UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES |
Investment Company Act file number 811-21637 Name of Fund: BlackRock Diversified Income Strategies Fund, Inc. (DVF) Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809 Name and address of agent for service: Donald C. Burke, Chief Executive Officer, BlackRock Diversified Income Strategies Fund, Inc., 800 Scudders Mill Road, Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011, Princeton, NJ, 08543-9011 Registrant’s telephone number, including area code: (800) 882-0052, Option 4 Date of fiscal year end: 08/31/2008 Date of reporting period: 09/01/2007 – 08/31/2008 Item 1 – Report to Stockholders |
![](https://capedge.com/proxy/N-CSR/0000900092-08-000527/brbhldvffrasfrsfr2ar0808x1x1.jpg)
EQUITIES FIXED INCOME REAL ESTATE LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS Annual Report AUGUST 31, 2008 |
BlackRock Defined Opportunity Credit Trust (BHL) BlackRock Diversified Income Strategies Fund, Inc. (DVF) BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) 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 | ||
A Letter to Shareholders | 3 | |
Annual Report: | ||
Fund Summaries | 4 | |
The Benefits and Risks of Leveraging | 9 | |
Swap Agreements | 9 | |
Disclosure of Expenses | 9 | |
Fund Financial Statements: | ||
Schedules of Investments | 10 | |
Statements of Assets and Liabilities | 28 | |
Statements of Operations | 30 | |
Statements of Changes in Net Assets | 32 | |
Statements of Cash Flows | 35 | |
Fund Financial Highlights | 36 | |
Fund Notes to Financial Statements | 41 | |
Fund Report of Independent Registered Public Accounting Firm | 49 | |
Master Senior Floating Rate LLC Portfolio Summary | 49 | |
Master Senior Floating Rate LLC Financial Statements: | ||
Schedule of Investments | 50 | |
Statement of Assets and Liabilities | 56 | |
Statement of Operations | 57 | |
Statements of Changes in Net Assets | 58 | |
Master Senior Floating Rate LLC Financial Highlights | 58 | |
Master Senior Floating Rate LLC Notes to Financial Statements | 59 | |
Master Senior Floating Rate LLC Report of Independent Registered Public Accounting Firm | 63 | |
Disclosure of Investment Advisory Agreement and Subadvisory Agreement | 64 | |
Important Tax Information | 69 | |
Automatic Dividend Reinvestment Program | 70 | |
Officers and Directors/Trustees | 71 | |
Additional Information | 74 |
2 ANNUAL REPORT |
AUGUST 31, 2008 |
A Letter to Shareholders Dear Shareholder It has been a tumultuous year for investors, marked by almost daily headlines related to the beleaguered housing market, rising food and energy prices, and the escalating credit crisis. The news took an extraordinarily heavy tone shortly after the close of this reporting period as the credit crisis boiled over and triggered unprecedented failures and consolidation in the financial sector, stoking fears of a market and economic collapse and prompting the largest government rescue plan since the Great Depression. Through it all, the Federal Reserve Board (the “Fed”) has been aggressive in its attempts to restore order in financial markets. Key moves included slashing the target federal funds rate 325 basis points (3.25%) between September 2007 and April 2008 and providing numerous cash injections and lending programs. As the credit crisis took an extreme turn for the worse in September, the Fed, in concert with five other global central banks, cut interest rates by 50 basis points in a rare move intended to stave off worldwide economic damage from the intensifying financial market turmoil. The U.S. economy managed to grow at a slow-but-positive pace through the second quarter of the year, though the recent events almost certainly portend a global economic recession. Against this backdrop, U.S. stocks experienced intense volatility (steep declines and quick recoveries), generally posting losses for the current reporting period. Small-cap stocks fared significantly better than their larger counterparts. Non-U.S. markets followed the U.S. on the way down and, notably, decelerated at a faster pace than domestic equities—a stark reversal of recent years’ trends, when international stocks generally outpaced U.S. stocks. Treasury securities also traded in a volatile fashion, but rallied overall (yields fell and prices correspondingly rose), as the broader flight-to-quality theme persisted. The yield on 10-year Treasury issues, which fell to 3.34% in March, climbed to the 4.20% range in mid-June as investors temporarily shifted out of Treasury issues in favor of riskier assets (such as stocks and other high-quality fixed income sectors), then declined again to 3.83% by period- end when credit fears resurfaced. Tax-exempt issues posted positive returns, but problems among municipal bond insurers and the collapse in the market for auction rate securities pressured the group throughout the course of the past year. Economic and financial market distress also dampened the performance of high yield issues, which were very volatile due to the macro factors noted above. |
Overall, severe market instability resulted in mixed results for the major benchmark indexes: | ||||
Total Returns as of August 31, 2008 | 6-month | 12-month | ||
U.S. equities (S&P 500 Index) | (2.57)% | (11.14)% | ||
Small cap U.S. equities (Russell 2000 Index) | 8.53 | (5.48) | ||
International equities (MSCI Europe, Australasia, Far East Index) | (10.18) | (14.41) | ||
Fixed income (Lehman Brothers U.S. Aggregate Index) | 0.18 | 5.86 | ||
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) | 5.12 | 4.48 | ||
High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Capped Index) | 0.74 | (0.66) | ||
Past performance is no guarantee of future results. Index performance shown for illustrative purposes only. You cannot invest directly in an index. |
Through periods of market turbulence, as ever, BlackRock’s full resources are dedicated to the management of our clients’ assets. For our most current views on the economy and financial markets, we invite you to visit www.blackrock.com/funds. 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. Sincerely, |
Rob Kapito President, BlackRock Advisors, LLC |
THIS PAGE NOT PART OF YOUR FUND REPORT |
3 |
Fund Summary as of August 31, 2008 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. Performance From inception (January 31, 2008) through August 31, 2008, the Fund returned (11.44)% based on market price and 4.79% based on net asset value (“NAV”). For the same period, the Lipper Loan Participation Funds category posted an average return of (1.70)% on a NAV basis. The Credit Suisse Leveraged Loan Index returned 0.34% over the same time period. All returns reflect reinvestment of dividends. The Fund’s primary advantage versus the Lipper peer group was its ability to invest its portfolio and take advantage of historically low valuations among bank loan securities, while its older competitors came into the period fully invested. The Fund’s conservative positioning also was beneficial in a difficult market. The Fund moved from a premium to NAV at launch to an 11.5% discount by period-end, which accounts for the difference between performance based on price and performance based on NAV. 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 | BHL | |
Initial Offering Date | January 31, 2008 | |
Yield on Closing Market Price as of August 31, 2008 ($12.66)1 | 10.66% | |
Current Monthly Distribution per share of Common Stock2 | $0.1125 | |
Current Annualized Distribution per share of Common Stock2 | $1.3500 | |
Leverage as of August 31, 20083 | 23% |
1 Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price.
Past performance does not guarantee future results.
2 The distribution is not constant and is subject to change.
3 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).
The table below summarizes the changes in the Fund’s market price and net asset value per share:
8/31/08 | High | Low | ||||
Market Price | $12.66 | $15.33 | $12.19 | |||
Net Asset Value | $14.31 | $14.82 | $14.05 | |||
The following unaudited chart shows the portfolio composition of the Fund’s long-term investments:
Portfolio Composition | ||
Asset Mix | 8/31/08 | |
Floating Rate Loan Interests | 99% | |
Corporate Bonds | 1 | |
4 ANNUAL REPORT AUGUST 31, 2008
Fund Summary as of August 31, 2008 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 convertible preferred securities), notes or other debt securities or instruments that pay a floating rate of interest. Performance For the 12 months ended August 31, 2008, the Fund returned (16.08)% based on market price and (10.17)% based on NAV. For the same period, the closed-end Lipper High Current Yield Funds (Leveraged) category posted an average return of (14.03)% on a NAV basis. All returns reflect reinvest- ment of dividends. During the period, high yield loans—which comprised about 47% of the Fund’s portfolio as of August 31, 2008 — outperformed high yield bonds, which aided relative performance as most of the other funds in the Lipper category invest primarily in high yield bonds. As of August 31, 2008, the Fund was more modestly leveraged (28% of total net assets) versus many of its counterparts, which also helped relative performance in a very challenging market. Conversely, high yield floating-rate notes, which the Fund owns, detracted from performance. The Fund’s discount to NAV, which widened from 1.9% to 8.4% over the period, accounts for the difference between performance based on price and performance based on NAV. 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 | DVF | |
Initial Offering Date | January 31, 2005 | |
Yield on Closing Market Price as of August 31, 2008 ($12.77)1 | 12.69% | |
Current Monthly Distribution per share of Common Stock2 | $0.135 | |
Current Annualized Distribution per share of Common Stock2 | $1.620 | |
Leverage as of August 31, 20083 | 28% |
1 Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price.
Past performance does not guarantee future results.
2 The distribution is not constant and is subject to change.
3 As a percentage of managed assets, which is the total assets of the Fund (including any assets attributable to any borrowing that may be out-
standing) minus the sum of accrued liabilities (other than debt representing financial leverage).
The table below summarizes the changes in the Fund’s market price and net asset value per share:
8/31/08 | 8/31/07 | Change | High | Low | ||||||
Market Price | $12.77 | $17.16 | (25.58)% | $17.40 | $11.86 | |||||
Net Asset Value | $13.94 | $17.50 | (20.34)% | $18.03 | $13.84 | |||||
The following unaudited charts show the portfolio composition of the Fund’s long-term investments and credit quality alloca-
tions of the Fund’s corporate bond investments:
Portfolio Composition | ||||
Asset Mix | 8/31/08 | 8/31/07 | ||
Corporate Bonds | 50% | 60% | ||
Floating Rate Loan Interests | 47 | 38 | ||
Preferred Stock | — | 1 | ||
Common Stock | 3 | 1 | ||
Credit Quality Allocations4 | ||||
Credit Rating | 8/31/08 | 8/31/07 | ||
AA/Aa | 3% | —% | ||
BBB/Baa | 1 | 2 | ||
BB/Ba | 7 | 7 | ||
B/B | 61 | 62 | ||
CCC/Caa | 20 | 19 | ||
CC/Ca | 2 | 2 | ||
Not Rated | 6 | 8 | ||
4 Using the higher of Standard & Poor’s (“S&P”) or Moody’s
Investor Service (“Moody’s”) ratings.
ANNUAL REPORT AUGUST 31, 2008 5 |
Fund Summary as of August 31, 2008 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 consis- tent with investment in a diversified, leveraged portfolio consisting primarily of floating rate debt securities and instruments. Performance For the 12 months ended August 31, 2008, the Fund returned (4.28)% based on market price and (2.56)% based on NAV. For the same period, the closed-end Lipper Loan Participation Funds category posted an average return of (5.50)% on a NAV basis. All returns reflect reinvestment of dividends. The Fund’s conservative positioning with respect to credit and sector allocation aided relative performance during a year of considerable volatility in credit markets. The Fund’s discount to NAV, which widened modestly during the annual period, accounts for the difference between performance based on price and performance based on NAV. 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 | FRA | |
Initital Offering Date | October 31, 2003 | |
Yield on Closing Market Price as of August 31, 2008 ($14.49)1 | 10.34% | |
Current Monthly Distribution per share of Common Stock2 | $0.124835 | |
Current Annualized Distribution per share of Common Stock2 | $1.498020 | |
Leverage as of August 31, 20083 | 26% | |
1 Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price.
Past performance does not guarantee future results.
2 The distribution is not constant and is subject to change.
3 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).
The table below summarizes the changes in the Fund’s market price and net asset value per share:
8/31/08 | 8/31/07 | Change | High | Low | ||||||
Market Price | $14.49 | $16.70 | (13.23)% | $17.53 | $13.05 | |||||
Net Asset Value | $16.12 | $18.25 | (11.67)% | $18.63 | $15.89 | |||||
The following unaudited charts show the portfolio composition of the Fund’s long-term investments and credit quality alloca-
tions of the Fund’s corporate bond investments:
Portfolio Composition | ||||
8/31/08 | 8/31/07 | |||
Floating Rate Loan Interests | 73% | 75% | ||
Corporate Bonds | 26 | 24 | ||
Common Stocks | 1 | 1 | ||
Credit Quality Allocations4 | ||||
Credit Rating | 8/31/08 | 8/31/07 | ||
AA/Aa | 5% | —% | ||
BBB/Baa | 11 | 5 | ||
BB/Ba | 11 | 20 | ||
B/B | 59 | 58 | ||
CCC/Caa | 8 | 10 | ||
D | — | 2 | ||
Not Rated | 6 | 5 | ||
4 Using the highest of S&P’s and Moody’s ratings. |
6 ANNUAL REPORT AUGUST 31, 2008
Fund Summary as of August 31, 2008 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. Performance For the 12 months ended August 31, 2008, the Fund returned (1.32)% based on NAV. For the same period, the closed-end Lipper Loan Participation Funds category posted an average return of (5.50)% on a NAV basis. All returns reflect reinvestment of dividends. The year featured considerable volatility in credit markets, with periods of downward pressure punctuated by sharp rebounds. In contrast to many of the other funds in the Lipper category, the Fund did not use leverage, which aided relative performance over the period. The Fund was defensively positioned in its sector allocation and broadly diversified among individual credits, which also proved advantageous. In addition, above-average cash positions, held for opportunistic purchases during periods of forced selling, benefited performance. The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results. Fund Information1 |
Initital Offering Date | November 3, 1989 | |
Yield based on Net Asset Value as of August 31, 2008 ($7.98)2 | 5.86% | |
Current Monthly Distribution per share of Common Stock3 | $0.038968 | |
Current Annualized Distribution per share of Common Stock3 | $0.467616 | |
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 changes in the Fund’s net asset value per share:
8/31/08 | 8/31/07 | Change | High | Low | ||||||
Net Asset Value | $7.98 | $8.60 | (7.21)% | $8.71 | $7.81 | |||||
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, 2008 | August 31, 2008 | During the Period4 | March 1, 2008 | August 31, 2008 | During the Period4 | |||||||
BlackRock Senior Floating Rate, Inc. | $1,000 | $1,037.50 | $7.49 | $1,000 | $1,017.65 | $7.41 | ||||||
4 Expenses are equal to the annualized expense ratio of 1.47%, multiplied by the average account value over the period, multiplied by 183/366 (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 Senior Floating Rate LLC (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 366. See “Disclosure of Expenses for Continuously Offered Closed-End Funds” on page 9 for further information on how expenses were calculated. |
ANNUAL REPORT AUGUST 31, 2008 7
Fund Summary as of August 31, 2008 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. Performance For the 12 months ended August 31, 2008, the Fund returned (1.61)% based on NAV. For the same period, the closed-end Lipper Loan Participation Funds category posted an average return of (5.50)% on a NAV basis. All returns reflect reinvestment of dividends. The year featured considerable volatility in credit markets, with periods of downward pressure punctuated by sharp rebounds. In contrast to many of the other funds in the Lipper category, the Fund did not use leverage, which aided relative performance over the period. The Fund was defensively positioned in its sector allocation and broadly diversified among individual credits, which also proved advantageous. In addition, above-average cash positions, held for opportunistic purchases during periods of forced selling, benefited performance. The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results. Fund Information1 |
Initital Offering Date | March 26, 1999 | |
Yield based on Net Asset Value as of August 31, 2008 ($8.67)2 | 5.32% | |
Current Monthly Distribution per share of Common Stock3 | $0.038406 | |
Current Annualized Distribution per share of Common Stock3 | $0.460872 | |
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 changes in the Fund’s net asset value per share:
8/31/08 | 8/31/07 | Change | High | Low | ||||||
Net Asset Value | $8.67 | $9.35 | (7.27)% | $9.47 | $8.49 | |||||
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, 2008 | August 31, 2008 | During the Period4 | March 1, 2008 | August 31, 2008 | During the Period4 | |||||||
BlackRock Senior Floating Rate II, Inc. | $1,000 | $1,036.50 | $8.50 | $1,000 | $1,016.65 | $8.42 | ||||||
4 Expenses are equal to the expense ratio of 1.67%, multiplied by the average account value over the period, multiplied by 183/366 (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 Senior Floating Rate LLC (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 366. See “Disclosure of Expenses for Continuously Offered Closed-End Funds” on page 9 for further information on how expenses were calculated. |
8 ANNUAL REPORT AUGUST 31, 2008
The Benefits and Risks of Leveraging BlackRock Defined Opportunity Credit Trust, BlackRock Diversified Income Strategies Fund, Inc. and BlackRock Floating Rate Income Strategies Fund, Inc. (each a “Fund” and collectively, the “Funds”) may utilize leverage through borrowings or issuance of short-term debt securi- ties. 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 sharehold- ers will be the beneficiaries of the incremental yield. Leverage creates risks for shareholders including the likelihood of greater NAV and market price volatility. In addition, there is the risk that fluctua- tions in interest rates on borrowings may reduce shareholders’ yield and negatively impact its NAV and market price. If the income derived from securities purchased with assets received from leverage exceeds the cost of leverage, each Fund’s net income will be greater than if leverage had not been used. Conversely, if the income from the securities purchased is not sufficient to cover the cost of leverage, each Fund’s net income will be less than if leverage had not been used, and therefore the amount available for distribution to shareholders will be reduced. |
Under the Investment Company Act of 1940, the Funds are permitted
to borrow through a credit facility and the issuance of short-term debt
securities up to 33 1 / 3% of total managed assets. As of August 31,
2008, the Funds had outstanding leverage from credit facility borrowings
as a percentage of total managed assets as follows:
Percent of | ||
Leverage | ||
BlackRock Defined Opportunity Credit Trust | 23% | |
BlackRock Diversified Income | ||
Strategies Fund, Inc | 28% | |
BlackRock Floating Rate Income | ||
Strategies Fund, Inc | 26% | |
Swap Agreements
The Funds may invest in swap agreements, which are over-the-counter
contracts in which one party agrees to make periodic payments based on
the change in market value of a specified bond, basket of bonds, or index
in return for periodic payments based on a fixed or variable interest rate or
the change in market value of a different bond, basket of bonds or index.
Swap agreements may be used to obtain exposure to a bond or market
without owning or taking physical custody of securities. Swap agreements involve the risk that the party with whom the Funds have entered into the swap will default on its obligation to pay the Funds and the risk that the Funds will not be able to meet their obligations to pay the other party to the agreement. |
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 advisory fees, and other Fund expenses. The following example (which is based on a hypothetical investment of $1,000 invested on March 1, 2008 and held through August 31, 2008) is 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 Expense Examples on pages 7 and 8 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 example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher. |
ANNUAL REPORT AUGUST 31, 2008 9
Schedule of Investments August 31, 2008
BlackRock Defined Opportunity Credit Trust
(Percentages shown are based on Net Assets)
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Aerospace & Defense — 2.8% | ||||||
Avio Holding SpA: | ||||||
Term Loan B, 4.594%, 9/25/14 | USD | 471 | $ 425,068 | |||
Term Loan C, 5.219%, 9/25/15 | 500 | 451,071 | ||||
Hawker Beechcraft Acquisition Co. LLC: | ||||||
Letter of Credit, 2.706%, 3/26/14 | 162 | 151,014 | ||||
Term Loan B, 4.801%, 3/26/14 | 2,776 | 2,584,856 | ||||
3,612,009 | ||||||
Auto Components — 3.4% | ||||||
Allison Transmission, Inc. Term Loan, | ||||||
5.22% – 5.56%, 8/07/14 | 2,204 | 1,976,878 | ||||
Dana Holding Corp. Term Advance, 6.75%, 1/31/15 | 2,487 | 2,286,428 | ||||
Delphi Corp. 2nd Lien: | ||||||
Initial Tranche C Loan, 8.50%, 12/31/08 | 182 | 150,127 | ||||
Subsequent Tranche C, 8.50%, 12/31/08 | 18 | 15,289 | ||||
4,428,722 | ||||||
Automobiles — 0.6% | ||||||
Ford Motor Co. Term Loan, 5.47%, 12/15/13 | 998 | 772,682 | ||||
Biotechnology — 0.7% | ||||||
Talecris Biotherapeutics Holdings Corp. Term Loan | ||||||
5.97% – 6.31%, 12/06/13 | 995 | 962,614 | ||||
Building Products — 2.3% | ||||||
Building Materials Corp. of America Term Loan Advance, | ||||||
5.438% – 5.563%, 2/22/14 | 749 | 642,365 | ||||
Momentive Performance Materials, Inc. Term Loan B2, | ||||||
6.73%, 12/04/13 | EUR | 1,000 | 1,285,503 | |||
Stile Aquisition Corp. (Aka Masonite International): | ||||||
Canadian Term Loan, 4.63% – 5.046%, | ||||||
4/06/13 | USD | 569 | 484,434 | |||
U.S. Term Loan, 4.63% – 5.046%, 4/06/13 | 574 | 489,137 | ||||
2,901,439 | ||||||
Capital Markets — 0.9% | ||||||
Nuveen Investments, Inc. Term Loan B, | ||||||
5.462%, 11/13/14 | 1,317 | 1,215,972 | ||||
Chemicals — 6.9% | ||||||
Brenntag AG: | ||||||
Second Lien Term Loan, 5.071%, 1/19/14 | 196 | 180,655 | ||||
Term Loan B2, 5.071%, 1/24/14 | 804 | 739,345 | ||||
Cognis Deutschland Term Loan C, 4.80%, 9/15/13 | 3,000 | 2,697,501 | ||||
Huish Detergents, Inc. Term Loan B, | ||||||
4.81%, 4/26/14 | 998 | 903,551 | ||||
Matrix Acquisition (MacDermid, Inc.) Tranche B | ||||||
Term Loan, 4.801%, 4/12/14 | 1,723 | 1,584,784 | ||||
PQ Corp.: | ||||||
First Lien Term Loan, 5.92% – 6.05%, 7/30/14 | 1,000 | 935,625 | ||||
Second Lien Term Loan, 9.30%, 7/30/15 | 1,000 | 865,000 | ||||
Solutia, Inc. Term Loan, 8.50%, 2/28/14 | 998 | 961,023 | ||||
8,867,484 | ||||||
Commercial Services & Supplies — 5.9% | ||||||
ARAMARK Corp.: | ||||||
Letter of Credit Facility, 2.44%, 1/26/14 | 60 | 56,576 | ||||
U.S. Term Loan B, 4.676%, 1/26/14 | 940 | 890,549 | ||||
Alliance Laundry Systems LLC Term Loan, | ||||||
4.96% – 5.30%, 1/27/12 | 947 | 918,947 | ||||
Allied Waste North America, Inc.: | ||||||
New Term Loan, 3.97%, 3/28/14 | 547 | 533,955 | ||||
New Tranche A Credit Linked Deposit, 2.39%, | ||||||
3/28/14 | 376 | 366,459 |
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Commercial Services & Supplies (concluded) | ||||||
Kion Group GmbH Facility: | ||||||
Term Loan B, 4.469%, 12/28/14 | USD | 500 | $ 427,500 | |||
Term Loan C, 4.969%, 12/23/15 | 500 | 427,500 | ||||
Synagro Technologies, Inc. First Lien, | ||||||
4.81%, 4/02/14 | 998 | 842,872 | ||||
Waste Services, Inc. Term Loan E, 5.15%, 3/31/11 | 1,345 | 1,328,029 | ||||
West Corp. Term Loan B2, 4.844% – 5.171%, | ||||||
10/24/13 | 1,995 | 1,750,257 | ||||
7,542,644 | ||||||
Communications Equipment — 4.1% | ||||||
Alltel Corp.: | ||||||
Initial Tranche B2, 5.064%, 5/16/15 | 1,493 | 1,474,945 | ||||
Initial Tranche B3, 4.966%, 5/18/15 | 2,988 | 2,976,074 | ||||
Sorenson Communications Inc. Tranche C Term Loan, | ||||||
4.97% – 5.30%, 8/16/13 | 850 | 824,500 | ||||
5,275,519 | ||||||
Computers & Peripherals — 1.1% | ||||||
Intergraph Corp. Initial Term Loan First Lien, | ||||||
4.809%, 5/29/14 | 1,500 | 1,425,000 | ||||
Containers & Packaging — 2.5% | ||||||
Crown Americas Additional Term B Dollar Loan, | ||||||
4.423%, 11/15/12 | 500 | 482,500 | ||||
Graphic Packaging International Corp. Incremental | ||||||
Term Loan, 5.535% – 5.88%, 5/16/14 | 1,495 | 1,441,741 | ||||
Smurfit Kappa Group: | ||||||
Term Loan B1, 6.36% – 6.996%, 12/31/13 | EUR | 500 | 660,173 | |||
C1 Term Loan Facility, 6.61% – 7.25%, 1/12/14 | 500 | 660,173 | ||||
3,244,587 | ||||||
Diversified Consumer Services — 1.1% | ||||||
Coinmach Corp. Term Loan, | ||||||
5.48% – 5.81%, 11/20/14 | USD | 1,496 | 1,374,671 | |||
Diversified Telecommunication Services — 5.8% | ||||||
BCM Ireland Holdings (Eircom): | ||||||
Term Loan B, 6.606%, 9/30/14 | EUR | 500 | 673,987 | |||
Term Loan C, 6.856%, 9/30/15 | 500 | 674,188 | ||||
Hawaiian Telcom Communications, Inc. | ||||||
Term Loan C, 5.301%, 6/01/14 | USD | 500 | 396,667 | |||
Integra Telecom, Inc. First Lien Term Loan, | ||||||
6.894% – 7.05%, 8/31/13 | 1,993 | 1,813,152 | ||||
PaeTec Holdings Corp. Replacement Term Loan, | ||||||
4.969%, 2/28/13 | 975 | 887,411 | ||||
Time Warner Telecom Holdings, Inc. Term Loan B, | ||||||
4.47%, 1/07/13 | 1,538 | 1,471,321 | ||||
Wind Finance Term Loan, 0.10%, 12/17/14 | EUR | 1,000 | 1,466,717 | |||
7,383,443 | ||||||
Electric Utilities — 0.4% | ||||||
Astoria Generating Co. Acquisitions, LLC | ||||||
Second Lien Term Loan C, 6.56%, 1/26/14 | USD | 500 | 472,083 | |||
Electronic Equipment & Instruments — 2.8% | ||||||
Deutsch Connectors: | ||||||
Term Loan B, 7.646%, 7/27/14 | 55 | 48,521 | ||||
Term Loan B2, 7.396%, 7/27/14 | 854 | 748,599 | ||||
Term Loan C2, 7.646%, 7/27/15 | 751 | 658,627 | ||||
Flextronics International Ltd. | ||||||
Delay Draw Term Loan A1, 5.041%, 10/01/14 | 445 | 403,471 | ||||
A Closing Rate Loan, 5.038% – 5.041%, 10/01/14 | 1,550 | 1,405,737 | ||||
L-1 Identity Solutions Operating Co. Term Loan, | ||||||
7.50%, 8/05/13 | 375 | 374,063 | ||||
3,639,018 | ||||||
See Notes to Financial Statements.
10 ANNUAL REPORT AUGUST 31, 2008
Schedule of Investments (continued)
BlackRock Defined Opportunity Credit Trust
(Percentages shown are based on Net Assets)
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Energy Equipment & Services — 1.7% | ||||||
Compagnie Generale de Geophysique Term Loan, | ||||||
4.702%, 1/12/14 | USD | 750 | $ 729,375 | |||
Dresser, Inc. Term Loan B, | ||||||
4.716% – 5.057%, 5/04/14 | 1,488 | 1,419,420 | ||||
2,148,795 | ||||||
Food & Staples Retailing — 1.3% | ||||||
Alliance Boots Plc Acquisition Term Loan Facility B-2 | ||||||
UK Borrower, 8.097%, 7/09/15 | GBP | 1,000 | 1,616,644 | |||
Food Products — 1.7% | ||||||
Dole Food Co., Inc.: | ||||||
Letter of Credit, 4.788%, 4/12/13 | USD | 74 | 67,517 | |||
Term Loan B, 4.50% – 6%, 4/12/13 | 134 | 123,322 | ||||
Term Loan C, 4.50% – 6%, 4/12/13 | 539 | 494,983 | ||||
Wrigley Co. Term Loan B, 6.633%, 8/11/14 | 1,500 | 1,505,894 | ||||
2,191,716 | ||||||
Forms & Bulk Printing Services — 0.3% | ||||||
Hanley-Wood LLC Term Loan, | ||||||
4.71% – 4.72%, 3/08/14 | 500 | 388,125 | ||||
Health Care Equipment & Supplies — 4.7% | ||||||
Bausch & Lomb, Inc.: | ||||||
Delay Draw Term Loan, 6.051%, 4/24/15 | 240 | 233,825 | ||||
Parent Term Loan, 6.051%, 4/24/15 | 1,594 | 1,551,038 | ||||
Biomet, Inc. Dollar Term Loan, 5.801%, 3/25/15 | 2,490 | 2,438,613 | ||||
DJO Finance LLC Term Loan, 5.469% – 5.801%, | ||||||
5/20/14 | 995 | 970,125 | ||||
Hologic, Inc. Term Loan B, 5.75%, 3/31/13 | 334 | 331,710 | ||||
Inverness Medical Innovations, Inc. First Lien Term Loan, | ||||||
4.808%, 6/26/14 | 500 | 471,250 | ||||
5,996,561 | ||||||
Health Care Providers & Services — 6.7% | ||||||
Community Health Systems, Inc. Funded Term Loan, | ||||||
4.719% – 5.06%, 7/25/14 | 3,768 | 3,560,905 | ||||
HCA, Inc. Term Loan B, 5.051%, 11/17/13 | 2,000 | 1,872,916 | ||||
HealthSouth Corp. Term Loan, 5.29%, 3/10/13 | 1,905 | 1,802,367 | ||||
Surgical Care Affiliates LLC Term Loan, | ||||||
5.051%, 12/29/14 | 498 | 437,789 | ||||
Symbion, Inc.: | ||||||
Tranche A Term Loan, | ||||||
5.719% – 6.049%, 8/23/13 | 479 | 421,769 | ||||
Term Loan B, 5.719% – 6.049%, 8/01/14 | 479 | 421,769 | ||||
8,517,515 | ||||||
Health Care Technology — 0.4% | ||||||
Sunquest Holdings, Inc. (Misys Hospital Systems) | ||||||
Term Loan, 5.72% – 6.05%, 10/11/14 | 496 | 467,716 | ||||
Hotels, Restaurants & Leisure — 4.6% | ||||||
Harrah’s Operating Co. Term Loan B2, | ||||||
5.80% – 5.81%, 1/28/15 | 3,242 | 2,839,477 | ||||
Penn National Gaming, Inc. Term Loan B, | ||||||
4.21% – 4.55%, 10/03/12 | 1,742 | 1,667,338 | ||||
QCE LLC First Lien Term Loan, 4.813%, 5/05/13 | 998 | 841,187 | ||||
VMLUS Finance LLC (Venetian Macau): | ||||||
Delay Draw Term Loan B, 5.06%, 5/25/12 | 181 | 175,026 | ||||
Term Loan B Funded Project, 5.06%, 5/25/13 | 319 | 309,140 | ||||
5,832,168 | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Household Durables — 2.4% | ||||||
Jarden Corp. Term Loan B3, 5.301%, 1/24/12 | USD | 1,742 | $ 1,602,487 | |||
The Yankee Candle Co., Inc. Term Loan, | ||||||
4.48% – 4.81%, 2/06/14 | 1,606 | 1,401,076 | ||||
3,003,563 | ||||||
Household Products — 0.4% | ||||||
VI/Jon Inc. (VJCS Acquisition) Term Loan B, | ||||||
4.716% – 4.919%, 4/24/14 | 500 | 467,500 | ||||
IT Services — 8.2% | ||||||
Amadeus Global Travel Distribution SA: | ||||||
Term Loan B3 Facillity, 6.481%, 7/15/13 | EUR | 307 | 379,178 | |||
Term Loan B-2, 7.57%, 5/04/15 | USD | 1,000 | 832,500 | |||
Term Loan B-4 Facility, 6.481%, 7/15/13 | EUR | 186 | 229,621 | |||
Term Loan C2, 7.82%, 6/30/13 | USD | 1,000 | 832,500 | |||
Term Loan C-3 Facility, 6.981%, 7/15/14 | EUR | 307 | 379,178 | |||
Term Loan C-4, 6.981%, 7/15/14 | 186 | 229,621 | ||||
Ceridian Corp. U.S. Term Loan, 5.464%, 11/07/14 | USD | 2,000 | 1,880,000 | |||
First Data Corp.: | ||||||
Term Loan B1, 5.222% – 5.552%, 9/24/14 | 748 | 777,716 | ||||
Term Loan B2, 5.222% – 5.552%, 9/24/14 | 1,989 | 2,068,017 | ||||
Term Loan B3, 5.551% – 5.552%, 9/24/14 | 997 | 1,036,608 | ||||
SunGard Data Systems, (Solar Capital Corp.) Inc. | ||||||
New U.S. Term Loan B, 4.553%, 2/28/14 | 1,992 | 1,869,884 | ||||
10,514,823 | ||||||
Independent Power Producers & | ||||||
Energy Traders — 6.2% | ||||||
Mirant North America, LLC, Term Loan | ||||||
4.219%, 1/03/13 | 753 | 722,179 | ||||
NRG Energy, Inc.: | ||||||
Letter of Credit, 2.70%, 2/01/13 | 328 | 310,817 | ||||
Term Loan, 4.301%, 2/01/13 | 2,084 | 1,974,288 | ||||
Texas Competitive Electric Holdings Co. LLC (TXU): | ||||||
Initial Term Loan B-1, 5.963% – 6.303%, | ||||||
10/13/14 | 499 | 464,188 | ||||
Initial Term Loan B-3, 5.963% – 6.303%, | ||||||
10/13/14 | 4,726 | 4,395,357 | ||||
7,866,829 | ||||||
Industrial Conglomerates — 0.9% | ||||||
Sequa Corp. Term Loan, 5.72% – 7.25%, 12/03/14 | 1,236 | 1,176,578 | ||||
Insurance — 0.7% | ||||||
Alliant Holdings I, Inc. Term Loan, 5.801%, 11/01/14 | 995 | 915,388 | ||||
Internet & Catalog Retail — 0.2% | ||||||
FTD Group, Inc. Term Loan B, 7.50%, 8/04/14 | 250 | 242,500 | ||||
Machinery — 2.9% | ||||||
Lincoln Industrials: | ||||||
Delay Draw First Lien, 4.97%, 7/11/14 | 270 | 256,500 | ||||
Initial U.S. First Lien Term Loan, 4.97%, 7/11/14 | 720 | 720,000 | ||||
Navistar International Corp.: | ||||||
Revolving Credit, 5.903% – 6.046%, 1/19/12 | 533 | 491,333 | ||||
Term Advance, 6.046% – 6.292%, 1/19/12 | 1,467 | 1,351,167 | ||||
OshKosh Truck Corp. Term Loan B, | ||||||
4.22% – 4.43%, 12/06/13 | 944 | 858,923 | ||||
3,677,923 | ||||||
See Notes to Financial Statements.
