-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WQKifNibgwFmVsYIxVa79jVv1hfY3lEF5YI5H2laMQngjM1iFtnMFWz/MyqSBbv1 qi+fh7foRW0J8xDyhF6ybg== 0000930413-04-000080.txt : 20040108 0000930413-04-000080.hdr.sgml : 20040108 20040108103250 ACCESSION NUMBER: 0000930413-04-000080 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20031031 FILED AS OF DATE: 20040108 EFFECTIVENESS DATE: 20040108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLACKROCK STRATEGIC BOND TRUST CENTRAL INDEX KEY: 0001165216 IRS NUMBER: 412024432 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-10635 FILM NUMBER: 04514580 BUSINESS ADDRESS: STREET 1: 100 BELLEVUE PARKWAY STREET 2: MUTUAL FUND DEPARTMENT CITY: WILMINGTON STATE: DE ZIP: 19809 BUSINESS PHONE: 302-797-2449 N-CSR 1 c30277_ncsr.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-10635 The BlackRock Strategic Bond Trust - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 100 Bellevue Parkway, Wilmington, DE 19809 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Robert S. Kapito, President The BlackRock Strategic Bond Trust 40 East 52nd Street, New York, NY 10022 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (302) 797-2449 Date of fiscal year end: 10/31 Date of reporting period: 10/31/03 ITEM 1. REPORTS TO STOCKHOLDERS. The Trust's annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: FIXED INCOME LIQUIDITY EQUITIES ALTERNATIVES BLACKROCK SOLUTIONS - ---------------------------------------------------------------------------- BlackRock Closed-End Funds Annual Report OCTOBER 31, 2003 - ---------------------------------------------------------------------------- BlackRock Broad Investment Grade 2009 Term Trust (BCT) BlackRock Core Bond Trust (BHK) BlackRock High Yield Trust (BHY) BlackRock Income Opportunity Trust (BNA) BlackRock Income Trust (BKT) BlackRock Limited Duration Income Trust (BLW) BlackRock Strategic Bond Trust (BHD) [BlackRock Logo] NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE TABLE OF CONTENTS Letter to Shareholders ..................................................... 1 Trust Summaries ............................................................ 2 Portfolios of Investments .................................................. 9 Financial Statements Statements of Assets and Liabilities .................................... 40 Statements of Operations ................................................ 42 Statements of Cash Flows ................................................ 44 Statements of Changes in Net Assets ..................................... 46 Financial Highlights ....................................................... 49 Notes to Financial Statements .............................................. 56 Independent Auditors' Report ............................................... 64 Additional Information ..................................................... 65 Tax Information ............................................................ 65 Dividend Reinvestment Plans ................................................ 65 Trustees Information ....................................................... 66 - -------------------------------------------------------------------------------- PRIVACY PRINCIPLES OF THE TRUSTS The Trusts are committed to maintaining the privacy of shareholders and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information the Trusts collect, how we protect that information and why, in certain cases, we may share information with select other parties. Generally, the Trusts do not receive any non-public personal information relating to their shareholders, although certain non-public personal information of shareholders may become available to the Trusts. The Trusts do not disclose any non-public personal information about their shareholders or former shareholders to anyone, except as permitted by law or as is necessary in order to service shareholder accounts (for example, to a transfer agent or third party administrator). The Trusts restrict access to non-public personal information about their shareholders to BlackRock employees with a legitimate business need for the information. The Trusts maintain physical, electronic and procedural safeguards designed to protect the non-public personal information of their shareholders. - -------------------------------------------------------------------------------- LETTER TO SHAREHOLDERS October 31, 2003 Dear Shareholder: We are pleased to report that during the period, the Trusts provided monthly income, as well as the opportunity to invest in various portfolios of fixed income securities. This report contains the Trusts' audited financial statements and a listing of the portfolios' holdings. The portfolio management team continuously monitors the fixed income markets and adjusts the portfolios in order to gain exposure to various issuers and security types. This strategy enables the Trusts to move among different sectors, credits and coupons to capitalize on changing market conditions. The following table shows the Trusts' yields, closing market prices per share and net asset values ("NAV") per share as of October 31, 2003.
- ---------------------------------------------------------------------------------------------- TRUST YIELD MARKET PRICE NAV - ---------------------------------------------------------------------------------------------- BlackRock Broad Investment Grade 2009 Term Trust Inc. (BCT) 5.68% $15.85 $16.02 - ---------------------------------------------------------------------------------------------- BlackRock Core Bond Trust (BHK) 7.74 13.57 14.75 - ---------------------------------------------------------------------------------------------- BlackRock High Yield Trust (BHY) 9.85 10.25 6.96 - ---------------------------------------------------------------------------------------------- BlackRock Income Opportunity Trust (BNA) 7.67 10.95 11.93 - ---------------------------------------------------------------------------------------------- BlackRock Income Trust Inc. (BKT) 7.94 7.71 7.21 - ---------------------------------------------------------------------------------------------- BlackRock Limited Duration Income Trust (BLW) 7.98 18.80 19.74 - ---------------------------------------------------------------------------------------------- BlackRock Strategic Bond Trust (BHD) 10.22 15.27 15.07 - ----------------------------------------------------------------------------------------------
Yield is based on market price. BlackRock, Inc. ("BlackRock"), a world leader in asset management, has a proven commitment to fixed income. As of September 30, 2003, BlackRock managed approximately $200 billion in bonds, including 16 open-end and 47 closed-end bond funds. BlackRock is recognized for its emphasis on risk management and proprietary analytics and for its reputation managing money for the world's largest institutional investors. BlackRock Advisors, Inc., which manages the Trusts, is a wholly owned subsidiary of BlackRock, Inc. On behalf of BlackRock, we thank you for your continued trust and assure you that we remain committed to excellence in managing your assets. Sincerely, /s/ Laurence D. Fink /s/ Ralph L. Schlosstein Laurence D. Fink Ralph L. Schlosstein Chief Executive Officer President BlackRock Advisors, Inc. BlackRock Advisors, Inc. 1 TRUST SUMMARIES OCTOBER 31, 2003 - -------------------------------------------------------- BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST (BCT) - -------------------------------------------------------- TRUST INFORMATION - -------------------------------------------------------------------------------- Symbol on American Stock Exchange: BCT - -------------------------------------------------------------------------------- Initial Offering Date: June 17, 1993 - -------------------------------------------------------------------------------- Closing Market Price as of 10/31/03: $15.85 - -------------------------------------------------------------------------------- Net Asset Value as of 10/31/03: $16.02 - -------------------------------------------------------------------------------- Yield on Closing Market Price as of 10/31/03 ($15.85):(1) 5.68% - -------------------------------------------------------------------------------- Current Monthly Distribution per Share:(2) $ 0.075 - -------------------------------------------------------------------------------- Current Annualized Distribution per Share:(2) $ 0.900 - -------------------------------------------------------------------------------- (1) Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. (2) The distribution is not constant and is subject to change. The table below summarizes the changes in the Trust's market price and NAV: -------------------------------------------------------------- 10/31/03 10/31/02 CHANGE HIGH LOW - -------------------------------------------------------------------------------- Market Price $15.85 $16.18 (2.04)% $16.95 $15.68 - -------------------------------------------------------------------------------- NAV $16.02 $17.33 (7.56)% $17.38 $15.77 - -------------------------------------------------------------------------------- The following charts show the Trust's asset composition and corporate credit quality allocations of the Trust's long-term investments: - -------------------------------------------------------------------------------- SECTOR BREAKDOWN - -------------------------------------------------------------------------------- COMPOSITION OCTOBER 31, 2003 OCTOBER 31, 2002 - -------------------------------------------------------------------------------- U.S. Government and Agency Securities 56% 36% - -------------------------------------------------------------------------------- Interest Only Mortgage-Backed Securities 12 8 - -------------------------------------------------------------------------------- Agency Multiple Class Mortgage Pass-Throughs 8 18 - -------------------------------------------------------------------------------- Corporate Bonds 8 10 - -------------------------------------------------------------------------------- Inverse Floating Rate Mortgages 8 18 - -------------------------------------------------------------------------------- Taxable Municipal Bonds 5 5 - -------------------------------------------------------------------------------- Mortgage Pass-Throughs 1 2 - -------------------------------------------------------------------------------- Commercial Mortgage-Backed Securities 1 1 - -------------------------------------------------------------------------------- Other 1 2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CORPORATE CREDIT BREAKDOWN(3) - -------------------------------------------------------------------------------- CREDIT RATING OCTOBER 31, 2003 OCTOBER 31, 2002 - -------------------------------------------------------------------------------- AAA/Aaa --% 8% - -------------------------------------------------------------------------------- AA/Aa 35 19 - -------------------------------------------------------------------------------- A 43 42 - -------------------------------------------------------------------------------- BBB/Baa 21 30 - -------------------------------------------------------------------------------- BB/Ba -- 1 - -------------------------------------------------------------------------------- CCC/Caa 1 -- - -------------------------------------------------------------------------------- - ---------- (3) Using the higher of Standard & Poor's ("S&P"), Moody's Investors Service ("Moody's") or Fitch Ratings ("Fitch") rating. Corporate bonds represented approximately 11.0% and 13.3% of net assets on October 31, 2003 and October 31, 2002, respectively. 2 TRUST SUMMARIES OCTOBER 31, 2003 - --------------------------------- BLACKROCK CORE BOND TRUST (BHK) - --------------------------------- TRUST INFORMATION - -------------------------------------------------------------------------------- Symbol on New York Stock Exchange: BHK - -------------------------------------------------------------------------------- Initial Offering Date: November 27, 2001 - -------------------------------------------------------------------------------- Closing Market Price as of 10/31/03: $13.57 - -------------------------------------------------------------------------------- Net Asset Value as of 10/31/03: $14.75 - -------------------------------------------------------------------------------- Yield on Closing Market Price as of 10/31/03 ($13.57):(1) 7.74% - -------------------------------------------------------------------------------- Current Monthly Distribution per Share:(2) $ 0.0875 - -------------------------------------------------------------------------------- Current Annualized Distribution per Share:(2) $ 1.0500 - -------------------------------------------------------------------------------- (1) Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. (2) The distribution is not constant and is subject to change. The table below summarizes the changes in the Trust's market price and NAV: ---------------------------------------------------------------- 10/31/03 10/31/02 CHANGE HIGH LOW - -------------------------------------------------------------------------------- Market Price $13.57 $13.82 (1.81)% $15.41 $13.41 - -------------------------------------------------------------------------------- NAV $14.75 $14.33 2.93% $15.99 $14.08 - -------------------------------------------------------------------------------- The following charts show the Trust's asset composition and corporate credit quality allocations of the Trust's long-term investments: - -------------------------------------------------------------------------------- SECTOR BREAKDOWN - -------------------------------------------------------------------------------- COMPOSITION OCTOBER 31, 2003 OCTOBER 31, 2002 - -------------------------------------------------------------------------------- Corporate Bonds 46% 44% - -------------------------------------------------------------------------------- Mortgage Pass-Throughs 26 28 - -------------------------------------------------------------------------------- U.S. Government and Agency Securities 16 17 - -------------------------------------------------------------------------------- Foreign Government Bonds 7 3 - -------------------------------------------------------------------------------- Taxable Municipal Bonds 2 -- - -------------------------------------------------------------------------------- Commercial Mortgage-Backed Securities 2 6 - -------------------------------------------------------------------------------- Interest Only Mortgage-Backed Securities 1 2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CORPORATE CREDIT BREAKDOWN(3) - -------------------------------------------------------------------------------- CREDIT RATING OCTOBER 31, 2003 OCTOBER 31, 2002 - -------------------------------------------------------------------------------- AAA/Aaa 3% 14% - -------------------------------------------------------------------------------- AA/Aa 11 6 - -------------------------------------------------------------------------------- A 25 20 - -------------------------------------------------------------------------------- BBB/Baa 21 18 - -------------------------------------------------------------------------------- BB/Ba 12 10 - -------------------------------------------------------------------------------- B 23 29 - -------------------------------------------------------------------------------- CCC/Caa 5 1 - -------------------------------------------------------------------------------- Not Rated -- 2 - -------------------------------------------------------------------------------- - ---------- (3) Using the higher of S&P's, Moody's or Fitch's rating. Corporate bonds represented approximately 61.6% and 62.1% of net assets on October 31, 2003 and October 31, 2002, respectively. 3 TRUST SUMMARIES OCTOBER 31, 2003 - ---------------------------------- BLACKROCK HIGH YIELD TRUST (BHY) - ---------------------------------- TRUST INFORMATION - -------------------------------------------------------------------------------- Symbol on New York Stock Exchange: BHY - -------------------------------------------------------------------------------- Initial Offering Date: December 23, 1998 - -------------------------------------------------------------------------------- Closing Market Price as of 10/31/03: $10.25 - -------------------------------------------------------------------------------- Net Asset Value as of 10/31/03: $ 6.96 - -------------------------------------------------------------------------------- Yield on Closing Market Price as of 10/31/03 ($10.25):(1) 9.85% - -------------------------------------------------------------------------------- Current Monthly Distribution per Share:(2) $ 0.084167 - -------------------------------------------------------------------------------- Current Annualized Distribution per Share:(2) $ 1.010004 - -------------------------------------------------------------------------------- (1) Yield on closing market price is calculated by dividing the annualized distribution per share by the closing market price. (2) The distribution is not constant and is subject to change. The table below summarizes the changes in the Trust's market price and NAV: ---------------------------------------------------------------- 10/31/03 10/31/02 CHANGE HIGH LOW - -------------------------------------------------------------------------------- Market Price $10.25 $8.68 18.09% $11.20 $7.91 - -------------------------------------------------------------------------------- NAV $ 6.96 $6.13 13.54% $ 6.96 $6.02 - -------------------------------------------------------------------------------- The following chart shows the Trust's corporate credit quality allocations of the Trust's long-term investments: - -------------------------------------------------------------------------------- CORPORATE CREDIT BREAKDOWN(3) - -------------------------------------------------------------------------------- CREDIT RATING OCTOBER 31, 2003 OCTOBER 31, 2002 - -------------------------------------------------------------------------------- BBB/Baa 3% 4% - -------------------------------------------------------------------------------- BB/Ba 12 18 - -------------------------------------------------------------------------------- B 52 62 - -------------------------------------------------------------------------------- CCC/Caa 25 10 - -------------------------------------------------------------------------------- CC/Ca 5 3 - -------------------------------------------------------------------------------- Not Rated 3 3 - -------------------------------------------------------------------------------- - ---------- (3) Using the higher of S&P's, Moody's or Fitch's rating. Corporate bonds represented approximately 135.4% and 144.5% of net assets on October 31, 2003 and October 31, 2002, respectively. 4 TRUST SUMMARIES OCTOBER 31, 2003 - ------------------------------------------ BLACKROCK INCOME OPPORTUNITY TRUST (BNA) - ------------------------------------------ TRUST INFORMATION - -------------------------------------------------------------------------------- Symbol on New York Stock Exchange: BNA - -------------------------------------------------------------------------------- Initial Offering Date: December 20, 1991 - -------------------------------------------------------------------------------- Closing Market Price as of 10/31/03: $10.95 - -------------------------------------------------------------------------------- Net Asset Value as of 10/31/03: $11.93 - -------------------------------------------------------------------------------- Yield on Closing Market Price as of 10/31/03 ($10.95):(1) 7.67% - -------------------------------------------------------------------------------- Current Monthly Distribution per Share:(2) $ 0.07 - -------------------------------------------------------------------------------- Current Annualized Distribution per Share:(2) $ 0.84 - -------------------------------------------------------------------------------- (1) Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. (2) The distribution is not constant and is subject to change. The table below summarizes the changes in the Trust's market price and NAV: --------------------------------------------------------------- 10/31/03 10/31/02 CHANGE HIGH LOW - -------------------------------------------------------------------------------- Market Price $10.95 $10.50 4.29% $11.79 $10.30 - -------------------------------------------------------------------------------- NAV $11.93 $11.83 0.85% $12.86 $11.21 - -------------------------------------------------------------------------------- The following charts show the Trust's asset composition and credit quality allocations of the Trust's long-term investments: - -------------------------------------------------------------------------------- SECTOR BREAKDOWN - -------------------------------------------------------------------------------- COMPOSITION OCTOBER 31, 2003 OCTOBER 31, 2002 - -------------------------------------------------------------------------------- Corporate Bonds 59% 30% - -------------------------------------------------------------------------------- Mortgage Pass-Throughs 29 55 - -------------------------------------------------------------------------------- U.S. Government and Agency Securities 7 7 - -------------------------------------------------------------------------------- Federal Housing Administration 2 4 - -------------------------------------------------------------------------------- Interest Only Mortgage-Backed Securities 2 1 - -------------------------------------------------------------------------------- Inverse Floating Rate Mortgages 1 1 - -------------------------------------------------------------------------------- Principal Only Mortgage-Backed Securities -- 2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CORPORATE CREDIT BREAKDOWN(3) - -------------------------------------------------------------------------------- CREDIT RATING OCTOBER 31, 2003 OCTOBER 31, 2002 - -------------------------------------------------------------------------------- AAA/Aaa 6% 14% - -------------------------------------------------------------------------------- AA/Aa 12 8 - -------------------------------------------------------------------------------- A 22 21 - -------------------------------------------------------------------------------- BBB/Baa 19 13 - -------------------------------------------------------------------------------- BB/Ba 17 24 - -------------------------------------------------------------------------------- B 22 20 - -------------------------------------------------------------------------------- CCC/Caa 2 -- - -------------------------------------------------------------------------------- - ---------- (3) Using the higher of S&P's, Moody's or Fitch's rating. Corporate bonds represented approximately 71.2% and 40.9% of net assets on October 31, 2003 and October 31, 2002, respectively. 5 TRUST SUMMARIES OCTOBER 31, 2003 - ------------------------------ BLACKROCK INCOME TRUST (BKT) - ------------------------------ TRUST INFORMATION - -------------------------------------------------------------------------------- Symbol on New York Stock Exchange: BKT - -------------------------------------------------------------------------------- Initial Offering Date: July 22, 1988 - -------------------------------------------------------------------------------- Closing Market Price as of 10/31/03: $7.71 - -------------------------------------------------------------------------------- Net Asset Value as of 10/31/03: $7.21 - -------------------------------------------------------------------------------- Yield on Closing Market Price as of 10/31/03 ($7.71):(1) 7.94% - -------------------------------------------------------------------------------- Current Monthly Distribution per Share:(2) $0.051042 - -------------------------------------------------------------------------------- Current Annualized Distribution per Share:(2) $0.612504 - -------------------------------------------------------------------------------- (1) Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. (2) The distribution is not constant and is subject to change. The table below summarizes the changes in the Trust's market price and NAV: ------------------------------------------------------------- 10/31/03 10/31/02 CHANGE HIGH LOW - -------------------------------------------------------------------------------- Market Price $7.71 $8.07 (4.46)% $8.25 $6.80 - -------------------------------------------------------------------------------- NAV $7.21 $8.13 (11.32)% $8.09 $7.02 - -------------------------------------------------------------------------------- The following chart shows the Trust's asset composition of the Trust's corporate investments: - -------------------------------------------------------------------------------- SECTOR BREAKDOWN - -------------------------------------------------------------------------------- COMPOSITION OCTOBER 31, 2003 OCTOBER 31, 2002 - -------------------------------------------------------------------------------- Mortgage Pass-Throughs 32% 48% - -------------------------------------------------------------------------------- U.S. Government and Agency Securities 30 16 - -------------------------------------------------------------------------------- Interest Only Mortgage-Backed Securities 15 8 - -------------------------------------------------------------------------------- Principal Only Mortgage-Backed Securities 11 8 - -------------------------------------------------------------------------------- Inverse Floating Rate Mortgages 4 9 - -------------------------------------------------------------------------------- Federal Housing Administration 3 5 - -------------------------------------------------------------------------------- Agency Multiple Class Mortgage Pass-Throughs 3 2 - -------------------------------------------------------------------------------- Commercial Mortgage-Backed Securities 2 2 - -------------------------------------------------------------------------------- Non-Agency Multiple Class Mortgage Pass-Throughs -- 1 - -------------------------------------------------------------------------------- Adjustable Rate Mortgage Securities -- 1 - -------------------------------------------------------------------------------- 6 TRUST SUMMARIES OCTOBER 31, 2003 - ----------------------------------------------- BLACKROCK LIMITED DURATION INCOME TRUST (BLW) - ----------------------------------------------- TRUST INFORMATION - -------------------------------------------------------------------------------- Symbol on New York Stock Exchange: BLW - -------------------------------------------------------------------------------- Initial Offering Date: July 30, 2003 - -------------------------------------------------------------------------------- Closing Market Price as of 10/31/03: $18.80 - -------------------------------------------------------------------------------- Net Asset Value as of 10/31/03: $19.74 - -------------------------------------------------------------------------------- Yield on Closing Market Price as of 10/31/03 ($18.80):(1) 7.98% - -------------------------------------------------------------------------------- Current Monthly Distribution per Share:(2) $ 0.125 - -------------------------------------------------------------------------------- Current Annualized Distribution per Share:(2) $ 1.500 - -------------------------------------------------------------------------------- (1) Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. (2) The distribution is not constant and is subject to change. The table below summarizes the Trust's market price and NAV: ---------------------------------------------- 10/31/03 HIGH LOW - -------------------------------------------------------------------------------- Market Price $18.80 $20.01 $18.76 - -------------------------------------------------------------------------------- NAV $19.74 $19.76 $18.72 - -------------------------------------------------------------------------------- The following charts show the Trust's asset composition and corporate credit quality allocations of the Trust's long-term investments: - -------------------------------------------------------------------------------- SECTOR BREAKDOWN - -------------------------------------------------------------------------------- COMPOSITION OCTOBER 31, 2003 - -------------------------------------------------------------------------------- Corporate Bonds 47% - -------------------------------------------------------------------------------- Mortgage Pass-Throughs 24 - -------------------------------------------------------------------------------- Bank Loans 20 - -------------------------------------------------------------------------------- U.S. Government and Agency Securities 8 - -------------------------------------------------------------------------------- Foreign Government Bonds 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CORPORATE CREDIT BREAKDOWN(3) - -------------------------------------------------------------------------------- CREDIT RATING OCTOBER 31, 2003 - -------------------------------------------------------------------------------- A 6% - -------------------------------------------------------------------------------- BBB/Baa 8 - -------------------------------------------------------------------------------- BB/Ba 26 - -------------------------------------------------------------------------------- B 60 - -------------------------------------------------------------------------------- - ---------- (3) Using the higher of S&P's, Moody's or Fitch's rating. Corporate bonds represented approximately 64.6% of net assets on October 31, 2003. 7 TRUST SUMMARIES OCTOBER 31, 2003 - -------------------------------------- BLACKROCK STRATEGIC BOND TRUST (BHD) - -------------------------------------- TRUST INFORMATION - -------------------------------------------------------------------------------- Symbol on New York Stock Exchange: BHD - -------------------------------------------------------------------------------- Initial Offering Date: February 26, 2002 - -------------------------------------------------------------------------------- Closing Market Price as of 10/31/03: $15.27 - -------------------------------------------------------------------------------- Net Asset Value as of 10/31/03: $15.07 - -------------------------------------------------------------------------------- Yield on Closing Market Price as of 10/31/03 ($15.27):(1) 10.22% - -------------------------------------------------------------------------------- Current Monthly Distribution per Share:(2) $ 0.13 - -------------------------------------------------------------------------------- Current Annualized Distribution per Share:(2) $ 1.56 - -------------------------------------------------------------------------------- (1) Yield on closing market price is calculated by dividing the annualized distribution per share as of October 31, 2003 by the closing market price. (2) The distribution is not constant and is subject to change. The table below summarizes the changes in the Trust's market price and NAV: ----------------------------------------------------------------- 10/31/03 10/31/02 CHANGE HIGH LOW - -------------------------------------------------------------------------------- Market Price $15.27 $12.35 23.64% $15.52 $12.41 - -------------------------------------------------------------------------------- NAV $15.07 $12.63 19.32% $15.07 $12.91 - -------------------------------------------------------------------------------- The following chart shows the Trust's corporate credit quality allocations of the Trust's long-term investments: - -------------------------------------------------------------------------------- CORPORATE CREDIT BREAKDOWN(3) - -------------------------------------------------------------------------------- CREDIT RATING OCTOBER 31, 2003 OCTOBER 31, 2002 - -------------------------------------------------------------------------------- AAA/Aaa 1% 1% - -------------------------------------------------------------------------------- AA/Aa 5 6 - -------------------------------------------------------------------------------- A 9 10 - -------------------------------------------------------------------------------- BBB/Baa 10 12 - -------------------------------------------------------------------------------- BB/Ba 23 29 - -------------------------------------------------------------------------------- B 47 41 - -------------------------------------------------------------------------------- CCC/Caa 4 -- - -------------------------------------------------------------------------------- Not Rated 1 1 - -------------------------------------------------------------------------------- - ---------- (3) Using the higher of S&P's, Moody's or Fitch's rating. Corporate bonds represented approximately 134.4% and 143.4% of net assets on October 31, 2003 and October 31, 2002, respectively. 8 CONSOLIDATED PORTFOLIO OF INVESTMENTS OCTOBER 31, 2003 - -------------------------------------------------------- BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST (BCT) - --------------------------------------------------------
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS--135.6% MORTGAGE PASS-THROUGHS--1.8% Federal National Mortgage Assoc., $ 758 5.50%, 1/01/17 - 2/01/17 .............................................................. $ 780,934 47 6.50%, 7/01/29 ........................................................................ 48,755 ------------- Total Mortgage Pass-Throughs ............................................................ 829,689 ------------- AGENCY MULTIPLE CLASS MORTGAGE PASS-THROUGHS--11.2% Federal Home Loan Mortgage Corp., 2,168 Ser. 1510, Class G, 5/15/13 ........................................................... 2,317,007 400 Ser. 1534, Class IG, 2/15/10 .......................................................... 414,464 2 Ser. 1601, Class SD, 10/15/08 ......................................................... 2,039 Federal National Mortgage Assoc., 619 Ser. 10, Class V, 7/25/13 ............................................................. 626,679 232 Ser. 13, Class SJ, 2/25/09 ............................................................ 240,068 118 Ser. 43, Class E, 4/25/22 ............................................................. 122,852 1,000 Ser. 49, Class H, 4/25/13 ............................................................. 1,058,370 14 Ser. 87, Class J, 4/25/22 ............................................................. 14,446 450 Ser. 214, Class SK, 12/25/08 .......................................................... 495,293 ------------- Total Agency Multiple Class Mortgage Pass-Throughs ...................................... 5,291,218 ------------- INVERSE FLOATING RATE MORTGAGES--10.6% AAA 462 Citicorp Mortgage Securities, Inc., Ser. 14, Class A-4, 11/25/23 ........................ 540,221 Aaa 532 Countrywide Funding Corp., Ser. 2, Class A-12S, 2/25/09 ................................. 542,715 Federal Home Loan Mortgage Corp., 336 Ser. 1425, Class SB, 12/15/07 ......................................................... 418,446 132 Ser. 1506, Class S, 5/15/08 ........................................................... 151,678 106 Ser. 1515, Class S, 5/15/08 ........................................................... 117,217 117 Ser. 1618, Class SA, 11/15/08 ......................................................... 121,227 304 Ser. 1621, Class SH, 11/15/22 ......................................................... 317,755 34 Ser. 1626, Class SA, 12/15/08 ......................................................... 34,031 171 Ser. 1661, Class SB, 1/15/09 .......................................................... 186,068 413 Ser. 1688, Class S, 12/15/13 .......................................................... 446,295 Federal National Mortgage Assoc., 166 Ser. 32, Class SA, 5/25/32 ............................................................ 172,229 35 Ser. 48, Class SC, 6/25/33 ............................................................ 35,198 474 Ser. 187, Class SB, 10/25/07 .......................................................... 560,675 261 Ser. 190, Class S, 11/25/07 ........................................................... 317,251 274 Ser. 191, Class SD, 10/25/08 .......................................................... 303,414 59 Ser. 202, Class VB, 11/25/23 .......................................................... 60,904 324 Ser. 214, Class SH, 12/25/08 .......................................................... 360,162 Residential Funding Mortgage Securities I, Inc., AAA 169 Ser. S23, Class A-12, 6/25/08 ......................................................... 175,267 AAA 175 Ser. S23, Class A-16, 6/25/08 ......................................................... 179,975 ------------- Total Inverse Floating Rate Mortgages ................................................... 5,040,728 ------------- INTEREST ONLY MORTGAGE-BACKED SECURITIES--16.3% Federal Home Loan Mortgage Corp., 252 Ser. 65, Class I, 8/15/20 ............................................................. 42,530 82 Ser. 141, Class H, 5/15/21 ............................................................ 1,238 253 Ser. 1114, Class J, 7/15/06 ........................................................... 24,815 225 Ser. 1285, Class M, 5/15/07 ........................................................... 14,547 2,000 Ser. 1598, Class J, 10/15/08 .......................................................... 2,145,900 1,096 Ser. 1645, Class IB, 9/15/08 .......................................................... 90,466 210 Ser. 2063, Class PU, 10/15/26 ......................................................... 2,956 70 Ser. 2306, Class PM, 5/15/26 .......................................................... 22 1,299 Ser. 2462, Class NI, 8/15/21 .......................................................... 191,169 1,578 Ser. 2513, Class BI, 12/15/15 ......................................................... 142,547 3,100 Ser. 2542, Class IY, 5/15/16 .......................................................... 49,042 2,688 Ser. 2543, Class IJ, 10/15/12 ......................................................... 215,494
See Notes to Financial Statements. 9
