The information in the above Financial Highlights represents the operating performance for a share outstanding, total investment returns, ratios to average net assets and other supplemental data for each period indicated. This information has been determined based upon financial information provided in the financial statements and market price data for the Trust’s shares.
See Notes to Financial Statements.
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NOTES TO FINANCIAL STATEMENTS (unaudited) |
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Note 1. Organization & Accounting Policies
BlackRock Broad Investment Grade 2009 Term Trust Inc. (“Broad Investment Grade”), BlackRock Core Bond Trust (“Core Bond”), BlackRock High Yield Trust (“High Yield”), BlackRock Income Opportunity Trust (“Income Opportunity”), BlackRock Income Trust Inc. (“Income Trust”), BlackRock Limited Duration Income Trust (“Limited Duration”) and BlackRock Strategic Bond Trust (“Strategic Bond”) are registered as diversified, closed-end management investment companies under the Investment Company Act of 1940, as amended (the “1940 Act”). BlackRock Preferred and Equity Advantage Trust (“Preferred and Equity”) is registered as a non-diversified, closed-end management investment company under the 1940 Act. Broad Investment Grade, Income Opportunity and Income Trust are organized as Maryland corporations. Core Bond, High Yield, Limited Duration, Equity and Preferred and Strategic Bond are organized as Delaware statutory trusts. Broad Investment Grade, Core Bond, High Yield, Income Opportunity, Income Trust, Limited Duration, Preferred and Equity and Strategic Bond are individually referred to as a “Trust” and collectively as the “Trusts”.
Preferred and Equity was organized on October 26, 2006 and had no transactions until November 21, 2006 when the Trust sold 4,817 common shares for $115,006 to BlackRock Funding, Inc. Investment operations for Preferred and Equity commenced on December 27, 2006. The Trust incurred organization costs which were deferred from the organization date until the commencement of operations.
On December 3, 1999, Broad Investment Grade transferred a substantial portion of its total assets to a 100% owned regulated investment company subsidiary called BCT Subsidiary, Inc. The financial statements and these notes to the financial statements for Broad Investment Grade are consolidated and include the operations of both Broad Investment Grade and its wholly owned subsidiary after elimination of all intercompany transactions and balances.
Under the Trusts’ organizational documents, their officers and Trustees (as defined below) are indemnified against certain liabilities arising out of the performance of their duties to the Trusts. In addition, in the normal course of business, the Trusts enter into contracts with their vendors and others that provide for general indemnifications. The Trusts’ maximum exposure under these arrangements are unknown as this would involve future claims that may be made against the Trusts. However, based on experience, the Trusts consider the risk of loss from such claims to be remote.
The following is a summary of significant accounting policies followed by the Trusts.
Investment Valuation: The Trusts value most of their investments on the basis of current market quotations provided by dealers or pricing services selected under the supervision of each Trust’s Board (the “Board”) of Directors/Trustees (the “Trustees”). In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, 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. Exchange-traded options are valued at their last sales price as of the close of options trading on applicable exchanges. In the absence of a last sale price, options are valued at the average of the quoted bid and asked prices as of the close of business. Swap quotations are provided by dealers selected under supervision of the Board. A futures contract is valued at the last sale price as of the close of the commodities exchange on which it trades. Short-term securities may be valued at amortized cost. Investments or other assets for which such current market quotations are not readily available are valued at fair value (“Fair Value Assets”) as determined in good faith under procedures established by, and under the general supervision and responsibility of, each Trust’s Board. The investment advisor and/or sub-advisor will submit its recommendations regarding the valuation and/or valuation methodologies for Fair Value Assets to a valuation committee. The valuation committee may accept, modify or reject any recommendations. The pricing of all Fair Value Assets shall be subsequently reported to the Board.
When determining the price for a Fair Value Asset, the investment advisor and/or sub-advisor shall seek to determine the price that the Trust might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that BlackRock Advisors deems relevant.
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 framework for measuring fair value and expands disclosures about fair value measurements. At this time, management is evaluating the implication of FAS 157 and its impact on the Trusts’ financial statements, if any, has not been determined.
In addition, in February 2007, Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“FAS 159”), was issued and is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FAS 157. FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. FAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. At this time, management is evaluating the implications of FAS 159 and its impact on the Trusts’ financial statements, if any, has not been determined.
Investment Transactions and Investment Income: Investment transactions are recorded on trade date. The cost of investments sold and the related gain or loss is determined by use of the specific identification method, generally first-in, first-out, for both financial reporting and federal income tax purposes. Each Trust records interest income on an accrual basis and amortizes premium and/or accretes discount on securities purchased using the interest method.
Each Trust may, from time to time, purchase, in the secondary market, certain mortgage pass-through securities packaged or master serviced by affiliates or mortgage-related securities containing loans or mortgages originated by Merrill Lynch & Co., Inc. and PNC Bank, or their affiliates, including Midland Loan Services, Inc., each of which may be presumed to be an affiliate of BlackRock Advisors, LLC. It is possible, under certain circumstances, that Merrill Lynch Mortgage Investors, Inc. and PNC Mortgage Securities Corp. or their affiliates, including Midland Loan Services, Inc., could have interests that are in conflict with the holders of these mortgage-backed securities, and such hold-
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ers could have rights against Merrill Lynch Mortgage Investors, Inc. and PNC Mortgage Securities Corp. or their affiliates, including Midland Loan Services, Inc.
Reverse Repurchase Agreements: The Trusts may enter into reverse repurchase agreements with qualified third-party broker-dealers as determined by and under the direction of the Trusts’ Board. Interest on the value of reverse repurchase agreements issued and outstanding is based upon competitive market rates at the time of issuance. At the time a Trust enters into a reverse repurchase agreement, it will establish and maintain a segregated account with the lender, containing liquid investment grade securities having a value not less than the repurchase price, including accrued interest of the reverse repurchase agreement.
Dollar Rolls: The Trusts may enter into dollar rolls in which a Trust sells securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. During the roll period the Trusts forgo principal and interest paid on the securities. The Trusts will be compensated by the interest earned on the cash proceeds of the initial sale and/or by the lower repurchase price at the future date.
Loan Payable: High Yield has a $32 million committed credit facility (the “facility”). Under the terms of the facility, the Trust borrows at the London Interbank Offered Rate (“LIBOR”) plus facility and administrative fees. In addition, the Trust pays a liquidity fee on the unused portion of the facility. The Trust may borrow up to 331/3% of its total assets up to the committed amount. In accordance with the terms of the facility, the Trust has pledged its portfolio assets as collateral for the borrowing.
Bank Loans: In the process of buying, selling and holding bank loans, a Trust may receive and/or pay certain fees. These fees are included in the purchase price and may include facility fees, commitment fees, amendment fees, commissions and prepayment penalty fees. These fees are amortized as premioum and/or accreted as discount over the term of the loan. When a Trust buys a bank loan it may receive a facility fee and when it sells a bank loan it may pay a facility fee. On an ongoing basis, a Trust may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a bank loan. In certain circumstances, a Trust may receive a prepayment penalty fee upon the prepayment of a bank loan by a borrower. Other fees received by a Trust may include covenant waiver fees and covenant modification fees.
A Trust may invest in multiple series or tranches of an issuer. A different series or tranche may have varying terms and carry different associated risks.
Option Writing/Purchasing: When a Trust writes or purchases an option, an amount equal to the premium received or paid by the Trust is recorded as a liability or an asset and is subsequently adjusted to the current market value of the option written or purchased. Premiums received or paid from writing or purchasing options which expire unexercised are treated by the Trust on the expiration date as realized gains or losses. The difference between the premium and the amount paid or received on effecting a closing purchase or sale transaction, including brokerage commissions, is also treated as a realized gain or loss. If an option is exercised, the premium paid or received is added to the cost of the purchase or the proceeds from the sale in determining whether a Trust has realized a gain or a loss on investment transactions. A Trust, as writer of an option, may have no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option.
Option writing and purchasing may be used by the Trusts as an attempt to manage the duration of positions, or collections of positions, so that changes in interest rates do not adversely affect the targeted duration of the portfolio unexpectedly. Duration is a measure of the price sensitivity of a security or a portfolio to relative changes in interest rates. For instance, a duration of “one” means that a portfolio’s or a security’s price would be expected to change by approximately one percent with a one percent change in interest rates, while a duration of five would imply that the price would move approximately five percent in relation to a one percent change in interest rates.
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. The main risk that is associated with purchasing options is that the option expires without being exercised. In this case, the option expires worthless and the premium paid for the option is considered the loss. The risk associated with writing call options is that a Trust may forgo the opportunity for a profit if the market value of the underlying position increases and the option is exercised. The risk in writing put options is that a Trust may incur a loss if the market value of the underlying position decreases and the option is exercised. In addition, the Trust risks not being able to enter into a closing transaction for the written option as the result of an illiquid market.
Stripped Mortgage-Backed Securities: Stripped mortgage-backed securities are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. In certain cases, one class will receive all of the interest (the interest-only or “IO” class), while the other class will receive all of the principal (the principal-only or “PO” class). The yield to maturity on IOs is sensitive to the rate of principal repayments (including prepayments) on the related underlying mortgage assets, and principal payments may have a material effect on yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a Trust may not fully recoup its initial investment in IOs. Such securities will be considered liquid only if so determined in accordance with guidelines established by the Trustees.
Inverse Floating Rate Securities: The Trusts may invest in inverse floating rate securities that pay interest at a rate that varies inversely with interest rates. As interest rates rise, inverse floating rates decline. The market value of such securities is more volatile than comparable fixed rate securities.
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. Risks arise from the possible inability of the counterparties to meet the terms of their contracts.
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During the term of the swap, changes in the value of the swap are recognized as unrealized gains or losses by “marking-to-market” to reflect the market value of the swap. When the swap is terminated, a Trust will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Trust’s basis in the contract, if any.
The Trusts are exposed to credit loss in the event of non-performance by the other party to the swap. However, the Trusts closely monitor swaps and do not anticipate non-performance by any counterparty.
Total Return Swaps: Total return swaps are agreements in which one party commits to pay interest in exchange for a market-linked return. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Trust will receive a payment from or make a payment to the counterparty.
During the term of the swap, changes in the value of the swap are recognized as unrealized gains or losses by “marking-to-market” to reflect the market value of the swap. When the swap is terminated, a Trust will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Trust’s basis in the contract, if any.
The Trusts are exposed to credit loss in the event of non-performance by the other party to the swap. However, the Trusts closely monitor swaps and do not anticipate non-performance by any counterparty.
Interest Rate Swaps: In an interest rate swap, one investor 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, an investor may pay a fixed rate and receive a floating rate. Interest rate swaps are efficient as asset/liability management tools. In more complex swaps, the notional principal amount may decline (or amortize) over time.
During the term of the swap, changes in the value of the swap are recognized as unrealized gains or losses by “marking-to-market” to reflect the market value of the swap. When the swap is terminated, a Trust will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Trust’s basis in the contract, if any.
The Trusts are exposed to credit loss in the event of non-performance by the other party to the swap. However, the Trusts closely monitor swaps and do not anticipate non-performance by any counterparty.
Swap Options: Swap options 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. Premiums received or paid from writing or purchasing options are recorded as liabilities or assets and are subsequently adjusted to the current market value of the option written or purchased. Premiums received or paid from writing or purchasing options which expire unexercised are treated by a Trust on the expiration date as realized gains or losses. The difference between the premium and the amount paid or received on effecting a closing purchase or sale transaction, including brokerage commission, is also treated as a realized gain or loss. If an option is exercised, the premium paid or received is added to the cost of the purchase or the proceeds from the sale in determining whether a Trust has realized a gain or loss on investment transactions.