ANNUAL REPORT |
AUGUST 31, 2008 |
11 |
Schedule of Investments (continued)
BlackRock Defined Opportunity Credit Trust
(Percentages shown are based on Net Assets)
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Media — 34.5% | ||||||
Alix Partners, LLP Tranche C Term Loan, 4.79%, | ||||||
10/12/13 | USD | 500 | $ 481,250 | |||
Alpha Topco Ltd.: | ||||||
Term Loan B1, 4.719%, 12/31/13 | 571 | 519,571 | ||||
Term Loan B2, 4.719%, 12/31/13 | 392 | 357,205 | ||||
Bresnan Communications, LLC: | ||||||
First Lien Add on Term Loan B, 5.02%, 9/29/13 | 1,000 | 953,333 | ||||
Initital Term Loan B, 4.80% – 5.05%, 9/29/13 | 500 | 476,667 | ||||
Cablevision Systems Corp. Incremental Term Loan, | ||||||
4.214%, 3/29/13 | 1,739 | 1,653,351 | ||||
Casema NV (Essent Kablecom): | ||||||
B1 Term Loan Facility, 6.985%, 11/14/14 | EUR | 329 | 461,113 | |||
B2 Term Loan Facility , 6.985%, 9/11/14 | 171 | 239,525 | ||||
Term Loan C, 7.485%, 11/14/15 | 500 | 700,639 | ||||
Catalina Marketing Corp. Initial Term Loan, | ||||||
5.801%, 10/01/14 | USD | 2,490 | 2,337,458 | |||
Cengage Learning Acquistions, Inc. (Thomson | ||||||
Learning) Incremental Term Loan 1, | ||||||
7.50%, 7/05/14 | 2,500 | 2,475,000 | ||||
Cequel Communications LLC (Cebridge) | ||||||
Term Loan, 4.791% – 6%, 11/05/13 | 2,489 | 2,323,012 | ||||
Charter Communications, Operating LLC | ||||||
Replacement Term Loan, 4.67% – 4.80%, 3/06/14 | 1,250 | 1,091,840 | ||||
Clarke American Corp. Term Loan B, | ||||||
5.291% – 5.301%, 3/30/14 | 2,490 | 2,046,734 | ||||
Dex Media West Term Loan, 7%, 10/24/14 | 750 | 685,781 | ||||
DirecTV Holdings LLC Term Loan C, | ||||||
5.25%, 4/13/13 | 675 | 672,469 | ||||
Discovery Communications Holding LLC Term Loan B, | ||||||
4.801%, 5/14/14 | 993 | 967,403 | ||||
FoxCo Acquisition Sub Term Loan, 7.25%, 7/14/15 | 500 | 484,584 | ||||
Getty Images, Inc. Initial Term Loan, 7.25%, 7/02/15 | 1,000 | 998,438 | ||||
Gray Television, Inc. Delayed Draw Term | ||||||
Loan B, 3.97% – 5.25%, 12/31/14 | 1,802 | 1,495,940 | ||||
HMH Publishing Co. Ltd. Tranche A Term Loan, | ||||||
6.464%, 6/12/14 | 2,000 | 1,795,000 | ||||
Hargray Acquisition Co., First Lien Term Loan, | ||||||
5.051%, 6/29/14 | 500 | 457,500 | ||||
Idearc, Inc. (Verizon) Term Loan B, 4.47% – 4.80%, | ||||||
11/17/14 | 370 | 259,191 | ||||
Insight Midwest Holdings LLC, Term Loan B, | ||||||
4.47%, 4/06/14 | 2,000 | 1,920,626 | ||||
Intelsat Corp.: | ||||||
Term Loan B2A, 5.288%, 1/03/14 | 333 | 317,087 | ||||
Term Loan B2B, 5.288%, 1/03/12 | 333 | 316,992 | ||||
Term Loan B2C, 5.288%, 1/03/12 | 333 | 316,992 | ||||
Lavena Holding 3 (Prosiebensat. 1 Media AG): | ||||||
Term Loan B1, 6.86% – 7.526%, 3/06/15 | EUR | 1,500 | 1,512,345 | |||
Term Loan C1, 7.11% – 7.776%, 6/30/16 | 1,500 | 1,512,345 | ||||
Local TV Finance, LLC Term Loan, 4.80% – | ||||||
4.87%, 5/07/13 | USD | 1,993 | 1,733,437 | |||
MCC Iowa LLC (Mediacom Broadband Group) | ||||||
Term Loan D14.21% – 4.23%, 1/31/15 | 249 | 230,041 | ||||
MCC Iowa (Mediacom Communications) Term Loan D2, | ||||||
4.21% – 4.23%, 1/31/15 | 884 | 815,470 | ||||
Mediacom Illinois LLC (Mediacom Communications, | ||||||
LLC) Term Loan C, 4.22% – 4.23%, 1/31/15 | 1,492 | 1,377,881 | ||||
NTL Cable Plc (Virgin): | ||||||
Second Lien Term Loan B2, 8.147%, 7/17/12 | GBP | 281 | 465,194 | |||
Term Loan 1, 8.147%, 7/30/12 | 913 | 1,513,544 | ||||
NV Broadcasting First Lien Term Loan 5.69%, 11/01/13 | 1,648 | 1,449,481 |
Floating Rate Loan Interests | (000) | Value | ||||
Media (concluded) | ||||||
Newsday LLC: | ||||||
Floating Rate Term Loan, 7.958%, 8/01/13 | USD | 500 | $ 500,000 | |||
Fixed Rate Term Loan, 9.75%, 8/01/13 | 250 | 249,531 | ||||
Nielsen Finance LLC Dollar Term Loan, | ||||||
4.803%, 8/09/13 | 1,985 | 1,833,161 | ||||
Parkin Broadcasting Term Loan B, | ||||||
5.69%, 11/09/13 | 337 | 297,327 | ||||
Sunshine Acquisition Ltd. Term Facilities, | ||||||
4.80%, 3/20/12 | 1,750 | 1,496,922 | ||||
UPC Financing Partnership (United Pan Europe | ||||||
Communications), Inc.: | ||||||
Term Loan M, 6.513%, 12/31/14 | EUR | 750 | 978,568 | |||
Term Loan N1, 4.214%, 12/31/14 | USD | 1,000 | 936,500 | |||
Weather Channel Term Loan B, 7.205%, 6/01/15 | 400 | 387,000 | ||||
44,093,448 | ||||||
Metals & Mining — 0.7% | ||||||
Algoma Steel, Inc. Term Loan, 4.98%, 6/20/13 | 1,000 | 945,000 | ||||
Multiline Retail — 1.5% | ||||||
Neiman Marcus Group, Inc. Term Loan, | ||||||
4.422%, 4/06/13 | 2,000 | 1,855,454 | ||||
Oil, Gas & Consumable Fuels — 1.5% | ||||||
Petroleum Geo-Services ASA/PGS Finance, Inc. | ||||||
Term Loan, 4.55%, 6/29/15 | 1,458 | 1,412,558 | ||||
Vulcan Energy Corp. Term Loan B3, 6.05%, 8/12/11 | 500 | 497,500 | ||||
1,910,058 | ||||||
Paper & Forest Products — 3.9% | ||||||
Boise Paper LLC (Aldbra Sub LLC) Tranche B | ||||||
Term Loan, 7.50%, 2/22/14 | 998 | 993,047 | ||||
Georgia-Pacific LLC Term Loan B, | ||||||
4.219% – 4.551%, 12/20/12 | 2,881 | 2,720,554 | ||||
NewPage Corp. Term Loan, 6.563%, 12/21/14 | 1,239 | 1,206,849 | ||||
4,920,450 | ||||||
Personal Products — 0.9% | ||||||
American Safety Razor Co. LLC Second Lien Term Loan, | ||||||
8.72% – 8.89%, 1/30/14 | 1,250 | 1,125,000 | ||||
Pharmaceuticals — 0.8% | ||||||
Warner Chilcott: | ||||||
Term Loan B, 4.469% – 4.801%, 1/18/12 | 719 | 696,228 | ||||
Term Loan C, 4.801%, 1/18/12 | 358 | 346,482 | ||||
1,042,710 | ||||||
Professional Services — 0.8% | ||||||
Booz Allen Hamilton, Inc. Term Loan B, | ||||||
7.50%, 7/31/15 | 1,000 | 1,000,417 | ||||
Real Estate Management & Development — 0.4% | ||||||
Capital Automotive L Term Loan, 4.22%, 12/16/10 | 600 | 565,380 | ||||
Road & Rail — 0.6% | ||||||
Rail America, Inc.: | ||||||
Canadian Term Loan, 6.79%, 8/14/09 | 65 | 64,904 | ||||
U.S. Term Loan, 6.79%, 8/14/09 | 684 | 681,346 | ||||
746,250 | ||||||
See Notes to Financial Statements.
12 ANNUAL REPORT |
AUGUST 31, 2008 |
Schedule of Investments (continued)
BlackRock Defined Opportunity Credit Trust
(Percentages shown are based on Net Assets)
Par | ||||
Floating Rate Loan Interests | (000) | Value | ||
Specialty Retail — 2.7% | ||||
Adesa, Inc. (KAR Holdings, Inc.) Initial Term Loan, | ||||
5.06%, 10/18/13 | USD 1,977 | $ 1,758,451 | ||
General Nutrition Centers, Inc. Term Loan, | ||||
5.04% – 5.06%, 9/16/13 | 995 | 896,295 | ||
Michaels Stores, Inc. Replacement Loan, | ||||
4.75%, 10/31/13 | 995 | 767,035 | ||
3,421,781 | ||||
Textiles, Apparel & Luxury Goods — 0.4% | ||||
Hanesbrands, Inc. Term Loan B, | ||||
4.545% – 4.551%, 9/05/13 | 500 | 484,861 | ||
Wireless Telecommunication Services — 4.7% | ||||
Centennial Cellular Operating Co. New Term Loan, | ||||
4.469% – 4.801%, 2/09/11 | 2,000 | 1,956,666 | ||
Cricket Communications, Inc. Term Loan B, | ||||
6.50%, 6/16/13 | 1,075 | 1,060,667 | ||
MetroPCS Wireless, Inc. New Tranche B Term Loan, | ||||
4.75% – 5.063%, 11/03/13 | 2,044 | 1,953,014 | ||
NTELOS Inc. Term Loan B-1 Facility, 4.72%, 8/24/11 | 997 | 975,298 | ||
5,945,645 | ||||
Total Floating Rate Loan Interests — 138.0% | 176,198,685 | |||
Corporate Bonds | ||||
Diversified Telecommunication Services — 1.1% | ||||
Qwest Corp., 6.026%, 6/15/13 (b) | 1,500 | 1,387,500 | ||
Total Corporate Bonds — 1.1% | 1,387,500 | |||
Total Long-Term Investments | ||||
(Cost — $177,472,047) — 139.1% | 177,586,185 | |||
Short-Term Securities | ||||
U.S. Government and Agency Obligations (c) | ||||
Federal Home Loan Bank, 2.36%, 9/16/08 | 700 | 699,390 | ||
U.S. Treasury Bills, 1.65%, 9/25/08 (e) | 700 | 699,288 | ||
1,398,678 | ||||
Beneficial | ||||
Interest | ||||
(000) | ||||
Money Market | ||||
BlackRock Liquidity Series, LLC | ||||
Cash Sweep Series, 2.41% (a)(d) | USD 2,366 | 2,365,561 | ||
Total Short-Term Securities (Cost — $3,764,239) — 2.9% | 3,764,239 | |||
Total Investments (Cost — $181,236,286*) — 142.0% | 181,350,424 | |||
Liabilities in Excess of Other Assets — (42.0)% | (53,655,276) | |||
Net Assets — 100.0% | $127,695,148 | |||
* The cost and unrealized appreciation (depreciation) of investments as of August
31, 2008, as computed for federal income tax purposes, were as follows:
Aggregate cost | $181,034,697 | |
Gross unrealized appreciation | $ 2,422,597 | |
Gross unrealized depreciation | (2,106,870) | |
Net unrealized appreciation | $ 315,727 | |
(a) Represents the current yield as of report date.
(b) Variable rate security. Rate shown is as of report date.
(c) Rate shown is the yield to maturity as of the date of purchase.
(d) 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 | ||||
(000) | Income | |||
BlackRock Liquidity Series, LLC | ||||
Cash Sweep Series | $2,366 | $201,589 | ||
(e) All or a portion of security held as collateral in connection with swap contracts.
•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. These industry
classifications are unaudited.
•Foreign currency exchange contracts as of August 31,2008 were as follows:
Currency | Currency | Settlement | Unrealized | |||
Purchased | Sold | Date | Appreciation | |||
USD 10,276,966 | EUR 6,566,500 | 10/23/08 | $ 672,136 | |||
USD 2,522,511 | GBP 1,271,900 | 10/23/08 | 213,525 | |||
Total | $ 885,661 | |||||
•Swaps outstanding as of August 31,2008 were as follows:
Notional | Unrealized | |||||
Amount | Appreciation | |||||
(000) | (Depreciation) | |||||
Sold credit default protection LCDX | ||||||
Index and receive 2.25% | ||||||
Broker, Goldman Sachs & Co. | ||||||
Expires December 2012 | USD | 5,000 | $ 110,265 | |||
Sold credit default protection on LCDX | ||||||
Index and receive 2.25% | ||||||
Broker, Goldman Sachs & Co. | ||||||
Expires December 2012 | USD | 5,000 | 185,265 | |||
Sold credit default protection LCDX | ||||||
Index and receive 5.25% | ||||||
Broker, UBS Securities | ||||||
Expires June 2013 | EUR | 5,000 | (200,702) | |||
Bought credit default protection on LCDX | ||||||
Index and pay 3.25% | ||||||
Broker, UBS Securities | ||||||
Expires June 2013 | USD | 5,750 | 95,968 | |||
Total | $ 190,796 | |||||
See Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2008 13
Schedule of Investments (concluded) BlackRock Defined Opportunity Credit Trust
•Currency Abbreviations:
EUR Euro
GBP British Pound
USD U.S. Dollar
•Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 157, "Fair Value Measurements" ("FAS 157"), clarifies the defini-
tion 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 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
circumstance, to the extent observable inputs are not available (including the
Fund’s own assumption used in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an
indication 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 Notes to Financial Statements.
The following table summarizes the inputs used as of August 31, 2008 in deter-
mining the fair valuation of the Fund’s investments:
Valuation | Investments in | Other Financial | ||
Inputs | Securities | Instruments* | ||
Level 1 | — | — | ||
Level 2 | $176,509,069 | $1,076,457 | ||
Level 3 | 4,841,355 | — | ||
Total | $181,350,424 | $1,076,457 | ||
* Other financial instruments are swaps and foreign currency exchange
contracts.
The following is a reconciliation of investments for unobservable inputs (Level 3)
were used in determining fair value:
Investments in | ||
Securities | ||
Balance, as of January 31, 2008 | $ — | |
Accrued discounts/premiums | — | |
Realized gain (loss) | — | |
Change in unrealized appreciation (depreciation) | (567,141) | |
Net purchases (sales) | 5,408,496 | |
Net transfers in/out of Level 3 | — | |
Balance, as of August 31, 2008 | $4,841,355 | |
See Notes to Financial Statements.
14 ANNUAL REPORT AUGUST 31, 2008
Schedule of Investments August 31, 2008
BlackRock Diversified Income Strategies Fund, Inc.
(Percentages shown are based on Net Assets)
Par | ||||||
Corporate Bonds | (000) | Value | ||||
Auto Components — 0.4% | ||||||
Allison Transmission, Inc. (a): | ||||||
11%, 11/01/15 | USD | 50 | $ 46,000 | |||
11.25%, 11/01/15 (b) | 465 | 409,200 | ||||
Lear Corp., 8.75%, 12/01/16 | 255 | 191,887 | ||||
647,087 | ||||||
Building Products — 1.9% | ||||||
CPG International I, Inc., 9.904%, 7/01/12 (c) | 2,500 | 1,900,000 | ||||
Momentive Performance Materials, Inc. Series WI, | ||||||
9.75%, 12/01/14 | 300 | 270,750 | ||||
Ply Gem Industries, Inc., 11.75%, 6/15/13 (a) | 1,215 | 1,105,650 | ||||
3,276,400 | ||||||
Capital Markets — 1.8% | ||||||
E*Trade Financial Corp., 12.50%, 11/30/17 (a) | 2,000 | 2,140,000 | ||||
Marsico Parent Co., LLC, 10.625%, 1/15/16 (a) | 724 | 608,160 | ||||
Marsico Parent Holdco, LLC, | ||||||
12.50%, 7/15/16 (a)(b) | 266 | 221,190 | ||||
Marsico Parent Superholdco, LLC, | ||||||
14.50%, 1/15/18 (a)(b) | 180 | 149,732 | ||||
3,119,082 | ||||||
Chemicals — 5.6% | ||||||
American Pacific Corp., 9%, 2/01/15 | 440 | 426,800 | ||||
Ames True Temper, Inc., 6.791%, 1/15/12 (c) | 3,425 | 2,740,000 | ||||
Hanna (M.A.) Co., 6.89%, 9/22/08 | 2,000 | 2,000,000 | ||||
Hexion U.S. Finance Corp., 7.304%, 11/15/14 (c) | 2,000 | 1,525,000 | ||||
MacDermid, Inc., 9.50%, 4/15/17 (a) | 420 | 384,300 | ||||
NOVA Chemicals Corp., 5.953%, 11/15/13 (c) | 2,745 | 2,360,700 | ||||
9,436,800 | ||||||
Commercial Services & Supplies — 1.0% | ||||||
US Investigations Services, Inc., | ||||||
10.50%, 11/01/15 (a) | 1,000 | 890,000 | ||||
West Corp., 11%, 10/15/16 | 985 | 770,763 | ||||
1,660,763 | ||||||
Construction Materials — 1.1% | ||||||
Nortek Holdings, Inc., 10%, 12/01/13 (a) | 2,050 | 1,916,750 | ||||
Containers & Packaging — 6.0% | ||||||
Berry Plastics Holding Corp., 6.651%, 9/15/14 (c)(k) | 2,235 | 1,676,250 | ||||
Packaging Dynamics Finance Corp., | ||||||
10%, 5/01/16 (a) | 1,570 | 1,059,750 | ||||
Smurfit Kappa Funding Plc, 7.75%, 4/01/15 | 5,000 | 4,400,000 | ||||
Smurfit-Stone Container Enterprises, Inc., | ||||||
8%, 3/15/17 | 780 | 624,000 | ||||
Wise Metals Group LLC, 10.25%, 5/15/12 | 2,750 | 2,426,875 | ||||
10,186,875 | ||||||
Diversified Financial Services — 2.0% | ||||||
FCE Bank Plc, 7.125%, 1/16/12 | EUR | 2,300 | 2,814,292 | |||
Ford Motor Credit Co. LLC, 5.538%, 1/13/12 (c) | USD | 815 | 601,718 | |||
3,416,010 | ||||||
Electric Utilities — 0.9% | ||||||
NSG Holdings LLC, 7.75%, 12/15/25 (a) | 1,570 | 1,507,200 | ||||
Food & Staples Retailing — 0.2% | ||||||
Rite Aid Corp., 9.375%, 12/15/15 | 580 | 374,100 | ||||
Corporate Bonds | (000) | Value | ||||
Health Care Equipment & Supplies — 3.4% | ||||||
Biomet, Inc.: | ||||||
10%, 10/15/17 | USD | 350 | $ 378,000 | |||
10.375%, 10/15/17 (b) | 350 | 369,250 | ||||
11.625%, 10/15/17 | 480 | 504,600 | ||||
DJO Finance LLC, 10.875%, 11/15/14 | 4,500 | 4,511,250 | ||||
5,763,100 | ||||||
Health Care Providers & Services — 0.7% | ||||||
Community Health Systems, Inc. Series WI, | ||||||
8.875%, 7/15/15 | 760 | 767,600 | ||||
Tenet Healthcare Corp.: | ||||||
6.375%, 12/01/11 | 155 | 149,575 | ||||
6.50%, 6/01/12 | 345 | 333,787 | ||||
1,250,962 | ||||||
Hotels, Restaurants & Leisure — 6.4% | ||||||
Harrah’s Operating Co., Inc.: | ||||||
10.75%, 2/01/16 (a) | 4,159 | 2,796,927 | ||||
10.75%, 2/01/18 (a)(b) | 1,278 | 754,853 | ||||
Little Traverse Bay Bands of Odawa Indians, | ||||||
10.25%, 2/15/14 (a) | 800 | 666,000 | ||||
Shingle Springs Tribal Gaming Authority, | ||||||
9.375%, 6/15/15 (a) | 410 | 333,125 | ||||
Snoqualmie Entertainment Authority, | ||||||
6.875%, 2/01/14 (a)(c) | 305 | 223,412 | ||||
Travelport LLC, 7.436%, 9/01/14 (a) | 945 | 744,188 | ||||
Tropicana Entertainment LLC Series WI, | ||||||
9.625%, 12/15/14 (d)(e) | 120 | 38,400 | ||||
Tunica-Biloxi Gaming Authority, 9%, 11/15/15 (a) | 1,000 | 947,500 | ||||
Universal City Florida Holding Co. I, | ||||||
7.551%, 5/01/10 (c) | 4,525 | 4,377,938 | ||||
10,882,343 | ||||||
Household Durables — 0.7% | ||||||
Jarden Corp., 7.50%, 5/01/17 | 525 | 467,250 | ||||
Stanley-Martin Communities LLC, 9.75%, 8/15/15 | 1,250 | 475,000 | ||||
The Yankee Candle Co., Inc., 9.75%, 2/15/17 | 285 | 180,975 | ||||
1,123,225 | ||||||
IT Services — 0.5% | ||||||
First Data Corp., 9.875%, 9/24/15 (a) | 1,000 | 862,500 | ||||
Independent Power Producers | ||||||
& Energy Traders — 1.0% | ||||||
Energy Future Holding Corp., | ||||||
11.25%, 11/01/17 (a)(b) | 1,000 | 985,000 | ||||
Texas Competitive Electric Holdings Co. LLC, | ||||||
10.50%, 11/01/16 (a)(b) | 800 | 764,000 | ||||
1,749,000 | ||||||
Industrial Conglomerates — 1.7% | ||||||
Sequa Corp. (a): | ||||||
11.75%, 12/01/15 | 1,530 | 1,346,400 | ||||
13.50%, 12/01/15 (b) | 1,995 | 1,625,297 | ||||
2,971,697 | ||||||
Insurance — 2.0% | ||||||
American International Group, Inc., | ||||||
8.25%, 8/15/18 (a) | 3,000 | 2,957,463 | ||||
USI Holdings Corp., 6.679%, 11/15/14 (a)(c) | 490 | 390,775 | ||||
3,348,238 | ||||||
See Notes to Financial Statements. |
ANNUAL REPORT |
AUGUST 31, 2008 |
15 |
Schedule of Investments (continued)
Par | ||||||
Corporate Bonds | (000) | Value | ||||
Machinery — 1.1% | ||||||
ESCO Corp., 6.651%, 12/15/13 (a)(c) | USD | 920 | $ 864,800 | |||
RBS Global, Inc., 8.875%, 9/01/16 | 505 | 470,912 | ||||
Titan International, Inc., 8%, 1/15/12 | 460 | 455,400 | ||||
1,791,112 | ||||||
Marine — 0.1% | ||||||
Navios Maritime Holdings, Inc., 9.50%, 12/15/14 (a) | 141 | 134,655 | ||||
Media — 5.4% | ||||||
Affinion Group, Inc., 10.125%, 10/15/13 | 320 | 315,200 | ||||
Canadian Satellite Radio Holdings, Inc., | ||||||
12.75%, 2/15/14 (a) | 3,000 | 2,527,500 | ||||
NTL Cable Plc, 9.125%, 8/15/16 | 3,725 | 3,548,062 | ||||
Nielsen Finance LLC, 10%, 8/01/14 | 980 | 992,250 | ||||
TL Acquisitions, Inc., 10.50%, 1/15/15 (a) | 1,570 | 1,342,350 | ||||
Windstream Regatta Holdings, Inc., | ||||||
11%, 12/01/17 (a) | 832 | 482,560 | ||||
9,207,922 | ||||||
Metals & Mining — 2.3% | ||||||
Aleris International, Inc.: | ||||||
9%, 12/15/14 (b) | 370 | 288,600 | ||||
10%, 12/15/16 | 500 | 348,750 | ||||
RathGibson, Inc., 11.25%, 2/15/14 | 1,390 | 1,337,875 | ||||
Ryerson, Inc., 10.176%, 11/01/14 (a)(c) | 2,010 | 1,919,550 | ||||
3,894,775 | ||||||
Oil, Gas & Consumable Fuels — 0.6% | ||||||
SandRidge Energy, Inc., 6.416%, 4/01/14 (a)(c) | 1,000 | 937,821 | ||||
Paper & Forest Products — 7.5% | ||||||
Abitibi-Consolidated, Inc., 6.276%, 6/15/11 (c) | 5,000 | 2,287,500 | ||||
Ainsworth Lumber Co. Ltd., 11%, 7/29/15 (a) | 2,570 | 2,062,079 | ||||
Bowater, Inc., 9%, 8/01/09 | 190 | 176,700 | ||||
NewPage Corp.: | ||||||
9.051%, 5/01/12 (c) | 3,000 | 2,812,500 | ||||
10%, 5/01/12 | 1,820 | 1,765,400 | ||||
Verso Paper Holdings LLC Series B, | ||||||
6.551%, 8/01/14 (c) | 4,000 | 3,560,000 | ||||
12,664,179 | ||||||
Pharmaceuticals — 1.9% | ||||||
Angiotech Pharmaceuticals, Inc., | ||||||
6.56%, 12/01/13 (c) | 1,500 | 1,327,500 | ||||
Elan Finance Plc, 6.804%, 11/15/11 (c) | 2,000 | 1,845,000 | ||||
3,172,500 | ||||||
Real Estate Management & Development — 1.4% | ||||||
Realogy Corp.: | ||||||
10.50%, 4/15/14 | 1,430 | 843,700 | ||||
11%, 4/15/14 (b) | 2,565 | 1,205,550 | ||||
12.375%, 4/15/15 | 760 | 349,600 | ||||
2,398,850 | ||||||
Road & Rail — 0.1% | ||||||
Swift Transportation Co., Inc., | ||||||
10.554%, 5/15/15 (a)(c) | 400 | 140,000 | ||||
Semiconductors & Semiconductor | ||||||
Equipment — 0.9% | ||||||
Avago Technologies Finance Ltd., | ||||||
8.311%, 6/01/13 (c) | 400 | 400,000 | ||||
Freescale Semiconductor, Inc., 8.875%, 12/15/14 | 160 | 129,600 | ||||
Spansion, Inc., 5.935%, 6/01/13 (a)(c) | 1,410 | 979,950 | ||||
1,509,550 | ||||||
See Notes to Financial Statements. | ||||||
BlackRock Diversified Income Strategies Fund, Inc. (Percentages shown are based on Net Assets) Par
Corporate Bonds | (000) | Value | ||||
Software — 0.1% | ||||||
BMS Holdings, Inc., 10.595%, 2/15/12 (a)(b)(c) | USD | 423 | $ 254,045 | |||
Specialty Retail — 3.1% | ||||||
AutoNation, Inc., 4.791%, 4/15/13 (c)(k) | 2,700 | 2,227,500 | ||||
Buffets, Inc., 12.50%, 11/01/14 (d)(e) | 360 | 3,600 | ||||
General Nutrition Centers, Inc., 7.199%, | ||||||
3/15/14 (b)(c) | 1,670 | 1,397,033 | ||||
Michaels Stores, Inc.: | ||||||
10%, 11/01/14 | 715 | 536,250 | ||||
11.375%, 11/01/16 | 1,135 | 726,400 | ||||
United Auto Group, Inc., 7.75%, 12/15/16 | 355 | 287,994 | ||||
5,178,777 | ||||||
Wireless Telecommunication Services — 6.3% | ||||||
BCM Ireland Preferred Equity Ltd., | ||||||
10.597%, 2/15/17 (a) | EUR | 413 | 296,889 | |||
Centennial Communications Corp., | ||||||
8.541%, 1/01/13 (c)(k) | USD | 3,000 | 2,985,000 | |||
Cricket Communications, Inc.: | ||||||
9.375%, 11/01/14 | 825 | 817,781 | ||||
10.875%, 11/01/14 | 280 | 277,550 | ||||
Digicel Group Ltd. (a): | ||||||
8.875%, 1/15/15 | 1,070 | 1,004,516 | ||||
9.125%, 1/15/15 (b) | 2,129 | 1,924,084 | ||||
FiberTower Corp. (f): | ||||||
9%, 11/15/12 (a) | 650 | 429,000 | ||||
9%, 11/15/12 | 350 | 231,000 | ||||
iPCS, Inc., 4.926%, 5/01/13 (c) | 380 | 337,250 | ||||
Nordic Telephone Co. Holdings ApS (a): | ||||||
8.875%, 5/01/16 | 800 | 770,000 | ||||
10.357%, 5/01/16 (c) | EUR | 500 | 711,519 | |||
Orascom Telecom Finance SCA, | ||||||
7.875%, 2/08/14 (a) | USD | 325 | 297,765 | |||
Sprint Capital Corp., 7.625%, 1/30/11 | 675 | 675,000 | ||||
10,757,354 | ||||||
Total Corporate Bonds — 68.1% | 115,533,672 | |||||
Floating Rate Loan Interests | ||||||
Airlines — 0.4% | ||||||
US Airways Group, Inc. Loan, 4.969%, 3/24/14 | 990 | 678,150 | ||||
Auto Components — 2.3% | ||||||
Allison Transmission, Inc. Term Loan, | ||||||
5.22% – 5.56%, 8/07/14 | 1,959 | 1,756,858 | ||||
Dana Holding Corp. Term Advance, | ||||||
6.75%, 1/31/15 | 998 | 917,266 | ||||
Intermet Corp.: | ||||||
Term Loan B, 7.696%, 11/08/10 (d)(e) | 357 | 304,046 | ||||
Term Loan B, 7.696%, 11/08/10 (b) | 37 | 31,997 | ||||
Synthetic Line of Credit, 2.343%, 11/08/10 (d)(e) | 519 | 440,741 | ||||
Synthetic Line of Credit, 2.343%, 11/09/10 (b) | 24 | 20,447 | ||||
Metaldyne Co. LLC: | ||||||
DF Loan, 2.336% – 6.563%, 1/11/12 | 87 | 48,407 | ||||
Initial Tranche B Term Loan, 6.50%, 1/13/14 | 588 | 329,171 | ||||
3,848,933 | ||||||
16 ANNUAL REPORT |
AUGUST 31, 2008 |
Schedule of Investments (continued) BlackRock Diversified Income Strategies Fund, Inc. |
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Automobiles — 0.3% | ||||||
Ford Motor Co. Term Loan, 5.47%, 12/16/13 | USD | 324 | $ 251,367 | |||
General Motors Corp. Secured Term Loan, | ||||||
5.163%, 11/29/13 | 249 | 184,103 | ||||
435,470 | ||||||
Beverages — 0.2% | ||||||
Culligan International Co. Loan (Second Lien), | ||||||
9.229% – 9.615%, 5/24/13 | EUR | 500 | 366,763 | |||
Biotechnology — 0.3% | ||||||
Talecris Biotherapeutics, Inc. First Lien Term Loan, | ||||||
5.97% – 6.31%, 12/06/13 | USD | 496 | 480,094 | |||
Building Products — 0.7% | ||||||
Stile Acquisition Corp. (Aka Masonite International): | ||||||
Canadian Term Loan, 4.63% – 5.046%, 4/05/13 | 692 | 589,417 | ||||
U.S. Term Loan, 4.63% – 5.046%, 4/05/13 | 698 | 595,136 | ||||
1,184,553 | ||||||
Chemicals — 4.8% | ||||||
Edwards (Cayman Islands II) Ltd. First Lien | ||||||
Term Loan, 4.81%, 5/30/14 | 495 | 429,413 | ||||
ElectricInvest Holding Co. Ltd. (Viridian Group PLC), | ||||||
Junior Term Facility, 8.735% – 9.625%, 12/21/12 | GBP | 1,000 | 1,613,227 | |||
Huish Detergents, Inc. Tranche B Term Loan, | ||||||
4.81%, 4/28/14 | USD | 495 | 448,387 | |||
ISP Chemco LLC Term Loan, 4% – 4.313%, 6/04/14 | 495 | 456,638 | ||||
Ineos US Finance LLC: | ||||||
Term B2 Facility, 4.885%, 12/16/13 | 248 | 209,662 | ||||
Term C2 Facility, 5.385%, 12/15/14 | 248 | 209,662 | ||||
PQ Corp.: | ||||||
First Lien Term Loan, 5.92% – 6.05%, 7/30/14 | 500 | 467,813 | ||||
Second Lien Loan, 9.30%, 7/30/15 | 3,250 | 2,811,250 | ||||
Solutia, Inc. Loan, 8.50%, 2/28/14 | 1,000 | 963,438 | ||||
Wellman, Inc. Second Lien Term Loan, | ||||||
11.989%, 2/10/10 (d)(e) | 3,000 | 600,000 | ||||
8,209,490 | ||||||
Commercial Services & Supplies — 3.1% | ||||||
ARAMARK Corp.: | ||||||
Facility Letter of Credit, 2.44%, 1/27/14 | 158 | 149,664 | ||||
U.S. Term Loan, 4.676%, 1/26/14 | 2,487 | 2,355,814 | ||||
Brickman Group Holdings, Inc. Tranche B Term Loan, | ||||||
4.801%, 1/23/14 | 741 | 662,859 | ||||
NES Rentals Holdings, Inc. Permanent Second Lien | ||||||
Term Loan, 9.50%, 7/20/13 | 1,726 | 1,311,541 | ||||
West Corp. Term B-2 Loan, | ||||||
4.844% – 5.171%, 10/24/13 (b) | 985 | 864,211 | ||||
5,344,089 | ||||||
Computers & Peripherals — 0.9% | ||||||
Dealer Computer Services, Inc. (Reynolds & Reynolds) | ||||||
First Lien Term Loan, 4.801%, 10/26/12 | 1,167 | 1,079,720 | ||||
Intergraph Corp. Second Lien Term Loan, | ||||||
8.809%, 11/28/14 | 500 | 480,000 | ||||
1,559,720 | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Construction & Engineering — 0.3% | ||||||
Brand Energy & Infrastructure Services, Inc. | ||||||
(FR Brand Acquisition Corp.) First Lien Term Loan B, | ||||||
5.063%, 2/07/14 | USD | 494 | $ 453,386 | |||
Containers & Packaging — 1.8% | ||||||
Berry Plastics Group Inc. Loan, 9.791%, 6/05/14 (b) | 2,926 | 1,609,315 | ||||
Graham Packaging Co., LP New Term Loan, | ||||||
4.938% – 5.063%, 10/07/11 | 1,478 | 1,403,891 | ||||
3,013,206 | ||||||
Diversified Consumer Services — 0.9% | ||||||
Coinmach Corp., Term Loan, | ||||||
5.48% – 5.81%, 11/14/14 | 1,746 | 1,603,783 | ||||
Diversified Financial Services — 0.9% | ||||||
J.G. Wentworth LLC Term First Lien Loan, 5.051%, | ||||||
4/04/14 | 2,000 | 1,540,000 | ||||
Diversified Telecommunication Services — 1.8% | ||||||
Hawaiian Telcom Communications, Inc. Tranche C | ||||||
Term Loan, 5.301%, 5/30/14 | 1,500 | 1,190,000 | ||||
Wind Acquisition Holdings Finance S.A., Dollar Loan | ||||||
10.035%, 12/21/11 (b) | 2,061 | 1,932,324 | ||||
3,122,324 | ||||||
Electrical Equipment — 1.1% | ||||||
Generac Acquisition Corp. First Lien Term Loan, | ||||||
5.288%, 11/11/13 | 2,499 | 1,930,507 | ||||
Energy Equipment & Services — 1.1% | ||||||
Dresser, Inc. Term B Loan, 4.716% – 5.057%, 5/04/14 | 971 | 925,688 | ||||
MEG Energy Corp.: | ||||||
Delayed Draw Term Loan, 4.80%, 4/03/13 | 499 | 475,502 | ||||
Initial Term Loan, 4.80%, 4/03/13 | 489 | 466,604 | ||||
1,867,794 | ||||||
Food & Staples Retailing — 0.7% | ||||||
McJunkin Corp. Term Loan, 6.051%, 1/31/14 | 739 | 726,437 | ||||
Wm. Bolthouse Farms, Inc. Second Lien Term Loan, | ||||||
8.301%, 12/16/13 | 500 | 465,000 | ||||
1,191,437 | ||||||
Food Products — 2.3% | ||||||
Dole Food Co., Inc.: | ||||||
Credit-Linked Deposit, 2.658%, 4/12/13 | 140 | 128,162 | ||||
Tranche B Term Loan, 4.50% – 6%, 4/12/13 | 255 | 234,092 | ||||
JRD Holdings, Inc. (Jetro Holdings) Term Loan, | ||||||
5.05%, 7/02/14 | 484 | 457,734 | ||||
Solvest, Ltd. (Dole) Tranche C Term Loan, | ||||||
4.50% – 6%, 4/12/13 | 1,024 | 939,589 | ||||
Sturm Foods, Inc.: | ||||||
Initial Term Loan First Loan, | ||||||
5.25% – 5.375%, 1/31/14 (b) | 493 | 402,406 | ||||
Second Lien Term Loan Initial Term, 8.875%, | ||||||
7/31/14 | 500 | 305,000 | ||||
Wrigley Co. Term Loan B, 0%, 8/11/14 | 1,500 | 1,505,894 | ||||
3,972,877 | ||||||
Health Care Equipment & Supplies — 0.9% | ||||||
Biomet, Inc. Dollar Term Loan, 5.801%, 3/25/15 | 497 | 487,233 | ||||
Hologic, Inc. Tranche B Term Loan, 5.75%, 3/31/13 | 334 | 331,710 | ||||
DJO Finance LLC Term Loan, 5.468% – 5.801%, 5/20/14 | 746 | 727,594 | ||||
1,546,537 | ||||||
See Notes to Financial Statements. |
ANNUAL REPORT |
AUGUST 31, 2008 |
17 |
Schedule of Investments (continued)
BlackRock Diversified Income Strategies Fund, Inc.
(Percentages shown are based on Net Assets)
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Health Care Providers & Services — 1.8% | ||||||
CCS Medical, Inc., Term Loan (First Lien), | ||||||
6.06%, 9/30/12 | USD | 486 | $ 390,169 | |||
Community Health Systems, Inc. Funded Term Loan, | ||||||
4.718% – 5.06%, 7/25/14 | 936 | 884,607 | ||||
Health Management Associates, Inc. Term B Loan, | ||||||
4.551%, 2/28/14 | 1,886 | 1,726,988 | ||||
3,001,764 | ||||||
Hotels, Restaurants & Leisure — 2.9% | ||||||
Golden Nugget, Inc. Second Lien Term Loan, | ||||||
5.73%, 12/31/14 | 500 | 305,000 | ||||
Green Valley Ranch Gaming LLC Second Lien Term | ||||||
Loan, 5.719%, 8/16/14 | 500 | 251,250 | ||||
Harrah’s Operating Co., Inc., Term B-2 Loan, | ||||||
5.80% – 5.801%, 1/28/15 | 498 | 436,843 | ||||
Lake at Las Vegas Joint Venture/LLV-1, LLC (d)(e): | ||||||
Revolving Loan Credit-Linked Deposit Account, | ||||||
16.1%, 12/22/12 | 120 | 18,056 | ||||
Term Loan, 16.1%, 6/20/12 | 910 | 136,452 | ||||
Las Vegas Sands LLC: | ||||||
Delay Draw Term Loan, 4.56%, 5/23/14 | 200 | 170,182 | ||||
Tranche B Term Loan, 4.56%, 5/23/14 | 792 | 673,920 | ||||
QCE, LLC (Quiznos) Second Lien Term Loan, | ||||||
8.551%, 11/05/13 | 1,000 | 807,500 | ||||
VML US Finance LLC (Venetian Macau): | ||||||
Term B Delayed Draw Project Loan, | ||||||
5.06%, 5/25/12 | 625 | 605,773 | ||||
Term B Funded Project Loan, 5.06%, 5/27/13 | 1,500 | 1,452,500 | ||||
4,857,476 | ||||||
Household Durables — 0.6% | ||||||
American Residential Services LLC Second Lien | ||||||
Term Loan, 12%, 4/17/15 (g) | 1,000 | 986,173 | ||||
Household Products — 0.6% | ||||||
Spectrum Brands, Inc.: | ||||||
Letter of Credit, 2.336%, 3/30/13 | 80 | 69,204 | ||||
Dollar Term B Loan, 6.669% – 6.804%, 3/30/13 | 1,106 | 949,953 | ||||
1,019,157 | ||||||
IT Services — 3.3% | ||||||
Activant Solutions Inc. Term Loan, | ||||||
4.688% – 4.813%, 5/02/13 | 1,638 | 1,417,198 | ||||
Audio Visual Services Group Inc.: | ||||||
Loan Second Lien, 8.31%, 2/28/14 | 500 | 440,000 | ||||
Tranche B Term Loan (First Lien), 5.06%, 2/28/14 | 993 | 843,625 | ||||
Ceridian Corp. U.S. Term Loan, 5.464%, 11/09/14 | 1,000 | 940,000 | ||||
First Data Corp.: | ||||||
Initial Tranche B-2 Term Loan, | ||||||
5.222% – 5.552%, 9/24/14 | 1,645 | 1,507,986 | ||||
Initial Tranche B-3 Term Loan, | ||||||
5.551% – 5.552%, 9/24/14 | 497 | 455,898 | ||||
5,604,707 | ||||||
Independent Power Producers | ||||||
& Energy Traders — 1.1% | ||||||
Texas Competitive Electric Holdings | ||||||
Co., LLC (TXU).: | ||||||
Initial Tranche B-2 Term Loan, | ||||||
5.963% – 6.303%, 10/10/14 | 993 | 924,954 | ||||
Initial Tranche B-3 Term Loan, | ||||||
5.963% – 6.303%, 10/10/14 | 993 | 923,025 | ||||
1,847,979 | ||||||
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Industrial Conglomerates — 0.3% | ||||||
Sequa Corp. Term Loan, | ||||||
5.72% – 7.25%, 12/03/14 | USD | 496 | $ 472,582 | |||
Insurance — 0.3% | ||||||
Alliant Holdings I, Inc. Term Loan, 5.801%, 8/21/14 | 496 | 456,550 | ||||
Internet & Catalog Retail — 0.3% | ||||||
FTD Group, Inc. Tranche B Term Loan, 7.50%, 8/04/14 | 500 | 485,000 | ||||
Machinery — 1.8% | ||||||
Navistar International Corp.: | ||||||
Revolving Credit Linked Deposit, 5.686% – 6.047%, | ||||||
1/19/12 | 800 | 737,000 | ||||
Term Advance, 6.046% – 6.292%, 1/19/12 | 2,200 | 2,026,750 | ||||
Rexnord Holdings, Inc. Loan, 9.81%, 3/02/13 (b) | 372 | 297,346 | ||||
3,061,096 | ||||||
Media — 17.0% | ||||||
Affinion Group Holdings, Inc. Loan, | ||||||
9.368%, 3/01/12 | 1,150 | 964,563 | ||||
Alix Partners, LLP Tranche C Term Loan, | ||||||
4.79%, 10/12/13 | 506 | 487,134 | ||||
Cengage Learning Acquistions, Inc. (Thomson | ||||||
Learning), 7.50%, 7/05/14 | 3,250 | 3,217,500 | ||||
Cequel Communications, LLC (Cebridge): | ||||||
Second Lien Tranche A Term Loan (Cash Pay), | ||||||
7.301% – 8.804%, 5/05/14 | 2,000 | 1,752,000 | ||||
Term Loan, 4.791% – 6%, 11/05/13 | 797 | 744,068 | ||||
Charter Communications Operating, LLC, | ||||||
Replacement Term Loan, 4.67% – 4.80%, 3/06/14 | 995 | 869,105 | ||||
EB Sports Corp. Loan, 8.98% – 8.99%, 5/01/12 | 1,268 | 976,461 | ||||
Ellis Communications KDOC, LLC Loan, | ||||||
10%, 12/30/11 | 1,948 | 1,558,148 | ||||
Getty Images, Inc. Initial Term Loan, 7.25%, 7/02/15 | 500 | 499,219 | ||||
HMH Publishing Co. Ltd.: | ||||||
Tranche A Term Loan, 6.464%, 6/12/14 | 1,538 | 1,380,246 | ||||
Mezzanine, 6.464%, 11/14/14 | 5,690 | 4,551,768 | ||||
Insight Midwest Holdings LLC B Term Loan, | ||||||
4.47%, 4/07/14 | 2,025 | 1,944,634 | ||||
Lavena Holding 3 GmbH (Prosiebensat.1 Media AG) | ||||||
Facility B1, 6.86% – 7.526%, 3/06/15 | EUR | 500 | 504,115 | |||
NEP II Inc., Term B Loan, 5.051%, 2/16/14 | USD | 988 | 888,743 | |||
National Cinemedia LLC Term Loan, 4.54%, 2/13/15 | 1,500 | 1,349,196 | ||||
Newsday LLC Fixed Rate Term Loan, 9.75%, 8/01/13 | 2,750 | 2,744,844 | ||||
Nielsen Finance LLC Dollar Term Loan, | ||||||
4.803%, 8/09/13 | 1,965 | 1,814,873 | ||||
Penton Media, Inc.: | ||||||
Loan (Second Lien), 7.799%, 2/01/14 | 1,000 | 757,500 | ||||
Term Loan (First Lien), | ||||||
4.719% – 5.049%, 2/01/13 | 987 | 681,375 | ||||
Sitel, LLC (ClientLogic) U.S. Term Loan, | ||||||
4.962% – 5.359%, 1/30/14 | 968 | 751,762 | ||||
Weather Channel Term Loan B, 7.25%, 6/01/15 | 500 | 483,750 | ||||
28,921,004 | ||||||
Metals & Mining — 0.8% | ||||||
Euramax International, Inc. | ||||||
Domestic Term Loan, 8%, 6/29/12 | 1,218 | 982,441 | ||||
Domestic Second Lien Domestic Loan, | ||||||
10.791%, 6/29/13 | 334 | 222,110 | ||||
Euramax International Holdings B.V. European | ||||||
Second Lien Loan, 10.7891%, 6/29/13 | 166 | 110,390 | ||||
1,314,941 | ||||||
See Notes to Financial Statements.