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- INTEREST ONLY MORTGAGE-BACKED SECURITIES--(CONT'D) Federal Home Loan Mortgage Corp. (cont'd) $ 3,670 Ser. 2543, Class IM, 9/15/12 ........................................................ $ 191,619 5,419 Ser. 2572, Class IT, 5/15/19 ........................................................ 507,230 3,981 Ser. 2633, Class PI, 3/15/12 ........................................................ 346,264 4,577 Ser. 2672, Class TP, 9/15/16 ........................................................ 426,868 Federal National Mortgage Assoc., 607 Ser. 8, Class HA, 1/25/08 ........................................................... 96,006 582 Ser. 20, Class SL, 9/25/08 .......................................................... 109,332 134 Ser. 39, Class PE, 1/25/23 .......................................................... 8,985 321 Ser. 42, Class SO, 3/25/23 .......................................................... 10,813 1,701 Ser. 49, Class L, 4/25/13 ........................................................... 134,822 1,540 Ser. 51, Class K, 4/25/07 ........................................................... 192,476 12,992 Ser. 70, Class ID, 4/25/22 .......................................................... 2,105,484 173 Ser. 72, Class H, 7/25/06 ........................................................... 21,778 1,710 Ser. 80, Class PI, 9/25/23 .......................................................... 68,969 2,000 Ser. 82, Class IR, 9/25/12 .......................................................... 179,063 1,047 Ser. 90, Class M, 1/25/28 ........................................................... 152,561 10 Ser. 174, Class S, 9/25/22 .......................................................... 30,884 418 Ser. 194, Class PV, 6/25/08 ......................................................... 23,296 1,731 Ser. 208, Class S, 2/25/23 .......................................................... 57,402 348 Ser. 223, Class PT, 10/25/23 ........................................................ 31,234 7 Ser. G-21, Class L, 7/25/21 ......................................................... 15,856 75 PNC Mortgage Securities Corp., Ser. 8, Class 4-X, 10/25/28 ............................ 2,889 6,672 Structured Asset Securities Corp., Ser. ALS1, Class 3AX, 5/25/14 ...................... 28,468 28,355 Vendee Mortgage Trust, Ser. 1, Class 1IO, 10/15/31 .................................... 39,980 ------------- Total Interest Only Mortgage-Backed Securities ........................................ 7,703,005 ------------- PRINCIPAL ONLY MORTGAGE-BACKED SECURITIES--0.1% Aaa 55 Salomon Brothers Mortgage Securities Inc. VI, Ser. 3, Class A, 10/23/17 ............... 50,068 ------------- COMMERCIAL MORTGAGE-BACKED SECURITIES--1.7% AAA 750(2) New York City Mortgage Loan Trust, Multifamily, Ser. 1996, Class A2, 6.75%, 6/25/11 ... 826,187 ------------- ASSET-BACKED SECURITIES--0.1% NR 239(2,4,5) Global Rated Eligible Asset Trust, Ser. A, Class 1, 7.33%, 3/15/06 .................. 7,169 Structured Mortgage Asset Residential Trust, NR 577(4,5) Ser. 2, 8.24%, 3/15/06 .............................................................. 10,099 NR 640(4,5) Ser. 3, 8.724%, 4/15/06 ............................................................. 11,194 ------------- Total Asset-Backed Securities ......................................................... 28,462 ------------- U.S. GOVERNMENT AND AGENCY SECURITIES--75.5% 236 Small Business Investment Companies, Ser. P10A-1, Class 1, 6.12%, 2/01/08 ............. 250,178 27,000(3) U.S. Treasury Bond, zero coupon, 11/15/09 ............................................. 21,488,922 U.S. Treasury Notes, 3,200(3) 3.50%, 11/15/06 ..................................................................... 3,302,749 7,225(3) 4.375%, 8/15/12 ..................................................................... 7,334,502 500 5.00%, 8/15/11 ...................................................................... 533,535 1,700 5.75%, 11/15/05 ..................................................................... 1,831,485 550 6.00%, 8/15/09 ...................................................................... 621,887 385 6.625%, 5/15/07 ..................................................................... 436,584 ------------- Total U.S. Government and Agency Securities ........................................... 35,799,842 ------------- CORPORATE BONDS--11.0% CHEMICAL--2.5% A- 1,000 Dow Capital BV, 9.20%, 6/01/10 ........................................................ 1,192,660 ------------- CONSUMER PRODUCTS--1.1% BBB+ 500 General Mills, 8.75%, 9/15/04 ......................................................... 530,305 ------------- ENERGY--1.1% BBB+ 500(2) Israel Electric Corp., Ltd., 7.25%, 12/15/06 (Israel) ................................. 541,920 ------------- FINANCE & BANKING--4.8% A+ 500(2) Metropolitan Life Insurance Co., 6.30%, 11/01/03 ...................................... 500,000 Aa3 1,000(3) Morgan Stanley Group, Inc., 10.00%, 6/15/08 ........................................... 1,254,560 AA+ 500 UBS PaineWebber Group, Inc., 8.875%, 3/15/05 .......................................... 541,190 ------------- 2,295,750 -------------
See Notes to Financial Statements. 10
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- CORPORATE BONDS--(CONT'D) TELECOMMUNICATION--1.2% A $ 500 Alltel Corp., 7.50%, 3/01/06 ............................................................ $ 551,766 ------------- TRANSPORTATION--0.2% CCC 100 American Airlines, Inc., 10.44%, 3/04/07 ................................................ 79,500 ------------- Total Corporate Bonds ................................................................... 5,191,901 ------------- TAXABLE MUNICIPAL BONDS--7.3% AAA 500 Fresno California Pension Oblig., 7.80%, 6/01/14 ........................................ 619,445 AAA 500 Kern County California Pension Oblig., 6.98%, 8/15/09 ................................... 583,160 Los Angeles County California Pension Oblig., AAA 1,000 Ser. A, 8.62%, 6/30/06 ................................................................ 1,152,740 AAA 500 Ser. D, 6.97%, 6/30/08 ................................................................ 575,030 AAA 500 Orleans Parish Louisiana School Board, Ser. A, 6.60%, 2/01/08 ........................... 554,300 ------------- Total Taxable Municipal Bonds ........................................................... 3,484,675 ------------- TOTAL LONG-TERM INVESTMENTS--(cost $63,224,280) ......................................... 64,245,775 ------------- SHORT-TERM INVESTMENT--2.9% U.S. GOVERNMENT AGENCY SECURITY--2.9% 1,400(6) Student Loan Marketing, 0.94%, 11/03/03 (cost $1,399,927) ............................... 1,399,927 ------------- TOTAL INVESTMENTS--138.5% (cost $64,624,207) ............................................ 65,645,702 ------------- LIABILITIES IN EXCESS OF OTHER ASSETS--(38.5)% .......................................... (18,264,430) ------------- NET ASSETS--100% ........................................................................ $ 47,381,272 =============
- ---------- (1) Using the higher of S&P's, Moody's or Fitch's rating. (2) Security is not registered under the Securities Act of 1933. These securities may be resold in transactions in accordance with Rule 144A under that Act, to qualified institutional buyers. As of October 31, 2003, the Trust held 4.0% of its net assets, with a current market value of $1,875,276, in securities restricted as to resale. (3) Entire or partial principal amount pledged as collateral for reverse repurchase agreements or financial futures contracts. (4) Security is fair valued. (5) Illiquid securities representing 0.06% of net assets. (6) For purposes of amortized cost valuation, the maturity date of this instrument is considered to be the earlier of the next date on which the security can be redeemed at par, or the next date on which the rate of interest is adjusted. See Notes to Financial Statements. 11 PORTFOLIO OF INVESTMENTS OCTOBER 31, 2003 - --------------------------------- BLACKROCK CORE BOND TRUST (BHK) - ---------------------------------
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS--135.3% MORTGAGE PASS-THROUGHS--35.8% $ 3,225 Federal Home Loan Bank System, 4.50%, 9/16/13 ......................................... $ 3,152,341 Federal Home Loan Mortgage Corp., 1,875 3.50%, 4/01/08 ...................................................................... 1,862,213 7,500 3.875%, 11/10/08 .................................................................... 7,446,750 7,488 5.50%, 9/01/33 ...................................................................... 7,548,667 1,885 5.75%, 4/15/08 ...................................................................... 2,064,414 1,045 6.00%, 6/15/11 ...................................................................... 1,150,838 3,175(2) 6.625%, 9/15/09 ..................................................................... 3,616,516 1,340 6.875%, 9/15/10 ..................................................................... 1,548,772 972 7.00%, 3/15/10 - 9/01/31 ............................................................ 1,114,985 1,500 5.00%, TBA .......................................................................... 1,476,570 4,000 5.50%, TBA .......................................................................... 4,118,752 44,000 6.00%, TBA .......................................................................... 45,718,728 Federal National Mortgage Assoc., 2,225 1.75%, 6/16/06 ...................................................................... 2,172,179 3,000 2.75%, 8/11/06 ...................................................................... 2,991,390 1,500 3.75%, 9/15/08 ...................................................................... 1,490,085 1,280 4.75%, 2/21/13 ...................................................................... 1,259,110 8,270 5.50%, - 6/01/33 .................................................................... 8,344,449 1,740 5.75%, 2/15/08 ...................................................................... 1,906,309 11,600(2) 6.00%, 5/15/08 - 5/15/11 ............................................................ 12,805,616 6,745 6.625%, 10/15/07 - 11/15/10 ......................................................... 7,668,760 1,615 7.00%, 1/01/31 - 7/01/32 ............................................................ 1,700,860 2,380(2) 7.125%, 3/15/07 - 6/15/10 ........................................................... 2,726,018 3,410(2) 7.25%, 1/15/10 ...................................................................... 4,001,635 1,600 5.00%, TBA .......................................................................... 1,578,000 1,000 5.50%, TBA .......................................................................... 1,029,375 5,900 6.00%, TBA .......................................................................... 6,062,091 684 Government National Mortgage Assoc., 5.50%, 5/15/33 - 9/15/33 ......................... 692,967 27,248 Residential Accredit Loans, Inc., Ser. QS10, Class A16, 6.43%, 10/25/03 ............... 2,929,143 2,550 Small Business Admin., Ser. P10B, Class 1, 5.136%, 8/10/13 ............................ 2,599,008 ------------- Total Mortgage Pass-Throughs .......................................................... 142,776,541 ------------- INTEREST ONLY MORTGAGE-BACKED SECURITIES--1.5% 5,317 Federal Home Loan Mortgage Corp., Ser. 2579, Class HI, 8/15/17 ........................ 787,085 Federal National Mortgage Assoc., 9,700 Ser. 16, Class IW, 11/25/12 ......................................................... 791,115 24,146 Ser. 92, Class IC, 4/25/13 .......................................................... 3,412,585 1,009 Residential Funding Mortgage Securities I, Inc., Ser. S6, Class A7, 4/25/17 ........... 1,020,114 ------------- Total Interest Only Mortgage-Backed Securities ........................................ 6,010,899 ------------- COMMERCIAL MORTGAGE-BACKED SECURITIES--2.5% AAA 1,437 Banc of America Funding Corp., Class A1, 6.00%, 5/20/33 ............................... 1,443,370 AAA 1,677 Heller Financial Commercial Mortgage Asset Co., Ser. PH1, Class A2, 6.847%, 5/15/31 ... 1,882,818 AAA 1,470 Morgan Stanley Capital I, Inc., Ser. HF2, Class A2, 6.48%, 11/15/30 ................... 1,634,632 AAA 431 Residential Funding Mortgage Securities I, Inc., Ser. S6, Class A7, 6.00%, 4/25/17 .... 434,792 AAA 3,500 Salomon Brothers Mortgage Securities VII, Ser. C1, Class A2, 7.52%, 12/18/09 .......... 4,066,301 AAA 414 Washington Mutual Mortgage Securitization Corp., Ser. 12, Class A, 6.50%, 5/25/32 ..... 421,083 ------------- Total Commercial Mortgage-Backed Securities ........................................... 9,882,996 ------------- U.S. GOVERNMENT AND AGENCY SECURITIES--21.8% 1,050 Resolution Funding Corp., Zero coupon, 7/15/18 - 10/15/18 ............................. 456,278 U.S. Treasury Bonds, 9,955 Zero coupon, 8/15/22 - 2/15/23 ...................................................... 3,458,375 15,615(2) 5.375%, 2/15/31 ..................................................................... 16,136,510 560 6.00%, 2/15/26 ...................................................................... 615,169 4,745(2) 6.75%, 8/15/26 ...................................................................... 5,694,370 3,350 7.625%, 11/15/22 .................................................................... 4,349,767
See Notes to Financial Statements. 12
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AND AGENCY SECURITIES--(CONT'D) U.S. Treasury Bonds, $11,325(2) 8.125%, 8/15/19 ..................................................................... $ 15,197,618 1,360 9.25%, 2/15/16 ...................................................................... 1,942,676 5,310(2) 10.375%, 11/15/12 ................................................................... 6,804,680 2,230(2) 12.00%, 8/15/13 ..................................................................... 3,094,734 U.S. Treasury Notes, 13,765(2) 1.625%, 1/31/05 - 10/31/05 .......................................................... 13,718,105 1,265 2.375%, 8/15/06 ..................................................................... 1,268,953 1,515(2) 4.00%, 11/15/12 ..................................................................... 1,492,097 10,540 4.25%, 8/15/13 ...................................................................... 10,497,186 2,000(2) 5.00%, 8/15/11 ...................................................................... 2,134,140 ------------- Total U.S. Government and Agency Securities ........................................... 86,860,658 ------------- CORPORATE BONDS--61.6% AERO & DEFENSE--2.0% B- 3,000 BE Aerospace, Inc., Ser. B, 8.00%, 3/01/08 ............................................ 2,700,000 A 270 General Dynamics Corp., 4.50%, 8/15/10 ................................................ 272,498 Lockheed Martin Corp., BBB 1,485 7.20%, 5/01/36 ...................................................................... 1,689,900 BBB 475 8.50%, 12/01/29 ..................................................................... 616,659 Northrop Grumman Corp., BBB 380 7.125%, 2/15/11 ..................................................................... 434,481 BBB 960 7.875%, 3/01/26 ..................................................................... 1,140,132 BBB- 1,000(2) Raytheon Co., 6.55%, 3/15/10 .......................................................... 1,094,973 ------------- 7,948,643 ------------- AUTOMOTIVE--3.2% A3 2,000 Chrysler Corporation, 7.45%, 3/01/27 .................................................. 1,984,396 B 2,000 CSK Auto, Inc., 12.00%, 6/15/06 ....................................................... 2,245,000 DaimlerChrysler NA Holding Corp., A3 975 4.05%, 6/04/08 ...................................................................... 947,359 A3 940 4.75%, 1/15/08 ...................................................................... 936,578 B3 1,500 Delco Remy Intl., Inc., 11.00%, 5/01/09 ............................................... 1,376,250 Baa1 850 General Motors Corp., 8.375%, 7/15/33 ................................................. 896,614 B+ 3,000(3) Sonic Automotive Inc., 8.625%, 8/15/13 ................................................ 3,172,500 B+ 1,000(3) TRW Automotive, Inc., 9.375%, 2/15/13 ................................................. 1,135,000 ------------- 12,693,697 ------------- BUILDING & DEVELOPMENT--1.5% B- 2,000 Ainsworth Lumber Co. Ltd., 12.50%, 7/15/07, (Canada) .................................. 2,280,000 BB 3,000 Hovnanian Enterprises, Inc., 10.50%, 10/01/07 ......................................... 3,551,250 ------------- 5,831,250 ------------- CHEMICAL--2.6% CCC+ 3,000 Avecia Group PLC, 11.00%, 7/01/09, (United Kingdom) ................................... 2,790,000 Dow Chemical Co., A- 1,650 5.97%, 1/15/09 ...................................................................... 1,755,303 A- 175 6.125%, 2/01/11 ..................................................................... 184,767 A- 1,460 7.375%, 11/01/29 .................................................................... 1,599,342 BB- 4,000 Lyondell Chemical Co., Ser. B, 9.875%, 5/01/07 ........................................ 4,060,000 ------------- 10,389,412 ------------- CONGLOMERATES--0.4% Tyco Intl. Group SA, (Luxembourg), BBB- 930 5.80%, 8/01/06 ...................................................................... 971,850 BBB- 684 6.375%, 2/15/06 ..................................................................... 723,070 ------------- 1,694,920 ------------- CONSUMER PRODUCTS--4.6% BB+ 3,000 American Greetings Corp., 11.75%, 7/15/08 ............................................. 3,465,000 A 1,025 Avery Dennison Corp., 4.875%, 1/15/13 ................................................. 1,015,673 BBB 220(3) Cadbury Schweppes US Finance, 5.125%, 10/01/13 ........................................ 217,900 B+ 1,950 Elizabeth Arden, Inc., Ser. B, 11.75%, 2/01/11 ........................................ 2,232,750 BBB+ 510 General Mills, Inc., 6.00%, 2/15/12 ................................................... 544,226 BBB 690 Kellogg Co., Ser. B, 6.60%, 4/01/11 ................................................... 771,220 Kraft Foods, Inc., A3 400 5.25%, 6/01/07 ...................................................................... 423,440 A3 4,250 5.625%, 11/01/11 .................................................................... 4,420,723
See Notes to Financial Statements. 13
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- CONSUMER PRODUCTS--(CONT'D) Kroger Co., BBB $ 650 6.80%, 4/01/11 ...................................................................... $ 724,395 BBB 550 Ser. B, 7.70%, 6/01/29 .............................................................. 635,524 B- 1,000 Pantry, Inc., The, 10.25%, 10/15/07 ................................................... 1,035,000 AA 3,035 Wal Mart Stores Inc., 3.375%, 10/01/08 ................................................ 2,991,639 ------------- 18,477,490 ------------- CONTAINERS & GLASS--0.7% B 1,000 Crown European Holdings SA, 10.875%, 3/01/13, (United Kingdom) ........................ 1,140,000 BB 1,500 Owens-Brockway Glass Container, 8.75%, 11/15/12 ....................................... 1,638,750 ------------- 2,778,750 ------------- ECOLOGICAL SERVICES & EQUIPMENT--1.4% B+ 5,000 Allied Waste NA, Inc., Ser. B, 10.00%, 8/01/09 ........................................ 5,437,500 ------------- ELECTRONICS--0.9% CCC- 2,500 Knowles Electronics Holdings, Inc., 13.125%, 10/15/09 ................................. 2,475,000 B 1,000 Stoneridge, Inc., 11.50%, 5/01/12 ..................................................... 1,161,250 ------------- 3,636,250 ------------- ENERGY--7.6% BBB 350 Amerada Hess Corp., 7.30%, 8/15/31 .................................................... 351,606 BBB+ 765(2) Anadarko Petroleum Corp., 5.375%, 3/01/07 ............................................. 817,471 CCC+ 1,000 Calpine Canada Energy Finance ULC, 8.50%, 5/01/08, (Canada) ........................... 732,500 BBB 270(3) Centerpoint Energy Houston, Ser. K, 6.95%, 3/15/33 .................................... 297,513 BB- 1,250 Chesapeake Energy Corp., 9.00%, 8/15/12 ............................................... 1,425,000 BB 1,000 Compagnie Generale De Geophysique SA, 10.625%, 11/15/07, (France) ..................... 1,060,000 A- 665 Conoco Funding Co., 6.35%, 10/15/11 ................................................... 738,955 A- 1,085 ConocoPhillips, 5.90%, 10/15/32 ....................................................... 1,075,745 A- 1,795 ConocoPhillips Holding Co., 6.95%, 4/15/29 ............................................ 2,012,949 BBB 550 Devon Energy, Corp., 7.95%, 4/15/32 ................................................... 661,645 BBB 140 Devon Financing Corp. ULC, 7.875%, 9/30/31 ............................................ 166,029 BBB+ 1,225 Dominion Resources, Inc., Ser. E, 6.75%, 12/15/32 ..................................... 1,299,394 B 3,000 Dresser, Inc., 9.375%, 4/15/11 ........................................................ 3,082,500 DTE Energy Co., BBB 250 6.00%, 6/01/04 ...................................................................... 255,635 BBB 660 6.45%, 6/01/06 ...................................................................... 712,411 B- 2,500(3) Dynegy Holdings Inc., 10.125%, 7/15/13 ................................................ 2,700,000 El Paso Natural Gas Co., B+ 850 7.625%, 8/01/10 ..................................................................... 841,500 B+ 265 8.375%, 6/15/32 ..................................................................... 246,450 B+ 2,250(3) El Paso Production Holding Co., 7.75%, 6/01/13 ........................................ 2,160,000 BBB+ 305 Exelon Corp., 6.75%, 5/01/11 .......................................................... 338,028 Baa2 530 FirstEnergy Corp., Ser. C, 7.375%, 11/15/31 ........................................... 566,183 BBB+ 220 Kinder Morgan Energy Partners LP, 7.30%, 8/15/33 ...................................... 244,838 BBB 930 Kinder Morgan, Inc., 7.25%, 3/01/28 ................................................... 1,021,001 BB- 2,000 Leviathan Gas Pipeline Partners LP, Ser. B, 10.375%, 6/01/09 .......................... 2,170,000 BBB+ 360 Occidental Petroleum Corp., 7.20%, 4/01/28 ............................................ 409,909 Oncor Electric Delivery Co., Baa1 435(3) 6.375%, 1/15/15 ..................................................................... 464,838 Baa1 350(3) 7.25%, 1/15/33 ...................................................................... 392,575 Baa1 1,650 Petroleos Mexicanos, 9.375%, 12/02/08, (Mexico) ....................................... 1,922,250 BBB+ 195 Texas Eastern Transmission LP, 7.00%, 7/15/32 ......................................... 210,477 BBB 955 Valero Energy Corp., 7.50%, 4/15/32 ................................................... 1,044,995 A3 725 Virginia Electric & Power Co., Ser. A, 5.75%, 3/31/06 ................................. 779,629 ------------- 30,202,026 ------------- FINANCE & BANKING--17.9% Aa1 1,000(2,3) American General Instl. Capital A, 7.57%, 12/01/45 .................................... 1,179,580 Bank of America Corp., Aa2 1,000 3.875%, 1/15/08 ..................................................................... 1,016,490 Aa3 1,350 7.40%, 1/15/11 ...................................................................... 1,570,320 Aa2 325 Bank One NA, 3.70%, 1/15/08 ........................................................... 327,652 A1 1,980 Bear Stearns Cos., Inc., 2.875%, 7/02/08 .............................................. 1,908,304 AAA 200(3) Camp Pendleton & Quantico Housing LLC, Military Housing Rev., Ser. A1, 5.937%, 10/01/43 198,626
See Notes to Financial Statements. 14
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- FINANCE & BANKING--(CONT'D) Citigroup, Inc., Aa2 $ 2,675 5.875%, 2/22/33 ..................................................................... $ 2,650,042 Aa1 185 6.875%, 6/01/25 ..................................................................... 205,029 Aa2 2,465 7.25%, 10/01/10 ..................................................................... 2,866,795 Aa3 585 Credit Suisse First Boston USA, Inc., 6.125%, 11/15/11 ................................ 632,543 BB 1,000(3) Crum & Forster Holdings Corp., 10.375%, 6/15/13 ....................................... 1,075,000 Ford Motor Credit Co., A3 650 5.625%, 10/01/08 .................................................................... 637,143 A3 1,320 7.375%, 10/28/09 .................................................................... 1,363,375 A3 505 7.875%, 6/15/10 ..................................................................... 531,316 Baa2 280 Fund American Cos, Inc., 5.875%, 5/15/13 .............................................. 276,912 General Electric Capital Corp., AAA 1,050 3.50%, 8/15/07 ...................................................................... 1,056,804 AAA 2,720 Ser. A, 5.875%, 2/15/12 ............................................................. 2,894,896 AAA 2,775 Ser. A, 6.00%, 6/15/12 .............................................................. 2,987,454 AAA 1,080 Ser. A, 6.125%, 2/22/11 ............................................................. 1,177,632 General Motors Acceptance Corp., A3 2,139 6.875%, 9/15/11 ..................................................................... 2,208,945 A3 150 8.00%, 11/01/31 155,280 Goldman Sachs Group, Inc., Aa3 2,050 5.25%, 10/15/13 ..................................................................... 2,051,669 Aa3 750 6.125%, 2/15/33 ..................................................................... 746,183 Aa3 940 6.60%, 1/15/12 ...................................................................... 1,043,447 Aa3 190 6.875%, 1/15/11 ..................................................................... 214,979 Aa3 135 7.35%, 10/01/09 ..................................................................... 156,792 Household Finance Corp., A1 160 4.75%, 7/15/13 ...................................................................... 154,696 A1 1,760 6.375%, 8/01/10 - 11/27/12 .......................................................... 1,924,784 A1 2,325 6.75%, 5/15/11 ...................................................................... 2,602,559 A1 475 7.625%, 5/17/32 ..................................................................... 564,899 A1 825 HSBC Holdings PLC, 5.25%, 12/12/12 .................................................... 841,187 Aa3 1,750(3) ING Bank NV, 5.125%, 5/01/15, (Netherlands) ........................................... 1,730,015 JP Morgan Chase & Co., A+ 540 3.625%, 5/01/08 ..................................................................... 539,039 A 1,155 6.75%, 2/01/11 ...................................................................... 1,294,351 Lehman Brothers Holdings, Inc., A1 165 6.25%, 5/15/06 ...................................................................... 179,523 A1 175 7.00%, 2/01/08 ...................................................................... 198,172 AA 650(3) Massachusetts Mutual Life Insurance Co., 5.625%, 5/15/33 .............................. 618,007 A 390 Metlife, Inc., 6.50%, 12/15/32 ........................................................ 408,252 Morgan Stanley, Aa3 375 5.80%, 4/01/07 ...................................................................... 404,348 Aa3 285 6.75%, 4/15/11 ...................................................................... 319,271 A- 20,300(3) Morgan Stanley Tracers, 5.894%, 3/01/03 ............................................... 21,783,118 A 415(3) Pacific Life Corp., 6.60%, 9/15/33 .................................................... 433,223 AA 775(3) Principal Life Global, 5.25%, 1/15/13 ................................................. 781,766 A- 635 Prudential Financial Inc., 5.75%, 7/15/33 ............................................. 588,924 A+ 1,000(3) Prudential Funding LLC, 6.60%, 5/15/08 ................................................ 1,115,090 Sears Roebuck Acceptance Corp., Baa1 725 6.75%, 8/15/11 ...................................................................... 812,798 Baa1 1,305 7.00%, 2/01/11 - 6/01/32 ............................................................ 1,432,078 SLM Corp., A 1,150 1.381%, 7/25/07 ..................................................................... 1,150,850 A 90 5.625%, 4/10/07 ..................................................................... 97,345 Aa3 375 U.S. Bancorp, Ser. N, 3.95%, 8/23/07 .................................................. 384,727 ------------- 71,492,230 ------------- FOREST PRODUCTS--1.5% B+ 3,425 Caraustar Industries, Inc., 9.875%, 4/01/11 ........................................... 3,562,000 Weyerhaeuser Co., BBB 1,245 6.875%, 12/15/33 .................................................................... 1,268,046 BBB 1,060 6.95%, 10/01/27 ..................................................................... 1,075,805 ------------- 5,905,851 -------------
See Notes to Financial Statements. 15
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- HEALTH CARE--1.0% D $ 2,000(4) HealthSouth Corp., 7.625%, 6/01/12 .................................................... $ 1,740,000 B 2,000 United Surgical Partners Int'l., Inc., 10.00%, 12/15/11 ............................... 2,220,000 ------------- 3,960,000 ------------- HOTELS & CASINO--1.2% B+ 1,000 Circus & Eldorado Joint Venture, 10.125%, 3/01/12 ..................................... 1,023,750 Ba3 2,574 HMH Properties, Inc., Ser. A, 7.875%, 8/01/05 ......................................... 2,641,568 B 1,000 Resorts Intl. Hotel & Casino, Inc., 11.50%, 3/15/09 ................................... 1,030,000 ------------- 4,695,318 ------------- INDUSTRIAL EQUIPMENT--1.3% B 3,000 Terex Corp., 9.25%, 7/15/11 ........................................................... 3,285,000 B+ 2,000(2) United Rentals, Inc., Ser. B, 9.25%, 1/15/09 .......................................... 2,100,000 ------------- 5,385,000 ------------- LEISURE--0.8% BB+ 3,000 Royal Caribbean Cruises Ltd., 8.125%, 7/28/04, (Liberia) .............................. 3,105,000 ------------- MEDIA--6.5% B1 4,000 Alliance Atlantis Communications, Inc., 13.00%, 12/15/09, (Canada) .................... 4,615,000 BBB+ 80 AOL Time Warner, Inc., 6.125%, 4/15/06 ................................................ 86,088 Ca 4,000 Charter Communications Holdings LLC, 10.75%, 10/01/09 ................................. 3,380,000 BBB 1,050 Comcast Cable Communications, Inc., 6.875%, 6/15/09 ................................... 1,174,258 BBB 3,550 Comcast Corp., 5.50%, 3/15/11 ......................................................... 3,662,677 Baa1 355(3) COX Enterprises, Inc., 4.375%, 5/01/08 ................................................ 359,278 BB- 4,000 EchoStar DBS Corp., 10.375%, 10/01/07 ................................................. 4,400,000 BBB- 700 News America Inc., 7.625%, 11/30/28 ................................................... 803,243 BBB 1,975 TCI Communications Inc., 7.875%, 2/15/26 .............................................. 2,256,307 BBB 10 Tele-Communications-TCI Group, 7.875%, 8/01/13 ........................................ 11,706 Time Warner, Inc., BBB+ 90 6.625%, 5/15/29 ..................................................................... 89,266 BBB+ 260 6.875%, 6/15/18 ..................................................................... 279,777 BBB+ 4,380 7.57%, 2/01/24 ...................................................................... 4,817,912 ------------- 25,935,512 ------------- REAL ESTATE--1.1% AvalonBay Communities, Inc., BBB+ 350 6.625%, 9/15/11 ..................................................................... 381,381 BBB+ 775 8.25%, 7/15/08 ...................................................................... 915,368 BBB+ 315 EOP Operating LP, 7.50%, 4/19/29 ...................................................... 348,800 ERP Operating LP, BBB+ 1,950 5.20%, 4/01/13 ...................................................................... 1,940,074 BBB+ 825 6.95%, 3/02/11 ...................................................................... 919,982 ------------- 4,505,605 ------------- TELECOMMUNICATION--3.9% A+ 170 Ameritech Capital Funding Corp., 6.45%, 1/15/18 ....................................... 189,373 A- 1,015 British Telecommunications PLC, 8.875%, 12/15/30, (United Kingdom) .................... 1,311,441 Deutsche Telekom Intl. Finance BV, (Netherlands) BBB+ 1,060 8.50%, 6/15/10 ...................................................................... 1,275,191 BBB+ 1,585 8.75%, 12/15/03 ..................................................................... 1,994,754 Aa3 1,750 New England Telephone & Telegraph Co., 7.875%, 11/15/29 ............................... 2,064,510 Aa3 230 New Jersey Bell Telephone Co., 7.85%, 11/15/29 ........................................ 272,258 Nextel Communications, Inc., B+ 2,000 9.375%, 11/15/09 .................................................................... 2,180,000 B+ 3,000 9.50%, 2/01/11 ...................................................................... 3,382,500 BBB+ 375(3) Telecom Italia Cap, 5.25%, 11/15/13, (Italy) .......................................... 372,939 A+ 325 Verizon Global Funding Corp., 7.75%, 12/01/30 - 6/15/32 ............................... 377,065 Aa3 1,750 Verizon New Jersey, Inc., Ser. A, 5.875%, 1/17/12 ..................................... 1,839,967 A 350 Vodafone Group PLC, 6.25%, 11/30/32, (United Kingdom) ................................. 350,361 ------------- 15,610,359 -------------
See Notes to Financial Statements. 16
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TRANSPORTATION--1.5% Aa3 $ 1,485 Burlington Northern Santa Fe Railway, Ser. 1, 8.251%, 1/15/21 ........................... $ 1,798,445 BBB+ 1,410(2) Canadian National Railway Co., 6.90%, 7/15/28, (Canada) ................................. 1,558,233 BBB 1,450 Canadian Pacific Railway Ltd., 6.25%, 10/15/11, (Canada) ................................ 1,586,605 A- 634 Continental Airlines, Inc., Ser. A, 6.545%, 2/02/19 ..................................... 630,180 Baa1 375 Norfolk Southern Corp., 7.05%, 5/01/37 .................................................. 412,815 ------------- 5,986,278 ------------- Total Corporate Bonds ................................................................... 245,671,091 ------------- TAXABLE MUNICIPAL BONDS--2.8% California Dept. of Wtr. Res. Pwr. Sply., A3 5,000 3.585%, 5/01/04 ....................................................................... 5,041,050 A3 650 3.975%, 5/01/05 ....................................................................... 660,582 AA 4,275 Illinois State, Taxable Pension, 5.10%, 6/01/33 ......................................... 3,865,669 AA- 1,400 Oregon State, Taxable Pension, 5.892%, 6/01/27 .......................................... 1,417,570 ------------- Total Taxable Municipal Bonds ........................................................... 10,984,871 ------------- FOREIGN GOVERNMENT BONDS--9.3% Aaa 5,850 Canada Government, 5.25%, 6/01/13 ....................................................... 4,568,234 AAA 4,260 France Government, 3.50%, 1/12/08 ....................................................... 4,947,509 AAA 9,860 Germany Federal Republic, 3.00%, 4/11/08 ................................................ 11,209,038 Kingdom of Sweden, AAA 21,325 5.00%, 1/28/09 ........................................................................ 2,803,763 AAA 17,515 8.00%, 8/15/07 ........................................................................ 2,545,164 Quebec Province Canada, A+ 550 7.38%, 4/09/26 ........................................................................ 652,408 A+ 2,475 7.50%, 7/15/23 ........................................................................ 3,000,591 United Mexican States, Baa2 350 4.625%, 10/08/08 ...................................................................... 351,225 Baa2 4,000 6.625%, 3/03/15 ....................................................................... 4,080,000 Baa2 2,770 8.00%, 9/24/22 ........................................................................ 2,991,600 ------------- Total Foreign Government Bonds .......................................................... 37,149,532 ------------- TOTAL LONG-TERM INVESTMENTS--(cost $527,426,624) ........................................ 539,336,588 ------------- SHORT-TERM INVESTMENTS--1.2% U.S. GOVERNMENT AND AGENCY SECURITIES--1.2% 1,100(5) Student Loan Marketing, 0.94%, 11/03/03 ................................................. 1,099,943 U.S. Treasury Bonds 2,284(5) 0.55%, 11/03/03 ....................................................................... 1,344,000 1,344(5) 0.85%, 11/17/03 ....................................................................... 2,284,187 ------------- TOTAL SHORT-TERM INVESTMENTS (cost $4,728,130) .......................................... 4,728,130 ------------- TOTAL INVESTMENTS BEFORE INVESTMENTS SOLD SHORT AND OUTSTANDING OPTIONS WRITTEN (COST $532,154,754) ................................................................... 544,064,718 ------------- INVESTMENTS SOLD SHORT--(0.4)% (1,500) Federal Home Loan Mortgage Corp., 5.00%, TBA (proceeds $1,458,281) ...................... (1,459,680) ------------- NOTIONAL AMOUNT (000) ---------- OUTSTANDING OPTIONS WRITTEN--(0.5)% $ 2,750 Federal Home Loan Mortgage Corp., 5.00%, expires 2/01/04 ................................ (34,375) 52,700 Interest Rate Swap, 3.60% over 3 month LIBOR, expires 11/01/04 .......................... (541,016) 39,000 Interest Rate Swap, 5.75% over 3 month LIBOR, expires 9/23/05 ........................... (890,760) 11,000 Interest Rate Swap, 6.00% over 3 month LIBOR, expires 10/25/04 .......................... (439,005) 158 U.S. Treasury Notes Futures ............................................................. (248,296) ------------- Total Outstanding Options Written (premium received $2,069,401) ......................... (2,153,452) ------------- TOTAL INVESTMENTS, NET OF INVESTMENTS SOLD SHORT AND OUTSTANDING OPTIONS WRITTEN--135.6% 540,451,586 LIABILITIES IN EXCESS OF OTHER ASSETS--(35.6)% .......................................... (141,911,876) ------------- NET ASSETS--100% ........................................................................ $ 398,539,710 =============
- ---------- (1) Using the higher of S&P's, Moody's or Fitch's rating. (2) Entire or partial principal amount pledged as collateral for reverse repurchase agreements or financial futures contracts. (3) Security is not registered under the Securities Act of 1933. These securities may be resold in transactions in accordance with Rule 144A under that Act, to qualified institutional buyers. As of October 31, 2003, the Trust held 10.1% of its net assets, with a current market value of $40,186,968, in securities restricted as to resale. (4) Issuer is technically in default and/or bankruptcy. (5) For purposes of amortized cost valuation, the maturity date of this instrument is considered to be the earlier of the next date on which the security can be redeemed at par, or the next date on which the rate of interest is adjusted. See Notes to Financial Statements. 17 PORTFOLIO OF INVESTMENTS OCTOBER 31, 2003 - ---------------------------------- BLACKROCK HIGH YIELD TRUST (BHY) - ----------------------------------
