-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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UNITEDSTATES
Investment Company Act file number 811-21280
EQUITIES FIXED INCOME REAL ESTATE LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS
NOT FDIC INSURED
Section 19(b) Disclosure
The fixed amounts distributed per share are subject to change at the discretion of each Funds Board. Under its Plan, each Fund will distribute all available
Dear Shareholder
The market environment has visibly improved since the beginning of the year, but a great deal of uncertainty and risk remain. Through periods of market
Announcement to Shareholders
Fund Summary as of October 31, 2009 BlackRock Credit Allocation Income Trust I, Inc.
Fund Summary as of October 31, 2009 BlackRock Credit Allocation Income Trust II, Inc.
Fund Summary as of October 31, 2009 BlackRock Credit Allocation Income Trust III Fund Summary as of October 31, 2009 BlackRock Credit Allocation Income Trust IV Fund Summary as of October 31, 2009 BlackRock Floating Rate Income Trust The Benefits and Risks of Leveraging Furthermore, the value of a Funds portfolio investments generally varies Derivative Financial Instruments fully use a derivative instrument depends on the investment advisors 10 ANNUAL REPORT OCTOBER 31, 2009
Notes to Financial Statements
Valuation: The Funds value their bond investments on the basis of last avail-
ANNUAL REPORT OCTOBER 31, 2009 47
Notes to Financial Statements (continued)
in receiving dividends as well) but is subordinated to the liabilities of the
48 ANNUAL REPORT OCTOBER 31, 2009
Notes to Financial Statements (continued)
will, consistent with SEC rules and/or certain interpretive letters issued by
ANNUAL REPORT OCTOBER 31, 2009 49
Notes to Financial Statements (continued)
amount of collateral moved to/from applicable counterparties is based
50 ANNUAL REPORT OCTOBER 31, 2009
Notes to Financial Statements (continued)
obligation to perform or disagree as to the meaning of the contractual
ANNUAL REPORT OCTOBER 31, 2009 51
3. Investment Advisory Agreement and Other Transactions
other services necessary to the operations of the Funds. For such services,
The Manager has voluntarily agreed to waive a portion of the investment
52 ANNUAL REPORT OCTOBER 31, 2009
ANNUAL REPORT OCTOBER 31, 2009 53
Notes to Financial Statements (continued)
For the year ended October 31, 2009, shares issued and outstanding for
erence plus any accumulated or unpaid dividends, whether or not declared,
Dividends on seven-day and 28-day Preferred Shares are cumulative at a
54 ANNUAL REPORT OCTOBER 31, 2009
Since February 13, 2008, the Preferred Shares of the Funds failed to clear
ANNUAL REPORT OCTOBER 31, 2009 55
Notes to Financial Statements (continued)
line of credit and a separate security agreement with State Street Bank
9. Income Tax Information:
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees/Directors of:
period ended December 31, 2007, and for the period August 30, 2004
58 ANNUAL REPORT OCTOBER 31, 2009
Report of Independent Registered Public Accounting Firm (concluded)
December 27, 2006 (commencement of operations) to October 31, 2007,
referred to above present fairly, in all material respects, the financial position
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements
The Board of Directors or the Board of Trustees, as the case may be, (each,
Throughout the year, the Boards, acting directly and through their commit-
60 ANNUAL REPORT OCTOBER 31, 2009
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)
Manager and such Fund and the Sub-Advisory Agreement among such
Independent Board Members, unanimously approved the continuation of
ANNUAL REPORT OCTOBER 31, 2009 61
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)
2009 meeting, the Boards were provided with reports, independently pre-
detailed the revenues earned and the expenses incurred by BlackRock for
62 ANNUAL REPORT OCTOBER 31, 2009
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (concluded)
The Boards noted that most closed-end fund complexes do not have fund
Conclusion
ANNUAL REPORT OCTOBER 31, 2009 63
Automatic Dividend Reinvestment Plans
There are no enrollment fees or brokerage fees for participating in the
64 ANNUAL REPORT OCTOBER 31, 2009
Automatic Dividend Reinvestment Plans (concluded)
account will be determined by dividing the dollar amount of the dividend
of dividends and distributions. The automatic reinvestment of dividends
ANNUAL REPORT OCTOBER 31, 2009 65
Effective July 31, 2009, Donald C. Burke, President and Chief Executive Officer of the Funds retired. The Funds Board
68 ANNUAL REPORT OCTOBER 31, 2009
Additional Information (continued)
earned in that month/quarter. As a result, the dividends paid by the Funds
General Information
Prior Name New Name
PSY and BPP each previously employed a non-fundamental investment pol-
70 ANNUAL REPORT OCTOBER 31, 2009
Additional Information (continued)
Intermediate Participant that sold the participation interest not only for
ANNUAL REPORT OCTOBER 31, 2009 71
Additional Information (continued)
Prepayment Risk During periods of declining interest rates, borrowers
72 ANNUAL REPORT OCTOBER 31, 2009
Additional Information (continued)
Quarterly performance, semi-annual and annual reports and other informa-
ANNUAL REPORT OCTOBER 31, 2009 73
BlackRock Privacy Principles
BlackRock does not sell or disclose to non-affiliated third parties any non-
74 ANNUAL REPORT OCTOBER 31, 2009
This report is transmitted to shareholders only. It is not a prospectus. Past performance results shown in this report should not be considered a representation
Item 2 Code of Ethics The registrant (or the Fund) has adopted a code of ethics, as of the end
The registrants board of directors has determined that W. Carl Kester and Karen P. Robards
1 The nature of the services include assurance and related services reasonably related to the performance of the audit of
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
(f) Not Applicable
(h) The registrants audit committee has considered and determined that the provision of
Regulation S-X Rule 2-01(c)(7)(ii) $407,500, 0%
without charge, (i) at www.blackrock.com and (ii) on the SECs website at
BlackRock and its affiliates (collectively, herein BlackRock) has built a professional
shareholders or the officers, directors and employees of any of them has any substantial
BlackRocks Chief Investment Officers make a subjective determination with respect to the
John Burger
None
Item 9 Purchases of Equity Securities by Closed-End Management Investment Company and
11(a) The registrants principal executive and principal financial officers or persons performing
Item 12 Exhibits attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment
By: /s/ Anne F. Ackerley
Date: December 21, 2009
By: /s/ Anne F. Ackerley
Date: December 21, 2009
By: /s/ Neal J. Andrews
Date: December 21, 2009 "]*!R3<'V+C_``KHZ*`,BS\-
M:39N'2U#N.C2$MC\#Q5G5=+M]6MEM[DN$5PXV'!S@C^M7J*`.<_X0K2O[UQ_
MWV/\*L0^%]/ALI[6-IPDY4N=XR<<@=.E;=%`%/3-.M]+M!;6P;9N+$L `>WM0!TTUO%<*%E0.!V/2I``H``P!Z5!8K*EA;K<$F98E$A)S
MEL#/ZU8H`2EHHH`****`"BBB@`HHHH`****`"BBB@`HHHH`****`"BBB@`HH
MJEK/_(%O_P#KWD_]!-`%VBN8MX;RU,7V9?[/BNYHT5,*V,1N6;'(&2!^5,BU
M359_(*L5%RN_86A#\$\1@DYX_O#L:`.JHKEX-1GGO51+MT$PC1IF0`J1YQ/R
MG(!)7%-L+^\CAT^"#(C2"`L"4`<.Q4Y+'/0<;>_6@#J$1(UVQHJ+DG"C`R3D
M_K3JY.YN[Z9%5[V0+)(6`55&W;<*@&<>AS^`]\[NK,K:)J`5PY6WD5CD9SM/
M6@"_17(6X$#O%Y20`S6D@CB;<@&_&<\ EX-99.CERT I, Anne F. Ackerley, Chief Executive Officer (principal executive officer) of BlackRock Credit Allocation Income Trust III, 1. I have reviewed this report on Form N-CSR of BlackRock Credit Allocation Income Trust III; material fact necessary to make the statements made, in light of the circumstances under which such statements were made, a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee a) all significant deficiencies and material weaknesses in the design or operation of internal control over Date: December 21, 2009 Anne F. Ackerley EX-99.CERT I, Neal J. Andrews, Chief Financial Officer (principal financial officer) of BlackRock Credit Allocation 1. I have reviewed this report on Form N-CSR of BlackRock Credit Allocation Income Trust III; omit to state a material fact necessary to make the statements made, in light of the circumstances under a) designed such disclosure controls and procedures, or caused such disclosure controls and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the a) all significant deficiencies and material weaknesses in the design or operation of internal b) any fraud, whether or not material, that involves management or other employees who /s/ Neal J. Andrews Exhibit 99.1350CERT Certification Pursuant to Rule 30a-2(b) under the 1940 Act and Pursuant to 18 U.S.C. § 1350, the undersigned officer of BlackRock Credit Allocation Income Trust III (the Anne F. Ackerley Pursuant to 18 U.S.C. § 1350, the undersigned officer of BlackRock Credit Allocation Income Trust III (the Neal J. Andrews This certification is being furnished pursuant to Rule 30a-2(b) under the Investment Company Act of 1940, as
SECURITIESANDEXCHANGECOMMISSION
Washington,D.C.20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Name of Fund: BlackRock Credit Allocation Income Trust III (BPP)
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: Anne F. Ackerley, Chief Executive Officer, BlackRock
Credit Allocation Income Trust III, 55 East 52nd Street, New York, NY 10055.
Registrants telephone number, including area code: (800) 882-0052, Option 4
Date of fiscal year end: 10/31/2009
Date of reporting period: 10/31/2009
Item 1 Report to Stockholders
Annual Report
OCTOBER 31, 2009
BlackRock Credit Allocation Income Trust I, Inc. (PSW)
BlackRock Credit Allocation Income Trust II, Inc. (PSY)
BlackRock Credit Allocation Income Trust III (BPP)
BlackRock Credit Allocation Income Trust IV (BTZ)
BlackRock Enhanced Capital and Income Fund, Inc. (CII)
BlackRock Floating Rate Income Trust (BGT)
MAY LOSE VALUE
NO BANK GUARANTEE
Table of Contents
Page
Section 19(b) Disclosure
2
Dear Shareholder
3
Annual Report:
Fund Summaries
4
The Benefits and Risks of Leveraging
10
Derivative Financial Instruments
10
Financial Statements:
Schedules of Investments
11
Statements of Assets and Liabilities
36
Statements of Operations
37
Statements of Changes in Net Assets
38
Statement of Cash Flows
40
Financial Highlights
41
Notes to Financial Statements
47
Report of Independent Registered Public Accounting Firm
58
Important Tax Information
59
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements
60
Automatic Dividend Reinvestment Plans
64
Officers and Directors
66
Additional Information
69
BlackRock Credit Allocation Income Trust IV (BTZ) and BlackRock Enhanced Capital and Income Fund, Inc. (CII) (collectively, the Funds), acting pursuant to
a Securities and Exchange Commission (SEC) exemptive order and with the approval of each Funds Board of Directors/Trustees (the Board), each
have
adopted a plan, consistent with its investment objectives and policies to support a level distribution of income, capital gains and/or return of capital
(Plan).
In accordance with the Plans, the Funds currently distribute the following fixed amounts per share on a monthly basis for BTZ and a quarterly basis for CII:
Exchange Symbol
Amount Per Common Share
BTZ
$ 0.100
CII
$ 0.485
investment income to its shareholders, consistent with its primary investment objectives and as required by the Internal Revenue Code of 1986, as amended
(the Code). If sufficient investment income is not available on a monthly/quarterly basis, the Funds will distribute long-term capital gains and/or return
of
capital to shareholders in order to maintain a level distribution. Each monthly/quarterly distribution to shareholders is expected to be at the fixed amount
established by the Board, except for extraordinary distributions and potential distribution rate increases or decreases to enable the Funds to comply with
the distribution requirements imposed by the Code.
Shareholders should not draw any conclusions about the Funds investment performance from the amount of these distributions or from the terms of the Plan.
Each Funds total return performance on net asset value is presented in its financial highlights table.
The Board may amend, suspend or terminate a Funds Plan without prior notice if it deems such actions to be in the best interests of the Fund or its share-
holders. The suspension or termination of the Plan could have the effect of creating a trading discount (if the Funds stock is trading at or above net asset
value) or widening an existing trading discount. The Funds are subject to risks that could have an adverse impact on their ability to maintain level distri-
butions. Examples of potential risks include, but are not limited to, economic downturns impacting the markets, decreased market volatility, companies sus-
pending or decreasing corporate dividend distributions and changes in the Code. Please refer to each Funds prospectus for a more complete description
of its risks.
Please refer to Additional Information for a cumulative summary of the Section 19(a) notices for each Funds current fiscal period. Section 19(a) notices for
the Funds, as applicable, are available on the BlackRock website www.blackrock.com.
2 ANNUAL REPORT OCTOBER 31, 2009
Over the past 12 months, we have witnessed a seismic shift in market sentiment from fear and pessimism during the worst economic decline and crisis
of confidence in financial markets since The Great Depression to increasing optimism amid emerging signs of recovery. The period began in the midst of an
intense deterioration in global economic activity and financial markets in the final months of 2008 and the early months of 2009. The collapse of confi-
dence resulted in massive government policy intervention on a global scale in the financial system and the economy. The tide turned dramatically in March
2009, however, on the back of new US government initiatives, as well as better-than-expected economic data and upside surprises in corporate earnings.
Not surprisingly, global equity markets endured extreme volatility over the past 12 months, starting with steep declines and heightened risk aversion in the
early part of the reporting period, which eventually gave way to an impressive rally that began in March. Although there have been fits and starts along the
way and a few modest corrections, the new bull market has pushed all major US indices well into positive territory for 2009. The experience in international
markets was similar to that in the United States. In particular, emerging markets (which were less affected by the global credit crunch and are experiencing
faster economic growth rates when compared to the developed world) have posted impressive gains since the rally began.
In fixed income markets, the flight-to-safety premium in Treasury securities prevailed during the equity market downturn, which drove yields sharply lower,
but concerns about deficit spending, debt issuance, inflation and dollar weakness have kept Treasury yields range bound in recent months. As economic
and market conditions began to improve in early 2009, near-zero interest rates on risk-free assets prompted many investors to reallocate money from cash
investments into higher-yielding and riskier non-Treasury assets. The high yield sector was the greatest beneficiary of this move, having decisively outpaced
all other taxable asset classes since the start of 2009. Similarly, the municipal bond market is on pace for its best performance year ever in 2009, following
one of its worst years in 2008. Investor demand remains strong for munis, helping to create a highly favorable technical backdrop. Municipal bond mutual
funds are seeing record inflows, reflecting the renewed investor interest in the asset class.
As a result of the rebound in sentiment and global market conditions, most major benchmark indexes are now in positive territory for both the
6- and 12-month periods.
Total Returns as of October 31, 2009
6-month
12-month
US equities (S&P 500 Index)
20.04%
9.80%
Small cap US equities (Russell 2000 Index)
16.21
6.46
International equities (MSCI Europe, Australasia, Far East Index)
31.18
27.71
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index*)
(0.79)
8.12
Taxable fixed income (Barclays Capital US Aggregate Bond Index)
5.61
13.79
Tax-exempt fixed income (Barclays Capital Municipal Bond Index)
4.99
13.60
High yield bonds (Barclays Capital US Corporate High Yield 2% Issuer Capped Index)
27.72
48.65
* Formerly a Merrill Lynch index.
Past performance is no guarantee of future results. Index performance shown for illustrative purposes only. You cannot invest directly in an
index.
turbulence, as ever, BlackRocks full resources are dedicated to the management of our clients assets. For additional market perspective and investment
insight, visit the most recent issue of our award-winning Shareholder® magazine at www.blackrock.com/shareholdermagazine. As always, we thank you
for entrusting BlackRock with your investments, and we look forward to continuing to serve you in the months and years ahead.
On December 1, 2009, BlackRock, Inc. and Barclays Global Investors, N.A. combined to form one of the world's preeminent investment management firms.
The new company, operating under the BlackRock name, manages $3.19 trillion in assets** and offers clients worldwide a full complement of active man-
agement, enhanced and index investment strategies and products, including individual and institutional separate accounts, mutual funds and other pooled
investment vehicles, and the industry-leading iShares platform of exchange traded funds.
** Data is as of September 30, 2009, is subject to change, and is based on a pro forma estimate of assets under management and other data at BlackRock, Inc.
and Barclays Global Investors.
THIS PAGE NOT PART OF YOUR FUND REPORT 3
Investment Objective
BlackRock Credit Allocation Income Trust I, Inc. (PSW) (formerly BlackRock Preferred and Corporate Income Strategies Fund, Inc.) (the Fund) seeks to
provide shareholders with high current income and capital appreciation. The Fund seeks to achieve its objectives by investing primarily in credit-related securi-
ties, including, but not limited to, investment grade corporate bonds, high yield bonds, bank loans, preferred securities or convertible bonds or derivatives with
economic characteristics similar to these credit-related securities.
Effective November 13, 2009, BlackRock Preferred and Corporate Income Strategies Fund, Inc. was renamed BlackRock Credit Allocation Income Trust I, Inc.
The Board approved a change to the Funds non-fundamental investment policies during the period. Please refer to page 70 in the Additional Information
section.
No assurance can be given that the Funds investment objective will be achieved.
Performance
For the 12 months ended October 31, 2009, the Fund returned 37.59% based on market price and 46.46% based on net asset value (NAV). For the
same period, the closed-end Lipper Income & Preferred Stock Funds category posted an average return of 39.55% on a market price basis and 40.36% on
a NAV basis. All returns reflect reinvestment of dividends. The Funds discount to NAV, which widened during the period, accounts for the difference between
performance based on price and performance based on NAV. Strong annual performance has been driven by the Funds positioning to fully capture the
near-term strength anticipated in the preferred sector during 2009. The Fund benefited from an overweight allocation to institutional hybrids (preferred secu-
rities available only over-the-counter to institutional investors) as the sector continued its dramatic outperformance during 2009 relative to retail preferred
securities, which are exchange traded. This position also served as a performance detractor when the preferred sector deteriorated during the fourth quarter
of 2008. Performance benefited from participation in several additional issuer-related tenders in preferred equity exchanges, along with an overweight in
the insurance sector. A generally large position in short-term securities proved beneficial as well most notably during 2008 and into the first quarter
of 2009 as it preserved NAV better than had the Fund been fully invested. Finally, the Fund notably reduced leverage in response to rating agency
methodology changes for preferred securities requiring greater collateral due to increased volatility in the sector, which detracted from performance.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions.
These
views are not intended to be a forecast of future events and are no guarantee of future results.
Fund Information
Symbol on New York Stock Exchange (NYSE)
PSW
Initial Offering Date
August 1, 2003
Yield based on Closing Market Price as of October 31, 2009 ($8.24)1
8.74%
Current Monthly Distribution per Common Share2
$0.06
Current Annualized Distribution per Common Share2
$0.72
Leverage as of October 31, 20093
32%
1 Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
Past performance does not guarantee future results.
2 The distribution is not constant and is subject to change. A portion of the
distribution may be deemed a tax return of capital or net realized gain.
3 Represents reverse repurchase agreements and Auction Market Preferred
Shares (Preferred Shares) as a percentage of total managed assets,
which is the total assets of the Fund (including any assets attributable to any borrowings and Preferred Shares) minus the sum of liabilities
(other
than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks
of
Leveraging on page 10.
The table below summarizes the changes in the Funds market price and NAV per share:
10/31/09
10/31/08
Change
High
Low
Market Price
$8.24
$7.00
17.71%
$8.52
$3.44
Net Asset Value
$9.31
$7.43
25.30%
$9.31
$4.55
The following unaudited charts show the portfolio composition and credit quality allocations of the Funds total investments:
Portfolio Composition
Credit Quality Allocations4
10/31/09
10/31/08
10/31/09
10/31/08
Preferred Securities
58%
87%
AA/Aa
14%
Short-Term Securities
29
11
A/A
26%
36
Corporate Bonds
13
2
BBB/Baa
62
36
BB/Ba
8
4
B/B
2
Not Rated
2
10
4 Using the higher of Standard & Poors (S&Ps) or
Moodys Investor
Service (Moodys) ratings.
4
ANNUAL REPORT
OCTOBER 31, 2009
Investment Objective
BlackRock Credit Allocation Income Trust II, Inc. (PSY) (formerly BlackRock Preferred Income Strategies Fund, Inc.) (the Fund) seeks to provide share-
holders with current income and capital appreciation. The Fund seeks to achieve its objectives by investing primarily in credit-related securities, including,
but not limited to, investment grade corporate bonds, high yield bonds, bank loans, preferred securities or convertible bonds or derivatives with economic
characteristics similar to these credit-related securities.
Effective November 13, 2009, BlackRock Preferred Income Strategies Fund, Inc. was renamed BlackRock Credit Allocation Income Trust II, Inc.
The Board approved a change to the Funds non-fundamental investment policies during the period. Please refer to page 70 in the Additional Information
section.
No assurance can be given that the Funds investment objective will be achieved.
Performance
For the 12 months ended October 31, 2009, the Fund returned 29.37% based on market price and 48.36% based on NAV. For the same period, the
closed-end Lipper Income & Preferred Stock Funds category posted an average return of 39.55% on a market price basis and 40.36% on a NAV basis.
All returns reflect reinvestment of dividends. The Fund moved from a premium to a discount to NAV by year-end, which accounts for the difference between
performance based on price and performance based on NAV. Strong annual performance has been driven by the Funds positioning to fully capture the
near-term strength anticipated in the preferred sector during 2009. The Fund benefited from an overweight allocation to institutional hybrids (preferred secu-
rities available only over-the-counter to institutional investors) as the sector continued its dramatic outperformance during 2009 relative to retail preferred
securities, which are exchange traded. This position also served as a performance detractor when the preferred sector deteriorated during the fourth quarter
of 2008. Performance benefited from participation in several additional issuer-related tenders in preferred equity exchanges, along with an overweight in
the insurance sector. A generally large position in short-term securities proved beneficial as well most notably during 2008 and into the first quarter
of 2009 as it preserved NAV better than had the Fund been fully invested. Finally, the Fund notably reduced leverage in response to rating agency
methodology changes for preferred securities requiring greater collateral due to increased volatility in the sector, which detracted from performance.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions.
These
views are not intended to be a forecast of future events and are no guarantee of future results.
Fund Information
Symbol on NYSE
PSY
Initial Offering Date
March 28, 2003
Yield on Closing Market Price as of October 31, 2009 ($8.90)1
10.11%
Current Monthly Distribution per Common Share2
$ 0.075
Current Annualized Distribution per Common Share2
$ 0.900
Leverage as of October 31, 20093
30%
1 Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
Past performance does not guarantee future results.
2 The distribution is not constant and is subject to change. A portion of the
distribution may be deemed a tax return of capital or net realized gain.
3 Represents reverse repurchase agreements and Preferred Shares as a
percentage of total managed assets, which is the total assets of the Fund
(including any assets attributable to any borrowings and Preferred Shares) minus the sum of liabilities (other than borrowings representing
financial
leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page
10.
The table below summarizes the changes in the Funds market price and NAV per share:
10/31/09
10/31/08
Change
High
Low
Market Price
$ 8.90
$8.10
9.88%
$ 9.20
$3.69
Net Asset Value
$10.03
$7.96
26.01%
$10.03
$4.60
The following unaudited charts show the portfolio composition and credit quality allocations of the Funds total investments:
Portfolio Composition
Credit Quality Allocations4
10/31/09
10/31/08
10/31/09
10/31/08
Preferred Securities
88%
93%
AA/Aa
1%
15%
Short-Term Securities
9
4
A/A
26
34
Corporate Bonds
3
3
BBB/Baa
56
28
BB/Ba
14
6
B/B
3
Not Rated
17
4 Using the higher of S&Ps or Moodys
ratings.
ANNUAL REPORT
OCTOBER 31, 2009
5
Investment Objective
BlackRock Credit Allocation Income Trust III (BPP) (formerly BlackRock Preferred Opportunity Trust) (the Fund) seeks high current income consistent
with capital preservation. The Fund seeks to achieve its objectives by investing primarily in credit-related securities, including, but not limited to, investment
grade corporate bonds, high yield bonds, bank loans, preferred securities or convertible bonds or derivatives with economic characteristics similar to these
credit-related securities.
Effective November 13, 2009, BlackRock Preferred Opportunity Trust was renamed BlackRock Credit Allocation Income Trust III.
The Board approved a change to the Funds non-fundamental investment policies during the period. Please refer to page 70 in the Additional Information
section.
No assurance can be given that the Funds investment objective will be achieved.
Performance
For the 12 months ended October 31, 2009, the Fund returned 36.42% based on market price and 47.16% based on NAV. For the same period, the
closed-end Lipper Income & Preferred Stock Funds category posted an average return of 39.55% on a market price basis and 40.36% on a NAV basis. All
returns reflect reinvestment of dividends. The Funds discount to NAV, which widened during the period, accounts for the difference between performance
based on price and performance based on NAV. Strong annual performance has been driven by the Funds positioning to fully capture the near-term
strength anticipated in the preferred sector during 2009. The Fund benefited from an overweight allocation to institutional hybrids (preferred securities avail-
able only over-the-counter to institutional investors) as the sector continued its dramatic outperformance during 2009 relative to retail preferred securities,
which are exchange traded. This position also served as a performance detractor when the preferred sector deteriorated during the fourth quarter of 2008.
Performance benefited from participation in several additional issuer-related tenders in preferred equity exchanges, along with an overweight in the insur-
ance sector. A generally large position in short-term securities proved beneficial as well most notably during 2008 and into the first quarter of 2009
as it preserved NAV better than had the Fund been fully invested. Finally, the Fund notably reduced leverage in response to rating agency methodology
changes for preferred securities requiring greater collateral due to increased volatility in the sector, which detracted from performance.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions.
These
views are not intended to be a forecast of future events and are no guarantee of future results.
Fund Information
Symbol on NYSE
BPP
Initial Offering Date
February 28, 2003
Yield on Closing Market Price as of October 31, 2009 ($9.94)1
8.75%
Current Monthly Distribution per Common Share2
$0.0725
Current Annualized Distribution per Common Share2
$0.8700
Leverage as of October 31, 20093
29%
1 Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
Past performance does not guarantee future results.
2 The distribution is not constant and is subject to change. A portion of the
distribution may be deemed a tax return of capital or net realized gain.
3 Represents reverse repurchase agreements and Preferred Shares as a
percentage of total managed assets, which is the total assets of the Fund
(including any assets attributable to any borrowings and Preferred Shares) minus the sum of liabilities (other than borrowings representing
financial
leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page
10.
The table below summarizes the changes in the Funds market price and NAV per share:
10/31/09
10/31/08
Change
High
Low
Market Price
$ 9.94
$8.51
16.80%
$10.35
$4.00
Net Asset Value
$11.05
$8.77
26.00%
$11.13
$5.06
The following unaudited charts show the portfolio composition and credit quality allocations of the Funds total investments:
Portfolio Composition
Credit Quality Allocations4
10/31/09
10/31/08
10/31/09
10/31/08
Preferred Securities
69%
90%
AA/Aa
4%
16%
Short-Term Securities
23
3
A/A
28
39
Corporate Bonds
8
7
BBB/Baa
45
24
BB/Ba
13
5
B
5
CCC/Caa
5
Not Rated
16
4 Using the higher of S&Ps or Moodys
ratings.
6
ANNUAL REPORT
OCTOBER 31, 2009
Investment Objective
BlackRock Credit Allocation Income Trust IV (BTZ) (formerly BlackRock Preferred and Equity Advantage Trust) (the Fund) seeks to achieve high
current income, current gains and capital appreciation. The Fund seeks to achieve its objectives by investing primarily in credit-related securities, including,
but not limited to, investment grade corporate bonds, high yield bonds, bank loans, preferred securities or convertible bonds or derivatives with economic char-
acteristics similar to these credit-related securities.
Effective November 13, 2009, BlackRock Preferred and Equity Advantage Trust was renamed BlackRock Credit Allocation Income Trust IV.
The Board approved a change to the Funds non-fundamental investment policies during the period. Please refer to page 70 in the Additional Information
section.
No assurance can be given that the Funds investment objective will be achieved.
Performance
For the 12 months ended October 31, 2009, the Fund returned 38.38% based on market price and 41.06% based on NAV. For the same period, the
closed-end Lipper Income & Preferred Stock Funds category posted an average return of 39.55% on a market price basis and 40.36% on a NAV basis. All
returns reflect reinvestment of dividends. The Funds discount to NAV, which widened during the period, accounts for the difference between performance
based on price and performance based on NAV. Strong annual performance has been driven by the Funds positioning to fully capture the near-term
strength anticipated in the preferred sector during 2009. The Fund benefited from an overweight allocation to institutional hybrids (preferred securities avail-
able only over-the-counter to institutional investors) as the sector continued its dramatic outperformance during 2009 relative to retail preferred securities,
which are exchange traded. This position also served as a performance detractor when the preferred sector deteriorated during the fourth quarter of 2008.
Performance benefited from participation in several additional issuer-related tenders in preferred equity exchanges, along with an overweight in the insur-
ance sector. A generally large position in short-term securities proved beneficial as well most notably during 2008 and into the first quarter of 2009
as it preserved NAV better than had the Fund been fully invested. Finally, the Fund notably reduced leverage in response to rating agency methodology
changes for preferred securities requiring greater collateral due to increased volatility in the sector, which detracted from performance.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These
views are not intended to be a forecast of future events and are no guarantee of future results.
Fund Information
Symbol on NYSE
BTZ
Initial Offering Date
December 27, 2006
Yield on Closing Market Price as of October 31, 2009 ($10.96)1
10.95%
Current Monthly Distribution per Common Share2
$ 0.10
Current Annualized Distribution per Common Share2
$ 1.20
Leverage as of October 31, 20093
31%
1 Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price.
Past performance does not guarantee future results.
2 The distribution is not constant and is subject to change. A portion of the distribution may be deemed a tax return of capital or net realized gain.
3 Represents reverse repurchase agreements and Preferred Shares as a percentage of total managed assets, which is the total assets of the Fund
(including any assets attributable to any borrowings and Preferred Shares) minus the sum of liabilities (other than borrowings representing financial
leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 10.
The table below summarizes the changes in the Funds market price and NAV per share:
10/31/09
10/31/08
Change
High
Low
Market Price
$10.96
$ 9.36
17.09%
$11.49
$4.56
Net Asset Value
$12.64
$10.59
19.36%
$12.69
$6.89
The following unaudited charts show the portfolio composition of the Funds total investments and credit quality allocations of the
Funds total investments excluding Common Stocks:
Portfolio Composition
Credit Quality Allocations4
10/31/09
10/31/08
10/31/09
10/31/08
Preferred Securities
57%
59%
AA/Aa
4%
15%
Short-Term Securities
33
21
A/A
33
37
Corporate Bonds
4
4
BBB/Baa
53
30
Common Stocks
6
16
BB/Ba
6
2
B/B
4
16
4 Using the higher of S&Ps or Moodys ratings.
ANNUAL REPORT
OCTOBER 31, 2009
7
Fund Summary as of October 31, 2009
BlackRock Enhanced Capital and Income Fund, Inc.
Investment Objective
BlackRock Enhanced Capital and Income Fund, Inc. (CII) (the Fund) seeks to provide investors with a combination of current income and capital
appreciation. The Fund seeks to achieve its investment objective by investing primarily in a diversified portfolio of common stocks in an attempt to
generate current income and by employing a strategy of writing (selling) call options on equity indexes in an attempt to generate gains from option
premiums primarily on the S&P 500 Index.
The Board approved a change to the Funds option writing policy during the period. Please refer to page 70 in the Additional Information section.
No assurance can be given that the Funds investment objective will be achieved.
Performance
For the 12 months ended October 31, 2009, the Fund returned 29.88% based on market price and 22.01% based on NAV. For the same period, the
benchmark S&P 500 Citigroup Value Index returned 2.98% based on NAV. All returns reflect reinvestment of dividends. The Fund's discount to NAV, which
narrowed significantly during the period, accounts for the difference between performance based on price and performance based on NAV. The main con-
tributor to Fund performance relative to the S&P 500 Citigroup Value Index was the Option strategy that was implemented by the Fund. The option strategy
contributed almost 75% of the outperformance over the index. From an equity holdings standpoint, the main contributors were an underweight and stock
selection in financials, stock selection in health care and industrials, and overweights in the information technology and energy sectors. The main detractors
from performance for the one-year period included stock selection in materials and consumer staples, as well as an underweight in the consumer
discretionary sector.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These
views are not intended to be a forecast of future events and are no guarantee of future results.
Fund Information
Symbol on NYSE
CII
Initial Offering Date
April 30, 2004
Yield on Closing Market Price as of October 31, 2009 ($13.76)1
14.10%
Current Quarterly Distribution per share2
$ 0.485
Current Annualized Distribution per share2
$ 1.940
1 Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price.
Past performance does not guarantee future results.
2 The distribution is not constant and is subject to change. A portion of the distribution may be deemed a tax return of capital or net realized gain.
The table below summarizes the changes in the Funds market price and NAV per share:
10/31/09
10/31/08
Change
High
Low
Market Price
$13.76
$12.37
11.24%
$15.70
$ 7.92
Net Asset Value
$14.40
$13.78
4.50%
$14.99
$10.62
The following unaudited charts show the ten largest holdings and sector allocations of the Funds long-term investments:
Ten Largest Holdings
Sector Allocations
10/31/09
10/31/09
10/31/08
The Travelers Cos., Inc.
4%
Financials
19%
16%
JPMorgan Chase & Co.
3
Information Technology
17
15
LSI Corp.
3
Health Care
13
4
Chevron Corp.
3
Consumer Staples
12
23
Schering-Plough Corp.
3
Energy
11
15
Bristol-Myers Squibb Co.
3
Industrials
9
7
Exxon Mobil Corp.
3
Telecommunication Services
7
6
Kimberly-Clark Corp.
3
Consumer Discretionary
6
6
Kraft Foods, Inc.
3
Materials
3
3
Time Warner, Inc.
3
Utilities
3
5
For Fund compliance purposes, the Funds sector classifications refer
to any one or more of the sector sub-classifications used by one or
more widely recognized market indexes or ratings group indexes,
and/or as defined by Fund management. This definition may not
apply for purposes of this report, which may combine sector sub-
classifications for reporting ease.
8
ANNUAL REPORT
OCTOBER 31, 2009
Investment Objective
BlackRock Floating Rate Income Trust (BGT) (formerly BlackRock Global Floating Rate Income Trust) (the Fund) seeks to provide a high level of current
income and to seek the preservation of capital. The Fund seeks to achieve its objective by investing in a global portfolio of primarily floating and variable
rate securities.
No assurance can be given that the Funds investment objective will be achieved.
Performance
For the 12 months ended October 31, 2009, the Fund returned 54.14% based on market price and 39.51% based on NAV. For the same period, the
closed-end Lipper Loan Participation Funds category posted an average return of 39.76% on a market price basis and 25.60% on a NAV basis. All returns
reflect reinvestment of dividends. (The performance of the Lipper category does not necessarily correlate to that of the Fund, as the Lipper group comprises
both closed-end funds that employ leverage and continuously offered closed-end funds that do not. For this reporting period, those Lipper peers that do not
employ leverage were at a disadvantage given the market rally.) The Fund's discount to NAV, which narrowed during the period, accounts for the difference
between performance based on price and performance based on NAV. For the first two months of the reporting period, the high yield loan market was under
extreme pressure and lost 10.9%, as measured by the Credit Suisse Leveraged Loan Index. However, this brief period of underperformance was followed by the
markets strongest results ever, as the sector gained more than 40% for the period January 1, 2009 to October 31, 2009. On average, market performance was
positive and the Funds reduction of leverage in response to higher collateral requirements imposed by the major rating agencies had a negative effect on
absolute performance. Relative to its Lipper peers, the Fund gained from both maintaining leverage and focusing on higher-quality sectors and structures, which
benefited most during the sharp rally in 2009. Conversely, the Funds cash position hurt performance during the period.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These
views are not intended to be a forecast of future events and are no guarantee of future results.
Fund Information
Symbol on NYSE
BGT
Initial Offering Date
August 30, 2004
Yield on Closing Market Price as of October 31, 2009 ($12.58)1
6.44%
Current Monthly Distribution per Common Share2
$0.0675
Current Annualized Distribution per Common Share2
$0.8100
Leverage as of October 31, 20093
19%
1 Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price.
Past performance does not guarantee future results.
2 The distribution is not constant and is subject to change. A portion of the distribution may be deemed a tax return of capital or net realized gain.
3 Represents loan outstanding and Preferred Shares as a percentage of total managed assets, which is the total assets of the Fund (including any
assets attributable to any borrowings and Preferred Shares) minus the sum of liabilities (other than borrowings representing financial leverage).
For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 10.
The table below summarizes the changes in the Funds market price and NAV per share:
10/31/09
10/31/08
Change
High
Low
Market Price
$12.58
$ 9.63
30.63%
$12.98
$6.88
Net Asset Value
$13.29
$11.24
18.24%
$13.35
$8.86
The following unaudited charts show the portfolio composition of the Funds long-term investments and credit quality allocations
of the Funds long-term investments excluding floating rate loan interests:
Portfolio Composition
Credit Quality Allocations4
10/31/09
10/31/08
10/31/09
10/31/08
Floating Rate Loan Interests
76%
79%
AAA/Aaa
16%
Corporate Bonds
20
14
A/A
4
20%
Foreign Government Obligations
3
7
BBB/Baa
27
30
Other Interests
1
BB/Ba
17
16
B/B
22
23
CCC/Caa
6
10
C/C
5
D
1
Not Rated
2
1
4 Using the higher of S&Ps or Moodys ratings.
ANNUAL REPORT
OCTOBER 31, 2009
9
The Funds may utilize leverage to seek to enhance the yield and NAV of their
Common Shares. However, these objectives cannot be achieved in all interest
rate environments.
The Funds may utilize leverage through borrowings, the issuance of
Preferred Shares or by entering into reverse repurchase agreements. In
general, the concept of leveraging is based on the premise that the cost of
assets to be obtained from leverage will be based on short-term interest
rates, which normally will be lower than the income earned by each Fund
on its longer-term portfolio investments. To the extent that the total assets
of each Fund (including the assets obtained from leverage) are invested in
higher-yielding portfolio investments, each Funds Common Shareholders
will benefit from the incremental net income.
The interest earned on securities purchased with the proceeds from lever-
age is paid to Common Shareholders in the form of dividends, and the
value of these portfolio holdings is reflected in the per share NAV of each
Funds Common Shares. However, in order to benefit Common Shareholders,
the yield curve must be positively sloped; that is, short-term interest rates
must be lower than long-term interest rates. If the yield curve becomes
negatively sloped, meaning short-term interest rates exceed long-term
interest rates, income to Common Shareholders will be lower than if the
Funds had not used leverage.
To illustrate these concepts, assume a Funds Common Shares capitalization
is $100 million and it borrows and/or issues Preferred Shares for an addi-
tional $50 million, creating a total value of $150 million available for invest-
ment in long-term securities. If prevailing short-term interest rates are 3%
and long-term interest rates are 6%, the yield curve has a strongly positive
slope. In this case, the Fund pays interest expense and/or dividends on
the $50 million of Preferred Shares based on the lower short-term interest
rates. At the same time, the securities purchased by the Fund with assets
received from the borrowings and/or issuance of Preferred Shares can earn
income based on long-term interest rates. In this case, the interest expense
and/or dividends paid to Preferred Shareholders are significantly lower
than the income earned on the Funds long-term investments, and there-
fore the Common Shareholders are the beneficiaries of the incremental
net income.
If short-term interest rates rise, narrowing the differential between short-
term and long-term interest rates, the incremental net income pickup on
the Common Shares will be reduced or eliminated completely. Furthermore,
if prevailing short-term interest rates rise above long-term interest rates of
6%, the yield curve has a negative slope. In this case, the Fund pays divi-
dends on the higher short-term interest rates whereas the Funds total port-
folio earns income based on lower long-term interest rates.
inversely with the direction of long-term interest rates, although other factors
can influence the value of portfolio investments. In contrast, the redemption
value of the Funds borrowings and/or Preferred Shares does not fluctuate
in relation to interest rates. As a result, changes in interest rates can influ-
ence the Funds NAV positively or negatively in addition to the impact on
Fund performance from leverage from borrowings.
The use of leverage may enhance opportunities for increased income to the
Funds and Common Shareholders, but as described above, it also creates
risks as short- or long-term interest rates fluctuate. Leverage also will gener-
ally cause greater changes to each Funds NAV, market price and dividend
rates than a comparable portfolio without leverage. If the income derived
from securities purchased with assets received from leverage exceeds the
cost of leverage, each Funds net income will be greater than if leverage had
not been used. Conversely, if the income from the securities purchased is
not sufficient to cover the cost of leverage, each Funds net income will be
less than if leverage had not been used, and therefore the amount available
for distribution to shareholders will be reduced. Each Fund may be required
to sell portfolio securities at inopportune times or at distressed values in
order to comply with regulatory requirements applicable to the use of lever-
age or as required by the terms of leverage instruments which may cause
a Fund to incur losses. The use of leverage may limit each Funds ability to
invest in certain types of securities or use certain types of hedging strate-
gies, such as in the case of certain restrictions imposed by ratings agencies
that rate Preferred Shares issued by each Fund. Each Fund will incur
expenses in connection with the use of leverage, all of which are borne by
the Common Shareholders and may reduce income on the Common Shares.
Under the Investment Company Act of 1940, BGT is permitted to borrow
through a credit facility up to 33 1 / 3 % of its total managed assets and the
Funds are permitted to issue Preferred Shares in an amount of up to 50%
of their total managed assets at the time of issuance. Under normal cir-
cumstances, each Fund anticipates that the total economic leverage from
Preferred Shares, reverse repurchase agreements and credit facility borrow-
ings will not exceed 50% of its total managed assets at the time such lever-
age is incurred. As of October 31, 2009, the Funds had economic leverage
from Preferred Shares, reverse repurchase agreements and/or credit facility
borrowings as a percentage of their total managed assets as follows:
Percent of
Leverage
PSW
32%
PSY
30%
BPP
29%
BTZ
31%
BGT
19%
The Funds may invest in various derivative instruments, including financial
futures contracts, swaps, foreign currency exchange contracts and options,
as specified in Note 2 of the Notes to Financial Statements, which consti-
tute forms of economic leverage. Such instruments are used to obtain
exposure to a market without owning or taking physical custody of securi-
ties or to hedge market, equity, credit, interest rate and/or foreign currency
exchange rate risks. Such derivative instruments involve risks, including the
imperfect correlation between the value of a derivative instrument and the
underlying asset, possible default of the counterparty to the transaction
and illiquidity of the derivative instrument. Each Funds ability to success-
ability to accurately predict pertinent market movements, which cannot be
assured. The use of derivative instruments may result in losses greater than
if they had not been used, may require the Funds to sell or purchase port-
folio securities at inopportune times or at distressed values, may limit the
amount of appreciation the Funds can realize on an investment or may
cause the Funds to hold a security that they might otherwise sell. The
Funds investments in these instruments are discussed in detail in the
Notes to Financial Statements.