18 ANNUAL REPORT |
AUGUST 31, 2008 |
Schedule of Investments (continued)
BlackRock Diversified Income Strategies Fund, Inc.
(Percentages shown are based on Net Assets)
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Multiline Retail — 0.7% | ||||||
Neiman Marcus Group, Inc. Term Loan, | ||||||
4.422%, 4/06/13 | USD | 1,250 | $ 1,159,659 | |||
Oil, Gas & Consumable Fuels — 2.9% | ||||||
Turbo Beta Limited Dollar Facility Assignment | ||||||
(Abbot Group), 14.50%, 3/15/18 (g) | 1,706 | 1,671,674 | ||||
Petroleum GEO-Services ASA/PGS Finance, Inc. | ||||||
Term Loan, 4.55%, 6/28/15 | 477 | 461,771 | ||||
Scorpion Drilling Ltd. Second Lien, 9.969%, 5/05/15 | 2,000 | 2,020,000 | ||||
Vulcan Energy Corp. (Plains Resources Inc.) | ||||||
Term Loan B3, 6.25%, 8/12/11 | 750 | 746,250 | ||||
4,899,695 | ||||||
Paper & Forest Products — 0.3% | ||||||
Boise Paper Holdings, LLC (Aldabra Sub LLC), | ||||||
Tranche B First Lien Term Loan, 7.50%, 2/24/14 | 499 | 496,524 | ||||
Pharmaceuticals — 0.8% | ||||||
Cardinal Health 409, Inc. Dollar Term Loan, | ||||||
5.051%, 4/15/14 | 1,485 | 1,295,663 | ||||
Professional Services — 0.1% | ||||||
Booz Allen Hamilton, Inc. Tranche B Term Loan, | ||||||
7.50%, 7/31/15 | 250 | 250,104 | ||||
Real Estate Management & Development — 1.2% | ||||||
LNR Property Corp. Initial Tranche B Term Loan, | ||||||
6.04%, 7/12/11 | 2,640 | 2,037,201 | ||||
Road & Rail — 0.6% | ||||||
Rail America, Inc.: | ||||||
Canadian Term Loan, 6.79%, 8/04/09 | 100 | 99,561 | ||||
U.S. Term Loan, 6.79%, 8/14/09 | 900 | 895,439 | ||||
995,000 | ||||||
Software — 1.3% | ||||||
Aspect Software, Inc. Loan (Second Lien), | ||||||
9.875%, 7/11/12 | 2,500 | 2,250,000 | ||||
Specialty Retail — 0.2% | ||||||
Claire’s Stores Inc. Term B Loan, 5.551%, 5/29/14 | 494 | 329,937 | ||||
Wireless Telecommunication Services — 0.5% | ||||||
IPC Systems, Inc. Tranche B-1 Term Loan, | ||||||
5.051%, 6/02/14 | 495 | 371,250 | ||||
LT LLC (NG Wireless Corp.): | ||||||
Delay Draw Term Loan, 5.219%, 8/15/14 | 94 | 88,904 | ||||
Term Loan (First Lien), | ||||||
5.219% – 5.551%, 8/15/14 | 406 | 386,096 | ||||
846,250 | ||||||
Total Floating Rate Loan Interests — 64.2% | 108,937,575 | |||||
Asset-Backed Securities | ||||||
North Street Referenced Linked Notes 2000-1 | ||||||
Ltd. Series 2005-8A Class D, | ||||||
17.276%, 6/15/41 (a)(c) | 1,350 | 64,935 | ||||
Total Asset-Backed Securities — 0.0% | 64,935 | |||||
Par | ||||
Capital Trusts | (000) | Value | ||
Diversified Financial Services — 0.7% | ||||
Citigroup, Inc., 8.40% (b)(h) | USD 1,300 | $ 1,103,726 | ||
Total Capital Trusts — 0.7% | 1,103,726 | |||
Common Stocks | Shares | |||
Capital Markets — 0.2% | ||||
E*Trade Financial Corp. (e) | 96,809 | 309,789 | ||
Electrical Equipment — 0.3% | ||||
Medis Technologies Ltd. (e) | 176,126 | 551,274 | ||
Oil, Gas & Consumable Fuels — 1.9% | ||||
EXCO Resources, Inc. (e) | 119,473 | 3,163,645 | ||
Paper & Forest Products — 1.1% | ||||
Ainsworth Lumber Co. Ltd. (a) | 349,782 | 1,006,591 | ||
Ainsworth Lumber Co. Ltd. | 311,679 | 895,291 | ||
1,901,882 | ||||
Total Common Stocks — 3.5% | 5,926,590 | |||
Preferred Stocks | ||||
Capital Markets — 0.0% | ||||
Marsico Parent Superholdco, LLC, 16.75% (a) | 48 | 41,040 | ||
Total Preferred Stocks — 0.0% | 41,040 | |||
Total Long-Term Investments | ||||
(Cost — $273,636,312) — 136.5% | 231,607,538 | |||
Beneficial | ||||
Interest | ||||
Short-Term Securities | (000) | |||
BlackRock Liquidity Series, LLC | ||||
Cash Sweep Series, 2.45% (i)(j) | USD 5,592 | 5,592,405 | ||
Total Short-Term Securities | ||||
(Cost — $5,592,405) — 3.3% | 5,592,405 | |||
Options Purchased | Contracts | |||
Call Options | ||||
Marsico Parent Superholdco LLC, | ||||
expiring December 2019 at $942.86 | 13 | 21,970 | ||
Total Options Purchased | ||||
(Cost — $12,711) — 0.0% | 21,970 | |||
Total Investments (Cost — $279,241,428*) — 139.8% | 237,221,913 | |||
Liabilities in Excess of Other Assets — (39.8)% | (67,514,834) | |||
Net Assets — 100.0% | $169,707,079 | |||
See Notes to Financial Statements.
ANNUAL REPORT |
AUGUST 31, 2008 |
19 |
Schedule of Investments (concluded)
BlackRock Diversified Income Strategies Fund, Inc.
* The cost and unrealized appreciation (depreciation) of investments as of August
31, 2008, as computed for federal income tax purposes, were as follows:
Aggregate cost | $ 279,240,217 | |
Gross unrealized appreciation | $ 2,464,335 | |
Gross unrealized depreciation | (44,482,639) | |
Net unrealized depreciation | $ (42,018,304) | |
(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) Represents a payment-in-kind security which may pay interest/dividends in additional par/shares. (c) Variable rate security. Rate shown is as of report date. (d) The issuer filed for bankruptcy or is in default of interest payments. (e) Non-income producing security. (f) Convertible security. (g) Security is fair valued. (h) Security is perpetual in nature and has no stated maturity date. (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 | ||||
Activity | ||||
Affiliate | (000) | Income | ||
BlackRock Liquidity Series, LLC | ||||
Cash Sweep Series | $3,064 | $ 96,853 | ||
(j) Represents the current yield as of report date.
(k) All or a portion of security held as collateral in connection with swap contracts.
•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. These industry
classifications are unaudited.
•Foreign currency exchange contracts as of August 31,2008 were as follows:
Unrealized | ||||||||
Currency | Currency | Settlement | Appreciation | |||||
Purchased | Sold | Date | (Depreciation) | |||||
EUR | 380,000 | USD 564,149 | 10/23/08 | $ (8,322) | ||||
USD | 844,985 | CAD 900,000 | 10/23/08 | (2,044) | ||||
USD | 2,839,801 | EUR 1,814,500 | 10/23/08 | 185,729 | ||||
USD | 2,797,248 | EUR 1,910,000 | 10/23/08 | 3,488 | ||||
USD | 819,881 | GBP 413,400 | 10/23/08 | 69,401 | ||||
Total | $ 248,252 | |||||||
Currency Abbreviations
CAD Canadian Dollar
EUR Euro
GBP British Pound
USD U.S. Dollar
•Swaps outstanding as of August 31,2008 were as follows: |
Notional | Unrealized | |||||
Amount | Appreciation | |||||
(000) | (Depreciation) | |||||
Sold credit default protection on Ford | ||||||
Motor Co. and receive 4.2% | ||||||
Broker, Deutsche Bank AG London | ||||||
Expires March 2010 | USD | 4,000 | $ (801,228) | |||
Sold credit default protection on ACES | ||||||
High Yield Index (10 – 13% Tranche) and | ||||||
receive 5.0% | ||||||
Broker, Morgan Stanley Capital Services, Inc. | ||||||
Expires March 2010 | USD | 7,000 | (339,855) | |||
Sold credit default protection on | ||||||
Pagesjaunes SA and receive 2.10% | ||||||
Broker, Lehman Brothers Special Finance | ||||||
Expires March 2012 | EUR | 2,000 | (279,893) | |||
Sold credit default protection on BAA | ||||||
Ferovial Junior Term Loan and receive 2.0% | ||||||
Broker, Deutsche Bank AG London | ||||||
Expires June 2012 | GBP | 300 | (67,473) | |||
Pay a fixed rate of 4.823% and receive | ||||||
a floating rate based on 3-month LIBOR | ||||||
Broker, JPMorgan Chase | ||||||
Expires January 2013 | USD20,000 | (704,507) | ||||
Pay a fixed rate of 4.853% and receive | ||||||
a floating rate based on 3-month LIBOR | ||||||
Broker, Lehman Brothers Special Finance | ||||||
Expires March 2013 | USD31,000 | (1,139,497) | ||||
Bought credit default protection on | ||||||
LCDX North America High Yield | ||||||
Index 10.V1 and pay 5% | ||||||
Broker, Credit Suisse First Boston | ||||||
International | ||||||
Expires June 2013 | USD | 2,000 | 5,728 | |||
Bought credit default protection on | ||||||
LCDX North America High Yield Series | ||||||
10.V1 Index and pay 5% | ||||||
Broker, Morgan Stanley Capital Services, Inc. | ||||||
Expires June 2013 | USD | 700 | 28,692 | |||
Bought credit default protection on | ||||||
LCDX North America High Yield Index | ||||||
Series 10.V1 and receive 5.00% | ||||||
Broker, Morgan Stanley Capital Services, Inc. | ||||||
Expires June 2013 | USD | 2,100 | 53,264 | |||
Total | $(3,244,769) | |||||
See Notes to Financial Statements.
20 ANNUAL REPORT AUGUST 31, 2008
Schedule of Investments August 31, 2008
BlackRock Floating Rate Income Strategies Fund, Inc.
(Percentages shown are based on Net Assets)
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Aerospace & Defense — 4.7% | ||||||
Avio Holding SpA: | ||||||
Dollar Mezzanine Term Loan 6.469%, 12/31/16 | USD | 2,035 | $ 1,844,618 | |||
Facility B-2, 4.594%, 12/15/14 | 1,669 | 1,505,624 | ||||
Facility C-2, 5.219%, 12/15/14 | 1,771 | 1,597,729 | ||||
Hawker Beechcraft Acquisition Co. LLC: | ||||||
Facility Deposit, 2.701%, 3/26/14 | 240 | 223,556 | ||||
Term Loan, 4.801%, 3/26/14 | 4,110 | 3,826,540 | ||||
IAP Worldwide Services, Inc. Term Loan First Lien, | ||||||
8.25%, 12/30/12 | 2,030 | 1,580,330 | ||||
Vought Aircraft Industries, Inc.: | ||||||
Term Loan, 4.97%, 12/22/11 | 2,843 | 2,644,132 | ||||
Tranche B Line of Credit Deposit, 2.486%, | ||||||
12/22/10 | 560 | 529,200 | ||||
13,751,729 | ||||||
Airlines — 0.8% | ||||||
Delta Air Lines, Inc. Credit-Linked Deposit Loan, | ||||||
2.336% – 4.469%, 4/30/12 | 1,237 | 1,033,313 | ||||
US Airways Group, Inc. Loan, 4.969%, 3/24/14 | 1,980 | 1,356,300 | ||||
2,389,613 | ||||||
Auto Components — 3.1% | ||||||
Affinia Group, Inc. Tranche B Term Loan, | ||||||
5.799%, 11/30/11 | 2,544 | 2,359,162 | ||||
Allison Transmission, Inc. Term Loan, | ||||||
5.22% – 5.56%, 8/27/14 | 4,897 | 4,392,144 | ||||
Dana Holding Corp. Term Advance, | ||||||
6.75%, 1/31/15 | 1,771 | 1,627,893 | ||||
GPX International Tire Corp. Tranche B | ||||||
Term Loan, 9.67% – 9.81%, 3/30/12 | 902 | 667,318 | ||||
9,046,517 | ||||||
Automobiles — 0.2% | ||||||
Ford Motor Co. Term Loan, 5.47%, 12/16/13 | 524 | 406,050 | ||||
General Motors Corp. Secured Term Loan, | ||||||
5.163%, 11/29/13 | 424 | 312,975 | ||||
719,025 | ||||||
Beverages — 0.1% | ||||||
Culligan International Co. Loan (Second Lien), | ||||||
9.229% – 9.615%, 5/24/13 | EUR | 500 | 366,763 | |||
Biotechnology — 0.5% | ||||||
Talecris Biotherapeutics, Holdings Corp. First Lien | ||||||
Term Loan, 5.97% – 6.31%, 12/06/13 | USD | 1,489 | 1,440,283 | |||
Building Products — 2.0% | ||||||
Building Materials Corp. of America | ||||||
Term Loan Advance, 5.438% – 5.563%, 2/24/14 | 2,743 | 2,353,374 | ||||
PGT Industries, Inc. Tranche A-2 Term Loan, | ||||||
7.75%, 2/14/12 | 2,137 | 1,837,653 | ||||
Stile Acquisition Corp. (Aka Masonite International): | ||||||
Canadian Term Loan 4.63% – 5.046%, 4/05/13 | 915 | 779,470 | ||||
U.S. Term Loan, 4.630% – 5.046%, 4/05/13 | 924 | 787,034 | ||||
5,757,531 | ||||||
Capital Markets — 0.5% | ||||||
RiskMetrics Group Holdings LLC Term B Loan | ||||||
(First Lien), 4.801%, 1/10/14 | 1,453 | 1,398,605 | ||||
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Chemicals — 8.4% | ||||||
Edwards (Cayman Islands II) Limited Term Loan | ||||||
(First Lien), 4.81%, 5/30/14 | USD | 495 | $ 429,413 | |||
ElectricInvest Holding Co. Ltd. (Viridian | ||||||
Group PLC) Junior Term Facility, | ||||||
8.735% – 9.625%, 12/21/12 | GBP | 3,000 | 4,839,680 | |||
Hercules, Inc. Term B Loan, | ||||||
3.969%, 10/08/10 | USD | 1,295 | 1,243,200 | |||
Huish Detergents, Inc. Tranche B Term Loan, | ||||||
4.81%, 4/28/14 | 1,485 | 1,345,162 | ||||
ISP Chemco LLC Term Loan, | ||||||
4% – 4.313%, 6/04/14 | 990 | 913,275 | ||||
Ineos US Finance LLC: | ||||||
Term B-2 Facility, 4.885%, 12/16/13 | 434 | 366,819 | ||||
Term C-2 Facility, 5.385%, 12/15/14 | 434 | 366,819 | ||||
Invista Canada Co., | ||||||
Tranche B-2 Term Loan 4.301%, 4/29/11 | 951 | 905,378 | ||||
Invista S.A.R.L, | ||||||
Tranche B-1 Term Loan, 4.301%, 4/29/11 | 2,072 | 1,973,276 | ||||
Nalco Co. Tranche B Term Loan, | ||||||
4.433% – 4.92%, 11/04/10 | 4,490 | 4,414,746 | ||||
PQ Corp. (Niagara Acquisition, Inc.) First Lien | ||||||
Term Loan, 5.92% – 6.05%, 7/30/14 | 4,000 | 3,742,500 | ||||
Rockwood Specialties Group, Inc. Tranche E | ||||||
Term Loan, 4.299%, 7/30/12 | 1,930 | 1,849,353 | ||||
Solutia, Inc. Loan, 8.50%, 2/28/14 | 1,500 | 1,445,157 | ||||
Wellman, Inc. Second Lien Term Loan, | ||||||
9.989%, 2/10/10 (b)(c) | 4,750 | 950,000 | ||||
24,784,778 | ||||||
Commercial Services & Supplies — 2.4% | ||||||
ARAMARK Corp.: | ||||||
Line of Credit Facility Letter of Credit, | ||||||
2.44%, 1/27/14 | 211 | 199,552 | ||||
U.S. Term Loan, 4.676%, 1/26/14 | 3,316 | 3,141,085 | ||||
Brickman Group Holdings, Inc. Tranche B Term Loan, | ||||||
4.801%, 1/23/14 | 741 | 662,859 | ||||
Camelbak Products LLC Term Loan (First Lien), | ||||||
8%, 8/04/11 | 615 | 427,274 | ||||
John Maneely Co. Term Loan, | ||||||
6.042% – 6.048%, 12/09/13 | 894 | 877,476 | ||||
West Corp. Term B-2 Loan, | ||||||
4.844% – 5.171%, 10/24/13 | 1,970 | 1,728,423 | ||||
7,036,669 | ||||||
Computers & Peripherals — 0.9% | ||||||
Dealer Computer Services, Inc. (Reynolds & Reynolds) | ||||||
Term Loan (First Lien), 4.801%, 10/26/12 | 1,866 | 1,726,475 | ||||
Intergraph Corp.: | ||||||
Initial Term Loan (First Lien) 4.809%, 5/29/14 | 419 | 397,756 | ||||
Second Lien Term Loan 8.809%, 11/28/14 | 500 | 480,000 | ||||
2,604,231 | ||||||
Construction Materials — 0.3% | ||||||
Headwaters Inc. Term Loan B-1 (First Lien), | ||||||
6.97%, 4/30/11 | 1,077 | 1,028,117 | ||||
See Notes to Financial Statements. |
ANNUAL REPORT |
AUGUST 31, 2008 |
21 |
Schedule of Investments (continued)
BlackRock Floating Rate Income Strategies Fund, Inc.
(Percentages shown are based on Net Assets)
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Containers & Packaging — 1.6% | ||||||
Berry Plastics Group, Inc. Loan, 9.791%, 6/05/14 | USD | 1,155 | $ 635,252 | |||
Consolidated Container Co. LLC Loan | ||||||
(Second Lien), 7.969% – 8.31%, 9/28/14 | 550 | 269,500 | ||||
Graham Packaging Co., L New Term Loan, | ||||||
4.938% – 5.063%, 10/07/11 | 1,975 | 1,876,558 | ||||
Graphic Packaging International, Inc. Incremental | ||||||
Term Loan, 5.535% – 5.884%, 5/16/14 | 1,990 | 1,919,106 | ||||
4,700,416 | ||||||
Distributors — 0.3% | ||||||
Keystone Automotive Operations, Inc. Loan, | ||||||
5.963% – 5.972%, 1/12/12 | 1,434 | 1,003,542 | ||||
Diversified Consumer Services — 0.9% | ||||||
Coinmach Corp. Term Loan, | ||||||
5.48% – 5.81%, 11/14/14 | 2,743 | 2,520,230 | ||||
Diversified Financial Services — 1.7% | ||||||
DaimlerChrysler Financial Services Americas LLC | ||||||
Term Loan (First Lien), 6.78%, 8/03/12 | 3,980 | 3,153,282 | ||||
J.G. Wentworth, LLC Loan (First Lien), | ||||||
5.051%, 4/04/14 | 2,300 | 1,771,000 | ||||
4,924,282 | ||||||
Electrical Equipment — 1.9% | ||||||
Generac Acquisition Corp. First Lien Term Loan, | ||||||
5.288%, 11/11/13 | 1,304 | 1,007,384 | ||||
Sensus Metering Systems: | ||||||
New Term B-1, 4.47% – 4.81%, 12/17/10 | 4,578 | 4,440,913 | ||||
Term Loan B-2, 4.47%, 12/17/10 | 118 | 114,449 | ||||
5,562,746 | ||||||
Energy Equipment & Services — 0.6% | ||||||
MEG Energy Corp.: | ||||||
Delayed Draw Term Loan, 4.80%, 4/03/13 | 996 | 951,003 | ||||
Initial Term Loan, 4.80%, 4/03/13 | 977 | 933,208 | ||||
1,884,211 | ||||||
Food & Staples Retailing — 3.4% | ||||||
AB Acquisitions UK Topco 2 Ltd. Facility B-2 | ||||||
UK Borrower, 7.405%, 7/05/15 | GBP | 3,000 | 4,849,933 | |||
Advantage Sales & Marketing, Inc. (ASM Merger | ||||||
Sub, Inc.) Term Loan, 4.47% – 4.81%, 3/29/13 | USD | 1,466 | 1,354,785 | |||
DS Waters of America Term Loan, 4.719%, 10/29/12 | 929 | 859,736 | ||||
Liberator Midco Ltd.: | ||||||
Faciilty B-1, 6.735%, 10/27/14 | EUR | 500 | 699,090 | |||
Facility C-1, 7.11%, 10/27/15 | 489 | 683,310 | ||||
McJunkin Corp. Term Loan, 6.051%, 1/31/14 | USD | 729 | 716,703 | |||
Wm. Bolthouse Farms, Inc. Second Lien Term Loan, | ||||||
8.301%, 12/16/13 | 1,000 | 930,000 | ||||
10,093,557 | ||||||
Food Products — 2.3% | ||||||
Dole Food Co., Inc.: | ||||||
Credit Linked Deposit, 2.658%, 4/12/13 | 256 | 235,228 | ||||
Tranche B Term Loan, 4.5% – 6%, 4/12/13 | 468 | 429,652 | ||||
Eight O’Clock Coffee Co. Term Loan, | ||||||
5.25%, 7/31/12 | 453 | 435,174 | ||||
Solvest, Ltd. (Dole), Tranche C Term Loan, | ||||||
4.50% – 6%, 4/12/13 | 1,879 | 1,724,515 |
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Food Products (concluded) | ||||||
Sturm Foods, Inc.: | ||||||
Initial Term Loan First Lien, | ||||||
5.25% – 5.375%, 1/31/14 (d) | USD | 980 | $ 798,731 | |||
Initial Term Loan Second Lien, 8.875%, 7/31/14 | 1,000 | 610,000 | ||||
Wrigley Co. Term Loan B, 7.25%, 8/11/14 | 2,500 | 2,509,823 | ||||
6,743,123 | ||||||
Health Care Equipment & Supplies — 1.5% | ||||||
Biomet, Inc. Dollar Term Loan, 5.801%, 3/25/15 | 2,981 | 2,919,743 | ||||
DJO Finance LLC Term Loan, | ||||||
5.469% — 5.801%, 5/20/14 | 995 | 970,125 | ||||
Hologic, Inc. Tranche B Term Loan, 5.75%, 3/31/13 | 501 | 497,565 | ||||
4,387,433 | ||||||
Health Care Providers & Services — 2.6% | ||||||
CCS Medical, Inc. Term Loan (First Lien), | ||||||
6.06%, 9/30/12 | 476 | 381,781 | ||||
Community Health Systems, Inc. Funded | ||||||
Term Loan, 4.719% – 5.06%, 7/25/14 | 3,276 | 3,096,420 | ||||
DaVita, Inc. Tranche B-1 Term Loan, | ||||||
3.97% – 4.32%, 10/05/12 | 2,000 | 1,923,126 | ||||
Health Management Associates, Inc. Term B Loan, | ||||||
4.551%, 2/28/14 | 1,886 | 1,726,988 | ||||
Sterigenics International, Inc. Tranche B Loan, | ||||||
5.03% – 5.39%, 11/21/13 | 729 | 667,141 | ||||
7,795,456 | ||||||
Hotels, Restaurants & Leisure — 3.7% | ||||||
Golden Nugget, Inc.: | ||||||
Additional Term Advance (First Lien), | ||||||
4.47%, 6/30/14 | 30 | 25,455 | ||||
Second Lien Term Loan, 5.73%, 12/31/14 | 500 | 305,000 | ||||
Term Advance (First Lien), 4.48%, 6/30/14 | 318 | 267,273 | ||||
Green Valley Ranch Gaming LLC Second Lien | ||||||
Term Loan, 5.719%, 8/16/14 | 500 | 251,250 | ||||
Greenwood Racing, Inc. Term Loan, 4.72%, 11/28/11 | 493 | 462,950 | ||||
Harrah’s Operating Co., Inc. Term Loan: | ||||||
B-1, 5.80% — 5.801%, 1/28/15 | 237 | 208,380 | ||||
B-2, 5.80% — 5.801%, 1/28/15 | 2,793 | 2,446,319 | ||||
B-3, 5.80% — 5.801%, 1/28/15 | 211 | 185,051 | ||||
Las Vegas Sands LLC: | ||||||
Delayed Draw Term Loan, 4.56%, 5/23/14 | 400 | 340,364 | ||||
Tranche B Term Loan, 4.56%, 5/23/14 | 1,584 | 1,347,840 | ||||
Penn National Gaming, Inc. Term Loan B, | ||||||
4.21% – 4.55%, 10/03/12 | 1,201 | 1,149,244 | ||||
QCE LLC Term Loan (First Lien), 4.813%, 5/05/13 | 989 | 833,827 | ||||
Travelport LLC (Travelport Inc.): | ||||||
Original Post-First Amendment and Restatement | ||||||
Synthetic Line of Credit Loan, 5.051%, 8/23/13 | 178 | 149,075 | ||||
Tranche B Dollar Term Loan, 4.719%, 8/23/13 | 889 | 742,959 | ||||
VML US Finance LLC (Venetian Macau) Term B: | ||||||
Delayed Draw Project Loan, | ||||||
5.06%, 5/25/12 | 750 | 726,250 | ||||
Funded Project Loan, 5.06%, 5/27/13 | 1,500 | 1,452,500 | ||||
10,893,737 | ||||||
See Notes to Financial Statements. |
22 ANNUAL REPORT |
AUGUST 31, 2008 |
Schedule of Investments (continued)
BlackRock Floating Rate Income Strategies Fund, Inc.
(Percentages shown are based on Net Assets)
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Household Durables — 2.0% | ||||||
American Residential Services LLC Term Loan | ||||||
(Second Lien), 12%, 4/17/15 (a) | USD | 2,000 | $ 1,972,347 | |||
Simmons Bedding Co. Tranche D Term Loan, | ||||||
4.50% – 7.125%, 12/19/11 | 3,166 | 2,940,389 | ||||
The Yankee Candle Co., Inc. Term Loan, | ||||||
4.48% – 4.81%, 2/06/14 | 1,250 | 1,090,625 | ||||
6,003,361 | ||||||
Household Products — 0.5% | ||||||
Spectrum Brands, Inc.: | ||||||
Letter of Credit, 2.314%, 3/30/13 | 81 | 69,204 | ||||
Dollar Term B Loan, 6.669% – 6.804%, 3/30/13 | 1,595 | 1,370,480 | ||||
1,439,684 | ||||||
IT Services — 5.2% | ||||||
Activant Solutions Inc. Term Loan, | ||||||
4.688% – 4.813%, 5/02/13 | 2,048 | 1,771,498 | ||||
Audio Visual Services Group, Inc.: | ||||||
Loan (Second Lien), 8.31%, 8/28/14 | 1,000 | 880,000 | ||||
Tranche B Term Loan (First Lien), | ||||||
5.06%, 2/28/14 | 1,489 | 1,265,438 | ||||
Ceridian Corp. U.S. Term Loan, 5.464%, 11/09/14 | 2,000 | 1,880,000 | ||||
First Data Corp. Initial Tranche Term Loan: | ||||||
B-1, 5.222% – 5.552%, 9/24/14 | 1,316 | 1,205,206 | ||||
B-2, 5.222% – 5.552%, 9/24/14 | 2,542 | 2,330,735 | ||||
B-3, 5.551% – 5.552%, 9/24/14 | 995 | 911,796 | ||||
RedPrairie Corp.: | ||||||
Term Loan 5.50% – 7.0%, 7/20/12 | 640 | 601,209 | ||||
Loan (Second Lien) 9.298%, 1/20/13 | 300 | 258,000 | ||||
SunGard Data Systems, Inc. (Solar Capital Corp.) | ||||||
New US Term Loan, 4.553%, 2/28/14 | 4,466 | 4,191,336 | ||||
15,295,218 | ||||||
Independent Power Producers | ||||||
& Energy Traders — 2.2% | ||||||
The AES Corp. Term Loan, | ||||||
5.063% – 5.10%, 8/10/11 | 1,571 | 1,534,107 | ||||
Calpine Generating Co. LLC Second Priority | ||||||
Term Loan, 11.07%, 4/01/10 | 17 | 15,487 | ||||
Texas Competitive Electric Holdings Co., LLC | ||||||
(TXU) Term Loan: | ||||||
B-2, 5.963% — 6.303%, 10/10/29 | 1,489 | 1,387,432 | ||||
B-3, 5.963% — 6.303% , 10/10/14 | 3,970 | 3,692,100 | ||||
6,629,126 | ||||||
Industrial Conglomerates — 1.1% | ||||||
Sequa Corp. Term Loan, | ||||||
5.72% – 7.25%, 12/03/14 | 3,493 | 3,324,331 | ||||
Insurance — 0.2% | ||||||
Alliant Holdings l, Inc. Term Loan, | ||||||
5.801%, 08/21/14 | 496 | 456,550 | ||||
Internet & Catalog Retail — 0.2% | ||||||
FTD Group, Inc. Tranche B Term Loan, | ||||||
7.50%, 8/04/14 | 750 | 727,500 | ||||
Leisure Equipment & Products — 2.4% | ||||||
24 Hour Fitness WorldWide, Inc. Tranche B | ||||||
Term Loan, 4.97% – 5.17%, 6/08/12 | 3,910 | 3,636,300 | ||||
Easton-Bell Sports, Inc. Tranche B Term Loan, | ||||||
4.22% – 4.44%, 3/16/12 | 3,234 | 2,910,630 |
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Leisure Equipment & Products (concluded) | ||||||
Fender Musical Instruments Corp.: | ||||||
Delayed Draw Loan, 5.06%, 6/09/14 | USD | 167 | $ 146,077 | |||
Initial Loan, 5.05% – 5.17%, 6/09/14 | 331 | 289,232 | ||||
6,982,239 | ||||||
Machinery — 3.5% | ||||||
Harrington Holdings, Inc. Term Loan (First Lien), | ||||||
4.719%, 1/11/14 | 988 | 915,906 | ||||
NACCO Materials Handling Group Loan, | ||||||
4.469% – 4.828%, 3/21/13 | 1,470 | 1,278,900 | ||||
Navistar International Corp.: | ||||||
Revolving Credit Linked Deposit, | ||||||
5.686% – 6.046%, 1/19/12 | 1,333 | 1,228,333 | ||||
Term Advance, 6.045% – 6.292%, 1/19/12 | 3,667 | 3,377,917 | ||||
OshKosh Truck Corp. Term B Loan, | ||||||
4.22% – 4.43%, 12/06/13 | 1,865 | 1,696,372 | ||||
Trimas Co. LLC: | ||||||
Tranche B-1 Loan, 2.463%, 8/02/13 | 375 | 339,375 | ||||
Tranche B Term Loan, 4.72% – 5.045%, 8/02/13 | 1,597 | 1,444,889 | ||||
10,281,692 | ||||||
Media — 24.3% | ||||||
Affinion Group Holdings, Inc. Loan, | ||||||
9.368%, 3/01/12 | 2,000 | 1,677,500 | ||||
AlixPartners, LLP Tranche C Term Loan, | ||||||
4.79%, 10/12/13 | 1,591 | 1,530,994 | ||||
Bresnan Communications, LLC Additional | ||||||
Term Loan B (First Lien), 5.02%, 6/30/13 | 1,500 | 1,430,000 | ||||
Catalina Marketing Corp. Initial Term Loan, | ||||||
5.801%, 10/01/14 | 1,741 | 1,634,003 | ||||
Cengage Learning Acquisitions, Inc. (Thomson | ||||||
Learning): | ||||||
Term Loan 4.97%, 7/03/14 | 1,489 | 1,292,887 | ||||
Term Loan B2, 7.50%, 7/05/14 | 6,250 | 6,187,500 | ||||
Cequel Communications LLC (Cebridge): | ||||||
2nd Lien Tranche A Term Loan (Cash Pay), | ||||||
7.301%, 5/05/14 | 2,000 | 1,752,000 | ||||
Term Loan, 4.791% – 6.0%, 11/05/13 | 2,132 | 1,990,074 | ||||
Charter Communications, Operating LLC | ||||||
Replacement Term Loan, 4.67% – 4.80%, 3/06/14 | 7,463 | 6,518,285 | ||||
Clarke American Corp. Tranche B Term Loan, | ||||||
5.291% – 5.301%, 6/30/14 | 990 | 813,780 | ||||
Emmis Operating Co. Tranche B Term Loan, | ||||||
4.801% – 4.810%, 11/01/13 | 564 | 491,299 | ||||
GateHouse Media Operating, Inc.: | ||||||
Delayed Draw Term Loan, 4.80% – 4.81%, 8/28/14 | 306 | 164,658 | ||||
Initial Term Loan B, 4.81%, 8/28/14 | 1,235 | 663,988 | ||||
Getty Images, Inc. Initial Term Loan, 7.25%, | ||||||
7/02/15 | 1,000 | 998,438 | ||||
Gray Television, Inc. Term Loan B – DD, | ||||||
3.97% – 4.29%, 12/31/14 | 900 | 747,034 | ||||
Hanley-Wood LLC Term Loan, 4.711% – 4.717%, | ||||||
3/08/14 | 1,493 | 1,158,553 | ||||
HMH Publishing Co. Ltd. (Education Media): | ||||||
Tranche A Term Loan, 6.464%, 11/14/14 | 2,636 | 2,366,136 | ||||
Mezzanine Tranche A Term Loan, 6.464%, 6/12/14 | 9,310 | 7,448,348 |
See Notes to Financial Statements.
ANNUAL REPORT |
AUGUST 31, 2008 |
23 |
Schedule of Investments (continued)
BlackRock Floating Rate Income Strategies Fund, Inc.