PRINCIPAL AMOUNT RATING(1) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS--135.8% CORPORATE BONDS--135.4% AERO & DEFENSE--3.3% B- $1,000 BE Aerospace, Inc., 9.50%, 11/01/08 ................................................... $ 942,500 NR 1,500(2) Condor Systems Inc., Ser. B, 11.875%, 5/01/09 ......................................... 525,000 ------------- 1,467,500 ------------- AUTOMOTIVE--4.6% B 1,000 CSK Auto, Inc., 12.00%, 6/15/06 ....................................................... 1,122,500 B3 1,000 Delco Remy Intl., Inc., 11.00%, 5/01/09 ............................................... 917,500 ------------- 2,040,000 ------------- BASIC MATERIAL--0.6% NR 2,000(2) Golden Northwest Aluminum Inc., 12.00%, 12/15/06 ...................................... 115,000 NR 376(2) Republic Engineered Products LLC, 10.00%, 8/16/09 ..................................... 112,941 NR 2,000(2) Republic Technologies International LLC, 13.75%, 7/15/09 .............................. 40,000 ------------- 267,941 ------------- BUILDING & DEVELOPMENT--7.8% B- 1,500 Ainsworth Lumber Co. Ltd., 12.50%, 7/15/07, (Canada) .................................. 1,710,000 Ba1 1,000 D.R. Horton, Inc., 10.50%, 4/01/05 .................................................... 1,090,000 CCC 1,000 MMI Prods Inc., Ser. B, 11.25%, 4/15/07 ............................................... 650,000 ------------- 3,450,000 ------------- CHEMICAL--9.8% CCC+ 250 Avecia Group PLC, 11.00%, 7/01/09, (United Kingdom) ................................... 232,500 Ba2 1,000 Hercules Inc., 11.125%, 11/15/07 ...................................................... 1,162,500 B 1,000(3) Huntsman LLC, 11.625%, 10/15/10 ....................................................... 960,000 B 1,000 Lyondell Chemical Co., 10.875%, 5/01/09 ............................................... 980,000 NR 1,750(2) Mississippi Chemical Corp., 7.25%, 11/15/17 ........................................... 140,000 CCC- 1,000 Solutia, Inc., 11.25%, 7/15/09 ........................................................ 890,000 ------------- 4,365,000 ------------- CONGLOMERATES--2.5% B- 1,000 Penhall Intl., Inc., 12.00%, 8/01/06 .................................................. 862,500 NR 250 Precision Partners Inc., 12.00%, 2/01/07 .............................................. 250,376 ------------- 1,112,876 ------------- CONSUMER PRODUCTS--16.7% BB+ 1,000 American Greetings Corp., 11.75%, 7/15/08 ............................................. 1,155,000 B+ 650 Elizabeth Arden, Inc., Ser. B, 11.75%, 2/01/11 ........................................ 744,250 B 250 Levi Strauss & Co., 11.625%, 1/15/08 .................................................. 215,000 B3 441 National Vision Inc., 12.00%, 3/30/09 ................................................. 233,685 NR 1,200(2) Nebco Evans Holding Co., 12.375%, 7/15/07 ............................................. 0 B- 1,100 Pantry, Inc., The, 10.25%, 10/15/07 ................................................... 1,138,500 Revlon Consumer Products Corp., CCC- 2,000 8.625%, 2/01/08 ..................................................................... 980,000 CCC+ 1,000 12.00%, 12/01/05 .................................................................... 980,000 B- 1,000 Sbarro, Inc., 11.00%, 9/15/09 ......................................................... 865,000 B- 1,000 St. John Knits Intl., Inc., 12.50%, 7/01/09 ........................................... 1,102,500 ------------- 7,413,935 ------------- CONTAINERS & GLASS--4.8% B 1,000(3) Radnor Holdings Inc., 11.00%, 3/15/10 ................................................. 860,000 CCC+ 1,500 U.S. Can Co., Ser. B, 12.375%, 10/01/10 ............................................... 1,275,000 ------------- 2,135,000 ------------- ECOLOGICAL SERVICES & EQUIPMENT--2.4% B+ 1,000 Allied Waste NA, Inc., Ser. B, 10.00%, 8/01/09 ........................................ 1,087,500 ------------- ELECTRONICS--10.1% B3 1,000 Communications & Power Industry Inc., 12.00%, 8/01/05 ................................. 1,012,500 CCC- 2,500 Knowles Electronics Holdings, Inc., 13.125%, 10/15/09 ................................. 2,475,000 B 825 On Semiconductor Corp., 12.00%, 3/15/10 ............................................... 981,750 ------------- 4,469,250 -------------
See Notes to Financial Statements. 18
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- ENERGY--9.4% B- $ 1,000 AES Corp., 8.375%, 8/15/07 ............................................................ $ 1,000,000 Calpine Corp., B 500(3) 8.75%, 7/15/13 ...................................................................... 457,500 CCC+ 1,000 10.50%, 5/15/06 ..................................................................... 915,000 CCC 1,000 Mission Energy Holding Co., 13.50%, 7/15/08 ........................................... 650,000 B2 1,000 Orion Power Holdings, Inc., 12.00%, 5/01/10 ........................................... 1,155,000 ------------- 4,177,500 ------------- FINANCE & BANKING--16.3% NR 500(2,3) Ameriserve Finance Capital Corp., 12.00%, 9/15/06 ..................................... 25,000 BBB+ 1,788 Asat Finance LLC, 12.50%, 11/01/06 .................................................... 1,876,980 Ba2 1,000(3) Capital Guardian High Yield, CBO, Ltd., Ser. 1A, 11.45%, 5/24/13 ...................... 820,000 BB 1,200(3) Crum & Forster Holdings Corp., 10.375%, 6/15/13 ....................................... 1,290,000 BB 1,000 Fairfax Financial Holdings Ltd., 6.875%, 4/15/08 ...................................... 970,000 Ba3 2,500(3) First Dominion Funding II, Ser. 1A, 11.614%, 4/25/14 .................................. 906,250 CCC+ 1,000 Madison River Capital Corp., 13.25%, 3/01/10 .......................................... 1,075,000 Caa 2,204(3) Zais Investment Grade Ltd., Class C, Pay-in-kind, 9.95%, 9/23/14 ...................... 264,474 ------------- 7,227,704 ------------- FOREST PRODUCTS--1.5% B 1,000 FiberMark Inc., 10.75%, 4/15/11 ....................................................... 670,000 ------------- HEALTH CARE--2.4% B- 1,000 MedQuest Inc., Ser. B, 11.875%, 8/15/12 ............................................... 1,080,000 ------------- HOME FURNISHING--5.4% CCC+ 1,760 O'Sullivan Industries Inc., 13.375%, 10/15/09 ......................................... 1,390,400 B- 1,000 Salton, Inc., 12.25%, 4/15/08 ......................................................... 990,000 ------------- 2,380,400 ------------- INDUSTRIAL EQUIPMENT--6.2% B- 1,000 Concentra Operating Corp., Ser. B, 13.00%, 8/15/09 .................................... 1,115,000 MSX Intl., Inc., B 500(3) 11.00%, 10/15/07 .................................................................... 500,000 B- 500 11.375%, 1/15/08 .................................................................... 385,000 Caa3 2,000(2) National Equipment Services Inc., Ser. D, 10.00%, 11/30/04 ............................ 740,000 ------------- 2,740,000 ------------- LEISURE--1.7% B3 1,000 Trump Atlantic City Assoc., 11.25%, 5/01/06 ........................................... 762,500 ------------- MEDIA--14.8% B1 2,000 Alliance Atlantis Communications, Inc., 13.00%, 12/15/09, (Canada) .................... 2,307,500 Charter Communications Holdings LLC, Ca 1,000 10.75%, 10/01/09 .................................................................... 845,000 Ca 1,000 11.125%, 1/15/11 .................................................................... 850,000 B- 1,000 WRC Media Inc., 12.75%, 11/15/09 ...................................................... 970,000 CCC+ 980 XM Satellite Radio Inc., 14.00%, 3/15/10 .............................................. 1,091,475 CC 647 Ziff Davis Media Inc., Ser. B, Pay-in-kind, 12.00%, 8/12/09 ........................... 517,733 ------------- 6,581,708 ------------- TELECOMMUNICATION--5.3% NR 2,000(2) Asia Global Crossing Ltd., 13.375%, 10/15/10, (United Kingdom) ........................ 290,000 B+ 1,000 Nextel Communications Inc., 12.00%, 11/01/08 .......................................... 1,062,500 NR 600(2,3) PF. Net Communications, Inc., 13.75%, 5/15/10 ......................................... 3,000 B3 1,000 Time Warner Telecom LLC, 9.75%, 7/15/08 ............................................... 1,025,000 ------------- 2,380,500 ------------- TRANSPORTATION--9.8% Amtran Inc., Ca 2,000(4) 9.625%, 12/15/05 .................................................................... 1,500,000 Ca 1,000(4) 10.50%, 8/01/04 ..................................................................... 780,000 B 1,000 Sea Containers Ltd., Ser. B, 10.75%, 10/15/06 ......................................... 970,000 B+ 1,000 TFM SA de CV, 12.50%, 6/15/12, (Mexico) ............................................... 1,100,000 ------------- 4,350,000 ------------- Total Corporate Bonds ................................................................. 60,159,314 -------------
See Notes to Financial Statements. 19
SHARES DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- COMMON STOCK--0.4% 8,000 Mattress Discounters Corp. ............................................................ $ 0 54,000 Neon Communications Inc. .............................................................. 147,461 1,000 Precision Partners Inc. ............................................................... 49,659 ------------- Total Common Stock .................................................................... 197,120 ------------- PREFERRED SECURITIES--0.0% 1,098(2) Adelphia Business Solutions, Inc., Ser. B, 12.875% .................................... 549 ------------- UNITS ------- WARRANTS--0.0% 1,000(3) Mattress Discounters Corp., Expires 7/15/07 ........................................... 1,000 53,622 Neon Communications Inc., Expires 12/02/12 ............................................ 0 600(3,4) PF. Net Communications, Inc., Expires 5/15/10 ......................................... 0 2,000(3) Republic Technologies International LLC, Expires 7/15/09 .............................. 20 ------------- Total Warrants ........................................................................ 1,020 ------------- TOTAL LONG-TERM INVESTMENTS--135.8% (cost $74,360,140) ................................ 60,358,003 ------------- PRINCIPAL AMOUNT (000) ---------- SHORT-TERM INVESTMENT--2.5% U.S. GOVERNMENT AGENCY SECURITIES--2.5% $ 1,100(5) Student Loan Marketing, 0.94%, 11/03/03 (cost $1,099,943) ............................. 1,099,943 ------------- TOTAL INVESTMENTS--138.3% (cost $75,460,083) .......................................... 61,457,946 ------------- LIABILITIES IN EXCESS OF OTHER ASSETS--(38.3)% ........................................ (17,019,892) ------------- NET ASSETS--100% ...................................................................... $ 44,438,054 =============
- ---------- (1) Using the higher of S&P's, Moody's or Fitch's rating. (2) Issuer is technically in default and/or bankruptcy. (3) Security is not registered under the Securities Act of 1933. These securities may be resold in transactions in accordance with Rule 144A under that Act, to qualified institutional buyers. As of October 31, 2003, the Trust held 13.7% of its net assets, with a current market value of $6,087,244, in securities restricted as to resale. (4) Illiquid securities representing 5.1% of net assets. (5) For purposes of amortized cost valuation, the maturity date of this instrument is considered to be the earlier of the next date on which the security can be redeemed at par, or the next date on which the rate of interest is adjusted. See Notes to Financial Statements. 20 PORTFOLIO OF INVESTMENTS OCTOBER 31, 2003 - ------------------------------------------ BLACKROCK INCOME OPPORTUNITY TRUST (BNA) - ------------------------------------------
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS--120.6% MORTGAGE PASS-THROUGHS--34.4% $24,438(2) Federal Home Loan Mortgage Corp., 6.50%, 1/01/26 - 11/01/32 ........................... $ 25,421,702 Federal National Mortgage Assoc., 59,065(2) 5.50%, 1/01/29 - 2/01/33 ............................................................ 59,632,724 14,518(2) 6.00%, 3/01/27 - 11/01/32 ........................................................... 14,919,748 663 7.00%, 2/01/24 - 1/01/29 ............................................................ 699,682 23,315 5.50%, 12/01/13 - 9/01/17, TBA ...................................................... 24,030,868 15,677 6.00%, 12/01/09 - 11/01/17, TBA ..................................................... 16,331,883 250 Government National Mortgage Assoc., 8.00%, 4/15/24 - 11/15/25 ........................ 271,577 ------------- Total Mortgage Pass-Throughs .......................................................... 141,308,184 ------------- FEDERAL HOUSING ADMINISTRATION--2.0% GMAC Projects, 900 Ser. 37, 7.43%, 5/01/22 ............................................................. 957,442 622 Ser. 44, 7.43%, 8/01/22 ............................................................. 661,910 Merrill Projects, 201 Ser. 29, 7.43%, 10/01/20 ............................................................ 213,624 1,867 Ser. 42, 7.43%, 9/01/22 ............................................................. 1,985,035 1,988 Reilly Project, Series B-11, 7.40%, 4/01/21 ........................................... 2,112,612 2,018 Westmore Project 8240, 7.25%, 4/01/21 ................................................. 2,135,584 ------------- Total Federal Housing Administration .................................................. 8,066,207 ------------- NON-AGENCY MULTIPLE CLASS MORTGAGE PASS-THROUGHS--0.0% AAA 139(3) Summit Mortgage Trust, Ser. 1, Class B1, 6.079%, 12/28/12 ............................. 140,043 ------------- ADJUSTABLE RATE MORTGAGE SECURITIES--0.0% 94 Federal National Mortgage Assoc., Ser. 256, Class F, 2.625%, 11/25/23 ................. 82,712 ------------- INVERSE FLOATING RATE MORTGAGES--0.8% Federal Home Loan Mortgage Corp., 7 Ser. 1601, Class SE, 10/15/08 ....................................................... 6,799 1,000 Ser. 1611, Class JC, 8/15/23 ........................................................ 1,058,090 Federal National Mortgage Assoc., 1,808 Ser. 23, Class PS, 4/25/23 .......................................................... 2,083,241 33 Ser. 46, Class S, 5/25/21 ........................................................... 9,755 30 Ser. 49, Class S, 12/25/21 .......................................................... 3,381 153 Ser. 87, Class S, 8/25/21 ........................................................... 189,106 63 Ser. 145, Class S, 10/25/06 ......................................................... 76,521 ------------- Total Inverse Floating Rate Mortgages ................................................. 3,426,893 ------------- INTEREST ONLY MORTGAGE-BACKED SECURITIES--1.8% Federal Home Loan Mortgage Corp., 30 Ser. 19, Class R, 3/15/20 ........................................................... 3,812 0 Ser. 75, Class R, 1/15/21 ........................................................... 16 0 Ser. 173 Class R, 11/15/21 .......................................................... 84 8 Ser. 176 Class M, 7/15/21 ........................................................... 957 1 Ser. 192 Class U, 2/15/22 ........................................................... 173 49 Ser. 200 Class R, 12/15/22 .......................................................... 5,752 22 Ser. 1043 Class H, 2/15/21 .......................................................... 22,906 4 Ser. 1054 Class I, 3/15/21 .......................................................... 4,349 27 Ser. 1056 Class K, 3/15/21 .......................................................... 2,608 30 Ser. 1057 Class J, 3/15/21 .......................................................... 2,558 94 Ser. 1148 Class E, 10/15/21 ......................................................... 20,388 25 Ser. 1178 Class O, 11/15/21 ......................................................... 429 27 Ser. 1221 Class H, 3/15/07 .......................................................... 2,526 882 Ser. 1223, Class H, 3/15/22 ......................................................... 144,842 606 Ser. 1254, Class Z, 4/15/22 ......................................................... 132,425 2,862 Ser. 1809, Class SC, 12/15/23 ....................................................... 52,570 1,245 Ser. 1831, Class PG, 3/15/11 ........................................................ 147,705 323 Ser. 2080, Class PL, 1/15/27 ........................................................ 6,721
See Notes to Financial Statements. 21
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- INTEREST ONLY MORTGAGE-BACKED SECURITIES--(CONT'D) Federal National Mortgage Assoc., $ 237 Ser. 5, Class H, 1/25/22 ............................................................ $ 49,328 19 Ser. 7, Class 2, 4/1/17 ............................................................. 3,598 1,100 Ser. 7, Class PH, 4/25/11 ........................................................... 137,428 51 Ser. 7, Class S, 3/25/21 ............................................................ 7,696 158 Ser. 10, Class S, 5/25/21 ........................................................... 22,074 122 Ser. 12, Class S, 5/25/21 ........................................................... 28,171 10,300 Ser. 16, Class IW, 11/25/12 ......................................................... 840,050 74 Ser. 17, Class S, 6/25/21 ........................................................... 10,619 2 Ser. 20, Class H, 3/25/06 ........................................................... 125 107 Ser. 33, Class PV, 10/25/21 ......................................................... 24,655 11 Ser. 38, Class N, 4/25/21 ........................................................... 1,970 1,196 Ser. 50, Class SI, 4/25/23 .......................................................... 30,921 9 Ser. 54, Class H, 5/25/05 ........................................................... 655 5,974 Ser. 70, Class IN, 5/25/15 .......................................................... 487,253 17 Ser. 84, Class H, 8/25/06 ........................................................... 1,669 33 Ser. 89, Class 2, 6/1/18 ............................................................ 6,060 25,750 Ser. 92, Class IC, 4/25/13 .......................................................... 3,639,298 10 Ser. 94, Class 2, 8/1/21 ............................................................ 1,630 43 Ser. 99, Class L, 8/25/21 ........................................................... 8,384 6 Ser. 123, Class M, 10/25/20 ......................................................... 1,344 58 Ser. 136, Class S, 11/25/20 ......................................................... 67,751 67 Ser. 139, Class PT, 10/25/21 ........................................................ 10,245 47 Ser. 141, Class SA, 8/25/07 ......................................................... 11,875 1,212 Ser. G46, Class H, 12/25/09 ......................................................... 225,365 12,117(3) Goldman Sachs Mortgage Securities Corp., Ser. 5, 2/19/25 .............................. 242,345 438 Government National Assoc., Ser. 3, Class E, 6/16/25 .................................. 77,368 7,402(3) Hanover Grantor Trust, Ser. A, Class 1, 8/1/27 ........................................ 87,898 3,403(3) Morgan Stanley Capital 1, Inc., Ser. HF1, Class X, 6/15/17 ............................ 124,543 7,359 Prudential Home Mortgage Securities Co., Ser. 05, Class A9, 2/25/24 ................... 1 Residential Asset Securization Trust, 10,137 Ser. A3, Class X, 5/25/29 ........................................................... 95,046 6,345 Ser. A5, Class A2, 9/25/30 .......................................................... 298,423 12,957 Salomon Brothers Mortgage Securities VII Inc., Ser. 1, Class IO, 3/25/22 .............. 103,265 26,388 Vendee Mortgage Trust, Ser. 1, Class IO, 2/15/27 ...................................... 239,079 ------------- Total Interest Only Mortgage-Backed Securities ........................................ 7,436,953 ------------- PRINCIPAL ONLY MORTGAGE-BACKED SECURITIES--0.6% Federal Home Loan Mortgage Corp., 357(2) Ser. 1739, Class B, 2/15/24 ......................................................... 328,367 79 Ser. 1857, Class PB, 12/15/08 ....................................................... 78,748 Federal National Mortgage Assoc., 35 Ser. 167, Class D, 10/25/17 ......................................................... 30,963 76 Ser. 203, Class 1, 2/1/23 ........................................................... 67,472 57 Ser. 228, Class 1, 5/1/23 ........................................................... 51,735 234 Ser. 26, Class L, 3/25/23 ........................................................... 233,053 212 Ser. 279, Class 1, 7/1/26 ........................................................... 183,424 74 Ser. 51, Class E, 2/25/23 ........................................................... 56,175 44 Ser. 70, Class A, 5/25/23 ........................................................... 37,026 6,055 Resolution Funding Corp., Ser. B, 4/15/30 ............................................. 1,282,086 ------------- Total Principal Only Mortgage-Backed Securities ....................................... 2,349,049 ------------- U.S. GOVERNMENT AND AGENCY SECURITIES--9.0% 18,736 Overseas Private Investment Corp., 4.09%-7.35%, 5/29/12 ............................... 19,723,249 2,201 Small Business Administration, Ser. 20K-1, 6.95%, 11/01/16 ............................ 2,438,953 U.S. Treasury Notes, 9,300(2) 2.00%, 5/15/06 ...................................................................... 9,277,475 2,100(2) 4.00%, 11/15/12 ..................................................................... 2,068,254 2,715(2) 4.25%, 8/15/13 ...................................................................... 2,704,395 700 4.875%, 2/15/12 ..................................................................... 738,445 ------------- Total U.S. Government and Agency Securities ........................................... 36,950,771 ------------- COLLATERALIZED MORTGAGE OBLIGATION RESIDUALS--0.0% 5 Collateralized Mortgage Obligation Trust 40, Class R, 4/01/18 ......................... 457 76 Collateralized Mortgage Obligation Trust 42, Class R, 10/01/14 ........................ 2,711 Morgan Stanley Mortgage Trust, 83 Ser. 38, Class 2, 11/20/21 .......................................................... 14,049 92 Ser. 39, Class 2, 12/20/21 .......................................................... 16,110 ------------- Total Collateralized Mortgage Obligation Residuals .................................... 33,327 -------------
See Notes to Financial Statements. 22
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- CORPORATE BONDS--71.2% AERO & DEFENSE--1.7% B- $ 1,235 BE Aerospace, Inc., 9.50%, 11/01/08 ................................................... $ 1,163,988 BB- 1,500 L-3 Communications Corp., 7.625%, 6/15/12 ............................................. 1,635,000 BBB 1,250 Lockheed Martin Corp., 8.50%, 12/01/29 ................................................ 1,622,787 BBB 1,000 Northrop Grumman Corp., 7.125%, 2/15/11 ............................................... 1,143,370 BBB- 1,200 Raytheon Co., 6.15%, 11/01/08 ......................................................... 1,294,200 ------------- 6,859,345 ------------- AUTOMOTIVE--1.9% BB+ 1,500 Autonation, Inc., 9.00%, 8/01/08 ...................................................... 1,710,000 BB+ 2,000 Briggs & Stratton Corp., 8.875%, 3/15/11 .............................................. 2,300,000 B+ 3,715 Dura Operating Corp., Ser. B, 8.625%, 4/15/12 ......................................... 3,770,725 ------------- 7,780,725 ------------- BASIC MATERIAL--1.3% B+ 3,000 AK Steel Corp., 7.875%, 2/15/09 ....................................................... 2,100,000 A2 2,000 Alcoa, Inc., 7.375%, 8/01/10 .......................................................... 2,330,880 B 1,000 Oregon Steel Mills, Inc., 10.00%, 7/15/09 ............................................. 820,000 ------------- 5,250,880 ------------- BUILDING & DEVELOPMENT--0.9% B- 1,000 Ainsworth Lumber Co. Ltd., 12.50%, 7/15/07, (Canada) .................................. 1,140,000 Ba1 2,500 D.R. Horton, Inc., 10.50%, 4/01/05 .................................................... 2,725,000 ------------- 3,865,000 ------------- CHEMICAL--1.9% CCC+ 500 Avecia Group PLC, 11.00%, 7/01/09, (United Kingdom) ................................... 465,000 Dow Chemical Co., A- 750 5.75%, 12/15/08 ..................................................................... 795,713 A- 1,400 6.00%, 10/01/12 ..................................................................... 1,453,816 BB- 3,000 Lyondell Chemical Co., 11.125%, 7/15/12 ............................................... 3,120,000 B 1,750 Noveon, Inc., Ser. B, 11.00%, 2/28/11 ................................................. 2,012,500 ------------- 7,847,029 ------------- CONGLOMERATES--1.2% AAA 3,650 General Electric Co., 5.00%, 2/01/13 .................................................. 3,671,572 A 1,300 Honeywell, Inc., 6.125%, 11/01/11 ..................................................... 1,422,317 ------------- 5,093,889 ------------- CONSUMER PRODUCTS--9.1% A 2,000 Avery Dennison Corp., 4.875%, 1/15/13 ................................................. 1,981,800 B- 2,000 Buffets Inc., 11.25%, 7/15/10 ......................................................... 2,160,000 General Mills, Inc., BBB+ 550 5.125%, 2/15/07 ..................................................................... 584,188 BBB+ 1,700 6.00%, 2/15/12 ...................................................................... 1,814,087 Kellogg Co., BBB 700 Ser. B, 6.00%, 4/01/06 .............................................................. 753,977 BBB 2,000 Ser. B, 6.60%, 4/01/11 .............................................................. 2,235,420 A- 3,000 Kohls Corp., 6.30%, 3/01/11 ........................................................... 3,333,720 A3 2,000 Kraft Foods, Inc., 5.625%, 11/01/11 ................................................... 2,080,340 BBB 1,000 Kroger Co., 5.50%, 2/01/13 ............................................................ 1,015,930 B 2,000 Levi Strauss & Co., 12.25%, 12/15/12 .................................................. 1,650,000 AA- 3,000 Procter & Gamble Co., 6.875%, 9/15/09 ................................................. 3,463,230 B 2,000 Roundys, Inc., Ser. B, 8.875%, 6/15/12 ................................................ 2,090,000 BBB 2,495 Safeway, Inc., 6.50%, 3/01/11 ......................................................... 2,722,155 A+ 2,000 Unilever Capital Corp., 7.125%, 11/01/10 .............................................. 2,318,500 BB- 2,000 United Rentals N.A. Inc., 10.75%, 4/15/08 ............................................. 2,240,000 AA 3,000 Wal-Mart Stores, Inc., 6.875%, 8/10/09 ................................................ 3,447,990 BB+ 3,000 Yum! Brands, Inc., 8.875%, 4/15/11 .................................................... 3,570,000 ------------- 37,461,337 ------------- CONTAINERS & GLASS--1.9% B+ 1,500 Crown European Holdings SA, 9.50%, 3/01/11, (United Kingdom) .......................... 1,665,000 BB 2,250 Owens-Brockway Glass Container, Inc., 8.875%, 2/15/09 ................................. 2,435,625 B+ 2,275 Plastipak Holdings, Inc., 10.75%, 9/01/11 ............................................. 2,502,500 B 1,240 Stone Container Corp., 9.25%, 2/01/08 ................................................. 1,351,600 ------------- 7,954,725 -------------
See Notes to Financial Statements. 23
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- ECOLOGICAL SERVICES & EQUIPMENT--1.4% B+ $ 3,000 Allied Waste NA, Inc., Ser. B, 10.00%, 8/01/09 ........................................ $ 3,262,500 B 2,250 Casella Waste Systems Inc., 9.75%, 2/01/13 ............................................ 2,452,500 ------------- 5,715,000 ------------- ELECTRONICS--0.5% B- 1,750 Chippac Int. Ltd., Ser. B, 12.75%, 8/01/09 ............................................ 1,933,750 ------------- ENERGY--8.3% BBB 2,000 Amerada Hess Corp., 6.65%, 8/15/11 .................................................... 2,158,360 BBB+ 600 Anadarko Petroleum Corp., 5.375%, 3/01/07 ............................................. 641,154 BB- 2,500 Chesapeake Energy Corp., 9.00%, 8/15/12 ............................................... 2,850,000 A- 3,000 Conoco Funding Co., 6.35%, 10/15/11 ................................................... 3,333,630 BBB+ 2,000 Dominion Resources, Inc., 5.70%, 9/17/12 .............................................. 2,087,700 B 2,500 Dresser, Inc., 9.375%, 4/15/11 ........................................................ 2,568,750 BBB 1,500 DTE Energy Co., 7.05%, 6/01/11 ........................................................ 1,696,980 B- 2,000(2) Dynegy Holdings Inc., 10.125%, 7/15/13 ................................................ 2,160,000 B 400 El Paso Corporation, 7.875%, 6/15/12 .................................................. 341,000 B+ 1,000 El Paso Natural Gas Co., 7.625%, 8/01/10 .............................................. 990,000 B+ 1,500(2) El Paso Production Holding Co., 7.75%, 6/01/13 ........................................ 1,440,000 BBB+ 640 Exelon Corp., 6.75%, 5/01/11 .......................................................... 709,306 Baa2 1,500 FirstEnergy Corp., Ser. C, 7.375%, 11/15/31 ........................................... 1,602,404 BBB+ 1,250 Kinder Morgan Energy Partners LP, 7.30%, 8/15/33 ...................................... 1,391,124 BBB 1,000 Kinder Morgan, Inc., 6.50%, 9/01/12 ................................................... 1,091,060 BB- 2,500 Leviathan Gas Pipeline Partners LP, Ser. B, 10.375%, 6/01/09 .......................... 2,712,500 BBB+ 1,800 Occidental Petroleum Corp., 6.75%, 1/15/12 ............................................ 2,030,310 Progress Energy, Inc., Baa2 1,800 6.75%, 3/01/06 ...................................................................... 1,953,270 Baa2 2,000 7.10%, 3/01/11 ...................................................................... 2,235,380 ------------- 33,992,928 ------------- FINANCE & BANKING--15.8% Aa3 2,450 Bank of America Corp., 7.80%, 2/15/10 ................................................. 2,892,250 Aa3 1,400(2) Bank One Corp., 6.50%, 2/01/06 ........................................................ 1,516,088 Aa3 2,000(3) Barclays Bank PLC, 6.86%, 9/29/49, (United Kingdom) ................................... 2,157,304 A1 500 Bear Stearns Co., Inc., 6.50%, 5/01/06 ................................................ 544,205 Aa2 6,000 Citigroup, Inc., 5.625%, 8/27/12 ...................................................... 6,330,360 Credit Suisse First Boston USA, Inc., Aa3 700(2) 6.125%, 11/15/11 .................................................................... 756,889 Aa3 1,000 7.125%, 7/15/32 ..................................................................... 1,125,840 BB 1,000(3) Crum & Forster Holdings Corp., 10.375%, 6/15/13 ....................................... 1,075,000 AAA 4,0002 Federal Home Loan Mortgage Corp., 6.875%, 9/15/10 ..................................... 4,623,200 AAA 4,000 Federal National Mortgage Assoc., 4.375%, 9/15/12 ..................................... 3,926,720 A3 3,000(2) Ford Motor Credit Co., 6.875%, 2/01/06 ................................................ 3,136,320 AAA 3,000 General Electric Capital Corp., Ser. A, 6.75%, 3/15/32 ................................ 3,330,180 General Motors Acceptance Corp., A3 700 6.75%, 1/15/06 ...................................................................... 747,180 A3 4,000 6.875%, 8/28/12 ..................................................................... 4,112,800 Aa3 1,000 Goldman Sachs Group, Inc., 6.60%, 1/15/12 ............................................. 1,110,050 A1 3,650 Household Finance Corp., 6.375%, 10/15/11 - 11/27/12 .................................. 3,978,887 JP Morgan Chase & Co., A+ 2,100 5.25%, 5/30/07 ...................................................................... 2,243,472 A 1,000 6.75%, 2/01/11 ...................................................................... 1,120,650 AAA 3,000 KFW Intl. Finance, Inc., 5.25%, 6/28/06 ............................................... 3,213,300 Ba1 1,000 Labranche & Co., Inc., 12.00%, 3/02/07 ................................................ 1,025,000 Lehman Brothers Holdings, Inc., A1 850 6.25%, 5/15/06 ...................................................................... 924,817 A1 1,500 6.625%, 1/18/12 ..................................................................... 1,676,280 A 2,000 Metlife, Inc., 5.375%, 12/15/12 ....................................................... 2,055,920 Morgan Stanley, Aa3 600 5.80%, 4/01/07 ...................................................................... 646,956 Aa3 1,600 6.75%, 4/15/11 ...................................................................... 1,792,400 A+ 2,000 Northern Trust Co., 6.30%, 3/07/11 .................................................... 2,197,980 Baa1 2,000 Sears Roebuck Acceptance Corp., 6.75%, 8/15/11 ........................................ 2,242,200 AA- 2,000 UBS Preferred Funding Trust I, 8.622%, 10/29/49 ....................................... 2,451,113 Aa1 2,000 Wells Fargo Bank, 7.55%, 6/21/10 ...................................................... 2,360,060 ------------- 65,313,421 -------------
See Notes to Financial Statements. 24
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- FOREST PRODUCTS--1.8% B+ $2,000 Caraustar Industries, Inc., 9.875%, 4/01/11 ........................................... $ 2,080,000 BB 2,500 Tembec Industries, Inc., 8.50%, 2/01/11, (Canada) ..................................... 2,425,000 Weyerhaeuser Co., BBB 1,550 5.95%, 11/01/08 ..................................................................... 1,658,640 BBB 1,000 6.75%, 3/15/12 ...................................................................... 1,083,590 ------------- 7,247,230 ------------- HEALTH CARE--1.3% AA- 1,000 Bristol Myers Squibb Co., 5.75%, 10/01/11 ............................................. 1,069,390 D 3,000(4) HealthSouth Corp., 7.00%, 6/15/08 ..................................................... 2,610,000 BB+ 1,500 Omnicare, Inc., Ser. B, 8.125%, 3/15/11 ............................................... 1,638,750 ------------- 5,318,140 ------------- HOTELS & CASINO--4.5% B+ 2,100 Argosy Gaming Co., 10.75%, 6/01/09 .................................................... 2,296,875 B+ 2,000 Boyd Gaming Corp., 8.75%, 4/15/12 ..................................................... 2,170,000 B 2,000 Extended Stay America, Inc., 9.875%, 6/15/11 .......................................... 2,240,000 B 1,700 Hammons John Q. Hotels LP, Ser. B, 8.875%, 5/15/12 .................................... 1,857,250 B 1,500 Herbst Gaming, Inc., Ser. B, 10.75%, 9/01/08 .......................................... 1,676,250 Ba3 1,500 HMH Properties, Inc., Ser. B, 7.875%, 8/01/08 ......................................... 1,548,750 Ba2 1,000 MGM Mirage, Inc., 9.75%, 6/01/07 ...................................................... 1,133,750 Ba2 2,000 Park Place Entertainment Corp., 8.875%, 9/15/08 ....................................... 2,222,500 BB+ 3,000 Starwood Hotels & Resorts World, 7.875%, 5/01/12 ...................................... 3,315,000 ------------- 18,460,375 ------------- INDUSTRIAL EQUIPMENT--0.9% B- 1,200 Concentra Operating Corp., Ser. B, 13.00%, 8/15/09 .................................... 1,338,000 B 2,010 Manitowoc, Inc., 10.50%, 8/01/12 ...................................................... 2,281,350 ------------- 3,619,350 ------------- MEDIA--5.3% B1 2,000 Alliance Atlantis Communications, Inc., 13.00%, 12/15/09, (Canada) .................... 2,307,500 AOL Time Warner, Inc., BBB+ 2,000 7.70%, 5/01/32 ...................................................................... 2,263,460 BBB+ 3,000 9.125%, 1/15/13 ..................................................................... 3,771,570 Ca 3,000 Charter Communications Holdings LLC, 10.75%, 10/01/09 ................................. 2,535,000 Comcast Cable Communications, Inc., BBB 1,000 6.75%, 1/30/11 ...................................................................... 1,107,070 BBB 1,800 8.875%, 5/01/17 ..................................................................... 2,277,601 BB- 3,000 EchoStar DBS Corp., 10.375%, 10/01/07 ................................................. 3,300,000 B 1,000 Quebecor Media, Inc., 11.125%, 7/15/11, (Canada) ...................................... 1,152,500 B- 3,000 WRC Media Inc., 12.75%, 11/15/09 ...................................................... 2,910,000 ------------- 21,624,701 ------------- OTHER--4.8% A3 17,508(3) Targeted Return Index Securities Trust, Inc, Ser. 10-2002, 6.851%, 1/15/12 ............ 19,642,548 ------------- REAL ESTATE--0.5% BBB+ 1,000 AvalonBay Communities, Inc., 6.625%, 9/15/11 .......................................... 1,089,660 BBB+ 800 EOP Operating LP, 7.00%, 7/15/11 ...................................................... 901,152 ------------- 1,990,812 ------------- TECHNOLOGY--0.5% BB+ 2,000 Seagate Technology Holdings, 8.00%, 5/15/09 ........................................... 2,175,000 ------------- TELECOMMUNICATION--3.7% BBB+ 2,000 Deutsche Telekom Intl. Finance BV, 8.50%, 6/15/10, (Netherlands) ...................... 2,406,020 B3 1,340 Dobson Communications Corp., 10.875%, 7/01/10 ......................................... 1,474,000 B+ 1,000 Nextel Communications, Inc., 9.95%, 2/15/08 ........................................... 1,050,000 Ba3 3,000 PanAmSat Corp., 8.50%, 2/01/12 ........................................................ 3,217,500 SBC Communications, Inc., A+ 450 5.875%, 8/15/12 ..................................................................... 476,069 A+ 1,000 6.25%, 3/15/11 ...................................................................... 1,089,040 A+ 1,000 Verizon Global Funding Corp., 7.75%, 6/15/32 .......................................... 1,162,540 Aa3 3,000 Verizon Pennsylvania, Inc., Ser. A, 5.65%, 11/15/11 ................................... 3,117,810 A 1,000 Vodafone Group PLC, 7.75%, 2/15/10, (United Kingdom) .................................. 1,177,710 ------------- 15,170,689 -------------
See Notes to Financial Statements. 25