The main risk that is associated with purchasing swap options is that the swap option expires without being exercised. In this case, the option expires worthless and the premium paid for the swap option is considered the loss. The main risk that is associated with the writing of a swap option is the market risk of an unfavorable change in the value of the interest rate swap underlying the written swap option.
Swap options may be used by the Trusts to manage the duration of the Trusts’ portfolios in a manner similar to more generic options described above.
Interest Rate Caps: Interest rate caps are similar to interest rate swaps, except that one party agrees to pay a fee, while the other party pays the excess, if any, of a floating rate over a specified fixed or floating rate.
Interest rate caps are intended to both manage the duration of the Trusts’ portfolios and their exposure to changes in short-term interest rates. Owning interest rate caps reduces a portfolio’s duration, making it less sensitive to changes in interest rates from a market value perspective. The effect on income involves protection from rising short-term interest rates, which the Trusts experience primarily in the form of leverage.
The Trusts are exposed to credit loss in the event of non-performance by the other party to the interest rate cap. However, the Trusts do not anticipate non-performance by any counterparty.
Transaction fees paid or received by the Trusts are recognized as assets or liabilities and amortized or accreted into interest expense or income over the life of the interest rate cap. The asset or liability is subsequently adjusted to the current market value of the interest rate cap purchased or sold. Changes in the value of the interest rate cap are recognized as unrealized gains and losses.
Interest Rate Floors: Interest rate floors are similar to interest rate swaps, except that one party agrees to pay a fee, while the other party pays the deficiency, if any, of a floating rate under a specified fixed or floating rate.
Interest rate floors are used by the Trusts to both manage the duration of the portfolios and their exposure to changes in short-term interest rates. Selling interest rate floors reduces a portfolio’s duration, making it less sensitive to changes in interest rates from a market value perspective. The Trusts’ leverage provides extra income in a period of falling rates. Selling floors reduces some of that extra income by partially monetizing it as an up front payment which the Trusts receive.
The Trusts are exposed to credit loss in the event of non-performance by the other party to the interest rate floor. However, the Trusts do not anticipate non-performance by any counterparty.
Transaction fees paid or received by the Trusts are recognized as assets or liabilities and amortized or accreted into interest expense or income over the life of the interest rate floor. The asset or liability is subsequently adjusted to the current market value of the interest rate floor purchased or sold. Changes in the value of the interest rate floor are recognized as unrealized gains and losses.
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Financial Futures Contracts: A futures contract is an agreement between two parties to buy and sell a financial instrument for a set price on a future date. Initial margin deposits are made upon entering into futures contracts and can be either cash or securities. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by “marking-to-market” on a daily basis to reflect the market value of the contract at the end of each day’s trading. Variation margin payments are made or received, depending upon whether unrealized gains or losses are incurred. When the contract is closed, a Trust records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Trust’s basis in the contract.
Financial futures contracts, when used by the Trusts, help in maintaining a targeted duration. Futures contracts can be sold to effectively shorten an otherwise longer duration portfolio. In the same sense, futures contracts can be purchased to lengthen a portfolio that is shorter than its duration target. Thus, by buying or selling futures contracts, the Trusts attempt to manage the duration of positions so that changes in interest rates do not change the duration of the portfolio unexpectedly.
Forward Currency Contracts: The Trusts enter into forward currency contracts primarily to facilitate settlement of purchases and sales of foreign securities and to help manage the overall exposure to foreign currency. A forward contract is a commitment to purchase or sell a foreign currency at a future date (usually the security transaction settlement date) at a negotiated forward rate. In the event that a security fails to settle within the normal settlement period, the forward currency contract is renegotiated at a new rate. The gain or loss arising from the difference between the settlement value of the original and renegotiated forward contracts is isolated and is included in net realized gains (losses) from foreign currency transactions. Risks may arise as a result of the potential inability of the counterparties to meet the terms of their contract.
Forward currency contracts, when used by the Trusts, help to manage the overall exposure to the foreign currency backing some of the investments held by the Trusts. Forward currency contracts are not meant to be used to eliminate all of the exposure to the foreign currency, rather they allow the Trusts to limit their exposure to foreign currency within a narrow band to the objectives of the Trusts.
Foreign Currency Translation: Foreign currency amounts are translated into United States dollars on the following basis:
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| (i) | market value of investment securities, assets and liabilities at the current rate of exchange; and |
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| (ii) | purchases and sales of investment securities, income and expenses-at the rates of exchange prevailing on the respective dates of such transactions. |
The Trusts isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held at period end. Similarly, the Trusts isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of portfolio securities sold during the period.
Net realized and unrealized foreign exchange gains and losses including realized foreign exchange gains and losses from sales and maturities of foreign portfolio securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of interest and discount recorded on the Trusts’ books and the U.S. dollar equivalent amounts actually received or paid, and changes in unrealized foreign exchange gains and losses in the value of portfolio securities and other assets and liabilities arising as a result of changes in the exchange rate.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the U.S. dollar.
Short Sales: The Trusts may make short sales of securities as a method of managing potential price declines in similar securities owned. When a Trust makes a short sale, it may borrow the security sold short and deliver it to the broker-dealer through which it made the short sale as collateral for its obligation to deliver the security upon conclusion of the sale. The Trusts may have to pay a fee to borrow the particular securities and may be obligated to pay over any payments received on such borrowed securities. A gain, limited to the price at which a Trust sold the security short, or a loss, unlimited as to dollar amount, will be recognized upon the termination of a short sale if the market price is greater or less than the proceeds originally received.
Bonds Borrowed Agreements: In a bonds borrowed agreement, the Trust borrows securities from a third party, with the commitment that they will be returned to the lender on an agreed-upon date. Bonds borrowed agreements are primarily entered into to settle short positions. In a bonds borrowed agreement, the Trust’s prime broker or third party broker takes possession of the underlying collateral securities or cash to settle such short positions. The value of the underlying collateral securities or cash approximates the principal amount of the bonds borrowed transaction, including accrued interest. To the extent that bonds borrowed transactions exceed one business day, the value of the collateral with any counterparty is marked-to-market on a daily basis to ensure the adequacy of the collateral. If the lender defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the lender of the security, realization of the collateral by the Trust may be delayed or limited.
Segregation: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that each Trust segregate assets in connection with certain investments (e.g., when issued securities, reverse repurchase agreements, swaps or futures contracts), each Trust 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.
Federal Income Taxes: It is each Trust’s intention to continue to be treated as a regulated investment company under the Internal Revenue Code and to distribute sufficient amounts of their taxable income to shareholders. Therefore, no federal income tax provisions have been recorded. As part of a tax planning strategy, Broad Investment Grade has retained a portion of its taxable income and will pay excise tax on the undistributed amounts.
In July 2006, the Financial Accounting Standards Board released FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes”. FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in financial statements. FIN 48 requires the evaluation of tax positions taken in the course of preparing the Trusts’ tax returns to determine whether
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the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be booked as a tax expense in the current year and recognized as: a liability for unrecognized tax benefits; a reduction of an income tax refund receivable; a reduction of deferred tax asset; an increase in deferred tax liability; or a combination thereof. Adoption of FIN 48 is required for the last net asset value calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006. At this time, management is evaluating the implications of FIN 48 and its impact on the Trusts’ financial statements, if any, has not yet been determined.
Dividends and Distributions: Each Trust declares and pays dividends and distributions to common shareholders monthly from net investment income, net realized short-term capital gains and other sources, if necessary. Net long-term capital gains, if any, in excess of loss carryforwards may be distributed in accordance with the 1940 Act. If the total dividends and distributions made in any tax year exceeds net investment income and accumulated realized capital gains, a portion of the total distribution may be treated as a tax-free return of capital. Dividends and distributions are recorded on the ex-dividend date. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America.
Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities including investment and swap valuations at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and such differences may be material.
Deferred Compensation and BlackRock Closed-End Share Equivalent Investment Plan: Under the deferred compensation plan approved by each Trust’s Board, non-interested Trustees (“Independent Trustees”) are required to defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar amounts had been invested in common shares of the other BlackRock Closed-End Funds selected by the Independent Trustees. These amounts are shown on the Statement of Assets and Liabilities as “Investments in Affiliates”. This has approximately the same economic effect for the Independent Trustees as if the Independent Trustees had invested the deferred amounts directly in such Trusts.
The deferred compensation plan is not funded and obligations thereunder represent general unsecured claims against the general assets of the Trust. Each Trust may, however, elect to invest in common shares of those Trusts selected by the Independent Trustees in order to match its deferred compensation obligations.
Other: Expenses that are directly related to one of the Trusts are charged directly to that Trust. Other operating expenses are generally prorated to the Trusts on the basis of relative net assets of all the BlackRock Closed-End Funds.
Note 2. Agreements and Other Transactions with Affiliates and Related Parties
Each Trust has an Investment Management Agreement with BlackRock Advisors, LLC (the “Advisor”), which is a wholly owned subsidiary of BlackRock, Inc. BlackRock Financial Management, Inc. (“BFM”), a wholly owned subsidiary of BlackRock, Inc., serves as sub-advisor to Core Bond, Limited Duration, Preferred and Equity and Strategic Bond. BlackRock Investment Management, LLC (“BIM”), a wholly owned subsidiary of BlackRock, Inc., also serves as sub-advisor to Preferred and Equity. Merrill Lynch & Co., Inc. (“Merrill Lynch”) and The PNC Financial Services Group, Inc. (“PNC”) are principal owners of BlackRock, Inc.
Broad Investment Grade, High Yield, Income Opportunity and Income Trust each have an Administration Agreement with the Advisor. The Investment Management Agreement for Core Bond, Limited Duration, Preferred and Equity and Strategic Bond covers both investment advisory and administration services.
Each Trust’s investment advisory fee paid to the Advisor is computed weekly and payable monthly based on an annual rate, 0.55% for Broad Investment Grade, 0.60% for Income Opportunity and 0.65% for Income Trust, of each Trust’s average net assets and 0.55% for Core Bond and Limited Duration, 0.65% for Preferred and Equity, 0.75% for Strategic Bond and 1.05% for High Yield, of each Trust’s average weekly managed assets. “Net assets” means the toal assets of the Trust minus the sum of accrued liabilities. “Managed assets” means the total assets of a Trust (including any assets attributable to any borrowing that may be outstanding) minus the sum of accrued liabilities (other than debt representing financial leverage). The Advisor has voluntarily agreed to waive a portion of the investment advisory fees or other expenses on Strategic Bond as a percentage of its average weekly managed assets as follows: 0.20% for the first five years of the Trust’s operations from 2002 through 2007, 0.15% in 2008, 0.10% in 2009 and 0.05% in 2010.
The Advisor pays BFM and BIM fees for its sub-advisory services.
The administration fee paid to the Advisor by Broad Investment Grade, High Yield, Income Opportunity and Income Trust is computed weekly and payable monthly based on an annual rate of 0.15%, 0.10%, 0.10%, and 0.15%, respectively, of the Trusts’ average weekly managed assets.
Pursuant to the agreements, the Advisor provides continuous supervision of the investment portfolio and pays the compensation of officers of each Trust who are affiliated persons of the Advisor, as well as occupancy and certain clerical and accounting costs of each Trust. Each Trust bears all other costs and expenses, which include reimbursements to the Advisor for cost of employees that provide pricing, secondary market support and compliance services provided to each Trust. For the six months ended April 30, 2007, the Trusts reimbursed the Advisor the following amounts, which are included in miscellaneous expenses in the Statement of Operations:
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Trust | | Amount | | | Trust | | Amount | |
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| | |
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Broad Investment Grade | | $ | 1,798 | | | Income Trust | | $ | 15,345 | |
Core Bond | | | 12,277 | | | Limited Duration | | | 22,289 | |
High Yield | | | 1,244 | | | Preferred and Equity | | | 11,909 | |
Income Opportunity | | | 12,688 | | | Strategic Bond | | | 3,068 | |
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Pursuant to the terms of the custody agreements, each Trust may receive earnings credits from its custodian for positive cash balances maintained, which are used to offset custody fees. These credits are shown on the Statements of Operations as “fees paid indirectly.”
