UNITEDSTATES
SECURITIESANDEXCHANGECOMMISSION
Washington,D.C.20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21413
Name of Fund: BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: Anne F. Ackerley, Chief Executive Officer, BlackRock
Floating Rate Income Strategies Fund, Inc., 40 East 52nd Street, New York, NY 10022.
Registrant’s telephone number, including area code: (800) 882-0052, Option 4
Date of fiscal year end: 08/31/2009
Date of reporting period: 08/31/2009
Item 1 – Report to Stockholders
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EQUITIES FIXED INCOME REAL ESTATE LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS
Annual Report
AUGUST 31, 2009
BlackRock Defined Opportunity Credit Trust (BHL)
BlackRock Diversified Income Strategies Fund, Inc. (DVF)
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
BlackRock Limited Duration Income Trust (BLW)
BlackRock Senior Floating Rate Fund, Inc.
BlackRock Senior Floating Rate Fund II, Inc.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
Table of Contents | |
Page | |
Dear Shareholder | 3 |
Annual Report: | |
Fund Summaries | 4 |
The Benefits and Risks of Leveraging | 10 |
Derivative Financial Instruments | 11 |
Disclosure of Expenses | 11 |
Fund Financial Statements | |
Schedules of Investments | 12 |
Statements of Assets and Liabilities | 38 |
Statements of Operations | 40 |
Statements of Changes in Net Assets | 42 |
Statements of Cash Flows | 45 |
Fund Financial Highlights | 46 |
Fund Notes to Financial Statements | 52 |
Fund Report of Independent Registered Public Accounting Firm | 63 |
Important Tax Information | 64 |
Master Senior Floating Rate LLC Portfolio Summary | 64 |
Master Senior Floating Rate LLC Financial Statements: | |
Schedule of Investments | 65 |
Statement of Assets and Liabilities | 71 |
Statement of Operations | 72 |
Statements of Changes in Net Assets | 72 |
Statement of Cash Flows | 73 |
Master Senior Floating Rate LLC Financial Highlights | 74 |
Master Senior Floating Rate LLC Notes to Financial Statements | 75 |
Master Senior Floating Rate LLC Report of Independent Registered Public Accounting Firm | 80 |
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements | 81 |
Automatic Dividend Reinvestment Plan | 85 |
Officers and Directors | 86 |
Additional Information | 89 |
2 ANNUAL REPORT AUGUST 31, 2009
Dear Shareholder
The past 12 months reveal two distinct economic and market backdrops — one of extreme investor pessimism and decided weakness, and another of
increased optimism amid growing signs of recovery. The start of the period was characterized by the former. September through December 2008 saw the
surge of the economic storm that sparked the worst recession in decades. The months featured, among others, the infamous collapse of Lehman Brothers,
uniformly poor economic data and plummeting investor confidence that resulted in massive government intervention (on a global scale) in the financial sys-
tem 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.
In this environment, US equities contended with extraordinary volatility, posting steep declines through mid-March before embarking on a rally that resulted
in strong year-to-date returns for all major indexes. June saw a brief correction, though it appeared to be induced more by profit-taking and portfolio rebal-
ancing than by a change in the economic outlook. The experience in international markets was similar to that in the United States. Notably, emerging mar-
kets staged a strong comeback in 2009 as these areas of the globe have generally seen a stronger acceleration in economic activity.
In fixed income markets, the flight-to-safety premium in Treasury securities prevailed during the equity market downturn, but more recently, ongoing concerns
about deficit spending, debt issuance, inflation and dollar weakness have kept Treasury yields higher. At the same time, relatively attractive yields and dis-
tressed valuations among non-Treasury assets, coupled with a more favorable macro environment, drew in sidelined investors and triggered a sharp recovery
in these sectors. This was particularly evident in the high yield sector, which has firmly outpaced all other taxable asset classes since the start of 2009. The
municipal bond market enjoyed strong returns in 2009 as well, buoyed by a combination of attractive valuations, robust retail investor demand and a slow-
down in forced selling. Moreover, the Build America Bond program has alleviated supply pressures, creating a more favorable technical environment. In par-
ticular, August marked the municipal market’s best monthly performance in more than 20 years, as the asset class has regained year-to-date all that was
lost during 2008.
Overall, results for the major benchmark indexes were mixed. Higher-risk assets (i.e., equities and high yield bonds) and Treasuries reflected a bifurcated
market, while less-risky fixed income investments posted stable, modest returns.
Total Returns as of August 31, 2009 | 6-month | 12-month |
US equities (S&P 500 Index) | 40.52% | (18.25)% |
Small cap US equities (Russell 2000 Index) | 48.25 | (21.29) |
International equities (MSCI Europe, Australasia, Far East Index) | 53.47 | (14.95) |
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index*) | (1.61) | 6.77 |
Taxable fixed income (Barclays Capital US Aggregate Bond Index) | 5.95 | 7.94 |
Tax-exempt fixed income (Barclays Capital Municipal Bond Index) | 5.61 | 5.67 |
High yield bonds (Barclays Capital US Corporate High Yield 2% Issuer Capped Index) | 36.31 | 7.00 |
* 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 tur- | ||
bulence, as ever, BlackRock’s full resources are dedicated to the management of our clients’ assets. We invite you to visit www.blackrock.com/funds for our | ||
most current views on the economy and financial markets. 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 June 16, 2009, BlackRock, Inc. announced that it received written notice from Barclays PLC (“Barclays”) in which Barclays’ Board of Directors had
accepted BlackRock’s offer to acquire Barclays Global Investors (“BGI”). At a special meeting held on August 6, 2009, BlackRock’s proposed purchase of
BGI was approved by an overwhelming majority of Barclays’ voting shareholders, an important step toward closing the transaction. The combination of
BlackRock and BGI will bring together market leaders in active and index strategies to create the preeminent asset management firm. The transaction is
scheduled to be completed in the fourth quarter of 2009, subject to important fund shareholder and regulatory approvals.
THIS PAGE NOT PART OF YOUR FUND REPORT 3
Fund Summary as of August 31, 2009 BlackRock Defined Opportunity Credit Trust
Investment Objective
BlackRock Defined Opportunity Credit Trust (BHL) (the “Fund”) seeks high current income, with a secondary objective of long-term capital appreciation.
No assurance can be given that the Fund’s investment objective will be achieved.
Performance
For the 12 months ended August 31, 2009, the Fund returned (2.65)% based on market price and (2.16)% based on net asset value (“NAV”). For the
same period, the closed-end Lipper Loan Participation Funds category posted an average return of (7.95)% on a market price basis and (13.39)% 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. The Fund maintained relatively defensive sector positioning and relatively low levels of lever-
age (less than 20%). On balance, that positioning benefited the Fund relative to its more highly levered Lipper competitors, although returns would have
been higher over the trailing six-month period had the Fund maintained a higher leverage balance. The Fund’s conservative positioning was a detractor dur-
ing the last six months given the market’s strong returns. During the period, the Fund moved from a larger cash and short-term investment balance, which
benefited performance in 2008, to a balance of less than 3%, which has benefited performance in the rising market of 2009.
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”) | BHL | ||||||
Initial Offering Date | January 31, 2008 | ||||||
Yield on Closing Market Price as of August 31, 2009 ($11.03)1 | 6.53% | ||||||
Current Monthly Distribution per Share2 | $0.06 | ||||||
Current Annualized Distribution per Share2 | $0.72 | ||||||
Leverage as of August 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 rate is not constant and is subject to change. | |||||||
3 Represents loans outstanding as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to | |||||||
borrowings), minus the sum of liabilities (other than borrowing 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: | |||||||
8/31/09 | 8/31/08 | Change | High | Low | |||
Market Price | $11.03 | $12.66 | (12.88)% | $13.29 | $6.53 | ||
Net Asset Value | $12.53 | $14.31 | (12.44)% | $14.35 | $8.36 | ||
The following unaudited charts show the portfolio composition of the Fund’s long-term investments: | |||||||
Portfolio Composition | |||||||
8/31/09 | 8/31/08 | ||||||
Floating Rate Loan Interests | 94% | 99% | |||||
Corporate Bonds | 6 | 1 |
4 ANNUAL REPORT AUGUST 31, 2009
Fund Summary as of August 31, 2009 BlackRock Diversified Income Strategies Fund, Inc.
Investment Objective
BlackRock Diversified Income Strategies Fund, Inc. (DVF) (the “Fund”) seeks to provide investors with a high current income by investing primarily in a
diversified portfolio of floating rate debt securities and instruments, including floating or variable rate loans, bonds, preferred securities (including convert-
ible preferred securities), notes or other debt securities or instruments that pay a floating rate of interest.
No assurance can be given that the Fund’s investment objective will be achieved.
Performance
For the 12 months ended August 31, 2009, the Fund returned (16.27)% based on market price and (23.82)% based on NAV. For the same period, the
closed-end Lipper Loan Participation Funds category posted an average return of (7.95)% on a market price basis and (13.39)% on a NAV basis. All returns
reflect reinvestment of dividends. The Fund moved from a discount to NAV to a premium by period-end, which accounts for the difference between perform-
ance based on price and performance based on NAV. Unlike other funds in the Lipper category, the Fund invests a significant amount of its portfolio in
fixed-rate, high yield corporate bonds, and a portion in high yield floating rate loan interests (“FRNs”). During the 12 months, fixed-rate, high yield bonds
outperformed leveraged loans and this contributed to performance. Conversely, the Fund’s credit quality has generally been skewed towards the lower credit
quality tiers, which had a negative impact on performance during the market’s fall in 2008. Though it has benefited the Fund in 2009 as markets rallied, on
balance, the positioning detracted relative to the Lipper category. The Fund’s allocation to high yield FRNs also hampered results as these issues underper-
formed. During the period, the Fund moved from a larger cash and short-term investment balance, which benefited performance in 2008, to a balance of
less than 3%, which further benefited performance in the rising market of 2009.
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 | DVF | |||||||
Initial Offering Date | January 31, 2005 | |||||||
Yield on Closing Market Price as of August 31, 2009 ($8.80)1 | 11.93% | |||||||
Current Monthly Distribution per Share2 | $0.0875 | |||||||
Current Annualized Distribution per Share2 | $1.0500 | |||||||
Leverage as of August 31, 20093 | 14% | |||||||
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 A change in the distribution rate was declared on September 1, 2009. The Monthly Distribution per Share was decreased to $0.0785. The Yield on | ||||||||
Closing Market Price, Current Monthly Distribution per Share and Current Annualized Distribution per Share do not reflect the new distribution rate. | ||||||||
The new distribution rate is not constant and is subject to further change in the future. | ||||||||
3 Represents loans outstanding as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to | ||||||||
any borrowings), 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: | ||||||||
8/31/09 | 8/31/08 | Change | High | Low | ||||
Market Price | $8.80 | $12.77 | (31.09)% | $13.04 | $4.70 | |||
Net Asset Value | $8.74 | $13.94 | (37.30)% | $13.94 | $5.35 | |||
The following unaudited charts show the portfolio composition of the Fund’s long-term investments and credit quality allocations | ||||||||
of the Fund’s corporate bond investments: | ||||||||
Portfolio Composition | Credit Quality Allocations4 | |||||||
8/31/09 | 8/31/08 | 8/31/09 | 8/31/08 | |||||
Corporate Bonds | 49% | 50% | AAA/Aaa | — | 3% | |||
Floating Rate Loan Interests | 49 | 47 | BBB/Baa | — | 1 | |||
Common Stocks | 2 | 3 | BB/Ba | 17% | 7 | |||
B/B | 37 | 61 | ||||||
CCC/Caa | 34 | 20 | ||||||
CC/Ca | 4 | 2 | ||||||
D | 3 | — | ||||||
Not Rated | 5 | 6 | ||||||
4 Using the higher of Standard & Poor’s (“S&P”) or Moody’s Investors | ||||||||
Service (“Moody’s”) ratings. |
ANNUAL REPORT AUGUST 31, 2009 5
Fund Summary as of August 31, 2009 BlackRock Floating Rate Income Strategies Fund, Inc.
Investment Objective
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) (the “Fund”) seeks high current income and such preservation of capital as is consistent with
investment in a diversified, leveraged portfolio consisting primarily of floating rate debt securities and instruments.
No assurance can be given that the Fund’s investment objective will be achieved.
Performance
For the 12 months ended August 31, 2009, the Fund returned (3.88)% based on market price and (8.88)% based on NAV. For the same period, the
closed-end Lipper Loan Participation Funds category posted an average return of (7.95)% on a market price basis and (13.39)% on a NAV basis. The per-
formance of the Lipper category does not necessarily correlate to that of the Fund, as the Lipper group includes unleveraged continuously offered closed-
end funds. All returns reflect reinvestment of dividends. 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. The Fund maintained relatively defensive sector positioning and low levels of leverage (less
than 20%). On balance, that positioning benefited the Fund versus its more highly levered Lipper competitors. The Fund also had about 20% of its portfolio
in high yield corporate bonds, which was beneficial as high yield outperformed loans. During the last six months, however, the Fund’s conservative position-
ing was a detractor given the market’s strong returns. During the period, the Fund moved from a larger cash and short-term investment balance, which bene-
fited performance in 2008, to a balance of less than 3%, which further benefited performance in the rising market of 2009.
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 | FRA | |||||||
Initial Offering Date | October 31, 2003 | |||||||
Yield on Closing Market Price as of August 31, 2009 ($12.26)1 | 8.79% | |||||||
Current Monthly Distribution per Share2 | $0.089835 | |||||||
Current Annualized Distribution per Share2 | $1.078020 | |||||||
Leverage as of August 31, 20093 | 14% | |||||||
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 A change in the distribution rate was declared on September 1, 2009. The Monthly Distribution per Share was decreased to $0.081500. The Yield | ||||||||
on Closing Market Price, Current Monthly Distribution per Share and Current Annualized Distribution per Share do not reflect the new distribution rate. | ||||||||
The new distribution rate is not constant and is subject to further change in the future. | ||||||||
3 Represents loans outstanding as a percentage of managed assets, which is the total assets of the Fund, including any assets attributable to | ||||||||
any borrowing that may be outstanding, minus the sum of accrued liabilities (other than debt 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: | ||||||||
8/31/09 | 8/31/08 | Change | High | Low | ||||
Market Price | $12.26 | $14.49 | (15.39)% | $14.68 | $7.79 | |||
Net Asset Value | $12.93 | $16.12 | (19.79)% | $16.12 | $8.96 | |||
The following unaudited charts show the portfolio composition of the Fund’s long-term investments and credit quality allocations of | ||||||||
the Fund’s corporate bond investments: | ||||||||
Portfolio Composition | Credit Quality Allocations4 | |||||||
8/31/09 | 8/31/08 | 8/31/09 | 8/31/08 | |||||
Floating Rate Loan Interests | 75% | 73% | AA/Aa | — | 5% | |||
Corporate Bonds | 24 | 26 | BBB/Baa | 12% | 11 | |||
Common Stocks | 1 | 1 | BB/Ba | 15 | 11 | |||
B/B | 46 | 59 | ||||||
CCC/Caa | 21 | 8 | ||||||
D/D | 4 | — | ||||||
Not Rated | 2 | 6 | ||||||
4 Using the higher of S&P’s or Moody’s ratings. |
6 ANNUAL REPORT AUGUST 31, 2009
Fund Summary as of August 31, 2009 BlackRock Limited Duration Income Trust
Investment Objective
BlackRock Limited Duration Income Trust (BLW) (the “Fund”) seeks to provide current income and capital appreciation.
No assurance can be given that the Fund’s investment objective will be achieved.
Performance
For the 12 months ended August 31, 2009, the Fund returned 6.40% based on market price and (1.57)% based on NAV. For the same period, the closed-
end Lipper High Current Yield Funds (Leveraged) category posted an average return of (2.57)% on a market price basis and (10.55)% on a NAV basis. All
returns reflect reinvestment of dividends. 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. The Fund’s Lipper category is composed primarily of high yield securities. The Fund tends to invest 25% to
30% of its portfolio in investment-grade bonds, which helped relative performance as these securities outperformed high yield securities. Exposure to mort-
gage-backed securities and an overall conservative positioning in high yield securities also aided results. At the same time, the Fund typically invests about
30% to 40% of its portfolio in bank loans; this detracted modestly from relative performance as loans underperformed high yield securities during the
period. The Fund’s allocation to investment-grade credit, while performing strongly, was a detractor in the last six months of the period when returns trailed
that of high yield securities. During the period, the Fund moved from a larger cash and short-term investment balance, which benefited performance in
2008, to a balance of less than 18%, which further benefited performance in the rising market of 2009.
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.
Symbol on NYSE | BLW | ||||||
Initial Offering Date | July 30, 2003 | ||||||
Yield on Closing Market Price as of August 31, 2009 ($14.09)1 | 7.03% | ||||||
Current Monthly Distribution per Share2 | $0.0825 | ||||||
Current Annualized Distribution per Share2 | $0.9900 | ||||||
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 A change in the distribution rate was declared on September 1, 2009. The Monthly Distribution per Share was decreased to $0.0700. The Yield on | |||||||
Closing Market Price, Current Monthly Distribution per Share and Current Annualized Distribution per Share do not reflect the new distribution rate. | |||||||
The new distribution rate is not constant and is subject to further change in the future. | |||||||
The table below summarizes the Fund’s market price and net asset value per share: | |||||||
8/31/09 | 8/31/08 | Change | High | Low | |||
Market Price | $14.09 | $14.57 | (3.29)% | $14.83 | $ 8.83 | ||
Net Asset Value | $14.95 | $16.71 | (10.53)% | $16.81 | $11.86 | ||
The following unaudited charts show the portfolio composition of the Fund’s long-term investments and credit quality allocations | |||||||
of the Fund’s corporate bond and US government securities investments: | |||||||
Portfolio Composition | Credit Quality Allocations3 | ||||||
8/31/09 | 8/31/08 | 8/31/09 | 8/31/08 | ||||
Floating Rate Loan Interests | 45% | 46% | AAA/Aaa4 | 53% | 47% | ||
Corporate Bonds | 24 | 32 | BBB/Baa | 6 | 8 | ||
U.S. Government Sponsored | BB/Ba | 11 | 10 | ||||
Agency Obligations | 26 | 16 | B | 10 | 25 | ||
U.S. Treasury Obligations | 1 | 4 | CCC/Caa | 16 | 7 | ||
Foreign Agency Obligations | 2 | 2 | C | 1 | — | ||
Asset-Backed Securities | 2 | — | D | 1 | — | ||
Not Rated | 2 | 3 | |||||
3 Using the higher of S&P’s or Moody’s ratings. | |||||||
4 Includes US Government Sponsored Agency securities and | |||||||
US Treasury Obligations, which are deemed AAA/Aaa by the | |||||||
investment advisor. |
ANNUAL REPORT AUGUST 31, 2009 7
Fund Summary as of August 31, 2009 BlackRock Senior Floating Rate Fund, Inc.
Investment Objective
BlackRock Senior Floating Rate Fund, Inc. (the “Fund”) is a continuously offered closed-end fund that seeks high current income and such preservation of
capital as is consistent with investment in senior collateralized corporate loans made by banks and other financial institutions.
No assurance can be given that the Fund’s investment objective will be achieved.
Performance
For the 12 months ended August 31, 2009, the Fund returned (4.69)% based on NAV. For the same period, the closed-end Lipper Loan Participation Funds
category posted an average return of (13.39)% on a NAV basis. All returns reflect reinvestment of dividends. The Fund maintained relatively defensive sector
positioning and no leverage, which benefited performance over the 12 months versus its Lipper competitors, many of which employ leverage. The Fund also
had about 9% of its portfolio in high yield bonds, which was beneficial as high yield outperformed loans. During the last six months, however, the Fund’s
conservative positioning was a detractor given the market’s strong returns. During the period, the Fund moved from a larger cash and short-term investment
balance, which benefited performance in 2008, to a balance of less than 8%, which further benefited performance in the rising market of 2009.
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 Information1 | |||||||
Initial Offering Date | November 3, 1989 | ||||||
Yield based on Net Asset Value as of August 31, 2009 ($7.16)2 | 3.60% | ||||||
Current Monthly Distribution per Share3 | $0.021903 | ||||||
Current Annualized Distribution per Share3 | $0.257890 | ||||||
1 The Fund is a continuously offered closed-end fund that does not trade on an exchange. | |||||||
2 Yield based on net asset value is calculated by dividing the current annualized distribution per share by the net asset value. | |||||||
Past performance does not guarantee future results. | |||||||
3 The distribution is not constant and is subject to change. | |||||||
The table below summarizes the change in the Fund’s NAV per share: | |||||||
8/31/09 | 8/31/08 | Change | High | Low | |||
Net Asset Value | $7.16 | $7.98 | (10.28)% | $7.98 | $5.54 | ||
Expense Example for Continuously Offered Closed-End Funds | |||||||
Actual | Hypothetical5 | ||||||
Beginning | Ending | Beginning | Ending | ||||
Account Value | Account Value | Expenses Paid | Account Value | Account Value | Expenses Paid | ||
March 1, 2009 | August 31, 2009 | During the Period4 | March 1, 2009 August 31, 2009 During the Period4 | ||||
BlackRock Senior Floating Rate, Inc. | $1,000 | $1,232.80 | $8.72 | $1,000 | $1,017.39 | $7.88 | |
4 Expenses are equal to the annualized expense ratio of 1.55%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year | |||||||
period shown). Because the Fund is a feeder fund, the expense table reflects the expenses of both the feeder fund and the Master LLC in which it invests. | |||||||
5 Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days in the most recent fiscal half year divided by 365. | |||||||
See “Disclosure of Expenses for Continuously Offered Closed-End Funds” on page 11 for further information on how expenses were calculated. |
8 ANNUAL REPORT AUGUST 31, 2009
Fund Summary as of August 31, 2009 BlackRock Senior Floating Rate Fund II, Inc.
Investment Objective
BlackRock Senior Floating Rate Fund II, Inc. (the “Fund”) is a continuously offered closed-end fund that seeks high current income and such preservation
of capital as is consistent with investment in senior collateralized corporate loans made by banks and other financial institutions.
No assurance can be given that the Fund’s investment objective will be achieved.
Performance
For the 12 months ended August 31, 2009, the Fund returned (4.70)% based on NAV. For the same period, the closed-end Lipper Loan Participation Funds
category posted an average return of (13.39)% on a NAV basis. All returns reflect reinvestment of dividends. The Fund maintained relatively defensive sector
positioning and no leverage, which benefited performance over the 12 months versus its Lipper competitors, many of which employ leverage. The Fund also
had about 9% of its portfolio in high yield bonds, which was beneficial as high yield outperformed loans. During the last six months, however, the Fund’s
conservative positioning was a detractor given the market’s strong returns. During the period, the Fund moved from a larger cash and short-term investment
balance, which benefited performance in 2008, to a balance of less than 8%, which further benefited performance in the rising market of 2009.
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 Information1 | |||||||
Initial Offering Date | March 26, 1999 | ||||||
Yield based on Net Asset Value as of August 31, 2009 ($7.76)2 | 3.44% | ||||||
Current Monthly Distribution per Share3 | $0.022653 | ||||||
Current Annualized Distribution per Share3 | $0.266721 | ||||||
1 The Fund is a continuously offered closed-end fund that does not trade on an exchange. | |||||||
2 Yield based on net asset value is calculated by dividing the current annualized distribution per share by the net asset value. | |||||||
Past performance does not guarantee future results. | |||||||
3 The distribution is not constant and is subject to change. | |||||||
The table below summarizes the change in the Fund’s NAV per share: | |||||||
8/31/09 | 8/31/08 | Change | High | Low | |||
Net Asset Value | $7.76 | $8.67 | (10.50)% | $8.67 $6.02 | |||
Expense Example for Continuously Offered Closed-End Funds | |||||||
Actual | Hypothetical5 | ||||||
Beginning | Ending | Beginning | Ending | ||||
Account Value | Account Value | Expenses Paid | Account Value | Account Value | Expenses Paid | ||
March 1, 2009 | August 31, 2009 | During the Period4 | March 1, 2009 August 31, 2009 | During the Period4 | |||
BlackRock Senior Floating Rate II, Inc. | $1,000 | $1,233.70 | $9.46 | $1,000 | $1,016.74 | $8.54 | |
4 Expenses are equal to the annualized expense ratio of 1.68%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year | |||||||
period shown). Because the Fund is a feeder fund, the expense table reflects the expenses of both the feeder fund and the Master LLC in which it invests. | |||||||
5 Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days in the most recent fiscal half year divided by 365. | |||||||
See “Disclosure of Expenses for Continuously Offered Closed-End Funds” on page 11 for further information on how expenses were calculated. |
ANNUAL REPORT AUGUST 31, 2009 9
The Benefits and Risks of Leveraging
BlackRock Defined Opportunity Credit Trust, BlackRock Diversified Income
Strategies Fund, Inc., BlackRock Floating Rate Income Strategies Fund, Inc.
and BlackRock Limited Duration Income Trust (each a “Fund” and collec-
tively, the “Funds”) may utilize leverage to seek to enhance the yield and
NAV. However, these objectives cannot be achieved in all interest rate
environments.
The Funds may utilize leverage through borrowings or through entering into
reverse repurchase agreements and dollar rolls. 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 shareholders will benefit from the incremental
net income.
The interest earned on securities purchased with the proceeds from lever-
age is paid to shareholders in the form of dividends, and the value of these
portfolio holdings is reflected in the per share NAV. However, in order to
benefit 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 shareholders will be lower than if
the Fund had not used leverage.
To illustrate these concepts, assume a Fund’s capitalization is $100 million
and it borrows for an additional $30 million, creating a total value of $130
million available for investment 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 borrowing
costs and interest expense on the $30 million of borrowings based on the
lower short-term interest rates. At the same time, the securities purchased
by the Fund with assets received from the borrowings earn the income
based on long-term interest rates. In this case, the borrowing costs and
interest expense of the borrowings is significantly lower than the income
earned on the Fund’s long-term investments, and therefore 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
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 interest expense on
the higher short-term interest rates whereas the Fund’s total portfolio earns
income based on lower long-term interest rates.
Furthermore, the value of the Fund’s portfolio investments generally varies
inversely with the direction of long-term interest rates, although other fac-
tors can influence the value of portfolio investments. In contrast, the
redemption value of the Fund’s borrowings do not fluctuate in relation to
interest rates. As a result, changes in interest rates can influence the Fund’s
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 shareholders, but as described above, it also creates risks
as short- or long-term interest rates fluctuate. Leverage also will generally
cause greater changes in each Fund’s NAV, market price and dividend rate
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 avail-
able 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 leverage or as required by the terms of leverage instruments which
may cause the Funds to incur losses. The use of leverage may limit a
Funds’ ability to invest in certain types of securities or use certain types of
hedging strategies. Each Fund will incur expenses in connection with the
use of leverage, all of which are borne by the shareholders of each Fund
and may reduce income.
Under the Investment Company Act of 1940, the Funds are permitted
to borrow through their credit facility up to 33 1 / 3% of their total managed
assets. As of August 31, 2009, BlackRock Limited Duration Income Trust
had no outstanding leverage and the other Funds had outstanding leverage
from borrowings as a percentage of their total managed assets as follows:
Percent of | |
Leverage | |
BHL | 19% |
DVF | 14% |
FRA | 14% |
10 ANNUAL REPORT AUGUST 31, 2009
Derivative Financial Instruments
The Funds may invest in various derivative instruments, including swap
agreements, financial futures contracts, foreign currency exchange contracts
and options, as specified in Note 2 of the Notes to Financial Statements,
which constitute forms of economic leverage. Such instruments are used to
obtain exposure to a market without owning or taking physical custody of
securities or to hedge market and/or interest 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 instru-
ment. The Funds’ ability to successfully 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 instru-
ments may result in losses greater than if they had not been used, may
require the Funds to sell or purchase portfolio securities at inopportune
times or for 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 it might otherwise sell. The Funds’ investments in these
instruments are discussed in detail in the Notes to Financial Statements.
Disclosure of Expenses for Continuously Offered Closed-End Funds
Shareholders of BlackRock Senior Floating Rate Fund, Inc. and
BlackRock Senior Floating Rate Fund II, Inc. may incur the following charges:
(a) expenses related to transactions, including early withdrawal fees; and
(b) operating expenses, including administration fees, and other Fund
expenses. The examples on the previous pages (which are based on a hypo-
thetical investment of $1,000 invested on March 1, 2009 and held through
August 31, 2009) are intended to assist shareholders both in calculating
expenses based on an investment in each Fund and in comparing
these expenses with similar costs of investing in other mutual funds.
The tables provide information about actual account values and actual
expenses. In order to estimate the expenses a shareholder paid during
the period covered by this report, shareholders can divide their account
value by $1,000 and then multiply the result by the number under the
heading entitled “Expenses Paid During the Period.”
The tables also provide information about hypothetical account values and
hypothetical expenses based on each Fund’s actual expense ratio and an
assumed rate of return of 5% per year before expenses. In order to assist
shareholders in comparing the ongoing expenses of investing in these
Funds and other funds, compare the 5% hypothetical example with the 5%
hypothetical examples that appear in other funds’ shareholder reports.
The expenses shown in the tables are intended to highlight shareholders’
ongoing costs only and do not reflect any transactional expenses, such
as early withdrawal fees. Therefore, the hypothetical examples are useful
in comparing ongoing expenses only, and will not help shareholders deter-
mine the relative total expenses of owning different funds. If these trans-
actional expenses were included, shareholder expenses would have
been higher.
ANNUAL REPORT AUGUST 31, 2009 11
Schedule of Investments August 31, 2009 | |||
Common Stocks | Shares | Value | |
Capital Markets — 0.4% | |||
E*Trade Financial Corp. (a) | 273,000 $ | 480,480 | |
Total Common Stocks — 0.4% | 480,480 | ||
Par | |||
Corporate Bonds | (000) | ||
Chemicals — 0.2% | |||
Nalco Co., 8.25%, 5/15/17 (b) | USD | 250 | 261,250 |
Commercial Services & Supplies — 0.4% | |||
Clean Harbors, Inc., 7.63%, 8/15/16 (b) | 400 | 401,000 | |
Containers & Packaging — 0.5% | |||
Crown Americas LLC, 7.63%, 5/15/17 (b) | 280 | 277,900 | |
Owens-Brockway Glass Container, Inc., 7.38%, 5/15/16 | 280 | 278,600 | |
556,500 | |||
Diversified Financial Services — 0.2% | |||
FCE Bank Plc: | |||
7.13%, 1/16/12 | EUR | 100 | 129,742 |
7.13%, 1/15/13 | 50 | 62,720 | |
192,462 | |||
Diversified Telecommunication Services — 0.8% | |||
PAETEC Holding Corp., 8.88%, 6/30/17 (b) | USD | 250 | 238,125 |
Qwest Corp., 3.88%, 6/15/13 (c) | 750 | 693,750 | |
931,875 | |||
Food Products — 0.4% | |||
Smithfield Foods, Inc., 10.00%, 7/15/14 (b) | 440 | 448,800 | |
Hotels, Restaurants & Leisure — 0.2% | |||
MGM Mirage, 11.13%, 11/15/17 (b) | 240 | 259,800 | |
IT Services — 0.3% | |||
SunGard Data Systems, Inc., 4.88%, 1/15/14 | 383 | 344,700 | |
Independent Power Producers & Energy Traders — 1.0% | |||
Calpine Construction Finance Co., LP, 8.00%, 6/01/16 (b) | 1,165 | 1,159,175 | |
Machinery — 0.2% | |||
CPM Holdings, Inc., 10.63%, 9/01/14 (b) | 200 | 202,000 | |
Media — 1.2% | |||
Cablevision Systems Corp., Series B, 8.00%, 4/15/12 | 710 | 725,975 | |
DIRECTV Holdings LLC, 8.38%, 3/15/13 | 650 | 666,250 | |
1,392,225 | |||
Paper & Forest Products — 0.2% | |||
Verso Paper Holdings LLC, 11.50%, 7/01/14 (b) | 200 | 196,000 | |
Textiles, Apparel & Luxury Goods — 0.6% | |||
Levi Strauss & Co., 8.63%, 4/01/13 | EUR | 450 | 616,094 |
Wireless Telecommunication Services — 1.3% | |||
Cricket Communications, Inc., 7.75%, 5/15/16 (b) | USD | 1,500 | 1,455,000 |
Total Corporate Bonds — 7.5% | 8,416,881 | ||
Floating Rate Loan Interests | |||
Aerospace & Defense — 1.0% | |||
Avio SpA: | |||
Facility B2, 2.39%, 12/15/14 | 468 | 393,380 | |
Facility C2, 3.01%, 12/14/15 | 500 | 420,000 | |
Hawker Beechcraft Acquisition Co., LLC: | |||
LC Facility Deposit, 2.28%, 3/26/14 | 23 | 17,391 | |
Term Loan, 2.26% – 2.60%, 3/26/14 | 395 | 294,670 | |
1,125,441 |
BlackRock Defined Opportunity Credit Trust (BHL) | |||
(Percentages shown are based on Net Assets) | |||
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Auto Components — 3.6% | |||
Allison Transmission, Inc., Term Loan, 3.03%, 8/07/14 | USD | 2,172 $ | 1,854,027 |
Dana Holding Corp., Term Advance, 7.25%, 1/31/15 | 1,301 | 995,881 | |
Delphi Corp. (a)(d): | |||
Initial Tranche Term Loan C, 9.50%, 12/31/09 | 908 | 499,164 | |
Subsequent Tranche Term Loan C, 9.50%, 12/31/09 | 92 | 50,836 | |
The Goodyear Tire & Rubber Co., Loan (Second Lien), | |||
2.02%, 4/30/14 | 750 | 691,875 | |
4,091,783 | |||
Automobiles — 0.4% | |||
Ford Motor Co., Term Loan, 3.28% – 3.51%, 12/15/13 | 498 | 431,615 | |
Building Products — 1.6% | |||
Building Materials Corp. of America, Term Loan Advance, | |||
3.06%, 2/22/14 | 741 | 676,428 | |
Momentive Performance Materials (Blitz 06-103 GmbH), | |||
Tranche B-2 Term Loan, 2.74%, 12/04/13 | EUR | 997 | 1,076,830 |
1,753,258 | |||
Capital Markets — 0.4% | |||
Nuveen Investments, Inc., Term Loan, 3.49% – 3.50%, | |||
11/13/14 | USD | 598 | 485,499 |
Chemicals — 7.6% | |||
Ashland, Inc., Term B Borrowing, 7.65%, 5/13/14 | 800 | 813,373 | |
Brenntag Holding GmbH & Co. KG, Facility B2, 2.27%, | |||
1/20/14 | 978 | 929,090 | |
Cognis GmbH, Facility C, 2.62%, 9/15/13 | 1,000 | 847,500 | |
Huish Detergents Inc., Tranche B Term Loan, 2.02%, | |||
4/26/14 | 987 | 941,326 | |
Matrix Acquisition Corp. (fka MacDermid, Inc.), Tranche B | |||
Term Loan, 2.26%, 4/12/14 | 1,557 | 1,292,256 | |
Nalco Co., Term Loan, 6.50%, 5/06/16 | 1,225 | 1,241,844 | |
PQ Corp. (fka Niagara Acquisition, Inc.): | |||
Loan (Second Lien), 6.77%, 7/30/15 | 1,000 | 550,000 | |
Original Term Loan (First Lien), 3.52% – 3.75%, | |||
7/31/14 | 1,239 | 1,021,448 | |
Solutia Inc., Loan, 7.25%, 2/28/14 | 987 | 977,389 | |
8,614,226 | |||
Commercial Services & Supplies — 4.2% | |||
ARAMARK Corp.: | |||
LC Facility Letter of Credit, 0.22%, 1/26/14 | 120 | 111,797 | |
U.S. Term Loan, 2.47%, 1/26/14 | 1,881 | 1,759,753 | |
Alliance Laundry Systems LLC, Term Loan, 2.79% – 4.75%, | |||
1/27/12 | 737 | 706,447 | |
Casella Waste Systems, Inc., Term B Loan, 7.00%, | |||
4/09/14 | 500 | 501,250 | |
Kion Group GmbH (formerly Neggio Holdings 3 GmbH): | |||
Facility B, 2.51%, 12/29/14 | 500 | 317,188 | |
Facility C, 2.76%, 12/29/15 | 500 | 317,188 | |
Synagro Technologies, Inc., Term Loan (First Lien), | |||
2.26% – 2.27%, 4/02/14 | 987 | 777,582 | |
West Corp., Term B-2 Loan, 2.64% – 2.65%, 10/24/13 | 209 | 198,498 | |
4,689,703 | |||
Computers & Peripherals — 0.8% | |||
Intergraph Corp., Initial Term Loan (First Lien), 2.37%, | |||
5/29/14 | 1,000 | 960,000 | |
Containers & Packaging — 3.9% | |||
Crown Americas LLC, Additional Term B Dollar Loan, | |||
2.02%, 11/15/12 | 495 | 487,887 | |
Graham Packaging Co., L.P., Term Loan B, 2.56%, 10/07/11 | 449 | 436,509 | |
Graphic Packaging International, Inc., Incremental Term | |||
Loan, 3.08% – 3.35%, 5/16/14 | 1,480 | 1,442,975 | |
Smurfit Kappa Acquisitions (JSG): | |||
C1 Term Loan Facility, 4.12% – 4.87%, 12/01/14 | EUR | 484 | 662,379 |
Term B1, 3.87% – 4.73%, 12/02/13 | 486 | 665,768 | |
Smurfit-Stone Container Enterprises, Inc., U.S. Term | |||
Loan Debtor in Possession, 10.00%, 1/28/10 | 720 | 726,993 | |
4,422,511 |
See Notes to Financial Statements.
12 ANNUAL REPORT AUGUST 31, 2009
Schedule of Investments (continued) BlackRock Defined Opportunity Credit Trust (BHL)
(Percentages shown are based on Net Assets)
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Diversified Consumer Services — 1.3% | |||
Coinmach Laundry Corp., Delay Draw Term Loan, | |||
3.28% – 3.43%, 11/14/14 | USD | 1,730 | $ 1,470,989 |
Diversified Telecommunication Services — 4.7% | |||
BCM Ireland Holdings Ltd. (Eircom): | |||
Facility B, 2.37%, 9/30/15 | EUR | 492 | 641,866 |
Facility C, 2.62%, 9/30/16 | 492 | 641,938 | |
Hawaiian Telcom Communications, Inc., Tranche C | |||
Term Loan, 4.75%, 5/30/14 | USD | 506 | 307,082 |
Integra Telecom Holdings, Inc., Term Loan (First Lien), | |||
10.50%, 8/31/13 | 1,972 | 1,932,952 | |
PAETEC Holding Corp., Replacement Term Loan, 2.76%, | |||
2/28/13 | 193 | 182,138 | |
Time Warner Telecom Holdings Inc., Term Loan B, | |||
2.02%, 1/07/13 | 152 | 148,532 | |
Wind Finance SL SA, Euro Facility (Second Lien), 7.70%, | |||
12/17/14 | EUR | 1,000 | 1,437,910 |
5,292,418 | |||
Electrical Equipment — 0.4% | |||
Baldor Electric Co., Term Loan, 5.25%, 1/31/14 | USD | 500 | 493,214 |
Electronic Equipment, Instruments & | |||
Components — 2.2% | |||
Flextronics International Ltd.: | |||
A Closing Date Loan, 2.53% – 2.85%, 10/1/2014 | 761 | 682,443 | |
Delay Draw Term Loan, 2.76%, 10/01/14 | 219 | 196,104 | |
L-1 Identity Solutions Operating Co., Term Loan, 6.75%, | |||
8/05/13 | 678 | 678,839 | |
Matinvest 2 SAS/Butterfly Wendel US, Inc. | |||
(Deutsche Connector): | |||
B-2 Facility, 2.97%, 6/22/14 | 886 | 496,037 | |
C-2 Facility 3.22%, 6/22/15 | 732 | 409,854 | |
2,463,277 | |||
Energy Equipment & Services — 0.8% | |||
Dresser, Inc., Term B Loan, 2.68%, 5/04/14 | 513 | 478,350 | |
Volnay Acquisition Co., I (aka CGG) B1 Term Loan Facility, | |||
3.93% – 4.58%, 1/12/14 | 421 | 407,944 | |
886,294 | |||
Food & Staples Retailing — 1.9% | |||
AB Acquisitions UK Topco 2 Ltd. (fka Alliance Boots), | |||
Facility B1, 3.53%, 7/09/15 | GBP | 1,000 | 1,394,856 |
Rite Aid Corp., Tranche 4 Term Loan, 9.50%, 6/04/15 | USD | 500 | 517,500 |
Wm. Bolthouse Farms, Inc., Term Loan (First Lien), | |||
2.56%, 12/16/12 | 189 | 182,345 | |
2,094,701 | |||
Food Products — 2.7% | |||
Dole Food Co. Inc.: | |||
Credit-Linked Deposit, 0.51%, 4/12/13 | 127 | 128,241 | |
Tranche B Term Loan, 8.00%, 4/12/13 | 223 | 224,177 | |
Solvest, Ltd. (Dole), Tranche C Term Loan, 8.00%, | |||
4/12/13 | 830 | 835,304 | |
Wm. Wrigley Jr. Co., Tranche B Term Loan, 6.50%, | |||
10/06/14 | 1,894 | 1,915,765 | |
3,103,487 | |||
Health Care Equipment & Supplies — 2.9% | |||
Bausch & Lomb, Inc.: | |||
Delayed Draw Term Loan, 3.51% – 3.85%, | |||
4/24/2015 | 98 | 92,698 | |
Parent Term Loan, 3.85%, 4/24/15 | 386 | 365,232 | |
Biomet, Inc., Dollar Term Loan, 3.26% – 3.61%, | |||
3/25/15 | 1,323 | 1,268,924 |
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Health Care Equipment & Supplies (concluded) | |||
DJO Finance LLC (ReAble Therapeutics Finance LLC), | |||
Term Loan, 3.26% – 3.60%, 5/20/14 | USD | 985 | $ 940,675 |
Hologic, Inc., Tranche B Term Loan, 3.56%, 3/31/13 | 141 | 136,067 | |
Iasis Healthcare: | |||
Delayed Draw Term Loan, 2.26%, 3/14/14 | 120 | 113,037 | |
Initial Term Loan, 2.26%, 3/14/14 | 347 | 326,645 | |
Synthetic Line of Credit, 0.16%, 3/14/14 | 32 | 30,448 | |
3,273,726 | |||
Health Care Providers & Services — 10.9% | |||
CCS Medical, Inc. (Chronic Care), Term Loan (First Lien), | |||
4.35%, 9/30/12 (a)(d) | 275 | 124,094 | |
CHS/Community Health Systems, Inc.: | |||
Delayed Draw Term Loan, 2.51%, 7/25/14 | 164 | 153,120 | |
Funded Term Loan, 2.51% — 2.62%, 7/25/14 | 3,233 | 3,011,726 | |
DaVita Inc., Tranche B-1 Term Loan, 1.77% – 2.10%, | |||
10/05/12 | 800 | 767,666 | |
Fresenius AG: | |||
Term Loan B1, 6.75%, 7/06/14 | 712 | 715,118 | |
Term Loan B2, 6.75%, 7/06/14 | 430 | 431,963 | |
HCA Inc., Tranche A-1 Term Loan, 2.10%, 11/17/12 | 3,667 | 3,423,345 | |
HealthSouth Corp., Term Loan, 2.52% – 2.53%, 3/10/13 | 1,753 | 1,695,173 | |
Surgical Care Affiliates, LLC, Term Loan, 2.60%, 12/29/14 | 343 | 309,417 | |
Symbion, Inc.: | |||
Tranche A Term Loan, 3.51%, 8/23/13 | 474 | 414,358 | |
Tranche B Term Loan, 3.51%, 8/25/14 | 474 | 414,358 | |
Vanguard Health Holding Co. II, LLC (Vanguard Health System, | |||
Inc.), Replacement Term Loan, 2.51%, 9/23/11 | 858 | 834,974 | |
12,295,312 | |||
Health Care Technology — 0.4% | |||
Sunquest Information Systems, Inc. (Misys Hospital Systems, | |||
Inc.), Term Loan, 3.52% – 3.74%, 10/13/14 | 491 | 447,856 | |
Hotels, Restaurants & Leisure — 3.4% | |||
BLB Worldwide Holdings, Inc. (Wembley, Inc.), First Priority | |||
Term Loan, 4.75%, 9/01/09 (a)(d) | 1,000 | 550,000 | |
Harrah’s Operating Co., Inc., Term B-2 Loan, 3.50%, | |||
1/28/15 | 1,525 | 1,228,509 | |
Penn National Gaming, Inc., Term Loan B, 2.03% – 2.21%, | |||
10/03/12 | 936 | 910,054 | |
QCE, LLC (Quiznos), Term Loan (First Lien), 2.88%, | |||
5/05/13 | 987 | 735,522 | |
VML US Finance LLC (aka Venetian Macau), Term B: | |||
Delayed Draw Project Loan, 6.10%, 5/25/12 | 180 | 164,908 | |
Funded Project Loan, 6.10%, 5/27/13 | 318 | 291,270 | |
3,880,263 | |||
Household Durables — 2.3% | |||
Jarden Corp., Term Loan B3, 3.10%, 1/24/12 | 1,428 | 1,409,490 | |
Yankee Candle Co., Inc., Term Loan, 2.27%, 2/06/14 | 1,221 | 1,132,407 | |
2,541,897 | |||
Household Products — 0.3% | |||
VI-JON, Inc. (VJCS Acquisition, Inc.), Tranche B Term Loan, | |||
2.28%, 4/24/14 | 341 | 311,733 | |
IT Services — 6.0% | |||
Amadeus Global Travel Distribution SA, GmbH | |||
(WAM Acquisition): | |||
Term Loan B, 2.28%, 7/01/13 | 955 | 835,558 | |
Term Loan C, 2.78%, 7/01/14 | 955 | 835,558 | |
Ceridian Corp., U.S. Term Loan, 3.27%, 11/09/14 | 1,977 | 1,692,520 | |
First Data Corp.: | |||
Initial Tranche B-1 Term Loan, 3.01% – 3.02%, | |||
9/24/14 | 741 | 616,994 | |
Initial Tranche B-2 Term Loan, 3.01% – 3.02%, | |||
9/24/14 | 1,027 | 854,350 | |
Initial Tranche B-3 Term Loan, 3.01% – 3.02%, | |||
9/24/14 | 986 | 819,922 |
See Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2009 13
Schedule of Investments (continued) BlackRock Defined Opportunity Credit Trust (BHL)
(Percentages shown are based on Net Assets)
Par | |||
Floating Rate Loan Interests | (000) | Value | |
IT Services (concluded) | |||
SunGard Data Systems Inc: | |||
(Solar Capital Corp.), New US Term Loan, 6.75%, | |||
2/28/14 | USD | 898 | $ 892,270 |
Term Loan B, 3.95% – 4.09%, 2/28/16 | 226 | 218,615 | |
6,765,787 | |||
Independent Power Producers & Energy Traders — 6.0% | |||
Dynegy Holdings Inc.: | |||
Term LC Facility Term Loan, 4.02%, 4/02/13 | 208 | 199,925 | |
Tranche B Term Loan, 4.02%, 4/02/13 | 17 | 16,176 | |
Mirant North America, LLC, Term Loan, 2.01%, 1/03/13 | 677 | 646,844 | |
NRG Energy, Inc.: | |||
Credit-Linked Deposit, 0.50%, 2/01/13 | 164 | 154,241 | |
Term Loan, 2.01% – 2.35%, 2/01/13 | 1,597 | 1,506,337 | |
Texas Competitive Electric Holdings Co., LLC (TXU): | |||
Initial Tranche B-1 Term Loan, 3.78% – 3.79%, | |||
10/10/14 | 494 | 375,226 | |
Initial Tranche B-2 Term Loan, 3.78% – 3.79%, | |||
10/10/14 | 499 | 379,036 | |
Initial Tranche B-3 Term Loan, 3.78% – 3.79%, | |||
10/10/14 | 4,679 | 3,540,677 | |
6,818,462 | |||
Industrial Conglomerates — 0.7% | |||
Sequa Corp., Term Loan, 3.65% – 3.88%, 12/03/14 | 989 | 842,978 | |
Insurance — 0.6% | |||
Alliant Holdings I, Inc., Term Loan, 3.60%, 8/21/14 | 736 | 676,749 | |
Internet & Catalog Retail — 0.2% | |||
FTD Group, Inc., Tranche B Term Loan, 6.75%, 8/04/14 | 236 | 233,672 | |
Life Sciences Tools & Services — 0.9% | |||
Life Technologies Corp., Term B Facility, 5.25%, | |||
11/20/15 | 991 | 1,000,531 | |
Machinery — 3.1% | |||
LN Acquisition Corp. (Lincoln Industrial): | |||
Delayed Draw Term Loan (First Lien), 2.83%, | |||
7/11/14 | 254 | 227,803 | |
Initial U.S. Term Loan (First Lien), 2.78% – 2.83%, | |||
7/11/14 | 677 | 607,474 | |
Navistar Financial Corp., Tranche A Term Loan, 2.31%, | |||
3/27/10 | 299 | 290,244 | |
Navistar International Corp.: | |||
Revolving Credit-Linked Deposit, 3.36% – 3.51%, | |||
1/19/12 | 533 | 496,000 | |
Term Advance, 3.51%, 1/19/12 | 1,467 | 1,364,000 | |
Oshkosh Truck Corp., Term Loan B, 6.60% – 6.64%, | |||
12/06/13 | 504 | 501,171 | |
3,486,692 | |||
Media — 28.9% | |||
AlixPartners, LLP, Tranche C Term Loan, 2.28% – 2.51%, | |||
10/12/13 | 500 | 486,250 | |
Alpha Topco Ltd. (Formula One), Facility B2, 2.51%, | |||
12/31/13 | 938 | 789,013 | |
Bresnan Communications, LLC, Additional Term Loan B | |||
(First Lien), 2.51% – 2.61%, 6/30/13 | 448 | 429,360 | |
CSC Holdings Inc. (Cablevision), Incremental B Term Loan, | |||
2.02% – 2.07%, 3/29/13 | 1,719 | 1,662,067 | |
Catalina Marketing Corp., Initial Term Loan, 3.03%, | |||
10/01/14 | 797 | 748,603 | |
Cengage Learning Acquisitions, Inc. (Thomson Learning), | |||
Tranche 1 Incremental Term Loan, 7.50%, 7/03/14 | 1,900 | 1,824,000 | |
Cequel Communications, LLC, Term Loan, 2.27%, | |||
11/05/13 | 2,463 | 2,326,430 |
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Media (concluded) | |||
Charter Communications Operating, LLC: | |||
Replacement Term Loan, 6.25%, 3/06/14 (a)(d) | USD | 1,284 | $ 1,191,296 |
Term Loan B1, 7.94%, 3/25/14 | 1,500 | 1,499,250 | |
FoxCo Acquisition Sub, LLC, Term Loan, 7.25%, 7/14/15 | 672 | 550,729 | |
Gray Television, Inc., Term Loan B, 3.78%, 12/31/14 | 480 | 346,190 | |
HMH Publishing Co., Ltd., Tranche A Term Loan, 5.26%, | |||
6/12/14 | 2,011 | 1,556,311 | |
Hanley-Wood, LLC (FSC Acquisition), Term Loan, | |||
2.52% – 2.54%, 3/08/14 | 495 | 208,715 | |
Hargray Acquisition Co./DPC Acquisition LLC/HCP | |||
Acquisition LLC, Term Loan (First Lien), 2.72%, 6/27/14 | 487 | 443,974 | |
Harland Clarke Holdings Corp. (fka Clarke American Corp.), | |||
Tranche B Term Loan, 2.76% – 3.10%, 6/30/14 | 525 | 428,700 | |
Insight Midwest Holdings, LLC, B Term Loan, 2.28%, | |||
4/07/14 | 500 | 477,143 | |
Intelsat Corp. (fka PanAmSat Corp.): | |||
B-2-B Term Loan, 2.78%, 1/03/14 | 660 | 624,349 | |
B-2-C Term Loan, 2.78%, 1/03/14 | 660 | 624,349 | |
Tranche B-2-A Term Loan, 2.78%, 1/03/14 | 660 | 624,539 | |
Lamar Advertising Co.: | |||
Term Loan B, 5.50%, 9/30/12 | 250 | 246,250 | |
Term Loan E, 5.50%, 3/15/13 | 741 | 734,145 | |
Lavena Holding 3 GmbH (Prosiebensat.1 Media AG): | |||
Facility B1, 3.53%, 3/06/15 | EUR | 1,010 | 818,408 |
Facility C1, 3.78%, 3/04/16 | 1,010 | 818,408 | |
Local TV Finance, LLC Term Loan, 2.27%, 5/07/13 | USD | 964 | 658,440 |
MCC Iowa LLC (Mediacom Broadband Group): | |||
Tranche D-1 Term Loan, 2.01%, 1/31/15 | 376 | 351,197 | |
Tranche E Term Loan, 6.50%, 11/30/15 | 823 | 823,951 | |
NTL Cable Plc B-7 Facility Term Loan, 5.39%, 3/09/12 | 469 | 709,198 | |
NV Broadcasting, LLC: | |||
Term Loan, Debtor in Possession, 13.00%, | |||
2/28/10 | USD | 239 | 236,238 |
Term Loan (First Lien), 5.25%, 11/01/13 (a)(d) | 1,639 | 409,710 | |
Newsday, LLC: | |||
Fixed Rate Term Loan, 9.75%, 8/01/13 | 250 | 254,375 | |
Floating Rate Term Loan, 6.01%, 8/01/13 | 500 | 493,750 | |
Nielson Finance LLC: | |||
Class A Dollar Term Loan, 2.28%, 8/09/13 | 763 | 709,903 | |
Class B Dollar Term Loan, 4.03%, 5/01/16 | 1,592 | 1,492,607 | |
Parkin Broadcasting, LLC Term Loan, 5.25%, | |||
11/01/13 (a)(d) | 336 | 84,042 | |
Sunshine Acquisition Ltd. (aka HIT Entertainment), Term | |||
Facility, 2.73%, 6/01/12 | 1,751 | 1,455,341 | |
TWCC Holding Corp., Term Loan, 7.25%, 9/14/15 | 1,395 | 1,402,854 | |
Tribune Co., Debtor in Possession Term Loan, 9.00%, | |||
4/07/10 | 350 | 351,750 | |
UPC Financing Partnership, Facility U, 4.54%, | |||
12/31/17 | EUR | 1,600 | 2,093,070 |
Virgin Media Investment Holdings Ltd. (fka NTL): | |||
B-1 Facility Term Loan, 3.89%, 7/30/12 | GBP | 206 | 308,698 |
C Facility, 3.62%, 7/17/13 | 165 | 236,378 | |
Term Loan B, 5.39%, 3/09/12 | 281 | 424,260 | |
World Color Press Inc. and World Color (USA) Corp. (fka | |||
Quebecor World Inc.), Advance, 9.00%, 7/21/12 | USD | 650 | 645,125 |
32,599,366 | |||
Metals & Mining — 0.8% | |||
Essar Steel Algoma Inc. (fka Algoma Steel Inc.), Term | |||
Loan, 2.77%, 6/20/13 | 990 | 890,909 |
See Notes to Financial Statements.