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ----------------------------------------------------------------------------------------------------------------------------------- TRANSPORTATION--2.0% BBB+ $ 1,000 Burlington Northern Santa Fe Corp., 5.90%, 7/01/12 ...................................... $ 1,062,630 BBB+ 1,000 Canadian National Railway Co., 6.375%, 10/15/11, (Canada) ............................... 1,102,912 BBB 1,475 Canadian Pacific Railway Ltd., 6.25%, 10/15/11, (Canada) ................................ 1,613,960 B 2,000 Railamerica Transportation Corp., 12.875%, 8/15/10 ...................................... 2,300,000 BBB 2,000 Union Pacific Corp., 6.125%, 1/15/12 .................................................... 2,156,740 ------------- 8,236,242 ------------- Total Corporate Bonds ................................................................... 292,553,116 ------------- FOREIGN GOVERNMENT BONDS--0.8% Baa2 3,000 United Mexican States, 8.00%, 9/24/22 ................................................... 3,240,000 ------------- TOTAL LONG-TERM INVESTMENTS (cost $479,724,642) ......................................... 495,587,255 ------------- SHORT-TERM INVESTMENTS--15.4% U.S. GOVERNMENT AND AGENCY SECURITIES--15.4% 8,800(5) Student Loan Marketing, 0.94%, 11/03/03 ................................................. 8,799,540 21,632(5) U.S. Treasury Bonds, 0.85%, 11/03/03 .................................................... 21,631,500 32,794(5) U.S. Treasury Notes, 0.85%, 11/03/03 .................................................... 32,793,750 ------------- TOTAL SHORT-TERM INVESTMENTS (cost $63,224,790) ......................................... 63,224,790 ------------- TOTAL INVESTMENTS BEFORE INVESTMENTS SOLD SHORT AND OUTSTANDING OPTIONS WRITTEN (COST $542,949,432) ................................................................... 558,812,045 ------------- INVESTMENTS SOLD SHORT--(13.1%) (20,700) U.S. Treasury Bonds, 5.375%, 2/15/31 .................................................... (21,391,339) (33,000) U.S. Treasury Notes, 2.625%, 5/15/08 .................................................... (32,349,008) ------------- TOTAL INVESTMENTS SOLD SHORT (proceeds $53,049,018) ..................................... (53,740,347) ------------- NOTIONAL AMOUNT (000) --------- OUTSTANDING OPTIONS WRITTEN--(0.6)% $56,300 Interest Rate Swap, 3.60% over 3 month LIBOR, expires 11/01/04 .......................... (577,973) 55,000 Interest Rate Swap, 5.75% over 3 month LIBOR, expires 9/23/05 ........................... (1,256,200) 11,900 Interest Rate Swap, 6.00% over 3 month LIBOR, expires 10/25/04 .......................... (470,645) 140 U.S. Treasury Notes Futures ............................................................. (277,812) ------------- Total Outstanding Options Written (premium received $2,432,578) ......................... (2,582,630) ------------- TOTAL INVESTMENTS, NET OF INVESTMENTS SOLD SHORT AND OUTSTANDING OPTIONS WRITTEN--122.3% 502,486,068 LIABILITIES IN EXCESS OF OTHER ASSETS--(22.3)% .......................................... (91,505,304) ------------- NET ASSETS--100% ........................................................................ $ 410,980,764 =============
- ---------- (1) Using the higher of S&P's, Moody's or Fitch's rating. (2) Entire or partial principal amount pledged as collateral for reverse repurchase agreements or financial futures contracts. (3) Security is not registered under the Securities Act of 1933. These securities may be resold in transactions in accordance with Rule 144A under that Act, to qualified institutional buyers. As of October 31, 2003, the Trust held 6.6% of its net assets, with a current market value of $27,069,681, in securities restricted as to resale. (4) Issuer is technically in default. (5) For purposes of amortized cost valuation, the maturity date of this instrument is considered to be the earlier of the next date on which the security can be redeemed at par, or the next date on which the rate of interest is adjusted. See Notes to Financial Statements. 26 PORTFOLIO OF INVESTMENTS OCTOBER 31, 2003 - ------------------------------ BLACKROCK INCOME TRUST (BKT) - ------------------------------
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS--117.0% MORTGAGE PASS-THROUGHS--37.1% Federal Home Loan Mortgage Corp., $23,746 5.50%, 10/01/16 - 5/01/17 ........................................................... $ 24,461,458 136 6.50%, 5/01/29 - 5/01/30 ............................................................ 141,617 43 7.50%, 2/01/23 ...................................................................... 46,482 204 8.00%, 11/01/15 ..................................................................... 215,307 411 9.00%, 9/01/20 ...................................................................... 457,762 173 8.50%, 10/01/06 - 3/01/08, TBA ...................................................... 184,693 Federal National Mortgage Assoc., 19,391 5.00%, 6/01/33 ...................................................................... 19,138,264 59,3852 5.50%, 11/01/16 - 9/01/17 ........................................................... 61,210,114 19,781 6.00%, 11/01/31 - 10/01/32 .......................................................... 20,306,567 11,876 6.50%, 2/01/26 - 5/01/31 ............................................................ 12,342,158 18,433 7.00%, 6/01/26 - 2/01/32 ............................................................ 19,413,933 5,292 7.50%, 11/01/14 - 9/01/23 ........................................................... 5,922,556 917 8.00%, 5/01/08 - 5/01/22 ............................................................ 981,646 14 9.50%, 1/01/19 - 6/01/20 ............................................................ 15,254 1,688 5.50%, 12/01/13 - 6/01/17, TBA ...................................................... 1,743,624 Government National Mortgage Assoc., 193 7.00%, 10/15/17 ..................................................................... 205,930 1,437 7.50%, 8/15/21 - 12/15/23 ........................................................... 1,546,568 1,027 8.00%, 10/15/22 - 2/15/29 ........................................................... 1,112,263 79 9.00%, 6/15/18 - 9/15/21 ............................................................ 87,360 ------------- Total Mortgage Pass-Throughs .......................................................... 169,533,556 ------------- FEDERAL HOUSING ADMINISTRATION--3.4% GMAC Projects, 754 Ser. 46, 7.43%, 1/01/22 ............................................................. 802,375 665 Ser. 51, 7.43%, 2/01/23 ............................................................. 706,873 1,920 Ser. 56, 7.43%, 11/01/22 ............................................................ 2,041,567 100 Merrill Project, Ser. 54, 7.43%, 5/15/23 .............................................. 105,920 904 Reilly Project, Ser. 41, 8.28%, 3/01/20 ............................................... 934,040 USGI Projects, 346 Ser. 87, 7.43%, 12/01/22 ............................................................ 358,286 1,385 Ser. 99, 7.43%, 10/01/23 ............................................................ 1,472,601 2,450 Ser. 6302, 7.43%, 12/01/21 .......................................................... 2,562,282 6,224 Yorkville, Ser. 6094, 7.43%, 6/01/21 .................................................. 6,619,842 ------------- Total Federal Housing Administration .................................................. 15,603,786 ------------- AGENCY MULTIPLE CLASS MORTGAGE PASS-THROUGHS--3.7% Federal Home Loan Mortgage Corp., 592 Ser. 19, Class F, 3/15/20 ........................................................... 592,054 8,578 Ser. T-11, Class A-9, 1/25/28 ....................................................... 7,817,843 Federal National Mortgage Assoc., 739 Ser. 12, Class G, 2/25/20 ........................................................... 747,130 770 Ser. 43, Class E, 4/25/22 ........................................................... 799,764 Government National Mortgage Assoc., 3,356 Ser. 5, Class Z, 5/16/26 ............................................................ 3,489,864 2,500 Ser. 33, Class PB, 7/20/31 .......................................................... 2,620,289 4,516 Ser. 58, Class IT, 7/20/33 .......................................................... 799,504 ------------- Total Agency Multiple Class Mortgage Pass-Throughs .................................... 16,866,448 ------------- NON-AGENCY MULTIPLE CLASS MORTGAGE PASS-THROUGHS--0.1% AAA 200 Prudential Home Mortgage Securities Co., Ser. 35, Class A12, 6.75%, 9/25/08 ........... 199,614 AAA 418(3) Summit Mortgage Trust, Ser. 1, Class B1, 6.079%, 12/28/12 ............................. 420,129 ------------- Total Non-Agency Multiple Class Mortgage Pass-Throughs ................................ 619,743 ------------- ADJUSTABLE RATE MORTGAGE SECURITIES--0.1% Federal National Mortgage Assoc., 314 Ser. 38, Class F, 4/25/21 ........................................................... 335,414 211 Ser. 256, Class F, 11/25/23 ......................................................... 186,102 ------------- Total Adjustable Rate Mortgage Securities ............................................. 521,516 -------------
See Notes to Financial Statements. 27
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- INVERSE FLOATING RATE MORTGAGES--4.6% AAA $ 156 Banc of America Mortgage Securities Inc., Ser. 2, Class 1A, 4/25/33 ................... $ 156,430 Federal Home Loan Mortgage Corp., 105 Ser. 1160, Class F, 10/15/21 ........................................................ 121,015 7 Ser. 1601, Class SE, 10/15/08 ....................................................... 7,373 1,225(2) Ser. 1616, Class SB, 11/15/08 ....................................................... 1,286,265 3,721 Ser. 1688, Class S, 12/15/13 ........................................................ 4,016,659 Federal National Mortgage Assoc., 2,213 Ser. 32, Class SA, 5/25/32 .......................................................... 2,299,948 319 Ser. 38, Class SA, 4/25/21 .......................................................... 333,189 75 Ser. 46, Class S, 5/25/21 ........................................................... 22,018 311 Ser. 48, Class SC, 6/25/33 .......................................................... 309,167 65 Ser. 49, Class S, 12/25/21 .......................................................... 7,258 335 Ser. 87, Class S, 8/25/21 ........................................................... 413,197 1,049 Ser. 93, Class S, 5/25/08 ........................................................... 1,085,094 128 Ser. 145, Class S, 10/25/06 ......................................................... 155,741 782 Ser. 170, Class SC, 9/25/08 ......................................................... 814,772 3,474 Ser. 196, Class SC, 10/25/08 ........................................................ 3,705,679 1,187 Ser. 214, Class S, 12/25/08 ......................................................... 1,224,596 972 Ser. 214, Class SH, 12/25/08 ........................................................ 1,080,486 2,562 Ser. 247, Class SN, 12/25/23 ........................................................ 2,657,500 Aaa 952 Kidder Peabody Acceptance Corp., Ser. 1, Class A6, 8/25/23 ............................ 968,346 AAA 238 Residential Funding Mortgage Securities Inc., Ser. S36, Class A13, 10/25/08 ........... 240,144 ------------- Total Inverse Floating Rate Mortgages 20,904,877 ------------- INTEREST ONLY MORTGAGE-BACKED SECURITIES--17.2% American Housing Trust, 443 Ser. III, Class 4, 3/25/19 .......................................................... 9,999 97 Ser. VII, Class 2, 11/25/20 ......................................................... 291,961 103,939 Commercial Mortgage Acceptance Corp., Ser. ML1, 12/15/30 .............................. 2,078,786 34,311(3) CS First Boston Mortgage Securities Corp., Ser. C1, Class AX, 6/20/29 ................. 1,765,244 Federal Home Loan Mortgage Corp., 56 Ser. 19, Class R, 3/15/20 ........................................................... 7,226 64 Ser. 75, Class R, 1/15/21 ........................................................... 64,332 0 Ser. 173 Class R, 11/15/21 .......................................................... 175 17 Ser. 176 Class M, 7/15/21 ........................................................... 2,055 2 Ser. 192 Class U, 2/15/22 ........................................................... 354 109 Ser. 200 Class R, 12/15/22 .......................................................... 12,819 6,294 Ser. 204, 5/01/29 ................................................................... 1,030,590 48 Ser. 1043 Class H, 2/15/21 .......................................................... 49,179 5 Ser. 1054 Class I, 3/15/21 .......................................................... 6,420 59 Ser. 1056 Class K, 3/15/21 .......................................................... 5,599 65 Ser. 1057 Class J, 3/15/21 .......................................................... 5,491 203 Ser. 1148 Class E, 10/15/21 ......................................................... 43,773 54 Ser. 1178 Class O, 11/15/21 ......................................................... 921 57 Ser. 1221 Class H, 3/15/07 .......................................................... 5,423 3,000 Ser. 1598 Class J, 10/15/08 ......................................................... 3,218,850 1,843 Ser. 1706, Class IA, 10/15/23 ....................................................... 272,406 520 Ser. 1720, Class PK, 1/15/24 ........................................................ 68,686 7,584 Ser. 1809, Class SC, 12/15/23 ....................................................... 139,309 13,682 Ser. 1914, Class PC, 12/15/11 ....................................................... 169,244 1,889 Ser. 1961 Class H, 5/15/12 .......................................................... 1,968,825 19,208 Ser. 2002, Class HJ, 10/15/08 ....................................................... 716,710 41 Ser. 2037, Class IB, 12/15/26 ....................................................... 16 766 Ser. 2050, Class PI, 12/15/11 ....................................................... 5,157 541 Ser. 2063, Class PI, 4/15/12 ........................................................ 13,418 896 Ser. 2080, Class PL, 1/15/27 ........................................................ 18,663 1,409 Ser. 2099, Class JB, 9/15/22 ........................................................ 107,754 65 Ser. 2138, Class PI, 3/15/11 ........................................................ 11 6,773 Ser. 2218 Class Z, 3/15/30 .......................................................... 7,826,295 3,625 Ser. 2296, Class SA, 3/15/16 ........................................................ 206,415 2,225 Ser. 2345 Class PQ, 8/15/16 ......................................................... 2,324,013 2,975 Ser. 2444, Class ST, 9/15/29 ........................................................ 219,403 2,488 Ser. 2513, Class BI, 12/15/15 ....................................................... 224,793 3,524 Ser. 2542, Class MX, 5/15/22 ........................................................ 333,153 4,613 Ser. 2543, Class IM, 9/15/12 ........................................................ 240,856 7,701 Ser. 2545, Class NI, 3/15/22 ........................................................ 1,585,503 11,974 Ser. 2561, Class EW, 9/15/16 ........................................................ 1,398,487 592 Ser. 2613, Class ZT, 3/15/33 ........................................................ 592,266
See Notes to Financial Statements. 28
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- INTEREST ONLY MORTGAGE-BACKED SECURITIES--(CONT'D) Federal Home Loan Mortgage Corp., (cont'd) $29,000 Ser. 2633, Class PI, 3/15/12 ........................................................ $ 2,522,710 11,963 Ser. 2658, Class PI, 6/15/13 ........................................................ 1,468,619 31,948 Ser. G-60, Class HS, 4/25/24 ........................................................ 1,653,168 Federal National Mortgage Assoc., 2,606 Ser. 2, Class ID, 3/25/23 ........................................................... 2,294 610 Ser. 5, Class H, 1/25/22 ............................................................ 126,842 36 Ser. 7, Class 2, 4/01/17 ............................................................ 6,884 110 Ser. 7, Class S, 3/25/21 ............................................................ 16,522 339 Ser. 10, Class S, 5/25/21 ........................................................... 47,394 262 Ser. 12, Class S, 5/25/21 ........................................................... 60,481 28,816 Ser. 16, Class PI, 11/25/12 ......................................................... 2,057,734 158 Ser. 17, Class S, 6/25/21 ........................................................... 22,799 4 Ser. 20, Class H, 3/25/06 ........................................................... 265 40,162 Ser. 23, Class ES, 10/25/22 ......................................................... 4,437,898 230 Ser. 33, Class PV, 10/25/21 ......................................................... 52,928 7,981 Ser. 33, Class SG, 3/25/09 .......................................................... 680,120 8,631 Ser. 37, Class SE, 10/25/22 ......................................................... 46,687 44,896 Ser. 38, Class MI, 9/25/20 .......................................................... 9,411,201 24 Ser. 38, Class N, 4/25/21 ........................................................... 4,229 15,708 Ser. 39, Class IA, 10/25/22 ......................................................... 3,533,588 39,896 Ser. 41, Class SP, 7/25/15 .......................................................... 4,108,138 2,393 Ser. 50, Class SI, 4/25/23 .......................................................... 61,842 7,372 Ser. 51, Class IE, 4/25/26 .......................................................... 1,403,760 20 Ser. 54, Class H, 5/25/05 ........................................................... 1,406 3,132 Ser. 62, Class IC, 7/25/15 .......................................................... 176,325 4,972 Ser. 62, Class IL, 3/25/24 .......................................................... 340,307 9,495 Ser. 66, Class Ci, 7/25/33 .......................................................... 2,425,663 10,119 Ser. 68, Class SC, 1/25/24 .......................................................... 834,705 7,989 Ser. 82, Class IR, 9/25/12 .......................................................... 715,227 36 Ser. 84, Class H, 8/25/06 ........................................................... 3,584 72 Ser. 89, Class 2, 6/01/18 ........................................................... 13,011 35,584 Ser. 90, Class M, 1/25/28 ........................................................... 5,187,078 18 Ser. 94, Class 2, 8/01/21 ........................................................... 3,125 93 Ser. 99, Class L, 8/25/21 ........................................................... 18,003 13 Ser. 123, Class M, 10/25/20 ......................................................... 2,886 125 Ser. 136, Class S, 11/25/20 ......................................................... 145,460 144 Ser. 139, Class PT, 10/25/21 ........................................................ 21,997 90 Ser. 141, Class SA, 8/25/07 ......................................................... 22,791 6,769 Ser. 199, Class SB, 10/25/23 ........................................................ 703,657 3,306 Ser. 301, Class 2, 4/01/29 .......................................................... 509,377 6,046 Ser. 302, Class 2, 6/01/29 .......................................................... 1,107,260 4,297 Ser. 339, Class 8, 7/01/33 .......................................................... 915,807 9,236 Ser. 602, Class BI, 10/25/22 ........................................................ 1,326,748 196 Ser. G-50, Class G, 12/25/21 ........................................................ 36,149 163 Ser. G92-12, Class C, 2/25/22 ....................................................... 30,944 1,922 Ser. G92-60, Class SB, 10/25/22 ..................................................... 53,164 2,063 Ser. W4, 12/25/28 ................................................................... 324,280 226 First Boston Mortgage Securities Corp., Ser. C, Class I, 4/25/17 ...................... 43,920 35,942 GMAC Commercial Mortgage Securities, Inc., Ser. C1, Class X, 7/15/27 .................. 2,050,369 24,961(3) Goldman Sachs Mortgage Securities Corp., Ser. 5, 2/19/25 .............................. 481,763 14,091(3) Hanover Grantor Trust, Ser. A, Class 1, 8/01/27 ....................................... 167,334 236 Kidder Peabody Acceptance Corp., Ser. B, Class A2, 4/22/18 ............................ 52,769 6,936 Merrill Lynch Mortgage Investors, Inc., Ser. C2, 6/15/21 .............................. 150,966 11,312(3) Morgan Stanley Capital 1, Inc., Ser. HF1, Class X, 6/15/17 ............................ 413,939 13,668 Prudential Home Mortgage Securities Co., Ser 5, Class A9, 2/25/24 ..................... 1 51 Prudential Securities Inc., Ser. 15, Class 1G, 5/20/21 ................................ 21,234 4,017 Residential Accredit Loans, Inc., Ser. QS7, Class A1, 4/25/33 ......................... 726,582 27,242 Small Business Administration, Ser. 1, 4/01/15 ........................................ 340,520 231,356 Vendee Mortgage Trust, Ser. 2, Class 1, 5/15/29 ....................................... 393,306 ------------- Total Interest Only Mortgage-Backed Securities 78,518,340 -------------
See Notes to Financial Statements. 29
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL ONLY MORTGAGE-BACKED SECURITIES--12.5% Aaa $ 273 Chase Mortgage Finance Corp., Ser. A, Class AP, 1/25/10 ............................... $ 255,001 Aaa 196 Collateralized Mortgage Obligation Trust, Ser. 29, Class A, 5/23/17 ................... 177,619 Countrywide Home Loans Inc., AAA 9,501 Ser. 26, 8/25/33 .................................................................... 7,107,596 AAA 1,774 Ser. J4, 6/25/33 .................................................................... 1,288,369 AAA 2,536 Ser. J5, 7/25/33 .................................................................... 1,889,354 AAA 1,638 Ser. J8, 9/25/23 .................................................................... 1,203,884 Drexel Burnham Lambert, Inc., AAA 78 Ser. K, Class 1, 9/23/17 ............................................................ 70,288 AAA 840 Ser. V, Class 1, 9/1/18 ............................................................. 781,803 Federal Home Loan Mortgage Corp., 538 Ser. 1418, Class M, 11/15/22 ........................................................ 462,545 1,670 Ser. 1571, Class G, 8/15/23 ......................................................... 1,440,718 6,274 Ser. 1691, Class B, 3/15/24 ......................................................... 5,612,603 801 Ser. 1739, Class B, 2/15/24 ......................................................... 735,863 11 Ser. 1750, Class PC, 3/15/24 ........................................................ 11,130 322 Ser. 1857, Class PB, 12/15/08 ....................................................... 321,854 708 Ser. T-8, Class A-10, 11/15/28 ...................................................... 587,417 Federal National Mortgage Assoc., 128 Ser. 7, Class J, 2/25/21 ............................................................ 115,337 3,439 Ser. 13, Class PR, 3/25/32 .......................................................... 3,077,677 638 Ser. 26, Class L, 3/25/23 ........................................................... 635,489 158 Ser. 51, Class E, 2/25/23 ........................................................... 120,606 95 Ser. 70, Class A, 5/25/23 ........................................................... 79,495 75 Ser. 167, Class D, 10/25/17 ......................................................... 66,477 163 Ser. 203, Class 1, 2/01/23 .......................................................... 144,860 123 Ser. 228, Class 1, 5/01/23 .......................................................... 111,073 923 Ser. 273, Class 1, 7/01/26 .......................................................... 821,219 547 Ser. 279, Class 1, 7/01/26 .......................................................... 473,021 15,330 Ser. 328, Class 1, 11/01/32 ......................................................... 12,738,335 11,435 Ser. 329, Class 1, 12/01/32 ......................................................... 8,879,910 4,437 Ser. 333, Class 1, 3/01/33 .......................................................... 3,407,930 1,066 Ser. G93-2, Class KB, 1/25/23 ....................................................... 968,319 1,002 Ser. W4, 2/25/29 .................................................................... 791,156 AAA 183 First Union Residential Securitization Trust, Ser. A, Class 1APO, 3/25/15 ............. 171,844 AAA 59 Structured Mortgage Asset Residential Trust, Ser. 3C, Class CX, 4/25/24 ............... 51,378 13,000 Resolution Funding Corp., Ser. B, 4/15/30 ............................................. 2,752,620 ------------- Total Principal Only Mortgage-Backed Securities ....................................... 57,352,790 ------------- COMMERCIAL MORTGAGE-BACKED SECURITIES--2.9% AAA 10,250(3) New York City Mortgage Loan Trust, Ser. 1996, Class A2, 6.75%, 6/25/11 ................ 11,291,225 AAA 1,915 Banc of America Funding Corp., Class A1, 6.00%, 5/20/33 ............................... 1,924,493 ------------- Total Commercial Mortgage-Backed Securities ........................................... 13,215,718 ------------- U.S. GOVERNMENT AGENCY SECURITIES--8.3% 17,033 Overseas Private Investment Corp., 4.09%-7.35%, 5/29/12 ............................... 17,930,225 Small Business Administration, 1,513 Ser. 20C-1, 7.15%, 3/01/17 .......................................................... 1,687,339 2,532 Ser. 20E-1, 7.60%, 5/01/16 .......................................................... 2,859,106 3,176 Ser. 20F-1, 7.55%, 6/01/16 .......................................................... 3,561,236 1,942 Ser. 20G-1, 7.70%, 7/01/16 .......................................................... 2,188,848 2,431 Ser. 20H-1, 7.25%, 8/01/16 .......................................................... 2,709,054 4,168 Ser. 20K-1, 6.95%, 11/01/16 ......................................................... 4,617,980 2,072 Small Business Investment Companies, Ser. P10A, Class 1, 6.12%, 2/01/08 ............... 2,197,567 ------------- Total U.S. Government and Agency Securities ........................................... 37,751,355 ------------- COLLATERALIZED MORTGAGE OBLIGATION RESIDUALS--0.1% Collateralized Mortgage Obligation Trust, 10 Ser. 40, Class R, 4/01/18 ........................................................... 981 157 Ser. 42, Class R, 10/01/14 .......................................................... 5,576 45(5) FBC Mortgage Securities Trust 16, CMO, Ser. A-1, 7/01/17 .............................. 336,825 Morgan Stanley Mortgage Trust, 177 Ser. 38, Class 2, 11/20/21 .......................................................... 30,161 197 Ser. 39, Class 2, 12/20/21 .......................................................... 34,592 ------------- Total Collateralized Mortgage Obligation Residuals .................................... 408,135 -------------
See Notes to Financial Statements. 30
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES--27.0% $155,700 U.S. Treasury Bonds, Zero Coupon, 11/15/24 .............................................. $ 48,232,123 8,325 U.S. Treasury Bonds, 8.00%, 11/15/21 .................................................... 11,157,123 U.S. Treasury Notes, 61,250 3.25%, 8/15/08 ........................................................................ 61,391,181 3,000 3.875%, 2/15/13 ....................................................................... 2,916,444 ------------- Total U.S. Government Securities ........................................................ 123,696,871 ------------- TOTAL LONG-TERM INVESTMENTS (cost $404,080,649) ......................................... 534,993,135 ------------- SHORT-TERM INVESTMENTS--38.1% U.S. GOVERNMENT AND AGENCY SECURITIES--38.1% 1,200(4) Student Loan Marketing, 0.94%, 11/03/03 ................................................. 1,199,937 41,069(4) U.S. Treasury Bonds, 0.85%, 11/03/03 .................................................... 41,068,500 U.S. Treasury Notes, 35,219(4) 0.55%, 11/03/03 ....................................................................... 35,218,750 3,834(4) 0.80%, 11/04/03 ....................................................................... 3,834,375 93,098(4) 0.85%, 11/03/03 - 11/05/03 ............................................................ 93,098,125 ------------- TOTAL SHORT-TERM INVESTMENTS (cost $174,419,687) ........................................ 174,419,687 ------------- TOTAL INVESTMENTS BEFORE INVESTMENTS SOLD SHORT AND OUTSTANDING OPTIONS WRITTEN (COST $717,432,138) ......................................................................... 709,412,822 ------------- INVESTMENTS SOLD SHORT--(29.8)% (39,300) U.S. Treasury Bonds, 5.375%, 2/15/31 .................................................... (40,612,541) U.S. Treasury Notes, (30,000) 1.50%, 7/31/05 ........................................................................ (29,902,740) (25,280) 2.625%, 5/15/08 ....................................................................... (24,781,302) (38,900) 3.625%, 5/15/13 ....................................................................... (37,245,233) (3,750) 4.375%, 8/15/12 ....................................................................... (3,806,835) ------------- TOTAL INVESTMENTS SOLD SHORT (proceeds $134,559,335) .................................... (136,348,651) ------------- NOTIONAL AMOUNT (000) --------- OUTSTANDING OPTIONS WRITTEN--(0.7)% $60,500 Interest Rate Swap, 3.60% over 3 month LIBOR, expires 11/01/04 .......................... (621,090) 77,000 Interest Rate Swap, 5.75% over 3 month LIBOR, expires 9/23/05 ........................... (1,758,680) 12,800 Interest Rate Swap, 6.00% over 3 month LIBOR, expires 10/25/04 .......................... (506,240) 185 U.S. Treasury Notes Futures ............................................................. (367,109) ------------- Total Outstanding Options Written (premium received $3,054,224) ......................... (3,253,119) ------------- TOTAL INVESTMENTS, NET OF INVESTMENTS SOLD SHORT AND OUTSTANDING OPTIONS WRITTEN--124.6% 569,811,052 LIABILITIES IN EXCESS OF OTHER ASSETS--(24.6)% .......................................... (112,510,372) ------------- NET ASSETS--100% ........................................................................ $ 457,300,680 =============
- ---------- (1) Using the higher of S&P's, Moody's or Fitch's rating. (2) Entire or partial principal amount pledged as collateral for reverse repurchase agreements or financial futures contracts. (3) Security is not registered under the Securities Act of 1933. These securities may be resold in transactions in accordance with Rule 144A under that Act, to qualified institutional buyers. As of October 31, 2003, the Trust held 3.2% of its net assets, with a current market value of $14,539,634, in securities restricted as to resale. (4) For purposes of amortized cost valuation, the maturity date of this instrument is considered to be the earlier of the next date on which the security can be redeemed at par, or the next date on which the rate of interest is adjusted. (5) Illiquid securities representing 0.07% of net assets. See Notes to Financial Statements. 31 PORTFOLIO OF INVESTMENTS OCTOBER 31, 2003 - ----------------------------------------------- BLACKROCK LIMITED DURATION INCOME TRUST (BLW) - -----------------------------------------------
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS--138.9% CORPORATE BONDS--63.2% AERO & DEFENSE--1.1% BB- $ 5,000 Sequa Corp., Ser. B, 8.875%, 4/01/08 .................................................. $ 5,400,000 B 2,500(2) Titan Corp., 8.00%, 5/15/11 ........................................................... 2,900,000 ------------- 8,300,000 ------------- AUTOMOTIVE--6.1% B2 5,000(2) Advanced Accessory Systems LLC, 10.75%, 6/15/11 ....................................... 5,350,000 B2 2,750 Collins & Aikman Products Co., 10.75%, 12/31/11 ....................................... 2,323,750 A3 7,500 DaimlerChrysler NA Holding Corp., 4.05%, 6/04/08 ...................................... 7,287,375 Dura Operating Corp., B+ 3,000 Ser. B, 8.625%, 4/15/12 ............................................................. 3,045,000 B 1,000 Ser. D, 9.00%, 5/01/09 .............................................................. 920,000 B- 5,000(2) EaglePicher Inc., 9.75%, 9/01/13 ...................................................... 5,300,000 B+ 5,000(2) Group 1 Automotive Inc., 8.25%, 8/15/13 ............................................... 5,425,000 B+ 5,000(2) Sonic Automotive Inc., 8.625%, 8/15/13 ................................................ 5,287,500 B+ 5,200(2) TRW Automotive, Inc., 9.375%, 2/15/13 ................................................. 5,902,000 B 3,000 Williams Scotsman Inc., 9.875%, 6/01/07 ............................................... 3,045,000 ------------- 43,885,625 ------------- BASIC MATERIAL--1.5% BB+ 5,000(2) Ipsco Inc, 8.75%, 6/01/13 ............................................................. 5,400,000 BB- 5,000 U.S. Steel Corp., 10.75%, 8/01/08 ..................................................... 5,487,500 ------------- 10,887,500 ------------- BUILDING & DEVELOPMENT--0.4% B 250 Collins & Aikman Floorcovering, Ser. B, 9.75%, 2/15/10 ................................ 265,000 Ba1 3,000 D R Horton Inc., 5.875%, 7/01/13 ...................................................... 2,940,000 ------------- 3,205,000 ------------- CHEMICAL--3.1% A- 5,590 Dow Chemical Co., 5.97%, 1/15/09 ...................................................... 5,946,754 B 2,500(2) Huntsman Advanced Materials LLC, 11.00%, 7/15/10 ...................................... 2,725,000 B 3,000(2) Huntsman Intl LLC, 11.625%, 10/15/10 .................................................. 2,880,000 BB- 5,000 Lyondell Chemical Co., 11.125%, 7/15/12 ............................................... 5,200,000 B- 5,000(2) Rockwood Specialties Group Inc., 10.625%, 5/15/11 ..................................... 5,375,000 ------------- 22,126,754 ------------- CONGLOMERATES--0.4% B 3,000 Trimas Corp., 9.875%, 6/15/12 ......................................................... 2,970,000 ------------- CONSUMER PRODUCTS--1.8% B2 2,000 Chattem Inc., 8.875%, 4/01/08 ......................................................... 2,055,000 BB+ 5,000 JC Penney Co. Inc., 8.00%, 3/01/10 .................................................... 5,562,500 B+ 5,000 Rite Aid Corp., 8.125%, 5/01/10 ....................................................... 5,387,500 ------------- 13,005,000 ------------- CONTAINERS & GLASS--1.3% B- 5,000(2) Graphic Packaging Intl., Inc., 9.50%, 8/15/13 ......................................... 5,562,500 B+ 4,000(2) Silgan Holdings Inc., 6.75%, 11/15/13 ................................................. 4,005,000 ------------- 9,567,500 ------------- ECOLOGICAL SERVICES & EQUIPMENT--2.3% B+ 7,000 Allied Waste NA, Inc., Ser. B, 10.00%, 8/01/09 ........................................ 7,612,500 B 2,000 Casella Waste Systems Inc., 9.75%, 2/01/13 ............................................ 2,180,000 B 6,250 National Waterworks Inc., Ser. B, 10.50%, 12/01/12 .................................... 6,968,750 ------------- 16,761,250 ------------- ELECTRONICS--1.7% B1 5,243(2) Amkor Technology Inc., 7.75%, 5/15/13 ................................................. 5,557,580 B- 2,500 Chippac Int. Ltd., Ser. B, 12.75%, 8/01/09 ............................................ 2,762,500 Ba2 3,972(2) Flextronics Intl. Ltd., 6.50%, 5/15/13, (Singapore) ................................... 3,912,420 ------------- 12,232,500 -------------
See Notes to Financial Statements. 32
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- ENERGY--9.3% B+ $ 5,500(2) AES Corp., The, 8.75%, 5/15/13 ........................................................ $ 5,871,250 BB- 5,290(2) Chesapeake Energy Corp., 7.50%, 9/15/13 ............................................... 5,686,750 BB 2,000 Compagnie Generale De Geophysique SA, 10.625%, 11/15/07, (France) ..................... 2,120,000 B 5,000 Dresser, Inc., 9.375%, 4/15/11 ........................................................ 5,137,500 B- 6,000 Dynegy Holdings Inc., 10.125%, 7/15/13 ................................................ 6,480,000 B+ 4,000 El Paso Production Holding Co., 7.75%, 6/01/13 ........................................ 3,840,000 B+ 5,000(2) Gazprom, 9.625%, 3/01/13, (Russia) .................................................... 5,425,000 B2 2,950 Hanover Equipment Test, Ser. B, 8.75%, 9/01/03 ........................................ 3,001,625 B 5,000(2) Hilcorp Energy I L P, 10.50%, 9/01/10 ................................................. 5,375,000 B+ 2,000 Massey Energy Corp., 6.95%, 3/01/07 ................................................... 2,010,000 BB- 5,000 Midwest Generation LLC, Ser. A, 8.30%, 7/02/09 ........................................ 4,900,000 B 5,000 Swift Energy Co., 9.375%, 5/01/12 ..................................................... 5,325,000 Ba3 5,000 Westport Resources Corp. New, 8.25%, 11/01/11 ......................................... 5,512,500 Williams Cos Inc., B+ 1,000 8.125%, 3/15/12 ..................................................................... 1,075,000 B+ 5,000 8.625%, 6/01/10 ..................................................................... 5,475,000 ------------- 67,234,625 ------------- FINANCE & BANKING--8.9% BB 3,000(2) Crum & Forster Holdings Corp., 10.375%, 6/15/13 ....................................... 3,225,000 A3 7,500(3) Ford Motor Credit Co., 7.375%, 2/01/11 ................................................ 7,636,162 B 3,000(2) Gemstone Investor Ltd., 7.71%, 10/31/04 ............................................... 2,992,500 A3 7,500 General Motors Acceptance Corp., 6.875%, 8/28/12 ...................................... 7,711,500 HYDI 100, B2 10,000(2) 6.40%, 6/20/08 ...................................................................... 9,937,500 B3 9,815(2) 9.00%, 6/20/08 ...................................................................... 10,096,991 Baa3 5,000(2) Kazkommerts Intl BV, 10.125%, 5/08/07, (Netherlands) .................................. 5,500,000 Ba1 2,840 Labranche & Co., Inc., 12.00%, 3/02/07 ................................................ 2,911,000 B1 4,500(2) Sheridan Group Inc., 10.25%, 8/15/11 .................................................. 4,657,500 B+ 5,000(2) Southern Star Central Corp., 8.50%, 8/01/10 ........................................... 5,300,000 BB- 4,215 Western Financial Bank, 9.625%, 5/15/12 ............................................... 4,604,888 ------------- 64,573,041 ------------- FOREST PRODUCTS--2.5% B+ 4,000 Caraustar Industries, Inc., 9.875%, 4/01/11 ........................................... 4,160,000 BB+ 5,685 Georgia Pacific Corp., 8.875%, 2/01/10 ................................................ 6,495,113 BBB 7,500 Weyerhaeuser Co., 5.25%, 12/15/09 ..................................................... 7,734,667 ------------- 18,389,780 ------------- HEALTH CARE--4.3% B 4,000 Alaris Med Systems Inc., 7.25%, 7/01/11 ............................................... 4,080,000 BB 5,000 Amerisourcebergen Corp., 8.125%, 9/01/08 .............................................. 5,412,500 BB- 1,000(2) Bio Rad Laboratories Inc., 7.50%, 8/15/13 ............................................. 1,062,500 B- 5,000 Concentra Operating Corp., 9.50%, 8/15/10 ............................................. 5,325,000 B- 3,500 Iasis Healthcare Corp., 8.50%, 10/15/09 ............................................... 3,666,250 B- 3,000 Insight Health Services Corp., Ser. B, 9.875%, 11/01/11 ............................... 3,217,500 B- 3,000(2) Norcross Safety Products LLC, 9.875%, 8/15/11 ......................................... 3,240,000 B 4,500 United Surgical Partners Int'l., Inc., 10.00%, 12/15/11 ............................... 4,995,000 ------------- 30,998,750 ------------- HOTELS & CASINOS--3.2% B 3,500 Ameristar Casinos Inc., 10.75%, 2/15/09 ............................................... 4,033,750 B+ 4,125 Boyd Gaming Corp., 7.75%, 12/15/12 .................................................... 4,320,937 B 2,000 Hammons John Q. Hotels LP, Ser. B, 8.875%, 5/15/12 .................................... 2,185,000 B 1,000 Herbst Gaming, Inc., Ser. B, 10.75%, 9/01/08 .......................................... 1,117,500 Ba3 5,000 HMH Properties, Inc., Ser. B, 7.875%, 8/01/08 ......................................... 5,162,500 Ba2 5,425 MGM Mirage, Inc., 9.75%, 6/01/07 ...................................................... 6,150,594 ------------- 22,970,281 ------------- INDUSTRIALS--4.2% B- 4,000 Fasten Tech Inc., 11.50%, 5/01/11 ..................................................... 4,240,000 B 5,025 Hexcel Corp., 9.875%, 10/01/08 ........................................................ 5,577,750 BB- 5,000 Mail-Well I Corp., 9.625%, 3/15/12 .................................................... 5,587,500 B- 5,885(2) Transdigm Inc., 8.375%, 7/15/11 ....................................................... 6,282,238 BBB- 7,500 Tyco Intl Group SA, 6.125%, 11/01/08, (Luxembourg) .................................... 7,853,175 B 1,000 Von Hoffman Corp., 10.25%, 3/15/09 .................................................... 1,077,500 ------------- 30,618,163 -------------