During the six months ended April 30, 2007, Merrill Lynch, through its affiliated broker dealer Merrill Lynch, Pierce, Fenner & Smith Incorporated, earned commissions on transactions of securities as follows:
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Trust | | Commission
Amount | |
| |
| |
Core Bond | | $ | 43,604 | |
Income Opportunity | | | 48,057 | |
Income Trust | | | 15,853 | |
Limited Duration | | | 614 | |
Preferred and Equity | | | 143,915 | |
For the six months ended April 30, 2007, investments in companies assumed to be an affiliate of the Trusts, were as follows:
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Trust | | Portfolio Company | | Beginning
Principal
Amount | | Sales | | Ending
Principal
Amount | | Interest
Income | | Market
Value of
Affiliates at
April 30,
2007 | |
| |
| |
| |
| |
| |
| |
| |
Core Bond | | Merrill Lynch | | | | | | | | | | | | | | | | |
| | Mortgage Investors, Inc., | | | | | | | | | | | | | | | | |
| | Ser. HE2, Class A2A | | $ | 1,509,548 | | $ | 618,847 | | $ | 890,701 | | $ | 34,249 | | $ | 890,858 | |
| | | | | | | | | | | | | | | | | | |
Income Opportunity | | Merrill Lynch | | | | | | | | | | | | | | | | |
| | Mortgage Investors, Inc., | | | | | | | | | | | | | | | | |
| | Ser. HE2, Class A2A | | | 1,651,471 | | | 677,029 | | | 974,442 | | | 38,421 | | | 974,614 | |
| | Merrill Projects, Ser. 29 | | | 152,326 | | | 2,859 | | | 149,467 | | | 5,585 | | | 151,214 | |
| | Merrill Projects, Ser. 42 | | | 51,398 | | | 1,053 | | | 50,345 | | | 1,893 | | | 50,965 | |
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Income Trust | | Merrill Projects, Ser. 54 | | | 51,249 | | | 847 | | | 50,402 | | | 1,881 | | | 51,029 | |
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Note 3. Portfolio Securities |
Purchases and sales of investment securities, other than short-term investments, dollar rolls and U.S. government securities, for the six months ended April 30, 2007 were as follows:
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Trust | | Purchases | | Sales | | Trust | | Purchases | | Sales | |
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| |
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| |
| |
Broad Investment Grade | | $ | 564,277 | | $ | 2,632,043 | | Income Trust | | $ | 772,139,401 | | $ | 819,761,664 | |
Core Bond | | | 105,314,228 | | | 105,722,400 | | Limited Duration | | | 480,300,522 | | | 513,363,584 | |
High Yield | | | 26,286,574 | | | 26,881,619 | | Preferred and Equity | | | 2,076,052,986 | | | 378,801,519 | |
Income Opportunity | | | 257,450,521 | | | 246,888,773 | | Strategic Bond | | | 23,146,631 | | | 31,736,494 | |
Purchases and sales of U.S. government securities for the six months ended April 30, 2007, aggregated as follows:
| | | | | | | | | | | | | | | | |
Trust | | Purchases | | Sales | | Trust | | Purchases | | Sales | |
| |
| |
| |
| |
| |
| |
Broad Investment Grade | | $ | — | | $ | 3,200,000 | | Income Trust | | $ | 11,800,781 | | $ | 21,000,000 | |
Core Bond | | | 91,500,255 | | | 71,749,375 | | Limited Duration | | | — | | | 10,000,000 | |
Income Opportunity | | | 117,445,898 | | | 99,740,058 | | Strategic Bond | | | — | | | 933,000 | |
Details of open forward currency contracts at April 30, 2007 were as follows:
| | | | | | | | | | | | | | | | | | | |
Trust | | Foreign
Currency | | Settlement
Date | | Contract to
Receive | | Value at
Settlement
Date | | Value at
April 30,
2007 | | Unrealized
Depreciation | |
| |
| |
| |
| |
| |
| |
| |
Core Bond | | | Sold: | | | | | | | | | | | | | | | | |
| | | Euro | | 7/18/07 | | $ | 207,567 | | $ | 279,795 | | $ | 284,076 | | $ | 4,281 | |
| | | | | | | | | | | | | | | | |
|
| |
Limited Duration | | | Sold: | | | | | | | | | | | | | | | | |
| | | Euro | | 7/18/07 | | $ | 19,790,550 | | $ | 26,726,116 | | $ | 27,085,352 | | $ | 359,236 | |
| | | British Pounds | | 7/18/07 | | | 6,563,875 | | | 12,989,497 | | | 13,118,222 | | | 128,725 | |
| | | | | | | | | | | | | | | | |
|
| |
| | | | | | | | | | | | | | | | | $ | 487,961 | |
| | | | | | | | | | | | | | | | |
|
| |
Income Trust held interest rate floors at April 30, 2007. Under the agreement, Income Trust pays the excess, if any, of a fixed rate over a floating rate. Income Trust received a transaction fee for the floors. Transaction fees are amortized through the termination of the agreement. Details of the interest rate floors held at April 30, 2007 were as follows:
| | | | | | | | | | | | | | | | | | | |
Notional
Amount
(000) | | Variable
Rate | | Counter Party | | Floating Rate | | Effective
Date | | Termination
Date | | Amortized
Cost | | Value at
April 30,
2007 | | Unrealized
Appreciation |
| |
| |
| |
| |
| |
| |
| |
| |
|
$165,000 | | 4.80% | | Goldman Sachs | | 3-month LIBOR | | 12/25/05 | | 03/25/11 | | $ | (1,840,997 | ) | $ | (852,777 | ) | $ | 988,220 |
119,000 | | 4.95 | | JPMorgan | | 3-month LIBOR | | 03/27/06 | | 03/25/11 | | | (1,427,694 | ) | | (418,999 | ) | | 1,008,695 |
80,000 | | 5.50 | | Union Bank of Switzerland | | 3-month LIBOR | | 12/15/06 | | 03/15/10 | | | (1,111,783 | ) | | (870,926 | ) | | 240,857 |
| | | | | | | | | | | |
|
| |
|
| |
|
|
| | | | | | | | | | | | $ | (4,380,474 | ) | $ | (2,142,702 | ) | $ | 2,237,772 |
| | | | | | | | | | | |
|
| |
|
| |
|
|
76
Details of open interest rate swaps at April 30, 2007 were as follows:
| | | | | | | | | | | | | | | | | |
Trust | | Notional
Amount
(000) | | Fixed
Rate | | Counter Party | | Floating Rate | | Effective
Date | | Termination
Date | | Unrealized
Appreciation
(Depreciation) | |
| |
| |
| |
| |
| |
| |
| |
| |
Core Bond | | $ | 41,200 | | 4.510 | %(b) | Citibank | | 3-month LIBOR | | 10/29/04 | | 10/29/14 | | $ | 1,450,998 | |
| | | 2,800 | | 4.500 | (b) | JPMorgan | | 3-month LIBOR | | 05/26/05 | | 05/26/15 | | | 83,293 | |
| | | 4,800 | | 4.372 | (a) | Union Bank of Switzerland | | 3-month LIBOR | | 06/30/05 | | 06/30/15 | | | (188,640 | ) |
| | | 4,600 | | 5.000 | (a) | Deutsche Bank | | 3-month LIBOR | | 11/07/05 | | 11/07/10 | | | 59,861 | |
| | | 4,800 | | 5.723 | (a) | JPMorgan | | 3-month LIBOR | | 07/14/06 | | 07/14/16 | | | 272,303 | |
| | | 25,100 | | 5.496 | (a) | Bank of America | | 3-month LIBOR | | 07/28/06 | | 07/28/11 | | | 842,858 | |
| | | 3,000 | | 5.025 | (a) | Deutsche Bank | | 3-month LIBOR | | 11/21/06 | | 11/21/11 | | | 41,855 | |
| | | 2,200 | | 5.348 | (a) | Union Bank of Switzerland | | 3-month LIBOR | | 02/05/07 | | 11/29/11 | | | 21,656 | |
| | | 8,300 | | 5.002 | (b) | Union Bank of Switzerland | | 3-month LIBOR | | 01/08/07 | | 01/08/12 | | | (104,580 | ) |
| | | 8,545 | | 5.411 | (a) | JPMorgan | | 3-month LIBOR | | 02/05/07 | | 08/15/22 | | | 92,115 | |
| | | 3,100 | | 5.347 | (a) | Goldman Sachs | | 3-month LIBOR | | 02/05/07 | | 02/05/17 | | | 43,408 | |
| | | 11,300 | | 5.295 | (a) | Union Bank of Switzerland | | 3-month LIBOR | | 02/08/07 | | 02/08/17 | | | 101,301 | |
| | | 13,500 | | 4.922 | (a) | Lehman Brothers | | 3-month LIBOR | | 03/22/07 | | 03/22/11 | | | 29,025 | |
| | | 700 | | 5.250 | (a) | Goldman Sachs | | 3-month LIBOR | | 04/12/07 | | 04/12/17 | | | 4,430 | |
| | | 21,400 | | 5.068 | (b) | Goldman Sachs | | 3-month LIBOR | | 04/30/07 | | 04/30/09 | | | (17,548 | ) |
| | | 2,900 | | 5.411 | (a) | Goldman Sachs | | 3-month LIBOR | | 04/30/07 | | 04/30/27 | | | 16,501 | |
| | | 7,110 | | 6.533 | (a) | Deutsche Bank | | 3-month LIBOR | | 01/12/07 | | 01/12/11 | | | (4,402 | ) |
| | | 7,110 | | 6.544 | (a) | Deutsche Bank | | 3-month LIBOR | | 01/22/07 | | 01/22/11 | | | (1,709 | ) |
| | | 6,200 | | 4.725 | (a) | Morgan Stanley | | 3-month LIBOR | | 08/02/05 | | 08/02/15 | | | (169,168 | ) |
| | | 5,000 | | 4.870 | (a) | Goldman Sachs | | 3-month LIBOR | | 01/25/06 | | 01/25/16 | | | (29,969 | ) |
| | | | | | | | | | | | | | |
|
| |
| | | | | | | | | | | | | | | $ | 2,543,588 | |
| | | | | | | | | | | | | | |
|
| |
Income
Opportunity
Trust | | $ | 5,200 | | 4.372 | %(a) | Union Bank of Switzerland | | 3-month LIBOR | | 06/30/05 | | 06/30/15 | | $ | (204,360 | ) |
| | | 8,000 | | 4.670 | (a) | Goldman Sachs | | 3-month LIBOR | | 09/20/05 | | 09/20/15 | | | (248,874 | ) |
| | | 10,000 | | 4.897 | (a) | JPMorgan | | 3-month LIBOR | | 12/12/06 | | 12/12/11 | | | 79,700 | |
| | | 23,600 | | 5.068 | (b) | Goldman Sachs | | 3-month LIBOR | | 04/30/07 | | 04/30/09 | | | (19,351 | ) |
| | | 3,100 | | 4.950 | (a) | Union Bank of Switzerland | | 3-month LIBOR | | 11/29/06 | | 11/29/11 | | | 30,515 | |
| | | 12,000 | | 5.002 | (b) | Union Bank of Switzerland | | 3-month LIBOR | | 01/08/07 | | 01/08/12 | | | (151,200 | ) |
| | | 800 | | 5.250 | (a) | Goldman Sachs | | 3-month LIBOR | | 04/12/07 | | 04/12/17 | | | 5,063 | |
| | | 5,000 | | 5.000 | (a) | Deutsche Bank | | 3-month LIBOR | | 11/07/05 | | 11/07/10 | | | 65,067 | |