14 ANNUAL REPORT AUGUST 31, 2009
Schedule of Investments (continued) BlackRock Defined Opportunity Credit Trust (BHL)
(Percentages shown are based on Net Assets)
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Multi-Utilities — 0.4% | |||
FirstLight Power Resources, Inc. (fka NE Energy, Inc.): | |||
First Lien Term Loan B, 3.13%, 11/01/13 | USD | 443 $ | 407,773 |
Synthetic Letter of Credit, 0.48%, 11/01/13 | 57 | 52,540 | |
460,313 | |||
Multiline Retail — 1.3% | |||
Dollar General Corp., Tranche B-1 Term Loan, | |||
3.01% – 3.24%, 7/07/14 | 1,500 | 1,458,958 | |
Oil, Gas & Consumable Fuels — 0.7% | |||
Big West Oil, LLC, Initial Advance Loan, 4.50%, 5/15/14 | 352 | 323,806 | |
Vulcan Energy Corp. (fka Plains Resources Inc.), | |||
Term B3 Loan, 5.50%, 8/12/11 | 500 | 493,125 | |
816,931 | |||
Paper & Forest Products — 3.1% | |||
Georgia-Pacific LLC, Term B Loan, 2.34% – 2.65%, | |||
12/20/12 | 2,291 | 2,213,236 | |
NewPage Corp., Term Loan, 4.06%, 12/22/14 | 1,389 | 1,286,169 | |
3,499,405 | |||
Personal Products — 0.9% | |||
American Safety Razor Co., LLC Loan (Second Lien), | |||
6.52%, 1/30/14 | 1,250 | 975,000 | |
Pharmaceuticals — 0.6% | |||
Warner Chilcott Co., Inc., Tranche B Acquisition Date | |||
Term Loan, 2.26% – 2.60%, 1/18/12 | 482 | 478,611 | |
Warner Chilcott Corp., Tranche C Acquisition Date | |||
Term Loan, 2.26%, 1/18/12 | 216 | 214,523 | |
693,134 | |||
Professional Services — 0.9% | |||
Booz Allen Hamilton Inc., Tranche B Term Loan, 4.50%, | |||
7/31/15 | 993 | 992,503 | |
Specialty Retail — 0.8% | |||
Adesa, Inc., (KAR Holdings, Inc.), Initial Term Loan, | |||
2.52%, 10/20/13 | 400 | 375,333 | |
General Nutrition Centers, Inc., Term Loan, | |||
2.52% – 2.85%, 9/16/13 | 552 | 507,469 | |
882,802 | |||
Textiles, Apparel & Luxury Goods — 0.4% | |||
Hanesbrands Inc., Term B Loan (First Lien), | |||
5.02% – 5.25%, 9/05/13 | 436 | 436,135 | |
Wireless Telecommunication Services — 2.5% | |||
Digicel International Finance Ltd., Tranche A, 3.13%, | |||
3/01/12 | 1,175 | 1,116,250 | |
MetroPCS Wireless, Inc., Tranche B Term Loan, | |||
2.56% – 2.75%, 11/03/13 | 1,272 | 1,195,985 | |
Ntelos Inc., Term B Advance, 5.75%, 7/31/15 | 500 | 498,750 | |
2,810,985 | |||
Total Floating Rate Loan Interests — 116.5% | 131,470,515 | ||
Total Investments (Cost — $146,223,408*) — 124.4% | 140,367,876 | ||
Liabilities in Excess of Other Assets — (24.4)% | (27,505,826) | ||
Net Assets — 100.0% | $112,862,050 | ||
* The cost and unrealized appreciation (depreciation) of investments as of August 31, | |||
2009, as computed for federal income tax purposes, were as follows: | |||
Aggregate cost | $146,223,408 | ||
Gross unrealized appreciation | $ 2,824,269 | ||
Gross unrealized depreciation | (8,679,801) | ||
Net unrealized depreciation | $ (5,855,532) |
(a) Non-income producing security. | ||||||
(b) 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. | ||||||
(c) Variable rate security. Rate shown is as of report date. | ||||||
(d) Issuer filed for bankruptcy and/or is in default of interest payments. | ||||||
• | 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 | ||||||
Activity | Income | |||||
BlackRock Liquidity Funds, TempFund | — | $ 6,279 | ||||
BlackRock Liquidity Series, LLC | ||||||
Cash Sweep Series | $(2,365,561) | $13,793 | ||||
• | 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 recog- | ||||||
nized market indexes or ratings group indexes, and/or as defined by Fund manage- | ||||||
ment. This definition may not apply for purposes of this report, which may combine | ||||||
such industry sub-classifications for reporting ease. | ||||||
• | Foreign currency exchange contracts as of August 31, 2009 were as follows: | |||||
Unrealized | ||||||
Currency | Currency | Settlement Appreciation | ||||
Purchased | Sold | Counterparty | Date | (Depreciation) | ||
EUR | 1,000 USD | 1,434 | Citibank NA | 9/01/09 | — | |
USD 9,015,715 EUR | 6,450,000 | Citibank NA | 9/16/09 | $ (231,252) | ||
USD 2,682,215 GBP | 1,641,000 | Citibank NA | 10/28/09 | 10,965 | ||
Total | $ (220,287) | |||||
• | Currency Abbreviations: | |||||
EUR | Euro | |||||
GBP | British Pound | |||||
USD | US Dollar | |||||
• | Financial Accounting Standards Board Statement of Financial Accounting Standards | |||||
No. 157, “Fair Value Measurements” clarifies the definition of fair value, establishes | ||||||
a framework for measuring fair values and requires additional disclosures about the | ||||||
use of fair value measurements. Various inputs are used in determining the fair value | ||||||
of investments, which are as follows: | ||||||
• Level 1 — price quotations in active markets/exchanges for identical securities | ||||||
• Level 2 — other observable inputs (including, but not limited to: quoted prices for | ||||||
similar assets or liabilities in markets that are active, quoted prices for identical or | ||||||
similar assets or liabilities in markets that are not active, inputs other than quoted | ||||||
prices that are observable for the assets or liabilities (such as interest rates, yield | ||||||
curves, volatilities, prepayment speeds, loss severities, credit risks and default | ||||||
rates) or other market-corroborated inputs) | ||||||
• Level 3 — unobservable inputs based on the best information available in the | ||||||
circumstances, to the extent observable inputs are not available (including the | ||||||
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 poli- | ||||||
cies, please refer to Note 1 of the Notes to Financial Statements. |
See Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2009 15
Schedule of Investments (concluded) BlackRock Defined Opportunity Credit Trust (BHL)
The following table summarizes the inputs used as of August 31, 2009 in | |||
determining the fair valuation of the Fund’s investments: | |||
Valuation | Investments in | ||
Inputs | Securities | ||
Assets | |||
Level 1 — Common Stocks | $ 480,480 | ||
Level 2 | |||
Long-Term Investments: | |||
Corporate Bonds | 8,416,881 | ||
Floating Rate Loan Interests | 106,975,159 | ||
Total Level 2 | 115,392,040 | ||
Level 3 — Floating Rate Loan Interests | 24,495,356 | ||
Total | $140,367,876 | ||
Valuation | Other Financial | ||
Inputs | Instruments1 | ||
Assets | Liabilities | ||
Level 1 | — | — | |
Level 2 | $ 10,965 | $ (231,252) | |
Level 3 | 60,517 | — | |
Total | $ 71,482 | $ (231,252) | |
1 Other financial instruments are foreign currency exchange contracts | |||
and unfunded loan commitments, which 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 | |||
Floating Rate | |||
Loan Interests | |||
Balance, as of August 31, 2008 | $ 4,841,355 | ||
Accrued discounts/premiums | — | ||
Realized gain (loss) | (418,772) | ||
Change in unrealized appreciation (depreciation)2 | (1,001,736) | ||
Net purchases (sales) | (981,612) | ||
Net transfers in/out of Level 3 | 22,056,121 | ||
Balance as of August 31, 2009 | $ 24,495,356 | ||
2 Included in the related net change in unrealized appreciation/depreciation | |||
on the Statements of Operations. | |||
The following is a reconciliation of other financial instruments for unobservable | |||
inputs (Level 3) used in determining fair value: | |||
Other Financial Instruments3 | |||
Assets | |||
Balance, as of August 31, 2008 | — | ||
Accrued discounts/premiums | — | ||
Realized gain (loss) | — | ||
Change in unrealized appreciation (depreciation) | — | ||
Net purchases (sales) | — | ||
Net transfers in/out of Level 3 | $ 60,517 | ||
Balance as of August 31, 2009 | $ 60,517 | ||
3 Other financial instruments are unfunded loan commitments. |
See Notes to Financial Statements.
16 ANNUAL REPORT AUGUST 31, 2009
Schedule of Investments August 31, 2009 BlackRock Diversified Income Strategies Fund, Inc. (DVF)
(Percentages shown are based on Net Assets)
Par | ||
Asset-Backed Securities | (000) | Value |
North Street Referenced Linked Notes 2000-1 | ||
Ltd. Series 2005-8A Class D, 15.13%, | ||
6/15/41 (a)(b) | USD 1,350 | $ 528,255 |
Total Asset-Backed Securities — 0.5% | 528,255 | |
Common Stocks | Shares | |
Building Products — 0.8% | ||
Masonite Worldwide Holdings (c) | 20,955 | 847,630 |
Capital Markets — 0.4% | ||
E*Trade Financial Corp. (c) | 248,000 | 436,480 |
Chemicals — 0.0% | ||
Wellman Holdings, Inc. (c) | 1,613 | 403 |
Electrical Equipment — 0.0% | ||
Medis Technologies Ltd. (c) | 176,126 | 50,196 |
Hotels, Restaurants & Leisure — 0.0% | ||
Buffets Restaurants Holdings, Inc. (c) | 688 | 7 |
Media — 0.3% | ||
Sirius XM Radio, Inc. (c) | 435,000 | 292,973 |
Metals & Mining — 0.0% | ||
Euramax International (c) | 467 | 5,026 |
Paper & Forest Products — 0.9% | ||
Ainsworth Lumber Co. Ltd. | 311,678 | 449,830 |
Ainsworth Lumber Co. Ltd. (b)(c) | 349,782 | 503,215 |
953,045 | ||
Software — 0.2% | ||
TiVo, Inc. (c) | 21,000 | 206,010 |
Total Common Stocks — 2.6% | 2,791,770 | |
Par | ||
Corporate Bonds | (000) | |
Airlines — 0.3% | ||
United Air Lines, Inc., 12.75%, 7/15/12 | USD 300 | 288,000 |
Auto Components — 2.0% | ||
Allison Transmission, Inc., 11.00%, 11/01/15 (b) | 63 | 56,700 |
The Goodyear Tire & Rubber Co., 5.01%, 12/01/09 (a) | 2,000 | 1,992,500 |
Lear Corp., 8.75%, 12/01/16 (c)(d) | 255 | 137,700 |
2,186,900 | ||
Building Products — 2.2% | ||
CPG International I, Inc., 7.87%, 7/01/12 (a) | 2,500 | 1,787,500 |
Momentive Performance Materials, Inc. Series WI, | ||
9.75%, 12/01/14 | 400 | 260,000 |
Ply Gem Industries, Inc., 11.75%, 6/15/13 | 400 | 334,000 |
2,381,500 | ||
Capital Markets — 1.2% | ||
E*Trade Financial Corp. (b): | ||
12.50%, 11/30/17 (e) | 140 | 140,738 |
3.16%, 8/31/19 (f)(g) | 443 | 756,976 |
Marsico Parent Co., LLC, 10.63%, 1/15/16 (b) | 724 | 304,080 |
Marsico Parent Holdco, LLC, 12.50%, 7/15/16 (b)(e) | 301 | 72,335 |
Marsico Parent Superholdco, LLC, 14.50%, | ||
1/15/18 (b)(e) | 208 | 54,083 |
1,328,212 |
Par | |||
Corporate Bonds | (000) | Value | |
Chemicals — 1.3% | |||
American Pacific Corp., 9.00%, 2/01/15 | USD | 440 | $ 397,100 |
Wellman Holdings, Inc., Subordinate Note (f): | |||
Second Lien, 10.00%, 1/29/19 (b) | 894 | 894,000 | |
Third Lien, 5.00%, 1/29/19 | 279 | 139,683 | |
1,430,783 | |||
Commercial Banks — 0.1% | |||
Glitnir Banki HF (b)(c)(d): | |||
4.15%, 4/20/10 | 65 | 12,837 | |
6.38%, 9/25/12 | 265 | 52,337 | |
Series EMTN, 3.00%, 6/30/10 | EUR | 20 | 5,878 |
71,052 | |||
Commercial Services & Supplies — 1.5% | |||
Clean Harbors, Inc., 7.63%, 8/15/16 (b) | USD | 400 | 401,000 |
RSC Equipment Rental, Inc., 10.00%, 7/15/17 (b) | 285 | 297,824 | |
West Corp., 11.00%, 10/15/16 | 985 | 908,662 | |
1,607,486 | |||
Construction Materials — 1.4% | |||
Nortek, Inc., 10.00%, 12/01/13 | 1,570 | 1,460,100 | |
Consumer Finance — 0.6% | |||
Ford Motor Credit Co. LLC, 3.26%, 1/13/12 (a) | 815 | 678,487 | |
Containers & Packaging — 4.7% | |||
Berry Plastics Holding Corp., 4.50%, 9/15/14 (a) | 2,235 | 1,609,200 | |
Crown Americas LLC, 7.63%, 5/15/17 (b) | 210 | 208,425 | |
Graphic Packaging International, Inc., 9.50%, 6/15/17 (b) | 420 | 430,500 | |
Packaging Dynamics Finance Corp., 10.00%, 5/01/16 (b) | 1,570 | 502,400 | |
Smurfit Kappa Funding Plc, 7.75%, 4/01/15 (h) | 1,000 | 810,000 | |
Solo Cup Co., 10.50%, 11/01/13 (b) | 130 | 136,500 | |
Wise Metals Group LLC, 10.25%, 5/15/12 | 2,750 | 1,347,500 | |
5,044,525 | |||
Diversified Financial Services — 5.1% | |||
FCE Bank Plc, 7.125%, 1/16/12 | EUR | 2,400 | 3,113,800 |
GMAC LLC (b): | |||
7.25%, 3/02/11 | USD | 200 | 187,750 |
6.88%, 9/15/11 | 300 | 276,750 | |
6.88%, 8/28/12 | 300 | 261,000 | |
6.75%, 12/01/14 | 1,380 | 1,131,600 | |
8.00%, 11/01/31 | 630 | 486,675 | |
5,457,575 | |||
Diversified Telecommunication Services — 1.2% | |||
Nordic Telephone Co. Holdings ApS, 8.88%, 5/01/16 (b) | 800 | 812,000 | |
PAETEC Holding Corp., 8.88%, 6/30/17 (b) | 500 | 476,250 | |
1,288,250 | |||
Food & Staples Retailing — 0.1% | |||
Duane Reade, Inc., 11.75%, 8/01/15 (b) | 80 | 80,800 | |
Food Products — 0.6% | |||
Smithfield Foods, Inc., 10.00%, 7/15/14 (b) | 340 | 346,800 | |
Tyson Foods, Inc., 10.50%, 3/01/14 | 300 | 334,500 | |
681,300 | |||
Hotels, Restaurants & Leisure — 3.3% | |||
Harrah’s Operating Co., Inc. (b): | |||
10.00%, 12/15/15 | 530 | 378,950 | |
10.00%, 12/15/18 | 1,389 | 972,300 | |
Little Traverse Bay Bands of Odawa Indians, 10.25%, | |||
2/15/14 (b)(c)(d) | 800 | 352,000 | |
MGM Mirage, 11.125%, 11/15/17 (b) | 390 | 422,175 | |
Shingle Springs Tribal Gaming Authority, 9.38%, 6/15/15 (b) | 95 | 67,450 |
See Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2009 17
Schedule of Investments (continued) BlackRock Diversified Income Strategies Fund, Inc. (DVF)
(Percentages shown are based on Net Assets)
Par | |||
Corporate Bonds | (000) | Value | |
Hotels, Restaurants & Leisure (concluded) | |||
Snoqualmie Entertainment Authority, 4.68%, | |||
2/01/14 (a)(b) | USD | 305 | $ 149,450 |
Travelport LLC, 4.986%, 9/01/14 (a) | 810 | 587,250 | |
Tropicana Entertainment LLC Series WI, 9.63%, | |||
12/15/14 (c)(d) | 120 | 75 | |
Tunica-Biloxi Gaming Authority, 9.00%, 11/15/15 (b) | 645 | 574,050 | |
3,503,700 | |||
Household Durables — 0.7% | |||
Standard Pacific Corp.: | |||
6.25%, 4/01/14 | 140 | 109,900 | |
7.00%, 8/15/15 | 465 | 365,025 | |
Stanley-Martin Communities LLC, 9.75%, 8/15/15 | 1,250 | 306,250 | |
781,175 | |||
IT Services — 1.0% | |||
Alliance Data Systems Corp., 1.75%, 8/01/13 (f) | 370 | 329,300 | |
First Data Corp.: | |||
9.88%, 9/24/15 | 255 | 218,025 | |
11.25%, 3/31/16 (b) | 60 | 45,900 | |
SunGard Data Systems, Inc., 4.88%, 1/15/14 | 549 | 494,100 | |
1,087,325 | |||
Independent Power Producers & Energy Traders — 2.4% | |||
AES Eastern Energy LP Series 99-B, 9.67%, 1/02/29 | 300 | 258,000 | |
Calpine Construction Finance Co. LP, 8.00%, 6/01/16 (b) | 500 | 497,500 | |
Dynegy Holdings, Inc., 8.38%, 5/01/16 | 650 | 526,500 | |
Energy Future Holdings Corp., 11.25%, 11/01/17 (e) | 1,060 | 606,743 | |
NRG Energy, Inc., 8.50%, 6/15/19 | 250 | 243,125 | |
Texas Competitive Electric Holdings Co. LLC, 10.50%, | |||
11/01/16 (e) | 845 | 468,895 | |
2,600,763 | |||
Industrial Conglomerates — 2.0% | |||
Sequa Corp. (b): | |||
11.75%, 12/01/15 | 1,530 | 963,900 | |
13.50%, 12/01/15 (e) | 2,278 | 1,190,476 | |
2,154,376 | |||
Insurance — 0.4% | |||
USI Holdings Corp., 4.32%, 11/15/14 (a)(b) | 490 | 378,525 | |
Leisure Equipment & Products — 0.5% | |||
Brunswick Corp., 11.25%, 11/01/16 (b) | 565 | 591,837 | |
Machinery — 1.9% | |||
CPM Holdings, Inc., 10.63%, 9/01/14 (b) | 200 | 202,000 | |
ESCO Corp., 4.50%, 12/15/13 (a)(b) | 920 | 821,100 | |
RBS Global, Inc.: | |||
9.50%, 8/01/14 (b) | 199 | 183,080 | |
8.88%, 9/01/16 | 505 | 405,262 | |
Titan International, Inc., 8.00%, 1/15/12 | 460 | 442,750 | |
2,054,192 | |||
Marine — 0.1% | |||
Navios Maritime Holdings, Inc., 9.50%, 12/15/14 | 141 | 123,375 | |
Media — 3.9% | |||
Affinion Group, Inc., 10.13%, 10/15/13 | 320 | 318,000 | |
CSC Holdings, Inc., 8.50%, 4/15/14 (b) | 180 | 182,700 | |
Canadian Satellite Radio Holdings, Inc., 12.75%, | |||
2/15/14 | 3,000 | 1,035,000 | |
Local Insight Regatta Holdings, Inc., 11.00%, | |||
12/01/17 | 832 | 316,160 | |
TL Acquisitions, Inc., 10.50%, 1/15/15 (b) | 1,570 | 1,428,700 | |
Virgin Media, Inc., 6.50%, 11/15/16 (b)(f) | 1,000 | 906,250 | |
4,186,810 |
Par | |||
Corporate Bonds | (000) | Value | |
Metals & Mining — 1.3% | |||
Aleris International, Inc. (c)(d): | |||
9.00%, 12/15/14 | USD | 370 | $ 925 |
10.00%, 12/15/16 | 500 | 1,250 | |
RathGibson, Inc., 11.25%, 2/15/14 (c)(d) | 1,390 | 500,400 | |
Ryerson, Inc., 7.86%, 11/01/14 (a) | 1,075 | 913,750 | |
1,416,325 | |||
Oil, Gas & Consumable Fuels — 3.7% | |||
Atlas Energy Operating Co., LLC, 12.13%, 8/01/17 | 425 | 448,375 | |
Atlas Energy Resources LLC, 10.75%, 2/01/18 (b) | 155 | 156,550 | |
Chesapeake Energy Corp., 9.50%, 2/15/15 | 455 | 464,100 | |
Denbury Resources, Inc., 9.75%, 3/01/16 | 1,150 | 1,210,375 | |
Forest Oil Corp.: | |||
8.50%, 2/15/14 (b) | 640 | 643,200 | |
7.25%, 6/15/19 | 200 | 188,000 | |
SandRidge Energy, Inc., 4.22%, 4/01/14 (a) | 1,000 | 830,368 | |
3,940,968 | |||
Paper & Forest Products — 5.5% | |||
Ainsworth Lumber Co. Ltd., 11.00%, 7/29/15 (b)(e) | 2,689 | 1,065,996 | |
Clearwater Paper Corp., 10.63%, 6/15/16 (b) | 190 | 203,537 | |
NewPage Corp.: | |||
6.73%, 5/01/12 (a) | 3,000 | 1,282,500 | |
10.00%, 5/01/12 | 1,820 | 987,350 | |
Verso Paper Holdings LLC: | |||
11.50%, 7/01/14 (b) | 160 | 156,800 | |
Series B, 4.23%, 8/01/14 (a) | 4,000 | 2,240,000 | |
5,936,183 | |||
Pharmaceuticals — 1.2% | |||
Angiotech Pharmaceuticals, Inc., 4.11%, 12/01/13 (a) | 1,500 | 1,260,000 | |
Real Estate Management & Development — 0.7% | |||
Realogy Corp.: | |||
10.50%, 4/15/14 | 410 | 243,950 | |
12.38%, 4/15/15 | 1,385 | 560,925 | |
804,875 | |||
Semiconductors & Semiconductor Equipment — 1.5% | |||
Avago Technologies Finance Pte. Ltd., 5.86%, | |||
6/01/13 (a) | 400 | 376,000 | |
Spansion, Inc., 3.79%, 6/01/13 (b)(c)(d) | 1,410 | 1,251,375 | |
1,627,375 | |||
Software — 0.0% | |||
BMS Holdings, Inc., 8.35%, 2/15/12 (a)(b)(e) | 466 | 7,489 | |
Specialty Retail — 1.1% | |||
General Nutrition Centers, Inc., 6.40%, 3/15/14 (a) | 145 | 127,600 | |
Michaels Stores, Inc., 11.38%, 11/01/16 | 910 | 782,600 | |
United Auto Group, Inc., 7.75%, 12/15/16 | 355 | 312,400 | |
1,222,600 | |||
Wireless Telecommunication Services — 4.2% | |||
BCM Ireland Preferred Equity Ltd., 8.28%, | |||
2/15/17 (b)(e) | EUR | 302 | 112,579 |
Cricket Communications, Inc., 7.75%, 5/15/16 (b) | USD | 1,000 | 970,000 |
Crown Castle International Corp., 9.00%, 1/15/15 | 100 | 104,000 | |
Digicel Group Ltd. (b): | |||
8.88%, 1/15/15 | 1,070 | 954,975 | |
9.13%, 1/15/15 (e) | 2,129 | 1,876,181 | |
iPCS, Inc., 2.61%, 5/01/13 (a) | 200 | 164,000 | |
Orascom Telecom Finance SCA, 7.88%, 2/08/14 (b) | 325 | 292,500 | |
4,474,235 | |||
Total Corporate Bonds — 57.7% | 62,137,098 |
See Notes to Financial Statements.
18 ANNUAL REPORT AUGUST 31, 2009
Schedule of Investments (continued) BlackRock Diversified Income Strategies Fund, Inc. (DVF)
(Percentages shown are based on Net Assets)
Floating Rate Loan Interests | (000) | Value | |
Airlines — 0.4% | |||
US Airways Group, Inc., Loan, 2.76%, 3/21/14 | USD | 730 | $ 393,105 |
Auto Components — 2.8% | |||
Allison Transmission, Inc., Term Loan, 3.03%, 8/07/14 | 1,930 | 1,647,680 | |
Dana Holding Corp., Term Advance, 7.25%, 1/31/15 | 874 | 668,955 | |
Delphi Corp. (c)(d): | |||
Initial Tranche C Loan (Debtor in Possession), | |||
10.50%, 12/31/09 | 908 | 499,164 | |
Subsequent Tranche C Loan (Debtor in Possession), | |||
9.50%, 12/31/09 | 93 | 50,836 | |
Intermet Corp.: | |||
Letter of Credit, 0.16%, 11/09/10 (c)(d) | 231 | 85,522 | |
Synthetic Letter of Credit, 5.65%, 11/09/10 (e) | 26 | 9,569 | |
1st Lien Credit Facility, 5.65%, 11/08/10 (c)(d)(e) | 115 | 22,978 | |
1st Lien Credit Facility, 5.65%, 11/08/10 (e) | 147 | 54,446 | |
3,039,150 | |||
Beverages — 0.2% | |||
Culligan International Co., Loan (Second Lien), | |||
5.28%, 4/24/13 | EUR | 500 | 179,201 |
Chemicals — 3.9% | |||
Ashland, Inc., Term B Borrowing, 7.65%, 5/13/14 | USD | 444 | 451,874 |
Edwards (Cayman Islands II) Ltd., Term Loan | |||
(First Lien), 2.85%, 5/31/14 | 276 | 171,303 | |
Huish Detergents Inc., Tranche B Term Loan, 2.02%, | |||
4/26/14 | 242 | 230,610 | |
Nalco Co., Term Loan B, 6.50%, 5/06/16 | 625 | 633,594 | |
PQ Corp. (fka Niagara Acquisition, Inc.): | |||
Loan (Second Lien), 6.77%, 7/30/15 | 2,500 | 1,375,000 | |
Term Loan (First Lien), 3.52% — 3.75%, 7/31/14 | 495 | 407,963 | |
Solutia Inc. Loan, 7.25%, 2/28/14 | 990 | 979,844 | |
4,250,188 | |||
Commercial Services & Supplies — 0.4% | |||
Casella Waste Systems, Term B Loan, 7.00%, 4/04/14 | 400 | 401,000 | |
Computers & Peripherals — 0.4% | |||
Intergraph Corp., Second Lien, Term Loan, 6.26% – 6.37%, | |||
11/28/14 | 500 | 466,250 | |
Containers & Packaging — 0.8% | |||
Graham Packaging Co., LP, B Term Loan, 2.56%, | |||
10/07/11 | 449 | 436,509 | |
Smurfit-Stone Container U.S. Term Loan Debtor in | |||
Possession, 10.00%, 7/28/10 | 436 | 440,639 | |
877,148 | |||
Diversified Consumer Services — 1.4% | |||
Coinmach Corp., Term Loan, 3.28% – 3.43%, 11/14/14 | 1,728 | 1,468,860 | |
Diversified Telecommunication Services — 1.2% | |||
Hawaiian Telcom Communications, Inc., Tranche C | |||
Term Loan, 4.75%, 5/30/14 (e) | 1,518 | 921,245 | |
Integra Telecom Holdings, Inc., Term Loan (First Lien), | |||
10.50%, 8/31/13 | 324 | 318,003 | |
Paetec Holdings Corp., Incremental Term Loan, 2.76%, | |||
2/28/13 | 84 | 79,507 | |
1,318,755 | |||
Electrical Equipment — 0.4% | |||
Generac Acquisition Corp., Term Loan (First Lien), 2.78%, | |||
11/10/13 | 494 | 414,087 | |
Energy Equipment & Services — 1.3% | |||
Dresser, Inc., Term B Loan, 2.68%, 5/04/14 | 571 | 532,315 | |
MEG Energy Corp.: | |||
Delayed Draw Term Loan, 2.60%, 4/02/13 | 493 | 457,990 | |
Initial Term Loan, 2.60%, 4/03/13 | 484 | 449,283 | |
1,439,588 |
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Food & Staples Retailing — 0.9% | |||
McJunkin Corp., Term Loan, 3.51%, 1/31/14 | USD | 499 | $ 475,032 |
Rite Aid Corp., Tranche 4 Term Loan, 9.50%, 6/04/15 | 500 | 517,500 | |
992,532 | |||
Food Products — 3.1% | |||
Dole Food Co., Inc. : | |||
Credit-Linked Deposit, 0.51%, 4/12/13 | 86 | 86,864 | |
Tranche B Term Loan, 8.00%, 4/12/13 | 151 | 151,845 | |
Solvest, Ltd. (Dole), Tranche C Term Loan, 8.00%, | |||
4/12/13 | 562 | 565,788 | |
Wm. Wrigley Jr. Co., Tranche B Term Loan, 6.50%, | |||
10/06/14 | 2,468 | 2,496,111 | |
3,300,608 | |||
Health Care Equipment & Supplies — 1.4% | |||
Biomet, Inc., Dollar Term Loan, 3.26% – 3.61%, 3/25/15 | 675 | 647,648 | |
DJO Finance LLC (ReAble Therapeutics Finance LLC), | |||
Term Loan, 3.26%, 5/20/14 | 739 | 705,506 | |
Hologic, Inc., Tranche B Term Loan, 3.56%, 3/31/13 | 142 | 136,067 | |
1,489,221 | |||
Health Care Providers & Services — 2.9% | |||
CCS Medical, Inc. (Chronic Care): | |||
Loan (Debtor in Possession), 11.00%, 11/14/09 | 31 | 30,309 | |
Term Loan (First Lien), 4.35%, 9/30/12 (c)(d) | 525 | 236,906 | |
CHS/Community Health Systems, Inc.: | |||
Delayed Draw Term Loan, 2.51%, 7/25/14 | 30 | 27,947 | |
Funded Term Loan, 2.51% – 2.62%, 7/25/14 | 585 | 544,964 | |
DaVita, Inc., Tranche B-1 Term Loan, 1.77% – 2.10%, | |||
10/05/12 | 275 | 263,885 | |
Fresenius AG: | |||
Tranche B-1 Term Loan, 6.75%, 7/06/14 | 120 | 120,441 | |
Tranche B-2 Term Loan, 6.75%, 7/06/14 | 84 | 84,039 | |
HCA Inc.: | |||
Tranche A-1 Term Loan, 2.10%, 11/17/12 | 1,597 | 1,491,174 | |
Tranche B-1 Term Loan, 2.85%, 11/18/13 | 387 | 364,407 | |
3,164,072 | |||
Hotels, Restaurants & Leisure — 1.5% | |||
Golden Nugget, Inc., Second Lien Term Loan, 3.52%, | |||
12/31/14 | 175 | 73,500 | |
Green Valley Ranch Gaming, LLC, Loan (Second Lien), | |||
3.88%, 8/16/14 | 500 | 102,500 | |
Harrah’s Operating Co., Inc., Term B-2 Loan, 3.50%, | |||
1/28/15 | 438 | 352,521 | |
Lake at Las Vegas Joint Venture/LLV-1, LLC.: | |||
Revolving Loan Credit-Linked Deposit Account, | |||
12.35%, 12/12/12 | 120 | 2,407 | |
Term Loan, 14.35% – 15.00%, 12/22/12 (c)(d) | 1,215 | 24,305 | |
QCE, LLC (Quiznos), Term Loan (Second Lien), 5.98%, | |||
2/26/13 | 1,000 | 460,000 | |
VML US Finance LLC (aka Venetian Macau), Term B: | |||
Delayed Draw Project Loan, 6.10%, 5/25/12 | 76 | 69,692 | |
Funded Project Loan, 6.10%, 5/25/13 | 548 | 501,063 | |
1,585,988 | |||
Household Durables — 0.8% | |||
American Residential Services LLC, Term Loan | |||
(Second Lien), 12.00%, 4/17/15 (e) | 1,020 | 889,871 | |
IT Services — 3.3% | |||
Audio Visual Services Group Inc.: | |||
Loan (Second Lien), 7.10%, 2/28/14 | 520 | 41,592 | |
Tranche B Term Loan (First Lien), 2.85%, 2/28/14 | 750 | 465,000 | |
Ceridian Corp., U.S. Term Loan, 3.27%, 11/09/14 | 989 | 846,260 |
See Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2009 19
Schedule of Investments (continued) | BlackRock Diversified Income Strategies Fund, Inc. (DVF) |
(Percentages shown are based on Net Assets) |
Par | |||
Floating Rate Loan Interests | (000) | Value | |
IT Services (concluded) | |||
First Data Corp.: | |||
Initial Tranche B-2 Term Loan, 3.01% – 3.02%, | |||
9/24/14 | USD | 2,134 | $ 1,775,203 |
Initial Tranche B-3 Term Loan, 3.01% – 3.02%, | |||
9/24/14 | 121 | 100,816 | |
SunGard Data Systems Inc. (Solar Capital Corp.), Tranche B | |||
U.S. Term Loan, 3.95% – 4.09%, 2/28/16 | 325 | 313,181 | |
3,542,052 | |||
Independent Power Producers & Energy Traders — 1.3% | |||
Texas Competitive Electric Holdings Co., LLC (TXU): | |||
Initial Tranche B-1 Term Loan, 3.78% – 3.79%, | |||
10/10/14 | 1,102 | 837,669 | |
Initial Tranche B-2 Term Loan, 3.78% – 3.79%, | |||
10/10/14 | 734 | 558,139 | |
1,395,808 | |||
Industrial Conglomerates — 0.3% | |||
Sequa Corp., Term Loan, 3.65% – 3.88%, 12/03/14 | 397 | 338,590 | |
Insurance — 0.4% | |||
Alliant Holdings I, Inc., Term Loan, 3.60%, 8/21/14 | 491 | 451,950 | |
Internet & Catalog Retail — 0.4% | |||
FTD Group, Inc., Tranche B Term Loan, 6.75%, 8/04/14 | 472 | 467,344 | |
Life Sciences Tools & Services — 0.8% | |||
Life Technologies Corp., Term B Facility, 5.25%, | |||
11/20/15 | 876 | 884,892 | |
Machinery — 2.6% | |||
Navistar International Corp.: | |||
Revolving Credit-Linked Deposit, 3.35% – 3.36%, | |||
1/19/12 | 800 | 744,000 | |
Term Advance, 3.51%, 1/19/12 | 2,200 | 2,046,000 | |
2,790,000 | |||
Media — 16.7% | |||
Affinion Group Holdings, Inc., Loan, 8.27%, 3/01/10 | 1,205 | 1,054,198 | |
AlixPartners, LLP, Tranche C Term Loan, 2.28% – 2.51%, | |||
10/12/13 (e) | 506 | 492,195 | |
Cebridge Connections, Second Lien Term Loan, 4.79%, | |||
5/05/14 | 2,000 | 1,802,500 | |
Cengage Learning Acquisitions, Inc. (Thomson Learning), | |||
Tranche 1 Incremental Term Loan, 7.50%, 7/03/14 | 1,000 | 960,000 | |
Cequel Communications, LLC, Tranche A Term Loan | |||
(Second Lien), 2.27% – 4.25%, 11/05/13 | 789 | 745,163 | |
Charter Communications, Term Loan B1, 0%, 3/25/14 (c)(d) | 1,515 | 1,514,242 | |
EB Sports Corp., Loan, 7.57%, 5/01/12 (e) | 890 | 489,262 | |
Ellis Communications KDOC, LLC Loan, 10.00%, 12/30/11 | 1,939 | 543,006 | |
HMH Publishing Co. Ltd.: | |||
Mezzanine, 17.50%, 11/14/14 (e) | 6,221 | 933,183 | |
Tranche A Term Loan, 5.26%, 6/12/14 | 1,536 | 1,188,521 | |
Insight Midwest Holdings, LLC, B Term Loan, 2.28%, | |||
4/07/14 | 475 | 453,286 | |
Lamar Media Corp., Series E Incremental Loan, 5.50%, | |||
3/15/13 | 247 | 244,715 | |
Lavena Holding 3 GmbH (Prosiebensat.1 Media AG) | |||
Facility B1, 3.53%, 6/30/15 | EUR | 337 | 272,803 |
Mediacom Illinois, LLC (fka Mediacom Communications, | |||
LLC), Tranche D Term Loan, 4.50%, 3/31/17 | USD | 500 | 498,750 |
Newsday, LLC, Fixed Rate Term Loan, 9.75%, 8/01/13 | 2,000 | 2,035,000 | |
Nielsen Finance LLC: | |||
Class A Dollar Term Loan, 2.28%, 8/09/13 | 603 | 561,398 | |
Class B Dollar Term Loan, 4.03%, 5/01/16 | 1,260 | 1,180,367 | |
Penton Media, Inc.: | |||
Loan (Second Lien), 5.49%, 2/01/14 | 1,000 | 210,000 | |
Term Loan (First Lien), 2.51% – 2.73%, 2/01/13 | 978 | 654,925 | |
Sunshine Acquisition Ltd. (aka HIT Entertainment) Term | |||
Facility, 2.73%, 7/31/14 | 325 | 270,156 | |
TWCC Holding Corp., Term Loan, 7.25%, 9/14/15 | 496 | 499,228 |
Par | ||
Floating Rate Loan Interests | (000) | Value |
Media (concluded) | ||
United Pan Europe Communications, Term Loan, 3.76%, | ||
12/31/16 | USD 1,000 | $ 982,500 |
Virgin Media Investment Holdings Ltd., C Facility, 3.62%, | ||
7/17/13 | GBP 145 | 207,726 |
World Color Press Inc. and World Color (USA) Corp. | ||
(fka Quebecor World Inc.), Advance, 9.00%, 6/30/12 | 200 | 198,500 |
17,991,624 | ||
Metals & Mining — 1.6% | ||
Euramax International, Inc., Domestic Term Loan: | ||
14.00%, 6/29/13 (e) | USD 626 | 269,062 |
(Cash Pay), 10.00%, 6/29/13 | 643 | 276,616 |
RathGibson Inc., Loan (Debtor in Possession), | ||
10.50% – 10.75%, 2/10/10 | 1,148 | 1,147,507 |
1,693,185 | ||
Multi-Utilities — 0.6% | ||
FirstLight Power Resources, Inc. (fka NE Energy, Inc.): | ||
Synthetic Letter of Credit, 0.48%, 11/01/13 | 74 | 68,302 |
Term B Advance (First Lien), 3.13%, 11/01/13 | 576 | 530,104 |
598,406 | ||
Multiline Retail — 0.2% | ||
Dollar General Corp., Tranche B-2 Term Loan, 3.01%, | ||
7/07/14 | 250 | 240,243 |
Oil, Gas & Consumable Fuels — 3.3% | ||
Big West Oil, LLC, Initial Advance Loan, 6.50%, 5/15/14 | 288 | 265,259 |
ScorpionDrilling Limited, Loan (Second Lien), 8.10%, | ||
5/08/14 | 1,650 | 1,369,500 |
Turbo Beta Ltd. Dollar Facility, 14.50%, 3/15/18 (e) | 1,738 | 1,216,786 |
Vulcan Energy Corp. (fka Plains Resources Inc), Term B3 | ||
Loan, 5.50%, 8/12/11 | 750 | 739,688 |
3,591,233 | ||
Paper & Forest Products — 0.8% | ||
Georgia-Pacific LLC, Term B Loan, 2.34% – 2.65%, | ||
12/20/12 | 835 | 806,982 |
Pharmaceuticals — 0.5% | ||
Warner Chilcott Co., Inc.: | ||
Tranche B Acquisition Date Term Loan, 2.26%, | ||
1/18/12 | 369 | 366,804 |
Tranche C Acquisition Date Term Loan, 2.26%, | ||
1/18/12 | 130 | 128,641 |
495,445 | ||
Software — 1.4% | ||
Aspect Software, Inc. Loan (Second Lien), 7.31%, | ||
7/11/12 | 2,500 | 1,512,500 |
Total Floating Rate Loan Interests — 58.0% | 62,469,878 | |
Beneficial | ||
Other Interests (i) | Interest | |
Diversified Financial Services — 0.2% | ||
JG Wentworth LLC Preferred Equity Interests | USD 271 | 228,566 |
Hotels, Restaurants & Leisure — 0.0% | ||
Buffets, Inc. | 360,000 | 36 |
Total Other Interests — 0.2% | 228,602 | |
Preferred Stocks | Shares | |
Capital Markets — 0.0% | ||
Marsico Parent Superholdco, LLC, 16.75% (b) | 48 | 12,240 |
Total Preferred Stocks — 0.0% | 12,240 |
See Notes to Financial Statements.