(Percentages shown are based on Net Assets)
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Media (concluded) | ||||||
Insight Midwest Holdings, LLC B Term Loan, | ||||||
4.47%, 4/07/14 | USD | 3,375 | $ 3,241,056 | |||
Intelsat Corp. Term: | ||||||
B-2-A, 5.288%, 1/03/14 | 1,346 | 1,280,482 | ||||
B-2-B, 5.288%, 1/03/14 | 1,346 | 1,280,096 | ||||
B-2-C, 5.288%, 1/03/14 | 1,346 | 1,280,096 | ||||
Intelsat Subsidiary Holding Co. Ltd. Tranche B | ||||||
Term Loan, 5.288%, 7/03/13 | 1,916 | 1,837,495 | ||||
Knology, Inc. Term Loan, 5.038%, 6/30/12 | 742 | 683,100 | ||||
Lavena Holding 3 GmbH (Prosiebensat.1 Media AG): | ||||||
Facility B-1 6.86% – 7.526%, 3/06/15 | EUR | 500 | 504,115 | |||
Facility C-1 7.11% – 7.776%, 3/04/16 | 500 | 504,115 | ||||
MCC Iowa LLC (Mediacom Broadband Group) | ||||||
Tranche A Term Loan, 3.97% – 3.98%, 3/31/10 | USD | 1,137 | 1,080,625 | |||
MCNA Cable Holdings LLC (OneLink Communications) | ||||||
Loan, 9.62%, 3/01/13 (d) | 1,123 | 985,718 | ||||
Mediacom Illinois, LLC (Mediacom | ||||||
Communications, LLC) Tranche C Term Loan, | ||||||
4.22% – 4.23%, 1/31/15 | 3,113 | 2,873,708 | ||||
Mediannuaire Holding (Pages Jaunes) Term Loan D, | ||||||
8.736%, 4/08/16 | EUR | 500 | 547,943 | |||
Metro-Goldwyn-Mayer, Inc. Tranche B Term Loan, | ||||||
6.051%, 4/09/12 | USD | 3,832 | 2,885,954 | |||
Multicultural Radio Broadcasting, Inc. Term Loan, | ||||||
5.422%, 12/18/12 | 349 | 314,100 | ||||
National Cinemedia LLC Term Loan, 4.54%, 2/13/15 | 1,000 | 899,464 | ||||
Newsday LLC Fixed Rate Term Loan, 9.75%, 8/01/13 | 2,250 | 2,245,781 | ||||
NextMedia Operating, Inc.: | ||||||
Delay Draw Term Loan, 6.466%, 11/15/12 | 314 | 273,524 | ||||
Initial Term Loan First Lien, 6.472%, 11/15/12 | 419 | 364,492 | ||||
Second Lien Term Loan, 9.47%, 11/15/13 | 1,754 | 1,385,995 | ||||
Nielsen Finance LLC Dollar Term Loan, | ||||||
4.803%, 8/09/13 | 5,895 | 5,444,619 | ||||
Penton Media, Inc. Loan (Second Lien), | ||||||
7.799%, 2/01/14 | 1,000 | 690,000 | ||||
Sitel, LLC (ClientLogic) U.S. Term Loan, | ||||||
4.962% – 5.359%, 1/30/14 | 968 | 751,762 | ||||
Sunshine Acquisition Limited (HIT | ||||||
Entertainment) Term Facility, 4.80%, 3/20/12 | 732 | 625,889 | ||||
Weather Channel Term Loan B, 7.25%, 6/01/15 | 750 | 725,625 | ||||
71,571,231 | ||||||
Multi-Utilities — 1.9% | ||||||
Coleto Creek Power, LP (Coleto Creek WLE, LP) | ||||||
(First Lien): | ||||||
Synthetic Letter of Credit, 2.701%, 6/28/13 | 127 | 114,650 | ||||
Term Loan, 5.551%, 6/28/13 | 1,812 | 1,630,811 | ||||
Energy Transfer Equity, LP Term Loan, | ||||||
4.553%, 11/01/12 | 1,000 | 968,542 | ||||
FirstLight Power Resources, Inc. | ||||||
Second Lien Term Loan, 7.313%, 5/01/14 | 500 | 453,750 | ||||
Riverside Energy Center Term Loan, 7.049%, 6/24/11 | 1,566 | 1,566,076 | ||||
Rocky Mountain Energy Center LLC: | ||||||
Credit Linked Deposit, 2.699%, 6/24/11 | 134 | 133,966 | ||||
Term Loan, 7.049%, 6/24/11 | 784 | 783,587 | ||||
5,651,382 | ||||||
Multiline Retail — 1.2% | ||||||
Neiman Marcus Group, Inc. Term Loan, | ||||||
4.422%, 4/06/13 | 3,734 | 3,464,297 | ||||
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Oil, Gas & Consumable Fuels — 2.0% | ||||||
Big West Oil, LLC: | ||||||
Delayed Advanced Loan, | ||||||
4.471% – 4.68%, 5/15/14 | USD | 550 | $ 484,000 | |||
Initial Advance Loan, 4.68%, 5/15/14 | 440 | 387,200 | ||||
Coffeyville Resources LLC: | ||||||
Funded Letter of Credit, 2.691%, 12/28/10 | 486 | 442,703 | ||||
Tranche D Term Loan, 5.541% – 6.75%, 12/30/13 | 1,575 | 1,433,006 | ||||
Petroleum Geo-Services ASA/PGS Finance, Inc. | ||||||
Term Loan, 4.55%, 6/28/15 | 953 | 923,542 | ||||
Vulcan Energy Corp. | ||||||
Term Loan B3, 6.25%, 8/12/11 | 1,500 | 1,492,500 | ||||
Western Refining, Inc. Term Loan, 7.75%, 5/30/14 | 991 | 854,076 | ||||
6,017,027 | ||||||
Paper & Forest Products — 2.5% | ||||||
Boise Paper Holdings LLC (Aldabra Sub LLC), | ||||||
Tranche B Term Loan (First Lien), 7.50%, 2/24/14 | 1,247 | 1,241,309 | ||||
Georgia-Pacific LLC Term Loan B, | ||||||
4.219% – 4.551%, 12/20/12 | 3,374 | 3,185,503 | ||||
NewPage Corp. Tem Loan, 6.563%, 12/22/14 | 1,244 | 1,211,723 | ||||
Verso Paper Finance Holdings LLC Loan, | ||||||
9.033%, 2/01/13 | 1,850 | 1,734,600 | ||||
7,373,135 | ||||||
Pharmaceuticals — 0.9% | ||||||
Cardinal Health 409, Inc.: | ||||||
Dollar Term Loan 5.051%, 4/10/14 | 1,485 | 1,295,663 | ||||
Term Loan 7.205%, 4/10/14 | EUR | 990 | 1,278,094 | |||
2,573,757 | ||||||
Professional Services — 0.2% | ||||||
Booz Allen Hamilton, Inc. Tranche B Term Loan, | ||||||
7.50%, 7/31/15 | USD | 500 | 500,209 | |||
Real Estate — 0.6% | ||||||
Realogy Corp. Initial Term Loan B, 5.462%, 10/10/13 | 1,980 | 1,634,326 | ||||
Real Estate Management & Development — 0.3% | ||||||
Mattamy Funding Partnership Loan, | ||||||
5.063%, 4/11/13 | 978 | 813,769 | ||||
Road & Rail — 0.5% | ||||||
Rail America, Inc.: | ||||||
Canadian Term Loan 6.79%, 8/14/09 | 130 | 129,809 | ||||
U.S. Term Loan, 6.79%, 8/14/09 | 1,370 | 1,362,691 | ||||
1,492,500 | ||||||
Semiconductors & Semiconductor | ||||||
Equipment — 0.3% | ||||||
Marvell Technology Group, Ltd. Loan, | ||||||
4.969%, 11/09/09 | 964 | 954,113 | ||||
Specialty Retail — 0.6% | ||||||
Adesa, Inc. (KAR Holdings Inc.) Initial Term Loan, | ||||||
5.06%, 10/21/13 | 1,474 | 1,311,418 | ||||
Claire’s Stores Inc. Term B Loan, | ||||||
5.219% – 5.56%, 5/29/14 | 741 | 494,905 | ||||
1,806,323 | ||||||
Textiles, Apparel & Luxury Goods — 0.1% | ||||||
Renfro Corp. Tranche B Term Loan, | ||||||
5.92% – 6.06%, 10/04/13 | 463 | 380,713 | ||||
See Notes to Financial Statements.
24 ANNUAL REPORT |
AUGUST 31, 2008 |
Schedule of Investments (continued)
BlackRock Floating Rate Income Strategies Fund, Inc.
(Percentages shown are based on Net Assets)
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Wireless Telecommunication Services — 0.7% | ||||||
Centennial Cellular Operating Co. New Term Loan, | ||||||
4.469% – 4.80%, 2/09/11 | USD | 931 | $ 911,288 | |||
IPC Systems, Inc. Tranche B-1 Term Loan, | ||||||
5.051%, 6/02/14 | 990 | 742,500 | ||||
LT LLC: | ||||||
Delay Draw Term Loan, 5.219%, 8/15/14 | 94 | 88,904 | ||||
Term Loan (First Lien), | ||||||
5.219% – 5.551%, 8/15/14 | 406 | 386,096 | ||||
2,128,788 | ||||||
Floating Rate Loan Interests — 97.8% | 288,333,865 | |||||
Corporate Bonds | ||||||
Auto Components — 0.3% | ||||||
The Goodyear Tire & Rubber Co., | ||||||
6.678%, 12/01/09 (e) | 1,000 | 1,000,000 | ||||
Building Products — 1.8% | ||||||
CPG International I, Inc.: | ||||||
9.904%, 7/01/12 (e) | 3,500 | 2,660,000 | ||||
10.50%, 7/01/13 | 3,000 | 2,310,000 | ||||
Momentive Performance Materials, Inc. Series WI, | ||||||
9.75%, 12/01/14 | 500 | 451,250 | ||||
5,421,250 | ||||||
Capital Markets — 2.3% | ||||||
E*Trade Financial Corp., 12.50%, 11/30/17 (f) | 5,000 | 5,350,000 | ||||
Marsico Parent Co., LLC, 10.625%, 1/15/16 (f) | 1,168 | 981,120 | ||||
Marsico Parent Holdco, LLC, | ||||||
12.50%, 7/15/16 (d)(f) | 430 | 356,759 | ||||
Marsico Parent Superholdco, LLC, | ||||||
14.50%, 1/15/18 (d)(f) | 290 | 240,834 | ||||
6,928,713 | ||||||
Chemicals — 1.8% | ||||||
GEO Specialty Chemicals Corp., | ||||||
7.50%, 3/31/15 (a)(d)(f) | 790 | 591,331 | ||||
11.283%, 12/31/09 | 1,319 | 987,601 | ||||
Hexion U.S. Finance Corp., 7.304%, 11/15/14 (e) | 4,000 | 3,050,000 | ||||
NOVA Chemicals Corp., 5.953%, 11/15/13 (e) | 985 | 847,100 | ||||
5,476,032 | ||||||
Commercial Services & Supplies — 2.3% | ||||||
ARAMARK Corp., 6.301%, 2/01/15 (e) | 2,000 | 1,860,000 | ||||
Allied Waste North America, Inc. Series B, | ||||||
7.375%, 4/15/14 | 3,375 | 3,408,750 | ||||
US Investigations Services, Inc., | ||||||
10.50%, 11/01/15 (f) | 1,600 | 1,424,000 | ||||
6,692,750 | ||||||
Construction & Engineering — 0.2% | ||||||
Dycom Industries, Inc., 8.125%, 10/15/15 | 600 | 561,000 | ||||
Construction Materials — 1.1% | ||||||
Nortek Holdings, Inc., 10%, 12/01/13 (f) | 3,420 | 3,197,700 | ||||
Par | ||||||
Corporate Bonds | (000) | Value | ||||
Containers & Packaging — 2.0% | ||||||
Berry Plastics Holding Corp., 6.651%, 9/15/14 (e) | USD | 1,450 | $ 1,087,500 | |||
Clondalkin Acquisition BV, | ||||||
4.776%, 12/15/13 (e)(f) | 4,000 | 3,320,000 | ||||
Packaging Dynamics Finance Corp., | ||||||
10%, 5/01/16 (f) | 2,350 | 1,586,250 | ||||
5,993,750 | ||||||
Diversified Financial Services — 1.7% | ||||||
FCE Bank Plc, 7.125%, 1/16/12 | EUR | 4,000 | 4,894,420 | |||
Diversified Telecommunication Services — 0.5% | ||||||
Qwest Corp., 6.026%, 6/15/13 (e) | USD | 1,450 | 1,341,250 | |||
Electronic Equipment & Instruments — 0.6% | ||||||
NXP BV, 5.541%, 10/15/13 (e) | 2,390 | 1,858,225 | ||||
Food & Staples Retailing — 0.1% | ||||||
AmeriQual Group LLC, 9%, 4/01/12 (f) | 250 | 162,500 | ||||
Health Care Equipment & Supplies — 2.7% | ||||||
DJO Finance LLC (ReAble Therapeutics Finance LLC), | ||||||
10.875%, 11/15/14 | 8,000 | 8,020,000 | ||||
Hotels, Restaurants & Leisure — 2.6% | ||||||
American Real Estate Partners LP, 7.125%, 2/15/13 | 5,000 | 4,368,750 | ||||
Harrah’s Operating Co., Inc. (f): | ||||||
10.75%, 2/01/16 | 2,503 | 1,683,267 | ||||
10.75%, 2/01/18 (d) | 426 | 251,618 | ||||
Little Traverse Bay Bands of Odawa Indians, | ||||||
10.25%, 2/15/14 (f) | 1,565 | 1,302,862 | ||||
7,606,497 | ||||||
Household Durables — 0.0% | ||||||
The Yankee Candle Co., Inc., 9.75%, 2/15/17 | 240 | 152,400 | ||||
IT Services — 0.6% | ||||||
First Data Corp., 9.875%, 9/24/15 (f) | 2,000 | 1,725,000 | ||||
Independent Power Producers | ||||||
& Energy Traders — 0.4% | ||||||
Texas Competitive Electric Holdings Co. LLC | ||||||
10.25%, 11/01/15 (b) | 1,230 | 1,226,925 | ||||
Industrial Conglomerates — 0.6% | ||||||
Sequa Corp. (f): | ||||||
11.75%, 12/01/15 | 640 | 563,200 | ||||
13.50%, 12/01/15 (d) | 1,489 | 1,212,657 | ||||
1,775,857 | ||||||
Insurance — 1.7% | ||||||
American International Group, Inc., | ||||||
8.25%, 8/15/18 (f) | 5,000 | 4,929,105 | ||||
Machinery — 0.5% | ||||||
Ahern Rentals, Inc., 9.25%, 8/15/13 | 250 | 161,250 | ||||
Sunstate Equipment Co. LLC, 10.50%, 4/01/13 (f) | 2,000 | 1,460,000 | ||||
1,621,250 | ||||||
Media — 1.5% | ||||||
CSC Holdings, Inc. Series B, 7.625%, 4/01/11 | 2,000 | 2,010,000 | ||||
Cablevision Systems Corp. Series B, 8%, 4/15/12 | 575 | 569,250 | ||||
Nielsen Finance LLC, 10%, 8/01/14 | 1,000 | 1,012,500 | ||||
Windstream Regatta Holdings, Inc., | ||||||
11%, 12/01/17 (f) | 1,244 | 721,520 | ||||
4,313,270 | ||||||
See Notes to Financial Statements. |
ANNUAL REPORT |
AUGUST 31, 2008 |
25 |
Schedule of Investments (continued)
BlackRock Floating Rate Income Strategies Fund, Inc.
(Percentages shown are based on Net Assets)
Par | ||||
Corporate Bonds | (000) | Value | ||
Metals & Mining — 2.1% | ||||
FMG Finance Property Ltd., 6.811%, 9/01/11 (e)(f) | USD 265 | $ 259,700 | ||
Freeport-McMoRan Copper & Gold, Inc., | ||||
5.883%, 4/01/15 (e) | 4,220 | 4,231,141 | ||
Ryerson, Inc., 10.176%, 11/01/14 (e)(f) | 1,680 | 1,604,400 | ||
6,095,241 | ||||
Oil, Gas & Consumable Fuels — 0.5% | ||||
SandRidge Energy, Inc., 6.416%, 4/01/14 (e)(f) | 1,600 | 1,500,513 | ||
Paper & Forest Products — 3.1% | ||||
Abitibi-Consolidated, Inc., 6.276%, 6/15/11 (e) | 2,650 | 1,212,375 | ||
Ainsworth Lumber Co. Ltd., 11%, 7/29/15 (f) | 1,124 | 901,698 | ||
Domtar Corp., 7.125%, 8/15/15 | 625 | 603,125 | ||
NewPage Corp.: | ||||
9.051%, 5/01/12 (e) | 925 | 867,187 | ||
10%, 5/01/12 | 2,000 | 1,940,000 | ||
Verso Paper Holdings LLC Series B, | ||||
6.551%, 8/01/14 (e) | 4,000 | 3,560,000 | ||
9,084,385 | ||||
Pharmaceuticals — 0.3% | ||||
Angiotech Pharmaceuticals, Inc., | ||||
6.56%, 12/01/13 (e) | 1,000 | 885,000 | ||
Real Estate Management & Development — 0.4% | ||||
Realogy Corp., 5.462%, 10/10/13 | 2,530 | 1,189,100 | ||
Road & Rail — 0.0% | ||||
Swift Transportation Co., Inc., | ||||
10.554%, 5/12/15 (e)(f) | 350 | 122,500 | ||
Semiconductors & Semiconductor | ||||
Equipment — 1.0% | ||||
Avago Technologies Finance Ltd., | ||||
8.311%, 6/01/13 (e) | 900 | 900,000 | ||
Spansion, Inc., 5.935%, 6/01/13 (e)(f) | 2,870 | 1,994,650 | ||
2,894,650 | ||||
Specialty Retail — 0.3% | ||||
AutoNation, Inc., 4.791%, 4/15/13 | 250 | 206,250 | ||
General Nutrition Centers, Inc., | ||||
7.199%, 3/15/14 (d)(e) | 700 | 585,583 | ||
791,833 | ||||
Wireless Telecommunication Services — 0.6% | ||||
Cricket Communications, Inc., 9.375%, 11/01/14 | 370 | 366,762 | ||
Digicel Group Ltd., 9.125%, 1/15/15 (d)(f) | 277 | 251,242 | ||
Sprint Capital Corp., 7.625%, 1/30/11 | 1,100 | 1,100,000 | ||
1,718,004 | ||||
Total Corporate Bonds — 33.6% | 99,179,120 | |||
Common Stocks | Shares | |||
Capital Markets — 0.3% | ||||
E*Trade Financial Corp. (b) | 242,021 | 774,467 | ||
Chemicals — 0.0% | ||||
GEO Specialty Chemicals, Inc. (a)(b) | 13,117 | 5,036 | ||
Electrical Equipment — 0.1% | ||||
Medis Technologies Ltd. (b) | 71,654 | 224,277 | ||
Common Stocks | Shares | Value | ||
Energy Equipment & Services — 0.9% | ||||
Trico Marine Services, Inc. (b) | 119,185 | $ 2,830,644 | ||
Paper & Forest Products — 0.3% | ||||
Ainsworth Lumber Co. Ltd. (f) | 152,951 | 440,157 | ||
Ainsworth Lumber Co. Ltd. | 136,290 | 391,489 | ||
Western Forest Products, Inc. (b) | 84,448 | 68,398 | ||
900,044 | ||||
Total Common Stocks — 1.6% | 4,734,468 | |||
Preferred Stocks | ||||
Capital Markets — 0.0% | ||||
Marsico Parent Superholdco, LLC, 16.75% (f) | 78 | 66,690 | ||
Total Preferred Stocks — 0.0% | 66,690 | |||
Warrants (h) | ||||
Electric Utilities — 0.0% | ||||
Reliant Resources (expires 10/25/08) | 4,558 | 54,423 | ||
Total Warrants — 0.0% | 54,423 | |||
Total Long-Term Investments | ||||
(Cost — $436,720,652) — 133.0% | 392,368,566 | |||
Beneficial | ||||
Interest | ||||
Short-Term Securities | (000) | |||
BlackRock Liquidity Series, LLC | ||||
Cash Sweep Series, 2.41% (i)(j) | USD 1,635 | 1,634,669 | ||
Total Short-Term Securities | ||||
(Cost — $1,634,669) — 0.6% | 1,634,669 | |||
Options Purchased | Contracts | |||
Call Options Purchased | ||||
Marsico Parent Superholdco LLC, | ||||
expiring December 2019 at $942.86 | 20 | 33,800 | ||
Total Options Purchased | ||||
(Cost — $19,556) — 0.0% | 33,800 | |||
Total Investments (Cost — $438,374,877*) — 133.6% | 394,037,035 | |||
Liabilities in Excess of Other Assets — (33.6)% | (99,032,232) | |||
Net Assets — 100.0% | $295,004,803 | |||
* The cost and unrealized appreciation (depreciation) of investments as of August
31, 2008, as computed for federal income tax purposes, were as follows:
Aggregate cost | $438,320,267 | |
Gross unrealized appreciation | $ 3,360,436 | |
Gross unrealized depreciation | (47,643,668) | |
Net unrealized depreciation | $ (44,283,232) | |
See Notes to Financial Statements.
26 ANNUAL REPORT |
AUGUST 31, 2008 |
Schedule of Investments (concluded)
BlackRock Floating Rate Income Strategies Fund, Inc.
(a) Security is fair valued.
(b) Non-income producing security.
(c) Issuer filed for bankruptcy or is in default of interest payments.
(d) Represents a payment-in-kind security which may pay interest/dividends in addi-
tional par/shares.
(e) Variable rate security. Rate shown is as of report date.
(f) 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.
(g) Convertible security.
(h) Warrants entitle the Fund to purchase a predetermined number of shares
of common stock and are non-income producing. The purchase price and
number of shares are subject to adjustment under certain conditions until the
expiration date.
(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 | ||||
Activity | ||||
Affiliate | (000) | Income | ||
BlackRock Liquidity Series, LLC | ||||
Cash Sweep Series | $1,635 | $116,423 | ||
(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. These industry
classifications are unaudited.
•Foreign currency exchange contracts as of August 31,2008 were as follows:
Unrealized | ||||||||||
Currency | Currency | Settlement | Appreciation | |||||||
Purchased | Sold | Date | (Depreciation) | |||||||
USD | 295,745 | CAD | 315,000 | 10/23/08 | $ (715) | |||||
USD | 8,265,641 | GBP | 4,167,700 | 10/23/08 | 699,669 | |||||
USD | 4,838,801 | EUR | 3,304,000 | 10/23/08 | 6,034 | |||||
USD | 8,806,593 | EUR | 5,627,000 | 10/23/08 | 575,970 | |||||
Total | $ 1,280,958 | |||||||||
•Swaps outstanding as of August 31,2008 were as follows:
Notional | Unrealized | |||||
Amount | Appreciation | |||||
(000) | (Depreciation) | |||||
Sold credit default protection on Ford | ||||||
Motor Co. and receive 3.80% | ||||||
Broker, UBS Warburg | ||||||
Expires March 2010 | USD | 10,000 | $(2,055,880) | |||
Bought credit default protection on | ||||||
LCDX North America High Yield | ||||||
Index 10.V1 and pay 5% | ||||||
Broker, Credit Suisse | ||||||
Expires June 2013 | USD | 4,000 | 11,456 | |||
Bought credit default protection on | ||||||
LCDX North America High Yield | ||||||
Series 10.V1 Index and pay 5% | ||||||
Broker, Morgan Stanley Capital Services | ||||||
Expires June 2013 | USD | 1,200 | 49,187 | |||
Bought credit default protection on | ||||||
LCDX North America High Yield | ||||||
Index Series 10.V1 and receive 5% | ||||||
Broker, Morgan Stanley Capital Services | ||||||
Expires June 2013 | USD | 3,600 | 91,310 | |||
Total | $(1,903,927) | |||||
•Currency Abbreviations
CAD Canadian Dollar
EUR Euro
GBP British Pound
USD U.S. Dollar
See Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2008 27
Statements of Assets and Liabilities | ||||||
BlackRock | BlackRock | |||||
BlackRock | Diversified | Floating Rate | ||||
Defined | Income | Income | ||||
Opportunity | Strategies | Strategies | ||||
August 31, 2008 | Credit Trust | Fund, Inc. | Fund, Inc. | |||
Assets | ||||||
Investments at value — unaffiliated1 | $ 178,984,863 | $ 231,629,508 | $ 392,402,366 | |||
Investments at value — affiliated2 | 2,365,561 | 5,592,405 | 1,634,669 | |||
Unrealized appreciation on foreign currency exchange contracts | 885,661 | 258,618 | 1,281,673 | |||
Unrealized appreciation on unfunded corporate loans | 4,973 | 2,059 | — | |||
Unrealized appreciation on swaps | 391,498 | 87,684 | 151,953 | |||
Foreign currency at value3 | 104,684 | 75,512 | 320,965 | |||
Cash | 151,800 | 934,251 | 956,591 | |||
Swap premium paid | 113,792 | 249,847 | 467,128 | |||
Interest receivable | 1,268,438 | 3,851,368 | 4,927,778 | |||
Investments sold receivable | 299,708 | 650,794 | 2,712,078 | |||
Dividends receivable | — | 16,822 | — | |||
Swaps receivable | 141,449 | 368,462 | 78,111 | |||
Commitment fees receivable | 827 | 80 | 2,859 | |||
Principal paydown receivable | 148,941 | — | 106,241 | |||
Other assets | — | — | 20,203 | |||
Prepaid expenses | 1,024 | 6,294 | 12,115 | |||
Total assets | 184,863,219 | 243,723,704 | 405,074,730 | |||
Liabilities | ||||||
Loan payable | 38,500,000 | 65,500,000 | 101,500,000 | |||
Unrealized depreciation on unfunded corporate loans | — | — | 182,608 | |||
Unrealized depreciation on foreign currency exchange contracts | — | 10,366 | 715 | |||
Unrealized depreciation on swaps | 200,702 | 3,332,453 | 2,055,880 | |||
Investments purchased payable | 17,120,314 | 3,890,113 | 5,372,509 | |||
Swap premium received | 702,992 | — | — | |||
Swaps payable | 38,414 | 839,898 | 90,445 | |||
Interest on loans payable | 140,982 | 49,648 | 76,382 | |||
Deferred income | 21,279 | 4,683 | 20,671 | |||
Officer’s and Directors’/Trustees’ fees payable | 70 | 105 | 181 | |||
Investment advisory fees payable | 137,493 | 149,719 | 257,815 | |||
Income dividends payable | 200,836 | 181,406 | 234,150 | |||
Other liabilities | — | — | 221,688 | |||
Other affiliates payable | 835 | 1,150 | 1,959 | |||
Other accrued expenses payable | 104,154 | 57,084 | 54,924 | |||
Total liabilities | 57,168,071 | 74,016,625 | 110,069,927 | |||
Net Assets | $ 127,695,148 | $ 169,707,079 | $ 295,004,803 | |||
Net Assets Consist of | ||||||
Par value per share4 | $ 8,924 | $ 1,217,688 | $ 1,830,503 | |||
Paid-in capital in excess of par | 127,081,012 | 230,357,607 | 347,369,214 | |||
Undistributed (distribution in excess of) net investment income | (1,438,090) | (175,645) | 848,640 | |||
Accumulated net realized gain (loss) | 754,018 | (16,661,101) | (9,717,445) | |||
Net unrealized appreciation/depreciation | 1,289,284 | (45,031,470) | (45,326,109) | |||
Net Assets | $ 127,695,148 | $ 169,707,079 | $ 295,004,803 | |||
Net asset value5 | $ 14.31 | $ 13.94 | $ 16.12 | |||
1 Investments at cost — unaffiliated | $ 178,870,725 | $ 273,649,023 | $ 436,740,208 | |||
2 Investments at cost — affiliated | $ 2,365,561 | $ 5,592,405 | $ 1,634,669 | |||
3 Foreign currency at cost | $ 108,221 | $ 81,554 | $ 385,705 | |||
4 Par value per share | $ 0.001 | $ 0.10 | $ 0.10 | |||
5 Shares outstanding | 8,923,781 | 12,176,877 | 18,305,029 | |||
See Notes to Financial Statements. | ||||||
28 ANNUAL REPORT |
AUGUST 31, 2008 |
Statements of Assets and Liabilities (concluded) | ||||
BlackRock | Blackrock | |||
Senior Floating | Senior Floating | |||
August 31, 2008 | Rate Fund, Inc. | Rate Fund II, Inc. | ||
Assets | ||||
Investments at value — Master Senior Floating Rate (the “Master LLC”)1 | $ 401,277,239 | $ 187,470,780 | ||
Capital shares sold receivable | 948,417 | 482,431 | ||
Prepaid expenses | 197,333 | 102,912 | ||
Total assets | 402,422,989 | 188,056,123 | ||
Liabilities | ||||
Income dividends payable | 1,879,853 | 818,231 | ||
Contributions payable to the Master LLC | 948,417 | 482,431 | ||
Administration fees payable | 87,067 | 65,155 | ||
Other affiliates payable | 50,305 | 15,336 | ||
Officer’s and Directors’ fees payable | 176 | 83 | ||
Other accrued expenses payable | 56,950 | 37,838 | ||
Total liabilities | 3,022,768 | 1,419,074 | ||
Net Assets | $ 399,400,221 | $ 186,637,049 | ||
Net Assets Consist of | ||||
Par value $0.10 per share, 1,000,000,000 shares authorized2 | $ 5,006,721 | $ 2,152,464 | ||
Paid-in capital in excess of par | 779,362,080 | 241,495,817 | ||
Undistributed (distributions in excess of) net investment income | 168,069 | 85,109 | ||
Accumulated net realized loss allocated from the Master LLC | (344,664,509) | (37,787,505) | ||
Net unrealized appreciation/depreciation allocated from the Master LLC | (40,472,140) | (19,308,836) | ||
Net Assets | $ 399,400,221 | $ 186,637,049 | ||
Net asset value | $ 7.98 | $ 8.67 | ||
1 Cost — investment in Master LLC | $ 441,749,379 | $ 206,779,616 | ||
2 Shares outstanding | 50,067,209 | 21,524,638 | ||
See Notes to Financial Statements. |
ANNUAL REPORT |
AUGUST 31, 2008 |
29 |
Statements of Operations | ||||||
BlackRock | BlackRock | |||||
BlackRock | Diversified | Floating Rate | ||||
Defined | Income | Income | ||||
Opportunity | Strategies | Strategies | ||||
Period Ended August 31, 2008 | Credit Trust1 | Fund, Inc. | Fund, Inc. | |||
Investment Income | ||||||
Interest | $ 5,195,495 | $ 24,378,276 | $ 34,254,742 | |||
Income from affiliates | 201,589 | 96,853 | 116,423 | |||
Dividends | — | 228,564 | — | |||
Facility and other fees | 10,610 | 143,973 | 293,297 | |||
Total income | 5,407,694 | 24,847,666 | 34,664,462 | |||
Expenses | ||||||
Investment advisory | 819,830 | 1,891,120 | 3,099,424 | |||
Professional | 121,603 | 91,948 | 110,821 | |||
Borrowing | 35,639 | 130,054 | 218,344 | |||
Printing | 28,508 | 41,010 | 43,704 | |||
Organization | 22,000 | — | — | |||
Accounting services | 17,276 | 48,422 | 78,127 | |||
Transfer agent | 16,792 | 11,988 | 6,713 | |||
Custodian | 9,788 | 22,479 | 29,034 | |||
Officer and Directors/Trustees | 5,465 | 19,953 | 30,447 | |||
Registration | — | 9,301 | 8,811 | |||
Miscellaneous | 18,091 | 55,997 | 53,674 | |||
Total expenses excluding interest expense | 1,094,992 | 2,322,272 | 3,679,099 | |||
Interest expense | 226,490 | 2,900,068 | 4,459,934 | |||
Total expenses | 1,321,482 | 5,222,340 | 8,139,033 | |||
Less fees paid indirectly | (2,171) | (3,352) | (8,331) | |||
Total expenses after fees paid indirectly | 1,319,311 | 5,218,988 | 8,130,702 | |||
Net investment income | 4,088,383 | 19,628,678 | 26,533,760 | |||
Realized and Unrealized Gain (Loss) | ||||||
Net realized gain (loss) from: | ||||||
Investments | 818,649 | (12,882,299) | (9,896,537) | |||
Options written | — | 120,000 | 240,000 | |||
Swaps | 309,504 | 435,766 | 431,225 | |||
Foreign currency | (487,037) | (778,962) | (1,201,198) | |||
641,116 | (13,105,495) | (10,426,510) | ||||
Change in unrealized appreciation/depreciation on: | ||||||
Investments | 114,138 | (25,093,510) | (26,883,532) | |||
Swaps | 190,796 | (3,534,065) | (1,210,581) | |||
Foreign currency | 979,377 | 131,776 | 959,688 | |||
Unfunded corporate loans | 4,973 | 35,671 | 288,554 | |||
1,289,284 | (28,460,128) | (26,845,871) | ||||
Total realized and unrealized gain (loss) | 1,930,400 | (41,565,623) | (37,272,381) | |||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ 6,018,783 | $ (21,936,945) | $ (10,738,621) | |||
1 Period January 31, 2008 (commencement of operations) to August 31, 2008. |
See Notes to Financial Statements. |
30 ANNUAL REPORT |
AUGUST 31, 2008 |
Statements of Operations (concluded) | ||||
BlackRock | Blackrock | |||
Senior Floating | Senior Floating | |||
Year Ended August 31, 2008 | Rate Fund, Inc. | Rate Fund II, Inc. | ||
Investment Income | ||||
Net Investment income allocated from the Master LLC: | ||||
Interest | $ 32,028,272 | $ 15,303,880 | ||
Facility and other fees | 183,442 | 87,127 | ||
Expenses | (4,494,138) | (2,142,295) | ||
Total income | 27,717,576 | 13,248,712 | ||
Expenses | ||||
Administration fees | 1,079,210 | 823,527 | ||
Transfer agent | 358,783 | 102,985 | ||
Tender offer fees | 193,052 | 183,346 | ||
Printing | 80,258 | 56,863 | ||
Professional | 64,407 | 42,132 | ||
Registration | 43,674 | 28,566 | ||
Officer and Directors | 1,097 | 514 | ||
Miscellaneous | 13,363 | 13,362 | ||
Total expenses | 1,833,844 | 1,251,295 | ||
Recovery of filing fees | (791,591) | (302,192) | ||
Total expenses after recovery of filing fees | 1,042,253 | 949,103 | ||
Net investment income | 26,675,323 | 12,299,609 | ||
Realized and Unrealized Gain (Loss) Allocated from the Master LLC | ||||
Net realized gain (loss) from: | ||||
Investments | (14,460,254) | (6,903,206) | ||
Swaps | 182,591 | 86,834 | ||
Foreign currency | (84,846) | (40,968) | ||
(14,362,509) | (6,857,340) | |||
Net change in unrealized appreciation/depreciation on investments, swaps, foreign currency and unfunded corporate loans | (18,260,695) | (8,921,385) | ||
Total realized and unrealized loss | (32,623,204) | (15,778,725) | ||
Net Decrease in Net Assets Resulting from Operations | $ (5,947,881) | $ (3,479,116) | ||
See Notes to Financial Statements. |
ANNUAL REPORT |
AUGUST 31, 2008 |
31 |
Statements of Changes in Net Assets | BlackRock Defined Opportunity Credit Trust | |||
Period | ||||
January 31, 20081 | ||||
to August 31, | ||||
Increase (Decrease) in Net Assets: | 2008 | |||
Operations | ||||
Net investment income | $ 4,088,383 | |||
Net realized gain | 641,116 | |||
Net change in unrealized appreciation/depreciation | 1,289,284 | |||
Net increase in net assets resulting from operations | 6,018,783 | |||
Dividends and Distributions to Shareholders From | ||||
Net investment income | (5,435,571) | |||
Tax return of capital | (481,911) | |||
Decrease in net assets resulting from dividends and distributions to shareholders | (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 | 224,341 | |||
Net increase in net assets resulting from share transactions | 127,471,841 | |||
Net Assets | ||||
Total increase in net assets | 127,573,142 | |||
Beginning of period | 122,006 | |||
End of period | $ 127,695,148 | |||
End of period distributions in excess of net investment income | $ (1,438,090) | |||
1 Commencement of operations. | ||||
BlackRock Diversified Income Strategies Fund, Inc. | ||||
Year Ended August 31, | ||||
Increase (Decrease) in Net Assets: | 2008 | 2007 | ||
Operations | ||||
Net investment income | $ 19,628,678 | $ 22,055,888 | ||
Net realized loss | (13,105,495) | (1,329,450) | ||
Net change in unrealized appreciation/depreciation | (28,460,128) | (13,696,073) | ||
Net increase (decrease) in net assets resulting from operations | (21,936,945) | 7,030,365 | ||
Dividends and Distributions to Shareholders From | ||||
Net investment income | (20,910,360) | (21,741,425) | ||
Tax return of capital | (443,389) | — | ||
Decrease in net assets resulting from dividends and distributions to shareholders | (21,353,749) | (21,741,425) | ||
Capital Share Transactions | ||||
Reinvestment of dividends | 205,747 | 3,347,551 | ||
Net Assets | ||||
Total decrease in net assets | (43,084,947) | (11,363,509) | ||
Beginning of year | 212,792,026 | 224,155,535 | ||
End of year | $ 169,707,079 | $ 212,792,026 | ||
End of year undistributed (distributions in excess of) net investment income | $ (175,645) | $ 1,905,486 | ||
See Notes to Financial Statements. | ||||
32 ANNUAL REPORT |
AUGUST 31, 2008 |
Statements of Changes in Net Assets | BlackRock Floating Rate Income Strategies Fund, Inc. | |||
Year Ended August 31, | ||||
Increase (Decrease) in Net Assets: | 2008 | 2007 | ||
Operations | ||||
Net investment income | $ 26,533,760 | $ 28,102,505 | ||
Net realized gain (loss) | (10,426,510) | 2,341,072 | ||
Net change in unrealized appreciation/depreciation | (26,845,871) | (21,949,912) | ||
Net increase (decrease) in net assets resulting from operations | (10,738,621) | 8,493,665 | ||
Dividends to Shareholders From | ||||
Net investment income | (28,321,303) | (28,142,426) | ||
Net Assets | ||||
Total decrease in net assets | (39,059,924) | (19,648,761) | ||
Beginning of year | 334,064,727 | 353,713,488 | ||
End of year | $ 295,004,803 | $ 334,064,727 | ||
End of year undistributed net investment income | $ 848,640 | $ 4,037,077 | ||
BlackRock Senior Floating Rate Fund, Inc. | ||||
Year Ended August 31, | ||||
Increase (Decrease) in Net Assets: | 2008 | 2007 | ||
Operations | ||||
Net investment income | $ 26,675,323 | $ 36,717,895 | ||
Net realized loss | (14,362,509) | (30,570,377) | ||
Net change in unrealized appreciation/depreciation | (18,260,695) | 11,735,034 | ||
Net increase (decrease) in net assets resulting from operations | (5,947,881) | 17,882,552 | ||
Dividends to Shareholders From | ||||
Net investment income | (26,664,539) | (36,713,751) | ||
Capital Share Transactions | ||||
Net decrease in net assets resulting from share transactions | (73,502,678) | (77,460,238) | ||
Net Assets | ||||
Total decrease in net assets | (106,115,098) | (96,291,437) | ||
Beginning of year | 505,515,319 | 601,806,756 | ||
End of year | $ 399,400,221 | $ 505,515,319 | ||
End of year undistributed (distributions in excess of) net investment income | $ 168,069 | $ (12,366) | ||
See Notes to Financial Statements. |
ANNUAL REPORT |
AUGUST 31, 2008 |
33 |
Statements of Changes in Net Assets | BlackRock Senior Floating Rate Fund II, Inc. | |||
Year Ended August 31, | ||||
Increase (Decrease) in Net Assets: | 2008 | 2007 | ||
Operations | ||||
Net investment income | $ 12,299,609 | $ 17,225,300 | ||
Net realized loss | (6,857,340) | (4,430,328) | ||
Net change in unrealized appreciation/depreciation | (8,921,385) | (4,878,870) | ||
Net increase (decrease) in net assets resulting from operations | (3,479,116) | 7,916,102 | ||
Dividends to Shareholders From | ||||
Net investment income | (12,294,014) | (17,223,323) | ||
Capital Share Transactions | ||||
Net decrease in net assets resulting from share transactions | (45,450,688) | (65,033,937) | ||
Net Assets | ||||
Total decrease in net assets | (61,223,818) | (74,341,158) | ||
Beginning of year | 247,860,867 | 322,202,025 | ||
End of year | $ 186,637,049 | $ 247,860,867 | ||
End of year undistributed net investment income | $ 85,109 | $ 3,998 | ||
See Notes to Financial Statements. |
34 ANNUAL REPORT |
AUGUST 31, 2008 |
Statements of Cash Flows | ||||
BlackRock | BlackRock | |||
Diversified | Floating Rate | |||
Income | Income | |||
Strategies | Strategies | |||
August 31, 2008 | Fund, Inc. | Fund, Inc. | ||
Cash Provided by Operating Activities | ||||
Net decrease in net assets resulting from operations | $ (21,936,945) | $ (10,738,621) | ||
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities: | ||||
Decrease in receivables | 1,904,475 | 1,674,986 | ||
Increase in prepaid expenses and other assets | (3,105) | (24,905) | ||
Decrease in other liabilities | (148,935) | 13,400 | ||
Swap premium received | (274,560) | (400,982) | ||
Swap premium paid | 68,753 | (225,670) | ||
Net realized and unrealized loss | 41,352,180 | 36,599,471 | ||
Amortization of premium and discount on investments | (155,765) | (632,745) | ||
Paid-in-kind income | (825,743) | (575,427) | ||
Premiums received from options written | 120,000 | 240,000 | ||
Proceeds from sales and paydowns of long-term securities | 112,792,521 | 207,903,073 | ||
Purchases of long-term securities | (101,002,032) | (206,607,574) | ||
Net purchases of short-term investments | (3,063,640) | (1,626,960) | ||
Net cash provided by operating activities | 28,827,204 | 25,598,046 | ||
Cash Used for Financing Activities | ||||
Cash receipts from loans | 87,000,000 | 209,500,000 | ||
Cash payments on loans | (93,500,000) | (215,000,000) | ||
Cash dividends paid | (21,418,666) | (28,372,086) | ||
Net cash used for financing activities | (27,918,666) | (33,872,086) | ||
Cash Impact from Foreign Exchange Fluctuations | ||||
Cash impact from foreign exchange fluctuations | (6,042) | (64,618) | ||
Cash | ||||
Net increase (decrease) in cash | 902,496 | (8,338,658) | ||
Cash and foreign currency at beginning of year | 107,267 | 9,616,214 | ||
Cash and foreign currency at end of year | $ 1,009,763 | $ 1,277,556 | ||
Cash Flow Information | ||||
Cash paid during the year for interest | $ 2,964,942 | $ 4,546,702 | ||
See Notes to Financial Statements. |
ANNUAL REPORT |
AUGUST 31, 2008 |
35 |
Financial Highlights | BlackRock Defined Opportunity Credit Trust | |
Period | ||
January 31, 20081 | ||
to August 31, | ||
2008 | ||
Per Share Operating Performance | ||
Net asset value, beginning of period | $ 14.332 | |
Net investment income3 | 0.47 | |
Net realized and unrealized gain | 0.21 | |
Net increase from investment operations | 0.68 | |
Dividends and distributions from: | ||
Net investment income | (0,62) | |
Tax return of capital | (0.06) | |
Total dividends and distributions | (0.68) | |
Capital charges with respect to issuance of shares | (0.02) | |
Net asset value, end of period | $ 14.31 | |
Market price, end of period | $ 12.66 | |
Total Investment Return4 | ||
Based on net asset value | 4.79%5 | |
Based on market price | (11.44)%5 | |
Ratios to Average Net Assets | ||
Total expenses after fees paid indirectly and excluding interest expense | 1.48%6 | |
Total expenses after fees paid indirectly | 1.78%6 | |
Total expenses before fees paid indirectly | 1.78%6 | |
Total expenses | 1.78%6 | |
Net investment income | 5.52%6 | |
Supplemental Data | ||
Net assets, end of period (000) | $ 127,695 | |
Loan outstanding, end of period (000) | $ 38,500 | |
Average loan outstanding during the period (000) | $ 13,788 | |
Portfolio turnover | 18% | |
Asset coverage, end of period per $1,000 | $ 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. Total invest- ment returns exclude the effects of sales charges. |
5 | Aggregate total investment return. |
6 | Annualized. |
See Notes to Financial Statements. |
36 ANNUAL REPORT |
AUGUST 31, 2008 |
Financial Highlights | BlackRock Diversified Income Strategies Fund, Inc. | |||||||||
Period | ||||||||||
January 31, | ||||||||||
20051 to | ||||||||||
Year Ended August 31, | August 31, | |||||||||
2008 | 2007 | 2006 | 2005 | |||||||
Per Share Operating Performance | ||||||||||
Net asset value, beginning of period | $ 17.50 | $ 18.70 | $ 18.38 | $ 19.10 | ||||||
Net investment income2 | 1.61 | 1.83 | 1.77 | 0.84 | ||||||
Net realized and unrealized gain (loss) | (3.41) | (1.23) | 0.25 | (0.77) | ||||||
Net increase (decrease) from investment operations | (1.80) | 0.60 | 2.02 | 0.07 | ||||||
Dividends and distributions from: | ||||||||||
Net investment income | (1.72) | (1.80) | (1.70) | (0.75) | ||||||
Tax return of capital | (0.04) | — | — | — | ||||||
Total dividends and distributions | (1.76) | (1.80) | (1.70) | (0.75) | ||||||
Capital charges with respect to issuance of shares | — | — | —3 | (0.04) | ||||||
Net asset value, end of period | $ 13.94 | $ 17.50 | $ 18.70 | $ 18.38 | ||||||
Market price, end of period | $ 12.77 | $ 17.16 | $ 18.85 | $ 17.53 | ||||||
Total Investment Return4 | ||||||||||
Based on net asset value | (10.17)% | 3.00% | 11.99% | 0.42%5 | ||||||
Based on market price | (16.08)% | 0.19% | 18.36% | (8.53)%5 | ||||||
Ratios to Average Net Assets | ||||||||||
Total expenses after waiver and fees paid indirectly and excluding interest expense | 1.23% | 1.30% | 1.29% | 1.00%6 | ||||||
Total expenses after waiver and fees paid indirectly | 2.77% | 3.66% | 3.17% | 2.20%6 | ||||||
Total expenses after waiver and before fees paid indirectly | 2.77% | 3.66% | 3.17% | 2.20%6 | ||||||
Total expenses | 2.77% | 3.66% | 3.17% | 2.48%6 | ||||||
Net investment income | 10.40% | 9.63% | 9.57% | 7.88%6 | ||||||
Supplemental Data | ||||||||||
Net assets, end of period (000) | $ 169,707 | $ 212,792 | $ 224,156 | $ 219,748 | ||||||
Loan outstanding, end of period (000) | $ 65,500 | $ 72,000 | $ 88,800 | $ 101,400 | ||||||
Average loan outstanding during the period (000) | $ 64,335 | $ 95,465 | $ 86,132 | $ 75,543 | ||||||
Portfolio turnover | 41% | 72% | 64% | 17% | ||||||
Asset coverage, end of period per $1,000 | $ 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. Total investment returns exclude the effects of sales charges. |
5 | Aggregate total investment return. |
6 | Annualized. |
See Notes to Financial Statements. |
ANNUAL REPORT |
AUGUST 31, 2008 |
37 |
Financial Highlights | BlackRock Floating Rate Income Strategies Fund, Inc. | |||||||||
Period | ||||||||||
October 31, | ||||||||||
20031 to | ||||||||||
Year Ended August 31, | August 31, | |||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||
Per Share Operating Performance | ||||||||||
Net asset value, beginning of period | $ 18.25 | $ 19.32 | $ 19.35 | $ 19.16 | $ 19.10 | |||||
Net investment income | 1.452 | 1.542 | 1.402 | 1.232 | 0.66 | |||||
Net realized and unrealized gain (loss) | (2.03) | (1.07) | (0.06) | 0.08 | 0.02 | |||||
Net increase (decrease) from investment operations | (0.58) | 0.47 | 1.34 | 1.31 | 0.68 | |||||
Dividends and distributions from: | ||||||||||
Net investment income | (1.55) | (1.54) | (1.37) | (1.11) | (0.60) | |||||
Net realized gain | — | — | — | (0.01) | — | |||||
Total dividends and distributions | (1.55) | (1.54) | (1.37) | (1.12) | (0.60) | |||||
Capital charges with respect to issuance of shares | — | — | — | — | (0.02) | |||||
Net asset value, end of period | $ 16.12 | $ 18.25 | $ 19.32 | $ 19.35 | $ 19.16 | |||||
Market price, end of period | $ 14.49 | $ 16.70 | $ 17.49 | $ 17.85 | $ 19.44 | |||||
Total Investment Return3 | ||||||||||
Based on net asset value | (2.56)% | 2.74% | 7.92% | 7.27% | 3.50%4 | |||||
Based on market price | (4.28)% | 3.85% | 5.91% | (2.47)% | 0.29%4 | |||||
Ratios to Average Net Assets | ||||||||||
Total expenses after fees paid indirectly and excluding interest expense | 1.18% | 1.20% | 1.14% | 1.22% | 0.71%5 | |||||
Total expenses after fees paid indirectly | 2.60% | 3.33% | 2.54% | 2.18% | 0.87%5 | |||||
Total expenses before fees paid indirectly | 2.61% | 3.33% | 2.54% | 2.18% | 0.87%5 | |||||
Total expenses | 2.61% | 3.33% | 2.54% | 2.18% | 1.08%5 | |||||
Net investment income | 8.49% | 7.88% | 7.30% | 6.34% | 3.80%5 | |||||
Supplemental Data | ||||||||||
Net assets, end of period (000) | $ 295,005 | $ 334,065 | $ 353,713 | $ 354,114 | $ 350,254 | |||||
Loan outstanding, end of period (000) | $ 101,500 | $ 107,000 | $ 135,200 | $ 123,600 | $ 123,225 | |||||
Average loan outstanding during the period (000) | $ 102,272 | $ 133,763 | $ 101,916 | $ 117,702 | $ 38,654 | |||||
Portfolio turnover | 49% | 69% | 57% | 48% | 43% | |||||
Asset coverage, end of period per $1,000 | $ 3,906 | $ 4,122 | $ 3,616 | $ 3,865 | $ 3,842 | |||||
1 | Commencement of operations. |
2 | Based on average shares outstanding. |
3 | Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Total investment returns exclude the effects of sales charges. |
4 | Aggregate total investment return. |
5 | Annualized. |
See Notes to Financial Statements. |
38 ANNUAL REPORT |
AUGUST 31, 2008 |
Financial Highlights | BlackRock Senior Floating Rate Fund, Inc. | |||||||||||
Year Ended August 31, | ||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||
Per Share Operating Performance | ||||||||||||
