Co., 6.50% | 50,000 | 1,500,000 | ||
Barclays Bank Plc, 5.93% (a)(d)(e) | 890 | 694,200 | |||||
CBA Capital Trust I, 5.81% (a)(d) | 5,000 | 4,550,000 | Insurance — 15.9% | ||||
FCB/NC Capital Trust I, 8.05%, 3/01/28 | 1,100 | 936,369 | Arch Capital Group Ltd., Series A, 8.00% | 117,414 | 2,841,419 | ||
Aspen Insurance Holdings Ltd., 7.40% (e) | 115,000 | 2,334,500 | |||||
Lloyds TSB Bank Plc, 6.90% (a) | 4,399 | 3,343,240 | |||||
Endurance Specialty Holdings Ltd., Series A, 7.75% | 172,400 | 3,775,560 | |||||
NBP Capital Trust III, 7.38% (a) | 2,000 | 1,485,000 | |||||
MetLife, Inc., Series B, 6.50% | 314,500 | 6,834,085 | |||||
National City Preferred Capital Trust I, 12.00% (a)(e) | 600 | 686,718 | PartnerRe Ltd., Series C, 6.75% | 209,400 | 4,634,022 | ||
SMFG Preferred Capital USD 3 Ltd., 9.50% (a)(d)(e) | 1,725 | 1,870,245 | Prudential Plc, 6.50% | 62,000 | 1,295,800 | ||
Santander Perpetual SA Unipersonal, 6.67%(a)(d)(e) | 625 | 570,308 | Prudential Plc, 6.50% (a) | 6,000 | 4,875,000 | ||
SunTrust Preferred Capital I, 5.85% (a)(e) | 303 | 197,708 | RenaissanceRe Holding Ltd., Series D, 6.60% | 210,000 | 4,328,100 | ||
Wells Fargo Capital XIII Series GMTN, 7.70% (a)(e) | 1,700 | 1,581,000 | Zurich RegCaPS Funding Trust, 6.58% (d)(e) | 2,000 | 1,571,250 | ||
Westpac Capital Trust IV, 5.26% (a)(d)(e) | 3,000 | 2,367,210 | |||||
32,489,736 | |||||||
19,304,998 | |||||||
Media — 0.0% | |||||||
Diversified Financial Services — 4.5% | CMP Susquemanna Radio Holdings Corp., | ||||||
JPMorgan Chase Capital XXI, Series U, | 0.00% (b)(d)(e) | 2,052 | — | ||||
1.23%, 2/02/37 (e)(g) | 7,125 | 4,862,898 | |||||
Real Estate Investment Trusts (REITs) — 2.3% | |||||||
JPMorgan Chase Capital XXIII, 1.44%, 5/15/77 (e) | 6,190 | 4,359,834 | BRE Properties, Inc., Series D, 6.75% | 20,000 | 410,400 | ||
9,222,732 | Public Storage: | ||||||
Electric Utilities — 0.4% | Series F, 6.45% | 20,000 | 425,000 | ||||
PPL Capital Funding, 6.70%, 3/30/67 (e) | 900 | 774,000 | Series M, 6.63% | 35,000 | 750,750 | ||
SunTrust Real Estate Investment Trust, 9.00% (d) | 30 | 3,027,189 | |||||
4,613,339 | |||||||
See Notes to Financial Statements. | Total Preferred Stocks — 29.8% | 60,931,330 | |||||
ANNUAL REPORT | OCTOBER 31, 2009 | 17 |
Schedule of Investments (continued) | BlackRock Credit Allocation Income Trust III (BPP) | ||||||||||||
(Percentages shown are based on Net Assets) | |||||||||||||
Shares | |||||||||||||
Trust Preferreds | (000) | Value | Short-Term Securities | Shares | Value | ||||||||
Capital Markets — 1.2% | BlackRock Liquidity Funds, TempFund, | ||||||||||||
Structured Asset Trust Unit Repackagings: | Institutional Class, 0.18% (j)(k) | 51,450,797 | $ 51,450,797 | ||||||||||
Credit Suisse First Boston (USA), Inc., Debenture | Total Short-Term Securities | ||||||||||||
Backed, Series 2003-13, 6.25%, 7/15/32 | 11 | $ 250,671 | (Cost — $51,450,797) — 25.2% | 51,450,797 | |||||||||
Goldman Sachs Group, Inc., Debenture Backed, | |||||||||||||
Series 2003-06, 6.00%, 2/15/33 | 103 | 2,179,215 | Total Investments (Cost — $256,459,826*) — 109.6% | 223,807,066 | |||||||||
Other Assets Less Liabilities — 24.9% | 50,753,074 | ||||||||||||
2,429,886 | Preferred Shares, at Redemption Value — (34.5)% | (70,426,884) | |||||||||||
Commercial Banks — 2.0% | Net Assets Applicable to Common Shares — 100.0% | $ 204,133,256 | |||||||||||
Mizuho Capital Investment 1 Ltd., 6.69% (a)(d)(e) | 5,000 | 4,170,930 | |||||||||||
Diversified Financial Services — 0.1% | * The cost and unrealized appreciation (depreciation) of investments as of October 31, | ||||||||||||
PPLUS Trust Certificates, Series VAL-1 Class A, | 2009, as computed for federal income tax purposes, were as follows: | ||||||||||||
7.25%, 4/15/32 | 11 | 263,407 | Aggregate cost | $ 257,997,371 | |||||||||
Food Products — 1.2% | Gross unrealized appreciation | $ 3,697,471 | |||||||||||
Corporate-Backed Trust Certificates, Kraft Foods, Inc., | Gross unrealized depreciation | ( 37,887,776) | |||||||||||
Debenture Backed, Series 2003-11, | Net unrealized depreciation | $ ( 34,190,305) | |||||||||||
5.88%, 11/01/31 | 100 | 2,417,000 | |||||||||||
(a) Security is perpetual in nature and has no stated maturity date. | |||||||||||||
Insurance — 1.1% | |||||||||||||
Everest Re Capital Trust, 6.20%, 3/29/34 | 30 | 597,330 | (b) Non-income producing security. | ||||||||||
Financial Security Assurance Holdings Ltd., | (c) Issuer filed for bankruptcy and/or is in default of interest payments. | ||||||||||||
5.60%, 7/15/03 | 15 | 193,235 | (d) Security exempt from registration under Rule 144A of the Securities Act of 1933. | ||||||||||
The Phoenix Cos., Inc., 7.45%, 1/15/32 | 79 | 1,423,286 | These securities may be resold in transactions exempt from registration to qualified | ||||||||||
2,213,851 | institutional investors. | ||||||||||||
Media — 6.0% | (e) Variable rate security. Rate shown is as of report date. | ||||||||||||
Comcast Corp.: | (f) Convertible security. | ||||||||||||
7.00%, 9/15/55 | 50 | 1,210,942 | (g) All or a portion of security held as collateral in connection with open financial | ||||||||||
6.63%, 5/15/56 | 470 | 10,786,500 | futures contracts. | ||||||||||
Corporate-Backed Trust Certificates, News | (h) All or a portion of security held as collateral in connection with open reverse repur- | ||||||||||||
America Debenture Backed, Series 2002-9, | chase agreements. | ||||||||||||
8.13%, 12/01/45 | 7 | 169,606 | |||||||||||
(i) Warrants entitle the Fund to purchase a predetermined number of shares of com- | |||||||||||||
12,167,048 | mon stock and are non-income producing. The purchase price and number of | ||||||||||||
Oil, Gas & Consumable Fuels — 1.8% | shares are subject to adjustment under certain conditions until the expiration date. | ||||||||||||
Nexen, Inc., 7.35%, 11/01/43 | 155 | 3,623,900 | (j) Investments in companies considered to be an affiliate of the Fund, for purposes of | ||||||||||
Wireless Telecommunication Services — 0.7% | Section 2(a)(3) of the Investment Company Act of 1940, were as follows: | ||||||||||||
Structured Repackaged Asset-Backed Trust Securities, | Net | ||||||||||||
Sprint Capital Corp., Debenture Backed, Series | Affiliate | Activity | Income | ||||||||||
2004-2, 6.50%, 11/15/28 | 103 | 1,526,233 | |||||||||||
BlackRock Liquidity Funds, TempFund, | |||||||||||||
Total Trust Preferreds — 14.1% | 28,812,555 | Institutional Class | $51,450,797 | $127,321 | |||||||||
Total Preferred Securities — 75.8% | 154,805,952 | (k) Represents the current yield as of report date. | |||||||||||
• | For Fund compliance purposes, the Fund’s industry classifications refer to any one | ||||||||||||
or more of the industry sub-classifications used by one or more widely recognized | |||||||||||||
market indexes or ratings group indexes, and/or as defined by Fund management. | |||||||||||||
Warrants (i) | Shares | This definition may not apply for purposes of this report, which may combine indus- | |||||||||||
Media — 0.0% | try sub-classifications for reporting ease. | ||||||||||||
CMP Susquemanna Radio Holdings Corp. | • | Reverse repurchase agreements outstanding as of October 31, 2009 were as follows: | |||||||||||
(expires 3/26/19) (d) | 2,345 | — | Interest | Trade | Maturity | Net Closing | Face | ||||||
Total Warrants — 0.0% | — | Counterparty | Rate | Date | Date | Amount | Amount | ||||||
Barclays Bank Plc | 0.75% | 10/16/09 | 11/02/09 $13,239,375 | $13,234,688 | |||||||||
• | Financial futures contracts purchased as of October 31, 2009 were as follows: | ||||||||||||
Investment Companies | Expiration | Notional | Unrealized | ||||||||||
Contracts | Issue | Date | Value | Appreciation | |||||||||
Ultra Short Real Estate Proshares | 60,000 | 619,800 | |||||||||||
Total Investment Companies — 0.3% | 619,800 | 14 | 30-Year U.S. | ||||||||||
Treasury Bond December 2009 $ 1,662,675 | $ 19,513 | ||||||||||||
Total Long Term Investments | |||||||||||||
(Cost — $205,009,029) — 84.4% | 172,356,269 | • | Credit default swaps on single-name issue — buy protection outstanding as of | ||||||||||
October 31, 2009 were as follows: | |||||||||||||
Pay | Notional | ||||||||||||
Fixed | Counter- | Amount | Unrealized | ||||||||||
Issuer | Rate | party | Expiration | (000) | Depreciation | ||||||||
Nordstrom, Inc. | 5.20% | Deutsche | June | ||||||||||
Bank AG | 2014 | $1,000 | $ (168,952) | ||||||||||
See Notes to Financial Statements. | |||||||||||||
18 | ANNUAL REPORT | OCTOBER 31, 2009 |
Schedule of Investments (concluded) | BlackRock Credit Allocation Income Trust III (BPP) | |||||
• Fair Value Measurements — Various inputs are used in determining the fair value of | The following tables summarize the inputs used as of October 31, 2009 in deter- | |||||
investments, which are as follows: | mining the fair valuation of the Fund’s investments: | |||||
• Level 1 — price quotations in active markets/exchanges for identical assets | Investments in | |||||
and liabilities | Valuation Inputs | Securities | ||||
• Level 2 — other observable inputs (including, but not limited to: quoted prices | Assets | |||||
for similar assets or liabilities in markets that are active, quoted prices for iden- | Level 1 | |||||
tical or similar assets or liabilities in markets that are not active, inputs other | Long-Term Investments: | |||||
than quoted prices that are observable for the assets or liabilities (such as | Preferred Stocks | $ 46,237,891 | ||||
interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit | Trust Preferreds | 24,448,090 | ||||
risks and default rates) or other market-corroborated inputs) | Investment Companies | 619,800 | ||||
• Level 3 — unobservable inputs based on the best information available in the | Short-Term Securities | 51,450,797 | ||||
circumstances, to the extent observable inputs are not available (including the | Total Level 1 | 122,756,578 | ||||
Fund’s own assumptions used in determining the fair value of investments) | Level 2 | |||||
The inputs or methodology used for valuing securities are not necessarily an | Long-Term Investments: | |||||
indication of the risk associated with investing in those securities. For information | Corporate Bonds | 16,918,517 | ||||
about the Fund’s policy regarding valuation of investments and other significant | Capital Trusts | 65,062,367 | ||||
accounting policies, please refer to Note 1 of the Notes to Financial Statements. | Preferred Stocks | 11,666,250 | ||||
Trust Preferreds | 4,364,165 | |||||
Total Level 2 | 98,011,299 | |||||
Level 3 | ||||||
Long-Term Investments: | ||||||
Corporate Bonds | 12,000 | |||||
Preferred Stocks | 3,027,189 | |||||
Total Level 3 | 3,039,189 | |||||
Total | $ 223,807,066 | |||||
Other Financial | ||||||
Valuation Inputs | Instruments1 | |||||
Assets | Liabilities | |||||
Level 1 | $ 19,513 | — | ||||
Level 2 | — | $ (168,952) | ||||
Level 3 | — | — | ||||
Total | $ 19,513 | $ (168,952) | ||||
1 Other financial instruments are financial futures contracts and swaps. | ||||||
Financial futures contracts and swaps are valued at the unrealized | ||||||
appreciation/depreciation on the instrument. | ||||||
The following is a reconciliation of investments for unobservable inputs (Level 3) used in determining fair value: | ||||||
Investments in Securities | ||||||
Corporate | Preferred | |||||
Bonds | Stocks | Total | ||||
Balance, as of October 31, 2008 | — | — | — | |||
Accrued discounts/premiums | — | — | — | |||
Realized gain (loss) | — | — | — | |||
Change in unrealized appreciation/depreciation | — | — | — | |||
Net purchases (sales) | — | — | — | |||
Net transfers in/out of Level 3 | $ 12,000 | $ 3,027,189 | $ 3,039,189 | |||
Balance, as of October 31, 2009 | $ 12,000 | $ 3,027,189 | $ 3,039,189 | |||
See Notes to Financial Statements. | ||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 19 |
Schedule of Investments October 31, 2009 | BlackRock Credit Allocation Income Trust IV (BTZ) | |||||
(Percentages shown are based on Net Assets) | ||||||
Common Stocks | Shares | Value | Common Stocks | Shares | Value | |
Aerospace & Defense — 0.1% | Diversified Financial Services — 0.3% | |||||
Honeywell International, Inc. | 1,800 | $ 64,602 | Bank of America Corp. | 36,800 | $ 536,544 | |
Lockheed Martin Corp. | 3,800 | 261,402 | JPMorgan Chase & Co. | 21,100 | 881,347 | |
Northrop Grumman Corp. | 5,200 | 260,676 | NYSE Euronext | 9,100 | 235,235 | |
United Technologies Corp. | 1,800 | 110,610 | 1,653,126 | |||
697,290 | Diversified Telecommunication Services — 0.3% | |||||
Air Freight & Logistics — 0.1% | AT&T Inc. | 38,887 | 998,229 | |||
United Parcel Service, Inc. Class B | 8,800 | 472,384 | CenturyTel, Inc. | 4,339 | 140,844 | |
Auto Components — 0.0% | Verizon Communications, Inc. | 20,900 | 618,431 | |||
Johnson Controls, Inc. | 3,700 | 88,504 | 1,757,504 | |||
Beverages — 0.2% | Electric Utilities — 0.1% | |||||
The Coca-Cola Co. | 14,300 | 762,333 | American Electric Power Co., Inc. | 2,200 | 66,484 | |
PepsiCo, Inc. | 5,800 | 351,190 | Duke Energy Corp. | 20,200 | 319,564 | |
1,113,523 | FirstEnergy Corp. | 1,300 | 56,264 | |||
Progress Energy, Inc. | 5,400 | 202,662 | ||||
Biotechnology — 0.2% | The Southern Co. | 8,700 | 271,353 | |||
Amgen, Inc. (a) | 6,900 | 370,737 | ||||
Biogen Idec, Inc. (a) | 2,500 | 105,325 | 916,327 | |||
Celgene Corp. (a) | 3,500 | 178,675 | Electrical Equipment — 0.1% | |||
Genzyme Corp. (a) | 1,700 | 86,020 | Emerson Electric Co. | 10,900 | 411,475 | |
Gilead Sciences, Inc. (a) | 7,100 | 302,105 | Rockwell Automation, Inc. | 5,400 | 221,130 | |
1,042,862 | 632,605 | |||||
Capital Markets — 0.1% | Electronic Equipment, Instruments | |||||
Federated Investors, Inc. Class B | 6,700 | 175,875 | & Components — 0.0% | |||
The Goldman Sachs Group, Inc. | 1,360 | 231,431 | Corning, Inc. | 8,600 | 125,646 | |
Morgan Stanley | 3,000 | 96,360 | Tyco Electronics Ltd. | 5,200 | 110,500 | |
503,666 | 236,146 | |||||
Chemicals — 0.2% | Energy Equipment & Services — 0.1% | |||||
Air Products & Chemicals, Inc. | 900 | 69,417 | National Oilwell Varco, Inc. (a) | 5,600 | 229,544 | |
E.I. du Pont de Nemours & Co. | 14,800 | 470,936 | Schlumberger Ltd. | 5,500 | 342,100 | |
Monsanto Co. | 2,900 | 194,822 | Smith International, Inc. | 5,418 | 150,241 | |
PPG Industries, Inc. | 3,900 | 220,077 | 721,885 | |||
955,252 | Food & Staples Retailing — 0.2% | |||||
Commercial Banks — 0.8% | CVS Caremark Corp. | 3,400 | 120,020 | |||
Citizens Banking Corp. (a) | 6,406,596 | 3,856,771 | SUPERVALU, Inc. | 8,300 | 131,721 | |
M&T Bank Corp. | 4,200 | 263,970 | SYSCO Corp. | 9,600 | 253,920 | |
Regions Financial Corp. | 38,400 | 185,856 | Wal-Mart Stores, Inc. | 15,200 | 755,136 | |
Wells Fargo & Co. | 33,300 | 916,416 | Walgreen Co. | 6,400 | 242,112 | |
5,223,013 | 1,502,909 | |||||
Commercial Services & Supplies — 0.1% | Food Products — 0.1% | |||||
Avery Dennison Corp. | 7,900 | 281,635 | Kraft Foods, Inc. | 12,135 | 333,955 | |
Pitney Bowes, Inc. | 10,800 | 264,600 | Sara Lee Corp. | 20,200 | 228,058 | |
Waste Management, Inc. | 7,700 | 230,076 | 562,013 | |||
776,311 | Health Care Equipment & Supplies — 0.1% | |||||
Communications Equipment — 0.2% | Baxter International, Inc. | 1,900 | 102,714 | |||
Cisco Systems, Inc. (a) | 23,400 | 534,690 | Becton Dickinson & Co. | 3,400 | 232,424 | |
Motorola, Inc. | 34,800 | 298,236 | Boston Scientific Corp. (a) | 5,900 | 47,908 | |
QUALCOMM, Inc. | 8,900 | 368,549 | Covidien Plc | 5,200 | 219,024 | |
1,201,475 | Medtronic, Inc. | 2,000 | 71,400 | |||
Computers & Peripherals — 0.4% | 673,470 | |||||
Apple, Inc. (a) | 6,000 | 1,131,000 | Health Care Providers & Services — 0.1% | |||
Dell, Inc. (a) | 14,900 | 215,901 | Aetna, Inc. | 2,400 | 62,472 | |
EMC Corp. (a) | 13,900 | 228,933 | Express Scripts, Inc. (a) | 3,400 | 271,728 | |
Hewlett-Packard Co. | 8,800 | 417,648 | Medco Health Solutions, Inc. (a) | 4,300 | 241,316 | |
International Business Machines Corp. | 5,800 | 699,538 | UnitedHealth Group, Inc. | 2,400 | 62,280 | |
2,693,020 | WellPoint, Inc. (a) | 4,500 | 210,420 | |||
Distributors — 0.0% | 848,216 | |||||
Genuine Parts Co. | 7,300 | 255,427 | Hotels, Restaurants & Leisure — 0.1% | |||
McDonald’s Corp. | 8,700 | 509,907 | ||||
Starwood Hotels & Resorts Worldwide, Inc. | 12,300 | 357,438 | ||||
867,345 | ||||||
See Notes to Financial Statements. | ||||||
20 | ANNUAL REPORT | OCTOBER 31, 2009 |
Schedule of Investments (continued) | BlackRock Credit Allocation Income Trust IV (BTZ) | |||||
(Percentages shown are based on Net Assets) | ||||||
Common Stocks | Shares | Value | Common Stocks | Shares | Value | |
Household Durables — 0.2% | Multiline Retail — 0.1% | |||||
Black & Decker Corp. | 5,700 | $ 269,154 | Macy's, Inc. | 18,400 | $ 323,288 | |
Fortune Brands, Inc. | 6,400 | 249,280 | Oil, Gas & Consumable Fuels — 0.9% | |||
KB Home | 15,100 | 214,118 | Anadarko Petroleum Corp. | 5,000 | 304,650 | |
Whirlpool Corp. | 5,800 | 415,222 | Apache Corp. | 1,800 | 169,416 | |
1,147,774 | Chevron Corp. | 13,400 | 1,025,636 | |||
Household Products — 0.2% | ConocoPhillips | 13,000 | 652,340 | |||
Clorox Co. | 4,200 | 248,766 | Exxon Mobil Corp. | 27,800 | 1,992,426 | |
The Procter & Gamble Co. | 17,400 | 1,009,200 | Hess Corp. | 3,700 | 202,538 | |
Massey Energy Co. | 5,400 | 157,086 | ||||
1,257,966 | Occidental Petroleum Corp. | 1,700 | 128,996 | |||
IT Services — 0.1% | Peabody Energy Corp. | 5,500 | 217,745 | |||
Automatic Data Processing, Inc. | 6,700 | 266,660 | Southwestern Energy Co. (a) | 5,500 | 239,690 | |
Cognizant Technology Solutions Corp. (a) | 3,400 | 131,410 | Spectra Energy Corp. | 14,700 | 281,064 | |
MasterCard, Inc. Class A | 409 | 89,579 | XTO Energy, Inc. | 6,900 | 286,764 | |
Paychex, Inc. | 9,700 | 275,577 | 5,658,351 | |||
763,226 | Paper & Forest Products — 0.1% | |||||
Industrial Conglomerates — 0.2% | MeadWestvaco Corp. | 15,300 | 349,299 | |||
3M Co. | 6,900 | 507,633 | Weyerhaeuser Co. | 5,600 | 203,504 | |
General Electric Co. | 43,400 | 618,884 | 552,803 | |||
Textron, Inc. | 23,400 | 416,052 | ||||
Pharmaceuticals — 0.6% | ||||||
1,542,569 | Abbott Laboratories | 10,400 | 525,928 | |||
Insurance — 0.3% | Bristol-Myers Squibb Co. | 17,800 | 388,040 | |||
Aflac, Inc. | 10,600 | 439,794 | Eli Lilly & Co. | 9,900 | 336,699 | |
The Allstate Corp. | 8,700 | 257,259 | Johnson & Johnson | 17,900 | 1,056,995 | |
Cincinnati Financial Corp. | 8,500 | 215,560 | Merck & Co., Inc. | 16,000 | 494,880 | |
Lincoln National Corp. | 13,000 | 309,790 | Pfizer, Inc. (b) | 31,504 | 536,513 | |
MetLife, Inc. | 10,600 | 360,718 | Schering-Plough Corp. | 13,000 | 366,600 | |
Principal Financial Group, Inc. | 9,200 | 230,368 | 3,705,655 | |||
1,813,489 | Real Estate Investment Trusts (REITs) — 0.1% | |||||
Internet & Catalog Retail — 0.0% | AvalonBay Communities, Inc. | 4,200 | 288,876 | |||
Amazon.com, Inc. (a) | 810 | 96,236 | Boston Properties, Inc. | 4,300 | 261,311 | |
Internet Software & Services — 0.2% | Public Storage | 1,200 | 88,320 | |||
eBay, Inc. (a) | 14,300 | 318,461 | Vornado Realty Trust | 4,978 | 296,490 | |
Google, Inc. Class A (a) | 1,160 | 621,899 | 934,997 | |||
Yahoo! Inc. (a) | 9,600 | 152,640 | Road & Rail — 0.0% | |||
1,093,000 | Norfolk Southern Corp. | 5,900 | 275,058 | |||
Leisure Equipment & Products — 0.0% | Semiconductors & Semiconductor Equipment — 0.2% | |||||
Mattel, Inc. | 11,600 | 219,588 | Applied Materials, Inc. | 5,200 | 63,440 | |
Life Sciences Tools & Services — 0.0% | Intel Corp. | 40,700 | 777,777 | |||
Thermo Fisher Scientific, Inc. (a) | 2,600 | 117,000 | Linear Technology Corp. | 7,900 | 204,452 | |
Microchip Technology, Inc. | 8,900 | 213,244 | ||||
Machinery — 0.1% | National Semiconductor Corp. | 9,500 | 122,930 | |||
Caterpillar, Inc. | 8,500 | 468,010 | Texas Instruments, Inc. | 9,300 | 218,085 | |
Cummins, Inc. | 4,200 | 180,852 | ||||
Deere & Co. | 2,800 | 127,540 | 1,599,928 | |||
776,402 | Software — 0.3% | |||||
Autodesk, Inc. (a) | 7,700 | 191,961 | ||||
Media — 0.0% | Microsoft Corp. | 46,100 | 1,278,353 | |||
Comcast Corp. Class A | 6,900 | 100,050 | Oracle Corp. (b) | 21,000 | 443,100 | |
The DIRECTV Group, Inc. (a) | 6,400 | 168,320 | ||||
1,913,414 | ||||||
268,370 | ||||||
Specialty Retail — 0.2% | ||||||
Metals & Mining — 0.1% | Home Depot, Inc. | 18,100 | 454,129 | |||
Alcoa, Inc. (b) | 24,500 | 304,290 | Limited Brands, Inc. | 16,100 | 283,360 | |
Nucor Corp. | 5,400 | 215,190 | Staples, Inc. | 12,300 | 266,910 | |
519,480 | 1,004,399 | |||||
Multi-Utilities — 0.2% | Textiles, Apparel & Luxury Goods — 0.0% | |||||
Consolidated Edison, Inc. | 5,400 | 219,672 | VF Corp. | 2,900 | 206,016 | |
Dominion Resources, Inc. | 2,200 | 74,998 | ||||
Integrys Energy Group, Inc. | 5,500 | 190,300 | Thrifts & Mortgage Finance — 0.0% | |||
Public Service Enterprise Group, Inc. | 7,900 | 235,420 | Hudson City Bancorp, Inc. | 19,000 | 249,660 | |
TECO Energy, Inc. | 8,900 | 127,626 | ||||
Xcel Energy, Inc. | 10,400 | 196,144 | ||||
1,044,160 | ||||||
See Notes to Financial Statements. | ||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 21 |
Schedule of Investments (continued) | BlackRock Credit Allocation Income Trust IV (BTZ) | ||||||
(Percentages shown are based on Net Assets) | |||||||
Par | |||||||
Common Stocks | Shares | Value | Capital Trusts | (000) | Value | ||
Tobacco — 0.2% | Commercial Banks (concluded) | ||||||
Altria Group, Inc. (b) | 20,500 | $ 371,255 | Commonwealth Bank of Australia, 6.02% (d)(e)(g) | $ 20,000 | $ 16,400,000 | ||
Philip Morris International, Inc. | 16,600 | 786,176 | HSBC Capital Funding LP/Jersey Channel Islands, | ||||
1,157,431 | 10.18% (d)(e)(g) | 7,000 | 8,330,000 | ||||
Lloyds Banking Group Plc, 6.66% (d)(e)(g) | 10,000 | 6,500,000 | |||||
Total Common Stocks — 8.2% | 53,634,533 | SMFG Preferred Capital USD 1 Ltd., 6.08% (d)(e)(g) | 10,000 | 8,637,700 | |||
SMFG Preferred Capital USD 3 Ltd., 9.50% (d)(e)(g) | 3,850 | 4,174,170 | |||||
Santander Perpetual SA Unipersonal, 6.67%, (d)(e)(g) | 1,300 | 1,186,241 | |||||
Par | Shinsei Finance II (Cayman) Ltd., 7.16% (d)(e)(g) | 1,005 | 588,240 | ||||
Corporate Bonds | (000) | Standard Chartered Bank, 7.014% (d)(e)(g) | 5,000 | 4,550,000 | |||
Capital Markets — 0.0% | Wells Fargo & Co. Series K, 7.98% (d)(e) | 12,985 | 12,157,206 | ||||
Lehman Brothers Holdings, Inc. (a)(c): | Wells Fargo Capital XIII Series GMTN, 7.70% (d)(e) | 3,900 | 3,627,000 | ||||
3.95%, 11/10/09 | $ 105 | 16,537 | 96,798,182 | ||||
4.38%, 11/30/10 | 325 | 51,187 | Diversified Financial Services — 3.6% | ||||
67,724 | JPMorgan Chase Capital XXI Series U, | ||||||
Computers & Peripherals — 0.8% | 1.23%, 2/02/37 (d) | 12,875 | 8,787,342 | ||||
International Business Machines Corp., | JPMorgan Chase Capital XXIII, 1.44%, 5/15/77 (d)(f) | 20,695 | 14,576,213 | ||||
8.00%, 10/15/38 | 4,000 | 5,461,952 | 23,363,555 | ||||
Diversified Financial Services — 1.2% | Electric Utilities — 0.5% | ||||||
ING Groep NV, 5.78% (d)(e)(f) | 10,000 | 7,300,000 | PPL Capital Funding, 6.70%, 3/30/67 (d) | 3,900 | 3,354,000 | ||
Stan IV Ltd., 2.74%, 7/20/11 (d) | 283 | 240,550 | Insurance — 9.7% | ||||
7,540,550 | AXA SA, 6.46% (d)(e)(g) | 12,000 | 9,885,000 | ||||
Insurance — 0.9% | The Allstate Corp., 6.50%, 5/15/57 (d) | 8,675 | 7,417,125 | ||||
QBE Insurance Group Ltd., 9.75%, 3/14/14 (g) | 4,973 | 5,680,902 | Chubb Corp., 6.38%, 3/29/67 (d)(f) | 4,000 | 3,630,000 | ||
Liberty Mutual Group, Inc., 10.75%, 6/15/88 (d)(g) | 4,000 | 4,200,000 | |||||
Metals & Mining — 0.0% | Lincoln National Corp., 7.00%, 5/17/66 (d) | 4,255 | 3,489,100 | ||||
Aleris International, Inc., 10.00%, 12/15/16 (a)(c) | 5,000 | 43,750 | MetLife, Inc., 6.40%, 12/15/66 | 4,550 | 3,941,437 | ||
Multi-Utilities — 1.5% | Nationwide Life Global Funding I, 6.75%, 5/15/67 | 4,000 | 3,031,740 | ||||
Dominion Resources, Inc., 8.88%, 1/15/19 | 8,000 | 10,098,472 | Progressive Corp., 6.70%, 6/15/67 (d)(f) | 4,000 | 3,503,788 | ||
Paper & Forest Products — 0.6% | Reinsurance Group of America, 6.75%, 12/15/65 (d)(f) | 15,000 | 11,625,000 | ||||
International Paper Co., 8.70%, 6/15/38 (b) | 3,100 | 3,571,953 | Swiss Re Capital I LP, 6.854% (d)(e)(g) | 3,000 | 2,310,000 | ||
The Travelers Cos., Inc., 6.25%, 3/15/67 (d)(f) | 4,000 | 3,600,000 | |||||
Total Corporate Bonds — 5.0% | 32,465,303 | White Mountains Re Group Ltd., 7.506% (d)(e)(g) | 4,400 | 3,634,752 | |||
ZFS Finance (USA) Trust IV, 5.88%, 5/09/32 (d)(g) | 599 | 484,286 | |||||
ZFS Finance (USA) Trust V, 6.50%, 5/09/67 (d)(g) | 3,331 | 2,698,110 | |||||
63,450,338 | |||||||
Investment Companies | Shares | ||||||
Multi-Utilities — 0.2% | |||||||
UltraShort Real Estate ProShares | 150,000 | 1,549,500 | Puget Sound Energy, Inc. Series A, 6.97%, 6/01/67 (d) | 1,575 | 1,377,999 | ||
Total Investment Companies — 0.2% | 1,549,500 | Oil, Gas & Consumable Fuels — 1.2% | |||||
Enterprise Products Operating LLC, 8.38%, 8/01/66 (d) | 4,500 | 4,410,000 | |||||
TransCanada PipeLines Ltd., 6.35%, 5/15/67 (d)(f) | 4,000 | 3,723,180 | |||||
Preferred Securities | 8,133,180 | ||||||
Par | Real Estate Investment Trusts (REITs) — 1.6% | ||||||
Capital Trusts | (000) | Sovereign Real Estate Investment Corp., 12.00% (g) | 10,000 | 10,500,000 | |||
Building Products — 0.9% | Total Capital Trusts — 35.5% | 232,306,446 | |||||
C8 Capital SPV Ltd., 6.64% (d)(e)(g) | $ 3,160 | 2,228,179 | |||||
C10 Capital SPV Ltd., 6.72% (d)(e)(g) | 5,000 | 3,542,750 | |||||
5,770,929 | |||||||
Capital Markets — 3.0% | Preferred Stocks | Shares | |||||
Credit Suisse Guernsey Ltd., 5.86% (d)(e) | 1,050 | 866,250 | Commercial Banks — 4.8% | ||||
State Street Capital Trust III, 8.25% (d)(e) | 1,740 | 1,755,016 | HSBC USA, Inc. Series H, 6.50% | 977,766 | 19,848,650 | ||
State Street Capital Trust IV, 1.30%, 6/01/67 (d) | 25,245 | 16,936,997 | Royal Bank of Scotland Group Plc Series M, 6.40% | 15,000 | 155,100 | ||
19,558,263 | Santander Finance Preferred SA Unipersonal, 10.50% | 419,881 | 11,487,944 | ||||
Commercial Banks — 14.8% | 31,491,694 | ||||||
BB&T Capital Trust IV, 6.82%, 6/12/77 (d)(f) | 15,300 | 13,559,625 | Diversified Financial Services — 2.0% | ||||
Bank of Ireland Capital Funding II, LP, 5.57% (d)(e)(g) | 1,422 | 625,680 | Cobank ACB, 7.00% (g) | 150,000 | 5,235,945 | ||
Bank of Ireland Capital Funding III, LP, 6.11% (d)(e)(g) | 9,153 | 4,027,320 | ING Groep NV: | ||||
Barclays Bank Plc, (d)(e)(g): | 6.13% | 200,000 | 3,130,000 | ||||
5.93% | 4,000 | 3,120,000 | 7.05% | 5,800 | 99,470 | ||
6.86% | 11,500 | 9,315,000 | 7.20% | 213,000 | 3,730,192 | ||
7.38% | 40,000 | 703,193 | |||||
12,898,800 | |||||||
See Notes to Financial Statements. | |||||||
22 | ANNUAL REPORT | OCTOBER 31, 2009 |
Schedule of Investments (continued) | BlackRock Credit Allocation Income Trust IV (BTZ) | ||||||||
(Percentages shown are based on Net Assets) | |||||||||
Preferred Stocks | Shares | Value | Short-Term Securities | Shares | Value | ||||
Diversified Telecommunication Services — 0.1% | BlackRock Liquidity Funds, TempFund, | ||||||||
AT&T, Inc., 6.38% | 30,000 | $ 778,580 | Institutional Class, 0.18% (h)(i) | 267,832,781 $ | 267,832,781 | ||||
Electric Utilities — 4.4% | Total Short-Term Securities | ||||||||
Alabama Power Co., 6.50% | 100,000 | 3,000,000 | (Cost — $267,832,781) — 40.9% | 267,832,781 | |||||
Entergy Louisiana LLC, 6.95% | 40,000 | 3,743,482 | Total Investments Before Outstanding Options Written | ||||||
Interstate Power & Light Co. Series B, 8.38% | 785,000 | 21,783,750 | (Cost — $905,234,626*) — 125.7% | 823,053,616 | |||||
28,527,232 | |||||||||
Insurance — 9.1% | |||||||||
Aegon NV, 6.50% | 400,000 | 6,496,000 | |||||||
Arch Capital Group Ltd.: | Options Written | Contracts | |||||||
Series A, 8.00% | 100,000 | 2,420,000 | Exchange-Traded Call Options Written | ||||||
Series B, 7.88% | 160,000 | 3,788,800 | S&P 500 Listed Option: | ||||||
Aspen Insurance Holdings Ltd., 7.40% (d) | 655,000 | 13,296,500 | expiring 11/21/09 at USD 1,090 | 234 | (113,490) | ||||
Axis Capital Holdings Ltd. Series B, 7.50% (d) | 180,000 | 13,477,500 | expiring 11/21/09 at USD 1,095 | 21 | (7,770) | ||||
Endurance Specialty Holdings Ltd. Series A, 7.75% | 369,000 | 8,081,100 | expiring 11/21/09 at USD 1,110 | 145 | (44,950) | ||||
PartnerRe Ltd. Series C, 6.75% | 265,600 | 5,877,728 | |||||||
RenaissanceRe Holding Ltd. Series D, 6.60% | 285,000 | 5,873,850 | Total Options Written | ||||||
(Premiums Received — $828,039) — (0.0)% | (166,210) | ||||||||
59,311,478 | |||||||||
Total Investments — 125.7% | 822,887,406 | ||||||||
Real Estate Investment Trusts (REITs) — 0.4% | Other Assets Less Liabilities — 9.6% | 63,155,825 | |||||||
BRE Properties, Inc. Series D, 6.75% | 30,000 | 615,600 | Preferred Shares, at Redemption Value — (35.3)% | (231,044,104) | |||||
iStar Financial, Inc. Series I, 7.50% | 55,000 | 385,000 | |||||||
Public Storage: | Net Assets Applicable to Common Shares — 100.0% | $ 654,999,127 | |||||||
Series F, 6.45% | 30,000 | 637,500 | * The cost and unrealized appreciation (depreciation) of investments as of October 31, | ||||||
Series M, 6.63% | 55,000 | 1,179,750 | 2009, as computed for federal income tax purposes, were as follows: | ||||||
2,817,850 | Aggregate cost | $ 918,380,664 | |||||||
Wireless Telecommunication Services — 1.5% | Gross unrealized appreciation | $ 26,032,998 | |||||||
Centaur Funding Corp., 9.08% (g) | 10,000 | 10,034,375 | Gross unrealized depreciation | (121,360,046) | |||||
Total Preferred Stocks — 22.3% | 145,860,009 | Net unrealized depreciation | $ (95,327,048) | ||||||
(a) Non-income producing security. | |||||||||
Shares | (b) All or a portion of the security has been pledged as collateral in connection with | ||||||||
Trust Preferreds | (000) | open financial futures contracts. | |||||||
Capital Markets — 0.0% | (c) Issuer filed for bankruptcy and/or is in default of interest payments. | ||||||||
Credit Suisse Guernsey Ltd., 7.90% (e) | 10 | 244,950 | (d) Variable rate security. Rate shown is as of report date. | ||||||
Commercial Banks — 3.4% | (e) Security is perpetual in nature and has no stated maturity date. | ||||||||
Kazkommerts Finance 2 BV, 9.20% (d)(e) | 500 | 315,000 | |||||||
Mizuho Capital Investment 1 Ltd., 6.686% (d)(e)(g) | 21,000 | 17,517,906 | (f) All or a portion of the security has been pledged as collateral for open reverse | ||||||
National City Preferred Trust I, 12% (d)(e) | 3,713 | 4,249,640 | repurchase agreements. | ||||||
22,082,546 | (g) Security exempt from registration under Rule 144A of the Securities Act of 1933. | ||||||||
These securities may be resold in transactions exempt from registration to qualified | |||||||||
Electric Utilities — 1.1% | institutional investors. | ||||||||
PPL Energy Supply LLC, 7.00%, 7/15/46 | 288 | 7,366,797 | |||||||
(h) Investments in companies considered to be an affiliate of the Fund, for purposes of | |||||||||
Insurance — 1.9% | Section 2(a)(3) of the Investment Company Act of 1940, were as follows: | ||||||||
AON Corp., 8.21%, 1/01/27 | 4,000 | 3,960,000 | |||||||
Ace Capital Trust II, 9.70%, 4/01/30 (f) | 4,000 | 4,420,912 | Net | ||||||
W.R. Berkley Capital Trust II, 6.75%, 7/26/45 | 171 | 3,807,443 | Affiliate | Activity | Income | ||||
12,188,355 | BlackRock Liquidity Funds, TempFund, | ||||||||
Media — 6.8% | Institutional Class | $267,832,781 | $ 479,886 | ||||||
Comcast Corp., 6.63%, 5/15/56 | 1,950 | 44,717,395 | |||||||
(i) Represents the current yield as of report date. | |||||||||
Oil, Gas & Consumable Fuels — 0.4% | • | For Fund compliance purposes, the Fund’s industry classifications refer to any one | |||||||
Nexen, Inc., 7.35%, 11/01/43 | 120 | 2,805,001 | |||||||
or more of the industry sub-classifications used by one or more widely recognized | |||||||||
Total Trust Preferreds — 13.6% | 89,405,044 | market indexes or ratings group indexes, and/or as defined by Fund management. | |||||||
Total Preferred Securities — 71.4% | 467,571,499 | This definition may not apply for purposes of this report, which may combine | |||||||
Total Long-Term Investments | industry sub-classifications for reporting ease. | ||||||||
(Cost — $637,401,845) — 84.8% | 555,220,835 | • | Reverse repurchase agreements outstanding as of October 31, 2009 were as follows: | ||||||
Interest | Trade | Maturity | Net Closing | Face | |||||
Counterparty | Rate | Date | Date | Amount | Amount | ||||
Barclays | |||||||||
Bank Plc | 0.75% | 10/16/09 | 11/16/09 $61,616,136 | $61,576,368 | |||||
See Notes to Financial Statements. | |||||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 23 |
Schedule of Investments (concluded) | BlackRock Credit Allocation Income Trust IV (BTZ) | |||||||||||
• | Financial futures contracts purchased as of October 31, 2009 were as follows: | Other Financial | ||||||||||
Valuation Inputs | Instruments1 | |||||||||||
Unrealized | ||||||||||||
Expiration | Notional | Appreciation | Assets | Liabilities | ||||||||
Contracts | Issue | Date | Value | (Depreciation) | Level 1 | $ 982,873 | $ (311,644) | |||||
422 | 10-Year US | Level 2 | — | (675,809) | ||||||||
Treasury Bond December 2009 | $49,119,100 | $ 934,090 | Level 3 | — | — | |||||||
35 | 30-Year US | Total | $ 982,873 | $ (987,453) | ||||||||
Treasury Bond | December 2009 | $ 4,156,686 | 48,783 | |||||||||
161 | S&P EMINI | December 2009 | $ 8,461,085 | (145,434) | 1 Other financial instruments are financial futures contracts, swaps and options. | |||||||
Total | $ 837,439 | Financial futures contracts and swaps are valued at the unrealized appreciation/ | ||||||||||
depreciation on the instrument and options are shown at market value. | ||||||||||||
• | Credit default swaps on single-name issue — buy protection oustanding as of | |||||||||||
October 31, 2009 were as follows: | The following is a reconciliation of investments for unobservable inputs (Level 3) | |||||||||||
used in determining fair value: | ||||||||||||
Pay | Notional | |||||||||||
Fixed | Counter- | Amount | Unrealized | Investments in | ||||||||
Issuer | Rate | party | Expiration (000) | Depreciation | Securities | |||||||
Nordstrom, Inc. 5.20% | Deutsche | June | Corporate Bonds | |||||||||
Bank AG | 2014 | $4,000 | $ (675,809) | |||||||||
Balance, as of October 31, 2008 | $ 268,850 | |||||||||||
• | Fair Value Measurements — Various inputs are used in determining the fair value of | Accrued discounts/premiums | — | |||||||||
investments, which are as follows: | Realized gain (loss) | — | ||||||||||
• Level 1 — price quotations in active markets/exchanges for identical assets | Change in unrealized appreciation/depreciation2 | (28,300) | ||||||||||
and liabiltiies | Net purchases (sales) | — | ||||||||||