20 ANNUAL REPORT AUGUST 31, 2009
Schedule of Investments (continued) BlackRock Diversified Income Strategies Fund, Inc. (DVF)
(Percentages shown are based on Net Assets)
Warrants (j) | Shares | Value | ||
Hotels, Restaurants & Leisure — 0.0% | ||||
Buffets Restaurants Holdings, Inc. (expires 4/29/14) | 304 | $ 3 | ||
Other — 0.0% | ||||
Turbo Cayman Ltd. (No Expiration) | 1 | — | ||
Total Warrants — 0.0% | 3 | |||
Total Long-Term Investments | ||||
(Cost — $177,149,788) — 119.0% | 128,167,846 | |||
Short-Term Securities | ||||
BlackRock Liquidity Funds, TempFund, 0.22% (k)(l) | 2,371,578 | 2,371,578 | ||
Total Short-Term Securities | ||||
(Cost — $2,371,578) — 2.2% | 2,371,578 | |||
Options Purchased | Contracts | |||
Over-the-Counter Call Options | ||||
Marsico Parent Superholdco LLC, expiring December | ||||
2019 at USD 942.86, Broker Goldman Sachs & Co. | 13 | 13,000 | ||
Total Options Purchased (Cost — $12,711) — 0.0% | 13,000 | |||
Total Investments (Cost — $179,534,077*) — 121.2% | 130,552,424 | |||
Liabilities in Excess of Other Assets — (21.2)% | (22,996,029) | |||
Net Assets — 100.0% | $107,556,395 | |||
* The cost and unrealized appreciation (depreciation) of investments as of August 31, | ||||
2009, as computed for federal income tax purposes, were as follows: | ||||
Aggregate cost | $180,146,320 | |||
Gross unrealized appreciation | $ 3,424,595 | |||
Gross unrealized depreciation | (53,018,491) | |||
Net unrealized depreciation | $ (49,593,896) | |||
(a) Variable rate security. Rate shown is as of report date. | ||||
(b) 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. | ||||
(c) Non-income producing security. | ||||
(d) Issuer filed for bankruptcy and/or is in default of interest payments. | ||||
(e) Represents a payment-in-kind security which may pay interest/dividends in addi- | ||||
tional par/shares. | ||||
(f) Convertible security. | ||||
(g) Represents a zero-coupon bond. Rate shown reflects the current yield as of report | ||||
date. | ||||
(h) All, or a portion of security, pledged as collateral in connection with swaps. | ||||
(i) Other interests represent beneficial interest in liquidation trusts and other reorgani- | ||||
zation entities and are non-income producing. | ||||
(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 | ||||
shares are subject to adjustment under certain conditions until the expiration date. | ||||
(k) 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 | $ 2,371,578 | $ 2,468 | ||
BlackRock Liquidity Series, LLC | ||||
Cash Sweep Series | $(5,592,405) | $17,999 | ||
(l) 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. | |||||||||||||
• | Foreign currency exchange contracts as of August 31, 2009 were as follows: | ||||||||||||
Unrealized | |||||||||||||
Currency | Currency | Settlement Appreciation | |||||||||||
Purchased | Sold | Counterparty | Date (Depreciation) | ||||||||||
USD 195,257 EUR | 140,000 | Citibank NA | 9/15/09 | $ (5,452) | |||||||||
USD 397,270 EUR | 280,000 | Citibank NA | 9/16/09 | (4,149) | |||||||||
USD 3,161,838 | EUR | 2,264,500 | Deutsche Bank AG 9/16/09 | (84,636) | |||||||||
USD | 326,927 | CAD | 355,000 | Barclays Bank Plc 10/28/09 | 2,622 | ||||||||
GBP 165,000 USD | 269,693 | Citibank NA | 10/28/09 | (1,102) | |||||||||
Total | $ (92,717) | ||||||||||||
• | Interest rate swaps outstanding as of August 31, 2009 were as follows: | ||||||||||||
Notional | |||||||||||||
Fixed | Floating | Amount | Unrealized | ||||||||||
Rate | Rate | Counterparty Expiration | (000) | Depreciation | |||||||||
4.82% (m) 3-month | JPMorgan | January | |||||||||||
LIBOR | Chase Bank NA | 2013 USD 20,000 | $(1,751,189) | ||||||||||
(m) Pays fixed rate and receives floating rate. | |||||||||||||
• | Credit default swaps on single-name issues — buy protection outstanding as of | ||||||||||||
August 31, 2009 were as follows: | |||||||||||||
Pay | Notional | Unrealized | |||||||||||
Fixed | Amount Appreciation | ||||||||||||
Issuer | Rate | Counterparty | Expiration | (000) (Depreciation) | |||||||||
Host Hotel & | Goldman Sachs | ||||||||||||
Resorts LP | 5.00% | Bank USA | March 2014 | USD 1,275 $ (177,446) | |||||||||
Masco | JPMorgan | ||||||||||||
Corp. | 5.30% | Chase Bank NA | March 2014 USD | 500 | (55,080) | ||||||||
Mohawk | |||||||||||||
Industries, | JPMorgan | ||||||||||||
Inc. | 4.45% | Chase Bank NA | March 2014 USD | 500 | (49,615) | ||||||||
Brunswick | Goldman Sachs September | ||||||||||||
Corp. | 5.00% | Bank USA | 2014 | USD | 100 | 561 | |||||||
Standard | |||||||||||||
Pacific | Credit Suisse | September | |||||||||||
Corp. | 5.00% | International | 2014 | USD | 270 | 10,739 | |||||||
Total | $ (270,841) | ||||||||||||
• | Credit default swaps on traded index — sold protection outstanding as of August 31, | ||||||||||||
2009 were as follows: | |||||||||||||
Receive | Notional | ||||||||||||
Fixed | Counter- | Credit | Amount | Unrealized | |||||||||
Index | Rate | party Expiration Rating1 | (000)2 Depreciation | ||||||||||
Aces High | 5.00% | Morgan | March | CCC | USD 6,736 | $(2,024,770) | |||||||
Yield Index | Stanley | 2010 | |||||||||||
Capital | |||||||||||||
Services, Inc. | |||||||||||||
• | Credit default swaps on single-name issues — sold protection outstanding as of | ||||||||||||
August 31, 2009 were as follows: | |||||||||||||
Receive | Notional | ||||||||||||
Fixed | Counter- | Credit | Amount | Unrealized | |||||||||
Issuer | Rate | party Expiration Rating3 | (000)2 Depreciation | ||||||||||
BAA | 2.00% | Deutsche | March | A– | GBP | 300 | $ (96,206) | ||||||
Ferrovial | Bank AG | 2012 | |||||||||||
Junior Term | |||||||||||||
Loan | |||||||||||||
1 | Using Standard & Poor’s weighted average ratings of the underlying securities | ||||||||||||
in the index. | |||||||||||||
2 | The maximum potential amount the Fund may pay should a negative credit | ||||||||||||
event take place under the terms of the agreement. See Note 2 of the Notes to | |||||||||||||
Financial Statements. | |||||||||||||
3 | Using Standard & Poor’s rating of the issuer. |
See Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2009 21
Schedule of Investments (continued) BlackRock Diversified Income Strategies Fund, Inc. (DVF)
• Currency Abbreviations:
CAD Canadian Dollar
EUR Euro
GBP British Pound
USD US Dollar
• Effective September 1, 2008, the Fund adopted Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 157, “Fair Value Measure-
ments,” (“FAS 157”). FAS 157 clarifies the definition of fair value, establishes a
framework for measuring fair values and requires additional disclosures about the
use of fair value measurements. Various inputs are used in determining the fair
value of investments, which are as follows:
• Level 1 — price quotations in active markets/exchanges for identical securities
• 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 identi-
cal or similar assets or liabilities in markets that are not active, inputs other than
quoted prices that are observable for the assets or liabilities (such as interest
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks
and default rates) or other market-corroborated inputs)
• Level 3 — unobservable inputs based on the best information available in the
circumstances, to the extent observable inputs are not available (including the
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 table summarizes the inputs used as of August 31, 2009 in | ||
determining the fair valuation of the Fund’s investments: | ||
Valuation | Investments in | |
Inputs | Securities | |
Assets | ||
Level 1 | ||
Long-Term Investments: | ||
Common Stocks | $ 2,283,119 | |
Short-Term Securities | 2,371,578 | |
Total Level 1 | 4,654,697 | |
Level 2 | ||
Long-Term Investments: | ||
Common Stocks | 503,215 | |
Corporate Bonds | 61,103,415 | |
Floating Rate Loan Interests | 36,916,830 | |
Preferred Stocks | 12,240 | |
Total Level 2 | 98,535,700 | |
Level 3 | ||
Long-Term Investments: | ||
Asset-Backed Securities | 528,255 | |
Common Stocks | 5,436 | |
Corporate Bonds | 1,033,683 | |
Floating Rate Loan Interests | 25,553,048 | |
Other Interests | 228,602 | |
Warrants | 3 | |
Total Level 3 | 27,349,027 | |
Total | $130,539,424 | |
Valuation | Other Financial | |
Inputs | Instruments1 | |
Assets | Liabilities | |
Level 1 | — | — |
Level 2 | $ 26,922 | $ (4,249,645) |
Level 3 | 38,010 | — |
Total | $ 64,932 | $ (4,249,645) |
1 Other financial instruments are swaps, foreign currency exchange contracts, | ||
options purchased and unfunded loan commitments. Swaps, foreign currency | ||
exchange contracts and unfunded loan commitments are valued at the unreal- | ||
ized appreciation/depreciation on the instrument and options purchased are | ||
shown at market value. |
See Notes to Financial Statements.
22 ANNUAL REPORT AUGUST 31, 2009
Schedule of Investments (concluded) BlackRock Diversified Income Strategies Fund, Inc. (DVF)
The following is a reconciliation of investments for unobservable inputs (Level 3) used in determining fair value: | |||||||||
Investments in Securities | |||||||||
Asset-Backed | Common | Corporate | Floating Rate | Other | |||||
Securities | Stocks | Bonds | Loan Interests | Interests | Warrants | Total | |||
Balance, as of August 31, 2008 | — | — | — | $17,146,004 | — | — | $17,146,004 | ||
Accrued discounts/premiums | — | — | — | — | — | — | — | ||
Realized gain (loss) | — | — | — | (5,893,500) | — | — | (5,893,500) | ||
Change in unrealized appreciation1 | $ 466,236 | $ 5,033 | $ (50,717) | 2,373,735 | — | — | 2,794,287 | ||
Net purchases (sales) | — | — | — | (10,472,926) | — | — | (10,472,926) | ||
Net transfers in/out of Level 3 | 62,019 | 403 | 1,084,400 | 22,399,735 | $ 228,602 | $ 3 | 23,775,162 | ||
Balance as of August 31, 2009 | $ 528,255 | $ 5,436 | $ 1,033,683 | $25,553,048 | $ 228,602 | $ 3 | $27,349,027 | ||
1 Included in the related net change in unrealized appreciation/depreciation on the Statements of Operations. | |||||||||
The following is a reconciliation of other financial instruments for unobservable inputs | |||||||||
(Level 3) used in determining fair value: | |||||||||
Other Financial | |||||||||
Instruments2 | |||||||||
Assets | |||||||||
Balance, as of August 31, 2008 | — | ||||||||
Accrued discounts/premiums | — | ||||||||
Realized gain (loss) | — | ||||||||
Change in unrealized appreciation (depreciation) | — | ||||||||
Net purchases (sales) | — | ||||||||
Net transfers in/out of Level 3 | $ 38,010 | ||||||||
Balance as of August 31, 2009 | $ 38,010 | ||||||||
2 Other financial instruments are unfunded loan commitments. |
See Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2009 23
Schedule of Investments August 31, 2009 BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
(Percentages shown are based on Net Assets)
Common Stocks | Shares | Value | |
Building Products — 0.6% | |||
Masonite Worldwide Holdings (a) | 33,758 | $ 1,365,511 | |
Chemicals — 0.0% | |||
GEO Specialty Chemicals, Inc. (a) | 13,117 | 5,036 | |
Wellman Holdings, Inc. | 430 | 107 | |
5,143 | |||
Electrical Equipment — 0.0% | |||
Medis Technologies Ltd. (a) | 71,654 | 20,421 | |
Energy Equipment & Services — 0.3% | |||
Trico Marine Services, Inc. (a) | 119,185 | 810,458 | |
Paper & Forest Products — 0.2% | |||
Ainsworth Lumber Co., Ltd. (a) | 136,289 | 196,699 | |
Ainsworth Lumber Co., Ltd. (a)(b) | 152,951 | 220,043 | |
Western Forest Products, Inc. (a)(b) | 84,448 | 20,056 | |
436,798 | |||
Total Common Stocks — 1.1% | 2,638,331 | ||
Par | |||
Corporate Bonds | (000) | ||
Auto Components — 1.9% | |||
The Goodyear Tire & Rubber Co., 5.01%, 12/01/09 (c) | USD | 4,500 | 4,483,125 |
Building Products — 2.0% | |||
CPG International I, Inc.: | |||
7.87%, 7/01/12 (c) | 3,500 | 2,502,500 | |
10.50%, 7/01/13 | 2,300 | 1,644,500 | |
Momentive Performance Materials, Inc., Series WI, | |||
9.75%, 12/01/14 | 750 | 487,500 | |
4,634,500 | |||
Capital Markets — 0.3% | |||
Marsico Parent Co., LLC, 10.63%, 1/15/16 (b) | 1,168 | 490,560 | |
Marsico Parent Holdco, LLC, 12.50%, 7/15/16 (b)(d) | 486 | 116,671 | |
Marsico Parent Superholdco, LLC, 14.50%, 1/15/18 (b)(d) | 335 | 86,990 | |
694,221 | |||
Chemicals — 0.6% | |||
GEO Specialty Chemicals, Inc.: | |||
10.00%, 3/31/15 | 844 | 548,704 | |
7.50%, 3/31/15 (b)(e) | 852 | 553,506 | |
Wellman Holdings, Inc., Third Lien Subordinate Note, | |||
5.00%, 1/29/19 (e) | 442 | 220,823 | |
1,323,033 | |||
Commercial Services & Supplies — 0.3% | |||
Clean Harbors, Inc., 7.63%, 8/15/16 (b) | 800 | 802,000 | |
Construction Materials — 1.0% | |||
Nortek, Inc., 10.00%, 12/01/13 | 2,540 | 2,362,200 | |
Containers & Packaging — 1.8% | |||
Clondalkin Acquisition BV, 2.63%, 12/15/13 (b)(c) | 4,000 | 3,200,000 | |
Crown European Holdings SA, 6.25%, 9/01/11 | EUR | 15 | 21,504 |
Owens Brockway Glass Container, Inc., 6.75%, | |||
12/01/14 | 143 | 198,856 | |
Packaging Dynamics Finance Corp., 10.00%, | |||
5/01/16 (b) | USD | 2,350 | 752,000 |
4,172,360 | |||
Diversified Financial Services — 2.2% | |||
FCE Bank Plc, 7.13%, 1/16/12 | EUR | 4,000 | 5,189,667 |
Diversified Telecommunication Services — 1.8% | |||
PAETEC Holding Corp., 8.88%, 6/30/17 (b) | USD | 1,150 | 1,095,375 |
Qwest Corp., 3.88%, 6/15/13 (c) | 3,500 | 3,237,500 | |
4,332,875 |
Par | |||
Corporate Bonds | (000) | Value | |
Food & Staples Retailing — 0.2% | |||
AmeriQual Group LLC, 9.50%, 4/01/12 (b) | USD | 250 | $ 162,500 |
Duane Reade, Inc., 11.75%, 8/01/15 (b) | 190 | 191,900 | |
354,400 | |||
Food Products — 0.4% | |||
Smithfield Foods, Inc., 10.00%, 7/15/14 (b) | 900 | 918,000 | |
Health Care Equipment & Supplies — 0.5% | |||
DJO Finance LLC, 10.88%, 11/15/14 | 1,320 | 1,267,200 | |
Hotels, Restaurants & Leisure — 2.4% | |||
American Real Estate Partners LP, 7.13%, 2/15/13 | 5,000 | 4,750,000 | |
Harrah’s Operating Co., Inc., 10.00%, 12/15/18 (b) | 413 | 289,100 | |
Little Traverse Bay Bands of Odawa Indians, 10.25%, | |||
2/15/14 (a)(b)(f) | 1,565 | 688,600 | |
5,727,700 | |||
IT Services — 0.8% | |||
First Data Corp.: | |||
9.88%, 9/24/15 | 1,020 | 872,100 | |
11.25%, 3/31/16 (b) | 1,190 | 910,350 | |
1,782,450 | |||
Independent Power Producers & Energy Traders — 1.4% | |||
Calpine Construction Finance Co., LP, 8.00%, 6/01/16 (b) | 2,120 | 2,109,400 | |
Texas Competitive Electric Holdings Co., LLC, 10.25%, | |||
11/01/15 | 2,005 | 1,328,312 | |
3,437,712 | |||
Industrial Conglomerates — 0.5% | |||
Sequa Corp. (b): | |||
11.75%, 12/01/15 | 640 | 403,200 | |
13.50%, 12/01/15 (d) | 1,700 | 888,231 | |
1,291,431 | |||
Machinery — 0.8% | |||
CPM Holdings, Inc., 10.63%, 9/01/14 (b) | 500 | 505,000 | |
Sunstate Equipment Co., LLC, 10.50%, 4/01/13 (b) | 2,000 | 1,500,000 | |
2,005,000 | |||
Media — 1.6% | |||
CSC Holdings, Inc.: | |||
8.50%, 4/15/14 (b) | 420 | 426,300 | |
Series B, 7.63%, 4/01/11 | 2,000 | 2,025,000 | |
Cablevision Systems Corp. Series B, 8.00%, 4/15/12 | 975 | 996,937 | |
Local Insight Regatta Holdings, Inc., 11.00%, 12/01/17 | 1,244 | 472,720 | |
3,920,957 | |||
Metals & Mining — 0.4% | |||
FMG Finance Property Ltd., 4.36%, 9/01/11 (b)(c) | 265 | 265,000 | |
Ryerson, Inc., 7.86%, 11/01/14 (c) | 900 | 765,000 | |
1,030,000 | |||
Oil, Gas & Consumable Fuels — 0.6% | |||
SandRidge Energy, Inc., 4.22%, 4/01/14 (c) | 1,600 | 1,328,589 | |
Paper & Forest Products — 2.3% | |||
Ainsworth Lumber Co., Ltd., 11.00%, 7/29/15 (b)(d) | 1,176 | 466,135 | |
NewPage Corp.: | |||
10.00%, 5/01/12 | 2,000 | 1,085,000 | |
6.73%, 5/01/12 (c) | 3,925 | 1,677,937 | |
Verso Paper Holdings LLC, Series B, 4.23%, 8/01/14 (c) | 4,000 | 2,240,000 | |
5,469,072 | |||
Pharmaceuticals — 1.4% | |||
Angiotech Pharmaceuticals, Inc., 4.11%, 12/01/13 (c) | 1,190 | 999,600 | |
Elan Finance Plc, 4.44%, 11/15/11 (c) | 2,500 | 2,350,000 | |
3,349,600 |
See Notes to Financial Statements.
24 ANNUAL REPORT AUGUST 31, 2009
Schedule of Investments (continued) BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
(Percentages shown are based on Net Assets)
Par | |||
Corporate Bonds | (000) | Value | |
Semiconductors & Semiconductor Equipment — 1.4% | |||
Avago Technologies Finance Pte. Ltd., 5.86%, | |||
6/01/13 (c) | USD | 900 | $ 846,000 |
Spansion, Inc., 3.79%, 6/01/13 (a)(b)(f) | 2,870 | 2,547,125 | |
3,393,125 | |||
Specialty Retail — 0.1% | |||
General Nutrition Centers, Inc., 6.40%, 3/15/14 (c) | 290 | 255,200 | |
Wireless Telecommunication Services — 1.8% | |||
Cricket Communications, Inc., 7.75%, 5/15/16 (b) | 2,500 | 2,425,000 | |
Crown Castle International Corp., 9.00%, 1/15/15 | 255 | 265,200 | |
Digicel Group Ltd., 9.13%, 1/15/15 (b)(d) | 278 | 244,987 | |
iPCS, Inc., 2.61%, 5/01/13 (c) | 1,500 | 1,230,000 | |
4,165,187 | |||
Total Corporate Bonds — 28.5% | 67,689,604 | ||
Floating Rate Loan Interests | |||
Aerospace & Defense — 2.5% | |||
Avio SpA: | |||
Dollar Mezzanine Term Loan, 4.26%, 12/13/16 (d) | 2,123 | 955,402 | |
Facility B2, 2.39%, 12/15/14 | 1,661 | 1,395,506 | |
Facility C2, 3.01%, 12/14/15 | 1,771 | 1,487,671 | |
Hawker Beechcraft Acquisition Co., LLC: | |||
Letter of Credit Facility Deposit, 2.28%, 3/26/14 | 137 | 102,306 | |
Term Loan, 2.26% – 2.60%, 3/26/14 | 2,325 | 1,733,406 | |
IAP Worldwide Services, Inc., Term Loan (First-Lien), | |||
7.25%, 12/30/12 (d) | 175 | 126,292 | |
5,800,583 | |||
Airlines — 0.8% | |||
Delta Air Lines, Inc., Credit- Linked Deposit Loan, | |||
0.11% – 2.28%, 4/30/12 | 1,225 | 1,093,823 | |
US Airways Group, Inc., Loan, 2.76%, 3/21/14 | 1,460 | 786,210 | |
1,880,033 | |||
Auto Components — 3.0% | |||
Allison Transmission, Inc., Term Loan, 3.03%, 8/07/14 | 4,825 | 4,119,199 | |
Dana Holding Corp., Term Advance, 7.25%, 1/31/15 | 1,551 | 1,187,394 | |
Delphi Corp. (a)(f): | |||
Initial Tranche Term Loan C, 10.50%, 12/31/09 | 2,269 | 1,247,910 | |
Subsequent Tranche Term Loan C, 9.50%, 12/31/09 | 231 | 127,090 | |
GPX International Tire Corp.: | |||
Term Loan, 12.00%, 4/11/12 (d) | 22 | 6,626 | |
Tranche B Term Loan, 10.25%, 3/30/12 (a)(f) | 1,280 | 384,097 | |
7,072,316 | |||
Beverages — 0.1% | |||
Culligan International Co., Loan (Second Lien), 5.28%, | |||
4/24/13 | EUR | 500 | 179,201 |
Building Products — 1.2% | |||
Building Materials Corp. of America, Term Loan Advance, | |||
3.06%, 2/22/14 | USD | 1,968 | 1,795,500 |
PGT Industries, Inc., Tranche A-2 Term Loan, 7.25%, | |||
2/14/12 | 1,752 | 1,086,352 | |
2,881,852 | |||
Capital Markets — 0.6% | |||
RiskMetrics Group Holdings, LLC, Term B Loan (First Lien), | |||
2.60%, 1/10/14 | 1,449 | 1,407,720 | |
Chemicals — 5.5% | |||
Ashland Inc., Term B Borrowing, 7.65%, 5/13/14 | 1,177 | 1,197,465 | |
Edwards (Cayman Islands II) Ltd., Term Loan (First Lien), | |||
2.85%, 5/31/14 | 490 | 303,800 |
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Chemicals (concluded) | |||
Huish Detergents Inc., Tranche B Term Loan, 2.02%, | |||
4/26/14 | USD | 1,470 | $ 1,401,400 |
Nalco Co., Term Loan, 6.50%, 5/06/16 | 2,450 | 2,483,688 | |
PQ Corp. (fka Niagara Acquisition, Inc.), Original Term | |||
Loan (First Lien), 3.52% – 3.75%, 7/31/14 | 3,960 | 3,263,701 | |
Solutia Inc., Loan, 7.25%, 2/28/14 | 4,462 | 4,416,704 | |
13,066,758 | |||
Commercial Services & Supplies — 0.8% | |||
Casella Waste Systems, Inc., Term B Loan, 7.00%, | |||
4/09/14 | 750 | 751,875 | |
John Maneely Co., Term Loan, 3.52% – 3.76%, 12/09/13 | 846 | 663,063 | |
West Corp., Term B-2 Loan, 2.64% – 2.65%, 10/24/13 | 533 | 505,807 | |
1,920,745 | |||
Computers & Peripherals — 0.4% | |||
Intergraph Corp.: | |||
Initial Term Loan (First Lien), 2.37%, 5/29/14 | 419 | 401,943 | |
Second Lien Term Loan, 6.26% – 6.37%, 11/28/14 | 500 | 466,250 | |
868,193 | |||
Construction Materials — 0.4% | |||
Headwaters Inc., Term Loan B1 (First Lien), 9.75%, | |||
4/30/11 | 1,012 | 979,576 | |
Containers & Packaging — 1.8% | |||
Graham Packaging Co.: | |||
B Term Loan, 2.56%, 10/07/11 | 109 | 105,644 | |
Term Loan C, 6.75%, 4/27/14 | 1,087 | 1,084,386 | |
Graphic Packaging International, Inc., Incremental Term | |||
Loan, 3.08% – 3.35%, 5/16/14 | 1,970 | 1,920,750 | |
Smurfit-Stone Container Enterprises, Inc., U.S. Term Loan | |||
Debtor in Possession, 10.00%, 1/28/10 | 1,155 | 1,167,020 | |
4,277,800 | |||
Distributors — 0.3% | |||
Keystone Automotive Operations, Inc., Loan, | |||
3.77% – 5.75%, 1/12/12 | 1,419 | 773,397 | |
Diversified Consumer Services — 1.0% | |||
Coinmach Service Corp., Term Loan, 3.28% – 3.43%, | |||
11/14/14 | 2,715 | 2,308,208 | |
Diversified Telecommunication Services — 1.0% | |||
Integra Telecom Holdings, Inc., Term Loan (First Lien), | |||
10.50%, 8/31/13 | 774 | 758,381 | |
PAETEC Holding Corp., Incremental Term Loan, 2.76%, | |||
2/28/13 | 169 | 159,006 | |
Wind Finance SL SA Euro Facility (Second Lien), 7.70%, | |||
12/17/14 | EUR | 1,000 | 1,437,910 |
2,355,297 | |||
Electrical Equipment — 0.6% | |||
Baldor Electric Co., Term Loan, 5.25%, 1/31/14 | USD | 1,000 | 986,429 |
Generac Acquisition Corp., Lien Term Loan (First Lien), | |||
2.78%, 11/10/13 | 548 | 459,740 | |
1,446,169 | |||
Energy Equipment & Services — 1.2% | |||
Dresser, Inc., Term B Loan, 2.68%, 5/04/14 | 1,200 | 1,118,400 | |
MEG Energy Corp.: | |||
Delayed Draw Term Loan, 2.60%, 4/02/13 | 986 | 915,980 | |
Initial Term Loan, 2.60%, 4/03/13 | 968 | 898,566 | |
2,932,946 | |||
Food & Staples Retailing — 2.9% | |||
AB Acquisitions UK Topco 2 Ltd. (fka Alliance Boots), | |||
Facility B1, 3.53%, 7/09/15 | GBP | 3,000 | 4,184,567 |
DSW Holdings, Inc., Loan, 2.52%, 10/27/12 | USD | 919 | 827,500 |
See Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2009 25
Schedule of Investments (continued) BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
(Percentages shown are based on Net Assets)
Floating Rate Loan Interests | (000) | Value | |
Food & Staples Retailing (concluded) | |||
McJunkin Corp., Term Loan, 3.51%, 1/31/14 | USD | 499 | $ 475,032 |
Rite Aid Corp., Tranche 4 Term Loan, 9.50%, 6/04/15 | 1,000 | 1,035,000 | |
Wm. Bolthouse Farms, Inc., Term Loan (First Lien), 2.56%, | |||
12/16/12 | 378 | 364,690 | |
6,886,789 | |||
Food Products — 3.2% | |||
Dole Food Co., Inc.: | |||
Credit-Linked Deposit, 0.51%, 4/12/13 | 390 | 392,601 | |
Tranche B Term Loan, 8.00%, 4/12/13 | 682 | 686,302 | |
Solvest, Ltd. (Dole), Tranche C Term Loan, 8.00%, 4/12/13 | 2,541 | 2,557,222 | |
Wm. Wrigley Jr. Co., Tranche B Term Loan, 6.50%, 10/06/14 | 3,925 | 3,968,817 | |
7,604,942 | |||
Health Care Equipment & Supplies — 1.4% | |||
Biomet, Inc., Dollar Term Loan, 3.26% – 3.61%, 3/25/15 | 2,250 | 2,158,828 | |
DJO Finance LLC (ReAble Therapeutics Finance LLC), | |||
Term Loan, 3.26% – 3.60%, 5/20/14 | 985 | 940,675 | |
Hologic, Inc., Tranche B Term Loan, 3.56%, 3/31/13 | 212 | 204,100 | |
3,303,603 | |||
Health Care Providers & Services — 6.7% | |||
CCS Medical, Inc. (Chronic Care): | |||
Loan Debtor in Possession, 11.00%, 11/14/09 | 31 | 30,309 | |
Term Loan (First Lien), 4.35%, 9/30/12 (a)(f) | 750 | 338,437 | |
CHS/Community Health Systems, Inc.: | |||
Delayed Draw Term Loan, 2.51%, 7/25/14 | 221 | 206,215 | |
Funded Term Loan, 2.51%, 7/25/14 | 4,319 | 4,024,123 | |
DaVita, Inc., Tranche B-1 Term Loan, 1.77% – 2.10%, | |||
10/05/12 | 1,000 | 959,583 | |
Fresenius AG: | |||
Term Loan B1, 6.75%, 7/06/14 | 1,478 | 1,485,952 | |
Term Loan B2, 6.75%, 7/06/14 | 903 | 907,957 | |
HCA Inc.: | |||
Tranche A-1 Term Loan, 2.10%, 11/17/12 | 3,512 | 3,278,934 | |
Tranche B-1 Term Loan, 2.85%, 11/18/13 | 3,098 | 2,915,255 | |
Vanguard Health Holding Co., II, LLC (Vanguard Health | |||
System, Inc.), Replacement Term Loan, 2.51%, 9/23/11 | 1,769 | 1,721,591 | |
15,868,356 | |||
Hotels, Restaurants & Leisure — 2.7% | |||
Golden Nugget, Inc., Second Lien Term Loan, 3.52%, | |||
12/31/14 | 250 | 105,000 | |
Green Valley Ranch Gaming, LLC, Second Lien Term Loan, | |||
3.88%, 8/16/14 | 500 | 102,500 | |
Harrah’s Operating Co., Inc.: | |||
Term B-1 Loan, 3.50%, 1/28/15 | 208 | 167,785 | |
Term B-2 Loan, 3.50%, 1/28/15 | 2,450 | 1,974,117 | |
Term B-3 Loan, 3.50% – 3.60%, 1/28/15 | 184 | 147,842 | |
Penn National Gaming, Inc., Term Loan B, 2.01 – 2.21%, | |||
10/03/12 | 1,136 | 1,104,234 | |
QCE, LLC (Quiznos), Term Loan (Second Lien), 2.88%, | |||
5/15/13 | 979 | 729,086 | |
Travelport LLC (fka Travelport Inc.): | |||
Original Post-First Amendment and Restatement | |||
Synthetic Letter of Credit Loan, 3.10%, 8/23/13 | 178 | 160,153 | |
Tranche B Dollar Term Loan, 2.76% – 3.10%, 8/23/13 | 889 | 798,171 | |
VML US Finance LLC (aka Venetian Macau), Term B: | |||
Delayed Draw Project Loan, 6.10%, 5/25/12 | 383 | 350,225 | |
Funded Project Loan, 6.10%, 5/27/13 | 864 | 790,220 | |
6,429,333 |
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Household Durables — 3.1% | |||
American Residential Services LLC, Term Loan (Second | |||
Lien), 12.00%, 4/17/15 (d) | USD | 2,040 | $ 1,779,743 |
Jarden Corp., Term Loan B3, 3.10%, 1/24/12 | 1,372 | 1,353,659 | |
Simmons Bedding Co., Tranche D Term Loan, 10.50%, | |||
12/19/11 | 3,166 | 3,076,263 | |
Yankee Candle Co., Inc., Term Loan, 2.27%, 2/06/14 | 1,184 | 1,098,083 | |
7,307,748 | |||
IT Services — 4.6% | |||
Audio Visual Services Group, Inc.: | |||
Loan (Second Lien), 7.10%, 2/28/14 (c) | 1,040 | 83,184 | |
Tranche B Term Loan (First Lien), 2.85%, 2/28/14 | 1,000 | 620,000 | |
Ceridian Corp., U.S. Term Loan, 3.27%, 11/09/14 | 1,977 | 1,692,520 | |
First Data Corp. Initial: | |||
Tranche B-1 Term Loan, 3.01% – 3.02%, 9/24/14 | 790 | 658,169 | |
Tranche B-2 Term Loan, 3.01% – 3.02%, 9/24/14 | 4,629 | 3,852,089 | |
Tranche B-3 Term Loan, 3.01% – 3.02%, 9/24/14 | 341 | 283,935 | |
RedPrairie Corp.: | |||
Loan (Second Lien), 6.97%, 1/20/13 | 300 | 214,500 | |
Term Loan B, 3.44% – 5.25%, 7/20/12 | 562 | 485,920 | |
SunGard Data Systems Inc.: | |||
(Solar Capital Corp.) Additional Term Loan B, 6.75%, | |||
2/28/14 | 900 | 894,696 | |
Term Loan B, 3.95% – 4.09%, 2/28/16 | 2,261 | 2,182,782 | |
10,967,795 | |||
Independent Power Producers & Energy Traders — 1.7% | |||
Texas Competitive Electric Holdings Co., LLC (TXU): | |||
Initial Tranche B-1 Term Loan, 3.78% – 3.79%, | |||
10/10/14 | 2,529 | 1,921,710 | |
Initial Tranche B-2 Term Loan, 3.78% – 3.79%, | |||
10/10/14 | 978 | 742,929 | |
Initial Tranche B-3 Term Loan, 3.78% – 3.79%, | |||
10/10/14 | 1,945 | 1,472,063 | |
4,136,702 | |||
Industrial Conglomerates — 0.6% | |||
Sequa Corp., Term Loan, 3.65% – 3.88%, 12/03/14 | 1,519 | 1,294,833 | |
Insurance — 0.2% | |||
Alliant Holdings I, Inc., Term Loan, 3.60%, 8/21/14 | 491 | 451,950 | |
Internet & Catalog Retail — 0.3% | |||
FTD Group, Inc., Tranche B Term Loan, 6.75%, 8/04/14 | 708 | 701,016 | |
Leisure Equipment & Products — 1.6% | |||
24 Hour Fitness Worldwide, Inc., Tranche B Term Loan, | |||
2.77% – 3.08%, 6/08/12 | 3,870 | 3,366,900 | |
Fender Musical Instruments Corp.: | |||
Delayed Draw Loan, 2.54%, 6/09/14 | 165 | 132,220 | |
Initial Loan, 2.85%, 6/07/14 | 327 | 261,770 | |
3,760,890 | |||
Life Sciences Tools & Services — 1.1% | |||
Life Technologies Corp., Term B Facility, 5.25%, 11/20/15 | 2,529 | 2,554,120 | |
Machinery — 3.0% | |||
NACCO Materials Handling Group, Inc., Loan, 2.26% – 3.41%, | |||
3/21/13 | 1,455 | 989,400 | |
Navistar Financial Corp. Tranche A Term loan, 2.31%, | |||
3/27/10 | 1,492 | 1,447,461 | |
Navistar International Corp.: | |||
Revolving Credit-Linked Deposit, 3.36% – 3.51%, | |||
1/19/12 | 1,067 | 992,000 | |
Term Advance, 3.51%, 1/19/12 | 2,933 | 2,728,000 | |
Oshkosh Truck Corp., Term B Loan, 6.60% – 6.64%, | |||
12/06/13 | 1,032 | 1,026,883 | |
7,183,744 |
See Notes to Financial Statements.
26 ANNUAL REPORT AUGUST 31, 2009
Schedule of Investments (continued) BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
(Percentages shown are based on Net Assets)
Floating Rate Loan Interests | (000) | Value | |
Media — 23.8% | |||
Affinion Group Holdings, Inc., Loan, 8.27%, | �� | ||
3/01/10 (d) | USD | 2,095 | $ 1,833,388 |
AlixPartners, LLP, Tranche C Term Loan, 2.28% – 2.51%, | |||
10/12/13 | 1,590 | 1,546,900 | |
Bresnan Communications, LLC, Additional Term Loan B | |||
(First Lien), 2.51% – 2.61%, 6/30/13 | 946 | 906,626 | |
Catalina Marketing Corp., Initial Term Loan, 3.03%, | |||
10/01/14 | 1,523 | 1,431,695 | |
Cengage Learning Acquisitions, Inc. (Thomson Learning), | |||
Tranche 1 Incremental Term Loan, 7.50%, 7/03/14 | 4,200 | 4,032,000 | |
Cequel Communications, LLC: | |||
Term Loan, 2.27% – 4.25%, 11/05/13 | 2,110 | 1,993,002 | |
Tranche A Term Loan (Second Lien), 4.79%, 5/05/14 | 2,000 | 1,802,500 | |
Charter Communications, Term Loan B1, 7.94%, 3/25/14 | 3,465 | 3,463,267 | |
HMH Publishing Co., Ltd. (fka Education Media): | |||
Mezzanine, 17.50%, 11/14/14 (d) | 10,180 | 1,527,027 | |
Tranche A Term Loan, 5.26%, 6/12/14 | 2,633 | 2,037,464 | |
Hanley-Wood, LLC (FSC Acquisition), Term Loan, | |||
2.52% – 2.54%, 3/08/14 | 1,478 | 623,013 | |
Harland Clarke Holdings Corp. (fka Clarke American Corp.), | |||
Tranche B Term Loan, 2.76%, 6/30/14 | 980 | 800,538 | |
Insight Midwest Holdings, LLC, B Term Loan, 2.28%, | |||
4/07/14 | 1,825 | 1,741,572 | |
Intelsat Subsidiary Holding Co., Ltd., Tranche B Term Loan, | |||
2.78%, 7/13/13 | 1,896 | 1,808,521 | |
Knology, Inc., Term Loan, 2.51%, 6/30/12 | 724 | 687,989 | |
Lamar Advertising Co.: | |||
Term Loan Incremental, 5.50%, 9/28/12 | 207 | 204,055 | |
Term Loan Incremental, 5.50%, 9/28/13 | 1,233 | 1,214,611 | |
Term Loan E, 5.50%, 9/30/12 | 494 | 489,430 | |
Lavena Holding 3 GmbH (Prosiebensat.1 Media AG): | |||
Facility B1, 3.53%, 3/06/15 | EUR | 337 | 272,803 |
Facility C1, 3.78%, 3/04/16 | 337 | 272,803 | |
MCC Iowa LLC (Mediacom Broadband Group), Tranche A | |||
Term Loan, 1.76%, 3/31/10 | USD | 544 | 535,594 |
MCNA Cable Holdings LLC (OneLink Communications), | |||
Loan (PIK facility), 8.31%, 3/01/13 (d) | 1,236 | 469,840 | |
Mediacom Broadband (Term Loan E), 6.50%, 11/30/15 | 2,868 | 2,871,343 | |
Mediannuaire Holding (Pages Jaunes), Term Loan D, | |||
4.77%, 4/08/16 | EUR | 500 | 188,758 |
Metro-Goldwyn-Mayer Inc., Tranche B Term Loan, 3.51%, | |||
4/09/12 | USD | 3,297 | 1,833,743 |
Multicultural Radio Broadcasting, Inc., Term Loan, 3.03%, | |||
12/18/12 | 317 | 221,900 | |
NTL Cable Plc, Second Lien, 3.62% – 4.19%, | |||
7/17/13 | GBP | 845 | 1,210,543 |
Newsday, LLC, Fixed Rate Term Loan, 9.75%, 8/01/13 | USD | 1,000 | 1,017,500 |
NextMedia Operating, Inc.: | |||
Delay Draw Term Loan, 8.25%, 11/15/12 | 200 | 129,869 | |
Initial Term Loan (First Lien), 8.25%, 11/15/12 | 266 | 173,060 | |
Term Loan (Second Lien), 11.25%, 11/15/13 | 1,772 | 212,674 | |
Nielsen Finance LLC: | |||
Class A Dollar Term Loan, 2.28%, 8/09/13 | 1,809 | 1,684,193 | |
Class B Dollar Term Loan, 4.03%, 5/01/16 | 3,778 | 3,541,100 | |
Penton Media, Inc., Loan (Second Lien), 5.49%, 2/01/14 | 1,000 | 210,000 | |
Sunshine Acquisition Ltd. (aka HIT Entertainment), Term | |||
Facility, 2.73%, 6/01/12 | 1,757 | 1,460,534 | |
TWCC Holding Corp., Term Loan, 7.25%, 9/14/15 | 2,739 | 2,755,786 | |
UPC Financing Partnership, Facility U,4.54%, 12/31/17 | EUR | 5,000 | 6,540,844 |
Virgin Media NTL, Term Loan, 4.40%, 6/03/12 | GBP | 1,000 | 1,513,178 |
World Color Press Inc. and World Color (USA) Corp. (fka | |||
Quebecor World Inc.), Term Loan, 9.00%, 6/30/12 | USD | 1,300 | 1,290,250 |
56,549,913 |
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Multi-Utilities — 0.9% | |||
Energy Transfer Equity, LP, Term Loan, 2.21%, 11/01/12 | USD | 1,000 | $ 968,571 |
FirstLight Power Resources, Inc. (fka NE Energy, Inc.): | |||
First Lien Term Loan B, 3.13%, 11/01/13 | 664 | 611,659 | |
Second Lien Term Loan, 5.13%, 5/01/14 | 500 | 386,250 | |
Synthetic Letter of Credit, 0.48%, 11/01/13 | 86 | 78,810 | |
2,045,290 | |||
Multiline Retail — 0.8% | |||
Dollar General Corp., Tranche B-2 Term Loan, 3.01%, | |||
7/07/14 | 1,975 | 1,897,920 | |
Oil, Gas & Consumable Fuels — 1.8% | |||
Big West Oil, LLC (a)(f): | |||
Delayed Advance Loan, 4.50%, 5/15/14 | 577 | 530,935 | |
Initial Advance Loan, 4.50%, 5/15/14 | 588 | 541,363 | |
Coffeyville Resources, LLC: | |||
Funded Letter of Credit, 6.50%, 12/28/10 | 194 | 190,216 | |
Tranche D Term Loan, 8.50%, 12/30/13 | 1,559 | 1,523,964 | |
Vulcan Energy Corp. (fka Plains Resources Inc.), Term B3 | |||
Loan, 5.50%, 8/12/11 | 1,500 | 1,479,375 | |
4,265,853 | |||
Paper & Forest Products — 2.5% | |||
Georgia-Pacific LLC, Term B Loan, 2.34% – 2.65%, | |||
12/20/12 | 4,297 | 4,151,381 | |
NewPage Corp., Term Loan, 4.06%, 12/22/14 | 1,619 | 1,499,075 | |
Verso Paper Finance Holdings LLC, Loan, 6.73%, | |||
2/01/13 (d) | 1,983 | 396,576 | |
6,047,032 | |||
Pharmaceuticals — 0.9% | |||
Catalent Pharma Solutions, Inc. (fka Cardinal Health | |||
409, Inc.), Euro Term Loan, 2.74%, 4/15/14 | EUR | 980 | 1,173,123 |
Warner Chilcott Co., Inc.: | |||
Tranche B Acquisition Date Term Loan, | |||
2.26%, 1/18/12 | USD | 738 | 733,608 |
Tranche C Acquisition Date Term Loan, | |||
2.26%, 1/18/12 | 259 | 257,283 | |
2,164,014 | |||
Real Estate Management & Development — 1.0% | |||
Mattamy Funding Partnership, Loan, 2.63%, 4/11/13 | 968 | 774,000 | |
Realogy Corp., Initial Term B Loan, 3.28%, 10/10/13 | 1,960 | 1,493,800 | |
2,267,800 | |||
Specialty Retail — 0.4% | |||
Adesa, Inc. (KAR Holdings, Inc.), Initial Term Loan, 2.52%, | |||
10/20/13 | 1,000 | 938,333 | |
Wireless Telecommunication Services — 0.9% | |||
Digicel International Finance Ltd., Tranche A, 3.13%, | |||
3/01/12 | 1,250 | 1,187,500 | |
Ntelos Inc., Term Loan B Advance, 5.75%, 7/31/15 | 1,000 | 997,500 | |
2,185,000 | |||
Total Floating Rate Loan Interests — 87.3% | 206,963,770 | ||
Beneficial | |||
Interest | |||
Other Interests (g) | (000) | ||
Diversified Financial Services — 0.1% | |||
J.G. Wentworth LLC Preferred Equity Interests | USD | —(h) | 262,849 |
Total Other Interests — 0.1% | 262,849 |
See Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2009 27
Schedule of Investments (continued) BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
(Percentages shown are based on Net Assets)
Preferred Stocks | Shares | Value |
Capital Markets — 0.0% | ||
Marsico Parent Superholdco, LLC, 16.75% (b) | 78 | $ 19,890 |
Total Preferred Stocks — 0.0% | 19,890 | |
Total Long-Term Investments | ||
(Cost — $330,781,619) — 117.0% | 277,574,444 | |
Short-Term Securities | ||
BlackRock Liquidity Funds, TempFund, 0.22% (i)(j) | 2,018,379 | 2,018,379 |
Total Short-Term Securities | ||
(Cost — $2,018,379) — 0.9% | 2,018,379 | |
Options Purchased | Contracts | |
Over-the-Counter Call Options | ||
Marsico Parent Superholdco LLC, expiring December 2019 | ||
at USD 942.86, Broker Goldman Sachs & Co. | 20 | 20,000 |
Total Options Purchased (Cost — $19,556) — 0.0% | 20,000 | |
Total Investments (Cost — $332,819,554*) — 117.9% | 279,612,823 | |
Liabilities in Excess of Other Assets — (17.9)% | (42,453,259) | |
Net Assets — 100.0% | $237,159,564 | |
* The cost and unrealized appreciation (depreciation) of investments as of August 31, | ||
2009, as computed for federal income tax purposes, were as follows: | ||
Aggregate cost | $333,081,083 | |
Gross unrealized appreciation | $ 6,045,238 | |
Gross unrealized depreciation | (59,513,498) | |
Net unrealized depreciation | $ (53,468,260) | |
(a) Non-income producing security. | ||
(b) 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. | ||
(c) Variable rate security. Rate shown is as of report date. | ||
(d) Represents a payment-in-kind security which may pay interest/dividends in addi- | ||
tional par/shares. | ||
(e) Convertible security. | ||
(f) Issuer filed for bankruptcy and/or is in default of interest payments. | ||
(g) Other interests represent beneficial interest in liquidation trusts and other reorgani- | ||
zation entities and are non-income producing. | ||
(h) Amount is less than $1,000. | ||
(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 | $ 2,018,379 | $ 5,993 |
BlackRock Liquidity Series, LLC | ||
Cash Sweep Series | $(1,634,669) | $26,105 |
(j) 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. |
• | Foreign currency exchange contracts as of August 31, 2009 were as follows: | |||||||||
Unrealized | ||||||||||
Currency | Currency | Settlement Appreciation | ||||||||
Purchased | Sold | Counterparty | Date (Depreciation) | |||||||
USD 439,329 EUR | 315,000 | Citibank NA | 9/15/09 $ | (12,267) | ||||||
USD14,031,553 EUR 10,059,000 | Citibank NA | 9/16/09 | (389,413) | |||||||
Royal Bank | ||||||||||
USD 703,165 EUR | 494,000 | of Scotland Plc | 9/16/09 | (5,053) | ||||||
USD 290,090 CAD | 315,000 Barclays Bank Plc 10/28/09 | 2,327 | ||||||||
USD 6,118,751 GBP 3,743,500 | Citibank NA | 10/28/09 | 25,014 | |||||||
Total | $ (379,392) | |||||||||
• | Credit default swaps on single-name issues — buy protection outstanding as of | |||||||||
August 31, 2009 were as follows: | ||||||||||
Pay | Notional | |||||||||
Fixed | Amount Unrealized | |||||||||
Issuer | Rate | Counterparty | Expiration | (000) Depreciation | ||||||
First Data | JPMorgan Chase | |||||||||
Corp. | 5.00% | Bank, NA | 12/20/13 | USD 3,000 $ | (230,284) | |||||
Host Hotels & | Goldman Sachs | |||||||||
Resorts LP | 5.00% | Bank USA | 3/20/14 | USD 2,500 | (347,933) | |||||
Masco Corp. | JPMorgan Chase | |||||||||
5.30% | Bank, NA | 3/20/14 | USD 1,000 | (110,160) | ||||||
Mohawk | JPMorgan Chase | |||||||||
Industries, | 4.45% | Bank, NA | 3/20/14 | USD 1,000 | (99,231) | |||||
Inc. | ||||||||||
Total | $ (787,608) | |||||||||
• | Credit default swaps on single-name issues — sold protection outstanding as of | |||||||||
August 31, 2009 were as follows: | ||||||||||
Receive | Notional | |||||||||
Fixed | Counter- | Credit | Amount Unrealized | |||||||
Issuer | Rate | party Expiration Ratings1 (000)2 Depreciation | ||||||||
Ford Motor | ||||||||||
Co. | 3.80% | UBS AG 3/20/10 | CCC USD 10,000 $ | (321,270) | ||||||
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 Note 2 of | ||||||||||
the Notes to Financial Statements. | ||||||||||
• | Currency Abbreviations: | |||||||||
CAD | Canadian Dollar | |||||||||
EUR | Euro | |||||||||
GBP | British Pound | |||||||||
USD | US Dollar | |||||||||
• | Effective September 1, 2008, Financial Accounting Standards Board Statement of | |||||||||
Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”). | ||||||||||
FAS 157 clarifies the definition of fair value, establishes a framework for measuring | ||||||||||
fair values and requires additional disclosures about the use of fair value measure- | ||||||||||
ments. Various inputs are used in determining the fair value of investments, which | ||||||||||
are as follows: | ||||||||||
• Level 1 — price quotations in active markets/exchanges for identical securities | ||||||||||
• Level 2 — other observable inputs (including, but not limited to: quoted prices for | ||||||||||
similar assets or liabilities in markets that are active, quoted prices for identical | ||||||||||
or similar assets or liabilities in markets that are not active, inputs other than | ||||||||||
quoted prices that are observable for the assets or liabilities (such as interest | ||||||||||
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks | ||||||||||
and default rates) or other market-corroborated inputs) | ||||||||||
• Level 3 — unobservable inputs based on the best information available in the | ||||||||||
circumstances, to the extent observable inputs are not available (including the | ||||||||||
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. |
See Notes to Financial Statements.