See Notes to Financial Statements. 33
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- LEISURE--0.5% BB+ $ 3,500 Royal Caribbean Cruises Ltd., 8.00%, 5/15/10, (Liberia) ............................... $ 3,745,000 ------------- MEDIA--5.4% B1 2,500 Alliance Atlantis Communications, Inc., 13.00%, 12/15/09, (Canada) .................... 2,884,375 B- 3,500(2) CBD Media Inc., 8.625%, 6/01/11 ....................................................... 3,753,750 BBB 7,500 Comcast Cable Communications I, 6.20%, 11/15/08 ....................................... 8,174,467 BB- 6,000 CSC Holdings Inc., 7.875%, 12/15/07 ................................................... 6,120,000 B 2,000 Dex Media East LLC, Ser. B, 12.125%, 11/15/12 ......................................... 2,400,000 BB- 2,000(2) Echostar Dbs Corp., 5.75%, 10/01/08 ................................................... 1,992,500 B 5,000 Houghton Mifflin Company, 9.875%, 2/01/13 ............................................. 5,400,000 B- 3,250 Nextmedia Operating, Inc., 10.75%, 7/01/11 ............................................ 3,672,500 B- 4,650 Salem Communications Holding Corp., 7.75%, 12/15/10 ................................... 4,789,500 B- 275 WRC Media Inc., 12.75%, 11/15/09 ...................................................... 266,750 ------------- 39,453,842 ------------- TECHNOLOGY--0.8% B+ 1,600(2) Cooperative Computing Inc., 10.50%, 6/15/11 ........................................... 1,728,000 BB+ 3,500 Unisys Corp., 6.875%, 3/15/10 ......................................................... 3,710,000 ------------- 5,438,000 ------------- TELECOMMUNICATION--3.6% B2 6,000(2) ACC Escrow Corp., 10.00%, 8/01/11 ..................................................... 6,540,000 BBB+ 7,500(3) Deutsche Telekom Intl. BV, 3.875%, 7/22/08, (Netherlands) ............................. 7,450,725 B+ 5,000 Nextel Communications Inc., 7.375%, 8/01/15 ........................................... 5,200,000 Ba3 6,000(2) Qwest Corp., 8.875%, 3/15/12 .......................................................... 6,780,000 ------------- 25,970,725 ------------- TRANSPORTATION--0.8% BB+ 1,650 Overseas Shipholding Group Inc., 8.75%, 12/01/13 ...................................... 1,757,250 B 3,720 RailAmerica Transportation Corp., 12.875%, 8/15/10 .................................... 4,278,000 ------------- 6,035,250 ------------- Total Corporate Bonds ................................................................. 458,368,586 ------------- BANK LOANS--28.5% AUTOMOTIVE--1.4% 2,988 EaglePicher Inc., Term Loan B, LIBOR + 3.50%, 8/07/09 ................................. 3,024,844 1,494 Metaldyne Co. LLC, Term Loan, LIBOR + 4.25%, 12/31/09 ................................. 1,468,226 4,000 TRW Automotive, Inc., Term Loan C1, LIBOR + 3.00%, 2/28/11 ............................ 4,060,000 1,902 Williams Scotsman, Inc., Term Loan, LIBOR + 3.00%, 12/31/08 ........................... 1,909,373 ------------- 10,462,443 ------------- BASIC MATERIALS--0.3% 1,948 International Steel, Term Loan B, LIBOR + 4.00%, 5/07/07 .............................. 1,941,143 ------------- BUILDING & DEVELOPMENT--0.3% 1,895 Associated Materials, Inc., Term Loan, LIBOR + 1.75%, 8/20/10 ......................... 1,918,421 ------------- BUSINESS EQUIPMENT & SERVICES--0.2% 1,500 Buhrmann U.S., Inc., Term Loan B, LIBOR + 4.00%, 11/01/07 ............................. 1,500,000 ------------- CHEMICAL--1.6% Huntsman Intl LLC, 1,250 Term Loan B, LIBOR + 4.00%, 6/30/08 ................................................. 1,250,000 1,250 Term Loan C, LIBOR + 4.25%, 6/30/07 ................................................. 1,250,000 998 INEOS Group Holdings Plc, Term Loan C, LIBOR + 3.50%, 6/30/09 ......................... 1,001,375 3,000 Nalco Chemical Co., Term Loan, LIBOR + 2.50%, 11/01/10 ................................ 3,000,000 1,000 USI Holdings Corp., Term Loan B, LIBOR + 3.00%, 7/30/08 ............................... 1,005,000 4,415 Veritas DGC, Inc., Term Loan B, LIBOR + 5.00%, 2/14/07 ................................ 4,360,005 ------------- 11,866,380 ------------- CONGLOMERATES--1.3% Colfax Corp., 3,925 Term Loan B, LIBOR + 3.75%, 6/30/09 ................................................. 3,934,812 1,250 Term Loan C, LIBOR + 6.25%, 6/30/10 ................................................. 1,251,563 2,500 Quintiles Transnational Corp., Term Loan, LIBOR + 4.25%, 9/25/09 ...................... 2,525,000 2,000 Trimas Corp., Term Loan, LIBOR + 3.25%, 12/31/09 ...................................... 2,000,000 ------------- 9,711,375 -------------
See Notes to Financial Statements. 34
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- CONSUMER PRODUCTS--3.0% $ 864 Dean Foods Co., Term Loan B, LIBOR + 2.00%, 8/15/08 ................................... $ 871,912 1,746 Dole Food Co., Inc., Term Loan B, LIBOR + 2.75%, 8/30/08 .............................. 1,760,981 2,000 Jarden Corp., Term Loan B, LIBOR + 2.75%, 4/30/08 ..................................... 2,017,500 3,000 Jostens, Inc., Term Loan B, LIBOR + 2.50%, 7/08/10 .................................... 3,011,250 2,000 Meow Mix Co., Term Loan, LIBOR + 3.50%, 8/30/09 ....................................... 2,015,000 2,500 Olympus, Term Loan B, PRIME + 2.00%, 9/30/10 .......................................... 2,325,000 2,963 Oriental Trading Co., Inc., Term Loan B, LIBOR + 2.75%, 6/30/09 ....................... 2,992,125 2,000 Pantry, Inc., The, Term Loan, LIBOR + 4.25%, 3/31/07 .................................. 2,020,000 1,500 Scotts Co., The, Term Loan, LIBOR + 2.00%, 10/30/10 ................................... 1,518,750 3,242 Tempur Pedic, Term Loan B, LIBOR + 3.50%, 8/13/09 ..................................... 3,258,084 ------------- 21,790,602 ------------- CONTAINERS & GLASS--2.6% 6,000 Crown Cork & Seal Co., Inc., Term Loan B1, LIBOR + 3.00%, 9/30/08 ..................... 6,060,000 4,000 Graphic Packaging Intl., Inc., Term Loan B, LIBOR + 2.75%, 6/30/10 .................... 4,050,000 8,500 Owens Brockway Glass Container, Inc., Term Loan A, LIBOR + 3.25%, 6/30/07 ............. 8,521,250 ------------- 18,631,250 ------------- ECOLOGICAL SERVICES & EQUIPMENT--0.6% 4,000 Allied Waste NA, Inc., Term Loan C, LIBOR + 3.00%, 1/15/10 ............................ 4,055,000 ------------- ELECTRONICS--0.5% 3,390 Knowles Electronics, Inc., Term Loan B2, LIBOR + 5.00%, 6/29/07 ....................... 3,339,215 ------------- ENERGY--1.6% 1,500 AES Corp., The, Term Loan, LIBOR + 4.00%, 4/30/08 ..................................... 1,500,000 1,995 Calpine Corp., LIBOR + 5.75%, 7/15/07 ................................................. 1,855,350 7,000 Centerpoint Energy, Inc., Term Loan, LIBOR + 3.50%, 10/30/06 .......................... 7,061,250 1,496 Massey Energy Corp., Term Loan B, LIBOR, 6/30/08 ...................................... 1,496,250 ------------- 11,912,850 ------------- FINANCE & BANKING--0.8% Nextel Finance Co., 2,743 Term Loan B, LIBOR + 3.375%, 6/30/08 ................................................ 2,749,931 2,743 Term Loan C, LIBOR + 3.625%, 12/31/08 ............................................... 2,749,930 ------------- 5,499,861 ------------- FOREST PRODUCTS--1.1% Jefferson Smurfit Group, 4,000 Term Loan B3, LIBOR + 2.75%, 12/31/08 ............................................... 4,020,000 4,000 Term Loan C3, LIBOR + 3.25%, 10/31/11 ............................................... 4,020,000 ------------- 8,040,000 ------------- FUNERAL SERVICES--0.3% 2,394 Alderwoods Group, Inc., Term Loan B, LIBOR + 3.25%, 9/30/08 ........................... 2,426,896 ------------- HEALTH CARE--3.4% 3,990 Community Health Systems, Inc., Term Loan B, LIBOR + 2.50%, 6/16/11 ................... 4,029,824 2,993 Concentra Operating Corp., Term Loan, LIBOR + 3.75%, 8/13/09 .......................... 3,022,425 3,000 Connecticare, Term Loan, LIBOR + 3.75%, 10/31/09 ...................................... 3,026,250 2,992 Davita, Inc., Term Loan B, LIBOR + 2.50%, 6/23/09 ..................................... 3,014,358 1,356 Fisher Scientific Intl., Inc., Term Loan B1, LIBOR + 2.25%, 2/28/10 ................... 1,371,192 2,993 Kinetic Concepts, Inc., Term Loan B, LIBOR + 2.75%, 8/05/10 ........................... 3,022,425 5,000 Medco Health, Term Loan, LIBOR + 2.25%, 6/30/10 ....................................... 5,062,500 2,000 Per-Se Technologies, Term Loan B, LIBOR + 4.25%, 8/30/08 .............................. 2,010,000 ------------- 24,558,974 ------------- HOTELS & CASINOS--0.6% 962 Greektown Casino, LLC, Term Loan B, LIBOR + 3.75%, 9/01/04 ............................ 966,062 3,000 Marina District Finance Co., Inc., Term Loan A, LIBOR + 3.00%, 12/01/07 ............... 3,022,500 ------------- 3,988,562 ------------- MEDIA--6.2% 2,000 Charter, Term Loan B, LIBOR + 2.75%, 9/30/07 .......................................... 1,912,500 2,494 Charter Communications Operating LLC, Incremental Term Loan, LIBOR + 2.75%, 9/18/08 ... 2,418,861 Cinram, 6,000 Term Loan B, LIBOR + 3.75%, 10/30/09 ................................................ 5,947,500 1,500 Term Loan C, LIBOR + 5.75%, 4/30/10 ................................................. 1,509,375 3,000 Dex Media East, LLC, Term Loan A, LIBOR + 2.50%, 11/08/08 ............................. 3,007,500
See Notes to Financial Statements. 35
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- MEDIA--(CONT'D) Dex Media West, LLC, $ 4,868 Term Loan A, LIBOR + 2.75%, 9/01/09 ................................................. $ 4,928,907 1,655 Term Loan B, LIBOR + 2.75%, 9/10/09 ................................................. 1,675,828 4,500 DirecTV Holdings, LLC, Term Loan B1, LIBOR + 2.75%, 2/13/10 ........................... 4,533,750 4,500 Echostar Dbs Corp., Term Loan, LIBOR + 3.75%, 1/01/04 ................................. 4,629,375 5,000 Insight Midwest Holdings LLC, Incremental Term Loan, LIBOR + 2.75%, 1/06/10 ........... 5,000,000 3,964 Loews Cineplex Entertainment Corp., LIBOR + 3.50%, 2/29/08 ............................ 3,968,490 4,000 MCC Iowa LLC, Term Loan B, LIBOR + 2,50%, 9/30/10 ..................................... 4,000,000 1,566 Readers Digest Assoc., Inc., Term Loan B, LIBOR + 3.00%, 5/20/08 ...................... 1,567,692 ------------- 45,099,778 ------------- TELECOMMUNICATIONS--2.7% 4,500 Crown Castle Operating Co., Term Loan B, LIBOR + 3.50%, 4/30/10 ....................... 4,533,750 1,556 Panamsat Corp., Term Loan B1, LIBOR + 2.50%, 10/29/10 ................................. 1,571,307 3,685 Pinnacle Towers, Inc., Term Loan, LIBOR + 4.50%, 10/31/05 ............................. 3,685,406 5,000 Qwest Corp., Term Loan A, LIBOR + 4.75%, 6/30/07 ...................................... 5,143,750 3,125 Western Wireless Corp., Term Loan B, LIBOR + 3.25%, 3/31/08 - 9/30/08 ................. 3,103,657 1,500 Worldspan, L.P., Term Loan, LIBOR + 3.75%, 6/30/07 .................................... 1,500,000 ------------- 19,537,870 ------------- Total Bank Loans ...................................................................... 206,280,620 ------------- MORTGAGE PASS-THROUGHS--33.3% Federal National Mortgage Assoc., 8,439 4.542%, TBA ......................................................................... 8,604,008 130,000 5.00%, TBA .......................................................................... 132,031,250 99,467 5.50%, TBA .......................................................................... 100,383,105 ------------- Total Mortgage Pass-Throughs .......................................................... 241,018,363 ------------- U.S. GOVERNMENT SECURITIES--10.7% U.S. Treasury Notes, 60,000(3) 1.625%, 10/31/05 .................................................................... 59,746,860 18,200(3) 4.00%, 11/15/12 ..................................................................... 17,924,871 ------------- Total U.S. Government Securities ...................................................... 77,671,731 ------------- FOREIGN GOVERNMENT BONDS--3.2% BB 5,000 Columbia Republic, 9.75%, 4/23/09 ..................................................... 5,400,000 B+ 5,000 Federal Republic of Brazil, 2.188%, 10/15/03 .......................................... 4,218,750 BB- 5,000 Peru Republic, 9.125%, 2/21/12 ........................................................ 5,587,500 B2 2,143 Republic of Venezuela, 2.313%, 12/18/03 ............................................... 1,982,090 B+ 5,000 Turkey Republic, 11.375%, 11/27/06 .................................................... 5,900,000 ------------- Total Foreign Government Bonds ........................................................ 23,088,340 ------------- TOTAL LONG-TERM INVESTMENTS (cost $984,552,252) ....................................... 1,006,427,640 ------------- SHORT-TERM INVESTMENTS--8.1% MORTGAGE PASS-THROUGHS--7.5% 54,570(4) Federal National Mortgage Assoc., 1.07%, 11/13/03 ..................................... 54,569,985 ------------- U.S. GOVERNMENT AND AGENCY SECURITIES--0.6% 800(4) Student Loan Marketing, 0.94%, 11/03/03 ............................................... 799,958 3,337(4) U.S. Treasury Notes, 0.50%, 11/14/03 .................................................. 3,337,125 ------------- Total U.S. Government and Agency Securities ........................................... 4,137,083 ------------- TOTAL SHORT-TERM INVESTMENTS (cost $58,707,068) ....................................... 58,707,068 ------------- TOTAL INVESTMENTS (cost $1,043,259,320) ............................................... 1,065,134,708 ------------- LIABILITIES IN EXCESS OF OTHER ASSETS--(47.0)% ........................................ (340,387,304) ------------- NET ASSETS--100% ...................................................................... $ 724,747,404 =============
- ---------- (1) Using the higher of S&P's, Moody's or Fitch's rating. (2) Security is not registered under the Securities Act of 1933. These securities may be resold in transactions in accordance with Rule 144A under that Act, to qualified institutional buyers. As of October 31, 2003, the Trust held 24.2% of its net assets, with a current market value of $175,588,478, in securities restricted as to resale. (3) Entire or partial principal amount pledged as collateral for reverse repurchase agreements or financial futures contracts. (4) For purposes of amortized cost valuation, the maturity date of this instrument is considered to be the earlier of the next date on which the security can be redeemed at par, or the next date on which the rate of interest is adjusted. See Notes to Financial Statements. 36 PORTFOLIO OF INVESTMENTS OCTOBER 31, 2003 - -------------------------------------- BLACKROCK STRATEGIC BOND TRUST (BHD) - --------------------------------------
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS--137.3% CORPORATE BONDS--134.4% AERO & DEFENSE--4.6% B- $2,000(2) BE Aerospace, Inc., 9.50%, 11/01/08 ................................................... $ 1,885,000 BBB 1,000 Lockheed Martin Corp., 8.20%, 12/01/09 ................................................ 1,212,970 BBB- 650(2) Raytheon Co., 6.55%, 3/15/10 .......................................................... 711,733 A 1,000(2) United Technologies Corp., 6.35%, 3/01/11 ............................................. 1,114,330 ------------- 4,924,033 ------------- AUTOMOTIVE--12.9% BB+ 2,000(2) Autonation, Inc., 9.00%, 8/01/08 ...................................................... 2,280,000 B2 2,000(2) Collins & Aikman Products Co., 10.75%, 12/31/11 ....................................... 1,690,000 A3 1,000(2) Daimler Chrysler NA Corp., 7.30%, 1/15/12 ............................................. 1,081,810 BB 2,000 Dana Corp., 10.125%, 3/15/10 .......................................................... 2,250,000 B3 1,000 Delco Remy Intl., Inc., 11.00%, 5/01/09 ............................................... 917,500 B 2,000 Dura Operating Corp., Ser. D, 9.00%, 5/01/09 .......................................... 1,840,000 B+ 2,000(3) Sonic Automotive Inc., 8.625%, 8/15/13 ................................................ 2,115,000 B+ 1,000(3) TRW Automotive, Inc., 9.375%, 2/15/13 ................................................. 1,135,000 B 2,000(2) United Auto Group Inc., 9.625%, 3/15/12 ............................................... 2,180,000 ------------- 15,489,310 ------------- BASIC MATERIAL--2.1% BB- 2,000(2) Century Aluminum Co., 11.75%, 4/15/08 ................................................. 2,200,000 ------------- BUILDING & DEVELOPMENT--5.1% BB 1,000 Beazer Homes USA, Inc., 8.625%, 5/15/11 ............................................... 1,092,500 B- 2,000 Great Lakes Dredge & Dock Corp., 11.25%, 8/15/08 ...................................... 2,110,000 Ba1 2,000 Schuler Homes, Inc., 9.375%, 7/15/09 .................................................. 2,240,000 ------------- 5,442,500 ------------- CHEMICAL--5.0% BB- 2,000 Lyondell Chemical Co., Ser. B, 9.875%, 5/01/07 ........................................ 2,030,000 B 1,796 Noveon, Inc., Ser. B, 11.00%, 2/28/11 ................................................. 2,065,400 B- 1,250 Resolution Performance Products, Inc., 13.50%, 11/15/10 ............................... 1,168,750 ------------- 5,264,150 ------------- CONGLOMERATES--4.7% A 325 Honeywell Intl., Inc., 7.50%, 3/01/10 ................................................. 380,243 B 1,500 MDP Acquisitions Plc, 9.625%, 10/01/12, (Ireland) ..................................... 1,665,000 B- 2,000 Penhall Intl., Inc., 12.00%, 8/01/06 .................................................. 1,725,000 BBB- 1,132(2) Tyco Intl. Group SA, 6.375%, 2/15/06, (Luxembourg) .................................... 1,196,660 ------------- 4,966,903 ------------- CONSUMER PRODUCTS--6.2% BBB+ 1,000(2) General Mills, Inc., 5.125%, 2/15/07 .................................................. 1,062,160 BBB 575(2) Kellogg Co., Ser. B, 6.00%, 4/01/06 ................................................... 619,338 B 1,000 Levi Strauss & Co., 12.25%, 12/15/12 .................................................. 825,000 B- 500 Pantry, Inc., The, 10.25%, 10/15/07 ................................................... 517,500 B- 2,000(2) Sbarro, Inc., 11.00%, 9/15/09 ......................................................... 1,730,000 ------------- 4,753,998 ------------- CONTAINERS & GLASS--2.9% B 1,000 Crown European Holdings SA, 10.875%, 3/01/13, (United Kingdom) ........................ 1,140,000 B+ 1,800 Plastipak Holdings, Inc., 10.75%, 9/01/11 ............................................. 1,980,000 ------------- 3,120,000 ------------- ECOLOGICAL SERVICES & EQUIPMENT--3.6% B+ 2,000 Allied Waste NA, Inc., Ser. B, 10.00%, 8/01/09 ........................................ 2,175,000 B 1,500 Casella Waste Systems Inc., 9.75%, 2/01/13 ............................................ 1,635,000 ------------- 3,810,000 -------------
See Notes to Financial Statements. 37
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- ENERGY--21.0% BBB+ $ 1,000(2) Anadarko Petroleum Corp., 5.375%, 3/01/07 ............................................. $ 1,068,590 CCC+ 2,000 Calpine Corp., 10.50%, 5/15/06 ........................................................ 1,830,000 BB 2,000(2) Compagnie Generale De Geophysique SA, 10.625%, 11/15/07, (France) ..................... 2,120,000 A- 1,000(2) ConocoPhillips Holding Co., 6.95%, 4/15/29 ............................................ 1,121,420 B 2,000(2) Dresser, Inc., 9.375%, 4/15/11 ........................................................ 2,055,000 BBB 250(2) DTE Energy Co., 7.05%, 6/01/11 ........................................................ 282,830 B- 1,500(3) Dynegy Holdings Inc., 10.125%, 7/15/13 ................................................ 1,620,000 El Paso Corp., B 165 7.75%, 1/15/32 ...................................................................... 124,163 B 85 7.80%, 8/01/31 ...................................................................... 63,750 BB- 1,000 El Paso Natural Gas Co., Ser. B, 8.50%, 6/01/11 ....................................... 1,090,000 B+ 1,750(3) El Paso Production Holding Co., 7.75%, 6/01/13 ........................................ 1,680,000 BBB+ 105 Exelon Corp., 6.75%, 5/01/11 .......................................................... 116,370 Baa2 325(2) FirstEnergy Corp., Ser. C, 7.375%, 11/15/31 ........................................... 347,187 B+ 2,000 Hanover Equipment Test, Ser. A, 8.50%, 9/01/08 ........................................ 2,035,000 BB- 1,000 Leviathan Gas Pipeline Partners LP, Ser. B, 10.375%, 6/01/09 .......................... 1,085,000 BBB+ 250 Occidental Petroleum Corp., 6.75%, 1/15/12 ............................................ 281,988 Baa2 1,000(2) Progress Energy, Inc., 6.75%, 3/01/06 ................................................. 1,085,150 B 2,000 Swift Energy Co., 10.25%, 8/01/09 ..................................................... 2,140,000 BB- 2,000 Western Gas Resources, Inc., 10.00%, 6/15/09 .......................................... 2,135,000 ------------- 22,281,448 ------------- FINANCE & BANKING--16.4% A+ 500(2) Allstate Corp., 7.875%, 5/01/05 ....................................................... 544,075 Aa3 1,000(2) Bank One Corp., 6.50%, 2/01/06 ........................................................ 1,082,920 Aa3 650(2,3) Barclays Bank PLC, 8.55%, 9/29/49, (United Kingdom) ................................... 797,314 A1 325(2) Bear Stearns Co., Inc., 6.50%, 5/01/06 ................................................ 353,733 B1 2,000 Bluewater Finance Ltd., 10.25%, 2/15/12, (United Kingdom) ............................. 2,020,000 Aa1 3,000(2) Citigroup, Inc., 5.75%, 5/10/06 ....................................................... 3,228,690 BB 500(3) Crum & Forster Holdings Corp., 10.375%, 6/15/13 ....................................... 537,500 Ford Motor Credit Co., A3 750(2) 5.80%, 1/12/09 ...................................................................... 734,887 A3 2,000(2) 6.875%, 2/01/06 ..................................................................... 2,090,880 General Motors Acceptance Corp., A3 250(2) 6.75%, 1/15/06 ...................................................................... 266,850 A3 900(2) 6.875%, 9/15/11 ..................................................................... 929,430 A3 300(2) 8.00%, 11/01/31 ..................................................................... 310,560 AAA 850(2) KFW Intl. Finance, Inc., 5.25%, 6/28/06 ............................................... 910,435 Ba1 1,000 Labranche & Co., Inc., 12.00%, 3/02/07 ................................................ 1,025,000 A1 1,000(2) Lehman Brothers Holdings, Inc., 6.25%, 5/15/06 ........................................ 1,088,020 A 325(2) Metlife, Inc., 6.125%, 12/01/11 ....................................................... 352,424 Baa1 1,000 Sears Roebuck Acceptance Corp., 6.75%, 8/15/11 ........................................ 1,121,100 ------------- 17,393,818 ------------- FOREST PRODUCTS--3.0% B+ 2,000 Caraustar Industries, Inc., 9.875%, 4/01/11 ........................................... 2,080,000 BBB 1,000 Weyerhaeuser Co., 6.125%, 3/15/07 ..................................................... 1,082,700 ------------- 3,162,700 ------------- HEALTH CARE--7.3% D 2,000(4) HealthSouth Corp., 6.875%, 6/15/05 .................................................... 1,810,000 B- 2,000 Insight Health Services Corp., Ser. B, 9.875%, 11/01/11 ............................... 2,145,000 B+ 2,000 Matria Healthcare, Inc., Ser. B, 11.00%, 5/01/08 ...................................... 2,140,000 B 1,500 United Surgical Partners Int'l., Inc., 10.00%, 12/15/11 ............................... 1,665,000 ------------- 7,760,000 ------------- HOTELS & CASINO--3.0% Ba2 2,000 Park Place Entertainment Corp., 7.875%, 3/15/10 ....................................... 2,160,000 B 1,000 Resorts Intl. Hotel & Casino, Inc., 11.50%, 3/15/09 ................................... 1,030,000 ------------- 3,190,000 ------------- INDUSTRIAL EQUIPMENT--4.1% BB- 2,000 Mail-Well I Corp., 9.625%, 3/15/12 .................................................... 2,235,000 B+ 2,000(2) United Rentals, Inc., Ser. B, 9.25%, 1/15/09 .......................................... 2,100,000 ------------- 4,335,000 ------------- LEISURE--1.6% BB+ 1,500 Royal Caribbean Cruises Ltd., 8.75%, 2/02/11, (Liberia) ............................... 1,680,000 -------------
See Notes to Financial Statements. 38
PRINCIPAL RATING(1) AMOUNT (UNAUDITED) (000) DESCRIPTION VALUE - ---------------------------------------------------------------------------------------------------------------------------------- MEDIA--13.5% NR $ 2,000(2,4) Adelphia Communications Corp., Ser. B, 10.50%, 7/15/04 ................................ $ 1,640,000 B1 1,500(2) Alliance Atlantis Communications, Inc., 13.00%, 12/15/09, (Canada) .................... 1,730,625 BBB+ 1,000(2) AOL Time Warner, Inc., 7.70%, 5/01/32 ................................................. 1,131,730 Ca 2,000 Charter Communications Holdings LLC, 11.125%, 1/15/11 ................................. 1,700,000 BBB 1,000 Comcast Cable Communications, Inc., 6.875%, 6/15/09 ................................... 1,118,341 BB- 2,000 EchoStar DBS Corp., 10.375%, 10/01/07 ................................................. 2,200,000 B- 2,000 Nextmedia Operating, Inc., 10.75%, 7/01/11 ............................................ 2,260,000 A- 1,000(2) Viacom, Inc., 6.625%, 5/15/11 ......................................................... 1,122,290 B- 1,500 WRC Media Inc., 12.75%, 11/15/09 ...................................................... 1,455,000 ------------- 14,357,986 ------------- REAL ESTATE--2.6% BBB+ 500(2) ERP Operating LP, 6.95%, 3/02/11 ...................................................... 557,565 Felcore Lodging LP, B1 1,000 9.00%, 6/01/11 ...................................................................... 1,090,000 B1 1,000 10.00%, 9/15/08 ..................................................................... 1,085,000 ------------- 2,732,565 ------------- TECHNOLOGY--2.1% BB+ 2,000 Unisys Corp., 8.125%, 6/01/06 ......................................................... 2,195,000 ------------- TELECOMMUNICATION--9.6% B2 1,750(3) ACC Escrow Corp., 10.00%, 8/01/11 ..................................................... 1,907,500 BBB 900(2) AT&T Corp., 7.25%, 11/15/06 ........................................................... 999,972 B3 1,000 Crown Castle Int'l. Corp., 10.75%, 8/01/11 ............................................ 1,122,500 Ba3 2,000 PanAmSat Corp., 8.50%, 2/01/12 ........................................................ 2,145,000 CCC+ 450 Qwest Capital Funding, Inc., 5.875%, 8/03/04 .......................................... 447,750 Aa3 2,000(2) Verizon New England, Inc., 6.50%, 9/15/11 ............................................. 2,179,500 A 1,000(2) Vodafone Group PLC, 7.75%, 2/15/10, (United Kingdom) .................................. 1,177,710 Worldcom, Inc., D 400(3,5) 7.375%, 1/15/06 ..................................................................... 149,000 D 200(5) 8.00%, 5/15/06 ...................................................................... 74,500 ------------- 10,203,432 ------------- TRANSPORTATION--3.1% BBB+ 500(2) Canadian National Railway Co., 6.90%, 7/15/28, (Canada) ............................... 552,565 Baa1 400 Norfolk Southern Corp., 7.05%, 5/01/37 ................................................ 440,336 B 2,000 Railamerica Transportation Corp., 12.875%, 8/15/10 .................................... 2,300,000 ------------- 3,292,901 ------------- Total Corporate Bonds ................................................................. 142,555,744 ------------- U.S. GOVERNMENT SECURITIES--0.9% 1,000 U.S. Treasury Notes, 4.25%, 8/15/13 ................................................... 996,094 ------------- FOREIGN GOVERNMENT BONDS--1.1% Baa2 1,000 United Mexican States, 8.125%, 12/30/19 ............................................... 1,104,000 ------------- SUPRANATIONAL--0.9% AAA 850(2) European Investment Bank, 4.875%, 9/06/06 ............................................. 904,239 ------------- TOTAL LONG-TERM INVESTMENTS--137.3% (cost $139,987,252) ............................... 145,560,077 ------------- SHORT-TERM INVESTMENTS--0.7% U.S. GOVERNMENT AGENCY SECURITIES--0.7% 800(4) Student Loan Marketing, 0.94%, 11/03/03, (cost $799,958) .............................. 799,958 ------------- TOTAL INVESTMENTS--138.0% (cost $140,787,210) ......................................... 146,360,035 ------------- LIABILITIES IN EXCESS OF OTHER ASSETS--(38.0)% ........................................ (40,315,064) ------------- NET ASSETS--100% ...................................................................... $106,044,971 =============
- ---------- (1) Using the higher of S&P's, Moody's or Fitch's rating. (2) Entire or partial principal amount pledged as collateral for reverse repurchase agreements or financial futures contracts. (3) Security is not registered under the Securities Act of 1933. These securities may be resold in transactions in accordance with Rule 144A under that Act, to qualified institutional buyers. As of October 31, 2003, the Trust held 9.4% of its net assets, with a current market value of $9,941,314, in securities restricted as to resale. (4) For purposes of amortized cost valuation, the maturity date of this instrument is considered to be the earlier of the next date on which the security can be redeemed at par, or the next date on which the rate of interest is adjusted. (5) Issuer is technically in default. See Notes to Financial Statements. 39 STATEMENTS OF ASSETS AND LIABILITIES OCTOBER 31, 2003 - --------------------------------------------------------------------------------
BROAD INVESTMENT GRADE 2009 CORE TERM TRUST(1) BOND TRUST (BCT) (BHK) ---------------- ------------- ASSETS Investments at value(2) ................................. $ 65,645,702 $ 544,064,718 Cash .................................................... 88,952 -- Foreign currency at value ............................... -- 246 Receivable for investments sold ......................... 1,144,618 45,179,866 Variation margin receivable ............................. 56,563 -- Receivable for open forward foreign currency contacts ... -- 67,187 Interest receivable ..................................... 778,406 8,152,134 Unrealized appreciation on interest rate swaps .......... -- -- Other assets ............................................ 14,358 49,777 ------------- ------------- 67,728,599 597,513,928 ------------- ------------- LIABILITIES Reverse repurchase agreement ............................ 19,952,625 91,668,469 Payable to custodian .................................... -- 460,397 Payable for investments purchased ....................... -- 102,452,396 Variation margin payable ................................ -- 66,844 Loan payable ............................................ -- -- Investments sold short at value(3) ...................... -- 1,459,680 Outstanding options written at value(4) ................. -- 2,153,452 Interest payable ........................................ 13,421 180,841 Unrealized depreciation on interest rate swaps .......... -- 188,307 Interest rate floors at value(3) ........................ -- -- Payable for closed forward foreign currency contacts, net -- 64,413 Investment advisory fee payable ......................... 22,397 211,451 Administration fee payable .............................. 6,108 -- Deferred Directors/Trustees fees ........................ 11,180 26,212 Other accrued expenses .................................. 341,596 41,756 ------------- ------------- 20,347,327 198,974,218 ------------- ------------- NET ASSETS .............................................. $ 47,381,272 $ 398,539,710 ============= ============= Composition of Net Assets: Par value ............................................... $ 29,571 $ 27,019 Paid-in capital in excess of par ........................ 39,184,069 386,195,639 Cost of shares held in treasury(5) ...................... -- -- Undistributed net investment income ..................... 8,349,474 -- Accumulated net realized gain (loss) .................... (1,501,431) 350,131 Net unrealized appreciation (depreciation) .............. 1,319,589 11,966,921 ------------- ------------- Net assets, October 31, 2003 ............................ $ 47,381,272 $ 398,539,710 ============= ============= Net Asset Value Per Common Share(6) ..................... $16.02 $14.75 ====== ====== (1)Consolidated Statement of Assets and Liabilities (2)Investments at cost .................................. $ 64,624,207 $ 532,154,754 (3)Proceeds received .................................... -- 1,458,281 (4)Premium received ..................................... -- 2,069,401 (5)Shares held in treasury .............................. -- -- (6)Common shares outstanding ............................ 2,957,093 27,018,774
See Notes to Financial Statements. 40
INCOME LIMITED HIGH OPPORTUNITY INCOME DURATION STRATEGIC YIELD TRUST TRUST TRUST INCOME TRUST BOND TRUST (BHY) (BNA) (BKT) (BLW) (BHD) - -------------- -------------- -------------- -------------- -------------- $ 61,457,946 $ 558,812,045 $ 709,412,822 $1,065,134,708 $ 146,360,035 107,680 -- 1,080,121 222,505 84,692 -- -- -- -- -- 403,691 2,736,337 6,542,352 11,634,999 2,159,542 -- 388,797 159,375 -- -- -- -- -- -- -- 1,860,522 7,882,677 5,088,448 13,895,130 3,534,350 -- 2,654,095 931,496 -- -- 57,487 108,428 127,287 41,048 12,005 - -------------- -------------- -------------- -------------- -------------- 63,887,326 572,582,379 723,341,901 1,090,928,390 152,150,624 - -------------- -------------- -------------- -------------- -------------- -- 103,378,025 121,766,813 118,993,475 45,871,594 -- 406,757 -- -- -- -- -- 1,253,807 246,555,554 -- -- -- -- -- -- 19,250,000 -- -- -- -- -- 53,740,347 136,348,651 -- -- -- 2,582,630 3,253,119 -- -- 26,742 995,054 1,953,179 29,155 24,619 -- -- -- -- -- -- -- 827,945 -- -- -- -- -- -- -- 38,029 209,153 252,993 475,379 71,223 1,531 68,348 102,077 -- -- 16,828 84,172 101,517 1,500 5,138 116,142 137,129 171,778 125,923 133,079 - -------------- -------------- -------------- -------------- -------------- 19,449,272 161,601,615 266,031,879 366,180,986 46,105,653 - -------------- -------------- -------------- -------------- -------------- $ 44,438,054 $ 410,980,764 $ 457,310,022 $ 724,747,404 $ 106,044,971 ============== ============== ============== ============== ============== $ 6,382 $ 344,497 $ 633,632 $ 36,706 $ 7,034 93,565,135 406,532,068 553,795,068 699,580,295 100,247,645 -- (17,377,850) -- -- -- -- 5,785,104 10,115,860 2,864,550 1,711,227 (35,131,326) (2,798,701) (98,385,297) 390,465 (1,493,760) (14,002,137) 18,495,646 (8,849,241) 21,875,388 5,572,825 - -------------- -------------- -------------- -------------- -------------- $ 44,438,054 $ 410,980,764 $ 457,310,022 $ 724,747,404 $ 106,044,971 ============== ============== ============== ============== ============== $6.96 $11.93 $7.21 $19.74 $15.07 ===== ====== ===== ====== ====== $ 75,460,083 $ 542,949,432 $ 717,432,138 $1,043,259,320 $ 140,787,210 -- 53,049,018 134,559,335 -- -- -- 2,432,578 3,054,224 -- -- -- 1,757,400 -- -- -- 6,381,648 34,449,693 63,389,691 36,706,021 7,035,621
41 STATEMENTS OF OPERATIONS FOR THE PERIOD(1) ENDED OCTOBER 31, 2003 - --------------------------------------------------------------------------------