Net transfers in/out of Level 3 | — | |||||||||||
• 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 | Balance, as of October 31, 2009 | $ 240,550 | ||||||||||
or similar assets or liabilities in markets that are not active, inputs other than | ||||||||||||
2 Included in the related net change in unrealized appreciation/depreciation in | ||||||||||||
quoted prices that are observable for the assets or liabilities (such as interest | ||||||||||||
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and | the Statements of Operations. | |||||||||||
default rates) or other market-corroborated inputs) | ||||||||||||
• Level 3 — unobservable inputs based on the best information available in the | ||||||||||||
circumstances, to the extent observable inputs are not available (including the | ||||||||||||
Fund’s own assumptions used in determining the fair value of investments) | ||||||||||||
The inputs or methodology used for valuing securities are not necessarily an indica- | ||||||||||||
tion of the risk associated with investing in those securities. For information about | ||||||||||||
the Fund’s policy regarding valuation of investments and other significant accounting | ||||||||||||
policies, please refer to Note 1 of the Notes to Financial Statements. | ||||||||||||
The following tables summarize the inputs used as of October 31, 2009 in | ||||||||||||
determining the fair valuation of the Fund’s investments: | ||||||||||||
Investments in | ||||||||||||
Valuation Inputs | Securities | |||||||||||
Assets | ||||||||||||
Level 1 | ||||||||||||
Long-Term Investments: | ||||||||||||
Common Stocks | $53,634,533 | |||||||||||
Investment Companies | 1,549,500 | |||||||||||
Preferred Stocks | 113,368,707 | |||||||||||
Trust Preferreds | 58,941,586 | |||||||||||
Short-Term Securities | 267,832,781 | |||||||||||
Total Level 1 | 495,327,107 | |||||||||||
Level 2 | ||||||||||||
Corporate Bonds | 32,224,753 | |||||||||||
Capital Trusts | 232,306,446 | |||||||||||
Preferred Stocks | 32,491,302 | |||||||||||
Trust Preferreds | 30,463,458 | |||||||||||
Total Level 2 | 327,485,959 | |||||||||||
Level 3 | ||||||||||||
Corporate Bonds | 240,550 | |||||||||||
Total | $ 823,053,616 | |||||||||||
See Notes to Financial Statements. | ||||||||||||
24 | ANNUAL REPORT | OCTOBER 31, 2009 |
Schedule of Investments October 31, 2009 | BlackRock Enhanced Capital and Income Fund, Inc. (CII) | ||||
(Percentages shown are based on Net Assets) | |||||
Common Stocks | Shares | Value | Common Stocks | Shares | Value |
Aerospace & Defense — 5.2% | Machinery — 1.5% | ||||
Honeywell International, Inc. | 337,600 | $ 12,116,464 | Deere & Co. | 207,286 | $ 9,441,877 |
Northrop Grumman Corp. | 192,800 | 9,665,064 | Media — 5.3% | ||
Raytheon Co. | 226,000 | 10,233,280 | Time Warner, Inc. | 538,272 | 16,212,753 |
32,014,808 | Viacom, Inc. Class B (a) | 418,424 | 11,544,318 | ||
Capital Markets — 5.9% | Walt Disney Co. | 189,947 | 5,198,849 | ||
The Bank of New York Mellon Corp. | 483,198 | 12,882,059 | 32,955,920 | ||
Invesco Ltd. | 584,300 | 12,357,945 | Metals & Mining — 1.4% | ||
Morgan Stanley | 353,613 | 11,358,050 | Nucor Corp. | 218,800 | 8,719,180 |
36,598,054 | Multi-Utilities — 1.4% | ||||
Chemicals — 1.8% | Dominion Resources, Inc. | 256,500 | 8,744,085 | ||
E.I. du Pont de Nemours & Co. | 353,100 | 11,235,642 | Oil, Gas & Consumable Fuels — 8.1% | ||
Commercial Banks — 1.4% | Anadarko Petroleum Corp. | 84,117 | 5,125,249 | ||
Wells Fargo & Co. | 316,600 | 8,712,832 | Chevron Corp. | 256,400 | 19,624,856 |
Communications Equipment — 1.0% | Exxon Mobil Corp. | 247,100 | 17,709,657 | ||
Nokia Oyj — ADR | 503,900 | 6,354,179 | Peabody Energy Corp. | 199,100 | 7,882,369 |
Computers & Peripherals — 4.5% | 50,342,131 | ||||
Hewlett-Packard Co. | 286,092 | 13,577,926 | Pharmaceuticals — 10.8% | ||
International Business Machines Corp. | 117,353 | 14,153,945 | Bristol-Myers Squibb Co. | 859,200 | 18,730,560 |
27,731,871 | Eli Lilly & Co. | 263,500 | 8,961,635 | ||
Johnson & Johnson | 143,454 | 8,470,959 | |||
Diversified Financial Services — 3.4% | Pfizer, Inc. | 681,599 | 11,607,622 | ||
JPMorgan Chase & Co. | 501,939 | 20,965,992 | Schering-Plough Corp. | 676,900 | 19,088,580 |
Diversified Telecommunication Services — 6.3% | 66,859,356 | ||||
AT&T Inc. | 459,400 | 11,792,798 | |||
Qwest Communications International Inc. | 3,573,701 | 12,829,587 | Semiconductors & Semiconductor | ||
Verizon Communications, Inc. | 494,300 | 14,626,337 | Equipment — 10.0% | ||
Analog Devices, Inc. | 500,100 | 12,817,563 | |||
39,248,722 | Intel Corp. | 501,078 | 9,575,601 | ||
Electric Utilities — 2.5% | LSI Corp. (a) | 3,895,920 | 19,947,110 | ||
FPL Group, Inc. | 152,044 | 7,465,360 | Maxim Integrated Products, Inc. | 655,500 | 10,927,185 |
The Southern Co. | 261,029 | 8,141,495 | Micron Technology, Inc. (a) | 1,233,100 | 8,372,749 |
15,606,855 | 61,640,208 | ||||
Electrical Equipment — 0.9% | Software — 1.0% | ||||
Emerson Electric Co. | 143,000 | 5,398,250 | Microsoft Corp. | 215,414 | 5,973,430 |
Energy Equipment & Services — 2.1% | Specialty Retail — 1.0% | ||||
Halliburton Co. | 441,089 | 12,884,210 | Home Depot, Inc. | 242,200 | 6,076,798 |
Food & Staples Retailing — 1.1% | Total Long-Term Investments | ||||
Walgreen Co. | 180,400 | 6,824,532 | (Cost — $664,851,097) — 97.7% | 604,104,432 | |
Food Products — 7.3% | |||||
General Mills, Inc. | 209,371 | 13,801,736 | |||
Kraft Foods, Inc. | 594,200 | 16,352,384 | |||
Unilever NV — ADR | 481,632 | 14,877,612 | Short-Term Securities | ||
45,031,732 | Money Market Funds — 4.0% | ||||
Health Care Equipment & Supplies — 1.3% | BlackRock Liquidity Funds, TempFund, | ||||
Covidien Plc | 193,800 | 8,162,856 | Institutional Class, 0.18% (b)(c) | 24,567,455 | 24,567,455 |
Household Products — 3.4% | Par | ||||
Clorox Co. | 54,557 | 3,231,411 | (000) | ||
Kimberly-Clark Corp. | 287,700 | 17,595,732 | Time Deposits — 0.0% | ||
20,827,143 | Brown Brothers Harriman & Co., 0.03%, 11/02/09 | $ 217 | 217,283 | ||
Industrial Conglomerates — 1.3% | Total Short-Term Securities | ||||
Tyco International Ltd. | 230,500 | 7,733,275 | (Cost — $24,784,738) — 4.0% | 24,784,738 | |
Insurance — 7.8% | Total Investments Before Outstanding Options Written | ||||
ACE Ltd. | 185,500 | 9,527,280 | (Cost — $689,635,835*) — 101.7% | 628,889,170 | |
MetLife, Inc. | 257,825 | 8,773,785 | |||
Prudential Financial, Inc. | 118,300 | 5,350,709 | |||
The Travelers Cos., Inc. | 489,430 | 24,368,720 | |||
48,020,494 | |||||
See Notes to Financial Statements. | |||||
ANNUAL REPORT | OCTOBER 31, 2009 | 25 |
Schedule of Investments (continued) | BlackRock Enhanced Capital and Income Fund, Inc. (CII) | ||||||
(Percentages shown are based on Net Assets) | |||||||
Options Written | Contracts | Value | Options Written | Contracts | Value | ||
Exchange-Traded Call Options Written | Exchange-Traded Call Options Written (concluded) | ||||||
ACE Ltd.: | Raytheon Co.: | ||||||
expiring 11/21/09 at USD 55 | 100 | $ (2,000) | expiring 11/21/09 at USD 46 | 900 | $ (72,000) | ||
expiring 12/19/09 at USD 55 | 550 | (39,875) | expiring 12/19/09 at USD 48 | 395 | (25,675) | ||
AT&T Inc., expiring 1/16/10 at USD 27 | 250 | (13,500) | Schering-Plough Corp.: | ||||
Anadarko Petroleum Corp.: | expiring 12/19/09 at USD 29 | 2,300 | (109,250) | ||||
expiring 11/21/09 at USD 60 | 425 | (148,750) | expiring 12/19/09 at USD 30 | 1,425 | (32,063) | ||
expiring 12/19/09 at USD 70 | 40 | (5,000) | Time Warner, Inc.: | ||||
Analog Devices, Inc., expiring 12/19/09 at USD 30 | 100 | (1,750) | expiring 12/19/09 at USD 32 | 2,700 | (209,250) | ||
The Bank of New York Mellon Corp.: | expiring 1/16/10 at USD 33 | 250 | (20,000) | ||||
expiring 12/19/09 at USD 30 | 1,500 | (75,000) | The Travelers Cos., Inc.: | ||||
expiring 12/19/09 at USD 31 | 190 | (5,700) | expiring 11/21/09 at USD 50 | 1,000 | (137,500) | ||
Bristol-Myers Squibb Co.: | expiring 12/19/09 at USD 50 | 465 | (95,325) | ||||
expiring 11/21/09 at USD 23 | 430 | (5,375) | expiring 12/19/09 at USD 55 | 250 | (11,250) | ||
expiring 12/19/09 at USD 23 | 2,470 | (75,335) | Tyco International Ltd., expiring 12/19/09 at USD 36 | 820 | (45,100) | ||
Clorox Co., expiring 1/16/10 at USD 60 | 410 | (79,950) | Unilever NV — ADR, expiring 12/19/09 at USD 30 | 1,700 | (289,000) | ||
Covidien Plc, expiring 11/21/09 at USD 42.50 | 100 | (12,750) | Verizon Communications, Inc.: | ||||
Deere & Co., expiring 12/19/09 at USD 49 | 1,550 | (251,875) | expiring 11/21/09 at USD 29 | 1,250 | (126,250) | ||
Dominion Resources, Inc., | expiring 12/19/09 at USD 30 | 1,250 | (95,624) | ||||
expiring 11/21/09 at USD 35 | 630 | (15,750) | expiring 12/19/09 at USD 31 | 250 | (9,750) | ||
expiring 1/16/10 at USD 35 | 400 | (27,000) | Viacom, Inc. Class B: | ||||
Eli Lilly & Co.: | expiring 11/21/09 at USD 30 | 1,060 | (31,800) | ||||
expiring 11/21/09 at USD 35 | 130 | (3,250) | expiring 12/19/09 at USD 30 | 1,035 | (72,450) | ||
expiring 12/19/09 at USD 35 | 800 | (44,000) | Walgreen Co., expiring 12/19/09 at USD 41 | 630 | (20,474) | ||
Emerson Electric Co.: | Walt Disney Co., expiring 12/19/09 at USD 31 | 400 | (10,000) | ||||
expiring 11/21/09 at USD 41 | 210 | (3,675) | Total Exchange-Traded Call Options Written | (4,359,940) | |||
expiring 12/19/09 at USD 41 | 290 | (13,050) | Over-the-Counter Call Options Written | ||||
Exxon Mobil Corp., expiring 11/21/09 at USD 75 | 1,850 | (70,300) | AT&T Inc.: | ||||
FPL Group, Inc., expiring 11/21/09 at USD 55 | 470 | (3,525) | expiring 12/15/09 at USD 26.60, Broker UBS AG | 2,000 | (73,008) | ||
General Mills, Inc.: | expiring 12/18/09 at USD 27, Broker Morgan | ||||||
expiring 11/21/09 at USD 65 | 515 | (90,125) | Stanley Capitial Services, Inc. | 270 | (6,589) | ||
expiring 12/19/09 at USD 65 | 815 | (207,825) | Analog Devices, Inc., expiring 11/30/09 at USD 28.39, | ||||
Halliburton Co., expiring 11/21/09 at USD 32 | 2,400 | (74,400) | Broker Citibank NA | 1,650 | (27,042) | ||
Hewlett-Packard Co.: | Bristol-Myers Squibb Co., expiring 11/13/09 | ||||||
expiring 12/19/09 at USD 48 | 790 | (144,175) | at USD 23.20, Broker Credit Suisse International | 1,825 | (6,209) | ||
expiring 12/19/09 at USD 50 | 285 | (28,500) | Chevron Corp.: | ||||
expiring 1/16/10 at USD 50 | 600 | (85,500) | expiring 11/30/09 at USD 79.18, Broker UBS AG | 1,170 | (134,217) | ||
Home Depot, Inc., expiring 12/19/09 at USD 28 | 1,815 | (43,560) | expiring 12/23/09 at USD 79.45, Broker UBS AG | 750 | (125,320) | ||
Honeywell International, Inc., | Covidien Plc, expiring 11/13/09 at USD 42.39, | ||||||
expiring 12/19/09 at USD 39 | 1,000 | (45,000) | Broker Credit Suisse International | 580 | (41,089) | ||
expiring 12/19/09 at USD 40 | 160 | (4,800) | Dominion Resources, Inc., expiring 12/11/09 | ||||
Intel Corp., expiring 12/19/09 at USD 21 | 2,750 | (63,250) | at USD 35.48, Broker UBS AG | 900 | (22,723) | ||
International Business Machines Corp., | E.I. du Pont de Nemours & Co., expiring 12/23/09 | ||||||
expiring 12/19/09 at USD 125 | 645 | (153,188) | at USD 34.87, Broker UBS AG | 2,655 | (148,622) | ||
Invesco Ltd., expiring 12/19/09 at USD 25 | 280 | (7,700) | FPL Group, Inc., expiring 11/17/09 at USD 55.96, | ||||
JPMorgan Chase & Co., expiring 12/19/09 at USD 48 | 2,000 | (125,000) | Broker Credit Suisse International | 450 | (438) | ||
Kimberly-Clark Corp.: | General Mills, Inc., expiring 11/20/09 at USD 65.50, | ||||||
expiring 11/21/09 at USD 60 | 710 | (136,675) | Broker UBS AG | 240 | (30,762) | ||
expiring 11/24/09 at USD 59 | 730 | (182,418) | Honeywell International, Inc., expiring 11/20/09 | ||||
expiring 1/16/10 at USD 65 | 100 | (6,000) | at USD 38.50, Broker Credit Suisse International | 640 | (10,045) | ||
Kraft Foods, Inc., expiring 12/19/09 at USD 28 | 1,485 | (111,375) | Invesco Ltd., expiring 1/06/10 at USD 22.68, | ||||
Maxim Integrated Products, Inc., expiring 11/21/09 | Broker Morgan Stanley Capital Services, Inc. | 1,470 | (132,869) | ||||
at USD 20 | 300 | (3,000) | Johnson & Johnson: | ||||
MetLife, Inc., expiring 11/21/09 at USD 39 | 900 | (24,750) | expiring 12/15/09 at USD 60.96, Broker Morgan | ||||
Microsoft Corp., expiring 12/19/09 at USD 27 | 535 | (78,378) | Stanley Capital Services, Inc. | 245 | (11,574) | ||
Micron Technology, Inc., expiring 12/19/09 at USD 9 | 3,700 | (27,750) | expiring 12/23/09 at USD 61.98, Broker Credit | ||||
Morgan Stanley, expiring 12/19/09 at USD 35 | 1,240 | (127,100) | Suisse International | 585 | (25,053) | ||
Nokia Oyj — ADR: | expiring 1/04/10 at USD 62, Broker Bank of America | 245 | (15,384) | ||||
expiring 11/21/09 at USD 14 | 750 | (5,625) | Kraft Foods, Inc., expiring 12/07/09 at USD 26.85, | ||||
expiring 12/19/09 at USD 14 | 1,000 | (27,500) | Broker Goldman Sachs Bank USA | 1,770 | (193,797) | ||
Nucor Corp., expiring 11/21/09 at USD 48 | 650 | (6,500) | |||||
Peabody Energy Corp., expiring 11/21/09 at USD 42 | 700 | (70,000) | |||||
Pfizer, Inc., expiring 12/19/09 at USD 18 | 5,110 | (153,300) | |||||
Prudential Financial, Inc.: | |||||||
expiring 11/21/09 at USD 55 | 355 | (8,875) | |||||
expiring 12/19/09 at USD 55 | 100 | (7,500) | |||||
See Notes to Financial Statements. | |||||||
26 | ANNUAL REPORT | OCTOBER 31, 2009 |
Schedule of Investments (concluded) | BlackRock Enhanced Capital and Income Fund, Inc. (CII) | ||||||
(Percentages shown are based on Net Assets) | |||||||
Options Written | Contracts | Value | |||||
Over-the-Counter Call Options Written (concluded) | • | Fair Value Measurements — Various inputs are used in determining the fair value of | |||||
LSI Corp.: | investments, which are as follows: | ||||||
expiring 11/13/09 at USD 5.63, Broker Morgan | • Level 1 — price quotations in active markets/exchanges for identical assets | ||||||
Stanley Capital Services, Inc. | 2,000 | $ (7,826) | |||||
and liabilities | |||||||
expiring 12/23/09 at USD 5.93, Broker Morgan | |||||||
Stanley Capital Services, Inc. | 9,600 | (94,118) | • Level 2 — other observable inputs (including, but not limited to: quoted prices | ||||
expiring 1/08/10 at USD 5.56, Broker Morgan | for similar assets or liabilities in markets that are active, quoted prices for identi- | ||||||
Stanley Capital Services, Inc. | 2,000 | (49,728) | cal or similar assets or liabilities in markets that are not active, inputs other than | ||||
Maxim Integrated Products, Inc.: | quoted prices that are observable for the assets or liabilities (such as interest | ||||||
expiring 12/23/09 at USD 19.06, Broker Morgan | rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks | ||||||
Stanley Capital Services, Inc. | 1,292 | (16,127) | and default rates) or other market-corroborated inputs) | ||||
expiring 1/08/10 at USD 19.25, Broker Morgan | • Level 3 — unobservable inputs based on the best information available in the | ||||||
Stanley Capital Services, Inc. | 2,000 | (41,582) | circumstances, to the extent observable inputs are not available (including the | ||||
Microsoft Corp., expiring 11/06/09 at USD 25, | Fund’s own assumptions used in determining the fair value of investments) | ||||||
Broker Deutshe Bank AG | 1,080 | (294,840) | |||||
The inputs or methodology used for valuing securities are not necessarily an indica- | |||||||
Northrop Grumman Corp., expiring 12/23/09 | |||||||
tion of the risk associated with investing in those securities. For information about | |||||||
at USD 51.94, Broker Citibank NA | 1,445 | (166,533) | |||||
the Fund’s policy regarding valuation of investments and other significant accounting | |||||||
Qwest Communications International Inc., | |||||||
policies, please refer to Note 1 of the Notes to Financial Statements. | |||||||
expiring 1/06/10 at USD 3.66, Broker Credit | |||||||
Suisse International | 12,500 | (217,713) | The following tables summarize the inputs used as of October 31, 2009 in deter- | ||||
The Southern Co., expiring 12/23/09 at USD 32.76, | mining the fair valuation of the Fund’s investments: | ||||||
Broker Citibank NA | 1,950 | (56,560) | |||||
Walt Disney Co., expiring 11/09/09 at USD 28.50, | Investments in | ||||||
Broker Morgan Stanley Capital Services, Inc. | 640 | (14,400) | Valuation Inputs | Securities | |||
Wells Fargo & Co., | Assets | ||||||
expiring 11/20/09 at USD 30.75, Broker Deutsche | Level 1 | ||||||
Bank AG | 1,390 | (31,570) | Long-Term Investments1 | $604,104,432 | |||
expiring 12/23/09 at USD 31.50, Broker Credit | Short-Term Securities | 24,567,455 | |||||
Suisse International | 350 | (21,468) | |||||
Total Level 1 | 628,671,887 | ||||||
Total Over-the-Counter Call Options Written | (2,017,206) | ||||||
Level 2 — Short-Term Securities | 217,283 | ||||||
Total Options Written | |||||||
(Premiums Received — $9,193,459) — (1.0)% | (6,377,146) | Level 3 | — | ||||
Total Investments, Net of Outstanding Options Written — 100.7% | 622,512,024 | Total | $628,889,170 | ||||
Liabilities in Excess of Other Assets — (0.7)% | (4,050,310) | 1 | See above Schedule of Investments for values in each industry. | ||||
Net Assets — 100.0% | $618,461,714 | ||||||
Other Financial | |||||||
* The cost and unrealized appreciation (depreciation) of investments as of October 31, | Valuation Inputs | Instruments2 | |||||
2009, as computed for federal income tax purposes, were as follows: | Liabilities | ||||||
Aggregate cost | $ 715,152,338 | Level 1 | $ (4,359,940) | ||||
Gross unrealized appreciation | $ 6,130,287 | Level 2 | (2,017,206) | ||||
Gross unrealized depreciation | (92,393,455) | Level 3 | — | ||||
Net unrealized depreciation | $ (86,263,168) | Total | $ (6,377,146) | ||||
(a) Non-income producing security. | 2 | Other financial instruments are options, which are shown at market value. | |||||
(b) Investments in companies considered to be an affiliate of the Fund, for purposes of | |||||||
Section 2(a)(3) of the Investment Company Act of 1940, were as follows: | |||||||
Net | |||||||
Affiliate | Activity | Income | |||||
BlackRock Liquidity Funds, TempFund, | |||||||
Institutional Class | $24,567,455 | $ 25,743 | |||||
BlackRock Liquidity Series, LLC | |||||||
Cash Sweep Series | $(2,450,990) | $117,920 | |||||
(c) Represents the current yield as of report date. | |||||||
• For Fund compliance purposes, the Fund’s industry classifications refer to any one | |||||||
or more of the industry sub-classifications used by one or more widely recognized | |||||||
market indexes or ratings group indexes, and/or as defined by Fund management. | |||||||
This definition may not apply for purposes of this report, which may combine industry | |||||||
sub-classifications for reporting ease. | |||||||
See Notes to Financial Statements. | |||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 27 |
Schedule of Investments October 31, 2009 | BlackRock Floating Rate Income Trust (BGT) | ||||||||
(Percentages shown are based on Net Assets) | |||||||||
Par | |||||||||
Common Stocks | Shares | Value | Corporate Bonds | (000) | Value | ||||
Chemicals — 0.0% | Energy Equipment & Services — 0.0% | ||||||||
British Vita Holding Co. (a)(b) | 166 | $ 977 | Compagnie Generale de Geophysique-Veritas: | ||||||
Commercial Services & Supplies — 0.0% | 7.50%, 5/15/15 | USD | 70 | $ 69,475 | |||||
Sirva (b) | 554 | 5,540 | 7.75%, 5/15/17 | 50 | 49,500 | ||||
Construction & Engineering — 0.0% | 118,975 | ||||||||
USI United Subcontractors (b) | 7,639 | 99,305 | Food & Staples Retailing — 0.1% | ||||||
Metals & Mining — 0.0% | Duane Reade, Inc., 11.75%, 8/01/15 (a) | 240 | 255,600 | ||||||
Euramax International (b) | 1,135 | 12,203 | Food Products — 0.2% | ||||||
Paper & Forest Products — 0.1% | Smithfield Foods, Inc., 10.00%, 7/15/14 (a) | 700 | 735,000 | ||||||
Ainsworth Lumber Co. Ltd. (b) | 55,855 | 90,850 | Health Care Equipment & Supplies — 0.2% | ||||||
Ainsworth Lumber Co. Ltd. (a)(b) | 62,685 | 102,419 | DJO Finance LLC, 10.88%, 11/15/14 | 635 | 661,987 | ||||
193,269 | Health Care Providers & Services — 0.4% | ||||||||
Total Common Stocks — 0.1% | 311,294 | DaVita, Inc., 6.63%, 3/15/13 | 1,070 | 1,053,950 | |||||
Tenet Healthcare Corp. (a): | |||||||||
9.00%, 5/01/15 | 95 | 100,462 | |||||||
10.00%, 5/01/18 | 35 | 38,587 | |||||||
Par | |||||||||
Corporate Bonds | (000) | 1,192,999 | |||||||
Air Freight & Logistics — 0.0% | Hotels, Restaurants & Leisure — 0.1% | ||||||||
Park-Ohio Industries, Inc., 8.38%, 11/15/14 | USD | 125 | 98,125 | American Real Estate Partners LP, 7.13%, 2/15/13 | 140 | 137,550 | |||
Greektown Holdings, LLC, 10.75%, 12/01/13 (a)(b)(d) | 122 | 24,400 | |||||||
Auto Components — 0.0% | |||||||||
Delphi International Holdings Unsecured, | 161,950 | ||||||||
12.00%, 10/06/14 | 39 | 37,992 | Household Durables — 0.5% | ||||||
The Goodyear Tire & Rubber Co., 5.01%, 12/01/09 (c) | 60 | 60,000 | Beazer Homes USA, Inc., 12.00%, 10/15/17 (a) | 1,500 | 1,575,000 | ||||
Lear Corp., 8.75%, 12/01/16 (b)(d) | 30 | 20,400 | Berkline/BenchCraft, LLC, 4.50%, 11/03/12 (b)(d)(e) | 400 | — | ||||
118,392 | 1,575,000 | ||||||||
Building Products — 0.0% | IT Services — 0.2% | ||||||||
CPG International I, Inc., 10.50%, 7/01/13 | 90 | 76,500 | SunGard Data Systems, Inc., 4.88%, 1/15/14 | 763 | 686,700 | ||||
Capital Markets — 0.6% | Independent Power Producers & Energy Traders — 1.6% | ||||||||
E*Trade Financial Corp. (a): | AES Ironwood LLC, 8.86%, 11/30/25 | 82 | 78,071 | ||||||
12.50%, 11/30/17 (e) | 138 | 153,180 | Calpine Construction Finance Co. LP, | ||||||
3.34%, 8/31/19 (f)(g) | 439 | 629,416 | 8.00%, 6/01/16 (a) | 2,580 | 2,618,700 | ||||
Marsico Parent Co., LLC, 10.63%, 1/15/16 (a) | 1,501 | 915,610 | NRG Energy, Inc., 7.25%, 2/01/14 | 2,200 | 2,183,500 | ||||
Marsico Parent Holdco, LLC, 12.50%, 7/15/16 (a)(e) | 645 | 145,226 | 4,880,271 | ||||||
Marsico Parent Superholdco, LLC, | |||||||||
14.50%, 1/15/18 (a)(e) | 445 | 100,213 | Machinery — 0.1% | ||||||
Sunstate Equipment Co. LLC, 10.50%, 4/01/13 (a) | 210 | 161,700 | |||||||
1,943,645 | Synventive Molding Solutions Sub-Series A, | ||||||||
Chemicals — 0.3% | 14.00%, 1/14/11 (e) | 986 | 246,504 | ||||||
American Pacific Corp., 9.00%, 2/01/15 | 125 | 116,250 | 408,204 | ||||||
Ames True Temper, Inc., 4.28%, 1/15/12 (c) | 1,100 | 968,000 | |||||||
Media — 1.0% | |||||||||
1,084,250 | Affinion Group, Inc., 10.13%, 10/15/13 | 50 | 51,250 | ||||||
Commercial Banks — 4.1% | CSC Holdings, Inc., 8.50%, 4/15/14 (a) | 550 | 580,937 | ||||||
SNS Bank NV Series EMTN, 2.88%, 1/30/12 | EUR | 8,500 | 12,711,922 | Charter Communications Holdings II, LLC (b)(d): | |||||
Commercial Services & Supplies — 0.3% | 10.25%, 9/15/10 | 260 | 314,600 | ||||||
DI Finance Series B, 9.50%, 2/15/13 | USD | 307 | 313,140 | Series B, 10.25%, 9/15/10 | 45 | 54,225 | |||
The Geo Group, Inc., 7.75%, 10/15/17 (a) | 675 | 685,125 | Charter Communications Operating, LLC, | ||||||
10.00%, 4/30/12 (a)(b)(d) | 210 | 213,150 | |||||||
998,265 | EchoStar DBS Corp.: | ||||||||
Containers & Packaging — 0.1% | 7.00%, 10/01/13 | 158 | 158,000 | ||||||
Berry Plastics Corp., 4.17%, 9/15/14 (c) | 300 | 236,250 | 7.13%, 2/01/16 | 230 | 230,000 | ||||
Impress Holdings BV, 3.41%, 9/15/13 (a)(c) | 150 | 142,687 | Local Insight Regatta Holdings, Inc., 11.00%, 12/01/17 | 770 | 377,300 | ||||
378,937 | Nielsen Finance LLC, 10.00%, 8/01/14 | 400 | 412,000 | ||||||
Rainbow National Services LLC, 8.75%, 9/01/12 (a) | 750 | 761,250 | |||||||
Diversified Financial Services — 0.1% | |||||||||
FCE Bank Plc, 7.13%, 1/16/12 | EUR | 200 | 282,556 | 3,152,712 | |||||
Diversified Telecommunication Services — 1.8% | Metals & Mining — 0.2% | ||||||||
PAETEC Holding Corp., 8.88%, 6/30/17 (a) | USD | 700 | 693,000 | Foundation PA Coal Co., 7.25%, 8/01/14 | 505 | 506,894 | |||
Qwest Corp., 8.38%, 5/01/16 (a) | 1,840 | 1,899,800 | Oil, Gas & Consumable Fuels — 5.4% | ||||||
Telefonica Emisiones SAU, 5.43%, 2/03/14 | EUR | 2,000 | 3,164,192 | Gazprom OAO, 9.63%, 3/01/13 | 11,530 | 12,770,628 | |||
5,756,992 | Repsol International Finance BV, 6.50%, 3/27/14 | EUR | 1,500 | 2,444,048 | |||||
SandRidge Energy, Inc., 3.91%, 4/01/14 (c) | USD | 1,400 | 1,239,308 | ||||||
Whiting Petroleum Corp., 7.25%, 5/01/13 | 300 | 300,375 | |||||||
16,754,359 | |||||||||
See Notes to Financial Statements. | |||||||||
28 | ANNUAL REPORT | OCTOBER 31, 2009 |
Schedule of Investments (continued) | BlackRock Floating Rate Income Trust (BGT) | ||||||
(Percentages shown are based on Net Assets) | |||||||
Par | Par | ||||||
Corporate Bonds | (000) | Value | Floating Rate Loan Interests (c) | (000) | Value | ||
Paper & Forest Products — 2.4% | Beverages (concluded) | ||||||
Ainsworth Lumber Co. Ltd., 11.00%, 7/29/15 (a)(e) | USD | 482 $ | 275,858 | Le-Nature’s, Inc., Tranche B Term Loan, | |||
NewPage Corp.: | 9.50%, 3/01/11 (b)(d) | USD | 1,000 $ | 390,000 | |||
6.53%, 5/01/12 (c) | 1,500 | 960,000 | Orangina SA: | ||||
11.38%, 12/31/14 (a) | 5,470 | 5,456,325 | Term Loan B2, 2.61%, 12/31/13 | EUR | 559 | 801,916 | |
Verso Paper Holdings LLC Series B, 4.03%, 8/01/14 (c) | 1,215 | 795,825 | Term Loan C2, 3.61%, 12/31/14 | 534 | 765,047 | ||
7,488,008 | 4,443,353 | ||||||
Pharmaceuticals — 0.5% | Building Products — 1.9% | ||||||
Angiotech Pharmaceuticals, Inc., 4.11%, 12/01/13 (c) | 1,750 | 1,452,500 | Building Materials Corp. of America, Term Loan | ||||
Real Estate Investment Trusts (REITs) — 1.4% | Advance, 3.00%, 2/22/14 | USD | 2,679 | 2,460,208 | |||
Rouse Co. LP, 5.38%, 11/26/13 (b)(d) | 4,835 | 4,254,800 | Custom Building Products, Inc., Loan (Second Lien), | ||||
10.75%, 4/20/12 | 1,500 | 1,421,250 | |||||
Specialty Retail — 0.1% | Goodman Global Holdings Term Loan B, | ||||||
General Nutrition Centers, Inc., 5.18%, 3/15/14 (c)(e) | 500 | 446,250 | 6.25%, 2/13/14 | 900 | 900,675 | ||
Lazy Days’ R.V. Center, Inc., 11.75%, 5/15/12 (b)(d) | 375 | 3,750 | Momentive Performance Materials (Blitz 06-103 | ||||
450,000 | GMBH), Tranche B-1 Term Loan, 2.50%, 12/04/13 | 1,218 | 1,007,952 | ||||
Textiles, Apparel & Luxury Goods — 0.6% | United Subcontractors, Inc., First Lien Term Loan, | ||||||
Levi Strauss & Co., 8.63%, 4/01/13 | EUR | 1,300 | 1,894,012 | 1.79%, 6/30/15 | 179 | 152,293 | |
Tobacco — 1.4% | 5,942,378 | ||||||
Imperial Tobacco Finance Plc, 4.38%, 11/22/13 | 1,500 | 2,238,020 | Capital Markets — 0.4% | ||||
Reynolds American, Inc., 7.63%, 6/01/16 | USD | 2,000 | 2,154,312 | Marsico Parent Co., LLC, Term Loan, | |||
4,392,332 | 5.00% – 5.06%, 12/15/14 | 458 | 309,239 | ||||
Nuveen Investments, Inc., First Lien Term Loan, | |||||||
Wireless Telecommunication Services — 1.3% | 3.28%, 11/13/14 | 1,174 | 1,009,334 | ||||
Cricket Communications, Inc., 7.75%, 5/15/16 (a) | 3,000 | 2,992,500 | |||||
iPCS, Inc., 2.41%, 5/01/13 (c) | 1,155 | 1,010,625 | 1,318,573 | ||||
4,003,125 | Chemicals — 8.0% | ||||||
Ashland Inc., Term B Borrowing, 7.65%, 5/13/14 | 1,071 | 1,085,440 | |||||
Total Corporate Bonds — 25.0% | 78,475,012 | Brenntag AG, Second Lien Term Loan, | |||||
4.25%, 7/17/15 | 1,000 | 937,500 | |||||
Brenntag Holding GmbH & Co. KG: | |||||||
Acquisition Facility 1, 2.25% – 2.99%, 1/20/14 | 384 | 363,650 | |||||
Floating Rate Loan Interests (c) | Acquisition Facility 2, 3.21%, 1/20/14 | EUR | 443 | 616,722 | |||
Aerospace & Defense — 1.1% | Facility B2, 2.25%, 1/20/14 | USD | 1,572 | 1,489,371 | |||
Avio SpA, Dollar Mezzanine Term Loan, | Facility B6A and B6B, 3.02%, 1/20/14 | EUR | 489 | 689,643 | |||
4.24%, 12/13/16 | 1,062 | 806,784 | Cognis GmbH: | ||||
Hawker Beechcraft Acquisition Co. LLC: | Facility A, 2.77%, 11/17/13 | 803 | 1,068,996 | ||||
Credit Linked Deposit, 0.18%, 3/26/14 | 163 | 127,717 | Facility B (French), 2.77%, 11/16/13 | 197 | 261,795 | ||
Term Loan, 2.24% – 2.28%, 3/26/14 | 2,750 | 2,158,412 | ElectricInvest Holding Co. Ltd. (Viridian Group Plc), | ||||
IAP Worldwide Services, Inc., Term Loan (First-Lien), | Junior Term Facility: | ||||||
9.25%, 12/30/12 (e) | 232 | 193,722 | 4.93%, 12/20/12 | 1,787 | 2,025,325 | ||
5.01%, 12/21/12 | GBP | 1,800 | 2,274,779 | ||||
3,286,635 | Huish Detergents Inc.: | ||||||
Airlines — 0.3% | Loan (Second Lien), 4.50%, 10/26/14 | USD | 750 | 710,625 | |||
US Airways Group, Inc., Loan, 2.78%, 3/21/14 | 1,460 | 965,425 | Tranche B Term Loan, 2.00%, 4/26/14 | 1,725 | 1,650,055 | ||
Auto Components — 2.7% | Ineos US Finance LLC, Term A4 Facility, | ||||||
Allison Transmission, Inc., Term Loan, | 7.00%, 12/14/12 | 1,236 | 1,091,535 | ||||
3.00% – 3.04%, 8/07/14 | 5,778 | 5,166,397 | Matrix Acquisition Corp. (MacDermid, Inc.), Tranche C | ||||
Dana Holding Corp., Term Advance, 7.25%, 1/31/15 | 2,874 | 2,532,390 | Term Loan, 2.64%, 12/15/13 | EUR | 1,616 | 1,839,021 | |
Dayco Products LLC — (Mark IV Industries, Inc.): | Nalco Co., Term Loan, 6.50%, 5/13/16 | USD | 1,891 | 1,918,858 | |||
Replacement Term B Loan, 8.75%, 6/21/11 (b)(d) | 853 | 382,583 | PQ Corp. (fka Niagara Acquisition, Inc.): | ||||
US Lien Term Loan, 8.50%, 5/01/10 | 101 | 100,806 | Loan (Second Lien), 6.75%, 7/30/15 | 2,250 | 1,839,375 | ||
US Term Loan, 8.50%, 6/01/11 | 20 | 10,081 | Term Loan (First Lien), 3.50% – 3.54%, 7/30/14 | 2,716 | 2,411,475 | ||
GPX International Tire Corp. (b)(d): | Rockwood Specialties Group, Inc., Tranche H Term Loan, | ||||||
Amendment Fee, 12.00%, 4/11/12 | 12 | 3,454 | 6.00%, 5/15/14 | 1,229 | 1,241,848 | ||
Tranche B Term Loan, 10.25%, 3/30/12 | 640 | 192,052 | Solutia Inc., Loan, 7.25%, 2/28/14 | 1,472 | 1,492,343 | ||
8,387,763 | 25,008,356 | ||||||
Automobiles — 0.5% | Commercial Services & Supplies — 3.1% | ||||||
Ford Motor Co., Term Loan, 3.25% – 3.29%, 12/15/13 | 1,690 | 1,502,202 | Aramark Corp.: | ||||
Facility Letter of Credit, 0.29%, 1/26/14 | 155 | 141,829 | |||||
Beverages — 1.4% | U.S. Term Loan, 2.12% – 2.16%, 1/26/14 | 2,359 | 2,161,562 | ||||
Culligan International Co., Loan (Second Lien), | Casella Waste Systems, Inc., Term B Loan, | ||||||
5.19%, 4/24/13 | EUR | 1,000 | 533,473 | 7.00%, 4/08/14 | 1,097 | 1,102,736 | |
Inbev NV Bridge Loan, 1.43%, 7/15/11 | USD | 1,000 | 986,250 | ||||
Inbev NV/SA, Bridge Loan, 1.72%, 7/15/13 | 1,000 | 966,667 | |||||
See Notes to Financial Statements. | |||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 29 |
Schedule of Investments (continued) | BlackRock Floating Rate Income Trust (BGT) | |||||||
(Percentages shown are based on Net Assets) | ||||||||
Par | Par | |||||||
Floating Rate Loan Interests (c) | (000) | Value | Floating Rate Loan Interests (c) | (000) | Value | |||
Commercial Services & Supplies (concluded) | Diversified Telecommunication Services — 3.8% | |||||||
EnviroSolutions Real Property Holdings, Inc., Initial | BCM Ireland Holdings Ltd. (Eircom): | |||||||
Term Loan, 11.00%, 7/07/12 (e) | USD | 2,030 $ | 1,502,171 | Facility B, 2.30%, 8/14/14 | EUR | 500 $ | 641,441 | |
John Maneely Co., Term Loan, | Facility C, 2.55%, 8/14/15 | 500 | 641,441 | |||||
3.50% – 3.53%, 12/09/13 | 1,380 | 1,259,076 | Cavtel Holdings, LLC, Term Loan, 10.50%, 12/31/12 | USD | 1,162 | 865,414 | ||
SIRVA Worldwide, Inc., Loan (Second Lien), | Hawaiian Telcom Communications, Inc., Tranche C | |||||||
12.00%, 5/12/15 | 133 | 13,339 | Term Loan, 4.75%, 5/30/14 | 1,223 | 868,143 | |||
Synagro Technologies, Inc., Term Loan (First Lien), | Integra Telecom Holdings, Inc., Term Loan (First Lien), | |||||||
2.24%, 4/02/14 | 1,971 | 1,584,205 | 10.50%, 8/31/13 | 1,870 | 1,829,318 | |||
West Corp. Incremental Term Loan B-3, | Nordic Telephone Co. Holdings APS: | |||||||
7.25%, 11/08/13 | 1,995 | 1,998,661 | Facility B2 Swiss, 1.93%, 11/29/13 | EUR | 885 | 1,238,990 | ||
9,763,579 | Facility C2 Swiss, 2.56%, 11/29/14 | 1,058 | 1,480,351 | |||||
PAETEC Holding Corp.: | ||||||||
Computers & Peripherals — 0.3% | Incremental Term Loan, 2.74%, 2/28/13 | USD | 132 | 124,349 | ||||
Intergraph Corp.: | Replacement Term Loan, 2.74%, 2/28/13 | 310 | 292,941 | |||||
Initial Term Loan (First Lien), 2.37%, 5/29/14 | 350 | 333,795 | Wind Telecomunicazioni SpA: | |||||
Second-Lien Term Loan, 6.24% – 6.37%, 11/28/14 | 750 | 718,125 | A1 Term Loan Facility, 2.90% – 2.93%, 9/22/12 | EUR | 848 | 1,180,221 | ||
1,051,920 | B1 Term Loan Facility, 3.69%, 9/22/13 | 1,000 | 1,404,009 | |||||
Construction & Engineering — 0.7% | C1 Term Loan Facility, 4.68%, 9/22/14 | 1,000 | 1,404,009 | |||||
Airport Development and Investment Ltd. (BAA) Facility | 11,970,627 | |||||||
(Second Lien), 4.56%, 4/07/11 | GBP | 566 | 843,498 | Electric Utilities — 0.3% | ||||
Brand Energy & Infrastructure Services, Inc. (FR Brand | Astoria Generating Co. Acquisitions, LLC, Term B Facility, | |||||||
Acquisition Corp.): | 2.04% – 2.05%, 2/23/13 | USD | 378 | 362,655 | ||||
Loan (Second Lien), 6.31% – 6.44%, 2/07/15 | USD | 1,000 | 791,250 | TPF Generation Holdings, LLC: | ||||
Synthetic Letter of Credit Term Loan (First Lien), | Synthetic Letter of Credit Deposit (First Lien), | |||||||
0.31%, 2/07/14 | 500 | 449,375 | 0.18%, 12/15/13 | 151 | 143,016 | |||
2,084,123 | Synthetic Revolving Deposit, 0.19%, 12/15/11 | 47 | 44,832 | |||||
Containers & Packaging — 1.9% | Term Loan (First Lien), 2.24%, 12/15/13 | 409 | 388,847 | |||||
Atlantis Plastic Films, Inc., Term Loan (Second Lien), | 939,350 | |||||||
12.25%, 3/22/12 (b)(d) | 500 | — | Electrical Equipment — 0.4% | |||||
Graham Packaging Co., L.P.: | Electrical Components International Holdings Co. (ECI), | |||||||
B Term Loan, 2.50% – 2.56%, 10/07/11 | 232 | 225,705 | Term Loan (Second Lien), 11.50%, 5/01/14 | 500 | 25,000 | |||
C Term Loan, 6.75%, 4/05/14 | 828 | 826,876 | Generac Acquisition Corp., Term Loan (First Lien), | |||||
OI European Group BV, Tranche D Term Loan, | 2.78%, 11/10/13 | 1,464 | 1,315,114 | |||||
1.93%, 6/14/13 | EUR | 1,915 | 2,672,599 | |||||
Smurfit Kappa Acquisitions (JSG): | 1,340,114 | |||||||
C1 Term Loan Facility, 4.05% – 4.46%, 12/01/14 | 724 | 1,017,226 | Electronic Equipment, Instruments | |||||
Term B1, 3.80% – 4.73%, 12/02/13 | 724 | 1,017,446 | & Components — 1.2% | |||||
Smurfit-Stone Container Canada, Inc.: | Flextronics International Ltd.: | |||||||
Tranche C, 2.50%, 11/01/11 | USD | 26 | 25,153 | A Closing Date Loan, 2.49% – 2.54%, 10/01/14 | 2,666 | 2,459,646 | ||
Tranche C-1 Term Loan, 2.50%, 11/01/11 | 8 | 7,605 | Delay Draw Term Loan, 2.53%, 10/01/14 | 766 | 706,795 | |||
Smurfit-Stone Container Enterprises, Inc.: | Matinvest 2 SAS (Deutsche Connector), Second Lien, | |||||||
Deposit Funded Facility, 4.50%, 11/01/10 | 12 | 11,754 | 4.97%, 12/22/15 | 500 | 235,000 | |||
Tranche B, 2.50%, 11/01/11 | 14 | 13,376 | Safenet, Inc., Loan (Second Lien), 6.25%, 4/12/15 | 500 | 426,250 | |||
U.S. Term Loan Debtor in Possession, | Tinnerman Palnut Engineered Products, LLC, Loan | |||||||
10.00%, 1/28/10 | 145 | 145,108 | (Second Lien), 13.00%, 11/01/11 (b)(d) | 2,407 | 24,068 | |||