Schedule of Investments October 31, 2009
BlackRock Credit Allocation Income Trust I, Inc. (PSW)
(Percentages shown are based on Net Assets)
Par
Par
Corporate Bonds
(000)
Value
Capital Trusts
(000)
Value
Insurance 2.5%
Multi-Utilities 2.8%
Oil Insurance Ltd., 7.56% (a)(b)(c)
$ 1,000
$ 706,200
Dominion Resources Capital Trust I,
QBE Insurance Group Ltd., 9.75%, 3/14/14 (a)
1,484
1,695,246
7.83%, 12/01/27 (f)
$ 1,200 $
1,202,650
2,401,446
Dominion Resources, Inc., 7.50% (c)
1,051
1,029,980
Puget Sound Energy, Inc. Series A, 6.97%, 6/01/67 (c)
475
415,587
Media 12.5%
COX Communications, Inc., 8.38%, 3/01/39 (a)
10,000
11,988,640
2,648,217
Total Corporate Bonds 15.0%
14,390,086
Oil, Gas & Consumable Fuels 1.3%
Enterprise Products Operating LLC, 8.38%, 8/01/66 (c)
825
808,500
TransCanada PipeLines Ltd., 6.35%, 5/15/67 (c)
500
465,397
Preferred Securities
1,273,897
Total Capital Trusts 33.5%
32,110,050
Capital Trusts
Building Products 0.7%
C8 Capital SPV Ltd., 6.64% (a)(b)(c)
980
691,018
Preferred Stocks
Shares
Capital Markets 5.8%
Commercial Banks 8.1%
Ameriprise Financial, Inc., 7.52%, 6/01/66 (c)
1,900
1,615,000
First Tennessee Bank NA, 3.90% (a)(c)
1,176
589,838
Lehman Brothers Holdings Capital Trust V,
HSBC USA, Inc.:
3.64% (b)(c)(d)(e)
1,600
160
Series D, 4.50% (c)
35,000
734,300
State Street Capital Trust III, 8.25% (b)(c)
725
731,257
Series H, 6.50%
168,000
3,410,400
State Street Capital Trust IV, 1.30%, 6/01/67 (c)
4,740
3,180,090
Provident Financial Group, Inc., 7.75%
42,000
1,013,250
5,526,507
Royal Bank of Scotland Group Plc, Series M, 6.40%
5,000
51,700
Commercial Banks 3.3%
Santander Finance Preferred SA Unipersonal, 6.80%
72,807
1,992,000
Bank of Ireland Capital Funding II, LP, 5.57% (a)(b)(c)
429
188,760
7,791,488
Bank of Ireland Capital Funding III, LP, 6.11% (a)(b)(c)
740
325,600
Diversified Financial Services 2.0%
Barclays Bank Plc, 5.93% (a)(b)(c)
500
390,000
Cobank ACB, 7.00% (a)
38,000
1,326,439
First Empire Capital Trust II, 8.28%, 6/01/27
910
691,337
ING Groep NV, 7.20%
35
612,942
National City Preferred Capital Trust I, 12.00% (b)(c)
300
343,359
SMFG Preferred Capital USD 3 Ltd., 9.50% (a)(b)(c)
875
948,675
1,939,381
Santander Perpetual SA Unipersonal, 6.67% (a)(b)(c)
250
228,123
Electric Utilities 3.6%
SunTrust Preferred Capital I, 5.85% (b)(c)
135
88,087
Alabama Power Co., 6.50%
25,000
750,000
3,203,941
Entergy Arkansas, Inc., 6.45%
28,800
609,301
Entergy Louisiana LLC, 6.95%
22,650
2,119,747
Diversified Financial Services 3.0%
Farm Credit Bank of Texas Series 1, 7.56% (b)(c)
1,000
701,550
3,479,048
JPMorgan Chase Capital XXIII, 1.44%, 5/15/77 (c)
3,085
2,172,873
Insurance 5.8%
2,874,423
Aspen Insurance Holdings Ltd., 7.40% (c)
55,000
1,116,500
Axis Capital Holdings Ltd.:
Electric Utilities 0.5%
Series A, 7.25%
35,000
789,250
PPL Capital Funding, 6.70%, 3/30/67 (c)
500
430,000
Series B, 7.50% (c)
9,000
673,875
Insurance 16.1%
Endurance Specialty Holdings Ltd. Series A, 7.75%
35,200
770,880
AXA SA, 6.38% (a)(b)(c)
3,585
3,038,287
RenaissanceRe Holding Ltd. Series D, 6.60%
110,000
2,267,100
Ace Capital Trust II, 9.70%, 4/01/30
500
552,614
5,617,605
The Allstate Corp., 6.50%, 5/15/57 (c)(f)
3,200
2,736,000
Chubb Corp., 6.38%, 3/29/67 (c)(g)
500
453,750
Real Estate Investment Trusts (REITs) 7.4%
Farmers Exchange Capital, 7.05%, 7/15/28 (a)
500
428,271
BRE Properties, Inc. Series D, 6.75%
10,000
205,200
Genworth Financial, Inc., 6.15%, 11/15/66 (c)
750
502,500
First Industrial Realty Trust, Inc., 6.24% (c)
610
270,116
Great West Life & Annuity Insurance Co.,
HRPT Properties Trust:
7.15%, 5/16/46 (a)(c)
500
415,000
Series B, 8.75%
97,917
2,257,966
Liberty Mutual Group, Inc., 10.75%, 6/15/88 (a)(c)
500
525,000
Series C, 7.13%
125,000
2,332,500
Lincoln National Corp., 7.00%, 5/17/66 (c)
500
410,000
iStar Financial, Inc. Series I, 7.50%
59,500
416,500
MetLife, Inc., 6.40%, 12/15/66 (f)
500
433,125
Public Storage:
Nationwide Life Global Funding I, 6.75%, 5/15/67
500
378,967
Series F, 6.45%
10,000
212,500
Oil Casualty Insurance Ltd., 8.00%, 9/15/34 (a)
915
576,450
Series I, 7.25%
40,000
954,000
Progressive Corp., 6.70%, 6/15/67 (c)
500
437,973
Series M, 6.63%
20,000
429,000
Reinsurance Group of America, 6.75%, 12/15/65 (c)
700
542,500
7,077,782
The Travelers Cos., Inc., 6.25%, 3/15/67 (c)
500
450,000
Wireless Telecommunication Services 2.8%
ZFS Finance (USA) Trust II, 6.45%, 12/15/65 (a)(c)(h)
1,800
1,620,000
Centaur Funding Corp., 9.08% (a)
2,720
2,729,350
ZFS Finance (USA) Trust IV, 5.88%, 5/09/32 (a)(c)
146
118,040
ZFS Finance (USA) Trust V, 6.50%, 5/09/67 (a)(c)
1,097
888,570
Total Preferred Stocks 29.7%
28,634,654
Zenith National Insurance Capital Trust I,
8.55%, 8/01/28 (a)
1,000
955,000
15,462,047
Portfolio Abbreviations
To simplify the listings of portfolio holdings in the Schedules of
ADR
American Depositary Receipts
MXN
Mexican New Peso
Investments, the names of many of the securities have been
EUR
Euro
USD
US Dollar
abbreviated according to the following list:
GBP
British Pound
See Notes to Financial Statements.
ANNUAL REPORT
OCTOBER 31, 2009
11
Schedule of Investments (continued)
BlackRock Credit Allocation Income Trust I, Inc. (PSW)
(Percentages shown are based on Net Assets)
Shares
Trust Preferreds
(000)
Value
Consumer Finance 2.2%
For Fund compliance purposes, the Funds industry classifications refer to any one
Capital One Capital II, 7.50%, 6/15/66
93
$ 2,060,649
or more of the industry sub-classifications used by one or more widely recognized
Electric Utilities 1.3%
market indexes or ratings group indexes, and/or as defined by Fund management.
PPL Energy Supply LLC, 7.00%, 7/15/46
49
1,263,610
This definition may not apply for purposes of this report, which may combine indus-
Insurance 2.0%
try sub-classifications for reporting ease.
ABN AMRO North America Capital Funding Trust II,
Reverse repurchase agreements outstanding as of October 31, 2009 were
2.87% (a)(b)(c)
2
85,988
as follows:
Lincoln National Capital VI Series F, 6.75%, 9/11/52
90
1,827,781
Interest
Trade
Maturity
Net Closing
Face
1,913,769
Counterparty
Rate
Date
Date
Amount
Amount
Total Trust Preferreds 5.5%
5,238,028
Barclays Bank Plc 0.75%
10/16/09
11/16/09
$4,975,252
$ 4,972,041
Total Preferred Securities 68.7%
65,982,732
Total Long Term Investments
Financial futures contracts purchased as of October 31, 2009 were as follows:
(Cost $94,148,823) 83.7%
80,372,818
Expiration
Notional
Unrealized
Contracts
Issue
Date
Value
Appreciation
50
2-Year U.S.
Treasury Bond December 2009
$ 10,793,860
$ 86,609
Short-Term Securities
Shares
6
30-Year U.S.
BlackRock Liquidity Funds, TempFund,
Treasury Bond
December 2009
$ 712,575
8,363
Institutional Class, 0.18% (i)(j)
33,286,296
33,286,296
Total
$ 94,972
Total Short-Term Securities
(Cost $33,286,296) 34.6%
33,286,296
Credit default swaps on single-name issue buy protection outstanding as of
October 31, 2009 were as follows:
Total Investments (Cost $127,435,119*) 118.3%
113,659,114
Other Assets Less Liabilities 23.6%
22,648,143
Pay
Notional
Preferred Shares, at Redemption Value (41.9)%
(40,258,949)
Fixed
Counter-
Amount
Unrealized
Net Assets Applicable to Common Shares 100.0%
$ 96,048,308
Issuer
Rate
party
Expiration
(000)
Depreciation
* The cost and unrealized appreciation (depreciation) of investments as of October 31,
Nordstrom, Inc. 5.20%
Deutsche
June
2009, as computed for federal income tax purposes, were as follows:
Bank AG
2014
$ 1,000
$ (168,952)
Aggregate cost
$ 127,460,901
Gross unrealized appreciation
$ 2,075,593
Gross unrealized depreciation
(15,877,380)
Net unrealized depreciation
$ (13,801,787)
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration to qualified
institutional investors.
(b) Security is perpetual in nature and has no stated maturity date.
(c) Variable rate security. Rate shown is as of report date.
(d) Non-income producing security.
(e) Issuer filed for bankruptcy and/or is in default of interest payments.
(f) All or a portion of the security has been pledged as collateral in connection with
open reverse repurchase agreements.
(g) All or a portion of the security has been pledged as collateral in connection with
open swaps.
(h) All or a portion of the security has been pledged as collateral in connection with
open financial futures contracts.
(i) Investments in companies considered to be an affiliate of the Fund, for purposes of
Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
Net
Affiliate
Activity
Income
BlackRock Liquidity Funds, TempFund,
Institutional Class
$ 33,286,296
$ 73,357
BlackRock Liquidity Series, LLC
Cash Sweep Series
$(15,938,424)
$ 56,701
(j) Represents the current yield as of report date.
See Notes to Financial Statements.
12
ANNUAL REPORT
OCTOBER 31, 2009
Schedule of Investments (concluded)
BlackRock Credit Allocation Income Trust I, Inc. (PSW)
Fair Value Measurements Various inputs are used in determining the fair value of
Other Financial
investments, which are as follows:
Valuation Inputs
Instruments1
Level 1 price quotations in active markets/exchanges for identical assets
Assets
Liabilities
and liabilities
Level 1
$ 94,972
Level 2 other observable inputs (including, but not limited to: quoted prices for
Level 2
$ (168,952)
similar assets or liabilities in markets that are active, quoted prices for identical
Level 3
or similar assets or liabilities in markets that are not active, inputs other than
Total
$ 94,972
$ (168,952)
quoted prices that are observable for the assets or liabilities (such as interest
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and
1 Other financial instruments are financial futures contracts and swaps. Financial
default rates) or other market-corroborated inputs)
futures contracts and swaps are valued at the unrealized appreciation/depreci-
Level 3 unobservable inputs based on the best information available in the
ation on the instrument.
circumstances, to the extent observable inputs are not available (including the
The following is a reconciliation of investments for unobservable inputs (Level 3)
Funds own assumptions used in determining the fair value of investments)
used in determining fair value:
The inputs or methodology used for valuing securities are not necessarily an indica-
Investments in
tion of the risk associated with investing in those securities. For information about
Securities
the Funds policy regarding valuation of investments and other significant accounting
policies, please refer to Note 1 of the Notes to Financial Statements.
Capital Trusts
The following tables summarize the inputs used as of October 31, 2009 in
Balance, as of October 31, 2008
determining the fair valuation of the Funds investments:
Accrued discounts/premiums
Realized gain (loss)
Investments in
Change in unrealized appreciation/depreciation
Valuation Inputs
Securities
Net purchases (sales)
Assets
Net transfers in/out Level 3
$ 576,450
Level 1
Balance, as of October 31, 2009
$ 576,450
Long-Term Investments:
Preferred Stocks
$ 19,302,737
Trust Preferreds
5,152,040
Short-Term Securities
33,286,296
Total Level 1
57,741,073
Level 2
Long-Term Investments:
Capital Trusts
31,533,600
Corporate Bonds
14,390,086
Preferred Stocks
9,331,917
Trust Preferreds
85,988
Total Level 2
55,341,591
Level 3
Long-Term Investments:
Capital Trusts
576,450
Total
$ 113,659,114
See Notes to Financial Statements.
ANNUAL REPORT
OCTOBER 31, 2009
13
Schedule of Investments October 31, 2009
BlackRock Credit Allocation Income Trust II, Inc. (PSY)
(Percentages shown are based on Net Assets)
Par
Par
Corporate Bonds
(000)
Value
Capital Trusts
(000)
Value
Insurance 2.6%
Insurance (concluded)
Oil Insurance Ltd., 7.56% (a)(b)(c)
$ 5,000
$ 3,531,000
Principal Life Insurance Co., 8.00%, 3/01/44 (a) $
6,325
$ 5,663,683
QBE Insurance Group Ltd., 9.75%, 3/14/14 (a)
5,967
6,816,396
Progressive Corp., 6.70%, 6/15/67 (c)(f)
2,000
1,751,894
Structured Asset Repackaged Trust, Series 2004-1,
Reinsurance Group of America,
0.78%, 4/21/11 (a)(c)
299
266,121
6.75%, 12/15/65 (c)
3,000
2,325,000
Total Corporate Bonds 2.6%
10,613,517
The Travelers Cos., Inc., 6.25%, 3/15/67 (c)
3,000
2,700,000
ZFS Finance (USA) Trust IV, 5.88%, 5/09/32 (a)(c)
379
306,418
ZFS Finance (USA) Trust V, 6.50%, 5/09/67 (a)(c)
4,312
3,492,720
Preferred Securities
Zenith National Insurance Capital Trust I,
8.55%, 8/01/28 (a)
3,750
3,581,250
85,641,493
Capital Trusts
Multi-Utilities 3.8%
Building Products 0.7%
Dominion Resources Capital Trust I,
C8 Capital SPV Ltd., 6.64% (a)(b)(c)
3,915
2,760,545
7.83%, 12/01/27
10,000
10,022,080
Capital Markets 5.3%
Dominion Resources, Inc., 7.50% (c)
5,449
5,340,020
Ameriprise Financial, Inc., 7.52%, 6/01/66 (c)
7,600
6,460,000
15,362,100
Lehman Brothers Holdings Capital Trust V,
3.64% (b)(c)(d)(e)
6,400
640
Oil, Gas & Consumable Fuels 1.4%
State Street Capital Trust III, 8.25% (b)(c)
2,920
2,945,200
Enterprise Products Operating LLC,
State Street Capital Trust IV, 1.30%, 6/01/67 (c)
18,235
12,233,953
8.38%, 8/01/66 (c)
2,000
1,960,000
TransCanada PipeLines Ltd., 6.35%, 5/15/67 (c)
4,000
3,723,180
21,639,793
5,683,180
Commercial Banks 12.0%
ABN AMRO North America Holding, Preferred
Road & Rail 0.9%
Capital Repackaging Trust I, 6.52% (a)(b)(c)
12,035
8,544,850
BNSF Funding Trust I, 6.61%, 12/15/55 (c)
3,750
3,548,437
Bank One Capital III, 8.75%, 9/01/30
2,000
2,252,786
Total Capital Trusts 49.3%
201,733,947
Bank of Ireland Capital Funding II, LP,
5.57% (a)(b)(c)
1,715
754,600
Bank of Ireland Capital Funding III, LP,
6.11% (a)(b)(c)
2,951
1,298,440
Preferred Stocks
Shares
Barclays Bank Plc, 5.93% (a)(b)(c)
2,500
1,950,000
Capital Markets 0.0%
First Empire Capital Trust II, 8.28%, 6/01/27
3,630
2,757,751
Deutsche Bank Contingent Capital Trust II, 6.55%
530
10,817
HSBC America Capital Trust I, 7.81%, 12/15/26 (a)
2,000
1,978,198
HSBC Capital Funding LP/Jersey Channel Islands,
Commercial Banks 8.3%
10.18% (a)(b)(c)(f)
4,835
5,753,650
Barclays Bank Plc, 8.13%
225,000
5,298,750
HSBC Finance Capital Trust IX, 5.91%, 11/30/35 (c)
7,300
5,767,000
First Tennessee Bank NA, 3.90% (a)(c)
4,650
2,332,266
Lloyds Banking Group Plc, 6.66%, 11/21/49 (a)(c)
5,000
3,250,000
HSBC USA, Inc.:
National City Preferred Capital Trust I, 12.00% (b)(c)
1,100
1,258,983
Series D, 4.50% (c)(g)
131,700
2,763,066
NationsBank Capital Trust III, 0.83%, 1/15/27 (c)
13,470
8,627,037
Series H, 6.50%
120,000
2,436,000
SMFG Preferred Capital USD 3 Ltd., 9.50% (a)(b)(c)
3,550
3,848,910
Provident Financial Group, Inc., 7.75%
166,800
4,024,050
Santander Perpetual SA Unipersonal,
Royal Bank of Scotland Group Plc, Series M, 6.40%
15,000
155,100
6.67%, 10/29/49 (a)(b)(c)
1,125
1,026,555
SG Preferred Capital II, 6.30% (a)(c)
23,000
13,800,000
SunTrust Preferred Capital I, 5.85% (b)(c)
307
200,318
Santander Finance Preferred SA Unipersonal, 6.80%
117,094
3,203,692
49,269,078
34,012,924
Diversified Financial Services 3.7%
Diversified Financial Services 1.9%
AgFirst Farm Credit Bank, 8.39%, 12/15/16 (c)
4,000
3,041,668
Cobank ACB, 7.00% (a)(b)
152,000
5,305,758
Farm Credit Bank of Texas, Series 1, 7.56% (b)(c)
2,500
1,753,875
ING Groep NV, 7.20%
140
2,451,769
ING Capital Funding Trust III, 8.44% (b)(c)
6,066
5,171,265
7,757,527
JPMorgan Chase Capital XXIII, 1.44%, 5/15/77 (c)
7,500
5,282,513
Electric Utilities 3.4%
15,249,321
Alabama Power Co.:
Electric Utilities 0.6%
5.83%
14,000
349,300
PPL Capital Funding, 6.70%, 3/30/67 (c)
3,000
2,580,000
6.50%
145,000
4,350,000
Entergy Arkansas, Inc., 6.45%
114,400
2,420,281
Insurance 20.9%
Entergy Louisiana LLC, 6.95%
49,850
4,665,314
AON Corp., 8.21%, 1/01/27
2,500
2,475,000
Interstate Power & Light Co., Series B, 8.38%
80,000
2,220,000
AXA SA, 6.38% (a)(b)(c)
13,470
11,415,825
Ace Capital Trust II, 9.70%, 4/01/30
5,000
5,526,140
14,004,895
The Allstate Corp., 6.50%, 5/15/57 (c)
12,775
10,922,625
Insurance 12.5%
Chubb Corp., 6.38%, 3/29/67 (c)
2,000
1,815,000
Aspen Insurance Holdings Ltd., 7.40% (c)
194,000
3,938,200
Farmers Exchange Capital, 7.05%, 7/15/28 (a)
2,500
2,141,357
Axis Capital Holdings Ltd.:
GE Global Insurance Holding Corp., 7.75%, 6/15/30
10,000
10,207,480
Series A, 7.25%
129,300
2,915,715
Genworth Financial, Inc., 6.15%, 11/15/66 (c)
3,000
2,010,000
Series B, 7.50% (c)
36,000
2,695,500
Liberty Mutual Group, Inc., 10.75%, 6/15/88 (a)(c)
2,925
3,071,250
Endurance Specialty Holdings Ltd., Series A, 7.75%
139,200
3,048,480
Lincoln National Corp., 7.00%, 5/17/66 (c)
3,350
2,747,000
MetLife, Inc., Series B, 6.50%
904,400
19,652,612
MetLife, Inc., 6.40%, 12/15/66
6,825
5,912,156
Prudential Plc, 6.50%
92,400
1,931,160
Nationwide Life Global Funding I, 6.75%, 5/15/67
7,000
5,305,545
RenaissanceRe Holding Ltd., Series D, 6.60%
435,000
8,965,350
Oil Casualty Insurance Ltd., 8.00%, 9/15/34 (a)
3,605
2,271,150
Zurich RegCaPS Funding Trust, 6.58% (a)(c)
9,800
7,699,125
50,846,142
See Notes to Financial Statements.
14
ANNUAL REPORT
OCTOBER 31, 2009
Schedule of Investments (continued)
BlackRock Credit Allocation Income Trust II, Inc. (PSY)
(Percentages shown are based on Net Assets)
Preferred Stocks
Shares
Value
Short-Term Securities
Shares
Value
Multi-Utilities 0.9%
BlackRock Liquidity Funds, TempFund,
Pacific Gas & Electric Co., Series A, 6.00%
140,000
$ 3,738,000
Institutional Class, 0.18% (h)(i)
41,019,397
$ 41,019,397
Real Estate Investment Trusts (REITs) 5.3%
Total Short-Term Securities
BRE Properties, Inc., Series D, 6.75%
35,000
718,200
(Cost $41,019,397) 10.0%
41,019,397
Developers Diversified Realty Corp., 8.00%
400,000
7,156,000
Total Investments (Cost $524,066,199*) 107.5%
440,148,651
First Industrial Realty Trust, Inc., 6.24% (c)
2,390
1,058,322
Other Assets Less Liabilities 33.8%
138,235,005
Firstar Realty LLC, 8.88% (a)
4,000
3,412,500
Preferred Shares, at Redemption Value (41.3)%
(169,090,727)
Kimco Realty Corp., Series F, 6.65%
50,000
1,011,500
Public Storage:
Net Assets Applicable to Common Shares 100.0%
$ 409,292,929
Series F, 6.45%
40,000
850,000
* The cost and unrealized appreciation (depreciation) of investments as of October 31,
Series I, 7.25%
160,000
3,816,000
2009, as computed for federal income tax purposes, were as follows:
Series M, 6.63%
71,900
1,542,255
Regency Centers Corp., Series D, 7.25%
100,000
2,175,000
Aggregate cost
$ 525,840,523
21,739,777
Gross unrealized appreciation
$ 9,977,374
Gross unrealized depreciation
(95,669,246)
Wireless Telecommunication Services 0.6%
Centaur Funding Corp., 9.08% (a)
2,423
2,431,329
Net unrealized depreciation
$ (85,691,872)
Total Preferred Stocks 32.9%
134,541,411
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration to qualified
institutional investors.
Shares
(b) Security is perpetual in nature and has no stated maturity date.
Trust Preferreds
(000)
(c) Variable rate security. Rate shown is as of report date.
Communications Equipment 0.4%
(d) Non-income producing security.
Corporate-Backed Trust Certificates, Motorola
Debenture Backed Series 2002-14,
(e) Issuer filed for bankruptcy and/or is in default of interest payments.
8.38%, 11/15/28
80
1,778,167
(f) All or a portion of security held as collateral in connection with open reverse repur-
Consumer Finance 3.6%
chase agreements.
Capital One Capital II, 7.50%, 6/15/66
668
14,799,807
(g) All or a portion of security has been pledged as collateral in connection with open
Electric Utilities 2.3%
financial futures contracts.
Georgia Power Co., Series O, 1.48%, 4/15/33
50
1,229,393
(h) Investments in companies considered to be an affiliate of the Fund, for purposes of
HECO Capital Trust III, 6.50%, 3/18/34
50
1,167,634
Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
National Rural Utilities Cooperative Finance Corp.,
6.75%, 2/15/43
50
1,236,387
Net
PPL Energy Supply LLC, 7.00%, 7/15/46
233
5,970,175
Affiliate
Activity
Income
9,603,589
BlackRock Liquidity Funds, TempFund,
Gas Utilities 3.7%
Institutional Class
$ 41,019,397
$ 70,651
Southwest Gas Capital II, 7.70%, 9/15/43
605
14,940,766
BlackRock Liquidity Series, LLC
Cash Sweep Series
$(28,803,004)
$ 80,088
Insurance 2.7%
ABN AMRO North America Capital Funding Trust II,
(i) Represents the current yield as of report date.
2.87% (a)(b)(c)
11
477,570
For Fund compliance purposes, the Funds industry classifications refer to any one
Lincoln National Capital VI, Series F,
or more of the industry sub-classifications used by one or more widely recognized
6.75%, 9/11/52
200
4,061,735
market indexes or ratings group indexes, and/or as defined by Fund management.
W.R. Berkley Capital Trust II, 6.75%, 7/26/45
295
6,578,745
This definition may not apply for purposes of this report, which may combine indus-
11,118,050
try sub-classifications for reporting ease.
Total Trust Preferreds 12.7%
52,240,379
Reverse repurchase agreements outstanding as of October 31, 2009 were as follows:
Total Preferred Securities 94.9%
388,515,737
Interest
Trade
Maturity
Net Closing
Face
Total Long-Term Investments
Counterparty
Rate
Date
Date
Amount
Amount
(Cost $483,046,802) 97.5%
399,129,254
Barclays Bank Plc
0.75%
10/16/09
11/16/09 $ 9,516,732
$ 9,510,590
Financial futures contracts purchased as of October 31, 2009 were as follows:
Expiration
Notional
Unrealized
Contracts
Issue
Date
Amount
Appreciation
25
30-Year U.S.
Treasury Bonds December 2009
$2,969,061
$ 34,845
Credit default swaps on single-name issue buy protection outstanding as of
October 31, 2009 were as follows:
Pay
Notional
Fixed
Counter-
Amount
Unrealized
Issuer
Rate
party
Expiration
(000)
Depreciation
Nordstrom, Inc.
5.20%
Deutsche
June
Bank AG
2014
$ 2,000
$ (337,904)
See Notes to Financial Statements.
ANNUAL REPORT
OCTOBER 31, 2009
15
Schedule of Investments (concluded)
BlackRock Credit Allocation Income Trust II, Inc. (PSY)
Fair Value Measurements Various inputs are used in determining the fair value of
The following tables summarize the inputs used as of October 31, 2009 in
investments, which are as follows:
determining the fair valuation of the Funds investments:
Level 1 price quotations in active markets/exchanges for identical assets
Investments in
and liabilities
Valuation Inputs
Securities
Level 2 other observable inputs (including, but not limited to: quoted prices for
Assets
similar assets or liabilities in markets that are active, quoted prices for identical
Level 1
or similar assets or liabilities in markets that are not active, inputs other than
Long-Term Investments:
quoted prices that are observable for the assets or liabilities (such as interest
Preferred Stocks
$ 84,696,966
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and
Trust Preferreds
51,762,809
default rates) or other market-corroborated inputs)
Short-Term Securities
41,019,397
Level 3 unobservable inputs based on the best information available in the
Total Level 1
177,479,172
circumstances, to the extent observable inputs are not available (including the
Level 2
Funds own assumptions used in determining the fair value of investments)
Long-Term Investments:
The inputs or methodology used for valuing securities are not necessarily an indica-
Capital Trusts
199,462,797
tion of the risk associated with investing in those securities. For information about
Corporate Bonds
10,347,396
the Funds policy regarding valuation of investments and other significant accounting
Preferred Stocks
36,044,445
policies, please refer to Note 1 of the Notes to Financial Statements.
Trust Preferreds
477,570
Total Level 2
246,332,208
Level 3
Long-Term Investments:
Capital Trusts
2,271,150
Corporate Bonds
266,121
Preferred Stocks
13,800,000
Total Level 3
16,337,271
Total
$ 440,148,651
Other Financial
Valuation Inputs
Instruments1
Assets
Liabilities
Level 1
$ 34,845
Level 2
$ (337,904)
Level 3
Total
$ 34,845
$ (337,904)
1 Other financial instruments are financial futures contracts and swaps. Financial
futures contracts and swaps are valued at the unrealized appreciation/
depreciation on the instrument.
The following is a reconciliation of investments for unobservable inputs (Level 3) used in determining fair value:
Investments in Securities
Capital
Corporate
Preferred
Trusts
Bonds
Stocks
Total
Balance, as of October 31, 2008
Accrued discounts/premiums
Realized gain (loss)
Change in unrealized appreciation/depreciation
Net purchases (sales)
Net transfers in/out of Level 3
$ 2,271,150
$ 266,121
$ 13,800,000
$ 16,337,271
Balance, as of October 31, 2009
$ 2,271,150
$ 266,121
$ 13,800,000
$ 16,337,271
See Notes to Financial Statements.
16
ANNUAL REPORT
OCTOBER 31, 2009
Schedule of Investments October 31, 2009
BlackRock Credit Allocation Income Trust III (BPP)
(Percentages shown are based on Net Assets)
Par
Par
Corporate Bonds
(000)
Value
Capital Trusts
(000)
Value
Commercial Banks 0.5%
Insurance 12.2%
RESPARCS Funding LP I, 8.00% (a)(b)(c)
$ 4,000
$ 1,000,000
AXA SA, 6.38% (a)(d)(e)
$ 7,150
$ 6,059,625
Containers & Packaging 0.1%
The Allstate Corp., 6.50%, 5/15/57 (e)
6,350
5,429,250
Impress Holdings BV, 3.41%, 9/15/13 (d)(e)
240
228,300
Chubb Corp., 6.38%, 3/29/67 (e)(h)
900
816,750
Genworth Financial, Inc., 6.15%, 11/15/66 (e)
1,475
988,250
Hotels, Restaurants & Leisure 0.0%
Liberty Mutual Group, Inc., 10.75%, 6/15/88 (d)(e)
900
945,000
Greektown Holdings, LLC, 10.75%, 12/01/13 (b)(c)(d)
362
72,400
Lincoln National Corp., 7.00%, 5/17/66 (e)
900
738,000
Insurance 5.2%
MetLife, Inc., 6.40%, 12/15/66
900
779,625
Kingsway America, Inc., 7.50%, 2/01/14
9,000
7,200,000
Nationwide Life Global Funding I, 6.75%, 5/15/67
900
682,141
QBE Insurance Group Ltd., 9.75%, 3/14/14 (d)
2,975
3,398,488
Progressive Corp., 6.70%, 6/15/67 (e)
900
788,352
Reinsurance Group of America, 6.75%, 12/15/65 (e)
1,300
1,007,500
10,598,488
The Travelers Cos., Inc., 6.25%, 3/15/67 (e)(h)
900
810,000
Machinery 0.2%
White Mountains Re Group Ltd., 7.51% (a)(d)(e)
2,600
2,147,808
AGY Holding Corp., 11.00%, 11/15/14
460
374,900
ZFS Finance (USA) Trust IV, 5.88%, 5/09/32 (d)(e)
190
153,613
ZFS Finance (USA) Trust V, 6.50%, 5/09/67 (d)(e)
2,209
1,789,290
Media 1.7%
Zenith National Insurance Capital Trust I,
CMP Susquehanna Corp., 4.75%, 5/15/14 (d)
9
180
8.55%, 8/01/28 (d)
1,800
1,719,000
Comcast Holdings Corp., 2.00%, 11/15/29 (f)
110
3,089,285
Local Insight Regatta Hldgs, Inc., 11.00%, 12/01/17
700
343,000
24,854,204
3,432,465
Multi-Utilities 0.4%
Puget Sound Energy, Inc., Series A, 6.97%, 6/01/67 (e)
925
809,301
Oil, Gas & Consumable Fuels 0.0%
EXCO Resources, Inc., 7.25%, 1/15/11
75
74,625
Oil, Gas & Consumable Fuels 0.4%
TransCanada PipeLines Ltd., 6.35%, 5/15/67 (e)
900
837,716
Paper & Forest Products 0.5%
International Paper Co., 8.70%, 6/15/38
900
1,037,019
Total Capital Trusts 31.9%
65,062,367
Professional Services 0.1%
FTI Consulting, Inc., 7.75%, 10/01/16
100
100,500
Specialty Retail 0.0%
Preferred Stocks
Shares
Lazy Days R.V. Center, Inc., 11.75%, 5/15/12 (b)(c)
1,182
11,820
Capital Markets 0.0%
Total Corporate Bonds 8.3%
16,930,517
Lehman Brothers Holdings Inc., Series D, 5.67% (b)(c)
31,100
9,641
Commercial Banks 8.6%
Banesto Holdings, Ltd. Series A, 10.50% (d)
30,000
669,375
Preferred Securities
Barclays Bank Plc, 8.13%
100,000
2,355,000
First Republic Preferred Capital Corp., 7.25%
117,045
2,130,219
Capital Trusts
HSBC USA, Inc., Series H, 6.50%
330,000
6,699,000
Royal Bank of Scotland Group Plc, Series M, 6.40%
10,000
103,400
Building Products 0.7%
Santander Finance Preferred SA Unipersonal 6.80%
38,500
1,053,360
C8 Capital SPV Ltd., 6.64% (a)(d)(e)
1,945
1,371,458
Union Planter Preferred Funding Corp., 7.75% (d)
60
4,550,625
Capital Markets 3.9%
17,560,979
State Street Capital Trust III, 8.25% (a)(e)
1,385
1,396,952
Diversified Financial Services 2.3%
State Street Capital Trust IV, 1.30%, 6/01/67 (e)
9,675
6,491,006
ING Groep NV, 7.20%
70
1,225,885
7,887,958
JPMorgan Chase & Co., Series E, 6.15%
75,000
3,531,750
Commercial Banks 9.4%
4,757,635
Bank of Ireland Capital Funding II, LP, 5.57% (a)(d)(e)
854
375,760
Electric Utilities 0.7%
Bank of Ireland Capital Funding III, LP, 6.11% (a)(d)(e)
1,471
647,240
Alabama Power Co., 6.50%
50,000
1,500,000
Barclays Bank Plc, 5.93% (a)(d)(e)
890
694,200
CBA Capital Trust I, 5.81% (a)(d)
5,000
4,550,000
Insurance 15.9%
FCB/NC Capital Trust I, 8.05%, 3/01/28
1,100
936,369
Arch Capital Group Ltd., Series A, 8.00%
117,414
2,841,419
Aspen Insurance Holdings Ltd., 7.40% (e)
115,000
2,334,500
Lloyds TSB Bank Plc, 6.90% (a)
4,399
3,343,240
Endurance Specialty Holdings Ltd., Series A, 7.75%
172,400
3,775,560
NBP Capital Trust III, 7.38% (a)
2,000
1,485,000
MetLife, Inc., Series B, 6.50%
314,500
6,834,085
National City Preferred Capital Trust I, 12.00% (a)(e)
600
686,718
PartnerRe Ltd., Series C, 6.75%
209,400
4,634,022
SMFG Preferred Capital USD 3 Ltd., 9.50% (a)(d)(e)
1,725
1,870,245
Prudential Plc, 6.50%
62,000
1,295,800
Santander Perpetual SA Unipersonal, 6.67%(a)(d)(e)
625
570,308
Prudential Plc, 6.50% (a)
6,000
4,875,000
SunTrust Preferred Capital I, 5.85% (a)(e)
303
197,708
RenaissanceRe Holding Ltd., Series D, 6.60%
210,000
4,328,100
Wells Fargo Capital XIII Series GMTN, 7.70% (a)(e)
1,700
1,581,000
Zurich RegCaPS Funding Trust, 6.58% (d)(e)
2,000
1,571,250
Westpac Capital Trust IV, 5.26% (a)(d)(e)
3,000
2,367,210
32,489,736
19,304,998
Media 0.0%
Diversified Financial Services 4.5%
CMP Susquemanna Radio Holdings Corp.,
JPMorgan Chase Capital XXI, Series U,
0.00% (b)(d)(e)
2,052
1.23%, 2/02/37 (e)(g)
7,125
4,862,898
Real Estate Investment Trusts (REITs) 2.3%
JPMorgan Chase Capital XXIII, 1.44%, 5/15/77 (e)
6,190
4,359,834
BRE Properties, Inc., Series D, 6.75%
20,000
410,400
9,222,732
Public Storage:
Electric Utilities 0.4%
Series F, 6.45%
20,000
425,000
PPL Capital Funding, 6.70%, 3/30/67 (e)
900
774,000
Series M, 6.63%
35,000
750,750
SunTrust Real Estate Investment Trust, 9.00% (d)
30
3,027,189
4,613,339
See Notes to Financial Statements.
Total Preferred Stocks 29.8%
60,931,330
ANNUAL REPORT
OCTOBER 31, 2009
17
Schedule of Investments (continued)
BlackRock Credit Allocation Income Trust III (BPP)
(Percentages shown are based on Net Assets)
Shares
Trust Preferreds
(000)
Value
Short-Term Securities
Shares
Value
Capital Markets 1.2%
BlackRock Liquidity Funds, TempFund,
Structured Asset Trust Unit Repackagings:
Institutional Class, 0.18% (j)(k)
51,450,797
$ 51,450,797
Credit Suisse First Boston (USA), Inc., Debenture
Total Short-Term Securities
Backed, Series 2003-13, 6.25%, 7/15/32
11
$ 250,671
(Cost $51,450,797) 25.2%
51,450,797
Goldman Sachs Group, Inc., Debenture Backed,
Series 2003-06, 6.00%, 2/15/33
103
2,179,215
Total Investments (Cost $256,459,826*) 109.6%
223,807,066
Other Assets Less Liabilities 24.9%
50,753,074
2,429,886
Preferred Shares, at Redemption Value (34.5)%
(70,426,884)
Commercial Banks 2.0%
Net Assets Applicable to Common Shares 100.0%
$ 204,133,256
Mizuho Capital Investment 1 Ltd., 6.69% (a)(d)(e)
5,000
4,170,930
Diversified Financial Services 0.1%
* The cost and unrealized appreciation (depreciation) of investments as of October 31,
PPLUS Trust Certificates, Series VAL-1 Class A,
2009, as computed for federal income tax purposes, were as follows:
7.25%, 4/15/32
11
263,407
Aggregate cost
$ 257,997,371
Food Products 1.2%
Gross unrealized appreciation
$ 3,697,471
Corporate-Backed Trust Certificates, Kraft Foods, Inc.,
Gross unrealized depreciation
( 37,887,776)
Debenture Backed, Series 2003-11,
Net unrealized depreciation
$ ( 34,190,305)
5.88%, 11/01/31
100
2,417,000
(a) Security is perpetual in nature and has no stated maturity date.
Insurance 1.1%
Everest Re Capital Trust, 6.20%, 3/29/34
30
597,330
(b) Non-income producing security.
Financial Security Assurance Holdings Ltd.,
(c) Issuer filed for bankruptcy and/or is in default of interest payments.
5.60%, 7/15/03
15
193,235
(d) Security exempt from registration under Rule 144A of the Securities Act of 1933.
The Phoenix Cos., Inc., 7.45%, 1/15/32
79
1,423,286
These securities may be resold in transactions exempt from registration to qualified
2,213,851
institutional investors.
Media 6.0%
(e) Variable rate security. Rate shown is as of report date.
Comcast Corp.:
(f) Convertible security.
7.00%, 9/15/55
50
1,210,942
(g) All or a portion of security held as collateral in connection with open financial
6.63%, 5/15/56
470
10,786,500
futures contracts.
Corporate-Backed Trust Certificates, News
(h) All or a portion of security held as collateral in connection with open reverse repur-
America Debenture Backed, Series 2002-9,
chase agreements.
8.13%, 12/01/45
7
169,606
(i) Warrants entitle the Fund to purchase a predetermined number of shares of com-
12,167,048
mon stock and are non-income producing. The purchase price and number of
Oil, Gas & Consumable Fuels 1.8%
shares are subject to adjustment under certain conditions until the expiration date.
Nexen, Inc., 7.35%, 11/01/43
155
3,623,900
(j) Investments in companies considered to be an affiliate of the Fund, for purposes of
Wireless Telecommunication Services 0.7%
Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
Structured Repackaged Asset-Backed Trust Securities,
Net
Sprint Capital Corp., Debenture Backed, Series
Affiliate
Activity
Income
2004-2, 6.50%, 11/15/28
103
1,526,233
BlackRock Liquidity Funds, TempFund,
Total Trust Preferreds 14.1%
28,812,555
Institutional Class
$51,450,797
$127,321
Total Preferred Securities 75.8%
154,805,952
(k) Represents the current yield as of report date.
For Fund compliance purposes, the Funds industry classifications refer to any one
or more of the industry sub-classifications used by one or more widely recognized
market indexes or ratings group indexes, and/or as defined by Fund management.
Warrants (i)
Shares
This definition may not apply for purposes of this report, which may combine indus-
Media 0.0%
try sub-classifications for reporting ease.
CMP Susquemanna Radio Holdings Corp.
Reverse repurchase agreements outstanding as of October 31, 2009 were as follows:
(expires 3/26/19) (d)
2,345
Interest
Trade
Maturity
Net Closing
Face
Total Warrants 0.0%
Counterparty
Rate
Date
Date
Amount
Amount
Barclays Bank Plc
0.75%
10/16/09
11/02/09 $13,239,375
$13,234,688
Financial futures contracts purchased as of October 31, 2009 were as follows:
Investment Companies
Expiration
Notional
Unrealized
Contracts
Issue
Date
Value
Appreciation
Ultra Short Real Estate Proshares
60,000
619,800
Total Investment Companies 0.3%
619,800
14
30-Year U.S.
Treasury Bond December 2009 $ 1,662,675
$ 19,513
Total Long Term Investments
(Cost $205,009,029) 84.4%
172,356,269
Credit default swaps on single-name issue buy protection outstanding as of
October 31, 2009 were as follows:
Pay
Notional
Fixed
Counter-
Amount
Unrealized
Issuer
Rate
party
Expiration
(000)
Depreciation
Nordstrom, Inc.
5.20%
Deutsche
June
Bank AG
2014
$1,000
$ (168,952)
See Notes to Financial Statements.
18
ANNUAL REPORT
OCTOBER 31, 2009
Schedule of Investments (concluded)
BlackRock Credit Allocation Income Trust III (BPP)
Fair Value Measurements Various inputs are used in determining the fair value of
The following tables summarize the inputs used as of October 31, 2009 in deter-
investments, which are as follows:
mining the fair valuation of the Funds investments:
Level 1 price quotations in active markets/exchanges for identical assets
Investments in
and liabilities
Valuation Inputs
Securities
Level 2 other observable inputs (including, but not limited to: quoted prices
Assets
for similar assets or liabilities in markets that are active, quoted prices for iden-
Level 1
tical or similar assets or liabilities in markets that are not active, inputs other
Long-Term Investments:
than quoted prices that are observable for the assets or liabilities (such as
Preferred Stocks
$ 46,237,891
interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit
Trust Preferreds
24,448,090
risks and default rates) or other market-corroborated inputs)
Investment Companies
619,800
Level 3 unobservable inputs based on the best information available in the
Short-Term Securities
51,450,797
circumstances, to the extent observable inputs are not available (including the
Total Level 1
122,756,578
Funds own assumptions used in determining the fair value of investments)
Level 2
The inputs or methodology used for valuing securities are not necessarily an
Long-Term Investments:
indication of the risk associated with investing in those securities. For information
Corporate Bonds
16,918,517
about the Funds policy regarding valuation of investments and other significant
Capital Trusts
65,062,367
accounting policies, please refer to Note 1 of the Notes to Financial Statements.