28 ANNUAL REPORT AUGUST 31, 2009
Schedule of Investments (concluded) BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
The following table summarizes the inputs used as of August 31, 2009 in determin- | Valuation | Other Financial | ||||||
ing the fair valuation of the Fund’s investments: | Inputs | Instruments1 | ||||||
Valuation | Investments in | Assets | Liabilities | |||||
Inputs | Securities | Level 1 | — | — | ||||
Assets | Level 2 | $ 47,341 | $ (1,515,611) | |||||
Level 3 | — | (49,905) | ||||||
Level 1 | ||||||||
Long-Term Investments: | Total | $ 47,341 | $ (1,565,516) | |||||
Common Stocks | $ 2,413,145 | |||||||
1 | Other financial instruments are swaps, options purchased, foreign currency | |||||||
Short-Term Securities | 2,018,379 | |||||||
exchange contracts and unfunded loan commitments. Swaps, foreign currency | ||||||||
Total Level 1 | 4,431,524 | exchange contracts and unfunded loan commitments are valued at the unreal- | ||||||
Level 2 | ized appreciation/depreciation on the instrument and options purchased are | |||||||
Long-Term Investments: | shown at market value. | |||||||
Common Stocks | 220,043 | |||||||
Corporate Bonds | 64,866,572 | |||||||
Floating Rate Loan Interests | 152,389,930 | |||||||
Preferred Stocks | 19,890 | |||||||
Total Level 2 | 217,496,435 | |||||||
Level 3 | ||||||||
Long-Term Investments: | ||||||||
Common Stocks | 5,143 | |||||||
Corporate Bonds | 2,823,032 | |||||||
Floating Rate Loan Interests | 54,573,840 | |||||||
Other Interests | 262,849 | |||||||
Total Level 3 | 57,664,864 | |||||||
Total | $279,592,823 | |||||||
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 | Total | ||||
Balance, as of August 31, 2008 | $ 5,036 | — | $27,972,884 | — | $27,977,920 | |||
Accrued discounts/premiums | — | — | — | — | — | |||
Realized gain (loss) | — | — | (6,318,545) | — | (6,318,545) | |||
Change in unrealized appreciation (depreciation)2 | — | $ (140,889) | (2,598,443) | — | (2,739,332) | |||
Net purchases (sales) | — | — | (17,770,999) | — | (17,770,999) | |||
Net transfers in/out of Level 3 | 107 | 2,963,921 | 53,288,943 | $ 262,849 | 56,515,820 | |||
Balance, as of August 31, 2009 | $ 5,143 | $ 2,823,032 | $54,573,840 | $ 262,849 | $57,664,864 | |||
2 Included in the related net change in unrealized appreciation/depreciation on the Statements of Operations. | ||||||||
The following is a reconciliation of other financial instruments for unobservable | ||||||||
inputs (Level 3) used in determining fair value: | ||||||||
Other Financial | ||||||||
Instruments3 | ||||||||
Liabilities | ||||||||
Balance, as of August 31, 2008 | — | |||||||
Accrued discounts/premiums | — | |||||||
Realized gain (loss) | — | |||||||
Change in unrealized appreciation (depreciation) | — | |||||||
Net purchases (sales) | — | |||||||
Net transfers in/out of Level 3 | $ (49,905) | |||||||
Balance as of August 31, 2009 | $ (49,905) | |||||||
3 Other financial instruments are unfunded loan commitments. |
See Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2009 29
Schedule of Investments August 31, 2009 BlackRock Limited Duration Income Trust (BLW)
(Percentages shown are based on Net Assets)
Par | |||
Asset-Backed Securities | (000) | Value | |
Ford Credit Auto Owner Trust Series 2009-A Class A3B, | |||
2.77%, 5/15/13 (a) | USD | 9,135 | $ 9,373,195 |
Interest Only — 0.5% | |||
Sterling Bank Trust Series 2004-2 Class Note, 2.08%, | |||
3/30/30 | 18,549 | 1,431,764 | |
Sterling Coofs Trust Series 1, 2.36%, 4/15/29 | 14,819 | 1,236,448 | |
2,668,212 | |||
Total Asset-Backed Securities — 2.2% | 12,041,407 | ||
Common Stocks | Shares | ||
Commercial Services & Supplies — 0.0% | |||
Sirva (b) | 1,109 | 5,545 | |
Construction & Engineering — 0.0% | |||
USI United Subcontractors (b) | 6,111 | 79,444 | |
Metals & Mining — 0.0% | |||
Euramax International (b) | 234 | 2,512 | |
Total Common Stocks — 0.0% | 87,501 | ||
Par | |||
Corporate Bonds | (000) | ||
Air Freight & Logistics — 0.1% | |||
Park-Ohio Industries, Inc., 8.38%, 11/15/14 | USD | 905 | 571,281 |
Airlines — 0.1% | |||
American Airlines Pass Through Trust Series 1999-1, | |||
7.32%, 4/15/11 | 520 | 512,200 | |
Auto Components — 0.1% | |||
Lear Corp., 8.75%, 12/01/16 (a)(b)(c) | 525 | 283,500 | |
Automobiles — 0.1% | |||
Ford Capital BV, 9.50%, 6/01/10 | 500 | 495,000 | |
Building Products — 0.1% | |||
CPG International I, Inc., 10.50%, 7/01/13 | 750 | 536,250 | |
Capital Markets — 0.4% | |||
E*Trade Financial Corp. (d): | |||
3.99%, 8/31/19 (e) | 249 | 425,479 | |
12.50%, 11/30/17 (f) | 78 | 78,975 | |
Marsico Parent Co., LLC, 10.62%, 1/15/16 | 2,651 | 1,113,420 | |
Marsico Parent Holdco, LLC, 12.50%, 7/15/16 (d)(f) | 1,105 | 265,135 | |
Marsico Parent Superholdco, LLC, 14.50%, 1/15/18 (d)(f) | 759 | 197,440 | |
2,080,449 | |||
Chemicals — 0.9% | |||
American Pacific Corp., 9.00%, 2/01/15 | 1,100 | 992,750 | |
Ames True Temper, Inc., 4.51%, 1/15/12 (a) | 2,085 | 1,834,800 | |
Innophos, Inc., 8.88%, 8/15/14 | 2,225 | 2,158,250 | |
Terra Capital, Inc., Series B, 7.00%, 2/01/17 | 15 | 14,137 | |
4,999,937 | |||
Commercial Services & Supplies — 0.8% | |||
DI Finance, Series B, 9.50%, 2/15/13 | 2,326 | 2,357,983 | |
Waste Services, Inc., 9.50%, 4/15/14 | 2,065 | 2,044,350 | |
4,402,333 | |||
Consumer Finance — 0.8% | |||
Ford Motor Credit Co. LLC: | |||
7.38%, 2/01/11 | 2,800 | 2,706,791 | |
3.26%, 1/13/12 (a) | 565 | 470,363 | |
7.80%, 6/01/12 | 1,665 | 1,540,202 | |
4,717,356 |
Par | |||
Corporate Bonds | (000) | Value | |
Containers & Packaging — 0.9% | |||
Berry Plastics Holding Corp.: | |||
4.50%, 9/15/14 (a) | USD | 510 | $ 367,200 |
8.88%, 9/15/14 | 465 | 409,200 | |
Crown Americas LLC, 7.75%, 11/15/15 | 885 | 876,150 | |
Impress Holdings BV, 3.63%, 9/15/13 (a)(d) | 1,370 | 1,251,837 | |
Pregis Corp., 12.38%, 10/15/13 | 2,020 | 1,818,000 | |
4,722,387 | |||
Diversified Financial Services — 0.4% | |||
GMAC LLC, 6.88%, 8/28/12 (d) | 1,731 | 1,505,970 | |
Structured Asset Repackaged Trust, 1.00%, 1/21/10 | 1,082 | 1,049,539 | |
2,555,509 | |||
Diversified Telecommunication Services — 3.8% | |||
Cincinnati Bell, Inc., 7.25%, 7/15/13 | 1,330 | 1,290,100 | |
Deutsche Telekom International Finance BV, 8.50%, | |||
6/15/10 | 5,000 | 5,258,820 | |
Nordic Telephone Co. Holdings ApS, 8.88%, 5/01/16 (d) | 3,850 | 3,907,750 | |
PAETEC Holding Corp., 8.88%, 6/30/17 (d) | 1,000 | 952,500 | |
Qwest Communications International, Inc.: | |||
Series B, 7.50%, 2/15/14 | 2,985 | 2,880,525 | |
7.50%, 2/15/14 | 610 | 588,650 | |
Qwest Corp., 3.88%, 6/15/13 (a) | 3,000 | 2,775,000 | |
Wind Acquisition Finance SA, 10.75%, 12/01/15 (d) | 900 | 967,500 | |
Windstream Corp.: | |||
8.13%, 8/01/13 | 1,480 | 1,480,000 | |
8.63%, 8/01/16 | 990 | 993,712 | |
21,094,557 | |||
Electric Utilities — 0.0% | |||
Elwood Energy LLC, 8.16%, 7/05/26 | 138 | 120,438 | |
Electronic Equipment, Instruments & Components — 0.1% | |||
Sanmina-SCI Corp., 8.13%, 3/01/16 | 600 | 517,500 | |
Energy Equipment & Services — 0.1% | |||
Compagnie Generale de Geophysique-Veritas: | |||
7.50%, 5/15/15 | 255 | 242,250 | |
7.75%, 5/15/17 | 420 | 396,900 | |
North American Energy Partners, Inc., 8.75%, 12/01/11 | 140 | 128,800 | |
767,950 | |||
Food & Staples Retailing — 0.1% | |||
Duane Reade, Inc., 11.75%, 8/01/15 (d) | 455 | 459,550 | |
Food Products — 0.3% | |||
Smithfield Foods, Inc., 10.00%, 7/15/14 (d) | 1,810 | 1,846,200 | |
Health Care Equipment & Supplies — 0.8% | |||
Biomet, Inc., 10.00%, 10/15/17 | 500 | 525,000 | |
DJO Finance LLC, 10.88%, 11/15/14 | 3,830 | 3,676,800 | |
4,201,800 | |||
Health Care Providers & Services — 0.8% | |||
Tenet Healthcare Corp. (d): | |||
9.00%, 5/01/15 | 812 | 832,300 | |
10.00%, 5/01/18 | 332 | 357,730 | |
Viant Holdings, Inc., 10.13%, 7/15/17 (d) | 2,948 | 2,771,120 | |
3,961,150 | |||
Hotels, Restaurants & Leisure — 1.7% | |||
American Real Estate Partners LP: | |||
8.13%, 6/01/12 | 5,860 | 5,772,100 | |
7.13%, 2/15/13 | 1,480 | 1,406,000 | |
Greektown Holdings, LLC, 10.75%, 12/01/13 (b)(c)(d) | 1,344 | 288,960 | |
Harrah’s Operating Co., Inc. (d): | |||
10.00%, 12/15/15 | 720 | 514,800 | |
10.00%, 12/15/18 | 1,881 | 1,316,700 | |
Tropicana Entertainment LLC Series WI, 9.63%, | |||
12/15/14 (b)(c) | 375 | 234 | |
9,298,794 |
See Notes to Financial Statements.
30 ANNUAL REPORT AUGUST 31, 2009
Schedule of Investments (continued) BlackRock Limited Duration Income Trust (BLW)
(Percentages shown are based on Net Assets)
Par | ||
Corporate Bonds | (000) | Value |
Household Durables — 0.0% | ||
Berkline/Benchcraft, LLC, 4.50%, 11/03/12 (d)(e)(f) USD | 200 | $ — |
IT Services — 0.4% | ||
iPayment, Inc., 9.75%, 5/15/14 | 950 | 612,750 |
iPayment Investors LP, 12.75%, 7/15/14 (d)(f) | 4,759 | 1,189,702 |
SunGard Data Systems, Inc., 4.88%, 1/15/14 | 215 | 193,500 |
1,995,952 | ||
Independent Power Producers & Energy Traders — 0.8% | ||
The AES Corp., 8.75%, 5/15/13 (d) | 2,803 | 2,845,045 |
Calpine Construction Finance Co. LP, 8.00%, 6/01/16 (d) | 1,250 | 1,243,750 |
NRG Energy, Inc.: | ||
7.25%, 2/01/14 | 210 | 204,225 |
7.38%, 2/01/16 | 475 | 454,219 |
4,747,239 | ||
Industrial Conglomerates — 0.9% | ||
Sequa Corp. (d): | ||
11.75%, 12/01/15 | 3,210 | 2,022,300 |
13.50%, 12/01/15 (f) | 5,678 | 2,966,940 |
4,989,240 | ||
Machinery — 0.7% | ||
AGY Holding Corp., 11.00%, 11/15/14 | 1,700 | 1,343,000 |
Accuride Corp., 8.50%, 2/01/15 (b)(c) | 850 | 170,000 |
Sunstate Equipment Co. LLC, 10.50%, 4/01/13 (d) | 3,125 | 2,343,750 |
Synventive Molding Solutions, Sub-Series A, 14.00%, 1/14/11 | 720 | 287,888 |
4,144,638 | ||
Marine — 0.1% | ||
Navios Maritime Holdings, Inc., 9.50%, 12/15/14 | 676 | 591,500 |
Media — 3.7% | ||
Affinion Group, Inc., 10.13%, 10/15/13 | 2,825 | 2,807,344 |
CMP Susquehanna Corp., 4.75%, 5/15/14 (d) | 194 | 3,880 |
Charter Communications Holdings II, LLC (b)(c): | ||
10.25%, 9/15/10 | 1,155 | 1,283,494 |
Series B, 10.25%, 9/15/10 | 765 | 850,106 |
Charter Communications, Inc., 6.50%, 10/01/27 (b)(c)(e) | 1,280 | 550,400 |
EchoStar DBS Corp.,: | ||
7.00%, 10/01/13 | 200 | 196,000 |
7.13%, 2/01/16 | 200 | 192,000 |
Local Insight Regatta Holdings, Inc., 11.00%, 12/01/17 | 1,575 | 598,500 |
Network Communications, Inc., 10.75%, 12/01/13 | 1,520 | 307,800 |
Nielsen Finance LLC, 10.00%, 8/01/14 | 3,695 | 3,491,775 |
ProtoStar I Ltd., 18.00%, 10/15/12 (b)(c)(d)(e) | 3,454 | 1,381,644 |
Rainbow National Services LLC (d): | ||
10.38%, 9/01/14 | 3,134 | 3,275,030 |
8.75%, 9/01/12 | 925 | 934,250 |
TL Acquisitions, Inc., 10.50%, 1/15/15 (d) | 4,965 | 4,518,150 |
20,390,373 | ||
Metals & Mining — 0.2% | ||
Freeport-McMoRan Copper & Gold, Inc., 8.38%, 4/01/17 | 1,225 | 1,277,063 |
Oil, Gas & Consumable Fuels — 1.5% | ||
Berry Petroleum Co., 8.25%, 11/01/16 | 550 | 489,500 |
Chesapeake Energy Corp., 6.38%, 6/15/15 | 650 | 592,313 |
EXCO Resources, Inc., 7.25%, 1/15/11 | 495 | 485,100 |
Encore Acquisition Co., 6.00%, 7/15/15 | 250 | 215,000 |
OPTI Canada, Inc., 8.25%, 12/15/14 | 1,805 | 1,173,250 |
Overseas Shipholding Group, Inc., 8.75%, 12/01/13 | 1,190 | 1,148,350 |
Sabine Pass LNG LP, 7.50%, 11/30/16 | 1,515 | 1,227,150 |
SandRidge Energy, Inc.: | ||
4.22%, 4/01/14 (a) | 1,500 | 1,245,552 |
8.63%, 4/01/15 (f) | 180 | 169,200 |
Whiting Petroleum Corp.: | ||
7.25%, 5/01/12 | 75 | 74,625 |
7.25%, 5/01/13 | 1,390 | 1,376,100 |
8,196,140 |
Par | |||
Corporate Bonds | (000) | Value | |
Paper & Forest Products — 0.2% | |||
Domtar Corp., 7.88%, 10/15/11 | USD | 10 | $ 10,263 |
NewPage Corp.: | |||
6.73%, 5/01/12 (a) | 1,500 | 641,250 | |
10.00%, 5/01/12 | 635 | 344,487 | |
996,000 | |||
Professional Services — 0.1% | |||
FTI Consulting, Inc., 7.75%, 10/01/16 | 350 | 341,250 | |
Real Estate Investment Trusts (REITs) — 0.2% | |||
Rouse Co. LP, 5.38%, 11/26/13 (b)(c) | 1,640 | 1,238,200 | |
Software — 0.0% | |||
BMS Holdings, Inc., 8.35%, 2/15/12 (a)(d)(f) | 568 | 9,122 | |
Specialty Retail — 1.9% | |||
General Nutrition Centers, Inc.: | |||
6.40%, 3/15/14 (a) | 2,250 | 1,980,000 | |
10.75%, 3/15/15 | 1,700 | 1,606,500 | |
Group 1 Automotive, Inc., 8.25%, 8/15/13 | 5,000 | 4,512,500 | |
Lazydays RV Center, Inc., 11.75%, 5/15/12 (b)(c) | 1,454 | 14,540 | |
Sonic Automotive, Inc., Series B, 8.63%, 8/15/13 | 3,135 | 2,649,075 | |
10,762,615 | |||
Textiles, Apparel & Luxury Goods — 0.7% | |||
Levi Strauss & Co., 8.63%, 4/01/13 | 2,400 | 3,285,833 | |
Quiksilver, Inc., 6.88%, 4/15/15 | 575 | 365,125 | |
3,650,958 | |||
Tobacco — 0.2% | |||
Reynolds American, Inc., 7.63%, 6/01/16 | 1,000 | 1,055,033 | |
Wireless Telecommunication Services — 1.1% | |||
Cricket Communications, Inc.: | |||
7.75%, 5/15/16 (d) | 2,250 | 2,182,500 | |
9.38%, 11/01/14 | 270 | 254,475 | |
Digicel Group Ltd. (d): | |||
8.88%, 1/15/15 | 1,120 | 999,600 | |
9.13%, 1/15/15 (e) | 2,467 | 2,174,044 | |
MetroPCS Wireless, Inc., 9.25%, 11/01/14 | 270 | 264,937 | |
5,875,556 | |||
Total Corporate Bonds — 25.1% | 138,405,020 | ||
Floating Rate Loan Interests | |||
Aerospace & Defense — 0.7% | |||
Avio SpA: | |||
Facility B2, 2.39%, 12/15/14 | 995 | 836,162 | |
Facility C2, 3.01%, 12/14/15 | 1,000 | 840,000 | |
Hawker Beechcraft Acquisition Co. LLC: | |||
Letter of Credit Facility Deposit, 2.28%, 3/26/14 | 156 | 115,998 | |
Term Loan, 2.26% – 2.60%, 3/26/14 | 2,637 | 1,965,395 | |
IAP Worldwide Services, Inc. Term Loan (First-Lien), | |||
7.25%, 12/30/12 | 150 | 108,249 | |
3,865,804 | |||
Airlines — 0.2% | |||
US Airways Group, Inc., Loan, 2.76%, 3/21/14 | 2,190 | 1,179,315 | |
Auto Components — 1.5% | |||
Allison Transmission, Inc., Term Loan, 3.03%, 8/07/14 | 4,004 | 3,418,134 | |
Dana Holding Corp., Term Advance, 7.25%, 1/31/15 | 1,876 | 1,436,349 | |
Dayco Products LLC – (Mark IV Industries, Inc.), | |||
Replacement Term B Loan, 8.75%, 6/21/11 (b)(c) | 854 | 352,803 |
See Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2009 31
Schedule of Investments (continued) BlackRock Limited Duration Income Trust (BLW)
(Percentages shown are based on Net Assets)
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Auto Components (concluded) | |||
Delphi Corp. (b)(c): | |||
Initial Tranche C Loan Debtor in Possession, | |||
10.50%, 12/31/09 | USD | 4,538 | $ 2,495,820 |
Subsequent Tranche C Loan Debtor in Possession, | |||
9.50%, 12/31/09 | 462 | 254,180 | |
Mark IV Industries: | |||
Replacement Term B Loan, 8.50%, 5/01/10 | 20 | — | |
US Term Loan, Debtor in Possession Loan, | |||
8.50%, 5/01/10 | 101 | 90,725 | |
8,048,011 | |||
Beverages — 0.4% | |||
Culligan International Co., Loan (Second Lien), 5.28%, | |||
4/24/13 | EUR | 1,500 | 537,604 |
InBev NV/SA, Bridge Loan, 1.95%, 7/15/13 | USD | 1,500 | 1,421,250 |
Le-Nature’s, Inc., Tranche B Loan, 9.39% – 9.42%, | |||
9/30/11 (b)(c) | 1,000 | 195,000 | |
2,153,854 | |||
Building Products — 0.9% | |||
Building Materials Corp. of America, Term Loan Advance, | |||
3.06%, 2/22/14 | 2,586 | 2,359,709 | |
Custom Building Products, Inc., Loan (Second Lien), | |||
10.75%, 4/20/12 | 1,500 | 1,404,375 | |
Momentive Performance Materials (Blitz 06-103 GmbH), | |||
Tranche B-2 Term Loan, 2.74%, 12/04/13 | EUR | 997 | 1,076,830 |
United Subcontractors, First Lien Term Loan, 2.10%, | |||
12/27/12 | USD | 143 | 121,744 |
4,962,658 | |||
Capital Markets — 0.2% | |||
Marsico Parent Co., LLC, Term Loan, 4.81%, 12/15/14 | 462 | 198,749 | |
Nuveen Investments, Inc., Term Loan, 3.49% – 3.50%, | |||
11/13/14 | 1,359 | 1,103,211 | |
1,301,960 | |||
Chemicals — 3.6% | |||
Ashland, Inc., Term B Borrowing, 7.65%, 5/13/14 | 889 | 903,747 | |
Brenntag Holdings Gmbh & Co. KG: | |||
Facility 2, 4.27%, 7/17/15 | 500 | 413,000 | |
Facility 3A (Second Lien), 5.65%, 7/17/15 | EUR | 115 | 136,147 |
Facility 3B Second Lien, 5.65%, 7/17/15 | 385 | 455,934 | |
Facility B6B, 3.60%, 1/20/14 | 218 | 297,235 | |
Loan B6A, 3.60%, 1/20/14 | 282 | 383,929 | |
Cognis GmbH: | |||
Facility A (French) 3.27%, 9/16/13 | 803 | 988,926 | |
Facility B (French) 3.27%, 9/16/13 | 197 | 242,186 | |
Edwards (Cayman Islands II) Ltd., Term Loan (First Lien), | |||
2.85%, 5/31/14 | USD | 449 | 278,290 |
ElectricInvest Holding Co. Ltd. (Viridian Group Plc) | |||
Junior Term Facility: | |||
5.00%, 12/21/12 | EUR | 894 | 819,938 |
5.04%, 12/21/12 | GBP | 900 | 937,698 |
Huish Detergents Inc., Tranche B Term Loan, 2.02%, | |||
4/26/14 | USD | 1,237 | 1,179,629 |
Ineos US Finance LLC: | |||
Term A4 Facility, 7.00%, 12/14/12 | 334 | 267,699 | |
Term B2 Facility, 7.50%, 12/16/13 | 1,631 | 1,239,581 | |
Term C2 Facility, 8.00%, 12/16/14 | 1,631 | 1,239,581 | |
Nalco Co., Term Loan, 6.50%, 5/06/16 | 2,075 | 2,103,531 | |
PQ Corp. (fka Niagara Acquisition, Inc.): | |||
Loan (Second Lien), 6.77%, 7/30/15 | 3,250 | 1,787,500 | |
Term Loan (First Loan), 3.52% – 3.75%, 7/31/14 | 3,960 | 3,263,700 | |
Rockwood Specialties Group, Inc., Term Loan H, 6.00%, | |||
5/15/14 | 940 | 946,544 | |
Solutia Inc., Loan, 7.25%, 2/28/14 | 1,732 | 1,714,728 | |
19,599,523 |
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Commercial Services & Supplies — 1.3% | |||
ARAMARK Corp.: | |||
Letter of Credit, 0.22%, 1/26/14 | USD | 185 | $ 172,822 |
U.S. Term Loan, 2.47%, 1/26/14 | 2,907 | 2,720,334 | |
Casella Waste Systems, Inc., Term B Loan, 5.60%, | |||
3/31/14 | 635 | 636,588 | |
EnviroSolutions Real Property Holdings, Inc., Initial Term | |||
Loan, 10.50%, 7/07/12 | 506 | 365,707 | |
Kion Group GmbH (formerly Neggio Holdings 3 GmbH): | |||
Facility B, 2.51%, 12/29/14 | 250 | 158,594 | |
Facility C, 2.76%, 12/29/15 | 250 | 158,594 | |
SIRVA Worldwide, Inc., Loan (Second Lien), 12.00%, | |||
5/12/15 | 259 | 19,412 | |
Synagro Technologies, Inc., Term Loan (First Lien), | |||
2.26% – 2.27%, 4/02/14 | 2,715 | 2,138,350 | |
West Corp., Term B-2 Loan, 2.64% – 2.65%, 10/24/13 | 880 | 834,806 | |
7,205,207 | |||
Communications Equipment — 0.1% | |||
Safenet, Inc., Term Loan (First Lien), 2.77%, 4/12/14 | 696 | 641,227 | |
Computers & Peripherals — 0.4% | |||
Intergraph Corp.: | |||
Initial Term Loan (First Lien), 2.37%, 5/29/14 | 1,431 | 1,373,600 | |
Second-Lien Term Loan, 6.26% – 6.37%, 11/28/14 | 750 | 699,375 | |
2,072,975 | |||
Construction & Engineering — 0.1% | |||
Brand Energy & Infrastructure Services, Inc. | |||
(FR Brand Acquisition Corp.): | |||
First Lien Term Loan B, 2.31% – 2.63%, 2/07/14 | 31 | 27,510 | |
Second Lien Term Loan, 6.31% – 6.44%, 2/07/15 | 1,000 | 690,000 | |
717,510 | |||
Containers & Packaging — 0.8% | |||
Atlantis Plastic Films, Inc., Term Loan (Second Lien), | |||
12.25%, 3/22/12 (b)(c) | 250 | — | |
Graham Packaging Co., LP, B Term Loan, 2.56%, 10/07/11 | 898 | 873,017 | |
Graphic Packaging International, Inc., Incremental Term | |||
Loan, 3.08% – 3.35%, 5/16/14 | 1,324 | 1,291,160 | |
Smurfit-Stone Container Enterprise, Inc.: | |||
Tranche C, 2.57%, 11/01/11 | 198 | 188,044 | |
Tranche C-1 Term Loan, 2.57%, 11/01/11 | 60 | 56,854 | |
Smurfit-Stone Container Enterprises, Inc., U.S. Term Loan | |||
Debtor in Possession, 10.00%, 7/28/10 | 1,301 | 1,313,900 | |
Smurfit-Stone Container Enterprises, Inc. (b)(c): | |||
Deposit Funded Facility, 4.50%, 11/01/10 | 92 | 87,705 | |
Tranche B, 2.57%, 11/01/11 | 105 | 99,811 | |
Smurfit-Stone Container, Revolving Credit US, | |||
0.01% – 4.50%, 11/01/09 | 459 | 437,532 | |
Smurfit-Stone Container, Canadian Revolving Credit, | |||
2.28% – 5.00%, 11/02/09 | 152 | 145,116 | |
4,493,139 | |||
Distributors — 0.1% | |||
Keystone Automotive Operations, Inc., Loan, 3.77% – 5.75% | |||
1/12/12 | 1,419 | 773,397 | |
Diversified Consumer Services — 0.9% | |||
Coinmach Service Corp., Term Loan, 3.28% – 3.43%, | |||
11/14/14 | 4,690 | 3,986,905 | |
Education Management, LLC, Term Loan C, 2.38%, | |||
6/01/13 | 748 | 714,995 | |
4,701,900 |
See Notes to Financial Statements.
32 ANNUAL REPORT AUGUST 31, 2009
Schedule of Investments (continued) BlackRock Limited Duration Income Trust (BLW)
(Percentages shown are based on Net Assets)
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Diversified Financial Services — 0.0% | |||
Professional Service Industries, Inc., Term Loan | |||
(First Lien), 3.02%, 10/31/12 | USD | 620 | $ 310,223 |
Diversified Telecommunication Services — 1.6% | |||
BCM Ireland Holdings Ltd. (Eircom): | |||
Facility B, 2.37%, 9/30/15 | EUR | 1,970 | 2,567,463 |
Facility C, 2.62%, 9/30/16 | 1,970 | 2,567,750 | |
Hawaiian Telcom Communications, Inc., Tranche C Term | |||
Loan, 4.75%, 5/30/14 | USD | 1,921 | 1,165,804 |
Integra Telecom Holdings, Inc., Term Loan (First Lien), | |||
10.50%, 8/31/13 | 350 | 343,000 | |
PAETEC Holding Corp., Replacement Term Loan, 2.76%, | |||
2/28/13 | 422 | 397,514 | |
Time Warner Telecom Holdings Inc., Term Loan B Loan, | |||
2.02%, 1/07/13 | 1,055 | 1,028,240 | |
Wind Telecomunicazioni S.P.A., A1 Term Loan Facility, | |||
2.95% – 3.02%, 9/22/12 | EUR | 424 | 577,255 |
8,647,026 | |||
Electric Utilities — 0.1% | |||
TPF Generation Holdings, LLC: | |||
Synthetic LC Deposit (First Lien), 2.28%, | |||
12/15/13 | USD | 151 | 142,317 |
Synthetic Revolving Deposit, 2.28%, 12/15/11 | 47 | 44,613 | |
Term Loan (First Loan), 2.26%, 12/15/13 | 429 | 405,181 | |
592,111 | |||
Electrical Equipment — 0.2% | |||
Electrical Components International Holdings Co. (ECI) | |||
Term Loan (Second Lien), 11.50%, 5/01/14 | 500 | 25,000 | |
Generac Acquisition Corp., Term Loan (First Lien), 2.78%, | |||
11/10/13 | 1,464 | 1,227,277 | |
1,252,277 | |||
Electronic Equipment, Instruments & Components — 0.9% | |||
Flextronics International Ltd.: | |||
A Closing Date Loan, 2.52% – 2.85%, 10/01/14 | 3,820 | 3,424,445 | |
Delay Draw Term Loan, 2.76%, 10/01/14 | 1,098 | 984,037 | |
Matinvest 2 SAS/Butterfly Wendel US, Inc. | |||
(Deutsche Connector): | |||
B-2 Facility, 2.97%, 6/22/14 | 445 | 249,061 | |
B-2 Facility, 2.97%, 6/22/14 | 33 | 18,586 | |
C-2 Facility, 3.22%, 6/22/15 | 719 | 402,826 | |
C-2 Facility, 3.22%, 6/22/15 | 110 | 61,536 | |
5,140,491 | |||
Energy Equipment & Services — 0.6% | |||
Dresser, Inc. Term B Loan, 2.68%, 5/04/14 | 2,082 | 1,940,767 | |
MEG Energy Corp., Initial Term Loan, 2.60%, 4/03/13 | 484 | 449,283 | |
Trinidad USA Partnership LLP, US Term Loan, 2.78%, | |||
5/01/11 | 1,022 | 868,678 | |
3,258,728 | |||
Food & Staples Retailing — 1.3% | |||
AB Acquisitions UK Topco 2 Ltd. (fka Alliance Boots), | |||
Facility B1, 3.53%, 7/09/15 | GBP | 3,500 | 4,881,995 |
DSW Holdings Inc., Loan, 4.27%, | |||
3/21/12 | USD | 500 | 421,667 |
Rite Aid Corp., Tranche 4 Term Loan, 9.50%, 6/04/15 | 750 | 776,250 | |
Wm. Bolthouse Farms, Inc., Term Loan (First Lien), 2.56%, | |||
12/16/12 | 872 | 841,462 | |
6,921,374 |
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Food Products — 1.2% | |||
Dole Food Co., Inc.: | |||
Credit-Linked Deposit, 0.51%, 4/12/13 | USD | 280 | $ 281,481 |
Tranche B Term Loan, 8.00%, 4/12/13 | 489 | 492,054 | |
Michael Foods, Term Loan B, 6.50%, 4/24/14 | 1,478 | 1,494,122 | |
Solvest, Ltd. (Dole), Tranche C Term Loan, 8.00%, | |||
4/12/13 | 1,822 | 1,833,438 | |
Wm. Wrigley Jr. Co., Tranche B Term Loan, 6.50%, | |||
10/06/14 | 2,468 | 2,496,111 | |
6,597,206 | |||
Health Care Equipment & Supplies — 0.7% | |||
Biomet, Inc., Dollar Term Loan, 3.26% – 3.61%, 3/25/15 | 1,678 | 1,610,226 | |
DJO Finance LLC (ReAble Therapeutics Finance LLC), | |||
Term Loan, 3.26% – 3.60%, 5/20/14 | 2,463 | 2,351,688 | |
3,961,914 | |||
Health Care Providers & Services — 3.1% | |||
CCS Medical Inc. (Chronic Care): | |||
Loan Debtor in Possession, 11.00%, 11/14/09 | 31 | 30,309 | |
Term Loan (First Lien), 4.35%, 9/30/12 (b)(c) | 875 | 394,844 | |
CHS/Community Health Systems, Inc.: | |||
Delayed Draw Term Loan, 2.51%, 7/25/14 | 410 | 382,005 | |
Funded Term Loan, 2.51% – 2.62%, 7/25/14 | 8,041 | 7,490,958 | |
Catalent Pharma Solutions, Inc. (fka Cardinal Health | |||
409, Inc.), Euro Term Loan, 2.74%, 4/10/14 | EUR | 1,960 | 2,346,245 |
DaVita, Inc., Tranche B-1 Term Loan, 1.77% – 2.10%, | |||
10/05/12 | USD | 750 | 719,687 |
HCA Inc., Tranche A-1 Term Loan, 2.10%, 11/17/12 | 1,824 | 1,703,243 | |
HealthSouth Corp., Term Loan, 2.52% – 2.53%, 3/10/13 | 2,312 | 2,235,586 | |
Surgical Care Affiliates, LLC, Term Loan, 2.60%, 12/29/14 | 721 | 650,307 | |
Vanguard Health Holding Co. II, LLC (Vanguard Health | |||
System, Inc.), Replacement Term Loan, 2.51%, 9/23/11 | 1,317 | 1,281,588 | |
17,234,772 | |||
Health Care Technology — 0.2% | |||
Sunquest Information Systems, Inc. (Misys Hospital | |||
Systems, Inc.), Term Loan, 3.52% – 3.74%, 10/13/14 | 1,474 | 1,343,569 | |
Hotels, Restaurants & Leisure — 2.2% | |||
BLB Worldwide Holdings, Inc. (Wembley, Inc.), First Priority | |||
Term Loan, 4.75%, 9/01/09 (b)(c) | 1,989 | 1,093,953 | |
CCM Merger Inc. (Motor City Casino), Term B Loan, 8.50%, | |||
7/13/12 | 1,503 | 1,402,917 | |
Green Valley Ranch Gaming, LLC: | |||
Second Lien Term Loan, 3.88%, 8/16/14 | 1,500 | 307,500 | |
Term Loan (New), 2.54% – 4.00%, 2/16/14 | 471 | 327,045 | |
Harrah’s Operating Co., Inc.: | |||
Term B-1 Loan, 3.50%, 1/28/15 | 487 | 391,498 | |
Term B-2 Loan, 3.50%, 1/28/15 | 613 | 493,529 | |
Term B-3 Loan, 3.50% – 3.60%, 1/28/15 | 704 | 566,874 | |
OSI Restaurant Partners, LLC, Revolving Credit | |||
Loan, 2.56%, 6/14/13 | 32 | 25,482 | |
Penn National Gaming, Inc., Term Loan B, 2.01% – 2.21%, | |||
10/03/12 | 3,828 | 3,720,123 | |
QCE, LLC (Quiznos), Term Loan (First Lien), 2.88%, | |||
5/05/13 | 1,940 | 1,445,300 | |
Travelport LLC (fka Travelport Inc.), Loan, 8.49%, | |||
3/27/12 | 4,607 | 2,580,008 | |
12,354,229 | |||
Household Durables — 0.9% | |||
Berkline/Benchcraft, LLC., Term Loan, 4.04%, | |||
11/03/11 (b)(c) | 107 | 5,373 | |
Jarden Corp., Term Loan B3, 3.10%, 1/24/12 | 816 | 805,133 | |
Simmons Bedding Co., Tranche D Term Loan, 10.50%, | |||
12/19/11 | 3,250 | 3,157,918 | |
Yankee Candle Co., Inc., Term Loan, 2.27%, 2/06/14 | 947 | 878,467 | |
4,846,891 |
See Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2009 33
Schedule of Investments (continued) BlackRock Limited Duration Income Trust (BLW)
(Percentages shown are based on Net Assets)
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Household Products — 0.2% | |||
Central Garden & Pet Co., Tranche B Term Loan, 1.77%, | |||
9/30/12 | USD | 991 | $ 929,582 |
IT Services — 2.1% | |||
Amadeus IT Group SA/Amadeus Verwaltungs GmbH: | |||
Term B3 Facility, 2.54%, 6/30/13 | EUR | 307 | 388,217 |
Term B4 Facility, 2.54%, 6/30/13 | 184 | 231,783 | |
Term C3 Facility, 3.04%, 6/30/14 | 307 | 388,217 | |
Term C4 Facility, 3.04%, 6/30/14 | 184 | 231,783 | |
Audio Visual Services Group, Inc., Loan (Second Lien), | |||
7.10%, 12/28/14 | USD | 1,040 | 83,184 |
Ceridian Corp., US Term Loan, 3.27%, 11/09/14 | 3,460 | 2,961,910 | |
First Data Corp.: | |||
Initial Tranche B-1 Term Loan, 3.02%, 9/24/14 | 3,664 | 3,052,266 | |
Initial Tranche B-2 Term Loan, 3.02%, 9/24/14 | 1,237 | 1,029,624 | |
Initial Tranche B-3 Term Loan, 3.02%, 9/24/14 | 563 | 467,929 | |
RedPrairie Corp., Term Loan B, 3.44% – 5.25%, 7/20/12 | 605 | 523,240 | |
SunGard Data Systems Inc. (Solar Capital Corp.): | |||
Incremental Term Loan, 6.75%, 2/28/14 | 1,197 | 1,189,931 | |
Tranche B U.S. Term Loan, 3.95% – 4.09%, 2/28/16 | 127 | 122,972 | |
Verifone, Inc., Term B Loan, 3.02%, 10/31/13 | 910 | 864,500 | |
11,535,556 | |||
Independent Power Producers & Energy Traders — 1.6% | |||
Texas Competitive Electric Holdings Co., LLC (TXU): | |||
Initial Tranche B-2 Term Loan, 3.78% – 3.79%, | |||
10/10/14 | 4,188 | 3,182,903 | |
Initial Tranche B-3 Term Loan, 3.78% -3.79%, | |||
10/10/14 | 7,233 | 5,473,543 | |
8,656,446 | |||
Insurance — 0.1% | |||
Conseco, Inc., Term Loan, 6.50%, 10/10/13 | 729 | 554,345 | |
Leisure Equipment & Products — 0.2% | |||
24 Hour Fitness Worldwide, Inc., Tranche B Term Loan, | |||
2.77% – 3.08%, 6/08/12 | 968 | 841,725 | |
Life Sciences Tools & Services — 0.3% | |||
Life Technologies Corp., Term B Facility, 5.25%, 11/23/15 | 1,783 | 1,800,956 | |
Machinery — 1.7% | |||
Blount, Inc., Term Loan B, 2.02% – 3.25%, 8/09/10 | 651 | 612,091 | |
LN Acquisition Corp. (Lincoln Industrial), Initial Term Loan | |||
(Second Lien), 6.07%, 1/09/15 | 1,500 | 1,110,000 | |
NACCO Materials Handling Group, Inc., Loan, | |||
2.26% – 3.44%, 3/21/13 | 485 | 329,800 | |
Navistar Financial Corp., Tranche A Term Loan, 2.31%, | |||
3/27/10 | 1,000 | 970,000 | |
Navistar International Corp.: | |||
Term Advance, 3.51%, 1/19/12 | 3,447 | 3,205,400 | |
Revolving Credit-Linked Deposit, 3.36% – 3.51%, | |||
1/19/12 | 1,253 | 1,165,600 | |
Oshkosh Truck Corp., Term B Loan, 6.60% – 6.64%, | |||
12/06/13 | 1,570 | 1,562,971 | |
Standard Steel, LLC: | |||
Delayed Draw Term Loan, 8.25%, 7/02/12 | 74 | 58,734 | |
Initial Term Loan, 9.00%, 7/02/12 | 369 | 291,416 | |
9,306,012 | |||
Marine — 0.3% | |||
Delphi Acquisition Holding I BV (fka Dockwise): | |||
Facility B2, 2.60%, 1/12/15 | 939 | 812,468 | |
Facility C2, 3.47%, 1/11/16 | 939 | 812,468 | |
1,624,936 |
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Media — 11.8% | |||
Acosta, Inc., Term Loan, 2.54%, 7/28/13 | USD | 970 | $ 917,863 |
Affinion Group Holdings, Inc., Loan, 8.27%, 3/01/10 | 1,048 | 916,694 | |
AlixPartners, LLP, Tranche C Term Loan, 2.28% – 2.51%, | |||
10/12/13 | 1,446 | 1,406,273 | |
Alpha Topco Limited (Formula One): | |||
Facility B1, 2.51%, 12/31/13 | 840 | 706,380 | |
Facility B2, 2.51%, 12/31/13 | 568 | 477,139 | |
Facility D, 3.76%, 6/30/14 | 1,000 | 740,000 | |
Atlantic Broadband Finance, LLC: | |||
Term Loan B-2-B, 6.75%, 6/01/13 | 935 | 935,386 | |
Tranche B-2-A Term Loan, 2.85%, 9/01/11 | 35 | 34,372 | |
CSC Holdings Inc (Cablevision), Incremental B Term Loan, | |||
2.02% – 2.07%, 3/29/13 | 2,630 | 2,542,399 | |
Catalina Marketing Corp., Initial Term Loan, 3.03%, | |||
10/01/14 | 1,075 | 1,009,897 | |
Cengage Learning Acquisitions, Inc. (Thomson Learning), | |||
Tranche 1 Incremental Term Loan, 7.50%, 7/03/14 | 3,713 | 3,564,000 | |
Cequel Communications, LLC, Term Loan, 2.27%, | |||
11/05/13 | 7,341 | 6,932,774 | |
Charter Communications Operating, LLC, New Term Loan, | |||
6.25%, 3/06/14 (b)(c) | 3,282 | 3,045,871 | |
Charter Communications, Term Loan B1, 4.25%, | |||
3/25/14 | 750 | 749,625 | |
FoxCo Acquisition Sub, LLC, Term Loan, 7.25%, 7/14/15 | 898 | 735,531 | |
Gray Television, Inc., Term Loan B, 3.78%, 12/31/14 (f) | 726 | 523,926 | |
HIT Entertainment, Inc., Term Loan (Second Lien), 5.98%, | |||
2/26/13 | 1,000 | 492,500 | |
HMH Publishing Co. Ltd., Mezzanine, 17.50%, | |||
11/14/14 (f) | 9,615 | 1,442,193 | |
Hanley-Wood, LLC (FSC Acquisition), Term Loan, | |||
2.52% – 2.54%, 3/08/14 | 1,478 | 623,013 | |
Harland Clarke Holdings Corp. (fka Clarke American Corp.), | |||
Tranche B Term Loan, 2.79% – 3.10%, 6/30/14 | 1,469 | 1,200,268 | |
Insight Midwest Holdings, LLC, B Term Loan, 2.28%, | |||
4/07/14 | 1,550 | 1,479,143 | |
Intelsat Corp. (fka PanAmSat Corp.): | |||
Term Loan B-2-A, 2.78%, 1/03/14 | 588 | 554,572 | |
Term Loan B-2-B, 2.78%, 1/03/14 | 587 | 555,766 | |
Term Loan B-2-C, 2.78%, 1/03/14 | 587 | 555,766 | |
Knology, Inc., Term Loan, 2.51%, 6/30/12 | 483 | 458,659 | |
Lamar Media Corp.: | |||
B Incremental, 5.50%, 9/28/12 | 1,223 | 1,204,895 | |
Term Loan, 5.50%, 9/30/12 | 500 | 492,500 | |
Lavena Holding 3 GmbH (Prosiebensat.1 Media AG): | |||
Facility B1, 3.53%, 6/30/15 | EUR | 337 | 272,803 |
Facility C1, 3.78%, 6/30/16 | 337 | 272,803 | |
Facility D, 4.90%, 12/28/16 | 904 | 194,454 | |
MCNA Cable Holdings LLC (OneLink Communications), | |||
Loan, 8.31%, 3/01/13 (f) | USD | 1,855 | 704,759 |
Mediacom Illinois, LLC (fka Mediacom Communications, | |||
LLC), Tranche D Term Loan, 3.96%, 3/31/17 | 1,000 | 997,500 | |
MCC Iowa LLC (Mediacom Broadband Group), Tranche E | |||
Term Loan, 6.50%, 1/03/16 | 449 | 449,428 | |
Metro-Goldwyn-Mayer Inc., Tranche B Term Loan, 3.51%, | |||
4/09/12 | 2,757 | 1,533,358 | |
Mission Broadcasting, Inc., Term B Loan, 2.35%, | |||
10/01/12 | 1,873 | 1,573,273 | |
Multicultural Radio Broadcasting, Inc., Term Loan, 3.03%, | |||
12/18/12 | 317 | 221,900 | |
NV Broadcasting, LLC: | |||
Term Loan Debtor in Possession, 13.00%, 2/25/10 | USD | 120 | 118,800 |
Term Loan (First Lien), 5.25%, 11/01/13 (b)(c) | 821 | 205,367 | |
Newsday, LLC, Fixed Rate Term Loan, 9.75%, 8/01/13 | 1,500 | 1,526,250 | |
Nexstar Broadcasting, Inc., Term B Loan, 2.09% – 2.24%, | |||
10/01/12 | 1,771 | 1,487,936 |
See Notes to Financial Statements.