| | | 3,200 | | 5.025 | (a) | Deutsche Bank | | 3-month LIBOR | | 11/21/06 | | 11/21/11 | | | 18,208 | |
| | | 3,200 | | 5.411 | (a) | Lehman Brothers | | 3-month LIBOR | | 04/30/07 | | 04/30/27 | | | 44,645 | |
| | | 14,800 | | 4.922 | (b) | Union Bank of Switzerland | | 3-month LIBOR | | 03/22/07 | | 03/22/11 | | | 31,820 | |
| | | 5,000 | | 5.071 | (b) | Goldman Sachs | | 3-month LIBOR | | 03/26/07 | | 03/26/17 | | | 38,750 | |
| | | 3,400 | | 5.348 | (a) | JPMorgan | | 3-month LIBOR | | 02/05/07 | | 02/05/17 | | | 47,609 | |
| | | 9,405 | | 5.411 | (a) | Union Bank of Switzerland | | 3-month LIBOR | | 02/05/07 | | 08/15/22 | | | 101,385 | |
| | | 12,000 | | 5.295 | (a) | JPMorgan | | 3-month LIBOR | | 02/08/07 | | 02/08/17 | | | 107,576 | |
| | | 3,000 | | 4.500 | (b) | JPMorgan | | 3-month LIBOR | | 05/26/05 | | 05/26/15 | | | 89,243 | |
| | | 5,200 | | 5.723 | (a) | Citibank | | 3-month LIBOR | | 07/14/06 | | 07/14/16 | | | 294,995 | |
| | | 13,800 | | 4.510 | (b) | Bank of America | | 3-month LIBOR | | 10/29/04 | | 10/29/14 | | | 486,013 | |
| | | 27,900 | | 5.496 | (a) | Deutsche Bank | | 3-month LIBOR | | 07/28/06 | | 07/28/11 | | | 936,882 | |
| | | 27,500 | | 4.399 | (b) | Morgan Stanley | | 3-month LIBOR | | 10/25/04 | | 10/25/14 | | | 1,161,190 | |
| | | | | | | | | | | | | | |
|
| |
| | | | | | | | | | | | | | | $ | 2,914,876 | |
| | | | | | | | | | | | | | |
|
| |
| | | | | | | | | | | | | | | | | |
Income Trust | | $ | 12,500 | | 4.399 | %(b) | Deutsche Bank | | 3-month LIBOR | | 10/25/04 | | 10/25/14 | | $ | 527,813 | |
| | | 3,000 | | 4.500 | (b) | JPMorgan | | 3-month LIBOR | | 05/26/05 | | 05/26/15 | | | 89,243 | |
| | | 5,400 | | 5.723 | (a) | JPMorgan | | 3-month LIBOR | | 07/14/06 | | 07/14/16 | | | 306,341 | |
| | | 3,000 | | 5.025 | (a) | Deutsche Bank | | 3-month LIBOR | | 11/21/06 | | 11/21/11 | | | 41,855 | |
| | | 4,400 | | 5.348 | (a) | Union Bank of Switzerland | | 3-month LIBOR | | 02/05/07 | | 11/29/11 | | | 43,312 | |
| | | 9,565 | | 5.411 | (a) | JPMorgan | | 3-month LIBOR | | 02/05/07 | | 08/15/22 | | | 103,110 | |
| | | 3,400 | | 5.347 | (a) | Goldman Sachs | | 3-month LIBOR | | 02/05/07 | | 02/05/17 | | | 47,609 | |
| | | 11,900 | | 5.295 | (a) | Union Bank of Switzerland | | 3-month LIBOR | | 02/08/07 | | 02/08/17 | | | 106,679 | |
| | | 800 | | 5.250 | (a) | Goldman Sachs | | 3-month LIBOR | | 04/30/07 | | 04/12/17 | | | 5,063 | |
| | | 12,000 | | 4.320 | (a) | Union Bank of Switzerland | | 3-month LIBOR | | 09/08/05 | | 09/08/10 | | | (261,999 | ) |
| | | 19,000 | | 4.889 | (b) | Goldman Sachs | | 3-month LIBOR | | 04/22/04 | | 04/22/14 | | | 196,809 | |
| | | 25,000 | | 4.883 | (a) | Union Bank of Switzerland | | 3-month LIBOR | | 03/21/05 | | 03/21/15 | | | (378,000 | ) |
| | | 16,000 | | 4.925 | (a) | Deutsche Bank | | 3-month LIBOR | | 03/22/05 | | 03/22/15 | | | 182,742 | |
| | | 4,500 | | 4.442 | (a) | Morgan Stanley | | 3-month LIBOR | | 07/11/05 | | 07/11/15 | | | (151,438 | ) |
| | | 2,800 | | 5.940 | (a) | Union Bank of Switzerland | | 3-month LIBOR | | 12/07/05 | | 12/07/15 | | | 199,808 | |
| | | 5,500 | | 4.870 | (a) | Goldman Sachs | | 3-month LIBOR | | 01/25/06 | | 01/25/16 | | | (32,965 | ) |
| | | | | | | | | | | | | | |
|
| |
| | | | | | | | | | | | | | | $ | 1,025,982 | |
| | | | | | | | | | | | | | |
|
| |
77
Details of open total return swaps at April 30, 2007 were as follows:
| | | | | | | | | | | | | | | | | |
Trust | | Notional
Amount
(000) | | Fixed
Rate | | Counter Party | | Floating Rate | | Effective
Date | | Termination
Date | | Unrealized
Depreciation | |
| |
| |
| |
| |
| |
| |
| |
| |
Core Bond | | $ | 7,430 | | 0.676 | %(b) | Morgan Stanley | | Lehman +0.40 | % | 04/18/07 | | 10/31/07 | | $ | 9,303 | |
| | | | | | | | | | | | | | |
|
| |
| | | | | | | | | | | | | | | | | |
Income
Opportunity
Trust | | | 81,900 | | 0.676 | (b) | Morgan Stanley | | Lehman +0.40 | % | 04/18/07 | | 10/31/07 | | $ | 10,255 | |
| | | | | | | | | | | | | | |
|
| |
| | | | | | | | | | | | | | | | | |
Income Trust | | | 28,700 | | 0.676 | (b) | Morgan Stanley | | Lehman +0.40 | % | 04/18/07 | | 10/31/07 | | $ | 3,594 | |
| | | | | | | | | | | | | | |
|
| |
|
(a) Trust pays floating interest rate and receives fixed rate.
(b) Trust pays fixed interest rate and receives floating rate.
The terms of the open credit default swap agreements in High Yield at April 30, 2007 were to receive the quarterly notional amount multiplied by the fixed rate and pay the counterparty, upon default event of Primedia, Inc., the par value of the notional amount of Primedia, Inc. Details of the open credit default swap in High Yield at April 30, 2007 were as follows:
| | | | | | | | | | | | | |
Notional
Amount
(000) | | Fixed
Rate | | Counter Party | | Effective
Date | | Termination
Date | | Unrealized
Appreciation | |
| |
| |
| |
| |
| |
| |
| $300 | | 2.450% | | Lehman Brothers | | 02/24/07 | | 03/20/12 | | $ | 10,172 | |
| | | | | | | | | | |
|
| |
Transaction in options written during the six months ended April 30, 2007 were as follows:
| | | | | | | | | | | | | |
| | Calls | | Puts | |
| |
| |
| |
Trust | | Contracts/
Notional
Amount | | Premium
Received | | Contracts/
Notional
Amount | | Premium
Received | |
| |
| |
| |
| |
| |
Core Bond | | | | | | | | | | | | | |
Options outstanding at
October 31, 2006 | | $ | 21,300,000 | | $ | 991,347 | | $ | 135,100,037 | | $ | 2,068,284 | |
Options written | | | 18,200,000 | | | 455,276 | | | 18,200,000 | | | 455,276 | |
Options closed | | | (11,600,000 | ) | | (315,851 | ) | | (125,400,037 | ) | | (1,392,787 | ) |
| |
|
| |
|
| |
|
| |
|
| |
Options outstanding at
April 30, 2007 | | $ | 27,900,000 | | $ | 1,130,772 | | $ | 27,900,000 | | $ | 1,130,773 | |
| |
|
| |
|
| |
|
| |
|
| |
Income Opportunity Trust | | | | | | | | | | | | | |
Options outstanding at
October 31, 2006 | | $ | 23,400,000 | | $ | 1,085,069 | | $ | 148,200,041 | | $ | 2,236,554 | |
Options written | | | 19,700,000 | | | 491,847 | | | 19,700,000 | | | 491,847 | |
Options closed | | | (12,400,000 | ) | | (337,634 | ) | | (137,200,041 | ) | | (1,489,123 | ) |
| |
|
| |
|
| |
|
| |
|
| |
Options outstanding at
April 30, 2007 | | $ | 30,700,000 | | $ | 1,239,282 | | $ | 30,700,000 | | $ | 1,239,278 | |
| |
|
| |
|
| |
|
| |
|
| |
Income Trust | | | | | | | | | | | | | |
Options outstanding at
October 31, 2006 | | $ | 23,500,000 | | $ | 1,088,815 | | $ | 150,100,000 | | $ | 2,223,745 | |
Options written | | | 19,600,000 | | | 489,124 | | | 19,600,000 | | | 489,124 | |
Options closed | | | (12,300,000 | ) | | (334,911 | ) | | (138,900,000 | ) | | (1,469,842 | ) |
| |
|
| |
|
| |
|
| |
|
| |
Options outstanding at
April 30, 2007 | | $ | 30,800,000 | | $ | 1,243,028 | | $ | 30,800,000 | | $ | 1,243,027 | |
| |
|
| |
|
| |
|
| |
|
| |
Preferred and Equity | | | | | | | | | | | | | |
Options outstanding at
October 31, 2006 | | $ | — | | $ | — | | $ | — | | $ | — | |
Options written | | | 1,426,500 | | | 19,941,479 | | | — | | | — | |
Options closed | | | (1,210,500 | ) | | (17,002,202 | ) | | — | | | — | |
Options expired | | | (1,000 | ) | | (3,990 | ) | | — | | | — | |
| |
|
| |
|
| |
|
| |
|
| |
Options outstanding at
April 30, 2007 | | $ | 215,000 | | $ | 2,935,287 | | $ | — | | $ | — | |
| |
|
| |
|
| |
|
| |
|
| |
78
Note 4. Borrowings
Details of open reverse repurchase agreements at April 30, 2007 were as follows (please see Corresponding Underlying Collateral Chart):
| | | | | | | | | | | | | |
Trust/Counter Party | | Rate | | Trade
Date | | Maturity
Date1 | | Net Closing
Amount | | Par | |
| |
| |
| |
| |
| |
| |
Core Bond | | | | | | | | | | | | | |
Lehman Brothers | | 4.150% | | 04/30/07 | | TBD | | $ | 3,125,360 | | $ | 3,125,000 | |
| | 4.750 | | 04/18/07 | | TBD | | | 2,336,376 | | | 2,332,375 | |
| | 5.000 | | 03/07/07 | | TBD | | | 210,597 | | | 209,000 | |
| | 5.000 | | 04/26/07 | | 5/3/07 | | | 7,901,861 | | | 7,895,281 | |
| | 5.000 | | 04/30/07 | | TBD | | | 12,011,537 | | | 12,009,869 | |
| | 5.220 | | 04/23/07 | | TBD | | | 4,766,529 | | | 4,761,006 | |
| | 5.250 | | 04/23/07 | | TBD | | | 593,285 | | | 592,594 | |
| | 5.280 | | 04/23/07 | | 5/1/07 | | | 5,328,244 | | | 5,322,000 | |
| | 5.300 | | 04/30/07 | | TBD | | | 307,045 | | | 307,000 | |
| | | | | | | | | | |
|
| |
| | | | | | | | | | | $ | 36,554,125 | |
| | | | | | | | | | |
|
| |
Income Opportunity | | | | | | | | | | | | | |
Lehman Brothers | | 5.400 | | 04/23/07 | | TBD | | $ | 8,939,802 | | $ | 8,930,425 | |
| | 5.180 | | 04/23/07 | | TBD | | | 8,065,203 | | | 8,057,088 | |
| | 5.280 | | 04/23/07 | | 05/01/07 | | | 22,782,366 | | | 22,759,000 | |
| | 4.800 | | 04/26/07 | | 05/02/07 | | | 7,226,597 | | | 7,220,820 | |
| | 4.900 | | 04/30/07 | | TBD | | | 12,854,768 | | | 12,853,018 | |
| | 5.050 | | 04/30/07 | | TBD | | | 1,364,666 | | | 1,364,475 | |
| | | | | | | | | | |
|
| |
| | | | | | | | | | | $ | 61,184,826 | |
| | | | | | | | | | |