Preferred Stocks
11,666,250
Trust Preferreds
4,364,165
Total Level 2
98,011,299
Level 3
Long-Term Investments:
Corporate Bonds
12,000
Preferred Stocks
3,027,189
Total Level 3
3,039,189
Total
$ 223,807,066
Other Financial
Valuation Inputs
Instruments1
Assets
Liabilities
Level 1
$ 19,513
Level 2
$ (168,952)
Level 3
Total
$ 19,513
$ (168,952)
1 Other financial instruments are financial futures contracts and swaps.
Financial futures contracts and swaps are valued at the unrealized
appreciation/depreciation on the instrument.
The following is a reconciliation of investments for unobservable inputs (Level 3) used in determining fair value:
Investments in Securities
Corporate
Preferred
Bonds
Stocks
Total
Balance, as of October 31, 2008
Accrued discounts/premiums
Realized gain (loss)
Change in unrealized appreciation/depreciation
Net purchases (sales)
Net transfers in/out of Level 3
$ 12,000
$ 3,027,189
$ 3,039,189
Balance, as of October 31, 2009
$ 12,000
$ 3,027,189
$ 3,039,189
See Notes to Financial Statements.
ANNUAL REPORT
OCTOBER 31, 2009
19
Schedule of Investments October 31, 2009
BlackRock Credit Allocation Income Trust IV (BTZ)
(Percentages shown are based on Net Assets)
Common Stocks
Shares
Value
Common Stocks
Shares
Value
Aerospace & Defense 0.1%
Diversified Financial Services 0.3%
Honeywell International, Inc.
1,800
$ 64,602
Bank of America Corp.
36,800
$ 536,544
Lockheed Martin Corp.
3,800
261,402
JPMorgan Chase & Co.
21,100
881,347
Northrop Grumman Corp.
5,200
260,676
NYSE Euronext
9,100
235,235
United Technologies Corp.
1,800
110,610
1,653,126
697,290
Diversified Telecommunication Services 0.3%
Air Freight & Logistics 0.1%
AT&T Inc.
38,887
998,229
United Parcel Service, Inc. Class B
8,800
472,384
CenturyTel, Inc.
4,339
140,844
Auto Components 0.0%
Verizon Communications, Inc.
20,900
618,431
Johnson Controls, Inc.
3,700
88,504
1,757,504
Beverages 0.2%
Electric Utilities 0.1%
The Coca-Cola Co.
14,300
762,333
American Electric Power Co., Inc.
2,200
66,484
PepsiCo, Inc.
5,800
351,190
Duke Energy Corp.
20,200
319,564
1,113,523
FirstEnergy Corp.
1,300
56,264
Progress Energy, Inc.
5,400
202,662
Biotechnology 0.2%
The Southern Co.
8,700
271,353
Amgen, Inc. (a)
6,900
370,737
Biogen Idec, Inc. (a)
2,500
105,325
916,327
Celgene Corp. (a)
3,500
178,675
Electrical Equipment 0.1%
Genzyme Corp. (a)
1,700
86,020
Emerson Electric Co.
10,900
411,475
Gilead Sciences, Inc. (a)
7,100
302,105
Rockwell Automation, Inc.
5,400
221,130
1,042,862
632,605
Capital Markets 0.1%
Electronic Equipment, Instruments
Federated Investors, Inc. Class B
6,700
175,875
& Components 0.0%
The Goldman Sachs Group, Inc.
1,360
231,431
Corning, Inc.
8,600
125,646
Morgan Stanley
3,000
96,360
Tyco Electronics Ltd.
5,200
110,500
503,666
236,146
Chemicals 0.2%
Energy Equipment & Services 0.1%
Air Products & Chemicals, Inc.
900
69,417
National Oilwell Varco, Inc. (a)
5,600
229,544
E.I. du Pont de Nemours & Co.
14,800
470,936
Schlumberger Ltd.
5,500
342,100
Monsanto Co.
2,900
194,822
Smith International, Inc.
5,418
150,241
PPG Industries, Inc.
3,900
220,077
721,885
955,252
Food & Staples Retailing 0.2%
Commercial Banks 0.8%
CVS Caremark Corp.
3,400
120,020
Citizens Banking Corp. (a)
6,406,596
3,856,771
SUPERVALU, Inc.
8,300
131,721
M&T Bank Corp.
4,200
263,970
SYSCO Corp.
9,600
253,920
Regions Financial Corp.
38,400
185,856
Wal-Mart Stores, Inc.
15,200
755,136
Wells Fargo & Co.
33,300
916,416
Walgreen Co.
6,400
242,112
5,223,013
1,502,909
Commercial Services & Supplies 0.1%
Food Products 0.1%
Avery Dennison Corp.
7,900
281,635
Kraft Foods, Inc.
12,135
333,955
Pitney Bowes, Inc.
10,800
264,600
Sara Lee Corp.
20,200
228,058
Waste Management, Inc.
7,700
230,076
562,013
776,311
Health Care Equipment & Supplies 0.1%
Communications Equipment 0.2%
Baxter International, Inc.
1,900
102,714
Cisco Systems, Inc. (a)
23,400
534,690
Becton Dickinson & Co.
3,400
232,424
Motorola, Inc.
34,800
298,236
Boston Scientific Corp. (a)
5,900
47,908
QUALCOMM, Inc.
8,900
368,549
Covidien Plc
5,200
219,024
1,201,475
Medtronic, Inc.
2,000
71,400
Computers & Peripherals 0.4%
673,470
Apple, Inc. (a)
6,000
1,131,000
Health Care Providers & Services 0.1%
Dell, Inc. (a)
14,900
215,901
Aetna, Inc.
2,400
62,472
EMC Corp. (a)
13,900
228,933
Express Scripts, Inc. (a)
3,400
271,728
Hewlett-Packard Co.
8,800
417,648
Medco Health Solutions, Inc. (a)
4,300
241,316
International Business Machines Corp.
5,800
699,538
UnitedHealth Group, Inc.
2,400
62,280
2,693,020
WellPoint, Inc. (a)
4,500
210,420
Distributors 0.0%
848,216
Genuine Parts Co.
7,300
255,427
Hotels, Restaurants & Leisure 0.1%
McDonalds Corp.
8,700
509,907
Starwood Hotels & Resorts Worldwide, Inc.
12,300
357,438
867,345
See Notes to Financial Statements.
20
ANNUAL REPORT
OCTOBER 31, 2009
Schedule of Investments (continued)
BlackRock Credit Allocation Income Trust IV (BTZ)
(Percentages shown are based on Net Assets)
Common Stocks
Shares
Value
Common Stocks
Shares
Value
Household Durables 0.2%
Multiline Retail 0.1%
Black & Decker Corp.
5,700
$ 269,154
Macy's, Inc.
18,400
$ 323,288
Fortune Brands, Inc.
6,400
249,280
Oil, Gas & Consumable Fuels 0.9%
KB Home
15,100
214,118
Anadarko Petroleum Corp.
5,000
304,650
Whirlpool Corp.
5,800
415,222
Apache Corp.
1,800
169,416
1,147,774
Chevron Corp.
13,400
1,025,636
Household Products 0.2%
ConocoPhillips
13,000
652,340
Clorox Co.
4,200
248,766
Exxon Mobil Corp.
27,800
1,992,426
The Procter & Gamble Co.
17,400
1,009,200
Hess Corp.
3,700
202,538
Massey Energy Co.
5,400
157,086
1,257,966
Occidental Petroleum Corp.
1,700
128,996
IT Services 0.1%
Peabody Energy Corp.
5,500
217,745
Automatic Data Processing, Inc.
6,700
266,660
Southwestern Energy Co. (a)
5,500
239,690
Cognizant Technology Solutions Corp. (a)
3,400
131,410
Spectra Energy Corp.
14,700
281,064
MasterCard, Inc. Class A
409
89,579
XTO Energy, Inc.
6,900
286,764
Paychex, Inc.
9,700
275,577
5,658,351
763,226
Paper & Forest Products 0.1%
Industrial Conglomerates 0.2%
MeadWestvaco Corp.
15,300
349,299
3M Co.
6,900
507,633
Weyerhaeuser Co.
5,600
203,504
General Electric Co.
43,400
618,884
552,803
Textron, Inc.
23,400
416,052
Pharmaceuticals 0.6%
1,542,569
Abbott Laboratories
10,400
525,928
Insurance 0.3%
Bristol-Myers Squibb Co.
17,800
388,040
Aflac, Inc.
10,600
439,794
Eli Lilly & Co.
9,900
336,699
The Allstate Corp.
8,700
257,259
Johnson & Johnson
17,900
1,056,995
Cincinnati Financial Corp.
8,500
215,560
Merck & Co., Inc.
16,000
494,880
Lincoln National Corp.
13,000
309,790
Pfizer, Inc. (b)
31,504
536,513
MetLife, Inc.
10,600
360,718
Schering-Plough Corp.
13,000
366,600
Principal Financial Group, Inc.
9,200
230,368
3,705,655
1,813,489
Real Estate Investment Trusts (REITs) 0.1%
Internet & Catalog Retail 0.0%
AvalonBay Communities, Inc.
4,200
288,876
Amazon.com, Inc. (a)
810
96,236
Boston Properties, Inc.
4,300
261,311
Internet Software & Services 0.2%
Public Storage
1,200
88,320
eBay, Inc. (a)
14,300
318,461
Vornado Realty Trust
4,978
296,490
Google, Inc. Class A (a)
1,160
621,899
934,997
Yahoo! Inc. (a)
9,600
152,640
Road & Rail 0.0%
1,093,000
Norfolk Southern Corp.
5,900
275,058
Leisure Equipment & Products 0.0%
Semiconductors & Semiconductor Equipment 0.2%
Mattel, Inc.
11,600
219,588
Applied Materials, Inc.
5,200
63,440
Life Sciences Tools & Services 0.0%
Intel Corp.
40,700
777,777
Thermo Fisher Scientific, Inc. (a)
2,600
117,000
Linear Technology Corp.
7,900
204,452
Microchip Technology, Inc.
8,900
213,244
Machinery 0.1%
National Semiconductor Corp.
9,500
122,930
Caterpillar, Inc.
8,500
468,010
Texas Instruments, Inc.
9,300
218,085
Cummins, Inc.
4,200
180,852
Deere & Co.
2,800
127,540
1,599,928
776,402
Software 0.3%
Autodesk, Inc. (a)
7,700
191,961
Media 0.0%
Microsoft Corp.
46,100
1,278,353
Comcast Corp. Class A
6,900
100,050
Oracle Corp. (b)
21,000
443,100
The DIRECTV Group, Inc. (a)
6,400
168,320
1,913,414
268,370
Specialty Retail 0.2%
Metals & Mining 0.1%
Home Depot, Inc.
18,100
454,129
Alcoa, Inc. (b)
24,500
304,290
Limited Brands, Inc.
16,100
283,360
Nucor Corp.
5,400
215,190
Staples, Inc.
12,300
266,910
519,480
1,004,399
Multi-Utilities 0.2%
Textiles, Apparel & Luxury Goods 0.0%
Consolidated Edison, Inc.
5,400
219,672
VF Corp.
2,900
206,016
Dominion Resources, Inc.
2,200
74,998
Integrys Energy Group, Inc.
5,500
190,300
Thrifts & Mortgage Finance 0.0%
Public Service Enterprise Group, Inc.
7,900
235,420
Hudson City Bancorp, Inc.
19,000
249,660
TECO Energy, Inc.
8,900
127,626
Xcel Energy, Inc.
10,400
196,144
1,044,160
See Notes to Financial Statements.
ANNUAL REPORT
OCTOBER 31, 2009
21
Schedule of Investments (continued)
BlackRock Credit Allocation Income Trust IV (BTZ)
(Percentages shown are based on Net Assets)
Par
Common Stocks
Shares
Value
Capital Trusts
(000)
Value
Tobacco 0.2%
Commercial Banks (concluded)
Altria Group, Inc. (b)
20,500
$ 371,255
Commonwealth Bank of Australia, 6.02% (d)(e)(g)
$ 20,000
$ 16,400,000
Philip Morris International, Inc.
16,600
786,176
HSBC Capital Funding LP/Jersey Channel Islands,
1,157,431
10.18% (d)(e)(g)
7,000
8,330,000
Lloyds Banking Group Plc, 6.66% (d)(e)(g)
10,000
6,500,000
Total Common Stocks 8.2%
53,634,533
SMFG Preferred Capital USD 1 Ltd., 6.08% (d)(e)(g)
10,000
8,637,700
SMFG Preferred Capital USD 3 Ltd., 9.50% (d)(e)(g)
3,850
4,174,170
Santander Perpetual SA Unipersonal, 6.67%, (d)(e)(g)
1,300
1,186,241
Par
Shinsei Finance II (Cayman) Ltd., 7.16% (d)(e)(g)
1,005
588,240
Corporate Bonds
(000)
Standard Chartered Bank, 7.014% (d)(e)(g)
5,000
4,550,000
Capital Markets 0.0%
Wells Fargo & Co. Series K, 7.98% (d)(e)
12,985
12,157,206
Lehman Brothers Holdings, Inc. (a)(c):
Wells Fargo Capital XIII Series GMTN, 7.70% (d)(e)
3,900
3,627,000
3.95%, 11/10/09
$ 105
16,537
96,798,182
4.38%, 11/30/10
325
51,187
Diversified Financial Services 3.6%
67,724
JPMorgan Chase Capital XXI Series U,
Computers & Peripherals 0.8%
1.23%, 2/02/37 (d)
12,875
8,787,342
International Business Machines Corp.,
JPMorgan Chase Capital XXIII, 1.44%, 5/15/77 (d)(f)
20,695
14,576,213
8.00%, 10/15/38
4,000
5,461,952
23,363,555
Diversified Financial Services 1.2%
Electric Utilities 0.5%
ING Groep NV, 5.78% (d)(e)(f)
10,000
7,300,000
PPL Capital Funding, 6.70%, 3/30/67 (d)
3,900
3,354,000
Stan IV Ltd., 2.74%, 7/20/11 (d)
283
240,550
Insurance 9.7%
7,540,550
AXA SA, 6.46% (d)(e)(g)
12,000
9,885,000
Insurance 0.9%
The Allstate Corp., 6.50%, 5/15/57 (d)
8,675
7,417,125
QBE Insurance Group Ltd., 9.75%, 3/14/14 (g)
4,973
5,680,902
Chubb Corp., 6.38%, 3/29/67 (d)(f)
4,000
3,630,000
Liberty Mutual Group, Inc., 10.75%, 6/15/88 (d)(g)
4,000
4,200,000
Metals & Mining 0.0%
Lincoln National Corp., 7.00%, 5/17/66 (d)
4,255
3,489,100
Aleris International, Inc., 10.00%, 12/15/16 (a)(c)
5,000
43,750
MetLife, Inc., 6.40%, 12/15/66
4,550
3,941,437
Multi-Utilities 1.5%
Nationwide Life Global Funding I, 6.75%, 5/15/67
4,000
3,031,740
Dominion Resources, Inc., 8.88%, 1/15/19
8,000
10,098,472
Progressive Corp., 6.70%, 6/15/67 (d)(f)
4,000
3,503,788
Paper & Forest Products 0.6%
Reinsurance Group of America, 6.75%, 12/15/65 (d)(f)
15,000
11,625,000
International Paper Co., 8.70%, 6/15/38 (b)
3,100
3,571,953
Swiss Re Capital I LP, 6.854% (d)(e)(g)
3,000
2,310,000
The Travelers Cos., Inc., 6.25%, 3/15/67 (d)(f)
4,000
3,600,000
Total Corporate Bonds 5.0%
32,465,303
White Mountains Re Group Ltd., 7.506% (d)(e)(g)
4,400
3,634,752
ZFS Finance (USA) Trust IV, 5.88%, 5/09/32 (d)(g)
599
484,286
ZFS Finance (USA) Trust V, 6.50%, 5/09/67 (d)(g)
3,331
2,698,110
63,450,338
Investment Companies
Shares
Multi-Utilities 0.2%
UltraShort Real Estate ProShares
150,000
1,549,500
Puget Sound Energy, Inc. Series A, 6.97%, 6/01/67 (d)
1,575
1,377,999
Total Investment Companies 0.2%
1,549,500
Oil, Gas & Consumable Fuels 1.2%
Enterprise Products Operating LLC, 8.38%, 8/01/66 (d)
4,500
4,410,000
TransCanada PipeLines Ltd., 6.35%, 5/15/67 (d)(f)
4,000
3,723,180
Preferred Securities
8,133,180
Par
Real Estate Investment Trusts (REITs) 1.6%
Capital Trusts
(000)
Sovereign Real Estate Investment Corp., 12.00% (g)
10,000
10,500,000
Building Products 0.9%
Total Capital Trusts 35.5%
232,306,446
C8 Capital SPV Ltd., 6.64% (d)(e)(g)
$ 3,160
2,228,179
C10 Capital SPV Ltd., 6.72% (d)(e)(g)
5,000
3,542,750
5,770,929
Capital Markets 3.0%
Preferred Stocks
Shares
Credit Suisse Guernsey Ltd., 5.86% (d)(e)
1,050
866,250
Commercial Banks 4.8%
State Street Capital Trust III, 8.25% (d)(e)
1,740
1,755,016
HSBC USA, Inc. Series H, 6.50%
977,766
19,848,650
State Street Capital Trust IV, 1.30%, 6/01/67 (d)
25,245
16,936,997
Royal Bank of Scotland Group Plc Series M, 6.40%
15,000
155,100
19,558,263
Santander Finance Preferred SA Unipersonal, 10.50%
419,881
11,487,944
Commercial Banks 14.8%
31,491,694
BB&T Capital Trust IV, 6.82%, 6/12/77 (d)(f)
15,300
13,559,625
Diversified Financial Services 2.0%
Bank of Ireland Capital Funding II, LP, 5.57% (d)(e)(g)
1,422
625,680
Cobank ACB, 7.00% (g)
150,000
5,235,945
Bank of Ireland Capital Funding III, LP, 6.11% (d)(e)(g)
9,153
4,027,320
ING Groep NV:
Barclays Bank Plc, (d)(e)(g):
6.13%
200,000
3,130,000
5.93%
4,000
3,120,000
7.05%
5,800
99,470
6.86%
11,500
9,315,000
7.20%
213,000
3,730,192
7.38%
40,000
703,193
12,898,800
See Notes to Financial Statements.
22
ANNUAL REPORT
OCTOBER 31, 2009
Schedule of Investments (continued)
BlackRock Credit Allocation Income Trust IV (BTZ)
(Percentages shown are based on Net Assets)
Preferred Stocks
Shares
Value
Short-Term Securities
Shares
Value
Diversified Telecommunication Services 0.1%
BlackRock Liquidity Funds, TempFund,
AT&T, Inc., 6.38%
30,000
$ 778,580
Institutional Class, 0.18% (h)(i)
267,832,781 $
267,832,781
Electric Utilities 4.4%
Total Short-Term Securities
Alabama Power Co., 6.50%
100,000
3,000,000
(Cost $267,832,781) 40.9%
267,832,781
Entergy Louisiana LLC, 6.95%
40,000
3,743,482
Total Investments Before Outstanding Options Written
Interstate Power & Light Co. Series B, 8.38%
785,000
21,783,750
(Cost $905,234,626*) 125.7%
823,053,616
28,527,232
Insurance 9.1%
Aegon NV, 6.50%
400,000
6,496,000
Arch Capital Group Ltd.:
Options Written
Contracts
Series A, 8.00%
100,000
2,420,000
Exchange-Traded Call Options Written
Series B, 7.88%
160,000
3,788,800
S&P 500 Listed Option:
Aspen Insurance Holdings Ltd., 7.40% (d)
655,000
13,296,500
expiring 11/21/09 at USD 1,090
234
(113,490)
Axis Capital Holdings Ltd. Series B, 7.50% (d)
180,000
13,477,500
expiring 11/21/09 at USD 1,095
21
(7,770)
Endurance Specialty Holdings Ltd. Series A, 7.75%
369,000
8,081,100
expiring 11/21/09 at USD 1,110
145
(44,950)
PartnerRe Ltd. Series C, 6.75%
265,600
5,877,728
RenaissanceRe Holding Ltd. Series D, 6.60%
285,000
5,873,850
Total Options Written
(Premiums Received $828,039) (0.0)%
(166,210)
59,311,478
Total Investments 125.7%
822,887,406
Real Estate Investment Trusts (REITs) 0.4%
Other Assets Less Liabilities 9.6%
63,155,825
BRE Properties, Inc. Series D, 6.75%
30,000
615,600
Preferred Shares, at Redemption Value (35.3)%
(231,044,104)
iStar Financial, Inc. Series I, 7.50%
55,000
385,000
Public Storage:
Net Assets Applicable to Common Shares 100.0%
$ 654,999,127
Series F, 6.45%
30,000
637,500
* The cost and unrealized appreciation (depreciation) of investments as of October 31,
Series M, 6.63%
55,000
1,179,750
2009, as computed for federal income tax purposes, were as follows:
2,817,850
Aggregate cost
$ 918,380,664
Wireless Telecommunication Services 1.5%
Gross unrealized appreciation
$ 26,032,998
Centaur Funding Corp., 9.08% (g)
10,000
10,034,375
Gross unrealized depreciation
(121,360,046)
Total Preferred Stocks 22.3%
145,860,009
Net unrealized depreciation
$ (95,327,048)
(a) Non-income producing security.
Shares
(b) All or a portion of the security has been pledged as collateral in connection with
Trust Preferreds
(000)
open financial futures contracts.
Capital Markets 0.0%
(c) Issuer filed for bankruptcy and/or is in default of interest payments.
Credit Suisse Guernsey Ltd., 7.90% (e)
10
244,950
(d) Variable rate security. Rate shown is as of report date.
Commercial Banks 3.4%
(e) Security is perpetual in nature and has no stated maturity date.
Kazkommerts Finance 2 BV, 9.20% (d)(e)
500
315,000
Mizuho Capital Investment 1 Ltd., 6.686% (d)(e)(g)
21,000
17,517,906
(f) All or a portion of the security has been pledged as collateral for open reverse
National City Preferred Trust I, 12% (d)(e)
3,713
4,249,640
repurchase agreements.
22,082,546
(g) Security exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration to qualified
Electric Utilities 1.1%
institutional investors.
PPL Energy Supply LLC, 7.00%, 7/15/46
288
7,366,797
(h) Investments in companies considered to be an affiliate of the Fund, for purposes of
Insurance 1.9%
Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
AON Corp., 8.21%, 1/01/27
4,000
3,960,000
Ace Capital Trust II, 9.70%, 4/01/30 (f)
4,000
4,420,912
Net
W.R. Berkley Capital Trust II, 6.75%, 7/26/45
171
3,807,443
Affiliate
Activity
Income
12,188,355
BlackRock Liquidity Funds, TempFund,
Media 6.8%
Institutional Class
$267,832,781
$ 479,886
Comcast Corp., 6.63%, 5/15/56
1,950
44,717,395
(i) Represents the current yield as of report date.
Oil, Gas & Consumable Fuels 0.4%
For Fund compliance purposes, the Funds industry classifications refer to any one
Nexen, Inc., 7.35%, 11/01/43
120
2,805,001
or more of the industry sub-classifications used by one or more widely recognized
Total Trust Preferreds 13.6%
89,405,044
market indexes or ratings group indexes, and/or as defined by Fund management.
Total Preferred Securities 71.4%
467,571,499
This definition may not apply for purposes of this report, which may combine
Total Long-Term Investments
industry sub-classifications for reporting ease.
(Cost $637,401,845) 84.8%
555,220,835
Reverse repurchase agreements outstanding as of October 31, 2009 were as follows:
Interest
Trade
Maturity
Net Closing
Face
Counterparty
Rate
Date
Date
Amount
Amount
Barclays
Bank Plc
0.75%
10/16/09
11/16/09 $61,616,136
$61,576,368
See Notes to Financial Statements.
ANNUAL REPORT
OCTOBER 31, 2009
23
Schedule of Investments (concluded)
BlackRock Credit Allocation Income Trust IV (BTZ)
Financial futures contracts purchased as of October 31, 2009 were as follows:
Other Financial
Valuation Inputs
Instruments1
Unrealized
Expiration
Notional
Appreciation
Assets
Liabilities
Contracts
Issue
Date
Value
(Depreciation)
Level 1
$ 982,873
$ (311,644)
422
10-Year US
Level 2
(675,809)
Treasury Bond December 2009
$49,119,100
$ 934,090
Level 3
35
30-Year US
Total
$ 982,873
$ (987,453)
Treasury Bond
December 2009
$ 4,156,686
48,783
161
S&P EMINI
December 2009
$ 8,461,085
(145,434)
1 Other financial instruments are financial futures contracts, swaps and options.
Total
$ 837,439
Financial futures contracts and swaps are valued at the unrealized appreciation/
depreciation on the instrument and options are shown at market value.
Credit default swaps on single-name issue buy protection oustanding as of
October 31, 2009 were as follows:
The following is a reconciliation of investments for unobservable inputs (Level 3)
used in determining fair value:
Pay
Notional
Fixed
Counter-
Amount
Unrealized
Investments in
Issuer
Rate
party
Expiration (000)
Depreciation
Securities
Nordstrom, Inc. 5.20%
Deutsche
June
Corporate Bonds
Bank AG
2014
$4,000
$ (675,809)
Balance, as of October 31, 2008
$ 268,850
Fair Value Measurements Various inputs are used in determining the fair value of
Accrued discounts/premiums
investments, which are as follows:
Realized gain (loss)
Level 1 price quotations in active markets/exchanges for identical assets
Change in unrealized appreciation/depreciation2
(28,300)
and liabiltiies
Net purchases (sales)
Net transfers in/out of Level 3
Level 2 other observable inputs (including, but not limited to: quoted prices for
similar assets or liabilities in markets that are active, quoted prices for identical
Balance, as of October 31, 2009
$ 240,550
or similar assets or liabilities in markets that are not active, inputs other than
2 Included in the related net change in unrealized appreciation/depreciation in
quoted prices that are observable for the assets or liabilities (such as interest
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and
the Statements of Operations.
default rates) or other market-corroborated inputs)
Level 3 unobservable inputs based on the best information available in the
circumstances, to the extent observable inputs are not available (including the
Funds own assumptions used in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an indica-
tion of the risk associated with investing in those securities. For information about
the Funds policy regarding valuation of investments and other significant accounting
policies, please refer to Note 1 of the Notes to Financial Statements.
The following tables summarize the inputs used as of October 31, 2009 in
determining the fair valuation of the Funds investments:
Investments in
Valuation Inputs
Securities
Assets
Level 1
Long-Term Investments:
Common Stocks
$53,634,533
Investment Companies
1,549,500
Preferred Stocks
113,368,707
Trust Preferreds
58,941,586
Short-Term Securities
267,832,781
Total Level 1
495,327,107
Level 2
Corporate Bonds
32,224,753
Capital Trusts
232,306,446
Preferred Stocks
32,491,302
Trust Preferreds
30,463,458
Total Level 2
327,485,959
Level 3
Corporate Bonds
240,550
Total
$ 823,053,616
See Notes to Financial Statements.
24
ANNUAL REPORT
OCTOBER 31, 2009
Schedule of Investments October 31, 2009
BlackRock Enhanced Capital and Income Fund, Inc. (CII)
(Percentages shown are based on Net Assets)
Common Stocks
Shares
Value
Common Stocks
Shares
Value
Aerospace & Defense 5.2%
Machinery 1.5%
Honeywell International, Inc.
337,600
$ 12,116,464
Deere & Co.
207,286
$ 9,441,877
Northrop Grumman Corp.
192,800
9,665,064
Media 5.3%
Raytheon Co.
226,000
10,233,280
Time Warner, Inc.
538,272
16,212,753
32,014,808
Viacom, Inc. Class B (a)
418,424
11,544,318
Capital Markets 5.9%
Walt Disney Co.
189,947
5,198,849
The Bank of New York Mellon Corp.
483,198
12,882,059
32,955,920
Invesco Ltd.
584,300
12,357,945
Metals & Mining 1.4%
Morgan Stanley
353,613
11,358,050
Nucor Corp.
218,800
8,719,180
36,598,054
Multi-Utilities 1.4%
Chemicals 1.8%
Dominion Resources, Inc.
256,500
8,744,085
E.I. du Pont de Nemours & Co.
353,100
11,235,642
Oil, Gas & Consumable Fuels 8.1%
Commercial Banks 1.4%
Anadarko Petroleum Corp.
84,117
5,125,249
Wells Fargo & Co.
316,600
8,712,832
Chevron Corp.
256,400
19,624,856
Communications Equipment 1.0%
Exxon Mobil Corp.
247,100
17,709,657
Nokia Oyj ADR
503,900
6,354,179
Peabody Energy Corp.
199,100
7,882,369
Computers & Peripherals 4.5%
50,342,131
Hewlett-Packard Co.
286,092
13,577,926
Pharmaceuticals 10.8%
International Business Machines Corp.
117,353
14,153,945
Bristol-Myers Squibb Co.
859,200
18,730,560
27,731,871
Eli Lilly & Co.
263,500
8,961,635
Johnson & Johnson
143,454
8,470,959
Diversified Financial Services 3.4%
Pfizer, Inc.
681,599
11,607,622
JPMorgan Chase & Co.
501,939
20,965,992
Schering-Plough Corp.
676,900
19,088,580
Diversified Telecommunication Services 6.3%
66,859,356
AT&T Inc.
459,400
11,792,798
Qwest Communications International Inc.
3,573,701
12,829,587
Semiconductors & Semiconductor
Verizon Communications, Inc.
494,300
14,626,337
Equipment 10.0%
Analog Devices, Inc.
500,100
12,817,563
39,248,722
Intel Corp.
501,078
9,575,601
Electric Utilities 2.5%
LSI Corp. (a)
3,895,920
19,947,110
FPL Group, Inc.
152,044
7,465,360
Maxim Integrated Products, Inc.
655,500
10,927,185
The Southern Co.
261,029
8,141,495
Micron Technology, Inc. (a)
1,233,100
8,372,749
15,606,855
61,640,208
Electrical Equipment 0.9%
Software 1.0%
Emerson Electric Co.
143,000
5,398,250
Microsoft Corp.
215,414
5,973,430
Energy Equipment & Services 2.1%
Specialty Retail 1.0%
Halliburton Co.
441,089
12,884,210
Home Depot, Inc.
242,200
6,076,798
Food & Staples Retailing 1.1%
Total Long-Term Investments
Walgreen Co.
180,400
6,824,532
(Cost $664,851,097) 97.7%
604,104,432
Food Products 7.3%
General Mills, Inc.
209,371
13,801,736
Kraft Foods, Inc.
594,200
16,352,384
Unilever NV ADR
481,632
14,877,612
Short-Term Securities
45,031,732
Money Market Funds 4.0%
Health Care Equipment & Supplies 1.3%
BlackRock Liquidity Funds, TempFund,
Covidien Plc
193,800
8,162,856
Institutional Class, 0.18% (b)(c)
24,567,455
24,567,455
Household Products 3.4%
Par
Clorox Co.
54,557
3,231,411
(000)
Kimberly-Clark Corp.
287,700
17,595,732
Time Deposits 0.0%
20,827,143
Brown Brothers Harriman & Co., 0.03%, 11/02/09
$ 217
217,283
Industrial Conglomerates 1.3%
Total Short-Term Securities
Tyco International Ltd.
230,500
7,733,275
(Cost $24,784,738) 4.0%
24,784,738
Insurance 7.8%
Total Investments Before Outstanding Options Written
ACE Ltd.
185,500
9,527,280
(Cost $689,635,835*) 101.7%
628,889,170
MetLife, Inc.
257,825
8,773,785
Prudential Financial, Inc.
118,300
5,350,709
The Travelers Cos., Inc.
489,430
24,368,720
48,020,494
See Notes to Financial Statements.
ANNUAL REPORT
OCTOBER 31, 2009
25
Schedule of Investments (continued)
BlackRock Enhanced Capital and Income Fund, Inc. (CII)
(Percentages shown are based on Net Assets)
Options Written
Contracts
Value
Options Written
Contracts
Value
Exchange-Traded Call Options Written
Exchange-Traded Call Options Written (concluded)
ACE Ltd.:
Raytheon Co.:
expiring 11/21/09 at USD 55
100
$ (2,000)
expiring 11/21/09 at USD 46
900
$ (72,000)
expiring 12/19/09 at USD 55
550
(39,875)
expiring 12/19/09 at USD 48
395
(25,675)
AT&T Inc., expiring 1/16/10 at USD 27
250
(13,500)
Schering-Plough Corp.:
Anadarko Petroleum Corp.:
expiring 12/19/09 at USD 29
2,300
(109,250)
expiring 11/21/09 at USD 60
425
(148,750)
expiring 12/19/09 at USD 30
1,425
(32,063)
expiring 12/19/09 at USD 70
40
(5,000)
Time Warner, Inc.:
Analog Devices, Inc., expiring 12/19/09 at USD 30
100
(1,750)
expiring 12/19/09 at USD 32
2,700
(209,250)
The Bank of New York Mellon Corp.:
expiring 1/16/10 at USD 33
250
(20,000)
expiring 12/19/09 at USD 30
1,500
(75,000)
The Travelers Cos., Inc.:
expiring 12/19/09 at USD 31
190
(5,700)
expiring 11/21/09 at USD 50
1,000
(137,500)
Bristol-Myers Squibb Co.:
expiring 12/19/09 at USD 50
465
(95,325)
expiring 11/21/09 at USD 23
430
(5,375)
expiring 12/19/09 at USD 55
250
(11,250)
expiring 12/19/09 at USD 23
2,470
(75,335)
Tyco International Ltd., expiring 12/19/09 at USD 36
820
(45,100)
Clorox Co., expiring 1/16/10 at USD 60
410
(79,950)
Unilever NV ADR, expiring 12/19/09 at USD 30
1,700
(289,000)
Covidien Plc, expiring 11/21/09 at USD 42.50
100
(12,750)
Verizon Communications, Inc.:
Deere & Co., expiring 12/19/09 at USD 49
1,550
(251,875)
expiring 11/21/09 at USD 29
1,250
(126,250)
Dominion Resources, Inc.,
expiring 12/19/09 at USD 30
1,250
(95,624)
expiring 11/21/09 at USD 35
630
(15,750)
expiring 12/19/09 at USD 31
250
(9,750)
expiring 1/16/10 at USD 35
400
(27,000)
Viacom, Inc. Class B:
Eli Lilly & Co.:
expiring 11/21/09 at USD 30
1,060
(31,800)
expiring 11/21/09 at USD 35
130
(3,250)
expiring 12/19/09 at USD 30
1,035
(72,450)
expiring 12/19/09 at USD 35
800
(44,000)
Walgreen Co., expiring 12/19/09 at USD 41
630
(20,474)
Emerson Electric Co.:
Walt Disney Co., expiring 12/19/09 at USD 31
400
(10,000)
expiring 11/21/09 at USD 41
210
(3,675)
Total Exchange-Traded Call Options Written
(4,359,940)
expiring 12/19/09 at USD 41
290
(13,050)
Over-the-Counter Call Options Written
Exxon Mobil Corp., expiring 11/21/09 at USD 75
1,850
(70,300)
AT&T Inc.:
FPL Group, Inc., expiring 11/21/09 at USD 55
470
(3,525)
expiring 12/15/09 at USD 26.60, Broker UBS AG
2,000
(73,008)
General Mills, Inc.:
expiring 12/18/09 at USD 27, Broker Morgan
expiring 11/21/09 at USD 65
515
(90,125)
Stanley Capitial Services, Inc.
270
(6,589)
expiring 12/19/09 at USD 65
815
(207,825)
Analog Devices, Inc., expiring 11/30/09 at USD 28.39,
Halliburton Co., expiring 11/21/09 at USD 32
2,400
(74,400)
Broker Citibank NA
1,650
(27,042)
Hewlett-Packard Co.:
Bristol-Myers Squibb Co., expiring 11/13/09
expiring 12/19/09 at USD 48
790
(144,175)
at USD 23.20, Broker Credit Suisse International
1,825
(6,209)
expiring 12/19/09 at USD 50
285
(28,500)
Chevron Corp.:
expiring 1/16/10 at USD 50
600
(85,500)
expiring 11/30/09 at USD 79.18, Broker UBS AG
1,170
(134,217)
Home Depot, Inc., expiring 12/19/09 at USD 28
1,815
(43,560)
expiring 12/23/09 at USD 79.45, Broker UBS AG
750
(125,320)
Honeywell International, Inc.,
Covidien Plc, expiring 11/13/09 at USD 42.39,
expiring 12/19/09 at USD 39
1,000
(45,000)
Broker Credit Suisse International
580
(41,089)
expiring 12/19/09 at USD 40
160
(4,800)
Dominion Resources, Inc., expiring 12/11/09
Intel Corp., expiring 12/19/09 at USD 21
2,750
(63,250)
at USD 35.48, Broker UBS AG
900
(22,723)
International Business Machines Corp.,
E.I. du Pont de Nemours & Co., expiring 12/23/09
expiring 12/19/09 at USD 125
645
(153,188)
at USD 34.87, Broker UBS AG
2,655
(148,622)
Invesco Ltd., expiring 12/19/09 at USD 25
280
(7,700)
FPL Group, Inc., expiring 11/17/09 at USD 55.96,
JPMorgan Chase & Co., expiring 12/19/09 at USD 48
2,000
(125,000)
Broker Credit Suisse International
450
(438)
Kimberly-Clark Corp.:
General Mills, Inc., expiring 11/20/09 at USD 65.50,
expiring 11/21/09 at USD 60
710
(136,675)
Broker UBS AG
240
(30,762)
expiring 11/24/09 at USD 59
730
(182,418)
Honeywell International, Inc., expiring 11/20/09
expiring 1/16/10 at USD 65
100
(6,000)
at USD 38.50, Broker Credit Suisse International
640
(10,045)
Kraft Foods, Inc., expiring 12/19/09 at USD 28
1,485
(111,375)
Invesco Ltd., expiring 1/06/10 at USD 22.68,
Maxim Integrated Products, Inc., expiring 11/21/09
Broker Morgan Stanley Capital Services, Inc.
1,470
(132,869)
at USD 20
300
(3,000)
Johnson & Johnson:
MetLife, Inc., expiring 11/21/09 at USD 39
900
(24,750)
expiring 12/15/09 at USD 60.96, Broker Morgan
Microsoft Corp., expiring 12/19/09 at USD 27
535
(78,378)
Stanley Capital Services, Inc.
245
(11,574)
Micron Technology, Inc., expiring 12/19/09 at USD 9
3,700
(27,750)
expiring 12/23/09 at USD 61.98, Broker Credit
Morgan Stanley, expiring 12/19/09 at USD 35
1,240
(127,100)
Suisse International
585
(25,053)
Nokia Oyj ADR:
expiring 1/04/10 at USD 62, Broker Bank of America
245
(15,384)
expiring 11/21/09 at USD 14
750
(5,625)
Kraft Foods, Inc., expiring 12/07/09 at USD 26.85,
expiring 12/19/09 at USD 14
1,000
(27,500)
Broker Goldman Sachs Bank USA
1,770
(193,797)
Nucor Corp., expiring 11/21/09 at USD 48
650
(6,500)
Peabody Energy Corp., expiring 11/21/09 at USD 42
700
(70,000)
Pfizer, Inc., expiring 12/19/09 at USD 18
5,110
(153,300)
Prudential Financial, Inc.:
expiring 11/21/09 at USD 55
355
(8,875)
expiring 12/19/09 at USD 55
100
(7,500)
See Notes to Financial Statements.
26
ANNUAL
REPORT
OCTOBER 31, 2009
Schedule of Investments (concluded)
BlackRock Enhanced Capital and Income Fund, Inc. (CII)
(Percentages shown are based on Net Assets)
Options Written
Contracts
Value
Over-the-Counter Call Options Written (concluded)
Fair Value Measurements Various inputs are used in determining the fair value of
LSI Corp.:
investments, which are as follows:
expiring 11/13/09 at USD 5.63, Broker Morgan
Level 1 price quotations in active markets/exchanges for identical assets
Stanley Capital Services, Inc.
2,000
$ (7,826)
and liabilities
expiring 12/23/09 at USD 5.93, Broker Morgan
Stanley Capital Services, Inc.
9,600
(94,118)
Level 2 other observable inputs (including, but not limited to: quoted prices
expiring 1/08/10 at USD 5.56, Broker Morgan
for similar assets or liabilities in markets that are active, quoted prices for identi-
Stanley Capital Services, Inc.
2,000
(49,728)
cal or similar assets or liabilities in markets that are not active, inputs other than
Maxim Integrated Products, Inc.:
quoted prices that are observable for the assets or liabilities (such as interest
expiring 12/23/09 at USD 19.06, Broker Morgan
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks
Stanley Capital Services, Inc.
1,292
(16,127)
and default rates) or other market-corroborated inputs)
expiring 1/08/10 at USD 19.25, Broker Morgan
Level 3 unobservable inputs based on the best information available in the
Stanley Capital Services, Inc.
2,000
(41,582)
circumstances, to the extent observable inputs are not available (including the
Microsoft Corp., expiring 11/06/09 at USD 25,
Funds own assumptions used in determining the fair value of investments)
Broker Deutshe Bank AG
1,080
(294,840)
The inputs or methodology used for valuing securities are not necessarily an indica-
Northrop Grumman Corp., expiring 12/23/09
tion of the risk associated with investing in those securities. For information about
at USD 51.94, Broker Citibank NA
1,445
(166,533)
the Funds policy regarding valuation of investments and other significant accounting
Qwest Communications International Inc.,
policies, please refer to Note 1 of the Notes to Financial Statements.
expiring 1/06/10 at USD 3.66, Broker Credit
Suisse International
12,500
(217,713)
The following tables summarize the inputs used as of October 31, 2009 in deter-
The Southern Co., expiring 12/23/09 at USD 32.76,
mining the fair valuation of the Funds investments:
Broker Citibank NA
1,950
(56,560)
Walt Disney Co., expiring 11/09/09 at USD 28.50,
Investments in
Broker Morgan Stanley Capital Services, Inc.
640
(14,400)
Valuation Inputs
Securities
Wells Fargo & Co.,
Assets
expiring 11/20/09 at USD 30.75, Broker Deutsche
Level 1
Bank AG
1,390
(31,570)
Long-Term Investments1
$604,104,432
expiring 12/23/09 at USD 31.50, Broker Credit
Short-Term Securities
24,567,455
Suisse International
350
(21,468)
Total Level 1
628,671,887
Total Over-the-Counter Call Options Written
(2,017,206)
Level 2 Short-Term Securities
217,283
Total Options Written
(Premiums Received $9,193,459) (1.0)%
(6,377,146)
Level 3
Total Investments, Net of Outstanding Options Written 100.7%
622,512,024
Total
$628,889,170
Liabilities in Excess of Other Assets (0.7)%
(4,050,310)
1
See above Schedule of Investments for values in each industry.