BROAD INVESTMENT GRADE 2009 CORE TERM TRUST(2) BOND TRUST (BCT) (BHK) ---------------- ------------ NET INVESTMENT INCOME Interest Income ...................................................... $ 4,972,268 $ 26,586,539 ------------ ------------ EXPENSES Investment advisory ................................................ 274,354 2,985,893 Administration ..................................................... 74,824 -- Transfer agent ..................................................... 12,204 16,284 Custodian .......................................................... 66,960 140,774 Reports to shareholders ............................................ 46,680 86,628 Directors/Trustees ................................................. 14,355 52,798 Registration ....................................................... 2,369 31,500 Independent accountants ............................................ 49,011 45,700 Legal .............................................................. 22,931 38,069 Insurance .......................................................... 3,489 47,361 Organization ....................................................... -- -- Miscellaneous ...................................................... 19,010 56,290 ------------ ------------ Total expenses excluding interest expense and excise tax ......... 586,187 3,501,297 Interest Expense ............................................... 235,225 709,198 Excise Tax ..................................................... 390,244 -- ------------ ------------ Total expenses ................................................... 1,211,656 4,210,495 Less fees waived by Advisor .................................... -- -- Less fees paid directly ........................................ -- (4,561) ------------ ------------ Net expenses ..................................................... 1,211,656 4,205,934 ------------ ------------ Net investment income ................................................ 3,760,612 22,380,605 ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments ...................................................... (2,442,600) 5,740,077 Foreign currency ................................................. -- 4,030,682 Futures .......................................................... (516,247) 371,443 Interest rate caps ............................................... -- -- Interest rate swaps .............................................. -- 495,924 Options written .................................................. -- (529,193) Short sales ...................................................... -- -- ------------ ------------ (2,958,847) 10,108,933 ------------ ------------ Net change in unrealized appreciation/depreciation on: Investments ...................................................... (1,384,674) 10,091,362 Foreign currency ................................................. -- 119,806 Futures .......................................................... 225,201 824,878 Interest rate caps ............................................... -- -- Interest rate floors ............................................. -- -- Interest rate swaps .............................................. -- (188,307) Options written .................................................. -- 50,529 Short sales ...................................................... -- (1,399) ------------ ------------ (1,159,473) 10,896,869 ------------ ------------ Net gain (loss) ...................................................... (4,118,320) 21,005,802 ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...... $ (357,708) $ 43,386,407 ============ ============
- ---------- (1) Commencement of investment operations for Limited Duration was July 30, 2003. The other Trusts' statements are for a full year. (2) Consolidated Statement of Operations. See Notes to Financial Statements. 42
INCOME LIMITED HIGH OPPORTUNITY INCOME DURATION STRATEGIC YIELD TRUST TRUST TRUST INCOME TRUST BOND TRUST (BHY) (BNA) (BKT) (BLW) (BHD) - ------------ ------------ ------------ ------------ ------------ $ 8,033,894 $ 34,238,249 $ 45,060,425 $ 13,462,605 $ 12,835,456 - ------------ ------------ ------------ ------------ ------------ 636,202 2,481,258 3,072,754 1,154,773 1,084,562 60,591 413,543 898,600 -- -- 21,364 32,000 91,811 4,557 15,810 31,392 199,285 184,754 51,336 46,011 56,513 108,217 125,000 50,000 27,435 12,000 57,620 74,706 20,367 13,221 22,500 31,500 48,074 11,067 22,499 31,976 119,586 112,141 30,000 39,930 24,083 67,546 49,000 17,856 13,316 1,830 44,553 29,901 20,086 7,556 -- -- -- 15,000 -- 20,188 111,042 155,803 10,136 18,969 - ------------ ------------ ------------ ------------ ------------ 918,639 3,666,150 4,842,544 1,385,178 1,289,309 350,855 1,664,516 1,584,933 51,372 694,780 -- -- -- -- -- - ------------ ------------ ------------ ------------ ------------ 1,269,494 5,330,666 6,427,477 1,436,550 1,984,089 -- -- -- -- (289,217) (1,864) (5,057) (8,158) -- (6,589) - ------------ ------------ ------------ ------------ ------------ 1,267,630 5,325,609 6,419,319 1,436,550 1,688,283 - ------------ ------------ ------------ ------------ ------------ 6,766,264 28,912,640 38,641,106 12,026,055 11,147,173 - ------------ ------------ ------------ ------------ ------------ (4,771,417) (3,393,714) (4,527,133) 594,555 (1,177,052) -- (198,307) -- -- -- -- (217,858) (13,602,696) (204,090) -- -- -- (2,318) -- -- -- 1,491,314 (4,162,695) -- -- -- (861,522) (615,153) -- -- -- -- 889,290 -- -- - ------------ ------------ ------------ ------------ ------------ (4,771,417) (3,180,087) (22,020,705) 390,465 (1,177,052) - ------------ ------------ ------------ ------------ ------------ 10,326,575 12,430,608 (19,541,288) 21,875,388 17,670,059 -- 168,091 -- -- -- -- 1,032,645 75,909 -- -- -- -- 356,506 -- -- -- -- 1,000,886 -- -- -- 537,812 8,956,825 -- -- -- (40,795) 201,718 -- -- -- (92,090) (1,789,316) -- -- - ------------ ------------ ------------ ------------ ------------ 10,326,575 14,036,271 (10,738,760) 21,875,388 17,670,059 - ------------ ------------ ------------ ------------ ------------ 5,555,158 10,856,184 (32,759,465) 22,265,853 16,493,007 - ------------ ------------ ------------ ------------ ------------ $ 12,321,422 $ 39,768,824 $ 5,881,641 $ 34,291,908 $ 27,640,180 ============ ============ ============ ============ ============
43 STATEMENTS OF CASH FLOWS FOR THE PERIOD(1) ENDED OCTOBER 31, 2003 - --------------------------------------------------------------------------------
BROAD INVESTMENT RECONCILIATION OF NET INCREASE (DECREASE) GRADE 2009 CORE IN NET ASSETS RESULTING FROM OPERATIONS TO TERM TRUST(2) BOND TRUST NET CASH FLOWS PROVIDED BY (USED FOR) (BCT) (BHK) OPERATING ACTIVITIES --------------- ------------- Net increase (decrease) in net assets resulting from operations ...... $ (357,708) $ 43,386,407 ------------ ------------ Decrease (increase) in investments ................................... 4,562,308 45,448,469 Net realized loss (gain) ............................................. 2,958,847 (10,108,933) Decrease (increase) in unrealized appreciation (depreciation) ........ 1,159,473 (10,896,869) Decrease in interest rate caps ....................................... -- -- Increase in interest rate swaps ...................................... -- -- Decrease (increase) in receivable for investments sold ............... (1,144,618) (13,872,329) Increase in receivable for forward foreign currency contacts ......... -- (67,187) Decrease (increase) in variation margin receivable ................... (33,001) 410,275 Decrease in collateral deposited with brokers ........................ -- -- Decrease (increase) in interest receivable ........................... (118,760) (268,707) Increase in other assets ............................................. (5,195) (37,268) Increase (decrease) in payable for investments purchased ............. -- (82,058,415) Decrease in payable for forward foreign currency contacts ............ -- (112,134) Increase in payable for forward foreign currency contacts, net ....... -- 47,287 Increase in variation margin payable ................................. -- 66,844 Increase (decrease) in interest payable .............................. (3,902) 180,693 Increase in outstanding options written .............................. -- 1,819,233 Increase (decrease) in investments sold short ........................ -- 1,459,680 Increase in interest rate floor ...................................... -- -- Increase (decrease) in interest rate swaps ........................... -- 188,307 Increase (decrease) in investment advisory fee payable ............... (1,632) (9,350) Increase (decrease) in administration fee payable .................... (445) -- Increase in deferred Directors/Trustees fees ......................... 3,503 17,116 Increase (decrease) in accrued expenses .............................. 215,573 (69,786) ------------ ------------ Total adjustments .................................................. 7,592,151 (67,863,074) ------------ ------------ Net cash flows provided by (used for) operating activities ........... $ 7,234,443 $(24,476,667) ============ ============ INCREASE (DECREASE) IN CASH AND FOREIGN CURRENCY Net cash flows provided by (used for) operating activities ........... $ 7,234,443 $(24,476,667) ------------ ------------ Cash flows provided by (used for) financing activities: Capital contributions .............................................. -- -- Increase (decrease) in reverse repurchase agreements ............... (3,716,562) 56,265,969 Cash dividends paid ................................................ (3,504,653) (32,084,759) ------------ ------------ Net cash flows provided by (used for) financing activities ........... (7,221,215) 24,181,210 ------------ ------------ Net increase (decrease) in cash .................................... 13,228 (295,457) Cash and foreign currency at beginning of period ................... 75,724 (164,694) ------------ ------------ Cash and foreign currency at end of period ......................... $ 88,952 $ (460,151) ============ ============
- ---------- (1) Commencement of investment operations for Limited Duration was July 30, 2003. This information includes the initial investment by BlackRock Funding, Inc. The other Trusts' statements are for a full year. (2) Consolidated Statement of Cash Flows. See Notes to Financial Statements. 44
INCOME LIMITED HIGH OPPORTUNITY INCOME DURATION STRATEGIC YIELD TRUST TRUST TRUST INCOME TRUST BOND TRUST (BHY) (BNA) (BKT) (BLW) (BHD) - --------------- --------------- --------------- --------------- --------------- $ 12,321,422 $ 39,768,824 $ 5,881,641 $ 34,291,908 $ 27,640,180 - --------------- --------------- --------------- --------------- --------------- 373,218 10,781,983 (53,973,836) (1,042,868,855) (468,135) 4,771,417 3,180,087 22,020,705 (390,465) 1,177,052 (10,326,575) (14,036,271) 10,738,760 (21,875,388) (17,670,059) -- -- 20 -- -- -- (537,811) (931,496) -- -- (403,691) 99,155,268 13,138,945 (11,634,999) (2,159,542) -- -- -- -- -- -- 300,045 136,839 -- -- -- -- 17,234,375 -- -- 451,489 (2,087,451) 1,734,013 (13,895,130) 150,919 (5,218) (14,977) (46,991) (41,048) (9,548) -- (101,568,077) (206,805) 246,555,554 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- (13,822) 715,163 (333,672) 29,155 (10,933) -- 2,348,912 2,396,153 -- -- -- (19,811,393) 136,348,651 -- -- (1,358,636) -- -- -- -- (8,025,329) -- -- (15,925) 2,968 (26,841) 475,379 7,989 (3,607) 33,984 21,963 -- -- 4,236 22,977 27,842 1,500 3,387 52,880 (158,754) (81,575) 125,923 (28,020) - --------------- --------------- --------------- --------------- --------------- (4,115,598) (21,673,347) 138,813,085 (843,518,374) (19,006,890) - --------------- --------------- --------------- --------------- --------------- $ 7,205,824 $ 18,095,477 $ 144,694,726 $ (809,226,466) $ 8,633,290 =============== =============== =============== =============== =============== $ 7,205,824 $ 18,095,477 $ 144,694,726 $ (809,226,466) $ 8,633,290 - --------------- --------------- --------------- --------------- --------------- -- -- -- 699,632,001 -- -- 17,674,238 (84,025,451) 118,993,475 1,648,219 (6,836,072) (36,267,803) (59,956,759) (9,176,505) (10,189,515) - --------------- --------------- --------------- --------------- --------------- (6,836,072) (18,593,565) (143,982,210) 809,448,971 (8,541,296) - --------------- --------------- --------------- --------------- --------------- 369,752 (498,088) 712,516 222,505 91,994 (262,072) 91,331 367,605 -- (7,302) - --------------- --------------- --------------- --------------- --------------- $ 107,680 $ (406,757) $ 1,080,121 $ 222,505 $ 84,692 =============== =============== =============== =============== ===============
45 STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 2003 AND FOR THE PERIOD(1) ENDED OCTOBER 31, 2002 - --------------------------------------------------------------------------------
BROAD INVESTMENT GRADE 2009 TERM TRUST(2) CORE BOND TRUST (BCT) (BHK) ------------------------------ ------------------------------ 2003 2002 2003 2002 ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income ................................ $ 3,760,612 $ 5,953,008 $ 22,380,605 $ 26,838,280 Net realized gain (loss) ............................. (2,958,847) 2,180,535 10,108,933 78,567 Net change in unrealized appreciation/depreciation ... (1,159,473) (2,064,590) 10,896,869 1,070,052 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations ...................................... (357,708) 6,068,953 43,386,407 27,986,899 ------------- ------------- ------------- ------------- DIVIDENDS AND DISTRIBUTIONS: From net investment income ........................... (3,504,653) (2,291,473) (27,108,407) (26,838,280) From net realized gains .............................. -- -- (4,976,352) -- Tax return of capital distributions .................. -- -- -- -- In excess of net investment income ................... -- -- -- (179,545) ------------- ------------- ------------- ------------- Total dividends and distributions .................. (3,504,653) (2,291,473) (32,084,759) (27,017,825) ------------- ------------- ------------- ------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from the issuance of common shares ...... -- -- -- 357,484,731 Net proceeds from the underwriters' overallotment option exercised ..................... -- -- -- 28,650,000 Reinvestment of dividends ............................ -- -- -- 134,257 Cost of Trust shares reacquired ...................... -- -- -- -- ------------- ------------- ------------- ------------- Net proceeds from capital share transactions ....... -- -- -- 386,268,988 ------------- ------------- ------------- ------------- Total increase (decrease) ........................ (3,862,361) 3,777,480 11,301,648 387,238,062 ------------- ------------- ------------- ------------- Net Assets Beginning of period .................................... 51,243,633 47,466,153 387,238,062 -- ------------- ------------- ------------- ------------- End of period .......................................... $ 47,381,272 $ 51,243,633 $ 398,539,710 $ 387,238,062 ============= ============= ============= ============= End of period undistributed net investment income ...... $ 8,349,474 $ 7,480,911 $ -- $ (144,545)
- ---------- (1) Commencement of investment operations for Core Bond was November 30, 2001. This information includes the initial investment by BlackRock Funding, Inc. The other Trusts' statements are for a full year. (2) Consolidated Statement of Changes in Net Assets. See Notes to Financial Statements. 46
HIGH YIELD TRUST INCOME OPPORTUNITY TRUST INCOME TRUST (BHY) (BNA) (BKT) - ------------------------------- ------------------------------- ------------------------------- 2003 2002 2003 2002 2003 2002 - ------------- ------------- ------------- ------------- ------------- ------------- $ 6,766,264 $ 7,613,863 $ 28,912,640 $ 39,603,548 $ 38,641,106 $ 62,183,766 (4,771,417) (8,468,860) (3,180,087) (6,747,774) (22,020,705) 28,398,002 10,326,575 2,224,397 14,036,271 5,135,503 (10,738,760) (50,286,165) - ------------- ------------- ------------- ------------- ------------- ------------- 12,321,422 1,369,400 39,768,824 37,991,277 5,881,641 40,295,603 - ------------- ------------- ------------- ------------- ------------- ------------- (7,116,448) (7,613,863) (27,903,349) (25,885,698) (63,862,381) (35,876,922) -- -- (8,364,454) -- -- -- -- (584,069) -- -- -- -- -- -- -- -- -- -- - ------------- ------------- ------------- ------------- ------------- ------------- (7,116,448) (8,197,932) (36,267,803) (25,885,698) (63,862,381) (35,876,922) - ------------- ------------- ------------- ------------- ------------- ------------- -- -- -- -- -- -- -- -- -- -- -- -- 280,376 261,647 -- -- 3,905,622 202,011 -- -- -- (2,381,796) -- -- - ------------- ------------- ------------- ------------- ------------- ------------- 280,376 261,647 -- (2,381,796) 3,905,622 202,011 - ------------- ------------- ------------- ------------- ------------- ------------- 5,485,350 (6,566,885) 3,501,021 9,723,783 (54,075,118) 4,620,692 - ------------- ------------- ------------- ------------- ------------- ------------- 38,952,704 45,519,589 407,479,743 397,755,960 511,385,140 506,764,448 - ------------- ------------- ------------- ------------- ------------- ------------- $ 44,438,054 $ 38,952,704 $ 410,980,764 $ 407,479,743 $ 457,310,022 $ 511,385,140 ============= ============= ============= ============= ============= ============= $ -- $ -- $ 5,785,104 $ 4,974,125 $ 10,115,860 $ 35,337,135
47 STATEMENTS OF CHANGES IN NET ASSETS FOR THE PERIOD(1) ENDED OCTOBER 31, 2003 AND FOR THE PERIOD(2) ENDED OCTOBER 31, 2002 - --------------------------------------------------------------------------------
LIMITED DURATION INCOME STRATEGIC BOND TRUST TRUST (BLW) (BHD) --------------- -------------------------------- 2003 2003 2002 ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income ................................ $ 12,026,055 $ 11,147,173 $ 6,886,556 Net realized gain (loss) ............................. 390,465 (1,177,052) (316,708) Net change in unrealized appreciation/depreciation ... 21,875,388 17,670,059 (12,097,234) ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations ...................................... 34,291,908 27,640,180 (5,527,386) ------------- ------------- ------------- DIVIDENDS FROM NET INVESTMENT INCOME ................... (9,176,505) (10,466,535) (5,890,967) ------------- ------------- ------------- Capital Share Transactions: Net proceeds from the issuance of common shares ...... 653,888,001 -- 99,920,015 Net proceeds from the underwriters' overallotment option exercised ..................... 45,744,000 -- -- Reinvestment of dividends ............................ -- 277,020 92,644 ------------- ------------- ------------- Net proceeds from capital share transactions ....... 699,632,001 277,020 100,012,659 ------------- ------------- ------------- Total increase .................................. 724,747,404 17,450,665 88,594,306 ------------- ------------- ------------- NET ASSETS Beginning of period .................................... -- 88,594,306 -- ------------- ------------- ------------- End of period .......................................... $ 724,747,404 $ 106,044,971 $ 88,594,306 ============= ============= ============= End of period undistributed net investment income ...... $ 2,864,550 $ 1,711,227 $ 1,005,589
- ---------- (1) Commencement of investment operations for Limited Duration was July 30, 2003. This information includes the initial investment by BlackRock Funding, Inc. The other Trust's statement is for a full year. (2) Commencement of investment operations for Strategic Bond was February 28, 2002. This information includes the initial investment by BlackRock Funding, Inc. See Notes to Financial Statements. 48 FINANCIAL HIGHLIGHTS - -------------------------------------------------------- BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST (BCT) - --------------------------------------------------------
YEAR ENDED OCTOBER 31, ------------------------------------------------------- 2003 2002 2001 2000 1999 ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of year ....................... $ 17.33 $ 16.05 $ 13.64 $ 13.64 $ 15.01 ------- ------- ------- ------- ------- Investment operations: Net investment income .................................. 1.28 2.01 1.17 0.91 0.93 Net realized and unrealized gain (loss) ................ (1.40) 0.04 2.01 (0.09) (1.45) ------- ------- ------- ------- ------- Net increase (decrease) from investment operations ....... (0.12) 2.05 3.18 0.82 (0.52) ------- ------- ------- ------- ------- Dividends from net investment income ..................... (1.19) (0.77) (0.77) (0.82) (0.85) ------- ------- ------- ------- ------- Net asset value, end of year ............................. $ 16.02 $ 17.33 $ 16.05 $ 13.64 $ 13.64 ======= ======= ======= ======= ======= Market value, end of year ................................ $ 15.85 $ 16.18 $ 14.39 $ 11.94 $ 11.44 ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN(1) ............................... 5.32% 18.34% 27.66% 12.11% (7.68)% ======= ======= ======= ======= ======= RATIOS TO AVERAGE NET ASSETS: Total expenses ........................................... 2.43% 2.50% 3.52% 4.36% 3.49% Net expenses ............................................. 2.43% 2.50% 3.52% 4.36% 3.49% Net expenses excluding interest expense and excise tax ... 1.18% 1.16% 1.16% 1.31% 1.03% Net investment income .................................... 7.54% 12.22% 7.93% 6.83% 6.58% SUPPLEMENTAL DATA: Average net assets (000) ................................. $49,882 $48,731 $43,701 $39,425 $41,909 Portfolio turnover ....................................... 39% 35% 19% 36% 25% Net assets, end of year (000) ............................ $47,381 $51,244 $47,466 $40,321 $40,345 Reverse repurchase agreements outstanding, end of year (000) ...................................... $19,953 $23,669 $13,373 $18,850 $16,304 Asset coverage(2) ........................................ $ 3,375 $ 3,165 $ 4,550 $ 3,139 $ 3,475
- ---------- (1) Total investment return is calculated assuming a purchase of a share at the current market price on the first day and a sale at the current market price on the last day of each year reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Trust's dividend reinvestment plan. Total investment returns do not reflect brokerage commissions. Total investment returns for less than a full year are not annualized. Past performance is not a guarantee of future results. (2) Per $1,000 of reverse repurchase agreements outstanding. The information above represents the audited operating performance for a share outstanding, total investment returns, ratios to average net assets and other supplemental data for each year indicated. This information has been determined based upon financial information provided in the financial statements and market value data for the Trust's shares. See Notes to Financial Statements. 49 FINANCIAL HIGHLIGHTS - --------------------------------- BLACKROCK CORE BOND TRUST (BHK) - ---------------------------------
FOR THE PERIOD NOVEMBER 30, 2001(1) YEAR ENDED THROUGH OCTOBER 31, 2003 OCTOBER 31, 2002 ---------------- ------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period ............................. $ 14.33 $ 14.33(2) ----------- ----------- Investment operations: Net investment income ......................................... 0.83 0.99 Net realized and unrealized gain .............................. 0.77 0.04 ----------- ----------- Net increase from investment operations .......................... 1.60 1.03 ----------- ----------- Dividends and distributions: From net investment income .................................... (1.00) (1.00) Net realized gain ............................................. (0.18) -- ----------- ----------- Total dividends and distributions ............................. (1.18) (1.00) ----------- ----------- Capital charges with respect to issuance of shares ............... -- (0.03) ----------- ----------- Net asset value, end of period ................................... $ 14.75 $ 14.33 =========== =========== Market value, end of period ...................................... $ 13.57 $ 13.82 =========== =========== TOTAL INVESTMENT RETURN(3) ....................................... 6.62% (1.02)% =========== =========== RATIOS TO AVERAGE NET ASSETS: Total expenses ................................................... 1.05% 1.04%(4) Net expenses ..................................................... 1.05% 1.04%(4) Net expenses excluding interest expense .......................... 0.87% 0.93%(4) Net investment income ............................................ 5.58% 7.67%(4) SUPPLEMENTAL DATA: Average net assets (000) ......................................... $ 401,049 $ 380,277 Portfolio turnover ............................................... 161% 73% Net assets, end of period (000) .................................. $ 398,540 $ 387,238 Reverse repurchase agreements outstanding, end of period (000) ... $ 91,668 $ 165,215 Asset coverage(5) ................................................ $ 5,348 $ 3,342
- ---------- (1) Commencement of investment operations. This information includes the initial investment by BlackRock Funding, Inc. (2) Net asset value, beginning of period, reflects a deduction of $0.675 per share sales charge from the initial offering price of $15.00 per share. (3) Total investment return is calculated assuming a purchase of a share at the current market price on the first day and a sale at the current market price on the last day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Trust's dividend reinvestment plan. Total investment returns do not reflect brokerage commissions. Total investment returns for less than a full year are not annualized. Past performance is not a guarantee of future results. (4) Annualized. (5) Per $1,000 of reverse repurchase agreements outstanding. The information above represents the audited 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 value data for the Trust's shares. See Notes to Financial Statements. 50 FINANCIAL HIGHLIGHTS - ---------------------------------- BLACKROCK HIGH YIELD TRUST (BHY) - ----------------------------------
FOR THE PERIOD DECEMBER 23, 1998(1) YEAR ENDED OCTOBER 31, THROUGH ------------------------------------------------- OCTOBER 31, 2003 2002 2001 2000 1999 ------- ------- ------- ------- -------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period ................. $ 6.13 $ 7.20 $ 10.60 $ 13.58 $ 15.00 ------- ------- ------- ------- ------- Investment operations: Net investment income ............................. 1.06 1.20 1.32 1.66 1.29 Net realized and unrealized gain (loss) ........... 0.89 (0.98) (3.13) (3.02) (1.52) ------- ------- ------- ------- ------- Net increase (decrease) from investment operations xxx 1.95 0.22 (1.81) (1.36) (0.23) ------- ------- ------- ------- ------- Dividends and distributions: From net investment income ........................ (1.07) (1.20) (1.48) (1.62) (1.17) Tax return of capital ............................. (0.05) (0.09) (0.11) -- -- ------- ------- ------- ------- ------- Total dividends and distributions .................... (1.12) (1.29) (1.59) (1.62) (1.17) ------- ------- ------- ------- ------- Capital charge with respect to issuance of shares .... -- -- -- -- (0.02) ------- ------- ------- ------- ------- Net asset value, end of period ....................... $ 6.96 $ 6.13 $ 7.20 $ 10.60 $ 13.58 ======= ======= ======= ======= ======= Market value, end of period .......................... $ 10.25 $ 8.68 $ 9.18 $ 11.88 $ 12.50 ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN(3) ........................... 32.87% 7.97% (11.31)% 8.23% (9.68)% ======= ======= ======= ======= ======= RATIOS TO AVERAGE NET ASSETS: Total expenses ....................................... 3.07% 3.45% 4.90% 5.29% 4.16%(4) Net expenses ......................................... 3.07% 3.45% 4.90% 5.29% 4.08%(4) Net expenses excluding interest expense .............. 2.22% 2.20% 2.03% 1.99% 1.98%(4) Net investment income ................................ 16.37% 16.29% 14.23% 13.12% 10.34%(4) SUPPLEMENTAL DATA: Average net assets (000) ............................. $41,326 $46,751 $58,553 $79,602 $92,116 Portfolio turnover ................................... 30% 147% 71% 92% 121% Net assets, end of period (000) ...................... $44,438 $38,953 $45,520 $66,867 $85,652 Loan outstanding, end of period (000) ................ $19,250 $19,250 $23,000 $33,000 $41,000 Asset coverage(5) .................................... $ 3,308 $ 3,024 $ 2,983 $ 3,032 $ 3,094
- ---------- (1) Commencement of investment operations. This information includes the initial investment by BlackRock Financial Management, Inc. (2) Net asset value, beginning of period, reflects a deduction of $0.675 per share sales charge from the initial offering price of $15.00 per share. (3) Total investment return is calculated assuming a purchase of a share at the current market price on the first day and a sale at the current market price on the last day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at prices obtained under the Trust's dividend reinvestment plan. Total investment return does not reflect brokerage commissions. Total investment returns for less than a full year are not annualized. Past performance is not a guarantee of future results. (4) Annualized. (5) Per $1,000 of loan outstanding. The information above represents the audited 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 value data for the Trust's shares. See Notes to Financial Statements. 51 FINANCIAL HIGHLIGHTS - ------------------------------------------ BLACKROCK INCOME OPPORTUNITY TRUST (BNA) - ------------------------------------------
YEAR ENDED OCTOBER 31, ---------------------------------------------------------------- 2003 2002 2001 2000 1999 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of year ................. $ 11.83 $ 11.47 $ 11.03 $ 11.45 $ 11.88 -------- -------- -------- -------- -------- Investment operations: Net investment income ........................... 0.84 1.15 0.87 0.70 0.84 Net realized and unrealized gain (loss) ......... 0.31 (0.05) 0.34 (0.31) (0.46) -------- -------- -------- -------- -------- Net increase from investment operations ............ 1.15 1.10 1.21 0.39 0.38 -------- -------- -------- -------- -------- Dividends and distributions: From net investment income ...................... (0.81) (0.75) (0.23) (0.39) (0.84) From net realized gains ......................... (0.24) -- -- (0.04) -- Tax return of capital ........................... -- -- (0.54) (0.41) -- -------- -------- -------- -------- -------- Total dividends and distributions .................. (1.05) (0.75) (0.77) (0.84) (0.84) -------- -------- -------- -------- -------- Increase resulting from Trust shares repurchased ... -- 0.01 -- 0.03 0.03 -------- -------- -------- -------- -------- Net asset value, end of year ....................... $ 11.93 $ 11.83 $ 11.47 $ 11.03 $ 11.45 ======== ======== ======== ======== ======== Market value, end of year .......................... $ 10.95 $ 10.50 $ 10.41 $ 9.75 $ 9.69 ======== ======== ======== ======== ======== TOTAL INVESTMENT RETURN(1) ......................... 14.71% 8.44% 15.09% 9.82% 6.70% ======== ======== ======== ======== ======== RATIOS TO AVERAGE NET ASSETS: Total expenses ..................................... 1.29% 1.40% 3.62% 3.76% 3.18% Net expenses ....................................... 1.29% 1.40% 3.62% 3.76% 3.18% Net expenses excluding interest expense ............ 0.89% 0.93% 1.01% 0.88% 0.85% Net investment income .............................. 6.99% 10.04% 7.76% 6.14% 7.14% SUPPLEMENTAL DATA: Average net assets (000) ........................... $413,543 $394,495 $388,478 $396,157 $426,283 Portfolio turnover ................................. 46% 153% 83% 82% 186% Net assets, end of year (000) ...................... $410,981 $407,480 $397,756 $383,651 $406,178 Reverse repurchase agreements outstanding, end of year (000) ............................... $103,378 $ 85,704 $136,385 $178,033 $149,346 Asset coverage(2) .................................. $ 4,976 $ 5,755 $ 3,916 $ 3,155 $ 3,720
- ---------- (1) Total investment return is calculated assuming a purchase of a share at the current market price on the first day and a sale at the current market price on the last day of each year reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Trust's dividend reinvestment plan. Total investment return does not reflect brokerage commissions. Total investment returns for less than a full year are not annualized. Past performance is not a guarantee of future results. (2) Per $1,000 of reverse repurchase agreements outstanding. The information above represents the audited operating performance for a share outstanding, total investment returns, ratios to average net assets and other supplemental data for each year indicated. This information has been determined based upon financial information provided in the financial statements and market value data for the Trust's shares. See Notes to Financial Statements. 52 FINANCIAL HIGHLIGHTS - ------------------------------ BLACKROCK INCOME TRUST (BKT) - ------------------------------
YEAR ENDED OCTOBER 31, ---------------------------------------------------------------- 2003 2002 2001 2000 1999 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of year ................... $ 8.13 $ 8.06 $ 7.23 $ 7.31 $ 7.94 -------- -------- -------- -------- -------- Investment operations: Net investment income ............................. 0.61 0.99 0.56 0.50 0.73 Net realized and unrealized gain (loss) ........... (0.52) (0.35) 0.83 (0.02) (0.80) -------- -------- -------- -------- -------- Net increase (decrease) from investment operations ... 0.09 0.64 1.39 0.48 (0.07) -------- -------- -------- -------- -------- Dividends from net investment income ................. (1.01) (0.57) (0.56) (0.56) (0.56) -------- -------- -------- -------- -------- Net asset value, end of year ......................... $ 7.21 $ 8.13 $ 8.06 $ 7.23 $ 7.31 ======== ======== ======== ======== ======== Market value, end of year ............................ $ 7.71 $ 8.07 $ 7.26 $ 6.38 $ 6.13 ======== ======== ======== ======== ======== TOTAL INVESTMENT RETURN(1) ........................... 15.41% 15.35% 23.23% 14.01% (4.04)% ======== ======== ======== ======== ======== RATIOS TO AVERAGE NET ASSETS: Total expense ........................................ 1.36% 2.05% 2.54% 2.78% 3.03% Net expenses ......................................... 1.36% 2.05% 2.54% 2.78% 3.03% Net expenses excluding interest expense .............. 1.02% 1.03% 1.03% 1.05% 1.01% Net investment income ................................ 8.18% 12.28% 7.43% 7.11% 9.54% SUPPLEMENTAL DATA: Average net assets (000) ............................. $472,676 $506,533 $470,185 $448,027 $482,685 Portfolio turnover ................................... 64% 125% 32% 114% 144% Net assets, end of year (000) ........................ $457,301 $511,385 $506,764 $454,510 $459,399 Reverse repurchase agreements outstanding, end of year (000) ................................. $121,767 $205,792 $118,634 $ 64,460 $186,451 Asset coverage(2) .................................... $ 4,756 $ 3,485 $ 5,272 $ 8,095 $ 3,478
- ---------- (1) Total investment return is calculated assuming a purchase of a share at the current market price on the first day and a sale at the current market price on the last day of each year reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Trust's dividend reinvestment plan. Total investment returns do not reflect brokerage commissions. Total investment returns for less than a full year are not annualized. Past performance is not a guarantee of future results. (2) Per $1,000 of reverse repurchase agreements outstanding. The information above represents the audited operating performance for a share outstanding, total investment returns, ratios to average net assets and other supplemental data for each year indicated. This information has been determined based upon financial information provided in the financial statements and market value data for the Trust's shares. See Notes to Financial Statements. 53 FINANCIAL HIGHLIGHTS - ----------------------------------------------- BLACKROCK LIMITED DURATION INCOME TRUST (BLW) - -----------------------------------------------
FOR THE PERIOD JULY 30, 2003(1) THROUGH OCTOBER 31, 2003 ---------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period ............................. $ 19.10 ----------- Investment operations: Net investment income ......................................... 0.33 Net realized and unrealized loss .............................. 0.60 ----------- Net increase from investment operations .......................... 0.93 ----------- Dividends from net investment income ............................. (0.25) ----------- Capital charges with respect to issuance of shares ............... (0.04) ----------- Net asset value, end of period ................................... $ 19.74 =========== Market value, end of period ...................................... $ 18.80 =========== TOTAL INVESTMENT RETURN(3) ....................................... (4.77)% =========== RATIOS TO AVERAGE NET ASSETS: Total expenses ................................................... 0.82%(4) Net expenses ..................................................... 0.82%(4) Net expenses excluding interest expense .......................... 0.79%(4) Net investment income ............................................ 6.87%(4) SUPPLEMENTAL DATA: Average net assets (000) ......................................... $ 686,655 Portfolio turnover ............................................... 127% Net assets, end of period (000) .................................. $ 724,747 Reverse repurchase agreements outstanding, end of period (000) ... $ 118,993 Asset coverage(5) ................................................ $ 7,091
- ---------- (1) Commencement of investment operations. This information includes the initial investment by BlackRock Funding, Inc. (2) Net asset value, beginning of period, reflects a deduction of $0.90 per share sales charge from the initial offering price of $20.00 per share. (3) Total investment return is calculated assuming a purchase of a share at the current market price on the first day and a sale at the current market price on the last day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Trust's dividend reinvestment plan. Total investment returns do not reflect brokerage commissions. Total investment returns for less than a full year are not annualized. Past performance is not a guarantee of future results. (4) Annualized. (5) Per $1,000 of reverse repurchase agreements outstanding. The information above represents the audited 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 value data for the Trust's shares. 54 FINANCIAL HIGHLIGHTS - -------------------------------------- BLACKROCK STRATEGIC BOND TRUST (BHD) - --------------------------------------