Smurfit-Stone Container, Revolving Credit: | 3,851,759 | |||||||
2.75% – 4.50%, 11/01/09 | 60 | 58,913 | ||||||
2.75% – 5.00%, 11/01/09 | 20 | 19,540 | Energy Equipment & Services — 0.9% | |||||
Dresser, Inc., Term Loan (Second Lien), 6.00%, 5/04/15 | 1,500 | 1,348,125 | ||||||
6,041,301 | MEG Energy Corp., Initial Term Loan, 2.29%, 4/03/13 | 483 | 454,756 | |||||
Distributors — 0.2% | Trinidad USA Partnership LLLP, Term Facility, | |||||||
Keystone Automotive Operations, Inc., Loan, | 2.74%, 5/01/11 | 1,019 | 876,748 | |||||
3.75% – 5.75%, 1/12/12 | 1,026 | 608,109 | 2,679,629 | |||||
Diversified Consumer Services — 2.5% | Food & Staples Retailing — 2.8% | |||||||
Coinmach Laundry Corp, Delay Draw Term Loan, | AB Acquisitions UK Topco 2 Ltd. (fka Alliance Boots), | |||||||
3.25% – 3.43%, 11/14/14 | 497 | 424,528 | Facility B1, 3.52%, 7/09/15 | GBP | 2,500 | 3,596,399 | ||
Coinmach Service Corp., Term Loan B, 3.43%, 11/14/14 | 2,539 | 2,094,394 | Birds Eye Iglo Group Ltd. (Liberator Midco Ltd.), | |||||
Education Management Corp, Term Loan C, | Mezzanine Credit Facility, 8.51%, 11/03/16 | 411 | 626,759 | |||||
2.06%, 6/01/13 | 1,197 | 1,118,950 | DSW Holdings, Inc., Term Loan, | |||||
Laureate Education New Incremental Term Loan, | 4.29%, 3/02/12 | USD | 1,000 | 861,667 | ||||
7.00%, 12/31/14 | 4,250 | 4,234,063 | McJunkin Corp., Term Loan, 3.49%, 1/31/14 | 497 | 481,060 | |||
7,871,935 | Pierre Foods Term Loan B, 8.50%, 9/23/14 | 817 | 821,085 | |||||
Diversified Financial Services — 0.1% | Rite Aid Corp., Tranche 4 Term Loan, 9.50%, 6/10/15 | 1,000 | 1,030,417 | |||||
Professional Service Industries, Inc., Term Loan | ||||||||
(First Lien), 3.00%, 10/31/12 | 620 | 310,223 | ||||||
See Notes to Financial Statements. | ||||||||
30 | ANNUAL REPORT | OCTOBER 31, 2009 |
Schedule of Investments (continued) | BlackRock Floating Rate Income Trust (BGT) | ||||||
(Percentages shown are based on Net Assets) | |||||||
Par | Par | ||||||
Floating Rate Loan Interests (c) | (000) | Value | Floating Rate Loan Interests (c) | (000) | Value | ||
Food & Staples Retailing (concluded) | Hotels, Restaurants & Leisure (concluded) | ||||||
Roundy’s Supermarkets, Inc., Tranche B Term Loan, | Penn National Gaming, Inc., Term Loan B, | ||||||
3.01% – 3.04%, 11/03/11 | USD | 501 $ | 492,229 | 1.99% – 2.21%, 10/03/12 | USD | 2,497 $ | 2,404,745 |
WM. Bolthouse Farms, Inc., Term Loan (First Lien), | QCE, LLC (Quiznos), Term Loan (First Lien), | ||||||
2.56%, 12/16/12 | 843 | 819,272 | 2.56%, 5/05/13 | 997 | 797,107 | ||
8,728,888 | 7,841,788 | ||||||
Food Products — 1.6% | Household Durables — 1.7% | ||||||
Dole Food Co., Inc.: | American Residential Services LLC, Term Loan | ||||||
Credit-Linked Deposit, 0.28%, 4/12/13 | 192 | 193,556 | (Second Lien), 10.00%, 4/17/15 | 2,051 | 1,927,183 | ||
Tranche B Term Loan, 8.00%, 4/12/13 | 335 | 338,055 | Berkline/Benchcraft, LLC., Term Loan, | ||||
FSB Holdings, Inc. (Fresh Start Bakeries), Term Loan | 6.58%, 11/03/11 (b)(d) | 107 | 5,373 | ||||
(Second Lien), 6.00%, 3/29/14 | 500 | 415,000 | Jarden Corp., Term Loan B3, 2.78%, 1/24/12 | 952 | 930,272 | ||
Solvest, Ltd. (Dole), Tranche C Term Loan, | Simmons Bedding Co., Tranche D Term Loan, | ||||||
8.00%, 4/12/13 | 1,205 | 1,214,151 | 10.50%, 12/19/11 | 1,500 | 1,477,500 | ||
Wm. Wrigley Jr. Co., Tranche B Term Loan, | Yankee Candle Co., Inc., Term Loan, 2.25%, 2/06/14 | 1,047 | 974,582 | ||||
6.50%, 9/30/14 | 2,924 | 2,956,946 | 5,314,910 | ||||
5,117,708 | Household Products — 0.2% | ||||||
Health Care Equipment & Supplies — 1.8% | VI-JON, Inc. (VJCS Acquisition, Inc.), Tranche B | ||||||
Bausch & Lomb Incorporated: | Term Loan, 2.25%, 4/24/14 | 674 | 630,379 | ||||
Delayed Draw Term Loan, 3.50% – 3.53%, 4/24/15 | 93 | 88,814 | IT Services — 4.1% | ||||
Parent Term Loan, 3.53%, 4/24/15 | 384 | 365,729 | Amadeus IT Group SA/Amadeus Verwaltungs GmbH: | ||||
Biomet, Inc., Euro Term Loan, | Term B3 Facility, 2.44%, 6/30/13 | EUR | 615 | 833,122 | |||
3.39% – 3.71%, 3/25/15 | EUR | 2,521 | 3,523,547 | Term B4 Facility, 2.44%, 6/30/13 | 489 | 663,217 | |
DJO Finance LLC (ReAble Therapeutics Fin LLC), | Term C3 Facility, 2.94%, 6/30/14 | 615 | 833,122 | ||||
Term Loan, 3.24% – 3.28%, 5/20/14 | USD | 1,485 | 1,426,110 | Term C4 Facility, 2.94%, 6/30/14 | 489 | 663,217 | |
Hologic, Inc., Tranche B Term Loan, 3.50%, 3/31/13 | 270 | 263,940 | Audio Visual Services Group, Inc., Loan (Second Lien), | ||||
5,668,140 | 6.79%, 2/28/14 | USD | 1,059 | 105,867 | |||
Health Care Providers & Services — 4.1% | Ceridian Corp, US Term Loan, | ||||||
CCS Medical, Inc. (Chronic Care): | 3.24% – 3.28%, 11/09/14 | 1,977 | 1,753,567 | ||||
Loan Debtor in Possession, 11.00%, 11/16/09 | 31 | 30,309 | First Data Corp.: | ||||
Term Loan (First Lien), 4.35%, 9/30/12 (b)(d) | 675 | 328,500 | Initial Tranche B-1 Term Loan, | ||||
CCS Medical Return of Capital, 0.00%, 9/30/11 (b)(d) | 475 | 231,167 | 2.99% – 3.04%, 9/24/14 | 2,454 | 2,106,768 | ||
CHS/Community Health Systems, Inc.: | Initial Tranche B-2 Term Loan, | ||||||
Delayed Draw Term Loan, 2.49%, 7/25/14 | 229 | 213,335 | 3.03% – 3.04%, 9/24/14 | 1,590 | 1,361,812 | ||
Funded Term Loan, 2.49% – 2.62%, 7/25/14 | 4,491 | 4,181,777 | Initial Tranche B-3 Term Loan, | ||||
Fresenius SE: | 3.03% – 3.04%, 9/24/14 | 975 | 834,104 | ||||
Tranche B1 Term Loan, 6.75%, 9/26/14 | 968 | 973,779 | RedPrairie Corp.: | ||||
Tranche B2 Term Loan, 6.75%, 9/26/14 | 521 | 524,586 | Loan (Second Lien), 6.97%, 1/20/13 | 1,250 | 1,081,250 | ||
HCA Inc., Tranche A-1 Term Loan, 1.78%, 11/17/12 | 3,084 | 2,869,645 | Term Loan B, 3.44% – 5.25%, 7/20/12 | 861 | 826,320 | ||
HealthSouth Corp., Tranche 1 Term Loan-Assignment | SunGard Data Systems Inc (Solar Capital Corp.), | ||||||
2.54% – 2.55%, 3/10/13 | 798 | 757,573 | Incremental Term Loan, 6.75%, 2/28/14 | 1,694 | 1,706,074 | ||
HealthSouth Corp., Tranche 2 Term Loan-Assignment | 12,768,440 | ||||||
4.04% – 4.05%, 3/15/14 | 657 | 632,965 | Independent Power Producers & Energy Traders — 2.4% | ||||
Surgical Care Affiliates, LLC, Term Loan, | Dynegy Holdings Inc.: | ||||||
2.28%, 12/29/14 | 392 | 357,114 | Term Letter of Credit Facility Term Loan, | ||||
Vanguard Health Holding Co. II, LLC (Vanguard | 4.00%, 4/02/13 | 1,110 | 1,063,811 | ||||
Health System, Inc.), Replacement Term Loan, | Tranche B Term Loan, 4.00%, 4/02/13 | 90 | 85,856 | ||||
2.49%, 9/23/11 | 1,637 | 1,594,878 | Texas Competitive Electric Holdings Co., LLC (TXU): | ||||
12,695,628 | Initial Tranche B-1 Term Loan, | ||||||
Hotels, Restaurants & Leisure — 2.5% | 3.74% – 3.78%, 10/10/14 | 2,477 | 1,918,853 | ||||
BLB Worldwide Holdings, Inc. (Wembley, Inc.) (b)(d): | Initial Tranche B-2 Term Loan, | ||||||
First Priority Term Loan, 4.75%, 7/18/11 | 2,418 | 1,426,744 | 3.74% – 3.78%, 10/10/14 | 3,261 | 2,520,589 | ||
Second Priority Term Loan, 7.06%, 7/18/12 | 1,500 | 67,500 | Initial Tranche B-3 Term Loan, | ||||
Golden Nugget, Inc.: | 3.74% – 3.78%, 10/10/14 | 2,485 | 1,903,001 | ||||
Additional Term Advance (First Lien), | 7,492,110 | ||||||
2.25% – 2.29%, 6/30/14 | 271 | 185,651 | Insurance — 0.5% | ||||
Second Lien Term Loan, 3.50%, 12/31/14 | 500 | 200,000 | Alliant Holdings I, Inc. Term Loan, 3.28%, 8/21/14 | 980 | 908,950 | ||
Term Advance (First Lien), 2.25%, 6/30/14 | 476 | 326,114 | Conseco, Inc, Term Loan, 6.50%, 10/10/13 | 728 | 651,745 | ||
Green Valley Ranch Gaming, LLC, Loan (Second Lien), | |||||||
3.55%, 8/16/14 | 1,500 | 367,500 | 1,560,695 | ||||
Harrah’s Operating Co., Inc., Term B-3 Loan, | Internet & Catalog Retail — 0.3% | ||||||
3.28%, 1/28/15 | 726 | 576,991 | FTD Group, Inc., Base Prime, 6.75%, 8/26/14 | 688 | 686,239 | ||
Harrah’s Operating Term B-4 Loan, 9.50%, 10/31/16 | 1,500 | 1,462,709 | Oriental Trading Co., Inc., Loan (Second Lien), | ||||
OSI Restaurant Partners, LLC, Pre-Funded RC Loan, | 6.24%, 1/31/14 | 500 | 110,000 | ||||
0.12% – 2.56%, 6/14/13 | 32 | 26,727 | 796,239 | ||||
See Notes to Financial Statements. | |||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 31 |
Schedule of Investments (continued) | BlackRock Floating Rate Income Trust (BGT) | |||||||
(Percentages shown are based on Net Assets) | ||||||||
Par | Par | |||||||
Floating Rate Loan Interests (c) | (000) | Value | Floating Rate Loan Interests (c) | (000) | Value | |||
Leisure Equipment & Products — 0.3% | Media (concluded) | |||||||
24 Hour Fitness Worldwide, Inc., Tranche B Term Loan, | Insight Midwest Holdings, LLC, B Term Loan, | |||||||
2.75% – 2.79%, 6/08/12 | USD | 965 $ | 894,234 | 2.29%, 4/07/14 | USD | 700 | $ 663,500 | |
Life Sciences Tools & Services — 0.8% | Kabel Deutschland GMBH, A Facility-Assignment, | |||||||
Life Technologies Corp., Term B Facility, | 2.18%, 6/01/12 | EUR | 4,000 | 5,605,645 | ||||
5.25%, 11/23/15 | 2,378 | 2,385,424 | Lamar Media Corp.: | |||||
Series B Incremental Loan, 5.50%, 9/28/12 | USD | 2,875 | 2,851,569 | |||||
Machinery — 1.7% | Term Loan, 5.50%, 9/30/12 | 641 | 635,871 | |||||
Accuride Term Loan, 6.00%, 1/31/12 | GBP | 1,150 | 1,139,579 | Lavena Holding 3 GmbH (Prosiebensat.1 Media AG): | ||||
Blount, Inc., Term Loan B, 2.00% – 3.25%, 8/09/10 | USD | 533 | 506,600 | Facility B, 3.53%, 6/28/15 | EUR | 337 | 323,548 | |
LN Acquisition Corp. (Lincoln Industrial): | Facility C, 3.78%, 6/30/16 | 674 | 647,096 | |||||
Delayed Draw Term Loan (First Lien), | Liberty Cablevision of Puerto Rico, Ltd., Initial Term | |||||||
2.79%, 7/11/14 | 254 | 220,823 | Facility, 2.25%, 6/17/14 | USD | 1,466 | 1,238,981 | ||
Initial U.S. Term Loan (First Lien), 2.79%, 7/11/14 | 659 | 573,043 | Local TV Finance, LLC, Term Loan, 2.25%, 5/07/13 | 739 | 590,317 | |||
NACCO Materials Handling Group, Inc., Loan, | MCC Iowa LLC (Mediacom Broadband Group), | |||||||
2.24% – 3.41%, 3/21/13 | 484 | 372,488 | Tranche E Term Loan, 6.50%, 1/03/16 | 597 | 598,470 | |||
Oshkosh Truck Corp., Term B Loan, | MCNA Cable Holdings LLC (OneLink Communications), | |||||||
6.29% – 6.33%, 12/06/13 | 2,115 | 2,108,175 | Loan, 7.23%, 3/01/13 (e) | 1,933 | 773,361 | |||
Standard Steel, LLC: | Mediacom Illinois, LLC (fka Mediacom | |||||||
Delayed Draw Term Loan, 8.25%, 7/02/12 | 74 | 63,030 | Communications, LLC), Tranche D Term Loan, | |||||
Initial Term Loan, 9.00%, 7/02/12 | 368 | 312,724 | 5.50%, 3/31/17 | 1,250 | 1,251,563 | |||
5,296,462 | Mediannuaire Holding (Pages Jaunes): | |||||||
Marine — 1.1% | Term Loan B2, 3.03%, 1/11/15 | EUR | 438 | 457,955 | ||||
Delphi Acquisition Holding I B.V. (fka Dockwise): | Term Loan C, 3.53%, 1/11/16 | 905 | 947,420 | |||||
Facility B1, 2.28%, 1/12/15 | 688 | 649,708 | Term Loan D, 5.03%, 1/11/17 | 500 | 448,853 | |||
Facility B2, 2.28%, 1/12/15 | 470 | 443,100 | Metro-Goldwyn-Mayer Inc., Tranche B Term Loan, | |||||
Facility C1, 3.16%, 1/11/16 | 577 | 544,590 | 20.50%, 4/09/12 | USD | 1,905 | 1,082,186 | ||
Facility C2, 3.16%, 1/11/16 | 470 | 443,100 | Mission Broadcasting, Inc., Term B Loan, | |||||
Facility D1, 4.78%, 1/11/16 | 650 | 513,500 | 5.00%, 10/01/12 | 1,099 | 923,069 | |||
Facility D2, 4.78%, 1/11/16 | 1,000 | 790,000 | Multicultural Radio Broadcasting, Inc., Term Loan, | |||||
2.99%, 12/04/13 | 313 | 219,100 | ||||||
3,383,998 | NTL Inc.: | |||||||
Media — 25.9% | C Facility, 3.58%, 7/17/13 | GBP | 3,875 | 5,848,420 | ||||
Acosta, Inc., 2006 Term Loan, 2.50%, 7/28/13 | 1,185 | 1,120,156 | Term Loan B1, 2.89%, 9/03/12 | 434 | 684,184 | |||
Affinion Group Holdings, Inc. Loan, 8.27%, 3/01/12 (e) | 1,021 | 903,991 | Term Loan B2, 2.89%, 9/03/12 | 508 | 799,702 | |||
Amsterdamse Beheer — En Consultingmaatschappij BV | NVT Networks LLC, Exit Term Loan, 13.00%, 10/01/12 | USD | 160 | 160,050 | ||||
(Casema) Casema: | Newsday, LLC: | |||||||
B1 Term Loan Facility, 2.93%, 11/02/14 | EUR | 625 | 873,332 | Fixed Rate Term Loan, 10.50%, 8/01/13 | 1,500 | 1,570,001 | ||
C Term Loan Facility, 3.43%, 11/02/15 | 625 | 873,332 | Floating Rate Term Loan, 6.53%, 8/01/13 | 1,250 | 1,231,250 | |||
Atlantic Broadband Finance, LLC, Tranche B-2-A | Nexstar Broadcasting, Inc, Term B Loan, | |||||||
Term Loan, 2.54%, 9/01/11 | USD | 69 | 68,033 | 5.00% – 6.25%, 10/01/12 | 1,039 | 976,204 | ||
Atlantic Broadband Tranche B-2-B Term Loan, | Nielson Finance LLC, Dollar Term Loan: | |||||||
6.75%, 6/01/13 | 1,866 | 1,848,493 | Class A, 2.24%, 8/09/13 | 1,178 | 1,093,676 | |||
Bresnan Communications, LLC, Term Loan | Class B, 3.99%, 5/01/16 | 2,292 | 2,145,880 | |||||
(Second Lien), 4.75%, 3/29/14 | 250 | 235,625 | Penton Media, Inc.: | |||||
Catalina Marketing Corp., Initial Term Loan, | Institutional Loan (Second Lien), 5.28%, 1/29/10 | 1,000 | 210,000 | |||||
3.00%, 10/01/14 | 1,345 | 1,276,398 | Term Loan (First Lien), 2.53% – 2.62%, 11/30/09 | 1,097 | 744,047 | |||
Cengage Learning Acquisitions, Inc. (Thomson Learning), | Puerto Rico Cable Acquisition Co. Inc. (D/B/A | |||||||
Tranche 1 Incremental Term Loan, 7.50%, 7/03/14 | 5,411 | 5,151,017 | Choice TV), Term Loan (Second Lien), 7.75%, 2/15/12 | 692 | 564,231 | |||
Cequel Communications, LLC, Term Loan, | Quebecor Media, Facility B, 2.28%, 1/17/13 | 722 | 682,172 | |||||
2.24% – 4.25%, 11/05/13 | 4,850 | 4,619,926 | Springer: | |||||
Charter Communications Operating, LLC, New Term Loan, | Term Loan B, 3.14%, 9/16/11 | EUR | 910 | 1,247,398 | ||||
6.25%, 3/06/14 | 1,299 | 1,177,279 | Term Loan C, 3.52%, 9/17/12 | 1,188 | 1,627,908 | |||
Charter Communications, Incremental Term Loan, | Sunshine Acquisition Ltd. (aka HIT Entertainment), | |||||||
9.25%, 3/25/14 | 2,996 | 3,021,893 | Term Facility, 2.73%, 3/20/12 | USD | 1,998 | 1,735,807 | ||
FoxCo Acquisition Sub, LLC, Term Loan, 7.50%, 7/14/15 | 2,391 | 2,166,610 | TWCC Holding Corp., Term Loan, 7.25%, 9/14/15 | 1,736 | 1,757,846 | |||
HIT Entertainment, Inc., Term Loan (Second Lien), | Telecommunications Management, LLC: | |||||||
5.98%, 2/26/13 | 1,000 | 532,500 | Multi-Draw Term Loan, 3.49%, 6/30/13 | 232 | 171,473 | |||
HMH Publishing Co. Ltd.: | Term Loan, 3.49%, 6/30/13 | 919 | 680,153 | |||||
Mezzanine, 17.50%, 11/14/14 | 1,063 | 292,405 | UPC Financing Partnership, Facility U, | |||||
Tranche A Term Loan, 5.28%, 6/12/14 | 2,648 | 2,281,948 | 4.44%, 12/31/17 | EUR | 3,767 | 5,085,895 | ||
Hanley-Wood, LLC (FSC Acquisition), Term Loan, | World Color USA Corp. (fka Quebecor World Inc.), | |||||||
2.49% – 2.53%, 3/08/14 | 2,212 | 922,069 | 9.00%, 7/23/12 | USD | 1,622 | 1,622,066 | ||
Hargray Acquisition Co./DPC Acquisition LLC/HCP | Yell Group Plc, Term Loan B1, 3.28%, 10/27/12 | 2,500 | 1,760,715 | |||||
Acquisition LLC: | 80,896,838 | |||||||
Loan (Second Lien), 5.97%, 1/29/15 | 500 | 312,500 | ||||||
Term Loan (First Lien), 2.72%, 6/27/14 | 368 | 343,708 | ||||||
Harland Clarke Holdings Corp. (fka Clarke | ||||||||
American Corp.), Tranche B Term Loan, | ||||||||
2.74% – 2.78%, 6/30/14 | 1,459 | 1,218,041 | ||||||
See Notes to Financial Statements. | ||||||||
32 | ANNUAL REPORT | OCTOBER 31, 2009 |
Schedule of Investments (continued) | BlackRock Floating Rate Income Trust (BGT) | ||||||
(Percentages shown are based on Net Assets) | |||||||
Par | Par | ||||||
Floating Rate Loan Interests (c) | (000) | Value | Floating Rate Loan Interests (c) | (000) | Value | ||
Metals & Mining — 0.6% | Software — 0.2% | ||||||
Essar Steel Algoma Inc. (fka Algoma Steel Inc.), | Bankruptcy Management Solutions, Inc.: | ||||||
Term Loan, 8.00%, 6/20/13 | USD | 1,934 $ | 1,813,014 | Loan (Second Lien), 6.49%, 7/31/13 | USD | 485 $ | 97,909 |
Multi-Utilities — 0.6% | Term Loan (First Lien), 4.25%, 7/31/12 | 945 | 567,149 | ||||
FirstLight Power Resources, Inc. (fka NE Energy, Inc.): | 665,058 | ||||||
Synthetic Letter of Credit, 0.16%, 11/01/13 | 159 | 145,457 | Specialty Retail — 0.6% | ||||
Term Advance (Second Lien), 4.81%, 5/01/14 | 750 | 609,375 | Adesa, Inc. (KAR Holdings, Inc.), Initial Term Loan, | ||||
Term B Advance (First Lien), 2.81%, 11/01/13 | 1,230 | 1,128,922 | 2.50%, 10/21/13 | 500 | 477,500 | ||
Mach Gen, LLC Synthetic Letter of Credit Loan | General Nutrition Centers, Inc., Term Loan, | ||||||
(First Lien), 0.03%, 2/22/13 | 69 | 63,696 | 2.50% – 2.54%, 9/16/13 | 261 | 240,795 | ||
1,947,450 | Orchard Supply Hardware, Term Loan B, | ||||||
Multiline Retail — 1.8% | 2.70%, 12/21/10 | 1,500 | 1,276,350 | ||||
Dollar General Corp.: | 1,994,645 | ||||||
Tranche B-1 Term Loan, 2.99% – 3.03%, 7/07/14 | 1,247 | 1,190,066 | Trading Companies & Distributors — 0.4% | ||||
Tranche B-2 Term Loan, 2.99%, 7/07/14 | 499 | 473,685 | Beacon Sales Acquisition, Inc., Term B Loan, | ||||
Hema BV Term Loan B (Euro), 5.43%, 1/01/17 | EUR | 3,800 | 3,914,585 | 2.24% – 2.29%, 9/30/13 | 1,188 | 1,110,373 | |
5,578,336 | Wireless Telecommunication Services — 1.5% | ||||||
Oil, Gas & Consumable Fuels — 1.9% | Digicel International Finance Ltd., Tranche A, | ||||||
Big West Oil, LLC: | 2.81%, 3/30/12 | 1,938 | 1,855,193 | ||||
Delayed Advance Loan, 4.50%, 5/15/14 | USD | 920 | 878,365 | MetroPCS Wireless, Inc., Tranche B Term Loan, | |||
Initial Advance Loan, 4.50%, 5/15/14 | 732 | 698,602 | 2.50% – 2.75%, 11/03/13 | 1,605 | 1,505,191 | ||
Coffeyville Resources, LLC Tranche D Term Loan, | Ntelos Inc., Term B Advance, 5.75%, 8/07/15 | 1,250 | 1,253,125 | ||||
8.50%, 12/30/13 | 1,037 | 1,036,440 | 4,613,509 | ||||
Drummond Co., Inc., Term Advance, 1.49%, 2/14/11 | 950 | 921,500 | |||||
Niska Gas Storage Canada ULC, Canadian Term Loan B, | Total Floating Rate Loan Interests — 95.7% | 298,940,865 | |||||
2.00%, 5/12/13 | 450 | 428,733 | |||||
Niska Gas Storage US, LLC: | |||||||
US Term B Loan, 2.00%, 5/12/13 | 47 | 45,047 | |||||
Wild Goose Acquisition Draw-US Term B, | Foreign Government Obligations | ||||||
2.00%, 5/12/13 | 32 | 30,514 | Brazilian Government International Bond, | ||||
Vulcan Energy Term Loan B, 5.50%, 9/30/15 | 1,750 | 1,760,938 | 10.25%, 6/17/13 | 475 | 585,200 | ||
5,800,139 | Colombia Government International Bond, | ||||||
Paper & Forest Products — 1.0% | 3.84%, 3/17/13 (c)(h) | 1,200 | 1,230,000 | ||||
Georgia-Pacific LLC, Term B Loan, | Mexican Bonos Series M, 9.00%, 12/22/11 | MXN 13,520 | 1,100,441 | ||||
2.28% – 2.46%, 12/22/12 | 3,263 | 3,136,698 | Republic of Venezuela, 1.28%, 4/20/11 (c)(h) | USD | 4,000 | 3,440,000 | |
Verso Paper Finance Holdings LLC, Loan, | South Africa Government International Bond, | ||||||
6.73% – 7.48%, 2/01/13 (e) | 360 | 120,629 | 7.38%, 4/25/12 | 2,400 | 2,634,000 | ||
Turkey Government International Bond, | |||||||
3,257,327 | 7.00%, 9/26/16 | 2,735 | 3,022,175 | ||||
Personal Products — 0.4% | Uruguay Government International Bond, | ||||||
American Safety Razor Co., LLC, Loan (Second Lien), | 6.88%, 1/19/16 | EUR | 950 | 1,460,979 | |||
6.54%, 1/30/14 | 1,525 | 1,212,375 | Total Foreign Government Obligations — 4.3% | 13,472,795 | |||
Pharmaceuticals — 2.3% | |||||||
Catalent Pharma Solutions, Inc. (fka Cardinal | |||||||
Health 409, Inc.), Euro Term Loan, 2.68%, 4/15/14 | EUR | 2,444 | 3,164,780 | Beneficial | |||
Warner Chilcott: | Interest | ||||||
Delay Draw Term Loan, 3.78%, 4/12/10 | USD | 524 | 524,673 | Other Interests (i) | (000) | ||
Term Loan A1, 5.50%, 10/14/14 | 1,390 | 1,391,134 | |||||
Term Loan B1, 5.75%, 3/30/15 | 695 | 695,567 | Auto Components — 0.6% | ||||
Term Loan B2, 5.75%, 4/30/15 | 1,529 | 1,530,248 | Delphi Debtor in Possession Hold Co. LLP Class B | ||||
Membership Interests | USD | 268 | 1,963,437 | ||||
7,306,402 | |||||||
Diversified Financial Services — 0.1% | |||||||
Professional Services — 0.3% | JG Wentorth LLC Preferred Equity Interests | 515 | 434,273 | ||||
Booz Allen Hamilton Inc., Tranche B Term Loan, | |||||||
7.50%, 7/31/15 | 992 | 1,000,643 | Health Care Providers & Services — 0.0% | ||||
Critical Care Systems International, Inc. | 947 | 190 | |||||
Real Estate Management & Development — 0.6% | |||||||
Enclave, First Lien Term Loan, 6.14%, 3/01/12 | 2,000 | 248,072 | Household Durables — 0.0% | ||||
Georgian Towers, Term Loan, 6.14%, 3/01/12 | 2,000 | 234,496 | Berkline Benchcraft Equity LLC | 6,155 | — | ||
Pivotal Promontory, LLC, Second Lien Term Loan, | Media — 0.1% | ||||||
12.00%, 8/31/11 (b)(d) | 750 | 37,500 | New Vision LLC Holdings | 40,441 | 328,381 | ||
Realogy Corp. Second Lien Term Loan, | Total Other Interests — 0.8% | 2,726,281 | |||||
13.50%, 10/15/17 | 1,250 | 1,282,291 | |||||
1,802,359 | |||||||
See Notes to Financial Statements. | |||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 33 |
Schedule of Investments (continued) | BlackRock Floating Rate Income Trust (BGT) | ||||||||||||||
(Percentages shown are based on Net Assets) | |||||||||||||||
Preferred Securities | |||||||||||||||
Preferred Stocks | Shares | Value | (f) Represents a zero-coupon bond. Rate shown reflects the current yield as of | ||||||||||||
report date. | |||||||||||||||
Capital Markets — 0.0% | |||||||||||||||
Marsico Parent Superholdco, LLC, 16.75% (a) | 100 $ | 22,500 | (g) Convertible security. | ||||||||||||
Total Preferred Securities — 0.0% | 22,500 | (h) Restricted securities as to resale, representing 1.5% of net assets were as follows: | |||||||||||||
Acquisition | |||||||||||||||
Issue | Date | Cost | Value | ||||||||||||
Warrants (j) | Colombia Government | ||||||||||||||
International Bond, | |||||||||||||||
Chemicals — 0.0% | 3.84%, 3/17/13 | 2/15/06 | $ 1,277,303 | $ 1,230,000 | |||||||||||
British Vita Holding Co. (non expiring) (a) | 166 | — | Republic of Venezuela, | ||||||||||||
Machinery — 0.0% | 1.28%, 4/20/11 | 10/26/04 | 3,860,186 | 3,440,000 | |||||||||||
Synventive Molding Solutions (expires 1/15/13) | 2 | — | Total | $ 5,137,489 | $ 4,670,000 | ||||||||||
Media — 0.0% | |||||||||||||||
Cumulus Media Warrants (expires 12/31/19) | 2,315 | 2,176 | (i) Other interests represent beneficial interest in liquidation trusts and other reorgani- | ||||||||||||
New Vision Holdings LLC (expires 9/30/14) | 22,447 | 224 | zation entities and are non-income producing. | ||||||||||||
2,400 | (j) Warrants entitle the Fund to purchase a predetermined number of shares of com- | ||||||||||||||
mon stock and are non-income producing. The purchase price and number of | |||||||||||||||
Total Warrants — 0.0% | 2,400 | shares are subject to adjustment under certain conditions until the expiration date. | |||||||||||||
Total Long-Term Investments | (k) Investments in companies considered to be an affiliate of the Fund, for purposes of | ||||||||||||||
(Cost — $433,669,495) — 125.9% | 393,951,147 | Section 2(a)(3) of the Investment Company Act of 1940, were as follows: | |||||||||||||
Net | |||||||||||||||
Affiliate | Activity | Income | |||||||||||||
Short-Term Securities | BlackRock Liquidity Funds, TempFund, | ||||||||||||||
BlackRock Liquidity Funds, TempFund, | Institutional Class | $ 9,320,934 | $ 16,254 | ||||||||||||
Institutional Class, 0.18% (k)(l) | 9,320,934 | 9,320,934 | |||||||||||||
(l) Represents the current yield as of report date. | |||||||||||||||
Total Short-Term Securities | |||||||||||||||
(Cost — $9,320,934) — 3.0% | 9,320,934 | • | For Fund compliance purposes, the Fund industry classifications refer to any one | ||||||||||||
or more of the industry sub-classifications used by one or more widely recognized | |||||||||||||||
market indexes or ratings group indexes, and/or as defined by Fund management. | |||||||||||||||
This definition may not apply for purposes of this report, which may combine | |||||||||||||||
industry sub-classifications for reporting ease. | |||||||||||||||
Options Purchased | Contracts | ||||||||||||||
Over-the-Counter Call Options | • | Foreign currency exchange contracts as of October 31, 2009 were as follows: | |||||||||||||
Marsico Parent Superholdco LLC, expiring 12/21/19 | Currency | Currency | Settlement | Unrealized | |||||||||||
at USD 942.86, Broker Goldman Sachs Group, Inc. | 26 | 6,110 | Purchased | Sold | Counterparty | Date | Depreciation | ||||||||
Total Options Purchased (Cost — $25,422) — 0.0% | 6,110 | EUR | 248,000 | USD | 365,155 | Citibank NA | 11/03/09 $ | (186) | |||||||
Total Investments (Cost — $443,015,851*) — 128.9% | 403,278,191 | USD70,188,421 | EUR 48,087,500 | Citibank NA | 11/18/09 | (576,271) | |||||||||
Liabilities in Excess of Other Assets — (10.1)% | (31,593,957) | USD | 9,468,195 | GBP | 5,811,500 | Citibank NA | 1/27/10 | (65,153) | |||||||
Preferred Shares, at Redemption Value — (18.8)% | (58,812,035) | USD | 1,038,130 | MXN 14,000,000 | Citibank NA | 1/27/10 | (9,353) | ||||||||
Net Assets Applicable to Common Shares — 100.0% | $ 312,872,199 | Total | $ (650,963) | ||||||||||||
* The cost and unrealized appreciation (depreciation) of investments as of October 31, | • | Credit default swaps on single-name issue — buy protection oustanding as of | |||||||||||||
2009, as computed for federal income tax purposes, were as follows: | October 31, 2009 were as follows: | ||||||||||||||
Aggregate cost | $ 443,044,301 | ||||||||||||||
Pay | Notional | ||||||||||||||
Gross unrealized appreciation | $ 12,539,776 | Fixed | Counter- | Amount | Unrealized | ||||||||||
Gross unrealized depreciation | (52,305,886) | Issuer | Rate | party | Expiration | (000) | Appreciation | ||||||||
Net unrealized depreciation | $ (39,766,110) | Ford Motor Co. | 5.00% | Deutsche | September | ||||||||||
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. | Bank AG | 2014 | USD 275 | $ 4,930 | |||||||||||
These securities may be resold in transactions exempt from registration to qualified | |||||||||||||||
institutional investors. | • | Credit default swaps on single-name issues — sold protection outstanding as of | |||||||||||||
October 31, 2009 were as follows: | |||||||||||||||
(b) Non-income producing security. | |||||||||||||||
(c) Variable rate security. Rate shown is as of report date. | Receive | Notional | |||||||||||||
Fixed | Counter- | Credit | Amount | Unrealized | |||||||||||
(d) Issuer filed for bankruptcy and/or is in default of interest payments. | |||||||||||||||
Issuer | Rate | party Expiration Rating1 (000)2 Depreciation | |||||||||||||
(e) Represents a payment-in-kind security which may pay interest/dividends in | |||||||||||||||
additional par/shares. | BAA Ferrovial | ||||||||||||||
Junior Term | Deutsche | ||||||||||||||
Loan | 2.00% | Bank AG March 2012 | NR | GPB 1,800 $ | (388,694) | ||||||||||
1 | Using Standard & Poor’s rating of the issuer. | ||||||||||||||
2 | The maximum potential amount the Fund may pay should a negative credit | ||||||||||||||
event take place as defined under the terms of the agreement. | |||||||||||||||
See Notes to Financial Statements. | |||||||||||||||
34 | ANNUAL REPORT | OCTOBER 31, 2009 |
Schedule of Investments (concluded) | BlackRock Floating Rate Income Trust (BGT) | |||||||||||||
• | Credit default swaps on index issue — buy protection oustanding as of October 31, | The following table summarizes the inputs used as of October 31, 2009 in | ||||||||||||
2009 were as follows: | determining the fair valuation of the Fund’s investments: | |||||||||||||
Valuation | Investments in | |||||||||||||
Pay | Notional | |||||||||||||
Inputs | Securities | |||||||||||||
Fixed | Counter- | Amount | Unrealized | |||||||||||
Issuer | Rate | party | Expiration | (000) | Depreciation | Assets | ||||||||
Level 1 | ||||||||||||||
LCDX North | Long-Term Investments: | |||||||||||||
America Index | Common Stocks | $ 90,850 | ||||||||||||
Series 12 | Credit Suisse | June | Short-Term Securities | 9,320,934 | ||||||||||
Volume 1 | 5.00% International | 2014 | USD 465 | $ (65,282) | Total Level 1 | 9,411,784 | ||||||||
• | Fair Value Measurements — Various inputs are used in determining the fair value of | Level 2 | ||||||||||||
investments, which are as follows: | Long-Term Investments: | |||||||||||||
Common Stocks | 107,959 | |||||||||||||
• Level 1 — price quotations in active markets/exchanges for identical assets | Corporate Bonds | 78,186,766 | ||||||||||||
and liabilities | Floating Rate Loan Interests | 214,513,792 | ||||||||||||
• Level 2 — other observable inputs (including, but not limited to: quoted prices for | Foreign Government Obligations | 13,472,795 | ||||||||||||
similar assets or liabilities in markets that are active, quoted prices for identical | Preferred Securities | 22,500 | ||||||||||||
or similar assets or liabilities in markets that are not active, inputs other than | Warrants | 2,176 | ||||||||||||
quoted prices that are observable for the assets or liabilities (such as interest | Total Level 2 | 306,305,988 | ||||||||||||
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and | Level 3 | |||||||||||||
default rates) or other market-corroborated inputs) | Long-Term Investments: | |||||||||||||
• Level 3 — unobservable inputs based on the best information available in the | Common Stocks | 112,485 | ||||||||||||
Corporate Bonds | 288,246 | |||||||||||||
circumstances, to the extent observable inputs are not available (including the | Floating Rate Loan Interests | 84,427,073 | ||||||||||||
Fund’s own assumptions used in determining the fair value of investments) | Other Interests | 2,726,281 | ||||||||||||
The inputs or methodology used for valuing securities are not necessarily an indica- | Warrants | 224 | ||||||||||||
tion of the risk associated with investing in those securities. For information about | Total Level 3 | 87,554,309 | ||||||||||||
the Fund’s policy regarding valuation of investments and other significant accounting | Total | $ 403,272,081 | ||||||||||||
policies, please refer to Note 1 of the Notes to Financial Statements. | ||||||||||||||
Valuation | Other Financial | |||||||||||||
Inputs | Instruments1 | |||||||||||||
Assets | Liabilities | |||||||||||||
Level 1 | — | — | ||||||||||||
Level 2 | $ 11,040 | $ (716,245) | ||||||||||||
Level 3 | 1,531 | (461,174) | ||||||||||||
Total | $ 12,571 | $ (1,177,419) | ||||||||||||
1 | Other financial instruments are swaps, foreign currency exchange contracts, | |||||||||||||
unfunded loan commitments and options. Swaps, foreign currency exchange | ||||||||||||||
contracts and unfunded loan commitments are valued at the unrealized appre- | ||||||||||||||
ciation/depreciation on the instrument and options are shown at market value. | ||||||||||||||
The following is a reconciliation of investments for unobservable inputs (Level 3) used in determining fair value: | ||||||||||||||
Investments in Securities | ||||||||||||||
Common | Corporate | Floating Rate | Other | |||||||||||
Stocks | Bonds | Loan Interests | Interests | Warrants | Total | |||||||||
Balance, as of October 31, 2008 | — | — $120,800,878 $ | 318 | — | $ 120,801,196 | |||||||||
Accrued discounts/premiums | — | — | 103,138 | — | — | 103,138 | ||||||||
Realized gain (loss) | — | — | (20,210,121) | — | — | (20,210,121) | ||||||||
Change in unrealized appreciation/depreciation2 | — | — | 34,906,002 | (2,383,496) $ | (8,051) | 32,514,455 | ||||||||
Net purchases (sales) | — | — | (44,870,950) | 2,383,369 | 8,051 | (42,479,530) | ||||||||
Net transfers in/out of Level 3 | $ 112,485 | $ 288,246 | (6,301,874) | 2,726,090 | 224 | (3,174,829) | ||||||||
Balance as of October 31, 2009 | $ 112,485 | $ 288,246 $ 84,427,073 $ | 2,726,281 $ | 224 | $ 87,554,309 | |||||||||
2 Included in the related net change in unrealized appreciation/depreciation on the Statements of Operations. | ||||||||||||||
Investments in | ||||||||||||||
Other Financial | ||||||||||||||
Instruments | ||||||||||||||
Assets | Liabilities | |||||||||||||
Balance, as of October 31, 2008 | — | $ (543,254) | ||||||||||||
Accrued discounts/premiums | — | — | ||||||||||||
Realized gain (loss) | — | — | ||||||||||||
Change in unrealized appreciation/depreciation | 154,560 | |||||||||||||
Net purchases (sales) | — | — | ||||||||||||
Net transfers in/out of Level 3 | $ 1,531 | (72,480) | ||||||||||||
Balance, as of October 31, 2009 | $ 1,531 | $ (461,174) | ||||||||||||
See Notes to Financial Statements. | ||||||||||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 35 |
Statements of Assets and Liabilities | |||||||
BlackRock | BlackRock | BlackRock | BlackRock | BlackRock | BlackRock | ||
Credit | Credit | Credit | Credit | Enhanced | Floating | ||
Allocation | Allocation | Allocation | Allocation | Capital | Rate | ||
Income | Income | Income | Income | and Income | Income | ||
Trust I, Inc. | Trust II, Inc. | Trust III | Trust IV | Fund, Inc. | Trust | ||
October 31, 2009 | (PSW) | (PSY) | (BPP) | (BTZ) | (CII) | (BGT) | |
Assets | |||||||
Investments at value — unaffiliated1 | $ 80,372,818 | $ 399,129,254 | $ 172,356,269 | $ 555,220,835 | $ 604,321,715 | $ 393,957,257 | |
Investments at value — affiliated2 | 33,286,296 | 41,019,397 | 51,450,797 | 267,832,781 | 24,567,455 | 9,320,934 | |
Unrealized appreciation on swaps | — | — | — | — | — | 4,930 | |
Cash | — | — | 702 | 320 | — | 179,334 | |
Cash collateral pledged for options written | — | — | — | — | 1,228,905 | — | |
Cash collateral for swaps | — | — | — | 600,000 | — | 600,000 | |
Swap premiums paid | — | — | — | — | — | 102,776 | |
Foreign currency at value3 | 424 | — | 529 | 49 | 7,407 | 9,337,968 | |
Investments sold receivable | 38,531,774 | 141,858,976 | 62,124,877 | 117,670,917 | 18,280,263 | 6,625,542 | |
Interest receivable | 1,232,806 | 6,597,165 | 2,228,881 | 7,302,689 | — | 3,131,832 | |
Dividends receivable | 129,555 | 133,293 | 58,707 | 832,499 | 1,348,426 | — | |
Margin variation receivable | 26,000 | 36,719 | 20,563 | 197,020 | — | — | |
Income receivable — affiliated | — | 204 | 256 | 304 | — | 341 | |
Swaps receivable | — | — | — | — | — | 6,893 | |
Principal paydown receivable | — | — | — | — | — | 2,934 | |
Other assets | — | 52,733 | 55,181 | 81,418 | — | 124,654 | |
Prepaid expenses | 54,878 | 86,085 | 41,606 | 119,075 | 55,894 | 127,541 | |
Total assets | 153,634,551 | 588,913,826 | 288,338,368 | 949,857,907 | 649,810,065 | 423,522,936 | |
Liabilities | |||||||
Unrealized depreciation on swaps | 168,952 | 337,904 | 168,952 | 675,809 | — | 453,976 | |
Unrealized depreciation on unfunded loan commitments | — | — | — | — | — | 70,949 | |
Unrealized depreciation on foreign currency | |||||||
exchange contracts | — | — | — | — | — | 650,963 | |
Loan payable | — | — | — | — | — | 14,000,000 | |
Options written at value4 | — | — | — | 166,210 | 6,377,146 | — | |
Reverse repurchase agreements | 4,972,041 | 9,510,590 | 13,234,688 | 61,576,368 | — | — | |
Investments purchased payable | 12,023,936 | — | — | — | 24,384,912 | 35,248,237 | |
Investment advisory fees payable | 71,449 | 303,207 | 159,933 | 522,028 | 469,580 | 206,219 | |
Income dividends payable — Common Shares | 36,588 | 196,712 | 69,120 | 550,627 | — | 51,113 | |
Swaps payable | 6,067 | 12,133 | 6,067 | 24,267 | — | 4,317 | |