Net Assets 100.0%
$618,461,714
Other Financial
* The cost and unrealized appreciation (depreciation) of investments as of October 31,
Valuation Inputs
Instruments2
2009, as computed for federal income tax purposes, were as follows:
Liabilities
Aggregate cost
$ 715,152,338
Level 1
$ (4,359,940)
Gross unrealized appreciation
$ 6,130,287
Level 2
(2,017,206)
Gross unrealized depreciation
(92,393,455)
Level 3
Net unrealized depreciation
$ (86,263,168)
Total
$ (6,377,146)
(a) Non-income producing security.
2
Other financial instruments are options, which are shown at market value.
(b) Investments in companies considered to be an affiliate of the Fund, for purposes of
Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
Net
Affiliate
Activity
Income
BlackRock Liquidity Funds, TempFund,
Institutional Class
$24,567,455
$ 25,743
BlackRock Liquidity Series, LLC
Cash Sweep Series
$(2,450,990)
$117,920
(c) Represents the current yield as of report date.
For Fund compliance purposes, the Funds industry classifications refer to any
one
or more of the industry sub-classifications used by one or more widely recognized
market indexes or ratings group indexes, and/or as defined by Fund management.
This definition may not apply for purposes of this report, which may combine industry
sub-classifications for reporting ease.
See Notes to Financial Statements.
ANNUAL REPORT
OCTOBER 31, 2009
27
Schedule of Investments October 31, 2009
BlackRock Floating Rate Income Trust (BGT)
(Percentages shown are based on Net Assets)
Par
Common Stocks
Shares
Value
Corporate Bonds
(000)
Value
Chemicals 0.0%
Energy Equipment & Services 0.0%
British Vita Holding Co. (a)(b)
166
$ 977
Compagnie Generale de Geophysique-Veritas:
Commercial Services & Supplies 0.0%
7.50%, 5/15/15
USD
70
$ 69,475
Sirva (b)
554
5,540
7.75%, 5/15/17
50
49,500
Construction & Engineering 0.0%
118,975
USI United Subcontractors (b)
7,639
99,305
Food & Staples Retailing 0.1%
Metals & Mining 0.0%
Duane Reade, Inc., 11.75%, 8/01/15 (a)
240
255,600
Euramax International (b)
1,135
12,203
Food Products 0.2%
Paper & Forest Products 0.1%
Smithfield Foods, Inc., 10.00%, 7/15/14 (a)
700
735,000
Ainsworth Lumber Co. Ltd. (b)
55,855
90,850
Health Care Equipment & Supplies 0.2%
Ainsworth Lumber Co. Ltd. (a)(b)
62,685
102,419
DJO Finance LLC, 10.88%, 11/15/14
635
661,987
193,269
Health Care Providers & Services 0.4%
Total Common Stocks 0.1%
311,294
DaVita, Inc., 6.63%, 3/15/13
1,070
1,053,950
Tenet Healthcare Corp. (a):
9.00%, 5/01/15
95
100,462
10.00%, 5/01/18
35
38,587
Par
Corporate Bonds
(000)
1,192,999
Air Freight & Logistics 0.0%
Hotels, Restaurants & Leisure 0.1%
Park-Ohio Industries, Inc., 8.38%, 11/15/14
USD
125
98,125
American Real Estate Partners LP, 7.13%, 2/15/13
140
137,550
Greektown Holdings, LLC, 10.75%, 12/01/13 (a)(b)(d)
122
24,400
Auto Components 0.0%
Delphi International Holdings Unsecured,
161,950
12.00%, 10/06/14
39
37,992
Household Durables 0.5%
The Goodyear Tire & Rubber Co., 5.01%, 12/01/09 (c)
60
60,000
Beazer Homes USA, Inc., 12.00%, 10/15/17 (a)
1,500
1,575,000
Lear Corp., 8.75%, 12/01/16 (b)(d)
30
20,400
Berkline/BenchCraft, LLC, 4.50%, 11/03/12 (b)(d)(e)
400
118,392
1,575,000
Building Products 0.0%
IT Services 0.2%
CPG International I, Inc., 10.50%, 7/01/13
90
76,500
SunGard Data Systems, Inc., 4.88%, 1/15/14
763
686,700
Capital Markets 0.6%
Independent Power Producers & Energy Traders 1.6%
E*Trade Financial Corp. (a):
AES Ironwood LLC, 8.86%, 11/30/25
82
78,071
12.50%, 11/30/17 (e)
138
153,180
Calpine Construction Finance Co. LP,
3.34%, 8/31/19 (f)(g)
439
629,416
8.00%, 6/01/16 (a)
2,580
2,618,700
Marsico Parent Co., LLC, 10.63%, 1/15/16 (a)
1,501
915,610
NRG Energy, Inc., 7.25%, 2/01/14
2,200
2,183,500
Marsico Parent Holdco, LLC, 12.50%, 7/15/16 (a)(e)
645
145,226
4,880,271
Marsico Parent Superholdco, LLC,
14.50%, 1/15/18 (a)(e)
445
100,213
Machinery 0.1%
Sunstate Equipment Co. LLC, 10.50%, 4/01/13 (a)
210
161,700
1,943,645
Synventive Molding Solutions Sub-Series A,
Chemicals 0.3%
14.00%, 1/14/11 (e)
986
246,504
American Pacific Corp., 9.00%, 2/01/15
125
116,250
408,204
Ames True Temper, Inc., 4.28%, 1/15/12 (c)
1,100
968,000
Media 1.0%
1,084,250
Affinion Group, Inc., 10.13%, 10/15/13
50
51,250
Commercial Banks 4.1%
CSC Holdings, Inc., 8.50%, 4/15/14 (a)
550
580,937
SNS Bank NV Series EMTN, 2.88%, 1/30/12
EUR
8,500
12,711,922
Charter Communications Holdings II, LLC (b)(d):
Commercial Services & Supplies 0.3%
10.25%, 9/15/10
260
314,600
DI Finance Series B, 9.50%, 2/15/13
USD
307
313,140
Series B, 10.25%, 9/15/10
45
54,225
The Geo Group, Inc., 7.75%, 10/15/17 (a)
675
685,125
Charter Communications Operating, LLC,
10.00%, 4/30/12 (a)(b)(d)
210
213,150
998,265
EchoStar DBS Corp.:
Containers & Packaging 0.1%
7.00%, 10/01/13
158
158,000
Berry Plastics Corp., 4.17%, 9/15/14 (c)
300
236,250
7.13%, 2/01/16
230
230,000
Impress Holdings BV, 3.41%, 9/15/13 (a)(c)
150
142,687
Local Insight Regatta Holdings, Inc., 11.00%, 12/01/17
770
377,300
378,937
Nielsen Finance LLC, 10.00%, 8/01/14
400
412,000
Rainbow National Services LLC, 8.75%, 9/01/12 (a)
750
761,250
Diversified Financial Services 0.1%
FCE Bank Plc, 7.13%, 1/16/12
EUR
200
282,556
3,152,712
Diversified Telecommunication Services 1.8%
Metals & Mining 0.2%
PAETEC Holding Corp., 8.88%, 6/30/17 (a)
USD
700
693,000
Foundation PA Coal Co., 7.25%, 8/01/14
505
506,894
Qwest Corp., 8.38%, 5/01/16 (a)
1,840
1,899,800
Oil, Gas & Consumable Fuels 5.4%
Telefonica Emisiones SAU, 5.43%, 2/03/14
EUR
2,000
3,164,192
Gazprom OAO, 9.63%, 3/01/13
11,530
12,770,628
5,756,992
Repsol International Finance BV, 6.50%, 3/27/14
EUR
1,500
2,444,048
SandRidge Energy, Inc., 3.91%, 4/01/14 (c)
USD
1,400
1,239,308
Whiting Petroleum Corp., 7.25%, 5/01/13
300
300,375
16,754,359
See Notes to Financial Statements.
28
ANNUAL REPORT
OCTOBER 31, 2009
Schedule of Investments (continued)
BlackRock Floating Rate Income Trust (BGT)
(Percentages shown are based on Net Assets)
Par
Par
Corporate Bonds
(000)
Value
Floating Rate Loan Interests (c)
(000)
Value
Paper & Forest Products 2.4%
Beverages (concluded)
Ainsworth Lumber Co. Ltd., 11.00%, 7/29/15 (a)(e)
USD
482 $
275,858
Le-Natures, Inc., Tranche B Term Loan,
NewPage Corp.:
9.50%, 3/01/11 (b)(d)
USD
1,000 $
390,000
6.53%, 5/01/12 (c)
1,500
960,000
Orangina SA:
11.38%, 12/31/14 (a)
5,470
5,456,325
Term Loan B2, 2.61%, 12/31/13
EUR
559
801,916
Verso Paper Holdings LLC Series B, 4.03%, 8/01/14 (c)
1,215
795,825
Term Loan C2, 3.61%, 12/31/14
534
765,047
7,488,008
4,443,353
Pharmaceuticals 0.5%
Building Products 1.9%
Angiotech Pharmaceuticals, Inc., 4.11%, 12/01/13 (c)
1,750
1,452,500
Building Materials Corp. of America, Term Loan
Real Estate Investment Trusts (REITs) 1.4%
Advance, 3.00%, 2/22/14
USD
2,679
2,460,208
Rouse Co. LP, 5.38%, 11/26/13 (b)(d)
4,835
4,254,800
Custom Building Products, Inc., Loan (Second Lien),
10.75%, 4/20/12
1,500
1,421,250
Specialty Retail 0.1%
Goodman Global Holdings Term Loan B,
General Nutrition Centers, Inc., 5.18%, 3/15/14 (c)(e)
500
446,250
6.25%, 2/13/14
900
900,675
Lazy Days R.V. Center, Inc., 11.75%, 5/15/12 (b)(d)
375
3,750
Momentive Performance Materials (Blitz 06-103
450,000
GMBH), Tranche B-1 Term Loan, 2.50%, 12/04/13
1,218
1,007,952
Textiles, Apparel & Luxury Goods 0.6%
United Subcontractors, Inc., First Lien Term Loan,
Levi Strauss & Co., 8.63%, 4/01/13
EUR
1,300
1,894,012
1.79%, 6/30/15
179
152,293
Tobacco 1.4%
5,942,378
Imperial Tobacco Finance Plc, 4.38%, 11/22/13
1,500
2,238,020
Capital Markets 0.4%
Reynolds American, Inc., 7.63%, 6/01/16
USD
2,000
2,154,312
Marsico Parent Co., LLC, Term Loan,
4,392,332
5.00% 5.06%, 12/15/14
458
309,239
Nuveen Investments, Inc., First Lien Term Loan,
Wireless Telecommunication Services 1.3%
3.28%, 11/13/14
1,174
1,009,334
Cricket Communications, Inc., 7.75%, 5/15/16 (a)
3,000
2,992,500
iPCS, Inc., 2.41%, 5/01/13 (c)
1,155
1,010,625
1,318,573
4,003,125
Chemicals 8.0%
Ashland Inc., Term B Borrowing, 7.65%, 5/13/14
1,071
1,085,440
Total Corporate Bonds 25.0%
78,475,012
Brenntag AG, Second Lien Term Loan,
4.25%, 7/17/15
1,000
937,500
Brenntag Holding GmbH & Co. KG:
Acquisition Facility 1, 2.25% 2.99%, 1/20/14
384
363,650
Floating Rate Loan Interests (c)
Acquisition Facility 2, 3.21%, 1/20/14
EUR
443
616,722
Aerospace & Defense 1.1%
Facility B2, 2.25%, 1/20/14
USD
1,572
1,489,371
Avio SpA, Dollar Mezzanine Term Loan,
Facility B6A and B6B, 3.02%, 1/20/14
EUR
489
689,643
4.24%, 12/13/16
1,062
806,784
Cognis GmbH:
Hawker Beechcraft Acquisition Co. LLC:
Facility A, 2.77%, 11/17/13
803
1,068,996
Credit Linked Deposit, 0.18%, 3/26/14
163
127,717
Facility B (French), 2.77%, 11/16/13
197
261,795
Term Loan, 2.24% 2.28%, 3/26/14
2,750
2,158,412
ElectricInvest Holding Co. Ltd. (Viridian Group Plc),
IAP Worldwide Services, Inc., Term Loan (First-Lien),
Junior Term Facility:
9.25%, 12/30/12 (e)
232
193,722
4.93%, 12/20/12
1,787
2,025,325
5.01%, 12/21/12
GBP
1,800
2,274,779
3,286,635
Huish Detergents Inc.:
Airlines 0.3%
Loan (Second Lien), 4.50%, 10/26/14
USD
750
710,625
US Airways Group, Inc., Loan, 2.78%, 3/21/14
1,460
965,425
Tranche B Term Loan, 2.00%, 4/26/14
1,725
1,650,055
Auto Components 2.7%
Ineos US Finance LLC, Term A4 Facility,
Allison Transmission, Inc., Term Loan,
7.00%, 12/14/12
1,236
1,091,535
3.00% 3.04%, 8/07/14
5,778
5,166,397
Matrix Acquisition Corp. (MacDermid, Inc.), Tranche C
Dana Holding Corp., Term Advance, 7.25%, 1/31/15
2,874
2,532,390
Term Loan, 2.64%, 12/15/13
EUR
1,616
1,839,021
Dayco Products LLC (Mark IV Industries, Inc.):
Nalco Co., Term Loan, 6.50%, 5/13/16
USD
1,891
1,918,858
Replacement Term B Loan, 8.75%, 6/21/11 (b)(d)
853
382,583
PQ Corp. (fka Niagara Acquisition, Inc.):
US Lien Term Loan, 8.50%, 5/01/10
101
100,806
Loan (Second Lien), 6.75%, 7/30/15
2,250
1,839,375
US Term Loan, 8.50%, 6/01/11
20
10,081
Term Loan (First Lien), 3.50% 3.54%, 7/30/14
2,716
2,411,475
GPX International Tire Corp. (b)(d):
Rockwood Specialties Group, Inc., Tranche H Term Loan,
Amendment Fee, 12.00%, 4/11/12
12
3,454
6.00%, 5/15/14
1,229
1,241,848
Tranche B Term Loan, 10.25%, 3/30/12
640
192,052
Solutia Inc., Loan, 7.25%, 2/28/14
1,472
1,492,343
8,387,763
25,008,356
Automobiles 0.5%
Commercial Services & Supplies 3.1%
Ford Motor Co., Term Loan, 3.25% 3.29%, 12/15/13
1,690
1,502,202
Aramark Corp.:
Facility Letter of Credit, 0.29%, 1/26/14
155
141,829
Beverages 1.4%
U.S. Term Loan, 2.12% 2.16%, 1/26/14
2,359
2,161,562
Culligan International Co., Loan (Second Lien),
Casella Waste Systems, Inc., Term B Loan,
5.19%, 4/24/13
EUR
1,000
533,473
7.00%, 4/08/14
1,097
1,102,736
Inbev NV Bridge Loan, 1.43%, 7/15/11
USD
1,000
986,250
Inbev NV/SA, Bridge Loan, 1.72%, 7/15/13
1,000
966,667
See Notes to Financial Statements.
ANNUAL REPORT
OCTOBER 31, 2009
29
Schedule of Investments (continued)
BlackRock Floating Rate Income Trust (BGT)
(Percentages shown are based on Net Assets)
Par
Par
Floating Rate Loan Interests (c)
(000)
Value
Floating Rate Loan Interests (c)
(000)
Value
Commercial Services & Supplies (concluded)
Diversified Telecommunication Services 3.8%
EnviroSolutions Real Property Holdings, Inc., Initial
BCM Ireland Holdings Ltd. (Eircom):
Term Loan, 11.00%, 7/07/12 (e)
USD
2,030 $
1,502,171
Facility B, 2.30%, 8/14/14
EUR
500 $
641,441
John Maneely Co., Term Loan,
Facility C, 2.55%, 8/14/15
500
641,441
3.50% 3.53%, 12/09/13
1,380
1,259,076
Cavtel Holdings, LLC, Term Loan, 10.50%, 12/31/12
USD
1,162
865,414
SIRVA Worldwide, Inc., Loan (Second Lien),
Hawaiian Telcom Communications, Inc., Tranche C
12.00%, 5/12/15
133
13,339
Term Loan, 4.75%, 5/30/14
1,223
868,143
Synagro Technologies, Inc., Term Loan (First Lien),
Integra Telecom Holdings, Inc., Term Loan (First Lien),
2.24%, 4/02/14
1,971
1,584,205
10.50%, 8/31/13
1,870
1,829,318
West Corp. Incremental Term Loan B-3,
Nordic Telephone Co. Holdings APS:
7.25%, 11/08/13
1,995
1,998,661
Facility B2 Swiss, 1.93%, 11/29/13
EUR
885
1,238,990
9,763,579
Facility C2 Swiss, 2.56%, 11/29/14
1,058
1,480,351
PAETEC Holding Corp.:
Computers & Peripherals 0.3%
Incremental Term Loan, 2.74%, 2/28/13
USD
132
124,349
Intergraph Corp.:
Replacement Term Loan, 2.74%, 2/28/13
310
292,941
Initial Term Loan (First Lien), 2.37%, 5/29/14
350
333,795
Wind Telecomunicazioni SpA:
Second-Lien Term Loan, 6.24% 6.37%, 11/28/14
750
718,125
A1 Term Loan Facility, 2.90% 2.93%, 9/22/12
EUR
848
1,180,221
1,051,920
B1 Term Loan Facility, 3.69%, 9/22/13
1,000
1,404,009
Construction & Engineering 0.7%
C1 Term Loan Facility, 4.68%, 9/22/14
1,000
1,404,009
Airport Development and Investment Ltd. (BAA) Facility
11,970,627
(Second Lien), 4.56%, 4/07/11
GBP
566
843,498
Electric Utilities 0.3%
Brand Energy & Infrastructure Services, Inc. (FR Brand
Astoria Generating Co. Acquisitions, LLC, Term B Facility,
Acquisition Corp.):
2.04% 2.05%, 2/23/13
USD
378
362,655
Loan (Second Lien), 6.31% 6.44%, 2/07/15
USD
1,000
791,250
TPF Generation Holdings, LLC:
Synthetic Letter of Credit Term Loan (First Lien),
Synthetic Letter of Credit Deposit (First Lien),
0.31%, 2/07/14
500
449,375
0.18%, 12/15/13
151
143,016
2,084,123
Synthetic Revolving Deposit, 0.19%, 12/15/11
47
44,832
Containers & Packaging 1.9%
Term Loan (First Lien), 2.24%, 12/15/13
409
388,847
Atlantis Plastic Films, Inc., Term Loan (Second Lien),
939,350
12.25%, 3/22/12 (b)(d)
500
Electrical Equipment 0.4%
Graham Packaging Co., L.P.:
Electrical Components International Holdings Co. (ECI),
B Term Loan, 2.50% 2.56%, 10/07/11
232
225,705
Term Loan (Second Lien), 11.50%, 5/01/14
500
25,000
C Term Loan, 6.75%, 4/05/14
828
826,876
Generac Acquisition Corp., Term Loan (First Lien),
OI European Group BV, Tranche D Term Loan,
2.78%, 11/10/13
1,464
1,315,114
1.93%, 6/14/13
EUR
1,915
2,672,599
Smurfit Kappa Acquisitions (JSG):
1,340,114
C1 Term Loan Facility, 4.05% 4.46%, 12/01/14
724
1,017,226
Electronic Equipment, Instruments
Term B1, 3.80% 4.73%, 12/02/13
724
1,017,446
& Components 1.2%
Smurfit-Stone Container Canada, Inc.:
Flextronics International Ltd.:
Tranche C, 2.50%, 11/01/11
USD
26
25,153
A Closing Date Loan, 2.49% 2.54%, 10/01/14
2,666
2,459,646
Tranche C-1 Term Loan, 2.50%, 11/01/11
8
7,605
Delay Draw Term Loan, 2.53%, 10/01/14
766
706,795
Smurfit-Stone Container Enterprises, Inc.:
Matinvest 2 SAS (Deutsche Connector), Second Lien,
Deposit Funded Facility, 4.50%, 11/01/10
12
11,754
4.97%, 12/22/15
500
235,000
Tranche B, 2.50%, 11/01/11
14
13,376
Safenet, Inc., Loan (Second Lien), 6.25%, 4/12/15
500
426,250
U.S. Term Loan Debtor in Possession,
Tinnerman Palnut Engineered Products, LLC, Loan
10.00%, 1/28/10
145
145,108
(Second Lien), 13.00%, 11/01/11 (b)(d)
2,407
24,068
Smurfit-Stone Container, Revolving Credit:
3,851,759
2.75% 4.50%, 11/01/09
60
58,913
2.75% 5.00%, 11/01/09
20
19,540
Energy Equipment & Services 0.9%
Dresser, Inc., Term Loan (Second Lien), 6.00%, 5/04/15
1,500
1,348,125
6,041,301
MEG Energy Corp., Initial Term Loan, 2.29%, 4/03/13
483
454,756
Distributors 0.2%
Trinidad USA Partnership LLLP, Term Facility,
Keystone Automotive Operations, Inc., Loan,
2.74%, 5/01/11
1,019
876,748
3.75% 5.75%, 1/12/12
1,026
608,109
2,679,629
Diversified Consumer Services 2.5%
Food & Staples Retailing 2.8%
Coinmach Laundry Corp, Delay Draw Term Loan,
AB Acquisitions UK Topco 2 Ltd. (fka Alliance Boots),
3.25% 3.43%, 11/14/14
497
424,528
Facility B1, 3.52%, 7/09/15
GBP
2,500
3,596,399
Coinmach Service Corp., Term Loan B, 3.43%, 11/14/14
2,539
2,094,394
Birds Eye Iglo Group Ltd. (Liberator Midco Ltd.),
Education Management Corp, Term Loan C,
Mezzanine Credit Facility, 8.51%, 11/03/16
411
626,759
2.06%, 6/01/13
1,197
1,118,950
DSW Holdings, Inc., Term Loan,
Laureate Education New Incremental Term Loan,
4.29%, 3/02/12
USD
1,000
861,667
7.00%, 12/31/14
4,250
4,234,063
McJunkin Corp., Term Loan, 3.49%, 1/31/14
497
481,060
7,871,935
Pierre Foods Term Loan B, 8.50%, 9/23/14
817
821,085
Diversified Financial Services 0.1%
Rite Aid Corp., Tranche 4 Term Loan, 9.50%, 6/10/15
1,000
1,030,417
Professional Service Industries, Inc., Term Loan
(First Lien), 3.00%, 10/31/12
620
310,223
See Notes to Financial Statements.
30
ANNUAL
REPORT
OCTOBER 31, 2009
Schedule of Investments (continued)
BlackRock Floating Rate Income Trust (BGT)
(Percentages shown are based on Net Assets)
Par
Par
Floating Rate Loan Interests (c)
(000)
Value
Floating Rate Loan Interests (c)
(000)
Value
Food & Staples Retailing (concluded)
Hotels, Restaurants & Leisure (concluded)
Roundys Supermarkets, Inc., Tranche B Term Loan,
Penn National Gaming, Inc., Term Loan B,
3.01% 3.04%, 11/03/11
USD
501 $
492,229
1.99% 2.21%, 10/03/12
USD
2,497 $
2,404,745
WM. Bolthouse Farms, Inc., Term Loan (First Lien),
QCE, LLC (Quiznos), Term Loan (First Lien),
2.56%, 12/16/12
843
819,272
2.56%, 5/05/13
997
797,107
8,728,888
7,841,788
Food Products 1.6%
Household Durables 1.7%
Dole Food Co., Inc.:
American Residential Services LLC, Term Loan
Credit-Linked Deposit, 0.28%, 4/12/13
192
193,556
(Second Lien), 10.00%, 4/17/15
2,051
1,927,183
Tranche B Term Loan, 8.00%, 4/12/13
335
338,055
Berkline/Benchcraft, LLC., Term Loan,
FSB Holdings, Inc. (Fresh Start Bakeries), Term Loan
6.58%, 11/03/11 (b)(d)
107
5,373
(Second Lien), 6.00%, 3/29/14
500
415,000
Jarden Corp., Term Loan B3, 2.78%, 1/24/12
952
930,272
Solvest, Ltd. (Dole), Tranche C Term Loan,
Simmons Bedding Co., Tranche D Term Loan,
8.00%, 4/12/13
1,205
1,214,151
10.50%, 12/19/11
1,500
1,477,500
Wm. Wrigley Jr. Co., Tranche B Term Loan,
Yankee Candle Co., Inc., Term Loan, 2.25%, 2/06/14
1,047
974,582
6.50%, 9/30/14
2,924
2,956,946
5,314,910
5,117,708
Household Products 0.2%
Health Care Equipment & Supplies 1.8%
VI-JON, Inc. (VJCS Acquisition, Inc.), Tranche B
Bausch & Lomb Incorporated:
Term Loan, 2.25%, 4/24/14
674
630,379
Delayed Draw Term Loan, 3.50% 3.53%, 4/24/15
93
88,814
IT Services 4.1%
Parent Term Loan, 3.53%, 4/24/15
384
365,729
Amadeus IT Group SA/Amadeus Verwaltungs GmbH:
Biomet, Inc., Euro Term Loan,
Term B3 Facility, 2.44%, 6/30/13
EUR
615
833,122
3.39% 3.71%, 3/25/15
EUR
2,521
3,523,547
Term B4 Facility, 2.44%, 6/30/13
489
663,217
DJO Finance LLC (ReAble Therapeutics Fin LLC),
Term C3 Facility, 2.94%, 6/30/14
615
833,122
Term Loan, 3.24% 3.28%, 5/20/14
USD
1,485
1,426,110
Term C4 Facility, 2.94%, 6/30/14
489
663,217
Hologic, Inc., Tranche B Term Loan, 3.50%, 3/31/13
270
263,940
Audio Visual Services Group, Inc., Loan (Second Lien),
5,668,140
6.79%, 2/28/14
USD
1,059
105,867
Health Care Providers & Services 4.1%
Ceridian Corp, US Term Loan,
CCS Medical, Inc. (Chronic Care):
3.24% 3.28%, 11/09/14
1,977
1,753,567
Loan Debtor in Possession, 11.00%, 11/16/09
31
30,309
First Data Corp.:
Term Loan (First Lien), 4.35%, 9/30/12 (b)(d)
675
328,500
Initial Tranche B-1 Term Loan,
CCS Medical Return of Capital, 0.00%, 9/30/11 (b)(d)
475
231,167
2.99% 3.04%, 9/24/14
2,454
2,106,768
CHS/Community Health Systems, Inc.:
Initial Tranche B-2 Term Loan,
Delayed Draw Term Loan, 2.49%, 7/25/14
229
213,335
3.03% 3.04%, 9/24/14
1,590
1,361,812
Funded Term Loan, 2.49% 2.62%, 7/25/14
4,491
4,181,777
Initial Tranche B-3 Term Loan,
Fresenius SE:
3.03% 3.04%, 9/24/14
975
834,104
Tranche B1 Term Loan, 6.75%, 9/26/14
968
973,779
RedPrairie Corp.:
Tranche B2 Term Loan, 6.75%, 9/26/14
521
524,586
Loan (Second Lien), 6.97%, 1/20/13
1,250
1,081,250
HCA Inc., Tranche A-1 Term Loan, 1.78%, 11/17/12
3,084
2,869,645
Term Loan B, 3.44% 5.25%, 7/20/12
861
826,320
HealthSouth Corp., Tranche 1 Term Loan-Assignment
SunGard Data Systems Inc (Solar Capital Corp.),
2.54% 2.55%, 3/10/13
798
757,573
Incremental Term Loan, 6.75%, 2/28/14
1,694
1,706,074
HealthSouth Corp., Tranche 2 Term Loan-Assignment
12,768,440
4.04% 4.05%, 3/15/14
657
632,965
Independent Power Producers & Energy Traders 2.4%
Surgical Care Affiliates, LLC, Term Loan,
Dynegy Holdings Inc.:
2.28%, 12/29/14
392
357,114
Term Letter of Credit Facility Term Loan,
Vanguard Health Holding Co. II, LLC (Vanguard
4.00%, 4/02/13
1,110
1,063,811
Health System, Inc.), Replacement Term Loan,
Tranche B Term Loan, 4.00%, 4/02/13
90
85,856
2.49%, 9/23/11
1,637
1,594,878
Texas Competitive Electric Holdings Co., LLC (TXU):
12,695,628
Initial Tranche B-1 Term Loan,
Hotels, Restaurants & Leisure 2.5%
3.74% 3.78%, 10/10/14
2,477
1,918,853
BLB Worldwide Holdings, Inc. (Wembley, Inc.) (b)(d):
Initial Tranche B-2 Term Loan,
First Priority Term Loan, 4.75%, 7/18/11
2,418
1,426,744
3.74% 3.78%, 10/10/14
3,261
2,520,589
Second Priority Term Loan, 7.06%, 7/18/12
1,500
67,500
Initial Tranche B-3 Term Loan,
Golden Nugget, Inc.:
3.74% 3.78%, 10/10/14
2,485
1,903,001
Additional Term Advance (First Lien),
7,492,110
2.25% 2.29%, 6/30/14
271
185,651
Insurance 0.5%
Second Lien Term Loan, 3.50%, 12/31/14
500
200,000
Alliant Holdings I, Inc. Term Loan, 3.28%, 8/21/14
980
908,950
Term Advance (First Lien), 2.25%, 6/30/14
476
326,114
Conseco, Inc, Term Loan, 6.50%, 10/10/13
728
651,745
Green Valley Ranch Gaming, LLC, Loan (Second Lien),
3.55%, 8/16/14
1,500
367,500
1,560,695
Harrahs Operating Co., Inc., Term B-3 Loan,
Internet & Catalog Retail 0.3%
3.28%, 1/28/15
726
576,991
FTD Group, Inc., Base Prime, 6.75%, 8/26/14
688
686,239
Harrahs Operating Term B-4 Loan, 9.50%, 10/31/16
1,500
1,462,709
Oriental Trading Co., Inc., Loan (Second Lien),
OSI Restaurant Partners, LLC, Pre-Funded RC Loan,
6.24%, 1/31/14
500
110,000
0.12% 2.56%, 6/14/13
32
26,727
796,239
See Notes to Financial Statements.
ANNUAL REPORT
OCTOBER 31, 2009
31
Schedule of Investments (continued)
BlackRock Floating Rate Income Trust (BGT)
(Percentages shown are based on Net Assets)
Par
Par
Floating Rate Loan Interests (c)
(000)
Value
Floating Rate Loan Interests (c)
(000)
Value
Leisure Equipment & Products 0.3%
Media (concluded)
24 Hour Fitness Worldwide, Inc., Tranche B Term Loan,
Insight Midwest Holdings, LLC, B Term Loan,
2.75% 2.79%, 6/08/12
USD
965 $
894,234
2.29%, 4/07/14
USD
700
$ 663,500
Life Sciences Tools & Services 0.8%
Kabel Deutschland GMBH, A Facility-Assignment,
Life Technologies Corp., Term B Facility,
2.18%, 6/01/12
EUR
4,000
5,605,645
5.25%, 11/23/15
2,378
2,385,424
Lamar Media Corp.:
Series B Incremental Loan, 5.50%, 9/28/12
USD
2,875
2,851,569
Machinery 1.7%
Term Loan, 5.50%, 9/30/12
641
635,871
Accuride Term Loan, 6.00%, 1/31/12
GBP
1,150
1,139,579
Lavena Holding 3 GmbH (Prosiebensat.1 Media AG):
Blount, Inc., Term Loan B, 2.00% 3.25%, 8/09/10
USD
533
506,600
Facility B, 3.53%, 6/28/15
EUR
337
323,548
LN Acquisition Corp. (Lincoln Industrial):
Facility C, 3.78%, 6/30/16
674
647,096
Delayed Draw Term Loan (First Lien),
Liberty Cablevision of Puerto Rico, Ltd., Initial Term
2.79%, 7/11/14
254
220,823
Facility, 2.25%, 6/17/14
USD
1,466
1,238,981
Initial U.S. Term Loan (First Lien), 2.79%, 7/11/14
659
573,043
Local TV Finance, LLC, Term Loan, 2.25%, 5/07/13
739
590,317
NACCO Materials Handling Group, Inc., Loan,
MCC Iowa LLC (Mediacom Broadband Group),
2.24% 3.41%, 3/21/13
484
372,488
Tranche E Term Loan, 6.50%, 1/03/16
597
598,470
Oshkosh Truck Corp., Term B Loan,
MCNA Cable Holdings LLC (OneLink Communications),
6.29% 6.33%, 12/06/13
2,115
2,108,175
Loan, 7.23%, 3/01/13 (e)
1,933
773,361
Standard Steel, LLC:
Mediacom Illinois, LLC (fka Mediacom
Delayed Draw Term Loan, 8.25%, 7/02/12
74
63,030
Communications, LLC), Tranche D Term Loan,
Initial Term Loan, 9.00%, 7/02/12
368
312,724
5.50%, 3/31/17
1,250
1,251,563
5,296,462
Mediannuaire Holding (Pages Jaunes):
Marine 1.1%
Term Loan B2, 3.03%, 1/11/15
EUR
438
457,955
Delphi Acquisition Holding I B.V. (fka Dockwise):
Term Loan C, 3.53%, 1/11/16
905
947,420
Facility B1, 2.28%, 1/12/15
688
649,708
Term Loan D, 5.03%, 1/11/17
500
448,853
Facility B2, 2.28%, 1/12/15
470
443,100
Metro-Goldwyn-Mayer Inc., Tranche B Term Loan,
Facility C1, 3.16%, 1/11/16
577
544,590
20.50%, 4/09/12
USD
1,905
1,082,186
Facility C2, 3.16%, 1/11/16
470
443,100
Mission Broadcasting, Inc., Term B Loan,
Facility D1, 4.78%, 1/11/16
650
513,500
5.00%, 10/01/12
1,099
923,069
Facility D2, 4.78%, 1/11/16
1,000
790,000
Multicultural Radio Broadcasting, Inc., Term Loan,
2.99%, 12/04/13
313
219,100
3,383,998
NTL Inc.:
Media 25.9%
C Facility, 3.58%, 7/17/13
GBP
3,875
5,848,420
Acosta, Inc., 2006 Term Loan, 2.50%, 7/28/13
1,185
1,120,156
Term Loan B1, 2.89%, 9/03/12
434
684,184
Affinion Group Holdings, Inc. Loan, 8.27%, 3/01/12 (e)
1,021
903,991
Term Loan B2, 2.89%, 9/03/12
508
799,702
Amsterdamse Beheer En Consultingmaatschappij BV
NVT Networks LLC, Exit Term Loan, 13.00%, 10/01/12
USD
160
160,050
(Casema) Casema:
Newsday, LLC:
B1 Term Loan Facility, 2.93%, 11/02/14
EUR
625
873,332
Fixed Rate Term Loan, 10.50%, 8/01/13
1,500
1,570,001
C Term Loan Facility, 3.43%, 11/02/15
625
873,332
Floating Rate Term Loan, 6.53%, 8/01/13
1,250
1,231,250
Atlantic Broadband Finance, LLC, Tranche B-2-A
Nexstar Broadcasting, Inc, Term B Loan,
Term Loan, 2.54%, 9/01/11
USD
69
68,033
5.00% 6.25%, 10/01/12
1,039
976,204
Atlantic Broadband Tranche B-2-B Term Loan,
Nielson Finance LLC, Dollar Term Loan:
6.75%, 6/01/13
1,866
1,848,493
Class A, 2.24%, 8/09/13
1,178
1,093,676
Bresnan Communications, LLC, Term Loan
Class B, 3.99%, 5/01/16
2,292
2,145,880
(Second Lien), 4.75%, 3/29/14
250
235,625
Penton Media, Inc.:
Catalina Marketing Corp., Initial Term Loan,
Institutional Loan (Second Lien), 5.28%, 1/29/10
1,000
210,000
3.00%, 10/01/14
1,345
1,276,398
Term Loan (First Lien), 2.53% 2.62%, 11/30/09
1,097
744,047
Cengage Learning Acquisitions, Inc. (Thomson Learning),
Puerto Rico Cable Acquisition Co. Inc. (D/B/A
Tranche 1 Incremental Term Loan, 7.50%, 7/03/14
5,411
5,151,017
Choice TV), Term Loan (Second Lien), 7.75%, 2/15/12
692
564,231
Cequel Communications, LLC, Term Loan,
Quebecor Media, Facility B, 2.28%, 1/17/13
722
682,172
2.24% 4.25%, 11/05/13
4,850
4,619,926
Springer:
Charter Communications Operating, LLC, New Term Loan,
Term Loan B, 3.14%, 9/16/11
EUR
910
1,247,398
6.25%, 3/06/14
1,299
1,177,279
Term Loan C, 3.52%, 9/17/12
1,188
1,627,908
Charter Communications, Incremental Term Loan,
Sunshine Acquisition Ltd. (aka HIT Entertainment),
9.25%, 3/25/14
2,996
3,021,893
Term Facility, 2.73%, 3/20/12
USD
1,998
1,735,807
FoxCo Acquisition Sub, LLC, Term Loan, 7.50%, 7/14/15
2,391
2,166,610
TWCC Holding Corp., Term Loan, 7.25%, 9/14/15
1,736
1,757,846
HIT Entertainment, Inc., Term Loan (Second Lien),
Telecommunications Management, LLC:
5.98%, 2/26/13
1,000
532,500
Multi-Draw Term Loan, 3.49%, 6/30/13
232
171,473
HMH Publishing Co. Ltd.:
Term Loan, 3.49%, 6/30/13
919
680,153
Mezzanine, 17.50%, 11/14/14
1,063
292,405
UPC Financing Partnership, Facility U,
Tranche A Term Loan, 5.28%, 6/12/14
2,648
2,281,948
4.44%, 12/31/17
EUR
3,767
5,085,895
Hanley-Wood, LLC (FSC Acquisition), Term Loan,
World Color USA Corp. (fka Quebecor World Inc.),
2.49% 2.53%, 3/08/14
2,212
922,069
9.00%, 7/23/12
USD
1,622
1,622,066
Hargray Acquisition Co./DPC Acquisition LLC/HCP
Yell Group Plc, Term Loan B1, 3.28%, 10/27/12
2,500
1,760,715
Acquisition LLC:
80,896,838
Loan (Second Lien), 5.97%, 1/29/15
500
312,500
Term Loan (First Lien), 2.72%, 6/27/14
368
343,708
Harland Clarke Holdings Corp. (fka Clarke
American Corp.), Tranche B Term Loan,
2.74% 2.78%, 6/30/14
1,459
1,218,041
See Notes to Financial Statements.
32
ANNUAL REPORT
OCTOBER 31, 2009
Schedule of Investments (continued)
BlackRock Floating Rate Income Trust (BGT)
(Percentages shown are based on Net Assets)
Par
Par
Floating Rate Loan Interests (c)
(000)
Value
Floating Rate Loan Interests (c)
(000)
Value
Metals & Mining 0.6%
Software 0.2%
Essar Steel Algoma Inc. (fka Algoma Steel Inc.),
Bankruptcy Management Solutions, Inc.:
Term Loan, 8.00%, 6/20/13
USD
1,934 $
1,813,014
Loan (Second Lien), 6.49%, 7/31/13
USD
485 $
97,909
Multi-Utilities 0.6%
Term Loan (First Lien), 4.25%, 7/31/12
945
567,149
FirstLight Power Resources, Inc. (fka NE Energy, Inc.):
665,058
Synthetic Letter of Credit, 0.16%, 11/01/13
159
145,457
Specialty Retail 0.6%
Term Advance (Second Lien), 4.81%, 5/01/14
750
609,375
Adesa, Inc. (KAR Holdings, Inc.), Initial Term Loan,
Term B Advance (First Lien), 2.81%, 11/01/13
1,230
1,128,922
2.50%, 10/21/13
500
477,500
Mach Gen, LLC Synthetic Letter of Credit Loan
General Nutrition Centers, Inc., Term Loan,
(First Lien), 0.03%, 2/22/13
69
63,696
2.50% 2.54%, 9/16/13
261
240,795
1,947,450
Orchard Supply Hardware, Term Loan B,
Multiline Retail 1.8%
2.70%, 12/21/10
1,500
1,276,350
Dollar General Corp.:
1,994,645
Tranche B-1 Term Loan, 2.99% 3.03%, 7/07/14
1,247
1,190,066
Trading Companies & Distributors 0.4%
Tranche B-2 Term Loan, 2.99%, 7/07/14
499
473,685
Beacon Sales Acquisition, Inc., Term B Loan,
Hema BV Term Loan B (Euro), 5.43%, 1/01/17
EUR
3,800
3,914,585
2.24% 2.29%, 9/30/13
1,188
1,110,373
5,578,336
Wireless Telecommunication Services 1.5%
Oil, Gas & Consumable Fuels 1.9%
Digicel International Finance Ltd., Tranche A,
Big West Oil, LLC:
2.81%, 3/30/12
1,938
1,855,193
Delayed Advance Loan, 4.50%, 5/15/14
USD
920
878,365
MetroPCS Wireless, Inc., Tranche B Term Loan,
Initial Advance Loan, 4.50%, 5/15/14
732
698,602
2.50% 2.75%, 11/03/13
1,605
1,505,191
Coffeyville Resources, LLC Tranche D Term Loan,
Ntelos Inc., Term B Advance, 5.75%, 8/07/15
1,250
1,253,125
8.50%, 12/30/13
1,037
1,036,440
4,613,509
Drummond Co., Inc., Term Advance, 1.49%, 2/14/11
950
921,500
Niska Gas Storage Canada ULC, Canadian Term Loan B,
Total Floating Rate Loan Interests 95.7%
298,940,865
2.00%, 5/12/13
450
428,733
Niska Gas Storage US, LLC:
US Term B Loan, 2.00%, 5/12/13
47
45,047
Wild Goose Acquisition Draw-US Term B,
Foreign Government Obligations
2.00%, 5/12/13
32
30,514
Brazilian Government International Bond,
Vulcan Energy Term Loan B, 5.50%, 9/30/15
1,750
1,760,938
10.25%, 6/17/13
475
585,200
5,800,139
Colombia Government International Bond,
Paper & Forest Products 1.0%
3.84%, 3/17/13 (c)(h)
1,200
1,230,000
Georgia-Pacific LLC, Term B Loan,
Mexican Bonos Series M, 9.00%, 12/22/11
MXN 13,520
1,100,441
2.28% 2.46%, 12/22/12
3,263
3,136,698
Republic of Venezuela, 1.28%, 4/20/11 (c)(h)
USD
4,000
3,440,000
Verso Paper Finance Holdings LLC, Loan,
South Africa Government International Bond,
6.73% 7.48%, 2/01/13 (e)
360
120,629
7.38%, 4/25/12
2,400
2,634,000
Turkey Government International Bond,
3,257,327
7.00%, 9/26/16
2,735
3,022,175
Personal Products 0.4%
Uruguay Government International Bond,
American Safety Razor Co., LLC, Loan (Second Lien),
6.88%, 1/19/16
EUR
950
1,460,979
6.54%, 1/30/14
1,525
1,212,375
Total Foreign Government Obligations 4.3%
13,472,795
Pharmaceuticals 2.3%
Catalent Pharma Solutions, Inc. (fka Cardinal
Health 409, Inc.), Euro Term Loan, 2.68%, 4/15/14
EUR
2,444
3,164,780
Beneficial
Warner Chilcott:
Interest
Delay Draw Term Loan, 3.78%, 4/12/10
USD
524
524,673
Other Interests (i)
(000)
Term Loan A1, 5.50%, 10/14/14
1,390
1,391,134
Term Loan B1, 5.75%, 3/30/15
695
695,567
Auto Components 0.6%
Term Loan B2, 5.75%, 4/30/15
1,529
1,530,248
Delphi Debtor in Possession Hold Co. LLP Class B
Membership Interests
USD
268
1,963,437
7,306,402
Diversified Financial Services 0.1%
Professional Services 0.3%
JG Wentorth LLC Preferred Equity Interests
515
434,273
Booz Allen Hamilton Inc., Tranche B Term Loan,
7.50%, 7/31/15
992
1,000,643
Health Care Providers & Services 0.0%
Critical Care Systems International, Inc.