Net asset value, beginning of year | $ 8.60 | $ 8.92 | $ 9.01 | $ 8.91 | $ 8.40 | |||||||
Net investment income1 | 0.51 | 0.60 | 0.52 | 0.37 | 0.30 | |||||||
Net realized and unrealized gain (loss) | (0.62) | (0.32) | (0.08) | 0.10 | 0.51 | |||||||
Net increase (decrease) from investment operations | (0.11) | 0.28 | 0.44 | 0.47 | 0.81 | |||||||
Dividends from net investment income | (0.51) | (0.60) | (0.53) | (0.37) | (0.30) | |||||||
Net asset value, end of year | $ 7.98 | $ 8.60 | $ 8.92 | $ 9.01 | $ 8.91 | |||||||
Total Investment Return2 | ||||||||||||
Based on net asset value | (1.32)%3 | 3.07% | 4.97% | 5.38% | 9.73% | |||||||
Ratios to Average Net Assets 4 | ||||||||||||
Total expenses | 1.28%3 | 1.44% | 1.43% | 1.41% | 1.44% | |||||||
Net investment income | 6.16% | 6.67% | 5.84% | 4.11% | 3.41% | |||||||
Supplemental Data | ||||||||||||
Net assets, end of year (000) | $ 399,400 | $ 505,515 | $ 601,807 | $ 676,703 | $ 756,795 | |||||||
Portfolio turnover for the Master LLC | 56% | 46% | 54% | 53% | 76% | |||||||
1 | Based on average shares outstanding. |
2 | Total investment returns exclude the early withdrawal charge, if any. 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. |
ANNUAL REPORT |
AUGUST 31, 2008 |
39 |
Financial Highlights | BlackRock Senior Floating Rate Fund II, Inc. | |||||||||||
Year Ended August 31, | ||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||
Per Share Operating Performance | ||||||||||||
Net asset value, beginning of year | $ 9.35 | $ 9.70 | $ 9.79 | $ 9.67 | $ 9.13 | |||||||
Net investment income1 | 0.54 | 0.63 | 0.56 | 0.39 | 0.30 | |||||||
Net realized and unrealized gain (loss) | (0.69) | (0.34) | (0.10) | 0.11 | 0.55 | |||||||
Net increase (decrease) from investment operations | (0.15) | 0.29 | 0.46 | 0.50 | 0.85 | |||||||
Dividends from net investment income | (0.53) | (0.64) | (0.55) | (0.38) | (0.31) | |||||||
Net asset value, end of year | $ 8.67 | $ 9.35 | $ 9.70 | $ 9.79 | $ 9.67 | |||||||
Total Investment Return2 | ||||||||||||
Based on net asset value | (1.61)%3 | 2.89% | 4.90% | 5.26% | 9.41% | |||||||
Ratios to Average Net Assets 4 | ||||||||||||
Total expenses | 1.50%3 | 1.59% | 1.57% | 1.54% | 1.57% | |||||||
Net investment income | 5.96% | 6.53% | 5.70% | 4.03% | 3.20% | |||||||
Supplemental Data | ||||||||||||
Net assets, end of year (000) | $ 186,637 | $ 247,861 | $ 322,202 | $ 355,108 | $ 295,382 | |||||||
Portfolio turnover for the Master LLC | 56% | 46% | 54% | 53% | 76% | |||||||
1 | Based on average shares outstanding. |
2 | Total investment returns exclude the early withdrawal charge, if any. 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. |
40 ANNUAL REPORT |
AUGUST 31, 2008 |
Notes to Financial Statements 1. Significant Accounting Policies: BlackRock Defined Opportunity Credit Trust (“Defined Opportunity”), BlackRock Diversified Income Strategies Fund, Inc. (“Diversified Income”), BlackRock Floating Rate Income Strategies Fund, Inc. (“Floating Rate Income”), BlackRock Senior Floating Rate Fund, Inc. (“Senior Floating Rate”) and BlackRock Senior Floating Rate Fund II, Inc. (“Senior Floating Rate II”) (referred to as the “Funds” or individually as the “Fund”) are registered under the Investment Company Act of 1940, as amended (the “1940 Act”). Defined Opportunity, Diversified Income and Floating Rate Income are registered as diversified, 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 gener- ally 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 Funds determine and make available for pub- lication the net asset value of their Common Shares on a daily basis. Prior to commencement of operations on January 31, 2008, Defined Opportunity had no operations other than those relating to organizational matters and the sale of 8,517 Common Shares on November 13, 2007 to BlackRock Advisors, LLC (the “Advisor” or “Administrator”), an indirect, wholly owned subsidiary of BlackRock, Inc., for $122,006. Investment operations for Defined Opportunity commenced on January 31, 2008. Defined Opportunity will terminate 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 of the 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 elsewhere in this report and should be read in conjunction with Senior Floating Rate and Senior Floating Rate II’s financial statements. The per- centage of the Master LLC owned by Senior Floating Rate and Senior Floating Rate II at August 31, 2008 was 68% and 32%, 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 the Funds’ Board of Directors/Trustees (the “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 determin- ing 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 invest- ments, various relationships observed in the market between invest- ments, and calculated yield measures based on valuation technology commonly employed in the market for such investments. Swap agree- ments are valued by quoted fair values received daily by the Funds’ pricing service or through brokers. Short-term securities are valued at amortized cost. Investments in open-end investment companies are valued at net asset value each business day. 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 deter- mined 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 val- ued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that such prior day’s price no longer reflects the fair value of the option. Over-the-counter options are valued by an independent pricing service using a mathematical model which incorporates a num- ber of market data factors. 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, the investment will be valued by a method approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the invest- ment advisor and/or sub-advisor seeks to determine the price that the Funds 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 sub- sequently reported to the Board or a committee thereof. 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 cur- rency 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 |
ANNUAL REPORT |
AUGUST 31, 2008 |
41 |
Notes to Financial Statements (continued) are determined and the close of business on the NYSE that may not be reflected in the computation of the 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 may 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. 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. Derivative Financial Instruments: The Funds may engage in various port- folio investment strategies both to increase the returns of the Funds and to hedge, or protect, their exposure to interest rate movements and move- ments in the securities markets. Losses may arise if the value of the con- tract decreases due to an unfavorable change in the price of the underly- ing security, or if the counterparty does not perform under the contract. |
•Foreign currency exchange contracts — The Funds may enter into for-
eign currency exchange contracts as a hedge against either specific
transactions or portfolio positions. Foreign currency exchange con-
tracts, when used by the Funds, help to manage the overall exposure
to the foreign currency backing some of the investments held by the
Funds. The contract is marked-to-market daily and the change in
market value is recorded by the Funds as an unrealized gain or loss.
When the contract is closed, the Funds record a realized gain or loss
equal to the difference between the value at the time it was opened
and the value at the time it was closed.
•Options — The Funds may purchase and write call and put options.
When the Funds writes an option, an amount equal to the premium
received by the Funds is reflected as an asset and an equivalent lia-
bility. The amount of the liability is subsequently marked-to-market to
reflect the current market value of the option written. When a security
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 security acquired or deducted from (or added to) the proceeds
of the security sold. When an option expires (or the Funds enter into
a closing transaction), the Funds realize a gain or loss on the option
to the extent of the premiums received or paid (or gain or loss to the
extent the cost of the closing transaction exceeds the premium
received or paid).
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 position 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 obligates the writer to buy the underlying
position at the exercise price at any time or at a specified time
during the option period.
•Swaps — Each Fund may enter into swap agreements, in which the
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 accompanying Statements of
Operations as realized gains or losses, respectively. Gains or losses
are realized upon termination of the swap agreements. Swaps are
marked-to-market daily and changes in value are recorded as unreal-
ized appreciation (depreciation). When the swap is terminated,
the Funds will record a realized gain or loss equal to the difference
between the proceeds from (or cost of) the closing transaction and
the Funds’ basis in the contract, if any.
Credit default swaps — Credit default swaps are agreements in
which one party pays fixed periodic payments to a counterparty in
consideration for a guarantee from the counterparty to make a
specific payment should a negative credit event take place.
Interest rate swaps — Interest rate swaps are agreements in which
one party pays a floating rate of interest on a notional principal
amount and receives a fixed rate of interest on the same notional
principal amount for a specified period of time. Alternatively, a party
may pay a fixed rate and receive a floating rate. In more complex
swaps, the notional principal amount may decline (or amortize)
over time.
•Swaptions — Swap options (swaptions) are similar to options on
securities except that instead of selling or purchasing the right to
buy or sell a security, the writer or purchaser of the 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.
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. Floating Rate Loans: The Funds invest in floating rate loans, which are generally non-investment grade, made by banks, other financial institu- tions 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 predetermined by reference to a base lending rate plus a premium. The base lending rates are generally (i) the lending rate offered by one or more European banks, such as LIBOR (London InterBank Offered Rate), (ii) the prime rate offered by one or more U.S. banks or (iii) the certificate of deposit |
42 ANNUAL REPORT |
AUGUST 31, 2008 |
Notes to Financial Statements (continued) rate. The Funds consider these investments to be investments in debt securities for purposes of its investment policies. Each Fund earns and/or pays facility and other fees on floating rate loans. Other fees earned/paid include commitment, amendment, con- sent, commissions 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 recognized on the accrual basis. Prepayment penalty fees are recorded as gains or losses. When a Fund buys a float- ing 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, a Fund 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, a Fund may receive a prepayment penalty fee upon the prepayment of a floating rate loan by a borrower. Other fees received by a Fund may include covenant waiver fees and covenant modification fees. Each Fund 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 Fund 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 contractu- al relationship only with the lender, not with the borrower. Each Fund 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 borrower, and a Fund 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 intermediaries who are parties to the transactions. In the event of the insolvency of the lender selling the Participation, the Funds may be treat- ed as general creditors of the lender and may not benefit from any offset between the lender and the borrower. Preferred Stock: The 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 convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions. Segregation: In cases in which the 1940 Act and the interpretive posi- tions of the Securities and Exchange Commission (“SEC”) require that the Funds segregate assets in connection with certain investments (e.g., swaps) and certain borrowings, the Funds will, consistent with certain interpretive letters issued by the SEC, designate on their books and record cash or other liquid debt securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Investment Transactions and Investment Income: Certain Funds’ invest- ment 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 premi- ums and discounts on debt securities. Senior Floating Rate and Senior Floating Rate II record daily their pro- portionate share of the Master LLC’s income, expenses and realized and unrealized 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. Income Taxes: It is the Funds policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment compa- nies and to distribute substantially all of their taxable income to their 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. Effective February 29, 2008, the Funds implemented Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes the minimum recognition thresh- old a tax position must meet in connection with accounting for uncer- tainties in income tax positions taken or expected to be taken by an |
ANNUAL REPORT |
AUGUST 31, 2008 |
43 |
Notes to Financial Statements (continued) entity, including investment companies, before being measured and recognized in the financial statements. The investment advisor has eval- uated the application of FIN 48 to the Funds and has determined that the adoption of FIN 48 does not have a material impact on the Funds’ financial statements. The Funds file U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Funds’ (except Defined Opportunity) U.S. federal tax returns remain open for the years ended August 31, 2005 through August 31, 2007. The statutes of limitations on the Funds’ state and local tax returns may remain open for an additional year depending upon the jurisdiction. Recent Accounting Pronouncements: In September 2006, Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”), was issued and is effective for fiscal years beginning after November 15, 2007. Effective January 31, 2008 Defined Opportunity adopted FAS 157. FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value meas- urements. The impact on the other Funds’ financial statement disclo- sures, if any, is currently being assessed. In March 2008, Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133" ("FAS 161"), was issued. FAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivative instruments affect an entity’s results of operations and financial position. In September 2008, FASB Staff Position No. 133-1 and FASB Interpretation No. 45-4 (the “FSP”), “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” was issued and is effec- tive for fiscal years and interim periods ending after November 15, 2008. The FSP amends FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” to require disclosures by sellers of credit derivatives, including credit derivatives embedded in hybrid instruments. The FSP also clarifies the effective date of FAS 161, where- by disclosures required by FAS 161 are effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The impact on the Funds' financial statement disclosures, if any, is currently being assessed. |
Deferred Compensation and BlackRock Closed-End Share Equivalent Investment Plan: Under the deferred compensation plan approved by each Fund’s Board, non-interested Directors (“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 the Funds. The Funds 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. 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. 2. Transactions with Affiliates: Certain Funds entered into an Investment Advisory Agreement with Advisor to provide investment advisory and administration services. Merrill Lynch & Co., Inc. (“Merrill Lynch”) and The PNC Financial Services Group, Inc. are principal owners of BlackRock, Inc. The Advisor is responsible for the management of the Funds’ portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Funds. For such serv- ices, Defined Opportunity pays a monthly fee at an annual rate of 1.00% and Diversified Income and Floating Rate Income 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 Advisor, on behalf of BlackRock Diversified Income Strategies Fund, Inc. and BlackRock Floating Rate Income Strategies Fund, Inc., has entered into a separate sub-advisory agreement with BlackRock Financial Management, Inc. (“BFM”), an affiliate of the Advisor, under which the Advisor 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 Advisor. |
44 ANNUAL REPORT |
AUGUST 31, 2008 |
Notes to Financial Statements (continued) For the period January 31, 2008 to August 31, 2008 Defined Opportunity reimbursed the Advisor $1,329, for certain accounting services, which is included in accounting services in the Statements of Operations. For the year ended August 31, 2008 the Diversified Income and Floating Rate Income reimbursed the Advisor $3,175 and $5,261, respectively, for certain accounting services, which is included in accounting services in the Statements of Operations. For the period January 31, 2008 through August 31, 2008 Merrill Lynch, Pierce, Fenner & Smith, Incorporated (“MLPF&S”), a wholly owned sub- sidiary of Merrill Lynch, received underwriting fees of $3,462,804 in connection with the issuance of the Defined Opportunity’s Common Shares. In addition, Defined Opportunity reimbursed MLPF&S $46,000 as a partial reimbursement of expenses incurred in connection with the issuance of the Fund’s Common Shares. Senior Floating Rate and Senior Floating Rate II have entered into an Administration Agreement with the Administrator. The administration fee to the Administrator is calculated daily and paid monthly based on an annual rate of 0.25% and 0.40%, respectively, of the average daily value of each Fund’s net assets for the performance of administrative services (other than investment advice and related portfolio activities) necessary for the operation of the Funds. Senior Floating Rate and Senior Floating Rate II have also entered into separate Distribution Agreements and Distribution Plans with FAM Distributors, Inc. (“FAMD”) and BlackRock Distributors, Inc. and its affiliates (“BDI”) (collectively, the “Distributor”). FAMD is a wholly owned subsidiary of Merrill Lynch Group, Inc. and BDI is an affiliate of BlackRock, Inc. For the year ended August 31, 2008, the Distributor received early withdrawal charges for Senior Floating Rate and Senior Floating Rate II in the amount of $208,987 and $51,020, respectively, relating to the tender of each Fund’s shares. PNC Global Investment Servicing (U.S.) Inc., formerly PFPC Inc., an indirect, wholly owned subsidiary of PNC and an affiliate of the Administrator, is Senior Floating Rate and Senior Floating Rate II’s transfer agent. Transfer agency fees borne by each fund are comprised of those fees charged for all shareholder communications including mailing of shareholder reports, dividend and distribution notices, and proxy materials for shareholders 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 identifica- tion services. Pursuant to the terms of the custody agreement, custodian fees may be reduced by amounts calculated on uninvested cash balances (“custody credits”), which are shown on the Statements of Operations as fees paid indirectly. Certain officers and/or directors/trustees of the Funds are officers and/or directors of BlackRock, Inc. or its affiliates. The Funds reimburse the Advisor for compensation to the Funds’ Chief Compliance Officer. 3. Investments: Purchases and sales (including paydowns) of investments, excluding short-term securities, for the period January 31, 2008 to August 31, 2008 for Defined Opportunity and the year ended August 31, 2008 for the other Funds were as follows: |
Total | Total | |||
Purchases | Sales | |||
Defined Opportunity | $198,465,500 | $ 22,903,196 | ||
Diversified Income | $104,091,042 | $110,632,375 | ||
Floating Rate Income | $207,357,390 | $203,564,969 | ||
Diversified Income Transactions in call options written for the year ended August 31, 2008 were as follows: |
Premiums | ||||
Contracts* | Received | |||
Outstanding call options written, | ||||
beginning of year | — | — | ||
Options written | 2 | $ 57,000 | ||
Options expired | (2) | (57,000) | ||
Outstanding call options written, | ||||
end of year | — | $ — | ||
* Some contracts represent a notional amount of $1,000,000. |
Transactions in put options written for the year ended August 31, 2008 were as follows: |
Premiums | ||||
Contracts* | Received | |||
Outstanding put options written, | ||||
beginning of year | — | — | ||
Options written | 2 | $ 63,000 | ||
Options expired | (2) | (63,000) | ||
Outstanding put options written, | ||||
end of year | — | $ — | ||
* Some contracts represent a notional amount of $1,000,000. |
ANNUAL REPORT |
AUGUST 31, 2008 |
45 |
Notes to Financial Statements (continued) Floating Rate Income Transactions in call options written for the year ended August 31, 2008 were as follows: |
Premiums | ||||
Contracts* | Received | |||
Outstanding call options written, | ||||
beginning of year | — | — | ||
Options written | 4 | $ 114,000 | ||
Options expired | (4) | (114,000) | ||
Outstanding call options written, | ||||
end of year | — | $ — | ||
* Some contracts represent a notional amount of $1,000,000. |
Transactions in put options written for the year ended August 31, 2008 were as follows: |
Premiums | ||||
Contracts* | Received | |||
Outstanding put options written, | ||||
beginning of year | — | — | ||
Options written | 4 | $ 126,000 | ||
Options expired | (4) | (126,000) | ||
Outstanding put options written, | ||||
end of year | — | $ — | ||
* Some contracts represent a notional amount of $1,000,000. |
4. Capital Share Transactions: Defined Opportunity is authorized to issue an unlimited number of shares, par value $0.001, all of which were initially classified as |
Common Shares. The Board is authorized, however, to classify and reclassify any unissued shares without approval of the holders of Common Shares. 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 and 15,264 from dividend reinvestments. Organization costs of $22,000 were expensed upon the commence- ment of operations. Offering costs incurred in connection with Defined Opportunity’s offering of Common Shares have been charged against the proceeds from the initial Common Share offering in the amount of $200,500. Diversified Income and Floating Rate Income are authorized to issue 200,000,000 shares, par value $0.10, all of which were initially classi- fied as Common Shares. The Board is authorized, however, to classify and reclassify any unissued shares without approval of the holders of Common Shares. Shares issued and outstanding for Diversified Income during the years ended August 31, 2008 and August 31, 2007 increased by 13,892 and 177,522, respectively, as a result of dividend reinvestment. Shares issued and outstanding for Floating Rate Income during the years ended August 31, 2008 and August 31, 2007 remained constant. At August 31, 2008, an affiliate of the Advisor owned 8,517 and 7,413 shares of Defined Opportunity and Floating Rate Income, respectively. |
Transactions in shares were as follows: | ||||||||
Year Ended | Year Ended | |||||||
August 31, 2008 | August 31, 2007 | |||||||
Senior Floating Rate | Shares | Amount | Shares | Amount | ||||
Shares sold | 4,490,899 | $ 36,601,922 | 2,617,014 | $ 23,300,290 | ||||
Shares issued to shareholders in reinvestment of dividends | 182,375 | 1,499,356 | 2,075,693 | 18,417,801 | ||||
Total issued | 4,673,274 | 38,101,278 | 4,692,707 | 41,718,091 | ||||
Shares tendered | (13,412,544) | (111,603,956) | (13,354,571) | (119,178,329) | ||||
Net decrease | (8,739,270) | $ (73,502,678) | (8,661,864) | $ (77,460,238) | ||||
Senior Floating Rate II | Shares | Amount | Shares | Amount | ||||
Shares sold | 2,834,064 | $ 25,451,600 | 3,631,891 | $ 35,223,121 | ||||
Shares issued to shareholders in reinvestment of dividends | 41,005 | 365,615 | 1,073,763 | 10,356,181 | ||||
Total issued | 2,875,069 | 25,817,215 | 4,705,654 | 45,579,302 | ||||
Shares tendered | (7,873,162) | (71,267,903) | (11,409,396) | (110,613,239) | ||||
Net increase (decrease) | (4,998,093) | $ (45,450,688) | (6,703,742) | $ (65,033,937) | ||||
46 ANNUAL REPORT |
AUGUST 31, 2008 |
Notes to Financial Statements (continued) 5. Commitments: Certain Funds may invest in floating rate loans. In connection with these investments, the Funds may, with their Advisor, also enter into unfunded corporate loans (“commitments”). Commitments may obligate the Funds to furnish temporary 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, 2008 the Funds had the following unfunded loan commitments: |
Defined Opportunity | ||||
Unfunded | Value of | |||
Commitment | Underlying Loan | |||
Borrower | (000) | (000) | ||
Bausch & Lomb, Inc | $ 160 | $ 156 | ||
Community Health Systems, Inc | $ 192 | $ 181 | ||
Diversified Income | ||||
Unfunded | Value of | |||
Commitment | Underlying Loan | |||
Borrower | (000) | (000) | ||
Community Health Systems Inc | $ 48 | $ 45 | ||
Floating Rate Income | ||||
Unfunded | Value of | |||
Commitment | Underlying Loan | |||
Borrower | (000) | (000) | ||
Community Health Systems, Inc | $ 168 | $ 158 | ||
Golden Nugget, Inc | $ 151 | $ 127 | ||
Vought Aircraft Industries Inc | $3,000 | $2,831 | ||
6. Short-Term Borrowings: On May 16, 2008, Diversified Income and Floating Rate Income renewed their revolving credit and security agreement funded by 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 has a maximum limit of $91,000,000 for Diversified Income and $155,000,000 for Floating Rate Income. Under the Citicorp program, the conduits will fund advances to the Funds through the issuance of highly rated commercial paper. As security for its obligations to the Lenders under the revolving securitization facility, the Funds have granted a security interest in substantially all of their assets to and in favor of the Lenders. The interest rate on the Funds’ borrowings is based on the interest rate carried by the commercial paper plus a program fee. The Funds pay additional borrowing costs including a back- stop commitment fee. These amounts are shown on the Statements of Operations as borrowing costs. For the year ended August 31, 2008, the daily weighted average interest rate was 4.44% for Diversified Income and 4.38% for Floating Rate Income. Defined Opportunity is a party to a senior committed secured, 364-day revolving line of credit and security agreement (the “Agreement”) with State Street Bank and Trust Company (“SSB”) dated April 9, 2008. The Agreement has a maximum limit of $67.5 million. Defined Opporunity has granted a security interest in substantially all of its assets to SSB. For the period January 31, 2008 through August 31, 2008, the weighted average annual interest rate was 1.70% . |
7. 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 on net asset values per share. The following permanent differences as of August 31, 2008 attributable to amortization methods on fixed income securities, expiration of capital loss carryfowards, accounting for swap agreements, securities in default, nondeductible expenses and foreign currency transactions were reclassified to the following accounts: |
Defined | Diversified | Floating Rate | Senior | Senior | ||||||
Opportunity | Income | Income | Floating Rate | Floating Rate II | ||||||
Increase (decrease) paid-in capital in excess of par | $ (22,000) | — | — | $(28,290,011) | — | |||||
Increase (decrease) undistributed (distributions in excess of) net | ||||||||||
investment income | $ (90,902) | $(799,449) | $(1,400,894) | $ 169,651 | $ 75,516 | |||||
Increase (decrease) accumulated net realized gain (loss) | $ 112,902 | $ 799,449 | $ 1,400,894 | $ 28,120,360 | $ (75,516) | |||||
ANNUAL REPORT |
AUGUST 31, 2008 |
47 |
Notes to Financial Statements (concluded) The tax character of distributions paid during the years ended August 31, 2008 and August 31, 2007 was as follows: |
Defined | Diversified | Floating Rate | Senior | Senior | ||||||
Opportunity | Income | Income | Floating Rate | Floating Rate II | ||||||
Ordinary Income | ||||||||||
8/31/08 | $ 5,435,571 | $ 20,910,360 | $ 28,321,303 | $ 26,664,539 | $ 12,294,014 | |||||
8/31/07 | — | $ 21,741,425 | $ 28,142,426 | $ 36,713,751 | $ 17,223,323 | |||||
Tax return of capital | ||||||||||
8/31/08 | $ 481,911 | $ 443,389 | — | — | — | |||||
8/31/07 | — | — | — | — | — | |||||
Total | ||||||||||
8/31/08 | $ 5,917,482 | $ 21,353,749 | $ 28,321,303 | $ 26,664,539 | $ 12,294,014 | |||||
8/31/07 | — | $ 21,741,425 | $ 28,142,426 | $ 36,713,751 | $ 17,223,323 | |||||
As of August 31, 2008, the tax components of acccumulated earnings (losses) were as follows: |
Defined | Diversified | Floating Rate | Senior | Senior | ||||||
Opportunity | Income | Income | Floating Rate | Floating Rate II | ||||||
Undistributed ordinary income | — | — | $ 2,071,275 | $ 221,255 | $ 87,452 | |||||
Undistributed long-term net capital gains (capital loss carryforwards) | — | $ (5,437,797) | (1,167,282) | (331,375,189) | (31,436,454) | |||||
Net unrealized gains (losses)* | $ 605,212 | (56,430,419) | (55,098,907) | (53,814,646) | (25,662,230) | |||||
Total accumulated net earnings (losses) | $ 605,212 | $(61,868,216) | $(54,194,914) | $(384,968,580) | $ (57,011,232) | |||||
* The difference between book-basis and tax-basis net unrealized gains/losses is attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains on certain foreign currency contracts, the deferral of post-October capital losses for tax purposes, the difference between book and tax amortiza- tion methods for premiums and discounts on fixed income securities, book/tax differences in the accrual of income on securities in default, the accounting for swap agree- ments and the timing of income recognition on partnership interests. As of August 31, 2008, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates: |
Senior | Senior | |||||||
Diversified | Floating Rate | Floating | Floating | |||||
Expires August 31 | Income | Income | Rate | Rate II | ||||
2009 | — | — | $ 64,746,799 | $ 1,546,632 | ||||
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 | 31,419,728 | 4,923,015 | ||||
Total | $ 5,437,797 | $ 1,167,282 | $331,375,189 | $31,436,454 | ||||
8. Subsequent Events: Each Fund paid a net investment income dividend to holders of its Common Shares on September 30, 2008 to shareholders of record on September 15, 2008. The amount of the net investment income divi- dend per share was as follows: |
Dividend | ||
Per Share | ||
Defined Opportunity | $0.112500 | |
Diversified Income | $0.135000 | |
Floating Rate Income | $0.124835 | |
Senior Floating Rate | $0.038968 | |
Senior Floating Rate II | $0.038406 | |
On September 15, 2008, Bank of America Corporation announced that it has agreed to acquire Merrill Lynch, one of the principal owners of |
BlackRock, Inc. The purchase has been approved by the directors of both companies. Subject to shareholder and regulatory approvals, the transaction is expected to close in the first quarter of 2009. As of August 31, 2008, Diversified Income had swap contracts out- standing with Lehman Brothers Holdings Inc. (“Lehman”) as the counterparty with net unrealized depreciation of $1,419,390 and swaps interest payable of approximately $491,000. On September 15, 2008, Lehman filed for Chapter 11 bankruptcy, and on that date, Diversified Income terminated these contracts and realized a loss of approximately $2,800,000. Effective October 1, 2008, BlackRock Investments, Inc., an affiliate of the Administrator, replaced FAM Distributors, Inc. and BlackRock Distributors, Inc. as the sole distributer of Senior Floating Rate and Senior Floating Rate II. |
48 ANNUAL REPORT |
AUGUST 31, 2008 |
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 Senior Floating Rate Fund, Inc., and 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, 2008, and the related statements of opera- tions and changes in net assets, and the financial highlights for the period January 31, 2008 (commencement of operations) to August 31, 2008. We have also audited the accompanying statements of assets and liabilities, including the schedules of investments of BlackRock Diversified Income Strategies Fund, Inc. and BlackRock Floating Rate Income Strategies Fund, Inc. as of August 31, 2008, 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 periods presented. We have also audited the accompanying statements of assets and liabilities, including the schedules of investments of BlackRock Senior Floating Rate Fund, Inc. and BlackRock Senior Floating Rate Fund II, Inc. as of August 31, 2008, 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 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 assur- ance 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, an audit of their internal control over finan- cial reporting. Our audits included consideration of internal control over |
financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over finan- cial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2008, by correspondence with the custodian and brokers; where replies were not received from brokers, 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, 2008, and the results of its operations, changes in its net assets, and the financial highlights for the period January 31, 2008 (commencement of opera- tions) 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 highlights referred to above present fairly, in all material respects, the financial position of BlackRock Diversified Income Strategies Fund, Inc. and BlackRock Floating Rate Income Strategies Fund, Inc. as of August 31, 2008, and the results of their operations and cash flows for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. Additionally in our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BlackRock Senior Floating Rate Fund, Inc. and BlackRock Senior Floating Rate Fund II, Inc. as of August 31, 2008, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the 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, 2008 |
Master Portfolio Summary as of August 31, 2008 | Master Senior Floating Rate LLC | |||||
Portfolio Composition | ||||||
Percent of | ||||||
Long-Term Investments | ||||||
Asset Mix | 8/31/08 | 8/31/07 | ||||
Floating Rate Loan Interests | 95% | 93% | ||||
Corporate Bonds | 5 | 7 | ||||
ANNUAL REPORT |
AUGUST 31, 2008 |
49 |
Schedule of Investments August 31, 2008
Master Senior Floating Rate LLC
(Percentages shown are based on Net Assets)
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Aerospace & Defense — 0.8% | ||||||
Hawker Beechcraft Acquisition Co. LLC: | ||||||
Letter of Credit Facility Deposit, | ||||||
2.701%, 3/26/14 | USD | 213 | $ 198,048 | |||
Term Loan, 4.801%, 3/26/14 | 3,641 | 3,389,920 | ||||
Vought Aircraft Industries, Inc. Tranche B | ||||||
Line of Credit Deposit, 2.486%, 12/22/10 | 1,200 | 1,134,000 | ||||
4,721,968 | ||||||
Airlines — 0.4% | ||||||
Delta Air Lines, Inc. Credit — Linked Deposit Loan, | ||||||
2.336% – 4.469%, 4/30/12 | 1,485 | 1,239,975 | ||||
US Airways Group, Inc. Loan, 4.969%, 3/24/14 | 2,000 | 1,370,000 | ||||
2,609,975 | ||||||
Auto Components — 2.0% | ||||||
Allison Transmission, Inc. Term Loan, | ||||||
5.22% – 5.56%, 8/07/14 | 7,107 | 6,374,537 | ||||
Dana Holding Corp. Term Advance, 6.75%, 1/31/15 | 2,794 | 2,568,081 | ||||
Delphi Corp.: | ||||||
Initial Tranche Loan C, 8.50%, 12/31/08 | 635 | 525,446 | ||||
Subsequent Tranche Loan C, 8.50%, 12/31/08 | 65 | 53,513 | ||||
Metaldyne Co. LLC: | ||||||
DF Loan, 2.336% – 6.563%, 1/11/12 | 288 | 161,358 | ||||
Initial Tranche Term Loan B, 6.50%, 1/13/14 | 1,962 | 1,097,236 | ||||
TRW Automotive, Inc. Tranche B-1 Term Loan, | ||||||
4.188 – 4.313%, 2/10/14 | 990 | 945,450 | ||||
11,725,621 | ||||||
Automobiles — 0.1% | ||||||
Ford Motor Co., Term Loan, 5.47%, 12/16/13 | 750 | 580,982 | ||||
Beverages — 0.4% | ||||||
Culligan International Co. Dollar Loan, | ||||||
4.72% – 5.05%, 11/26/12 | 3,450 | 2,445,188 | ||||
Biotechnology — 0.4% | ||||||
Talecris Biotherapeutics Holdings Corp.: | ||||||
First Lien Term Loan, 5.97% – 6.31%, 12/06/13 | 1,244 | 1,203,864 | ||||
Second Lien Term Loan, 6.31% — 6.57%, 12/06/14 | 1,000 | 983,750 | ||||
2,187,614 | ||||||
Building Products — 0.7% | ||||||
Building Materials Corp. of America Term Loan Advance, | ||||||
5.438% – 5.563%, 2/24/14 | 2,023 | 1,735,620 | ||||
Momentive Performance Materials, Inc.: | ||||||
Tranche B-1 Term Loan, 4.75%, 12/04/13 | 1,474 | 1,357,604 | ||||
Tranche B-2 Term Loan, 6.73%, 12/04/13 | EUR | 972 | 1,249,760 | |||
4,342,984 | ||||||
Cable Television Services — 0.7% | ||||||
Insight Midwest Holdings LLC Term Loan B, | ||||||
4.47%, 4/07/14 | USD | 4,075 | 3,913,275 | |||
Capital Markets — 0.4% | ||||||
Marsico Parent Co., LLC Term Loan, | ||||||
5.50% – 7%, 12/15/14 | 995 | 850,725 | ||||
RiskMetrics Group Holdings LLC First Lien Term Loan B, | ||||||
4.801%, 1/10/14 | 1,453 | 1,398,605 | ||||
2,249,330 | ||||||
Chemicals — 6.7% | ||||||
Brenntag AG: | ||||||
Second Lien Term Loan, 5.071%, 1/19/14 | 295 | 270,982 | ||||
Term Loan B2, 5.071%, 1/24/14 | 1,205 | 1,109,018 |
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Chemicals (concluded) | ||||||
Columbian Chemicals Acquisition LLC Tranche B | ||||||
Term Loan, 6.051%, 3/16/13 | USD 1,761 | $ 1,637,646 | ||||
Edwards (Cayman Islands II) First Lien Term Loan, | ||||||
4.81%, 5/30/14 | 743 | 644,119 | ||||
Flint Group Holdings Term Loan B9, | ||||||
4.88%, 12/31/14 | 2,000 | 1,613,334 | ||||
GenTek, Inc. First Lien Term Loan, | ||||||
4.78% – 4.79%, 2/28/11 | 2,973 | 2,764,671 | ||||
Huish Detergents, Inc., Tranche Term Loan B: | ||||||
4.81%, 4/28/14 | 1,995 | 1,807,103 | ||||
7.06%, 10/15/14 | 750 | 654,375 | ||||
ISP Chemco LLC Term Loan, 4% – 4.313%, 6/04/14 | 1,485 | 1,369,913 | ||||
Invista Canada Co., Tranche B-2 Term Loan, | ||||||
4.301%, 4/29/11 | 1,628 | 1,550,734 | ||||
Invista S.A.R.L. Tranche B-1 Term Loan, | ||||||
4.432%, 4/29/11 | 3,760 | 3,581,105 | ||||
Nalco Co. Tranche B Term Loan, | ||||||
4.433% – 4.92%, 11/04/10 | 3,735 | 3,672,308 | ||||
PQ Corp. (Niagra Acquisition, Inc.): | ||||||
First Lien Term Loan, 5.92% – 6.05%, 7/30/14 | 3,000 | 2,806,875 | ||||
Second Lien Loan, 9.30%, 7/30/15 | 3,000 | 2,595,000 | ||||
Polymer Group, Inc. Term Loan, | ||||||
4.722% – 5.058%, 11/22/12 | 1,796 | 1,634,671 | ||||
Rockwood Specialties Group, Inc. Tranche E | ||||||
Term Loan, 4.299%, 7/30/12 | 3,613 | 3,461,609 | ||||
Solutia, Inc. Loan, 8.50%, 2/28/14 | 2,900 | 2,793,970 | ||||
Wellman, Inc. (b)(c): | ||||||
First Lien Term Loan, 8.88%, 2/10/09 | 7,500 | 3,750,000 | ||||
Second Lien Term Loan, 11.989%, 2/10/10 | 8,250 | 1,650,000 | ||||
39,367,433 | ||||||
Commercial Services & Supplies — 3.0% | ||||||
ARAMARK Corp.: | ||||||
LC Facility Letter of Credit, 2.44%, 1/27/14 | 225 | 213,540 | ||||
U.S. Term Loan, 4.676%, 1/26/14 | 3,549 | 3,361,256 | ||||
Allied Waste North America, Inc.: | ||||||
New Term Loan, 3.97%, 3/28/14 | 2,509 | 2,448,929 | ||||
New Tranche A Credit Linked Deposit, | ||||||
2.39%, 3/28/14 | 1,724 | 1,682,880 | ||||
Brickman Group Holdings, Inc. Tranche B Term Loan, | ||||||
4.801%, 1/23/14 | 247 | 220,953 | ||||
Camelbak Products LLC First Lien Term Loan, | ||||||
8%, 8/04/11 | 1,844 | 1,281,822 | ||||
John Maneely Co. Term Loan, | ||||||
6.042% – 6.048%, 12/09/13 | 1,206 | 1,184,593 | ||||
Kion Group GmbH: | ||||||
Facility B, 4.469%, 12/23/14 | 250 | 213,750 | ||||
Facility C, 4.969%, 12/23/15 | 250 | 213,750 | ||||
Sirva Worldwide, Inc. Second Lien Loan, 12%, 5/15/15 | 380 | 309,357 | ||||
Synagro Technologies, Inc. First Lien Term Loan, | ||||||
4.81%, 4/02/14 | 2,743 | 2,318,429 | ||||
West Corp. Term Loan B-2, | ||||||
4.844% – 5.171%, 10/24/13 | 4,925 | 4,321,056 | ||||
17,770,315 | ||||||
Communications Equipment — 2.3% | ||||||
Alltel Corp.: | ||||||
Initial Tranche B-2 Term Loan, 5.314%, 5/15/15 | 7,479 | 7,390,782 | ||||
Initial Tranche B-3 Term Loan, 4.966%, 5/15/15 | 4,474 | 4,456,659 | ||||
Sorenson Communications, Inc. Tranche C | ||||||
Term Loan, 4.97% – 5.301%, 8/16/13 | 1,650 | 1,600,500 | ||||
13,447,941 | ||||||
See Notes to Financial Statements.