Interest payable | 1,761 | 3,368 | 4,687 | 21,808 | — | 40,826 | |
Other affiliates payable | 728 | 3,172 | 1,636 | 5,428 | 3,882 | 2,224 | |
Officer’s and Directors’ fees payable | 181 | 53,660 | 56,606 | 82,674 | 1,287 | 78,876 | |
Other accrued expenses payable | 45,591 | 109,424 | 76,539 | 189,457 | 111,544 | 185,052 | |
Other liabilities | — | — | — | — | — | 845,950 | |
Total liabilities | 17,327,294 | 10,530,170 | 13,778,228 | 63,814,676 | 31,348,351 | 51,838,702 | |
Preferred Shares at Redemption Value | |||||||
$25,000 per share liquidation preferrence, plus | |||||||
unpaid dividends5,6,7 | 40,258,949 | 169,090,727 | 70,426,884 | 231,044,104 | — | 58,812,035 | |
Net Assets Applicable to Common Shareholders | $ 96,048,308 | $ 409,292,929 | $ 204,133,256 | $ 654,999,127 | $ 618,461,714 | $ 312,872,199 | |
Net Assets Applicable to Common Shareholders Consist of | |||||||
Paid-in capital8,9,10 | $ 237,664,112 | $ 942,700,922 | $ 423,649,824 | $1,138,011,175 | $ 808,123,162 | $ 427,560,397 | |
Undistributed (distributions in excess of) net | |||||||
investment income | 636,666 | 2,088,988 | 952,028 | 1,348,832 | — | (397,610) | |
Accumulated net realized loss | (128,402,541) | (451,276,374) | (187,666,466) | (403,003,336) | (131,729,362) | (73,097,284) | |
Net unrealized appreciation/depreciation | (13,849,929) | (84,220,607) | (32,802,130) | (81,357,544) | (57,932,086) | (41,193,304) | |
Net Assets Applicable to Common Shareholders | $ 96,048,308 | $ 409,292,929 | $ 204,133,256 | $ 654,999,127 | $ 618,461,714 | $ 312,872,199 | |
Net asset value per Common Share | $ 9.31 | $ 10.03 | $ 11.05 | $ 12.64 | $ 14.40 | $ 13.29 | |
1 Investments at cost — unaffiliated | $ 94,148,823 | $ 483,046,802 | $ 205,009,029 | $ 637,401,845 | $ 665,068,380 | $ 433,694,917 | |
2 Investments at cost — affiliated | $ 33,286,296 | $ 41,019,397 | $ 51,450,797 | $ 267,832,781 | $ 24,567,455 | $ 9,320,934 | |
3 Foreign currency at cost | $ 368 | — | $ 459 | $ 43 | $ 9,142 | $ 9,386,817 | |
4 Premiums received | — | — | — | $ 828,039 | $ 9,193,459 | — | |
5 Preferred Shares par value per share | $ 0.10 | $ 0.10 | $ 0.001 | $ 0.001 | — | $ 0.001 | |
6 Preferred Shares outstanding | 1,610 | 6,761 | 2,817 | 9,240 | — | 2,352 | |
7 Preferred Shares authorized | 5,460 | 22,000 | unlimited | unlimited | — | unlimited | |
8 Common Shares par value per share | $ 0.10 | $ 0.10 | $ 0.001 | $ 0.001 | $ 0.10 | $ 0.001 | |
9 Common Shares outstanding | 10,311,941 | 40,807,418 | 18,467,785 | 51,828,157 | 42,953,312 | 23,545,239 | |
10 Common Shares authorized | 199,994,540 | 199,978,000 | unlimited | unlimited | 200 million | unlimited | |
See Notes to Financial Statements. | |||||||
36 | ANNUAL REPORT | OCTOBER 31, 2009 |
Statements of Operations | |||||||
BlackRock | BlackRock | BlackRock | BlackRock | BlackRock | BlackRock | ||
Credit | Credit | Credit | Credit | Enhanced | Floating | ||
Allocation | Allocation | Allocation | Allocation | Capital | Rate | ||
Income | Income | Income | Income | and Income | Income | ||
Trust I, Inc. | Trust II, Inc. | Trust III | Trust IV | Fund, Inc. | Trust | ||
Year Ended October 31, 2009 | (PSW) | (PSY) | (BPP) | (BTZ) | (CII) | (BGT) | |
Investment Income | |||||||
Interest | $ 7,416,978 | $ 37,527,272 | $ 17,161,194 | $ 41,120,279 | $ 1,342 | $ 26,881,305 | |
Dividends | 2,464,323 | 11,794,850 | 5,227,665 | 18,091,488 | 17,659,173 | — | |
Foreign taxes withheld | — | — | — | — | (115,844) | — | |
Income — affiliated | 130,058 | 155,313 | 133,485 | 486,591 | 143,663 | 23,848 | |
Facility and other fees | — | — | — | — | — | 503,103 | |
Total income | 10,011,359 | 49,477,435 | 22,522,344 | 59,698,358 | 17,688,334 | 27,408,256 | |
Expenses | |||||||
Investment advisory | 732,203 | 3,091,438 | 1,631,690 | 5,363,633 | 4,832,658 | 2,774,485 | |
Commissions for Preferred Shares | 74,688 | 348,733 | 134,702 | 375,820 | — | 102,063 | |
Professional | 66,950 | 72,163 | 79,888 | 142,814 | 75,892 | 253,450 | |
Transfer agent | 46,330 | 126,203 | 37,871 | 35,582 | 93,722 | 29,425 | |
Accounting services | 21,930 | 120,409 | 84,218 | 163,930 | 161,229 | 58,206 | |
Printing | 14,291 | 58,934 | 55,147 | 147,566 | 45,877 | 73,520 | |
Officer and Directors | 10,058 | 53,432 | 35,932 | 90,453 | 70,049 | 49,794 | |
Registration | 9,180 | 13,907 | 9,278 | 17,673 | 14,571 | 10,416 | |
Custodian | 6,980 | 24,134 | 15,059 | 36,325 | 52,648 | 55,304 | |
Borrowing costs1 | — | — | — | — | — | 391,557 | |
Miscellaneous | 61,634 | 107,378 | 63,515 | 130,998 | 52,161 | 117,808 | |
Total expenses excluding interest expense | 1,044,244 | 4,016,731 | 2,147,300 | 6,504,794 | 5,398,807 | 3,916,028 | |
Interest expense | 102,223 | 229,496 | 389,341 | 1,784,509 | — | 1,140,406 | |
Total expenses | 1,146,467 | 4,246,227 | 2,536,641 | 8,289,303 | 5,398,807 | 5,056,434 | |
Less fees waived by advisor | (14,003) | (14,491) | (21,506) | (95,646) | (7,172) | (709,042) | |
Less fees paid indirectly | (1,843) | (852) | (3,758) | (1,210) | — | — | |
Total expenses after fees waived and | |||||||
paid indirectly | 1,130,621 | 4,230,884 | 2,511,377 | 8,192,447 | 5,391,635 | 4,347,392 | |
Net investment income | 8,880,738 | 45,246,551 | 20,010,967 | 51,505,911 | 12,296,699 | 23,060,864 | |
Realized and Unrealized Gain (Loss) | |||||||
Net realized gain (loss) from: | |||||||
Investments | (55,149,960) | (188,070,488) | (112,478,894) | (248,073,396) | (103,821,441) | (44,719,252) | |
Financial futures contracts and swaps | (1,780,676) | (8,923,503) | (3,915,858) | (2,741,351) | (617,742) | (1,014,281) | |
Foreign currency transactions | 4,366 | 34,450 | 1,348 | 22,255 | — | (2,653,326) | |
Options written | — | — | - | 3,763,345 | 52,995,108 | — | |
(56,926,270) | (196,959,541) | (116,393,404) | (247,029,147) | (51,444,075) | (48,386,859) | ||
Net change in unrealized appreciation/depreciation on: | |||||||
Investments | 77,627,511 | 284,111,656 | 160,001,314 | 372,102,104 | 142,551,744 | 118,712,825 | |
Financial futures contracts and swaps | 527,517 | 1,647,334 | 906,527 | 4,642,624 | — | 371,495 | |
Foreign currency transactions | (4,229) | (32,957) | (990) | (158,256) | (948) | (6,642,896) | |
Options written | — | — | — | 2,230,492 | 5,758,405 | — | |
Unfunded corporate loans | — | — | — | — | — | 96,088 | |
78,150,799 | 285,726,033 | 160,906,851 | 378,816,964 | 148,309,201 | 112,537,512 | ||
Total realized and unrealized gain | 21,224,529 | 88,766,492 | 44,513,447 | 131,787,817 | 96,865,126 | 64,150,653 | |
Dividends to Preferred Shareholders From | |||||||
Net investment income | (774,824) | (3,570,342) | (577,861) | (3,828,948) | — | (971,243) | |
Net Increase in Net Assets Applicable to Common | |||||||
Shareholders Resulting from Operations | $ 29,330,443 | $ 130,442,701 | $ 63,946,553 | $ 179,464,780 | $ 109,161,825 | $ 86,240,274 | |
1 See Note 8 of the Notes to the Financial Statements for details of borrowings. | |||||||
See Notes to Financial Statements. | |||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 37 |
Statements of Changes in Net Assets | |||||||
BlackRock Credit Allocation | BlackRock Credit Allocation | ||||||
Income Trust I, Inc. (PSW) | Income Trust II, Inc. (PSY) | ||||||
Increase (Decrease) in Net Assets | Year Ended October 31, | Year Ended October 31, | |||||
Applicable to Common Shareholders: | 2009 | 2008 | 2009 | 2008 | |||
Operations | |||||||
Net investment income | $ 8,880,738 | $ 17,531,692 | $ 45,246,551 | $ 70,160,283 | |||
Net realized loss | (56,926,270) | (40,404,468) | (196,959,541) | (147,042,661) | |||
Net change in unrealized appreciation/depreciation | 78,150,799 | (83,863,786) | 285,726,033 | (333,625,419) | |||
Dividends to Preferred Shareholders from net investment income | (774,824) | (4,921,335) | (3,570,342) | (19,937,495) | |||
Net increase (decrease) in net assets applicable to Common Shareholders | |||||||
resulting from operations | 29,330,443 | (111,657,897) | 130,442,701 | (430,445,292) | |||
Dividends and Distributions to Common Shareholders From | |||||||
Net investment income | (8,498,069) | (12,521,666) | (45,358,157) | (46,831,403) | |||
Tax return of capital | (1,345,345) | (545,246) | (116,310) | (9,002,427) | |||
Decrease in net assets resulting from dividends and distributions | |||||||
to Common Shareholders | (9,843,414) | (13,066,912) | (45,474,467) | (55,833,830) | |||
Capital Share Transactions | |||||||
Reinvestment of common dividends | 131,419 | — | 1,192,453 | — | |||
Net Assets Applicable to Common Shareholders | |||||||
Total increase (decrease) in net assets | 19,618,448 | (124,724,809) | 86,160,687 | (486,279,122) | |||
Beginning of year | 76,429,860 | 201,154,669 | 323,132,242 | 809,411,364 | |||
End of year | $ 96,048,308 | $ 76,429,860 | $ 409,292,929 | $ 323,132,242 | |||
Undistributed net investment income | $ 636,666 | $ 1,283,192 | $ 2,088,988 | $ 7,207,075 | |||
BlackRock Credit Allocation | BlackRock Credit Allocation | ||||||
Income Trust III (BPP) | Income Trust IV (BTZ) | ||||||
Year | Period | Year | |||||
Ended | January 1, 2008 | Ended | Year Ended | ||||
Increase (Decrease) in Net Assets | October 31, | to October 31, | December 31, | October 31, | |||
Applicable to Common Shareholders: | 2009 | 2008 | 2007 | 2009 | 2008 | ||
Operations | |||||||
Net investment income | $ 20,010,967 | $ 27,233,861 | $ 37,729,277 | $ 51,505,911 | $ 68,908,426 | ||
Net realized loss | (116,393,404) | (47,985,932) | (24,690,221) | (247,029,147) | (113,133,432) | ||
Net change in unrealized appreciation/depreciation | 160,906,851 | (149,715,592) | (61,889,014) | 378,816,964 | (408,221,553) | ||
Dividends and distributions to Preferred Shareholders from: | |||||||
Net investment income | (577,861) | (5,653,232) | (11,458,715) | (3,828,948) | (17,100,517) | ||
Net realized gain | — | — | (87,490) | — | — | ||
Net increase (decrease) in net assets applicable to Common Shareholders | |||||||
resulting from operations | 63,946,553 | (176,120,895) | (60,396,163) | 179,464,780 | (469,547,076) | ||
Dividends and Distributions to Common Shareholders From | |||||||
Net investment income | (17,461,459) | (15,206,928) | (29,219,599) | (48,398,817) | (46,857,132) | ||
Net realized gain | — | — | (312,510) | — | — | ||
Tax return of capital | (4,250,036) | (5,480,035) | (2,820,986) | (24,678,883) | (43,518,226) | ||
Decrease in net assets resulting from dividends and distributions | |||||||
to Common Shareholders | (21,711,495) | (20,686,963) | (32,353,095) | (73,077,700) | (90,375,358) | ||
Capital Share Transactions | |||||||
Reinvestment of common dividends | 587,363 | 101,702 | 770,755 | — | — | ||
Net Assets Applicable to Common Shareholders | |||||||
Total increase (decrease) in net assets | 42,822,421 | (196,706,156) | (91,978,503) | 106,387,080 | (559,922,434) | ||
Beginning of period | 161,310,835 | 358,016,991 | 449,995,494 | 548,612,047 | 1,108,534,481 | ||
End of period | $ 204,133,256 | $ 161,310,835 | $ 358,016,991 | $ 654,999,127 | $ 548,612,047 | ||
Undistributed (distributions in excess of) net investment income | $ 952,028 | $ 2,846,583 | $ (2,571,328) | $ 1,348,832 | $ 3,486,479 | ||
See Notes to Financial Statements. | |||||||
38 | ANNUAL REPORT | OCTOBER 31, 2009 |
Statements of Changes in Net Assets (concluded) | ||||||
BlackRock Enhanced Capital | BlackRock | |||||
and Income Fund, Inc. (CII) | Floating Rate Income Trust (BGT) | |||||
Year | Period January 1, | Year | Year | Period | Year | |
Ended | 2008 to | Ended | Ended | January 1, 2008 | Ended | |
Increase (Decrease) in Net Assets | October 31, | October 31, | December 31, | October 31, | to October 31, | December 31, |
Applicable to Common Shareholders: | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 |
Operations | ||||||
Net investment income | $ 12,296,699 | $ 2,834,944 | $ 3,828,423 | $ 23,060,864 | $ 33,370,850 | $ 47,903,772 |
Net realized gain (loss) | (51,444,075) | 5,942,502 | 24,442,607 | (48,386,859) | (19,428,459) | (10,326,522) |
Net change in unrealized appreciation/depreciation | 148,309,201 | (83,432,417) | (17,410,396) | 112,537,512 | (136,762,427) | (22,345,656) |
Dividends to Preferred Shareholders from net | ||||||
investment income | — | — | — | (971,243) | (5,542,312) | (12,723,631) |
Net increase (decrease) in net assets applicable to | ||||||
Common Shareholders resulting from operations | 109,161,825 | (74,654,971) | 10,860,634 | 86,240,274 | (128,362,348) | 2,507,963 |
Dividends and Distributions to Common Shareholders From | ||||||
Net investment income | (12,510,205) | (2,820,467) | (4,178,081) | (27,963,106) | (24,133,870) | (26,833,571) |
Net realized gain | (50,728,478) | (7,621,956) | (25,569,419) | — | — | — |
Tax return of capital | (19,660,314) | (7,292,188) | — | (9,994,857) | — | (8,473,282) |
Decrease in net assets resulting from dividends and | ||||||
distributions to shareholders | (82,898,997) | (17,734,611) | (29,747,500) | (37,957,963) | (24,133,870) | (35,306,853) |
Capital Share Transactions | ||||||
Value of shares resulting from reorganization | 420,968,153 | — | — | — | — | — |
Reinvestment of common dividends | 3,234,875 | — | — | — | — | 820,433 |
Net increase in net assets derived from | ||||||
capital share transactions | 424,203,028 | — | — | — | — | 820,433 |
Net Assets Applicable to Common Shareholders | ||||||
Total increase (decrease) in net assets | 450,465,856 | (92,389,582) | (18,886,866) | 48,282,311 | (152,496,218) | (31,978,457) |
Beginning of period | 167,995,858 | 260,385,440 | 279,272,306 | 264,589,888 | 417,086,106 | 449,064,563 |
End of period | $ 618,461,714 | $ 167,995,858 | $ 260,385,440 | $ 312,872,199 | $ 264,589,888 | $ 417,086,106 |
Undistributed (distributions in excess of) | ||||||
net investment income | — | $ 205,627 | — | $ (397,610) | $ 8,661,698 | $ 219,332 |
See Notes to Financial Statements. | ||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 39 |
Statement of Cash Flows | |||
BlackRock | |||
Floating Rate | |||
Income | |||
Year Ended October 31, 2009 | Trust (BGT) | ||
Cash Provided by Operating Activities | |||
Net increase in net assets resulting from operations, excluding dividends to Preferred Shareholders | $ 87,211,517 | ||
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities: | |||
Decrease in interest receivable | 2,477,996 | ||
Decrease in commitment fees receivable | 2,301 | ||
Increase in other assets | (37,618) | ||
Increase in income receivable — affiliated | (341) | ||
Increase in prepaid expenses | (74,683) | ||
Decrease in swaps receivable | 19,241 | ||
Decrease in swaps payable | (150,019) | ||
Decrease in investment advisor payable | (37,245) | ||
Decrease in interest expense payable | (86,768) | ||
Decrease in other affiliates payable | (884) | ||
Increase in accrued expenses payable | 24,637 | ||
Increase in other liabilities | 838,450 | ||
Increase in Officer’s and Directors’ payable | 30,273 | ||
Net realized and unrealized gain | (67,171,527) | ||
Amortization of premium and discount on investments | (2,498,618) | ||
Paid-in-kind income | (890,200) | ||
Increase in cash collateral on swaps | (600,000) | ||
Net periodic and termination payments of swaps | (340,836) | ||
Proceeds from sales and paydowns of long-term investments | 262,712,645 | ||
Purchases of long-term investments | (131,639,514) | ||
Net purchases of short-term securities | (7,820,185) | ||
Cash provided by operating activities | 141,968,622 | ||
Cash Used for Financing Activities | |||
Cash receipts from borrowings | 163,209,375 | ||
Cash payments from borrowings | (272,359,375) | ||
Cash dividends paid to Common Shareholders | (38,016,260) | ||
Cash dividends paid to Preferred Shareholders | (980,133) | ||
Cash used for financing activities | (148,146,393) | ||
Cash Impact from Foreign Exchange Fluctuations | |||
Cash impact from foreign exchange fluctuations | 146,028 | ||
Cash: | |||
Net decrease in cash | (6,031,743) | ||
Cash and foreign currency at beginning of year | 15,549,045 | ||
Cash and foreign currency at end of year | $ 9,517,302 | ||
Cash Flow Information: | |||
Cash paid during the year for interest | $ 1,227,174 | ||
A Statement of Cash Flows is presented when a Fund had a significant amount of borrowing during the year, based on the average borrowing outstanding | |||
in relation to total assets. | |||
See Notes to Financial Statements. | |||
40 | ANNUAL REPORT | OCTOBER 31, 2009 |
Financial Highlights | BlackRock Credit Allocation Income Trust I, Inc. (PSW) | ||||||
Year Ended October 31, | |||||||
2009 | 2008 | 2007 | 2006 | 2005 | |||
Per Share Operating Performance | |||||||
Net asset value, beginning of year | $ 7.43 | $ 19.54 | $ 22.25 | $ 22.36 | $ 23.69 | ||
Net investment income | 0.861 | 1.701 | 2.011 | 2.141 | 2.16 | ||
Net realized and unrealized gain (loss) | 2.06 | (12.06) | (2.41) | 0.07 | (1.09) | ||
Dividends to Preferred Shareholders from net investment income | (0.08) | (0.48) | (0.71) | (0.63) | (0.40) | ||
Net increase (decrease) from investment operations | 2.84 | (10.84) | (1.11) | 1.58 | 0.67 | ||
Dividends and distributions to Common Shareholders from: | |||||||
Net investment income | (0.83) | (1.22) | (1.18) | (1.69) | (2.00) | ||
Tax return of capital | (0.13) | (0.05) | (0.42) | — | — | ||
Total dividends and distributions | (0.96) | (1.27) | (1.60) | (1.69) | (2.00) | ||
Net asset value, end of year | $ 9.31 | $ 7.43 | $ 19.54 | $ 22.25 | $ 22.36 | ||
Market price, end of year | $ 8.24 | $ 7.00 | $ 17.29 | $ 21.26 | $ 21.03 | ||
Total Investment Return2 | |||||||
Based on net asset value | 46.46% | (58.09)% | (5.03)% | 7.97% | 3.25% | ||
Based on market price | 37.59% | (55.38)% | (12.05)% | 9.69% | 0.73% | ||
Ratios to Average Net Assets Applicable to Common Shareholders | |||||||
Total expenses3 | 1.61% | 2.00% | 1.32% | 1.29% | 1.26% | ||
Total expenses after fees waived and paid indirectly3 | 1.59% | 2.00% | 1.32% | 1.29% | 1.26% | ||
Total expenses after fees waived and paid indirectly and excluding | |||||||
interest expense3 | 1.44% | 1.48% | 1.29% | 1.29% | 1.26% | ||
Net investment income3 | 12.45% | 10.79% | 9.38% | 9.70% | 9.23% | ||
Dividends to Preferred Shareholders | 1.09% | 3.03% | 3.29% | 2.84% | 1.71% | ||
Net investment income to Common Shareholders | 11.36% | 7.76% | 6.09% | 6.86% | 7.52% | ||
Supplemental Data | |||||||
Net assets applicable to Common Shareholders, end of year (000) | $ 96,048 | $ 76,430 | $ 201,155 | $ 228,734 | $ 229,850 | ||
Preferred Shares outstanding at $25,000 liquidation preference, end of year (000) | $ 40,250 | $ 68,250 | $ 136,500 | $ 136,500 | $ 136,500 | ||
Borrowings outstanding, end of year (000) | $ 4,972 | $ 4,024 | $ 590 | — | — | ||
Average borrowings outstanding, during the year (000) | $ 5,321 | $ 25,692 | $ 2,690 | — | — | ||
Portfolio turnover | 36% | 119% | 88% | 19% | 25% | ||
Asset coverage per Preferred Share at $25,000 liquidation preference, end of year | $ 84,663 | $ 53,009 | $ 61,846 | $ 66,907 | $ 67,115 | ||
1 Based on average shares outstanding. | |||||||
2 Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. | |||||||
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions. | |||||||
3 Do not reflect the effect of dividends to Preferred Shareholders. | |||||||
See Notes to Financial Statements. | |||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 41 |
Financial Highlights | BlackRock Credit Allocation Income Trust II, Inc. (PSY) | |||||||
Year Ended October 31, | ||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||
Per Share Operating Performance | ||||||||
Net asset value, beginning of year | $ 7.96 | $ 19.93 | $ 22.36 | $ 22.26 | $ 23.48 | |||
Net investment income1 | 1.11 | 1.73 | 2.02 | 2.03 | 2.09 | |||
Net realized and unrealized gain (loss) | 2.17 | (11.84) | (2.35) | 0.32 | (0.91) | |||
Dividends to Preferred Shareholders from net investment income | (0.09) | (0.49) | (0.73) | (0.65) | (0.40) | |||
Net increase (decrease) from investment operations | 3.19 | (10.60) | (1.06) | 1.70 | 0.78 | |||
Dividends and distributions to Common Shareholders from: | ||||||||
Net investment income | (1.12) | (1.15) | (1.16) | (1.51) | (2.00) | |||
Tax return of capital | —2 | (0.22) | (0.21) | (0.09) | — | |||
Total dividends and distributions | (1.12) | (1.37) | (1.37) | (1.60) | (2.00) | |||
Net asset value, end of year | $ 10.03 | $ 7.96 | $ 19.93 | $ 22.36 | $ 22.26 | |||
Market price, end of year | $ 8.90 | $ 8.10 | $ 16.94 | $ 20.12 | $ 21.20 | |||
Total Investment Return3 | ||||||||
Based on net asset value | 48.36% | (55.71)% | (4.35)% | 8.77% | 3.73% | |||
Based on market price | 29.37% | (46.97)% | (9.65)% | 2.77% | 1.43% | |||
Ratios to Average Net Assets Applicable to Common Shareholders | ||||||||
Total expenses4 | 1.41% | 1.90% | 1.27% | 1.23% | 1.20% | |||
Total expenses after fees waived and paid indirectly4 | 1.41% | 1.90% | 1.27% | 1.23% | 1.20% | |||
Total expenses after fees waived and paid indirectly and excluding | ||||||||
interest expense4 | 1.33% | 1.40% | 1.23% | 1.23% | 1.20% | |||
Net investment income4 | 15.05% | 10.71% | 9.29% | 9.26% | 8.96% | |||
Dividends to Preferred Shareholders | 1.19% | 3.04% | 3.34% | 2.96% | 1.73% | |||
Net investment income to Common Shareholders | 13.86% | 7.67% | 5.95% | 6.30% | 7.23% | |||
Supplemental Data | ||||||||
Net assets applicable to Common Shareholders, end of year (000) | $ 409,293 | $ 323,132 | $ 809,411 | $ 907,897 | $ 903,601 | |||
Preferred Shares outstanding at $25,000 liquidation preference, end of year (000) | $ 169,025 | $ 275,000 | $ 550,000 | $ 550,000 | $ 550,000 | |||
Borrowings outstanding, end of year (000) | $ 9,511 | $ 54,369 | — | — | — | |||
Average borrowings outstanding, during the year (000) | $ 15,842 | $ 94,908 | $ 14,375 | — | — | |||
Portfolio turnover | 16% | 120% | 81% | 18% | 28% | |||
Asset coverage per Preferred Share at $25,000 liquidation preference, end of year | $ 85,547 | $ 54,408 | $ 61,817 | $ 66,294 | $ 66,077 | |||
1 Based on average shares outstanding. | ||||||||
2 Amount is less than $(0.01) per share. | ||||||||
3 Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. | ||||||||
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions. | ||||||||
4 Do not reflect the effect of dividends to Preferred Shareholders. | ||||||||
See Notes to Financial Statements. | ||||||||
42 | ANNUAL REPORT | OCTOBER 31, 2009 |
Financial Highlights | BlackRock Credit Allocation Income Trust III (BPP) | |||||||
Period | ||||||||
Year | January 1, | |||||||
Ended | 2008 to | |||||||
October 31, | October 31, | Year Ended December 31, | ||||||
2009 | 2008 | 2007 | 2006 | 2005 | 2004 | |||
Per Share Operating Performance | ||||||||
Net asset value, beginning of period | $ 8.77 | $ 19.47 | $ 24.52 | $ 24.43 | $ 25.88 | $ 25.58 | ||
Net investment income | 1.091 | 1.481 | 2.05 | 2.05 | 2.11 | 2.22 | ||
Net realized and unrealized gain (loss) | 2.40 | (10.74) | (4.72) | 0.62 | (0.82) | 0.33 | ||
Dividends and distributions to Preferred Shareholders from: | ||||||||
Net investment income | (0.03) | (0.31) | (0.62) | (0.46) | (0.26) | (0.16) | ||
Net realized gain | — | — | — | (0.12) | (0.13) | (0.02) | ||
Net increase (decrease) from investment operations | 3.46 | (9.57) | (3.29) | 2.09 | 0.90 | 2.37 | ||
Dividends and distributions to Common Shareholders from: | ||||||||
Net investment income | (0.95) | (0.83) | (1.59) | (1.58) | (1.74) | (2.00) | ||
Net realized gain | — | — | (0.02) | (0.42) | (0.61) | (0.07) | ||
Tax return of capital | (0.23) | (0.30) | (0.15) | — | — | — | ||
Total dividends and distributions | (1.18) | (1.13) | (1.76) | (2.00) | (2.35) | (2.07) | ||
Net asset value, end of period | $ 11.05 | $ 8.77 | $ 19.47 | $ 24.52 | $ 24.43 | $ 25.88 | ||
Market price, end of period | $ 9.94 | $ 8.51 | $ 17.31 | $ 26.31 | $ 24.20 | $ 25.39 | ||
Total Investment Return2 | ||||||||
Based on net asset value | 47.16% | (51.22)%3 | (13.86)% | 8.89% | 3.81% | 10.15% | ||
Based on market price | 36.42% | (46.76)%3 | (28.62)% | 17.98% | 4.83% | 11.01% | ||
Ratios to Average Net Assets Applicable to Common Shareholders | ||||||||
Total expenses4 | 1.66% | 1.96%5 | 1.46% | 1.62% | 1.51% | 1.44% | ||
Total expenses after fees waived and paid indirectly4 | 1.64% | 1.96%5 | 1.45% | 1.62% | 1.51% | 1.44% | ||
Total expenses after fees waived and paid indirectly and excluding | ||||||||
interest expense4 | 1.39% | 1.39%5 | 1.24% | 1.25% | 1.22% | 1.19% | ||
Net investment income4 | 13.08% | 10.53%5 | 8.90% | 8.46% | 8.37% | 8.66% | ||
Dividends paid to Preferred Shareholders | 0.38% | 2.19%5 | 2.70% | 1.89% | 1.27% | 0.62% | ||
Net investment income to Common Shareholders | 12.70% | 8.34%5 | 6.20% | 6.58% | 7.10% | 8.04% | ||
Supplemental Data | ||||||||
Net assets applicable to Common Shareholders, end of period (000) | $ 204,133 | $ 161,311 | $ 358,017 | $ 449,995 | $ 447,190 | $ 473,809 | ||
Preferred Shares outstanding at $25,000 liquidation preference, | ||||||||
end of period (000) | $ 70,425 | $ 110,400 | $ 220,800 | $ 220,800 | $ 220,800 | $ 220,800 | ||
Borrowings outstanding, end of period (000) | $ 13,235 | $ 44,281 | — | — | — | — | ||
Average borrowings outstanding, during the period (000) | $ 16,330 | $ 51,995 | $ 903 | $ 1,303 | $ 2,904 | $ 782 | ||
Portfolio turnover | 16% | 121% | 97% | 91% | 77% | 88% | ||
Asset coverage per Preferred Share at $25,000 liquidation preference, | ||||||||
end of period | $ 97,465 | $ 61,540 | $ 65,554 | $ 75,965 | $ 75,642 | $ 78,650 | ||
1 Based on average shares outstanding. | ||||||||
2 Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. | ||||||||
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions. | ||||||||
3 Aggregate total investment return. | ||||||||
4 Do not reflect the effect of dividends to Preferred Shareholders. | ||||||||
5 Annualized. | ||||||||
See Notes to Financial Statements. | ||||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 43 |
Financial Highlights | BlackRock Credit Allocation Income Trust IV (BTZ) | |||
Period | ||||
December 27, | ||||
20061 to | ||||
Year Ended October 31, | October 31, | |||
2009 | 2008 | 2007 | ||
Per Share Operating Performance | ||||
Net asset value, beginning of period | $ 10.59 | $ 21.39 | $ 23.882 | |
Net investment income | 0.993 | 1.333 | 1.25 | |
Net realized and unrealized gain (loss) | 2.54 | (10.06) | (1.86) | |
Dividends to Preferred Shareholders from net investment income | (0.07) | (0.33) | (0.31) | |
Net increase (decrease) from investment operations | 3.46 | (9.06) | (0.92) | |
Dividends and distributions to Common Shareholders from: | ||||
Net investment income | (0.93) | (0.90) | (0.93) | |
Tax return of capital | (0.48) | (0.84) | (0.47) | |
Total dividends and distributions | (1.41) | (1.74) | (1.40) | |
Capital charge with respect to issuance of: | ||||
Common Shares | — | — | (0.04) | |
Preferred Shares | — | — | (0.13) | |
Total capital charges | — | — | (0.17) | |
Net asset value, end of period | $ 12.64 | $ 10.59 | $ 21.39 | |
Market price, end of period | $ 10.96 | $ 9.36 | $ 18.65 | |
Total Investment Return4 | ||||
Based on net asset value | 41.06% | (44.27)% | (4.42)%5 | |
Based on market price | 38.38% | (43.51)% | (20.34)%5 | |
Ratios to Average Net Assets Applicable to Common Shareholders | ||||
Total expenses6 | 1.60% | 1.65% | 1.90%7 | |
Total expenses after fees waived and paid indirectly6 | 1.58% | 1.65% | 1.88%7 | |
Total expenses after fees waived and paid indirectly and excluding interest expense6 | 1.24% | 1.21% | 1.04%7 | |
Net investment income6 | 9.93% | 7.63% | 6.50%7 | |
Dividends to Preferred Shareholders | 0.74% | 1.89% | 1.64%7 | |
Net investment income to Common Shareholders | 9.19% | 5.74% | 4.86%7 | |
Supplemental Data | ||||
Net assets applicable to Common Shareholders, end of period (000) | $ 654,999 | $ 548,612 | $ 1,108,534 | |
Preferred Shares outstanding at $25,000 liquidation preference, end of period (000) | $ 231,000 | $ 231,000 | $ 462,000 | |
Borrowings outstanding, end of period (000) | $ 61,576 | $ 223,512 | $ 88,291 | |
Average borrowings outstanding, during the period (000) | $ 76,521 | $ 107,377 | $ 96,468 | |
Portfolio turnover | 30% | 126% | 35% | |
Asset coverage per Preferred Share at $25,000 liquidation preference, end of period | $ 95,892 | $ 84,384 | $ 89,737 | |
1 Commencement of operations. This information includes the initial investment by BlackRock Funding, Inc. | ||||
2 Net asset value, beginning of period, reflects a deduction of $1.12 per share sales charge from initial offering price of $25.00 per share. | ||||
3 Based on average shares outstanding. | ||||
4 Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. | ||||
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions. | ||||
5 Aggregate total investment return. | ||||
6 Do not reflect the effect of dividends to Preferred Shareholders. | ||||
7 Annualized. | ||||
See Notes to Financial Statements. | ||||
44 | ANNUAL REPORT | OCTOBER 31, 2009 |
Financial Highlights | BlackRock Enhanced Capital and Income Fund, Inc. (CII) | |||||||
Period | Period | |||||||
Year | January 1, | April 30, | ||||||
Ended | 2008 to | 20041 to | ||||||
Year Ended December 31, | ||||||||
October 31, | October 31, | December 31, | ||||||
2009 | 2008 | 2007 | 2006 | 2005 | 2004 | |||
Per Share Operating Performance | ||||||||
Net asset value, beginning of period | $ 13.78 | $ 21.36 | $ 22.91 | $ 20.31 | $ 20.76 | $ 19.102 | ||
Net investment income | 0.293 | 0.233 | 0.313 | 0.373 | 0.463 | 0.46 | ||
Net realized and unrealized gain (loss) | 2.27 | (6.36) | 0.58 | 3.69 | 0.29 | 1.84 | ||
Net increase (decrease) from investment operations | 2.56 | (6.13) | 0.89 | 4.06 | 0.75 | 2.30 | ||
Dividends and distributions from: | ||||||||
Net investment income | (0.29) | (0.23) | (0.34) | (0.33) | (0.47) | (0.48) | ||
Net realized gain | (1.19) | (0.62) | (2.10) | (1.13) | (0.73) | (0.11) | ||
Tax return of capital | (0.46) | (0.60) | — | — | — | (0.01) | ||
Total dividends and distributions | (1.94) | (1.45) | (2.44) | (1.46) | (1.20) | (0.60) | ||
Capital charges with respect to the issuance of shares | — | — | — | — | — | (0.04) | ||
Net asset value, end of period | $ 14.40 | $ 13.78 | $ 21.36 | $ 22.91 | $ 20.31 | $ 20.76 | ||
Market price, end of period | $ 13.76 | $ 12.37 | $ 20.06 | $ 20.41 | $ 17.21 | $ 18.32 | ||
Total Investment Return4 | ||||||||
Based on net asset value | 22.01% | (29.46)%5 | 4.79% | 21.70% | 4.69% | 12.30%5 | ||
Based on market price | 29.88% | (32.58)%5 | 10.47% | 27.95% | 0.52% | (5.36)%5 | ||
Ratios to Average Net Assets | ||||||||
Total expenses | 0.95% | 1.10%6 | 1.96% | 3.54% | 2.96% | 2.19%6 | ||
Total expenses after fees waived and paid indirectly | 0.95% | 1.10%6 | 1.96% | 3.54% | 2.96% | 1.96%6 | ||
Total expenses after fees waived and paid indirectly | ||||||||
and excluding interest expense | 0.95% | 1.01%6 | 1.19% | 1.42% | 1.47% | 1.20%6 | ||
Net investment income | 2.16% | 1.46%6 | 1.36% | 1.75% | 2.28% | 3.52%6 | ||
Supplemental Data | ||||||||
Net assets, end of period (000) | $ 618,462 | $ 167,996 | $ 260,385 | $ 279,272 | $ 260,638 | $ 266,345 | ||
Borrowings outstanding, end of period (000) | — | — | — | $ 100,000 | $ 109,000 | $ 109,000 | ||
Average borrowings outstanding, during the period (000) | — | — | $ 38,788 | $ 107,504 | $ 109,000 | $ 98,750 | ||
Portfolio turnover | 138% | 45% | 63% | 38% | 61% | 20% | ||
Asset coverage, end of period per $1,000 | — | — | — | $ 3,793 | $ 3,391 | $ 3,444 | ||
1 Commencement of operations. This information includes the initial investment by BlackRock Investment Managers, LLC. | ||||||||
2 Net asset value, beginning of period, reflects a deduction of $0.90 per share sales charge from initial offering price of $20.00 per share. | ||||||||
3 Based on average shares outstanding. | ||||||||
4 Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. | ||||||||
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions. | ||||||||
5 Aggregate total investment return. | ||||||||
6 Annualized. | ||||||||
See Notes to Financial Statements. | ||||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 45 |
Financial Highlights | BlackRock Floating Rate Income Trust (BGT) | ||||||||
Period | Period | ||||||||
Year | January 1, | August 30, | |||||||
Ended | 2008 to | 20041 to | |||||||
Year Ended December 31, | |||||||||
October 31, | October 31, | December 31, | |||||||
2009 | 2008 | 2007 | 2006 | 2005 | 2004 | ||||
Per Share Operating Performance | |||||||||
Net asset value, beginning of period | $ 11.24 | $ 17.71 | $ 19.11 | $ 19.13 | $ 19.21 | $ 19.102 | |||
Net investment income | 0.983 | 1.423 | 2.03 | 1.99 | 1.64 | 0.33 | |||
Net realized and unrealized gain (loss) | 2.72 | (6.62) | (1.39) | (0.06) | (0.17) | 0.35 | |||
Dividends and distributions to Preferred Shareholders from: | |||||||||
Net investment income | (0.04) | (0.24) | (0.54) | (0.48) | (0.33) | (0.04) | |||
Net realized gain | — | — | — | (0.01) | (0.00)4 | — | |||
Net increase (decrease) from investment operations | 3.66 | (5.44) | 0.10 | 1.44 | 1.14 | 0.64 | |||
Dividends and distributions to Common Shareholders from: | |||||||||
Net investment income | (1.19) | (1.03) | (1.14) | (1.44) | (1.22) | (0.37) | |||
Net realized gain | — | — | — | (0.02) | (0.00)4 | — | |||
Tax return of capital | (0.42) | — | (0.36) | — | — | — | |||
Total dividends and distributions | (1.61) | (1.03) | (1.50) | (1.46) | (1.22) | (0.37) | |||
Capital charges with respect to issuance of: | |||||||||
Common Shares | — | — | — | — | — | (0.04) | |||
Preferred Shares | — | — | — | — | — | (0.12) | |||
Total capital charges | — | — | — | — | — | (0.16) | |||
Net asset value, end of period | $ 13.29 | $ 11.24 | $ 17.71 | $ 19.11 | $ 19.13 | $ 19.21 | |||
Market price, end of period | $ 12.58 | $ 9.63 | $ 15.78 | $ 19.27 | $ 17.16 | $ 18.63 | |||
Total Investment Return5 | |||||||||
Based on net asset value | 39.51% | (31.62)%6 | 0.98% | 7.93% | 6.63% | 2.57%6 | |||
Based on market price | 54.14% | (34.24)%6 | (10.92)% | 21.31% | (1.34)% | (5.00)%6 | |||
Ratios to Average Net Assets Applicable to Common Shareholders | |||||||||
Total expenses7 | 1.96% | 2.22%8 | 1.67% | 1.75% | 1.56% | 1.26%8 | |||
Total expenses after fees waived and paid indirectly7 | 1.68% | 1.89%8 | 1.33% | 1.43% | 1.23% | 0.97%8 | |||
Total expenses after fees waived and paid indirectly and excluding | |||||||||
interest expense7 | 1.24% | 1.21%8 | 1.16% | 1.19% | 1.15% | 0.97%8 | |||
Net investment income7 | 8.92% | 10.56%8 | 10.83% | 10.38% | 8.52% | 5.04%8 | |||
Dividends to Preferred Shareholders | 0.38% | 1.75%8 | 2.88% | 2.51% | 1.71% | 0.62%8 | |||
Net investment income to Common Shareholders | 8.54% | 8.81%8 | 7.95% | 7.87% | 6.81% | 4.42%8 | |||