34 ANNUAL REPORT AUGUST 31, 2009
Schedule of Investments (continued) BlackRock Limited Duration Income Trust (BLW)
(Percentages shown are based on Net Assets)
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Media (concluded) | |||
Nielsen Finance LLC: | |||
Class A Dollar Term Loan, 2.28%, 8/09/13 | USD | 1,302 | $ 1,211,586 |
Class B Dollar Term Loan, 4.03%, 5/01/16 | 2,718 | 2,547,420 | |
Parkin Broadcasting, LLC, Term Loan, 5.25%, | |||
11/01/13 (b)(c) | 169 | 42,127 | |
Penton Media, Inc.: | |||
Loan (Second Lien), 5.49%, 2/01/14 | 1,000 | 210,000 | |
Term Loan (First Lien), 2.51% – 2.74%, 2/01/13 | 1,100 | 736,791 | |
ProtoStar Ltd. (b)(c): | |||
Debtor in Possession Term Loan, 18.00%, 10/15/09 | 84 | 83,842 | |
Revolver, 18.00%, 9/30/10 | 407 | 398,860 | |
Puerto Rico Cable Acquisition Co. Inc. (dba Choice TV), | |||
Term Loan (Second Lien), 7.81%, 2/15/12 | 692 | 450,000 | |
Springer: | |||
Term Loan B, 2.69%, 9/16/11 | 820 | 760,086 | |
Term Loan C-2, 3.35%, 5/05/12 | 597 | 553,254 | |
Term Loan E-2, 3.29%, 9/16/12 | 229 | 212,398 | |
Term Loan E2-U, 3.29%, 9/16/12 | 311 | 287,989 | |
Sunshine Acquisition Ltd. (aka HIT Entertainment), | |||
Term Facility, 2.73%, 6/01/12 | 1,268 | 1,054,050 | |
TWCC Holding Corp., Term Loan, 7.25%, 9/14/15 | 1,496 | 1,504,580 | |
Telecommunications Management, LLC: | |||
Multi-Draw Term Loan, 3.76%, 6/30/13 | 232 | 146,350 | |
Term Loan, 3.76%, 6/30/13 | 922 | 580,545 | |
UPC Financing Partnership, Facility U, 4.54%, | |||
12/31/17 | EUR | 3,013 | 3,940,858 |
Virgin Media Investment Holdings Ltd.: | |||
B1 Facility, 3.89%, 7/30/12 | GBP | 380 | 568,963 |
B2 Facility, 3.89%, 3/09/12 | 203 | 303,947 | |
C Facility, 3.62%, 7/17/13 | 2,000 | 2,865,190 | |
World Color Press Inc. and World Color (USA) Corp. | |||
(fka Quebecor World Inc.), Advance, 9.00%, 6/30/12 | 1,300 | 1,290,250 | |
Yell Group Plc Facility B2, 3.49%, 10/29/12 | USD | 2,150 | 1,453,041 |
65,058,163 | |||
Metals & Mining — 0.1% | |||
Essar Stell Algoma Inc. (fka Algoma Steel Inc.), Term | |||
Loan, 2.77%, 6/20/13 | 495 | 445,455 | |
Multi-Utilities — 0.4% | |||
FirstLight Power Resources, Inc. (fka NE Energy, Inc.): | |||
First Lien Term Loan B, 3.13%, 11/01/13 | 1,895 | 1,744,426 | |
Synthetic Letter of Credit, 0.48%, 11/01/13 | 244 | 224,763 | |
Mach Gen, LLC Synthetic, LC Loan (First Lien), 0.35%, | |||
2/22/13 | 69 | 63,696 | |
2,032,885 | |||
Oil, Gas & Consumable Fuels — 1.1% | |||
Big West Oil, LLC (b)(c): | |||
Delayed Advance Loan, 4.50%, 5/15/14 | 546 | 502,477 | |
Initial Advance Loan, 4.50%, 5/15/14 | 1,007 | 926,778 | |
Coffeyville Resources, LLC: | |||
Funded Letter of Credit, 6.50%, 12/28/10 | 97 | 95,108 | |
Tranche D Term Loan, 8.50%, 12/30/13 | 780 | 761,982 | |
Drummond Co., Inc., Term Advance, 1.51%, 2/14/11 | 1,075 | 1,042,750 | |
Niska Gas Storage Canada ULC Canadian, Term Loan B, | |||
2.02%, 5/12/13 | 451 | 425,849 | |
Niska Gas Storage US, LLC, US Term B Loan, 2.02%, | |||
5/12/13 | 47 | 44,749 | |
Niska Gas Storage US, LLC, Wild Goose Acquisition | |||
Draw-US Term B, 2.02%, 5/12/13 | 32 | 30,312 | |
Turbo Beta Ltd., Dollar Facility, 14.50%, 3/15/18 | 3,068 | 2,147,270 | |
5,977,275 |
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Paper & Forest Products — 1.6% | |||
Georgia-Pacific LLC: | |||
Term Loan B2, 2.34% – 2.46%, 12/20/12 | USD | 1,897 | $ 1,833,036 |
Term B Loan, 2.34% – 2.65%, 12/20/12 | 4,520 | 4,366,263 | |
NewPage Corp., Term Loan, 4.06%, 12/22/14 | 2,593 | 2,401,374 | |
Verso Paper Finance Holdings LLC, Loan, 6.73%, | |||
2/01/13 (f) | 600 | 120,029 | |
8,720,702 | |||
Personal Products — 0.4% | |||
American Safety Razor Co., LLC, Loan (Second Lien), | |||
6.52%, 1/30/14 | 2,500 | 1,950,000 | |
Real Estate Management & Development — 0.1% | |||
Enclave, Term Loan B, 6.14%, 3/01/12 | 3,000 | 395,397 | |
Georgian Towers, Term Loan, 6.14%, 3/01/12 | 3,000 | 372,375 | |
Pivotal Promontory, LLC, Second Lien Term Loan, | |||
8.75%, 8/31/11 (b)(c) | 750 | 37,500 | |
805,272 | |||
Software — 0.1% | |||
Bankruptcy Management Solutions, Inc., Term Loan (First | |||
Lien), 4.27%, 7/31/12 | 945 | 538,792 | |
Specialty Retail — 0.5% | |||
Adesa, Inc. (KAR Holdings, Inc.), Initial Term Loan, 2.52%, | |||
10/20/13 | 1,250 | 1,172,916 | |
Eye Care Centers of America, Inc., Term Loan, | |||
2.77% – 3.16%, 3/01/12 | 522 | 506,296 | |
OSH Properties, LLC (Orchard Supply), Term Loan B, | |||
2.72%, 12/04/11 | 1,500 | 1,245,000 | |
2,924,212 | |||
Textiles, Apparel & Luxury Goods — 0.2% | |||
Hanesbrands Inc., Term B Loan, 5.02% – 5.25%, 9/05/13 | 872 | 872,270 | |
St. John Knits International, Inc., Term Loan, 10.00%, 3/23/12 | 631 | 454,077 | |
Springer, Term Loan E, 3.29%, 9/16/12 | 45 | 41,719 | |
1,368,066 | |||
Trading Companies & Distributors — 0.2% | |||
Beacon Sales Acquisition, Inc., Term B Loan, 2.26% – 2.60%, | |||
9/30/13 | 1,191 | 1,119,187 | |
Wireless Telecommunication Services — 0.6% | |||
Cellular South, Inc.: | |||
Delayed Draw Term Loan, 2.01%, 5/29/14 | 500 | 477,500 | |
Term Loan, 2.01% – 4.00%, 5/29/14 | 1,470 | 1,403,850 | |
Digicel International Finance Ltd., Tranche A, 3.13%, | |||
3/01/12 | 1,150 | 1,092,500 | |
2,973,850 | |||
Total Floating Rate Loan Interests — 47.8% | 263,340,708 | ||
Foreign Agency Obligations | |||
Peru Government International Bond, 8.38%, 5/03/16 | 4,871 | 5,699,070 | |
Turkey Government International Bond, 7.00%, 9/26/16 | 5,093 | 5,385,847 | |
Total Foreign Agency Obligations — 2.0% | 11,084,917 | ||
Beneficial | |||
Interest | |||
Other Interests (g) | (000) | ||
Diversified Financial Services — 0.1% | |||
J.G. Wentworth LLC Preferred Equity Interests | 1 | 502,843 | |
Health Care Providers & Services — 0.0% | |||
Critical Care Systems International, Inc. | 8 | 1,525 | |
Household Durables — 0.0% | |||
Berkline Benchcraft Equity LLC | 3 | — | |
Total Other Interests — 0.1% | 504,368 |
See Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2009 35
Schedule of Investments (continued) BlackRock Limited Duration Income Trust (BLW)
(Percentages shown are based on Net Assets)
Preferred Stocks | Shares | Value |
Capital Markets — 0.0% | ||
Marsico Parent Superholdco, LLC (b)(h) | 177 | $ 45,135 |
Media — 0.0% | ||
CMP Susquehanna Radio Holdings Corp. (h) | 45,243 | — |
Total Preferred Stocks — 0.0% | 45,135 | |
U.S. Government Sponsored | Par | |
Agency Obligations | (000) | |
Agency Obligations — 3.1% | ||
Fannie Mae, 7.25%, 1/15/10 | USD 17,000 | 17,450,245 |
Mortgage-Backed Securities — 24.1% | ||
Fannie Mae Guaranteed Pass Through Certificates: | ||
5.00%, 9/15/24 (i) | 121,000 | 126,104,748 |
5.50%, 12/01/28 – 11/01/33 (j)(k) | 6,563 | 6,876,101 |
Total U.S. Government Sponsored | ||
Agency Obligations — 27.2% | 150,431,094 | |
U.S. Treasury Obligations | ||
U.S. Treasury Notes: | ||
3.38%, 9/15/09 | 3,425 | 3,428,747 |
4.25%, 8/15/15 | 1,815 | 1,967,572 |
Total U.S. Treasury Obligations — 1.0% | 5,396,319 | |
Warrants (l) | Shares | |
Machinery — 0.0% | ||
Synventive Molding Solutions (expires 1/15/13) (b) | 1 | — |
Media — 0.0% | ||
CMP Susquehanna Radio Holdings Corp. (expires | ||
3/26/19) (b) | 51,701 | — |
Other — 0.0% | ||
Turbo Cayman Ltd. (No Expiration) (b) | 2 | — |
Total Warrants — 0.0% | — | |
Total Long-Term Investments | ||
(Cost — $662,132,560) — 105.4% | 581,336,469 | |
Short-Term Securities | ||
BlackRock Liquidity Funds, TempFund, 0.22% (m)(n) | 96,671,566 | 96,671,566 |
Total Short-Term Securities | ||
(Cost — $96,671,566) — 17.5% | 96,671,566 | |
Options Purchased | Contracts | |
Over-the-Counter Call Options | ||
Marsico Parent Superholdco LLC, expiring December | ||
2019 at USD 942.86, Broker Goldman Sachs & Co. | 46 | 46,000 |
Total Options Purchased | ||
(Premiums Paid — $44,978) — 0.0% | 46,000 | |
Total Investments | ||
(Cost — $758,849,104*) — 122.9% | 678,054,035 | |
Liabilities in Excess of Other Assets — (22.9)% | (126,549,501) | |
Net Assets — 100.0% | $551,504,534 |
* The cost and unrealized appreciation (depreciation) of investments as of August 31, | ||||||
2009, as computed for federal income tax purposes, were as follows: | ||||||
Aggregate cost | $ 759,386,517 | |||||
Gross unrealized appreciation | $ 9,364,256 | |||||
Gross unrealized depreciation | (90,696,738) | |||||
Net unrealized depreciation | $ (81,332,482) | |||||
(a) Variable rate security. Rate shown is as of report date. | ||||||
(b) Non-income producing security. | ||||||
(c) Issuer filed for bankruptcy and/or is in default of interest payments. | ||||||
(d) 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. | ||||||
(e) Convertible security. | ||||||
(f) Represents a payment-in-kind security which may pay interest/dividends in addi- | ||||||
tional par/shares. | ||||||
(g) Other interests represent beneficial interest in liquidation trusts and other reorgani- | ||||||
zation entities and are non-income producing. | ||||||
(h) Security is perpetual in nature and has no stated maturity date. | ||||||
(i) Represents or includes a to-be-announced transaction. The Trust has committed to | ||||||
purchasing (selling) securities for which all specific information is not available at | ||||||
this time. | ||||||
Unrealized | ||||||
Counterparty | Value | Appreciation | ||||
Goldman Sachs & Co. | $126,104,748 | $ 1,285,686 | ||||
(j) All or a portion of security has been pledged as collateral for financial futures | ||||||
contracts. | ||||||
(k) All or a portion of security has been pledged as collateral in connection with open | ||||||
swap contracts. | ||||||
(l) Warrants entitle the Trust to purchase a predetermined number of shares of com- | ||||||
mon stock and are non-income producing. The purchase price and number of | ||||||
shares are subject to adjustment under certain conditions until the expiration date. | ||||||
(m) Investments in companies considered to be an affiliate of the Trust, 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 | USD 96,671,566 | $ 176,533 | ||||
(n) 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. | ||||||
• | Foreign currency exchange contracts as of August 31, 2009 were as follows: | |||||
Unrealized | ||||||
Currency | Currency | Settlement Appreciation | ||||
Purchased | Sold | Counterparty | Date (Depreciation) | |||
USD 4,838,602 EUR 3,396,500 | Citibank NA | 9/16/09 | $ (30,749) | |||
USD 19,093,897 | EUR 13,675,000 | Deutsche Bank AG 9/16/09 | (511,105) | |||
USD 8,998,740 GBP 5,505,500 | Citibank NA | 10/28/09 | 36,788 | |||
Total | $ (505,066) | |||||
• | Financial futures contracts purchased as of August 31, 2009 were as follows: | |||||
Expiration | Face | Unrealized | ||||
Contracts | Issue | Date | Value | Appreciation | ||
50 5-Year U.S. Treasury Bond December 2009 | USD 5,740,422 | $ 22,078 |
See Notes to Financial Statements.
36 ANNUAL REPORT AUGUST 31, 2009
Schedule of Investments (concluded) BlackRock Limited Duration Income Trust (BLW)
• | Credit default swaps on traded indexes — buy protection outstanding as of August 31, | The following table summarizes the inputs used as of August 31, 2009 in determin- | ||||||||||||||
2009 were as follows: | ing the fair valuation of the Fund’s investments: | |||||||||||||||
Pay | Notional | Valuation | Investments in | |||||||||||||
Fixed | Amount | Unrealized | Inputs | Securities | ||||||||||||
Index | Rate | Counterparty Expiration | (000) | Depreciation | Assets | |||||||||||
Credit Suisse | June | Level 1 — Short-Term Securities | $ 96,671,566 | |||||||||||||
LCDX Index | 5.00% | International | 2014 | USD 930 | $ (83,859) | Level 2 | ||||||||||
Long-Term Investments: | ||||||||||||||||
• | Currency Abbreviations: | Asset-Backed Securities | 9,373,195 | |||||||||||||
EUR | Euro | Common Stocks | 5,545 | |||||||||||||
GBP | British Pound | Corporate Bonds | 132,134,077 | |||||||||||||
USD | US Dollar | Floating Rate Loan Interests | 179,430,318 | |||||||||||||
• | Effective September 1, 2008, the Fund adopted Financial Accounting Standards | Foreign Agency Obligations | 11,084,917 | |||||||||||||
Board Statement of Financial Accounting Standards No. 157, “Fair Value Measure- | Preferred Stocks | 45,135 | ||||||||||||||
U.S. Government Sponsored Agency Obligations | 150,431,094 | |||||||||||||||
ments” (“FAS 157”). FAS 157 clarifies the definition of fair value, establishes a | U.S. Treasury Obligations | 5,396,319 | ||||||||||||||
framework for measuring fair values and requires additional disclosures about the | ||||||||||||||||
use of fair value measurements. Various inputs are used in determining the fair | Total Level 2 | 487,900,600 | ||||||||||||||
value of investments, which are as follows: | Level 3 | |||||||||||||||
• Level 1 — price quotations in active markets/exchanges for identical securities | Long-Term Investments: | |||||||||||||||
Asset-Backed Securities | 2,668,212 | |||||||||||||||
• Level 2 — other observable inputs (including, but not limited to: quoted prices for | Common Stocks | 81,956 | ||||||||||||||
similar assets or liabilities in markets that are active, quoted prices for identical | Corporate Bonds | 6,270,943 | ||||||||||||||
or similar assets or liabilities in markets that are not active, inputs other than | Floating Rate Loan Interests | 83,910,390 | ||||||||||||||
quoted prices that are observable for the assets or liabilities (such as interest | Other Interests | 504,368 | ||||||||||||||
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and | Total Level 3 | 93,435,869 | ||||||||||||||
default rates) or other market-corroborated inputs) | Total | $678,008,035 | ||||||||||||||
• Level 3 — unobservable inputs based on the best information available in the | ||||||||||||||||
circumstances, to the extent observable inputs are not available (including the | Valuation | Other Financial | ||||||||||||||
Fund’s own assumptions used in determining the fair value of investments) | Inputs | Instruments1 | ||||||||||||||
The inputs or methodology used for valuing securities are not necessarily an indica- | Assets | Liabilities | ||||||||||||||
tion of the risk associated with investing in those securities. For information about | Level 1 | $ 22,078 | — | |||||||||||||
the Fund’s policy regarding valuation of investments and other significant accounting | Level 2 | 82,788 | $ (625,713) | |||||||||||||
policies, please refer to Note 1 of the Notes to Financial Statements. | Level 3 | 63,812 | — | |||||||||||||
Total | $ 168,678 | $ (625,713) | ||||||||||||||
1 | Other financial instruments are swaps, futures, options purchased and foreign | |||||||||||||||
currency exchange contracts. Swaps, futures and foreign currency exchange | ||||||||||||||||
contracts are shown at the unrealized appreciation/depreciation on the | ||||||||||||||||
instrument and options purchased 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 | ||||||||||||||||
Asset-Backed | Common | Corporate | Floating Rate | Other | ||||||||||||
Securities | Stocks | Bonds | Loan Interests Interests | Total | ||||||||||||
Balance, as of August 31, 2008 | — | — | — | $27,080,000 | $ 2,546 | $ 27,082,546 | ||||||||||
Accrued discounts/premiums | — | — | — | — | — | — | ||||||||||
Realized gain (loss) | — | — | $ 76 | (6,382,877) | — | (6,382,801) | ||||||||||
Change in unrealized appreciation (depreciation)2 | $ (3,780) | — | (875,732) | (3,027,612) | (1,021) | (3,908,145) | ||||||||||
Net purchases (sales) | — | — | (491,063) | (8,418,888) | — | (8,909,951) | ||||||||||
Net transfers in/out of Level 3 | 2,671,992 | $ 81,956 | 7,637,662 | 74,659,767 | 502,843 | 85,554,220 | ||||||||||
Balance as of August 31, 2009 | $ 2,668,212 | $ 81,956 | $ 6,270,943 | $83,910,390 | $ 504,368 | $93,435,869 | ||||||||||
2 | Included in the related net change in unrealized appreciation/depreciation on the Statements of Operations. | |||||||||||||||
The following is a reconciliation of other financial instruments for unobservable inputs | ||||||||||||||||
(Level 3) used in determining fair value: | ||||||||||||||||
Other Financial | ||||||||||||||||
Instruments3 | ||||||||||||||||
Assets | ||||||||||||||||
Balance, as of August 31, 2008 | — | |||||||||||||||
Accrued discounts/premiums | — | |||||||||||||||
Realized gain (loss) | — | |||||||||||||||
Change in unrealized appreciation (depreciation) | — | |||||||||||||||
Net purchases (sales) | — | |||||||||||||||
Net transfers in/out of Level 3 | $ 63,812 | |||||||||||||||
Balance as of August 31, 2009 | $ 63,812 | |||||||||||||||
3 | Other financial instruments are unfunded loan commitments. | |||||||||||||||
See Notes to Financial Statements. | ||||||||||||||||
ANNUAL REPORT | AUGUST 31, 2009 | 37 |
Statements of Assets and Liabilities | |||||
BlackRock | BlackRock | ||||
BlackRock | Diversified | Floating Rate | BlackRock | ||
Defined | Income | Income | Limited | ||
Opportunity | Strategies | Strategies | Duration | ||
Credit Trust | Fund, Inc. | Fund, Inc. | Income Trust | ||
August 31, 2009 | (BHL) | (DVF) | (FRA) | (BLW) | |
Assets | |||||
Investments at value — unaffiliated1 | $ 140,367,876 | $ 128,180,846 | $ 277,594,444 | $ 581,382,469 | |
Investments at value — affiliated2 | — | 2,371,578 | 2,018,379 | 96,671,566 | |
Unrealized appreciation on foreign currency exchange contracts | 10,965 | 2,622 | 27,341 | 36,788 | |
Unrealized appreciation on unfunded loan commitments | 60,517 | 38,010 | — | 63,812 | |
Unrealized appreciation on swaps | — | 11,300 | — | — | |
Foreign currency at value3 | 649,034 | 100,367 | 3,476,153 | 32,591 | |
Cash | 1,910,422 | 18,789 | — | 26,795 | |
Cash pledged as collateral in connection with swaps | — | 1,600,000 | — | — | |
Investments sold receivable | 1,838,747 | 619,692 | 6,512,374 | 6,654,815 | |
Interest receivable | 729,682 | 2,268,686 | 3,394,297 | 5,445,172 | |
Principal paydown receivable | 485 | — | — | — | |
Income receivable — affiliated | 241 | — | — | — | |
Swap premiums paid | — | 246,565 | 989,746 | 148,946 | |
Swaps receivable | — | 77,396 | 74,945 | — | |
Dividends receivable | — | 16,822 | — | 554 | |
Margin variation receivable | — | — | — | 17,188 | |
Prepaid expenses | 48,790 | 43,771 | 88,878 | 60,055 | |
Other assets | 106,457 | 81,592 | 61,990 | 269,647 | |
Total assets | 145,723,216 | 135,678,036 | 294,238,547 | 690,810,398 | |
Liabilities | |||||
Bank overdraft | — | — | 43,905 | — | |
Loan payable | 27,000,000 | 18,000,000 | 38,000,000 | — | |
Unrealized depreciation on foreign currency exchange contracts | 231,252 | 95,339 | 406,733 | 541,854 | |
Cash held as collateral in connection with swaps | — | — | 100,000 | — | |
Unrealized depreciation on unfunded loan commitments | — | — | 49,905 | — | |
Unrealized depreciation on swaps | — | 4,154,306 | 1,108,878 | 83,859 | |
Investments purchased payable | 5,147,449 | 5,080,921 | 16,737,531 | 137,777,131 | |
Deferred income | 120,455 | 80,469 | 79,562 | 163,303 | |
Investment advisory fees payable | 114,539 | 78,449 | 172,075 | 249,395 | |
Income dividends payable | 100,398 | 722 | 164,503 | 112,994 | |
Interest expense payable | 24,980 | 18,696 | 38,490 | — | |
Officer’s and Directors’ fees payable | 85 | 258 | 453 | 119,793 | |
Swaps payable | — | 122,296 | 73,465 | 9,150 | |
Other affiliates payable | 430 | 366 | 850 | 1,728 | |
Other accrued expenses payable | 121,578 | 89,864 | 102,633 | 246,657 | |
Other liabilities | — | 399,955 | — | — | |
Total liabilities | 32,861,166 | 28,121,641 | 57,078,983 | 139,305,864 | |
Net Assets | $ 112,862,050 | $ 107,556,395 | $ 237,159,564 | $ 551,504,534 | |
Net Assets Consist of | |||||
Paid-in capital4,5,6 | $ 127,810,765 | $ 229,575,720 | $ 349,498,291 | $ 701,342,104 | |
Distributions in excess of net investment income | (925,324) | (710,207) | (786,997) | (2,953,716) | |
Accumulated net realized loss | (8,005,928) | (68,140,448) | (56,737,331) | (65,590,423) | |
Net unrealized appreciation/depreciation | (6,017,463) | (53,168,670) | (54,814,399) | (81,293,431) | |
Net Assets | $ 112,862,050 | $ 107,556,395 | $ 237,159,564 | $ 551,504,534 | |
Net asset value | $ 12.53 | $ 8.74 | $ 12.93 | $ 14.95 | |
1 Investment at cost — unaffiliated | $ 146,223,408 | $ 177,162,499 | $ 330,801,175 | $ 662,177,538 | |
2 Investment at cost — affiliated | — | $ 2,371,578 | $ 2,018,379 | $ 96,671,566 | |
3 Foreign currency at cost | $ 648,966 | $ 99,953 | $ 3,469,138 | $ 32,006 | |
4 Par value per share | $ 0.001 | $ 0.10 | $ 0.10 | $ 0.001 | |
5 Shares outstanding | 9,008,704 | 12,306,154 | 18,336,820 | 36,889,650 | |
6 Shares authorized | unlimited | 200 million | 200 million | unlimited | |
See Notes to Financial Statements. | |||||
38 | ANNUAL REPORT | AUGUST 31, 2009 |
Statements of Assets and Liabilities (concluded) | ||
BlackRock | BlackRock | |
Senior Floating | Senior Floating | |
August 31, 2009 | Rate Fund, Inc. | Rate Fund II, Inc. |
Assets | ||
Investment at value — Master Senior Floating Rate (the “Master LLC”)1 | $ 312,548,298 | $ 150,735,659 |
Capital shares sold receivable | 441,324 | 307,937 |
Prepaid expenses | 192,030 | 101,804 |
Total assets | 313,181,652 | 151,145,400 |
Liabilities | ||
Income dividends payable | 888,978 | 386,592 |
Contributions payable to the Master LLC | 440,318 | 307,937 |
Administration fees payable | 65,564 | 50,418 |
Other affiliates payable | 4,393 | 773 |
Capital shares redeemed payable | 1,006 | — |
Officer’s and Directors’ fees payable | 238 | 113 |
Other accrued expenses payable | 118,760 | 52,522 |
Total liabilities | 1,519,257 | 798,355 |
Net Assets | $ 311,662,395 | $ 150,347,045 |
Net Assets Consist of | ||
Paid-in capital2 | $ 677,826,264 | $ 227,132,287 |
Undistributed net investment income | 1,249,054 | 113,729 |
Accumulated net realized loss | (314,988,118) | (52,616,500) |
Net unrealized appreciation/depreciation | (52,424,805) | (24,282,471) |
Net Assets | $ 311,662,395 | $ 150,347,045 |
Net asset value | $ 7.16 | $ 7.76 |
1 Cost — investment in Master LLC | $ 364,973,103 | $ 175,018,130 |
2 Shares outstanding, par value $0.10 per share, 1 billion shares authorized | 43,520,395 | 19,386,559 |
See Notes to Financial Statements. | ||
ANNUAL REPORT | AUGUST 31, 2009 | 39 |
Statements of Operations | |||||
BlackRock | BlackRock | ||||
BlackRock | Diversified | Floating Rate | BlackRock | ||
Defined | Income | Income | Limited | ||
Opportunity | Strategies | Strategies | Duration | ||
Credit Trust | Fund, Inc. | Fund, Inc. | Income Trust | ||
Year Ended August 31, 2009 | (BHL) | (DVF) | (FRA) | (BLW) | |
Investment Income | |||||
Interest | $ 9,932,361 | $ 15,151,985 | $ 24,292,175 | $ 39,980,390 | |
Facility and other fees | 173,968 | 136,364 | 613,979 | 580,427 | |
Income — affiliated | 20,215 | 20,647 | 32,098 | 188,455 | |
Total income | 10,126,544 | 15,308,996 | 24,938,252 | 40,749,272 | |
Expenses | |||||
Investment advisory | 1,275,472 | 924,328 | 1,919,277 | 2,819,087 | |
Professional | 384,400 | 149,397 | 203,610 | 187,206 | |
Borrowing costs1 | 79,577 | 258,417 | 314,968 | — | |
Accounting services | 29,180 | 26,989 | 63,840 | 102,049 | |
Transfer agent | 20,776 | 31,646 | 43,750 | 12,391 | |
Custodian | 14,343 | 19,355 | 22,903 | 34,970 | |
Officer and Directors | 12,993 | 11,723 | 28,071 | 71,284 | |
Printing | 10,280 | 17,679 | 27,994 | 148,152 | |
Registration | 9,511 | 9,215 | 9,197 | 12,579 | |
Miscellaneous | 32,495 | 47,295 | 66,551 | 103,817 | |
Total expenses excluding interest expense | 1,869,027 | 1,496,044 | 2,700,161 | 3,491,535 | |
Interest expense | 434,636 | 853,832 | 1,324,413 | 101,955 | |
Total expenses | 2,303,663 | 2,349,876 | 4,024,574 | 3,593,490 | |
Less fees waived by advisor | (719) | (674) | (828) | (27,344) | |
Less fees paid indirectly | (396) | (344) | (1,203) | (4,536) | |
Total expenses after fees waived and paid indirectly | 2,302,548 | 2,348,858 | 4,022,543 | 3,561,610 | |
Net investment income | 7,823,996 | 12,960,138 | 20,915,709 | 37,187,662 | |
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) from: | |||||
Investments | (7,240,206) | (47,826,125) | (48,127,734) | (50,345,439) | |
Financial futures contracts and swaps | (875,528) | (3,732,047) | 933,553 | 97,366 | |
Foreign currency | 1,854,695 | 531,200 | 1,465,026 | 6,159,464 | |
TBA sale commitments | — | — | — | 6,619,821 | |
(6,261,039) | (51,026,972) | (45,729,155) | (37,468,788) | ||
Net change in unrealized appreciation/depreciation on: | |||||
Investments | (5,969,670) | (6,962,138) | (8,868,889) | (18,022,517) | |
Financial futures contracts and swaps | (190,796) | (898,237) | 795,049 | (132,057) | |
Foreign currency | (1,201,825) | (312,776) | (1,547,153) | (3,749,994) | |
Unfunded corporate loans | 55,544 | 35,951 | 132,703 | 90,545 | |
(7,306,747) | (8,137,200) | (9,488,290) | (21,814,023) | ||
Total realized and unrealized loss | (13,567,786) | (59,164,172) | (55,217,445) | (59,282,811) | |
Net Decrease in Net Assets Resulting from Operations | $ (5,743,790) | $ (46,204,034) | $ (34,301,736) | $ (22,095,149) | |
1 See Note 9 of the Notes to Financial Statements for details of borrowings. | |||||
See Notes to Financial Statements. | |||||
40 | ANNUAL REPORT | AUGUST 31, 2009 |
Statements of Operations (concluded) | ||
BlackRock | Blackrock | |
Senior Floating | Senior Floating | |
Year Ended August 31, 2009 | Rate Fund, Inc. | Rate Fund II, Inc. |
Investment Income | ||
Net Investment income allocated from the Master LLC: | ||
Interest | $ 21,423,940 | $ 9,905,686 |
Income — affiliated | 190,457 | 88,396 |
Facility and other fees | 357,209 | 166,414 |
Expenses | (3,067,282) | (1,424,066) |
Total income | 18,904,324 | 8,736,430 |
Expenses | ||
Administration | 732,567 | 544,168 |
Transfer agent | 318,401 | 92,481 |
Tender offer | 128,900 | 69,871 |
Professional | 123,117 | 69,999 |
Printing | 67,628 | 38,412 |
Registration | 34,024 | 28,631 |
Officer and Directors | 1,257 | 584 |
Miscellaneous | 12,356 | 11,534 |
Total expenses | 1,418,250 | 855,680 |
Net investment income | 17,486,074 | 7,880,750 |
Realized and Unrealized Gain (Loss) Allocated from the Master LLC | ||
Net realized gain (loss) from investments, swaps and foreign currency | (34,004,504) | (15,895,082) |
Net change in unrealized appreciation/depreciation on investments, swaps, foreign currency and unfunded corporate loans | (11,952,665) | (4,973,635) |
Total realized and unrealized loss | (45,957,169) | (20,868,717) |
Net Decrease in Net Assets Resulting from Operations | $ (28,471,095) | $ (12,987,967) |
See Notes to Financial Statements. | ||
ANNUAL REPORT | AUGUST 31, 2009 | 41 |
Statements of Changes in Net Assets | BlackRock Defined Opportunity Credit Trust (BHL) | |||
Period | ||||
January 31, | ||||
Year Ended | 20081 to | |||
August 31, | August 31, | |||
Increase (Decrease) in Net Assets: | 2009 | 2008 | ||
Operations | ||||
Net investment income | $ 7,823,996 | $ 4,088,383 | ||
Net realized gain (loss) | (6,261,039) | 641,116 | ||
Net change in unrealized appreciation/depreciation | (7,306,747) | 1,289,284 | ||
Net increase (decrease) in net assets resulting from operations | (5,743,790) | 6,018,783 | ||
Dividends and Distributions to Shareholders From | ||||
Net investment income | (9,810,137) | (5,435,571) | ||
Tax return of capital | (88,324) | (481,911) | ||
Decrease in net assets resulting from dividends and distributions to shareholders | (9,898,461) | (5,917,482) | ||
Capital Share Transactions | ||||
Net proceeds from the issuance of shares | — | 127,448,000 | ||
Capital charges with respect to issuance of shares | — | (200,500) | ||
Reinvestment of dividends | 809,153 | 224,341 | ||
Net increase in net assets resulting from capital share transactions | 809,153 | 127,471,841 | ||
Net Assets | ||||
Total increase (decrease) in net assets | (14,833,098) | 127,573,142 | ||
Beginning of period | 127,695,148 | 122,006 | ||
End of period | $ 112,862,050 | $ 127,695,148 | ||
Distributions in excess of net investment income | $ (925,324) | $ (1,438,090) | ||
1 Commencement of operations. | ||||
BlackRock Diversified Income Strategies Fund, Inc. (DVF) | ||||
Year Ended | ||||
August 31, | ||||
Increase (Decrease) in Net Assets: | 2009 | 2008 | ||
Operations | ||||
Net investment income | $ 12,960,138 | $ 19,628,678 | ||
Net realized loss | (51,026,972) | (13,105,495) | ||
Net change in unrealized appreciation/depreciation | (8,137,200) | (28,460,128) | ||
Net decrease in net assets resulting from operations | (46,204,034) | (21,936,945) | ||
Dividends and Distributions to Shareholders From | ||||
Net investment income | (13,947,075) | (20,910,360) | ||
Tax return of capital | (2,882,990) | (443,389) | ||
Decrease in net assets resulting from dividends and distributions to shareholders | (16,830,065) | (21,353,749) | ||
Capital Share Transactions | ||||
Reinvestment of dividends | 883,415 | 205,747 | ||
Net Assets | ||||
Total decrease in net assets | (62,150,684) | (43,084,947) | ||
Beginning of year | 169,707,079 | 212,792,026 | ||
End of year | $ 107,556,395 | $ 169,707,079 | ||
Distributions in excess of net investment income | $ (710,207) | $ (175,645) | ||
See Notes to Financial Statements. | ||||
42 | ANNUAL REPORT | AUGUST 31, 2009 |
Statements of Changes in Net Assets | BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) | ||
Year Ended | |||
August 31, | |||
Increase (Decrease) in Net Assets: | 2009 | 2008 | |
Operations | |||
Net investment income | $ 20,915,709 | $ 26,533,760 | |
Net realized loss | (45,729,155) | (10,426,510) | |
Net change in unrealized appreciation/depreciation | (9,488,290) | (26,845,871) | |
Net decrease in net assets resulting from operations | (34,301,736) | (10,738,621) | |
Dividends to Shareholders From | |||
Net investment income | (23,842,077) | (28,321,303) | |
Capital Share Transactions | |||
Reinvestment of dividends | 298,574 | — | |
Net Assets | |||
Total decrease in net assets | (57,845,239) | (39,059,924) | |
Beginning of year | 295,004,803 | 334,064,727 | |
End of year | $ 237,159,564 | $ 295,004,803 | |
Undistributed (distributions in excess of) net investment income | $ (786,997) | $ 848,640 | |
BlackRock Limited Duration Income Trust (BLW) | |||
Period | |||
November 1, | |||
Year Ended | 2007 to | Year Ended | |
August 31, | August 31, | October 31, | |
Increase (Decrease) in Net Assets: | 2009 | 2008 | 2007 |
Operations | |||
Net investment income | $ 37,187,662 | $ 41,919,013 | $ 55,219,613 |
Net realized gain (loss) | (37,468,788) | (24,118,166) | 3,120,082 |
Net change in unrealized appreciation/depreciation | (21,814,023) | (40,618,831) | (21,221,592) |
Net increase (decrease) in net assets resulting from operations | (22,095,149) | (22,817,984) | 37,118,103 |
Dividends and Distributions to Shareholders From | |||
Net investment income | (42,793,064) | (43,898,690) | (51,967,739) |
Net realized gain | — | — | (2,229,742) |
Tax return of capital | — | — | (1,074,826) |
Decrease in net assets resulting from dividends and distributions to shareholders | (42,793,064) | (43,898,690) | (55,272,307) |
Capital Share Transactions | |||
Reinvestment of dividends | — | — | 2,057,525 |
Net Assets | |||
Total decrease in net assets | (64,888,213) | (66,716,674) | (16,096,679) |
Beginning of period | 616,392,747 | 683,109,421 | 699,206,100 |
End of period | $ 551,504,534 | $ 616,392,747 | $ 683,109,421 |
Undistributed (distributions in excess of) net investment income | $ (2,953,716) | $ (3,360,775) | $ 800,386 |
See Notes to Financial Statements. | |||
ANNUAL REPORT | AUGUST 31, 2009 | 43 |
Statements of Changes in Net Assets | BlackRock Senior Floating Rate Fund, Inc. | |||
Year Ended | ||||
August 31, | ||||
Increase (Decrease) in Net Assets: | 2009 | 2008 | ||
Operations | ||||
Net investment income | $ 17,486,074 | $ 26,675,323 | ||
Net realized loss | (34,004,504) | (14,362,509) | ||
Net change in unrealized appreciation/depreciation | (11,952,665) | (18,260,695) | ||
Net decrease in net assets resulting from operations | (28,471,095) | (5,947,881) | ||
Dividends to Shareholders From | ||||
Net investment income | (17,470,993) | (26,664,539) | ||
Capital Share Transactions | ||||
Net decrease in net assets resulting from capital share transactions | (41,795,738) | (73,502,678) | ||
Net Assets | ||||
Total decrease in net assets | (87,737,826) | (106,115,098) | ||
Beginning of year | 399,400,221 | 505,515,319 | ||
End of year | $ 311,662,395 | $ 399,400,221 | ||
Undistributed net investment income | $ 1,249,054 | $ 168,069 | ||
BlackRock Senior Floating Rate Fund II, Inc. | ||||
Year Ended | ||||
August 31, | ||||
Increase (Decrease) in Net Assets: | 2009 | 2008 | ||
Operations | ||||
Net investment income | $ 7,880,750 | $ 12,299,609 | ||
Net realized loss | (15,895,082) | (6,857,340) | ||
Net change in unrealized appreciation/depreciation | (4,973,635) | (8,921,385) | ||
Net decrease in net assets resulting from operations | (12,987,967) | (3,479,116) | ||
Dividends to Shareholders From | ||||
Net investment income | (8,332,675) | (12,294,014) | ||
Capital Share Transactions | ||||
Net decrease in net assets resulting from capital share transactions | (14,969,362) | (45,450,688) | ||
Net Assets | ||||
Total decrease in net assets | (36,290,004) | (61,223,818) | ||
Beginning of year | 186,637,049 | 247,860,867 | ||
End of year | $ 150,347,045 | $ 186,637,049 | ||
Undistributed net investment income | $ 113,729 | $ 85,109 | ||
See Notes to Financial Statements. | ||||
44 | ANNUAL REPORT | AUGUST 31, 2009 |
Statements of Cash Flows | ||||
BlackRock | BlackRock | BlackRock | ||
BlackRock | Diversified | Floating Rate | Limited | |
Defined | Income | Income | Income | |
Opportunity | Strategies | Strategies | Duration | |
Credit Trust | Fund, Inc. | Fund, Inc. | Trust | |
August 31, 2009 | (BHL) | (DVF) | (FRA) | (BLW) |
Cash Provided by Operating Activities | ||||
Net decrease in net assets resulting from operations | $ (5,743,790) | $ (46,204,034) | $ (34,301,736) | $ (22,095,149) |
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided | ||||
by operating activities: | ||||
Decrease in interest receivable — unaffiliated | 538,756 | 1,582,682 | 1,533,481 | 5,225,321 |
Increase in dividend receivable | — | — | — | (554) |
Increase in interest receivable — affiliated | (241) | — | — | — |
Decrease in swap receivable | 141,449 | 291,066 | 3,166 | 49,870 |
Increase in margin variation receivable | — | — | — | (6,789) |
(Increase) decrease in prepaid expenses | (47,766) | (37,477) | (76,763) | 9,674 |
Increase in other assets | (105,630) | (81,512) | (38,928) | (163,711) |
Increase (decrease) in other liabilities | — | 399,955 | (221,688) | — |
Decrease in investment advisor payable | (22,954) | (71,270) | (85,740) | (80,497) |
Decrease in interest expense payable | (116,002) | (30,952) | (37,892) | (178,414) |
Decrease in other affiliates payable | (405) | (784) | (1,109) | (2,334) |
Increase (decrease) in accrued expenses payable | 17,425 | 32,780 | 47,709 | (16,300) |
Decrease in swaps payable | (38,414) | (717,602) | (16,980) | (14,232) |
Increase in officers and directors payable | 15 | 153 | 272 | 31,915 |
Swap premium received | 234,740 | 50,673 | 600,834 | 575,252 |
Swap premium paid | (259,956) | (272,513) | (1,838,750) | (169,500) |
Net realized and unrealized gain | 14,132,122 | 55,925,734 | 58,346,253 | 65,900,247 |
Amortization of premium and discount on investments | (2,296,304) | (868,065) | (2,813,385) | (2,550,465) |
Paid-in-kind Income | (22,566) | (969,233) | (1,164,458) | (1,556,888) |
Cash collateral on swaps | — | (1,600,000) | 100,000 | — |
Proceeds from sales and paydowns of long-term securities | 76,235,530 | 108,732,811 | 209,126,755 | 1,854,428,848 |
Purchases of long-term securities | (63,427,541) | (56,652,968) | (139,581,244) | (1,699,772,959) |
Net proceeds (purchases) from sales of short-term investments | 3,770,645 | 3,220,827 | (383,710) | (94,471,566) |
Cash provided by operating activities | 22,989,113 | 62,730,271 | 89,196,087 | 105,141,769 |
Cash Used for Financing Activities | ||||
Cash receipts from borrowings | 50,000,000 | 39,000,000 | 122,000,000 | 17,601,456 |
Cash payments from borrowings | (61,500,000) | (86,500,000) | (185,500,000) | (82,138,964) |
Cash dividends paid to shareholders | (9,189,746) | (16,127,334) | (23,613,150) | (42,904,068) |
Increase in bank overdraft | — | — | 43,905 | — |
Cash used for financing activities | (20,689,746) | (63,627,334) | (87,069,245) | (107,441,576) |
Cash Impact from Foreign Exchange Fluctuations | ||||
Cash impact from foreign exchange fluctuations | 3,605 | 6,456 | 71,755 | 55,449 |
Cash | ||||
Net increase (decrease) in cash | 2,302,972 | (890,607) | 2,198,597 | (2,244,358) |
Cash and foreign currency at beginning of year. | 256,484 | 1,009,763 | 1,277,556 | 2,303,744 |
Cash and foreign currency at end of year | $ 2,559,456 | $ 119,156 | $ 3,476,153 | $ 59,386 |
Cash Flow Information | ||||
Cash paid for interest | $ 550,638 | $ 884,784 | $ 1,362,305 | $ 280,369 |
A Statement of Cash Flows is presented when a Fund has a significant amount of borrowing during the period, based on the average borrowing outstanding in relation to average | ||||
total assets. | ||||
See Notes to Financial Statements. | ||||
ANNUAL REPORT | AUGUST 31, 2009 | 45 |
Financial Highlights | BlackRock Defined Opportunity Credit Trust (BHL) | |||
Period | ||||
January 31, | ||||
Year Ended | 20081 to | |||
August 31, | August 31, | |||
2009 | 2008 | |||
Per Share Operating Performance | ||||
Net asset value, beginning of period | $ 14.31 | $ 14.332 | ||
Net investment income3 | 0.87 | 0.47 | ||
Net realized and unrealized gain (loss) | (1.55) | 0.21 | ||
Net increase (decrease) from investment operations | (0.68) | 0.68 | ||
Dividends and distributions from: | ||||
Net investment income | (1.09) | (0.62) | ||
Tax return of capital | (0.01) | (0.06) | ||
Total dividends and distributions | (1.10) | (0.68) | ||
Capital charges with respect to issuance of shares | — | (0.02) | ||
Net asset value, end of period | $ 12.53 | $ 14.31 | ||
Market price, end of period | $ 11.03 | $ 12.66 | ||
Total Investment Return4 | ||||
Based on net asset value | (2.16)% | 4.79%5 | ||
Based on market price | (2.65)% | (11.44)%5 | ||
Ratios to Average Net Assets | ||||
Total expenses | 2.39% | 1.78%6 | ||
Total expenses after fees waived and paid indirectly and excluding interest expense | 1.94% | 1.48%6 | ||
Net investment income | 8.11% | 5.52%6 | ||
Supplemental Data | ||||
Net assets, end of period (000) | $ 112,862 | $ 127,695 | ||
Borrowings outstanding, end of period (000) | $ 27,000 | $ 38,500 | ||
Average borrowings outstanding, during the period (000) | $ 31,141 | $ 13,788 | ||
Portfolio turnover | 41% | 18% | ||
Asset coverage, end of period per $1,000 | $ 5,180 | $ 4,317 | ||
1 Commencement of operations. | ||||
2 Net asset value, beginning of period, reflects a deduction of $0.675 per share sales charge from initial offering price of $15.00 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. | ||||
46 | ANNUAL REPORT | AUGUST 31, 2009 |
Financial Highlights | BlackRock Diversified Income Strategies Fund, Inc. (DVF) | |||||
Period | ||||||
January 31, | ||||||
20051 to | ||||||
Year Ended August 31, | August 31, | |||||
2009 | 2008 | 2007 | 2006 | 2005 | ||
Per Share Operating Performance | ||||||
Net asset value, beginning of period | $ 13.94 | $ 17.50 | $ 18.70 | $ 18.38 | $ 19.10 | |
Net investment income2 | 1.06 | 1.61 | 1.83 | 1.77 | 0.84 | |
Net realized and unrealized gain (loss) | (4.88) | (3.41) | (1.23) | 0.25 | (0.77) | |
Net increase (decrease) from investment operations | (3.82) | (1.80) | 0.60 | 2.02 | 0.07 | |
Dividends and distributions from: | ||||||
Net investment income | (1.14) | (1.72) | (1.80) | (1.70) | (0.75) | |
Tax return of capital | (0.24) | (0.04) | — | — | — | |
Total dividends and distributions | (1.38) | (1.76) | (1.80) | (1.70) | (0.75) | |
Capital charges with respect to issuance of shares | — | — | — | (0.00)3 | (0.04) | |
Net asset value, end of period | $ 8.74 | $ 13.94 | $ 17.50 | $ 18.70 | $ 18.38 | |
Market price, end of period | $ 8.80 | $ 12.77 | $ 17.16 | $ 18.85 | $ 17.53 | |
Total Investment Return4 | ||||||
Based on net asset value | (23.82)% | (10.17)% | 3.00% | 11.99% | 0.42%5 | |
Based on market price | (16.27)% | (16.08)% | 0.19% | 18.36% | (8.53)%5 | |
Ratios to Average Net Assets | ||||||
Total expenses | 2.47% | 2.77% | 3.66% | 3.17% | 2.48%6 | |
Total expenses after fees waived and paid indirectly | 2.47% | 2.77% | 3.66% | 3.17% | 2.20%6 | |
Total expenses after fees waived and paid indirectly and excluding interest expense | 1.57% | 1.23% | 1.30% | 1.29% | 1.00%6 | |
Net investment income | 13.63% | 10.40% | 9.63% | 9.57% | 7.88%6 | |
Supplemental Data | ||||||
Net assets, end of period (000) | $ 107,556 | $ 169,707 | $ 212,792 | $ 224,156 | $ 219,748 | |
Borrowings outstanding, end of period (000) | $ 18,000 | $ 65,500 | $ 72,000 | $ 88,800 | $ 101,400 | |
Average borrowings outstanding, during the period (000) | $ 28,247 | $ 64,335 | $ 95,465 | $ 86,132 | $ 75,543 | |
Portfolio turnover | 45% | 41% | 72% | 64% | 17% | |
Asset coverage, end of period per $1,000 | $ 6,975 | $ 3,591 | $ 3,955 | $ 3,524 | $ 3,167 | |
1 Commencement of operations. | ||||||
2 Based on average shares outstanding. | ||||||
3 Amount is less than $(0.01) per share. | ||||||
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 | AUGUST 31, 2009 | 47 |
Financial Highlights | BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) | ||||||
Year Ended August 31, | |||||||
2009 | 2008 | 2007 | 2006 | 2005 | |||
Per Share Operating Performance | |||||||
Net asset value, beginning of year | $ 16.12 | $ 18.25 | $ 19.32 | $ 19.35 | $ 19.16 | ||
Net investment income1 | 1.14 | 1.45 | 1.54 | 1.40 | 1.23 | ||
Net realized and unrealized gain (loss) | (3.04) | (2.03) | (1.07) | (0.06) | 0.08 | ||
Net increase (decrease) from investment operations | (1.90) | (0.58) | 0.47 | 1.34 | 1.31 | ||
Dividends and distributions from: | |||||||
Net investment income | (1.29) | (1.55) | (1.54) | (1.37) | (1.11) | ||
Net realized gain | — | — | — | — | (0.01) | ||
Total dividends and distributions | (1.29) | (1.55) | (1.54) | (1.37) | (1.12) | ||
Net asset value, end of year | $ 12.93 | $ 16.12 | $ 18.25 | $ 19.32 | $ 19.35 | ||
Market price, end of year | $ 12.26 | $ 14.49 | $ 16.70 | $ 17.49 | $ 17.85 | ||
Total Investment Return2 | |||||||
Based on net asset value | (8.88)% | (2.56)% | 2.74% | 7.92% | 7.27% | ||
Based on market price | (3.88)% | (4.28)% | 3.85% | 5.91% | (2.47)% | ||
Ratios to Average Net Assets | |||||||
Total expenses | 1.96% | 2.61% | 3.33% | 2.54% | 2.18% | ||
Total expenses after fees waived and paid indirectly | 1.96% | 2.60% | 3.33% | 2.54% | 2.18% | ||
Total expenses after fees waived and paid indirectly and excluding interest expense | 1.31% | 1.18% | 1.20% | 1.14% | 1.22% | ||
Net investment income | 10.18% | 8.49% | 7.88% | 7.30% | 6.34% | ||
Supplemental Data | |||||||
Net assets, end of year (000) | $ 237,160 | $ 295,005 | $ 334,065 | $ 353,713 | $ 354,114 | ||
Borrowings outstanding, end of year (000) | $ 38,000 | $ 101,500 | $ 107,000 | $ 135,200 | $ 123,600 | ||
Average borrowings outstanding, during the year (000) | $ 50,591 | $ 102,272 | $ 133,763 | $ 101,916 | $ 117,702 | ||
Portfolio turnover | 58% | 49% | 69% | 57% | 48% | ||
Asset coverage, end of year per $1,000 | $ 7,241 | $ 3,906 | $ 4,122 | $ 3,616 | $ 3,865 | ||
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. | |||||||
See Notes to Financial Statements. | |||||||
48 | ANNUAL REPORT | AUGUST 31, 2009 |
Financial Highlights | BlackRock Limited Duration Income Trust (BLW) | ||||||
Period | |||||||
November 1, | |||||||
Year Ended | 2007 to | ||||||
August 31, | August 31, | Year Ended October 31, | |||||
2009 | 2008 | 2007 | 2006 | 2005 | 2004 | ||
Per Share Operating Performance | |||||||
Net asset value, beginning of period | $ 16.71 | $ 18.52 | $ 19.01 | $ 19.17 | $ 20.13 | $ 19.74 | |
Net investment income | 1.011 | 1.141 | 1.50 | 1.35 | 1.46 | 1.46 | |
Net realized and unrealized gain (loss) | (1.61) | (1.76) | (0.49) | 0.03 | (0.94) | 0.43 | |
Net increase (decrease) from investment operations | (0.60) | (0.62) | 1.01 | 1.38 | 0.52 | 1.89 | |
Dividends and distributions from: | |||||||
Net investment income | (1.16) | (1.19) | (1.41) | (1.52) | (1.33) | (1.49) | |
Net realized gain | — | — | (0.06) | — | (0.15) | (0.01) | |
Tax return of capital | — | — | (0.03) | (0.02) | — | — | |
Total dividends and distributions | (1.16) | (1.19) | (1.50) | (1.54) | (1.48) | (1.50) | |
Net asset value, end of period | $ 14.95 | $ 16.71 | $ 18.52 | $ 19.01 | $ 19.17 | $ 20.13 | |
Market price, end of period | $ 14.09 | $ 14.57 | $ 16.68 | $ 18.85 | $ 17.48 | $ 19.95 | |
Total Investment Return2 | |||||||
Based on net asset value | (1.57)% | (2.60)%3 | 5.66% | 7.85% | 2.93% | 10.17% | |
Based on market price | 6.40% | (5.70)%3 | (4.03)% | 17.31% | (5.30)% | 14.64% | |
Ratios to Average Net Assets | |||||||
Total expenses | 0.72% | 1.39%4 | 2.16% | 2.20% | 1.71% | 1.26% | |
Total expenses after fees waived and before fees paid indirectly | 0.71% | 1.39%4 | 2.16% | 2.20% | 1.71% | 1.28% | |
Total expenses after fees waived and paid indirectly | 0.71% | 1.38%4 | 2.14% | 2.19% | 1.71% | 1.25% | |
Total expenses after fees waived and paid indirectly and | |||||||
excluding interest expense | 0.69% | 0.76%4 | 0.83% | 0.91% | 0.92% | 0.90% | |
Net investment income | 7.42% | 7.84%4 | 7.92% | 7.10% | 7.42% | 7.34% | |
Supplemental Data | |||||||
Net assets, end of period (000) | $ 551,505 | $ 616,393 | $ 638,109 | $ 699,206 | $ 704,961 | $ 739,225 | |
Borrowings outstanding, end of period (000) | $ — | $ 64,538 | $ 109,287 | $ 220,000 | $ 176,010 | $ 159,416 | |
Average borrowings outstanding, during the period (000) | $ 11,705 | $ 120,295 | $ 172,040 | $ 179,366 | $ 186,660 | $ 195,845 | |
Portfolio turnover | 287%5 | 191%6 | 65% | 132% | 70% | 215% | |
Asset coverage, end of period per $1,000 | $ — | $ 10,551 | $ 7,251 | $ 4,178 | $ 5,005 | $ 5,637 | |
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 Annualized. | |||||||
5 Includes mortgage dollar roll transactions. Excluding these transactions, the portfolio turnover would have been 79%. | |||||||
6 Includes TBA transactions. Excluding these transactions, the portfolio turnover would have been 24%. | |||||||
See Notes to Financial Statements. | |||||||
ANNUAL REPORT | AUGUST 31, 2009 | 49 |
Financial Highlights | BlackRock Senior Floating Rate Fund, Inc. | |||||||
Year Ended August 31, | ||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||
Per Share Operating Performance | ||||||||
Net asset value, beginning of year | $ 7.98 | $ 8.60 | $ 8.92 | $ 9.01 | $ 8.91 | |||
Net investment income1 | 0.39 | 0.51 | 0.60 | 0.52 | 0.37 | |||
Net realized and unrealized gain (loss) | (0.83) | (0.62) | (0.32) | (0.08) | 0.10 | |||
Net increase (decrease) from investment operations | (0.44) | (0.11) | 0.28 | 0.44 | 0.47 | |||
Dividends from net investment income | (0.38) | (0.51) | (0.60) | (0.53) | (0.37) | |||
Net asset value, end of year | $ 7.16 | $ 7.98 | $ 8.60 | $ 8.92 | $ 9.01 | |||
Total Investment Return2 | ||||||||
Based on net asset value | (4.69)% | (1.32)%3 | 3.07% | 4.97% | 5.38% | |||
Ratios to Average Net Assets4 | ||||||||
Total expenses | 1.53% | 1.28%3 | 1.44% | 1.43% | 1.41% | |||
Net investment income | 5.97% | 6.16% | 6.67% | 5.84% | 4.11% | |||
Supplemental Data | ||||||||
Net assets, end of year (000) | $ 311,662 | $ 399,400 | $ 505,515 | $ 601,807 | $ 676,703 | |||
Portfolio turnover for the Master LLC | 47% | 56% | 46% | 54% | 53% | |||
1 Based on average shares outstanding. | ||||||||
2 Where applicable, total investment returns exclude the early withdrawal charge, but do include the reinvestment of dividends and distributions. The Fund is a continuously offered | ||||||||
closed-end fund, the shares of which are offered at net asset value. No secondary market for the Fund’s shares exists. | ||||||||
3 During the year ended August 31, 2008, the Fund recorded a refund related to overpayments of prior years’ tender offer fees, which increased net investment income per | ||||||||
share $0.02 and increased total investment return 0.24%. The expense ratio excluding the refund was 1.46%. | ||||||||
4 Includes the Fund’s share of the Master LLC’s allocated expenses and/or net investment income. | ||||||||
See Notes to Financial Statements. | ||||||||
50 | ANNUAL REPORT | AUGUST 31, 2009 |
Financial Highlights | BlackRock Senior Floating Rate Fund II, Inc. | ||||||
Year Ended August 31, | |||||||
2009 | 2008 | 2007 | 2006 | 2005 | |||
Per Share Operating Performance | |||||||
Net asset value, beginning of year | $ 8.67 | $ 9.35 | $ 9.70 | $ 9.79 | $ 9.67 | ||
Net investment income1 | 0.41 | 0.54 | 0.63 | 0.56 | 0.39 | ||
Net realized and unrealized gain (loss) | (0.89) | (0.69) | (0.34) | (0.10) | 0.11 | ||
Net increase (decrease) from investment operations | (0.48) | (0.15) | 0.29 | 0.46 | 0.50 | ||
Dividends from net investment income | (0.43) | (0.53) | (0.64) | (0.55) | (0.38) | ||
Net asset value, end of year | $ 7.76 | $ 8.67 | $ 9.35 | $ 9.70 | $ 9.79 | ||
Total Investment Return2 | |||||||
Based on net asset value | (4.70)% | (1.61)%3 | 2.89% | 4.90% | 5.26% | ||
Ratios to Average Net Assets4 | |||||||
Total expenses | 1.68% | 1.50%3 | 1.59% | 1.57% | 1.54% | ||
Net investment income | 5.79% | 5.96% | 6.53% | 5.70% | 4.03% | ||
Supplemental Data | |||||||
Net assets, end of year (000) | $ 150,347 | $ 186,637 | $ 247,861 | $ 322,202 | $ 355,108 | ||
Portfolio turnover for the Master LLC | 47% | 56% | 46% | 54% | 53% | ||
1 Based on average shares outstanding. | |||||||
2 Where applicable, total investment returns exclude the early withdrawal charge, but do include the reinvestment of dividends and distributions. The Fund is a continuously offered | |||||||
closed-end fund, the shares of which are offered at net asset value. No secondary market for the Fund’s shares exists. | |||||||
3 During the year ended August 31, 2008, the Fund recorded a refund related to overpayments of prior years’ tender offer fees, which increased net investment income per | |||||||
share $0.02 and increased total investment return 0.11%. The expense ratio excluding the refund was 1.64%. | |||||||
4 Includes the Fund’s share of the Master LLC’s allocated expenses and/or net investment income. | |||||||
See Notes to Financial Statements. | |||||||
ANNUAL REPORT | AUGUST 31, 2009 | 51 |
Notes to Financial Statements
1. Organization and Significant Accounting Policies:
BlackRock Defined Opportunity Credit Trust (“BHL”), BlackRock Diversified
Income Strategies Fund, Inc. (“DVF”), BlackRock Floating Rate Income
Strategies Fund, Inc. (“FRA”), BlackRock Limited Duration Income Trust
(“BLW”), BlackRock Senior Floating Rate Fund, Inc. (“Senior Floating Rate”)
and BlackRock Senior Floating Rate Fund II, Inc. (“Senior Floating Rate II”)
(collectively, referred to as the “Funds” or individually as the “Fund”) are
registered under the Investment Company Act of 1940, as amended (the
“1940 Act”). BHL and BLW are organized as Delaware Statutory trusts. DVF,
FRA, Senior Floating Rate and Senior Floating Rate II are organized as
Maryland corporations. BHL, DVF, FRA and BLW are registered as diversi-
fied, closed-end management investment companies. Senior Floating Rate
and Senior Floating Rate II are registered as continuously offered, non-
diversified, closed-end management investment companies. The Funds’
financial statements are prepared in conformity with accounting principles
generally accepted in the United States of America, which may require the
use of management accruals and estimates. Actual results may differ from
these estimates. The Boards of Directors and the Boards of Trustees of the
Funds 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 shares on a daily basis.