FOR THE PERIOD FEBRUARY 28, 2002(1) YEAR ENDED THROUGH OCTOBER 31, 2003 OCTOBER 31, 2002 ---------------- -------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period ............................. $ 12.63 $ 14.33(2) -------- -------- Investment operations: Net investment income ......................................... 1.59 0.98 Net realized and unrealized loss .............................. 2.34 (1.77) -------- -------- Net increase from investment operations .......................... 3.93 (0.79) -------- -------- Dividends from net investment income ............................. (1.49) (0.84) -------- -------- Capital charges with respect to issuance of shares ............... -- (0.07) -------- -------- Net asset value, end of period ................................... $ 15.07 $ 12.63 ======== ======== Market value, end of period ...................................... $ 15.27 $ 12.35 ======== ======== TOTAL INVESTMENT RETURN(3) ....................................... 37.36% (12.34)% ======== ======== RATIOS TO AVERAGE NET ASSETS: Total expenses ................................................... 2.01% 2.57%(4) Net expenses ..................................................... 1.71% 2.26%(4) Net expenses excluding interest expense .......................... 1.01% 1.25%(4) Net investment income ............................................ 11.32% 10.68%(4) SUPPLEMENTAL DATA: Average net assets (000) ......................................... $ 98,498 $ 95,675 Portfolio turnover ............................................... 32% 22% Net assets, end of period (000) .................................. $106,045 $ 88,594 Reverse repurchase agreements outstanding, end of period (000) ... $ 45,872 $ 44,223 Asset coverage(5) ................................................ $ 3,312 $ 3,003
- ---------- (1) Commencement of investment operations. This information includes the initial investment by BlackRock Funding, Inc. (2) Net asset value, beginning of period, reflects a deduction of $0.675 per share sales charge from the initial offering price of $15.00 per share. (3) Total investment return is calculated assuming a purchase of a share at the current market price on the first day and a sale at the current market price on the last day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Trust's dividend reinvestment plan. Total investment returns do not reflect brokerage commissions. Total investment returns for less than a full year are not annualized. Past performance is not a guarantee of future results. (4) Annualized. (5) Per $1,000 of reverse repurchase agreements outstanding. The information above represents the audited 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 value data for the Trust's shares. See Notes to Financial Statements. 55 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1. ORGANIZATION & ACCOUNTING POLICIES The BlackRock Broad Investment Grade 2009 Term Trust Inc. ("Broad Investment Grade"), BlackRock Core Bond Trust ("Core Bond"), The BlackRock High Yield Trust ("High Yield"), BlackRock Income Opportunity Trust ("Income Opportunity"), The 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. Broad Investment Grade, Income Opportunity and Income Trust are Maryland corporations. Core Bond, High Yield, Limited Duration and Strategic Bond are organized as Delaware statutory trusts. Limited Duration had no transactions before its commencement of investment operations on July 30, 2003 other than a sale to BlackRock Funding, Inc. of 6,021 common shares for $115,001. 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. The following is a summary of significant accounting policies followed by the Trusts. SECURITIES VALUATION: The Trusts value most of their securities 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 ("Trustees"). In determining the value of a particular security, pricing services may use certain information with respect to transactions in such securities, quotations from dealers, market transactions in comparable securities, various relationships observed in the market between securities, and calculated yield measures based on valuation technology commonly employed in the market for such securities. 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, options are valued at the average of the quoted bid and asked prices as of the close of business. 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. Securities or other assets for which such current market quotations are not readily available are valued at fair value as determined in good faith under procedures established by, and under the general supervision and responsibility of, each Trust's Board. SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on trade date. Realized and unrealized gains and losses are calculated on the identified cost basis. Each Trust also records interest income on an accrual basis and amortizes premium and/or accretes discount on securities purchased using the interest method. REPURCHASE AGREEMENTS: In connection with transactions in repurchase agreements, a Trust's custodian takes possession of the underlying collateral securities, the value of which at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to ensure the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by a Trust may be delayed or limited. 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 proceeds from the sale or cost of the purchase 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. Options, when used by the Trusts, help in maintaining a targeted duration. 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. 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. A call option gives the purchaser of the option the right (but not 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. Put or call options can be purchased or sold to effectively help manage the targeted duration of the portfolio. 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, as with futures contracts, the Trust risks not being able to enter into a closing transaction for the written option as the result of an illiquid market. 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 56 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 proceeds from the sale or cost of the purchase 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 them 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. Transactions 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 portfolios 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 advantage 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. Transactions 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. 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 may 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 differ- 57 ence 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: (i) market value of investment securities, other assets and liabilities--at the New York City noon rates of exchange. (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, maturities of foreign reverse repurchase agreements, 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 the 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. SECURITY LENDING: The Trusts may lend their portfolio securities to qualified institutions. The loans are secured by collateral at least equal, at all times, to the market value of the securities loaned. The Trusts may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower of the securities fail financially. The Trusts receive compensation for lending their securities in the form of interest on the loan. The Trusts also continue to receive interest on the securities loaned, and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the accounts of the Trusts. The Trusts did not enter into any security lending transactions during the period ended October 31, 2003. SEGREGATION: In cases in which the Investment Company Act of 1940, as amended, 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 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 (excluding Limited Duration) intention to continue, and Limited Duration intends to elect, 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 are required. As part of a tax planning strategy, Broad Investment Grade intends to retain a portion of its taxable income and pay an excise tax on the undistributed amounts. 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 annually. 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 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. DEFERRED COMPENSATION AND BLACKROCK CLOSED-END SHARE EQUIVALENT INVESTMENT PLAN: Under the revised deferred compensation plan approved by each Trust's Board, non-interested Trustees may elect to defer receipt of all or a portion of their annual compensation. As of January 1, 2003, the Board elected to require its non-interested members to defer a portion of their annual complex compensation pursuant to the plan. Deferred amounts earn an approximate return as though equivalent dollar amounts had been invested in common shares of other BlackRock closed-end funds selected by the Trustees. This has the same economic effect for the Trustees as if the Trustees had invested the deferred amounts 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 Trustees/Directors in order to match its deferred compensation obligations. 58 RECLASSIFICATION OF CAPITAL ACCOUNTS: In order to present undistributed (distribution in excess of) net investment income ("UNII"), accumulated net realized gain ("Accumulated Gain") and paid-in capital ("PIC") more closely to its tax character the following accounts, for each Trust, were increased (decreased): TRUST UNII ACCUMULATED GAIN PIC - --------- ---------- ---------------- ------------- Broad Investment Grade $ 612,604 $ 443,366 $ (1,055,970) Core Bond 4,872,347 (4,861,017) (11,330) High Yield 350,184 (350,184) Income Opportunity (198,402) 198,402 Income Trust 10,359,634 (10,359,634) Limited Duration 15,000 (15,000) Strategic Bond 25,000 (25,000) NOTE 2. AGREEMENTS Each Trust has an Investment Management Agreement with BlackRock Advisors, Inc. (the "Advisor"), which is a wholly owned subsidiary of BlackRock, Inc. BlackRock Financial Management, Inc., a wholly owned subsidiary of BlackRock, Inc., serves as sub-advisor to Core Bond, Limited Duration and Strategic Bond. BlackRock, Inc. is an indirect, majority owned subsidiary of The PNC Financial Services Group, Inc. The investment management agreement for Core Bond, Limited Duration and Strategic Bond covers both investment advisory and administration services. Broad Investment Grade had an Administration Agreement with Princeton Administrators, L.P. ("Princeton"), an indirect wholly owned affiliate of Merrill Lynch & Co., Inc. High Yield, Income Opportunity and Income Trust each had an Administration Agreement with Prudential Investments LLC ("Prudential"), an indirect wholly owned subsidiary of Prudential Financial, Inc. 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, 1.05% for High Yield and 0.75% for Strategic Bond, of each Trust's average weekly managed assets. 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 5 years of the Trust's operations, 0.15% in year 6, 0.10% in year 7 and 0.05% in year 8. The administration fee paid to each Trust's respective administrator, on other than Core Bond, Limited Duration and Strategic Bond, is computed weekly and payable monthly based on an annual rate, 0.15% for Broad Investment Grade, 0.10% for Income Opportunity and 0.20% of the first $500 million and 0.15% on any excess for Income Trust, of each Trust's average net assets and 0.10% for High Yield based on its average weekly managed assets. On May 22, 2003, the Board approved the change of the Trusts' administrators to the Advisor. The new administration agreements became effective August 18, 2003. The administration fee structures for Broad Investment Grade, Income Opportunity and High Yield, as described above, remain unchanged under the new administration agreements. Income Trust's new administration fee is 0.15% of its average weekly net 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. The Advisor pays occupancy and certain clerical and accounting costs for Core Bond, Limited Duration and Strategic Bond. Each Trust's respective administrator pays occupancy and certain clerical and accounting costs of their respective Trust(s). Each Trust bears all other costs and expenses, which include reimbursements to the Advisor for certain operational support services provided to each Trust. Pursuant to the terms of their custody agreements, Core Bond, High Yield, Income Opportunity, Income Trust and Strategic Bond received earnings credits from its custodian for positive cash balances maintained, which are used to offset custody fees. NOTE 3. PORTFOLIO SECURITIES Purchases and sales of investment securities, other than short-term investments, dollar rolls and U.S. government securities, for the year ended October 31, 2003, aggregated as follows: TRUST PURCHASES SALES - --------- -------------- ------------- Broad Investment Grade $ 9,518,939 $ 17,566,287 Core Bond 1,802,685,560 447,259,526 High Yield 17,429,401 21,150,056 Income Opportunity 254,047,342 230,794,922 Income Trust 191,331,458 124,033,582 Limited Duration 2,374,989,704 554,303,341 Strategic Bond 41,918,181 43,796,771 Purchases and sales of U.S. government securities for the year ended October 31, 2003, aggregated as follows: TRUST PURCHASES SALES - --------- -------------- ------------- Broad Investment Grade $ 10,556,264 $ 1,817,063 Core Bond 590,274,891 594,380,609 High Yield -- -- Income Opportunity 26,261,365 33,652,852 Income Trust 421,835,640 269,779,710 Limited Duration 155,160,852 76,878,768 Strategic Bond 2,828,040 3,026,708 59 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 PNCBank or its affiliates, including Midland Loan Services, Inc. It is possible under certain circumstances, that PNC Mortgage Securities Corp. or its affiliates, including Midland Loan Services, Inc., could have interests that are in conflict with the holders of these mortgage backed securities, and such holders could have rights against PNC Mortgage Securities Corp. or its affiliates, including Midland Loan Services, Inc. At October 31, 2003, the total cost of securities for Federal income tax purposes and the aggregate gross unrealized appreciation and depreciation for securities held by each Trust were as follows:
TRUST COST APPRECIATION DEPRECIATION NET - -------- -------------- ------------ ------------ ------------- Broad Investment Grade $ 64,723,574 $ 3,764,776 $ 2,842,648 $ 922,128 Core Bond 536,291,164 12,242,474 4,468,920 7,773,554 High Yield 75,461,110 5,124,302 19,127,466 (14,003,164) Income Opportunity 542,949,432 21,880,827 6,018,214 15,862,613 Income Trust 717,455,177 26,541,762 34,584,117 (8,042,355) Limited Duration 1,043,259,320 23,014,432 1,139,044 21,875,388 Strategic Bond 140,787,210 8,071,541 2,498,716 5,572,825
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:
CAPITAL LOSS CAPITAL LOSS TRUST CARRYFORWARDS AMOUNT EXPIRES TRUST CARRYFORWARDS AMOUNT EXPIRES - -------- -------------------- ------- -------- -------------------- ------- Broad Investment Grade $ 85,817 2008 Income Opportunity $ 1,978,381 2011 131,829 2011 =========== ----------- INCOME TRUST $27,373,194 2004 $ 217,646 33,107,952 2007 =========== 1,352,206 2008 High Yield $ 3,443,603 2007 13,940,898 2009 3,270,311 2008 21,960,613 2011 15,159,280 2009 ----------- 8,468,860 2010 $97,734,863 4,771,417 2011 =========== ----------- Strategic Bond $ 316,708 2010 $35,113,471 1,177,052 2011 =========== ----------- $ 1,493,760 ===========
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 carryforward amounts. Details of open financial futures contracts at October 31, 2003, were as follows:
UNREALIZED NUMBER OF EXPIRATION VALUE AT VALUE AT APPRECIATION TRUST CONTRACTS TYPE DATE TRADE DATE OCTOBER 31, 2003 (DEPRECIATION) - -------- --------- ------------------ ---------- ------------ ---------------- -------------- LONG POSITION: Broad Investment Grade 60 10 Yr. U.S. T-Note Dec. '03 $ 6,628,781 $ 6,737,813 $ 109,032 50 30 Yr. U.S. T-Bond Dec. '03 5,246,876 5,435,939 189,063 ----------- $ 298,095 =========== Core Bond 422 30 Yr. U.S. T-Bond Dec. '03 44,332,486 45,879,313 $ 1,546,827 ----------- Income Opportunity 826 10 Yr. U.S. T-Note Dec. '03 91,388,531 92,757,218 $ 1,368,687 380 30 Yr. U.S. T-Bond Dec. '03 39,907,169 41,313,125 1,405,956 ----------- $ 2,774,643 =========== Income Trust 350 30 Yr. U.S. T-Bond Dec. '03 36,723,694 38,051,563 $ 1,327,869 ----------- SHORT POSITION: Core Bond 718 5 Yr. U.S. T-Note Dec. '03 $ 79,256,986 $ 80,281,375 $(1,024,389) 177 10 Yr. U.S. T-Note Dec. '03 19,709,270 19,876,547 (167,277) 49 10 Yr. U.S. T-Note Mar. '04 5,399,033 5,432,109 (33,076) ----------- $(1,224,742) =========== Income Opportunity 979 5 Yr. U.S. T-Note Dec. '03 107,510,114 109,464,437 $(1,954,323) -----------
60
UNREALIZED NUMBER OF EXPIRATION VALUE AT VALUE AT APPRECIATION TRUST CONTRACTS TYPE DATE TRADE DATE OCTOBER 31, 2003 (DEPRECIATION) - -------- --------- ------------------ ---------- ---------- ---------------- -------------- Income Trust 436 10 Yr. U.S. T-Note Dec. '03 23,671,102 24,256,125 $ (585,023) 30 Euro Dollar Jun. '04 7,346,137 7,376,250 (30,113) 30 Euro Dollar Sep. '04 7,316,513 7,345,875 (29,362) 30 Euro Dollar Dec. '04 7,289,137 7,312,125 (22,988) 30 Euro Dollar Mar. '05 7,266,638 7,281,750 (15,112) 25 Euro Dollar Jun. '05 6,036,781 6,045,625 (8,844) 25 Euro Dollar Sep. '05 6,021,156 6,025,625 (4,469) 25 Euro Dollar Dec. '05 6,006,157 6,009,063 (2,906) 25 Euro Dollar Mar. '06 5,992,406 5,994,063 (1,657) ---------- $ (700,474) ==========
Core Bond had open forward currency contracts at October 31, 2003, were as follows:
VALUE AT VALUE AT UNREALIZED SETTLEMENT CONTRACT SETTLEMENT OCTOBER 31, APPRECIATION TRUST AND FOREIGN CURRENCY DATE TO RECEIVE DATE 2003 (DEPRECIATION) - -------------------------- ---------- ------------- ----------- ----------- -------------- SOLD: Canadian Dollar 01/12/04 6,264,653 $ $ 4,713,369 $ 4,733,640 $(20,271) Euro 01/08/04 14,232,091 Euro 16,509,226 16,491,551 17,675 Swedish Krona 01/07/04 39,660,864 kr 5,134,757 5,064,974 69,783 -------- $ 67,187 ========
Income Trust held one interest rate floor. 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 floor. Transaction fees are amortized through the termination of the agreement. Details of the interest rate floor held at October 31, 2003, were as follows:
NOTIONAL VALUE AT AMOUNT FIXED FLOATING TERMINATION AMORTIZED OCTOBER 31, UNREALIZED (000) RATE RATE DATE COST 2003 DEPRECIATION -------- -------- ---------- ---------- -------- --------- ------------ $23,000 6.00% 1-month LIBOR 1/25/05 $417,375 $827,945 $(410,570) ======== ======== =========
Details of open interest rate swaps at October 31, 2003, were as follows:
NOTIONAL UNREALIZED AMOUNT FIXED FLOATING TERMINATION APPRECIATION TRUST (000) RATE RATE DATE (DEPRECIATION) - -------- --------- --------- ------------- ----------- -------------- Core Bond $25,000 2.64% (a) 3-month LIBOR 8/14/06 $ (25,906) 21,800 3.52% (a) 3-month LIBOR 9/26/08 (182,715) 5,700 3.52% (a) 3-month LIBOR 9/26/08 (31,848) 10,800 3.57% (b) 3-month LIBOR 10/31/08 52,162 4,400 5.82% (b) 3-month LIBOR 11/27/24 -- ---------- $ (188,307) ========== Income Opportunity $47,000 5.73% (a) 3-month LIBOR 5/4/06 $2,620,762 50,000 2.64% (a) 3-month LIBOR 8/14/06 (54,951) 8,000 3.52% (a) 3-month LIBOR 9/26/08 (44,800) 11,500 3.57% (B) 3-MONTH LIBOR 10/31/08 55,543 7,000 5.23% (b) 3-month LIBOR 11/4/21 77,741 4,800 5.82% (b) 3-month LIBOR 11/27/24 -- ---------- $2,654,295 ========== Income Trust $50,000 2.64% (a) 3-month LIBOR 8/14/06 $ (54,951) 24,000 3.55% (a) 3-month LIBOR 10/26/06 537,931 11,200 3.52% (a) 3-month LIBOR 9/26/08 (62,720) 12,400 3.57% (b) 3-month LIBOR 10/31/08 59,892 25,000 5.23% (b) 3-month LIBOR 8/15/23 451,344 5,100 5.82% (b) 3-month LIBOR 11/27/24 -- ---------- $ 931,496 ==========
- ---------- (a) Trust pays floating interest rate and receives fixed rate. (b) Trust pays fixed interest rate and receives floating rate. 61 Transactions in options written during the year ended October 31, 2003, were as follows:
CONTRACTS/ NOTIONAL AMOUNT PREMIUM TRUST (000) RECEIVED - --------- ----------- ----------- CORE BOND Options outstanding at October 31, 2002 $ 138 $ 199,639 Options written 113,366 2,291,544 Options expired (138) (199,639) Options terminated in closing purchase transactions (7,658) (222,143) -------- ---------- Options outstanding at October 31, 2003 $105,708 $2,069,401 ======== ========== INCOME OPPORTUNITY Options outstanding at October 31, 2002 $ 6,000 $ 124,460 Options written 123,340 2,432,578 Options expired (3,000) (56,660) Options terminated in closing purchase transactions (3,000) (67,800) -------- ---------- Options outstanding at October 31, 2003 $123,340 $2,432,578 ======== ========== INCOME TRUST Options outstanding at October 31, 2002 $ 22,000 $ 456,353 Options written 150,485 3,054,224 Options expired (11,000) (207,753) Options terminated in closing purchase transactions (11,000) (248,600) -------- ---------- Options outstanding at October 31, 2003 $150,485 $3,054,224 ======== ==========
NOTE 4. BORROWINGS 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. The average daily balance and weighted average interest rate of reverse repurchase agreements during the year ended October 31, 2003, were as follows: AVERAGE DAILY WEIGHTED AVERAGE TRUST BALANCE INTEREST RATE - ----- ------------- ----------------- Broad Investment Grade $ 19,408,552 1.21% Core Bond 67,591,003 1.05% Income Opportunity 136,171,515 1.22% Income Trust 135,804,028 1.17% Limited Duration 26,590,763 0.76% Strategic Bond 46,036,350 1.51% 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 33 1/3% of its total assets up to the committed amount. In accordance with the terms of the debt agreement, the Trust has pledged its portfolio assets as collateral for the borrowing. For the year ended October 31, 2003, High Yield borrowed a daily weighted average balance of $19,250,000 at a weighted average interest rate at 1.96%. 62 NOTE 5. CAPITAL 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 and Strategic Bond. At October 31, 2003, the common shares outstanding and the shares owned by affiliates of the Advisor of each Trust were: COMMON SHARES COMMON SHARES TRUST OUTSTANDING OWNED - -------- ------------- -------------- Broad Investment Grade 2,957,093 7,093 Core Bond 27,018,774 9,425 High Yield 6,381,648 -- Income Opportunity 34,449,693 -- Income Trust 63,389,691 -- Limited Duration 36,706,021 8,029 Strategic Bond 7,035,621 9,425 Transactions in common shares of beneficial interest for the periods ended October 31, 2003, were as follows:
SHARES FROM ------------------------------------------------------------- INTIAL PUBLIC UNDERWRITERS' EXERCISING THE REINVESTMENT NET INCREASE IN TRUST OFFERING OVER-ALLOTMENT OPTION OF DIVIDENDS SHARES OUTSTANDING - ----- ------------- ---------------------------- ------------ ------------------ High Yield -- -- 29,680 56,728 Income Trust -- -- 514,874 514,874 Limited Duration 34,306,021 2,400,000 -- 36,706,021 Strategic Bond -- -- 19,467 19,467
Transactions in common shares of beneficial interest for the periods ended October 31, 2002, were as follows:
SHARES FROM ------------------------------------------------------------- INTIAL PUBLIC UNDERWRITERS' EXERCISING THE REINVESTMENT NET INCREASE IN TRUST OFFERING OVER-ALLOTMENT OPTION OF DIVIDENDS SHARES OUTSTANDING - ----- ------------- ---------------------------- ------------ ------------------ Core Bond 25,009,425 2,000,000 9,349 27,018,774 High Yield -- -- 27,048 27,048 Strategic Bond 7,009,425 -- 6,729 7,016,154
During the year ended October 31, 2002, Income Opportunity repurchased a total of 238,100 shares of its outstanding common shares at a cost of $2,381,796, at an average discount of approximately 9.8% from its net asset value. These shares are being held in treasury. Offering costs incurred in connection with Core Bond, Limited Duration and Strategic Bond offering of common shares have been charged to paid-in capital in excess of par of the common shares were $765,000, $1,222,110 and $490,000, respectively. NOTE 6. DIVIDENDS Subsequent to October 31, 2003, the Board of each of the Trusts declared dividends per common share payable November 28, 2003, to shareholders of record on November 14, 2003. The per share common dividends declared were as follows: COMMON DIVIDEND TRUST PER SHARE - -------- --------------- Broad Investment Grade $0.075000 Core Bond 0.087500 High Yield 0.084167 Income Opportunity 0.070000 Income Trust 0.051042 Limited Duration 0.125000 Strategic Bond 0.130000 63 INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- To the Board of Directors/Trustees and Shareholders of: BlackRock Broad Investment Grade 2009 Term Trust BlackRock Core Bond Trust BlackRock High Yield Trust BlackRock Income Opportunity Trust BlackRock Income Trust BlackRock Limited Duration Income Trust BlackRock Strategic Bond Trust We have audited the accompanying statements of assets and liabilities of each of the above mentioned Trusts, including the portfolios of investments, as of October 31, 2003, and the related statements of operations and cash flows for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Trusts' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures, included confirmation of securities owned as of October 31, 2003, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the Trusts as of October 31, 2003, the results of their operations and their cash flows for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Boston, Massachusetts December 18, 2003 64 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 and Strategic Bond are automatically enrolled, to have all distributions of dividends and capital gains reinvested by EquiServe 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 and/or Income Opportunity Trust 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. The Plan Agent's fees for the handling of the reinvestment of dividends and distributions will be paid by each Trust. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of dividends and distributions. The automatic reinvestment of dividends and distributions will not relieve participants of any Federal income tax that may be payable on such dividends or distributions. Each 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 that 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 commisson. All correspondence concerning the Plan should be directed to the Plan Agent at 150 Royall Street, Canton, MA 02021 or (800) 699-1BFM. 65 TRUSTEES INFORMATION - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------- Name, address, age Andrew F. Brimmer Richard E. Cavanagh Kent Dixon P.O. Box 4546 P.O. Box 4546 P.O. Box 4546 New York, NY 10163-4546 New York, NY 10163-4546 New York, NY 10163-4546 Age: 77 Age: 57 Age: 66 - ------------------------------------------------------------------------------------------------------------------------------- Current positions held with Lead Trustee Trustee Trustee the Trusts Audit Committee Chairman(2) Audit Committee Member Audit Committee Member(2) - ------------------------------------------------------------------------------------------------------------------------------- Term of office and length 3 years(4)/since inception 3 years(4)/since inception(5) 3 years(4)/since inception of time served - ------------------------------------------------------------------------------------------------------------------------------- Principal occupations President of Brimmer & President and Chief Executive Consultant/Investor. Former during the past five years Company, Inc., a Washington, Officer of The Conference President and Chief Executive D.C.-based economic and Board, Inc., a leading global Officer of Empire Federal financial consulting firm, business membership Savings Bank of America and also Wilmer D. Barrett organization, from Banc PLUS Savings Association, Professor of Economics, 1995-present. Former Executive former Chairman of the Board, University of Massachusetts - Dean of the John F. Kennedy President and Chief Executive Amherst. Formerly member of School of Government at Officer of Northeast Savings. the Board of Governors of the Harvard University from Federal Reserve System. Former 1988-1995. Acting Director, Chairman, District of Columbia Harvard Center for Business Financial Control Board. and Government (1991-1993). Formerly Partner (principal) of McKinsey & Company, Inc. (1980- 1988). Former Executive Director of Federal Cash Management, White House Office of Management and Budget (1977-1979). Co-author, THE WINNING PERFORMANCE (best selling management book published in 13 national editions). - ------------------------------------------------------------------------------------------------------------------------------- Number of portfolios over- 48 48 48 seen within the fund complex - ------------------------------------------------------------------------------------------------------------------------------- Other Directorships held Director of CarrAmerica Realty Trustee: Airplanes Group, Former Director of ISFA (the outside of the fund Corporation and Borg-Warner Aircraft Finance Trust (AFT) owner of INVEST, a national complex Automotive. Formerly Director and Educational Testing securities brokerage service of Airborne Express, Service (ETS). Director, Arch designed for banks and thrift BankAmerica Corporation (Bank Chemicals, Fremont Group and institutions). of America), Bell South The Guardian Life Insurance Corporation, College Company of America. Retirement Equities Fund (Trustee), Commodity Exchange, Inc. (Public Governor), Connecticut Mutual Life Insurance Company, E.I. du Pont de Nemours & Company, Equitable Life Assurance Society of the United States, Gannett Company, Mercedes-Benz of North America, MNC Financial Corporation (American Security Bank), NCM Capital Management, Navistar International Corporation, PHH Corp. and UAL Corporation (United Airlines). - ------------------------------------------------------------------------------------------------------------------------------- For "Interested Director/ Trustee" Relationships, events or transactions by reason of which the Trustee is an interested person as defined in Section 2(a)(19)(1940 Act) - -------------------------------------------------------------------------------------------------------------------------------
(1) Interested Trustee as defined by Section 2(a)(19) of the Investment Company Act of 1940. (2) The Board of each Trust has determined that each Trust has two Audit Committee financial experts serving on its Audit Committee, Dr. Brimmer and Mr. Dixon, both of whom are independent for the purpose of the definition of Audit Committee financial expert as applicable to the Trusts. (3) Trustee since inception; appointed Chairman of the Board on August 22, 2002. (4) The Board is classified into three classes of which one class is elected annually. Each Trustee serves a three year term concurrent with the class from which he is elected. (5) For Broad Investment Grade, Income Opportunity and Income Trust appointed Director on 08/11/94. (6) For Income Opportunity and Income Trust appointed Director on 06/19/92. (7) Except during the periods 08/12/93 through 04/15/97 and 10/31/02 through 11/11/02. (8) Effective 12/11/03. 66
- ------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES (CONTINUED) - ------------------------------------------------------------------------------------------------ Frank J. Fabozzi James Clayburn La Force, Jr. Walter F. Mondale P.O. Box 4546 P.O. Box 4546 P.O. Box 4546 New York, NY 10163-4546 New York, NY 10163-4546 New York, NY 10163-4546 Age: 55 Age: 74 Age: 75 - ------------------------------------------------------------------------------------------------ Trustee Trustee Trustee - ------------------------------------------------------------------------------------------------ 3 years(4)/since inception 3 years(4)/since inception(6) 3 years(4)/since inception(7) - ------------------------------------------------------------------------------------------------ Consultant. Editor of THE Dean Emeritus of the John E. Partner, Dorsey & Whitney, JOURNAL OF PORTFOLIO Anderson Graduate School of LLP., a law firm (December MANAGEMENT and Frederick Frank Management, University of 1996-present, September Adjunct Professor of Finance California since July 1, 1993. 1987-August 1993). Formerly at the School of Management at Acting Dean of the School of U.S. Ambassador to Japan Yale University. Author and Business, Hong Kong University (1993-1996). Formerly Vice editor of several books on of Science and Technology President of the United fixed income portfolio 1990-1993. From 1978 to States, U.S. Senator and management. Visiting Professor September 1993, Dean of the Attorney General of the State of Finance and Accounting at John E. Anderson Graduate of Minnesota. 1984 Democratic the Sloan School of School of Management, Nominee for President of the Management, Massachusetts University of California. United States. Institute of Technology from 1986 to August 1992. - ------------------------------------------------------------------------------------------------ 48 48 48 - ------------------------------------------------------------------------------------------------ Director, Guardian Mutual Payden & Rygel Investment Funds Group (18 portfolios). Trust, Provident Investment Counsel Funds, Advisors Series Trust, Arena Pharmaceuticals, Inc. and CancerVax Corporation. - ------------------------------------------------------------------------------------------------ - ----------------------------------------------------------------- INTERESTED TRUSTEES(1) - ----------------------------------------------------------------- Ralph L. Schlosstein Robert S. Kapito BlackRock,Inc. BlackRock,Inc. 40 East 52nd Street 40 East 52nd Street New York, NY 10022 New York, NY 10022 Age: 52 Age: 46 - ----------------------------------------------------------------- Chairman of the Board(3) President and Trustee - ----------------------------------------------------------------- 3 years(4)/since inception 3 years(4)/since August 22, 2002(7) - ----------------------------------------------------------------- Director since 1999 and Vice Chairman of BlackRock, President of BlackRock, Inc. Inc. Head of the Portfolio since its formation in 1998 Management Group. Also a and of BlackRock, Inc.'s member of the Management predecessor entities since Committee, the Investment 1988. Member of the Management Strategy Group, the Fixed Committee and Investment Income and Global Operating Strategy Group of BlackRock, Committees and the Equity Inc. Formerly, Managing Investment Strategy Group. Director of Lehman Brothers, Responsible for the portfolio Inc. and Co-head of its management of the Fixed Mortgage and Savings Income, Domestic Equity and Institutions Group. Currently, International Equity, Chairman and a Trustee of each Liquidity, and Alternative of the closed-end Trusts in Investment Groups of which BlackRock Advisors, Inc. BlackRock. Currently President acts as investment advisor. and a Director/Trustee of each of the closed-end Trusts in which BlackRock Advisors, Inc. acts as investment advisor. - ----------------------------------------------------------------- 48 48 - ----------------------------------------------------------------- Chairman and President of the Chairman of the Hope and BlackRock Provident Heroes Children's Cancer Fund. Institutional Funds (10 President of the Board of portfolios), Director of Directors of the Periwinkle Anthracite Capital, Inc.8 and National Theatre for Young Director of several of Audiences. Director of BlackRock's alternative icruise.com, Corp. investment vehicles. Currently, a Member of the Visiting Board of Overseers of the John F. Kennedy School of Government at Harvard University, the Financial Institutions Center Board of the Wharton School of the University of Pennsylvania, a Trustee of Trinity School in New York City and a Trustee of New Visions for Public Education in New York City. Formerly, a Director of Pulte Corporation and a Member of Fannie Mae's Advisory Council. - ----------------------------------------------------------------- Director and President of the Vice Chairman of the Advisor. Advisor. - -----------------------------------------------------------------
67 ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT As of September 2003, Jeff Gary, Managing Director of BlackRock Financial Management ("BFM") since 2003, joined the portfolio management team for the following Trusts: BlackRock Strategic Bond Trust (BHD), BlackRock High Yield Trust (BHY), BlackRock Core Bond Trust (BHK), BlackRock Limited Duration Income Trust (BLW) and BlackRock Income Opportunity Trust (BNA). Prior to joining BFM, Mr. Gary was a Managing Director and high yield portfolio manager with AIG (American General) Investment Group. Dennis Schaney is no longer a member of the portfolio management team for the Trusts listed above. TAX INFORMATION - -------------------------------------------------------------------------------- We wish to advise you as to the federal tax status of dividends paid by the Trusts during the fiscal year ended October 31, 2003. During the fiscal year ended October 31, 2003, the Trusts paid dividends and distributions as follows:
NON-TAXABLE LONG TERM ORDINARY INCOME RETURN OF CAPITAL CAPITAL GAINS FUND PER SHARE PER SHARE PER SHARE TOTAL - -------- --------------- ----------------- -------------- -------- Broad Investment Grade 2009 Term (BCT) $1.18525 -- -- $1.18525 Core Bond (BHK) 1.12106 -- $0.06644 1.18750 High Yield (BHY) 1.11796 $0.05224 -- 1.17020 Income Opportunity (BNA) 0.81000 -- 0.24280 1.05280 Income (BKT) 1.01250 -- -- 1.01250 Limited Duration Income (BLW) 0.25000 -- -- 0.25000 Strategic Bond (BHD) 1.49000 -- -- 1.49000
Further, we with to advise you that your income dividends do not qualify for the dividends received deduction. For the purpose of preparing your 2003 annual federal income tax return, you should report the amounts as reflected on the appropriate From 1099 DIV which will be mailed to you in January 2004. 68 BlackRock Closed-End Funds Director/Trustees Custodian Ralph L. Schlosstein, CHAIRMAN State Street Bank and Trust Company Andrew F. Brimmer One Heritage Drive Richard E. Cavanagh North Quincy, MA 02171 Kent Dixon Frank J. Fabozzi Transfer Agent Robert S. Kapito EquiServe Trust Company, N.A. James Clayburn La Force, Jr. 150 Royall Street Walter F. Mondale Canton, MA 02021 (800) 699-1BFM Officers Robert S. Kapito, PRESIDENT Independent Accountants Henry Gabbay, TREASURER Deloitte & Touche LLP Anne Ackerley, VICE PRESIDENT 200 Berkeley Street Jeff Gary, VICE PRESIDENT Boston, MA 02116 Michael Lustig, VICE PRESIDENT Richard M. Shea, VICE PRESIDENT/TAX Legal Counsel James Kong, ASSISTANT TREASURER Skadden, Arps, Slate, Meagher & Flom LLP Vincent B. Tritto, SECRETARY Four Times Square Brian P. Kindelan, ASSISTANT SECRETARY New York, NY 10036 Investment Advisor Legal Counsel - Independent Trustees BlackRock Advisors, Inc. Debevoise & Plimpton 100 Bellevue Parkway 919 Third Avenue Wilmington, DE 19809 New York, NY 10022 (800) 227-7BFM This report is for shareholder information. Sub-Advisor(1) This is not a prospectus intended for use in the BlackRock Financial Management, Inc. purchase or sale of Trust shares. Statements and 40 East 52nd Street other information contained in this report are New York, NY 10022 as dated and are subject to change.