Supplemental Data | |||||||||
Net assets applicable to Common Shareholders, end of period (000) | $ 312,872 | $ 264,590 | $ 417,086 | $ 449,065 | $ 449,219 | $ 451,126 | |||
Preferred Shares outstanding at $25,000 liquidation preference, | |||||||||
end of period (000) | $ 58,800 | $ 58,800 | $ 243,450 | $ 243,450 | $ 243,450 | $ 243,450 | |||
Borrowings outstanding, end of period (000) | $ 14,000 | $ 123,150 | — | $ 26,108 | — | — | |||
Average borrowings outstanding during the period (000) | $ 53,156 | $ 71,780 | $ 10,524 | $ 19,562 | $ 10,722 | $ 114 | |||
Portfolio turnover | 42% | 25% | 41% | 50% | 46% | 11% | |||
Asset coverage per Preferred Share at $25,000 liquidation preference, | |||||||||
end of period | $ 158,029 | $ 137,505 | $ 67,849 | $ 73,810 | $ 71,139 | $ 71,330 | |||
1 Commencement of operations. This information includes the initial investment by BlackRock Funding, Inc. | |||||||||
2 Net asset value, beginning of period, reflects a deduction of $0.90 per share sales charge from initial offering price of $20.00 per share. | |||||||||
3 Based on average shares outstanding. | |||||||||
4 Amount is less than $(0.01) per share. | |||||||||
5 Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. | |||||||||
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions. | |||||||||
6 Aggregate total investment return. | |||||||||
7 Do not reflect the effect of dividends to Preferred Shareholders. | |||||||||
8 Annualized. | |||||||||
See Notes to Financial Statements. | |||||||||
46 | ANNUAL REPORT | OCTOBER 31, 2009 |
Notes to Financial Statements
1. Organization and Significant Accounting Policies:
BlackRock Credit Allocation Income Trust I, Inc. (formerly BlackRock
Preferred and Corporate Income Strategies Fund, Inc.) (“PSW”), BlackRock
Credit Allocation Income Trust II, Inc. (formerly BlackRock Preferred Income
Strategies Fund, Inc.) (“PSY”) and BlackRock Enhanced Capital and
Income Fund, Inc. (“CII”) are registered as diversified, closed-end manage-
ment investment companies under the Investment Company Act of 1940,
as amended (the “1940 Act”). BlackRock Credit Allocation Income Trust III
(formerly BlackRock Preferred Opportunity Trust) (“BPP”), BlackRock Credit
Allocation Income Trust IV (formerly BlackRock Preferred and Equity
Advantage Trust) (“BTZ”) and BlackRock Floating Rate Income Trust (for-
merly BlackRock Global Floating Rate Income Trust) (“BGT”) are registered
as non-diversified, closed-end management investment companies under
the 1940 Act. PSW, PSY and CII are organized as Maryland corporations.
BPP, BTZ and BGT are organized as Delaware statutory trusts. PSW, PSY,
BPP, BTZ, CII and BGT are collectively referred to as the “Funds” or individu-
ally as the “Fund.” The Funds’ financial statements are prepared in con-
formity with accounting principles generally accepted in the United States
of America, which may require the use of management accruals and esti-
mates. Actual results may differ from these estimates. The Board of Directors
and Board of Trustees of the Funds, as applicable, are referred to throughout
this report as the “Board of Directors” or the “Board.” The Funds determine
and make available for publication the net asset value of their Common
Shares on a daily basis.
CII Reorganization: The Board and the shareholders of each of BlackRock
Enhanced Equity Yield Fund, Inc. (“EEF”), BlackRock Enhanced Equity Yield
and Premium Fund, Inc. (“ECV”) (the “Target Funds”) and CII approved the
reorganization of each Target Fund into CII (the “Reorganizations”). The Reor-
ganizations were tax-free events and were effective as of the opening for
business of the New York Stock Exchange (“NYSE”) on November 3, 2008.
Target Funds | Acquiring Fund | |||
EEF | CII | |||
ECV | CII | |||
Under the agreement and plan of reorganization between each Target | ||||
Fund and CII, the shares of each Target Fund (“Target Fund Shares”) were | ||||
exchanged for CII shares. The conversion ratios for Target Fund Shares | ||||
were as follows: | ||||
EEF/CII | 0.80653563 | |||
ECV/CII | 0.81144752 | |||
The net assets of CII before and after the Reorganizations and CII shares | ||||
issued and Target Fund Shares redeemed in connection with the Reorgani- | ||||
zations were as follows: | ||||
Net Assets | Net Assets | Target Funds | ||
Acquiring | After the | Prior to the | Shares | |
Fund | Reorganizations | Reorganizations | Shares Issued | Redeemed |
CII | $591,399,963 | $170,431,810 | 30,542,706 | 37,766,622 |
Included in the net assets acquired by CII were the following components: | ||||
Target | Paid-In | Realized | Net Unrealized | |
Funds | Capital | Loss | Depreciation | Net Assets |
EEF | $329,483,362 | $(16,478,636) | $(80,066,510) | $232,938,216 |
ECV | $270,207,354 | $(15,306,983) | $(66,870,434) | $188,029,937 |
The following is a summary of significant accounting policies followed by | ||||
the Funds: |
Valuation: The Funds value their bond investments on the basis of last avail-
able bid prices or current market quotations provided by dealers or pricing
services selected under the supervision of each Fund’s Board. Floating rate
loan interests are valued at the mean of the bid prices from one or more
brokers or dealers as obtained from a pricing service. In determining the
value of a particular investment, pricing services may use certain informa-
tion with respect to transactions in such investments, quotations from deal-
ers, pricing matrixes, market transactions in comparable investments, various
relationships observed in the market between investments and calculated
yield measures based on valuation technology commonly employed in the
market for such investments. Swap agreements are valued utilizing quotes
received daily by the Funds’ pricing service or through brokers, which are
derived using daily swap curves and trades of underlying securities. Invest-
ments in open-end investment companies are valued at net asset value
each business day. Short-term securities with maturities less than 60 days
may be valued at amortized cost, which approximates fair value. The Funds
value their investments in the Cash Sweep Series of BlackRock Liquidity
Series, LLC at fair value, which is ordinarily based upon their pro rata own-
ership in the net assets of the underlying fund.
Securities and other assets and liabilities denominated in foreign curren-
cies are translated into U.S. dollars using exchange rates determined as
of the close of business on the NYSE. Foreign currency exchange contracts
are valued at the mid between the bid and ask prices and are determined
as of the close of business on the NYSE. Interpolated values are derived
when the settlement date of the contract is an interim date for which quo-
tations are not available.
Equity investments traded on a recognized securities exchange or the
NASDAQ Global Market System are valued at the last reported sale price
that day or the NASDAQ official closing price, if applicable. For equity
investments traded on more than one exchange, the last reported sale
price on the exchange where the stock is primarily traded is used. Equity
investments traded on a recognized exchange for which there were no
sales on that day are valued at the last available bid (long positions) or
ask (short positions) price. If no bid or ask price is available, the prior day’s
price will be used, unless it is determined that such prior day’s price no
longer reflects the fair value of the security.
Exchange-traded options are valued at the mean between the last bid and
ask prices at the close of the options market in which the options trade. An
exchange-traded option for which there is no mean price is valued at the
last bid (long positions) or ask (short positions) price. If no bid or ask price
is available, the prior day’s price will be used, unless it is determined that
such prior day’s price no longer reflects the fair value of the option. Over-
the-counter (“OTC”) options are valued by an independent pricing service
or through brokers using a mathematical model which incorporates a
ANNUAL REPORT OCTOBER 31, 2009 47
Notes to Financial Statements (continued)
number of market data factors, such as the trades and prices of the
underlying instruments.
In the event that application of these methods of valuation results in a
price for an investment which is deemed not to be representative of the
market value of such investment or is not available, the investment will be
valued by a method approved by the Board as reflecting fair value (“Fair
Value Assets”). When determining the price for Fair Value Assets, the invest-
ment advisor and/or sub-advisor seeks to determine the price that each
Fund might reasonably expect to receive from the current sale of that asset
in an arm’s-length transaction. Fair value determinations shall be based
upon all available factors that the investment advisor and/or sub-advisor
deems relevant. The pricing of all Fair Value Assets is subsequently reported
to the Board or a committee thereof.
Generally, trading in foreign instruments is substantially completed each
day at various times prior to the close of business on the NYSE. The values
of such instruments used in computing the net assets of each Fund are
determined as of such times. Occasionally, events affecting the values of
such instruments may occur between the times at which they are deter-
mined and the close of business on the NYSE that may not be reflected in
the computation of each Fund’s net assets. If events (for example, a com-
pany announcement, market volatility or a natural disaster) occur during
such periods that are expected to materially affect the value of such instru-
ments, those instruments may be Fair Value Assets and be valued at their
fair value as determined in good faith by the Board or by the investment
advisor using a pricing service and/or procedures approved by the Board.
Foreign Currency Transactions: Foreign currency amounts are translated
into United States dollars on the following basis: (i) market value of invest-
ment securities, assets and liabilities at the current rate of exchange; and
(ii) purchases and sales of investment securities, income and expenses at
the rates of exchange prevailing on the respective dates of such transactions.
The Funds report foreign currency related transactions as components of
realized gain (loss) for financial reporting purposes, whereas such compo-
nents are treated as ordinary income for federal income tax purposes.
Capital Trusts and Trust Preferreds: These securities are typically issued by
corporations, generally in the form of interest-bearing notes with preferred
securities characteristics, or by an affiliated business trust of a corporation,
generally in the form of beneficial interests in subordinated debentures or
similarly structured securities. The securities can be structured as either
fixed or adjustable coupon securities that can have either a perpetual or
stated maturity date. Dividends can be deferred without creating an event
of default or acceleration, although maturity cannot take place unless all
cumulative payment obligations have been met. The deferral of payments
does not affect the purchase or sale of these securities in the open market.
Payments on these securities are treated as interest rather than dividends
for Federal income tax purposes. These securities can have a rating that is
slightly below that of the issuing company’s senior debt securities.
Preferred Stock: Certain Funds may invest in preferred stocks. Preferred
stock has a preference over common stock in liquidation (and generally
in receiving dividends as well) but is subordinated to the liabilities of the
issuer in all respects. As a general rule, the market value of preferred stock
with a fixed dividend rate and no conversion element varies inversely with
interest rates and perceived credit risk, while the market price of convert-
ible preferred stock generally also reflects some element of conversion
value. Because preferred stock is junior to debt securities and other obli-
gations of the issuer, deterioration in the credit quality of the issuer will
cause greater changes in the value of a preferred stock than in a more
senior debt security with similar stated yield characteristics. Unlike interest
payments on debt securities, preferred stock dividends are payable only if
declared by the issuer’s board of directors. Preferred stock also may be
subject to optional or mandatory redemption provisions.
Floating Rate Loan Interests: Certain Funds may invest in floating rate
loans, which are generally non-investment grade, made by banks, other
financial institutions, and privately and publicly offered corporations.
Floating rate loans are senior in the debt structure of a corporation.
Floating rate loans generally pay interest at rates that are periodically
determined by reference to a base lending rate plus a premium. The
base lending rates are generally (i) the lending rate offered by one or
more European banks, such as LIBOR (London InterBank Offered Rate),
(ii) the prime rate offered by one or more US banks or (iii) the certificate
of deposit rate. The Funds consider these investments to be investments
in debt securities for purposes of their investment policies.
The Funds earn and/or pay facility and other fees on floating rate loans.
Other fees earned/paid include commitment, amendment, consent and
prepayment penalty fees. Facility, commitment and amendment fees are
typically amortized over the term of the loan. Consent fees and various
other fees are recorded as income. Prepayment penalty fees are recorded
as realized gains. When a Fund buys a floating rate loan it may receive a
facility fee and when it sells a floating rate loan it may pay a facility fee. On
an ongoing basis, the Funds may receive a commitment fee based on the
undrawn portion of the underlying line of credit portion of a floating rate
loan. In certain circumstances, the Funds may receive a prepayment
penalty fee upon the prepayment of a floating rate loan by a borrower.
Other fees received by the Funds may include covenant waiver fees and
covenant modification fees.
The Funds may invest in multiple series or tranches of a loan. A different
series or tranche may have varying terms and carry different associated risks.
Floating rate loans are usually freely callable at the issuer’s option. The
Funds may invest in such loans in the form of participations in loans
(“Participations”) and assignments of all or a portion of loans from third
parties. Participations typically will result in the Funds having a contractual
relationship only with the lender, not with the borrower. The Funds will have
the right to receive payments of principal, interest and any fees to which it
is entitled only from the lender selling the Participation and only upon
receipt by the lender of the payments from the borrower.
In connection with purchasing Participations, the Funds generally will have
no right to enforce compliance by the borrower with the terms of the loan
48 ANNUAL REPORT OCTOBER 31, 2009
Notes to Financial Statements (continued)
agreement relating to the loans, nor any rights of offset against the borrower,
and the Funds may not benefit directly from any collateral supporting the
loan in which it has purchased the Participation.
As a result, the Funds will assume the credit risk of both the borrower and
the lender that is selling the Participation. The Funds’ investments in loan
participation interests involve the risk of insolvency of the financial interme-
diaries who are parties to the transactions. In the event of the insolvency of
the lender selling the Participation, the Funds may be treated as a general
creditor of the lender and may not benefit from any offset between the
lender and the borrower.
Reverse Repurchase Agreements: Certain Funds may enter into reverse
repurchase agreements with qualified third party broker-dealers. In a
reverse repurchase agreement, the Funds sell securities to a bank or bro-
ker-dealer and agree to repurchase the securities at a mutually agreed
upon date and price. Interest on the value of the reverse repurchase agree-
ments issued and outstanding is based upon competitive market rates
determined at the time of issuance. The Funds may utilize reverse repur-
chase 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 agree-
ments involve leverage risk and also the risk that the market value of
the securities that the Funds are obligated to repurchase under the agree-
ment may decline below the repurchase price. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, the Funds’ use of the proceeds from the agreement
may be restricted while the other party, or its trustee or receiver, determines
whether or not to enforce the Funds’ obligation to repurchase the securities.
Defensive Positions: Each of PSW, PSY, BPP and BTZ may vary its invest-
ment policies for temporary defensive purposes during periods in which
the investment advisor believes that conditions in the securities markets or
other economic, financial or political conditions warrant. Under such condi-
tions, the Funds for temporary defensive purposes may invest up to 100%
of its total assets in, as applicable and described in each Fund’s prospec-
tus, U.S. government securities, certificates of deposit, repurchase agree-
ments that involve purchases of debt securities, bankers’ acceptances and
other bank obligations, commercial paper, money market funds and/or
other debt securities deemed by the investment advisor to be consistent
with a defensive posture, or may hold its assets in cash.
Zero-Coupon Bonds: Certain Funds may invest in zero-coupon bonds, which
are normally issued at a significant discount from face value and do not
provide for periodic interest payments. Zero-coupon bonds may experience
greater volatility in market value than similar maturity debt obligations
which provide for regular interest payments.
Segregation and Collateralization: In cases in which the 1940 Act and
the interpretive positions of the Securities and Exchange Commission
(“SEC”) require that a Fund either deliver collateral or segregate assets in
connection with certain investments (e.g., written options, foreign currency
exchange contracts, financial futures contracts and swaps), or certain bor-
rowings (e.g., reverse repurchase agreements and loan payable) each Fund
will, consistent with SEC rules and/or certain interpretive letters issued by
the SEC, segregate collateral or designate on its books and records cash or
other liquid securities having a market value at least equal to the amount
that would otherwise be required to be physically segregated. Furthermore,
based on requirements and agreements with certain exchanges and third
party broker-dealers, each party has requirements to deliver/deposit secu-
rities as collateral for certain investments.
Investment Transactions and Investment Income: For financial reporting
purposes, investment transactions are recorded on the dates the trans-
actions are entered into (the trade dates). Realized gains and losses on
investment transactions are determined on the identified cost basis. Divi-
dend income is recorded on the ex-dividend dates. Dividends from foreign
securities where the ex-dividend date may have passed are subsequently
recorded when the Funds have determined the ex-dividend date. Interest
income is recognized on the accrual basis. The Funds amortize all premiums
and discounts on debt securities. Upon notification from issuers, some of
the dividend income received from a real estate investment trust may
be redesignated as a reduction of cost of the related investment and/or
realized gain. Consent fees are compensation for agreeing to changes in
the terms of debt instruments and are included in interest income in the
Statements of Operations.
Dividends and Distributions: Dividends from net investment income are
declared and paid monthly (quarterly for CII). Distributions of capital gains
are recorded on the ex-dividend dates. If the total dividends and distribu-
tions made in any tax year exceeds net investment income and accumu-
lated realized capital gains, a portion of the total distribution may be
treated as a tax return of capital.
Income Taxes: It is each Fund’s policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies
and to distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required. Under the applicable
foreign tax laws, a withholding tax may be imposed on interest, dividends
and capital gains at various rates.
Each Fund files US federal and various state and local tax returns. No
income tax returns are currently under examination. The statute of limitations
on PSW’s and PSY’s US federal tax returns remains open for the four years
ended October 31, 2009. The statute of limitations on BPP’s, CII’s and BGT’s
US federal tax returns remains open for the two years ended December 31,
2007, the period ended October 31, 2008 and year ended October 31,
2009. The statute of limitations on BTZ’s US Federal tax returns remains
open for the two years ended October 31, 2009 and the period ended
October 31, 2007. The statutes of limitations on the Funds’ state and
local tax returns may remain open for an additional year depending upon
the jurisdiction.
Recent Accounting Standards: In June 2009, amended guidance was
issued by the Financial Accounting Standards Board for transfers of finan-
cial assets. This guidance is intended to improve the relevance, representa-
tional faithfulness and comparability of the information that a reporting
ANNUAL REPORT OCTOBER 31, 2009 49
Notes to Financial Statements (continued)
entity provides in its financial statements about a transfer of financial
assets; the effects of a transfer on its financial position, financial perform-
ance, and cash flows; and a transferor’s continuing involvement, if any, in
transferred financial assets. The amended guidance is effective for financial
statements for fiscal years and interim periods beginning after November 15,
2009. Earlier application is prohibited. The recognition and measurement
provisions of this guidance must be applied to transfers occurring on or
after the effective date. Additionally, the enhanced disclosure provisions of
the amended guidance should be applied to transfers that occurred both
before and after the effective date of this guidance. The impact of this
guidance on the Funds’ financial statements and disclosures, if any, is
currently being assessed.
Deferred Compensation and BlackRock Closed-End Share Equivalent
Investment Plan: Under the deferred compensation plan approved by
each Fund’s Board, non-interested Directors or Trustees (“Independent
Directors or 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 other
certain BlackRock Closed-End Funds selected by the Independent Directors
or Trustees. This has approximately the same economic effect for the
Independent Directors or Trustees as if the Independent Directors or
Trustees had invested the deferred amounts directly in other certain
BlackRock Closed-End Funds.
The deferred compensation plan is not funded and obligations there-
under represent general unsecured claims against the general assets of
each Fund. Each Fund may, however, elect to invest in common shares of
other certain BlackRock Closed-End Funds selected by the Independent
Directors or Trustees in order to match its deferred compensation obliga-
tions. Investments to cover each Fund’s deferred compensation liability,
if any, are included in other assets in the Statements of Assets and
Liabilities. Dividends and distributions from the BlackRock Closed-End
Fund investments under the plan are included in income-affiliated in
the Statements of Operations.
Other: Expenses directly related to a Fund are charged to that Fund. Other
operating expenses shared by several funds are pro rated among those
funds on the basis of relative net assets or other appropriate methods.
Pursuant to the terms of the custody agreement, custodian fees may be
reduced by amounts calculated on uninvested cash balances, which are
shown in the Statements of Operations as fees paid indirectly.
2. Derivative Financial Instruments:
The Funds may engage in various portfolio investment strategies both to
increase the returns of the Funds and to economically hedge, or protect,
their exposure to certain risks such as credit risk, equity risk, interest rate
risk and foreign currency exchange rate risk. Losses may arise if the value
of the contract decreases due to an unfavorable change in the price of
the underlying security or if the counterparty does not perform under the
contract. The Funds may mitigate counterparty risk through master net-
ting agreements included within an International Swaps and Derivatives
Association, Inc. (“ISDA”) Master Agreement between a Fund and each
of its counterparties. The ISDA Master Agreement allows each Fund to
offset with its counterparty certain derivative financial instruments’ pay-
ables and/or receivables with collateral held with each counterparty. The
amount of collateral moved to/from applicable counterparties is based
upon minimum transfer amounts of up to $500,000. To the extent amounts
due to the Funds from their counterparties are not fully collateralized con-
tractually or otherwise, the Funds bear the risk of loss from counterparty
non-performance. See Note 1 “Segregation and Collateralization” for addi-
tional information with respect to collateral practices.
The Funds’ maximum risk of loss from counterparty credit risk on over-
the-counter derivatives is generally the aggregate unrealized gain in excess
of any collateral pledged by the counterparty to the Funds. For over-the-
counter purchased options, the Funds bear the risk of loss in the amount
of the premiums paid and change in market value of the options should
the counterparty not perform under the contracts. Options written by the
Funds do not give rise to counterparty credit risk, as written options obli-
gate the Funds to perform and not the counterparty. Certain ISDA Master
Agreements allow counterparties to over-the-counter derivatives to termi-
nate derivative contracts prior to maturity in the event a Fund’s net assets
decline by a stated percentage or a Fund fails to meet the terms of its
ISDA Master Agreements, which would cause the Fund to accelerate pay-
ment of any net liability owed to the counterparty. Counterparty risk related
to exchange-traded financial futures contracts and options is minimal
because of the protection against defaults provided by the exchange on
which they trade.
Financial Futures Contracts: Certain Funds may purchase or sell financial
futures contracts and options on financial futures contracts to gain expo-
sure to, or economically hedge against, changes in the value of interest
rates (interest rate risk) or foreign currencies (foreign currency exchange
rate risk). Financial futures contracts are contracts for delayed delivery of
securities at a specific future date and at a specific price or yield. Pursuant
to the contract, the Funds agree to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as margin variation and are recognized by
the Funds as unrealized gains or losses. When the contract is closed, the
Funds record a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time
it was closed. The use of financial futures contracts involves the risk of an
imperfect correlation in the movements in the price of financial futures
contracts, interest rates and the underlying assets.
Foreign Currency Exchange Contracts: Certain Funds may enter into foreign
currency exchange contracts as an economic hedge against either specific
transactions or portfolio positions (foreign currency exchange rate risk). A
foreign currency exchange contract is an agreement between two parties
to buy and sell a currency at a set exchange rate on a future date. Foreign
currency exchange contracts, when used by a Fund, help to manage the
overall exposure to the currency backing some of the investments held by
a Fund. The contract is marked-to-market daily and the change in market
value is recorded by a Fund as an unrealized gain or loss. When the con-
tract is closed, a Fund records a realized gain or loss equal to the differ-
ence between the value at the time it was opened and the value at the
time it was closed. The use of foreign currency exchange contracts involves
the risk that counterparties may not meet the terms of the agreement or
unfavorable movements in the value of a foreign currency relative to the
US dollar.
50 ANNUAL REPORT OCTOBER 31, 2009
Notes to Financial Statements (continued)
Options: Certain Funds may purchase and write call and put options to
increase or decrease their exposure to underlying instruments. A call option
gives the purchaser of the option the right (but not the obligation) to buy,
and obligates the seller to sell (when the option is exercised), the underly-
ing instrument at the exercise price at any time or at a specified time dur-
ing the option period. A put option gives the holder the right to sell and
obligates the writer to buy the underlying instrument at the exercise price
at any time or at a specified time during the option period. When a Fund
purchases (writes) an option, an amount equal to the premium paid
(received) by a Fund is reflected as an asset (liability). The amount of the
asset (liability) is subsequently marked-to-market to reflect the current
market value of the option purchased (written). When an instrument is
purchased or sold through an exercise of an option, the related premium
paid (or received) is added to (or deducted from) the basis of the instru-
ment acquired or deducted from (or added to) the proceeds of the instru-
ment sold. When an option expires (or a Fund enters into a closing
transaction), a Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium received or paid). When a Fund
writes a call option, such option is “covered,” meaning that a Fund holds
the underlying instrument subject to being called by the option counter-
party, or cash in an amount sufficient to cover the obligation. When a Fund
writes a put option, such option is covered by cash in an amount sufficient
to cover the obligation.
In purchasing and writing options, a Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that a Fund
may not be able to enter into a closing transaction due to an illiquid mar-
ket. Exercise of a written option could result in a Fund purchasing or selling
a security at a price different from the current market value. The Funds may
execute transactions in both listed and OTC options.
Swaps: Certain Funds may enter into swap agreements, in which a Fund
and a counterparty agree to make periodic net payments on a specified
notional amount. These periodic payments received or made by the Funds
are recorded in the Statements of Operations as realized gains or losses,
respectively. Swaps are marked-to-market daily and changes in value are
recorded as unrealized appreciation (depreciation). When the swap is ter-
minated, the Fund will record a realized gain or loss equal to the difference
between the proceeds from (or cost of) the closing transaction and the
Fund’s basis in the contract, if any. Swap transactions involve, to varying
degrees, elements of interest rate, credit and market risk in excess of the
amounts recognized in the Statements of Assets and Liabilities. Such risks
involve the possibility that there will be no liquid market for these agree-
ments, that the counterparty to the agreements may default on its
obligation to perform or disagree as to the meaning of the contractual
terms in the agreements, and that there may be unfavorable changes in
interest rates and/or market values associated with these transactions.
• Credit default swaps — Certain Funds may enter into credit default
swaps to manage its exposure to the market or certain sectors of the
market, to reduce their risk exposure to defaults of corporate and/or
sovereign issuers or to create exposure to corporate and/or sovereign
issuers to which they are not otherwise exposed (credit risk). The Funds
enter into credit default agreements to provide a measure of protection
against the default of an issuer (as buyer of protection) and/or gain
credit exposure to an issuer to which it is not otherwise exposed (as
seller of protection). The Funds may either buy or sell (write) credit
default swaps on single-name issuers (corporate or sovereign) or
traded indexes. Credit default swaps on single-name issuers are agree-
ments in which the buyer pays fixed periodic payments to the seller in
consideration for a guarantee from the seller to make a specific pay-
ment should a negative credit event take place (e.g., bankruptcy, failure
to pay, obligation accelerators, repudiation, moratorium or restructur-
ing). Credit default swaps on traded indexes are agreements in which
the buyer pays fixed periodic payments to the seller in consideration
for a guarantee from the seller to make a specific payment should a
write-down, principal or interest shortfall or default of all or individual
underlying securities included in the index occurs. As a buyer, if an
underlying credit event occurs, the Funds will either receive from the
seller an amount equal to the notional amount of the swap and deliver
the referenced security or underlying securities comprising of an index
or receive a net settlement of cash equal to the notional amount of
the swap less the recovery value of the security or underlying securi-
ties comprising of an index. As a seller (writer), if an underlying credit
event occurs the Funds will either pay the buyer an amount equal to the
notional amount of the swap and take delivery of the referenced secu-
rity or underlying securities comprising of an index or pay a net settle-
ment of cash equal to the notional amount of the swap less the recovery
value of the security or underlying securities comprising of an index.
• Interest rate swaps — Certain Funds may enter into interest rate swaps
to manage duration, the yield curve or interest rate risk by economically
hedging the value of the fixed rate bonds which may decrease when
interest rates rise (interest rate risk). Interest rate swaps are agreements
in which one party pays a floating rate of interest on a notional princi-
pal amount and receives a fixed rate of interest on the same notional
principal amount for a specified period of time. In more complex swaps,
the notional principal amount may decline (or amortize) over time.