Prior to its commencement of operations on January 31, 2008, BHL had
no operations other than those relating to organizational matters and the
sale of 8,517 shares on November 13, 2007 to BlackRock Advisors, LLC
(the “Manager”), the Funds’ investment advisor, an indirect, wholly owned
subsidiary of BlackRock, Inc. (“BlackRock”), for $122,006. BHL will termi-
nate no later than December 31, 2017.
Senior Floating Rate and Senior Floating Rate II seek to achieve their
investment objectives by investing all their assets in the Master Senior
Floating Rate LLC (the “Master LLC”), which has the same investment
objective and strategies as these Funds. The value of each Fund’s invest-
ment in the Master LLC reflects each Fund’s proportionate interest in the
net assets of the Master LLC. The performance of each Fund is directly
affected by the performance of the Master LLC. The financial statements of
the Master LLC, including the Schedule of Investments, are included else-
where in this report and should be read in conjunction with Senior Floating
Rate and Senior Floating Rate II’s financial statements. The percentage of
the Master LLC owned by Senior Floating Rate and Senior Floating Rate II
at August 31, 2009 was 67% and 33%, respectively.
The following is a summary of significant accounting policies followed by
the Funds:
Valuation of Investments: The Funds value their bond investments on the
basis of last available 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 between the last
available bid prices from one or more brokers or dealers as obtained from a
pricing service. In determining the value of a particular investment, pricing
services may use certain information with respect to transactions in
such investments, quotations from dealers, pricing matrixes, market trans-
actions 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 invest-
ments. The fair value of asset-backed and mortgage-backed securities
are estimated based on models that consider the estimated cash flows
of each tranche of the entity, establishes a benchmark yield and develops
an estimated tranche specific spread to the benchmark yield based on
the unique attributes of the tranche. Financial futures contracts traded on
exchanges are valued at their last sale price. To be announced (“TBA”)
commitments are valued at the current market value of the underlying
securities. 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. Investments 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 Cash Sweep Series of BlackRock Liquidity Series, LLC at
fair value, which is ordinarily based upon their pro rata ownership in the
net assets of the underlying fund.
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 price. If no bid 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 price. If no bid 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 options and swaptions are
valued by an independent pricing service using a mathematical model
which incorporates a number of market data factors, such as the trades
and prices of the underlying securities.
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 are 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
investment 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.
52 ANNUAL REPORT AUGUST 31, 2009
Notes to Financial Statements (continued)
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of business on the New York Stock
Exchange (“NYSE”). The values of such securities used in computing the
net assets of each Fund are determined as of such times. Foreign currency
exchange rates will be determined as of the close of business on the
NYSE. Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined
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 company
announcement, market volatility or a natural disaster) occur during such
periods that are expected to materially affect the value of such securities,
those securities will 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 exchange
contracts are valued at the mean between the bid and ask prices. Inter-
polated values are derived when the settlement date of the contract is
an interim date for which quotations are not available.
Senior Floating Rate and Senior Floating Rate II record their investments in
the Master LLC at fair value. Valuation of securities held by the Master LLC
is discussed in Note 1 of the Master LLC’s Notes to Financial Statements,
which are included elsewhere in this report.
Effective September 1, 2008, the Senior Floating Rate and Senior Floating
Rate II implemented Financial Accounting Standards Board Statement
of Financial Accounting Standards No. 157, “Fair Value Measurements”
(“FAS 157”). FAS 157 clarifies the definition of fair value, establishes a
framework for measuring fair values and requires additional disclosures
about the use of fair value measurements. Various inputs are used in
determining the fair value of investments, which are as follows:
• Level 1 — price quotations in active markets/exchanges for identical
securities
• Level 2 — other observable inputs (including, but not limited to: quoted
prices for similar assets or liabilities in markets that are active, quoted
prices for identical or similar assets or liabilities in markets that are
not active, inputs other than quoted prices that are observable for the
assets or liabilities (such as interest rates, yield curves, volatilities, pre-
payment speeds, loss severities, credit risks and default rates) or other
market-corroborated inputs
• Level 3 — unobservable inputs based on the best information available
in the circumstances, to the extent observable inputs are not available
(including the Funds’ own assumptions used in determining the fair
value of investments)
The inputs or methodology used for valuing securities are not neces-
sarily an indication of the risk associated with investing in those
securities.
The following table summarizes the inputs used as of August 31, 2009
in determining the fair valuation of the Funds’ investments:
Senior Floating | Senior Floating | |
Rate | Rate II | |
Investment in | Investment in | |
Valuation Inputs | the Master LLC | the Master LLC |
Level 1 | — | — |
Level 2 | $312,548,298 | $ 150,735,659 |
Level 3 | — | — |
Total | $312,548,298 | $ 150,735,659 |
Foreign Currency Transactions: Foreign currency amounts are translated
into United States dollars on the following basis: (i) market value of
investment 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 gains for financial reporting purposes, whereas such components
are treated as ordinary income for federal income tax purposes.
Asset-Backed and Mortgage-Backed Securities: Certain Funds may invest
in asset-backed securities. Asset-backed securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in an underlying pool of assets, or as debt instruments, which
are also known as collateralized obligations, and are generally issued as
the debt of a special purpose entity organized solely for the purpose of
owning such assets and issuing such debt. Asset-backed securities are
often backed by a pool of assets representing the obligations of a number
of different parties. The yield characteristics of certain asset-backed securi-
ties may differ from traditional debt securities. One such major difference
is that all or a principal part of the obligations may be prepaid at any time
because the underlying assets (i.e., loans) may be prepaid at any time. As
a result, a decrease in interest rates in the market may result in increases
in the level of prepayments as borrowers, particularly mortgagors, refinance
and repay their loans. An increased prepayment rate with respect to an
asset-backed security subject to such a prepayment feature will have the
effect of shortening the maturity of the security. If a Fund has purchased
such an asset-backed security at a premium, a faster than anticipated
prepayment rate could result in a loss of principal to the extent of the
premium paid.
The Funds may purchase certain mortgage pass-through securities. There
are a number of important differences among the agencies and instrumen-
talities of the US Government that issue mortgage related securities and
among the securities that they issue. For example, mortgage-related securi-
ties guaranteed by the Government National Mortgage Association
(“GNMA”) are guaranteed as to the timely payment of principal and interest
by GNMA and such guarantee is backed by the full faith and credit of the
United States. However, mortgage-related securities issued by the Federal
Home Loan Mortgage Corporation (“FHLMC”) and Federal National
Mortgage Association (“FNMA”) include FNMA guaranteed Mortgage
Pass-Through Certificates, which are solely the obligations of the FNMA,
ANNUAL REPORT AUGUST 31, 2009 53
Notes to Financial Statements (continued)
are not backed by or entitled to the full faith and credit of the United
States and are supported by the right of the issuer to borrow from
the Treasury.
Certain Funds invest a significant portion of their assets in securities
backed by commercial or residential mortgage loans or in issuers that hold
mortgage and other asset-backed securities. Please see the Schedules of
Investments for these securities. Changes in economic conditions, including
delinquencies and/or defaults on assets underlying these securities, can
affect the value, income and/or liquidity of such positions.
Forward Commitments, When-Issued and Delayed Delivery Securities:
Certain Funds may purchase securities on a when-issued basis and may
purchase or sell securities on a forward commitment basis. Settlement of
such transactions normally occurs within a month or more after the pur-
chase or sale commitment is made. The Funds may purchase securities
under such conditions only with the intention of actually acquiring them,
but may enter into a separate agreement to sell the securities before the
settlement date. Since the value of securities purchased may fluctuate prior
to settlement, the Funds may be required to pay more at settlement than
the security is worth. In addition, the purchaser is not entitled to any of the
interest earned prior to the settlement. When purchasing a security on a
delayed delivery basis, the Funds assume the rights and risks of ownership
of the security, including the risk of price and yield fluctuations. In the event
of default by the counterparty, the Funds’ maximum amount of loss is the
unrealized gain of the commitment, which is shown on the Schedule of
Investments, if any.
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 obliga-
tions 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 Loans: 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 gener-
ally (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, com-
missions and prepayment penalty fees. Facility, amendment and consent
fees are typically amortized as premium and/or accreted as discount
over the term of the loan. Commitment, commission and various other fees
are recorded as income. Prepayment penalty fees are recognized on the
accrual basis. 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
agreement relating to the loans, nor any rights of offset against the bor-
rower, 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 general
creditor of the lender and may not benefit from any offset between the
lender and the borrower.
Mortgage Dollar Roll Transactions: Certain Funds may sell mortgage-
backed securities and simultaneously contract to repurchase substantially
similar (same type, coupon and maturity) securities on a specific future
date at an agreed upon price. During the period between the sale
and the repurchase, the Funds will not be entitled to receive interest and
principal payments on the securities sold. The Funds account for dollar roll
transactions as purchases and sales and realize gains and losses on these
transactions.
54 ANNUAL REPORT AUGUST 31, 2009
Notes to Financial Statements (continued)
Mortgage dollar rolls involve the risk that the market value of the securities
that each Fund is required to purchase may decline below the agreed
upon repurchase price of those securities. If investment performance of
securities purchased does not exceed that of the securities sold as part
of the dollar roll, the use of this technique will adversely impact the
investment performance of each Fund.
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
broker-dealer and agree to repurchase the securities at a mutually agreed
upon date and price. Interest on the value of the reverse repurchase
agreements issued and outstanding is based upon competitive market
rates determined at the time of issuance. The Funds may utilize reverse
repurchase agreements when it is anticipated that the interest income
to be earned from the investment of the proceeds of the transaction is
greater than the interest expense of the transaction. Reverse repurchase
agreements involve leverage risk and also the risk that the market value
of the securities that the Funds are obligated to repurchase under the
agreement 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, determine
whether or not to enforce the Funds’ obligation to repurchase the securities.
TBA Commitments: Certain Funds may enter into TBA commitments to pur-
chase or sell securities for a fixed price at a future date. TBA commitments
are considered securities in themselves, and involve a risk of loss if the
value of the security to be purchased or sold declines or increases prior
to settlement date, which is in addition to the risk of decline in the value
of the Funds’ other assets.
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 delivers collateral or segregates assets in con-
nection with certain investments (e.g., dollar rolls, TBA’s beyond normal
settlement, foreign currency exchange contracts, financial futures contracts
and swaps), or certain borrowings (e.g., reverse repurchase agreements)
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 seg-
regated. Furthermore, based on requirements and agreements with certain
exchanges and third party broker-dealers, each party has requirements to
deliver/deposit securities as collateral for certain investments (e.g., finan-
cial futures contracts, reverse repurchase agreements and swaps). As part
of these agreements, when the value of these investments achieves a previ-
ously agreed upon value (minimum transfer amount), each party may be
required to deliver additional collateral.
Investment Transactions and Investment Income: For financial reporting
purposes, certain Funds’ investment transactions are recorded on the
dates the transactions are entered into (the trade dates). Realized gains
and losses on security transactions are determined on the identified cost
basis. Dividend 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.
Senior Floating Rate and Senior Floating Rate II record daily their propor-
tionate share of the Master LLC’s income, expenses and realized and unre-
alized gains and losses. In addition, both Funds accrue their own expenses.
Dividends and Distributions: Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on
the ex-dividend dates. If the total dividends and distributions made in any
tax year exceeds net investment income and accumulated 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 limita-
tions on the Funds’ US federal tax returns remains open for the two periods
ended August 31, 2009 for BHL, the four years ended August 31, 2009
for DVF, FRA, Senior Floating Rate and Senior Floating Rate II, and the two
years ended October 31, 2007 and the two periods ended August 31,
2009 for BLW. 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 Pronouncement: In June 2009, Statement of Financial
Accounting Standards No. 166, “Accounting for Transfers of Financial Assets
— an amendment of FASB Statement No. 140” (“FAS 166”), was issued.
FAS 166 is intended to improve the relevance, representational faithfulness
and comparability of the information that a reporting entity provides in its
financial statements about a transfer of financial assets; the effects of a
transfer on its financial position, financial performance, and cash flows;
and a transferor’s continuing involvement, if any, in transferred financial
assets. FAS 166 is effective for financial statements issued for fiscal years
and interim periods beginning after November 15, 2009. Earlier application
is prohibited. The recognition and measurement provisions of FAS 166
must be applied to transfers occurring on or after the effective date.
Additionally, the disclosure provisions of FAS 166 should be applied to
transfers that occurred both before and after the effective date of FAS 166.
The impact of FAS 166 on the Funds’ statement disclosures, if any, is cur-
rently being assessed.
ANNUAL REPORT AUGUST 31, 2009 55
Notes to Financial Statements (continued)
Deferred Compensation and BlackRock Closed-End Share Equivalent
Investment Plan: Under the deferred compensation plan approved by each
Fund’s Board, non-interested Directors (“Independent Directors”) may defer
a portion of their annual complex-wide compensation. Deferred amounts
earn an approximate return as though equivalent dollar amounts have
been invested in common shares of other certain BlackRock Closed-End
Funds selected by the Independent Directors. This has approximately the
same economic effect for the Independent Directors as if the Independent
Directors had invested the deferred amounts directly in other certain
BlackRock Closed-End Funds.
The deferred compensation plan is not funded and obligations thereunder
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
in order to match its deferred compensation obligations. 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 on 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 value of
the underlying security or if the counterparty does not perform under the
contract. The Funds may mitigate counterparty risk through master netting
agreements included within an International Swap 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’ payables
and/or receivables with collateral held with each counterparty. The amount
of collateral moved to/from applicable counterparties is based upon mini-
mum transfer amounts of up to $500,000. To the extent amounts due to
the Funds from their counterparties are not fully collateralized contractually
or otherwise, the Funds bear the risk of loss from counterparty non-perform-
ance. See Note 1 “Segregation and Collateralization” for 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
obligate the Funds to perform and not the counterparty. Certain ISDA Master
Agreements allow counterparties to over-the-counter derivatives to terminate
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 payment 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 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 transactions 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 foreign 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
contract is closed, a Fund records a realized gain or loss equal to the dif-
ference 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.
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 underlying
56 ANNUAL REPORT AUGUST 31, 2009
Notes to Financial Statements (continued)
instrument at the exercise price at any time or at a specified time during
the option period. A put option gives the holder the right to sell and obli-
gates 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 pur-
chases (writes) an option, an amount equal to the premium paid (received)
by a Fund is reflected as an asset (liability) and an equivalent liability
(asset). The amount of the asset (liability) is subsequently marked-to-mar-
ket to reflect the current market value of the option purchased
(written). When an instrument is purchased or sold through an exercise of
an option, the related premium paid (or received) is added to (or deducted
from) the basis of the instrument acquired or deducted from (or added to)
the proceeds of the instrument sold. When an option expires (or 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 “cov-
ered,” meaning that a Fund holds the underlying instrument subject to
being called by the option counterparty, or cash in an amount sufficient to
cover the obligation. When a Fund writes a put option, such option is cov-
ered 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 the Fund
may not be able to enter into a closing transaction due to an illiquid mar-
ket. Exercise of a written put option could result in a Fund purchasing a
security at a price different from the current market value. The Funds may
execute transactions in both listed and over-the-counter 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 on 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 obliga-
tion 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 their exposure to the market or certain sectors of
the market, to reduce their risk exposure to defaults of corporate
and/or sovereign issuers or to create exposure to corporate and/or sov-
ereign 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 they are not other-
wise exposed (as seller of protection). The Fund 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 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 negative credit event take place (e.g., bank-
ruptcy, failure to pay, obligation accelerators, repudiation, moratorium or
restructuring). Credit default swaps on traded indexes are agreements
in which the buyer pays fixed periodic payments to the seller in consid-
eration 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,
a Fund 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 securities comprising of an index. As
a seller (writer), a Fund 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. Interest rate floors,
which are a type of interest rate swap, are agreements in which one
party agrees to make payments to the other party to the extent that
interest rates fall below a specified rate or floor in return for a premium.
In more complex swaps, the notional principal amount may decline
(or amortize) over time.
• Swaptions — Swap options (swaptions) are similar to options on securi-
ties except that instead of selling or purchasing the right to buy or sell a
security, the writer or purchaser of the swap option is granting or buying
the right to enter into a previously agreed upon interest rate swap
agreement at any time before the expiration of the option (interest rate
risk). In purchasing and writing swaptions, the Funds bear the market
risk of an unfavorable change in the price of the underlying interest rate
swap or the risk that the Funds may not be able to enter into a closing
transaction due to an illiquid market. Exercise of a written swaption
could result in the Funds entering into an interest rate swap at a price
different from the current market value. The Funds execute transactions
in over-the-counter swaptions.
![](https://capedge.com/proxy/N-CSR/0000900092-09-001095/brtax6ar0809x57x1.jpg)
Notes to Financial Statements (continued) | ||||||||
Derivatives Not Accounted for as Hedging Instruments under Financial Accounting Standards Board Statement of Financial Accounting Standards No. 133, Accounting for | ||||||||
Derivative Instruments and Hedging Activities: | ||||||||
Values of Derivative Instruments as of August 31, 2009* | ||||||||
Asset Derivatives | ||||||||
Statements of Assets | ||||||||
and Liabilities Location | BHL | DVF | FRA | BLW | ||||
Interest rate contracts | Net unrealized appreciation/depreciation | — | — | — | $ 22,078** | |||
Foreign currency exchange contracts | Unrealized appreciation on foreign | |||||||
currency exchange contracts | $ 10,965 | $ 2,622 | $ 27,341 | 36,788 | ||||
Credit contracts | Unrealized appreciation on swaps | — | 11,300 | — | — | |||
Equity contracts | Investments at value — unaffiliated | — | 13,000 | 20,000 | 46,000 | |||
Total | $ 10,965 | $ 26,922 | $ 47,341 | $ 104,866 | ||||
Liability Derivatives | ||||||||
Statements of Assets | ||||||||
and Liabilities Location | BHL | DVF | FRA | BLW | ||||
Interest rate contracts | Unrealized depreciation on swaps | — | $1,751,189 | — | — | |||
Foreign exchange contracts | Unrealized depreciation on foreign | |||||||
currency exchange contracts | $ 231,252 | 95,339 | $ 406,733 | $ 541,854 | ||||
Credit contracts | Unrealized depreciation on swaps | — | 2,403,117 | 1,108,878 | 83,859 | |||
Total | $ 231,252 | $4,249,645 | $1,515,611 | $ 625,713 | ||||
* | For open derivative instruments as of August 31, 2009, see the Schedules of Investments, which is also indicative of activity for the year ended August 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 & Liabilities. | ||||||||
The Effect of Derivative Instruments on the Statements of Operations | ||||||||
Year Ended August 31, 2009 | ||||||||
Net Realized Gain (Loss) From Derivatives Recognized in Income | ||||||||
BHL | DVF | FRA | BLW | |||||
Credit contracts: | ||||||||
Swaps | $ (875,528) | $(1,879,082) | $ 933,553 | $ (570,536) | ||||
Foreign currency exchange contracts: | ||||||||
Foreign currency exchange contracts | 1,692,962 | 697,705 | 2,255,357 | 6,193,595 | ||||
Interest contracts: | ||||||||
Financial futures contracts | — | — | — | 667,902 | ||||
Swaps | — | (1,852,965) | — | — | ||||
Total | $ 817,434 | $(3,034,342) | $3,188,910 | $ 6,290,961 | ||||
Net Change in Unrealized Appreciation/Depreciation on Derivatives Recognized in Income | ||||||||
BHL | DVF | FRA | BLW | |||||
Credit contracts: | ||||||||
Swaps | $ (190,796) | $ (991,052) | $ 795,049 | $ (21,853) | ||||
Equity contracts: | ||||||||
Options | — | (8,970) | (13,800) | (31,740) | ||||
Foreign currency exchange contracts: | ||||||||
Foreign currency exchange contracts | (1,105,948) | (340,969) | (1,660,349) | (3,837,217) | ||||
Interest contracts: | ||||||||
Financial futures contracts | — | — | — | (110,204) | ||||
Swaps | — | 92,815 | — | — | ||||
Total | $ (1,296,744) | $(1,248,176) | $ (879,100) | $(4,001,014) | ||||
58 | ANNUAL REPORT | AUGUST 31, 2009 |
Notes to Financial Statements (continued)
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. 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.
BHL, DVF, FRA and BLW has entered into an Investment Advisory Agreement
or an Administration Agreement with the Manager to provide investment
advisory and/or 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 each Fund. For such services,
BHL pays a monthly fee at an annual rate of 1.00%, BLW pays a monthly
fee at an annual rate of 0.55% and DVF and FRA each pay a monthly fee
at an annual rate of 0.75% of the average daily value of each Fund’s net
assets plus the proceeds of any outstanding borrowings.
The Manager, on behalf of BHL, DVF, FRA and BLW, has entered into a
separate sub-advisory agreement with BlackRock Financial Management,
Inc. (“BFM”), an affiliate of the Manager, under which the Manager pays
BFM, for services it provides, a monthly fee that is an annual percentage
of the investment advisory fee paid by the Funds to the Manager.
The Manager has 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 shown
as fees waived by advisor in the Statements of Operations.
For the year ended August 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 | |
BHL | $ 2,463 |
DVF | $ 2,278 |
FRA | $ 4,935 |
BLW | $10,348 |
Merrill Lynch, Pierce, Fenner & Smith, Incorporated (“MLPF&S”), a
wholly owned subsidiary of Merrill Lynch, received underwriting fees of
$3,462,804 from January 31, 2008 to August 31, 2008 in connection with
the issuance of the BHL’s Shares. In addition, BHL reimbursed MLPF&S
$46,000 as a partial reimbursement of expenses incurred in connection
with the issuance of the Fund’s Shares.
Senior Floating Rate and Senior Floating Rate II have entered into an
Administration Agreement with the Manager. The administration fee paid
to the Manager is calculated daily and paid monthly based on an annual
rate of 0.25% and 0.40%, respectively, of the average daily value of these
Fund’s net assets for the performance of administrative services (other
than investment advice and related portfolio activities) necessary for the
operation of these Funds.
Senior Floating Rate and Senior Floating Rate II entered into a separate
Distribution Agreement and Distribution Plan with BlackRock Investments,
LLC (“BRIL”), which replaced FAM Distributors, Inc. (“FAMD”) and BlackRock
Distributors, Inc. and its affiliates (“BDI”) (collectively, the “Distributor”)
as the sole distributor of the Funds. FAMD is a wholly owned subsidiary of
Merrill Lynch Group, Inc. BIL and BDI are affiliates of BlackRock.
For the year ended August 31, 2009, the Distributor received early with-
drawal charges for Senior Floating Rate and Senior Floating Rate II in the
amount of $181,726 and $31,438, respectively, relating to the tender of
each Fund’s shares.
PNC Global Investment Servicing (U.S.) Inc., an indirect, wholly owned
subsidiary of PNC and an affiliate of the Manager, is the transfer agent
and dividend disbursing agent for Senior Floating Rate and Senior Floating
Rate II. Transfer agency fees borne by the Funds are comprised of those
fees charged for all shareholder communications including mailing of
shareholder reports, dividend and distribution notices, and proxy materials
for shareholder meetings, as well as per account and per transaction fees
related to servicing and maintenance of shareholder accounts, including
the issuing, redeeming and transferring of shares, check writing, anti-money
laundering services, and customer identification services.
Senior Floating Rate and Senior Floating Rate II may earn income on posi-
tive cash balances in demand deposit accounts that are maintained by the
transfer agent on behalf of the Funds. These amounts are included in
income — affiliated in the Statements of Operations.
Certain officers and/or directors of the Funds are officers and/or
directors of BlackRock or its affiliates. The Funds reimburse the Manager
for compensation to the Funds’ Chief Compliance Officer.
4. Investments:
Purchases and sales (including paydowns and TBA and mortgage dollar
roll transactions and excluding short-term securities and US Government
securities) for the year ended August 31, 2009 were as follows:
Purchases | Sales | |
BHL | $ 53,338,515 | $ 79,414,735 |
DVF | $ 57,843,776 | $ 108,701,709 |
FRA | $ 150,946,266 | $ 212,820,811 |
BLW | $1,712,915,647 | $1,835,126,323 |
For the year ended August 31, 2009, purchases and sales of US govern-
ment securities for BLW were $0 and $23,000,000, respectively.
For the year ended August 31, 2009, purchases and sales for BLW
attributable to mortgage dollar rolls were $1,240,666,602 and
$1,368,558,242, respectively.
ANNUAL REPORT AUGUST 31, 2009 59
Notes to Financial Statements (continued) | |||||||
5. 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 August 31, 2009 attributable to amortization methods on fixed income securities, accounting for swap agreements, | |||||||
foreign currency transactions, the reclassification of distributions, the expiration of capital loss carryforwards and the classification of investments were | |||||||
reclassified to the following accounts: | |||||||
Senior | Senior | ||||||
Floating Rate | Floating Rate | ||||||
BHL | DVF | FRA | BLW | Fund | Fund II | ||
Paid-in capital | — | — | — | — | $(64,746,799) | $(1,546,632) | |
Undistributed (distributions in excess of) net investment income | $ 2,498,907 | $ 452,375 | $ 1,290,731 | $ 6,012,461 | $ 1,065,904 | $ 480,545 | |
Accumulated net realized loss | $(2,498,907) | $(452,375) | $(1,290,731) | $(6,012,461) | $ 63,680,895 | $ 1,066,087 | |
The tax character of distributions paid during the fiscal years ended October 31, 2007, the fiscal period ended August 31, 2008 and the fiscal years ended | |||||||
August 31, 2008 and August 31, 2009 were as follows: | |||||||
Senior | Senior | ||||||
Floating Rate | Floating Rate | ||||||
BHL | DVF | FRA | BLW | Fund | Fund II | ||
Ordinary income | |||||||
8/31/2009 | $ 9,810,137 | $13,947,075 | $23,842,077 | $42,793,064 | $17,470,993 | $ 8,332,675 | |
8/31/2008 | 5,435,571 | 20,910,360 | 28,321,303 | — | 26,664,539 | 12,294,014 | |
11/01/2007 – 8/31/2008 | — | — | — | 43,898,690 | — | ||
10/31/2007 | — | — | — | 51,967,739 | — | ||
Long-term capital gains | |||||||
10/31/2007 | — | — | — | $ 2,229,742 | — | — | |
Tax return of capital | |||||||
8/31/2009 | $ 88,324 | $ 2,882,990 | — | — | — | — | |
8/31/2008 | 481,911 | 443,389 | — | — | — | — | |
10/31/2007 | — | — | — | $ 1,074,826 | — | — | |
Total distributions | |||||||
8/31/2009 | $ 9,898,461 | $16,830,065 | $23,842,077 | $42,793,064 | $17,470,993 | $ 8,332,675 | |
8/31/2008 | $ 5,917,482 | $21,353,749 | $28,321,303 | — | $26,664,539 | $12,294,014 | |
11/01/2007 – 8/31/2008 | — | — | — | $43,898,690 | — | — | |
10/31/2007 | — | — | — | $55,272,307 | — | — | |
As of August 31, 2009, the tax components of accumulated net losses were as follows: | |||||||
Senior | Senior | ||||||
Floating Rate | Floating Rate | ||||||
BHL | DVF | FRA | BLW | Fund | Fund II | ||
Undistributed ordinary income | — | — | $ 619,326 | $ 786,625 | $ 1,277,797 | $ 106,666 | |
Capital loss carryforward | $ (1,063,204) | $ (25,687,627) | (22,121,314) | (31,930,795) | (282,849,718) | (37,618,235) | |
Net unrealized losses* | (13,885,511) | (96,331,698) | (90,836,739) | (118,693,400) | (84,591,948) | (39,273,673) | |
Total accumulated net losses | $(14,948,715) | $(122,019,325) | $(112,338,727) | $(149,837,570) | $(366,163,869) | $(76,785,242) | |
* The differences between book-basis and tax-basis net unrealized losses is attributable primarily to the tax deferral of losses on wash sales, the difference between book and tax | |||||||
for premiums and discounts on fixed income securities, book/tax differences in 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 classification of investments, | |||||||
the deferral of post-October currency and capital losses for tax purposes and the deferral of compensation to Trustees. | |||||||
As of August 31, 2009, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates: | |||||||
Senior | Senior | ||||||
Floating Rate | Floating Rate | ||||||
Expires | BHL | DVF | FRA | BLW | Fund | Fund II | |
2010 | — | — | — | — | $ 87,904,309 | $ 864,375 | |
2011 | — | — | — | — | 53,409,203 | 17,719,049 | |
2012 | — | — | — | — | 34,221,818 | 6,383,383 | |
2013 | — | — | $ 691,829 | — | 56,166,095 | — | |
2014 | — | $ 1,755,694 | — | — | 945,546 | — | |
2015 | — | 2,237,399 | — | — | 2,561,691 | — | |
2016 | — | 1,444,704 | 475,453 | $21,933,927 | 31,419,599 | 4,923,144 | |
2017 | $1,063,204 | 20,249,830 | 20,954,032 | 9,996,868 | 16,221,457 | 7,728,284 | |
Total | $1,063,204 | $25,687,627 | $22,121,314 | $31,930,795 | $282,849,718 | $37,618,235 | |
60 | ANNUAL REPORT | AUGUST 31, 2009 |
Notes to Financial Statements (continued)
6. Market and Credit Risk:
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 certain events, including those directly involving the issuers whose secu-
rities 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
transactions 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 these financial assets is
approximated by their value recorded in the Funds’ Statements of Assets
and Liabilities.
7. Capital Share Transactions:
BHL and BLW are authorized to issue an unlimited number of shares, par
value $0.001, all of which were initially classified as Common Shares. DVF
and FRA are authorized to issue 200 million shares, par value $0.10, all of
which were initially classified as Common Shares. The Board is authorized,
however, to classify and reclassify any unissued shares without approval of
Common Shareholders.
Shares issued and outstanding for the year ended August 31, 2009 | |||
and the period ended August 31, 2008 (and the year ended October 31, | |||
2007 for BLW) increased by the following amounts as a result of dividend | |||
reinvestments: | |||
Year Ended | Period Ended | Year Ended | |
August 31, | August 31, | October 31, | |
2009 | 2008 | 2007 | |
BHL | 84,923 | 15,264 | — |
DVF | 129,277 | 13,892 | — |
FRA | 31,791 | — | — |
BLW | — | — | 107,367 |
At August 31, 2009, the shares owned by an affiliate of the Manager of the | |||
Funds were as follows: | |||
Shares | |||
BHL | 8,517 | ||
FRA | 7,877 | ||
BLW | 6,021 | ||
BHL’s shares issued and outstanding during the period January 31, | |||
2008 (commencement of operations) to August 31, 2008 increased | |||
by 8,900,000 from shares sold. Organization costs of $22,000 were | |||
expensed upon the commencement of operations. Offering costs incurred | |||
in connection with BHL’s offering of Common Shares have been charged | |||
against the proceeds from the initial Common Share offering in the amount | |||
of $200,500. |
Transactions in capital shares, with respect to Senior Floating Rate and Senior Floating Rate II, were as follows: | ||||
Year Ended | Year Ended | |||
August 31, 2009 | August 31, 2008 | |||
Senior Floating Rate | Shares | Amount | Shares | Amount |
Shares sold | 3,495,709 | $22,066,554 | 4,490,899 | $ 36,601,922 |
Shares issued to shareholders in reinvestment of dividends | 189,466 | 1,198,984 | 182,375 | 1,499,356 |
Total issued | 3,685,175 | 23,265,538 | 4,673,274 | 38,101,278 |
Shares tendered | (10,231,989) | (65,061,276) | (13,412,544) | (111,603,956) |
Net decrease | (6,546,814) | $(41,795,738) | (8,739,270) | $ (73,502,678) |
Year Ended | Year Ended | |||
August 31, 2009 | August 31, 2008 | |||
Senior Floating Rate II | Shares | Amount | Shares | Amount |
Shares sold | 3,475,221 | $23,697,009 | 2,834,064 | $ 25,451,600 |
Shares issued to shareholders in reinvestment of dividends | ||||
and distributions | 83,856 | 580,777 | 41,005 | 365,615 |
Total issued | 3,559,077 | 24,277,786 | 2,875,069 | 25,817,215 |
Shares tendered | (5,697,156) | (39,247,148) | (7,873,162) | (71,267,903) |
Net decrease | (2,138,079) | $(14,969,362) | (4,998,093) | $ (45,450,688) |
8. Commitments:
The Funds may invest in floating rate loans. In connection with these
investments, the Funds may also enter into unfunded corporate loans
(“commitments”). Commitments may obligate the Funds to furnish tem-
porary financing to a borrower until permanent financing can be arranged.
In connection with these commitments, the Funds earn a commitment
fee, typically 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 August
31, 2009, the Funds had the following unfunded loan commitments:
ANNUAL REPORT AUGUST 31, 2009 61
Notes to Financial Statements (concluded) | |||
Borrower | |||
Value of | |||
Unfunded | Underlying | ||
Commitment | Loans | ||
BHL | (000) | (000) | |
Big West Oil, LLC | $ 442 | $ 407 | |
NV Broadcasting, LLC | $ 179 | $ 177 | |
Smurfit-Stone Container Enterprises, Inc. | $ 506 | $ 483 | |
DVF | |||
Big West Oil, LLC | $ 363 | $ 333 | |
Smurfit-Stone Container Enterprises, Inc. | $ 298 | $ 286 | |
FRA | |||
Big West Oil, LLC | $ 233 | $ 214 | |
Smurfit-Stone Container Enterprises, Inc. | $ 805 | $ 769 | |
Vought Aircraft Industries, Inc. | $ 1,148 | $ 1,074 | |
BLW | |||
Big West Oil, LLC | $ 724 | $ 666 | |
NV Broadcasting, LLC | $ 90 | $ 89 | |
Smurfit-Stone Container Enterprises, Inc. | $ 904 | $ 864 | |
ProtoStar Ltd. | $ 529 | $ 529 | |
9. Borrowings: | |||
On May 16, 2008, DVF and FRA renewed their revolving credit and security | |||
Agreements (“Citicorp Agreement”) pursuant to a commercial paper asset | |||
securitization program with Citicorp North America, Inc. (“Citicorp”), as | |||
Agent, certain secondary 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 maximum limits as follows: | |||
Maximum Limit | |||
DVF | $ 91,000,000 | ||
FRA | $155,000,000 | ||
Under the Citicorp Agreement, the conduits funded advances to each Fund | |||
through the issuance of highly rated commercial paper. Each 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 each Fund’s borrowings was based on the interest rate carried by | |||
the commercial paper plus a program fee. In addition, each Fund paid a | |||
liquidity fee to the secondary backstop lenders and the agent. Under the | |||
Citicorp Agreement, the Funds were subject to certain conditions and | |||
covenants, which included among other things limitations on asset declines | |||
over prescribed time periods. As a result of the decline in net assets attrib- | |||
utable to market conditions, certain terms of the facility were renegotiated | |||
effective December 5, 2008, which included waivers of certain financial | |||
covenants by the Lenders, an increase in program and liquidity fees under | |||
the facility and a reduction of the maximum limits. | |||
On March 5, 2009, DVF and FRA terminated their revolving credit agree- | |||
ment with Citicorp and entered into a senior committed secured, 364-day | |||
revolving line of credit and a separate security agreement (the “SSB | |||
Agreement”) with State Street Bank and Trust Company (“SSB”). The SSB | |||
Agreement has the same maximum limits as the renegotiated limits under | |||
the Citigroup Agreement and are as follows: | |||
Maximum Limit | |||
DVF | $ 50,000,000 | ||
FRA | $103,000,000 |
The Funds have granted a security interest in substantially all of its assets | |
to SSB. | |
Advances are made by SSB to the Funds, at the Funds’ option (a) the higher | |
of 1.0% above the Fed Effective Rate or 1.0% above the Overnight LIBOR | |
Rate and (b) 1.0% above 7-day, 30-day, or 60-day LIBOR Rate. In addition, | |
the Funds pay a facility fee and a commitment fee based upon SSBs total | |
commitment to the Funds. The fees associated with each of the agreements | |
are included in the Statements of Operations as borrowing costs. Advances | |
to the Funds as of August 31, 2009 are shown in the Statements of Assets | |
and Liabilities as loan payable. | |
BHL is a party to a senior committed secured, 364-day revolving line of | |
credit and a separate security agreement (the “BHL Agreement”) with SSB | |
dated April 9, 2008. The Agreement has a maximum limit of $67.5 million. | |
BHL has granted a security interest in substantially all of its assets to SSB. | |
BHL renewed its revolving line of credit and security agreement with SSB | |
effective April 8, 2009. The renewed agreement expires March 4, 2010 and | |
the maximum commitment was reduced to $55 million. | |
The Funds may not declare dividends or make other distributions on shares | |
or purchase any such shares if, at the time of the declaration, distribution | |
or purchase, asset coverage with respect to the outstanding short term bor- | |
rowings is less than 300%. | |
For the year ended August 31, 2009, the daily weighted average interest | |
rates for funds with loans under the revolving credit agreement were | |
as follows: | |
Daily Weighted | |
Average | |
Interest Rate | |
BHL | 1.40% |
DVF | 3.02% |
FRA | 2.63% |
For the year ended August 31, 2009, the daily weighted average interest | |
rates for funds with reverse repurchase agreements were as follows: | |
Daily Weighted | |
Average | |
Interest Rate | |
BLW | 0.87% |
10. Subsequent Events: | |
The Funds paid a net investment income dividend on September 30, 2009 | |
to shareholders of record on September 15, 2009 as follows: | |
Common | |
Dividend | |
Per Share | |
BHL | $0.0600 |
DVF | $0.0785 |
FRA | $0.0815 |
BLW | $0.0700 |
Management’s evaluation of the impact of all subsequent events on the | |
Funds’ financial statements was completed through October 30, 2009, the | |
date the financial statements were issued. |
62 ANNUAL REPORT AUGUST 31, 2009
Report of Independent Registered Public Accounting Firm
To the Shareholders and Boards of Directors/Trustees of:
BlackRock Defined Opportunity Credit Trust
BlackRock Diversified Income Strategies Fund, Inc.
BlackRock Floating Rate Income Strategies Fund, Inc.
BlackRock Limited Duration Income Trust
BlackRock Senior Floating Rate Fund, Inc.
BlackRock Senior Floating Rate Fund II, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of BlackRock Defined Opportunity
Credit Trust as of August 31, 2009, and the related statements of opera-
tions and cash flows for the year then ended, the statements of changes in
net assets for the year then ended and the period January 31, 2008 (com-
mencement of operations) to August 31, 2008, and the financial highlights
for the year then ended and the period January 31, 2008 to August 31,
2008. We have also audited the accompanying statement of assets and
liabilities, including the schedule of investments, of BlackRock Diversified
Income Strategies Fund, Inc. as of August 31, 2009, and the related state-
ments of operations and cash flows for the year then ended, the state-
ments 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 and the period January 31, 2005 (commencement of opera-
tions) to August 31, 2005. We have also audited the accompanying state-
ment of assets and liabilities, including the schedule of investments, of
BlackRock Floating Rate Income Strategies Fund, Inc. as of August 31,
2009, and the related statements of operations and cash flows for the year
then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. We have also audited the accompany-
ing statement of assets and liabilities, including the schedule of invest-
ments, of BlackRock Limited Duration Income Trust as of August 31, 2009,
and the related statements of operations and cash flows for the year then
ended, the statements of changes in net assets for the year then ended,
the period November 1, 2007 to August 31, 2008, and the year ended
October 31, 2007, and the financial highlights for the year then ended, the
period November 1, 2007 to August 31, 2008, and four years in the period
ended October 31, 2007. We have also audited the accompanying state-
ments of assets and liabilities of BlackRock Senior Floating Rate Fund, Inc.
and BlackRock Senior Floating Rate Fund II, Inc. as of August 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 five years in the
period then ended. BlackRock Defined Opportunity Credit Trust, BlackRock
Diversified Income Strategies Fund, Inc., BlackRock Floating Rate Income
Strategies Fund, Inc., BlackRock Limited Duration Income Trust, BlackRock
Senior Floating Rate Fund, Inc., and BlackRock Senior Floating Rate Fund
II, Inc. are collectively referred to as the “Funds.” These financial statements
and financial highlights are the responsibility of the Funds’ management.
Our responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial highlights are free
of material misstatement. The Funds are not required to have, nor were we
engaged to perform, audits of their internal control over financial reporting.
Our audits included consideration of internal control over financial report-
ing 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 Funds' 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 included confirmation
of securities owned as of August 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 Defined Opportunity Credit Trust as of August 31, 2009, the
results of its operations and its cash flows for the year then ended, changes
in its net assets for the year then ended and the period January 31, 2008
to August 31, 2008, and the financial highlights for the year then ended
and the period January 31, 2008 to August 31, 2008, in conformity with
accounting principles generally accepted in the United States of America.