50 ANNUAL REPORT |
AUGUST 31, 2008 |
Schedule of Investments (continued)
Master Senior Floating Rate LLC
(Percentages shown are based on Net Assets)
Par | ||||
Floating Rate Loan Interests | (000) | Value | ||
Computers & Peripherals — 0.6% | ||||
Dealer Computer Services, Inc. (Reynolds and | ||||
Reynold) First Lien Term Loan, 4.801%, 10/26/12 USD | 2,497 | $ 2,310,142 | ||
Intergraph Corp. Second Lien Term Loan, | ||||
8.809%, 11/28/14 | 1,000 | 960,000 | ||
3,270,142 | ||||
Construction & Engineering — 0.5% | ||||
BakerCorp. Tranche C Term Loan, | ||||
4.714% – 4.719%, 5/08/14 | 988 | 883,813 | ||
Brand Energy & Infrastructure Services, Inc.: | ||||
First Lien Term Loan B, 5.063%, 2/07/14 | 986 | 901,844 | ||
Second Lien Term Loan, 8.813%, 2/09/15 | 1,200 | 1,104,000 | ||
2,889,657 | ||||
Construction Materials — 0.4% | ||||
Headwaters, Inc. First Lien Term Loan B-1, | ||||
6.97%, 4/30/11 | 2,214 | 2,115,176 | ||
Containers & Packaging — 1.9% | ||||
Consolidated Container Co. LLC Second Lien | ||||
Term Loan, 7.969% – 8.31%, 9/28/14 | 450 | 220,500 | ||
Graham Packaging Co. LP New Term Loan, | ||||
4.938% – 5.063%, 10/07/11 | 2,938 | 2,791,179 | ||
Graphic Packaging International Inc.: | ||||
Term Loan B 4.785% – 4.80%, 5/16/14 | 590 | 556,028 | ||
Incremental Term Loan 5.542% – 5.884%, | ||||
5/16/14 | 2,621 | 2,527,265 | ||
Smurfit-Stone Container Canada Inc. | ||||
Tranche C Term Loan, 4.50% – 4.688%, 11/01/11 | 2,047 | 1,979,275 | ||
Smurfit-Stone Container Enterprises, Inc.: | ||||
Deposit Funded Facility, 2.713%, 11/01/10 | 2,241 | 2,166,027 | ||
Tranche B, 4.50% – 4.688%, 11/01/11 | 481 | 465,693 | ||
Tegrant Corp. First Lien Term Loan, 5.56%, 3/08/14 | 987 | 636,937 | ||
11,342,904 | ||||
Distributors — 0.3% | ||||
Keystone Automotive Operations, Inc. Loan, | ||||
5.963% – 5.972%, 1/12/12 | 2,628 | 1,839,827 | ||
Diversified Consumer Services ��� 0.6% | ||||
Coinmach Corp. Term Loan, | ||||
5.48% – 5.81%, 11/14/14 | 3,990 | 3,665,789 | ||
Diversified Financial Services — 1.6% | ||||
DaimlerChrysler Financial Services Americas LLC | ||||
First Lien Term Loan, 6.78%, 8/03/12 | 993 | 786,350 | ||
J.G. Wentworth, LLC First Lien Term Loan, | ||||
5.051%, 4/04/14 | 6,800 | 5,236,000 | ||
LPL Holdings, Inc. Tranche D Term Loan, | ||||
4.469% – 4.801%, 6/28/13 | 3,755 | 3,529,522 | ||
9,551,872 | ||||
Diversified Telecommunication Services — 0.8% | ||||
Hawaiian Telcom Communications, Inc. Tranche C | ||||
Term Loan, 5.301%, 5/30/14 | 1,595 | 1,265,689 | ||
Kentucky Data Link, Inc. Term Loan, | ||||
4.719%, 2/24/14 | 483 | 453,597 | ||
PaeTec Holding Corp. Replacement Term Loan, | ||||
4.969%, 2/28/13 | 1,459 | 1,327,766 | ||
Time Warner Telecom Holdings Inc. Term Loan B, | ||||
4.47%, 1/07/13 | 1,970 | 1,884,305 | ||
4,931,357 | ||||
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Electric Utilities — 0.3% | ||||||
Astoria Generating Co. Acquisitions, LLC | ||||||
Second Lien Term Loan C, 6.56%, 8/23/13 | USD | 1,750 | $ 1,652,292 | |||
Electrical Equipment — 0.3% | ||||||
Generac Acquisition Corp., First Lien Term Loan, | ||||||
5.288%, 11/11/13 | 2,629 | 2,030,946 | ||||
Electronic Equipment & Instruments — 1.3% | ||||||
Flextronics International Ltd. A Closing Date | ||||||
Loan, 5.038% – 5.041%, 10/01/14 | 4,466 | 4,051,728 | ||||
L-1 Identity Solutions Operating Co., Term Loan, | ||||||
7.294%, 8/05/13 | 1,225 | 1,221,938 | ||||
SafeNet, Inc. Second Lien Loan, 9.288%, 4/12/15 | 3,000 | 2,370,000 | ||||
7,643,666 | ||||||
Energy Equipment & Services — 1.7% | ||||||
Brock Holdings III, Inc. Term Loan B, | ||||||
4.63% – 6%, 2/26/14 | 1,481 | 1,392,375 | ||||
Compagnie Generale de Geophysique Term Loan, | ||||||
4.70%, 1/13/14 | 1,500 | 1,458,750 | ||||
Dresser, Inc.: | ||||||
Second Lien Term Loan, 8.557%, 5/04/15 | 2,000 | 1,920,000 | ||||
Term Loan B, 4.716% – 5.057%, 5/04/14 | 2,912 | 2,777,063 | ||||
MEG Energy Corp.: | ||||||
Delayed Draw Term Loan, 4.80%, 4/03/13 | 1,245 | 1,188,754 | ||||
Initial Term Loan, 4.80%, 4/03/13 | 1,222 | 1,166,509 | ||||
9,903,451 | ||||||
Food & Staples Retailing — 1.4% | ||||||
AB Acquisitions UK Topco 2 Ltd. Facility B-2 | ||||||
UK Borrower, 7.405%, 7/05/15 | GBP | 4,000 | 6,466,578 | |||
DSW Holdings, Inc. Loan, 6.469%, 3/02/2012 | USD | 500 | 462,500 | |||
DS Waters of America Term Loan | ||||||
4.719%, 10/29/12 | 1,398 | 1,292,836 | ||||
8,221,914 | ||||||
Food Products — 1.5% | ||||||
Dole Food Co. Inc.: | ||||||
Credit-Linked Deposit, 2.658%, 4/12/13 | 345 | 316,708 | ||||
Tranche B Term Loan, 4.50% – 6%, 4/12/13 | 460 | 422,530 | ||||
Eight O'Clock Coffee Co. Term Loan, 5.25%, 7/31/12 | 680 | 652,761 | ||||
Solvest, Ltd. Tranche C Term Loan: | ||||||
4.50% – 4.875%, 4/12/13 | 1,503 | 1,379,863 | ||||
6%, 4/12/13 | 344 | 316,065 | ||||
Sturm Foods, Inc. Initial First Lien Term Loan, | ||||||
5.25% – 5.375%, 1/31/14 (d) | 2,469 | 2,012,031 | ||||
Wrigley Co. Term Loan B, 6.768%, 8/11/14 | 3,750 | 3,764,734 | ||||
8,864,692 | ||||||
Health Care Equipment & Supplies — 2.3% | ||||||
Bausch & Lomb, Inc.: | ||||||
Delayed Draw Term Loan, 6.051%, 4/24/15 | 481 | 468,118 | ||||
Parent Term Loan, 6.051%, 4/24/15 | 3,190 | 3,105,182 | ||||
Biomet, Inc. Dollar Term Loan, 5.801%, 3/25/15 | 6,214 | 6,086,176 | ||||
DJO Finance LLC Term Loan, | ||||||
5.469% – 5.801%, 5/20/14 | 2,985 | 2,910,375 | ||||
Hologic, Inc. Tranche B Term Loan, 5.75%, 3/31/13 | 1,168 | 1,160,985 | ||||
13,730,836 | ||||||
See Notes to Financial Statements.
ANNUAL REPORT |
AUGUST 31, 2008 |
51 |
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 Providers & Services — 4.6% | ||||||
CCS Medical, Inc. First Lien Term Loan, | ||||||
6.06%, 9/30/12 | USD | 729 | $ 585,254 | |||
Community Health Systems, Inc. Funded | ||||||
Term Loan, 4.719% – 5.06%, 7/25/14 | 9,073 | 8,575,270 | ||||
DaVita, Inc. Tranche B-1 Term Loan, | ||||||
3.97% – 4.32%, 10/05/12 | 4,000 | 3,846,252 | ||||
HCA, Inc. Tranche B Term Loan, 5.051%, 11/18/13 | 6,493 | 6,080,503 | ||||
Health Management Associates, Inc. Term Loan B, | ||||||
4.551%, 2/28/14 | 1,886 | 1,726,988 | ||||
HealthSouth Corp. Term Loan, 5.29%, 3/11/13 | 1,750 | 1,655,624 | ||||
Sterigenics International, Inc. Tranche B Term Loan, | ||||||
5.03% – 5.39%, 11/21/13 | 729 | 667,141 | ||||
Surgical Care Affiliates LLC Term Loan, | ||||||
5.051%, 12/29/14 | 995 | 875,578 | ||||
Vanguard Health Holding Co. II, LLC | ||||||
Replacement Term Loan, 5.051%, 9/23/11 | 3,151 | 3,032,374 | ||||
27,044,984 | ||||||
Health Care Technology — 0.2% | ||||||
Sunquest Holdings, Inc. (MISYS Hospital Systems) | ||||||
Term Loan, 5.72% – 6.05%, 10/13/14 | 1,489 | 1,403,147 | ||||
Hotels, Restaurants & Leisure — 4.3% | ||||||
CCM Merger Inc. (Motor City Casino) Term Loan B, | ||||||
4.677% – 4.811%, 7/13/12 | 1,897 | 1,702,657 | ||||
Green Valley Ranch Gaming LLC: | ||||||
New Term Loan, 4.469% – 4.801%, 2/16/14 | 476 | 364,285 | ||||
Second Lien Term Loan, 5.719%, 8/16/14 | 1,750 | 879,375 | ||||
Harrah's Operating Co., Inc.: | ||||||
Term Loan B-1, 5.80% – 5.801%, 12/22/12 | 472 | 413,567 | ||||
Term Loan B-2, 5.80% – 5.801%, 1/28/15 | 12,226 | 10,708,670 | ||||
Term Loan B-3, 5.80% – 5.801%, 1/28/15 | 419 | 367,266 | ||||
Lake at Las Vegas Joint Venture/LLV-1, LLC (b)(c): | ||||||
Revolving Loan Credit-Linked, 16.10%, 6/20/12 | 361 | 54,167 | ||||
Term Loan, 16.10%, 6/20/12 | 2,729 | 409,355 | ||||
OSI Industries, LLC Term Loan B, 4.801%, 9/22/11 | 982 | 967,763 | ||||
Penn National Gaming, Inc. Term Loan B, | ||||||
4.21% – 4.55%, 10/03/12 | 3,845 | 3,679,546 | ||||
QCE LLC: | ||||||
First Lien Term Loan, 4.813%, 5/05/13 | 1,960 | 1,652,933 | ||||
Second Lien Term Loan, 8.551%, 11/05/13 | 2,800 | 2,261,000 | ||||
VML US Finance LLC (Venetian Macau) Term B | ||||||
Funded Project Loan, 5.06%, 5/27/13 | 1,624 | 1,572,976 | ||||
25,033,560 | ||||||
Household Durables — 2.2% | ||||||
American Achievement Corp. Tranche B Term Loan, | ||||||
4.91% – 6.25%, 3/25/11 | 1,461 | 1,431,784 | ||||
Jarden Corp. Term Loan B3, 5.301%, 1/24/12 | 1,492 | 1,373,066 | ||||
Simmons Bedding Co. Tranche D Term Loan, | ||||||
4.50% – 7.125%, 12/19/11 | 7,269 | 6,751,245 | ||||
Visant Corp. Tranche C Term Loan, 5.171%, 12/21/11 | 1,819 | 1,768,944 | ||||
The Yankee Candle Co., Inc. Term Loan, | ||||||
4.48% – 4.81%, 2/06/14 | 1,833 | 1,599,024 | ||||
12,924,063 | ||||||
IT Services — 4.7% | ||||||
Activant Solutions Inc. Term Loan, | ||||||
4.688% – 4.813%, 5/02/13 | 3,541 | 3,062,617 |
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
IT Services (concluded) | ||||||
Audio Visual Services Group, Inc.: | ||||||
Second Lien Term Loan, 8.31%, 8/28/14 | USD | 1,500 | $ 1,320,000 | |||
Tranche B Term Loan, 5.06%, 2/28/14 | 1,985 | 1,687,250 | ||||
Ceridian Corp. U.S. Term Loan, 5.464%, 11/09/14 | 3,250 | 3,055,000 | ||||
First Data Corp.: | ||||||
Initial Tranche B-1 Term Loan, | ||||||
5.222% – 5.552%, 9/24/14 | 2,845 | 2,606,222 | ||||
Initial Tranche B-2 Term Loan, | ||||||
5.222% – 5.552%, 9/24/14 | 9,738 | 8,927,070 | ||||
Initial Tranche B-3 Term Loan, 5.551% — | ||||||
5.552%, 9/24/14 | 1,000 | 916,389 | ||||
RedPrairie Corp.: | ||||||
Term Loan 5.50% – 7%, 7/20/12 | 491 | 461,754 | ||||
Tack-on Loan 5.75%, 7/20/12 | 295 | 277,770 | ||||
SunGard Data Systems, Inc. (Solar Capital Corp.) | ||||||
New U.S. Term Loan, 4.553%, 2/28/14 | 5,863 | 5,502,701 | ||||
27,816,773 | ||||||
Independent Power Producers | ||||||
& Energy Traders — 4.8% | ||||||
The AES Corp. Term Loan, 5.063% – 5.10%, 8/10/11 | 2,000 | 1,952,500 | ||||
NRG Energy, Inc. Term Loan, 4.301%, 2/01/13 | 4,240 | 4,016,070 | ||||
Texas Competitive Electric Holdings Co., LLC (TXU): | ||||||
Initial Tranche Term Loan B-2, | ||||||
5.963% – 6.303%, 10/10/14 | 9,916 | 9,241,372 | ||||
Initial Tranche Term Loan B-3, | ||||||
5.963% – 6.303%, 10/10/14 | 13,905 | 12,931,627 | ||||
28,141,569 | ||||||
Industrial Conglomerates — 0.5% | ||||||
Sequa Corp. Term Loan, 6.06% – 7.25%, 12/03/14 | 2,979 | 2,835,492 | ||||
Insurance — 0.3% | ||||||
Alliant Holdings I, Inc. Term Loan, | ||||||
5.801%, 08/21/14 | 1,983 | 1,823,906 | ||||
Internet & Catalog Retail — 0.3% | ||||||
FTD Group, Inc. Tranche B Term Loan, | ||||||
7.50%, 8/04/14 | 1,750 | 1,697,500 | ||||
Internet Software & Services — 0.0% | ||||||
Channel Master Holdings, Inc. (a)(b): | ||||||
Revolving Credit, 8.313%, 11/15/04 | 128 | — | ||||
Term Loan, 9%, 11/15/04 | 1,014 | — | ||||
— | ||||||
Leisure Equipment & Products — 0.5% | ||||||
Fender Musical Instruments Corp.: | ||||||
Delayed Draw Term Loan, 5.06%, 6/09/14 | 668 | 584,307 | ||||
Initial Loan, 5.05% – 5.17%, 6/09/14 | 1,322 | 1,156,928 | ||||
True Temper Sports, Inc. Term Loan, | ||||||
6.034% – 6.051%, 3/15/11 | 1,069 | 962,057 | ||||
2,703,292 | ||||||
Machinery — 2.7% | ||||||
Harrington Holdings, Inc. First Lien Term Loan, | ||||||
4.719%, 1/11/14 | 988 | 915,906 | ||||
Mueller Water Products, Inc. Term Loan B, | ||||||
4.219% – 4.551%, 5/26/14 | 2,683 | 2,508,321 | ||||
Navistar International Corp.: | ||||||
Revolving Credit-Linked Deposit, | ||||||
5.686% – 6.046%, 1/19/12 | 1,600 | 1,474,000 | ||||
Term Advance, 6.046% – 6.292%, 1/19/12 | 4,400 | 4,053,500 |
See Notes to Financial Statements. |
52 ANNUAL REPORT |
AUGUST 31, 2008 |
Schedule of Investments (continued)
Master Senior Floating Rate LLC
(Percentages shown are based on Net Assets)
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Machinery (concluded) | ||||||
OshKosh Truck Corp. Term Loan B, | ||||||
4.22% – 4.43%, 12/06/13 | USD | 2,798 | $ 2,544,558 | |||
Trimas Co. LLC.: | ||||||
Tranche B-1 Loan, 2.463%, 8/02/13 | 937 | 848,437 | ||||
Tranche B Term Loan, 4.72% – 5.045%, 8/02/13 | 3,991 | 3,612,223 | ||||
15,956,945 | ||||||
Media — 19.9% | ||||||
Alpha Topco Ltd.: | ||||||
Facility B-1, 4.719%, 12/31/13 | 857 | 779,357 | ||||
Facility B-2, 4.719%, 12/31/13 | 589 | 535,808 | ||||
Facility D (2nd Lien), 6.634%, 6/30/14 | 1,000 | 845,833 | ||||
Bragg Communications Inc., Term Loan B, | ||||||
5.182%, 8/31/14 | 2,978 | 2,917,950 | ||||
CSC Holdings Inc. Incremental Term Loan, | ||||||
4.214%, 3/29/13 | 3,970 | 3,775,084 | ||||
Catalina Marketing Corp. Initial Term Loan, | ||||||
5.801%, 10/01/14 | 2,482 | 2,330,444 | ||||
Cengage Learning Acquisitions, Inc. (Thomson Learning): | ||||||
Term Loan, 4.97%, 7/03/14 | 2,479 | 2,152,646 | ||||
Tranche 1 Incremental Term Loan, | ||||||
7.50%, 7/05/14 | 6,750 | 6,682,500 | ||||
Cequel Communications LLC (Cebridge): | ||||||
First Lien Term Loan, 6%, 11/05/13 | 918 | 856,637 | ||||
Second Lien Term Loan, 7.301%, 11/05/13 | 5,000 | 4,380,000 | ||||
Term Loan, 4.791% – 4.804%, 11/05/13 | 5,015 | 4,680,772 | ||||
Charter Communications, Operating LLC Replacement | ||||||
Term Loan, 4.67% – 4.80%, 3/06/14 | 2,490 | 2,174,945 | ||||
Clarke American Corp. Tranche B Term Loan, | ||||||
5.291% – 5.301%, 6/30/14 | 3,317 | 2,726,877 | ||||
Cumulus Media, Inc. Replacement Term Loan, | ||||||
4.216% – 4.219%, 6/11/14 | 982 | 816,506 | ||||
Dex Media West LLC Tranche B Term Loan, | ||||||
7%, 10/24/14 | 3,000 | 2,743,125 | ||||
DirecTV Holdings LLC Tranche C Term Loan, | ||||||
5.25%, 4/13/13 | 1,975 | 1,967,594 | ||||
Discovery Communications Holding, LLC | ||||||
Term Loan B, 4.801%, 5/14/14 | 3,454 | 3,366,570 | ||||
FoxCo Acquisition Sub, LLC Term Loan, | ||||||
7.25%, 7/14/15 | 750 | 726,875 | ||||
GateHouse Media Operating, Inc. Initial Term Loan, | ||||||
4.81%, 8/28/14 | 1,770 | 951,433 | ||||
Getty Images, Inc. Initial Term Loan, 7.25%, 7/02/15 | 2,000 | 1,996,876 | ||||
Gray Television, Inc. Term Loan B, | ||||||
3.97% – 4.29%, 12/31/14 | 2,700 | 2,241,102 | ||||
HMH Publishing Co. Ltd.: | ||||||
Mezzanine Second Lien Term Loan, 6.46%, | ||||||
11/14/14 | 8,276 | 6,620,753 | ||||
Tranche A Term Loan, 6.464%, 6/12/14 | 4,394 | 3,943,561 | ||||
Hanley-Wood LLC Term Loan, 4.711% – 4.717%, | ||||||
3/08/14 | 2,250 | 1,746,563 | ||||
Hargray Acquisition Co., First Lien Term Loan, | ||||||
5.051%, 6/27/14 | 2,000 | 1,830,000 | ||||
Idearc, Inc. Tranche B Term Loan, | ||||||
4.47% – 4.80%, 11/17/14 | 1,347 | 942,568 | ||||
Intelsat Corp.: | ||||||
Term B-2-A, 5.288%, 1/03/14 | 1,259 | 1,197,827 | ||||
Term B-2-B, 5.288%, 1/03/14 | 1,260 | 1,198,347 | ||||
Term B-2-C, 5.288%, 1/03/14 | 1,259 | 1,197,827 | ||||
Intelsat Subsidiary Holding Co. Ltd. | ||||||
Tranche B Term Loan, 5.288%, 7/03/13 | 1,982 | 1,992,248 | ||||
Knology, Inc. Term Loan B, 5.038%, 6/30/12 | 2,475 | 2,277,000 |
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Media (concluded) | ||||||
Local TV Finance, LLC Term Loan, | ||||||
4.80% – 4.87%, 5/07/13 | USD | 1,247 | $ 1,084,761 | |||
LodgeNet Entertainment Corp. Closing Date | ||||||
Term Loan, 4.81%, 4/04/14 | 1,965 | 1,739,229 | ||||
MCC Lowa LLC (Mediacom Broadband Group) | ||||||
Tranche A Term Loan, 3.97% – 3.98%, 3/31/10 | 2,844 | 2,701,562 | ||||
MCNA Cable Holdings LLC (OneLink Communications | ||||||
Loan), 9.47%, 3/01/13 (d) | 1,125 | 985,718 | ||||
Merrill Communications LLC, Combined Term Loan, | ||||||
4.719% – 5.051%, 12/22/12 | 2,925 | 2,274,188 | ||||
Metro-Goldwyn-Mayer, Inc. Tranche B Term Loan, | ||||||
6.051%, 4/09/12 | 4,515 | 3,400,035 | ||||
NEP II, Inc. Term Loan B, 5.051%, 2/16/14 | 1,234 | 1,110,929 | ||||
NTL Cable Plc (Virgin) Term Loan B, 6.781%, | ||||||
7/30/12 | GBP | 2,294 | 3,801,502 | |||
NV Broadcasting, LLC Second Lien, | ||||||
9.19%, 10/26/14 | USD | 3,250 | 2,340,000 | |||
National Cinemedia LLC Term Loan, 4.54%, 2/13/15 | 2,500 | 2,248,660 | ||||
Newsday LLC Floating Rate Term Loan, | ||||||
7.958%, 8/01/13 | 2,500 | 2,500,000 | ||||
NextMedia Operating, Inc.: | ||||||
Delay Draw Term Loan, 6.466%, 11/15/12 | 1,257 | 1,094,096 | ||||
Initial First Lien Term Loan, 6.472%, 11/15/12 | 2,202 | 1,915,558 | ||||
Second Lien Term Loan, 9.47%, 11/15/13 | 3,259 | 2,573,990 | ||||
Nielsen Finance LLC Dollar Term Loan, | ||||||
4.803%, 8/09/13 | 9,378 | 8,661,040 | ||||
Penton Media Inc.: | ||||||
First Lien Term Loan 4.719% – 5.049%, 2/01/13 | 494 | 374,016 | ||||
Second Lien Loan 7.799%, 2/01/14 | 500 | 345,000 | ||||
Sitel, LLC (ClientLogic) U.S. Term Loan, 4.962% – | ||||||
5.359%, 1/30/14 | 968 | 751,762 | ||||
United Pan Europe Communications Term Loan M, | ||||||
6.513%, 12/31/14 | EUR | 2,000 | 2,609,515 | |||
Univision Communications, Inc. Initial Term Loan, | ||||||
4.719% – 5.049%, 9/29/14 | USD | 1,295 | 1,038,969 | |||
Weather Channel Term Loan B, 7.428%, 6/01/15 | 1,000 | 967,500 | ||||
117,113,658 | ||||||
Metals & Mining — 0.4% | ||||||
Algoma Steel, Inc. Term Loan, 4.98%, 6/20/13 | 2,459 | 2,323,388 | ||||
Multi-Utilities — 1.3% | ||||||
Energy Transfer Equity LP Term Loan, | ||||||
4.553%, 11/01/12 | 750 | 726,407 | ||||
KGen LLC: | ||||||
First Lien Term Loan, 4.563%, 2/08/14 | 1,231 | 1,148,141 | ||||
Synthetic LC First Lien Loan, 2.653%, 2/08/14 | 750 | 699,375 | ||||
La Paloma Generating Co., LLC: | ||||||
Acquisition Term Loan, 4.551%, 8/16/12 | 3,064 | 2,693,910 | ||||
Delayed Take-Down Term Loan, 4.551%, 8/16/12 | 244 | 214,551 | ||||
Synthetic Letter of Credit, 2.369%, 8/16/12 | 544 | 478,381 | ||||
MACH Gen LLC: | ||||||
Synthetic Letter of Credit First Lien Loan, | ||||||
2.551%, 2/22/13 | 69 | 65,251 | ||||
Term B Loan, 4.81%, 2/22/14 | 670 | 637,344 | ||||
USPF Holdings LLC Term Loan, 4.213%, 4/11/14 | 939 | 859,047 | ||||
7,522,407 | ||||||
See Notes to Financial Statements.