947
190
Real Estate Management & Development 0.6%
Enclave, First Lien Term Loan, 6.14%, 3/01/12
2,000
248,072
Household Durables 0.0%
Georgian Towers, Term Loan, 6.14%, 3/01/12
2,000
234,496
Berkline Benchcraft Equity LLC
6,155
Pivotal Promontory, LLC, Second Lien Term Loan,
Media 0.1%
12.00%, 8/31/11 (b)(d)
750
37,500
New Vision LLC Holdings
40,441
328,381
Realogy Corp. Second Lien Term Loan,
Total Other Interests 0.8%
2,726,281
13.50%, 10/15/17
1,250
1,282,291
1,802,359
See Notes to Financial Statements.
ANNUAL REPORT
OCTOBER 31, 2009
33
Schedule of Investments (continued)
BlackRock Floating Rate Income Trust (BGT)
(Percentages shown are based on Net Assets)
Preferred Securities
Preferred Stocks
Shares
Value
(f) Represents a zero-coupon bond. Rate shown reflects the current yield as of
report date.
Capital Markets 0.0%
Marsico Parent Superholdco, LLC, 16.75% (a)
100 $
22,500
(g) Convertible security.
Total Preferred Securities 0.0%
22,500
(h) Restricted securities as to resale, representing 1.5% of net assets were as follows:
Acquisition
Issue
Date
Cost
Value
Warrants (j)
Colombia Government
International Bond,
Chemicals 0.0%
3.84%, 3/17/13
2/15/06
$ 1,277,303
$ 1,230,000
British Vita Holding Co. (non expiring) (a)
166
Republic of Venezuela,
Machinery 0.0%
1.28%, 4/20/11
10/26/04
3,860,186
3,440,000
Synventive Molding Solutions (expires 1/15/13)
2
Total
$ 5,137,489
$ 4,670,000
Media 0.0%
Cumulus Media Warrants (expires 12/31/19)
2,315
2,176
(i) Other interests represent beneficial interest in liquidation trusts and other reorgani-
New Vision Holdings LLC (expires 9/30/14)
22,447
224
zation entities and are non-income producing.
2,400
(j) Warrants entitle the Fund to purchase a predetermined number of shares of com-
mon stock and are non-income producing. The purchase price and number of
Total Warrants 0.0%
2,400
shares are subject to adjustment under certain conditions until the expiration date.
Total Long-Term Investments
(k) Investments in companies considered to be an affiliate of the Fund, for purposes of
(Cost $433,669,495) 125.9%
393,951,147
Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
Net
Affiliate
Activity
Income
Short-Term Securities
BlackRock Liquidity Funds, TempFund,
BlackRock Liquidity Funds, TempFund,
Institutional Class
$ 9,320,934
$ 16,254
Institutional Class, 0.18% (k)(l)
9,320,934
9,320,934
(l) Represents the current yield as of report date.
Total Short-Term Securities
(Cost $9,320,934) 3.0%
9,320,934
For Fund compliance purposes, the Fund industry classifications refer to any one
or more of the industry sub-classifications used by one or more widely recognized
market indexes or ratings group indexes, and/or as defined by Fund management.
This definition may not apply for purposes of this report, which may combine
industry sub-classifications for reporting ease.
Options Purchased
Contracts
Over-the-Counter Call Options
Foreign currency exchange contracts as of October 31, 2009 were as follows:
Marsico Parent Superholdco LLC, expiring 12/21/19
Currency
Currency
Settlement
Unrealized
at USD 942.86, Broker Goldman Sachs Group, Inc.
26
6,110
Purchased
Sold
Counterparty
Date
Depreciation
Total Options Purchased (Cost $25,422) 0.0%
6,110
EUR
248,000
USD
365,155
Citibank NA
11/03/09 $
(186)
Total Investments (Cost $443,015,851*) 128.9%
403,278,191
USD70,188,421
EUR 48,087,500
Citibank NA
11/18/09
(576,271)
Liabilities in Excess of Other Assets (10.1)%
(31,593,957)
USD
9,468,195
GBP
5,811,500
Citibank NA
1/27/10
(65,153)
Preferred Shares, at Redemption Value (18.8)%
(58,812,035)
USD
1,038,130
MXN 14,000,000
Citibank NA
1/27/10
(9,353)
Net Assets Applicable to Common Shares 100.0%
$ 312,872,199
Total
$ (650,963)
* The cost and unrealized appreciation (depreciation) of investments as of October 31,
Credit default swaps on single-name issue buy protection oustanding as of
2009, as computed for federal income tax purposes, were as follows:
October 31, 2009 were as follows:
Aggregate cost
$ 443,044,301
Pay
Notional
Gross unrealized appreciation
$ 12,539,776
Fixed
Counter-
Amount
Unrealized
Gross unrealized depreciation
(52,305,886)
Issuer
Rate
party
Expiration
(000)
Appreciation
Net unrealized depreciation
$ (39,766,110)
Ford Motor Co.
5.00%
Deutsche
September
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933.
Bank AG
2014
USD 275
$ 4,930
These securities may be resold in transactions exempt from registration to qualified
institutional investors.
Credit default swaps on single-name issues sold protection outstanding as of
October 31, 2009 were as follows:
(b) Non-income producing security.
(c) Variable rate security. Rate shown is as of report date.
Receive
Notional
Fixed
Counter-
Credit
Amount
Unrealized
(d) Issuer filed for bankruptcy and/or is in default of interest payments.
Issuer
Rate
party Expiration Rating1 (000)2 Depreciation
(e) Represents a payment-in-kind security which may pay interest/dividends in
additional par/shares.
BAA Ferrovial
Junior Term
Deutsche
Loan
2.00%
Bank AG March 2012
NR
GPB 1,800 $
(388,694)
1
Using Standard & Poors rating of the issuer.
2
The maximum potential amount the Fund may pay should a negative credit
event take place as defined under the terms of the agreement.
See Notes to Financial Statements.
34
ANNUAL REPORT
OCTOBER 31, 2009
Schedule of Investments (concluded)
BlackRock Floating Rate Income Trust (BGT)
Credit default swaps on index issue buy protection oustanding as of October 31,
The following table summarizes the inputs used as of October 31, 2009 in
2009 were as follows:
determining the fair valuation of the Funds investments:
Valuation
Investments in
Pay
Notional
Inputs
Securities
Fixed
Counter-
Amount
Unrealized
Issuer
Rate
party
Expiration
(000)
Depreciation
Assets
Level 1
LCDX North
Long-Term Investments:
America Index
Common Stocks
$ 90,850
Series 12
Credit Suisse
June
Short-Term Securities
9,320,934
Volume 1
5.00% International
2014
USD 465
$ (65,282)
Total Level 1
9,411,784
Fair Value Measurements Various inputs are used in determining the fair value of
Level 2
investments, which are as follows:
Long-Term Investments:
Common Stocks
107,959
Level 1 price quotations in active markets/exchanges for identical assets
Corporate Bonds
78,186,766
and liabilities
Floating Rate Loan Interests
214,513,792
Level 2 other observable inputs (including, but not limited to: quoted prices
for
Foreign Government Obligations
13,472,795
similar assets or liabilities in markets that are active, quoted prices for identical
Preferred Securities
22,500
or similar assets or liabilities in markets that are not active, inputs other than
Warrants
2,176
quoted prices that are observable for the assets or liabilities (such as interest
Total Level 2
306,305,988
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and
Level 3
default rates) or other market-corroborated inputs)
Long-Term Investments:
Level 3 unobservable inputs based on the best information available in the
Common Stocks
112,485
Corporate Bonds
288,246
circumstances, to the extent observable inputs are not available (including the
Floating Rate Loan Interests
84,427,073
Funds own assumptions used in determining the fair value of investments)
Other Interests
2,726,281
The inputs or methodology used for valuing securities are not necessarily an indica-
Warrants
224
tion of the risk associated with investing in those securities. For information about
Total Level 3
87,554,309
the Funds policy regarding valuation of investments and other significant accounting
Total
$ 403,272,081
policies, please refer to Note 1 of the Notes to Financial Statements.
Valuation
Other Financial
Inputs
Instruments1
Assets
Liabilities
Level 1
Level 2
$ 11,040
$ (716,245)
Level 3
1,531
(461,174)
Total
$ 12,571
$ (1,177,419)
1
Other financial instruments are swaps, foreign currency exchange contracts,
unfunded loan commitments and options. Swaps, foreign currency exchange
contracts and unfunded loan commitments are valued at the unrealized appre-
ciation/depreciation on the instrument and options are shown at market value.
The following is a reconciliation of investments for unobservable inputs (Level 3) used in determining fair value:
Investments in Securities
Common
Corporate
Floating Rate
Other
Stocks
Bonds
Loan Interests
Interests
Warrants
Total
Balance, as of October 31, 2008
$120,800,878 $
318
$ 120,801,196
Accrued discounts/premiums
103,138
103,138
Realized gain (loss)
(20,210,121)
(20,210,121)
Change in unrealized appreciation/depreciation2
34,906,002
(2,383,496) $
(8,051)
32,514,455
Net purchases (sales)
(44,870,950)
2,383,369
8,051
(42,479,530)
Net transfers in/out of Level 3
$ 112,485
$ 288,246
(6,301,874)
2,726,090
224
(3,174,829)
Balance as of October 31, 2009
$ 112,485
$ 288,246 $ 84,427,073 $
2,726,281 $
224
$ 87,554,309
2 Included in the related net change in unrealized appreciation/depreciation on the
Statements of Operations.
Investments in
Other Financial
Instruments
Assets
Liabilities
Balance, as of October 31, 2008
$ (543,254)
Accrued discounts/premiums
Realized gain (loss)
Change in unrealized appreciation/depreciation
154,560
Net purchases (sales)
Net transfers in/out of Level 3
$ 1,531
(72,480)
Balance, as of October 31, 2009
$ 1,531
$ (461,174)
See Notes to Financial Statements.
ANNUAL REPORT
OCTOBER 31, 2009
35
Statements of Assets and Liabilities
BlackRock
BlackRock
BlackRock
BlackRock
BlackRock
BlackRock
Credit
Credit
Credit
Credit
Enhanced
Floating
Allocation
Allocation
Allocation
Allocation
Capital
Rate
Income
Income
Income
Income
and Income
Income
Trust I, Inc.
Trust II, Inc.
Trust III
Trust IV
Fund, Inc.
Trust
October 31, 2009
(PSW)
(PSY)
(BPP)
(BTZ)
(CII)
(BGT)
Assets
Investments at value unaffiliated1
$ 80,372,818
$ 399,129,254
$ 172,356,269
$ 555,220,835
$ 604,321,715
$ 393,957,257
Investments at value affiliated2
33,286,296
41,019,397
51,450,797
267,832,781
24,567,455
9,320,934
Unrealized appreciation on swaps
4,930
Cash
702
320
179,334
Cash collateral pledged for options written
1,228,905
Cash collateral for swaps
600,000
600,000
Swap premiums paid
102,776
Foreign currency at value3
424
529
49
7,407
9,337,968
Investments sold receivable
38,531,774
141,858,976
62,124,877
117,670,917
18,280,263
6,625,542
Interest receivable
1,232,806
6,597,165
2,228,881
7,302,689
3,131,832
Dividends receivable
129,555
133,293
58,707
832,499
1,348,426
Margin variation receivable
26,000
36,719
20,563
197,020
Income receivable affiliated
204
256
304
341
Swaps receivable
6,893
Principal paydown receivable
2,934
Other assets
52,733
55,181
81,418
124,654
Prepaid expenses
54,878
86,085
41,606
119,075
55,894
127,541
Total assets
153,634,551
588,913,826
288,338,368
949,857,907
649,810,065
423,522,936
Liabilities
Unrealized depreciation on swaps
168,952
337,904
168,952
675,809
453,976
Unrealized depreciation on unfunded loan commitments
70,949
Unrealized depreciation on foreign currency
exchange contracts
650,963
Loan payable
14,000,000
Options written at value4
166,210
6,377,146
Reverse repurchase agreements
4,972,041
9,510,590
13,234,688
61,576,368
Investments purchased payable
12,023,936
24,384,912
35,248,237
Investment advisory fees payable
71,449
303,207
159,933
522,028
469,580
206,219
Income dividends payable Common Shares
36,588
196,712
69,120
550,627
51,113
Swaps payable
6,067
12,133
6,067
24,267
4,317
Interest payable
1,761
3,368
4,687
21,808
40,826
Other affiliates payable
728
3,172
1,636
5,428
3,882
2,224
Officers and Directors fees payable
181
53,660
56,606
82,674
1,287
78,876
Other accrued expenses payable
45,591
109,424
76,539
189,457
111,544
185,052
Other liabilities
845,950
Total liabilities
17,327,294
10,530,170
13,778,228
63,814,676
31,348,351
51,838,702
Preferred Shares at Redemption Value
$25,000 per share liquidation preferrence, plus
unpaid dividends5,6,7
40,258,949
169,090,727
70,426,884
231,044,104
58,812,035
Net Assets Applicable to Common Shareholders
$ 96,048,308
$ 409,292,929
$ 204,133,256
$ 654,999,127
$ 618,461,714
$ 312,872,199
Net Assets Applicable to Common Shareholders Consist of
Paid-in capital8,9,10
$ 237,664,112
$ 942,700,922
$ 423,649,824
$1,138,011,175
$ 808,123,162
$ 427,560,397
Undistributed (distributions in excess of) net
investment income
636,666
2,088,988
952,028
1,348,832
(397,610)
Accumulated net realized loss
(128,402,541)
(451,276,374)
(187,666,466)
(403,003,336)
(131,729,362)
(73,097,284)
Net unrealized appreciation/depreciation
(13,849,929)
(84,220,607)
(32,802,130)
(81,357,544)
(57,932,086)
(41,193,304)
Net Assets Applicable to Common Shareholders
$ 96,048,308
$ 409,292,929
$ 204,133,256
$ 654,999,127
$ 618,461,714
$ 312,872,199
Net asset value per Common Share
$ 9.31
$ 10.03
$ 11.05
$ 12.64
$ 14.40
$ 13.29
1 Investments at cost unaffiliated
$ 94,148,823
$ 483,046,802
$ 205,009,029
$ 637,401,845
$ 665,068,380
$ 433,694,917
2 Investments at cost affiliated
$ 33,286,296
$ 41,019,397
$ 51,450,797
$ 267,832,781
$ 24,567,455
$ 9,320,934
3 Foreign currency at cost
$ 368
$ 459
$ 43
$ 9,142
$ 9,386,817
4 Premiums received
$ 828,039
$ 9,193,459
5 Preferred Shares par value per share
$ 0.10
$ 0.10
$ 0.001
$ 0.001
$ 0.001
6 Preferred Shares outstanding
1,610
6,761
2,817
9,240
2,352
7 Preferred Shares authorized
5,460
22,000
unlimited
unlimited
unlimited
8 Common Shares par value per share
$ 0.10
$ 0.10
$ 0.001
$ 0.001
$ 0.10
$ 0.001
9 Common Shares outstanding
10,311,941
40,807,418
18,467,785
51,828,157
42,953,312
23,545,239
10 Common Shares authorized
199,994,540
199,978,000
unlimited
unlimited
200 million
unlimited
See Notes to Financial Statements.
36
ANNUAL REPORT
OCTOBER 31, 2009
Statements of Operations
BlackRock
BlackRock
BlackRock
BlackRock
BlackRock
BlackRock
Credit
Credit
Credit
Credit
Enhanced
Floating
Allocation
Allocation
Allocation
Allocation
Capital
Rate
Income
Income
Income
Income
and Income
Income
Trust I, Inc.
Trust II, Inc.
Trust III
Trust IV
Fund, Inc.
Trust
Year Ended October 31, 2009
(PSW)
(PSY)
(BPP)
(BTZ)
(CII)
(BGT)
Investment Income
Interest
$ 7,416,978
$ 37,527,272
$ 17,161,194
$ 41,120,279
$ 1,342
$ 26,881,305
Dividends
2,464,323
11,794,850
5,227,665
18,091,488
17,659,173
Foreign taxes withheld
(115,844)
Income affiliated
130,058
155,313
133,485
486,591
143,663
23,848
Facility and other fees
503,103
Total income
10,011,359
49,477,435
22,522,344
59,698,358
17,688,334
27,408,256
Expenses
Investment advisory
732,203
3,091,438
1,631,690
5,363,633
4,832,658
2,774,485
Commissions for Preferred Shares
74,688
348,733
134,702
375,820
102,063
Professional
66,950
72,163
79,888
142,814
75,892
253,450
Transfer agent
46,330
126,203
37,871
35,582
93,722
29,425
Accounting services
21,930
120,409
84,218
163,930
161,229
58,206
Printing
14,291
58,934
55,147
147,566
45,877
73,520
Officer and Directors
10,058
53,432
35,932
90,453
70,049
49,794
Registration
9,180
13,907
9,278
17,673
14,571
10,416
Custodian
6,980
24,134
15,059
36,325
52,648
55,304
Borrowing costs1
391,557
Miscellaneous
61,634
107,378
63,515
130,998
52,161
117,808
Total expenses excluding interest expense
1,044,244
4,016,731
2,147,300
6,504,794
5,398,807
3,916,028
Interest expense
102,223
229,496
389,341
1,784,509
1,140,406
Total expenses
1,146,467
4,246,227
2,536,641
8,289,303
5,398,807
5,056,434
Less fees waived by advisor
(14,003)
(14,491)
(21,506)
(95,646)
(7,172)
(709,042)
Less fees paid indirectly
(1,843)
(852)
(3,758)
(1,210)
Total expenses after fees waived and
paid indirectly
1,130,621
4,230,884
2,511,377
8,192,447
5,391,635
4,347,392
Net investment income
8,880,738
45,246,551
20,010,967
51,505,911
12,296,699
23,060,864
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments
(55,149,960)
(188,070,488)
(112,478,894)
(248,073,396)
(103,821,441)
(44,719,252)
Financial futures contracts and swaps
(1,780,676)
(8,923,503)
(3,915,858)
(2,741,351)
(617,742)
(1,014,281)
Foreign currency transactions
4,366
34,450
1,348
22,255
(2,653,326)
Options written
-
3,763,345
52,995,108
(56,926,270)
(196,959,541)
(116,393,404)
(247,029,147)
(51,444,075)
(48,386,859)
Net change in unrealized appreciation/depreciation on:
Investments
77,627,511
284,111,656
160,001,314
372,102,104
142,551,744
118,712,825
Financial futures contracts and swaps
527,517
1,647,334
906,527
4,642,624
371,495
Foreign currency transactions
(4,229)
(32,957)
(990)
(158,256)
(948)
(6,642,896)
Options written
2,230,492
5,758,405
Unfunded corporate loans
96,088
78,150,799
285,726,033
160,906,851
378,816,964
148,309,201
112,537,512
Total realized and unrealized gain
21,224,529
88,766,492
44,513,447
131,787,817
96,865,126
64,150,653
Dividends to Preferred Shareholders From
Net investment income
(774,824)
(3,570,342)
(577,861)
(3,828,948)
(971,243)
Net Increase in Net Assets Applicable to Common
Shareholders Resulting from Operations
$ 29,330,443
$ 130,442,701
$ 63,946,553
$ 179,464,780
$ 109,161,825
$ 86,240,274
1 See Note 8 of the Notes to the Financial Statements for details of
borrowings.
See Notes to Financial Statements.
ANNUAL REPORT
OCTOBER 31, 2009
37
Statements of Changes in Net Assets
BlackRock Credit Allocation
BlackRock Credit Allocation
Income Trust I, Inc. (PSW)
Income Trust II, Inc. (PSY)
Increase (Decrease) in Net Assets
Year Ended October 31,
Year Ended October 31,
Applicable to Common Shareholders:
2009
2008
2009
2008
Operations
Net investment income
$ 8,880,738
$ 17,531,692
$ 45,246,551
$ 70,160,283
Net realized loss
(56,926,270)
(40,404,468)
(196,959,541)
(147,042,661)
Net change in unrealized appreciation/depreciation
78,150,799
(83,863,786)
285,726,033
(333,625,419)
Dividends to Preferred Shareholders from net investment income
(774,824)
(4,921,335)
(3,570,342)
(19,937,495)
Net increase (decrease) in net assets applicable to Common Shareholders
resulting from operations
29,330,443
(111,657,897)
130,442,701
(430,445,292)
Dividends and Distributions to Common Shareholders From
Net investment income
(8,498,069)
(12,521,666)
(45,358,157)
(46,831,403)
Tax return of capital
(1,345,345)
(545,246)
(116,310)
(9,002,427)
Decrease in net assets resulting from dividends and distributions
to Common Shareholders
(9,843,414)
(13,066,912)
(45,474,467)
(55,833,830)
Capital Share Transactions
Reinvestment of common dividends
131,419
1,192,453
Net Assets Applicable to Common Shareholders
Total increase (decrease) in net assets
19,618,448
(124,724,809)
86,160,687
(486,279,122)
Beginning of year
76,429,860
201,154,669
323,132,242
809,411,364
End of year
$ 96,048,308
$ 76,429,860
$ 409,292,929
$ 323,132,242
Undistributed net investment income
$ 636,666
$ 1,283,192
$ 2,088,988
$ 7,207,075
BlackRock Credit Allocation
BlackRock Credit Allocation
Income Trust III (BPP)
Income Trust IV (BTZ)
Year
Period
Year
Ended
January 1, 2008
Ended
Year Ended
Increase (Decrease) in Net Assets
October 31,
to October 31,
December 31,
October 31,
Applicable to Common Shareholders:
2009
2008
2007
2009
2008
Operations
Net investment income
$ 20,010,967
$ 27,233,861
$ 37,729,277
$ 51,505,911
$ 68,908,426
Net realized loss
(116,393,404)
(47,985,932)
(24,690,221)
(247,029,147)
(113,133,432)
Net change in unrealized appreciation/depreciation
160,906,851
(149,715,592)
(61,889,014)
378,816,964
(408,221,553)
Dividends and distributions to Preferred Shareholders from:
Net investment income
(577,861)
(5,653,232)
(11,458,715)
(3,828,948)
(17,100,517)
Net realized gain
(87,490)
Net increase (decrease) in net assets applicable to Common Shareholders
resulting from operations
63,946,553
(176,120,895)
(60,396,163)
179,464,780
(469,547,076)
Dividends and Distributions to Common Shareholders From
Net investment income
(17,461,459)
(15,206,928)
(29,219,599)
(48,398,817)
(46,857,132)
Net realized gain
(312,510)
Tax return of capital
(4,250,036)
(5,480,035)
(2,820,986)
(24,678,883)
(43,518,226)
Decrease in net assets resulting from dividends and distributions
to Common Shareholders
(21,711,495)
(20,686,963)
(32,353,095)
(73,077,700)
(90,375,358)
Capital Share Transactions
Reinvestment of common dividends
587,363
101,702
770,755
Net Assets Applicable to Common Shareholders
Total increase (decrease) in net assets
42,822,421
(196,706,156)
(91,978,503)
106,387,080
(559,922,434)
Beginning of period
161,310,835
358,016,991
449,995,494
548,612,047
1,108,534,481
End of period
$ 204,133,256
$ 161,310,835
$ 358,016,991
$ 654,999,127
$ 548,612,047
Undistributed (distributions in excess of) net investment income
$ 952,028
$ 2,846,583
$ (2,571,328)
$ 1,348,832
$ 3,486,479
See Notes to Financial Statements.
38
ANNUAL REPORT
OCTOBER 31, 2009
Statements of Changes in Net Assets (concluded)
BlackRock Enhanced Capital
BlackRock
and Income Fund, Inc. (CII)
Floating Rate Income Trust (BGT)
Year
Period January 1,
Year
Year
Period
Year
Ended
2008 to
Ended
Ended
January 1, 2008
Ended
Increase (Decrease) in Net Assets
October 31,
October 31,
December 31,
October 31,
to October 31,
December 31,
Applicable to Common Shareholders:
2009
2008
2007
2009
2008
2007
Operations
Net investment income
$ 12,296,699
$ 2,834,944
$ 3,828,423
$ 23,060,864
$ 33,370,850
$ 47,903,772
Net realized gain (loss)
(51,444,075)
5,942,502
24,442,607
(48,386,859)
(19,428,459)
(10,326,522)
Net change in unrealized appreciation/depreciation
148,309,201
(83,432,417)
(17,410,396)
112,537,512
(136,762,427)
(22,345,656)
Dividends to Preferred Shareholders from net
investment income
(971,243)
(5,542,312)
(12,723,631)
Net increase (decrease) in net assets applicable to
Common Shareholders resulting from operations
109,161,825
(74,654,971)
10,860,634
86,240,274
(128,362,348)
2,507,963
Dividends and Distributions to Common Shareholders From
Net investment income
(12,510,205)
(2,820,467)
(4,178,081)
(27,963,106)
(24,133,870)
(26,833,571)
Net realized gain
(50,728,478)
(7,621,956)
(25,569,419)
Tax return of capital
(19,660,314)
(7,292,188)
(9,994,857)
(8,473,282)
Decrease in net assets resulting from dividends and
distributions to shareholders
(82,898,997)
(17,734,611)
(29,747,500)
(37,957,963)
(24,133,870)
(35,306,853)
Capital Share Transactions
Value of shares resulting from reorganization
420,968,153
Reinvestment of common dividends
3,234,875
820,433
Net increase in net assets derived from
capital share transactions
424,203,028
820,433
Net Assets Applicable to Common Shareholders
Total increase (decrease) in net assets
450,465,856
(92,389,582)
(18,886,866)
48,282,311
(152,496,218)
(31,978,457)
Beginning of period
167,995,858
260,385,440
279,272,306
264,589,888
417,086,106
449,064,563
End of period
$ 618,461,714
$ 167,995,858
$ 260,385,440
$ 312,872,199
$ 264,589,888
$ 417,086,106
Undistributed (distributions in excess of)
net investment income
$ 205,627
$ (397,610)
$ 8,661,698
$ 219,332
See Notes to Financial Statements.
ANNUAL REPORT
OCTOBER 31, 2009
39
Statement of Cash Flows
BlackRock
Floating Rate
Income
Year Ended October 31, 2009
Trust (BGT)
Cash Provided by Operating Activities
Net increase in net assets resulting from operations, excluding dividends to Preferred Shareholders
$ 87,211,517
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities:
Decrease in interest receivable
2,477,996
Decrease in commitment fees receivable
2,301
Increase in other assets
(37,618)
Increase in income receivable affiliated
(341)
Increase in prepaid expenses
(74,683)
Decrease in swaps receivable
19,241
Decrease in swaps payable
(150,019)
Decrease in investment advisor payable
(37,245)
Decrease in interest expense payable
(86,768)
Decrease in other affiliates payable
(884)
Increase in accrued expenses payable
24,637
Increase in other liabilities
838,450
Increase in Officers and Directors payable
30,273
Net realized and unrealized gain
(67,171,527)
Amortization of premium and discount on investments
(2,498,618)
Paid-in-kind income
(890,200)
Increase in cash collateral on swaps
(600,000)
Net periodic and termination payments of swaps
(340,836)
Proceeds from sales and paydowns of long-term investments
262,712,645
Purchases of long-term investments
(131,639,514)
Net purchases of short-term securities
(7,820,185)
Cash provided by operating activities
141,968,622
Cash Used for Financing Activities
Cash receipts from borrowings
163,209,375
Cash payments from borrowings
(272,359,375)
Cash dividends paid to Common Shareholders
(38,016,260)
Cash dividends paid to Preferred Shareholders
(980,133)
Cash used for financing activities
(148,146,393)
Cash Impact from Foreign Exchange Fluctuations
Cash impact from foreign exchange fluctuations
146,028
Cash:
Net decrease in cash
(6,031,743)
Cash and foreign currency at beginning of year
15,549,045
Cash and foreign currency at end of year
$ 9,517,302
Cash Flow Information:
Cash paid during the year for interest
$ 1,227,174
A Statement of Cash Flows is presented when a Fund had a significant amount of borrowing during the year, based on the average borrowing
outstanding
in relation to total assets.
See Notes to Financial Statements.
40
ANNUAL REPORT
OCTOBER 31, 2009
Financial Highlights
BlackRock Credit Allocation Income Trust I, Inc. (PSW)
Year Ended October 31,
2009
2008
2007
2006
2005
Per Share Operating Performance
Net asset value, beginning of year
$ 7.43
$ 19.54
$ 22.25
$ 22.36
$ 23.69
Net investment income
0.861
1.701
2.011
2.141
2.16
Net realized and unrealized gain (loss)
2.06
(12.06)
(2.41)
0.07
(1.09)
Dividends to Preferred Shareholders from net investment income
(0.08)
(0.48)
(0.71)
(0.63)
(0.40)
Net increase (decrease) from investment operations
2.84
(10.84)
(1.11)
1.58
0.67
Dividends and distributions to Common Shareholders from:
Net investment income
(0.83)
(1.22)
(1.18)
(1.69)
(2.00)
Tax return of capital
(0.13)
(0.05)
(0.42)
Total dividends and distributions
(0.96)
(1.27)
(1.60)
(1.69)
(2.00)
Net asset value, end of year
$ 9.31
$ 7.43
$ 19.54
$ 22.25
$ 22.36
Market price, end of year
$ 8.24
$ 7.00
$ 17.29
$ 21.26
$ 21.03
Total Investment Return2
Based on net asset value
46.46%
(58.09)%
(5.03)%
7.97%
3.25%
Based on market price
37.59%
(55.38)%
(12.05)%
9.69%
0.73%
Ratios to Average Net Assets Applicable to Common Shareholders
Total expenses3
1.61%
2.00%
1.32%
1.29%
1.26%
Total expenses after fees waived and paid indirectly3
1.59%
2.00%
1.32%
1.29%
1.26%
Total expenses after fees waived and paid indirectly and excluding
interest expense3
1.44%
1.48%
1.29%
1.29%
1.26%
Net investment income3
12.45%
10.79%
9.38%
9.70%
9.23%
Dividends to Preferred Shareholders
1.09%
3.03%
3.29%
2.84%
1.71%
Net investment income to Common Shareholders
11.36%
7.76%
6.09%
6.86%
7.52%
Supplemental Data
Net assets applicable to Common Shareholders, end of year (000)
$ 96,048
$ 76,430
$ 201,155
$ 228,734
$ 229,850
Preferred Shares outstanding at $25,000 liquidation preference, end of year (000)
$ 40,250
$ 68,250
$ 136,500
$ 136,500
$ 136,500
Borrowings outstanding, end of year (000)
$ 4,972
$ 4,024
$ 590
Average borrowings outstanding, during the year (000)
$ 5,321
$ 25,692
$ 2,690
Portfolio turnover
36%
119%
88%
19%
25%
Asset coverage per Preferred Share at $25,000 liquidation preference, end of year
$ 84,663
$ 53,009
$ 61,846
$ 66,907
$ 67,115
1 Based on average shares outstanding.
2 Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result in substantially different returns.
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and
distributions.
3 Do not reflect the effect of dividends to Preferred
Shareholders.
See Notes to Financial Statements.
ANNUAL REPORT
OCTOBER 31, 2009
41
Financial Highlights
BlackRock Credit Allocation Income Trust II, Inc. (PSY)
Year Ended October 31,
2009
2008
2007
2006
2005
Per Share Operating Performance
Net asset value, beginning of year
$ 7.96
$ 19.93
$ 22.36
$ 22.26
$ 23.48
Net investment income1
1.11
1.73
2.02
2.03
2.09
Net realized and unrealized gain (loss)
2.17
(11.84)
(2.35)
0.32
(0.91)
Dividends to Preferred Shareholders from net investment income
(0.09)
(0.49)
(0.73)
(0.65)
(0.40)
Net increase (decrease) from investment operations
3.19
(10.60)
(1.06)
1.70
0.78
Dividends and distributions to Common Shareholders from:
Net investment income
(1.12)
(1.15)
(1.16)
(1.51)
(2.00)
Tax return of capital
2
(0.22)
(0.21)
(0.09)
Total dividends and distributions
(1.12)
(1.37)
(1.37)
(1.60)
(2.00)
Net asset value, end of year
$ 10.03
$ 7.96
$ 19.93
$ 22.36
$ 22.26
Market price, end of year
$ 8.90
$ 8.10
$ 16.94
$ 20.12
$ 21.20
Total Investment Return3
Based on net asset value
48.36%
(55.71)%
(4.35)%
8.77%
3.73%
Based on market price
29.37%
(46.97)%
(9.65)%
2.77%
1.43%
Ratios to Average Net Assets Applicable to Common Shareholders
Total expenses4
1.41%
1.90%
1.27%
1.23%
1.20%
Total expenses after fees waived and paid indirectly4
1.41%
1.90%
1.27%
1.23%
1.20%
Total expenses after fees waived and paid indirectly and excluding
interest expense4
1.33%
1.40%
1.23%
1.23%
1.20%
Net investment income4
15.05%
10.71%
9.29%
9.26%
8.96%
Dividends to Preferred Shareholders
1.19%
3.04%
3.34%
2.96%
1.73%
Net investment income to Common Shareholders
13.86%
7.67%
5.95%
6.30%
7.23%
Supplemental Data
Net assets applicable to Common Shareholders, end of year (000)
$ 409,293
$ 323,132
$ 809,411
$ 907,897
$ 903,601
Preferred Shares outstanding at $25,000 liquidation preference, end of year (000)
$ 169,025
$ 275,000
$ 550,000
$ 550,000
$ 550,000
Borrowings outstanding, end of year (000)
$ 9,511
$ 54,369
Average borrowings outstanding, during the year (000)
$ 15,842
$ 94,908
$ 14,375
Portfolio turnover
16%
120%
81%
18%
28%
Asset coverage per Preferred Share at $25,000 liquidation preference, end of year
$ 85,547
$ 54,408
$ 61,817
$ 66,294
$ 66,077
1 Based on average shares outstanding.
2 Amount is less than $(0.01) per share.
3 Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result in substantially different returns.
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and
distributions.
4 Do not reflect the effect of dividends to Preferred
Shareholders.
See Notes to Financial Statements.
42
ANNUAL REPORT
OCTOBER 31, 2009
Financial Highlights
BlackRock Credit Allocation Income Trust III (BPP)
Period
Year
January 1,
Ended
2008 to
October 31,
October 31,
Year Ended December 31,
2009
2008
2007
2006
2005
2004
Per Share Operating Performance
Net asset value, beginning of period
$ 8.77
$ 19.47
$ 24.52
$ 24.43
$ 25.88
$ 25.58
Net investment income
1.091
1.481
2.05
2.05
2.11
2.22
Net realized and unrealized gain (loss)
2.40
(10.74)
(4.72)
0.62
(0.82)
0.33
Dividends and distributions to Preferred Shareholders from:
Net investment income
(0.03)
(0.31)
(0.62)
(0.46)
(0.26)
(0.16)
Net realized gain
(0.12)
(0.13)
(0.02)
Net increase (decrease) from investment operations
3.46
(9.57)
(3.29)
2.09
0.90
2.37
Dividends and distributions to Common Shareholders from:
Net investment income
(0.95)
(0.83)
(1.59)
(1.58)
(1.74)
(2.00)
Net realized gain
(0.02)
(0.42)
(0.61)
(0.07)
Tax return of capital
(0.23)
(0.30)
(0.15)
Total dividends and distributions
(1.18)
(1.13)
(1.76)
(2.00)
(2.35)
(2.07)
Net asset value, end of period
$ 11.05
$ 8.77
$ 19.47
$ 24.52
$ 24.43
$ 25.88
Market price, end of period
$ 9.94
$ 8.51
$ 17.31
$ 26.31
$ 24.20
$ 25.39
Total Investment Return2
Based on net asset value
47.16%
(51.22)%3
(13.86)%
8.89%
3.81%
10.15%
Based on market price
36.42%
(46.76)%3
(28.62)%
17.98%
4.83%
11.01%
Ratios to Average Net Assets Applicable to Common Shareholders
Total expenses4
1.66%
1.96%5
1.46%
1.62%
1.51%
1.44%
Total expenses after fees waived and paid indirectly4
1.64%
1.96%5
1.45%
1.62%
1.51%
1.44%
Total expenses after fees waived and paid indirectly and excluding
interest expense4
1.39%
1.39%5
1.24%
1.25%
1.22%
1.19%
Net investment income4
13.08%
10.53%5
8.90%
8.46%
8.37%
8.66%
Dividends paid to Preferred Shareholders
0.38%
2.19%5
2.70%
1.89%
1.27%
0.62%
Net investment income to Common Shareholders
12.70%
8.34%5
6.20%
6.58%
7.10%
8.04%
Supplemental Data
Net assets applicable to Common Shareholders, end of period (000)
$ 204,133
$ 161,311
$ 358,017
$ 449,995
$ 447,190
$ 473,809
Preferred Shares outstanding at $25,000 liquidation preference,
end of period (000)
$ 70,425
$ 110,400
$ 220,800
$ 220,800
$ 220,800
$ 220,800
Borrowings outstanding, end of period (000)
$ 13,235
$ 44,281
Average borrowings outstanding, during the period (000)
$ 16,330
$ 51,995
$ 903
$ 1,303
$ 2,904
$ 782
Portfolio turnover
16%
121%
97%
91%
77%
88%
Asset coverage per Preferred Share at $25,000 liquidation preference,
end of period
$ 97,465
$ 61,540
$ 65,554
$ 75,965
$ 75,642
$ 78,650
1 Based on average shares outstanding.
2 Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result in substantially different returns.
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and
distributions.
3 Aggregate total investment return.
4 Do not reflect the effect of dividends to Preferred
Shareholders.
5 Annualized.
See Notes to Financial Statements.
ANNUAL REPORT
OCTOBER 31, 2009
43
Financial Highlights
BlackRock Credit Allocation Income Trust IV (BTZ)
Period
December 27,
20061 to
Year Ended October 31,
October 31,
2009
2008
2007
Per Share Operating Performance
Net asset value, beginning of period
$ 10.59
$ 21.39
$ 23.882
Net investment income
0.993
1.333
1.25
Net realized and unrealized gain (loss)
2.54
(10.06)
(1.86)
Dividends to Preferred Shareholders from net investment income
(0.07)
(0.33)
(0.31)
Net increase (decrease) from investment operations
3.46
(9.06)
(0.92)
Dividends and distributions to Common Shareholders from:
Net investment income
(0.93)
(0.90)
(0.93)
Tax return of capital
(0.48)
(0.84)
(0.47)
Total dividends and distributions
(1.41)
(1.74)
(1.40)
Capital charge with respect to issuance of:
Common Shares
(0.04)
Preferred Shares
(0.13)
Total capital charges
(0.17)
Net asset value, end of period
$ 12.64
$ 10.59
$ 21.39
Market price, end of period
$ 10.96
$ 9.36
$ 18.65
Total Investment Return4
Based on net asset value
41.06%
(44.27)%
(4.42)%5
Based on market price
38.38%
(43.51)%
(20.34)%5
Ratios to Average Net Assets Applicable to Common Shareholders
Total expenses6
1.60%
1.65%
1.90%7
Total expenses after fees waived and paid indirectly6
1.58%
1.65%
1.88%7
Total expenses after fees waived and paid indirectly and excluding interest expense6
1.24%
1.21%
1.04%7
Net investment income6
9.93%
7.63%
6.50%7
Dividends to Preferred Shareholders
0.74%
1.89%
1.64%7
Net investment income to Common Shareholders
9.19%
5.74%
4.86%7
Supplemental Data
Net assets applicable to Common Shareholders, end of period (000)
$ 654,999
$ 548,612
$ 1,108,534
Preferred Shares outstanding at $25,000 liquidation preference, end of period (000)
$ 231,000
$ 231,000
$ 462,000
Borrowings outstanding, end of period (000)
$ 61,576
$ 223,512
$ 88,291
Average borrowings outstanding, during the period (000)
$ 76,521
$ 107,377
$ 96,468
Portfolio turnover
30%
126%
35%
Asset coverage per Preferred Share at $25,000 liquidation preference, end of period
$ 95,892
$ 84,384
$ 89,737
1 Commencement of operations. This information includes the initial
investment by BlackRock Funding, Inc.
2 Net asset value, beginning of period, reflects a deduction of
$1.12 per share sales charge from initial offering price of $25.00 per share.
3 Based on average shares outstanding.
4 Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result in substantially different returns.
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and
distributions.
5 Aggregate total investment return.
6 Do not reflect the effect of dividends to Preferred
Shareholders.
7 Annualized.
See Notes to Financial Statements.
44
ANNUAL REPORT
OCTOBER 31, 2009
Financial Highlights
BlackRock Enhanced Capital and Income Fund, Inc. (CII)
Period
Period
Year
January 1,
April 30,
Ended
2008 to
20041 to
Year Ended December 31,
October 31,
October 31,
December 31,
2009
2008
2007
2006
2005
2004
Per Share Operating Performance
Net asset value, beginning of period
$ 13.78
$ 21.36
$ 22.91
$ 20.31
$ 20.76
$ 19.102
Net investment income
0.293
0.233
0.313
0.373
0.463
0.46
Net realized and unrealized gain (loss)
2.27
(6.36)
0.58
3.69
0.29
1.84
Net increase (decrease) from investment operations
2.56
(6.13)
0.89
4.06
0.75
2.30
Dividends and distributions from:
Net investment income
(0.29)
(0.23)
(0.34)
(0.33)
(0.47)
(0.48)
Net realized gain
(1.19)
(0.62)
(2.10)
(1.13)
(0.73)
(0.11)
Tax return of capital
(0.46)
(0.60)
(0.01)
Total dividends and distributions
(1.94)
(1.45)
(2.44)
(1.46)
(1.20)
(0.60)
Capital charges with respect to the issuance of shares
(0.04)
Net asset value, end of period
$ 14.40
$ 13.78
$ 21.36
$ 22.91
$ 20.31
$ 20.76
Market price, end of period
$ 13.76
$ 12.37
$ 20.06
$ 20.41
$ 17.21
$ 18.32
Total Investment Return4
Based on net asset value
22.01%
(29.46)%5
4.79%
21.70%
4.69%
12.30%5
Based on market price
29.88%
(32.58)%5
10.47%
27.95%
0.52%
(5.36)%5
Ratios to Average Net Assets
Total expenses
0.95%
1.10%6
1.96%
3.54%
2.96%
2.19%6
Total expenses after fees waived and paid indirectly
0.95%
1.10%6
1.96%
3.54%
2.96%
1.96%6
Total expenses after fees waived and paid indirectly
and excluding interest expense
0.95%
1.01%6
1.19%
1.42%
1.47%
1.20%6
Net investment income
2.16%
1.46%6
1.36%
1.75%
2.28%
3.52%6
Supplemental Data
Net assets, end of period (000)
$ 618,462
$ 167,996
$ 260,385
$ 279,272
$ 260,638
$ 266,345
Borrowings outstanding, end of period (000)
$ 100,000
$ 109,000
$ 109,000
Average borrowings outstanding, during the period (000)
$ 38,788
$ 107,504
$ 109,000
$ 98,750
Portfolio turnover
138%
45%
63%
38%
61%
20%
Asset coverage, end of period per $1,000
$ 3,793
$ 3,391
$ 3,444
1 Commencement of operations. This information includes the initial
investment by BlackRock Investment Managers, LLC.