Derivatives Categorized by Risk Exposure: | |||||||
Values of Derivative Instruments as of October 31, 2009* | |||||||
Asset Derivatives | |||||||
Statements of Assets | |||||||
and Liabilities Location | PSW | PSY | BPP | BTZ | BGT | ||
Interest rate contracts** | Net unrealized appreciation/depreciation | $ 94,972 | $ 34,845 | $ 19,513 | $ 982,873 | — | |
Credit contracts | Unrealized appreciation on swaps | — | — | — | — | $ 4,930 | |
Equity contracts | Investments at value — unaffiliated | — | — | — | — | 6,110 | |
Total | $ 94,972 | $ 34,845 | $ 19,513 | $ 982,873 | $ 11,040 |
ANNUAL REPORT OCTOBER 31, 2009 51
Notes to Financial Statements (continued) | ||||||||||||
Derivatives Categorized by Risk Exposure (concluded): | ||||||||||||
Liability Derivatives | ||||||||||||
Statements of Assets | ||||||||||||
and Liabilities Location | PSW | PSY | BPP | BTZ | CII | BGT | ||||||
Foreign currency exchange contracts | Unrealized depreciation on foreign | |||||||||||
currency exchange contracts | — | — | — | — | — | $ 650,963 | ||||||
Credit contracts | Unrealized depreciation on swaps | $ 168,952 | $ 337,904 | $ 168,952 | $ 675,809 | — | 453,976 | |||||
Equity contracts** | Net unrealized appreciation/depreciation/ | |||||||||||
Options written — at value | — | — | — | 311,644 | $6,377,146 | — | ||||||
Total | $ 168,952 | $ 337,904 | $ 168,952 | $ 987,453 | $6,377,146 | $1,104,939 | ||||||
* | For open derivative instruments as of October 31, 2009, see the Schedules of Investments, which is also indicative of activity for the year ended October 31, 2009. | |||||||||||
** | Includes cumulative appreciation/depreciation of the financial futures contracts as reported in Schedules of Investments. Only current day’s margin variation is reported within the | |||||||||||
Statements of Assets and Liabilities. | ||||||||||||
The Effect of Derivative Instruments on the Statements of Operations | ||||||||||||
Year Ended October 31, 2009 | ||||||||||||
Net Realized Gain (Loss) From | ||||||||||||
PSW | PSY | BPP | BTZ | CII | BGT | |||||||
Interest rate contracts: | ||||||||||||
Financial futures contracts | $ (3,986,014) $(23,855,057) $(11,138,251) $(22,441,107) | — | — | |||||||||
Swaps | 1,958,406 | 13,723,072 | 6,758,008 | 17,501,084 | — | — | ||||||
Foreign currency exchange contracts: | ||||||||||||
Foreign currency exchange contracts | 4,366 | 34,450 | 1,348 | 9,785 | — | $ (2,429,013) | ||||||
Credit contracts: | ||||||||||||
Swaps | 246,932 | 1,208,482 | 464,385 | 1,004,951 | — | (1,014,281) | ||||||
Equity contracts: | ||||||||||||
Financial futures contracts | — | — | — | 1,193,721 | $ (617,742) | — | ||||||
Options*** | — | — | — | 3,769,225 | 52,938,361 | — | ||||||
Total | $ (1,776,310) $ (8,889,053) $ (3,914,510) | $ 1,037,659 | $52,320,619 | $ (3,443,294) | ||||||||
Net Change in Unrealized Appreciation/Depreciation on | ||||||||||||
PSW | PSY | BPP | BTZ | CII | BGT | |||||||
Interest rate contracts: | ||||||||||||
Financial futures contracts | $ 584,149 | $ 3,572,427 | $ 1,716,894 | $ 7,820,983 | — | — | ||||||
Swaps | 248,398 | (911,039) | (503,217) | (1,216,856) | — | — | ||||||
Foreign currency exchange contracts: | ||||||||||||
Foreign currency exchange contracts | (4,287) | (32,964) | (1,062) | (7,689) | — | $ (6,893,115) | ||||||
Credit contracts: | ||||||||||||
Swaps | (305,030) | (1,014,054) | (307,150) | (1,086,163) | — | 371,495 | ||||||
Equity contracts: | ||||||||||||
Financial futures contracts | — | — | — | (875,340) | — | — | ||||||
Options*** | — | — | — | 2,230,493 | $ 5,758,405 | (37,700) | ||||||
Total | $ 523,230 | $ 1,614,370 | $ 905,465 | $ 6,865,428 | $ 5,758,405 | $ (6,559,320) | ||||||
*** | Options purchased are included in the net realized gain (loss) from investments and net change in unrealized appreciation/depreciation on investments. |
3. Investment Advisory Agreement and Other Transactions
with Affiliates:
The PNC Financial Services Group, Inc. (“PNC”) and Bank of America
Corporation (“BAC”) are the largest stockholders of BlackRock, Inc.
(“BlackRock”). BAC became a stockholder of BlackRock following its
acquisition of Merrill Lynch & Co., Inc. (“Merrill Lynch”) on January 1,
2009. Prior to that date, both PNC and Merrill Lynch were considered
affiliates of the Funds under the 1940 Act. Subsequent to the acquisition,
PNC remains an affiliate, but due to the restructuring of Merrill Lynch’s
ownership interest of BlackRock, BAC is not deemed to be an affiliate
under the 1940 Act.
Each Fund entered into an Investment Advisory Agreement with BlackRock
Advisors, LLC (the “Manager”), the Funds’ investment advisor, an indirect,
wholly owned subsidiary of BlackRock, to provide investment advisory and
administration services.
The Manager is responsible for the management of each Fund’s portfolio
and provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Funds. For such services,
each Fund pays the Manager a monthly fee at the following annual rates of
each Fund’s average daily (weekly for BPP, BTZ and BGT) net assets (includ-
ing any assets attributable to borrowings or the proceeds from the issuance
of Preferred Shares) minus the sum of liabilities (other than borrowings
representing financial leverage) as follows:
PSW | 0.60% |
PSY | 0.60% |
BPP | 0.65% |
BTZ | 0.65% |
CII | 0.85% |
BGT | 0.75% |
The Manager has voluntarily agreed to waive a portion of the investment
advisory fees or other expenses on BGT as a percentage of its average weekly
net assets as follows: 0.20% for the first six years of the Fund’s operations
(through August 30, 2010), 0.10% in year seven (through August 30, 2011)
and 0.05% in year eight (through August 30, 2012). For the year ended
October 31, 2009, the Manager waived $706,594, which is included in
fees waived by advisor in the Statements of Operations.
52 ANNUAL REPORT OCTOBER 31, 2009
Notes to Financial Statements (continued) | ||
The Manager has voluntarily agreed to waive its advisory fees by the amount | ||
of investment advisory fees each Fund pays to the Manager indirectly through | ||
its investment in affiliated money market funds. These amounts are included | ||
in fees waived by advisor in the Statements of Operations as follows: | ||
PSW | $14,003 | |
PSY | $14,491 | |
BPP | $21,506 | |
BTZ | $95,646 | |
CII | $ 7,172 | |
BGT | $ 2,448 | |
The Manager has entered into a separate sub-advisory agreement with | ||
BlackRock Financial Management, Inc. (“BFM”), an affiliate of the Manager, | ||
with respect to PSW, PSY, BPP, BTZ and BGT. BFM and BlackRock Invest- | ||
ment Management, LLC (“BIM”), an affiliate of the Manager, serve as sub- | ||
advisors for CII. The Manager pays the sub-advisors for services they pro- | ||
vide, a monthly fee that is a percentage of the investment advisory fees | ||
paid by each Fund to the Manager. | ||
For the year ended October 31, 2009, the Funds reimbursed the Manager for | ||
certain accounting services, which are included in accounting services in | ||
the Statements of Operations. The reimbursements were as follows: | ||
Accounting | ||
Services | ||
PSW | $ 1,913 | |
PSY | $ 8,364 | |
BPP | $ 4,214 | |
BTZ | $14,113 | |
CII | $11,054 | |
BGT | $ 6,510 | |
Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a wholly | ||
owned subsidiary of Merrill Lynch, for the period November 1, 2008 to | ||
December 31, 2008 (after which time Merrill Lynch was no longer consid- | ||
ered an affiliate), earned commissions on transactions of securities | ||
as follows: | ||
BTZ | $ 5,223 | |
CII | $ 31,748 | |
Certain officers and/or directors or trustees of the Funds are officers | ||
and/or directors of BlackRock or its affiliates. The Funds reimburse the | ||
Manager for compensation paid to the Funds’ Chief Compliance Officer. | ||
4. Investments: | ||
Purchases and sales of investments, including paydowns, excluding short- | ||
term securities and US government securities, for the year ended October 31, | ||
2009 were as follows: | ||
Purchases | Sales | |
PSW | $ 32,909,061 | $ 103,719,933 |
PSY | $ 73,975,856 | $ 375,248,172 |
BPP | $ 34,574,885 | $ 194,230,481 |
BTZ | $ 186,459,982 | $ 541,219,389 |
CII | $ 747,473,597 | $ 737,185,021 |
BGT | $ 157,239,797 | $ 250,200,520 |
For the year ended October 31, 2009, purchases and sales of US govern- | ||
ment securities were as follows: |
Purchases | Sales | ||||
BTZ | $ 494,173 | $ 482,813 | |||
Transactions in options written for the year ended October 31, 2009 for | |||||
BTZ and CII were as follows: | |||||
BTZ | CII | ||||
Premiums | Premiums | ||||
Call Options Written | Contracts | Received Contracts | Received | ||
Outstanding options written, | |||||
beginning of year | 1,150 | $ 4,556,037 | 1,225 $ 3,449,258 | ||
Options written | 14,750 | 32,565,145 | 696,648 | 122,618,221 | |
Options exercised | — | — | (247,949) | (19,106,119) | |
Options expired | (1,905) | (4,347,543) (182,483) | (21,102,291) | ||
Options closed | (13,595) | (31,945,600) (150,354) | (76,665,610) | ||
Outstanding options written, | |||||
end of year | 400 | $828,039 | 117,087 | $9,193,459 | |
CII | |||||
Premiums | |||||
Put Options Written | Contracts | Received | |||
Outstanding options written, beginning of year | — | — | |||
Options written | 1,350 $ | 80,744 | |||
Options exercised | (1,350) | (80,744) | |||
Outstanding options written, end of year | — | — | |||
5. Commitments: | |||||
BGT invests in floating rate loans. In connection with these investments, | |||||
the Fund may, with its Manager, also enter into unfunded corporate loans | |||||
(“commitments”). Commitments may obligate the Fund to furnish temporary | |||||
financing to a borrower until permanent financing can be arranged. In con- | |||||
nection with these commitments, the Fund earns a commitment fee, typi- | |||||
cally set as a percentage of the commitment amount. Such fee income, | |||||
which is classified in the Statements of Operations as facility and other | |||||
fees, is recognized ratably over the commitment period. As of October 31, | |||||
2009, the Fund had the following unfunded loan commitments: | |||||
Value of | |||||
Underlying | Underlying | ||||
Commitment | Loan | ||||
(000) | (000) | ||||
Delphi Acquisition Holding IBV | $368 | $306 | |||
NVT Networks LLC Exit Term Loan | $ 50 | $ 51 | |||
Smurfit-Stone Container Enterprises, Inc., | |||||
U.S. Term Loan Debtor in Possession | $910 | $900 | |||
6. Concentration, Market and Credit Risk: | |||||
PSY, BPP and BTZ invest a significant portion of their assets in securities | |||||
in the financials sector and BGT invests a significant portion of its assets | |||||
in securities in the media sector. Please see the Schedules of Investments | |||||
for these securities. Changes in economic conditions affecting the finan- | |||||
cials and media sectors would have a greater impact on the respective | |||||
Funds and could affect the value, income and/or liquidity of positions in | |||||
such securities. | |||||
In the normal course of business, the Funds invest in securities and enter | |||||
into transactions where risks exist due to fluctuations in the market (market | |||||
risk) or failure of the issuer of a security to meet all its obligations (credit | |||||
risk). The value of securities held by the Funds may decline in response to |
ANNUAL REPORT OCTOBER 31, 2009 53
Notes to Financial Statements (continued)
certain events, including those directly involving the issuers whose securi-
ties are owned by the Funds; conditions affecting the general economy;
overall market changes; local, regional or global political, social or eco-
nomic instability; and currency and interest rate and price fluctuations.
Similar to credit risk, the Funds may be exposed to counterparty risk, or
the risk that an entity with which the Funds have unsettled or open trans-
actions may default. Financial assets, which potentially expose the Funds
to credit and counterparty risks, consist principally of investments and cash
due from counterparties. The extent of the Funds’ exposure to credit and
counterparty risks with respect to those financial assets is approximated by
their value recorded in the Funds’ Statements of Assets and Liabilities, less
any collateral held by the Funds.
7. Capital Share Transactions:
PSW, PSY and CII are authorized to issue 200 million of $0.10 par value
shares, all of which initially were classified as Common Shares. The Boards
of PSW and PSY are authorized to classify and reclassify any unissued
shares. In this regard, the Boards of PSW and PSY have reclassified 5,460
and 22,000 shares, respectively, of unissued shares as Preferred Shares.
There are an unlimited number of $0.001 par value shares authorized for
BPP, BTZ and BGT.
Common Shares | |||
At October 31, 2009, the shares owned by an affiliate of the Manager of | |||
the Funds were as follows: | |||
Shares | |||
PSW | 7,656 | ||
PSY | 7,927 | ||
BTZ | 4,817 | ||
CII | 23,362 | ||
BGT | 8,239 | ||
Shares issued and outstanding during the years ended October 31, 2009 | |||
and October 31, 2008 for PSW and PSY and the year ended October 31, | |||
2009, the period January 1, 2008 to October 31, 2008 and the year ended | |||
December 31, 2007 for BPP, CII and BGT increased by the following | |||
amounts as a result of dividend reinvestment: | |||
October 31, | October 31, | December 31, | |
2009 | 2008 | 2007 | |
PSW | 20,060 | — | N/A |
PSY | 200,878 | — | N/A |
BPP | 76,154 | 5,794 | 30,981 |
CII | 221,870 | — | — |
BGT | — | — | 42,574 |
Shares issued and outstanding remained constant for BTZ for the years | |||
ended October 31, 2009 and October 31, 2008. |
For the year ended October 31, 2009, shares issued and outstanding for
CII increased 30,542,706 as a result of a reorganization as discussed in
Note 1 “CII Reorganization”.
Preferred Shares
The Preferred Shares are redeemable at the option of each Fund, in whole
or in part, on any dividend payment date at $25,000 per share plus any
accumulated or unpaid dividends whether or not declared. The Preferred
Shares are also subject to mandatory redemption at their liquidation pref-
erence plus any accumulated or unpaid dividends, whether or not declared,
if certain requirements relating to the composition of the assets and liabili-
ties of the Fund, as set forth in the Fund’s Statement of Preferences/Articles
Supplementary (“Governing Instrument”), as applicable, are not satisfied.
From time to time in the future, the Funds that have issued Preferred
Shares may effect repurchases of such shares at prices below their liquida-
tion preferences as agreed upon by the Funds and seller. The Funds also
may redeem such shares from time to time as provided in the applicable
Governing Instrument. The Funds intend to effect such redemptions and/or
repurchases to the extent necessary to maintain applicable asset coverage
requirements or for such other reasons as the Board may determine.
The holders of Preferred Shares have voting rights equal to the holders of
Common Shares (one vote per share) and will vote together with holders
of Common Shares (one vote per share) as a single class. However, holders
of Preferred Shares, voting as a separate class, are also entitled to elect
two Directors/Trustees for each Fund. In addition, the 1940 Act requires
that along with approval by shareholders that might otherwise be required,
the approval of the holders of a majority of any outstanding Preferred
Shares, voting separately as a class would be required to (a) adopt any
plan of reorganization that would adversely affect the Preferred Shares,
(b) change a Fund’s subclassification as a closed-end investment com-
pany or change its fundamental investment restrictions or (c) change its
business so as to cease to be an investment company.
PSW, PSY, BPP, BTZ and BGT had the following series of Preferred Shares | ||||
outstanding, effective yields and reset frequency as of October 31, 2009: | ||||
Reset | ||||
Preferred | Effective | Frequency | ||
Series | Shares | Yield | Days | |
PSW | M7 | 805 | 1.48% | 7 |
T7 | 805 | 1.48% | 7 | |
PSY | M7 | 861 | 1.48% | 7 |
T7 | 861 | 1.48% | 7 | |
W7 | 861 | 1.47% | 7 | |
TH7 | 861 | 1.47% | 7 | |
F7 | 861 | 1.48% | 7 | |
W28 | 1,228 | 1.49% | 28 | |
TH28 | 1,228 | 1.49% | 28 | |
BPP | T7 | 939 | 0.24% | 7 |
W7 | 939 | 0.24% | 7 | |
R7 | 939 | 0.26% | 7 | |
BTZ | T7 | 2,310 | 1.48% | 7 |
W7 | 2,310 | 1.47% | 7 | |
R7 | 2,310 | 1.47% | 7 | |
F7 | 2,310 | 1.48% | 7 | |
BGT | T7 | 784 | 1.48% | 7 |
W7 | 784 | 1.47% | 7 | |
R7 | 784 | 1.47% | 7 |
Dividends on seven-day and 28-day Preferred Shares are cumulative at a
rate that is reset every seven or 28 days, respectively, based on the results
of an auction. If the Preferred Shares fail to clear the auction on an auction
date, the affected Fund is required to pay the maximum applicable rate on
the Preferred Shares to holders of such shares for successive dividend
periods until such time as the shares are successfully auctioned. The maxi-
mum applicable rate on Preferred Shares are as follows: for PSW, PSY and
BGT, the higher of 125% times or 1.25% plus the Telerate/BBA LIBOR rate;
for BPP 150% of the interest equivalent of the 30-day commercial paper
rate and for BTZ, the higher of 150% times or 1.25% plus the Telerate/BBA
54 ANNUAL REPORT OCTOBER 31, 2009
Notes to Financial Statements (continued) | ||||
LIBOR rate. The low, high and average dividend rates for the year ended | ||||
October 31, 2009, were as follows: | ||||
Series | Low | High | Average | |
PSW | M7 | 1.48% | 3.39% | 1.62% |
T7 | 1.48% | 3.34% | 1.63% | |
PSY | M7 | 1.48% | 3.39% | 1.63% |
T7 | 1.48% | 3.34% | 1.63% | |
W7 | 1.47% | 3.27% | 1.63% | |
TH7 | 1.47% | 2.89% | 1.62% | |
F7 | 1.48% | 2.57% | 1.62% | |
W28 | 1.49% | 4.53% | 1.70% | |
TH28 | 1.49% | 5.76% | 1.84% | |
BPP | T7 | 0.23% | 4.21% | 0.64% |
W7 | 0.24% | 4.07% | 0.60% | |
R7 | 0.20% | 4.09% | 0.59% | |
BTZ | T7 | 1.48% | 3.34% | 1.63% |
W7 | 1.47% | 3.27% | 1.66% | |
R7 | 1.47% | 2.89% | 1.65% | |
F7 | 1.48% | 2.57% | 1.64% | |
BGT | T7 | 1.48% | 3.34% | 1.62% |
W7 | 1.47% | 3.27% | 1.66% | |
R7 | 1.47% | 2.89% | 1.64% |
Since February 13, 2008, the Preferred Shares of the Funds failed to clear
any of their auctions. As a result, the Preferred Shares dividend rates were
reset to the maximum applicable rate, which ranged from 0.20% to 5.76%.
A failed auction is not an event of default for the Funds but it has a nega-
tive impact on the liquidity of Preferred Shares. A failed auction occurs
when there are more sellers of a fund’s auction rate preferred shares than
buyers. It is impossible to predict how long this imbalance will last. A suc-
cessful auction for the Funds’ Preferred Shares may not occur for some time,
if ever, and even if liquidity does resume, Preferred Shareholders may not
have the ability to sell the Preferred Shares at their liquidation preference.
The Funds may not declare dividends or make other distributions on
Common Shares or purchase any such shares if, at the time of the
declaration, distribution or purchase, asset coverage with respect to the
outstanding Preferred Shares is less than 200%.
Prior to December 22, 2008, the Funds paid commissions to certain
broker-dealers at the end of each auction at an annual rate of 0.25%,
calculated on the aggregate principal amount. On December 22, 2008,
commissions paid to broker-dealers on Preferred Shares that experience a
failed auction were reduced to 0.15% on the aggregate principal amount.
Subsequently, certain broker-dealers have individually agreed to further
reduce commissions for failed auctions. The Funds will continue to pay
commissions of 0.25% on the aggregate principal amount of all shares
that successfully clear their auctions. MLPF&S earned commissions for the
period November 1, 2008 to December 31, 2008 (after which time Merrill
Lynch was no longer considered an affiliate) as follows:
Commissions | |
PSW | $14,200 |
PSY | $42,997 |
BPP | $13,434 |
BTZ | $41,221 |
BGT | $ 683 |
During the year ended October 31, 2009 the Funds announced the follow- | |
ing redemptions, as of the date indicated, of Preferred Shares at a price of | |
$25,000 per share plus any accrued and unpaid dividends through the | |
redemption dates: |
March 26, 2009 | ||||
Redemption | Shares | Aggregate | ||
Series | Date | Redeemed | Principal | |
PSY | M7 | 4/14/09 | 107 | $2,675,000 |
T7 | 4/15/09 | 107 | $2,675,000 | |
W7 | 4/16/09 | 107 | $2,675,000 | |
TH7 | 4/13/09 | 107 | $2,675,000 | |
F7 | 4/13/09 | 107 | $2,675,000 | |
W28 | 5/07/09 | 153 | $3,825,000 | |
TH28 | 4/24/09 | 153 | $3,825,000 | |
BPP | T7 | 4/15/09 | 267 | $6,675,000 |
W7 | 4/16/09 | 267 | $6,675,000 | |
R7 | 4/17/09 | 267 | $6,675,000 | |
February 24, 2009 | ||||
Redemption | Shares | Aggregate | ||
Series | Date | Redeemed | Principal | |
PSW | M7 | 3/17/09 | 160 | $ 4,000,000 |
T7 | 3/18/09 | 160 | $ 4,000,000 | |
PSY | M7 | 3/17/09 | 203 | $ 5,075,000 |
T7 | 3/18/09 | 203 | $ 5,075,000 | |
W7 | 3/19/09 | 203 | $ 5,075,000 | |
TH7 | 3/13/09 | 203 | $ 5,075,000 | |
F7 | 3/16/09 | 203 | $ 5,075,000 | |
W28 | 4/09/09 | 292 | $ 7,300,000 | |
TH28 | 3/27/09 | 292 | $ 7,300,000 | |
November 25, 2008 | ||||
Redemption | Shares | Aggregate | ||
Series | Date | Redeemed | Principal | |
PSW | M7 | 12/16/08 | 400 | $10,000,000 |
T7 | 12/17/08 | 400 | $10,000,000 | |
PSY | M7 | 12/16/08 | 229 | $ 5,725,000 |
T7 | 12/17/08 | 229 | $ 5,725,000 | |
W7 | 12/18/08 | 229 | $ 5,725,000 | |
TH7 | 12/12/08 | 229 | $ 5,725,000 | |
F7 | 12/15/08 | 229 | $ 5,725,000 | |
W28 | 12/18/08 | 327 | $ 8,175,000 | |
TH28 | 1/02/09 | 327 | $ 8,175,000 | |
BPP | T7 | 12/17/08 | 266 | $ 6,650,000 |
W7 | 12/18/08 | 266 | $ 6,650,000 | |
R7 | 12/19/08 | 266 | $ 6,650,000 | |
During the period ended October 31, 2008, the Funds announced the fol- | ||||
lowing redemptions as of May 19, 2008 of Preferred Shares at a price of | ||||
$25,000 per share plus any accrued and unpaid dividends through the | ||||
redemption date: | ||||
Redemption | Shares | Aggregate | ||
Series | Date | Redeemed | Principal | |
PSW | M7 | 6/10/2008 | 1,365 | $34,125,000 |
T7 | 6/11/2008 | 1,365 | $34,125,000 | |
PSY | M7 | 6/10/2008 | 1,400 | $35,000,000 |
T7 | 6/11/2008 | 1,400 | $35,000,000 | |
W7 | 6/05/2008 | 1,400 | $35,000,000 | |
TH7 | 6/06/2008 | 1,400 | $35,000,000 | |
F7 | 6/09/2008 | 1,400 | $35,000,000 | |
W28 | 6/05/2008 | 2,000 | $50,000,000 | |
TH28 | 6/20/2008 | 2,000 | $50,000,000 | |
BPP | T7 | 6/11/2008 | 1,472 | $36,800,000 |
W7 | 6/12/2008 | 1,472 | $36,800,000 | |
R7 | 6/13/2008 | 1,472 | $36,800,000 | |
BTZ | T7 | 6/11/2008 | 2,310 | $57,750,000 |
W7 | 6/12/2008 | 2,310 | $57,750,000 | |
R7 | 6/13/2008 | 2,310 | $57,750,000 | |
F7 | 6/09/2008 | 2,310 | $57,750,000 | |
BGT | T7 | 6/11/2008 | 2,462 | $61,550,000 |
W7 | 6/12/2008 | 2,462 | $61,550,000 | |
R7 | 6/13/2008 | 2,462 | $61,550,000 |
ANNUAL REPORT OCTOBER 31, 2009 55
Notes to Financial Statements (continued)
All of the Funds, except BGT, financed the Preferred Share redemptions
with cash received from reverse repurchase agreements. BGT financed the
Preferred Share redemptions with cash received from a loan.
Preferred Shares issued and outstanding for the year ended December 31,
2007 for BGT and BPP remained constant.
8. Borrowings:
On May 16, 2008, BGT renewed its revolving credit and security Agreement
(“Citicorp Agreement”) pursuant to a commercial paper asset securitization
program with Citicorp North America, Inc. (“Citicorp”), as Agent, certain sec
ondary backstop lenders and certain asset securitization conduits, as
lenders (the “Lenders”). The agreement was renewed for one year and at
the time of renewal had a maximum limit of $190 million.
Under the Citicorp Agreement, the conduits funded advances to the Fund
through the issuance of highly rated commercial paper. The Fund had
granted a security interest in substantially all of its assets to, and in favor
of, the Lenders as security for its obligations to the Lenders. The interest
rate on the Fund’s borrowings was based on the interest rate carried by
commercial paper plus a program fee. Effective December 5, 2008, the
Fund renegotiated certain terms of the Citicorp Agreement and reduced
the commitment amount to $134 million.
On March 5, 2009, BGT terminated its revolving credit agreement with
Citicorp and entered into a senior committed secured, 364-day revolving
line of credit and a separate security agreement with State Street Bank
and Trust Company (“SSB”). The SSB line of credit provides the Fund with
a maximum commitment of $134 million. The Fund has granted a security
interest in substantially all of its assets to SSB.
Advances are made by SSB to BGT at BGT’s option at either (a) the higher
of 1.00% above the Fed Effective Rate or 1.00% above the Overnight LIBOR
Rate and (b) 1.00% above 7-day, 30-day, or 60-day LIBOR Rate. In addi-
tion, BGT pays a facility fee and a commitment fee based upon SSB’s total
commitment to BGT. The fees associated with each of the agreements are
included in the Statements of Operations as borrowing costs. Advances to
BGT as of October 31, 2009 are shown in the Statements of Assets and
Liabilities as loan payable. For the year ended October 31, 2009, the daily
weighted average interest rate was 2.15%.
Under the Investment Company Act of 1940, BGT may not declare divi-
dends or make other distributions on Common Shares if, at the time of the
declaration, distribution or purchase, asset coverage with respect to the
outstanding indebtedness is less than 300%.
For the year ended October 31, 2009, the daily weighted average interest
rates for Funds with reverse repurchase agreements were as follows:
PSW | 1.93% |
PSY | 1.45% |
BPP | 2.38% |
BTZ | 2.33% |
9. Income Tax Information:
Reclassifications: Accounting principles generally accepted in the United States of America require that certain components of net assets be adjusted to
reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. The
following permanent differences as of October 31, 2009 attributable to accounting for swap agreements, the classification of investments, foreign currency
transactions and non-deductible expenses were reclassified to the following accounts:
PSW | PSY | BPP | BTZ | CII | BGT | ||
Paid-in capital | — | $ (3,858) | — | — | $ (7,879) | — | |
Undistributed (distributions in excess of) net investment income | $ (254,371) | $ (1,436,139) | $ (3,866,202) | $ (1,415,793) | $ 7,879 | $ (3,185,823) | |
Accumulated net realized loss | $ 254,371 | $ 1,439,997 | $ 3,866,202 | $ 1,415,793 | — | $ 3,185,823 | |
The tax character of distributions paid during the periods ended October 31, 2009 and 2008 for all Funds and December 31, 2007 for BPP, CII and BGT | |||||||
were as follows: | |||||||
PSW | PSY | BPP | BTZ | CII | BGT | ||
Ordinary income | |||||||
10/31/2009 | $ 9,272,893 | $ 48,928,499 | $ 18,039,320 | $ 52,227,765 | $ 52,962,484 | $ 28,934,349 | |
10/31/2008 | $ 17,443,001 | $ 66,768,898 | $ 20,860,160 | $ 63,957,649 | $ 7,846,070 | $ 29,676,182 | |
12/31/2007 | — | — | $ 40,678,314 | — | $ 5,911,539 | $ 39,557,202 | |
Long-term capital gains | |||||||
10/31/2009 | — | — | — | — | $ 10,276,199 | — | |
10/31/2008 | — | — | — | — | $ 2,596,353 | — | |
12/31/2007 | — | — | $ 400,000 | — | $ 23,835,961 | — | |
Tax return of capital | |||||||
10/31/2009 | $ 1,345,345 | $ 116,310 | $ 4,250,036 | $ 24,678,883 | $ 19,660,314 | $ 9,994,857 | |
10/31/2008 | $ 545,246 | $ 9,002,427 | $ 5,480,035 | $ 43,518,226 | $ 7,292,188 | — | |
12/31/2007 | — | — | $ 2,820,986 | — | — | $ 8,473,282 | |
Total distributions | |||||||
10/31/2009 | $ 10,618,238 | $ 49,044,809 | $ 22,289,356 | $ 76,906,648 | $ 82,898,997 | $ 38,929,206 | |
10/31/2008 | $ 17,988,247 | $ 75,771,325 | $ 26,340,195 | $ 107,475,875 | $ 17,734,611 | $ 29,676,182 | |
12/31/2007 | — | — | $ 43,899,300 | — | $ 29,747,500 | $ 48,030,484 | |
56 | ANNUAL REPORT | OCTOBER 31, 2009 |
Notes to Financial Statements (concluded) | |||||||
As of October 31, 2009, the tax components of accumulated net losses were as follows: | |||||||
PSW | PSY | BPP | BTZ | CII | BGT | ||
Capital loss carryforwards | $(127,842,748) | $(447,757,170) | $(185,378,942) | $(387,036,152) | $(106,212,859) | $ (73,270,778) | |
Net unrealized losses* | (13,773,056) | (85,650,823) | (34,137,626) | (95,975,896) | (83,448,589) | (41,417,420) | |
Total | $(141,615,804) | $(533,407,993) | $(219,516,568) | $(483,012,048) | $(189,661,448) | $(114,688,198) | |
* The differences between book-basis and tax-basis net unrealized losses were attributable primarily to the tax deferral of losses on wash sales, the amortization methods for premi- | |||||||
ums and discounts on fixed income securities, the accrual of income on securities in default, the realization for tax purposes of unrealized gains/(losses) on certain futures and | |||||||
foreign currency contracts, the timing and recognition of partnership income, the accounting for swap agreements, the deferral of compensation to trustees and directors, the classi- | |||||||
fication of investments and other temporary differences. | |||||||
As of October 31, 2009, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates: | |||||||
Expires October 31, | PSW | PSY | BPP | BTZ | CII | BGT | |
2011 | $ 1,276,621 | — | — | — | — | — | |
2012 | 10,243,141 | $ 62,733,648 | — | — | — | — | |
2013 | 5,058,900 | 17,911,331 | — | — | — | — | |
2014 | 8,481,628 | 12,145,117 | — | — | — | — | |
2015 | 6,724,694 | 19,582,978 | $ 18,184,893 | $ 49,741,712 | — | $ 3,268,804 | |
2016 | 40,232,230 | 140,413,242 | 58,197,929 | 113,355,213 | $ 26,706,998 | 24,616,531 | |
2017 | 55,825,534 | 194,970,854 | 108,996,120 | 223,939,227 | 79,505,861 | 45,385,443 | |
Total | $ 127,842,748 | $ 447,757,170 | $ 185,378,942 | $ 387,036,152 | $ 106,212,859 | $ 73,270,778 | |
10. Subsequent Events: | |||||||
Management’s evaluation of the impact of all subsequent events on the | |||||||
Funds’ financial statements was completed through December 28, 2009, | |||||||
the date the financial statements were issued. | |||||||
The Funds paid net investment income dividends on November 30, 2009 | |||||||
to shareholders of record on November 13, 2009 as follows: | |||||||
Common | |||||||
Dividend | |||||||
Per Share | |||||||
PSW | $0.0600 | ||||||
PSY | $0.0750 | ||||||
BPP | $0.0725 | ||||||
BTZ | $0.1000 | ||||||
BGT | $0.0675 | ||||||
The dividends declared on Preferred Shares for the period November 1, | |||||||
2009 through November 30, 2009 were as follows: | |||||||
Dividends | |||||||
Series | Declared | ||||||
PSW | M7 | $23,880 | |||||
T7 | $23,790 | ||||||
PSY | M7 | $25,541 | |||||
T7 | $25,445 | ||||||
W7 | $25,452 | ||||||
TH7 | $25,446 | ||||||
F7 | $25,573 | ||||||
W28 | $36,859 | ||||||
TH28 | $36,888 | ||||||
BPP | T7 | $ 4,435 | |||||
W7 | $ 4,317 | ||||||
R7 | $ 4,431 | ||||||
BTZ | T7 | $68,268 | |||||
W7 | $68,285 | ||||||
R7 | $68,497 | ||||||
F7 | $68,228 | ||||||
BGT | T7 | $23,175 | |||||
W7 | $23,172 | ||||||
R7 | $23,175 | ||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 57 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees/Directors of:
BlackRock Credit Allocation Income Trust I, Inc.
BlackRock Credit Allocation Income Trust II, Inc.
BlackRock Credit Allocation Income Trust III
BlackRock Credit Allocation Income Trust IV
Blackrock Enhanced Capital and Income Fund, Inc., and
BlackRock Floating Rate Income Trust
(Collectively the “Trusts”):
We have audited the accompanying statements of assets and liabilities
of BlackRock Credit Allocation Income Trust I, Inc. (formerly BlackRock
Preferred and Corporate Income Strategies Fund, Inc.) and BlackRock
Credit Allocation Income Trust II, Inc. (formerly BlackRock Preferred Income
Strategies Fund, Inc.), including the schedules of investments, as of
October 31, 2009, and the related statements of operations for the year
then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of
the four years in the period then ended. We have also audited the accom-
panying statement of assets and liabilities of BlackRock Credit Allocation
Income Trust III (formerly BlackRock Preferred Opportunity Trust), including
the schedule of investments, as of October 31, 2009, and the related
statement of operations for the year then ended, the statements of
changes in net assets for the year then ended, for the period January 1,
2008 to October 31, 2008, and for the year ended December 31, 2007,
and the financial highlights for the year ended October 31, 2009, for the
period January 1, 2008 to October 31, 2008, and for each of the four
years in the period ended December 31, 2007. We have also audited the
accompanying statement of assets and liabilities of BlackRock Credit
Allocation Income Trust IV (formerly BlackRock Preferred and Equity
Advantage Trust), including the schedule of investments, as of October 31,
2009, and the related statements of operations for the year then ended,
the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the two years
in the period ended October 31, 2009, and for the period December 27,
2006 (commencement of operations) to October 31, 2007. We have also
audited the accompanying statement of assets and liabilities of BlackRock
Enhanced Capital and Income Fund, Inc., including the schedule of invest-
ments, as of October 31, 2009, and the related statement of operations
for the year then ended, the statements of changes in net assets for the
year then ended, for the period January 1, 2008 to October 31, 2008, and
for the year ended December 31, 2007, and the financial highlights for the
year ended October 31, 2009, for the period January 1, 2008 to October
31, 2008, for each of the three years in the period ended December 31,
2007, and for the period April 30, 2004 (commencement of operations) to
December 31, 2004. We have also audited the accompanying statements
of assets and liabilities of BlackRock Floating Rate Income Trust (formerly
BlackRock Global Floating Rate Income Trust), including the schedule of
investments, as of October 31, 2009, and the related statement of opera-
tions and cash flows for the year then ended, the statements of changes
in net assets for the year then ended, for the period January 1, 2008 to
October 31, 2008, and for the year ended December 31, 2007, and the
financial highlights for the year ended October 31, 2009, for the period
January 1, 2008 to October 31, 2008, for each of the three years in the
period ended December 31, 2007, and for the period August 30, 2004
(commencement of operations) to December 31, 2004. These financial
statements and financial highlights are the responsibility of the Trusts’ man-
agement. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial high-
lights of BlackRock Credit Allocation Income Trust I, Inc. and BlackRock
Credit Allocation Income Trust II, Inc., for the year ended October 31, 2005
were audited by other auditors whose report, dated December 9, 2005,
expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial highlights are free of
material misstatement. The Trusts are not required to have, nor were we
engaged to perform an audit of their internal control over financial report-
ing. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Trusts’ internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and signifi-
cant estimates made by management, as well as evaluating the overall
financial statement presentation. Our procedures include confirmation of
the securities owned as of October 31, 2009, by correspondence with the
custodian and financial intermediaries; where replies were not received
from financial intermediaries, we performed other auditing procedures. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
BlackRock Credit Allocation Income Trust I, Inc. and BlackRock Credit
Allocation Income Trust II, Inc., the results of their operations for the year
then ended, the changes in their net assets for each of the two years in
the period then ended, and the financial highlights for each of the four
years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America. Additionally, in our
opinion, the financial statements and financial highlights referred to above
present fairly, in all material respects, the financial position of BlackRock
Credit Allocation Income Trust III, the results of its operations for the year
then ended, the changes in its net assets for the year then ended,
for the period January 1, 2008 to October 31, 2008, and for the year
ended December 31, 2007, and the financial highlights for the year ended
October 31, 2009, for the period January 1, 2008 to October 31, 2008,
and for each of the four years in the period ended December 31, 2007,
in conformity with accounting principles generally accepted in the United
States of America. Additionally, in our opinion, the financial statements and
financial highlights referred to above present fairly, in all material respects,
the financial position of BlackRock Credit Allocation Income Trust IV, the
results of its operations 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 high-
lights for each of the two years in the period then ended, and for the period
58 ANNUAL REPORT OCTOBER 31, 2009
Report of Independent Registered Public Accounting Firm (concluded)
December 27, 2006 (commencement of operations) to October 31, 2007,
in conformity with accounting principles generally accepted in the United
States of America. Additionally, in our opinion, the financial statements and
financial highlights referred to above present fairly, in all material respects,
the financial position of BlackRock Enhanced Capital and Income Fund,
Inc., the results of its operations for the year then ended, the changes in
its net assets for the year then ended, for the period January 1, 2008 to
October 31, 2008, and for the year ended December 31, 2007, and the
financial highlights for the year ended October 31, 2009, for the period
January 1, 2008 to October 31, 2008, for each of the three years in the
period ended December 31, 2007, and for the period April 30, 2004
(commencement of operations) to December 31, 2004, in conformity with
accounting principles generally accepted in the United States of America.