Additionally, in our opinion, the financial statements and financial high-
lights referred to above present fairly, in all material respects, the finan-
cial position of BlackRock Diversified Income Strategies Fund, Inc. as of
August 31, 2009, the results of its operations and its cash flows for the
year then ended, changes in its 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 and the period January 31, 2005 to August 31,
2005, in conformity with accounting principles generally accepted in the
United States of America. Additionally, in our opinion, the financial state-
ments and financial highlights referred to above present fairly, in all mate-
rial respects, the financial position of BlackRock Floating Rate Income
Strategies Fund, Inc. as of August 31, 2009, the results of its operations
and its cash flows for the year then ended, changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with
accounting principles generally accepted in the United States of America
Additionally, in our opinion, the financial statements and financial high-
lights referred to above present fairly, in all material respects, the financial
position of BlackRock Limited Duration Income Trust as of August 31,
2009, and the results of its operations and its cash flows for the year
then ended, changes in its net assets for the year then ended, the period
November 1, 2007 to August 31, 2008, and the year ended October 31,
2007, and the financial highlights for the year then ended, the period
November 1, 2007 to August 31, 2008, and four years in the period
ended October 31, 2007, in conformity with accounting principles gen-
erally 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 Senior
Floating Rate Fund, Inc. and BlackRock Senior Floating Rate Fund II, Inc.
as of August 31, 2009, and the results of their operations for the year then
ended, changes in their net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally
accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
October 30, 2009
ANNUAL REPORT AUGUST 31, 2009 63
Important Tax Information | |||||||
The following table summarizes the taxable per share distributions paid by the Funds during the taxable year ended August 31, 2009: | |||||||
Senior | |||||||
Senior | Floating | ||||||
BHL | DVF | FRA | BLW | Floating Rate | Rate II | ||
Interest-Related Dividends for Non-U.S. Residents*† | |||||||
September 2008 | 57.78% | 53.85% | 75.25% | 70.02% | 77.87% | 78.22% | |
October 2008 – December 2008 | 57.78% | 53.85% | 76.83% | 69.28% | 76.97% | 77.47% | |
January 2009 | 57.78% | 53.85% | 76.83% | 69.28% | 86.42% | 86.22% | |
February 2009 – August 2009 | 73.21% | 100.00% | 79.34% | 73.88% | 86.42% | 86.22% | |
Federal Obligation Interest**† | — | — | — | 1.11% | — | — | |
† | Expressed as a percentage of the ordinary income distributions. | ||||||
* | Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations. | ||||||
** | The law varies in each state as to whether and what percentage of dividend income attributable to Federal Obligations is exempt from state income tax. We recommmend that | ||||||
you consult your tax advisor to determine if any portion of the dividends you received is exempt from state income taxes. |
Master Portfolio Summary as of August 31, 2009 | Master Senior Floating Rate LLC | ||||
Portfolio Composition | |||||
Percent of | |||||
Long-Term Investments | |||||
Asset Mix | 8/31/09 | 8/31/08 | |||
Floating Rate Loan Interests | 91% | 95% | |||
Corporate Bonds | 9 | 5 | |||
64 | ANNUAL REPORT | AUGUST 31, 2009 |
Schedule of Investments August 31, 2009 Master Senior Floating Rate LLC
(Percentages shown are based on Net Assets)
Common Stocks | Shares | Value | |
Chemicals — 0.0% | |||
GEO Specialty Chemicals, Inc. (a)(b) | 39,151 | $ 15,030 | |
Wellman Holdings, Inc. (b) | 5,206 | 1,302 | |
16,332 | |||
Commercial Services & Supplies — 0.0% | |||
Sirva (b) | 1,817 | 9,085 | |
Paper & Forest Products — 0.2% | |||
Ainsworth Lumber Co. Ltd. | 335,138 | 483,689 | |
Ainsworth Lumber Co. Ltd. (a)(b) | 376,109 | 541,090 | |
1,024,779 | |||
Total Common Stocks — 0.2% | 1,050,196 | ||
Par | |||
Corporate Bonds | (000) | ||
Chemicals — 1.6% | |||
GEO Specialty Chemicals Corp.: | |||
7.50%, 3/31/15 (a)(c) | USD | 2,538 | 1,650,024 |
10.00%, 3/31/15 | 2,515 | 1,634,464 | |
Nalco Co., 8.25%, 5/15/17 (a) | 1,015 | 1,060,675 | |
Wellman Holdings, Inc. (c): | |||
Second Lien Subordinate Note, 10.00%, 1/29/19 | 2,000 | 2,000,000 | |
Third Lien Subordinate Note, 5.00%, 1/29/19 | 2,266 | 1,132,873 | |
7,478,036 | |||
Commercial Services & Supplies — 0.3% | |||
Clean Harbors, Inc., 7.63%, 8/15/16 (a) | 1,600 | 1,604,000 | |
Containers & Packaging — 0.5% | |||
Crown Americas LLC, 7.63%, 5/15/17 (a) | 1,190 | 1,181,075 | |
Owens-Brockway Glass Container, Inc., 7.38%, 5/15/16 | 1,210 | 1,203,950 | |
2,385,025 | |||
Diversified Financial Services — 0.1% | |||
FCE Bank Plc: | |||
7.13%, 1/15/13 | EUR | 200 | 250,882 |
7.88%, 2/15/11 | GBP | 100 | 152,213 |
403,095 | |||
Diversified Telecommunication Services — 0.9% | |||
PAETEC Holding Corp., 8.88%, 6/30/17 (a) | USD | 1,300 | 1,238,250 |
Qwest Corp.: | |||
3.88%, 6/15/13 (d) | 2,525 | 2,335,625 | |
8.38%, 5/01/16 (a) | 500 | 505,000 | |
4,078,875 | |||
Food Products — 0.4% | |||
Smithfield Foods, Inc., 10.00%, 7/15/14 (a) | 1,790 | 1,825,800 | |
Hotels, Restaurants & Leisure — 0.2% | |||
MGM Mirage, 11.13%, 11/15/17 (a) | 1,030 | 1,114,975 | |
IT Services — 0.3% | |||
SunGard Data Systems, Inc., 4.88%, 1/15/14 | 1,429 | 1,286,100 | |
Independent Power Producers & Energy Traders — 0.8% | |||
Calpine Construction Finance Co. LP, 8.00%, 6/01/16 (a) | 3,770 | 3,751,150 | |
Machinery — 0.2% | |||
CPM Holdings, Inc., 10.63%, 9/01/14 (a) | 1,000 | 1,010,000 | |
Media — 0.9% | |||
DIRECTV Holdings LLC, 8.38%, 3/15/13 | 2,000 | 2,050,000 | |
EchoStar DBS Corp., 6.38%, 10/01/11 | 2,000 | 2,002,500 | |
4,052,500 |
Par | |||
Corporate Bonds | (000) | Value | |
Paper & Forest Products — 1.0% | |||
Ainsworth Lumber Co. Ltd., 11.00%, 7/29/15 (a)(e) | USD | 2,891 | $ 1,146,234 |
NewPage Corp., 6.73%, 5/01/12 (d) | 650 | 277,875 | |
Verso Paper Holdings LLC Series B, 4.23%, 8/01/14 (d) | 5,400 | 3,024,000 | |
4,448,109 | |||
Textiles, Apparel & Luxury Goods — 0.6% | |||
Levi Strauss & Co., 8.63%, 4/01/13 | EUR | 2,000 | 2,738,194 |
Wireless Telecommunication Services — 0.9% | |||
Cricket Communications, Inc., 7.75%, 5/15/16 (a) | USD | 4,250 | 4,122,500 |
Total Corporate Bonds — 8.7% | 40,298,359 | ||
Floating Rate Loan Interests | |||
Aerospace & Defense — 0.8% | |||
Hawker Beechcraft Acquisition Co. LLC: | |||
Letter of Credit Facility Deposit, 2.28%, 3/26/14 | 280 | 208,445 | |
Term Loan, 2.26%, 3/26/14 | 4,738 | 3,531,762 | |
3,740,207 | |||
Airlines — 0.5% | |||
Delta Air Lines, Inc., Credit – Linked Deposit Loan, | |||
0.11% – 2.28%, 4/30/12 | 1,470 | 1,312,588 | |
US Airways Group, Inc., Loan, 2.76%, 3/21/14 | 1,475 | 794,152 | |
2,106,740 | |||
Auto Components — 2.3% | |||
Allison Transmission, Inc., Term Loan, 3.03%, 8/07/14 | 7,003 | 5,978,398 | |
Dana Holding Corp., Term Advance, 7.25%, 1/31/15 | 3,446 | 2,638,787 | |
The Goodyear Tire & Rubber Co., Loan (Second Lien), 2.02%, | |||
4/30/14 | 2,000 | 1,845,000 | |
10,462,185 | |||
Automobiles — 0.3% | |||
Ford Motor Co., Term Loan, 3.50%, 12/15/13 | 1,814 | 1,571,713 | |
Building Products — 0.8% | |||
Building Materials Corp. of America, Term Loan Advance, | |||
3.06%, 2/22/14 | 2,003 | 1,827,653 | |
Momentive Performance Materials (Blitz 06-103 GmbH): | |||
Tranche B-1 Term Loan, 2.56%, 12/04/13 | 972 | 783,840 | |
Tranche B-2 Term Loan, 2.74%, 12/04/13 | EUR | 969 | 1,046,890 |
3,658,383 | |||
Capital Markets — 0.5% | |||
Marsico Parent Co., LLC, Term Loan, 4.81%, 12/15/14 | USD | 924 | 397,499 |
Nuveen Investments, Inc., First Lien Term Loan, | |||
3.49% – 3.50%, 11/13/14 | 2,343 | 1,901,495 | |
2,298,994 | |||
Chemicals — 5.1% | |||
Ashland, Inc., Term Loan B, 7.65%, 5/13/14 | 2,044 | 2,078,619 | |
Brenntag Holding GmbH & Co. KG: | |||
Acquisition Facility 1, 2.27% – 2.99%, 1/20/14 | 125 | 119,045 | |
Facility B2, 2.27%, 1/20/14 | 1,831 | 1,739,046 | |
Columbian Chemicals Acquisition LLC/Columbian | |||
Chemicals Merger Sub, Inc., Tranche B Term Loan, | |||
6.63%, 3/16/13 | 1,715 | 1,337,388 | |
Edwards (Cayman Islands II) Ltd., Term Loan (First Lien), | |||
2.85%, 5/31/14 | 735 | 455,700 | |
Huish Detergents Inc.: | |||
Loan (Second Lien), 4.53%, 10/26/14 | 750 | 706,875 | |
Tranche B Term Loan, 2.02%, 4/26/14 | 1,975 | 1,882,653 | |
Nalco Co., Term Loan, 6.50%, 5/06/16 | 3,625 | 3,674,844 | |
PQ Corp. (fka Niagara Acquisition, Inc.): | |||
Loan (Second Lien), 6.77%, 7/30/15 | 3,000 | 1,650,000 | |
Original Term Loan (First Lien), 3.52% – 3.75%, | |||
7/31/14 | 4,967 | 4,094,034 |
See Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2009 65
Schedule of Investments (continued) Master Senior Floating Rate LLC
(Percentages shown are based on Net Assets)
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Chemicals (concluded) | |||
Rockwood Specialties Group, Inc., Term Loan H, 6.00%, | |||
5/15/14 | USD | 1,815 | $ 1,826,941 |
Solutia Inc., Loan, 7.25%, 2/28/14 | 4,120 | 4,078,162 | |
23,643,307 | |||
Commercial Services & Supplies — 2.3% | |||
Alliance Laundry Systems LLC, Term Loan, 2.79% – 4.75%, | |||
1/27/12 | 1,251 | 1,199,457 | |
ARAMARK Corp.: | |||
Letter of Credit Facility Letter of Credit, 0.22%, 1/26/14 | 225 | 210,981 | |
US Term Loan, 2.47%, 1/26/14 | 3,549 | 3,320,976 | |
Casella Waste Systems, Term Loan B, 7.00%, 4/09/14 | 1,250 | 1,253,125 | |
John Maneely Co., Term Loan, 3.52% – 3.76%, 12/09/13 | 1,142 | 895,135 | |
Kion Group GmbH (fka Neggio Holdings 3 GmbH): | |||
Facility B, 2.51%, 12/29/14 | 250 | 158,594 | |
Facility C, 2.76%, 12/29/15 | 250 | 158,594 | |
SIRVA Worldwide, Inc., Loan (Second Lien), 12.00%, 5/12/15 | 424 | 31,812 | |
Synagro Technologies, Inc., Term Loan (First Lien), | |||
2.26% – 2.27%, 4/02/14 | 2,716 | 2,138,841 | |
West Corp., Term B-2 Loan, 2.64% – 2.65%, 10/24/13 | 1,389 | 1,317,328 | |
10,684,843 | |||
Computers & Peripherals — 0.2% | |||
Intergraph Corp., Second-Lien Term Loan, 6.26% – 6.37%, | |||
11/28/14 | 1,000 | 932,500 | |
Construction Materials — 0.4% | |||
Headwaters Inc., Term Loan B1 (First Lien), 9.75%, | |||
4/30/11 | 2,083 | 2,015,310 | |
Containers & Packaging — 1.5% | |||
Graham Packaging Co., LP: | |||
B Term Loan, 2.56%, 10/07/11 | 423 | 411,657 | |
C Term Loan, 6.75%, 4/27/14 | 1,242 | 1,238,433 | |
Graphic Packaging International, Inc.: | |||
Incremental Term Loan, 3.08% – 3.35%, 5/16/14 | 2,594 | 2,529,430 | |
Term B Loan, 2.33% – 2.60%, 5/16/14 | 584 | 562,588 | |
Smurfit-Stone Container Enterprises, Inc.: | |||
Canada Tranche C, 2.57%, 11/01/11 | 135 | 128,373 | |
Canada Tranche C-1 Term Loan, 2.57%, 11/01/11 | 41 | 38,813 | |
Deposit Funded LC Facility, 4.50%, 11/01/10 (b)(f) | 63 | 59,874 | |
Revolving Credit Canadian, 2.82% – 5.00%, 11/12/09 | 104 | 99,067 | |
Revolving Credit U.S., 2.82% – 4.50%, 11/01/09 | 314 | 298,691 | |
Tranche B, 2.75%, 11/01/11 (b)(f) | 72 | 68,138 | |
U.S. Term Loan, Debtor in Possession, 10.00%, | |||
7/28/10 | 1,412 | 1,426,599 | |
6,861,663 | |||
Distributors — 0.3% | |||
Keystone Automotive Operations, Inc., Loan, 3.77% – 5.75%, | |||
1/12/12 | 2,602 | 1,417,894 | |
Diversified Consumer Services — 1.0% | |||
Coinmach Service Corp., Term Loan, 3.28% – 3.43%, | |||
11/14/14 | 3,950 | 3,357,393 | |
Education Management LLC, Term Loan C, 2.38%, | |||
6/01/13 | 1,413 | 1,351,023 | |
4,708,416 | |||
Diversified Financial Services — 0.2% | |||
LPL Holdings, Inc., Tranche D Term Loan, 2.01% – 2.35%, | |||
6/28/13 | 928 | 854,291 |
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Diversified Telecommunication Services — 1.9% | |||
BCM Ireland Holdings Ltd. (Eircom): | |||
Facility B, 2.37%, 9/30/15 | EUR | 985 | $ 1,283,732 |
Facility C, 2.62%, 9/30/16 | 985 | 1,283,875 | |
Hawaiian Telcom Communications, Inc., Tranche C | |||
Term Loan, 4.75%, 5/30/14 | USD | 1,614 | 979,840 |
Integra Telecom Holdings, Inc., Term Loan (First Lien), | |||
10.50%, 8/31/13 | 1,372 | 1,345,013 | |
PAETEC Holding Corp., Replacement Term Loan, 2.76%, | |||
2/28/13 | 605 | 569,883 | |
Time Warner Telecom Holdings Inc., Term Loan B Loan, | |||
2.02%, 1/07/13 | 628 | 612,412 | |
Wind Finance SL SA, Euro Facility (Second Lien), 7.70%, | |||
1/26/14 | EUR | 2,000 | 2,875,821 |
8,950,576 | |||
Electrical Equipment — 0.4% | |||
Generac Acquisition Corp., Term Loan (First Lien), 2.78%, | |||
11/10/13 | USD | 2,107 | 1,766,628 |
Electronic Equipment, Instruments & Components — 1.1% | |||
Flextronics International Ltd.: | |||
A Closing Date Loan, 2.53% – 2.85%, 10/01/14 | 1,507 | 1,351,125 | |
Delay Draw Term Loan, 2.76%, 10/01/14 | 433 | 388,254 | |
L-1 Identity Solutions Operating Co., Term Loan, 6.75%, | |||
8/05/13 | 2,422 | 2,425,821 | |
Safenet, Inc., Loan (Second Lien), 6.27%, 4/12/15 | 1,250 | 1,045,834 | |
5,211,034 | |||
Energy Equipment & Services — 1.6% | |||
Brock Holdings III, Inc., Term B Loan, 2.85% – 4.50%, | |||
2/26/14 | 1,371 | 1,083,017 | |
Dresser, Inc.: | |||
Term B Loan, 2.68%, 5/04/14 | 1,987 | 1,851,633 | |
Term Loan (Second Lien), 6.02%, 5/04/15 | 1,500 | 1,246,875 | |
MEG Energy Corp.: | |||
Delayed Draw Term Loan, 2.60%, 4/02/13 | 1,233 | 1,144,975 | |
Initial Term Loan, 2.60%, 4/03/13 | 1,209 | 1,123,207 | |
Volnay Acquisition Co. I (aka CGG), B1 Term Loan Facility, | |||
3.93%, 1/12/14 | 1,051 | 1,019,860 | |
7,469,567 | |||
Food & Staples Retailing — 2.1% | |||
AB Acquisitions UK Topco 2 Ltd. (fka Alliance Boots), | |||
Facility B1, 3.53%, 7/09/15 | GBP | 4,000 | 5,579,423 |
DS Waters of America, Inc., Term Loan, 2.52%, | |||
10/29/12 | USD | 1,383 | 1,244,361 |
DSW Holdings, Inc., Loan, 4.27%, 3/02/12 | 500 | 421,667 | |
Rite Aid Corp., Tranche 4 Term Loan, 9.50%, 6/04/15 | 1,775 | 1,837,125 | |
WM. Bolthouse Farms, Inc., Term Loan (First Lien), 2.56%, | |||
12/16/12 | 779 | 752,173 | |
9,834,749 | |||
Food Products — 2.7% | |||
Dean Foods, Term Loan B, 1.65% – 1.98%, 4/02/14 | 1,197 | 1,142,458 | |
Dole Food Co., Inc.: | |||
Credit-Linked Deposit, 0.51%, 4/12/13 | 442 | 444,851 | |
Tranche B Term Loan, 8.00%, 4/12/13 | 610 | 613,984 | |
Solvest, Ltd. (Dole), Tranche C Term Loan, 8.00%, 4/12/13 | 2,273 | 2,287,755 | |
Wm. Wrigley Jr. Co., Tranche B Term Loan, 6.50%, | |||
10/06/14 | 7,677 | 7,762,905 | |
12,251,953 | |||
Health Care Equipment & Supplies — 2.5% | |||
Bausch & Lomb Inc.: | |||
Delayed Draw Term Loan, 2.10% – 3.85%, 4/24/15 | 247 | 233,938 | |
Parent Term Loan, 3.85%, 4/24/15 | 974 | 921,715 |
See Notes to Financial Statements.
66 ANNUAL REPORT AUGUST 31, 2009
Schedule of Investments (continued) Master Senior Floating Rate LLC
(Percentages shown are based on Net Assets)
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Health Care Equipment & Supplies (concluded) | |||
Biomet, Inc., Dollar Term Loan, 3.26% – 3.61%, | |||
3/25/15 | USD | 4,910 | $ 4,711,185 |
DJO Finance LLC (ReAble Therapeutics Finance LLC), | |||
Term Loan, 3.26%, 5/20/14 | 2,955 | 2,822,025 | |
Hologic, Inc., Tranche B Term Loan, 3.56%, 3/31/13 | 495 | 476,233 | |
Iasis Healthcare LLC: | |||
Delay Draw Term Loan, 2.26%, 3/14/14 | 584 | 550,832 | |
Initial Term Loan, 2.26%, 3/14/14 | 1,689 | 1,591,747 | |
Line of Credit, 0.16%, 3/14/14 | 157 | 148,372 | |
11,456,047 | |||
Health Care Providers & Services — 7.3% | |||
CCS Medical, Inc. (Chronic Care), Term Loan (First Lien), | |||
4.35%, 9/30/12 (b)(f) | 750 | 338,437 | |
CHS/Community Health Systems, Inc.: | |||
Delayed Draw Term Loan, 2.54%, 7/25/14 | 455 | 423,465 | |
Funded Term Loan, 2.51%, 7/25/14 | 8,911 | 8,300,719 | |
DaVita, Inc., Tranche B-1 Term Loan, 1.77% – 2.10%, | |||
10/05/12 | 2,375 | 2,279,010 | |
Fresenius SE: | |||
Tranche B1 Term Loan, 6.75%, 7/06/14 | 2,510 | 2,522,193 | |
Tranche B2 Term Loan, 6.75%, 7/06/14 | 1,584 | 1,592,339 | |
HCA Inc., Tranche A-1 Term Loan, 2.10%, 11/17/12 | 12,465 | 11,637,430 | |
HealthSouth Corp., Term Loan, 2.52% – 2.53%, 3/10/13 | 3,455 | 3,341,388 | |
Surgical Care Affiliates, LLC, Term Loan, 2.60%, 12/29/14 | 561 | 506,308 | |
Vanguard Health Holding Co. II, LLC (Vanguard Health | |||
System, Inc.), Replacement Term Loan, 2.51%, 9/23/11 | 3,119 | 3,035,953 | |
33,977,242 | |||
Health Care Technology — 0.3% | |||
Sunquest Information Systems, Inc. (Misys Hospital Systems, | |||
Inc.), Term Loan, 3.52% – 3.74%, 10/13/14 | 1,474 | 1,343,569 | |
Hotels, Restaurants & Leisure — 3.8% | |||
CCM Merger Inc. (Motor City Casino), Term B Loan, 8.50%, | |||
7/13/12 | 1,713 | 1,598,401 | |
Green Valley Ranch Gaming, LLC: | |||
Second Lien Term Loan, 3.88%, 8/16/14 | 1,750 | 358,750 | |
Term Loan (New), 2.54% – 4.00%, 2/16/14 | 471 | 327,045 | |
Harrah’s Operating Co., Inc.: | |||
Term B-1 Loan, 3.50%, 1/28/15 | 414 | 332,998 | |
Term B-2 Loan, 3.50%, 1/28/15 | 7,432 | 5,987,025 | |
Term B-3 Loan, 3.50% – 3.60%, 1/28/15 | 365 | 293,418 | |
Lake at Las Vegas Joint Venture/LLV-1, LLC (b)(f): | |||
First and Second Tranche Term Loan, 12.35% – 15.00%, | |||
12/22/12 | 3,646 | 72,916 | |
Revolving Loan Credit-Linked Deposit Account, 12.35%, | |||
12/22/12 | 361 | 7,222 | |
Penn National Gaming, Inc., Term Loan B, 2.01% – 2.21%, | |||
10/03/12 | 4,678 | 4,546,869 | |
QCE, LLC (Quiznos), Term Loan: | |||
(First Lien), 2.88%, 5/15/13 | 1,940 | 1,445,300 | |
(Second Lien), 6.35%, 11/05/13 | 2,800 | 1,288,000 | |
VML US Finance LLC (aka Venetian Macau), Term B Funded | |||
Project Loan, 6.10%, 5/27/13 | 1,620 | 1,482,047 | |
17,739,991 | |||
Household Durables — 1.7% | |||
American Achievement Corp., Tranche B Term Loan, | |||
6.25%, 3/25/11 | 886 | 752,715 | |
Jarden Corp., Term Loan B3, 3.10%, 1/24/12 | 1,224 | 1,207,700 | |
Simmons Bedding Co., Tranche D Term Loan, 10.50%, | |||
12/19/11 | 4,269 | 4,148,216 | |
Yankee Candle Co., Inc., Term Loan, 2.27%, 2/06/14 | 1,736 | 1,609,959 | |
7,718,590 |
Par | |||
Floating Rate Loan Interests | (000) | Value | |
IT Services — 3.3% | |||
Audio Visual Services Group, Inc.: | |||
Loan (Second Lien), 7.10%, 8/28/14 | USD | 1,560 | $ 124,776 |
Tranche B Term Loan (First Lien), 2.85%, 2/28/14 | 1,350 | 837,000 | |
Ceridian Corp., US Term Loan, 3.27%, 11/09/14 | 3,213 | 2,750,345 | |
First Data Corp., Initial Tranche: | |||
Initial Tranche B-1 Term Loan, 3.01% – 3.02%, 9/24/14 | 2,816 | 2,346,359 | |
Initial Tranche B-2 Term Loan, 3.01% – 3.02%, 9/24/14 | 8,246 | 6,861,177 | |
RedPrairie Corp.: | |||
Tack-on-Loan, 3.69%, 7/20/12 | 260 | 224,516 | |
Term Loan B, 3.44% – 5.25%, 7/20/12 | 431 | 373,207 | |
SunGard Data Systems Inc. (Solar Capital Corp.): | |||
Incremental Term Loan, 6.75%, 2/28/14 | 997 | 991,609 | |
Tranche B US Term Loan, 3.95% – 4.09%, 2/28/16 | 844 | 815,129 | |
15,324,118 | |||
Independent Power Producers & Energy Traders — 4.2% | |||
Dynegy Holdings, Inc.: | |||
Term Letter of Credit Facility Term Loan, 4.02%, 4/02/13 | 971 | 933,517 | |
Tranche B Term Loan, 4.02%, 4/02/13 | 79 | 75,533 | |
NRG Energy, Inc., Term Loan, 2.01% – 2.35%, 2/01/13 | 3,872 | 3,651,892 | |
Texas Competitive Electric Holdings Co., LLC | |||
(TXU), Initial Tranche: | |||
Initial Tranche B-2 Term Loan, 3.78% – 3.79%, | |||
10/10/14 | 9,140 | 6,946,304 | |
Initial Tranche B-3 Term Loan, 3.78% – 3.79%, | |||
10/10/14 | 10,291 | 7,788,380 | |
19,395,626 | |||
Industrial Conglomerates — 0.4% | |||
Sequa Corp., Term Loan, 3.65% – 3.88%, 12/03/14 | 2,383 | 2,031,534 | |
Insurance — 0.3% | |||
Alliant Holdings I, Inc., Term Loan, 3.60%, 8/21/14 | 1,713 | 1,576,113 | |
Internet Software & Services — 0.0% | |||
Channel Master Holdings, Inc. (b)(f)(g): | |||
Revolver, 8.31%, 11/15/04 | 128 | — | |
Term Loan, 9.00%, 11/15/04 | 1,014 | — | |
— | |||
Leisure Equipment & Products — 0.5% | |||
Fender Musical Instruments Corp.: | |||
Delayed Draw Loan, 2.54%, 6/09/14 | 661 | 528,881 | |
Initial Loan, 2.85%, 6/09/14 | 1,309 | 1,047,078 | |
True Temper Sports, Inc., Term Loan B, 5.50%, 3/15/11 | 1,057 | 810,049 | |
2,386,008 | |||
Life Sciences Tools & Services — 0.9% | |||
Life Technologies Corp. Term B Facility, 5.25%, 11/20/15 | 4,168 | 4,209,572 | |
Machinery — 1.8% | |||
Navistar Financial Corp., Tranche A Term loan, 2.31%, | |||
3/27/10 | 1,843 | 1,787,959 | |
Navistar International Corp.: | |||
Revolving Credit-Linked Deposit, 3.39% – 3.51%, | |||
1/19/12 | 1,333 | 1,240,000 | |
Term Advance, 3.51%, 1/19/12 | 3,667 | 3,410,000 | |
Oshkosh Truck Corp., Term B Loan, 6.60% – 6.64%, | |||
12/06/13 | 2,109 | 2,099,059 | |
8,537,018 | |||
Media — 22.5% | |||
AlixPartners, LLP, Tranche C Term Loan, 2.28% – 2.51%, | |||
10/12/13 | 423 | 411,386 | |
Alpha Topco Ltd. (Formula One): | |||
Facility B1, 2.51%, 12/31/13 | 840 | 706,380 | |
Facility B2, 2.51%, 12/31/13 | 568 | 477,139 | |
Facility D, 3.76%, 6/30/14 | 1,000 | 740,000 |
See Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2009 67
Schedule of Investments (continued) Master Senior Floating Rate LLC
(Percentages shown are based on Net Assets)
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Media (continued) | |||
Bragg Communications Inc., Term Loan B Tranche Two | |||
Facility, 3.17%, 8/31/14 | USD | 1,206 | $ 1,168,662 |
Bresnan Communications, LLC Term Loan B (First Lien), | |||
2.47% – 2.64%, 9/29/13 | 1,746 | 1,672,527 | |
CSC Holdings Inc. (Cablevision), Incremental Term Loan, | |||
2.02% – 2.07%, 3/29/13 | 3,432 | 3,316,972 | |
Catalina Marketing Corp., Initial B Term Loan, 3.03%, | |||
10/01/14 | 1,744 | 1,639,103 | |
Cengage Learning Acquisitions, Inc. (Thomson Learning), | |||
Tranche 1 Incremental Term Loan, 7.50%, 7/03/14 | 8,591 | 8,246,998 | |
Cequel Communications, LLC: | |||
Tranche A Term Loan (Second Lien), 4.78%, 5/05/14 | 5,000 | 4,506,250 | |
Term Loan, 2.27%, 11/05/13 | 5,872 | 5,545,558 | |
Charter Communications Operating, LLC, New Term Loan, | |||
4.25%, 3/06/14 (b)(f) | 2,929 | 2,718,220 | |
Charter Communications, Term Loan B1, 7.94%, 3/25/14 | 6,525 | 6,521,737 | |
FoxCo Acquisition Sub, LLC, Term Loan, 7.25%, 7/14/15 | 1,338 | 1,096,401 | |
Gray Television, Inc., Term Loan B, 3.78%, 12/31/14 | 1,319 | 951,233 | |
HMH Publishing Co. Ltd.: | |||
Mezzanine, 17.50%, 11/14/14 (e) | 9,049 | 1,357,358 | |
Tranche A Term Loan, 5.26%, 6/12/14 | 4,389 | 3,395,774 | |
Hanley-Wood, LLC (FSC Acquisition), Term Loan, | |||
2.52% – 2.54%, 3/08/14 | 2,227 | 939,216 | |
Hargray Acquisition Co./DPC Acquisition LLC/HCP | |||
Acquisition LLC, Term Loan (First Lien), 2.72%, 6/27/14 | 1,946 | 1,775,898 | |
Harland Clarke Holdings Corp. (fka Clarke American Corp.), | |||
Tranche B Term Loan, 2.76%, 6/30/14 | 2,284 | 1,865,628 | |
Insight Midwest Holdings, LLC, B Term Loan, 2.28%, | |||
4/07/14 | 3,075 | 2,934,429 | |
Intelsat Corp. (fka PanAmSat Corp.): | |||
Tranche B-2-A Term Loan, 2.78%, 1/03/14 | 1,247 | 1,177,245 | |
Tranche B-2-B Term Loan, 2.78%, 1/03/14 | 1,247 | 1,179,624 | |
Tranche B-2-C Term Loan, 2.78%, 1/03/14 | 1,247 | 1,179,624 | |
Intelsat Subsidiary Holding Co. Ltd., Tranche B Term Loan | |||
2.78%, 7/03/13 | 1,962 | 1,871,410 | |
Knology, Inc., Term Loan, 2.51%, 6/30/12 | 1,602 | 1,521,732 | |
Lamar Media Corp.: | |||
Term Loan, 5.50%, 9/28/12 | 3,984 | 3,924,360 | |
Series E Incremental Loan, 5.50%, 3/15/13 | 988 | 978,859 | |
Local TV Finance, LLC, Term Loan, 2.27%, 5/07/13 | 1,234 | 843,408 | |
MCC Iowa LLC (Mediacom Broadband Group), Tranche | |||
E Term Loan, 6.50%, 11/30/16 | 2,394 | 2,396,947 | |
MCNA Cable Holdings LLC (OneLink Communications), | |||
Loan, 8.31%, 3/01/13 (e) | 1,236 | 469,840 | |
Mediacom Illinois, LLC (fka meidacom Communications, | |||
LLC), Tranche D Term Loan, 3.96%, 3/31/17 | 1,500 | 1,496,250 | |
Metro-Goldwyn-Mayer Inc., Tranche B Term Loan, 3.51%, | |||
4/09/12 | 1,736 | 965,844 | |
Multicultural Radio Broadcasting, Inc., Term Loan, 3.03%, | |||
12/18/12 | 515 | 360,588 | |
NTL Cable Plc, Second Lien, 4.19%, 3/04/12 | GBP | 710 | 1,017,142 |
NV Broadcasting, LLC: | |||
Second Lien, 7.77%, 11/03/14 (b)(f) | USD | 3,250 | 32,500 |
Term Loan, Debtor in Possession, 13.00%, 7/14/12 | 170 | 168,300 | |
Newsday, LLC, Floating Rate Term Loan, 6.01%, 8/01/13 | 2,500 | 2,468,750 | |
NextMedia Operating, Inc.: | |||
Delay Draw Term Loan, 8.25%, 11/15/12 | 121 | 78,950 | |
Initial Term Loan (1st Lien), 8.25%, 11/15/12 | 1,399 | 909,505 | |
Loan (Second Lien), 11.25%, 11/15/13 | 3,291 | 394,965 | |
Nielsen Finance LLC: | |||
Class A Dollar Term Loan, 2.28%, 8/09/13 | 2,956 | 2,751,439 | |
Class B Dollar Term Loan, 4.03%, 5/01/16 | 6,172 | 5,785,039 | |
Penton Media, Inc.: | |||
Loan (Second Lien), 5.49%, 2/01/14 | 500 | 105,000 | |
Term Loan (First Lien), 2.51% – 2.74%, 2/01/13 | 489 | 327,463 |
Par | |||
Floating Rate Loan Interests | (000) | Value | |
Media (concluded) | |||
Sunshine Acquisition Ltd. (aka HIT Entertainment), Term | |||
Facility, 2.73%, 6/01/12 | USD | 4,243 | $ 3,527,145 |
TWCC Holding Corp., Term Loan, 7.25%, 9/14/15 | 3,686 | 3,707,830 | |
Tribune Co., Debtor in Possession, Term Loan, 9.00%, | |||
4/07/10 | 1,100 | 1,105,500 | |
UPC Financing Partnership, Facility U, 4.54%, | |||
12/31/17 | EUR | 3,200 | 4,186,140 |
United Pan Europe Communications, Term Loan, 3.76%, | |||
12/31/16 | USD | 2,000 | 1,965,000 |
Virgin Media Investment Holdings Ltd.: | |||
B7 Facility, 5,39%, 9/30/12 | GBP | 199 | 297,977 |
B8 Facility, 5.39%, 9/30/12 | 131 | 196,266 | |
B11 Facility, 5.12%, 7/30/12 | 823 | 1,232,849 | |
B12 Facility, 5.31%, 7/30/12 | 1,141 | 1,708,786 | |
World Color Press Inc. and World Color (USA) Corp. (fka | |||
Quebecor World Inc.), Advance, 9.00%, 6/30/12 | 1,800 | 1,786,500 | |
104,105,646 | |||
Metals & Mining — 0.5% | |||
Essar Steel Algoma Inc. (fka Algoma Steel Inc.), Term | |||
Loan, 2.77%, 6/20/13 | USD | 2,434 | 2,190,399 |
Multi-Utilities — 1.0% | |||
Brand Energy & Infrastructure Services, Inc. (FR Brand | |||
Acquisition Corp.): | |||
Loan (Second Lien), 6.31% – 6.44%, 2/07/15 | 1,200 | 828,000 | |
Term B Loan (First Lien), 2.32% – 2.63%, 2/07/14 | 170 | 152,610 | |
Energy Transfer Equity, LP, Term Loan, 2.21%, 11/01/12 | 750 | 726,428 | |
FirstLight Power Resources, Inc. (fka NE Energy, Inc.): | |||
Term B Advance (First Lien), 3.13%, 11/01/13 | 2,217 | 2,041,271 | |
Synthetic Letter of Credit, 0.48%, 11/01/13 | 283 | 260,291 | |
Mach Gen, LLC, Synthetic Letter of Credit Loan (First Lien), | |||
0.35%, 2/22/13 | 69 | 63,696 | |
USPF Holdings, LLC, Term Loan, 2.02%, 4/11/14 | 886 | 823,944 | |
4,896,240 | |||
Multiline Retail — 0.5% | |||
Dollar General Corp., Tranche B-1 Term Loan, 3.01% – 3.24%, | |||
7/07/14 | 2,300 | 2,237,070 | |
Oil, Gas & Consumable Fuels — 1.8% | |||
Big West Oil, LLC (b)(f): | |||
Delayed Advance Loan, 4.50%, 5/15/14 | 956 | 879,335 | |
Initial Advance Loan, 4.50%, 5/15/14 | 1,207 | 1,110,344 | |
ScorpionDrilling Ltd., Loan (Second Lien), 8.10%, | |||
5/08/14 | 5,350 | 4,440,500 | |
Vulcan Energy Corp. (fka Plains Resources Inc), Term B3 | |||
Loan, 5.50%, 8/12/11 | 1,750 | 1,725,938 | |
8,156,117 | |||
Paper & Forest Products — 2.8% | |||
Georgia-Pacific LLC: | |||
Term B Loan, 2.34% – 2.46%, 12/20/12 | 6,437 | 6,218,319 | |
Term Loan B2, 2.31% – 2.65%, 12/20/12 | 1,518 | 1,466,429 | |
NewPage Corp., Term Loan, 4.06%, 12/22/14 | 5,727 | 5,303,273 | |
12,988,021 | |||
Personal Products — 0.5% | |||
American Safety Razor Co., LLC Loan (Second Lien), 6.52%, | |||
1/30/14 | 2,650 | 2,067,000 | |
Pharmaceuticals — 0.3% | |||
Warner Chilcott Co., Inc.: | |||
Tranche B Acquisition Date Term Loan, 2.26% – 2.60%, | |||
1/18/12 | 1,182 | 1,173,773 | |
Tranche C Acquisition Date Term Loan, 2.26%, 1/18/12 | 414 | 411,652 | |
1,585,425 |
See Notes to Financial Statements.
68 ANNUAL REPORT AUGUST 31, 2009
Schedule of Investments (continued) Master Senior Floating Rate LLC
(Percentages shown are based on Net Assets)
Par | ||
Floating Rate Loan Interests | (000) | Value |
Professional Services — 0.5% | ||
Booz Allen Hamilton Inc., Tranche B Term Loan, 7.50%, | ||
7/31/15 | USD 2,374 $ | 2,374,027 |
Real Estate Management & Development — 0.5% | ||
Mattamy Funding Partnership, Loan, 2.63%, 4/11/13 | 2,903 | 2,322,000 |
Specialty Retail — 0.3% | ||
Adesa, Inc. (KAR Holdings, Inc.), Initial Term Loan, 2.52%, | ||
10/20/13 | 750 | 703,750 |
General Nutrition Centers, Inc., Term Loan, 2.52% – 2.85%, | ||
9/16/13 | 550 | 505,513 |
1,209,263 | ||
Textiles, Apparel & Luxury Goods — 0.2% | ||
Hanesbrands Inc., Term B Loan, 5.02% – 5.25%, | ||
9/05/13 | 1,045 | 1,045,707 |
Trading Companies & Distributors — 0.2% | ||
Beacon Sales Acquisition, Inc., Term B Loan, 2.26% – 2.60%, | ||
9/30/13 | 953 | 895,350 |
Wireless Telecommunication Services — 2.1% | ||
Cellular South, Inc.: | ||
Delayed Draw Term Loan, 2.01%, 5/29/14 | 500 | 477,500 |
Term Loan, 2.01% – 4.00%, 5/29/14 | 1,470 | 1,403,850 |
Digicel International Finance Ltd., Tranche A, 3.13%, | ||
3/01/12 | 4,475 | 4,251,250 |
MetroPCS Wireless, Inc., New Tranche B Term Loan, | ||
2.56% – 2.75%, 11/03/13 | 2,226 | 2,092,634 |
Ntelos, Term B Advance, 5.75%, 7/31/15 | 1,500 | 1,496,250 |
9,721,484 | ||
Total Floating Rate Loan Interests — 86.7% | 401,930,130 | |
Beneficial | ||
Interest | ||
Other Interests (h) | (000) | |
Diversified Financial Services — 0.2% | ||
J.G. Wentworth LLC Preferred Equity Interests | 921 | 777,120 |
Total Other Interests — 0.2% | 777,120 | |
Total Long-Term Investments | ||
(Cost — $520,136,694 ) — 95.8% | 444,055,805 | |
Short-Term Securities | Shares | |
BlackRock Liquidity Funds, TempFund, 0.22% (i)(j) | 33,608,423 | 33,608,423 |
Total Short-Term Securities | ||
(Cost — $33,608,423) — 7.3% | 33,608,423 | |
Total Investments (Cost — $553,745,117*) — 103.1% | 477,664,228 | |
Liabilities in Excess of Other Assets — (3.1)% | (14,380,271) | |
Net Assets — 100.0% | $ 463,283,957 | |
* The cost and unrealized appreciation (depreciation) of investments as of August 31, | ||
2009, as computed for federal income tax purposes, were as follows: | ||
Aggregate cost | $ 553,814,673 | |
Gross unrealized appreciation | $ 9,012,104 | |
Gross unrealized depreciation | (85,162,549) | |
Net unrealized depreciation | $ (76,150,445) |
(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) Non-income producing security. | ||||||||||
(c) Convertible security. | ||||||||||
(d) Variable rate security. Rate shown is as of report date. | ||||||||||
(e) Represents a payment-in-kind security which may pay interest/dividends in addi- | ||||||||||
tional par/shares. | ||||||||||
(f) Issuer filed for bankruptcy and/or is in default of interest payments. | ||||||||||
(g) As a result of bankruptcy proceedings, the company did not repay the principal | ||||||||||
amount of the security upon maturity. | ||||||||||
(h) Other interests represent beneficial interest in liquidation trusts and other reorgani- | ||||||||||
zation entities and are non-income producing. | ||||||||||
(i) Investments in companies considered to be an affiliate of the Master LLC, for pur- | ||||||||||
poses of Section 2(a)(3) of the Investment Company Act of 1940, were as follows: | ||||||||||
Net | ||||||||||
Affiliate | Activity | Income | ||||||||
BlackRock Liquidity Funds, TempFund | USD 33,608,423 | $ 78,227 | ||||||||
BlackRock Liquidity Series, LLC | ||||||||||
Cash Sweep Series | USD (29,066,037) | $200,626 | ||||||||
(j) Represents the current yield as of report date. | ||||||||||
• | For Master LLC compliance purposes, the Master LLC’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 Master | ||||||||||
LLC management. This definition may not apply for purposes of this report, which | ||||||||||
may combine industry sub-classifications for reporting ease. | ||||||||||
• | Foreign currency exchange contracts as of August 31, 2009 were as follows: | |||||||||
Unrealized | ||||||||||
Currency | Currency | Settlement Appreciation | ||||||||
Purchased | Sold | Counterparty | Date | (Depreciation) | ||||||
USD | 235,838 | EUR | 166,000 | Citibank NA | 9/16/09 $ | (2,146) | ||||
USD | 1,057,022 | EUR | 745,000 | Citibank NA | 9/16/09 | (11,039) | ||||
USD | 2,829,491 | EUR | 1,982,000 | Citibank NA | 9/16/09 | (11,979) | ||||
USD | 7,671,767 | EUR | 5,494,500 | Deutsche Bank AG 9/16/09 | (205,357) | |||||
Royal Bank | ||||||||||
USD | 1,265,411 | EUR | 889,000 | of Scotland | 9/16/09 | (9,093) | ||||
USD | 570,971 | CAD | 620,000 | Barclays Bank PLC 10/28/09 | 4,580 | |||||
USD | 8,344,123 | GBP | 5,105,000 | Citibank NA | 10/28/09 | 34,112 | ||||
Total | $ (200,922) | |||||||||
• | Credit default swaps on traded index issues — bought protection outstanding as of | |||||||||
August 31, 2009 were as follows: | ||||||||||
Pay | Notional | |||||||||
Fixed | Counter- | Amount | Unrealized | |||||||
Index | Rate | party | Expiration | (000)1 | Depreciation | |||||
Credit Suisse, | June | |||||||||
LCDX Index | 5.00% | International | 2014 | USD 3,255 | $ (290,086) | |||||
1 | The maximum potential amount the Fund may pay should a negative credit | |||||||||
event take place as defined under the terms of the agreement. See Note 2 of | ||||||||||
the Notes to Financial Statements. | ||||||||||
• | Currency Abbreviations: | |||||||||
CAD | Canadian Dollar | |||||||||
EUR Euro | ||||||||||
GBP | British Pound | |||||||||
USD | US Dollar |
See Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2009 69
Schedule of Investments (concluded) Master Senior Floating Rate LLC
• Effective September 1, 2008, the Master LLC adopted Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 157, “Fair Value
Measurements” (“FAS 157”). FAS 157 clarifies the definition of fair value, estab-
lishes a framework for measuring fair values and requires additional disclosures
about the use of fair value measurements. Various inputs are used in determining
the fair value of investments, which are as follows:
• Level 1 — price quotations in active markets/exchanges for identical securities
• Level 2 — other observable inputs (including, but not limited to: quoted prices for
similar assets or liabilities in markets that are active, quoted prices for identical
or similar assets or liabilities in markets that are not active, inputs other than
quoted prices that are observable for the assets or liabilities (such as interest
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and
default rates) or other market-corroborated inputs)
• Level 3 — unobservable inputs based on the best information available in the
circumstances, to the extent observable inputs are not available (including the
Master LLC’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 Master LLC’s policy regarding valuation of investments and other significant
accounting policies, please refer to Note 1 of the Notes to Financial Statements.
The following table summarizes the inputs used as of August 31, 2009 in determin- | ||
ing the fair valuation of the Master LLC’s investments: | ||
Valuation | Investments in | |
Inputs | Securities | |
Assets | ||
Level 1 | ||
Long-Term Investments: | ||
Common Stocks | $ 483,689 | |
Short-Term Securities | 33,608,423 | |
Total Level 1 | 34,092,112 | |
Level 2 | ||
Long-Term Investments: | ||
Common Stocks | 550,175 | |
Corporate Bonds | 33,880,998 | |
Floating Rate Loan Interests | 304,641,971 | |
Total Level 2 | 339,073,144 | |
Level 3 | ||
Long-Term Investments: | ||
Common Stocks | 16,332 | |
Corporate Bonds | 6,417,361 | |
Floating Rate Loan Interests | 97,288,159 | |
Other Interests | 777,120 | |
Total Level 3 | 104,498,972 | |
Total | $477,664,228 | |
Valuation | Other Financial | |
Inputs | Instruments1 | |
Assets | Liabilities | |
Level 1 | — | — |
Level 2 | $ 38,692 | $ (529,700) |
Level 3 | — | (112,385) |
Total | $ 38,692 | $ (642,085) |
1 Other financial instruments are foreign currency exchange contracts, unfunded | ||
loan commitments and swaps which are shown 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 | ||||||||
Common | Corporate | Floating Rate | Other | |||||
Stocks | Bonds | Loan Interests | Interests | Total | ||||
Balance, as of August 31, 2008 | $ 15,030 | — | $ 43,430,665 | — | $ 43,445,695 | |||
Accrued discounts/premiums | — | — | — | — | — | |||
Realized gain (loss) | — | — | (12,647,335) | — | (12,647,335) | |||
Change in unrealized appreciation (depreciation)2 | — | $ (592,309) | 10,806,622 | — | 10,214,313 | |||
Net purchases (sales) | — | — | (34,773,486) | — | (34,773,486) | |||
Net transfers in/out of Level 3 | 1,302 | 7,009,670 | 90,471,693 | $ 777,120 | 98,259,785 | |||
Balance, as of August 31, 2009 | $ 16,332 | $ 6,417,361 | $ 97,288,159 | $ 777,120 | $104,498,972 | |||
2 Included in the related net change in unrealized appreciation/depreciation on the Statement of Operations. | ||||||||
The following is a reconciliation of other financial instruments for unobservable | ||||||||
inputs (Level 3) used in determining fair value: | ||||||||
Other Financial | ||||||||
Instruments3 | ||||||||
Liabilities | ||||||||
Balance, as of August 31, 2008 | — | |||||||
Accrued discounts/premiums | — | |||||||
Realized gain (loss) | — | |||||||
Change in unrealized appreciation (depreciation) | — | |||||||
Net purchases (sales) | — | |||||||
Net transfers in/out of Level 3 | $ (112,385) | |||||||
Balance as of August 31, 2009 | $ (112,385) | |||||||
3 Other financial instruments are unfunded loan commitments. | ||||||||
See Notes to Financial Statements. | ||||||||
70 | ANNUAL REPORT | AUGUST 31, 2009 |
Statement of Assets and Liabilities | Master Senior Floating Rate LLC | |
August 31, 2009 | ||
Assets | ||
Investments at value — unaffiliated (cost — $520,136,694) | $ 444,055,805 | |
Investments at value — affiliated (cost — $33,608,423) | 33,608,423 | |
Unrealized appreciation on foreign currency exchange contracts | 38,692 | |
Foreign currency at value (cost — $37,381) | 37,366 | |
Cash | 109,518 | |
Interest receivable | 3,971,146 | |
Investments sold receivable | 3,893,176 | |
Contributions receivable from investors | 748,255 | |
Swap premium paid | 521,311 | |
Prepaid expenses | 18,214 | |
Principal paydown receivable | 13,843 | |
Other assets | 189,286 | |
Total assets | 487,205,035 | |
Liabilities | ||
Unrealized depreciation on foreign currency exchange contracts | 239,614 | |
Unrealized depreciation on swaps | 290,086 | |
Unrealized depreciation on unfunded loan commitments | 112,385 | |
Investments purchased payable | 22,609,445 | |
Investment advisory fees payable | 367,525 | |
Deferred income | 142,136 | |
Other accrued expenses payable | 110,093 | |
Swaps payable | 32,025 | |
Other affiliates payable | 1,442 | |
Officer’s and Directors’ fees payable | 725 | |
Other liabilities | 15,602 | |
Total liabilities | 23,921,078 | |
Net Assets | $ 463,283,957 | |
Net Assets Consist of | ||
Investors’ capital | $ 539,991,233 | |
Net unrealized appreciation/depreciation | (76,707,276) | |
Net Assets | $ 463,283,957 | |
See Notes to Financial Statements. | ||
ANNUAL REPORT | AUGUST 31, 2009 | 71 |
Statement of Operations | Master Senior Floating Rate LLC | |||
Year Ended August 31, 2009 | ||||
Investment Income | ||||
Interest | $ 31,329,626 | |||
Income — affiliated | 278,853 | |||
Facility and other fees | 523,623 | |||
Total income | 32,132,102 | |||
Expenses | ||||
Investment advisory | 4,077,764 | |||
Accounting services | 171,056 | |||
Officer and Directors | 55,859 | |||
Professional | 45,947 | |||
Custodian | 44,697 | |||
Printing | 5,302 | |||
Miscellaneous | 94,264 | |||
Total expenses excluding interest expense | 4,494,889 | |||
Interest expense | 8,398 | |||
Total expenses | 4,503,287 | |||
Less fees waived by advisor | (11,939) | |||
Total expenses after fees waived | 4,491,348 | |||
Net investment income | 27,640,754 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) from: | ||||
Investments | (51,663,096) | |||
Swaps | 46,864 | |||
Foreign currency | 1,716,646 | |||
(49,899,586) | ||||
Net change in unrealized appreciation/depreciation on: | ||||
Investments | (15,700,804) | |||
Swaps | (348,501) | |||
Foreign currency | (1,136,888) | |||
Unfunded corporate loans | 259,893 | |||
(16,926,300) | ||||
Total realized and unrealized loss | (66,825,886) | |||
Net Decrease in Net Assets Resulting from Operations | $ (39,185,132) | |||
Statements of Changes in Net Assets | Master Senior Floating Rate LLC | |||
Year Ended | ||||
August 31, | ||||
Increase (Decrease) in Net Assets: | 2009 | 2008 | ||
Operations | ||||
Net investment income | $ 27,640,754 | $ 40,966,288 | ||
Net realized loss | (49,899,586) | (21,219,849) | ||
Net change in unrealized appreciation/depreciation | (16,926,300) | (27,182,080) | ||
Net decrease in net assets resulting from operations | (39,185,132) | (7,435,641) | ||
Capital Transactions | ||||
Proceeds from contributions | 45,763,562 | 62,053,522 | ||
Fair value of withdrawals | (132,042,492) | (224,197,628) | ||
Net decrease in net assets derived from capital transactions | (86,278,930) | (162,144,106) | ||
Net Assets | ||||
Total decrease in net assets | (125,464,062) | (169,579,747) | ||
Beginning of year | 588,748,019 | 758,327,766 | ||
End of year | $ 463,283,957 | $ 588,748,019 | ||
See Notes to Financial Statements. | ||||
72 | ANNUAL REPORT | AUGUST 31, 2009 |
Statement of Cash Flows | ||
Year Ended August 31, 2009 | ||
Cash Provided by Operating Activities | ||
Net decrease in net assets resulting from operations | $ (39,185,132) | |
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities: | ||
Decrease in interest receivable | 910,414 | |
Increase in other assets | (131,011) | |
Decrease in prepaid expenses | 2,653 | |
Decrease in investment advisor payable | (119,166) | |
Decrease in other affiliates payable | (2,746) | |
Increase in other liabilities payable | 14,863 | |
Decrease in accrued expenses payable | (133,431) | |
Increase in swaps payable | 8,643 | |
Increase in Officer’s and Directors’ fees | 466 | |
Swap premium received | 6,400 | |
Swap premium paid | (600,638) | |
Net realized and unrealized loss | 68,061,566 | |
Amortization of premium and discount on investments | (4,115,187) | |
Paid-in-kind Income | (686,595) | |
Proceeds from sales and paydowns of long-term securities | 263,963,681 | |
Purchases of long-term securities | (198,389,728) | |
Net purchases of short-term investments | (4,542,386) | |
Cash provided by operating activities | 85,062,666 | |
Cash Used for Financing Activities | ||
Cash receipts from borrowings | 29,000,000 | |
Cash payments on borrowings | (29,000,000) | |
Cash receipts from contributions | 46,446,155 | |
Cash payments on withdrawals | (132,042,492) | |
Cash used for financing activities | (85,596,337) | |
Cash Impact From Foreign Exchange Fluctuations | ||
Cash impact from foreign exchange fluctuations | 13,927 | |
Cash | ||
Net decrease in cash | (519,744) | |
Cash at beginning of year | 666,628 | |
Cash at end of year | $ 146,884 | |
Cash Flow Information | ||
Cash paid for interest | $ 8,398 | |
See Notes to Financial Statements. | ||
ANNUAL REPORT | AUGUST 31, 2009 | 73 |
Financial Highlights | Master Senior Floating Rate LLC | ||||||
Year Ended August 31, | |||||||
2009 | 2008 | 2007 | 2006 | 2005 | |||
Total Investment Return | |||||||
Total investment return | (4.23)% | (1.08)% | 3.49% | 5.37% | 5.78% | ||
Ratios to Average Net Assets | |||||||
Total expenses | 1.05% | 1.04% | 1.04% | 1.04% | 1.01% | ||
Total expenses after fees waived | 1.05% | 1.04% | 1.04% | 1.04% | 1.01% | ||
Total expenses after fees waived and excluding interest expense | 1.04% | 1.04% | 1.02% | 1.03% | 1.01% | ||
Net investment income | 6.44% | 6.41% | 7.07% | 6.22% | 4.52% | ||
Supplemental Data | |||||||
Net assets, end of year (000) | $ 463,284 | $ 588,748 | $ 758,328 | $ 925,910 | $ 1,032,819 | ||
Portfolio turnover | 47% | 56% | 46% | 54% | 53% | ||
Average loan outstanding during the year (000) | $ 420 | — | $ 2,255 | $ 1,932 | — | ||
See Notes to Financial Statements. | |||||||
74 | ANNUAL REPORT | AUGUST 31, 2009 |
Notes to Financial Statements Master Senior Floating Rate LLC
1. Organization and Significant Accounting Policies:
Master Senior Floating Rate LLC (the “Master LLC”) is registered under the
Investment Company Act of 1940, as amended (the “1940 Act”), and is
organized as a Delaware limited liability company. The Limited Liability
Company Agreement permits the Board of Directors (the “Board”) to issue
nontransferable interests in the Master LLC, subject to certain limitations.