2 Net asset value, beginning of period, reflects a deduction of
$0.90 per share sales charge from initial offering price of $20.00 per share.
3 Based on average shares outstanding.
4 Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result in substantially different returns.
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and
distributions.
5 Aggregate total investment return.
6 Annualized.
See Notes to Financial Statements.
ANNUAL REPORT
OCTOBER 31, 2009
45
Financial Highlights
BlackRock Floating Rate Income Trust (BGT)
Period
Period
Year
January 1,
August 30,
Ended
2008 to
20041 to
Year Ended December 31,
October 31,
October 31,
December 31,
2009
2008
2007
2006
2005
2004
Per Share Operating Performance
Net asset value, beginning of period
$ 11.24
$ 17.71
$ 19.11
$ 19.13
$ 19.21
$ 19.102
Net investment income
0.983
1.423
2.03
1.99
1.64
0.33
Net realized and unrealized gain (loss)
2.72
(6.62)
(1.39)
(0.06)
(0.17)
0.35
Dividends and distributions to Preferred Shareholders from:
Net investment income
(0.04)
(0.24)
(0.54)
(0.48)
(0.33)
(0.04)
Net realized gain
(0.01)
(0.00)4
Net increase (decrease) from investment operations
3.66
(5.44)
0.10
1.44
1.14
0.64
Dividends and distributions to Common Shareholders from:
Net investment income
(1.19)
(1.03)
(1.14)
(1.44)
(1.22)
(0.37)
Net realized gain
(0.02)
(0.00)4
Tax return of capital
(0.42)
(0.36)
Total dividends and distributions
(1.61)
(1.03)
(1.50)
(1.46)
(1.22)
(0.37)
Capital charges with respect to issuance of:
Common Shares
(0.04)
Preferred Shares
(0.12)
Total capital charges
(0.16)
Net asset value, end of period
$ 13.29
$ 11.24
$ 17.71
$ 19.11
$ 19.13
$ 19.21
Market price, end of period
$ 12.58
$ 9.63
$ 15.78
$ 19.27
$ 17.16
$ 18.63
Total Investment Return5
Based on net asset value
39.51%
(31.62)%6
0.98%
7.93%
6.63%
2.57%6
Based on market price
54.14%
(34.24)%6
(10.92)%
21.31%
(1.34)%
(5.00)%6
Ratios to Average Net Assets Applicable to Common Shareholders
Total expenses7
1.96%
2.22%8
1.67%
1.75%
1.56%
1.26%8
Total expenses after fees waived and paid indirectly7
1.68%
1.89%8
1.33%
1.43%
1.23%
0.97%8
Total expenses after fees waived and paid indirectly and excluding
interest expense7
1.24%
1.21%8
1.16%
1.19%
1.15%
0.97%8
Net investment income7
8.92%
10.56%8
10.83%
10.38%
8.52%
5.04%8
Dividends to Preferred Shareholders
0.38%
1.75%8
2.88%
2.51%
1.71%
0.62%8
Net investment income to Common Shareholders
8.54%
8.81%8
7.95%
7.87%
6.81%
4.42%8
Supplemental Data
Net assets applicable to Common Shareholders, end of period (000)
$ 312,872
$ 264,590
$ 417,086
$ 449,065
$ 449,219
$ 451,126
Preferred Shares outstanding at $25,000 liquidation preference,
end of period (000)
$ 58,800
$ 58,800
$ 243,450
$ 243,450
$ 243,450
$ 243,450
Borrowings outstanding, end of period (000)
$ 14,000
$ 123,150
$ 26,108
Average borrowings outstanding during the period (000)
$ 53,156
$ 71,780
$ 10,524
$ 19,562
$ 10,722
$ 114
Portfolio turnover
42%
25%
41%
50%
46%
11%
Asset coverage per Preferred Share at $25,000 liquidation preference,
end of period
$ 158,029
$ 137,505
$ 67,849
$ 73,810
$ 71,139
$ 71,330
1 Commencement of operations. This information includes the initial
investment by BlackRock Funding, Inc.
2 Net asset value, beginning of period, reflects a deduction of
$0.90 per share sales charge from initial offering price of $20.00 per share.
3 Based on average shares outstanding.
4 Amount is less than $(0.01) per share.
5 Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result in substantially different returns.
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and
distributions.
6 Aggregate total investment return.
7 Do not reflect the effect of dividends to Preferred
Shareholders.
8 Annualized.
See Notes to Financial Statements.
46
ANNUAL REPORT
OCTOBER 31, 2009
1. Organization and Significant Accounting Policies:
BlackRock Credit Allocation Income Trust I, Inc. (formerly BlackRock
Preferred and Corporate Income Strategies Fund, Inc.) (PSW), BlackRock
Credit Allocation Income Trust II, Inc. (formerly BlackRock Preferred Income
Strategies Fund, Inc.) (PSY) and BlackRock Enhanced Capital and
Income Fund, Inc. (CII) are registered as diversified, closed-end manage-
ment investment companies under the Investment Company Act of 1940,
as amended (the 1940 Act). BlackRock Credit Allocation Income Trust III
(formerly BlackRock Preferred Opportunity Trust) (BPP), BlackRock Credit
Allocation Income Trust IV (formerly BlackRock Preferred and Equity
Advantage Trust) (BTZ) and BlackRock Floating Rate Income Trust (for-
merly BlackRock Global Floating Rate Income Trust) (BGT) are registered
as non-diversified, closed-end management investment companies under
the 1940 Act. PSW, PSY and CII are organized as Maryland corporations.
BPP, BTZ and BGT are organized as Delaware statutory trusts. PSW, PSY,
BPP, BTZ, CII and BGT are collectively referred to as the Funds or individu-
ally as the Fund. The Funds financial statements are prepared in con-
formity with accounting principles generally accepted in the United States
of America, which may require the use of management accruals and esti-
mates. Actual results may differ from these estimates. The Board of Directors
and Board of Trustees of the Funds, as applicable, are referred to throughout
this report as the Board of Directors or the Board. The Funds determine
and make available for publication the net asset value of their Common
Shares on a daily basis.
CII Reorganization: The Board and the shareholders of each of BlackRock
Enhanced Equity Yield Fund, Inc. (EEF), BlackRock Enhanced Equity Yield
and Premium Fund, Inc. (ECV) (the Target Funds) and CII approved the
reorganization of each Target Fund into CII (the Reorganizations). The Reor-
ganizations were tax-free events and were effective as of the opening for
business of the New York Stock Exchange (NYSE) on November 3, 2008.
Target Funds
Acquiring Fund
EEF
CII
ECV
CII
Under the agreement and plan of reorganization between each Target
Fund and CII, the shares of each Target Fund (Target Fund Shares) were
exchanged for CII shares. The conversion ratios for Target Fund Shares
were as follows:
EEF/CII
0.80653563
ECV/CII
0.81144752
The net assets of CII before and after the Reorganizations and CII shares
issued and Target Fund Shares redeemed in connection with the Reorgani-
zations were as follows:
Net Assets
Net Assets
Target Funds
Acquiring
After the
Prior to the
Shares
Fund
Reorganizations
Reorganizations
Shares Issued
Redeemed
CII
$591,399,963
$170,431,810
30,542,706
37,766,622
Included in the net assets acquired by CII were the following components:
Target
Paid-In
Realized
Net Unrealized
Funds
Capital
Loss
Depreciation
Net Assets
EEF
$329,483,362
$(16,478,636)
$(80,066,510)
$232,938,216
ECV
$270,207,354
$(15,306,983)
$(66,870,434)
$188,029,937
The following is a summary of significant accounting policies followed by
the Funds:
able bid prices or current market quotations provided by dealers or pricing
services selected under the supervision of each Funds Board. Floating rate
loan interests are valued at the mean of the bid prices from one or more
brokers or dealers as obtained from a pricing service. In determining the
value of a particular investment, pricing services may use certain informa-
tion with respect to transactions in such investments, quotations from deal-
ers, pricing matrixes, market transactions in comparable investments, various
relationships observed in the market between investments and calculated
yield measures based on valuation technology commonly employed in the
market for such investments. Swap agreements are valued utilizing quotes
received daily by the Funds pricing service or through brokers, which are
derived using daily swap curves and trades of underlying securities. Invest-
ments in open-end investment companies are valued at net asset value
each business day. Short-term securities with maturities less than 60 days
may be valued at amortized cost, which approximates fair value. The Funds
value their investments in the Cash Sweep Series of BlackRock Liquidity
Series, LLC at fair value, which is ordinarily based upon their pro rata own-
ership in the net assets of the underlying fund.
Securities and other assets and liabilities denominated in foreign curren-
cies are translated into U.S. dollars using exchange rates determined as
of the close of business on the NYSE. Foreign currency exchange contracts
are valued at the mid between the bid and ask prices and are determined
as of the close of business on the NYSE. Interpolated values are derived
when the settlement date of the contract is an interim date for which quo-
tations are not available.
Equity investments traded on a recognized securities exchange or the
NASDAQ Global Market System are valued at the last reported sale price
that day or the NASDAQ official closing price, if applicable. For equity
investments traded on more than one exchange, the last reported sale
price on the exchange where the stock is primarily traded is used. Equity
investments traded on a recognized exchange for which there were no
sales on that day are valued at the last available bid (long positions) or
ask (short positions) price. If no bid or ask price is available, the prior days
price will be used, unless it is determined that such prior days price no
longer reflects the fair value of the security.
Exchange-traded options are valued at the mean between the last bid and
ask prices at the close of the options market in which the options trade. An
exchange-traded option for which there is no mean price is valued at the
last bid (long positions) or ask (short positions) price. If no bid or ask price
is available, the prior days price will be used, unless it is determined that
such prior days price no longer reflects the fair value of the option. Over-
the-counter (OTC) options are valued by an independent pricing service
or through brokers using a mathematical model which incorporates a
number of market data factors, such as the trades and prices of the
underlying instruments.
In the event that application of these methods of valuation results in a
price for an investment which is deemed not to be representative of the
market value of such investment or is not available, the investment will be
valued by a method approved by the Board as reflecting fair value (Fair
Value Assets). When determining the price for Fair Value Assets, the invest-
ment advisor and/or sub-advisor seeks to determine the price that each
Fund might reasonably expect to receive from the current sale of that asset
in an arms-length transaction. Fair value determinations shall be based
upon all available factors that the investment advisor and/or sub-advisor
deems relevant. The pricing of all Fair Value Assets is subsequently reported
to the Board or a committee thereof.
Generally, trading in foreign instruments is substantially completed each
day at various times prior to the close of business on the NYSE. The values
of such instruments used in computing the net assets of each Fund are
determined as of such times. Occasionally, events affecting the values of
such instruments may occur between the times at which they are deter-
mined and the close of business on the NYSE that may not be reflected in
the computation of each Funds net assets. If events (for example, a com-
pany announcement, market volatility or a natural disaster) occur during
such periods that are expected to materially affect the value of such instru-
ments, those instruments may be Fair Value Assets and be valued at their
fair value as determined in good faith by the Board or by the investment
advisor using a pricing service and/or procedures approved by the Board.
Foreign Currency Transactions: Foreign currency amounts are translated
into United States dollars on the following basis: (i) market value of invest-
ment securities, assets and liabilities at the current rate of exchange; and
(ii) purchases and sales of investment securities, income and expenses at
the rates of exchange prevailing on the respective dates of such transactions.
The Funds report foreign currency related transactions as components of
realized gain (loss) for financial reporting purposes, whereas such compo-
nents are treated as ordinary income for federal income tax purposes.
Capital Trusts and Trust Preferreds: These securities are typically issued by
corporations, generally in the form of interest-bearing notes with preferred
securities characteristics, or by an affiliated business trust of a corporation,
generally in the form of beneficial interests in subordinated debentures or
similarly structured securities. The securities can be structured as either
fixed or adjustable coupon securities that can have either a perpetual or
stated maturity date. Dividends can be deferred without creating an event
of default or acceleration, although maturity cannot take place unless all
cumulative payment obligations have been met. The deferral of payments
does not affect the purchase or sale of these securities in the open market.
Payments on these securities are treated as interest rather than dividends
for Federal income tax purposes. These securities can have a rating that is
slightly below that of the issuing companys senior debt securities.
Preferred Stock: Certain Funds may invest in preferred stocks. Preferred
stock has a preference over common stock in liquidation (and generally
issuer in all respects. As a general rule, the market value of preferred stock
with a fixed dividend rate and no conversion element varies inversely with
interest rates and perceived credit risk, while the market price of convert-
ible preferred stock generally also reflects some element of conversion
value. Because preferred stock is junior to debt securities and other obli-
gations of the issuer, deterioration in the credit quality of the issuer will
cause greater changes in the value of a preferred stock than in a more
senior debt security with similar stated yield characteristics. Unlike interest
payments on debt securities, preferred stock dividends are payable only if
declared by the issuers board of directors. Preferred stock also may be
subject to optional or mandatory redemption provisions.
Floating Rate Loan Interests: Certain Funds may invest in floating rate
loans, which are generally non-investment grade, made by banks, other
financial institutions, and privately and publicly offered corporations.
Floating rate loans are senior in the debt structure of a corporation.
Floating rate loans generally pay interest at rates that are periodically
determined by reference to a base lending rate plus a premium. The
base lending rates are generally (i) the lending rate offered by one or
more European banks, such as LIBOR (London InterBank Offered Rate),
(ii) the prime rate offered by one or more US banks or (iii) the certificate
of deposit rate. The Funds consider these investments to be investments
in debt securities for purposes of their investment policies.
The Funds earn and/or pay facility and other fees on floating rate loans.
Other fees earned/paid include commitment, amendment, consent and
prepayment penalty fees. Facility, commitment and amendment fees are
typically amortized over the term of the loan. Consent fees and various
other fees are recorded as income. Prepayment penalty fees are recorded
as realized gains. When a Fund buys a floating rate loan it may receive a
facility fee and when it sells a floating rate loan it may pay a facility fee. On
an ongoing basis, the Funds may receive a commitment fee based on the
undrawn portion of the underlying line of credit portion of a floating rate
loan. In certain circumstances, the Funds may receive a prepayment
penalty fee upon the prepayment of a floating rate loan by a borrower.
Other fees received by the Funds may include covenant waiver fees and
covenant modification fees.
The Funds may invest in multiple series or tranches of a loan. A different
series or tranche may have varying terms and carry different associated risks.
Floating rate loans are usually freely callable at the issuers option. The
Funds may invest in such loans in the form of participations in loans
(Participations) and assignments of all or a portion of loans from third
parties. Participations typically will result in the Funds having a contractual
relationship only with the lender, not with the borrower. The Funds will have
the right to receive payments of principal, interest and any fees to which it
is entitled only from the lender selling the Participation and only upon
receipt by the lender of the payments from the borrower.
In connection with purchasing Participations, the Funds generally will have
no right to enforce compliance by the borrower with the terms of the loan
agreement relating to the loans, nor any rights of offset against the borrower,
and the Funds may not benefit directly from any collateral supporting the
loan in which it has purchased the Participation.
As a result, the Funds will assume the credit risk of both the borrower and
the lender that is selling the Participation. The Funds investments in loan
participation interests involve the risk of insolvency of the financial interme-
diaries who are parties to the transactions. In the event of the insolvency of
the lender selling the Participation, the Funds may be treated as a general
creditor of the lender and may not benefit from any offset between the
lender and the borrower.
Reverse Repurchase Agreements: Certain Funds may enter into reverse
repurchase agreements with qualified third party broker-dealers. In a
reverse repurchase agreement, the Funds sell securities to a bank or bro-
ker-dealer and agree to repurchase the securities at a mutually agreed
upon date and price. Interest on the value of the reverse repurchase agree-
ments issued and outstanding is based upon competitive market rates
determined at the time of issuance. The Funds may utilize reverse repur-
chase agreements when it is anticipated that the interest income to be
earned from the investment of the proceeds of the transaction is greater
than the interest expense of the transaction. Reverse repurchase agree-
ments involve leverage risk and also the risk that the market value of
the securities that the Funds are obligated to repurchase under the agree-
ment may decline below the repurchase price. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, the Funds use of the proceeds from the agreement
may be restricted while the other party, or its trustee or receiver, determines
whether or not to enforce the Funds obligation to repurchase the securities.
Defensive Positions: Each of PSW, PSY, BPP and BTZ may vary its invest-
ment policies for temporary defensive purposes during periods in which
the investment advisor believes that conditions in the securities markets or
other economic, financial or political conditions warrant. Under such condi-
tions, the Funds for temporary defensive purposes may invest up to 100%
of its total assets in, as applicable and described in each Funds prospec-
tus, U.S. government securities, certificates of deposit, repurchase agree-
ments that involve purchases of debt securities, bankers acceptances and
other bank obligations, commercial paper, money market funds and/or
other debt securities deemed by the investment advisor to be consistent
with a defensive posture, or may hold its assets in cash.
Zero-Coupon Bonds: Certain Funds may invest in zero-coupon bonds, which
are normally issued at a significant discount from face value and do not
provide for periodic interest payments. Zero-coupon bonds may experience
greater volatility in market value than similar maturity debt obligations
which provide for regular interest payments.
Segregation and Collateralization: In cases in which the 1940 Act and
the interpretive positions of the Securities and Exchange Commission
(SEC) require that a Fund either deliver collateral or segregate assets in
connection with certain investments (e.g., written options, foreign currency
exchange contracts, financial futures contracts and swaps), or certain bor-
rowings (e.g., reverse repurchase agreements and loan payable) each Fund
the SEC, segregate collateral or designate on its books and records cash or
other liquid securities having a market value at least equal to the amount
that would otherwise be required to be physically segregated. Furthermore,
based on requirements and agreements with certain exchanges and third
party broker-dealers, each party has requirements to deliver/deposit secu-
rities as collateral for certain investments.
Investment Transactions and Investment Income: For financial reporting
purposes, investment transactions are recorded on the dates the trans-
actions are entered into (the trade dates). Realized gains and losses on
investment transactions are determined on the identified cost basis. Divi-
dend income is recorded on the ex-dividend dates. Dividends from foreign
securities where the ex-dividend date may have passed are subsequently
recorded when the Funds have determined the ex-dividend date. Interest
income is recognized on the accrual basis. The Funds amortize all premiums
and discounts on debt securities. Upon notification from issuers, some of
the dividend income received from a real estate investment trust may
be redesignated as a reduction of cost of the related investment and/or
realized gain. Consent fees are compensation for agreeing to changes in
the terms of debt instruments and are included in interest income in the
Statements of Operations.
Dividends and Distributions: Dividends from net investment income are
declared and paid monthly (quarterly for CII). Distributions of capital gains
are recorded on the ex-dividend dates. If the total dividends and distribu-
tions made in any tax year exceeds net investment income and accumu-
lated realized capital gains, a portion of the total distribution may be
treated as a tax return of capital.
Income Taxes: It is each Funds policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies
and to distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required. Under the applicable
foreign tax laws, a withholding tax may be imposed on interest, dividends
and capital gains at various rates.
Each Fund files US federal and various state and local tax returns. No
income tax returns are currently under examination. The statute of limitations
on PSWs and PSYs US federal tax returns remains open for the four years
ended October 31, 2009. The statute of limitations on BPPs, CIIs and BGTs
US federal tax returns remains open for the two years ended December 31,
2007, the period ended October 31, 2008 and year ended October 31,
2009. The statute of limitations on BTZs US Federal tax returns remains
open for the two years ended October 31, 2009 and the period ended
October 31, 2007. The statutes of limitations on the Funds state and
local tax returns may remain open for an additional year depending upon
the jurisdiction.
Recent Accounting Standards: In June 2009, amended guidance was
issued by the Financial Accounting Standards Board for transfers of finan-
cial assets. This guidance is intended to improve the relevance, representa-
tional faithfulness and comparability of the information that a reporting
entity provides in its financial statements about a transfer of financial
assets; the effects of a transfer on its financial position, financial perform-
ance, and cash flows; and a transferors continuing involvement, if any, in
transferred financial assets. The amended guidance is effective for financial
statements for fiscal years and interim periods beginning after November 15,
2009. Earlier application is prohibited. The recognition and measurement
provisions of this guidance must be applied to transfers occurring on or
after the effective date. Additionally, the enhanced disclosure provisions of
the amended guidance should be applied to transfers that occurred both
before and after the effective date of this guidance. The impact of this
guidance on the Funds financial statements and disclosures, if any, is
currently being assessed.
Deferred Compensation and BlackRock Closed-End Share Equivalent
Investment Plan: Under the deferred compensation plan approved by
each Funds Board, non-interested Directors or Trustees (Independent
Directors or Trustees) may defer a portion of their annual complex-wide
compensation. Deferred amounts earn an approximate return as though
equivalent dollar amounts had been invested in common shares of other
certain BlackRock Closed-End Funds selected by the Independent Directors
or Trustees. This has approximately the same economic effect for the
Independent Directors or Trustees as if the Independent Directors or
Trustees had invested the deferred amounts directly in other certain
BlackRock Closed-End Funds.
The deferred compensation plan is not funded and obligations there-
under represent general unsecured claims against the general assets of
each Fund. Each Fund may, however, elect to invest in common shares of
other certain BlackRock Closed-End Funds selected by the Independent
Directors or Trustees in order to match its deferred compensation obliga-
tions. Investments to cover each Funds deferred compensation liability,
if any, are included in other assets in the Statements of Assets and
Liabilities. Dividends and distributions from the BlackRock Closed-End
Fund investments under the plan are included in income-affiliated in
the Statements of Operations.
Other: Expenses directly related to a Fund are charged to that Fund. Other
operating expenses shared by several funds are pro rated among those
funds on the basis of relative net assets or other appropriate methods.
Pursuant to the terms of the custody agreement, custodian fees may be
reduced by amounts calculated on uninvested cash balances, which are
shown in the Statements of Operations as fees paid indirectly.
2. Derivative Financial Instruments:
The Funds may engage in various portfolio investment strategies both to
increase the returns of the Funds and to economically hedge, or protect,
their exposure to certain risks such as credit risk, equity risk, interest rate
risk and foreign currency exchange rate risk. Losses may arise if the value
of the contract decreases due to an unfavorable change in the price of
the underlying security or if the counterparty does not perform under the
contract. The Funds may mitigate counterparty risk through master net-
ting agreements included within an International Swaps and Derivatives
Association, Inc. (ISDA) Master Agreement between a Fund and each
of its counterparties. The ISDA Master Agreement allows each Fund to
offset with its counterparty certain derivative financial instruments pay-
ables and/or receivables with collateral held with each counterparty. The
upon minimum transfer amounts of up to $500,000. To the extent amounts
due to the Funds from their counterparties are not fully collateralized con-
tractually or otherwise, the Funds bear the risk of loss from counterparty
non-performance. See Note 1 Segregation and Collateralization for addi-
tional information with respect to collateral practices.
The Funds maximum risk of loss from counterparty credit risk on over-
the-counter derivatives is generally the aggregate unrealized gain in excess
of any collateral pledged by the counterparty to the Funds. For over-the-
counter purchased options, the Funds bear the risk of loss in the amount
of the premiums paid and change in market value of the options should
the counterparty not perform under the contracts. Options written by the
Funds do not give rise to counterparty credit risk, as written options obli-
gate the Funds to perform and not the counterparty. Certain ISDA Master
Agreements allow counterparties to over-the-counter derivatives to termi-
nate derivative contracts prior to maturity in the event a Funds net assets
decline by a stated percentage or a Fund fails to meet the terms of its
ISDA Master Agreements, which would cause the Fund to accelerate pay-
ment of any net liability owed to the counterparty. Counterparty risk related
to exchange-traded financial futures contracts and options is minimal
because of the protection against defaults provided by the exchange on
which they trade.
Financial Futures Contracts: Certain Funds may purchase or sell financial
futures contracts and options on financial futures contracts to gain expo-
sure to, or economically hedge against, changes in the value of interest
rates (interest rate risk) or foreign currencies (foreign currency exchange
rate risk). Financial futures contracts are contracts for delayed delivery of
securities at a specific future date and at a specific price or yield. Pursuant
to the contract, the Funds agree to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as margin variation and are recognized by
the Funds as unrealized gains or losses. When the contract is closed, the
Funds record a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time
it was closed. The use of financial futures contracts involves the risk of an
imperfect correlation in the movements in the price of financial futures
contracts, interest rates and the underlying assets.
Foreign Currency Exchange Contracts: Certain Funds may enter into foreign
currency exchange contracts as an economic hedge against either specific
transactions or portfolio positions (foreign currency exchange rate risk). A
foreign currency exchange contract is an agreement between two parties
to buy and sell a currency at a set exchange rate on a future date. Foreign
currency exchange contracts, when used by a Fund, help to manage the
overall exposure to the currency backing some of the investments held by
a Fund. The contract is marked-to-market daily and the change in market
value is recorded by a Fund as an unrealized gain or loss. When the con-
tract is closed, a Fund records a realized gain or loss equal to the differ-
ence between the value at the time it was opened and the value at the
time it was closed. The use of foreign currency exchange contracts involves
the risk that counterparties may not meet the terms of the agreement or
unfavorable movements in the value of a foreign currency relative to the
US dollar.
Options: Certain Funds may purchase and write call and put options to
increase or decrease their exposure to underlying instruments. A call option
gives the purchaser of the option the right (but not the obligation) to buy,
and obligates the seller to sell (when the option is exercised), the underly-
ing instrument at the exercise price at any time or at a specified time dur-
ing the option period. A put option gives the holder the right to sell and
obligates the writer to buy the underlying instrument at the exercise price
at any time or at a specified time during the option period. When a Fund
purchases (writes) an option, an amount equal to the premium paid
(received) by a Fund is reflected as an asset (liability). The amount of the
asset (liability) is subsequently marked-to-market to reflect the current
market value of the option purchased (written). When an instrument is
purchased or sold through an exercise of an option, the related premium
paid (or received) is added to (or deducted from) the basis of the instru-
ment acquired or deducted from (or added to) the proceeds of the instru-
ment sold. When an option expires (or a Fund enters into a closing
transaction), a Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium received or paid). When a Fund
writes a call option, such option is covered, meaning that a Fund holds
the underlying instrument subject to being called by the option counter-
party, or cash in an amount sufficient to cover the obligation. When a Fund
writes a put option, such option is covered by cash in an amount sufficient
to cover the obligation.
In purchasing and writing options, a Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that a Fund
may not be able to enter into a closing transaction due to an illiquid mar-
ket. Exercise of a written option could result in a Fund purchasing or selling
a security at a price different from the current market value. The Funds may
execute transactions in both listed and OTC options.
Swaps: Certain Funds may enter into swap agreements, in which a Fund
and a counterparty agree to make periodic net payments on a specified
notional amount. These periodic payments received or made by the Funds
are recorded in the Statements of Operations as realized gains or losses,
respectively. Swaps are marked-to-market daily and changes in value are
recorded as unrealized appreciation (depreciation). When the swap is ter-
minated, the Fund will record a realized gain or loss equal to the difference
between the proceeds from (or cost of) the closing transaction and the
Funds basis in the contract, if any. Swap transactions involve, to varying
degrees, elements of interest rate, credit and market risk in excess of the
amounts recognized in the Statements of Assets and Liabilities. Such risks
involve the possibility that there will be no liquid market for these agree-
ments, that the counterparty to the agreements may default on its
terms in the agreements, and that there may be unfavorable changes in
interest rates and/or market values associated with these transactions.
Credit default swaps Certain Funds may enter into credit default
swaps to manage its exposure to the market or certain sectors of the
market, to reduce their risk exposure to defaults of corporate and/or
sovereign issuers or to create exposure to corporate and/or sovereign
issuers to which they are not otherwise exposed (credit risk). The Funds
enter into credit default agreements to provide a measure of protection
against the default of an issuer (as buyer of protection) and/or gain
credit exposure to an issuer to which it is not otherwise exposed (as
seller of protection). The Funds may either buy or sell (write) credit
default swaps on single-name issuers (corporate or sovereign) or
traded indexes. Credit default swaps on single-name issuers are agree-
ments in which the buyer pays fixed periodic payments to the seller in
consideration for a guarantee from the seller to make a specific pay-
ment should a negative credit event take place (e.g., bankruptcy, failure
to pay, obligation accelerators, repudiation, moratorium or restructur-
ing). Credit default swaps on traded indexes are agreements in which
the buyer pays fixed periodic payments to the seller in consideration
for a guarantee from the seller to make a specific payment should a
write-down, principal or interest shortfall or default of all or individual
underlying securities included in the index occurs. As a buyer, if an
underlying credit event occurs, the Funds will either receive from the
seller an amount equal to the notional amount of the swap and deliver
the referenced security or underlying securities comprising of an index
or receive a net settlement of cash equal to the notional amount of
the swap less the recovery value of the security or underlying securi-
ties comprising of an index. As a seller (writer), if an underlying credit
event occurs the Funds will either pay the buyer an amount equal to the
notional amount of the swap and take delivery of the referenced secu-
rity or underlying securities comprising of an index or pay a net settle-
ment of cash equal to the notional amount of the swap less the recovery
value of the security or underlying securities comprising of an index.
Interest rate swaps Certain Funds may enter into interest rate swaps
to manage duration, the yield curve or interest rate risk by economically
hedging the value of the fixed rate bonds which may decrease when
interest rates rise (interest rate risk). Interest rate swaps are agreements
in which one party pays a floating rate of interest on a notional princi-
pal amount and receives a fixed rate of interest on the same notional
principal amount for a specified period of time. In more complex swaps,
the notional principal amount may decline (or amortize) over time.
Derivatives Categorized by Risk Exposure:
Values of Derivative Instruments as of October 31, 2009*
Asset Derivatives
Statements of Assets
and Liabilities Location
PSW
PSY
BPP
BTZ
BGT
Interest rate contracts**
Net unrealized appreciation/depreciation
$ 94,972
$ 34,845
$ 19,513
$ 982,873
Credit contracts
Unrealized appreciation on swaps
$ 4,930
Equity contracts
Investments at value unaffiliated
6,110
Total
$ 94,972
$ 34,845
$ 19,513
$ 982,873
$ 11,040
Notes to Financial Statements (continued)
Derivatives Categorized by Risk Exposure (concluded):
Liability Derivatives
Statements of Assets
and Liabilities Location
PSW
PSY
BPP
BTZ
CII
BGT
Foreign currency exchange contracts
Unrealized depreciation on foreign
currency exchange contracts
$ 650,963
Credit contracts
Unrealized depreciation on swaps
$ 168,952
$ 337,904
$ 168,952
$ 675,809
453,976
Equity contracts**
Net unrealized appreciation/depreciation/
Options written at value
311,644
$6,377,146
Total
$ 168,952
$ 337,904
$ 168,952
$ 987,453
$6,377,146
$1,104,939
*
For open derivative instruments as of October 31, 2009, see the Schedules of Investments, which is also indicative of activity for the year ended October 31,
2009.
**
Includes cumulative appreciation/depreciation of the financial futures contracts as reported in Schedules of Investments. Only current days margin variation is reported
within the
Statements of Assets and Liabilities.
The Effect of Derivative Instruments on the Statements of Operations
Year Ended October 31, 2009
Net Realized Gain (Loss) From
PSW
PSY
BPP
BTZ
CII
BGT
Interest rate contracts:
Financial futures contracts
$ (3,986,014) $(23,855,057) $(11,138,251) $(22,441,107)
Swaps
1,958,406
13,723,072
6,758,008
17,501,084
Foreign currency exchange contracts:
Foreign currency exchange contracts
4,366
34,450
1,348
9,785
$ (2,429,013)
Credit contracts:
Swaps
246,932
1,208,482
464,385
1,004,951
(1,014,281)
Equity contracts:
Financial futures contracts
1,193,721
$ (617,742)
Options***
3,769,225
52,938,361
Total
$ (1,776,310) $ (8,889,053) $ (3,914,510)
$ 1,037,659
$52,320,619
$ (3,443,294)
Net Change in Unrealized Appreciation/Depreciation on
PSW
PSY
BPP
BTZ
CII
BGT
Interest rate contracts:
Financial futures contracts
$ 584,149
$ 3,572,427
$ 1,716,894
$ 7,820,983
Swaps
248,398
(911,039)
(503,217)
(1,216,856)
Foreign currency exchange contracts:
Foreign currency exchange contracts
(4,287)
(32,964)
(1,062)
(7,689)
$ (6,893,115)
Credit contracts:
Swaps
(305,030)
(1,014,054)
(307,150)
(1,086,163)
371,495
Equity contracts:
Financial futures contracts
(875,340)
Options***
2,230,493
$ 5,758,405
(37,700)
Total
$ 523,230
$ 1,614,370
$ 905,465
$ 6,865,428
$ 5,758,405
$ (6,559,320)
***
Options purchased are included in the net realized gain (loss) from investments and net change in unrealized appreciation/depreciation on investments.
with Affiliates:
The PNC Financial Services Group, Inc. (PNC) and Bank of America
Corporation (BAC) are the largest stockholders of BlackRock, Inc.
(BlackRock). BAC became a stockholder of BlackRock following its
acquisition of Merrill Lynch & Co., Inc. (Merrill Lynch) on January 1,
2009. Prior to that date, both PNC and Merrill Lynch were considered
affiliates of the Funds under the 1940 Act. Subsequent to the acquisition,
PNC remains an affiliate, but due to the restructuring of Merrill Lynchs
ownership interest of BlackRock, BAC is not deemed to be an affiliate
under the 1940 Act.
Each Fund entered into an Investment Advisory Agreement with BlackRock
Advisors, LLC (the Manager), the Funds investment advisor, an indirect,
wholly owned subsidiary of BlackRock, to provide investment advisory and
administration services.
The Manager is responsible for the management of each Funds portfolio
and provides the necessary personnel, facilities, equipment and certain
each Fund pays the Manager a monthly fee at the following annual rates of
each Funds average daily (weekly for BPP, BTZ and BGT) net assets (includ-
ing any assets attributable to borrowings or the proceeds from the issuance
of Preferred Shares) minus the sum of liabilities (other than borrowings
representing financial leverage) as follows:
PSW
0.60%
PSY
0.60%
BPP
0.65%
BTZ
0.65%
CII
0.85%
BGT
0.75%
advisory fees or other expenses on BGT as a percentage of its average weekly
net assets as follows: 0.20% for the first six years of the Funds operations
(through August 30, 2010), 0.10% in year seven (through August 30, 2011)
and 0.05% in year eight (through August 30, 2012). For the year ended
October 31, 2009, the Manager waived $706,594, which is included in
fees waived by advisor in the Statements of Operations.
Notes to Financial Statements (continued)
The Manager has voluntarily agreed to waive its advisory fees by the amount
of investment advisory fees each Fund pays to the Manager indirectly through
its investment in affiliated money market funds. These amounts are included
in fees waived by advisor in the Statements of Operations as follows:
PSW
$14,003
PSY
$14,491
BPP
$21,506
BTZ
$95,646
CII
$ 7,172
BGT
$ 2,448
The Manager has entered into a separate sub-advisory agreement with
BlackRock Financial Management, Inc. (BFM), an affiliate of the Manager,
with respect to PSW, PSY, BPP, BTZ and BGT. BFM and BlackRock Invest-
ment Management, LLC (BIM), an affiliate of the Manager, serve as sub-
advisors for CII. The Manager pays the sub-advisors for services they pro-
vide, a monthly fee that is a percentage of the investment advisory fees
paid by each Fund to the Manager.
For the year ended October 31, 2009, the Funds reimbursed the Manager for
certain accounting services, which are included in accounting services in
the Statements of Operations. The reimbursements were as follows:
Accounting
Services
PSW
$ 1,913
PSY
$ 8,364
BPP
$ 4,214
BTZ
$14,113
CII
$11,054
BGT
$ 6,510
Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S), a wholly
owned subsidiary of Merrill Lynch, for the period November 1, 2008 to
December 31, 2008 (after which time Merrill Lynch was no longer consid-
ered an affiliate), earned commissions on transactions of securities
as follows:
BTZ
$ 5,223
CII
$ 31,748
Certain officers and/or directors or trustees of the Funds are officers
and/or directors of BlackRock or its affiliates. The Funds reimburse the
Manager for compensation paid to the Funds Chief Compliance Officer.
4. Investments:
Purchases and sales of investments, including paydowns, excluding short-
term securities and US government securities, for the year ended October 31,
2009 were as follows:
Purchases
Sales
PSW
$ 32,909,061
$ 103,719,933
PSY
$ 73,975,856
$ 375,248,172
BPP
$ 34,574,885
$ 194,230,481
BTZ
$ 186,459,982
$ 541,219,389
CII
$ 747,473,597
$ 737,185,021
BGT
$ 157,239,797
$ 250,200,520
For the year ended October 31, 2009, purchases and sales of US govern-
ment securities were as follows:
Purchases
Sales
BTZ
$ 494,173
$ 482,813
Transactions in options written for the year ended October 31, 2009 for
BTZ and CII were as follows:
BTZ
CII
Premiums
Premiums
Call Options Written
Contracts
Received Contracts
Received
Outstanding options written,
beginning of year
1,150
$ 4,556,037
1,225 $ 3,449,258
Options written
14,750
32,565,145
696,648
122,618,221
Options exercised
(247,949)
(19,106,119)
Options expired
(1,905)
(4,347,543) (182,483)
(21,102,291)
Options closed
(13,595)
(31,945,600) (150,354)
(76,665,610)
Outstanding options written,
end of year
400
$828,039
117,087
$9,193,459
CII
Premiums
Put Options Written
Contracts
Received
Outstanding options written, beginning of year
Options written
1,350 $
80,744
Options exercised
(1,350)
(80,744)
Outstanding options written, end of year
5. Commitments:
BGT invests in floating rate loans. In connection with these investments,
the Fund may, with its Manager, also enter into unfunded corporate loans
(commitments). Commitments may obligate the Fund to furnish temporary
financing to a borrower until permanent financing can be arranged. In con-
nection with these commitments, the Fund earns a commitment fee, typi-
cally set as a percentage of the commitment amount. Such fee income,
which is classified in the Statements of Operations as facility and other
fees, is recognized ratably over the commitment period. As of October 31,
2009, the Fund had the following unfunded loan commitments:
Value of
Underlying
Underlying
Commitment
Loan
(000)
(000)
Delphi Acquisition Holding IBV
$368
$306
NVT Networks LLC Exit Term Loan
$ 50
$ 51
Smurfit-Stone Container Enterprises, Inc.,
U.S. Term Loan Debtor in Possession
$910
$900
6. Concentration, Market and Credit Risk:
PSY, BPP and BTZ invest a significant portion of their assets in securities
in the financials sector and BGT invests a significant portion of its assets
in securities in the media sector. Please see the Schedules of Investments
for these securities. Changes in economic conditions affecting the finan-
cials and media sectors would have a greater impact on the respective
Funds and could affect the value, income and/or liquidity of positions in
such securities.
In the normal course of business, the Funds invest in securities and enter
into transactions where risks exist due to fluctuations in the market (market
risk) or failure of the issuer of a security to meet all its obligations (credit
risk). The value of securities held by the Funds may decline in response to
certain events, including those directly involving the issuers whose securi-
ties are owned by the Funds; conditions affecting the general economy;
overall market changes; local, regional or global political, social or eco-
nomic instability; and currency and interest rate and price fluctuations.
Similar to credit risk, the Funds may be exposed to counterparty risk, or
the risk that an entity with which the Funds have unsettled or open trans-
actions may default. Financial assets, which potentially expose the Funds
to credit and counterparty risks, consist principally of investments and cash
due from counterparties. The extent of the Funds exposure to credit and
counterparty risks with respect to those financial assets is approximated by
their value recorded in the Funds Statements of Assets and Liabilities, less
any collateral held by the Funds.
7. Capital Share Transactions:
PSW, PSY and CII are authorized to issue 200 million of $0.10 par value
shares, all of which initially were classified as Common Shares. The Boards
of PSW and PSY are authorized to classify and reclassify any unissued
shares. In this regard, the Boards of PSW and PSY have reclassified 5,460
and 22,000 shares, respectively, of unissued shares as Preferred Shares.
There are an unlimited number of $0.001 par value shares authorized for
BPP, BTZ and BGT.
Common Shares
At October 31, 2009, the shares owned by an affiliate of the Manager of
the Funds were as follows:
Shares
PSW
7,656
PSY
7,927
BTZ
4,817
CII
23,362
BGT
8,239
Shares issued and outstanding during the years ended October 31, 2009
and October 31, 2008 for PSW and PSY and the year ended October 31,
2009, the period January 1, 2008 to October 31, 2008 and the year ended
December 31, 2007 for BPP, CII and BGT increased by the following
amounts as a result of dividend reinvestment:
October 31,
October 31,
December 31,
2009
2008
2007
PSW
20,060
N/A
PSY
200,878
N/A
BPP
76,154
5,794
30,981
CII
221,870
BGT
42,574
Shares issued and outstanding remained constant for BTZ for the years
ended October 31, 2009 and October 31, 2008.
CII increased 30,542,706 as a result of a reorganization as discussed in
Note 1 CII Reorganization.
Preferred Shares
The Preferred Shares are redeemable at the option of each Fund, in whole
or in part, on any dividend payment date at $25,000 per share plus any
accumulated or unpaid dividends whether or not declared. The Preferred
Shares are also subject to mandatory redemption at their liquidation pref-
if certain requirements relating to the composition of the assets and liabili-
ties of the Fund, as set forth in the Funds Statement of Preferences/Articles
Supplementary (Governing Instrument), as applicable, are not satisfied.
From time to time in the future, the Funds that have issued Preferred
Shares may effect repurchases of such shares at prices below their liquida-
tion preferences as agreed upon by the Funds and seller. The Funds also
may redeem such shares from time to time as provided in the applicable
Governing Instrument. The Funds intend to effect such redemptions and/or
repurchases to the extent necessary to maintain applicable asset coverage
requirements or for such other reasons as the Board may determine.
The holders of Preferred Shares have voting rights equal to the holders of
Common Shares (one vote per share) and will vote together with holders
of Common Shares (one vote per share) as a single class. However, holders
of Preferred Shares, voting as a separate class, are also entitled to elect
two Directors/Trustees for each Fund. In addition, the 1940 Act requires
that along with approval by shareholders that might otherwise be required,
the approval of the holders of a majority of any outstanding Preferred
Shares, voting separately as a class would be required to (a) adopt any
plan of reorganization that would adversely affect the Preferred Shares,
(b) change a Funds subclassification as a closed-end investment com-
pany or change its fundamental investment restrictions or (c) change its
business so as to cease to be an investment company.