|
| |
Income Trust | | | | | | | | | | | | | |
Lehman Brothers | | 5.210 | | 01/09/07 | | TBD | | $ | 22,599,299 | | $ | 22,242,000 | |
| | 4.950 | | 03/12/07 | | TBD | | | 14,041,471 | | | 13,947,500 | |
| | | | | | | | | | |
|
| |
| | | | | | | | | | | $ | 36,189,500 | |
| | | | | | | | | | |
|
| |
Limited Duration | | | | | | | | | | | | | |
Barclay’s Bank | | 5.380 | | 04/24/07 | | TBD | | $ | 4,063,474 | | $ | 4,061,000 | |
| | 5.400 | | 04/26/07 | | 05/02/07 | | | 1,239,519 | | | 1,239,147 | |
| | | | | | | | | | |
|
| |
| | | | | | | | | | | $ | 5,300,147 | |
| | | | | | | | | | |
|
| |
Credit Suisse First Boston LLC | | 5.450 | | 11/28/06 | | TBD | | $ | 2,722,635 | | $ | 2,661,000 | |
| | 5.400 | | 12/05/06 | | TBD | | | 21,430,624 | | | 20,974,430 | |
| | 5.400 | | 12/07/06 | | TBD | | | 7,629,893 | | | 7,467,475 | |
| | 5.500 | | 12/14/06 | | TBD | | | 3,525,732 | | | 3,455,000 | |
| | 5.400 | | 01/17/07 | | TBD | | | 2,240,300 | | | 2,206,214 | |
| | 5.500 | | 01/18/07 | | TBD | | | 58,213,681 | | | 57,311,816 | |
| | 5.500 | | 02/01/07 | | TBD | | | 2,616,094 | | | 2,581,000 | |
| | 4.000 | | 04/17/07 | | TBD | | | 1,561,946 | | | 1,559,520 | |
| | 5.450 | | 04/17/07 | | TBD | | | 12,862,264 | | | 12,837,000 | |
| | 5.450 | | 04/19/07 | | TBD | | | 4,482,539 | | | 4,474,410 | |
| | 5.300 | | 04/23/07 | | TBD | | | 2,547,477 | | | 2,544,480 | |
| | 5.350 | | 04/25/07 | | TBD | | | 572,797 | | | 570,000 | |
| | | | | | | | | | |
|
| |
| | | | | | | | | | | $ | 118,642,345 | |
| | | | | | | | | | |
|
| |
|
79
| | | | | | | | | | | | | | |
Trust/Counter Party | | Rate | Trade
Date | | Maturity
Date1 | | Net Closing
Amount | | Par | |
| |
|
|
| |
| |
| |
| |
Limited Duration (con’t)
Lehman Brothers | | 3.250 | % | 01/09/06 | | TBD | | | $ | 1,406,615 | | $ | 1,384,000 | |
| | 1.500 | | 09/06/06 | | TBD | | | | 894,697 | | | 888,000 | |
| | 5.500 | | 11/27/06 | | TBD | | | | 341,858 | | | 334,000 | |
| | 5.180 | | 01/09/07 | | TBD | | | | 3,401,891 | | | 3,347,937 | |
| | 5.200 | | 01/11/07 | | TBD | | | | 16,857,549 | | | 16,596,250 | |
| | 5.150 | | 02/12/07 | | TBD | | | | 1,803,135 | | | 1,783,237 | |
| | 5.250 | | 02/28/07 | | TBD | | | | 5,976,087 | | | 5,923,294 | |
| | 5.000 | | 03/07/07 | | TBD | | | | 984,463 | | | 977,000 | |
| | 5.270 | | 03/19/07 | | TBD | | | | 18,408,741 | | | 18,296,250 | |
| | 3.500 | | 04/11/07 | | TBD | | | | 1,733,028 | | | 1,730,000 | |
| | 5.260 | | 04/20/07 | | TBD | | | | 1,444,318 | | | 1,442,000 | |
| | 5.290 | | 04/24/07 | | 05/02/07 | | | | 1,912,927 | | | 1,910,681 | |
| | 5.280 | | 04/26/07 | | 05/03/07 | | | | 3,624,595 | | | 3,623,000 | |
| | | | | | | | | | | |
|
| |
| | | | | | | | | | | | $ | 58,235,649 | |
| | | | | | | | | | | |
|
| |
Preferred and Equity
Credit Suisse First Boston LLC | | 5.400 | | 04/27/07 | | TBD | | | $ | 4,321,648 | | $ | 4,321,000 | |
| | 5.400 | | 04/30/07 | | TBD | | | | 5,740,861 | | | 5,740,000 | |
| | | | | | | | | | | |
|
| |
| | | | | | | | | | | | $ | 10,061,000 | |
| | | | | | | | | | | |
|
| |
Strategic Bond
Credit Suisse First Boston LLC | | 5.000 | | 03/07/07 | | TBD | | | $ | 1,146,693 | | $ | 1,138,000 | |
| | 5.200 | | 03/07/07 | | TBD | | | | 2,189,255 | | | 2,172,000 | |
| | 5.240 | | 03/07/07 | | TBD | | | | 247,969 | | | 246,000 | |
| | 5.400 | | 01/18/07 | | TBD | | | | 6,040,419 | | | 5,949,393 | |
| | 5.400 | | 01/19/07 | | TBD | | | | 989,425 | | | 974,515 | |
| | | | | | | | | | | |
|
| |
| | | | | | | | | | | | $ | 10,479,908 | |
| | | | | | | | | | | |
|
| |
80
Details of underlying collateral for open reverse repurchase agreements at April 30, 2007 were as follows:
| | | | | | | | | | | | | | | | |
Trust / Counter
Party | | Description | | Rate | Maturity
Date | | | Original
Face | | | Current
Face | | | Market Value | |
| |
| |
|
|
| |
|
| |
|
| |
|
| |
Core Bond
Lehman Brothers | | Federal Home Loan | | | | | | | | | | | | | | |
| | Mortgage Corp. | | 5.500 | % | 11/01/18 | | $ | 690,000 | | $ | 315,298 | | $ | 316,391 | |
| | Federal National Mortgage Assoc. | | 6.000 | | 02/01/36 | | | 1,000,000 | | | 866,860 | | | 873,610 | |
| | Federal National Mortgage Assoc. | | 6.000 | | 09/01/36 | | | 1,000,000 | | | 894,207 | | | 901,170 | |
| | Federal National Mortgage Assoc. | | 6.000 | | 11/01/36 | | | 4,000,000 | | | 3,691,036 | | | 3,719,778 | |
| | Digicel Group Ltd. | | 8.875 | | 01/15/15 | | | 240,000 | | | 240,000 | | | 235,500 | |
| | Resolution Funding Corp. | | 0.000 | | 07/15/18 | | | 525,000 | | | 525,000 | | | 303,641 | |
| | Resolution Funding Corp. | | 0.000 | | 10/15/18 | | | 525,000 | | | 525,000 | | | 299,396 | |
| | U.S. Treasury Inflation Protected Bond | | 2.000 | | 01/15/26 | | | 5,005,000 | | | 5,124,369 | | | 4,864,948 | |
| | U.S. Treasury Bonds | | 4.750 | | 02/15/37 | | | 7,925,000 | | | 7,925,000 | | | 10,164,225 | |
| | U.S. Treasury Notes | | 4.625 | | 02/15/17 | | | 11,965,000 | | | 11,965,000 | | | 11,959,388 | |
| | U.S. Treasury Notes | | 4.500 | | 03/31/12 | | | 3,125,000 | | | 3,125,000 | | | 3,122,438 | |
| | | | | | | | | | | | | |
|
| |
| | | | | | | | | | | | | | $ | 36,760,485 | |
| | | | | | | | | | | | | |
|
| |
Income Opportunity
Lehman Brothers | | Bank of America Corp. | | 7.800 | | 02/15/10 | | | 2,450,000 | | | 2,450,000 | | $ | 2,622,095 | |
| | Berkshire Hathaway Finance Corp. | | 3.375 | | 10/15/08 | | | 2,525,000 | | | 2,525,000 | | | 2,463,524 | |
| | Citigroup, Inc. | | 6.125 | | 08/25/36 | | | 1,350,000 | | | 1,350,000 | | | 1,391,977 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 10/01/20 | | | 445,159 | | | 371,002 | | | 371,675 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 07/01/16 | | | 5,601,876 | | | 502,529 | | | 504,766 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 03/01/18 | | | 1,539,074 | | | 529,211 | | | 531,060 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 05/01/17 | | | 2,610,656 | | | 432,974 | | | 434,683 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 11/01/17 | | | 4,172,428 | | | 543,440 | | | 545,586 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 08/01/17 | | | 13,451,104 | | | 2,479,521 | | | 2,489,311 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 12/01/32 | | | 583,245 | | | 331,624 | | | 328,807 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 09/01/17 | | | 2,272,174 | | | 373,721 | | | 375,197 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 08/01/17 | | | 2,274,535 | | | 324,370 | | | 325,651 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 01/01/33 | | | 12,476,919 | | | 5,958,886 | | | 5,908,261 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 03/01/18 | | | 1,483,364 | | | 510,924 | | | 512,710 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 04/01/34 | | | 875,003 | | | 469,625 | | | 465,649 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 02/01/35 | | | 5,014,015 | | | 3,278,696 | | | 3,250,936 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 05/18/35 | | | 600,000 | | | 390,038 | | | 391,578 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 10/01/20 | | | 810,190 | | | 756,131 | | | 757,502 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 07/01/20 | | | 906,698 | | | 627,378 | | | 628,515 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 10/01/20 | | | 807,941 | | | 734,105 | | | 735,436 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 03/01/21 | | | 677,502 | | | 601,106 | | | 601,951 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 04/01/21 | | | 410,151 | | | 360,261 | | | 360,767 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 06/01/36 | | | 1,001,094 | | | 946,330 | | | 936,113 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 10/01/20 | | | 833,871 | | | 659,220 | | | 660,416 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 12/01/20 | | | 353,789 | | | 292,162 | | | 292,692 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 02/01/21 | | | 505,628 | | | 423,235 | | | 423,829 | |
| | Federal National Mortgage Assoc. | | 5.500 | | 03/01/21 | | | 654,254 | | | 587,474 | | | 588,299 | |
| | Federal National Mortgage Assoc. | | 6.000 | | 01/01/37 | | | 1,000,000 | | | 971,274 | | | 978,824 | |
| | General Electric Capital Corp. | | 6.750 | | 03/15/32 | | | 2,650,000 | | | 2,650,000 | | | 3,017,242 | |
| | U.S. Treasury Inflation Protected Bond | | 2.000 | | 01/15/26 | | | 8,470,000 | | | 8,673,534 | | | 8,234,436 | |
| | U.S. Treasury Bonds | | 4.750 | | 02/15/37 | | | 8,628,000 | | | 8,628,000 | | | 8,534,982 | |
| | U.S. Treasury Notes | | 4.625 | | 02/15/17 | | | 12,805,000 | | | 12,805,000 | | | 12,798,994 | |
| | | | | | | | | | | | | |
|
| |
| | | | | | | | | | | | | | $ | 62,463,465 | |
| | | | | | | | | | | | | |
|
| |
Income Trust Lehman Brothers | | U.S. Treasury Strip | | 0.000 | | 11/15/24 | | | 52,800,000 | | | 52,800,000 | | $ | 22,281,811 | |