The Master LLC’s financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America,
which may require the use of management accruals and estimates. Actual
results may differ from these estimates.
The following is a summary of significant accounting policies followed by
the Master LLC:
Valuation of Investments: The Master LLC values its bond investments on
the basis of last available bid prices or current market quotations provided
by dealers or pricing services selected under the supervision of the Master
LLC’s Board. Floating rate loan interests are valued at the mean between
the last available bid prices from one or more brokers or dealers as
obtained from a pricing service. In determining the value of a particular
investment, pricing services may use certain information with respect to
transactions in such investments, quotations from dealers, pricing matrixes,
market transactions in comparable investments, various relationships
observed in the market between investments and calculated yield meas-
ures based on valuation technology commonly employed in the market for
such investments. Swap agreements are valued utilizing quotes received
daily by the Master LLC’s pricing service or through brokers which are
derived using daily swap curves and trades of underlying securities. Short-
term securities with maturities less than 60 days may be valued at amor-
tized cost, which approximates fair value.
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 price. If no bid 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.
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 are 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
investment advisor and/or sub-advisor seeks to determine the price that
the Master LLC 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.
Foreign Currency Transactions: Foreign currency amounts are translated
into United States dollars on the following basis: (i) market value of
investment 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 Master LLC reports foreign currency related transactions as compo-
nents of realized gains for financial reporting purposes, whereas such com-
ponents are treated as ordinary income for federal income tax purposes.
Floating Rate Loans: The Master LLC 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 gener-
ally (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 Master LLC
consider these investments to be investments in debt securities for pur-
poses of their investment policies.
The Master LLC earns and/or pays facility and other fees on floating rate
loans. Other fees earned/paid include commitment, amendment, consent,
commissions and prepayment penalty fees. Facility, amendment and con-
sent fees are typically amortized as premium and/or accreted as discount
over the term of the loan. Commitment, commission and various other fees
are recorded as income. Prepayment penalty fees are recognized on the
accrual basis. When the Master LLC 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 Master LLC 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 Master LLC may receive a prepay-
ment penalty fee upon the prepayment of a floating rate loan by a bor-
rower. Other fees received by the Master LLC may include covenant waiver
fees and covenant modification fees.
The Master LLC 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
Master LLC 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 Master LLC having a con-
tractual relationship only with the lender, not with the borrower. The Master
LLC 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.
ANNUAL REPORT AUGUST 31, 2009 75
Notes to Financial Statements (continued) Master Senior Floating Rate LLC
In connection with purchasing Participations, the Master LLC generally will
have no right to enforce compliance by the borrower with the terms of the
loan agreement relating to the loans, nor any rights of offset against the
borrower, and the Master LLC may not benefit directly from any collateral
supporting the loan in which it has purchased the Participation.
As a result, the Master LLC will assume the credit risk of both the borrower
and the lender that is selling the Participation. The Master LLC’s invest-
ments in loan participation interests involve the risk of insolvency of the
financial intermediaries who are parties to the transactions. In the event of
the insolvency of the lender selling the Participation, the Master LLC may
be treated as general creditor of the lender and may not benefit from any
offset between the lender and the borrower.
Segregation and Collateralization: In cases in which the 1940 Act and
the interpretive positions of the Securities and Exchange Commission
(“SEC”) require that the Master LLC either delivers collateral or segregates
assets in connection with certain investments (e.g., swaps and foreign cur-
rency exchange contracts) the Master LLC 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 securities as collateral for
certain investments (e.g., swaps). As part of these agreements, when the
value of these investments achieves a previously agreed upon value (mini-
mum transfer amount), each party may be required to deliver additional
collateral.
Investment Transactions and Investment Income: For financial reporting
purposes, with respect to the Master LLC, investment transactions are
recorded on the dates the trans-actions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend 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 Master LLC has
determined the ex-dividend date. Interest income is recognized on the
accrual basis. The Master LLC amortizes all premiums and discounts on
debt securities.
Income Taxes: The Master LLC is classified as a partnership for federal
income tax purposes. As such, each investor in the Master LLC is treated as
owner of its proportionate share of the net assets, income, expenses and
realized and unrealized gains and losses of the Master LLC. Therefore, no
federal income tax provision is required. It is intended that the Master LLC’s
assets will be managed so an investor in the Master LLC can satisfy the
requirements of Subchapter M of the Internal Revenue Code.
The Master LLC files US federal and various state and local tax returns.
No income tax returns are currently under examination. The statute of
limitations on the Master LLC’s US federal tax returns remains open for
each of the four years ended August 31, 2009. The statutes of limitations
on the Master LLC’s state and local tax returns may remain open for an
additional year depending upon the jurisdiction.
Recent Accounting Pronouncement: In June 2009, Statement of Financial
Accounting Standards No. 166, “Accounting for Transfers of Financial Assets
— an amendment of FASB Statement No. 140” (“FAS 166”), was issued.
FAS 166 is intended to improve the relevance, representational faithfulness
and comparability of the information that a reporting entity provides in its
financial statements about a transfer of financial assets; the effects of a
transfer on its financial position, financial performance, and cash flows;
and a transferor’s continuing involvement, if any, in transferred financial
assets. FAS 166 is effective for financial statements issued for fiscal years
and interim periods beginning after November 15, 2009. Earlier application
is prohibited. The recognition and measurement provisions of FAS 166
must be applied to transfers occurring on or after the effective date.
Additionally, the disclosure provisions of FAS 166 should be applied to
transfers that occurred both before and after the effective date of FAS 166.
The impact of FAS 166 on the Master LLC’s financial statement disclo-
sures, if any, is currently being assessed.
Other: Expenses directly related to the Master LLC are charged to the
Master LLC. Other operating expenses shared by several funds are
prorated among those funds on the basis of relative net assets or other
appropriate methods.
2. Derivative Financial Instruments:
The Master LLC may engage in various portfolio investment strategies
both to increase the return of the Master LLC 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
value of the underlying security or if the counter-party does not perform
under the contract. The Master LLC may mitigate counterparty risk through
master netting agreements included within an International Swap and
Derivatives Association, Inc. (“ISDA”) Master Agreement between the Master
LLC and each of its counterparties. The ISDA Master Agreement allows the
Master LLC to offset with its counterparty certain derivative financial instru-
ments’ payables and/or receivables with collateral held with each counter-
party. 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 Master LLC from its counterparties are not fully collat-
eralized contractually or otherwise, the Master LLC bears the risk of loss
from the counterparty non-performance. See Note 1 “Segregation and
Collateralization” for information with respect to collateral practices.
The Master LLC’s 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 Master LLC.
Certain ISDA Master Agreements allow counterparties to over-the-counter
derivatives to terminate derivative contracts prior to maturity in the event
76 ANNUAL REPORT AUGUST 31, 2009
Notes to Financial Statements (continued) Master Senior Floating Rate LLC
the Master LLC’s net assets decline by a stated percentage or the Master
LLC fails to meet the terms of its ISDA Master Agreements, which would
cause the Master LLC to accelerate payment of any net liability owed to the
counterparty.
Foreign Currency Exchange Contracts: The Master LLC may enter into for-
eign 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 the Master LLC, help
to manage the overall exposure to the foreign currency backing some of
the investments held by the Master LLC. The contract is marked-to-market
daily and the change in market value is recorded by the Master LLC as an
unrealized gain or loss. When the contract is closed, the Master LLC records
a realized gain or loss equal to the difference between the value at the
time it was opened and the value at the time it was closed. The use of for-
eign 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.
Swaps: The Master LLC may enter into swap agreements, in which the
Master LLC and a counterparty agree to make periodic net payments on a
specified notional amount. These periodic payments received or made by
the Master LLC are recorded in the accompanying Statement of Operations
as realized gains or losses, respectively. Swaps are marked-to-market daily
and changes in value are recorded as unrealized appreciation (deprecia-
tion). When the swap is terminated, the Master LLC will record a realized
gain or loss equal to the difference between the proceeds from (or cost
of) the closing transaction and the Master LLC’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 on the
Statement of Assets and Liabilities. Such risks involve the possibility that
there will be no liquid market for these agreements, that the counterparty
to the agreements may default on its obligation to perform or disagree
as to the meaning of the contractual terms in the agreements, and that
there may be unfavorable changes in interest rates and/or market values
associated with these transactions.
• Credit default swaps — The Master LLC may enter into credit default
swaps to manage its exposure to the market or certain sectors of the
market, to reduce its risk exposure to defaults of corporate and/or
sovereign issuers or to create exposure to corporate and/or sovereign
issuers to which it is not otherwise exposed (credit risk). The Master LLC
enters into credit default agreements to provide a measure of protec-
tion 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 Master LLC 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
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 negative credit event take place (e.g., bank-
ruptcy, failure to pay, obligation accelerators, repudiation, moratorium or
restructuring). Credit default swaps on traded indexes are agreements
in which the buyer pays fixed periodic payments to the seller in consid-
eration 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,
the Master LLC 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 securities comprising of an index. As
a seller (writer), the Master LLC will either pay the buyer an amount
equal to the notional amount of the swap and take delivery of the refer-
enced security or underlying securities comprising of an index or pay a
net settlement of cash equal to the notional amount of the swap less
the recovery value of the security or underlying securities comprising
of an index.
Derivatives Not Accounted for as Hedging Instruments under Financial | ||||||
Accounting Standards Board Statement of Financial Accounting Standards | ||||||
No. 133, “Accounting for Derivative Instruments and Hedging Activities” | ||||||
Master Senior Floating Rate LLC | ||||||
Values of Derivative Instruments as of August 31, 2009* | ||||||
Asset Derivatives | Liability Derivatives | |||||
Statement | Statement | |||||
of Assets and | of Assets and | |||||
Liabilities | Liabilities | |||||
Location | Value | Location | Value | |||
Unrealized | Unrealized | |||||
appreciation | depreciation | |||||
on foreign | on foreign | |||||
currency | curency | |||||
Foreign currency exchange | exchange | exchange | ||||
contracts | contracts | $38,692 | contracts | $239,614 | ||
Unrealized | ||||||
depreciation | ||||||
Credit contracts | — | on swaps | 290,086 | |||
Total | $38,692 | $529,700 | ||||
* For open derivative instruments as of August 31, 2009, see the Schedule | ||||||
of Investments, which is also indicative of activity for the year ended | ||||||
August 31, 2009. | ||||||
The Effect of Derivative Instruments on the Statement of Operations | ||||||
Year Ended August 31, 2009 | ||||||
Net Realized Gain (Loss) From Derivatives Recognized in Income | ||||||
Foreign | ||||||
Currency | ||||||
Exchange | ||||||
Contracts | Swaps | Total | ||||
Foreign currency exchange | ||||||
contracts | $ 719,893 | — | $ 719,893 | |||
Credit contracts | — | $ 46,864 | $ 46,864 | |||
Total | $ 719,893 | $ 46,864 | $ 766,757 |
ANNUAL REPORT AUGUST 31, 2009 77
Notes to Financial Statements (continued) Master Senior Floating Rate LLC
Net Change in Unrealized Appreciation/Depreciation | |||
on Derivatives Recognized in Income | |||
Foreign | |||
Currency | |||
Exchange | |||
Contracts | Swaps | Total | |
Foreign exchange | |||
contracts | $ (858,335) | — | $ (858,335) |
Credit contracts | — | $ (348,501) | $ (348,501) |
Total | $ (858,335) | $ (348,501) | $(1,206,836) |
3. 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 Master LLC 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.
The Master LLC entered into an Investment Advisory Agreement with
BlackRock Advisors, LLC (the “Manager”), the Master LLC’s investment
advisor, an indirect, wholly owned subsidiary of BlackRock, to provide
investment advisory and administration services.
The Manager is responsible for the management of the Master LLC’s portfo-
lio and provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Master LLC. For such
services, the Master LLC pays the Manager a monthly fee at an annual rate
of 0.95% of the average daily value of the Master LLC’s net assets.
The Manager has entered into a separate sub-advisory agreement with
BlackRock Financial Management, Inc. (“BFM”), an affiliate the Manager,
under which the Manager pays BFM for services it provides, monthly fee
that is a percentage of the investment advisory fee paid by the Master LLC
to the Manager.
The Manager has agreed to waive its advisory fee by the amount of invest-
ment advisory fees the Master LLC pays to the Manager indirectly through
its investment in affiliated money market funds. This amount is shown as
fees waived by advisor in the Statement of Operations.
For the year ended August 31, 2009, the Master LLC reimbursed the
Advisor $8,441 for certain accounting services, which are included in
accounting services in the Statement of Operations.
Certain officers and/or directors of the Master LLC are officers and/or
directors of BlackRock or its affiliates. The Master LLC reimburses the
Manager for compensation to the Master LLC’s Chief Compliance Officer.
4. Investments:
Purchases and sales (including paydowns) of investments, excluding
short-term securities, for the year ended August 31, 2009 were
$196,913,499 and $259,646,559, respectively.
5. Market and Credit Risk:
In the normal course of business, the Master LLC invests in securities and
enters 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 Master LLC may decline
in response to certain events, including those directly involving the issuers
whose securities are owned by the Master LLC; conditions affecting the
general economy; overall market changes; local, regional or global political,
social or economic instability; and currency and interest rate and price
fluctuations. Similar to credit risk, the Master LLC may be exposed to
counterparty risk, or the risk that an entity with which the Master LLC
has unsettled or open transactions may default. Financial assets, which
potentially expose the Master LLC to credit and counterparty risks, consist
principally of investments and cash due from counterparties. The extent
of the Master LLCs’ exposure to credit and counterparty risks with respect
to these financial assets is approximated by their value recorded in the
Master LLCs’ Statement of Assets and Liabilities.
6. Commitments:
The Master LLC may invest in floating rate loans. In connection with these
investments, the Master LLC may also enter into unfunded corporate loan
(“commitments”). Commitments may obligate the Master LLC to furnish
temporary financing to a borrower until permanent financing can be
arranged. In connection with these commitments, the Master LLC earns a
commitment fee, typically set as a percentage of the commitment amount.
Such fee income, which is classified in the Statement of Operations
as facility and other fees, is recognized ratably over the commitment
period. As of August 31, 2009 the Master LLC had the following unfunded
loan commitments:
Value of | ||
Unfunded | Underlying | |
Commitment | Loan | |
Borrower | (000) | (000) |
Big West Oil | $ 562 | $ 517 |
Smurfit Corp. | $1,039 | $ 971 |
Vought Aircraft Industries, Inc. | $2,185 | $2,043 |
7. Short-Term Borrowings:
The Master LLC, along with certain other funds managed by the Manager
and its affiliates, is a party to a $500 million credit agreement with a
group of lenders, which expired November 2008 and was subsequently
renewed until November 2009. The Master LLC may borrow under the
78 ANNUAL REPORT AUGUST 31, 2009
Notes to Financial Statements (concluded) Master Senior Floating Rate LLC
credit agreement to fund shareholder redemptions and for other lawful
purposes other than for leverage. The Master LLC may borrow up to the
maximum amount allowable under the Master LLC’s current Prospectus
and Statement of Additional Information, subject to various other legal,
regulatory or contractual limits. The Master LLC paid its pro rata share of a
0.02% upfront fee on the aggregate commitment amount based on its net
assets as of October 31, 2008. The Master LLC pays a commitment fee of
0.08% per annum based on the Master LLC’s pro rata share of the unused
portion of the credit agreement, which is included in miscellaneous in the
Statement of Operations. Amounts borrowed under the credit agreement
bear interest at a rate equal to the higher of (a) federal funds effective rate
and (b) reserve adjusted one month LIBOR, plus, in each case, the higher
of (i) 1.50% and (ii) 50% of the CDX Index (as defined in the credit agree-
ment) in effect from time to time. For the year ended August 31, 2009 the
daily weighted average interest rate was 2.00%.
8. Subsequent Events:
Management has evaluated the impact of all subsequent events on the
Master LLC through October 30, 2009, the date the financial statements
were issued, and has determined that there were no subsequent events
requiring adjustment or disclosure in the financial statements.
ANNUAL REPORT AUGUST 31, 2009 79
Report of Independent Registered Public Accounting Firm Master Senior Floating Rate LLC
To the Investors and Board of Directors of Master Senior
Floating Rate LLC:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Master Senior Floating Rate LLC
(the “Master LLC”) as of August 31, 2009, and the related statement 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 five years in the period then ended. These finan-
cial statements and financial highlights are the responsibility of the Master
LLC’s management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
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 Master LLC is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting.
Our audits included consideration of internal control over financial report-
ing 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 Master LLC’s 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 included confirmation of
securities owned as of August 31, 2009, by correspondence with the cus-
todian 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
Master Senior Floating Rate LLC as of August 31, 2009, 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 highlights for
each of the five years in the period then ended, in conformity with account-
ing principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
October 30, 2009
80 ANNUAL REPORT AUGUST 31, 2009
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 Defined Opportunity
Credit Trust (“BHL”), BlackRock Diversified Income Strategies Fund, Inc.
(“DVF”), BlackRock Floating Rate Income Strategies Fund, Inc. (“FRA”),
BlackRock Limited Duration Income Trust (“BLW,” and together with BHL,
DVF, and FRA, each a “Fund” and, collectively, the “Funds”) and Master
Senior Floating Rate Fund LLC (the “Master LLC”) met on April 14, 2009
and May 28 – 29, 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 the Funds and the Master LLC also considered the
approval of the sub-advisory agreement (each, a “Sub-Advisory Agreement”)
between each such Fund or the Master LLC, as applicable, the Manager
and BlackRock Financial Management, Inc. (the “Sub-Advisor”). BlackRock
Senior Floating Rate Fund, Inc. (“Senior Floating Rate”) and BlackRock
Senior Floating Rate Fund II, Inc. (“Senior Floating Rate II,” and together
with Senior Floating Rate, each, a “Feeder Fund” and together, the “Feeder
Funds”) currently invest substantially all of their investable assets in the
Master LLC; accordingly, the Boards of each of the Feeder Funds also
considered the approval of the Advisory Agreement and the Sub-Advisory
Agreement between the Master LLC, the Manager and the Sub-Advisor. The
Feeder Funds do not require investment advisory services because all of
their investments are made at the Master LLC level.
The Manager and the Sub-Advisor 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 regard to its respective fund.
Activities and Composition of the Boards
Each Board consists of twelve individuals, ten of whom are not “interested
persons” of any of the Funds, the Feeder Funds or the Master LLC 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 operations of such fund and
perform the various duties imposed on the directors of investment com-
panies by the 1940 Act. The Independent Board Members have retained
independent legal counsel to assist them in connection with their duties.
The Chairman of each Board is an Independent Board Member. Each
Board has established 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, each Board has
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 manage-
ment, administrative and shareholder services, oversight of fund account-
ing and custody, marketing services and assistance in meeting applicable
legal and regulatory requirements.
Throughout the year, the Boards, acting directly and through their com-
mittees, 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
shareholders. Among the matters the Boards considered were: (a) invest-
ment performance for one-, three- and five-year periods, as applicable,
against peer funds, and applicable benchmarks, if any, as well as senior
management and portfolio managers’ analysis of the reasons for any out-
performance or underperformance against its peers; (b) fees, including
advisory fees, administration fees with respect to the Feeder Funds, and
other amounts paid to BlackRock and its affiliates by the funds for services
such as call center and fund accounting, and, in the case of the Feeder
Funds, transfer agency, marketing and distribution; (c) fund 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 Codes 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 Boards; (i) execution quality of port-
folio transactions; (j) BlackRock’s implementation of the funds’ valuation
and liquidity procedures; 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 its deliberations. The materials provided in connection with the April
meeting included (a) information independently compiled and prepared by
Lipper, Inc. (“Lipper”) on Fund and Feeder Fund fees and expenses, and
the investment performance of each Fund and Feeder Fund as compared
with a peer group of funds as determined by Lipper (collectively, “Peers”);
(b) information on the profitability 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, each
Feeder Fund and the Master LLC to BlackRock and (f) an internal com-
parison 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.
ANNUAL REPORT AUGUST 31, 2009 81
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)
At an in-person meeting held on May 28 – 29, 2009, each Board, including
the Independent Board Members, unanimously approved the continuation
of the Advisory Agreement between the Manager and its Fund or the Master
LLC, as applicable, and the Sub-Advisory Agreement between its Fund or
the Master LLC, as applicable, the Manager and the Sub-Advisor, each for
a one-year term ending June 30, 2010. The Board of Directors of each
Feeder Fund, including the Independent Board Members, also considered
the continuation of the Agreements with respect to the Master LLC and
found the Agreements to be satisfactory. The Boards considered all factors
they believed relevant with respect to the Funds and the Master LLC, includ-
ing, among other factors: (a) the nature, extent and quality of the services
provided by BlackRock; (b) the investment performance of the Funds, the
Feeder Funds and BlackRock portfolio management; (c) the advisory fee
and the cost of the services and profits to be realized by BlackRock and
certain affiliates from the relationship with the Funds, the Feeder Funds
and the Master LLC; (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 or the Master LLC’s portfolio holdings, as applicable,
direct and indirect benefits to BlackRock and its affiliates and significant
shareholders from their relationship with such Fund, the Feeder Funds or
the Master LLC 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 par-
ticular information as controlling, and each Board Member may have
attributed different weights to the various items considered.
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, Feeder Fund, or the
Master LLC, as applicable. Throughout the year, each Board compared its
respective Fund’s or Feeder Fund’s performance to the performance of a
comparable group of closed-end funds, and the performance of at least
one relevant benchmark, if any. The Boards met with BlackRock’s senior
management personnel responsible for investment operations, including
the senior investment officers. Each Board also reviewed the materials pro-
vided by its respective Fund’s or the Master LLC’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 respec-
tive Fund’s or the Master LLC’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 commit-
ment to compliance and BlackRock’s approach to training and retaining
portfolio managers and other research, advisory and management per-
sonnel. Each Board also reviewed a general description of BlackRock’s
compensation structure with respect to its respective Fund’s or the Master
LLC’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, Feeder Fund or the Master LLC. BlackRock and its affiliates and
significant shareholders provide the Funds, the Feeder Funds and the
Master LLC with certain administrative services, in the case of the Feeder
Funds, transfer agency and shareholder services, 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 affili-
ates provide the Funds, the Feeder Funds and the Master LLC with other
services, including (i) preparing disclosure documents, such as the pros-
pectus and the statement of additional information in connection with the
initial public offering and periodic shareholder reports; (ii) preparing com-
munications 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) providing legal and
compliance support; and (viii) performing other administrative functions
necessary for the operation of the funds, such as tax reporting, fulfilling reg-
ulatory filing requirements, and call center services. The Boards reviewed the
structure and duties of BlackRock’s fund administration, accounting, legal
and compliance departments and considered BlackRock’s policies and pro-
cedures for assuring compliance with applicable 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, Feeder Fund, or the Master
LLC, as applicable. In preparation for the April 14, 2009 meeting, each
Board was provided with reports, independently prepared by Lipper, which
included a comprehensive analysis of its respective Fund’s or Feeder
Fund’s performance. The Boards also reviewed a narrative and statistical
analysis of the Lipper data that was prepared by BlackRock, which ana-
lyzed various factors that affect Lipper’s rankings. In connection with its
review, each Board received and reviewed information regarding the invest-
ment performance of its respective Fund or Feeder Fund as compared to
a representative group of similar funds as determined by Lipper and to
all funds in such Fund’s or Feeder Fund’s applicable Lipper category. 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, Feeder Fund, or the Master LLC throughout the year.
The Board of each of FRA, BLW and Senior Floating Rate I noted that, in
general, FRA, BLW and Senior Floating Rate I performed better than their
respective Peers in that the performance of each of FRA, BLW and Senior
Floating Rate I was at or above the median of its respective Lipper perform-
ance universe in each of the one-, three- and five-year periods reported.
The Board of BHL noted that, in general, BHL performed better than its
Peers in that BHL’s performance was at or above the median of its Lipper
performance universe in the since inception period reported.
The Board of Senior Floating Rate II noted that although Senior Floating
Rate II underperformed its Peers in at least two of the one-, three- and five-
year periods reported, such underperformance was not greater than 10% of
82 ANNUAL REPORT AUGUST 31, 2009
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)
the median return of its Peers for any of the periods. The Board concluded
that BlackRock was committed to providing the resources necessary to
assist the portfolio managers and to continue improving Senior Floating
Rate II’s performance. Based on its review, the Board generally was satis-
fied with BlackRock’s efforts to manage Senior Floating Rate II.
The Board of DVF noted that DVF performed below the median of its Lipper
performance universe in the one-year, three-year and since inception peri-
ods reported. The Board and BlackRock reviewed the reasons for DVF’s
underperformance during these periods compared with its Peers. The Board
was informed that, among other things, DVF’s credit allocation for most of
the period was overweight CCC and B and underweight BB. Since lower
quality credits underperformed higher quality during the period, this nega-
tively impacted performance.
For DVF, the Board and BlackRock discussed BlackRock’s commitment to
providing the resources necessary to assist the portfolio managers and to
improve DVF’s performance.
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 Fund: Each Board, including its Independent Board
Members, reviewed its respective Fund’s or the Master LLC’s contractual
advisory fee rates compared with the other funds in its Lipper category.
Each Board also compared its respective Fund’s or the Feeder Funds’ total
expenses, as well as actual management fees, to those of other compa-
rable 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 finan-
cial condition and profitability with respect to the services it provided the
Funds and the Master LLC. 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 Feeder Funds and the
Master LLC. The Boards reviewed BlackRock’s profitability with respect to the
Funds and the Master LLC and other funds the Boards currently oversee for
the year ended December 31, 2008 compared to available aggregate prof-
itability data provided for the year ended December 31, 2007. The Boards
reviewed BlackRock’s profitability with respect to other fund complexes man-
aged 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 business
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 compared to the operating margin for leading investment man-
agement 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 competitors. In addi-
tion, 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, the Feeder Funds and the Master LLC by BlackRock, and
BlackRock’s and its affiliates’ profits relating to the management and dis-
tribution of the Funds, the Feeder Funds and the Master LLC and the other
funds advised by BlackRock and its affiliates. As part of its analysis, the
Boards reviewed BlackRock’s methodology in allocating its costs to the
management of the funds. The Board also considered whether BlackRock
has the financial resources necessary to attract and retain high quality
investment management personnel to perform its obligations under the
Agreements and to continue to provide the high quality of services that
is expected by the Boards.
The Board of each of DVF, FRA and BLW 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 contrac-
tual management fees paid by such Fund’s Peers.
The Board of Senior Floating Rate I noted that, although Senior Floating
Rate I paid contractual management fees higher than the median of its
Peers, its actual total expenses were lower than or equal to the median of
its Peers.
The Board of Senior Floating Rate II noted that, although Senior Floating Rate
II paid contractual management fees higher than the median of its Peers, its
actual total expenses were within 5% of the actual total expense median.
The Board of BHL noted that BHL pays contractual management fees that
are higher than the median of its Peers and considered this higher fee in
light of the quality of services provided by the Manager and the investment
objectives and policies of BHL. The Board also noted that BHL is included
in a Lipper Peer group where most funds commenced operations between
6 and 10 years ago. There are 3 Peer funds that were offered recently and
are more appropriate funds for comparison as they contain a more appro-
priate pricing structure for bank loan products offered in the current market
environment. These recently offered funds are similar portfolios that are
being offered to take advantage of current market opportunities. BHL is
competitive when compared to these 3 Peer funds.
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 or the Master LLC increase
and whether there should be changes in the advisory fee rate or structure
in order to enable such Fund or the Master LLC 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 or the Master LLC, as
applicable. 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
ANNUAL REPORT AUGUST 31, 2009 83
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (concluded)
also considered BlackRock’s overall operations and its efforts to expand
the scale of, and improve the quality of, its operations.
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, the Feeder Funds and
the Master LLC, both tangible and intangible, 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 affiliates and significant shareholders as
service providers to the Funds, the Feeder Funds and the Master LLC,
including for administrative, and in the case of the Feeder Funds transfer
agency, 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 or the Master LLC and the Manager for a one-year term ending
June 30, 2010 and, as applicable, the Sub-Advisory Agreement between
such Fund or the Master LLC, the Manager and Sub-Advisor for a one-year
term ending June 30, 2010. Based upon its evaluation of all these factors
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 or the Master LLC and its
shareholders. The Board of Directors of each Feeder Fund, including the
Independent Board Members, also considered the continuation of the
Agreements with respect to the Master LLC and found the Agreements to
be satisfactory. 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 independent legal counsel in making this determination. The
contractual fee arrangements for each Fund or the Master LLC reflects
the results of several years of review by such Fund’s and the Master LLC’s
Board Members and predecessor Board Members, as applicable, and dis-
cussions 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 arrange-
ments in prior years.
84 ANNUAL REPORT AUGUST 31, 2009
Automatic Dividend Reinvestment Plan
How the Plan Works — The Funds offer a Dividend Reinvestment Plan
(the “Plan”) under which income and capital gains dividends paid by
a Fund are automatically reinvested in additional Common Shares of the
Fund. The Plan is administered on behalf of the shareholders by BNY
Mellon Shareowner Services for Senior Floating Rate and Senior Floating
Rate II and Computershare Trust Company, N.A. for BHL, DVF, FRA and BLW
(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 commis-
sions (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 con-
dition 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 purchases, or if the market discount shifts to a market premium
during the purchase period, the Plan Agents will invest any uninvested por-
tion 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 — Participation in the Plan is automatic, that
is, a shareholder is automatically enrolled in the Plan when he or she pur-
chases shares of Common Shares of the Funds unless the shareholder
specifically elects not to participate 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.
Benefits of the Plan — The Plan provides an easy, convenient way for
shareholders to make additional, 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 available 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.
Plan Fees — There are no enrollment fees or brokerage fees for
participating in the Plan. The Plan Agents’ service fees for handling the
reinvestment of distributions are paid for by the Funds. However, broker-
age commissions may be incurred when the Funds purchase shares on
the open market and shareholders will pay a pro rata share of any
such commissions.
Tax Implications — The automatic reinvestment of dividends and distribu-
tions 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 possi-
ble 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 distribution. If the discount is viewed as a taxable dis-
tribution, 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 dis-
tributions equal to their allocable share of the discount.
Contact Information — All correspondence concerning the Plan, including
any questions about the Plan, should be directed to the Plan Agent at
the following addresses: Shareholders of Senior Floating Rate and Senior
Floating Rate II should contact BNY Mellon Shareowner Services, P.O. Box
385035, Pittsburgh, PA 15252-8035 Telephone: (866) 216-0242 and
shareholders of BHL, DVF, FRA and BLW 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.
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Officers and Directors | |||||
Number of BlackRock- | |||||
Advised Registered | |||||
Position(s) | Length | Investment Companies | |||
Held with | of Time | (“RICs”) Consisting of | |||
Name, Address | Funds/ | Served as | Investment Portfolios | Public | |
and Year of Birth | Master LLC | 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 | 104 RICS consisting of | Arch Chemical |
40 East 52nd Street | of the Board | 2007 | Life Insurance Company of America since 1998; Trustee, Educational | 101 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 of | Since | Partner of Robards & Company, LLC (financial advisory firm) since | 104 RICs consisting of | AtriCure, Inc. |
40 East 52nd Street | the Board, | 2007 | 1987; Co-founder and Director of the Cooke Center for Learning and | 101 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 | 104 RICs consisting of | None |
40 East 52nd Street | 2007 | (Beckwith Family Foundation) and various Beckwith property companies | 101 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 and | Since | Consultant/Investor since 1988. | 104 RICs consisting of | None |
40 East 52nd Street | Member of | 2007 | 101 Portfolios | ||
New York, NY 10022 | the Audit | ||||
1937 | Committee | ||||
Frank J. Fabozzi | Director and | Since | Consultant/Editor of The Journal of Portfolio Management since 2006; | 104 RICs consisting of | None |
40 East 52nd Street | Member of | 2007 | Professor in the Practice of Finance and Becton Fellow, Yale University, | 101 Portfolios | |
New York, NY 10022 | 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 | 104 RICs consisting of | The McClatchy |
40 East 52nd Street | 2007 | firm) since 1987; Chair, Board of Trustees, McLean Hospital from | 101 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 and | Since | Chief Financial Officer of JP Morgan & Co., Inc. from 1990 to 1995. | 104 RICs consisting of | None |
40 East 52nd Street | Member of | 2007 | 101 Portfolios | ||
New York, NY 10022 | the Audit | ||||
1939 | Committee | ||||
Jerrold B. Harris | Director | Since | Trustee, Ursinus College since 2000; Director, Troemner LLC | 104 RICs consisting of | BlackRock Kelso |
40 East 52nd Street | 2007 | (scientific equipment)since 2000. | 101 Portfolios | Capital Corp. | |
New York, NY 10022 | |||||
1942 | |||||
86 | ANNUAL REPORT | AUGUST 31, 2009 |
Officers and Directors (continued) | ||||||
Number of BlackRock- | ||||||
Advised Registered | ||||||
Position(s) | Length | Investment Companies | ||||
Held with | of Time | (“RICs”) Consisting of | ||||
Name, Address | Funds/ | Served as | Investment Portfolios | Public | ||
and Year of Birth | Master LLC | 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 | 104 RICs consisting of | ADP (data and | |
40 East 52nd Street | 2007 | member since 1988; Co-Director, Columbia Business School’s | 101 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 | 104 RICs consisting of | None | |
40 East 52nd Street | 2007 | Business School; Deputy Dean for Academic Affairs, since 2006; Unit | 101 Portfolios | |||
New York, NY 10022 | Head, Finance, Harvard Business School, from 2005 to 2006; Senior | |||||
1951 | 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 and Master LLC 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’/ | ||||||
Master LLC’s board in 2007, each director first became a member of the board of directors 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 | 173 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, | 283 Portfolios | |||
1945 | SSR Realty from 2000 to 2004. | |||||
Henry Gabbay | Director | Since | Consultant, BlackRock, Inc. from 2007 to 2008; Managing Director, BlackRock, | 173 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 | 283 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/Master LLC based on his position with BlackRock, | ||||||
Inc. and its affiliates. Mr. Gabbay is an “interested person” of the Funds/Master LLC 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 | AUGUST 31, 2009 | 87 |
Officers and Directors (concluded) | ||||||
Position(s) | ||||||
Held with | ||||||
Name, Address | Funds/ | Length of | ||||
and Year of Birth | Master LLC | Time Served Principal Occupation(s) During Past 5 Years | ||||
Funds/Master LLC 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 Account Management Group (AMG) since 2009; Chief Operating Officer of | |||
New York, NY 10022 | Executive | BlackRock’s 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/Master LLC serve at the pleasure of the Board of Directors. | ||||||
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 Company2 | Computershare Trust Company, N.A.2 | and Trust Company | Accounting Firm | Meagher & Flom LLP | |
Boston, MA 02101 | Providence, RI 02940 | Princeton, NJ 08540 | Deloitte & Touche LLP | New York, NY 10036 | ||
Sub-Advisor | ||||||
Princeton, NJ 08540 | ||||||
BlackRock Financial | The Bank of | PNC Global Investment | Address of the Funds | |||
Management, Inc | New York Mellon3 | Servicing (U.S.) Inc.3 | 100 Bellevue Parkway | |||
New York, NY 10022 | New York, NY 10286 | Wilmington, DE 19809 | Wilmington, DE 19809 | |||
2 For BHL, DVF, FRA, and BLW. | ||||||
3 For Senior Floating Rate and Senior Floating Rate II. |
Effective July 31, 2009, Donald C. Burke, President and Chief Executive Officer of the Funds and Master LLC retired. The
Funds’ and Master LLC’s Board of Directors wish Mr. Burke well in his retirement.
Effective August 1, 2009, Anne F. Ackerley became President and Chief Executive Officer of the Funds and Master LLC, and
Brendan Kyne became Vice President of the Funds and Master LLC.
88 ANNUAL REPORT AUGUST 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 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 | |
DVF | 9,155,029 | 373,970 | 9,156,729 | 372,270 | 9,156,729 | 372,270 |
FRA | 14,645,169 | 164,452 | 14,648,802 | 160,819 | 14,632,612 | 177,009 |
Kent Dixon | Frank J. Fabozzi | Kathleen F. Feldstein | ||||
Votes | Votes | Votes | ||||
Votes For | Withheld | Votes For | Withheld | Votes For | Withheld | |
DVF | 9,143,906 | 385,093 | 9,155,129 | 373,870 | 9,214,394 | 314,605 |
FRA | 14,621,624 | 187,997 | 14,662,972 | 146,649 | 14,627,697 | 181,924 |
James T. Flynn | Henry Gabbay | Jerrold B. Harris | ||||
Votes | Votes | Votes | ||||
Votes For | Withheld | Votes For | Withheld | Votes For | Withheld | |
DVF | 9,144,616 | 384,383 | 9,157,685 | 371,314 | 9,153,500 | 375,499 |
FRA | 14,647,862 | 161,759 | 14,632,690 | 176,931 | 14,643,243 | 166,378 |
R. Glenn Hubbard | W. Carl Kester | Karen P. Robards | ||||
Votes | Votes | Votes | ||||
Votes For | Withheld | Votes For | Withheld | Votes For | Withheld | |
DVF | 9,132,619 | 396,380 | 9,144,844 | 384,155 | 9,215,478 | 313,521 |
FRA | 14,658,263 | 151,358 | 14,647,982 | 161,639 | 14,620,093 | 189,528 |
Approved the Class II Directors/Trustees as follows: | ||||||
Richard S. Davis | Frank J. Fabozzi | James T. Flynn | ||||
Votes | Votes | Votes | ||||
Votes For | Withheld | Votes For | Withheld | Votes For | Withheld | |
BHL | 8,275,596 | 252,027 | 8,275,596 | 252,027 | 8,174,587 | 353,036 |
BLW | 32,281,241 | 701,401 | 32,281,241 | 701,401 | 32,257,346 | 725,296 |
Karen P. Robards | ||||||
Votes | ||||||
Votes For | Withheld | |||||
BHL | 8,262,061 | 265,562 | ||||
BLW | 32,228,618 | 754,024 |
Fund Certification
Certain Funds are listed for trading on the New York Stock Exchange
(“NYSE”) and have filed with the NYSE their annual chief executive officer
certification regarding compliance with the NYSE’s listing standards. The
Funds filed with the SEC the certification of its chief executive officer and
chief financial officer required by section 302 of the Sarbanes-Oxley Act.
Dividend Policy
Each Fund’s dividend policy is to distribute all or a portion of its net invest-
ment income to its shareholders on a monthly 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 and may at times in any particular month
pay out such accumulated but undistributed income in addition to net
investment income earned in that month. As a result, the dividends paid
by the Funds for any particular month may be more or less than the
amount of net investment income earned by the Funds during such month.
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.
ANNUAL REPORT AUGUST 31, 2009 89
Additional Information (continued)
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.
During the period, 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 their shareholders or in the principal risk factors associated
with investment in the Funds. Changes regarding the persons who are pri-
marily responsible for the day-to-day management for the Funds’ portfolios
are noted in the boxed text below.
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 SEC
for the first and third quarters of each fiscal year on Form N-Q. The Funds’
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
determine how to vote proxies relating to portfolio securities is available
(1) without charge, upon request, by calling toll-free (800) 441-7762;
(2) at www.blackrock.com; and (3) on the Securities and Exchange
Commission’s website at http://www.sec.gov.
Availability of Proxy Voting Record
Information about how the Funds voted proxies relating to securities
held in the Funds’ portfolios 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
Securities and Exchange Commission’s website at http://www.sec.gov.
BHL, DVF, FRA, BLW, Senior Floating Rate and Senior Floating Rate II are managed by a team of financial professionals.
The portfolio managers are primarily responsible for the day-to-day management of the Funds’ portfolios. Effective May 8,
2009, Leland T. Hart, James E. Keenan and C. Adrian Marshall are the portfolio managers for BHL, BLW and DVF. Leland T.
Hart and C. Adrian Marshall are the portfolio managers for FRA, Senior Floating Rate and Senior Floating Rate II.
Mr. Hart is Managing Director of BlackRock, Inc. since 2009; Partner of R3 Capital Partners in 2009 and Managing
Director thereof from 2008 to 2009; Managing Director of Lehman Brothers from 2006 to 2008 and Executive Director
thereof from 2003 to 2006.
Mr. Keenan is Managing Director of BlackRock, Inc. since 2008 and Director thereof from 2004 to 2008; Head of the
Leveraged Finance Portfolio team; and senior high yield trader at Columbia Management Group from 2003 to 2004.
Mr. Marshall is Director of BlackRock, Inc. since 2007 and Vice President thereof from 2004 to 2007.
90 ANNUAL REPORT AUGUST 31, 2009
Additional Information (concluded)
Section 19 Notices
The amounts and sources of distributions reported are only 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 invest-
ment experience during the year and may be subject to changes based on
the tax regulations. Each Fund will send you a Form 1099-DIV each calen-
dar year that will tell you how to report these distributions for federal
income tax purposes.
Total Cumulative Distributions | % Breakdown of the Total Cumulative | |||||||
for the Fiscal Year-to-Date | Distributions for the Fiscal Year-to-Date | |||||||
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 | |
BHL | $0.795949 | — | $0.306551 | $1.102500 | 72% | 0% | 28% | 100% |
DVF | $1.080595 | — | $0.296905 | $1.377500 | 78% | 0% | 22% | 100% |
FRA | $1.209873 | — | $0.091341 | $1.301214 | 93% | 0% | 7% | 100% |
BLW | $0.958695 | — | $0.201334 | $1.160029 | 83% | 0% | 17% | 100% |
Senior Floating Rate | $0.376591 | — | $0.007176 | $0.383768 | 98% | 0% | 2% | 100% |
Senior Floating Rate II. | $0.399235 | — | $0.006780 | $0.406016 | 98% | 0% | 2% | 100% |
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and for-
mer fund investors and individual clients (collectively, “Clients”) and to
safeguarding their non-public personal information. The following informa-
tion is provided to help you understand what personal information
BlackRock collects, how we protect that information and why in certain
cases we share such information with select parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and
about you from different sources, including the following: (i) information we
receive from you or, if applicable, your financial intermediary, on 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.
ANNUAL REPORT AUGUST 31, 2009 91
![](https://capedge.com/proxy/N-CSR/0000900092-09-001095/brtax6ar0809x92x1.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 represen-
tation of future performance. BlackRock Defined Opportunity Credit Trust, BlackRock Diversified Income Strategies Fund, Inc., BlackRock Floating Rate
Income Strategies Fund, Inc., BlackRock Limited Duration Income Trust, BlackRock Senior Floating Rate Fund, Inc. and BlackRock Senior Floating Rate
Fund II, Inc. 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/0000900092-09-001095/brtax6ar0809x92x2.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 Floating | ||||||||
Rate Income | $49,300 | $46,300 | $0 | $8,000 | $6,100 | $6,100 | $1,028 | $1,049 |
Strategies Fund, Inc. |
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 Floating Rate | $414,628 | $420,149 |
Income Strategies Fund, Inc. |
(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 August 31,
2009.
(a)(1) The registrant (or “Fund”) is managed by a team of investment professionals
comprised of Leland Hart, Managing Director at BlackRock and C. Adrian Marshall,
Director at BlackRock. Messrs. Hart and Marshall are the Fund’s co-portfolio managers and
are responsible for the day-to-day management of the Fund’s portfolio and the selection of
its investments. Messrs. Hart and Marshall have been members of the Fund’s management
team since 2009.
Portfolio Manager | Biography | ||||||
Leland Hart | Managing Director of BlackRock, Inc. since 2009; Partner of R3 Capital | ||||||
Partners ("R3") in 2009; Managing Director of R3 in 2008 - 2009; Managing | |||||||
Director of Lehman Brothers from 2006 - 2008; Executive Director of Lehman | |||||||
Brothers from 2003 - 2006. | |||||||
C. Adrian Marshall | Director of BlackRock, Inc. since 2007; Vice President of BlackRock, Inc. | ||||||
from 2004 - 2007. | |||||||
(a)(2) As of August 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 | ||||||
Leland Hart | 8 | 1 | 0 | 0 | 0 | 0 | |
$2.21 Billion | $36.6 Million | $0 | $0 | $0 | $0 | ||
C. Adrian Marshall | 8 | 15 | 6 | 0 | 10 | 0 | |
$2.21 Billion | $4.23 Billion | $1.06 Billion | $0 | $3.48 Billion | $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 Mr. Marshall
currently manages 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 August 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 and Restricted Stock
Program.
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 managers, such benchmarks for the
Fund include a combination of market-based indices (e.g., CSFB Leveraged Loan Index),
certain customized indices and certain fund industry peer groups.
BlackRock’s Chief Investment Officers make a subjective determination with respect to the
portfolio managers’ 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. Prior to 2006, the plan provided
for the grant of awards that were expressed as an amount of cash that, if properly vested and
subject to the attainment of certain performance goals, will be settled in cash and/or in
BlackRock, Inc. common stock. 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. Marshall 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. Marshall 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. | |
Portfolio Manager | Dollar Range of Equity Securities | |
Beneficially Owned | ||
Leland Hart | None | |
C. Adrian Marshall | $1 - $10,000 |
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
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 Floating Rate Income Strategies Fund, Inc.
By: /s/ Anne F. Ackerley
Anne F. Ackerley
Chief Executive Officer of
BlackRock Floating Rate Income Strategies Fund, Inc.
Date: October 22, 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 Floating Rate Income Strategies Fund, Inc.
Date: October 22, 2009
By: /s/ Neal J. Andrews
Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock Floating Rate Income Strategies Fund, Inc.
Date: October 22, 2009