PSW, PSY, BPP, BTZ and BGT had the following series of Preferred Shares
outstanding, effective yields and reset frequency as of October 31, 2009:
Reset
Preferred
Effective
Frequency
Series
Shares
Yield
Days
PSW
M7
805
1.48%
7
T7
805
1.48%
7
PSY
M7
861
1.48%
7
T7
861
1.48%
7
W7
861
1.47%
7
TH7
861
1.47%
7
F7
861
1.48%
7
W28
1,228
1.49%
28
TH28
1,228
1.49%
28
BPP
T7
939
0.24%
7
W7
939
0.24%
7
R7
939
0.26%
7
BTZ
T7
2,310
1.48%
7
W7
2,310
1.47%
7
R7
2,310
1.47%
7
F7
2,310
1.48%
7
BGT
T7
784
1.48%
7
W7
784
1.47%
7
R7
784
1.47%
7
rate that is reset every seven or 28 days, respectively, based on the results
of an auction. If the Preferred Shares fail to clear the auction on an auction
date, the affected Fund is required to pay the maximum applicable rate on
the Preferred Shares to holders of such shares for successive dividend
periods until such time as the shares are successfully auctioned. The maxi-
mum applicable rate on Preferred Shares are as follows: for PSW, PSY and
BGT, the higher of 125% times or 1.25% plus the Telerate/BBA LIBOR rate;
for BPP 150% of the interest equivalent of the 30-day commercial paper
rate and for BTZ, the higher of 150% times or 1.25% plus the Telerate/BBA
Notes to Financial Statements (continued)
LIBOR rate. The low, high and average dividend rates for the year ended
October 31, 2009, were as follows:
Series
Low
High
Average
PSW
M7
1.48%
3.39%
1.62%
T7
1.48%
3.34%
1.63%
PSY
M7
1.48%
3.39%
1.63%
T7
1.48%
3.34%
1.63%
W7
1.47%
3.27%
1.63%
TH7
1.47%
2.89%
1.62%
F7
1.48%
2.57%
1.62%
W28
1.49%
4.53%
1.70%
TH28
1.49%
5.76%
1.84%
BPP
T7
0.23%
4.21%
0.64%
W7
0.24%
4.07%
0.60%
R7
0.20%
4.09%
0.59%
BTZ
T7
1.48%
3.34%
1.63%
W7
1.47%
3.27%
1.66%
R7
1.47%
2.89%
1.65%
F7
1.48%
2.57%
1.64%
BGT
T7
1.48%
3.34%
1.62%
W7
1.47%
3.27%
1.66%
R7
1.47%
2.89%
1.64%
any of their auctions. As a result, the Preferred Shares dividend rates were
reset to the maximum applicable rate, which ranged from 0.20% to 5.76%.
A failed auction is not an event of default for the Funds but it has a nega-
tive impact on the liquidity of Preferred Shares. A failed auction occurs
when there are more sellers of a funds auction rate preferred shares than
buyers. It is impossible to predict how long this imbalance will last. A suc-
cessful auction for the Funds Preferred Shares may not occur for some time,
if ever, and even if liquidity does resume, Preferred Shareholders may not
have the ability to sell the Preferred Shares at their liquidation preference.
The Funds may not declare dividends or make other distributions on
Common Shares or purchase any such shares if, at the time of the
declaration, distribution or purchase, asset coverage with respect to the
outstanding Preferred Shares is less than 200%.
Prior to December 22, 2008, the Funds paid commissions to certain
broker-dealers at the end of each auction at an annual rate of 0.25%,
calculated on the aggregate principal amount. On December 22, 2008,
commissions paid to broker-dealers on Preferred Shares that experience a
failed auction were reduced to 0.15% on the aggregate principal amount.
Subsequently, certain broker-dealers have individually agreed to further
reduce commissions for failed auctions. The Funds will continue to pay
commissions of 0.25% on the aggregate principal amount of all shares
that successfully clear their auctions. MLPF&S earned commissions for the
period November 1, 2008 to December 31, 2008 (after which time Merrill
Lynch was no longer considered an affiliate) as follows:
Commissions
PSW
$14,200
PSY
$42,997
BPP
$13,434
BTZ
$41,221
BGT
$ 683
During the year ended October 31, 2009 the Funds announced the follow-
ing redemptions, as of the date indicated, of Preferred Shares at a price of
$25,000 per share plus any accrued and unpaid dividends through the
redemption dates:
March 26, 2009
Redemption
Shares
Aggregate
Series
Date
Redeemed
Principal
PSY
M7
4/14/09
107
$2,675,000
T7
4/15/09
107
$2,675,000
W7
4/16/09
107
$2,675,000
TH7
4/13/09
107
$2,675,000
F7
4/13/09
107
$2,675,000
W28
5/07/09
153
$3,825,000
TH28
4/24/09
153
$3,825,000
BPP
T7
4/15/09
267
$6,675,000
W7
4/16/09
267
$6,675,000
R7
4/17/09
267
$6,675,000
February 24, 2009
Redemption
Shares
Aggregate
Series
Date
Redeemed
Principal
PSW
M7
3/17/09
160
$ 4,000,000
T7
3/18/09
160
$ 4,000,000
PSY
M7
3/17/09
203
$ 5,075,000
T7
3/18/09
203
$ 5,075,000
W7
3/19/09
203
$ 5,075,000
TH7
3/13/09
203
$ 5,075,000
F7
3/16/09
203
$ 5,075,000
W28
4/09/09
292
$ 7,300,000
TH28
3/27/09
292
$ 7,300,000
November 25, 2008
Redemption
Shares
Aggregate
Series
Date
Redeemed
Principal
PSW
M7
12/16/08
400
$10,000,000
T7
12/17/08
400
$10,000,000
PSY
M7
12/16/08
229
$ 5,725,000
T7
12/17/08
229
$ 5,725,000
W7
12/18/08
229
$ 5,725,000
TH7
12/12/08
229
$ 5,725,000
F7
12/15/08
229
$ 5,725,000
W28
12/18/08
327
$ 8,175,000
TH28
1/02/09
327
$ 8,175,000
BPP
T7
12/17/08
266
$ 6,650,000
W7
12/18/08
266
$ 6,650,000
R7
12/19/08
266
$ 6,650,000
During the period ended October 31, 2008, the Funds announced the fol-
lowing redemptions as of May 19, 2008 of Preferred Shares at a price of
$25,000 per share plus any accrued and unpaid dividends through the
redemption date:
Redemption
Shares
Aggregate
Series
Date
Redeemed
Principal
PSW
M7
6/10/2008
1,365
$34,125,000
T7
6/11/2008
1,365
$34,125,000
PSY
M7
6/10/2008
1,400
$35,000,000
T7
6/11/2008
1,400
$35,000,000
W7
6/05/2008
1,400
$35,000,000
TH7
6/06/2008
1,400
$35,000,000
F7
6/09/2008
1,400
$35,000,000
W28
6/05/2008
2,000
$50,000,000
TH28
6/20/2008
2,000
$50,000,000
BPP
T7
6/11/2008
1,472
$36,800,000
W7
6/12/2008
1,472
$36,800,000
R7
6/13/2008
1,472
$36,800,000
BTZ
T7
6/11/2008
2,310
$57,750,000
W7
6/12/2008
2,310
$57,750,000
R7
6/13/2008
2,310
$57,750,000
F7
6/09/2008
2,310
$57,750,000
BGT
T7
6/11/2008
2,462
$61,550,000
W7
6/12/2008
2,462
$61,550,000
R7
6/13/2008
2,462
$61,550,000
All of the Funds, except BGT, financed the Preferred Share redemptions
with cash received from reverse repurchase agreements. BGT financed the
Preferred Share redemptions with cash received from a loan.
Preferred Shares issued and outstanding for the year ended December 31,
2007 for BGT and BPP remained constant.
8. Borrowings:
On May 16, 2008, BGT renewed its revolving credit and security Agreement
(Citicorp Agreement) pursuant to a commercial paper asset securitization
program with Citicorp North America, Inc. (Citicorp), as Agent, certain sec
ondary backstop lenders and certain asset securitization conduits, as
lenders (the Lenders). The agreement was renewed for one year and at
the time of renewal had a maximum limit of $190 million.
Under the Citicorp Agreement, the conduits funded advances to the Fund
through the issuance of highly rated commercial paper. The Fund had
granted a security interest in substantially all of its assets to, and in favor
of, the Lenders as security for its obligations to the Lenders. The interest
rate on the Funds borrowings was based on the interest rate carried by
commercial paper plus a program fee. Effective December 5, 2008, the
Fund renegotiated certain terms of the Citicorp Agreement and reduced
the commitment amount to $134 million.
On March 5, 2009, BGT terminated its revolving credit agreement with
Citicorp and entered into a senior committed secured, 364-day revolving
and Trust Company (SSB). The SSB line of credit provides the Fund with
a maximum commitment of $134 million. The Fund has granted a security
interest in substantially all of its assets to SSB.
Advances are made by SSB to BGT at BGTs option at either (a) the higher
of 1.00% above the Fed Effective Rate or 1.00% above the Overnight LIBOR
Rate and (b) 1.00% above 7-day, 30-day, or 60-day LIBOR Rate. In addi-
tion, BGT pays a facility fee and a commitment fee based upon SSBs total
commitment to BGT. The fees associated with each of the agreements are
included in the Statements of Operations as borrowing costs. Advances to
BGT as of October 31, 2009 are shown in the Statements of Assets and
Liabilities as loan payable. For the year ended October 31, 2009, the daily
weighted average interest rate was 2.15%.
Under the Investment Company Act of 1940, BGT may not declare divi-
dends or make other distributions on Common Shares if, at the time of the
declaration, distribution or purchase, asset coverage with respect to the
outstanding indebtedness is less than 300%.
For the year ended October 31, 2009, the daily weighted average interest
rates for Funds with reverse repurchase agreements were as follows:
PSW
1.93%
PSY
1.45%
BPP
2.38%
BTZ
2.33%
Reclassifications: Accounting principles generally accepted in the United States of America require
that certain components of net assets be adjusted to
reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. The
following permanent differences as of October 31, 2009 attributable to accounting for swap agreements, the classification of investments, foreign currency
transactions and non-deductible expenses were reclassified to the following accounts:
PSW
PSY
BPP
BTZ
CII
BGT
Paid-in capital
$ (3,858)
$ (7,879)
Undistributed (distributions in excess of) net investment income
$ (254,371)
$ (1,436,139)
$ (3,866,202)
$ (1,415,793)
$ 7,879
$ (3,185,823)
Accumulated net realized loss
$ 254,371
$ 1,439,997
$ 3,866,202
$ 1,415,793
$ 3,185,823
The tax character of distributions paid during the periods ended October 31, 2009 and 2008 for all Funds and December 31, 2007 for BPP, CII and BGT
were as follows:
PSW
PSY
BPP
BTZ
CII
BGT
Ordinary income
10/31/2009
$ 9,272,893
$ 48,928,499
$ 18,039,320
$ 52,227,765
$ 52,962,484
$ 28,934,349
10/31/2008
$ 17,443,001
$ 66,768,898
$ 20,860,160
$ 63,957,649
$ 7,846,070
$ 29,676,182
12/31/2007
$ 40,678,314
$ 5,911,539
$ 39,557,202
Long-term capital gains
10/31/2009
$ 10,276,199
10/31/2008
$ 2,596,353
12/31/2007
$ 400,000
$ 23,835,961
Tax return of capital
10/31/2009
$ 1,345,345
$ 116,310
$ 4,250,036
$ 24,678,883
$ 19,660,314
$ 9,994,857
10/31/2008
$ 545,246
$ 9,002,427
$ 5,480,035
$ 43,518,226
$ 7,292,188
12/31/2007
$ 2,820,986
$ 8,473,282
Total distributions
10/31/2009
$ 10,618,238
$ 49,044,809
$ 22,289,356
$ 76,906,648
$ 82,898,997
$ 38,929,206
10/31/2008
$ 17,988,247
$ 75,771,325
$ 26,340,195
$ 107,475,875
$ 17,734,611
$ 29,676,182
12/31/2007
$ 43,899,300
$ 29,747,500
$ 48,030,484
56
ANNUAL REPORT
OCTOBER 31, 2009
Notes to Financial Statements (concluded)
As of October 31, 2009, the tax components of accumulated net losses were as follows:
PSW
PSY
BPP
BTZ
CII
BGT
Capital loss carryforwards
$(127,842,748)
$(447,757,170)
$(185,378,942)
$(387,036,152)
$(106,212,859)
$ (73,270,778)
Net unrealized losses*
(13,773,056)
(85,650,823)
(34,137,626)
(95,975,896)
(83,448,589)
(41,417,420)
Total
$(141,615,804)
$(533,407,993)
$(219,516,568)
$(483,012,048)
$(189,661,448)
$(114,688,198)
* The differences between book-basis and tax-basis net unrealized losses were attributable primarily to the tax deferral of losses on wash sales, the amortization methods for
premi-
ums and discounts on fixed income securities, the accrual of income on securities in default, the realization for tax purposes of unrealized
gains/(losses) on certain futures and
foreign currency contracts, the timing and recognition of partnership income, the accounting for swap agreements, the deferral of compensation to trustees and directors, the
classi-
fication of investments and other temporary differences.
As of October 31, 2009, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates:
Expires October 31,
PSW
PSY
BPP
BTZ
CII
BGT
2011
$ 1,276,621
2012
10,243,141
$ 62,733,648
2013
5,058,900
17,911,331
2014
8,481,628
12,145,117
2015
6,724,694
19,582,978
$ 18,184,893
$ 49,741,712
$ 3,268,804
2016
40,232,230
140,413,242
58,197,929
113,355,213
$ 26,706,998
24,616,531
2017
55,825,534
194,970,854
108,996,120
223,939,227
79,505,861
45,385,443
Total
$ 127,842,748
$ 447,757,170
$ 185,378,942
$ 387,036,152
$ 106,212,859
$ 73,270,778
10. Subsequent Events:
Managements evaluation of the impact of all subsequent events on the
Funds financial statements was completed through December 28, 2009,
the date the financial statements were issued.
The Funds paid net investment income dividends on November 30, 2009
to shareholders of record on November 13, 2009 as follows:
Common
Dividend
Per Share
PSW
$0.0600
PSY
$0.0750
BPP
$0.0725
BTZ
$0.1000
BGT
$0.0675
The dividends declared on Preferred Shares for the period November 1,
2009 through November 30, 2009 were as follows:
Dividends
Series
Declared
PSW
M7
$23,880
T7
$23,790
PSY
M7
$25,541
T7
$25,445
W7
$25,452
TH7
$25,446
F7
$25,573
W28
$36,859
TH28
$36,888
BPP
T7
$ 4,435
W7
$ 4,317
R7
$ 4,431
BTZ
T7
$68,268
W7
$68,285
R7
$68,497
F7
$68,228
BGT
T7
$23,175
W7
$23,172
R7
$23,175
ANNUAL REPORT
OCTOBER 31, 2009
57
BlackRock Credit Allocation Income Trust I, Inc.
BlackRock Credit Allocation Income Trust II, Inc.
BlackRock Credit Allocation Income Trust III
BlackRock Credit Allocation Income Trust IV
Blackrock Enhanced Capital and Income Fund, Inc., and
BlackRock Floating Rate Income Trust
(Collectively the Trusts):
We have audited the accompanying statements of assets and liabilities
of BlackRock Credit Allocation Income Trust I, Inc. (formerly BlackRock
Preferred and Corporate Income Strategies Fund, Inc.) and BlackRock
Credit Allocation Income Trust II, Inc. (formerly BlackRock Preferred Income
Strategies Fund, Inc.), including the schedules of investments, as of
October 31, 2009, and the related statements of operations for the year
then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of
the four years in the period then ended. We have also audited the accom-
panying statement of assets and liabilities of BlackRock Credit Allocation
Income Trust III (formerly BlackRock Preferred Opportunity Trust), including
the schedule of investments, as of October 31, 2009, and the related
statement of operations for the year then ended, the statements of
changes in net assets for the year then ended, for the period January 1,
2008 to October 31, 2008, and for the year ended December 31, 2007,
and the financial highlights for the year ended October 31, 2009, for the
period January 1, 2008 to October 31, 2008, and for each of the four
years in the period ended December 31, 2007. We have also audited the
accompanying statement of assets and liabilities of BlackRock Credit
Allocation Income Trust IV (formerly BlackRock Preferred and Equity
Advantage Trust), including the schedule of investments, as of October 31,
2009, and the related statements of operations for the year then ended,
the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the two years
in the period ended October 31, 2009, and for the period December 27,
2006 (commencement of operations) to October 31, 2007. We have also
audited the accompanying statement of assets and liabilities of BlackRock
Enhanced Capital and Income Fund, Inc., including the schedule of invest-
ments, as of October 31, 2009, and the related statement of operations
for the year then ended, the statements of changes in net assets for the
year then ended, for the period January 1, 2008 to October 31, 2008, and
for the year ended December 31, 2007, and the financial highlights for the
year ended October 31, 2009, for the period January 1, 2008 to October
31, 2008, for each of the three years in the period ended December 31,
2007, and for the period April 30, 2004 (commencement of operations) to
December 31, 2004. We have also audited the accompanying statements
of assets and liabilities of BlackRock Floating Rate Income Trust (formerly
BlackRock Global Floating Rate Income Trust), including the schedule of
investments, as of October 31, 2009, and the related statement of opera-
tions and cash flows for the year then ended, the statements of changes
in net assets for the year then ended, for the period January 1, 2008 to
October 31, 2008, and for the year ended December 31, 2007, and the
financial highlights for the year ended October 31, 2009, for the period
January 1, 2008 to October 31, 2008, for each of the three years in the
(commencement of operations) to December 31, 2004. These financial
statements and financial highlights are the responsibility of the Trusts man-
agement. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial high-
lights of BlackRock Credit Allocation Income Trust I, Inc. and BlackRock
Credit Allocation Income Trust II, Inc., for the year ended October 31, 2005
were audited by other auditors whose report, dated December 9, 2005,
expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial highlights are free of
material misstatement. The Trusts are not required to have, nor were we
engaged to perform an audit of their internal control over financial report-
ing. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Trusts internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and signifi-
cant estimates made by management, as well as evaluating the overall
financial statement presentation. Our procedures include confirmation of
the securities owned as of October 31, 2009, by correspondence with the
custodian and financial intermediaries; where replies were not received
from financial intermediaries, we performed other auditing procedures. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
BlackRock Credit Allocation Income Trust I, Inc. and BlackRock Credit
Allocation Income Trust II, Inc., the results of their operations for the year
then ended, the changes in their net assets for each of the two years in
the period then ended, and the financial highlights for each of the four
years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America. Additionally, in our
opinion, the financial statements and financial highlights referred to above
present fairly, in all material respects, the financial position of BlackRock
Credit Allocation Income Trust III, the results of its operations for the year
then ended, the changes in its net assets for the year then ended,
for the period January 1, 2008 to October 31, 2008, and for the year
ended December 31, 2007, and the financial highlights for the year ended
October 31, 2009, for the period January 1, 2008 to October 31, 2008,
and for each of the four years in the period ended December 31, 2007,
in conformity with accounting principles generally accepted in the United
States of America. Additionally, in our opinion, the financial statements and
financial highlights referred to above present fairly, in all material respects,
the financial position of BlackRock Credit Allocation Income Trust IV, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial high-
lights for each of the two years in the period then ended, and for the period
in conformity with accounting principles generally accepted in the United
States of America. Additionally, in our opinion, the financial statements and
financial highlights referred to above present fairly, in all material respects,
the financial position of BlackRock Enhanced Capital and Income Fund,
Inc., the results of its operations for the year then ended, the changes in
its net assets for the year then ended, for the period January 1, 2008 to
October 31, 2008, and for the year ended December 31, 2007, and the
financial highlights for the year ended October 31, 2009, for the period
January 1, 2008 to October 31, 2008, for each of the three years in the
period ended December 31, 2007, and for the period April 30, 2004
(commencement of operations) to December 31, 2004, in conformity with
accounting principles generally accepted in the United States of America.
Additionally, in our opinion, the financial statements and financial highlights
of BlackRock Floating Rate Income Trust, the results of its operations and
its cash flows for the year then ended, the changes in its net assets for the
year then ended, for the period January 1, 2008 to October 31, 2008, and
for the year ended December 31, 2007, and the financial highlights for the
year ended October 31, 2009, for the period January 1, 2008 to October
31, 2008, for each of the three years in the period ended December 31,
2007, and for the period August 30, 2004 (commencement of operations)
to December 31, 2004, in conformity with accounting principles generally
accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
December 28, 2009
Important Tax Information (Unaudited)
The following information is provided with respect to the ordinary income distributions paid by the Funds for the taxable year ended
October 31, 2009:
PSW
PSY
BPP
BTZ
CII
BGT
Qualified Dividend Income for Individuals*
Months Paid:
November December 2008
28.71%
32.86%
43.81%
38.14%
27.56%
January October 2009
28.16%
23.53%
55.05%
63.22%
33.97%
Dividends Received Deductions for Corporations*
Months Paid:
November December 2008
14.15%
17.08%
13.42%
2.49%
26.00%
January October 2009
9.43%
11.78%
17.49%
37.17%
31.13%
Interest-Related Dividends and Qualified Short-Term Capital Gains
for Non-U.S. Residents**
Months Paid:
November December 2008
51.30%
55.03%
41.66%
29.12%
46.19%
January October 2009
61.37%
63.14%
53.10%
54.52%
100%
100%
* The Funds hereby designate the percentage indicated above or the maximum amount allowable by law.
** Represents the portion of taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign
corporations.
Includes dividend paid on January 9, 2009 to PSW, PSY, BPP, BTZ, and BGT Common Shareholders.
Additionally, of the CII distributions paid between March and September 2009, 16.53% represented long-term capital gains.
ANNUAL REPORT
OCTOBER 31, 2009
59
a Board and, collectively, the Boards, and the members of which are
referred to as Board Members) of each of BlackRock Credit Allocation
Income Trust I, Inc. (formerly BlackRock Preferred and Corporate Income
Strategies Fund, Inc.) (PSW), BlackRock Credit Allocation Income Trust
II, Inc. (formerly BlackRock Preferred Income Strategies Fund, Inc.) (PSY),
BlackRock Credit Allocation Income Trust III (formerly BlackRock Preferred
Opportunity Trust) (BPP), BlackRock Credit Allocation Income Trust IV (for-
merly BlackRock Preferred and Equity Advantage Trust) (BTZ), BlackRock
Enhanced Capital and Income Fund, Inc. (CII) and BlackRock Floating
Rate Income Trust (BGT, and together with PSW, PSY, BPP, BTZ, and CII,
each a Fund and, collectively, the Funds) met on April 14, 2009,
May 28 29, 2009 and August 25 26, 2009 to consider the approval
of its respective Funds investment advisory agreement (each, an Advisory
Agreement) with BlackRock Advisors, LLC (the Manager), each Funds
investment advisor. The Board of each of PSW, PSY, BPP, BTZ, CII and BGT
also considered the approval of a sub-advisory agreement (each, a Sub-
Advisory Agreement) among its respective Fund, the Manager and one
or both of the following sub-advisors, as the case may be: BlackRock
Financial Management, Inc.; and BlackRock Investment Management, LLC
(each, a Sub-Advisor). The Manager and the Sub-Advisors are referred
to herein as BlackRock. The Advisory Agreements and the Sub-Advisory
Agreements are referred to herein as the Agreements. Unless otherwise
indicated, references to actions taken by the Board or the Boards shall
mean each Board acting independently with respect to its Fund.
Activities and Composition of the Boards
Each Board consists of twelve individuals, ten of whom are not interested
persons of the Funds as defined in the Investment Company Act of 1940,
as amended (the 1940 Act) (the Independent Board Members). The
Board Members of each Fund are responsible for the oversight of the oper-
ations of such Fund and perform the various duties imposed on the direc-
tors of investment companies by the 1940 Act. The Independent Board
Members have retained independent legal counsel to assist them in con-
nection with their duties. The Chairman of each Board is an Independent
Board Member. Each Board has established five standing committees: an
Audit Committee, a Governance and Nominating Committee, a Compliance
Committee, a Performance Oversight Committee and an Executive
Committee, each of which is composed of Independent Board Members
(except for the Executive Committee, which has one interested Board
Member) and is chaired by an Independent Board Member. In addition,
the Boards of certain of the Funds have established an Ad Hoc Committee
on Auction Market Preferred Shares.
The Agreements
Pursuant to the 1940 Act, each Board is required to consider the continuation
of the Agreements on an annual basis. In connection with this process, each
Board assessed, among other things, the nature, scope and quality of the
services provided to its respective Fund by the personnel of BlackRock and its
affiliates, including investment management, administrative and shareholder
services, oversight of fund accounting and custody, marketing services and
assistance in meeting applicable legal and regulatory requirements.
tees, consider at each of their meetings factors that are relevant to their
annual consideration of the renewal of the Agreements, including the
services and support provided by BlackRock to the Funds and their share-
holders. Among the matters the Boards considered were: (a) investment
performance for one-, three- and five-year periods, as applicable, against
peer funds, and applicable benchmarks, if any, as well as senior manage-
ment and portfolio managers analysis of the reasons for any out perform-
ance or underperformance against its peers; (b) fees, including advisory
and other amounts paid to BlackRock and its affiliates by the Funds for
services such as call center and fund accounting; (c) the Funds operating
expenses; (d) the resources devoted to, and compliance reports relating to,
the Funds investment objectives, policies and restrictions; (e) the Funds
compliance with their Code of Ethics and compliance policies and proce-
dures; (f) the nature, cost and character of non-investment management
services provided by BlackRock and its affiliates; (g) BlackRocks and other
service providers internal controls; (h) BlackRocks implementation of the
proxy voting policies approved by the Board; (i) execution quality of port-
folio transactions and, as applicable, the use of brokerage commissions;
(j) BlackRocks implementation of the Funds valuation and liquidity proce-
dures; and (k) periodic updates on BlackRocks business.
Board Considerations in Approving the Agreements
The Approval Process: Prior to the April 14, 2009 meeting, each Board
requested and received materials specifically relating to the Agreements.
Each Board is engaged in an ongoing process with BlackRock to continu-
ously review the nature and scope of the information provided to better
assist their deliberations. The materials provided in connection with the
April meeting included (a) information independently compiled and pre-
pared by Lipper, Inc. (Lipper) on Fund fees and expenses, and the invest-
ment performance of each Fund as compared with a peer group of funds
as determined by Lipper and, where applicable, a customized peer group
selected by BlackRock (collectively, Peers); (b) information on the profit-
ability of the Agreements to BlackRock and a discussion of fall-out benefits
to BlackRock and its affiliates and significant shareholders; (c) a general
analysis provided by BlackRock concerning investment advisory fees charged
to other clients, such as institutional clients and open-end funds, under
similar investment mandates, as well as the performance of such other
clients; (d) the impact of economies of scale; (e) a summary of aggregate
amounts paid by each Fund to BlackRock; and (f) an internal comparison
of management fees classified by Lipper, if applicable.
At an in-person meeting held on April 14, 2009, each Board reviewed
materials relating to its consideration of the Agreements. As a result of the
discussions that occurred during the April 14, 2009 meeting, the Boards
presented BlackRock with questions and requests for additional informa-
tion and BlackRock responded to these requests with additional written
information in advance of the May 28 29, 2009 Board meeting.
At an in-person meeting held on May 28 29, 2009, the Boards of each
of BGT, BPP, BTZ and CII, including the Independent Board Members, unani-
mously approved the continuation of the Advisory Agreement between the
Fund, the Manager and the Sub-Advisor(s), as applicable, each for a one-
year term ending June 30, 2010. The Boards considered all factors they
believed relevant with respect to the Funds, including, among other factors:
(a) the nature, extent and quality of the services provided by BlackRock;
(b) the investment performance of the Fund and BlackRock portfolio man-
agement; (c) the advisory fee and the cost of the services and profits to
be realized by BlackRock and certain affiliates from their relationship with
the Fund; (d) economies of scale; and (e) other factors.
Each Board also considered other matters it deemed important to the
approval process, such as services related to the valuation and pricing
of its respective Funds portfolio holdings, direct and indirect benefits to
BlackRock and its affiliates and significant shareholders from their relation
ship with such Fund and advice from independent legal counsel with
respect to the review process and materials submitted for the Boards
review. The Boards noted the willingness of BlackRock personnel to engage
in open, candid discussions with the Boards. The Boards did not identify
any particular information as controlling, and each Board Member may
have attributed different weights to the various items considered.
At the in-person meeting held on May 28 29, 2009, the Boards of each
of PSY and PSW held extended discussions of the long- and short-term
performance of PSY and PSW and the future prospects for the investment
policies of such Funds with respect to investing in primarily preferred
stocks. At such meeting, the Boards of each of PSY and PSW approved
the continuation of the Advisory Agreement between the Manager and
each such Fund and the Sub-Advisory Agreement among such Fund, the
Manager and the Sub-Advisor(s) on an interim basis for a three-month
period ended September 30, 2009. In taking such action, the Boards of
each of PSY and PSW noted that the interim approval of the Agreements
was intended to allow and encourage BlackRock to explore various alter-
natives for the future management of PSY and PSW, and to report back to
the Boards with recommendations at the Boards next regularly scheduled
in-person meetings.
At an in-person meeting of the Boards of each of PSY and PSW on
August 25 26, 2009, BlackRock recommended changing certain
investment policies of PSY and PSW by removing their non-fundamental
investment policies requiring that they invest at least 80% of their respec-
tive assets in preferred securities and adopting a new non-fundamental
policy requiring that PSY and PSW invest at least 80% of their respective
total assets in credit-related securities, including, but not limited to,
investment grade corporate bonds, high yield bonds, bank loans, preferred
securities or convertible bonds or derivatives with economic characteristics
similar to these credit-related securities. As a result of these investment
policy amendments, PSY and PSW were proposed to be renamed
BlackRock Credit Allocation Income Trust I, Inc. and BlackRock Credit
Allocation Income Trust II, Inc., respectively, to reflect their new
portfolio characteristics.
After considering BlackRocks proposed changes for PSY and PSW and
recalling their deliberations with respect to PSY and PSW at the April
and May Board meetings, the Board of each such Fund, including the
the Advisory Agreement between the Manager and such Fund and the Sub-
Advisory Agreement among such Fund, the Manager and the Sub-Advisor(s),
each for a nine-month term ending June 30, 2010.
A. Nature, Extent and Quality of the Services: Each Board, including its
Independent Board Members, reviewed the nature, extent and quality of
services provided by BlackRock, including the investment advisory services
and the resulting performance of its respective Fund. Throughout the year,
each Board compared its respective Funds performance to the perform-
ance of a comparable group of closed-end funds, and the performance of
a relevant benchmark, if any. The Boards met with BlackRocks senior man-
agement personnel responsible for investment operations, including the
senior investment officers. Each Board also reviewed the materials provided
by its respective Funds portfolio management team discussing such Funds
performance and such Funds investment objective, strategies and outlook.
Each Board considered, among other factors, the number, education and
experience of BlackRocks investment personnel generally and its respective
Funds portfolio management team, investments by portfolio managers in the
funds they manage, BlackRocks portfolio trading capabilities, BlackRocks
use of technology, BlackRocks commitment to compliance and BlackRocks
approach to training and retaining portfolio managers and other research,
advisory and management personnel. Each Board also reviewed a general
description of BlackRocks compensation structure with respect to its
respective Funds portfolio management team and BlackRocks ability
to attract and retain high-quality talent.
In addition to advisory services, each Board considered the quality of the
administrative and non-investment advisory services provided to its respec-
tive Fund. BlackRock and its affiliates and significant shareholders provide
the Funds with certain administrative and other services (in addition to any
such services provided to the Funds by third parties) and officers and other
personnel as are necessary for the operations of the Funds. In addition to
investment advisory services, BlackRock and its affiliates provide the Funds
with other services, including (i) preparing disclosure documents, such as
the prospectus and the statement of additional information in connection
with the initial public offering and periodic shareholder reports; (ii) prepar-
ing communications with analysts to support secondary market trading of
the Funds; (iii) assisting with daily accounting and pricing; (iv) preparing
periodic filings with regulators and stock exchanges; (v) overseeing and
coordinating the activities of other service providers; (vi) organizing Board
meetings and preparing the materials for such Board meetings; (vii) pro-
viding legal and compliance support; and (viii) performing other adminis-
trative functions necessary for the operation of the Funds, such as tax
reporting, fulfilling regulatory filing requirements, and call center services.
The Boards reviewed the structure and duties of BlackRocks fund adminis-
tration, accounting, legal and compliance departments and considered
BlackRocks policies and procedures for assuring compliance with applica-
ble laws and regulations.
B. The Investment Performance of the Funds and BlackRock: Each Board,
including its Independent Board Members, also reviewed and considered
the performance history of its respective Fund. In preparation for the April 14,
pared by Lipper, which included a comprehensive analysis of each Funds
performance. The Boards also reviewed a narrative and statistical analysis
of the Lipper data that was prepared by BlackRock, which analyzed various
factors that affect Lippers rankings. In connection with its review, each
Board received and reviewed information regarding the investment per-
formance of its respective Fund as compared to a representative group
of similar funds as determined by Lipper and to all funds in such Funds
applicable Lipper category and, where applicable, a customized peer group
selected by BlackRock. Each Board was provided with a description of the
methodology used by Lipper to select peer funds. Each Board regularly
reviews the performance of its respective Fund throughout the year.
The Board of BTZ noted that, in general, BTZ performed better than its Peers
in that the performance of BTZ was at or above the median of its customized
Lipper peer group in both the one-year and since inception periods reported.
The Board of CII noted that, in general, CII performed better than its Peers
in that the performance of CII was at or above the median of its Lipper
Performance Universe in two of the one-year, three-year and since incep-
tion periods reported.
The Board of BGT noted that, in general, BGT performed better than its
Peers in that the performance of BGT was at or above the median of its
Lipper Performance Universe in each of the one-year, three-year and since
inception periods reported.
The Board of each of PSW, PSY, and BPP noted that PSW, PSY, and BPP
performed below the median of their respective customized Lipper peer
group in the one-, three- and five-year periods reported. The Board of
each of PSW, PSY, and BPP, and BlackRock reviewed the reasons for PSWs,
PSYs, and BPPs underperformance during these periods compared with
their respective Peers. Each Board was informed that, among other things,
PSWs, PSYs, and BPPs respective underweight position to retail preferreds
negatively impacted each such Fund.
For PSW, PSY and BPP, the Board of each respective Fund and BlackRock
discussed BlackRocks commitment to providing the resources necessary
to assist the portfolio managers and to improve each such Funds per-
formance, including the changes to PSWs and PSYs non-fundamental
investment policies.
C. Consideration of the Advisory Fees and the Cost of the Services
and Profits to be Realized by BlackRock and its Affiliates from their
Relationship with the Funds: Each Board, including its Independent
Board Members, reviewed its respective Funds contractual advisory fee
rates compared with the other funds in its respective Lipper category.
Each Board also compared its respective Funds total expenses, as well
as actual management fees, to those of other comparable funds. Each
Board considered the services provided and the fees charged by
BlackRock to other types of clients with similar investment mandates,
including separately managed institutional accounts.
The Boards received and reviewed statements relating to BlackRocks
financial condition and profitability with respect to the services it provided
the Funds. The Boards were also provided with a profitability analysis that
services provided to the Funds. The Boards reviewed BlackRocks profitabil-
ity with respect to the Funds and other funds the Boards currently oversee
for the year ended December 31, 2008 compared to available aggregate
profitability data provided for the year ended December 31, 2007. The
Boards reviewed BlackRocks profitability with respect to other fund com-
plexes managed by the Manager and/or its affiliates. The Boards reviewed
BlackRocks assumptions and methodology of allocating expenses in the
profitability analysis, noting the inherent limitations in allocating costs among
various advisory products. The Boards recognized that profitability may be
affected by numerous factors including, among other things, fee waivers by
the Manager, the types of funds managed, expense allocations and busi-
ness mix, and therefore comparability of profitability is somewhat limited.
The Boards noted that, in general, individual fund or product line profitability
of other advisors is not publicly available. Nevertheless, to the extent such
information is available, the Boards considered BlackRocks overall operat-
ing margin, in general, compared to the operating margin for leading invest-
ment management firms whose operations include advising closed-end
funds, among other product types. The comparison indicated that operating
margins for BlackRock with respect to its registered funds are generally
consistent with margins earned by similarly situated publicly traded com-
petitors. In addition, the Boards considered, among other things, certain
third-party data comparing BlackRocks operating margin with that of other
publicly-traded asset management firms, which concluded that larger asset
bases do not, in themselves, translate to higher profit margins.
In addition, the Boards considered the cost of the services provided to the
Funds by BlackRock, and BlackRocks and its affiliates profits relating to the
management and distribution of the Funds and the other funds advised by
BlackRock and its affiliates. As part of their analysis, the Boards reviewed
BlackRocks methodology in allocating its costs to the management of the
Funds. The Boards also considered whether BlackRock has the financial
resources necessary to attract and retain high quality investment manage-
ment personnel to perform its obligations under the Agreements and to con-
tinue to provide the high quality of services that is expected by the Boards.
The Boards of each of BGT, BPP, BTZ, CII, PSY and PSW noted that its
respective Fund paid contractual management fees, which do not take into
account any expense reimbursement or fee waivers, lower than or equal to
the median contractual management fees paid by such Funds Peers.
D. Economies of Scale: Each Board, including its Independent Board
Members, considered the extent to which economies of scale might be
realized as the assets of its respective Fund increase and whether there
should be changes in the advisory fee rate or structure in order to enable
such Fund to participate in these economies of scale, for example through
the use of breakpoints in the advisory fee based upon the assets of such
Fund. The Boards considered that the funds in the BlackRock fund complex
share some common resources and, as a result, an increase in the overall
size of the complex could permit each fund to incur lower expenses than
it would otherwise as a stand-alone entity. The Boards also considered
BlackRocks overall operations and its efforts to expand the scale of, and
improve the quality of, its operations.
level breakpoints because closed-end funds generally do not experience
substantial growth after the initial public offering and each fund is man-
aged independently, consistent with its own investment objectives. The
Boards noted that only one closed-end fund in the Fund Complex has
breakpoints in its fee structure. Information provided by Lipper also
revealed that only one closed-end fund complex used a complex-level
breakpoint structure.
E. Other Factors: The Boards also took into account other ancillary or fall-
out benefits that BlackRock or its affiliates and significant shareholders
may derive from their relationship with the Funds, both tangible and intan-
gible, such as BlackRocks ability to leverage its investment professionals
who manage other portfolios, an increase in BlackRocks profile in the
investment advisory community, and the engagement of BlackRocks affili-
ates and significant shareholders as service providers to the Funds, includ-
ing for administrative and distribution services. The Boards also noted that
BlackRock may use third-party research obtained by soft dollars generated
by certain mutual fund transactions to assist itself in managing all or a
number of its other client accounts.
In connection with their consideration of the Agreements, the Boards also
received information regarding BlackRocks brokerage and soft dollar prac-
tices. The Boards received reports from BlackRock, which included informa-
tion on brokerage commissions and trade execution practices throughout
the year.
Each Board, including its Independent Board Members, unanimously
approved the continuation of the Advisory Agreement between its respec-
tive Fund and the Manager for a one-year term ending June 30, 2010, in
the case of BGT, BPP, BTZ and CII, and for a three-month interim period
followed by a nine-month term ending June 30, 2010 for each of PSW
and PSY, and, where applicable, the Sub-Advisory Agreement among such
Fund, the Manager and such Funds Sub-Advisor(s) for a one-year term
ending June 30, 2010, in the case of BGT, BPP, BTZ and CII, and for a
three-month interim period followed by a nine-month term ending June 30,
2010 for each of PSW and PSY. Based upon its evaluation of all these fac-
tors in their totality, each Board, including its Independent Board Members,
was satisfied that the terms of the Agreements were fair and reasonable
and in the best interest of its respective Fund and its shareholders. In
arriving at a decision to approve the Agreements, each Board did not
identify any single factor or group of factors as all-important or controlling,
but considered all factors together, and different Board Members may
have attributed different weights to the various factors considered. The
Independent Board Members were also assisted by the advice of inde-
pendent legal counsel in making this determination. The contractual fee
arrangements for each Fund reflects the results of several years of review
by such Funds Board Members and predecessor Board Members, and
discussions between such Board Members (and predecessor Board
Members) and BlackRock. Certain aspects of the arrangements may be
the subject of more attention in some years than in others, and the Board
Members conclusions may be based in part on their consideration of these
arrangements in prior years.
For PSW, PSY and CII
PSW, PSY and CII offer a Dividend Reinvestment Plan (the Plan) under
which income and capital gains dividends paid by a Fund are automati-
cally reinvested in additional Common Shares of the Fund. The Plan is
administered on behalf of the shareholders by BNY Mellon Shareowner
Services for CII and Computershare Trust Company, N.A. for PSW and PSY
(individually, the Plan Agent or together, the Plan Agents). Under the Plan,
whenever a Fund declares a dividend, participants in the Plan will receive
the equivalent in Common Shares of the Fund. The Plan Agents will acquire
the shares for the participants account either (i) through receipt of addi-
tional unissued but authorized shares of the Funds (newly issued shares)
or (ii) by purchase of outstanding Common Shares on the open market on
the New York Stock Exchange, as applicable, or elsewhere. If, on the divi-
dend payment date, the Funds net asset value per share is equal to or less
than the market price per share plus estimated brokerage commissions
(a condition often referred to as a market premium), the Plan Agents will
invest the dividend amount in newly issued shares. If the Funds net asset
value per share is greater than the market price per share (a condition often
referred to as a market discount), the Plan Agents will invest the dividend
amount by purchasing on the open market additional shares. If the Plan
Agents are unable to invest the full dividend amount in open market pur-
chases, or if the market discount shifts to a market premium during the
purchase period, the Plan Agents will invest any uninvested portion in
newly issued shares. The shares acquired are credited to each shareholders
account. The amount credited is determined by dividing the dollar amount
of the dividend by either (i) when the shares are newly issued, the net
asset value per share on the date the shares are issued or (ii) when shares
are purchased in the open market, the average purchase price per share.
Participation in the Plan is automatic, that is, a shareholder is automati-
cally enrolled in the Plan when he or she purchases shares of Common
Shares of the Funds unless the shareholder specifically elects not to partici-
pate in the Plan. Shareholders who elect not to participate will receive all
dividend distributions in cash. Shareholders who do not wish to participate
in the Plan must advise their Plan Agent in writing (at the address set forth
below) that they elect not to participate in the Plan. Participation in the
Plan is completely voluntary and may be terminated or resumed at any
time without penalty by writing to the Plan Agent.
The Plan provides an easy, convenient way for shareholders to make addi-
tional, regular investments in the Funds. The Plan promotes a long-term
strategy of investing at a lower cost. All shares acquired pursuant to the
Plan receive voting rights. In addition, if the market price plus commissions
of a Funds shares is above the net asset value, participants in the Plan will
receive shares of the Funds for less than they could otherwise purchase
them and with a cash value greater than the value of any cash distribution
they would have received. However, there may not be enough shares avail-
able in the market to make distributions in shares at prices below the net
asset value. Also, since the Funds do not redeem shares, the price on
resale may be more or less than the net asset value.