| | U.S. Treasury Notes | | 4.000 | | 08/31/07 | | | 14,000,000 | | | 14,000,000 | | | 13,952,974 | |
| | | | | | | | | | | | | |
|
| |
| | | | | | | | | | | | | | $ | 36,234,785 | |
| | | | | | | | | | | | | |
|
| |
81
| | | | | | | | | | | | | | | | | |
Trust / Counter Party | | Description | | Rate | | Maturity
Date | | Original
Face | | Current
Face | | Market Value | |
| |
| |
| |
| |
| |
| |
| |
Limited Duration Barclay’s Bank | | Lyondell Chemical Co. | | 11.125 | % | | 07/15/12 | | $ | 3,020,000 | | $ | 3,020,000 | | $ | 3,216,300 | |
| | Huntsman LLC | | 11.625 | | | 10/15/10 | | | 925,000 | | | 925,000 | | | 996,688 | |
| | Freeport-McMoRan | | | | | | | | | | | | | | | |
| | Copper & Gold, Inc. | | 8.375 | | | 04/01/17 | | | 1,246,000 | | | 1,246,000 | | | 1,362,812 | |
| | | | | | | | | | | | | | |
|
| |
| | | | | | | | | | | | | | | $ | 5,575,800 | |
| | | | | | | | | | | | | | |
|
| |
Credit Suisse First Boston LLC | | AES Corp. | | 8.750 | | | 05/15/13 | | | 5,100,000 | | | 5,100,000 | | $ | 5,437,875 | |
| | American Real Estate Partners LP/American Real Estate Finance Corp. | | 8.125 | | | 06/01/11 | | | 4,970,000 | | | 4,970,000 | | | 5,069,400 | |
| | American Real Estate Partners LP/American Real Estate Finance Corp. | | 7.125 | | | 02/15/13 | | | 1,480,000 | | | 1,480,000 | | | 1,455,950 | |
| | Chesapeake Energy Corp. | | 7.500 | | | 09/15/13 | | | 4,000,000 | | | 4,000,000 | | | 4,180,000 | |
| | Republic of Colombia | | 9.750 | | | 04/23/09 | | | 5,000,000 | | | 5,000,000 | | | 5,405,000 | |
| | Comcast Cable Communications, Inc. | | 6.875 | | | 06/15/09 | | | 6,685,000 | | | 6,685,000 | | | 6,913,092 | |
| | Concentra Operating Corp. | | 9.500 | | | 08/15/10 | | | 5,000,000 | | | 5,000,000 | | | 5,275,000 | |
| | DR Horton, Inc. | | 5.875 | | | 07/01/13 | | | 3,000,000 | | | 3,000,000 | | | 2,924,886 | |
| | DaimlerChrysler NA Holding Corp. | | 4.050 | | | 06/04/08 | | | 7,500,000 | | | 7,500,000 | | | 7,395,345 | |
| | Deutsche Telekom Intl. Finance BV | | 8.000 | | | 06/15/10 | | | 5,000,000 | | | 5,000,000 | | | 5,410,445 | |
| | General Motors Acceptance Corp. | | 6.875 | | | 08/28/12 | | | 2,735,000 | | | 2,735,000 | | | 2,733,085 | |
| | Group 1 Automotive, Inc. | | 8.250 | | | 08/15/13 | | | 5,000,000 | | | 5,000,000 | | | 5,175,000 | |
| | Kazkommerts Intl. BV | | 10.125 | | | 05/08/07 | | | 5,000,000 | | | 5,000,000 | | | 5,002,500 | |
| | Midwest Generation LLC | | 8.560 | | | 01/02/16 | | | 5,180,000 | | | 4,324,265 | | | 4,767,502 | |
| | Nielsen Finance LLC/Nielsen Finance Co. | | 10.000 | | | 08/01/14 | | | 4,340,000 | | | 4,340,000 | | | 4,741,450 | |
| | JC Penney Co., Inc. | | 8.000 | | | 03/01/10 | | | 4,400,000 | | | 4,400,000 | | | 4,708,902 | |
| | Peru Government International Bond | | 8.375 | | | 05/03/16 | | | 2,795,000 | | | 2,795,000 | | | 3,342,820 | |
| | Qwest Communications Intl., Inc. | | 8.860 | | | 02/15/09 | | | 4,000,000 | | | 4,000,000 | | | 4,040,000 | |
| | Qwest Corp. | | 9.125 | | | 03/15/12 | | | 3,675,000 | | | 3,675,000 | | | 4,060,875 | |
| | Qwest Corp. | | 7.875 | | | 09/01/11 | | | 1,000,000 | | | 1,000,000 | | | 1,065,000 | |
| | Qwest Corp. | | 8.605 | | | 06/15/13 | | | 2,500,000 | | | 2,500,000 | | | 2,734,375 | |
| | RH Donnelley Corp. | | 8.875 | | | 01/15/16 | | | 4,260,000 | | | 4,260,000 | | | 4,622,100 | |
| | Rite Aid Corp. | | 8.125 | | | 05/01/10 | | | 5,000,000 | | | 5,000,000 | | | 5,162,500 | |
| | Rouse Co. | | 5.375 | | | 11/26/13 | | | 2,000,000 | | | 2,000,000 | | | 1,885,294 | |
| | Sanmina-SCI Corp. | | 8.125 | | | 03/01/16 | | | 1,710,000 | | | 1,710,000 | | | 1,673,663 | |
| | Swift Energy Co. | | 9.375 | | | 05/01/12 | | | 5,000,000 | | | 5,000,000 | | | 5,225,000 | |
| | Turkey | | 7.000 | | | 09/26/16 | | | 5,093,000 | | | 5,093,000 | | | 5,207,592 | |
| | Tyco Intl. Group S.A. | | 6.125 | | | 11/01/08 | | | 7,500,000 | | | 7,500,000 | | | 7,609,560 | |
| | Windstream Corp. | | 8.125 | | | 08/01/13 | | | 2,340,000 | | | 2,340,000 | | | 2,538,900 | |
| | | | | | | | | | | | | | |
|
| |
| | | | | | | | | | | | | | | $ | 125,763,111 | |
| | | | | | | | | | | | | | |
|
| |
Lehman Brothers | | Digicel Group Ltd. | | 8.875 | | | 01/15/15 | | | 1,120,000 | | | 1,120,000 | | $ | 1,099,000 | |
| | Federal National Mortgage Assoc. | | 7.250 | | | 01/15/10 | | | 17,000,000 | | | 17,000,000 | | | 18,040,757 | |
| | Federal National Mortgage Assoc. | | 5.500 | | | 10/01/33 | | | 2,317,378 | | | 1,123,789 | | | 1,114,268 | |
| | Federal National Mortgage Assoc. | | 5.500 | | | 02/01/32 | | | 390,000 | | | 125,329 | | | 124,264 | |
| | Federal National Mortgage Assoc. | | 5.500 | | | 03/01/32 | | | 900,000 | | | 311,268 | | | 309,594 | |
| | Federal National Mortgage Assoc. | | 5.500 | | | 01/01/33 | | | 263,772 | | | 103,987 | | | 103,104 | |
| | Federal National Mortgage Assoc. | | 5.500 | | | 03/01/33 | | | 900,000 | | | 249,818 | | | 247,702 | |
| | Federal National Mortgage Assoc. | | 5.500 | | | 06/01/33 | | | 800,952 | | | 389,380 | | | 386,083 | |
| | Federal National Mortgage Assoc. | | 5.500 | | | 07/01/33 | | | 1,982,153 | | | 1,030,583 | | | 1,021,858 | |
| | Federal National Mortgage Assoc. | | 5.500 | | | 08/01/33 | | | 1,236,912 | | | 558,619 | | | 553,890 | |
| | Federal National Mortgage Assoc. | | 5.500 | | | 09/01/33 | | | 5,790,192 | | | 3,135,887 | | | 3,109,336 | |
| | Federal National Mortgage Assoc. | | 5.500 | | | 10/01/33 | | | 453,504 | | | 208,605 | | | 206,839 | |
| | Grant Prideco, Inc. | | 6.125 | | | 08/15/15 | | | 380,000 | | | 380,000 | | | 377,150 | |
| | Metaldyne Corp. | | 11.000 | | | 11/01/13 | | | 1,000,000 | | | 1,000,000 | | | 1,030,000 | |
| | NewPage Corp. | | 11.606 | | | 05/01/12 | | | 1,500,000 | | | 1,500,000 | | | 1,663,125 | |
| | Sally Holdings LLC | | 10.500 | | | 11/15/16 | | | 1,790,000 | | | 1,790,000 | | | 1,861,600 | |
| | U.S. Treasury Notes | | 3.375 | | | 12/15/08 | | | 17,000,000 | | | 17,000,000 | | | 16,654,696 | |
| | U.S. Treasury Notes | | 3.875 | | | 05/15/09 | | | 5,945,000 | | | 5,945,000 | | | 5,860,700 | |
| | U.S. Treasury Notes | | 3.375 | | | 09/15/09 | | | 3,425,000 | | | 3,425,000 | | | 3,334,693 | |
| | U.S. Treasury Notes | | 4.250 | | | 08/15/15 | | | 1,815,000 | | | 1,815,000 | | | 1,770,191 | |
| | | | | | | | | | | | | | |
|
| |
| | | | | | | | | | | | | | | $ | 58,868,850 | |
| | | | | | | | | | | | | | |
|
| |
82
| | | | | | | | | | | | | | | | | |
Trust / Counter Party | | Description | | Rate | | Maturity
Date | | Original
Face | | Current
Face | | Market Value | |
| |
| |
| |
| |
| |
| |
| |
Preferred and Equity
Credit Suisse First Boston LLC | | HBOS Plc | | 5.920 | % | | N/A1 | | $ | 6,000,000 | | $ | 6,000,000 | | $ | 5,896,152 | |
| | HSBC Capital Funding LP | | 10.176 | | | N/A1 | | | 3,000,000 | | | 3,000,000 | | | 4,380,135 | |
| | | | | | | | | | | | | | |
|
| |
| | | | | | | | | | | | | | | $ | 10,276,287 | |
| | | | | | | | | | | | | | |
|
| |
Strategic Bond
Credit Suisse First Boston LLC | | DTE Energy Co. | | 7.050 | | | 06/01/11 | | | 100,000 | | | 100,000 | | $ | 106,465 | |
| | Digicel Group Ltd. | | 8.875 | | | 01/15/15 | | | 170,000 | | | 170,000 | | | 166,812 | |
| | General Electric Capital Corp. | | 3.450 | | | 07/16/07 | | | 2,000,000 | | | 2,000,000 | | | 1,992,624 | |
| | Merck & Co., Inc. | | 4.375 | | | 02/15/13 | | | 1,000,000 | | | 1,000,000 | | | 960,531 | |
| | TIAA Global Markets, Inc. | | 3.875 | | | 01/22/08 | | | 1,000,000 | | | 1,000,000 | | | 987,987 | |
| | U.S. Treasury Bonds | | 5.375 | | | 02/15/31 | | | 225,000 | | | 225,000 | | | 240,996 | |
| | U.S. Treasury Notes | | 4.250 | | | 08/15/13 | | | 1,000,000 | | | 1,000,000 | | | 985,312 | |
| | U.S. Treasury Notes | | 4.750 | | | 05/15/14 | | | 710,000 | | | 710,000 | | | 717,627 | |
| | U.S. Treasury Notes | | 4.125 | | | 08/15/10 | | | 810,000 | | | 810,000 | | | 800,824 | |
| | U.S. Treasury Notes | | 4.250 | | | 08/15/15 | | | 75,000 | | | 75,000 | | | 73,148 | |
| | U.S. Treasury Notes | | 4.875 | | | 08/15/16 | | | 550,000 | | | 550,000 | | | 560,097 | |
| | Vodafone Group Plc | | 7.750 | | | 02/15/10 | | | 1,000,000 | | | 1,000,000 | | | 1,065,864 | |
| | Wells Fargo & Co. | | 3.500 | | | 04/04/08 | | | 2,000,000 | | | 2,000,000 | | | 1,966,848 | |
| | | | | | | | | | | | | | |
|
| |
| | | | | | | | | | | | | | | $ | 10,625,135 | |
| | | | | | | | | | | | | | |
|
| |
| |
|
1 | The security is a perpetual bond and has no stated maturity date. |
Bridge Debt Commitments: At April 30, 2007, High Yield and Limited Duration had $2,310,000 and $19,510,000, respectively, in commitments outstanding to fund high yield bridge debt. The Trusts are entitled to a fee upon the expiration of the commitment period, generally within six months of the initial commitment date. The bridge debt terms approximate market rates at the time the commitment is entered into.