Additionally, in our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial position
of BlackRock Floating Rate Income Trust, the results of its operations and
its cash flows for the year then ended, the changes in its net assets for the
year then ended, for the period January 1, 2008 to October 31, 2008, and
for the year ended December 31, 2007, and the financial highlights for the
year ended October 31, 2009, for the period January 1, 2008 to October
31, 2008, for each of the three years in the period ended December 31,
2007, and for the period August 30, 2004 (commencement of operations)
to December 31, 2004, in conformity with accounting principles generally
accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
December 28, 2009
Important Tax Information (Unaudited) | |||||||
The following information is provided with respect to the ordinary income distributions paid by the Funds for the taxable year ended | |||||||
October 31, 2009: | |||||||
PSW | PSY | BPP | BTZ | CII | BGT | ||
Qualified Dividend Income for Individuals* | |||||||
Months Paid: | |||||||
November – December 2008† | 28.71% | 32.86% | 43.81% | 38.14% | 27.56% | — | |
January – October 2009 | 28.16% | 23.53% | 55.05% | 63.22% | 33.97% | — | |
Dividends Received Deductions for Corporations* | |||||||
Months Paid: | |||||||
November – December 2008† | 14.15% | 17.08% | 13.42% | 2.49% | 26.00% | — | |
January – October 2009 | 9.43% | 11.78% | 17.49% | 37.17% | 31.13% | — | |
Interest-Related Dividends and Qualified Short-Term Capital Gains | |||||||
for Non-U.S. Residents** | |||||||
Months Paid: | |||||||
November – December 2008† | 51.30% | 55.03% | 41.66% | 29.12% | — | 46.19% | |
January – October 2009 | 61.37% | 63.14% | 53.10% | 54.52% | 100% | 100% | |
* The Funds hereby designate the percentage indicated above or the maximum amount allowable by law. | |||||||
** Represents the portion of taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations. | |||||||
† Includes dividend paid on January 9, 2009 to PSW, PSY, BPP, BTZ, and BGT Common Shareholders. | |||||||
Additionally, of the CII distributions paid between March and September 2009, 16.53% represented long-term capital gains. | |||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 59 |
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements
The Board of Directors or the Board of Trustees, as the case may be, (each,
a “Board” and, collectively, the “Boards,” and the members of which are
referred to as “Board Members”) of each of BlackRock Credit Allocation
Income Trust I, Inc. (formerly BlackRock Preferred and Corporate Income
Strategies Fund, Inc.) (“PSW”), BlackRock Credit Allocation Income Trust
II, Inc. (formerly BlackRock Preferred Income Strategies Fund, Inc.) (“PSY”),
BlackRock Credit Allocation Income Trust III (formerly BlackRock Preferred
Opportunity Trust) (“BPP”), BlackRock Credit Allocation Income Trust IV (for-
merly BlackRock Preferred and Equity Advantage Trust) (“BTZ”), BlackRock
Enhanced Capital and Income Fund, Inc. (“CII”) and BlackRock Floating
Rate Income Trust (“BGT,” and together with PSW, PSY, BPP, BTZ, and CII,
each a “Fund” and, collectively, the “Funds”) met on April 14, 2009,
May 28 – 29, 2009 and August 25 – 26, 2009 to consider the approval
of its respective Fund’s investment advisory agreement (each, an “Advisory
Agreement”) with BlackRock Advisors, LLC (the “Manager”), each Fund’s
investment advisor. The Board of each of PSW, PSY, BPP, BTZ, CII and BGT
also considered the approval of a sub-advisory agreement (each, a “Sub-
Advisory Agreement”) among its respective Fund, the Manager and one
or both of the following sub-advisors, as the case may be: BlackRock
Financial Management, Inc.; and BlackRock Investment Management, LLC
(each, a “Sub-Advisor”). The Manager and the Sub-Advisors are referred
to herein as “BlackRock.” The Advisory Agreements and the Sub-Advisory
Agreements are referred to herein as the “Agreements.” Unless otherwise
indicated, references to actions taken by the “Board” or the “Boards” shall
mean each Board acting independently with respect to its Fund.
Activities and Composition of the Boards
Each Board consists of twelve individuals, ten of whom are not “interested
persons” of the Funds as defined in the Investment Company Act of 1940,
as amended (the “1940 Act”) (the “Independent Board Members”). The
Board Members of each Fund are responsible for the oversight of the oper-
ations of such Fund and perform the various duties imposed on the direc-
tors of investment companies by the 1940 Act. The Independent Board
Members have retained independent legal counsel to assist them in con-
nection with their duties. The Chairman of each Board is an Independent
Board Member. Each 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 composed of Independent Board Members
(except for the Executive Committee, which has one interested Board
Member) and is chaired by an Independent Board Member. In addition,
the Boards of certain of the Funds have established an Ad Hoc Committee
on Auction Market Preferred Shares.
The Agreements
Pursuant to the 1940 Act, each Board is required to consider the continuation
of the Agreements on an annual basis. In connection with this process, each
Board assessed, among other things, the nature, scope and quality of the
services provided to its respective Fund by the personnel of BlackRock and its
affiliates, including investment management, administrative and shareholder
services, oversight of fund accounting and custody, marketing services and
assistance in meeting applicable legal and regulatory requirements.
Throughout the year, the Boards, acting directly and through their commit-
tees, consider at each of their meetings factors that are relevant to their
annual consideration of the renewal of the Agreements, including the
services and support provided by BlackRock to the Funds and their share-
holders. Among the matters the Boards considered were: (a) investment
performance for one-, three- and five-year periods, as applicable, against
peer funds, and applicable benchmarks, if any, as well as senior manage-
ment and portfolio managers’ analysis of the reasons for any out perform-
ance or underperformance against its peers; (b) fees, including advisory
and other amounts paid to BlackRock and its affiliates by the Funds for
services such as call center and fund accounting; (c) the Funds’ operating
expenses; (d) the resources devoted to, and compliance reports relating to,
the Funds’ investment objectives, policies and restrictions; (e) the Funds’
compliance with their Code of Ethics and compliance policies and proce-
dures; (f) the nature, cost and character of non-investment management
services provided by BlackRock and its affiliates; (g) BlackRock’s and other
service providers’ internal controls; (h) BlackRock’s implementation of the
proxy voting policies approved by the Board; (i) execution quality of port-
folio transactions and, as applicable, the use of brokerage commissions;
(j) BlackRock’s implementation of the Funds’ valuation and liquidity proce-
dures; and (k) periodic updates on BlackRock’s business.
Board Considerations in Approving the Agreements
The Approval Process: Prior to the April 14, 2009 meeting, each Board
requested and received materials specifically relating to the Agreements.
Each Board is engaged in an ongoing process with BlackRock to continu-
ously review the nature and scope of the information provided to better
assist their deliberations. The materials provided in connection with the
April meeting included (a) information independently compiled and pre-
pared by Lipper, Inc. (“Lipper”) on Fund fees and expenses, and the invest-
ment performance of each Fund as compared with a peer group of funds
as determined by Lipper and, where applicable, a customized peer group
selected by BlackRock (collectively, “Peers”); (b) information on the profit-
ability of the Agreements to BlackRock and a discussion of fall-out benefits
to BlackRock and its affiliates and significant shareholders; (c) a general
analysis provided by BlackRock concerning investment advisory fees charged
to other clients, such as institutional clients and open-end funds, under
similar investment mandates, as well as the performance of such other
clients; (d) the impact of economies of scale; (e) a summary of aggregate
amounts paid by each Fund to BlackRock; and (f) an internal comparison
of management fees classified by Lipper, if applicable.
At an in-person meeting held on April 14, 2009, each Board reviewed
materials relating to its consideration of the Agreements. As a result of the
discussions that occurred during the April 14, 2009 meeting, the Boards
presented BlackRock with questions and requests for additional informa-
tion and BlackRock responded to these requests with additional written
information in advance of the May 28 – 29, 2009 Board meeting.
At an in-person meeting held on May 28 – 29, 2009, the Boards of each
of BGT, BPP, BTZ and CII, including the Independent Board Members, unani-
mously approved the continuation of the Advisory Agreement between the
60 ANNUAL REPORT OCTOBER 31, 2009
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)
Manager and such Fund and the Sub-Advisory Agreement among such
Fund, the Manager and the Sub-Advisor(s), as applicable, each for a one-
year term ending June 30, 2010. The Boards considered all factors they
believed relevant with respect to the Funds, including, among other factors:
(a) the nature, extent and quality of the services provided by BlackRock;
(b) the investment performance of the Fund and BlackRock portfolio man-
agement; (c) the advisory fee and the cost of the services and profits to
be realized by BlackRock and certain affiliates from their relationship with
the Fund; (d) economies of scale; and (e) other factors.
Each Board also considered other matters it deemed important to the
approval process, such as services related to the valuation and pricing
of its respective Fund’s portfolio holdings, direct and indirect benefits to
BlackRock and its affiliates and significant shareholders from their relation
ship with such Fund and advice from independent legal counsel with
respect to the review process and materials submitted for the Board’s
review. The Boards noted the willingness of BlackRock personnel to engage
in open, candid discussions with the Boards. The Boards did not identify
any particular information as controlling, and each Board Member may
have attributed different weights to the various items considered.
At the in-person meeting held on May 28 – 29, 2009, the Boards of each
of PSY and PSW held extended discussions of the long- and short-term
performance of PSY and PSW and the future prospects for the investment
policies of such Funds with respect to investing in primarily preferred
stocks. At such meeting, the Boards of each of PSY and PSW approved
the continuation of the Advisory Agreement between the Manager and
each such Fund and the Sub-Advisory Agreement among such Fund, the
Manager and the Sub-Advisor(s) on an interim basis for a three-month
period ended September 30, 2009. In taking such action, the Boards of
each of PSY and PSW noted that the interim approval of the Agreements
was intended to allow and encourage BlackRock to explore various alter-
natives for the future management of PSY and PSW, and to report back to
the Boards with recommendations at the Boards’ next regularly scheduled
in-person meetings.
At an in-person meeting of the Boards of each of PSY and PSW on
August 25 – 26, 2009, BlackRock recommended changing certain
investment policies of PSY and PSW by removing their non-fundamental
investment policies requiring that they invest at least 80% of their respec-
tive assets in preferred securities and adopting a new non-fundamental
policy requiring that PSY and PSW invest at least 80% of their respective
total assets in credit-related securities, including, but not limited to,
investment grade corporate bonds, high yield bonds, bank loans, preferred
securities or convertible bonds or derivatives with economic characteristics
similar to these credit-related securities. As a result of these investment
policy amendments, PSY and PSW were proposed to be renamed
BlackRock Credit Allocation Income Trust I, Inc. and BlackRock Credit
Allocation Income Trust II, Inc., respectively, to reflect their new
portfolio characteristics.
After considering BlackRock’s proposed changes for PSY and PSW and
recalling their deliberations with respect to PSY and PSW at the April
and May Board meetings, the Board of each such Fund, including the
Independent Board Members, unanimously approved the continuation of
the Advisory Agreement between the Manager and such Fund and the Sub-
Advisory Agreement among such Fund, the Manager and the Sub-Advisor(s),
each for a nine-month term ending June 30, 2010.
A. Nature, Extent and Quality of the Services: Each Board, including its
Independent Board Members, reviewed the nature, extent and quality of
services provided by BlackRock, including the investment advisory services
and the resulting performance of its respective Fund. Throughout the year,
each Board compared its respective Fund’s performance to the perform-
ance of a comparable group of closed-end funds, and the performance of
a relevant benchmark, if any. The Boards met with BlackRock’s senior man-
agement personnel responsible for investment operations, including the
senior investment officers. Each Board also reviewed the materials provided
by its respective Fund’s portfolio management team discussing such Fund’s
performance and such Fund’s investment objective, strategies and outlook.
Each Board considered, among other factors, the number, education and
experience of BlackRock’s investment personnel generally and its respective
Fund’s portfolio management team, investments by portfolio managers in the
funds they manage, BlackRock’s portfolio trading capabilities, BlackRock’s
use of technology, BlackRock’s commitment to compliance and BlackRock’s
approach to training and retaining portfolio managers and other research,
advisory and management personnel. Each Board also reviewed a general
description of BlackRock’s compensation structure with respect to its
respective Fund’s portfolio management team and BlackRock’s ability
to attract and retain high-quality talent.
In addition to advisory services, each Board considered the quality of the
administrative and non-investment advisory services provided to its respec-
tive Fund. BlackRock and its affiliates and significant shareholders provide
the Funds with certain administrative and other services (in addition to any
such services provided to the Funds by third parties) and officers and other
personnel as are necessary for the operations of the Funds. In addition to
investment advisory services, BlackRock and its affiliates provide the Funds
with other services, including (i) preparing disclosure documents, such as
the prospectus and the statement of additional information in connection
with the initial public offering and periodic shareholder reports; (ii) prepar-
ing communications with analysts to support secondary market trading of
the Funds; (iii) assisting with daily accounting and pricing; (iv) preparing
periodic filings with regulators and stock exchanges; (v) overseeing and
coordinating the activities of other service providers; (vi) organizing Board
meetings and preparing the materials for such Board meetings; (vii) pro-
viding legal and compliance support; and (viii) performing other adminis-
trative functions necessary for the operation of the Funds, such as tax
reporting, fulfilling regulatory filing requirements, and call center services.
The Boards reviewed the structure and duties of BlackRock’s fund adminis-
tration, accounting, legal and compliance departments and considered
BlackRock’s policies and procedures for assuring compliance with applica-
ble laws and regulations.
B. The Investment Performance of the Funds and BlackRock: Each Board,
including its Independent Board Members, also reviewed and considered
the performance history of its respective Fund. In preparation for the April 14,
ANNUAL REPORT OCTOBER 31, 2009 61
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)
2009 meeting, the Boards were provided with reports, independently pre-
pared by Lipper, which included a comprehensive analysis of each Fund’s
performance. The Boards also reviewed a narrative and statistical analysis
of the Lipper data that was prepared by BlackRock, which analyzed various
factors that affect Lipper’s rankings. In connection with its review, each
Board received and reviewed information regarding the investment per-
formance of its respective Fund as compared to a representative group
of similar funds as determined by Lipper and to all funds in such Fund’s
applicable Lipper category and, where applicable, a customized peer group
selected by BlackRock. Each Board was provided with a description of the
methodology used by Lipper to select peer funds. Each Board regularly
reviews the performance of its respective Fund throughout the year.
The Board of BTZ noted that, in general, BTZ performed better than its Peers
in that the performance of BTZ was at or above the median of its customized
Lipper peer group in both the one-year and since inception periods reported.
The Board of CII noted that, in general, CII performed better than its Peers
in that the performance of CII was at or above the median of its Lipper
Performance Universe in two of the one-year, three-year and since incep-
tion periods reported.
The Board of BGT noted that, in general, BGT performed better than its
Peers in that the performance of BGT was at or above the median of its
Lipper Performance Universe in each of the one-year, three-year and since
inception periods reported.
The Board of each of PSW, PSY, and BPP noted that PSW, PSY, and BPP
performed below the median of their respective customized Lipper peer
group in the one-, three- and five-year periods reported. The Board of
each of PSW, PSY, and BPP, and BlackRock reviewed the reasons for PSW’s,
PSY’s, and BPP’s underperformance during these periods compared with
their respective Peers. Each Board was informed that, among other things,
PSW’s, PSY’s, and BPP’s respective underweight position to retail preferreds
negatively impacted each such Fund.
For PSW, PSY and BPP, the Board of each respective Fund and BlackRock
discussed BlackRock’s commitment to providing the resources necessary
to assist the portfolio managers and to improve each such Fund’s per-
formance, including the changes to PSW’s and PSY’s non-fundamental
investment policies.
C. Consideration of the Advisory Fees and the Cost of the Services
and Profits to be Realized by BlackRock and its Affiliates from their
Relationship with the Funds: Each Board, including its Independent
Board Members, reviewed its respective Fund’s contractual advisory fee
rates compared with the other funds in its respective Lipper category.
Each Board also compared its respective Fund’s total expenses, as well
as actual management fees, to those of other comparable funds. Each
Board considered the services provided and the fees charged by
BlackRock to other types of clients with similar investment mandates,
including separately managed institutional accounts.
The Boards received and reviewed statements relating to BlackRock’s
financial condition and profitability with respect to the services it provided
the Funds. The Boards were also provided with a profitability analysis that
detailed the revenues earned and the expenses incurred by BlackRock for
services provided to the Funds. The Boards reviewed BlackRock’s profitabil-
ity with respect to the Funds and other funds the Boards currently oversee
for the year ended December 31, 2008 compared to available aggregate
profitability data provided for the year ended December 31, 2007. The
Boards reviewed BlackRock’s profitability with respect to other fund com-
plexes managed by the Manager and/or its affiliates. The Boards reviewed
BlackRock’s assumptions and methodology of allocating expenses in the
profitability analysis, noting the inherent limitations in allocating costs among
various advisory products. The Boards recognized that profitability may be
affected by numerous factors including, among other things, fee waivers by
the Manager, the types of funds managed, expense allocations and busi-
ness mix, and therefore comparability of profitability is somewhat limited.
The Boards noted that, in general, individual fund or product line profitability
of other advisors is not publicly available. Nevertheless, to the extent such
information is available, the Boards considered BlackRock’s overall operat-
ing margin, in general, compared to the operating margin for leading invest-
ment management firms whose operations include advising closed-end
funds, among other product types. The comparison indicated that operating
margins for BlackRock with respect to its registered funds are generally
consistent with margins earned by similarly situated publicly traded com-
petitors. In addition, the Boards considered, among other things, certain
third-party data comparing BlackRock’s operating margin with that of other
publicly-traded asset management firms, which concluded that larger asset
bases do not, in themselves, translate to higher profit margins.
In addition, the Boards considered the cost of the services provided to the
Funds by BlackRock, and BlackRock’s and its affiliates’ profits relating to the
management and distribution of the Funds and the other funds advised by
BlackRock and its affiliates. As part of their analysis, the Boards reviewed
BlackRock’s methodology in allocating its costs to the management of the
Funds. The Boards also considered whether BlackRock has the financial
resources necessary to attract and retain high quality investment manage-
ment personnel to perform its obligations under the Agreements and to con-
tinue to provide the high quality of services that is expected by the Boards.
The Boards of each of BGT, BPP, BTZ, CII, PSY and PSW noted that its
respective Fund paid contractual management fees, which do not take into
account any expense reimbursement or fee waivers, lower than or equal to
the median contractual management fees paid by such Fund’s Peers.
D. Economies of Scale: Each Board, including its Independent Board
Members, considered the extent to which economies of scale might be
realized as the assets of its respective Fund increase and whether there
should be changes in the advisory fee rate or structure in order to enable
such Fund to participate in these economies of scale, for example through
the use of breakpoints in the advisory fee based upon the assets of such
Fund. The Boards considered that the funds in the BlackRock fund complex
share some common resources and, as a result, an increase in the overall
size of the complex could permit each fund to incur lower expenses than
it would otherwise as a stand-alone entity. The Boards also considered
BlackRock’s overall operations and its efforts to expand the scale of, and
improve the quality of, its operations.
62 ANNUAL REPORT OCTOBER 31, 2009
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (concluded)
The Boards noted that most closed-end fund complexes do not have fund
level breakpoints because closed-end funds generally do not experience
substantial growth after the initial public offering and each fund is man-
aged independently, consistent with its own investment objectives. The
Boards noted that only one closed-end fund in the Fund Complex has
breakpoints in its fee structure. Information provided by Lipper also
revealed that only one closed-end fund complex used a complex-level
breakpoint structure.
E. Other Factors: The Boards also took into account other ancillary or “fall-
out” benefits that BlackRock or its affiliates and significant shareholders
may derive from their relationship with the Funds, both tangible and intan-
gible, such as BlackRock’s ability to leverage its investment professionals
who manage other portfolios, an increase in BlackRock’s profile in the
investment advisory community, and the engagement of BlackRock’s affili-
ates and significant shareholders as service providers to the Funds, includ-
ing for administrative and distribution services. The Boards also noted that
BlackRock may use third-party research obtained by soft dollars generated
by certain mutual fund transactions to assist itself in managing all or a
number of its other client accounts.
In connection with their consideration of the Agreements, the Boards also
received information regarding BlackRock’s brokerage and soft dollar prac-
tices. The Boards received reports from BlackRock, which included informa-
tion on brokerage commissions and trade execution practices throughout
the year.
Conclusion
Each Board, including its Independent Board Members, unanimously
approved the continuation of the Advisory Agreement between its respec-
tive Fund and the Manager for a one-year term ending June 30, 2010, in
the case of BGT, BPP, BTZ and CII, and for a three-month interim period
followed by a nine-month term ending June 30, 2010 for each of PSW
and PSY, and, where applicable, the Sub-Advisory Agreement among such
Fund, the Manager and such Fund’s Sub-Advisor(s) for a one-year term
ending June 30, 2010, in the case of BGT, BPP, BTZ and CII, and for a
three-month interim period followed by a nine-month term ending June 30,
2010 for each of PSW and PSY. Based upon its evaluation of all these fac-
tors in their totality, each Board, including its Independent Board Members,
was satisfied that the terms of the Agreements were fair and reasonable
and in the best interest of its respective Fund and its shareholders. In
arriving at a decision to approve the Agreements, each 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 inde-
pendent legal counsel in making this determination. The contractual fee
arrangements for each Fund reflects the results of several years of review
by such Fund’s Board Members and predecessor Board Members, and
discussions between such Board Members (and predecessor Board
Members) and BlackRock. Certain aspects of the arrangements may be
the subject of more attention in some years than in others, and the Board
Members’ conclusions may be based in part on their consideration of these
arrangements in prior years.
ANNUAL REPORT OCTOBER 31, 2009 63
Automatic Dividend Reinvestment Plans
For PSW, PSY and CII
PSW, PSY and CII offer a Dividend Reinvestment Plan (the “Plan”) under
which income and capital gains dividends paid by a Fund are automati-
cally reinvested in additional Common Shares of the Fund. The Plan is
administered on behalf of the shareholders by BNY Mellon Shareowner
Services for CII and Computershare Trust Company, N.A. for PSW and PSY
(individually, the “Plan Agent” or together, the “Plan Agents”). Under the Plan,
whenever a Fund declares a dividend, participants in the Plan will receive
the equivalent in Common Shares of the Fund. The Plan Agents will acquire
the shares for the participant’s account either (i) through receipt of addi-
tional unissued but authorized shares of the Funds (“newly issued shares”)
or (ii) by purchase of outstanding Common Shares on the open market on
the New York Stock Exchange, as applicable, or elsewhere. If, on the divi-
dend payment date, the Fund’s net asset value per share is equal to or less
than the market price per share plus estimated brokerage commissions
(a condition often referred to as a “market premium”), the Plan Agents will
invest the dividend amount in newly issued shares. If the Fund’s net asset
value per share is greater than the market price per share (a condition often
referred to as a “market discount”), the Plan Agents will invest the dividend
amount by purchasing on the open market additional shares. If the Plan
Agents are unable to invest the full dividend amount in open market pur-
chases, or if the market discount shifts to a market premium during the
purchase period, the Plan Agents will invest any uninvested portion in
newly issued shares. The shares acquired are credited to each shareholder’s
account. The amount credited is determined by dividing the dollar amount
of the dividend by either (i) when the shares are newly issued, the net
asset value per share on the date the shares are issued or (ii) when shares
are purchased in the open market, the average purchase price per share.
Participation in the Plan is automatic, that is, a shareholder is automati-
cally enrolled in the Plan when he or she purchases shares of Common
Shares of the Funds unless the shareholder specifically elects not to partici-
pate in the Plan. Shareholders who elect not to participate will receive all
dividend distributions in cash. Shareholders who do not wish to participate
in the Plan must advise their Plan Agent in writing (at the address set forth
below) that they elect not to participate in the Plan. Participation in the
Plan is completely voluntary and may be terminated or resumed at any
time without penalty by writing to the Plan Agent.
The Plan provides an easy, convenient way for shareholders to make addi-
tional, regular investments in the Funds. The Plan promotes a long-term
strategy of investing at a lower cost. All shares acquired pursuant to the
Plan receive voting rights. In addition, if the market price plus commissions
of a Fund’s shares is above the net asset value, participants in the Plan will
receive shares of the Funds for less than they could otherwise purchase
them and with a cash value greater than the value of any cash distribution
they would have received. However, there may not be enough shares avail-
able in the market to make distributions in shares at prices below the net
asset value. Also, since the Funds do not redeem shares, the price on
resale may be more or less than the net asset value.
There are no enrollment fees or brokerage fees for participating in the
Plan. The Plan Agents’ service fees for handling the reinvestment of distri-
butions are paid for by the Funds. However, brokerage commissions may be
incurred when the Funds purchase shares on the open market and share-
holders will pay a pro rata share of any such commissions.
The automatic reinvestment of dividends and distributions will not relieve
participants of any federal, state or local income tax that may be payable
(or required to be withheld) on such dividends. Therefore, income and
capital gains may still be realized even though shareholders do not receive
cash. If, when the Funds’ shares are trading at a market premium, the
Funds issue shares pursuant to the Plan that have a greater fair market
value than the amount of cash reinvested, it is possible that all or a portion
of the discount from the market value (which may not exceed 5% of the
fair market value of the Funds’ shares) could be viewed as a taxable distri-
bution. If the discount is viewed as a taxable distribution, it is also possible
that the taxable character of this discount would be allocable to all the
shareholders, including shareholders who do not participate in the Plan.
Thus, shareholders who do not participate in the Plan might be required to
report as ordinary income a portion of their distributions equal to their allo-
cable share of the discount.
All correspondence concerning the Plan, including any questions about
the Plan, should be directed to the Plan Agent at the following addresses:
Shareholders of CII should contact BNY Mellon Shareowner Services, P.O.
Box 385035, Pittsburgh, PA 15252-8035 Telephone: (866) 216-0242
and shareholders of PSW and PSY should contact Computershare Trust
Company, N.A., P.O. Box 43078, Providence, RI 02940-3078 Telephone:
(800) 699-1BFM or overnight correspondence should be directed to the
Plan Agent at 250 Royall Street, Canton, MA 02021.
For BPP, BTZ and BGT
Pursuant to the Plan of BPP, BTZ and BGT (the “Funds”), shareholders are
automatically enrolled to have all distributions of dividends and capital
gains reinvested by Computershare Trust Company, N.A. (the “Plan Agent”)
in the respective Fund’s shares pursuant to the Plan. Shareholders who
do not participate in the Plan will receive all distributions in cash paid by
check and mailed directly to the shareholders of record (or if the shares
are held in street or other nominee name, then to the nominee) by the
Plan Agent, which serves as agent for the shareholders in administering
the Plan.
After the Funds declare a dividend or determine to make a capital gain
distribution, the Plan Agent will acquire shares for the participants’ account,
depending upon the circumstances described below, either (i) through
receipt of unissued but authorized shares from the Funds (“newly issued
shares”) or (ii) by 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
being referred to herein as “market premium”), the Plan Agent will invest
the dividend amount in newly issued shares on behalf of the participants.
The number of newly issued shares to be credited to each participant’s
64 ANNUAL REPORT OCTOBER 31, 2009
Automatic Dividend Reinvestment Plans (concluded)
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 payment date, the dollar amount of
the dividend will be divided by 95% of the market price on the payment
date. If, on the dividend payment date, the NAV is greater than the market
value per share plus estimated brokerage commissions (such condition
being referred to herein as “market discount”), the Plan Agent will invest
the dividend amount in shares acquired on behalf of the participants in
open-market purchases.
The Plan Agent’s fees for the handling of the reinvestment of dividends and
distributions will be paid by each Fund. However, each participant will pay
a pro rata share of brokerage commissions incurred with respect to the
Plan Agent’s open market purchases in connection with the reinvestment
of dividends and distributions. The automatic reinvestment of dividends
and distributions will not relieve participants of any Federal income tax
that may be payable on such dividends or distributions.
Each Fund reserves the right to amend or terminate the Plan. There is
no direct service charge to participants in the Plan; however each Fund
reserves the right to amend the Plan to include a service charge payable
by the participants. Participants who request a sale of shares through the
Plan Agent are subject to a $2.50 sales fee and a $0.15 per share sold
brokerage commission. All correspondence concerning the Plan should be
directed to the Plan Agent at P.O. Box 43078, Providence, RI 02940-3078
or by calling (800) 699-1BFM. All overnight correspondence should be
directed to the Plan Agent at 250 Royall Street, Canton, MA 02021.
ANNUAL REPORT OCTOBER 31, 2009 65
Officers and Directors | |||||
Number of BlackRock- | |||||
Advised Registered | |||||
Length | Investment Companies | ||||
Position(s) | of Time | (“RICs”) Consisting of | |||
Name, Address | Held with | Served as | Investment Portfolios | Public | |
and Year of Birth | Funds | a Director2 | Principal Occupation(s) During Past 5 Years | (“Portfolios”) Overseen | Directorships |
Non-Interested Directors1 | |||||
Richard E. Cavanagh | Chairman | Since | Trustee, Aircraft Finance Trust since 1999; Director, The Guardian | 102 RICS consisting of | Arch Chemical |
40 East 52nd Street | of the Board | 2007 | Life Insurance Company of America since 1998; Trustee, Educational | 100 Portfolios | (chemical and allied |
New York, NY 10022 | and Director | Testing Service from 1997 to 2009 and Chairman from 2005 to 2009 | products) | ||
1946 | Senior Advisor, The Fremont Group since 2008 and Director thereof | ||||
since 1996; Adjunct Lecturer, Harvard University since 2007; President | |||||
and Chief Executive Officer of The Conference Board, Inc. (global | |||||
business research organization) from 1995 to 2007. | |||||
Karen P. Robards | Vice Chair | Since | Partner of Robards & Company, LLC (financial advisory firm) since | 102 RICs consisting of | AtriCure, Inc. |
40 East 52nd Street | of the Board, | 2007 | 1987; Co-founder and Director of the Cooke Center for Learning and | 100 Portfolios | (medical devices); |
New York, NY 10022 | Chair of | Development, (a not-for-profit organization) since 1987; Director of | Care Investment | ||
1950 | the Audit | Enable Medical Corp. from 1996 to 2005. | Trust, Inc. (health | ||
Committee | care real estate | ||||
and Director | investment trust) | ||||
G. Nicholas Beckwith, III | Director | Since | Chairman and Chief Executive Officer, Arch Street Management, LLC | 102 RICs consisting of | None |
40 East 52nd Street | 2007 | (Beckwith Family Foundation) and various Beckwith property companies | 100 Portfolios | ||
New York, NY 10022 | since 2005; Chairman of the Board of Directors, University of Pittsburgh | ||||
1945 | Medical Center since 2002; Board of Directors, Shady Side Hospital | ||||
Foundation since 1977; Board of Directors, Beckwith Institute for | |||||
Innovation In Patient Care since 1991; Member, Advisory Council on | |||||
Biology and Medicine, Brown University since 2002; Trustee, Claude | |||||
Worthington Benedum Foundation (charitable foundation) since 1989; | |||||
Board of Trustees, Chatham University since 1981; Board of Trustees, | |||||
University of Pittsburgh since 2002; Emeritus Trustee, Shady Side | |||||
Academy since 1977; Chairman and Manager, Penn West Industrial | |||||
Trucks LLC (sales, rental and servicing of material handling equipment) | |||||
from 2005 to 2007; Chairman, President and Chief Executive Officer, | |||||
Beckwith Machinery Company (sales, rental and servicing of construction | |||||
and equipment) from 1985 to 2005; Member of the Board of Directors, | |||||
National Retail Properties (REIT) from 2006 to 2007. | |||||
Kent Dixon | Director | Since | Consultant/Investor since 1988. | 102 RICs consisting of | None |
40 East 52nd Street | and Member | 2007 | 100 Portfolios | ||
New York, NY 10022 | of the Audit | ||||
1937 | Committee | ||||
Frank J. Fabozzi | Director | Since | Consultant/Editor of The Journal of Portfolio Management since 2006; | 102 RICs consisting of | None |
40 East 52nd Street | and Member | 2007 | Professor in the Practice of Finance and Becton Fellow, Yale University, | 100 Portfolios | |
New York, NY 10022 | of the Audit | School of Management, since 2006; Adjunct Professor of Finance | |||
1948 | Committee | and Becton Fellow, Yale University from 1994 to 2006. | |||
Kathleen F. Feldstein | Director | Since | President of Economics Studies, Inc. (private economic consulting | 102 RICs consisting of | The McClatchy |
40 East 52nd Street | 2007 | firm) since 1987; Chair, Board of Trustees, McLean Hospital from | 100 Portfolios | Company | |
New York, NY 10022 | 2000 to 2008 and Trustee Emeritus thereof since 2008; Member of | (publishing) | |||
1941 | the Board of Partners Community Healthcare, Inc. since 2005; | ||||
Member of the Corporation of Partners HealthCare since 1995; | |||||
Trustee, Museum of Fine Arts, Boston since 1992; Member of the | |||||
Visiting Committee to the Harvard University Art Museum since 2003. | |||||
James T. Flynn | Director | Since | Chief Financial Officer of JP Morgan & Co., Inc. from 1990 to 1995. | 102 RICs consisting of | None |
40 East 52nd Street | and Member | 2007 | 100 Portfolios | ||
New York, NY 10022 | of the Audit | ||||
1939 | Committee | ||||
Jerrold B. Harris | Director | Since | Trustee, Ursinus College since 2000; Director, Troemner LLC | 102 RICs consisting of | BlackRock Kelso |
40 East 52nd Street | 2007 | (scientific equipment)since 2000. | 100 Portfolios | Capital Corp. | |
New York, NY 10022 | |||||
1942 | |||||
66 | ANNUAL REPORT | OCTOBER 31, 2009 |
Officers and Directors (continued) | ||||||
Number of BlackRock- | ||||||
Advised Registered | ||||||
Length | Investment Companies | |||||
Position(s) | of Time | (“RICs”) Consisting of | ||||
Name, Address | Held with | Served as | Investment Portfolios | Public | ||
and Year of Birth | Funds | a Director2 | Principal Occupation(s) During Past 5 Years | (“Portfolios”) Overseen | Directorships | |
Non-Interested Directors1 (concluded) | ||||||
R. Glenn Hubbard | Director | Since | Dean, Columbia Business School since 2004; Columbia faculty | 102 RICs consisting of | ADP (data and | |
40 East 52nd Street | 2007 | member since 1988; Co-Director, Columbia Business School’s | 100 Portfolios | information services), | ||
New York, NY 10022 | Entrepreneurship Program from 1997 to 2004; Visiting Professor, | KKR Financial | ||||
1958 | John F. Kennedy School of Government at Harvard University and the | Corporation (finance), | ||||
Harvard Business School since 1985 and at the University of Chicago | Metropolitan Life | |||||
since 1994; Chairman, U.S. Council of Economic Advisers under the | Insurance Company | |||||
President of the United States from 2001 to 2003. | (insurance) | |||||
W. Carl Kester | Director | Since | George Fisher Baker Jr. Professor of Business Administration, Harvard | 102 RICs consisting of | None | |
40 East 52nd Street | and Member | 2007 | Business School; Deputy Dean for Academic Affairs, since 2006; Unit | 100 Portfolios | ||
New York, NY 10022 | of the Audit | Head, Finance, Harvard Business School, from 2005 to 2006; Senior | ||||
1951 | Committee | Associate Dean and Chairman of the MBA Program of Harvard Business | ||||
School, from 1999 to 2005; Member of the faculty of Harvard Business | ||||||
School since 1981; Independent Consultant since 1978. | ||||||
1 Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. | ||||||
2 Date shown is the earliest date a person has served as a director for the Funds covered by this annual report. Following the combination of Merrill Lynch | ||||||
Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. (“BlackRock”) in September 2006, the various legacy MLIM and legacy BlackRock Fund boards | ||||||
were realigned and consolidated into three new Fund boards in 2007. As a result, although the chart shows directors as joining the Funds’ board in 2007, | ||||||
each director first became a member of the board of other legacy MLIM or legacy BlackRock Funds as follows: G. Nicholas Beckwith, III, 1999; Richard E. | ||||||
Cavanagh, 1994; Kent Dixon, 1988; Frank J. Fabozzi, 1988; Kathleen F. Feldstein, 2005; James T. Flynn, 1996; Jerrold B. Harris, 1999; R. Glenn Hubbard, | ||||||
2004; W. Carl Kester, 1995 and Karen P. Robards, 1998. | ||||||
Interested Directors3 | ||||||
Richard S. Davis | President | Since | Managing Director, BlackRock, Inc. since 2005; Chief Executive Officer, State Street | 171 RICs | None | |
40 East 52nd Street | and | 2007 | Research & Management Company from 2000 to 2005; Chairman of the Board | consisting of | ||
New York, NY 10022 | Director | of Trustees, State Street Research Mutual Funds from 2000 to 2005; Chairman, | 282 Portfolios | |||
1945 | SSR Realty from 2000 to 2004. | |||||
Henry Gabbay | Director | Since | Consultant, BlackRock, Inc. from 2007 to 2008; Managing Director, BlackRock, | 171 RICs | None | |
40 East 52nd Street | 2007 | Inc. from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC | consisting of | |||
New York, NY 10022 | from 1998 to 2007; President of BlackRock Funds and BlackRock Bond | 282 Portfolios | ||||
1947 | Allocation Target Shares from 2005 to 2007; Treasurer of certain closed-end | |||||
funds in the BlackRock fund complex from 1989 to 2006. | ||||||
3 Mr. Davis is an “interested person,” as defined in the Investment Company Act of 1940, of the Funds based on his position with BlackRock, Inc. and its | ||||||
affiliates. Mr. Gabbay is an “interested person” of the Funds based on his former positions with BlackRock, Inc. and its affiliates as well as his ownership | ||||||
of BlackRock, Inc. and PNC securities. Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. | ||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 67 |
Officers and Directors (concluded) | ||||||
Position(s) | ||||||
Name, Address | Held with | Length of | ||||
and Year of Birth | Funds | Time Served Principal Occupation(s) During Past 5 Years | ||||
Funds Officers1 | ||||||
Anne F. Ackerley | President | Since | Managing Director of BlackRock, Inc. since 2000; Vice President of the BlackRock-advised funds from 2007 to 2009; | |||
40 East 52nd Street | and Chief | 2009 | Chief Operating Officer of BlackRock’s Global Client Group (GCG) since 2009; Chief Operating Officer of BlackRock’s | |||
New York, NY 10022 | Executive | U.S. Retail Group from 2006 to 2009; Head of BlackRock’s Mutual Fund Group from 2000 to 2006. | ||||
1962 | Officer | |||||
Brendan Kyne | Vice | Since | Director of BlackRock, Inc. since 2008; Head of Product Development and Management for BlackRock’s U.S. Retail | |||
40 East 52nd Street | President | 2009 | Group since 2009, co-head thereof from 2007 to 2009; Vice President of BlackRock, Inc. from 2005 to 2008; | |||
New York, NY 10022 | Associate of BlackRock, Inc. from 2002 to 2004. | |||||
1977 | ||||||
Neal J. Andrews | Chief | Since | Managing Director of BlackRock, Inc. since 2006; Senior Vice President and Line of Business Head of Fund | |||
40 East 52nd Street | Financial | 2007 | Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006. | |||
New York, NY 10022 | Officer | |||||
1966 | ||||||
Jay M. Fife | Treasurer | Since | Managing Director of BlackRock, Inc. since 2007 and Director in 2006; Assistant Treasurer of the Merrill Lynch | |||
40 East 52nd Street | 2007 | Investment Managers, L.P. (“MLIM”) and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of | ||||
New York, NY 10022 | MLIM Fund Services Group from 2001 to 2006. | |||||
1970 | ||||||
Brian P. Kindelan | Chief | Since | Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel | |||
40 East 52nd Street | Compliance | 2007 | of BlackRock, Inc. since 2005; Director and Senior Counsel of BlackRock Advisors, LLC from 2001 to 2004. | |||
New York, NY 10022 | Officer | |||||
1959 | ||||||
Howard B. Surloff | Secretary | Since | Managing Director and General Counsel of U.S. Funds at BlackRock, Inc. since 2006; General Counsel (U.S.) | |||
40 East 52nd Street | 2007 | of Goldman Sachs Asset Management, L.P. from 1993 to 2006. | ||||
New York, NY 10022 | ||||||
1965 | ||||||
1 Officers of the Funds serve at the pleasure of the Board. | ||||||
Investment Advisor | Custodians | Transfer Agent | Accounting Agent | Independent | Legal Counsel | |
BlackRock Advisors, LLC | State Street Bank | Common Shares | State Street Bank | Registered Public | Skadden, Arps, Slate, | |
Wilmington, DE 19809 | and Trust Company1 | Computershare Trust Company, N.A.1 | and Trust Company | Accounting Firm | Meagher & Flom LLP | |
Boston, MA 02111 | Canton, MA 02021 | Princeton, NJ 08540 | Deloitte & Touche LLP | New York, NY 10036 | ||
Sub-Advisor | ||||||
Princeton, NJ 08540 | ||||||
BlackRock Financial | Brown Brothers, | BNY Mellon Shareowner Services2 | Address of the Funds | |||
Management, Inc.2,3 | Harriman & Co.2 | Jersey City, NJ 07310 | 100 Bellevue Parkway | |||
New York, NY 10022 | Boston, MA 02109 | Wilmington, DE 19809 | ||||
Auction Agent | ||||||
BlackRock Investment | Preferred Shares | |||||
Management, LLC2 | BNY Mellon Shareowner Services1 | |||||
Plainsboro, NJ 08536 | Jersey City, NJ 07310 | |||||
1 For all Funds except CII. | ||||||
2 For CII. | ||||||
3 For PSW, PSY, BPP, BTZ and BGT. |
Effective July 31, 2009, Donald C. Burke, President and Chief Executive Officer of the Funds retired. The Funds’ Board
wishes Mr. Burke well in his retirement.
Effective August 1, 2009, Anne F. Ackerley became President and Chief Executive Officer of the Funds, and Brendan Kyne
became Vice President of the Funds.