ANNUAL REPORT |
AUGUST 31, 2008 |
53 |
Schedule of Investments (continued)
Master Senior Floating Rate LLC
(Percentages shown are based on Net Assets)
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Multiline Retail — 0.6% | ||||||
Neiman Marcus Group, Inc. Term Loan, | ||||||
4.422%, 4/06/13 | USD | 4,053 | $ 3,760,472 | |||
Oil, Gas & Consumable Fuels — 2.8% | ||||||
Big West Oil LLC: | ||||||
Delayed Advance Loan, 4.471% – 4.68%, | ||||||
5/15/14 | 963 | 847,000 | ||||
Initial Advance Loan, 4.68%, 5/15/14 | 770 | 677,600 | ||||
Enterprise GP Holdings LP Term Loan B, | ||||||
4.713% – 5.04%, 11/10/14 | 3,500 | 3,419,063 | ||||
Petroleum Geo-Services ASA/PGS Finance, Inc. | ||||||
Term Loan, 4.55%, 6/28/15 | 1,910 | 1,850,555 | ||||
Scorpion Drilling Ltd. Second Lien 9.969%, 5/05/15 | 7,000 | 7,070,000 | ||||
Vulcan Energy Corp. Term Loan B-3, 6.25%, 8/12/11 | 1,750 | 1,741,250 | ||||
Western Refining Inc. Term Loan, 7.75%, 5/30/14 | 1,134 | 977,228 | ||||
16,582,696 | ||||||
Other — 0.1% | ||||||
Multicultural Radio Broadcasting Inc. Term Loan, | ||||||
5.422%, 12/18/12 | 567 | 510,413 | ||||
Paper & Forest Products — 2.3% | ||||||
Georgia-Pacific LLC: | ||||||
Add-on Term Loan B, | ||||||
4.446% – 4.551%, 12/20/12 | 1,909 | 1,802,313 | ||||
Term Loan B, 4.219% – 4.551%, 12/20/12 | 8,095 | 7,643,683 | ||||
NewPage Corp. Term Loan, 6.563%, 12/22/14 | 3,980 | 3,877,515 | ||||
13,323,511 | ||||||
Personal Products — 0.4% | ||||||
American Safety Razor Co. LLC Second Lien | ||||||
Loan, 8.72% – 8.89%, 1/30/14 | 2,650 | 2,385,000 | ||||
Pharmaceuticals — 0.4% | ||||||
Cardinal Health 409, Inc. Dollar Term Loan, | ||||||
5.051%, 4/10/14 | 2,970 | 2,591,325 | ||||
Professional Services — 0.3% | ||||||
Booz Allen Hamilton, Inc. Tranche B Term Loan, | ||||||
7.50%, 7/31/15 | 2,000 | 2,000,834 | ||||
Real Estate Management & Development — 0.8% | ||||||
Capital Automotive L Term Loan, 4.22%, 12/16/10 | 2,128 | 2,004,865 | ||||
Mattamy Funding Partnership Loan, | ||||||
5.063%, 4/11/13 | 2,933 | 2,441,306 | ||||
4,446,171 | ||||||
Road & Rail — 0.4% | ||||||
Rail America, Inc.: | ||||||
Canadian Term Loan, 6.79%, 8/14/09 | 156 | 155,648 | ||||
U.S. Term Loan, 6.79%, 8/14/09 | 2,093 | 2,083,102 | ||||
2,238,750 | ||||||
Semiconductors & Semiconductor | ||||||
Equipment — 0.2% | ||||||
Marvell Technology Group, Ltd. Term Loan, | ||||||
4.969%, 11/09/09 | 964 | 954,113 | ||||
Service — 0.3% | ||||||
Alliance Laundry Systems LLC Term Loan, | ||||||
4.96%, 1/27/12 | 1,609 | 1,560,255 | ||||
Par | ||||||
Floating Rate Loan Interests | (000) | Value | ||||
Specialty Retail — 0.7% | ||||||
Adesa, Inc. (KAR Holdings, Inc.) Initial Term Loan, | ||||||
5.06%, 10/21/13 | USD | 983 | $ 874,279 | |||
Burlington Coat Factory Warehouse Corp. Term Loan, | ||||||
5.06%, 5/28/13 | 987 | 764,354 | ||||
Claire's Stores Inc. Term Loan B, | ||||||
5.551% – 5.56%, 5/29/14 | 1,484 | 991,469 | ||||
General Nutrition Centers, Inc. Term Loan, | ||||||
5.04% – 5.06%, 9/16/13 | 1,750 | 1,576,458 | ||||
4,206,560 | ||||||
Textiles, Apparel & Luxury Goods — 0.2% | ||||||
Hanesbrands, Inc. First Lien Term Loan B, | ||||||
4.545% – 4.551%, 9/05/13 | 1,199 | 1,162,535 | ||||
Trading Companies & Distributors — 0.1% | ||||||
Beacon Sales Acquisition, Inc. Term Loan B, | ||||||
4.469% – 4.783%, 9/30/13 | 983 | 874,425 | ||||
Wireless Telecommunication Services — 1.9% | ||||||
Cellular South, Inc. Term Loan, | ||||||
4.22% – 4.545%, 5/29/14 | 1,485 | 1,425,600 | ||||
Centennial Cellular Operating Co. New Term Loan, | ||||||
4.469% – 4.801%, 2/09/11 | 2,942 | 2,877,930 | ||||
Cricket Communications, Inc. Term Loan B, | ||||||
6.50%, 6/16/13 | 2,050 | 2,022,667 | ||||
Crown Castle Operating Co. Tranche B Term Loan, | ||||||
4.301%, 3/06/14 | —(e) | 12 | ||||
IPC Systems, Inc. Tranche B-1 Term Loan, | ||||||
5.051%, 6/02/14 | 2,475 | 1,856,250 | ||||
LT LLC: | ||||||
Delay Draw Term Loan, 5.219%, 8/15/14 | 140 | 133,356 | ||||
First Lien Term Loan, | ||||||
5.219% – 5.551%, 8/15/14 | 610 | 579,144 | ||||
MetroPCS Wireless, Inc. New Tranche B Term Loan, | ||||||
4.75% – 5.063%, 11/04/13 | 2,750 | 2,626,564 | ||||
11,521,523 | ||||||
Total Floating Rate Loan Interests — 91.6% | 539,476,414 | |||||
Corporate Bonds | ||||||
Chemicals — 0.8% | ||||||
GEO Specialty Chemicals Corp. (f): | ||||||
11.283%, 12/31/09 | 3,929 | 2,941,839 | ||||
7.50%, 3/31/15 (a)(g) | 2,354 | 1,762,785 | ||||
4,704,624 | ||||||
Diversified Financial Services — 0.1% | ||||||
Ford Motor Credit Co. LLC, 7.241%, 4/15/12 (h) | 750 | 717,211 | ||||
Diversified Telecommunication Services — 0.9% | ||||||
Qwest Communications International, Inc., | ||||||
6.304%, 2/15/09 (h) | 3,166 | 3,158,085 | ||||
Qwest Corp., 6.026%, 6/15/13 (h) | 2,525 | 2,335,625 | ||||
5,493,710 | ||||||
Hotels, Restaurants & Leisure — 0.6% | ||||||
Galaxy Entertainment Finance Co. Ltd., | ||||||
8.133%, 12/15/10 (g)(h) | 3,300 | 3,168,000 | ||||
Universal City Florida Holding Co. I, | ||||||
7.551%, 5/01/10 (h) | 50 | 48,375 | ||||
3,216,375 | ||||||
See Notes to Financial Statements. |
54 ANNUAL REPORT |
AUGUST 31, 2008 |
Schedule of Investments (concluded)
Master Senior Floating Rate LLC
(Percentages shown are based on Net Assets)
Par | ||||||
Corporate Bonds | (000) | Value | ||||
Paper & Forest Products — 2.2% | ||||||
Ainsworth Lumber Co. Ltd., 11%, 7/29/15 (g) | USD | 2,763 | $ 2,217,289 | |||
NewPage Corp., 9.051%, 5/01/12 (h) | 650 | 609,375 | ||||
Verso Paper Holdings LLC Series B, | ||||||
6.551%, 8/01/14 (h) | 11,400 | 10,146,000 | ||||
12,972,664 | ||||||
Total Corporate Bonds — 4.6% | 27,104,584 | |||||
Common Stocks | Shares | |||||
Chemicals — 0.0% | ||||||
GEO Specialty Chemicals, Inc. (a)(c) | 39,151 | 15,030 | ||||
Commercial Services & Supplies — 0.0% | ||||||
Sirva Technologies Holding Co. (a) | 1,817 | 127,190 | ||||
Paper & Forest Products — 0.4% | ||||||
Ainsworth Lumber Co. Ltd. | 335,139 | 962,679 | ||||
Ainsworth Lumber Co. Ltd. (g) | 376,109 | 1,082,354 | ||||
2,045,033 | ||||||
Total Common Stocks — 0.4% | 2,187,253 | |||||
Warrant (i) | ||||||
Electric Utilities — 0.0% | ||||||
Reliant Resources (expires 10/25/08) | 9,115 | 108,833 | ||||
Total Warrant — 0.0% | 108,833 | |||||
Total Long-Term Investments | ||||||
(Cost — $629,257,169) — 96.6% | 568,877,084 | |||||
Beneficial | ||||||
Interest | ||||||
Short-Term Securities | (000) | |||||
BlackRock Liquidity Series, LLC | ||||||
Cash Sweep Series, 2.41% (j)(k) | USD | 29,066 | 29,066,037 | |||
Total Short-Term Securities | ||||||
(Cost — $29,066,037) — 5.0% | 29,066,037 | |||||
Total Investments (Cost — $658,323,206*) — 101.6% | 597,943,121 | |||||
Liabilities in Excess of Other Assets — (1.6)% | (9,195,102) | |||||
Net Assets — 100.0% | $588,748,019 | |||||
* The cost and unrealized appreciation (depreciation) of investments as of August
31, 2008, as computed for federal income tax purposes, were as follows:
Aggregate cost | $657,671,550 | |
Gross unrealized appreciation | $ 2,269,668 | |
Gross unrealized depreciation | (61,998,097) | |
Net unrealized depreciation | $ (59,728,429) | |
(a) Security is fair valued.
(b) Issuer filed for bankruptcy or is in default of interest payments.
(c) Non-income producing security.
(d) Represents a payment-in-kind security which may pay interest/dividends in
additional par/shares.
(e) Amount is less than $1,000.
(f) Convertible security.
(g) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration to
qualified institutional investors.
(h) Variable rate security. Rate shown is as of report date.
(i) Warrants entitle the Master LLC to purchase a predetermined number of shares
of common stock and are non-income producing. The purchase price and
number of shares are subject to adjustment under certain conditions until the
expiration date.
(j) Investments in companies considered to be an affiliate of the Master LLC, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were
as follows:
Net | ||||
Activity | ||||
Affiliate | (000) | Income | ||
BlackRock Liquidity Series, LLC | ||||
Cash Sweep Series | $(68,486) | $2,051,036 | ||
(k) 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 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. These
industry classifications are unaudited.
•Foreign currency exchange contracts as of August 31, 2008 were as follows:
Unrealized | ||||||
Currency | Currency | Settlement | Appreciation | |||
Purchased | Sold | Date | (Depreciation) | |||
EUR 1,300,000 | USD 1,929,984 | 10/23/08 | $ (28,472) | |||
USD 938,873 | CAD 1,000,000 | 10/23/08 | (2,271) | |||
USD 7,504,998 | GBP 3,803,000 | 10/23/08 | 601,096 | |||
USD 1,374,092 | EUR 880,000 | 10/25/08 | 87,060 | |||
Total | $ 657,413 | |||||
•Swapsoutstanding as of August 31, 2008 were as follows: | ||||||
Notional | ||||||
Amount | Unrealized | |||||
(000) | Appreciation | |||||
Bought credit default protection on | ||||||
LCDX Index and pay 3.25% | ||||||
Broker, UBS Warburg | ||||||
Expires June 2013 | $3,500 | $ 58,415 | ||||
•Currency Abbreviations: See Notes to Financial Statements.
|
ANNUAL REPORT |
AUGUST 31, 2008 |
55 |
Statement of Assets and Liabilities | Master Senior Floating Rate LLC | |
August 31, 2008 | ||
Assets | ||
Investments at value — unaffiliated (cost — $629,257,169) | $ 568,877,084 | |
Investments at value — affiliated (cost — $29,066,037) | 29,066,037 | |
Unrealized appreciation on foreign currency exchange contracts | 688,156 | |
Unrealized appreciation on swaps | 58,415 | |
Foreign currency at value (cost — $458,288) | 444,346 | |
Cash | 222,282 | |
Investments sold receivable | 8,148,088 | |
Interest receivable | 4,881,560 | |
Contributions receivable from investors | 1,430,848 | |
Principal paydown receivable | 76,053 | |
Swap premium paid | 42,767 | |
Commitment fees receivable | 9,843 | |
Prepaid expenses | 20,867 | |
Other assets | 48,432 | |
Total assets | 614,014,778 | |
Liabilities | ||
Investments purchased payable | 24,085,674 | |
Investment advisory fees payable | 486,691 | |
Unrealized depreciation on unfunded corporate loans | 372,278 | |
Unrealized depreciation on foreign currency exchange contracts | 30,743 | |
Swaps payable | 23,382 | |
Deferred income | 19,281 | |
Other affiliates payable | 4,188 | |
Officer’s and Directors’ fees payable | 259 | |
Other accrued expenses payable | 243,524 | |
Other liabilities payable | 739 | |
Total liabilities | 25,266,759 | |
Net Assets | $ 588,748,019 | |
Net Assets Consist of | ||
Investors’ capital | $ 648,528,995 | |
Net unrealized appreciation/depreciation | (59,780,976) | |
Net Assets | $ 588,748,019 | |
See Notes to Financial Statements. |
56 ANNUAL REPORT |
AUGUST 31, 2008 |
Statement of Operations | Master Senior Floating Rate LLC | |
Year Ended August 31, 2008 | ||
Investment Income | ||
Interest (including $2,051,036 from affiliates) | $ 47,332,152 | |
Facility and other fees | 270,569 | |
Total income | 47,602,721 | |
Expenses | ||
Investment advisory | 6,054,249 | |
Accounting services | 225,085 | |
Professional | 189,646 | |
Officer and Directors | 56,176 | |
Custodian | 50,686 | |
Printing | 6,798 | |
Miscellaneous | 53,793 | |
Total expenses | 6,636,433 | |
Net investment income | 40,966,288 | |
Realized and Unrealized Gain (Loss) | ||
Net realized gain (loss) from: | ||
Investments | (21,363,460) | |
Swaps | 269,425 | |
Foreign currency | (125,814) | |
(21,219,849) | ||
Net change in unrealized appreciation/depreciation on: | ||
Investments | (28,697,039) | |
Swaps | 65,083 | |
Foreign currency | 912,971 | |
Unfunded corporate loans | 536,905 | |
(27,182,080) | ||
Total realized and unrealized loss | (48,401,929) | |
Net Decrease in Net Assets Resulting from Operations | $ (7,435,641) | |
See Notes to Financial Statements. |
ANNUAL REPORT |
AUGUST 31, 2008 |
57 |
Statements of Changes in Net Assets | Master Senior Floating Rate LLC | |||||||||
Year Ended | ||||||||||
August 31, | ||||||||||
Increase (Decrease) in Net Assets: | 2008 | 2007 | ||||||||
Operations | ||||||||||
Net investment income | $ 40,966,288 | $ 57,598,184 | ||||||||
Net realized loss | (21,219,849) | (35,000,705) | ||||||||
Net change in unrealized appreciation/depreciation | (27,182,080) | 6,856,164 | ||||||||
Net increase (decrease) in net assets resulting from operations | (7,435,641) | 29,453,643 | ||||||||
Capital Transactions | ||||||||||
Proceeds from contributions | 62,053,522 | 58,523,411 | ||||||||
Fair value of withdrawals | (224,197,628) | (255,559,328) | ||||||||
Net decrease in net assets derived from capital transactions | (162,144,106) | (197,035,917) | ||||||||
Net Assets | ||||||||||
Total decrease in net assets | (169,579,747) | (167,582,274) | ||||||||
Beginning of year | 758,327,766 | 925,910,040 | ||||||||
End of year | $ 588,748,019 | $ 758,327,766 | ||||||||
Financial Highlights | Master Senior Floating Rate LLC | |||||||||
Year Ended August 31, | ||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||
Total Investment Return | ||||||||||
Total investment return | (1.08)% | 3.49% | 5.37% | 5.78% | 10.15% | |||||
Ratios to Average Net Assets | ||||||||||
Total expenses excluding interest expense | 1.04% | 1.02% | 1.03% | 1.01% | 1.02% | |||||
Total expenses | 1.04% | 1.04% | 1.04% | 1.01% | 1.02% | |||||
Net investment income | 6.41% | 7.07% | 6.22% | 4.52% | 3.81% | |||||
Supplemental Data | ||||||||||
Net assets, end of year (000) | $ 588,748 | $ 758,328 | $ 925,910 | $1,032,819 | $1,052,881 | |||||
Portfolio turnover | 56% | 46% | 54% | 53% | 76% | |||||
Average loan outstanding during the year (000) | — | $ 2,255 | $ 1,932 | — | — | |||||
See Notes to Financial Statements. |
58 ANNUAL REPORT |
AUGUST 31, 2008 |
Notes to Financial Statements Master Senior Floating Rate LLC
1. 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 most of its bond investments on the basis of last available bid price or current market quotations provided by dealers or pricing services selected under the supervision of the 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 pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments, and calculated yield measures based on valuation technology commonly employed in the market for such investments. Swap agreements are valued by quoted fair values received daily by the Master LLC’s pricing service or through brokers. Short-term securities are valued at amortized cost. 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 deter- mined 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, the investment will be valued by, under the direction of, or in accordance with, 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 transac- tion. 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. Derivative Financial Instruments: The Master LLC may engage in various portfolio investment strategies both to increase the return of the Master LLC and to hedge, or protect, its exposure to interest rate movements and movements in the securities markets. Losses may arise if the value of the contract decreases due to an unfavorable change in the price of the underlying security, or if the counterparty does not perform under the contract. |
•Credit Default Swaps — The Master LLC may invest in credit default
swaps, which are agreements in which one party pays fixed periodic
payments to a counterparty in consideration for a guarantee from
the counterparty to make a specific payment should a negative
credit event take place. These periodic payments received or made
by the Master LLC are recorded in the accompanying Statement of
Operations as realized gains and losses, respectively. Gains or losses
are also realized upon termination of the swap agreements. Swaps
are marked-to-market daily and changes in value are recorded as
unrealized appreciation (depreciation). When the swap is terminated,
the Master LLC will record a realized gain or loss equal to the differ-
ence between the proceeds from (or cost of) the closing transaction
and the Master LLC’s basis in the contract, if any.
•Foreign Currency Exchange Contracts — The Master LLC may enter
into foreign currency exchange contracts as a hedge against either
specific transactions or portfolio positions. 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.
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. |
ANNUAL REPORT |
AUGUST 31, 2008 |
59 |
Notes to Financial Statements (continued) Master Senior Floating Rate LLC
The Master LLC reports 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. Floating Rate Loans: The Master LLC invests in floating rate loans, which are generally non-investment grade, made by banks, other finan- cial institutions and privately and publicly offered corporations. Floating rate loans generally pay interest at rates that are periodically predeter- mined by reference to a base lending rate plus a premium. The base lending rates are generally (i) the lending rate offered by one or more European banks, such as LIBOR (London InterBank Offered Rate), (ii) the prime rate offered by one or more U.S. banks or (iii) the certificate of deposit rate. The Master LLC considers these investments to be invest- ments in debt securities for purposes of its 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 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 or expense. Prepayment penalty fees are recorded as gains or losses. When the Master LLC buys a floating rate loan it may receive a facility fee and when it sells a float- ing rate loan it may pay a facility fee. On an ongoing basis, a 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 circum- stances, a Master LLC may receive a prepayment penalty fee upon the prepayment of a floating rate loan by a borrower. Other fees received by a Master LLC may include covenant waiver fees and covenant modifi- cation 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 contractual 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. 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 bor- rower and the lender that is selling the Participation. The Master LLC’s investments 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 a general creditor of the lender and may not benefit from any offset between the lender and the borrower. Segregation: In cases in which the 1940 Act and the interpretive posi- tions of the Securities and Exchange Commission (“SEC”) require that the Master LLC segregate assets in connection with certain investments (e.g., swaps) and certain borrowings, the Master LLC will, consistent with certain interpretive letters issued by the SEC, designate on its books and records cash or other liquid debt securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Investment Transactions and Investment Income: Investment transac- tions 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 Master LLC has determined the ex-dividend date. Interest income is rec- ognized 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 net assets will be managed so an investor in the Master LLC can satisfy the requirements of Subchapter M of the Internal Revenue Code. |
60 ANNUAL REPORT |
AUGUST 31, 2008 |
Notes to Financial Statements (continued) Master Senior Floating Rate LLC
Effective February 29, 2008, the Master LLC implemented Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes the minimum recognition thresh- old a tax position must meet in connection with accounting for uncer- tainties in income tax positions taken or expected to be taken by an entity, including investment companies, before being measured and recognized in the financial statements. The investment advisor has evalu- ated the application of FIN 48 to the Master LLC, and has determined that the adoption of FIN 48 does not have a material impact on the Master LLC’s financial statements. The Master LLC files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master LLCs’ U.S. federal tax returns remain open for the years ended August 31, 2005 through August 31, 2007. The statutes of limitations on the Master LLCs’ state and local tax returns may remain open for an additional year depending upon the jurisdiction. Recent Accounting Pronouncements: In September 2006, Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”), was issued and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a frame- work for measuring fair value and expands disclosures about fair value measurements. The impact on the Master LLCs’ financial statement disclosures, if any, is currently being assessed. In March 2008, Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133" ("FAS 161"), was issued. FAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivative instruments affect an entity’s results of opera- tions and financial position. In September 2008, FASB Staff Position No. 133-1 and FASB Interpretation No. 45-4 (the “FSP”), “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” was issued and is effective for fiscal years and interim periods ending after November 15, 2008. The FSP amends FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” to require disclosures by sellers of credit derivatives, including credit derivatives embedded in hybrid instruments. The FSP also clarifies the effective date of FAS 161, whereby disclosures required by FAS 161 are effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The impact on the Master LLC’s financial statement disclosures, if any, is currently being assessed. |
Deferred Compensation and BlackRock Closed-End Share Equivalent
Investment Plan: Under the deferred compensation plan approved
by the Master LLCs’ Board, non-interested Directors (“Independent
Directors”) may defer a portion of their annual complex-wide compen-
sation. 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 there-
under represent general unsecured claims against the general assets
of the Master LLC. The Master LLC may, however, elect to invest in
common stock of other certain BlackRock Closed-End Funds selected
by the Independent Directors in order to match its deferred comp-
ensation obligations.
Other: Expenses directly related to the Master LLC are charged to that
Master LLC. Other operating expenses shared by several funds are
pro-rated among those funds on the basis of relative net assets or other
appropriate methods.
2. Investment Advisory Agreement and Other Transactions
with Affiliates:
The Master LLC entered into an Investment Advisory Agreement with
BlackRock Advisors, LLC (the “Advisor”) to provide investment advisory
and administration services. Merrill Lynch & Co., Inc. (“Merrill Lynch”)
and The PNC Financial Services Group, Inc. are principal owners of
BlackRock, Inc.
The Advisor is responsible for the management of the Master LLC’s
portfolio 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 Advisor a monthly fee at
an annual rate of 0.95% of the value of the average daily net assets of
the Master LLC.
The Advisor has entered into a separate sub-advisory agreement with
BlackRock Financial Management, Inc. (“BFM”), an affiliate of the
Advisor, under which the Advisor pays BFM for services it provides, a
monthly fee that is a percentage of the investment advisory fee paid by
the Master LLC to the Advisor.
For the year ended August 31, 2008, the Master LLC reimbursed the
Advisor $11,086 for certain accounting services, which are included in
accounting services in the Statement of Operations.
ANNUAL REPORT |
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61 |
Notes to Financial Statements (concluded) Master Senior Floating Rate LLC
Certain officers and/or directors of the Master LLC are officers and/or directors of BlackRock, Inc. or its affiliates. The Master LLC reimburses the Advisor for compensation to the Master LLC’s Chief Compliance Officer. 3. Investments: Purchases and sales (including paydowns) of investments, excluding short-term securities, for the year ended August 31, 2008 were $333,699,056 and $362,238,110, respectively. 4. Commitments: The Master LLC may invest in floating rate loans. In connection with these investments, the Master LLC may, with its Advisor, 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. At August 31, 2008, the Master LLC had out- standing unfunded commitments of approximately $7,285,000. In con- nection 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, 2008 the Master LLC had the following unfunded loan commitments: |
Value of | ||||
Unfunded | Underlying | |||
Commitment | Loan | |||
Borrower | (000) | (000) | ||
Bausch & Lomb , Inc | $ 321 | $ 312 | ||
Cellular South, Inc | $ 500 | $ 480 | ||
Community Health Systems, Inc | $ 464 | $ 439 | ||
Vought Aircraft Industries, Inc | $6,000 | $5,663 | ||
5. Short-Term Borrowings: The Master LLC, along with certain other funds managed by the Advisor and its affiliates, is party to a $500,000,000 credit agreement with a group of lenders. The Master LLC may borrow under the 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, regu- latory or contractual limits. On November 21, 2007, the credit agree- ment was renewed for one year under substantially the same terms. The Master LLC pays a commitment fee of 0.06% per annum based on the Master LLC’s pro rata share of the unused portion of the credit agree- ment, which is included in miscellaneous in the Statement of Operations. Amounts borrowed under the credit agreement bear interest at a rate equal to, at each fund’s election, the federal funds rate plus 0.35% or a base rate as defined in the credit agreement. The Master LLC did not borrow under the credit agreement during the year ended August 31, 2008. |
6. Subsequent Event: On September 15, 2008, Bank of America Corporation announced that it has agreed to acquire Merrill Lynch, one of the principal owners of BlackRock, Inc. The purchase has been approved by the directors of both companies. Subject to shareholder and regulatory approvals, the transaction is expected to close in the first quarter of 2009. |
62 ANNUAL REPORT |
AUGUST 31, 2008 |
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, 2008, 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 finan- cial highlights for each of the five years in the period then ended. These financial 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 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 assur- ance 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 reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of express- ing 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 significant estimates made by manage- ment, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2008, by correspondence with the custodian and financial interme- diaries; 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, 2008, 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 con- formity with accounting principles generally accepted in the United States of America. |
Deloitte & Touche LLP Princeton, New Jersey October 30, 2008 |
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Disclosure of Investment Advisory Agreement and Subadvisory Agreement
The Boards of Directors (collectively, the "Board,” the members of which are referred to as “Directors”) of the BlackRock Diversified Income Strategies Fund, Inc. (“DVF”), BlackRock Floating Rate Income Strategies Fund, Inc. (“FRA”), BlackRock Senior Floating Rate Fund, Inc. (“SFR-I”), BlackRock Senior Floating Rate Fund II, Inc. (“SFR-II”) and Master Senior Floating Rate LLC (“MSFR,” and together with DVF, FRA, SFR-I and SFR-II, the “Funds”) met in April and May 2008 to consider approving the con- tinuation of each Fund’s investment advisory agreement (each, an “Advisory Agreement”) with BlackRock Advisors, LLC (the “Advisor”), each Fund’s investment advisor. The Board also considered the approval of each Fund’s subadvisory agreement (each, a “Subadvisory Agreement” and, together with the “Advisory Agreement,” the “Agreements”) between the Advisor and BlackRock Financial Management, Inc. (the “Subadvisor”). The Advisor and the Subadvisor are collectively referred to herein as the “Advisors” and, together with BlackRock, Inc., “BlackRock.” Activities and Composition of the Board The Board of each Fund consists of thirteen individuals, eleven of whom are not “interested persons” of the Funds as defined in the Investment Company Act of 1940 (the “1940 Act”) (the “Independent Directors”). The Directors are responsible for the oversight of the operations of the Funds and perform the various duties imposed on the directors of invest- ment companies by the 1940 Act. The Independent Directors have retained independent legal counsel to assist them in connection with their duties. The Chairman of the Board is an Independent Director. The Board has established four standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee and a Performance Oversight Committee. Advisory Agreement and Subadvisory Agreement Upon the consummation of the combination of BlackRock, Inc.’s invest- ment management business with Merrill Lynch & Co., Inc.’s investment management business, including Merrill Lynch Investment Managers, L. ., and certain affiliates, each Fund entered into an Advisory Agreement and a Subadvisory Agreement, each with an initial two-year term. Consistent with the 1940 Act, after the Advisory Agreement’s and Subadvisory Agreement’s respective initial two-year term, the Board is required to consider the continuation of each Fund’s Advisory Agreement and Subadvisory Agreement on an annual basis. In connection with this process, the Board assessed, among other things, the nature, scope and quality of the services provided to each Fund by the personnel of BlackRock and its affiliates, including investment advisory services, administrative services, secondary market support services, oversight of fund accounting and custody, and assistance in meeting legal and regu- latory requirements. The Board also received and assessed information regarding the services provided to each Fund by certain unaffiliated service providers. |
Throughout the year, the Board also considered a range of information in connection with its oversight of the services provided by BlackRock and its affiliates. Among the matters the Board considered were: (a) invest- ment performance for one-, three- and five-year periods, as applicable, against peer funds, as well as senior management and portfolio man- agers’ analysis of the reasons for underperformance, if applicable; (b) fees, including advisory, administration and other fees paid to BlackRock and its affiliates by each Fund, such as transfer agency fees and fees for marketing and distribution, as applicable; (c) Fund operat- ing expenses paid to third parties; (d) the resources devoted to and compliance reports relating to each Fund’s investment objective, policies and restrictions; (e) each Fund’s compliance with its Code of Ethics and compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls; (h) BlackRock’s implementation of the proxy voting guidelines approved by the Board; (i) execution quality; (j) valuation and liquidity procedures; and (k) reviews of BlackRock’s business, including BlackRock’s response to the increasing scale of its business. Board Considerations in Approving the Advisory Agreement and Subadvisory Agreement To assist the Board in its evaluation of the Agreements, the Directors received information from BlackRock in advance of the April 22, 2008 meeting which detailed, among other things, the organization, business lines and capabilities of the Advisors, including: (a) the responsibilities of various departments and key personnel and biographical information relating to key personnel; (b) financial statements for BlackRock; (c) the advisory and/or administrative fees paid by each Fund to the Advisors, including comparisons, compiled by Lipper Inc. (“Lipper”), an independ- ent third party, with the management fees, which include advisory and administration fees, of funds with similar investment objectives (“Peers”); (d) the profitability of BlackRock and certain industry profitability analy- ses for advisors to registered investment companies; (e) the expenses of BlackRock in providing various services; (f) non-investment advisory reimbursements, if applicable, and “fallout” benefits to BlackRock; (g) economies of scale, if any, generated through the Advisors’ manage- ment of all of the BlackRock closed-end funds (the “Fund Complex”); (h) the expenses of each Fund, including comparisons of each such Fund’s expense ratios (both before and after any fee waivers) with the expense ratios of its Peers; (i) an internal comparison of management fees classified by Lipper, if applicable; and (j) each Fund’s performance for the past one-, three- and five-year periods, as applicable, as well as each Fund’s performance compared to its Peers. The Board also considered other matters it deemed important to the approval process, where applicable, such as payments made to BlackRock or its affiliates relating to the distribution of Fund shares, |
64 ANNUAL REPORT |
AUGUST 31, 2008 |
Disclosure of Investment Advisory Agreement and Subadvisory Agreement (continued)
services related to the valuation and pricing of Fund portfolio holdings, and direct and indirect benefits to BlackRock and its affiliates from their relationship with the Funds. In addition to the foregoing materials, independent legal counsel to the Independent Directors provided a legal memorandum outlining, among other things, the duties of the Board under the 1940 Act, as well as the general principles of relevant law in reviewing and approving advisory contracts, the requirements of the 1940 Act in such matters, an advi- sor’s fiduciary duty with respect to advisory agreements and compensa- tion, and the standards used by courts in determining whether invest- ment company boards of directors have fulfilled their duties and the factors to be considered by boards in voting on advisory agreements. The Independent Directors reviewed this information and discussed it with independent legal counsel prior to the meeting on April 22, 2008. At the Board meeting on April 22, 2008, BlackRock made a presenta- tion to and responded to questions from the Board. Following the meet- ing on April 22, 2008, the Board presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written materials provided to the Directors prior to the meetings on May 29 and 30, 2008. At the Board meetings on May 29 and 30, 2008, BlackRock responded to further questions from the Board. In connection with BlackRock’s presentations, the Board con- sidered each Agreement and, in consultation with independent legal counsel, reviewed the factors set out in judicial decisions and Securities and Exchange Commission (“SEC”) statements relating to the renewal of the Agreements. Matters Considered by the Board In connection with its deliberations with respect to the Agreements, the Board considered all factors it believed relevant with respect to each Fund, including the following: the nature, extent and quality of the servic- es provided by the Advisors; the investment performance of each Fund; the costs of the services to be provided and profits to be realized by the Advisors and their affiliates from their relationship with the Funds; the extent to which economies of scale would be realized as the Fund Complex grows; and whether BlackRock realizes other benefits from its relationship with the Funds. A. Nature, Extent and Quality of the Services: In evaluating the nature, extent and quality of the Advisors’ services, the Board reviewed informa- tion concerning the types of services that the Advisors provide and are expected to provide to each Fund, narrative and statistical information concerning each Fund’s performance record and how such performance compares to each Fund’s Peers, information describing BlackRock’s organization and its various departments, the experience and responsi- bilities of key personnel and available resources. The Board noted the willingness of the personnel of BlackRock to engage in open, candid dis- cussions with the Board. The Board further considered the quality of the Advisors’ investment process in making portfolio management decisions. |
In addition to advisory services, the Directors considered the quality of the administrative and non-investment advisory services provided to the Funds. The Advisors and their affiliates provided each Fund with such administrative, transfer agency, shareholder and other services, as applicable (in addition to any such services provided by others for the Funds), and officers and other personnel as are necessary for the opera- tions of the respective Fund. In addition to investment management services, the Advisors and their affiliates provided each Fund with ser- vices such as: preparing shareholder reports and communications, including annual and semi-annual financial statements and the Funds’ websites; communications with analysts to support secondary market trading; assisting with daily accounting and pricing; preparing periodic filings with regulators and stock exchanges; overseeing and coordinating the activities of other service providers; administering and organizing Board meetings and preparing the Board materials for such meetings; providing legal and compliance support (such as helping to prepare proxy statements and responding to regulatory inquiries); and perform- ing other Fund administrative tasks necessary for the operation of the respective Fund (such as tax reporting and fulfilling regulatory filing requirements). The Board considered the Advisors’ policies and proce- dures for assuring compliance with applicable laws and regulations. B. The Investment Performance of the Funds and BlackRock: As previ- ously noted, the Board received performance information regarding each Fund and its Peers. Among other things, the Board received materials reflecting each Fund’s historic performance and each Fund’s one-, three- and five-year total returns (as applicable) relative to its Peers (including the Peers’ median performance). The Board was provided with a descrip- tion of the methodology used by Lipper to select each Fund's Peers. The Board noted that it regularly reviews the performance of each Fund throughout the year. The Board reviewed a narrative and statistical analy- sis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper rankings. The Board noted that in general DVF performed better than its Peers in that its performance was at or above the median of its respective Peers in at least one of the one-year and since inception periods reported. The Board noted that in general FRA performed better than its Peers in that its performance was at or above the median of its Peers in at least two of the one-year, three-year and since inception periods reported. The Board noted that in general SFR-I performed better than its Peers in that its performance was at or above the median of its Peers in at least two of the one-, three- and five-year periods reported. The Board noted that although SFR-II underperformed its Peers in at least two of the one-, three- and five-year periods reported, such under- performance was not greater than 10% of the median return of its Peers for any of the periods above and therefore was not considered to be material. The Board concluded that BlackRock was committed to pro- |
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Disclosure of Investment Advisory Agreement and Subadvisory Agreement (continued)
viding the resources necessary to assist the portfolio managers and to continue improving SFR-II’s performance. Based on its review, the Board generally was satisfied with BlackRock’s efforts to manage SFR-II. C. Consideration of the Advisory Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Funds: In evaluating the management fees and expenses that each Fund is expected to bear, the Board considered each Fund’s current management fee structure and each Fund’s expense ratios in absolute terms as well as relative to the fees and expense ratios of its applicable Peers. The Board, among other things, reviewed comparisons of each Fund’s gross management fees before and after any applicable reimbursements and fee waivers and total expense ratios before and after any applicable waivers with those of applicable Peers. The Board also reviewed a narrative analysis of the Peer rankings pre- pared by Lipper and summarized by BlackRock at the request of the Board. This summary placed the Peer rankings into context by analyzing various factors that affect these comparisons. The Board noted that each of DVF and FRA paid contractual manage- ment fees lower than or equal to the median contractual fees paid by each Fund’s respective Peers. This comparison was made without giving effect to any expense reimbursements or fee waivers. The Board noted that, although SFR-I paid contractual management fees higher than the median of its Peers, such fees were no more than 5 basis points greater than the median amount and therefore considered not to be materially higher than its Peers. This comparison was made without giving effect to any expense reimbursements or fee waivers. The Board noted that, although SFR-II paid contractual management fees higher than the median of its Peers, BlackRock and its affiliates incur increased business risk in connection with the distribution of the Fund’s shares because the Advisor makes payments relating to distribu- tion and sales support activities out of their past profits or other sources available to them (and not as an additional charge to the Fund). The Board concluded that a higher fee to compensate the Advisor for this additional risk was reasonable. The Board also compared the management fees charged and services provided by the Advisors to closed-end funds in general versus other types of clients (such as open-end investment companies and separate- ly managed institutional accounts) in similar investment categories. The Board noted certain differences in services provided and costs incurred by the Advisor with respect to closed-end funds compared to these other types of clients and the reasons for such differences. |
In connection with the Board’s consideration of the fees and expense information, the Board reviewed the considerable investment manage- ment experience of the Advisors and considered the high level of invest- ment management, administrative and other services provided by the Advisors. D. Profitability of BlackRock: The Board also considered BlackRock’s profitability in conjunction with its review of fees. The Board reviewed BlackRock’s profitability with respect to the Fund Complex and other fund complexes managed by the Advisors. In reviewing profitability, the Board recognized that one of the most difficult issues in determining profitability is establishing a method of allocating expenses. The Board also reviewed BlackRock’s assumptions and methodology of allocating expenses, noting the inherent limitations in allocating costs among various advisory products. The Board also recognized that individual fund or product line profitability of other advisors is generally not publicly available. The Board recognized that profitability may be affected by numerous fac- tors including, among other things, the types of funds managed, expense allocations and business mix, and therefore comparability of profitability is somewhat limited. Nevertheless, to the extent available, the Board considered BlackRock’s operating margin compared to the operating margin estimated by BlackRock for a leading investment management firm whose operations consist primarily of advising closed-end funds. The comparison indicated that BlackRock’s operating margin was approximately the same as the operating margin of such firm. In evaluating the reasonableness of the Advisors’ compensation, the Board also considered any other revenues paid to the Advisors, including partial reimbursements paid to the Advisors for certain non-investment advisory services, if applicable. The Board noted that these payments were less than the Advisors’ costs for providing these services. The Board also considered indirect benefits (such as soft dollar arrangements) that the Advisors and their affiliates are expected to receive, which are attrib- utable to their management of the Fund. E. Economies of Scale: In reviewing each Fund’s fees and expenses, the Board examined the potential benefits of economies of scale, and whether any economies of scale should be reflected in the Fund’s fee structure, for example through the use of breakpoints for the Fund or the Fund Complex. In this regard, the Board reviewed information provided by BlackRock, noting that most closed-end fund complexes do not have |
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Disclosure of Investment Advisory Agreement and Subadvisory Agreement (continued)
fund-level breakpoints because closed-end funds generally do not expe- rience substantial growth after their initial public offering and each fund is managed independently consistent with its own investment objectives. The Board noted that only three closed-end funds in the Fund Complex have breakpoints in their fee structures. Information provided by Lipper also revealed that only one closed-end fund complex used a complex- level breakpoint structure. The Board found, based on its review of com- parable funds, that each Fund’s management fee is appropriate in light of the scale of the respective Fund. F. Other Factors: In evaluating fees, the Board also considered indirect benefits or profits the Advisors or their affiliates may receive as a result of their relationships with the Funds (“fall-out benefits”). The Directors, including the Independent Directors, considered the intangible benefits that accrue to the Advisors and their affiliates by virtue of their relation- ships with the Funds, including potential benefits accruing to the Advisors and their affiliates as a result of participating in offerings of the Funds’ shares, potentially stronger relationships with members of the broker-dealer community, increased name recognition of the Advisors and their affiliates, enhanced sales of other investment funds and prod- ucts sponsored by the Advisors and their affiliates and increased assets under management which may increase the benefits realized by the Advisors from soft dollar arrangements with broker-dealers. The Board also considered the unquantifiable nature of these potential benefits. Conclusion with Respect to the Agreements In reviewing and approving the continuation of the Agreements, the Directors did not identify any single factor discussed above as all-impor- tant or controlling, but considered all factors together, and different Directors may have attributed different weights to the various factors considered. The Independent Directors were also assisted by the advice of independent legal counsel in making this determination. The Directors, including the Independent Directors, unanimously determined that each of the factors described above, in light of all the other factors and all of the facts and circumstances applicable to each respective Fund, was acceptable for each Fund and supported the Directors’ conclusion that the terms of each Agreement were fair and reasonable, that each Fund’s fees are reasonable in light of the services provided to the respective Fund and that each Agreement should be approved. |