|
Note 6. Income Tax Information |
The tax character of distributions paid during the year ended October 31, 2006 were as follows:
| | | | | | | | | | | | | | | | | |
| | Year ended October 31, 2006 | |
| |
| |
Distributions Paid from: | | Ordinary
Income | | Non-taxable
Return of Capital | | Long-term
Capital Gains | | Total
Distributions | |
| |
| |
| |
| |
| |
Broad Investment Grade | | $ | 4,241,016 | | | $ | — | | | $ | 20,078 | | | $ | 4,261,094 | | |
Core Bond | | | 25,048,230 | | | | — | | | | 7,914,351 | | | | 32,962,581 | | |
High Yield | | | 4,175,232 | | | | — | | | | — | | | | 4,175,232 | | |
Income Opportunity | | | 22,238,533 | | | | 2,162,198 | | | | 8,976,685 | | | | 33,377,416 | | |
Income Trust | | | 21,910,288 | | | | 5,576,693 | | | | — | | | | 27,486,981 | | |
Limited Duration | | | 55,725,066 | | | | 760,960 | | | | — | | | | 56,486,026 | | |
Strategic Bond | | | 6,969,104 | | | | 251,641 | | | | — | | | | 7,220,745 | | |
83
For Federal income tax purposes, the following Trusts had capital loss carryforwards as of their last respective tax year end. These amounts may be used to offset future realized capital gains, if any:
| | | | | | | | | | | | | | | | | | | |
Trust | | Capital Loss
Carryforward Amount | | Expires | | Trust | | Capital Loss
Carryforward Amount | | Expires | |
| |
| |
| |
| |
| |
| |
Broad Investment Grade | | | $ | 2,061,303 | | | | 2011 | | Income Trust | | | $ | 33,107,952 | | | | 2007 | |
| | | | 684,360 | | | | 2012 | | | | | | 1,352,206 | | | | 2008 | |
| | | | 493,567 | | | | 2014 | | | | | | 13,940,898 | | | | 2009 | |
| | |
|
| | | | | | | | | | | | | | | |
| | | $ | 3,239,230 | | | | | | | | | | 21,960,613 | | | | 2011 | |
| | |
|
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | 10,100,201 | | | | 2012 | |
| | | | | | | | | | | | | | 3,861,222 | | | | 2013 | |
High Yield | | | $ | 2,558,868 | | | | 2007 | | | | | | 6,952,429 | | | | 2014 | |
| | | | | | | | | | | | |
|
| | | | | |
| | | | 3,270,311 | | | | 2008 | | | | | $ | 91,275,521 | | | | | |
| | | | 15,159,280 | | | | 2009 | | | | |
|
| | | | | |
| | | | 8,468,860 | | | | 2010 | | | | | | | | | | | |
| | | | 4,771,417 | | | | 2011 | | Limited Duration | | | $ | 2,008,113 | | | | 2013 | |
| | | | 316,410 | | | | 2012 | | | | | | 1,268,222 | | | | 2014 | |
| | | | | | | | | | | | |
|
| | | | | |
| | | | 2,060,533 | | | | 2014 | | | | | $ | 3,276,335 | | | | | |
| | |
|
| | | | | | | | |
|
| | | | | |
| | | $ | 36,605,679 | | | | | | | | | | | | | | | |
| | |
|
| | | | | | | | | | | | | | | |
| | | | | | | | | | Strategic Bond | | | $ | 432,713 | | | | 2011 | |
Income Opportunity | | | $ | 2,451,628 | | | | 2014 | | | | | | 318,492 | | | | 2013 | |
| | | | | | | | | | | | | | 689,609 | | | | 2014 | |
| | | | | | | | | | | | |
|
| | | | | |
| | | | | | | | | | | | | $ | 1,440,814 | | | | | |
| | | | | | | | | | | | |
|
| | | | | |
Accordingly, no capital gain distributions are expected to be paid to shareholders of a Trust until that Trust has net realized capital gains in excess of its capital loss carryforward amounts.
There are 200 million of $0.01 par value common shares authorized for Broad Investment Grade, Income Opportunity and Income Trust. There are an unlimited number of $0.001 par value common shares authorized for Core Bond, High Yield, Limited Duration, Preferred and Equity and Strategic Bond. At April 30, 2007, the shares owned by an affiliate of the Advisor of Limited Duration and Preferred and Equity were 6,021 and 4,817, respectively.
Preferred and Equity, which commenced on December 27, 2006, issued 47,004,817 common shares under the initial public offering. On February 1, 2007, an additional 4,750,000 shares were issued by the undewriters’ exercising their over-allotment option. Offering costs incurred in connection with the offering of common shares have been charged against the proceeds from the initial common share offering in the amount of $1,367,957.
During the period ended April 30, 2007 and the year ended October 31, 2006, the following Trusts issued additional shares under their respec tive dividend reinvestment plan:
| | | | | | | |
Trust | | April 30, 2007 | | October 31, 2006 | |
| |
| |
| |
High Yield | | — | | | 6,259 | | |
Limited Duration | | 67,233 | | | 13,785 | | |
Preferred and Equity | | 73,340 | | | — | | |
As of April 30, 2007, Preferred and Equity has the following series of preferred shares outstanding as listed in the table below. The preferred shares have a liquidation value of $25,000 per share plus any accumulated unpaid dividends.
| | | | |
Series | | | Shares | |
| | |
| |
T7 | | | 4,620 | |
W7 | | | 4,620 | |
R7 | | | 4,620 | |
F7 | | | 4,620 | |
Dividends on seven-day preferred shares are cumulative at a rate which is reset every seven days based on the results of an auction. The dividend ranges on the preferred shares for Preferred and Equity for the period ended April 30, 2007 were as follows:
| | | | | | | | | | | | | |
Series | | Low | | High | | Average | |
| |
| |
| |
| |
T7 | | | 5.10 | % | | | 5.30 | % | | | 5.22 | % | |
W7 | | | 5.20 | | | | 5.30 | | | | 5.23 | | |
R7 | | | 5.20 | | | | 5.30 | | | | 5.23 | | |
F7 | | | 5.20 | | | | 5.30 | | | | 5.25 | | |
84
Preferred and Equity may not declare dividends or make other distributions on common shares or purchase any such shares if, at the time of the declaration, distribution or purchase, asset coverage with respect to the outstanding preferred shares and any other borrowings would be less than 200%. The preferred shares are redeemable at the option of Preferred and Equity, in whole or in part, on any dividend payment date at $25,000 per share plus any accumulated or unpaid dividends whether or not declared. The preferred shares are also subject to mandatory redemption at $25,000 per share plus any accumulated or unpaid dividends, whether or not declared, if certain requirements relating to the composition of the assets and liabilities of Preferred and Equity, as set forth in Preferred and Equity’s Declaration of Trust, are not satisfied. The holders of preferred shares have voting rights equal to the holders of common shares (one vote per share) and will vote together with holders of common shares as a single class. However, holders of preferred shares, voting as a separate class, are also entitled to elect two Trustees for Preferred and Equity. In addition, the 1940 Act requires that along with approval by shareholders that might otherwise be required, the approval of the holders of a majority of any outstanding preferred shares, voting separately as a class would be required to (a) adopt any plan of reorganization that would adversely affect the preferred shares, (b) change a Trust’s sub-classification as a closed-end investment company or change its fundamental investment restrictions and (c) change the nature of its business so as to cease to be an investment company.
|
Note 8. Subsequent Dividends |
Subsequent to April 30, 2007, the Board of each of the Trusts declared dividends from undistributed earnings per common share payable May 31, 2007, to shareholders of record on May 15, 2007. The per share common dividends declared were as follows:
| | | | | | |
Trust | | Common Dividend
Per Share | |
| |
| |
Broad Investment Grade | | | $ | 0.07500 | | |
Core Bond | | | | 0.06700 | | |
High Yield | | | | 0.05100 | | |
Income Opportunity | | | | 0.05500 | | |
Income Trust | | | | 0.03100 | | |
Limited Duration | | | | 0.12500 | | |
Preferred and Equity | | | | 0.15625 | | |
Strategic Bond | | | | 0.07700 | | |
The dividends declared on preferred shares for the period May 1, 2007 to May 31, 2007 for Preferred and Equity were as follows:
| | | | | | |
Series | | Dividends Declared | |
| |
| |
T7 | | | $ | 583,044 | | |
W7 | | | | 582,767 | | |
R7 | | | | 469,346 | | |
F7 | | | | 479,140 | | |
85
|
DIVIDEND REINVESTMENT PLANS |
|
Pursuant to each Trust’s respective Dividend Reinvestment Plan (the “Plan”), shareholders of Broad Investment Grade, Income Opportunity and Income Trust may elect, while shareholders of Core Bond, High Yield, Limited Duration, Preferred and Equity and Strategic Bond are automatically enrolled, to have all distributions of dividends and capital gains reinvested by Computershare Trust Company, N.A. (the “Plan Agent”) in the respective Trust’s shares pursuant to the Plan. Shareholders who do not participate in the Plan will receive all distributions in cash paid by check and mailed directly to the shareholders of record (or if the shares are held in street or other nominee name, then to the nominee) by the Plan Agent, which serves as agent for the shareholders in administering the Plan.
After Broad Investment Grade declares a dividend or determines to make a capital gain distribution, the Plan Agent will acquire shares for the participants’ account, by the purchase of outstanding shares on the open market, on the Trust’s primary exchange or elsewhere (“open market purchases”). The Trust will not issue any new shares under the Plan.