- -------------------------------------------------------------------------------- BlackRock Advisors, Inc.(2) Princeton Administrators, L.P.(2) Prudential Investments LLC(2) 100 Bellevue Parkway P.O. Box 9095 Gateway Center Three Wilmington, DE 19809 Princeton, NJ 08543-9095 100 Mulberry Street (800) 227-7BFM (800) 543-6217 Newark, NJ 07102-4077 BlackRock Core Bond Trust BlackRock Broad Investment Grade (800) 277-7BFM BlackRock Limited Duration 2009 Term Trust BlackRock High Yield Trust Income Trust BlackRock Income Opportunity Trust BlackRock Strategic Bond Trust BlackRock Income Trust
Effective August 18, 2003, BlackRock Advisors, Inc. provides administrative services for all trusts. - ---------- (1) For Core Bond, Limited Duration and Strategic Bond only. (2) Provided administrative services for the Trust(s) listed directly below its name. 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) 227-7BFM. 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 procedures, without charge, by calling (800) 699-1236. These policies and procedures are also available on the website of the Securities and Exchange Commission at http://www.sec.gov. [BLACKROCK LOGO] 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-ANN-3 ITEM 2. CODE OF ETHICS. (a) The Registrant has adopted a code of ethics (the "Code of Ethics") that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. (b) Not applicable. (c) The Registrant has not amended its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto. (d) The Registrant has not granted a waiver or an implicit waiver from a provision of its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto. (e) Not applicable. (f) The Registrant's Code of Ethics is attached as an Exhibit hereto. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Registrant's Board of Trustees has determined that it has two audit committee financial experts serving on its audit committee, each of whom is an "independent" Trustee: Dr. Andrew F. Brimmer and Mr. Kent Dixon. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable until annual reports for fiscal years ending after December 15, 2003. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. The Trust has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The audit committee of the Trust is comprised of: Dr. Andrew F. Brimmer; Richard E. Cavanagh; and Kent Dixon. ITEM 6. RESERVED. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. The Registrant has delegated the voting of proxies relating to its voting securities to its investment advisor, BlackRock Advisors, Inc. (the "Advisor") and its sub-advisor, BlackRock Financial Management, Inc. (the "Sub-Advisor"). The Proxy Voting Policies and Procedures of the Advisor and Sub-Advisor (the "Proxy Voting Policies") are included as an Exhibit hereto. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 10. CONTROLS AND PROCEDURES. (a) The Registrant's principal executive officer and principal financial officer have evaluated the Registrant's disclosure controls and procedures within 90 days of this filing and have concluded that the Registrant's disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely. (b) The Registrant's principal executive officer and principal financial officer are aware of no changes in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a)(1) Code of Ethics. (a)(2) Certifications of principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (b) Certification of principal executive officer and principal financial officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002. (c) Proxy Voting Policies. 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) The BlackRock Strategic Bond Trust By: /s/ Henry Gabbay --------------------------- Name: Henry Gabbay Title: Treasurer Date: January 7, 2004 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: January 7, 2004 By: /s/ Henry Gabbay --------------------------- Name: Henry Gabbay Title: Principal Financial Officer Date: January 7, 2004 EX-99.CODE ETH 3 c30277_ex99codeeth.txt Exhibit 99 Code Eth JOINT CODE OF ETHICS FOR CHIEF EXECUTIVE AND SENIOR FINANCIAL OFFICERS OF THE BLACKROCK CLOSED-END FUNDS AS ADOPTED BY THE BOARDS OF TRUSTEES/DIRECTORS MAY 2003 Each BlackRock Closed-End Fund (each a "TRUST" and, collectively, the "TRUSTS")(1) is committed to conducting business in accordance with applicable laws, rules and regulations and the highest standards of business ethics, and to full and accurate disclosure -- financial and otherwise -- in compliance with applicable law. This Code of Ethics, applicable to the Trust's Chief Executive Officer, President, Chief Financial Officer and Treasurer (or persons performing similar functions) (together, "SENIOR OFFICERS"), sets forth policies to guide you in the performance of your duties. As a Senior Officer, you must comply with applicable law. You also have a responsibility to conduct yourself in an honest and ethical manner. You have leadership responsibilities that include creating a culture of high ethical standards and a commitment to compliance, maintaining a work environment that encourages the internal reporting of compliance concerns and promptly addressing compliance concerns. This Code of Ethics recognizes that the Senior Officers are subject to certain conflicts of interest inherent in the operation of investment companies, because the Senior Officers currently or may in the future serve as Senior Officers of each of the Trusts, as officers or employees of the Trust's investment advisor (the "ADVISOR") and/or affiliates of the Trust's investment advisor (collectively with the Advisor, "BLACKROCK") and as officers or trustees/directors of other registered investment companies and unregistered investment funds advised by BlackRock. This Code of Ethics also recognizes that certain laws and regulations applicable to, and certain policies and procedures adopted by, the Trust or BlackRock govern your conduct in connection with many of the conflict of interest situations that arise in connection with the operations of the Trust, including: - -------- (1) This Joint Code of Ethics for Chief Executive and Senior Financial Officers has been adopted by the Board of Trustees/Directors for each Trust. Solely for the sake of clarity and simplicity, this Joint Code of Ethics has been drafted as if there is a single Trust, a single Governance Committee and a single Board of Trustees/Directors. The terms "Trustees," "Independent Trustees" and "Governance Committee" mean the Trustees, the Independent Trustees and the Governance Committee of each Trust, respectively, unless the context otherwise requires. The Trustees, the Independent Trustees and the Governance Committee of each Trust, however, shall act separately and in the best interests of its respective Trust. o the Investment Company Act of 1940, and the rules and regulation promulgated thereunder by the Securities and Exchange Commission (the "1940 ACT"); o the Investment Advisers Act of 1940, and the rules and regulations promulgated thereunder by the Securities and Exchange Commission (the "ADVISERS ACT"); o the Code of Ethics adopted by the Trust and the other Trusts pursuant to Rule 17j-1(c) under the 1940 Act (collectively, the "TRUST'S 1940 ACT CODE OF ETHICS"); o one or more codes of ethics adopted by BlackRock that have been reviewed and approved by those trustees/directors (the "TRUSTEES") of the Trust that are not "interested persons" of the Trust (the "INDEPENDENT TRUSTEES") within the meaning of the 1940 Act (the "BLACKROCK'S 1940 ACT CODE OF ETHICS" and, together with the Trust's 1940 Act Code of Ethics, the "1940 ACT CODES OF ETHICS"); o the policies and procedures adopted by the Trust and the other Trusts to address conflict of interest situations, such as procedures under Rule 10f-3 and Rule 17a-7 under the 1940 Act (collectively, the "TRUST POLICIES"); and o BlackRock's general policies and procedures to address, among other things, conflict of interest situations and related matters (collectively, the "BLACKROCK POLICIES"). The provisions of the 1940 Act, the Advisers Act, the 1940 Act Codes of Ethics, the Trust Policies and the BlackRock Policies are referred to herein collectively as the "ADDITIONAL CONFLICT RULES". This Code of Ethics is different from, and is intended to supplement, the Additional Conflict Rules. Accordingly, a violation of the Additional Conflict Rules by a Senior Officer is hereby deemed not to be a violation of this Code of Ethics, unless and until the Governance Committee of the Trustees (the "GOVERNANCE COMMITTEE") shall determine that any such violation of the Additional Conflict Rules is also a violation of this Code of Ethics. SENIOR OFFICERS SHOULD ACT HONESTLY AND CANDIDLY Each Senior Officer has a responsibility to the Trust to act with integrity. Integrity requires, among other things, being honest and candid. Deceit and subordination of principle are inconsistent with integrity. Each Senior Officer must: 2 o act with integrity, including being honest and candid while still maintaining the confidentiality of information where required by law or the Additional Conflict Rules; o comply with the laws, rules and regulations that govern the conduct of the Trust's operations and report any suspected violations thereof in accordance with the section below entitled "Compliance With Code Of Ethics"; and o adhere to a high standard of business ethics. CONFLICTS OF INTEREST A conflict of interest for the purpose of this Code of Ethics occurs when your private interests interfere in any way, or even appear to interfere, with the interests of the Trust. Senior Officers are expected to use objective and unbiased standards when making decisions that affect the Trust, keeping in mind that Senior Officers are subject to certain inherent conflicts of interest because Senior Officers of a Trust also are or may be officers of other Trusts, BlackRock and other funds advised or serviced by BlackRock (as a result of which it is incumbent upon you to be familiar with and to seek to comply with the Additional Conflict Rules). You are required to conduct the business of the Trust in an honest and ethical manner, including the ethical handling of actual or apparent conflicts of interest between personal and business relationships. When making any investment, accepting any position or benefits, participating in any transaction or business arrangement or otherwise acting in a manner that creates or appears to create a conflict of interest with respect to the Trust where you are receiving a personal benefit, you should act in accordance with the letter and spirit of this Code of Ethics. If you are in doubt as to the application or interpretation of this Code of Ethics to you as a Senior Officer of the Trust, you should make full disclosure of all relevant facts and circumstances to the general counsel of BlackRock (the "GENERAL COUNSEL") and obtain the approval of the General Counsel prior to taking action. Some conflict of interest situations that should always be approved by the General Counsel, if material, include the following: o the receipt of any entertainment or non-nominal gift by the Senior Officer, or a member of his or her family, from any company with which the Trust has current or prospective business dealings (other than BlackRock), unless such entertainment or gift is business related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; 3 o any ownership interest in, or any consulting or employment relationship with, any of the Trust's service providers, other than BlackRock; or o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Trust for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Senior Officer's employment by BlackRock, such as compensation or equity ownership. DISCLOSURES It is the policy of the Trust to make full, fair, accurate, timely and understandable disclosure in compliance with all applicable laws and regulations in all reports and documents that the Trust files with, or submits to, the Securities and Exchange Commission or a national securities exchange and in all other public communications made by the Trust. As a Senior Officer, you are required to promote compliance with this policy and to abide by the Trust's standards, policies and procedures designed to promote compliance with this policy. Each Senior Officer must: o familiarize himself or herself with the disclosure requirements applicable to the Trust as well as the business and financial operations of the Trust; and o not knowingly misrepresent, or cause others to misrepresent, facts about the Trust to others, including to the Trustees, the Trust's independent auditors, the Trust's counsel, counsel to the Independent Trustees, governmental regulators or self-regulatory organizations. COMPLIANCE WITH CODE OF ETHICS If you know of or suspect a violation of this Code of Ethics or other laws, regulations, policies or procedures applicable to the Trust, you must report that information on a timely basis to the General Counsel or report it anonymously by following the "whistle blower" policies adopted by BlackRock from time to time. NO ONE WILL BE SUBJECT TO RETALIATION BECAUSE OF A GOOD FAITH REPORT OF A SUSPECTED VIOLATION. The Trust will follow these procedures in investigating and enforcing this Code of Ethics, and in reporting on this Code of Ethics: o the General Counsel will take all appropriate action to investigate any actual or potential violations reported to him or her; o violations and potential violations will be reported to the Governance Committee after such investigation; 4 o if the Governance Committee determines that a violation has occurred, it will take all appropriate disciplinary or preventive action; and o appropriate disciplinary or preventive action may include a letter of censure, suspension, dismissal or, in the event of criminal or other serious violations of law, notification of the Securities and Exchange Commission or other appropriate law enforcement authorities. WAIVERS OF CODE OF ETHICS Except as otherwise provided in this Code of Ethics, the General Counsel is responsible for applying this Code of Ethics to specific situations in which questions are presented to the General Counsel and has the authority to interpret this Code of Ethics in any particular situation. The General Counsel shall take all action he or she considers appropriate to investigate any actual or potential violations reported under this Code of Ethics. The General Counsel is authorized to consult, as appropriate, with the chair of the Governance Committee and with counsel to the Trust, BlackRock or the Independent Trustees, and is encouraged to do so. The Governance Committee is responsible for granting waivers of this Code of Ethics, as appropriate. Any changes to or waivers of this Code of Ethics will, to the extent required, be disclosed on Form N-CSR, or otherwise, as provided by Securities and Exchange Commission rules. RECORDKEEPING The Trust will maintain and preserve for a period of not less than six (6) years from the date an action is taken, the first two (2) years in an easily accessible place, a copy of the information or materials supplied to the Governance Committee: o that provided the basis for any amendment or waiver to this Code of Ethics; and o relating to any violation of this Code of Ethics and sanctions imposed for such violation, together with a written record of the approval or action taken by the Governance Committee. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code of Ethics shall be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code of Ethics, such matters shall not be disclosed to anyone other than the Independent Trustees and their counsel, the Trust and its counsel, BlackRock and its counsel and any other advisors, consultants or counsel retained by the Trustees, the Independent Trustees or any committee of the Trustees. 5 AMENDMENTS This Code of Ethics may not be amended except in written form, which is specifically approved by a majority vote of the Trustees, including a majority of the Independent Trustees. NO RIGHTS CREATED This Code of Ethics is a statement of certain fundamental principles, policies and procedures that govern each of the Senior Officers in the conduct of the Trust's business. It is not intended to and does not create any rights in any employee, investor, supplier, competitor, shareholder or any other person or entity. 6 ACKNOWLEDGMENT FORM I have received and read the Joint Code of Ethics for Chief Executive and Senior Financial Officers, and I understand its contents. I agree to comply fully with the standards contained in the Code of Ethics and the Company's related policies and procedures. I understand that I have an obligation to report any suspected violations of the Code of Ethics on a timely basis to the General Counsel or report it anonymously by following the "whistle blower" policies adopted by BlackRock from time to time. ------------------------------- Printed Name ------------------------------- Signature ------------------------------- Date 7 EX-99.CERT 4 c30277_ex99cert.txt Exhibit 99.Cert I, Robert Kapito, certify that: 1. I have reviewed this report on Form N-CSR of the BlackRock Strategic Bond Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 7, 2004 ---------------- /s/ Robert S. Kapito -------------------------- Robert S. Kapito Principal Executive Officer Exhibit 99.Cert I, Henry Gabbay, certify that: 1. I have reviewed this report on Form N-CSR of the BlackRock Strategic Bond Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 7, 2004 --------------- /s/ Henry Gabbay -------------------------- Henry Gabbay Principal Financial Officer EX-99.906CERT 5 c30277_ex99-906.txt Exhibit 99.906CERT SECTION 906 CERTIFICATION Pursuant to 18 U.S.C. ss. 1350, the undersigned officers of the BlackRock Strategic Bond Trust (the "Company"), hereby certifies, to the best of their knowledge, that the Company's Report on Form N-CSR for the fiscal year ended October 31, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: January 7, 2004 ---------------------------- /s/ Robert S. Kapito - ---------------------------------- Name: Robert S. Kapito Title: Principal Executive Officer /s/ Henry Gabbay - ---------------------------------- Name: Henry Gabbay Title: Principal Financial Officer EX-99.10.C 6 c30277_ex99-10c.txt Exhibit 99.10(c) PROXY VOTING POLICY FOR BLACKROCK ADVISORS, INC. AND ITS AFFILIATED REGISTERED INVESTMENT ADVISERS INTRODUCTION This Proxy Voting Policy ("Policy") for BlackRock Advisors, Inc. and its affiliated registered investment advisers ("BlackRock") reflects our duty as a fiduciary under the Investment Advisers Act of 1940 (the "Advisers Act") to vote proxies in the best interests of our clients. In addition, the Department of Labor views the fiduciary act of managing ERISA plan assets to include the voting of proxies. Proxy voting decisions must be made solely in the best interests of the pension plan's participants and beneficiaries. The Department of Labor has interpreted this requirement as prohibiting a fiduciary from subordinating the retirement income interests of participants and beneficiaries to unrelated objectives. The guidelines in this Policy have been formulated to ensure decision-making consistent with these fiduciary responsibilities. Any general or specific proxy voting guidelines provided by an advisory client or its designated agent in writing will supercede the specific guidelines in this Policy. BlackRock will disclose to our advisory clients information about this Policy as well as disclose to our clients how they may obtain information on how we voted their proxies. Additionally, BlackRock will maintain proxy voting records for our advisory clients consistent with the Advisers Act. For those of our clients that are registered investment companies, BlackRock will disclose this Policy to the shareholders of such funds and make filings with the Securities and Exchange Commission and make available to fund shareholders the specific proxy votes that we cast in shareholder meetings of issuers of portfolio securities in accordance with the rules and regulations under the Investment Company Act of 1940. Registered investment companies that are advised by BlackRock as well as certain of our advisory clients may participate in securities lending programs, which may reduce or eliminate the amount of shares eligible for voting by BlackRock in accordance with this Policy if such shares are out on loan and cannot be recalled in time for the vote. Implicit in the initial decision to retain or invest in the security of a corporation is approval of its existing corporate ownership structure, its management, and its operations. Accordingly, proxy proposals that would change the existing status of a corporation will be reviewed carefully and supported only when it seems clear that the proposed changes are likely to benefit the corporation and its shareholders. Notwithstanding this favorable predisposition, management will be assessed on an ongoing basis both in terms of its business capability and its dedication to the shareholders to ensure that our continued confidence remains warranted. If it is determined that management is acting on its own behalf instead of for the well being of the corporation, we will vote to support 1 shareholder proposals, unless other mitigating circumstances are present. Additionally, situations may arise that involve an actual or perceived conflict of interest. For example, we may manage assets of a pension plan of a company whose management is soliciting proxies, or a BlackRock employee involved with managing an account may have a close relative who serves as a director or executive of a company that is soliciting proxies regarding securities held in such account. In all cases, the manner in which we vote proxies must be based on our clients' best interests and not the product of a conflict. This Policy and its attendant recommendations attempt to generalize a complex subject. It should be clearly understood that specific fact situations, including differing voting practices in jurisdictions outside the United States, might warrant departure from these guidelines. In such instances, the relevant facts will be considered, and if a vote contrary to these guidelines is indicated it will be cast and the reasons therefor recorded in writing. Section I of the Policy describes proxy proposals that may be characterized as routine and lists examples of the types of proposals we would typically support. Section II of the Policy describes various types of non-routine proposals and provides general voting guidelines. These non-routine proposals are categorized as those involving: A. Social Issues, B. Financial/Corporate Issues, and C. Shareholder Rights. Finally, Section III of the Policy describes the procedures to be followed in casting a vote pursuant to these guidelines. 2 SECTION I ROUTINE MATTERS Routine proxy proposals, amendments, or resolutions are typically proposed by management and meet the following criteria: 1. They do not measurably change the structure, management control, or operation of the corporation. 2. They are consistent with industry standards as well as the corporate laws of the state of incorporation. VOTING RECOMMENDATION BlackRock will normally support the following routine proposals: 1. To increase authorized common shares. 2. To increase authorized preferred shares as long as there are not disproportionate voting rights per preferred share. 3. To elect or re-elect directors. 4. To appoint or elect auditors. 5. To approve indemnification of directors and limitation of directors' liability. 6. To establish compensation levels. 7. To establish employee stock purchase or ownership plans. 8. To set time and location of annual meeting. 3 SECTION II NON-ROUTINE PROPOSALS A. SOCIAL ISSUES Proposals in this category involve issues of social conscience. They are typically proposed by shareholders who believe that the corporation's internally adopted policies are ill-advised or misguided. VOTING RECOMMENDATION If we have determined that management is generally socially responsible, we will generally vote AGAINST the following shareholder proposals: 1. To enforce restrictive energy policies. 2. To place arbitrary restrictions on military contracting. 3. To bar or place arbitrary restrictions on trade with other countries. 4. To restrict the marketing of controversial products. 5. To limit corporate political activities. 6. To bar or restrict charitable contributions. 7. To enforce a general policy regarding human rights based on arbitrary parameters. 8. To enforce a general policy regarding employment practices based on arbitrary parameters. 9. To enforce a general policy regarding animal rights based on arbitrary parameters. 10. To place arbitrary restrictions on environmental practices. B. FINANCIAL/CORPORATE ISSUES Proposals in this category are usually offered by management and seek to change a corporation's legal, business or financial structure. 4 VOTING RECOMMENDATION We will generally vote in favor of the following management proposals provided the position of current shareholders is preserved or enhanced: 1. To change the state of incorporation. 2. To approve mergers, acquisitions or dissolution. 3. To institute indenture changes. 4. To change capitalization. C. SHAREHOLDER RIGHTS Proposals in this category are made regularly both by management and shareholders. They can be generalized as involving issues that transfer or realign board or shareholder voting power. We typically would oppose any proposal aimed solely at thwarting potential takeover offers by requiring, for example, super-majority approval. At the same time, we believe stability and continuity promote profitability. The guidelines in this area seek to find a middle road, and they are no more than guidelines. Individual proposals may have to be carefully assessed in the context of their particular circumstances. VOTING RECOMMENDATION We will generally vote FOR the following management proposals: 1. To require majority approval of shareholders in acquisitions of a controlling share in the corporation. 2. To institute staggered board of directors. 3. To require shareholder approval of not more than 66 2/3% for a proposed amendment to the corporation's by-laws. 4. To eliminate cumulative voting. 5. To adopt anti-greenmail charter or by-law amendments or to otherwise restrict a company's ability to make greenmail payments. 5 6. To create a dividend reinvestment program. 7. To eliminate preemptive rights. 8. To eliminate any other plan or procedure designed primarily to discourage a takeover or other similar action (commonly known as a "poison pill"). We will generally vote AGAINST the following management proposals: 1. To require greater than 66 2/3% shareholder approval for a proposed amendment to the corporation's by-laws ("super-majority provisions"). 2. To require that an arbitrary fair price be offered to all shareholders that is derived from a fixed formula ("fair price amendments"). 3. To authorize a new class of common stock or preferred stock which may have more votes per share than the existing common stock. 4. To prohibit replacement of existing members of the board of directors. 5. To eliminate shareholder action by written consent without a shareholder meeting. 6. To allow only the board of directors to call a shareholder meeting or to propose amendments to the articles of incorporation. 7. To implement any other action or procedure designed primarily to discourage a takeover or other similar action (commonly known as a "poison pill"). 8. To limit the ability of shareholders to nominate directors. We will generally vote FOR the following shareholder proposals: 1. To rescind share purchases rights or require that they be submitted for shareholder approval, but only if the vote required for approval is not more than 66 2/3%. 2. To opt out of state anti-takeover laws deemed to be detrimental to the shareholder. 3. To change the state of incorporation for companies operating under the umbrella of anti-shareholder state corporation laws if another state is chosen with favorable laws in this and other areas. 4. To eliminate any other plan or procedure designed primarily to discourage a takeover or other similar action. 6 5. To permit shareholders to participate in formulating management's proxy and the opportunity to discuss and evaluate management's director nominees, and/or to nominate shareholder nominees to the board. 6. To require that the board's audit, compensation, and/or nominating committees be comprised exclusively of independent directors. 7. To adopt anti-greenmail charter or by-law amendments or otherwise restrict a company's ability to make greenmail payments. 8. To create a dividend reinvestment program. 9. To recommend that votes to "abstain" not be considered votes "cast" at an annual meeting or special meeting, unless required by state law. 10. To require that "golden parachutes" be submitted for shareholder ratification. We will generally vote AGAINST the following shareholder proposals: 1. To restore preemptive rights. 2. To restore cumulative voting. 3. To require annual election of directors or to specify tenure. 4. To eliminate a staggered board of directors. 5. To require confidential voting. 6. To require directors to own a minimum amount of company stock in order to qualify as a director or to remain on the board. 7. To dock director pay for failing to attend board meetings. 7 SECTION III VOTING PROCESS BlackRock has engaged a third-party service provider to assist us in the voting of proxies. These guidelines have been provided to this service provider, who then analyzes all proxy solicitations we receive for our clients and makes recommendations to us as to how, based upon our guidelines, the relevant votes should be cast. These recommendations are set out in a report that is provided to the relevant Portfolio Management Group team, who must approve the proxy vote in writing and return such written approval to the Operations Group. If any authorized member of a Portfolio Management Group team desires to vote in a manner that differs from the recommendations, the reason for such differing vote shall be noted in the written approval form. A copy of the written approval form is attached as an exhibit. The head of each relevant Portfolio Management Group team is responsible for making sure that proxies are voted in a timely manner. The Brokerage Allocation Committee shall receive regular reports of all proxy votes cast to review how proxies have been voted, including reviewing votes that differ from recommendations made by our third-party service provider and votes that may have involved a potential conflict of interest. The Committee shall also review these guidelines from time to time to determine their continued appropriateness and whether any changes to the guidelines or the proxy voting process should be made. IF THERE IS ANY POSSIBILITY THAT THE VOTE MAY INVOLVE A MATERIAL CONFLICT OF INTEREST BECAUSE, FOR EXAMPLE, THE ISSUER SOLICITING THE VOTE IS A BLACKROCK CLIENT OR THE MATTER BEING VOTED ON INVOLVES BLACKROCK, PNC OR ANY AFFILIATE (INCLUDING A PORTFOLIO MANAGEMENT GROUP EMPLOYEE) OF EITHER OF THEM, PRIOR TO APPROVING SUCH VOTE, THE BROKERAGE ALLOCATION COMMITTEE MUST BE CONSULTED AND THE MATTER DISCUSSED. The Committee, in consultation with the Legal and Compliance Department, shall determine whether the potential conflict is material and if so, the appropriate method to resolve such conflict, based on the particular facts and circumstances, the importance of the proxy issue, whether the Portfolio Management Group team is proposing a vote that differs from recommendations made by our third-party service provider with respect to the issue and the nature of the conflict, so as to ensure that the voting of the proxy is not affected by the potential conflict. If the conflict is determined not to be material, the relevant Portfolio Management Group team shall vote the proxy in accordance with this Policy. Determinations of the Committee with respect to votes involving material conflicts of interest shall be documented in writing and maintained for a period of at least six years. With respect to votes in connection with securities held on a particular record date but sold from a client account prior to the holding of the related meeting, BlackRock may take no action on proposals to be voted on in such meeting. With respect to voting proxies of non-U.S. companies, a number of logistical problems may arise that may have a detrimental effect on BlackRock's ability to vote such proxies in the best interests of our clients. These problems include, but are not limited to, (i) untimely and/or 8 inadequate notice of shareholder meetings, (ii) restrictions on the ability of holders outside the issuer's jurisdiction of organization to exercise votes, (iii) requirements to vote proxies in person, if not practicable, (iv) the imposition of restrictions on the sale of the securities for a period of time in proximity to the shareholder meeting, and (v) impracticable or inappropriate requirements to provide local agents with power of attorney to facilitate the voting instructions. Accordingly, BlackRock may determine not to vote proxies if it believes that the restrictions or other detriments associated with such vote outweigh the benefits that will be derived by voting on the company's proposal. * * * * * Any questions regarding this Policy may be directed to the General Counsel of BlackRock. Approved: October 21, 1998 Revised: May 27, 2003 9 -----END PRIVACY-ENHANCED MESSAGE-----