Disclosure of Investment Advisory Agreement and Subadvisory Agreement for BlackRock Defined Opportunity Credit Trust The Board of the BlackRock Defined Opportunity Credit Trust (the “Trust”) met on November 7, 2007 and November 29, 2007 to consider the approval of the Trust’s Advisory Agreement with the Advisor. The Board also considered the approval of the Trust’s Subadvisory Agreement between the Advisor and the Subadvisor. The Trust commenced opera- tions in January 2008. |
Activities and Composition of the Board The Board of Trustees of the Trust consists of thirteen individuals, eleven of whom are not “interested persons” of the Trust as defined in the 1940 Act (the “Independent Trustees”). The Trustees are responsible for the oversight of the operations of the Trust and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Trustees retained independent legal counsel to assist them in connection with their duties. The Chairman of the Board is an Independent Trustee. The Board has established four standing commit- tees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee and a Performance Oversight Committee. Advisory Agreement and Subadvisory Agreement Throughout the year, in connection with their duties as trustees or directors of other funds in the Fund Complex, the Board considered a range of information in connection with its oversight of the services provided by BlackRock and its affiliates. Among the matters the Board considered were: (a) investment performance of funds in the Fund Complex; (b) fees, including advisory, administration and other fees paid to BlackRock and its affiliates by funds in the Fund Complex, as applicable; (c) fund operating expenses paid to third parties by funds in the Fund Complex; (d) the resources devoted to and compliance reports relating to investment objectives, policies and restrictions of funds in the Fund Complex; (e) compliance by funds in the Fund Complex with their Code of Ethics and compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock's and other service providers’ internal controls; (h) BlackRock's implementation of the proxy voting guidelines approved by the Board; (i) execution quality; (j) valuation and liquidity procedures; and (k) reviews of BlackRock’s business, including BlackRock's response to the increasing scale of its business. Board Considerations in Approving the Advisory Agreement and Subadvisory Agreement To assist the Board in its evaluation of the Agreements, in advance of the November 7, 2007 and November 29, 2007 meetings, the Trustees received from BlackRock information which detailed, among other things, the organization, business lines and capabilities of the Advisors, including: (a) the responsibilities of various departments and key personnel and biographical information relating to key personnel; (b) the advisory and/or administrative fees to be paid by the Trust to the Advisors, including comparisons with the management fees, which include advisory and administration fees, of its Peers; (c) “fallout” bene- fits to BlackRock; and (d) the estimated expenses of the Trust, including comparisons of the Trust’s expense ratios with the expense ratios of its Peers. |
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Disclosure of Investment Advisory Agreement and Subadvisory Agreement (continued)
The Board also considered other matters it deemed important to the approval process, where applicable, such as payments to be made to BlackRock or its affiliates relating to the distribution of Trust shares, services related to the valuation and pricing of Trust portfolio holdings and direct and indirect benefits to BlackRock and its affiliates from their relationship with the Trust. In addition to the foregoing materials, independent legal counsel to the Independent Trustees provided a legal memorandum outlining, among other things, the duties of the Board under the 1940 Act, as well as the general principles of relevant law in reviewing and approving advisory contracts, the requirements of the 1940 Act in such matters, an advis- er’s fiduciary duty with respect to advisory agreements and compensa- tion, and the standards used by courts in determining whether invest- ment company boards of directors have fulfilled their duties and the factors to be considered by boards in voting on advisory agreements. The Independent Trustees reviewed this information and discussed it with independent legal counsel prior to the meetings on November 7, 2007 and November 29, 2007. At the Board meeting on November 29, 2007, BlackRock made a presentation to and responded to questions from the Board. In connection with BlackRock’s presentations, the Board considered each Agreement and, in consultation with independent legal counsel, reviewed the factors set out in judicial decisions and SEC statements relating to the approval of the Agreements. Matters Considered by the Board In connection with its deliberations with respect to the Agreements, the Board considered all factors it believed relevant with respect to the Trust, including the following: the nature, extent and quality of the services to be provided by the Advisors; the costs of the services to be provided and profits to be realized by the Advisors and their affilliates from their relationship with the Trust; the extent to which economies of scale would be realized as the Fund Complex grows; and whether BlackRock will realize other benefits from its relationship with the Trust. A. Nature, Extent and Quality of the Services: In evaluating the nature, extent and quality of the Advisors’ services, the Board reviewed informa- tion concerning the types of services that the Advisors provide and are expected to provide to the Trust, information describing BlackRock’s organization and its various departments, the experience and responsi- bilities of key personnel and available resources. The Board noted the willingness of the personnel of BlackRock to engage in open, candid discussions with the Board. The Board further considered the quality of the Advisors’ investment process in making portfolio management deci- sions. The Board also noted information received at prior Board meet- ings concerning standards of BlackRock with respect to the execution of portfolio transactions. |
In addition to advisory services, throughout the year, the Trustees consid- er the quality of the administrative and non-investment advisory services provided to the Fund Complex, which would also be provided to the Trust. The Advisors and their affiliates provide the funds in the Fund Complex with such administrative and other services, as applicable (in addition to any such services provided by others to the funds), and offi- cers and other personnel as are necessary for the operations of the funds. In addition to investment management services, the Advisors and their affiliates provide each fund in the Fund Complex with services such as: preparing shareholder reports and communications, including annual and semi-annual financial statements and the funds’ website; communi- cations with analysts to support secondary market trading; assisting with daily accounting and pricing; preparing periodic filings with regulators and stock exchanges; overseeing and coordinating the activities of other service providers; administering and organizing Board meetings and preparing the Board materials for such meetings; providing legal and compliance support (such as helping to prepare proxy statements and responding to regulatory inquiries); and performing other administrative tasks necessary for the operation of the respective fund (such as tax reporting and fulfilling regulatory filing requirements). The Board consid- ered the Advisors’ policies and procedures for assuring compliance with applicable laws and regulations. B. The Investment Performance of the Trust and BlackRock: The Board did not consider the performance history of the Trust because the Trust was newly organized; however, the Board considered the investment performance of BlackRock generally. The Board will monitor the Trust’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 Trust: In evaluating the management fees and expenses that the Trust is expected to bear, the Board considered the Trust’s proposed management fee structure and the Trust’s expense ratios in absolute terms as well as relative to the fees and expense ratios of its applicable Peers. The Board, among other things, reviewed comparisons of the Trust’s gross management fees before and after any fee waivers and total expense ratios before and after any waivers with those of its Peers. Because the Trust had not yet commenced operations, BlackRock did not provide the Board with specific information concerning the expected profits to be realized by BlackRock and its affiliates from their relation- ships with the Trust. BlackRock, however, will provide the Board with such information at future meetings when the Agreements are being consid- ered for renewal. Throughout the year, the Board considers the cost of the services provided to the funds in the Fund Complex by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management and, if applicable, distri- bution of such funds. As part of its analysis, the Board typically reviews |
68 ANNUAL REPORT |
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Disclosure of Investment Advisory Agreement and Subadvisory Agreement (concluded)
BlackRock’s methodology in allocating its costs to the management of the funds in the Fund Complex. The Board also generally considers 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 provide the high quality of services that are expected by the Board. In connection with the Board’s consideration of the fees and expense information, the Board reviewed the considerable investment manage- ment experience of the Advisors and considered the high level of invest- ment management, administrative and other services provided by the Advisors. D. Economies of Scale: In reviewing the Trust’s fees and expenses, the Board examined the potential benefits of economies of scale, and whether any economies of scale should be reflected in the Trust’s fee structure, for example through the use of breakpoints for the Trust or the Fund Complex. The Board found, based on its review of comparable funds, that the Trust’s management fee is appropriate in light of the scale of the Trust. E. Other Factors: In evaluating fees, the Board also considered fall-out benefits. The Trustees, including the Independent Trustees, considered the intangible benefits that accrue to the Advisors and their affiliates by virtue of their relationships with the Trust, including potential benefits accruing to the Advisors and their affiliates as a result of participating in offerings of the Trust’s shares, potentially stronger relationships with members of the broker-dealer community, increased name recognition of the Advisors and their affiliates, enhanced sales of other investment |
funds and products sponsored by the Advisors and their affiliates and increased assets under management which may increase the benefits realized by the Advisors from soft dollar arrangements with broker- dealers. The Board also considered the unquantifiable nature of these potential benefits. During the Trustees’ deliberations in connection with its approval of the management fee, the Trustees were aware that BlackRock intended to pay compensation, out of its own assets, to the lead underwriter and to certain qualifying underwriters of the Trust’s common shares and of the anticipated amounts of such compensation and the general nature of the services to be rendered to BlackRock in consideration of such com- pensation. The Trustees also considered whether the management fee met applicable standards in light of the services provided by the Advisor, without regard to whether the Advisor ultimately pays any portion of the anticipated compensation to the underwriters. Conclusion with Respect to the Agreements In reviewing and approving the Agreements, the Trustees did not identify any single factor discussed above as all-important or controlling, but considered all factors together, and different Trustees may have attrib- uted different weights to the various factors considered. The Independent Directors were also assisted by the advice of independent legal counsel in making this determination. The Trustees, including the Independent Trustees, unanimously determined that each of the factors described above, in light of all the other factors and all of the facts and circum- stances applicable to the Trust, was acceptable for the Trust and sup- ported the Trustees’ conclusion that the terms of each Agreement were fair and reasonable, that the Trust’s fees are reasonable in light of the services to be provided to the Trust and that each Agreement should be approved. |
Important Tax Information The following information is provided with respect to the ordinary income distributions paid by the Funds for the taxable period ended August 31, 2008: |
BlackRock | BlackRock | BlackRock | BlackRock | BlackRock | ||||||||
Defined | Diversified | Floating Rate | Senior | Senior | ||||||||
Opportunity | Income Strategies | Income Strategies | Floating Rate | Floating Rate | ||||||||
Credit Trust | Fund, Inc. | Fund, Inc. | Fund, Inc. | Fund II, Inc. | ||||||||
Federal Obligation Interest1 | 4.05% | — | — | — | — | |||||||
Interest-Related Dividends for Non-U.S. Residents2 | ||||||||||||
Month(s) Paid: | September 2007 | — | 91.40% | 88.31% | 85.85% | 85.64% | ||||||
October 2007 | — | 78.06% | 89.74% | 85.94% | 85.69% | |||||||
November 2007 | — | 77.90% | 94.32% | 85.94% | 85.69% | |||||||
December 2007 | — | 77.90% | 94.32% | 85.94% | 85.69% | |||||||
January 2008 | — | 77.90% | 94.32% | 83.56% | 83.70% | |||||||
February 2008 | — | 86.97% | 75.08% | 83.56% | 83.70% | |||||||
March — August 2008 | 64.82% | 86.97% | 75.08% | 83.56% | 83.70% | |||||||
1 The law varies in each state as to whether and what percentage of dividend income attributable to federal obligations is exempt from state income tax. We recommend that you consult your adviser to determine if any portion of the dividends you received is exempt from state income taxes. 2 Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations. |
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69 |
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 BlackRock Senior Floating Rate Fund, Inc. and BlackRock Senior Floating Rate Fund II, Inc. and Computershare Trust Company, N.A. for BlackRock Defined Opportunity Credit Trust, BlackRock Diversified Income Strategies Fund, Inc. and BlackRock Floating Rate Income Strategies Fund, Inc. (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 partic- ipant’s account either (i) through receipt of additional unissued but authorized shares of the Funds (“newly issued shares”) or (ii) by pur- chase of outstanding Common Shares on the open market on the New York Stock Exchange or American Stock Exchange, as applicable or else- where. If, on the dividend payment date, the Fund’s net asset value per share is equal to or less than the market price per share plus estimated brokerage commissions (a condition often referred to as a “market pre- mium”), the Plan Agents will invest the dividend amount in newly issued shares. If the Fund’s net asset value per share is greater than the market price per share (a condition often referred to as a “market discount”), the Plan Agents will invest the dividend amount by purchasing on the open market additional shares. If the Plan Agents are unable to invest the full dividend amount in open market purchases, or if the market discount shifts to a market premium during the purchase period, the Plan Agents will invest any uninvested portion in newly issued shares. The shares acquired are credited to each shareholder’s account. The amount credited is determined by dividing the dollar amount of the dividend by either (i) when the shares are newly issued, the net asset value per share on the date the shares are issued or (ii) when shares are purchased in the open market, the average purchase price per share. Participation in the Plan — Participation in the Plan is automatic, that is, a shareholder is automatically enrolled in the Plan when he or she purchases shares of Common Shares of the Funds unless the share- holder 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 possible that all or a portion of the discount from the market value (which may not exceed 5% of the fair market value of the Funds’s shares) could be viewed as a taxable distribution. If the discount is viewed as a taxable distribution, it is also possible that the taxable char- acter of this discount would be allocable to all the shareholders, includ- ing shareholders who do not participate in the Plan. Thus, shareholders who do not participate in the Plan might be required to report as ordi- nary income a portion of their distributions 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 BlackRock Senior Floating Rate Fund, Inc. and BlackRock Senior Floating Rate Fund II, Inc. should contact BNY Mellon Shareowner Services, .O. Box 385035, Pittsburgh, PA 15252-8055 Telephone: (800) 432-8224 and shareholders of BlackRock Defined Opportunity Credit Trust, BlackRock Diversified Income Strategies Fund, Inc. and BlackRock Floating Rate Income Strategies Fund, Inc. should contact Computershare Trust Company, N.A., .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/Trustees | ||||||||||
Length of | Number of | |||||||||
Position(s) | Time | BlackRock- | ||||||||
Held with | Served as | Advised Funds | ||||||||
Name, Address | Funds/ | a Director/ | and Portfolios | Public | ||||||
and Year of Birth | Master LLC | Trustee2 | Principal Occupation(s) During Past 5 Years | Overseen | Directorships | |||||
Non-Interested Directors/Trustees1 | ||||||||||
Richard E. Cavanagh | Chairman | Since | Trustee, Aircraft Finance Trust since 1999; Director, The Guardian Life | 113 Funds | Arch Chemical | |||||
40 East 52nd Street | of the Board | 2007 | Insurance Company of America since 1998; Trustee, Educational | 110 Portfolios | (chemical and allied | |||||
New York, NY 10022 | and Director/ | Testing Service since 1997; Director, The Fremont Group since 1996; | products) | |||||||
1946 | Trustee | Formerly President and Chief Executive Officer of The Conference | ||||||||
Board, Inc. (global business research organization) from 1995 to | ||||||||||
2007. | ||||||||||
Karen . Robards | Vice Chair of | Since | Partner of Robards & Company, LLC, (financial advisory firm) since | 112 Funds | AtriCure, Inc. | |||||
40 East 52nd Street | the Board, | 2007 | 1987; Co-founder and Director of the Cooke Center for Learning and | 109 Portfolios | (medical devices); | |||||
New York, NY 10022 | Chair of | Development, (a not-for-profit organization) since 1987; Formerly | Care Investment | |||||||
1950 | the Audit | Director of Enable Medical Corp. from 1996 to 2005; Formerly an | Trust, Inc. (health | |||||||
Committee | investment banker at Morgan Stanley from 1976 to 1987. | care REIT) | ||||||||
and Director/ | ||||||||||
Trustee | ||||||||||
G. Nicholas Beckwith, III | Director/ | Since | Chairman and Chief Executive Officer, Arch Street Management, LLC | 112 Funds | None | |||||
40 East 52nd Street | Trustee | 2007 | (Beckwith Family Foundation) and various Beckwith property companies 109 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; Formerly Chairman and Manager, Penn West | ||||||||||
Industrial Trucks LLC (sales, rental and servicing of material handling | ||||||||||
equipment) from 2005 to 2007; Formerly Chairman, President and | ||||||||||
Chief Executive Officer, Beckwith Machinery Company (sales, rental | ||||||||||
and servicing of construction and equipment) from 1985 to 2005; | ||||||||||
Formerly Board of Directors, National Retail Properties (REIT) from | ||||||||||
2006 to 2007. | ||||||||||
Kent Dixon | Director/ | Since | Consultant/Investor since 1988. | 113 Funds | None | |||||
40 East 52nd Street | Trustee and | 2007 | 110 Portfolios | |||||||
New York, NY 10022 | Member of | |||||||||
1937 | the Audit | |||||||||
Committee | ||||||||||
Frank J. Fabozzi | Director/ | Since | Consultant/Editor of The Journal of Portfolio Management since 2006; | 113 Funds | None | |||||
40 East 52nd Street | Trustee and | 2007 | Professor in the Practice of Finance and Becton Fellow, Yale University, | 110 Portfolios | ||||||
New York, NY 10022 | Member of | School of Management, since 2006; Formerly Adjunct Professor of | ||||||||
1948 | the Audit | Finance and Becton Fellow, Yale University from 1994 to 2006. | ||||||||
Committee | ||||||||||
Kathleen F. Feldstein | Director/ | Since | President of Economics Studies, Inc. (private economic consulting firm) | 113 Funds | The McClatchy | |||||
40 East 52nd Street | Trustee | 2007 | since 1987; Chair, Board of Trustees, McLean Hospital from 2000 | 110 Portfolios | Company | |||||
New York, NY 10022 | to 2008 and Trustee Emeritus thereof since 2008; Member of the | (newspaper | ||||||||
1941 | Corporation of Partners Community Healthcare, Inc. since 2005; | publishing) | ||||||||
Member of the Corporation of Partners HealthCare since 1995; | ||||||||||
Member of the Corporation of Sherrill House (healthcare) since 1990; | ||||||||||
Trustee, Museum of Fine Arts, Boston since 1992; Member of the | ||||||||||
Visiting Committee to the Harvard University Art Museum since 2003; | ||||||||||
Trustee, The Committee for Economic Development (research organi- | ||||||||||
zation) since 1990; Member of the Advisory Board to the International | ||||||||||
School of Business, Brandeis University since 2002. |
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71 |
Officers and Directors/Trustees (continued) | ||||||||||
Length of | Number of | |||||||||
Position(s) | Time | BlackRock- | ||||||||
Held with | Served as | Advised Funds | ||||||||
Name, Address | Funds/ | a Director/ | and Portfolios | Public | ||||||
and Year of Birth | Master LLC | Trustee2 | Principal Occupation(s) During Past 5 Years | Overseen | Directorships | |||||
Non-Interested Directors or Trustees1 (concluded) | ||||||||||
James T. Flynn | Director/ | Since | Formerly Chief Financial Officer of JP Morgan & Co., Inc. from 1990 | 112 Funds | None | |||||
40 East 52nd Street | Trustee and | 2007 | to 1995. | 109 Portfolios | ||||||
New York, NY 10022 | Member of | |||||||||
1939 | the Audit | |||||||||
Committee | ||||||||||
Jerrold B. Harris | Director/ | Since | Trustee, Ursinus College since 2000; Director, Troemner LLC (scientific | 112 Funds | BlackRock Kelso | |||||
40 East 52nd Street | Trustee | 2007 | equipment) since 2000. | 109 Portfolios | Capital Corp. | |||||
New York, NY 10022 | ||||||||||
1942 | ||||||||||
R. Glenn Hubbard | Director/ | Since | Dean of Columbia Business School since 2004; Columbia faculty | 113 Funds | ADP (data and | |||||
40 East 52nd Street | Trustee | 2007 | member since 1988; Formerly Co-Director of Columbia Business | 110 Portfolios | information services), | |||||
New York, NY 10022 | School's Entrepreneurship Program from 1997 to 2004; Visiting | KKR Financial | ||||||||
1958 | Professor at the John F. Kennedy School of Government at Harvard | Corporation (finance), | ||||||||
University and the Harvard Business School since 1985 and at the | Duke Realty (real | |||||||||
University of Chicago since 1994; Formerly Chairman of the U.S. | estate), Metropolitan | |||||||||
Council of Economic Advisers under the President of the United | Life Insurance Com- | |||||||||
States from 2001 to 2003. | pany (insurance), | |||||||||
Information Services | ||||||||||
Group (media/ | ||||||||||
technology) | ||||||||||
W. Carl Kester | Director/ | Since | Mizuho Financial Group Professor of Finance, Harvard Business School. | 112 Funds | None | |||||
40 East 52nd Street | Trustee and | 2007 | Deputy Dean for Academic Affairs since 2006; Unit Head, Finance, | 109 Portfolios | ||||||
New York, NY 10022 | Member of | Harvard Business School, from 2005 to 2006; Senior Associate Dean | ||||||||
1951 | the Audit | and Chairman of the MBA Program of Harvard Business School, | ||||||||
Committee | from 1999 to 2005; Member of the faculty of Harvard Business | |||||||||
School since 1981; Independent Consultant since 1978. | ||||||||||
Robert S. Salomon, Jr. | Director/ | Since | Formerly Principal of STI Management LLC (investment adviser) from | 112 Funds | None | |||||
40 East 52nd Street | Trustee and | 2007 | 1994 to 2005. | 109 Portfolios | ||||||
New York, NY 10022 | Member of | |||||||||
1936 | the Audit | |||||||||
Committee | ||||||||||
1 Directors/Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. | ||||||||||
2 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/trustee first became a member of the board of directors/ | ||||||||||
trustees of other legacy MLIM or legacy BlackRock Funds as follows: G. Nicholas Beckwith, III since 1999; Richard E. Cavanagh since 1994; | ||||||||||
Kent Dixon since 1988; Frank J. Fabozzi since 1988; Kathleen F. Feldstein since 2005; James T. Flynn since 1996; Jerrold B. Harris since 1999; | ||||||||||
R. Glenn Hubbard since 2004; W. Carl Kester since 1998; Karen . Robards since 1998 and Robert S. Salomon, Jr. since 1996. | ||||||||||
Interested Directors or Trustees3 | ||||||||||
Richard S. Davis | Director/ | Since | Managing Director, BlackRock, Inc. since 2005; Formerly Chief | 185 Funds | None | |||||
40 East 52nd Street | Trustee | 2007 | Executive Officer, State Street Research & Management Company | 295 Portfolios | ||||||
New York, NY 10022 | from 2000 to 2005; Formerly Chairman of the Board of Trustees, | |||||||||
1945 | State Street Research Mutual Funds from 2000 to 2005; Formerly | |||||||||
Chairman, SSR Realty from 2000 to 2004. | ||||||||||
Henry Gabbay | Director/ | Since | Consultant, BlackRock, Inc. since 2007; Formerly Managing Director, | 184 Funds | None | |||||
40 East 52nd Street | Trustee | 2007 | BlackRock, Inc. from 1989 to 2007; Formerly Chief Administrative | 294 Portfolios | ||||||
New York, NY 10022 | Officer, BlackRock Advisors, LLC from 1998 to 2007; Formerly President | |||||||||
1947 | of BlackRock Funds and BlackRock Bond Allocation Target Shares from | |||||||||
2005 to 2007; Formerly Treasurer of certain closed-end funds in the | ||||||||||
BlackRock fund complex from 1989 to 2006. | ||||||||||
3 | Messrs. Davis and Gabbay are both “interested persons,” as defined in the Investment Company Act of 1940, of the Funds/Master LLC based on their positions with BlackRock, Inc. and its affiliates. Directors/Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. |
72 ANNUAL REPORT |
AUGUST 31, 2008 |
72 |
Officers and Directors/Trustees (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 | |||||||||
Fund Officers1 | ||||||||||||
Donald C. Burke | Fund | Since 2007 | Managing Director of BlackRock, Inc. since 2006; Formerly Managing Director of Merrill Lynch Investment | |||||||||
40 East 52nd Street | President | Managers, L.P. (“MLIM”) and Fund Asset Management, L.P. (“FAM”) in 2006; First Vice President thereof from | ||||||||||
New York, NY 10022 | and Chief | 1997 to 2005; Treasurer thereof from 1999 to 2006 and Vice President thereof from 1990 to 1997. | ||||||||||
1960 | Executive | |||||||||||
Officer | ||||||||||||
Anne F. Ackerley | Vice | Since 2007 | Managing Director of BlackRock, Inc. since 2000; Chief Operating Officer of BlackRock’s U.S. Retail Group since | |||||||||
40 East 52nd Street | President | 2006; Head of BlackRock’s Mutual Fund Group from 2000 to 2006; Merrill Lynch & Co., Inc. from 1984 to 1986 | ||||||||||
New York, NY 10022 | and from 1988 to 2000, most recently as First Vice President and Operating Officer of the Mergers and | |||||||||||
1962 | Acquisitions Group. | |||||||||||
Neal J. Andrews | Chief | Since 2007 | Managing Director of BlackRock, Inc. since 2006; Formerly Senior Vice President and Line of Business Head of | |||||||||
40 East 52nd Street | Financial | Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. (formerly PFPC Inc.) from | ||||||||||
New York, NY 10022 | Officer | 1992 to 2006. | ||||||||||
1966 | ||||||||||||
Jay M. Fife | Treasurer | Since 2007 | Managing Director of BlackRock, Inc. since 2007 and Director in 2006; Formerly Assistant Treasurer of the | |||||||||
40 East 52nd Street | MLIM/FAM advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006. | |||||||||||
New York, NY 10022 | ||||||||||||
1970 | ||||||||||||
Brian P. Kindelan | Chief | Since 2007 | Chief Compliance Officer of the BlackRock-advised Funds since 2007; Anti-Money Laundering Officer of the | |||||||||
40 East 52nd Street | Compliance | BlackRock-advised Funds since 2007; Managing Director and Senior Counsel of BlackRock, Inc. since 2005; | ||||||||||
New York, NY 10022 | Officer of | Director and Senior Counsel ofBlackRock Advisors, Inc. from 2001 to 2004 and Vice President and Senior Counsel | ||||||||||
1959 | the Funds | thereof from 1998 to 2000; Formerly Senior Counsel of The PNC Bank Corp. from 1995 to 1998. | ||||||||||
Howard B. Surloff | Secretary | Since 2007 | Managing Director of BlackRock, Inc. and General Counsel of U.S. Funds at BlackRock, Inc. since 2006; Formerly | |||||||||
40 East 52nd Street | General Counsel (U.S.) of Goldman Sachs Asset Management, L 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/Trustees. | ||||||||||||
For All Funds | ||||||||||||
Accounting Agent | Independent Registered Public | Legal Counsel | Fund Address | |||||||||
State Street Bank and | Accounting Firm | Skadden, Arps, Slate Meagher & Flom LLP | 100 Bellevue Parkway | |||||||||
Trust Company | Deloitte & Touche LLP | New York, NY 10036 | Wilmington, DE 19809 | |||||||||
Princeton, NJ 08540 | Princeton, NJ 08540 | |||||||||||
Defined Opportunity | ||||||||||||
Diversified Income | Senior Floating Rate | |||||||||||
Floating Rate Income | Senior Floating Rate II | |||||||||||
Custodian | Transfer Agent | Custodian | Transfer Agent | |||||||||
State Street Bank and | Computershare Trust | The Bank of New York Mellon | PNC Global Investment | |||||||||
Trust Company | Company, N.A. | New York, NY 10286 | Servicing (U.S.) Inc. | |||||||||
Boston, MA 02101 | Providence, RI 02940 | Wilmington, DE 19809 |
ANNUAL REPORT |
AUGUST 31, 2008 |
73 |
Additional Information Fund Certification BlackRock Defined Opportunity Credit Trust, BlackRock Diversified Income Fund, Inc. and BlackRock Floating Rate Income Strategies Fund, Inc. 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. Each Fund filed with the Securities and Exchange Commission (“SEC”) the certification of their chief executive officer and chief financial officer required by section 302 of the Sabanes-Oxley Act. |
Availability of Quarterly Schedule of Investments The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The 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 (800) SEC-0330. The Funds’ Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762. |
Electronic Delivery Electronic copies of most financial reports are available on the Funds’ websites or shareholders can sign up for e-mail notifications of quarterly statements, 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. |
General Information |
BlackRock Defined Opportunity Credit Trust, BlackRock Diversified Income Fund, Inc. and BlackRock Floating Rate Income Strategies Fund, Inc. do not make available copies of their Statements of Additional Information because the Funds’ shares are not continuously offered, which means that the Statements of Additional Information of the Funds have not been updated after completion of the Funds’ offering and the infor- mation contained in the Funds’ Statements of Additional Information may have become outdated. During the period, there were no material changes in the Funds’ invest- ment objectives or policies or to the Funds’ charters or by-laws that were not approved by the shareholders or in the principal risk factors associ- ated with investment in the Funds. There have been no changes in the persons who are primarily responsible for the day-to-day management of the Funds’ portfolios. |
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 elimi- nate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact the Funds at (800) 441-7762. Quarterly performance, semi-annual and annual reports and other information 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 regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website into this report. |
74 ANNUAL REPORT |
AUGUST 31, 2008 |
74 |
Additional Information (concluded) Section 19 Notices These amounts are 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 investment experience during the remainder of its fiscal year end |
and may be subject to changes based on the tax regulations. The Funds will send you a Form 1099-DIV each calendar year that will tell you how to report these distributions for federal income tax purposes. |
Total Fiscal Period to Date Cumulative | Percentage of Fiscal Period to Date | |||||||||||||||
Distributions by Character | Cumulative Distributions by Character | |||||||||||||||
Net | Net | Total Per | Net | Net | Total Per | |||||||||||
Investment | Realized | Return of | Common | Investment | Realized | Return of | Common | |||||||||
Income | Capital Gains | Capital | Share | Income | Capital Gains | Capital | Share | |||||||||
BlackRock Defined Opportunity | ||||||||||||||||
Credit Trust | $0.40117 | $0.06793 | $0.20590 | $0.67500 | 59% | 10% | 31% | 100% | ||||||||
BlackRock Diversified Income Strategies | ||||||||||||||||
Fund, Inc. | $1.75500 | — | — | $1.75500 | 100% | 0% | 0% | 100% | ||||||||
BlackRock Floating Rate Income Strategies | ||||||||||||||||
Fund, Inc. | $1.54719 | — | — | $1.54719 | 100% | 0% | 0% | 100% | ||||||||
BlackRock Privacy Principles BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following infor- mation 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 appli- cations, forms or other documents; (ii) information about your transac- tions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites. |
BlackRock does not sell or disclose to non-affiliated third parties any non- public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose. We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information. |
ANNUAL REPORT |
AUGUST 31, 2008 |
75 |
This report is transmitted to shareholders only. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. BlackRock Defined Opportunity Credit Trust, BlackRock Diversified Income Fund, Inc. and BlackRock Floating Rate Income Strategies Fund, 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. 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. Information about how the Fund voted proxies relating to securities held in the Fund’s portfolio during the most recent 12-month period ended June 30, 2008 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. |
![](https://capedge.com/proxy/N-CSR/0000900092-08-000527/brbhldvffrasfrsfr2ar080x76x1.jpg)
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#TAX5-8/08 |
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 (term began effective November 1, 2007) Frank J. Fabozzi (term began effective November 1, 2007) James T. Flynn (term began effective November 1, 2007) Ronald W. Forbes (term ended effective November 1, 2007) W. Carl Kester (term began effective November 1, 2007) Karen P. Robards (term began effective November 1, 2007) Robert S. Salomon, Jr. (term began effective November 1, 2007) Richard R. West (term ended effective November 1, 2007) 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 | ||||||||||||||||
Diversified Income | $46,300 | $38,500 | $8,000 | $0 | $6,100 | $6,100 | $1,049 | $1,042 | ||||||||
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 Diversified Income | $302,649 | $291,642 | ||
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 advisor (not including any non-affiliated sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by the registrant’s investment advisor), and any entity controlling, controlled by, or under common control with the investment advisor 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) – $287,500, 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 (term began effective November 1, 2007) Frank J. Fabozzi (term began effective November 1, 2007) James T. Flynn (term began effective November 1, 2007) Ronald W. Forbes (term ended effective November 1, 2007) W. Carl Kester (term began effective November 1, 2007) Cynthia A. Montgomery (term ended effective November 1, 2007) Jean Margo Reid (term ended effective November 1, 2007) Karen P. Robards (term began effective November 1, 2007) Robert S. Salomon, Jr. (term began effective November 1, 2007) Roscoe S. Suddarth (not reappointed to audit committee effective November 1, 2007; retired effective December 31, 2007) Richard R. West (term ended effective November 1, 2007) 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 advisor (“Investment Advisor”) pursuant to the Investment Advisor’s proxy voting guidelines. Under these guidelines, the Investment Advisor 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 Advisor, or any affiliated person of the Fund or the Investment Advisor, on the other. In such event, provided that the Investment Advisor’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 Advisor’s clients. If the Investment Advisor 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 Advisor’s Portfolio Management Group and/or the Investment Advisor’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, 2008. (a)(1) BlackRock Diversified Income Strategies Fund, Inc. is managed by a team of investment professionals comprised of Mark J. Williams, Managing Director and head of the bank loan investment team at BlackRock, and Kevin J. Booth, CFA, Managing Director and co-head of the high yield team at BlackRock. Each is a member of BlackRock’s fixed income portfolio management group. Messrs. Williams and Booth 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. Williams and Booth have been members of the Fund’s portfolio management team since 2006. Mark J. Williams heads BlackRock's bank loan investment team within the Fixed Income Portfolio Management Group and is co-head of BlackRock's leveraged finance business. He is a member of the firm's Investment Strategy Group and the Alternatives Operating Committee. Mr. Williams is also involved in the evaluation and sourcing of mezzanine investments, and is a member of the Investment Committee for BlackRock Kelso Capital, the firm's business development company. Prior to joining BlackRock in 1998, Mr. Williams spent eight years with PNC Bank's New York office and was a founding member of the bank's leveraged finance group. In that capacity he was responsible for structuring proprietary middle market leveraged deals and sourcing and evaluating broadly syndicated leveraged loans in the primary and secondary markets for PNC Bank's investment portfolio. Mr. Williams has developed extensive contacts over the years working with private equity sponsors and major loan syndication groups. From 1984 until 1990, Mr. Williams worked in PNC Bank's Philadelphia office in a variety of marketing and corporate finance positions. Kevin Booth is co-head of the high yield team within BlackRock's Fixed Income Portfolio Management Group, he also co-heads BlackRock's leveraged finance business. His primary responsibilities are managing portfolios and directing investment strategy. He specializes in hybrid high yield portfolios, consisting of leveraged bank loans, high yield bonds, and distressed obligations. Prior to joining BlackRock, Mr. Booth was a Managing Director (Global Fixed Income) of Merrill Lynch Investment Managers (“MLIM”) in 2006, a Director from 1998 to 2006 and was a Vice President of MLIM from 1991 to 1998. He has been a portfolio manager with BlackRock or MLIM since 1992, and was a member of MLIM’s bank loan group from 2000 to 2006. (a)(2) As of August 31, 2008: |
Number of Other Accounts Managed | Number of Other Accounts and | |||||||||||
and Assets by Account Type | Assets for Which Advisory Fee is | |||||||||||
Performance-Based | ||||||||||||
Other | Other Pooled | Other | Other Pooled | |||||||||
Name of | Registered | Investment | Other | Registered | Investment | Other | ||||||
Portfolio Manager | Investment | Vehicles | Accounts | Investment | Vehicles | Accounts | ||||||
Companies | Companies | |||||||||||
Mark J. Williams | 10 | 17 | 2 | 0 | 12 | 0 | ||||||
$3.06 Billion | $6.7 Billion | $364 Million | $0 | $5.5 Billion | $0 | |||||||
Kevin Booth | 24 | 10 | 10 | 0 | 4 | 3 | ||||||
$8.89 Billion | $4.87 Billion | $1.97 Billion | $0 | $2.98 Billion | $400 Million | |||||||
(iv) Potential Material Conflicts of Interest BlackRock, Inc. 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 for the Fund. In addition, BlackRock, its affiliates 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 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’) officers, directors or employees are directors or officers, or companies as to which BlackRock or any of its affiliates or the officers, directors or 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 regard, it should be noted that Messrs. Williams and Booth currently manage certain accounts that are subject to performance fees. In addition, a portfolio manager may assist in managing certain hedge funds and may be entitled to receive a portion of any incentive fees earned on such funds and a portion of such incentive fees may be voluntarily or involuntarily deferred. Additional portfolio managers may in the future manage other such accounts or funds and may be entitled to receive incentive fees. As a fiduciary, BlackRock owes a duty of loyalty to its clients and must treat each client fairly. When BlackRock purchases or sells securities for more than one account, the trades must be allocated in a manner consistent with its fiduciary duties. BlackRock attempts to allocate investments in a fair and equitable manner among client accounts, with no account receiving preferential treatment. To this end, BlackRock has adopted a policy that is intended to ensure that investment opportunities are allocated fairly and equitably among client accounts over time. This policy also seeks to achieve reasonable efficiency in client transactions and provide BlackRock with sufficient flexibility to allocate investments in a manner that is consistent with the particular investment discipline and client base. |
(a)(3) As of August 31, 2008: 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 the following: |
Portfolio Manager | Benchmarks Applicable to Each Manager | |
Mark Williams | A combination of market-based indices (e.g., Credit Suisse | |
Leveraged Loan Index, LIBOR), certain customized indices and | ||
certain fund industry peer groups. | ||
Kevin Booth | A combination of market-based indices (e.g., The Lehman | |
Brothers U.S. Corporate High Yield 2% Issuer Cap 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. Messrs. Williams and Booth have each 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. Each portfolio manager has participated in the deferred compensation program. Options and Restricted Stock Awards — A portion of the annual compensation of certain employees is mandatorily deferred into BlackRock restricted stock units. Prior to the mandatory deferral into restricted stock units, BlackRock granted stock options to key employees, including certain portfolio managers who may still hold unexercised or unvested options. BlackRock, Inc. also granted restricted stock awards designed to reward certain key employees as an incentive to contribute to the long-term success of BlackRock. These awards vest over a period of years. Mr. Williams has been granted stock options and/or restricted stock in prior years. 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% of eligible compensation, plus an additional contribution of 2% for any year in which BlackRock has positive net operating income. 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. As of August 31, 2008, Mr. Williams did not beneficially own any stock issued by the Fund. As of August 31, 2008, Mr. Booth beneficially owned stock issued by the Fund in the range $100,001 - $500,000. 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 13a-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 Diversified Income Strategies Fund, Inc. By: /s/ Donald C. Burke Donald C. Burke Chief Executive Officer of BlackRock Diversified Income Strategies Fund, Inc. Date: October 20, 2008 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/ Donald C. Burke Donald C. Burke Chief Executive Officer (principal executive officer) of BlackRock Diversified Income Strategies Fund, Inc. Date: October 20, 2008 By: /s/ Neal J. Andrews Neal J. Andrews Chief Financial Officer (principal financial officer) of BlackRock Diversified Income Strategies Fund, Inc. Date: October 20, 2008 |