After Core Bond, High Yield, Income Trust, Limited Duration and/or Strategic Bond declares a dividend or determines to make a capital gain distribution, the Plan Agent will acquire shares for the participants’ account, depending upon the circumstances described below, either (i) through receipt of unissued but authorized shares from the Trust (“newly issued shares”) or (ii) by open market purchases. If, on the dividend payment date, the NAV is equal to or less than the market price per share plus estimated brokerage commissions (such condition being referred to herein as “market premium”), the Plan Agent will invest the dividend amount in newly issued shares on behalf of the participants. The number of newly issued shares to be credited to each participant’s account will be determined by dividing the dollar amount of the dividend by the NAV on the date the shares are issued. However, if the NAV is less than 95% of the market price on the payment date, the dollar amount of the dividend will be divided by 95% of the market price on the payment date. If, on the dividend payment date, the NAV is greater than the market value per share plus estimated brokerage commissions (such condition being referred to herein as “market discount”), the Plan Agent will invest the dividend amount in shares acquired on behalf of the participants in open-market purchases.
At a meeting of the Board of Trustees of the Income Opportunity Trust on November 21, 2006, the Board approved an amendment to the Dividend Reinvestment Plan of the Income Opportunity Trust. The Plan previously operated in a manner similar to Broad Investment Grade’s Plan, and permitted shares to be purchased only on the open market. As a result of the amendment, the Plan began permitting purchases of newly issued shares on terms similar to the Plans described in the next paragraph on April 1, 2007.
The Plan Agent’s fees for the handling of the reinvestment of dividends and distributions is paid by each Trust. However, each participant pays a pro rata share of brokerage commissions incurred with respect to the Plan Agent’s open market purchases in connection with the reinvestment of dividends and distributions. The automatic reinvestment of dividends and distributions does not relieve participants of any Federal income tax that may be payable on such dividends or distributions.
Each Trust reserves the right to amend or terminate the Plan. There is no direct service charge to participants in the Plan; however, each Trust reserves the right to amend the Plan to include a service charge payable by the participants. Participants who request a sale of shares through the Plan Agent are subject to a $2.50 sales fee and a $0.15 per share sold brokerage commission. All correspondence concerning the Plan should be directed to the Plan Agent at 250 Royall Street, Canton, MA 02021 or (800) 699-1BFM.
86
Each Trust listed for trading on the New York Stock Exchange (“NYSE”) has filed with the NYSE its annual chief executive officer certification regarding compliance with the NYSE’s listing standards and each Trust listed for trading on the American Stock Exchange (“AMEX”) has filed with the AMEX its corporate governance certification regarding compliance with the AMEX’s listing standards. All of the Trusts have filed with the Securities and Exchange Commission the certification of its chief executive officer and chief financial officer required by section 302 of the Sarbanes-Oxley Act.
The Trusts do not make available copies of their respective Statements of Additional Information because the Trusts’ shares are not continuously offered, which means that the Statement of Additional Information of each Trust has not been updated after completion of such Trust’s offering and the information contained in each Trust’s Statement of Additional Information may have become outdated.
During the period, there were no material changes in any Trust’s investment objective or policies or to any Trust’s charters or by-laws that were not approved by the shareholders or in the principle risk factors associated with investment in the Trusts. There have been no changes in the persons who are primarily responsible for the day-to-day management of the Trusts’ portfolios.
Quarterly performance, semi-annual and annual reports and other information regarding the Trusts may be found on BlackRock’s website, which can be accessed at http://www.blackrock.com. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Trusts and does not, and is not intended, to incorporate BlackRock’s website into this report.
Certain of the officers of the Trusts listed on the inside back cover of this Report to Shareholders are also officers of the Advisor or Sub-Advisors. They serve in the following capacities for the Advisor or Sub-Advisors: Robert S. Kapito—Director and Vice Chairman of the Advisor and the Sub-Advisors, Donald Burke, Anne Ackerley, Bartholomew Battista, Vincent Tritto and Brian Kindelan—Managing Directors of the Advisor and the Sub-Advisors, Neal Andrews—Managing Director of the Advisor, James Kong and Jay Fife—Managing Directors of the Sub-Advisors, Spencer Fleming—Director of the Advisor and a Sub-Advisor and Robert Mahar—Director of a Sub-Advisor.
Important Information Regarding the BlackRock Closed-End Funds Semi-Annual Investor Update
The Semi-Annual Investor Update (“Update”) is available on the Internet and may be accessed through BlackRock’s website at http://www.blackrock.com. The Update provides information on the fixed income markets and summaries of BlackRock Closed-End Funds’ investment objectives and strategies. It also contains recent news regarding certain BlackRock Closed-End Funds.
If you would like to receive a hard copy of the BlackRock Closed-End Funds Semi-Annual Investor Update, please call (800) 699-1BFM.
87
The amounts and sources of distributions reported are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon the Trust’s investment experience during the remainder of its fiscal year and may be subject to changes based on the tax regulations. The Trust will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
| | | | | | | | | | | | | | | | |
| | Total Fiscal Year to Date1
Cumulative Distributions | | Percentage of
Fiscal Year to Date1
Cumulative Distributions
by Character |
| |
| |
|
Trust | | Net
Investment
Income | | Net
Realized
Capital
Gains | | Return
of
Capital | | Total Per
Common
Share | | Net
Investment
Income | | Net
Realized
Capital
Gains | | Return
of
Capital | | Total Per
Common Share |
| |
| |
| |
| |
| |
| |
| |
| |
|
Preferred & Equity Advantage* | | $0.38 | | $— | | $0.09 | | $0.47 | | 81% | | —% | | 19% | | 100% |
| |
1 | Commencement of investment operations for Preferred and Equity Advantage was December 27, 2006. |
| |
* | The Trust estimates that it has distributed more than its income and net realized gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Trust is paid back to you. A return of capital does not necessarily reflect the Trust’s investment performance and should not be confused with ‘yield’ or ‘income.’ |
88
BlackRock Closed-End Funds
| |
Directors/Trustees |
| Ralph L. Schlosstein, Chairman |
| Andrew F. Brimmer, Lead Trustee1 |
| Richard E. Cavanagh, Lead Trustee2 |
| Kent Dixon |
| Frank J. Fabozzi |
| Kathleen Feldstein |
| R. Glenn Hubbard
Robert S. Kapito3 |
| |
Officers |
| Robert S. Kapito, President |
| Donald C. Burke, Treasurer |
| Bartholomew Battista, Chief Compliance Officer |
| Anne Ackerley, Vice President |
| Neal Andrews, Assistant Treasurer |
| Jay Fife, Assistant Treasurer |
| Spencer Fleming, Assistant Treasurer |
| James Kong, Assistant Treasurer |
| Robert Mahar, Assistant Treasurer |
| Vincent B. Tritto, Secretary |
| Brian P. Kindelan, Assistant Secretary |
| |
Investment Advisor |
| BlackRock Advisors, LLC |
| 100 Bellevue Parkway |
| Wilmington, DE 19809 |
| (800) 227-7BFM |
| |
Sub-Advisor |
| BlackRock Financial Management, Inc.4 |
| 40 East 52nd Street |
| New York, NY 10022 |
| |
| BlackRock Investment Management, LLC5 |
| 40 East 52nd Street |
| New York, NY 10022 |
| |
Accounting Agent and Custodian |
| State Street Bank and Trust Company |
| 2 Avenue de Lafayette |
| Boston, MA 02111 |
| |
Transfer Agent |
| Computershare Trust Company, N.A. |
| 250 Royall Street |
| Canton, MA 02021 |
| (800) 699-1BFM |
| |
Auction Agent5 |
| Bank of New York |
| 101 Barclay Street, 7 West |
| New York, NY 10286 |
| |
Independent Registered Public Accounting Firm |
| Deloitte & Touche LLP |
| 200 Berkeley Street |
| Boston, MA 02116 |
| |
Legal Counsel |
| Skadden, Arps, Slate, Meagher & Flom LLP |
| 4 Times Square |
| New York, NY 10036 |
| |
Legal Counsel – Independent Directors/Trustees |
| Debevoise & Plimpton LLP |
| 919 Third Avenue |
| New York, NY 10022 |
This report is for shareholder information. This is not a prospectus intended for use in the purchase or sale of Trust shares. Statements and other information contained in this report are as dated and are subject to change.
|
BlackRock Closed-End Funds |
c/o BlackRock Advisors, LLC |
100 Bellevue Parkway |
Wilmington, DE 19809 |
(800) 227-7BFM |
| |
|
1 | Retired, effective December 31, 2006. |
2 | Effective as of January 1, 2007. |
3 | Resigned, effective December 31, 2006. |
4 | For Core Bond, Limited Duration, Preferred and Equity and Strategic Bond. |
5 | For Preferred and Equity. |
The Trusts will mail only one copy of shareholder documents, including annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact the Trusts at (800) 699-1BFM.
The Trusts have delegated to the Advisor the voting of proxies relating to their voting securities pursuant to the Advisor’s proxy voting policies and procedures. You may obtain a copy of these proxy voting policies and procedures, without charge, by calling (800) 699-1BFM. These policies and procedures are also available on the website of the Securities and Exchange Commission (the “Commission”) at http://www.sec.gov.
Information on how proxies relating to the Trusts’ voting securities were voted (if any) by the Advisor during the most recent 12-month period ended June 30th is available without charge, upon request, by calling (800) 699-1BFM or on the website of the Commission at http://www.sec.gov.
The Trusts file their complete schedule of portfolio holdings for the first and third quarters of their respective fiscal years with the Commission on Form N-Q. Each Trust’s Form N-Q will be available on the Commission’s website at http://www.sec.gov. Each Trust’s Form N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information regarding the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Each Trust’s Form N-Q may also be obtained, upon request, by calling (800) 699-1BFM.
This report is for shareholder information. This is not a prospectus intended for
use in the purchase or sale of Trust shares. Statements and other information
contained in this report are as dated and are subject to change.
CEF-SEMI-3-0407
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. Schedule of Investments.
The Registrant’s Schedule of Investments is included as part of the Report to Shareholders filed under Item 1 of this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable for semi-annual reports.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
(a) Not applicable for semi-annual reports.
(b) Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Companies and Affiliated Purchasers.
Not applicable because no such purchases were made during the period covered by this report.
Item 10. Submission of Matters to a Vote of Security Holders.
No matters were voted on by shareholders during the period covered by this report.
Item 11. Controls and Procedures.
(a) The Registrant's principal executive and principal financial officers have evaluated the Registrant's disclosure controls and procedures within 90 days of this filing and have concluded, as of that date, that the Registrant’s disclosure controls and procedures were reasonably designed to ensure that information required to be disclosed by the Registrant in this Form N-CSR was recorded, processed, summarized, and reported within the required time periods and that information required to be disclosed by the Registrant in this Form N-CSR was accumulated and communicated to the Registrant’s management, including its principle executive and principle financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 (17 CFR 270.30a-3(d)) that occurred during the Registrant's 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.
(a) (1) Not applicable.
(a) (2) Separate certifications of Principal Executive and Financial Officers pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 attached as EX-99.CERT.
(a) (3) Not applicable.
(b) Certification of Principal Executive and Financial Officers pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 furnished as EX-99.906CERT.
SIGNATURES
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.
(Registrant) BlackRock Income Opportunity Trust, Inc.
| By: | | /s/ Donald C. Burke | |
Name: | | Donald C. Burke |
Title: | | Treasurer |
Date: | | July 3, 2007 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| By: | | /s/ Robert S. Kapito | |
Name: | | Robert S. Kapito |
Title: | | Principal Executive Officer |
Date: | | July 3, 2007 |
| By: | | /s/ Donald C. Burke | |
Name: | | Donald C. Burke |
Title: | | Principal Financial Officer |
Date: | | July 3, 2007 |