68 ANNUAL REPORT OCTOBER 31, 2009
Additional Information | ||||||||
Proxy Results | ||||||||
The Annual Meeting of Shareholders was held on August 26, 2009 for shareholders of record on June 29, 2009 to elect director nominees of each Fund: | ||||||||
Approved the Class II Directors as follows: | ||||||||
Richard S. Davis | Frank J. Fabozzi | James T. Flynn | Karen P. Robards | |||||
Votes | Votes | Votes | Votes | |||||
Votes For | Withheld | Votes For | Withheld | Votes For | Withheld | Votes For | Withheld | |
BGT1 | 19,304,993 | 695,969 | 1,5362 | 412 | 19,358,516 | 642,446 | 19,407,966 | 592,996 |
BTZ1 | 45,476,492 | 1,268,611 | 5,6002 | 1082 | 45,358,705 | 1,386,398 | 45,337,245 | 1,407,858 |
BPP1 | 16,044,548 | 543,383 | 1,5222 | 302 | 16,044,548 | 543,383 | 16,037,584 | 550,347 |
Approved the Directors as follows: | ||||||||
G. Nicholas Beckwith, III | Richard E. Cavanagh | Richard S. Davis | ||||||
Votes | Votes | Votes | ||||||
Votes For | Withheld | Votes For | Withheld | Votes For | Withheld | |||
CII | 37,172,227 | 1,688,817 | 37,233,458 | 1,627,586 | 37,337,729 | 1,523,315 | ||
PSW | 8,451,844 | 322,043 | 8,430,797 | 343,090 | 8,450,828 | 323,059 | ||
PSY | 34,209,217 | 1,432,504 | 34,213,593 | 1,428,128 | 34,247,323 | 1,394,398 | ||
Kent Dixon | Frank J. Fabozzi | Kathleen F. Feldstein | ||||||
Votes | Votes | Votes | ||||||
Votes For | Withheld | Votes For | Withheld | Votes For | Withheld | |||
CII | 37,174,585 | 1,686,459 | 37,288,696 | 1,572,348 | 37,194,912 | 1,666,132 | ||
PSW | 8,433,142 | 340,745 | 1,2792 | 122 | 8,454,805 | 319,082 | ||
PSY | 34,097,941 | 1,543,780 | 3,7312 | 722 | 34,195,383 | 1,446,338 | ||
James T. Flynn | Henry Gabbay | Jerrold B. Harris | ||||||
Votes | Votes | Votes | ||||||
Votes For | Withheld | Votes For | Withheld | Votes For | Withheld | |||
CII | 37,181,395 | 1,679,649 | 37,303,898 | 1,557,146 | 37,281,759 | 1,579,285 | ||
PSW | 8,438,377 | 335,510 | 8,450,828 | 323,059 | 8,447,635 | 326,252 | ||
PSY | 34,166,913 | 1,474,808 | 34,240,405 | 1,401,316 | 34,247,106 | 1,394,615 | ||
R. Glenn Hubbard | W. Carl Kester | Karen P. Robards | ||||||
Votes | Votes | Votes | ||||||
Votes For | Withheld | Votes For | Withheld | Votes For | Withheld | |||
CII | 37,209,180 | 1,651,864 | 37,313,817 | 1,547,227 | 37,310,060 | 1,550,984 | ||
PSW | 8,436,816 | 337,071 | 1,2792 | 122 | 8,437,967 | 335,920 | ||
PSY | 34,258,257 | 1,383,464 | 3,7312 | 722 | 34,257,723 | 1,383,998 | ||
1 The Board is organized into three classes, one class of which is elected annually. Each Director serves a three-year term concurrent with the class into which he or she is elected. | ||||||||
2 Voted on by holders of Preferred Shares only | ||||||||
Fund Certification | ||||||||
Certain Funds are listed for trading on the New York Stock Exchange | Funds filed with the SEC the certification of its chief executive officer and | |||||||
(“NYSE”) and have filed with the NYSE their annual chief executive officer | chief financial officer required by section 302 of the Sarbanes-Oxley Act. | |||||||
certification regarding compliance with the NYSE’s listing standards. The | ||||||||
ANNUAL REPORT | OCTOBER 31, 2009 | 69 |
Additional Information (continued)
Dividend Policy
Each Fund’s, except CII’s, dividend policy is to distribute all or a portion of
its net investment income to its shareholders on a monthly (quarterly for
CII) basis. In order to provide shareholders with a more stable level of
dividend distributions, the Funds 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 accumu-
lated but undistributed income in addition to net investment income
earned in that month/quarter. As a result, the dividends paid by the Funds
for any particular month/quarter may be more or less than the amount
of net investment income earned by the Funds during such month/quarter.
The Funds’ current accumulated but undistributed net investment income,
if any, is disclosed in the Statements of Assets and Liabilities, which com-
prises part of the financial information included in this report.
General Information
The Funds do not make available copies of their Statements of Additional
Information because the Funds’ shares are not continuously offered, which
means that the Statement of Additional Information of each Fund has not
been updated after completion of the respective Fund’s offerings and the
information contained in each Fund’s Statement of Additional Information
may have become outdated.
CII
During the period, the Board of Directors (the “Board”) of CII approved a
change to the Fund’s option writing policy. The Fund has the authority to
write (i.e., sell) put options on the types of securities or instruments that
may be held by the Fund, provided that such put options are covered,
meaning that such options are secured by segregated, liquid instruments
or cash. Under the original policy, the Fund was limited from selling puts if,
as a result, more than 50% of the Fund’s assets would be required to cover
its potential obligations under its hedging and other investment transac-
tions. The Board approved the elimination of this 50% requirement. When
the Fund writes covered put options, it bears the risk of loss if the value of
the underlying stock declines below the exercise price minus the put pre-
mium. If the option is exercised, the Fund could incur a loss if it is required
to purchase the stock underlying the put option at a price greater than the
market price of the stock at the time of exercise plus the put premium the
Fund received when it wrote the option. While the Fund’s potential gain in
writing a covered put option is limited to distributions earned on the liquid
assets securing the put option plus the premium received from the pur-
chaser of the put option, the Fund risks a loss equal to the entire exercise
price of the option minus the put premium.
PSW, PSY, BPP and BTZ
On August 26, 2009, the Board of PSW, PSY, BPP and BTZ (the “Funds”)
approved a change to certain investment policies of the Funds. As a result
of these policy changes, PSY and BPP will no longer focus their investments
primarily on preferred securities and PSW will no longer focus its invest-
ments primarily on preferred securities and corporate bonds. In addition,
BTZ will no longer focus its investments primarily on preferred and equity
securities, nor will it employ an option-writing strategy in the future.
Instead, the Funds will transition to a portfolio investing in a broader
spectrum of securities across the capital structure. In addition, the
Board approved name changes for the Funds as follows:
Prior Name New Name
BlackRock Preferred and Corporate BlackRock Credit Allocation Income
Income Strategies Fund, Inc. Trust I, Inc.
BlackRock Preferred Income Strategies BlackRock Credit Allocation Income
Fund, Inc. Trust II, Inc.
BlackRock Preferred Opportunity Trust BlackRock Credit Allocation Income Trust III
BlackRock Preferred and Equity BlackRock Credit Allocation Income Trust IV
Advantage Trust
PSY and BPP each previously employed a non-fundamental investment pol-
icy of investing, under normal market conditions, at least 80% of its total
assets in preferred securities. PSW previously employed a non-fundamental
investment policy of investing, under normal market conditions, at least
80% of its total assets in a portfolio of preferred securities and corporate
debt securities. In addition, PSW employed a policy of investing, under
normal market conditions, at least 65% of its total assets in preferred
securities and up to 35% of its total assets in debt securities. BTZ previ-
ously employed a non-fundamental investment policy of investing, under
normal market conditions, at least 80% of its total assets in preferred and
equity securities and derivatives with economic characteristics similar to
individual or groups of equity securities. For each Fund, its non-fundamen-
tal policy has been revised to allow the Fund to invest, under normal mar-
ket conditions, at least 80% of its total assets in credit-related securities,
including, but not limited to, investment grade corporate bonds, high yield
bonds, bank loans, preferred securities or convertible bonds or derivatives
with economic characteristics similar to these credit-related securities.
The Board has taken these actions in response to the current and prospec-
tive market environment for preferred securities. BlackRock and the Board
believe the amended policies will better position each Fund to achieve its
investment objective and are in the best interests of the Funds’ sharehold-
ers. The approved changes will not alter the Funds’ investment objectives
and each Fund will continue to be managed in accordance with its invest-
ment objective of primarily providing shareholders with current income and
secondarily providing shareholders with capital appreciation.
In addition to the foregoing, the Board also approved changes to each
Fund’s restriction on credit quality of eligible investments. Previously, each
Fund was restricted to investing, under normal market conditions, no more
than 20% of its total assets in securities rated below investment grade at
the time of purchase. The amended policy allows each Fund to invest,
under normal market conditions, without limitation in securities rated below
investment grade at the time of purchase. While this policy affords each
Fund additional flexibility to invest in securities rated below investment
grade at the time of purchase, it is anticipated, under current market con-
ditions, that the Fund will maintain an average credit quality of at least
investment grade.
BlackRock anticipates that it will gradually reposition each Fund’s portfolio
over time and that during such period the Fund may continue to hold a
substantial portion of its assets in preferred securities, corporate bonds
and/or equity securities, as applicable. At this time, it is uncertain how long
the repositioning may take, and the Fund may continue to be subject to
70 ANNUAL REPORT OCTOBER 31, 2009
Additional Information (continued)
General Information (continued)
risks associated with investing a substantial portion of its assets in pre-
ferred securities until the repositioning is complete.
The Fund’s Investments
Following the transition, each Fund will invest at least 80% of its total
assets in credit-related securities, including, but not limited to, the follow-
ing types of investments:
Corporate Bonds — The Funds may invest in corporate bonds. The invest-
ment return of corporate bonds reflects interest on the security and
changes in the market value of the security. The market value of a
corporate bond generally may be expected to rise and fall inversely with
interest rates. The market value of a corporate bond also may be affected
by the credit rating of the corporation, the corporation’s performance and
perceptions of the corporation in the market place. There is a risk that
the issuers of the securities may not be able to meet their obligations on
interest or principal payments at the time called for by an instrument.
Below Investment Grade Securities — Though the Funds’ portfolios are
expected to maintain an average credit quality of at least investment grade
quality, the Fund may have a portion of its assets invested in securities
rated below investment grade, such as those rated Ba or lower by Moody’s
and BB or lower by S&P or Fitch or securities comparably rated by other
rating agencies, or in unrated securities determined by BlackRock Advisors,
LLC (the “Manager”) to be of comparable quality. Securities rated Ba by
Moody’s are judged to have speculative elements, their future cannot be
considered as well assured and often the protection of interest and princi-
pal payments may be very moderate. Securities rated BB by S&P or Fitch
are regarded as having predominantly speculative characteristics and, while
such obligations have less near-term vulnerability to default than other
speculative grade debt, they face major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.
Securities rated C are regarded as having extremely poor prospects of ever
attaining any real investment standing. Securities rated D are in default
and the payment of interest and/or repayment of principal is in arrears.
When the Manager believes it to be in the best interests of the Funds’ share-
holders, the Funds will reduce their investment in lower grade securities.
Bank Loans — The Fund may invest in bank loans denominated in US and
foreign currencies that are originated, negotiated and structured by a syn-
dicate of lenders (“Co-Lenders”) consisting of commercial banks, thrift
institutions, insurance companies, financial companies or other financial
institutions one or more of which administers the security on behalf of the
syndicate (the “Agent Bank”). Co-Lenders may sell such securities to third
parties called “Participants.” The Fund may invest in such securities either
by participating as a Co-Lender at origination or by acquiring an interest
in the security from a Co-Lender or a Participant (collectively, “Participation
Interests”). Co-Lenders and Participants interposed between the Fund and
the corporate borrower (the “Borrower”), together with Agent Banks, are
referred herein as “Intermediate Participants.” The Fund also may purchase a
participation interest in a portion of the rights of an Intermediate Participant,
which would not establish any direct relationship between the Fund and
the Borrower. In such cases, the Fund would be required to rely on the
Intermediate Participant that sold the participation interest not only for
the enforcement of the Fund’s rights against the Borrower but also for the
receipt and processing of payments due to the Fund under the security.
Because it may be necessary to assert through an Intermediate Participant
such rights as may exist against the Borrower, in the event the Borrower
fails to pay principal and interest when due, the Fund may be subject to
delays, expenses and risks that are greater than those that would be
involved if the Fund could enforce its rights directly against the Borrower.
Moreover, under the terms of a Participation Interest, the Fund may be
regarded as a creditor of the Intermediate Participant (rather than of the
Borrower), so that the Fund may also be subject to the risk that the Inter-
mediate Participant may become insolvent. Similar risks may arise with
respect to the Agent Bank if, for example, assets held by the Agent Bank
for the benefit of the Fund were determined by the appropriate regulatory
authority or court to be subject to the claims of the Agent Bank’s creditors.
In such case, the Fund might incur certain costs and delays in realizing
payment in connection with the Participation Interest or suffer a loss of
principal and/or interest. Further, in the event of the bankruptcy or insol-
vency of the Borrower, the obligation of the Borrower to repay the loan may
be subject to certain defenses that can be asserted by such Borrower as a
result of improper conduct by the Agent Bank or Intermediate Participant.
Convertible Bonds — The Fund may invest in convertible bonds. A convertible
bond is a bond that may be converted into or exchanged for a prescribed
amount of common stock or other equity security of the same or a different
issuer within a particular period of time at a specified price or formula. A
convertible bond entitles the holder to receive interest paid or accrued on
debt until the convertible bond matures or is redeemed, converted or
exchanged. Before conversion, convertible bonds have characteristics simi-
lar to nonconvertible income securities in that they ordinarily provide a sta-
ble stream of income with generally higher yields than those of common
stocks of the same or similar issuers, but lower yields than comparable
nonconvertible bonds. The value of a convertible bond is influenced by
changes in interest rates, with investment value declining as interest rates
increase and increasing as interest rates decline. The credit standing of the
issuer and other factors also may have an effect on the convertible bond’s
investment value. Convertible bonds rank senior to common stock in a cor-
poration’s capital structure but are usually subordinated to comparable
nonconvertible bonds. Convertible bonds may be subject to redemption at
the option of the issuer at a price established in the convertible bond’s
governing instrument.
Credit Derivatives — The Fund may engage in credit derivative transactions.
There are two broad categories of credit derivatives: default price risk
derivatives and market spread derivatives. Default price risk derivatives are
linked to the price of reference securities or loans after a default by the
issuer or borrower, respectively. Market spread derivatives are based on the
risk that changes in market factors, such as credit spreads, can cause a
decline in the value of a security, loan or index. There are three basic trans-
actional forms for credit derivatives: swaps, options and structured instru-
ments. The Fund may use credit default swaps. A credit default swap is an
agreement between two counterparties that allows one counterparty (the
“seller”) to purchase or be “long” a third party’s credit risk and the other
party (the “buyer”) to sell or be “short” the credit risk. Typically, the seller
ANNUAL REPORT OCTOBER 31, 2009 71
Additional Information (continued)
General Information (continued)
agrees to make regular fixed payments to the buyer with the same fre-
quency as the underlying reference bond. In exchange, the seller typically
has the right upon default of the underlying bond to put the bond to the
buyer in exchange for the bond’s par value plus interest. Credit default
swaps can be used as a substitute for purchasing or selling a credit secu-
rity and sometimes are preferable to actually purchasing the security. The
Fund does not intend to leverage its investments through the use of credit
default swaps. A purchaser of a credit default swap is subject to counter-
party risk. The Fund will monitor any such swaps or derivatives with a view
towards ensuring that the Fund remains in compliance with all applicable
regulatory, investment policy and tax requirements.
Risks
As a result of the Fund’s portfolio restructuring and revisions to certain of
its non-fundamental investment policies, your investment in the Fund will
be subject to the following additional risks following the transition:
Credit Risk — Credit risk is the risk that one or more debt securities in the
Fund’s portfolio will decline in price or fail to pay interest or principal when
due because the issuer of the security experiences a decline in its financial
status. If the recent adverse conditions in the credit markets adversely
affect the broader economy, the credit quality of issuers of credit securities
in which the Fund may invest would be more likely to decline, all other
things being equal. While a senior position in the capital structure of a bor-
rower may provide some protection with respect to the Fund’s investments
in senior secured floating rate and fixed rate loans or debt, losses may still
occur. To the extent the Fund invests in below investment grade securities, it
will be exposed to a greater amount of credit risk than a Fund which invests
in investment grade securities. The prices of lower grade securities are more
sensitive to negative developments, such as a decline in the issuer’s rev-
enues or a general economic downturn, than are the prices of higher grade
securities. Securities of below investment grade quality are predominantly
speculative with respect to the issuer’s capacity to pay interest and repay
principal when due and therefore involve a greater risk of default. In addi-
tion, the Fund’s use of credit derivatives will expose it to additional risk in
the event that the bonds underlying the derivatives default.
Interest Rate Risk — The value of certain debt securities in the Fund’s port-
folio could be affected by interest rate fluctuations. When interest rates
decline, the value of fixed rate securities can be expected to rise. Con-
versely, when interest rates rise, the value of fixed rate securities can be
expected to decline. Recent adverse conditions in the credit markets may
cause interest rates to rise. Although changes in prevailing interest rates
can be expected to cause some fluctuations in the value of floating rate
securities (due to the fact that rates only reset periodically), the values of
these securities are substantially less sensitive to changes in market inter-
est rates than fixed rate instruments. Fluctuations in the value of the Fund’s
securities will not affect interest income on existing securities, but will be
reflected in the Fund’s net asset value. The Fund may utilize certain strate-
gies, including taking positions in futures or interest rate swaps, for the pur-
pose of reducing the interest rate sensitivity of the portfolio and decreasing
the Fund’s exposure to interest rate risk, although there is no assurance
that it will do so or that such strategies will be successful.
Prepayment Risk — During periods of declining interest rates, borrowers
may exercise their option to prepay principal earlier than scheduled. For
fixed rate securities, such payments often occur during periods of declin-
ing interest rates, forcing the Fund to reinvest in lower yielding securities,
resulting in a possible decline in the Fund’s income and distributions to
shareholders. This is known as prepayment or “call” risk. Below investment
grade securities frequently have call features that allow the issuer to redeem
the security at dates prior to its stated maturity at a specified price (typi-
cally greater than par) only if certain prescribed conditions are met (“call
protection”). An issuer may redeem a below investment grade security if,
for example, the issuer can refinance the debt at a lower cost due to declin-
ing interest rates or an improvement in the credit standing of the issuer.
Certain of the Fund’s investments will not have call protection. For premium
bonds (bonds acquired at prices that exceed their par or principal value)
purchased by the Fund, prepayment risk may be enhanced.
Below Investment Grade Risk — The Fund may invest a substantial portion
of its assets in fixed income securities that are rated below investment
grade, which are commonly referred to as “junk bonds” and are regarded
as predominately speculative with respect to the issuer’s capacity to pay
interest and repay principal.
Lower grade securities may be particularly susceptible to economic down-
turns. It is likely that a prolonging of the current economic recession or a
future economic recession could disrupt severely the market for such secu-
rities and may have an adverse impact on the value of such securities. In
addition, it is likely that any such continuing or future economic downturn
could adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon and increase the incidence of default for
such securities.
Lower grade securities, though high yielding, are characterized by high risk.
They may be subject to certain risks with respect to the issuing entity and
to greater market fluctuations than certain lower yielding, higher rated
securities. The retail secondary market for lower grade securities may be
less liquid than that for higher rated securities. Adverse conditions could
make it difficult at times for the Fund to sell certain securities or could
result in lower prices than those used in calculating the Fund’s net asset
value. Because of the substantial risks associated with investments in lower
grade securities, you could lose money on your investment in common
shares of the Fund, both in the short-term and the long-term.
Bank Loan Risk — As in the case of junk bonds, bank loans may be rated
in lower grade rating categories, or may be unrated but of lower grade qual-
ity. As in the case of junk bonds, bank loans can provide higher yields than
higher grade income securities, but are subject to greater credit and other
risks. Although bank loan obligations often are secured by pledges of
assets by the borrower and have other structural aspects intended to pro-
vide greater protection to the holders of bank loans than the holders of
unsecured and subordinated securities, there are also additional risks in
holding bank loans. In particular, the secondary trading market for bank
loans is not well developed, and therefore, bank loans present increased
market risk relating to liquidity and pricing concerns. In addition, there is
72 ANNUAL REPORT OCTOBER 31, 2009
Additional Information (continued)
General Information (concluded)
no assurance that the liquidation of the collateral would satisfy the claims
of the borrower’s obligations in the event of the nonpayment of scheduled
interest or principal, or that the collateral could be readily liquidated. As
a result, the Fund might not receive payments to which it is entitled and
thereby may experience a decline in the value of its investment and its
net asset value.
Convertible Bonds Risk — Although to a lesser extent than with fixed-income
securities, the market value of convertible bonds tends to decline as inter-
est rates increase and, conversely, tends to increase as interest rates
decline. In addition, because of the conversion feature, the market value
of convertible bonds tends to vary with fluctuations in the market value of
the underlying common stock. A unique feature of convertible bonds is that
as the market price of the underlying common stock declines, convertible
bonds tend to trade increasingly on a yield basis, and so may not experi-
ence market value declines to the same extent as the underlying common
stock. When the market price of the underlying common stock increases,
the prices of the convertible bonds tend to rise as a reflection of the value
of the underlying common stock. While no securities investments are with-
out risk, investments in convertible bonds generally entail less risk than
investments in common stock of the same issuer.
Credit Derivatives Risk — The use of credit derivatives is a highly specialized
activity which involves strategies and risks different from those associated
with ordinary portfolio security transactions. If the Manager is incorrect in its
forecasts of default risks, market spreads or other applicable factors, the
investment performance of the Fund would diminish compared with what it
would have been if these techniques were not used. Moreover, even if the
Manager is correct in its forecasts, there is a risk that a credit derivative posi-
tion may correlate imperfectly with the price of the asset or liability being
protected. The Fund’s risk of loss in a credit derivative transaction varies with
the form of the transaction. For example, if the Fund purchases a default
option on a security, and if no default occurs with respect to the security, the
Fund’s loss is limited to the premium it paid for the default option. In con-
trast, if there is a default by the grantor of a default option, the Fund’s loss
will include both the premium that it paid for the option and the decline in
value of the underlying security that the default option protected.
Other than the revisions discussed above, there were no material changes
in the Funds’ investment objectives or policies or to the Funds’ charters or
by-laws that were not approved by the shareholders or in the principal risk
factors associated with investment in the Funds. There have been no
changes in the persons who are primarily responsible for the day-to-day
management of the Funds’ portfolios.
BGT
During the period, the Board of BGT approved a change to the Fund’s name
from “BlackRock Global Floating Rate Income Trust” to “BlackRock Floating
Rate Income Trust.”
Quarterly performance, semi-annual and annual reports and other informa-
tion regarding the Funds may be found on BlackRock’s website, which can
be accessed at http://www.blackrock.com. This reference to BlackRock’s
website is intended to allow investors public access to information regard-
ing the Funds and does not, and is not intended to, incorporate BlackRock’s
website into this report.
Electronic Delivery
Electronic copies of most financial reports are available on the Funds’ web-
sites or shareholders can sign up for e-mail notifications of quarterly state-
ments, annual and semi-annual reports by enrolling in the Funds’ electronic
delivery program.
Shareholders Who Hold Accounts with Investment Advisors, Banks
or Brokerages:
Please contact your financial advisor to enroll. Please note that not all
investment advisors, banks or brokerages may offer this service.
Householding
The Funds 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 it 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 other-
wise. If you do not want the mailing of these documents to be combined
with those for other members of your household, please contact the Funds
at (800) 441-7762.
Availability of Quarterly Schedule of Investments
Each Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (“SEC”) for the first and third quar-
ters of each fiscal year on Form N-Q. Each Fund’s Forms N-Q are available
on the SEC’s website at http://www.sec.gov and may also be reviewed and
copied at the SEC’s Public Reference Room in Washington, DC. Information
on the operation of the Public Reference Room may be obtained by calling
(202) 551-8090. Each Fund’s Forms N-Q may also be obtained upon
request and without charge by calling (800) 441-7762.
Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that the Funds use to deter-
mine how to vote proxies relating to portfolio securities is available (1) with-
out charge, upon request, by calling toll-free (800) 441-7762; (2) at
www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.
Availability of Proxy Voting Record
Information about how each Fund voted proxies relating to securities
held in each Fund’s portfolio during the most recent 12-month period
ended June 30 is available upon request and without charge (1) at
www.blackrock.com or by calling (800) 441-7762 and (2) on the
SEC’s website at http://www.sec.gov.
ANNUAL REPORT OCTOBER 31, 2009 73
Additional Information (concluded) | ||||||||
Section 19(a) Notices | ||||||||
These reported amounts and sources of distributions are estimates and are not being provided for tax reporting purposes. The actual amounts and sources | ||||||||
for tax reporting purposes will depend upon each Fund’s investment experience during the year and may be subject to changes based on the tax regula- | ||||||||
tions. Each Fund will provide a Form 1099-DIV each calendar year that will explain the character of these dividends and distributions for federal income | ||||||||
tax purposes. | ||||||||
October 31, 2009 | ||||||||
Total Cumulative Distributions | % Breakdown of the Total Cumulative | |||||||
for the Fiscal Year | Distributions for the Fiscal Year | |||||||
Net | Net Realized | Total Per | Net | Net Realized | Total Per | |||
Investment | Capital | Return of | Common | Investment | Capital | Return of | Common | |
Income | Gains | Capital | Share | Income | Gains | Capital | Share | |
PSW | $0.814362 | $ — | $0.141238 | $0.955600 | 85% | 0% | 15% | 100% |
PSY | $1.033169 | $ — | $0.083912 | $1.117081 | 92% | 0% | 8% | 100% |
BPP | $1.075354 | $ — | $0.102146 | $1.177500 | 91% | 0% | 9% | 100% |
BTZ. | $0.934658 | $ — | $0.475342 | $1.410000 | 66% | 0% | 34% | 100% |
CII | $0.329222 | $ — | $1.610778 | $1.940000 | 17% | 0% | 83% | 100% |
BGT | $1.379018 | $ — | $0.233111 | $1.612129 | 86% | 0% | 14% | 100% |
Each Fund estimates that it has distributed more than the amount of earned income and net realized gains; therefore, a portion of the distribution may be | ||||||||
a return of capital. A return of capital may occur, for example, when some or all of the shareholder’s investment in a Fund is returned to the shareholder. | ||||||||
A return of capital does not necessarily reflect a Fund’s investment performance and should not be confused with ‘yield’ or ‘income. |
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former
fund investors and individual clients (collectively, “Clients”) and to safe-
guarding their non-public personal information. The following information is
provided to help you understand what personal information BlackRock col-
lects, 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 applica-
tions, 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 pro-
cedures relating to the proper storage and disposal of such information.
74 ANNUAL REPORT OCTOBER 31, 2009
![](https://capedge.com/proxy/N-CSR/0000900092-10-000032/brtax-6ar1009x76x1.jpg)
This report is transmitted to shareholders only. It is not a prospectus. Past performance results shown in this report should not be considered a representation
of future performance. PSW, PSY, BPP, BTZ and BGT leverage their Common Shares, which creates risk for Common Shareholders, including the likelihood of
greater volatility of net asset value and market price of 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.
![](https://capedge.com/proxy/N-CSR/0000900092-10-000032/brtax-6ar1009x76x2.jpg)
Item 2 – Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end
of the period covered by this report, applicable to the registrant’s principal executive officer,
principal financial officer and principal accounting officer, or persons performing similar
functions. During the period covered by this report, there have been no amendments to or
waivers granted under the code of ethics. A copy of the code of ethics is available without
charge at www.blackrock.com.
Item 3 – Audit Committee Financial Expert – The registrant’s board of directors or trustees, as
applicable (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:
Kent Dixon
Frank J. Fabozzi
James T. Flynn
W. Carl Kester
Karen P. Robards
Robert S. Salomon, Jr. (retired effective December 31, 2008)
The registrant’s board of directors has determined that W. Carl Kester and Karen P. Robards
qualify as financial experts pursuant to Item 3(c)(4) of Form N-CSR.
Prof. Kester has a thorough understanding of generally accepted accounting principles,
financial statements and internal control over financial reporting as well as audit committee
functions. Prof. Kester has been involved in providing valuation and other financial
consulting services to corporate clients since 1978. Prof. Kester’s financial consulting
services present a breadth and level of complexity of accounting issues that are generally
comparable to the breadth and complexity of issues that can reasonably be expected to be
raised by the registrant’s financial statements.
Ms. Robards has a thorough understanding of generally accepted accounting principles,
financial statements and internal control over financial reporting as well as audit committee
functions. Ms. Robards has been President of Robards & Company, a financial advisory
firm, since 1987. Ms. Robards was formerly an investment banker for more than 10 years
where she was responsible for evaluating and assessing the performance of companies based
on their financial results. Ms. Robards has over 30 years of experience analyzing financial
statements. She also is a member of the audit committee of one publicly held company and
a non-profit organization.
Under applicable securities laws, a person determined to be an audit committee financial
expert will not be deemed an “expert” for any purpose, including without limitation for the
purposes of Section 11 of the Securities Act of 1933, as a result of being designated or
identified as an audit committee financial expert. The designation or identification as an
audit committee financial expert does not impose on such person any duties, obligations, or
liabilities greater than the duties, obligations, and liabilities imposed on such person as a
member of the audit committee and board of directors in the absence of such designation or
identification.
Item 4 – Principal Accountant Fees and Services | ||||||||
(a) Audit Fees | (b) Audit-Related Fees1 | (c) Tax Fees2 | (d) All Other Fees3 | |||||
Current | Previous | Current | Previous | Current | Previous | Current | Previous | |
Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | |
Entity Name | End | End | End | End | End | End | End | End |
BlackRock Credit | ||||||||
Allocation Income | $37,000 | $35,300 | $3,500 | $3,500 | $6,100 | $6,100 | $1,028 | $1,049 |
Trust III |
1 The nature of the services include assurance and related services reasonably related to the performance of the audit of
financial statements not included in Audit Fees.
2 The nature of the services include tax compliance, tax advice and tax planning.
3 The nature of the services include a review of compliance procedures and attestation thereto.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The registrant’s audit committee (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 registrant’s 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 SEC’s auditor independence rules and b) routine and recurring services that will
not impair the independence of the independent accountants may be approved by the
Committee without consideration on a specific case-by-case basis (“general pre-approval”).
The term of any general pre-approval is 12 months from the date of the pre-approval, unless
the Committee provides for a different period. Tax or other non-audit services provided to
the registrant which have a direct impact on the operation 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 for all of the registrants the
Committee oversees. 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 may delegate to one or more of its members 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 audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable
(g) Affiliates’ Aggregate Non-Audit Fees:
Current Fiscal Year | Previous Fiscal Year | |
Entity Name | End | End |
BlackRock Credit Allocation | ||
Income Trust III | $418,128 | $415,649 |
(h) The registrant’s audit committee has considered and determined that the provision of
non-audit services that were rendered to the registrant’s investment adviser (not including
any non-affiliated sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by the registrant’s investment adviser), and any entity
controlling, controlled by, or under common control with the investment adviser that
provides ongoing services to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal
accountant’s independence.
Regulation S-X Rule 2-01(c)(7)(ii) – $407,500, 0%
Item 5 – Audit Committee of Listed Registrants – The following individuals are members of the
registrant’s separately-designated standing audit committee established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)):
Kent Dixon
Frank J. Fabozzi
James T. Flynn
W. Carl Kester
Karen P. Robards
Robert S. Salomon, Jr. (retired effective December 31, 2008)
Item 6 – Investments
(a) The registrant’s Schedule of Investments is included as part of the Report to
Stockholders filed under Item 1 of this form.
(b) Not Applicable due to no such divestments during the semi-annual period covered since
the previous Form N-CSR filing.
Item 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management
Investment Companies – The board of directors has delegated the voting of proxies for the
Fund securities to the Fund’s investment adviser (“Investment Adviser”) pursuant to the
Investment Adviser’s proxy voting guidelines. Under these guidelines, the Investment
Adviser will vote proxies related to Fund securities in the best interests of the Fund and its
stockholders. From time to time, a vote may present a conflict between the interests of the
Fund’s stockholders, on the one hand, and those of the Investment Adviser, or any affiliated
person of the Fund or the Investment Adviser, on the other. In such event, provided that the
Investment Adviser’s Equity Investment Policy Oversight Committee, or a sub-committee
thereof (the “Oversight Committee”) is aware of the real or potential conflict or material
non-routine matter and if the Oversight Committee does not reasonably believe it is able to
follow its general voting guidelines (or if the particular proxy matter is not addressed in the
guidelines) and vote impartially, the Oversight Committee may retain an independent
fiduciary to advise the Oversight Committee on how to vote or to cast votes on behalf of the
Investment Adviser’s clients. If the Investment Adviser determines not to retain an
independent fiduciary, or does not desire to follow the advice of such independent fiduciary,
the Oversight Committee shall determine how to vote the proxy after consulting with the
Investment Adviser’s Portfolio Management Group and/or the Investment Adviser’s Legal
and Compliance Department and concluding that the vote cast is in its client’s best interest
notwithstanding the conflict. A copy of the Fund’s Proxy Voting Policy and Procedures are
attached as Exhibit 99.PROXYPOL. Information on how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 is available
without charge, (i) at www.blackrock.com and (ii) on the SEC’s website at
http://www.sec.gov.
Item 8 – Portfolio Managers of Closed-End Management Investment Companies – as of October 31,
2009.
(a)(1) The registrant (or “Fund”) is managed by a team of investment professionals led by
John Burger, Managing Director at BlackRock. Mr. Burger is a member of
BlackRock’s fixed income portfolio management group and is primarily responsible
for the day-to-day management of the registrant’s portfolio and the selection of its
investments. Mr. Burger has been a member of the registrant’s portfolio management
team since 2006.
Portfolio Manager | Biography | |||||
John Burger | Managing Director of BlackRock, Inc. since 2006; Managing Director of | |||||
Merrill Lynch Investment Managers, L.P. (“MLIM”) from 2004 to 2006. | ||||||
(a)(2) As of October 31, 2009: | ||||||
(ii) Number of Other Accounts Managed | (iii) Number of Other Accounts and | |||||
and Assets by Account Type | Assets for Which Advisory Fee is | |||||
Performance-Based | ||||||
Other | Other Pooled | Other | Other Pooled | |||
(i) Name of | Registered | Investment | Other | Registered | Investment | Other |
Portfolio Manager | Investment | Vehicles | Accounts | Investment | Vehicles | Accounts |
Companies | Companies | |||||
John Burger | 4 | 2 | 56 | 0 | 0 | 0 |
$1.57 Billion | $102 Million | $11.28 Billion | $0 | $0 | $0 | |
(iv) Potential Material Conflicts of Interest |
BlackRock and its affiliates (collectively, herein “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, its affiliates and significant shareholders and any officer, director, stockholder
or employee may or may not have an interest in the securities whose purchase and sale
BlackRock recommends to the Fund. BlackRock, or any of its affiliates or significant
shareholders, or any officer, director, stockholder, 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’s (or its
affiliates’ or significant shareholders’) officers, directors or employees are directors or
officers, or companies as to which BlackRock 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. Each portfolio manager
also may manage accounts whose investment strategies may at times be opposed to the
strategy utilized for a fund. In this connection, it should be noted that a portfolio manager
may currently manage certain accounts that are subject to performance fees. In addition, a
portfolio manager may assist in managing certain hedge funds and may be entitled to
receive a portion of any incentive fees earned on such funds and a portion of such incentive
fees may be voluntarily or involuntarily deferred. Additional portfolio managers may in the
future manage other such accounts or funds and may be entitled to receive incentive fees.
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 has adopted a policy that is
intended to ensure that investment opportunities are allocated fairly and equitably among
client accounts over time. This policy also seeks to achieve 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.
(a)(3) As of October 31, 2009:
Portfolio Manager Compensation Overview
BlackRock’s financial arrangements with its portfolio managers, its competitive
compensation and its career path emphasis at all levels reflect the value senior management
places on key resources. Compensation may include a variety of components and may vary
from year to year based on a number of factors. The principal components of compensation
include a base salary, a performance-based discretionary bonus, participation in various
benefits programs and one or more of the incentive compensation programs established by
BlackRock such as its Long-Term Retention and Incentive Plan.
Base compensation. Generally, portfolio managers receive base compensation based on
their seniority and/or their position with the firm. Senior portfolio managers who perform
additional management functions within the portfolio management group or within
BlackRock may receive additional compensation for serving in these other capacities.
Discretionary Incentive Compensation
Discretionary incentive compensation is a function of several components: the performance
of BlackRock, Inc., the performance of the portfolio manager’s group within BlackRock,
the investment performance, including risk-adjusted returns, of the firm’s assets under
management or supervision by that portfolio manager relative to predetermined
benchmarks, and the individual’s seniority, role within the portfolio management team,
teamwork and contribution to the overall performance of these portfolios and BlackRock.
In most cases, including for the portfolio managers of the Fund, these benchmarks are the
same as the benchmark or benchmarks against which the performance of the Fund or other
accounts managed by the portfolio managers are measured. BlackRock’s Chief Investment
Officers determine the benchmarks against which the performance of funds and other
accounts managed by each portfolio manager is compared and the period of time over which
performance is evaluated. With respect to the portfolio manager, such benchmarks for the
Fund include a combination of certain fund industry peer groups.
BlackRock’s Chief Investment Officers make a subjective determination with respect to the
portfolio manager’s compensation based on the performance of the funds and other accounts
managed by each portfolio manager relative to the various benchmarks noted above.
Performance is measured on both a pre-tax and after-tax basis over various time periods
including 1, 3, 5 and 10-year periods, as applicable.
Distribution of Discretionary Incentive Compensation
Discretionary incentive compensation is distributed to portfolio managers in a combination
of cash and BlackRock, Inc. restricted stock units which vest ratably over a number of
years. The BlackRock, Inc. restricted stock units, if properly vested, will be settled in
BlackRock, Inc. common stock. Typically, the cash bonus, when combined with base
salary, represents more than 60% of total compensation for the portfolio managers. Paying
a portion of annual bonuses in stock puts compensation earned by a portfolio manager for a
given year “at risk” based on BlackRock’s ability to sustain and improve its performance
over future periods.
Long-Term Retention and Incentive Plan (“LTIP”) — The LTIP is a long-term
incentive plan that seeks to reward certain key employees. Beginning in 2006, awards are
granted under the LTIP in the form of BlackRock, Inc. restricted stock units that, if properly
vested and subject to the attainment of certain performance goals, will be settled in
BlackRock, Inc. common stock. Mr. Burger has received awards under the LTIP.
Deferred Compensation Program — A portion of the compensation paid to
eligible BlackRock employees may be voluntarily deferred into an account that tracks the
performance of certain of the firm’s investment products. Each participant in the deferred
compensation program is permitted to allocate his deferred amounts among the various
investment options. Mr. Burger has participated in the deferred compensation program.
Other compensation benefits. In addition to base compensation 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 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 6% of eligible pay contributed to the plan capped
at $4,000 per year, and a company retirement contribution equal to 3-5% of eligible
compensation. The RSP offers a range of investment options, including registered
investment companies managed by the firm. BlackRock contributions follow the investment
direction set by participants for their own contributions or, absent employee investment
direction, are invested into a balanced portfolio. The ESPP allows for investment in
BlackRock 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
or a dollar value of $25,000. Each portfolio manager is eligible to participate in these plans.
(a)(4) Beneficial Ownership of Securities – October 31, 2009.
Portfolio Manager | Dollar Range of Equity Securities |
Beneficially Owned |
John Burger
None
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 – The registrant’s Nominating and
Governance Committee will consider nominees to the board of directors recommended by
shareholders when a vacancy becomes available. Shareholders who wish to recommend a
nominee should send nominations that include biographical information and set forth the
qualifications of the proposed nominee to the registrant’s Secretary. There have been no
material changes to these procedures.
Item 11 – Controls and Procedures
11(a) – The registrant’s principal executive and principal financial officers or persons performing
similar functions have concluded that the registrant’s disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the
“1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the
evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act
and Rule 13(a)-15(b) under the Securities Exchange Act of 1934, as amended.
11(b) – There were no changes in the registrant’s internal control over financial reporting (as
defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter
of the period covered by this report that have materially affected, or are reasonably likely to
materially affect, the registrant’s internal control over financial reporting.
Item 12 – Exhibits attached hereto
12(a)(1) – Code of Ethics – See Item 2
12(a)(2) – Certifications – Attached hereto
12(a)(3) – Not Applicable
12(b) – Certifications – Attached hereto
12(c) – Not Applicable
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 Credit Allocation Income Trust III
By: /s/ Anne F. Ackerley
Anne F. Ackerley
Chief Executive Officer of
BlackRock Credit Allocation Income Trust III
Date: December 21, 2009
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/ Anne F. Ackerley
Anne F. Ackerley
Chief Executive Officer (principal executive officer) of
BlackRock Credit Allocation Income Trust III
Date: December 21, 2009
By: /s/ Neal J. Andrews
Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock Credit Allocation Income Trust III
Date: December 21, 2009