Plan. The Plan Agents service fees for handling the reinvestment of distri-
butions are paid for by the Funds. However, brokerage commissions may be
incurred when the Funds purchase shares on the open market and share-
holders will pay a pro rata share of any such commissions.
The automatic reinvestment of dividends and distributions will not relieve
participants of any federal, state or local income tax that may be payable
(or required to be withheld) on such dividends. Therefore, income and
capital gains may still be realized even though shareholders do not receive
cash. If, when the Funds shares are trading at a market premium, the
Funds issue shares pursuant to the Plan that have a greater fair market
value than the amount of cash reinvested, it is possible that all or a portion
of the discount from the market value (which may not exceed 5% of the
fair market value of the Funds shares) could be viewed as a taxable distri-
bution. If the discount is viewed as a taxable distribution, it is also possible
that the taxable character of this discount would be allocable to all the
shareholders, including shareholders who do not participate in the Plan.
Thus, shareholders who do not participate in the Plan might be required to
report as ordinary income a portion of their distributions equal to their allo-
cable share of the discount.
All correspondence concerning the Plan, including any questions about
the Plan, should be directed to the Plan Agent at the following addresses:
Shareholders of CII should contact BNY Mellon Shareowner Services, P.O.
Box 385035, Pittsburgh, PA 15252-8035 Telephone: (866) 216-0242
and shareholders of PSW and PSY should contact Computershare Trust
Company, N.A., P.O. Box 43078, Providence, RI 02940-3078 Telephone:
(800) 699-1BFM or overnight correspondence should be directed to the
Plan Agent at 250 Royall Street, Canton, MA 02021.
For BPP, BTZ and BGT
Pursuant to the Plan of BPP, BTZ and BGT (the Funds), shareholders are
automatically enrolled to have all distributions of dividends and capital
gains reinvested by Computershare Trust Company, N.A. (the Plan Agent)
in the respective Funds shares pursuant to the Plan. Shareholders who
do not participate in the Plan will receive all distributions in cash paid by
check and mailed directly to the shareholders of record (or if the shares
are held in street or other nominee name, then to the nominee) by the
Plan Agent, which serves as agent for the shareholders in administering
the Plan.
After the Funds declare a dividend or determine to make a capital gain
distribution, the Plan Agent will acquire shares for the participants account,
depending upon the circumstances described below, either (i) through
receipt of unissued but authorized shares from the Funds (newly issued
shares) or (ii) by open market purchases. If, on the dividend payment
date, the net asset value per share NAV is equal to or less than the market
price per share plus estimated brokerage commissions (such condition
being referred to herein as market premium), the Plan Agent will invest
the dividend amount in newly issued shares on behalf of the participants.
The number of newly issued shares to be credited to each participants
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 Agents fees for the handling of the reinvestment of dividends and
distributions will be paid by each Fund. However, each participant will pay
a pro rata share of brokerage commissions incurred with respect to the
Plan Agents open market purchases in connection with the reinvestment
and distributions will not relieve participants of any Federal income tax
that may be payable on such dividends or distributions.
Each Fund reserves the right to amend or terminate the Plan. There is
no direct service charge to participants in the Plan; however each Fund
reserves the right to amend the Plan to include a service charge payable
by the participants. Participants who request a sale of shares through the
Plan Agent are subject to a $2.50 sales fee and a $0.15 per share sold
brokerage commission. All correspondence concerning the Plan should be
directed to the Plan Agent at P.O. Box 43078, Providence, RI 02940-3078
or by calling (800) 699-1BFM. All overnight correspondence should be
directed to the Plan Agent at 250 Royall Street, Canton, MA 02021.
Officers and Directors
Number of BlackRock-
Advised Registered
Length
Investment Companies
Position(s)
of Time
(RICs) Consisting of
Name, Address
Held with
Served as
Investment Portfolios
Public
and Year of Birth
Funds
a Director2
Principal Occupation(s) During Past 5 Years
(Portfolios) Overseen
Directorships
Non-Interested Directors1
Richard E. Cavanagh
Chairman
Since
Trustee, Aircraft Finance Trust since 1999; Director, The Guardian
102 RICS consisting of
Arch Chemical
40 East 52nd Street
of the Board
2007
Life Insurance Company of America since 1998; Trustee, Educational
100 Portfolios
(chemical and allied
New York, NY 10022
and Director
Testing Service from 1997 to 2009 and Chairman from 2005 to 2009
products)
1946
Senior Advisor, The Fremont Group since 2008 and Director thereof
since 1996; Adjunct Lecturer, Harvard University since 2007; President
and Chief Executive Officer of The Conference Board, Inc. (global
business research organization) from 1995 to 2007.
Karen P. Robards
Vice Chair
Since
Partner of Robards & Company, LLC (financial advisory firm) since
102 RICs consisting of
AtriCure, Inc.
40 East 52nd Street
of the Board,
2007
1987; Co-founder and Director of the Cooke Center for Learning and
100 Portfolios
(medical devices);
New York, NY 10022
Chair of
Development, (a not-for-profit organization) since 1987; Director of
Care Investment
1950
the Audit
Enable Medical Corp. from 1996 to 2005.
Trust, Inc. (health
Committee
care real estate
and Director
investment trust)
G. Nicholas Beckwith, III
Director
Since
Chairman and Chief Executive Officer, Arch Street Management, LLC
102 RICs consisting of
None
40 East 52nd Street
2007
(Beckwith Family Foundation) and various Beckwith property companies
100 Portfolios
New York, NY 10022
since 2005; Chairman of the Board of Directors, University of Pittsburgh
1945
Medical Center since 2002; Board of Directors, Shady Side Hospital
Foundation since 1977; Board of Directors, Beckwith Institute for
Innovation In Patient Care since 1991; Member, Advisory Council on
Biology and Medicine, Brown University since 2002; Trustee, Claude
Worthington Benedum Foundation (charitable foundation) since 1989;
Board of Trustees, Chatham University since 1981; Board of Trustees,
University of Pittsburgh since 2002; Emeritus Trustee, Shady Side
Academy since 1977; Chairman and Manager, Penn West Industrial
Trucks LLC (sales, rental and servicing of material handling equipment)
from 2005 to 2007; Chairman, President and Chief Executive Officer,
Beckwith Machinery Company (sales, rental and servicing of construction
and equipment) from 1985 to 2005; Member of the Board of Directors,
National Retail Properties (REIT) from 2006 to 2007.
Kent Dixon
Director
Since
Consultant/Investor since 1988.
102 RICs consisting of
None
40 East 52nd Street
and Member
2007
100 Portfolios
New York, NY 10022
of the Audit
1937
Committee
Frank J. Fabozzi
Director
Since
Consultant/Editor of The Journal of Portfolio Management since 2006;
102 RICs consisting of
None
40 East 52nd Street
and Member
2007
Professor in the Practice of Finance and Becton Fellow, Yale University,
100 Portfolios
New York, NY 10022
of the Audit
School of Management, since 2006; Adjunct Professor of Finance
1948
Committee
and Becton Fellow, Yale University from 1994 to 2006.
Kathleen F. Feldstein
Director
Since
President of Economics Studies, Inc. (private economic consulting
102 RICs consisting of
The McClatchy
40 East 52nd Street
2007
firm) since 1987; Chair, Board of Trustees, McLean Hospital from
100 Portfolios
Company
New York, NY 10022
2000 to 2008 and Trustee Emeritus thereof since 2008; Member of
(publishing)
1941
the Board of Partners Community Healthcare, Inc. since 2005;
Member of the Corporation of Partners HealthCare since 1995;
Trustee, Museum of Fine Arts, Boston since 1992; Member of the
Visiting Committee to the Harvard University Art Museum since 2003.
James T. Flynn
Director
Since
Chief Financial Officer of JP Morgan & Co., Inc. from 1990 to 1995.
102 RICs consisting of
None
40 East 52nd Street
and Member
2007
100 Portfolios
New York, NY 10022
of the Audit
1939
Committee
Jerrold B. Harris
Director
Since
Trustee, Ursinus College since 2000; Director, Troemner LLC
102 RICs consisting of
BlackRock Kelso
40 East 52nd Street
2007
(scientific equipment)since 2000.
100 Portfolios
Capital Corp.
New York, NY 10022
1942
66
ANNUAL REPORT
OCTOBER 31, 2009
Officers and Directors (continued)
Number of BlackRock-
Advised Registered
Length
Investment Companies
Position(s)
of Time
(RICs) Consisting of
Name, Address
Held with
Served as
Investment Portfolios
Public
and Year of Birth
Funds
a Director2
Principal Occupation(s) During Past 5 Years
(Portfolios) Overseen
Directorships
Non-Interested Directors1
(concluded)
R. Glenn Hubbard
Director
Since
Dean, Columbia Business School since 2004; Columbia faculty
102 RICs consisting of
ADP (data and
40 East 52nd Street
2007
member since 1988; Co-Director, Columbia Business Schools
100 Portfolios
information services),
New York, NY 10022
Entrepreneurship Program from 1997 to 2004; Visiting Professor,
KKR Financial
1958
John F. Kennedy School of Government at Harvard University and the
Corporation (finance),
Harvard Business School since 1985 and at the University of Chicago
Metropolitan Life
since 1994; Chairman, U.S. Council of Economic Advisers under the
Insurance Company
President of the United States from 2001 to 2003.
(insurance)
W. Carl Kester
Director
Since
George Fisher Baker Jr. Professor of Business Administration, Harvard
102 RICs consisting of
None
40 East 52nd Street
and Member
2007
Business School; Deputy Dean for Academic Affairs, since 2006; Unit
100 Portfolios
New York, NY 10022
of the Audit
Head, Finance, Harvard Business School, from 2005 to 2006; Senior
1951
Committee
Associate Dean and Chairman of the MBA Program of Harvard Business
School, from 1999 to 2005; Member of the faculty of Harvard Business
School since 1981; Independent Consultant since 1978.
1 Directors serve until their resignation, removal or death, or until December 31 of the
year in which they turn 72.
2 Date shown is the earliest date a person has served as a director for the Funds covered
by this annual report. Following the combination of Merrill Lynch
Investment Managers, L.P. (MLIM) and BlackRock, Inc. (BlackRock) in September 2006, the various legacy MLIM and legacy BlackRock Fund
boards
were realigned and consolidated into three new Fund boards in 2007. As a result, although the chart shows directors as joining the Funds board in
2007,
each director first became a member of the board of other legacy MLIM or legacy BlackRock Funds as follows: G. Nicholas Beckwith, III, 1999; Richard E.
Cavanagh, 1994; Kent Dixon, 1988; Frank J. Fabozzi, 1988; Kathleen F. Feldstein, 2005; James T. Flynn, 1996; Jerrold B. Harris, 1999; R. Glenn Hubbard,
2004; W. Carl Kester, 1995 and Karen P. Robards, 1998.
Interested Directors3
Richard S. Davis
President
Since
Managing Director, BlackRock, Inc. since 2005; Chief Executive Officer, State Street
171 RICs
None
40 East 52nd Street
and
2007
Research & Management Company from 2000 to 2005; Chairman of the Board
consisting of
New York, NY 10022
Director
of Trustees, State Street Research Mutual Funds from 2000 to 2005; Chairman,
282 Portfolios
1945
SSR Realty from 2000 to 2004.
Henry Gabbay
Director
Since
Consultant, BlackRock, Inc. from 2007 to 2008; Managing Director, BlackRock,
171 RICs
None
40 East 52nd Street
2007
Inc. from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC
consisting of
New York, NY 10022
from 1998 to 2007; President of BlackRock Funds and BlackRock Bond
282 Portfolios
1947
Allocation Target Shares from 2005 to 2007; Treasurer of certain closed-end
funds in the BlackRock fund complex from 1989 to 2006.
3 Mr. Davis is an interested person, as defined in the Investment Company Act
of 1940, of the Funds based on his position with BlackRock, Inc. and its
affiliates. Mr. Gabbay is an interested person of the Funds based on his former positions with BlackRock, Inc. and its affiliates as well as his
ownership
of BlackRock, Inc. and PNC securities. Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.
ANNUAL REPORT
OCTOBER 31, 2009
67
Officers and Directors (concluded)
Position(s)
Name, Address
Held with
Length of
and Year of Birth
Funds
Time Served Principal Occupation(s) During Past 5 Years
Funds Officers1
Anne F. Ackerley
President
Since
Managing Director of BlackRock, Inc. since 2000; Vice President of the BlackRock-advised funds from 2007 to 2009;
40 East 52nd Street
and Chief
2009
Chief Operating Officer of BlackRocks Global Client Group (GCG) since 2009; Chief Operating Officer of BlackRocks
New York, NY 10022
Executive
U.S. Retail Group from 2006 to 2009; Head of BlackRocks Mutual Fund Group from 2000 to 2006.
1962
Officer
Brendan Kyne
Vice
Since
Director of BlackRock, Inc. since 2008; Head of Product Development and Management for BlackRocks U.S. Retail
40 East 52nd Street
President
2009
Group since 2009, co-head thereof from 2007 to 2009; Vice President of BlackRock, Inc. from 2005 to 2008;
New York, NY 10022
Associate of BlackRock, Inc. from 2002 to 2004.
1977
Neal J. Andrews
Chief
Since
Managing Director of BlackRock, Inc. since 2006; Senior Vice President and Line of Business Head of Fund
40 East 52nd Street
Financial
2007
Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
New York, NY 10022
Officer
1966
Jay M. Fife
Treasurer
Since
Managing Director of BlackRock, Inc. since 2007 and Director in 2006; Assistant Treasurer of the Merrill Lynch
40 East 52nd Street
2007
Investment Managers, L.P. (MLIM) and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of
New York, NY 10022
MLIM Fund Services Group from 2001 to 2006.
1970
Brian P. Kindelan
Chief
Since
Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel
40 East 52nd Street
Compliance
2007
of BlackRock, Inc. since 2005; Director and Senior Counsel of BlackRock Advisors, LLC from 2001 to 2004.
New York, NY 10022
Officer
1959
Howard B. Surloff
Secretary
Since
Managing Director and General Counsel of U.S. Funds at BlackRock, Inc. since 2006; General Counsel (U.S.)
40 East 52nd Street
2007
of Goldman Sachs Asset Management, L.P. from 1993 to 2006.
New York, NY 10022
1965
1 Officers of the Funds serve at the pleasure of the Board.
Investment Advisor
Custodians
Transfer Agent
Accounting Agent
Independent
Legal Counsel
BlackRock Advisors, LLC
State Street Bank
Common Shares
State Street Bank
Registered Public
Skadden, Arps, Slate,
Wilmington, DE 19809
and Trust Company1
Computershare Trust Company, N.A.1
and Trust Company
Accounting Firm
Meagher & Flom LLP
Boston, MA 02111
Canton, MA 02021
Princeton, NJ 08540
Deloitte & Touche LLP
New York, NY 10036
Sub-Advisor
Princeton, NJ 08540
BlackRock Financial
Brown Brothers,
BNY Mellon Shareowner Services2
Address of the Funds
Management, Inc.2,3
Harriman & Co.2
Jersey City, NJ 07310
100 Bellevue Parkway
New York, NY 10022
Boston, MA 02109
Wilmington, DE 19809
Auction Agent
BlackRock Investment
Preferred Shares
Management, LLC2
BNY Mellon Shareowner Services1
Plainsboro, NJ 08536
Jersey City, NJ 07310
1 For all Funds except CII.
2 For CII.
3 For PSW, PSY, BPP, BTZ and BGT.
wishes Mr. Burke well in his retirement.
Effective August 1, 2009, Anne F. Ackerley became President and Chief Executive Officer of the Funds, and Brendan Kyne
became Vice President of the Funds.
Additional Information
Proxy Results
The Annual Meeting of Shareholders was held on August 26, 2009 for shareholders of record on June 29, 2009 to elect director nominees of each Fund:
Approved the Class II Directors as follows:
Richard S. Davis
Frank J. Fabozzi
James T. Flynn
Karen P. Robards
Votes
Votes
Votes
Votes
Votes For
Withheld
Votes For
Withheld
Votes For
Withheld
Votes For
Withheld
BGT1
19,304,993
695,969
1,5362
412
19,358,516
642,446
19,407,966
592,996
BTZ1
45,476,492
1,268,611
5,6002
1082
45,358,705
1,386,398
45,337,245
1,407,858
BPP1
16,044,548
543,383
1,5222
302
16,044,548
543,383
16,037,584
550,347
Approved the Directors as follows:
G. Nicholas Beckwith, III
Richard E. Cavanagh
Richard S. Davis
Votes
Votes
Votes
Votes For
Withheld
Votes For
Withheld
Votes For
Withheld
CII
37,172,227
1,688,817
37,233,458
1,627,586
37,337,729
1,523,315
PSW
8,451,844
322,043
8,430,797
343,090
8,450,828
323,059
PSY
34,209,217
1,432,504
34,213,593
1,428,128
34,247,323
1,394,398
Kent Dixon
Frank J. Fabozzi
Kathleen F. Feldstein
Votes
Votes
Votes
Votes For
Withheld
Votes For
Withheld
Votes For
Withheld
CII
37,174,585
1,686,459
37,288,696
1,572,348
37,194,912
1,666,132
PSW
8,433,142
340,745
1,2792
122
8,454,805
319,082
PSY
34,097,941
1,543,780
3,7312
722
34,195,383
1,446,338
James T. Flynn
Henry Gabbay
Jerrold B. Harris
Votes
Votes
Votes
Votes For
Withheld
Votes For
Withheld
Votes For
Withheld
CII
37,181,395
1,679,649
37,303,898
1,557,146
37,281,759
1,579,285
PSW
8,438,377
335,510
8,450,828
323,059
8,447,635
326,252
PSY
34,166,913
1,474,808
34,240,405
1,401,316
34,247,106
1,394,615
R. Glenn Hubbard
W. Carl Kester
Karen P. Robards
Votes
Votes
Votes
Votes For
Withheld
Votes For
Withheld
Votes For
Withheld
CII
37,209,180
1,651,864
37,313,817
1,547,227
37,310,060
1,550,984
PSW
8,436,816
337,071
1,2792
122
8,437,967
335,920
PSY
34,258,257
1,383,464
3,7312
722
34,257,723
1,383,998
1 The Board is organized into three classes, one class of which is elected annually. Each
Director serves a three-year term concurrent with the class into which he or she is elected.
2 Voted on by holders of Preferred Shares only
Fund Certification
Certain Funds are listed for trading on the New York Stock Exchange
Funds filed with the SEC the certification of its chief executive officer and
(NYSE) and have filed with the NYSE their annual chief executive officer
chief financial officer required by section 302 of the Sarbanes-Oxley Act.
certification regarding compliance with the NYSEs listing standards. The
ANNUAL REPORT
OCTOBER 31, 2009
69
Dividend Policy
Each Funds, except CIIs, dividend policy is to distribute all or a portion of
its net investment income to its shareholders on a monthly (quarterly for
CII) basis. In order to provide shareholders with a more stable level of
dividend distributions, the Funds may at times pay out less than the entire
amount of net investment income earned in any particular month/quarter
and may at times in any particular month/quarter pay out such accumu-
lated but undistributed income in addition to net investment income
for any particular month/quarter may be more or less than the amount
of net investment income earned by the Funds during such month/quarter.
The Funds current accumulated but undistributed net investment income,
if any, is disclosed in the Statements of Assets and Liabilities, which com-
prises part of the financial information included in this report.
The Funds do not make available copies of their Statements of Additional
Information because the Funds shares are not continuously offered, which
means that the Statement of Additional Information of each Fund has not
been updated after completion of the respective Funds offerings and the
information contained in each Funds Statement of Additional Information
may have become outdated.
CII
During the period, the Board of Directors (the Board) of CII approved a
change to the Funds option writing policy. The Fund has the authority to
write (i.e., sell)
put options on the types of securities or instruments that
may be held by the Fund, provided that such put options are covered,
meaning that such options are secured by segregated, liquid instruments
or cash. Under the original policy, the Fund was limited from selling puts if,
as a result, more than 50% of the Funds assets would be required to cover
its potential obligations under its hedging and other investment transac-
tions. The Board approved the elimination of this 50% requirement. When
the Fund writes covered put options, it bears the risk of loss if the value of
the underlying stock declines below the exercise price minus the put pre-
mium. If the option is exercised, the Fund could incur a loss if it is required
to purchase the stock underlying the put option at a price greater than the
market price of the stock at the time of exercise plus the put premium the
Fund received when it wrote the option. While the Funds potential gain in
writing a covered put option is limited to distributions earned on the liquid
assets securing the put option plus the premium received from the pur-
chaser of the put option, the Fund risks a loss equal to the entire exercise
price of the option minus the put premium.
PSW, PSY, BPP and BTZ
On August 26, 2009, the Board of PSW, PSY, BPP and BTZ (the Funds)
approved a change to certain investment policies of the Funds. As a result
of these policy changes, PSY and BPP will no longer focus their investments
primarily on preferred securities and PSW will no longer focus its invest-
ments primarily on preferred securities and corporate bonds. In addition,
BTZ will no longer focus its investments primarily on preferred and equity
securities, nor will it employ an option-writing strategy in the future.
Instead, the Funds will transition to a portfolio investing in a broader
spectrum of securities across the capital structure. In addition, the
Board approved name changes for the Funds as follows:
BlackRock Preferred and Corporate BlackRock Credit Allocation Income
Income Strategies Fund, Inc. Trust I, Inc.
BlackRock Preferred Income Strategies BlackRock Credit Allocation Income
Fund, Inc. Trust II, Inc.
BlackRock Preferred Opportunity Trust BlackRock Credit Allocation Income Trust III
BlackRock Preferred and Equity BlackRock Credit Allocation Income Trust IV
Advantage Trust
icy of investing, under normal market conditions, at least 80% of its total
assets in preferred securities. PSW previously employed a non-fundamental
investment policy of investing, under normal market conditions, at least
80% of its total assets in a portfolio of preferred securities and corporate
debt securities. In addition, PSW employed a policy of investing, under
normal market conditions, at least 65% of its total assets in preferred
securities and up to 35% of its total assets in debt securities. BTZ previ-
ously employed a non-fundamental investment policy of investing, under
normal market conditions, at least 80% of its total assets in preferred and
equity securities and derivatives with economic characteristics similar to
individual or groups of equity securities. For each Fund, its non-fundamen-
tal policy has been revised to allow the Fund to invest, under normal mar-
ket conditions, at least 80% of its total assets in credit-related securities,
including, but not limited to, investment grade corporate bonds, high yield
bonds, bank loans, preferred securities or convertible bonds or derivatives
with economic characteristics similar to these credit-related securities.
The Board has taken these actions in response to the current and prospec-
tive market environment for preferred securities. BlackRock and the Board
believe the amended policies will better position each Fund to achieve its
investment objective and are in the best interests of the Funds sharehold-
ers. The approved changes will not alter the Funds investment objectives
and each Fund will continue to be managed in accordance with its invest-
ment objective of primarily providing shareholders with current income and
secondarily providing shareholders with capital appreciation.
In addition to the foregoing, the Board also approved changes to each
Funds restriction on credit quality of eligible investments. Previously, each
Fund was restricted to investing, under normal market conditions, no more
than 20% of its total assets in securities rated below investment grade at
the time of purchase. The amended policy allows each Fund to invest,
under normal market conditions, without limitation in securities rated below
investment grade at the time of purchase. While this policy affords each
Fund additional flexibility to invest in securities rated below investment
grade at the time of purchase, it is anticipated, under current market con-
ditions, that the Fund will maintain an average credit quality of at least
investment grade.
BlackRock anticipates that it will gradually reposition each Funds portfolio
over time and that during such period the Fund may continue to hold a
substantial portion of its assets in preferred securities, corporate bonds
and/or equity securities, as applicable. At this time, it is uncertain how long
the repositioning may take, and the Fund may continue to be subject to
General Information (continued)
risks associated with investing a substantial portion of its assets in pre-
ferred securities until the repositioning is complete.
The Funds Investments
Following the transition, each Fund will invest at least 80% of its total
assets in credit-related securities, including, but not limited to, the follow-
ing types of investments:
Corporate Bonds The Funds may invest in corporate bonds. The invest-
ment return of corporate bonds reflects interest on the security and
changes in the market value of the security. The market value of a
corporate bond generally may be expected to rise and fall inversely with
interest rates. The market value of a corporate bond also may be affected
by the credit rating of the corporation, the corporations performance and
perceptions of the corporation in the market place. There is a risk that
the issuers of the securities may not be able to meet their obligations on
interest or principal payments at the time called for by an instrument.
Below Investment Grade Securities Though the Funds portfolios are
expected to maintain an average credit quality of at least investment grade
quality, the Fund may have a portion of its assets invested in securities
rated below investment grade, such as those rated Ba or lower by Moodys
and BB or lower by S&P or Fitch or securities comparably rated by other
rating agencies, or in unrated securities determined by BlackRock Advisors,
LLC (the Manager) to be of comparable quality. Securities rated Ba by
Moodys are judged to have speculative elements, their future cannot be
considered as well assured and often the protection of interest and princi-
pal payments may be very moderate. Securities rated BB by S&P or Fitch
are regarded as having predominantly speculative characteristics and, while
such obligations have less near-term vulnerability to default than other
speculative grade debt, they face major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.
Securities rated C are regarded as having extremely poor prospects of ever
attaining any real investment standing. Securities rated D are in default
and the payment of interest and/or repayment of principal is in arrears.
When the Manager believes it to be in the best interests of the Funds share-
holders, the Funds will reduce their investment in lower grade securities.
Bank Loans The Fund may invest in bank loans denominated in US and
foreign currencies that are originated, negotiated and structured by a syn-
dicate of lenders (Co-Lenders) consisting of commercial banks, thrift
institutions, insurance companies, financial companies or other financial
institutions one or more of which administers the security on behalf of the
syndicate (the Agent Bank). Co-Lenders may sell such securities to third
parties called Participants. The Fund may invest in such securities either
by participating as a Co-Lender at origination or by acquiring an interest
in the security from a Co-Lender or a Participant (collectively, Participation
Interests). Co-Lenders and Participants interposed between the Fund and
the corporate borrower (the Borrower), together with Agent Banks, are
referred herein as Intermediate Participants. The Fund also may purchase a
participation interest in a portion of the rights of an Intermediate Participant,
which would not establish any direct relationship between the Fund and
the Borrower. In such cases, the Fund would be required to rely on the
the enforcement of the Funds rights against the Borrower but also for the
receipt and processing of payments due to the Fund under the security.
Because it may be necessary to assert through an Intermediate Participant
such rights as may exist against the Borrower, in the event the Borrower
fails to pay principal and interest when due, the Fund may be subject to
delays, expenses and risks that are greater than those that would be
involved if the Fund could enforce its rights directly against the Borrower.
Moreover, under the terms of a Participation Interest, the Fund may be
regarded as a creditor of the Intermediate Participant (rather than of the
Borrower), so that the Fund may also be subject to the risk that the Inter-
mediate Participant may become insolvent. Similar risks may arise with
respect to the Agent Bank if, for example, assets held by the Agent Bank
for the benefit of the Fund were determined by the appropriate regulatory
authority or court to be subject to the claims of the Agent Banks creditors.
In such case, the Fund might incur certain costs and delays in realizing
payment in connection with the Participation Interest or suffer a loss of
principal and/or interest. Further, in the event of the bankruptcy or insol-
vency of the Borrower, the obligation of the Borrower to repay the loan may
be subject to certain defenses that can be asserted by such Borrower as a
result of improper conduct by the Agent Bank or Intermediate Participant.
Convertible Bonds The Fund may invest in convertible bonds. A convertible
bond is a bond that may be converted into or exchanged for a prescribed
amount of common stock or other equity security of the same or a different
issuer within a particular period of time at a specified price or formula. A
convertible bond entitles the holder to receive interest paid or accrued on
debt until the convertible bond matures or is redeemed, converted or
exchanged. Before conversion, convertible bonds have characteristics simi-
lar to nonconvertible income securities in that they ordinarily provide a sta-
ble stream of income with generally higher yields than those of common
stocks of the same or similar issuers, but lower yields than comparable
nonconvertible bonds. The value of a convertible bond is influenced by
changes in interest rates, with investment value declining as interest rates
increase and increasing as interest rates decline. The credit standing of the
issuer and other factors also may have an effect on the convertible bonds
investment value. Convertible bonds rank senior to common stock in a cor-
porations capital structure but are usually subordinated to comparable
nonconvertible bonds. Convertible bonds may be subject to redemption at
the option of the issuer at a price established in the convertible bonds
governing instrument.
Credit Derivatives The Fund may engage in credit derivative transactions.
There are two broad categories of credit derivatives: default price risk
derivatives and market spread derivatives. Default price risk derivatives are
linked to the price of reference securities or loans after a default by the
issuer or borrower, respectively. Market spread derivatives are based on the
risk that changes in market factors, such as credit spreads, can cause a
decline in the value of a security, loan or index. There are three basic trans-
actional forms for credit derivatives: swaps, options and structured instru-
ments. The Fund may use credit default swaps. A credit default swap is an
agreement between two counterparties that allows one counterparty (the
seller) to purchase or be long a third partys credit risk and the other
party (the buyer) to sell or be short the credit risk. Typically, the seller
General Information (continued)
agrees to make regular fixed payments to the buyer with the same fre-
quency as the underlying reference bond. In exchange, the seller typically
has the right upon default of the underlying bond to put the bond to the
buyer in exchange for the bonds par value plus interest. Credit default
swaps can be used as a substitute for purchasing or selling a credit secu-
rity and sometimes are preferable to actually purchasing the security. The
Fund does not intend to leverage its investments through the use of credit
default swaps. A purchaser of a credit default swap is subject to counter-
party risk. The Fund will monitor any such swaps or derivatives with a view
towards ensuring that the Fund remains in compliance with all applicable
regulatory, investment policy and tax requirements.
Risks
As a result of the Funds portfolio restructuring and revisions to certain of
its non-fundamental investment policies, your investment in the Fund will
be subject to the following additional risks following the transition:
Credit Risk Credit risk is the risk that one or more debt securities in the
Funds portfolio will decline in price or fail to pay interest or principal when
due because the issuer of the security experiences a decline in its financial
status. If the recent adverse conditions in the credit markets adversely
affect the broader economy, the credit quality of issuers of credit securities
in which the Fund may invest would be more likely to decline, all other
things being equal. While a senior position in the capital structure of a bor-
rower may provide some protection with respect to the Funds investments
in senior secured floating rate and fixed rate loans or debt, losses may still
occur. To the extent the Fund invests in below investment grade securities, it
will be exposed to a greater amount of credit risk than a Fund which invests
in investment grade securities. The prices of lower grade securities are more
sensitive to negative developments, such as a decline in the issuers rev-
enues or a general economic downturn, than are the prices of higher grade
securities. Securities of below investment grade quality are predominantly
speculative with respect to the issuers capacity to pay interest and repay
principal when due and therefore involve a greater risk of default. In addi-
tion, the Funds use of credit derivatives will expose it to additional risk in
the event that the bonds underlying the derivatives default.
Interest Rate Risk The value of certain debt securities in the Funds port-
folio could be affected by interest rate fluctuations. When interest rates
decline, the value of fixed rate securities can be expected to rise. Con-
versely, when interest rates rise, the value of fixed rate securities can be
expected to decline. Recent adverse conditions in the credit markets may
cause interest rates to rise. Although changes in prevailing interest rates
can be expected to cause some fluctuations in the value of floating rate
securities (due to the fact that rates only reset periodically), the values of
these securities are substantially less sensitive to changes in market inter-
est rates than fixed rate instruments. Fluctuations in the value of the Funds
securities will not affect interest income on existing securities, but will be
reflected in the Funds net asset value. The Fund may utilize certain strate-
gies, including taking positions in futures or interest rate swaps, for the pur-
pose of reducing the interest rate sensitivity of the portfolio and decreasing
the Funds exposure to interest rate risk, although there is no assurance
that it will do so or that such strategies will be successful.
may exercise their option to prepay principal earlier than scheduled. For
fixed rate securities, such payments often occur during periods of declin-
ing interest rates, forcing the Fund to reinvest in lower yielding securities,
resulting in a possible decline in the Funds income and distributions to
shareholders. This is known as prepayment or call risk. Below investment
grade securities frequently have call features that allow the issuer to redeem
the security at dates prior to its stated maturity at a specified price (typi-
cally greater than par) only if certain prescribed conditions are met (call
protection). An issuer may redeem a below investment grade security if,
for example, the issuer can refinance the debt at a lower cost due to declin-
ing interest rates or an improvement in the credit standing of the issuer.
Certain of the Funds investments will not have call protection. For premium
bonds (bonds acquired at prices that exceed their par or principal value)
purchased by the Fund, prepayment risk may be enhanced.
Below Investment Grade Risk The Fund may invest a substantial portion
of its assets in fixed income securities that are rated below investment
grade, which are commonly referred to as junk bonds and are regarded
as predominately speculative with respect to the issuers capacity to pay
interest and repay principal.
Lower grade securities may be particularly susceptible to economic down-
turns. It is likely that a prolonging of the current economic recession or a
future economic recession could disrupt severely the market for such secu-
rities and may have an adverse impact on the value of such securities. In
addition, it is likely that any such continuing or future economic downturn
could adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon and increase the incidence of default for
such securities.
Lower grade securities, though high yielding, are characterized by high risk.
They may be subject to certain risks with respect to the issuing entity and
to greater market fluctuations than certain lower yielding, higher rated
securities. The retail secondary market for lower grade securities may be
less liquid than that for higher rated securities. Adverse conditions could
make it difficult at times for the Fund to sell certain securities or could
result in lower prices than those used in calculating the Funds net asset
value. Because of the substantial risks associated with investments in lower
grade securities, you could lose money on your investment in common
shares of the Fund, both in the short-term and the long-term.
Bank Loan Risk As in the case of junk bonds, bank loans may be rated
in lower grade rating categories, or may be unrated but of lower grade qual-
ity. As in the case of junk bonds, bank loans can provide higher yields than
higher grade income securities, but are subject to greater credit and other
risks. Although bank loan obligations often are secured by pledges of
assets by the borrower and have other structural aspects intended to pro-
vide greater protection to the holders of bank loans than the holders of
unsecured and subordinated securities, there are also additional risks in
holding bank loans. In particular, the secondary trading market for bank
loans is not well developed, and therefore, bank loans present increased
market risk relating to liquidity and pricing concerns. In addition, there is
General Information (concluded)
no assurance that the liquidation of the collateral would satisfy the claims
of the borrowers obligations in the event of the nonpayment of scheduled
interest or principal, or that the collateral could be readily liquidated. As
a result, the Fund might not receive payments to which it is entitled and
thereby may experience a decline in the value of its investment and its
net asset value.
Convertible Bonds Risk Although to a lesser extent than with fixed-income
securities, the market value of convertible bonds tends to decline as inter-
est rates increase and, conversely, tends to increase as interest rates
decline. In addition, because of the conversion feature, the market value
of convertible bonds tends to vary with fluctuations in the market value of
the underlying common stock. A unique feature of convertible bonds is that
as the market price of the underlying common stock declines, convertible
bonds tend to trade increasingly on a yield basis, and so may not experi-
ence market value declines to the same extent as the underlying common
stock. When the market price of the underlying common stock increases,
the prices of the convertible bonds tend to rise as a reflection of the value
of the underlying common stock. While no securities investments are with-
out risk, investments in convertible bonds generally entail less risk than
investments in common stock of the same issuer.
Credit Derivatives Risk The use of credit derivatives is a highly specialized
activity which involves strategies and risks different from those associated
with ordinary portfolio security transactions. If the Manager is incorrect in its
forecasts of default risks, market spreads or other applicable factors, the
investment performance of the Fund would diminish compared with what it
would have been if these techniques were not used. Moreover, even if the
Manager is correct in its forecasts, there is a risk that a credit derivative posi-
tion may correlate imperfectly with the price of the asset or liability being
protected. The Funds risk of loss in a credit derivative transaction varies with
the form of the transaction. For example, if the Fund purchases a default
option on a security, and if no default occurs with respect to the security, the
Funds loss is limited to the premium it paid for the default option. In con-
trast, if there is a default by the grantor of a default option, the Funds loss
will include both the premium that it paid for the option and the decline in
value of the underlying security that the default option protected.
Other than the revisions discussed above, there were no material changes
in the Funds investment objectives or policies or to the Funds charters or
by-laws that were not approved by the shareholders or in the principal risk
factors associated with investment in the Funds. There have been no
changes in the persons who are primarily responsible for the day-to-day
management of the Funds portfolios.
BGT
During the period, the Board of BGT approved a change to the Funds name
from BlackRock Global Floating Rate Income Trust to BlackRock Floating
Rate Income Trust.
tion regarding the Funds may be found on BlackRocks website, which can
be accessed at http://www.blackrock.com. This reference to BlackRocks
website is intended to allow investors public access to information regard-
ing the Funds and does not, and is not intended to, incorporate BlackRocks
website into this report.
Electronic Delivery
Electronic copies of most financial reports are available on the Funds web-
sites or shareholders can sign up for e-mail notifications of quarterly state-
ments, annual and semi-annual reports by enrolling in the Funds electronic
delivery program.
Shareholders Who Hold Accounts with Investment Advisors, Banks
or Brokerages:
Please contact your financial advisor to enroll. Please note that not all
investment advisors, banks or brokerages may offer this service.
Householding
The Funds will mail only one copy of shareholder documents, including
annual and semi-annual reports and proxy statements, to shareholders
with multiple accounts at the same address. This practice is commonly
called householding and it is intended to reduce expenses and eliminate
duplicate mailings of shareholder documents. Mailings of your shareholder
documents may be householded indefinitely unless you instruct us other-
wise. If you do not want the mailing of these documents to be combined
with those for other members of your household, please contact the Funds
at (800) 441-7762.
Availability of Quarterly Schedule of Investments
Each Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (SEC) for the first and third quar-
ters of each fiscal year on Form N-Q. Each Funds Forms N-Q are available
on the SECs website at http://www.sec.gov and may also be reviewed and
copied at the SECs Public Reference Room in Washington, DC. Information
on the operation of the Public Reference Room may be obtained by calling
(202) 551-8090. Each Funds Forms N-Q may also be obtained upon
request and without charge by calling (800) 441-7762.
Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that the Funds use to deter-
mine how to vote proxies relating to portfolio securities is available (1) with-
out charge, upon request, by calling toll-free (800) 441-7762; (2) at
www.blackrock.com; and (3) on the SECs website at http://www.sec.gov.
Availability of Proxy Voting Record
Information about how each Fund voted proxies relating to securities
held in each Funds portfolio during the most recent 12-month period
ended June 30 is available upon request and without charge (1) at
www.blackrock.com or by calling (800) 441-7762 and (2) on the
SECs website at http://www.sec.gov.
Additional Information (concluded)
Section 19(a) Notices
These reported amounts and sources of distributions are estimates and are not being provided for tax reporting purposes. The actual amounts and sources
for tax reporting purposes will depend upon each Funds investment experience during the year and may be subject to changes based on the tax regula-
tions. Each Fund will provide a Form 1099-DIV each calendar year that will explain the character of these dividends and distributions for federal income
tax purposes.
October 31, 2009
Total Cumulative Distributions
% Breakdown of the Total Cumulative
for the Fiscal Year
Distributions for the Fiscal Year
Net
Net Realized
Total Per
Net
Net Realized
Total Per
Investment
Capital
Return of
Common
Investment
Capital
Return of
Common
Income
Gains
Capital
Share
Income
Gains
Capital
Share
PSW
$0.814362
$
$0.141238
$0.955600
85%
0%
15%
100%
PSY
$1.033169
$
$0.083912
$1.117081
92%
0%
8%
100%
BPP
$1.075354
$
$0.102146
$1.177500
91%
0%
9%
100%
BTZ.
$0.934658
$
$0.475342
$1.410000
66%
0%
34%
100%
CII
$0.329222
$
$1.610778
$1.940000
17%
0%
83%
100%
BGT
$1.379018
$
$0.233111
$1.612129
86%
0%
14%
100%
Each Fund estimates that it has distributed more than the amount of earned income and net realized gains; therefore, a portion of the distribution may be
a return of capital. A return of capital may occur, for example, when some or all of the shareholders investment in a Fund is returned to the shareholder.
A return of capital does not necessarily reflect a Funds investment performance and should not be confused with yield or income.
BlackRock is committed to maintaining the privacy of its current and former
fund investors and individual clients (collectively, Clients) and to safe-
guarding their non-public personal information. The following information is
provided to help you understand what personal information BlackRock col-
lects, how we protect that information and why in certain cases we share
such information with select parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and
about you from different sources, including the following: (i) information we
receive from you or, if applicable, your financial intermediary, on applica-
tions, forms or other documents; (ii) information about your transactions
with us, our affiliates, or others; (iii) information we receive from a consumer
reporting agency; and (iv) from visits to our websites.
public personal information about its Clients, except as permitted by law
or as is necessary to respond to regulatory requests or to service Client
accounts. These non-affiliated third parties are required to protect the
confidentiality and security of this information and to use it only for its
intended purpose.
We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services
that may be of interest to you. In addition, BlackRock restricts access
to non-public personal information about its Clients to those BlackRock
employees with a legitimate business need for the information. BlackRock
maintains physical, electronic and procedural safeguards that are designed
to protect the non-public personal information of its Clients, including pro-
cedures relating to the proper storage and disposal of such information.
of future performance. PSW, PSY, BPP, BTZ and BGT leverage their Common Shares, which creates risk for Common Shareholders, including the likelihood of
greater volatility of net asset value and market price of Common Shares, and the risk that fluctuations in short-term interest rates may reduce the Common
Shares yield. Statements and other information herein are as dated and are subject to change.
of the period covered by this report, applicable to the registrants principal executive officer,
principal financial officer and principal accounting officer, or persons performing similar
functions. During the period covered by this report, there have been no amendments to or
waivers granted under the code of ethics. A copy of the code of ethics is available without
charge at www.blackrock.com.
Item 3 Audit Committee Financial Expert The registrants board of directors or trustees, as
applicable (the board of directors) has determined that (i) the registrant has the following
audit committee financial experts serving on its audit committee and (ii) each audit
committee financial expert is independent:
Kent Dixon
Frank J. Fabozzi
James T. Flynn
W. Carl Kester
Karen P. Robards
Robert S. Salomon, Jr. (retired effective December 31, 2008)
qualify as financial experts pursuant to Item 3(c)(4) of Form N-CSR.
Prof. Kester has a thorough understanding of generally accepted accounting principles,
financial statements and internal control over financial reporting as well as audit committee
functions. Prof. Kester has been involved in providing valuation and other financial
consulting services to corporate clients since 1978. Prof. Kesters financial consulting
services present a breadth and level of complexity of accounting issues that are generally
comparable to the breadth and complexity of issues that can reasonably be expected to be
raised by the registrants financial statements.
Ms. Robards has a thorough understanding of generally accepted accounting principles,
financial statements and internal control over financial reporting as well as audit committee
functions. Ms. Robards has been President of Robards & Company, a financial advisory
firm, since 1987. Ms. Robards was formerly an investment banker for more than 10 years
where she was responsible for evaluating and assessing the performance of companies based
on their financial results. Ms. Robards has over 30 years of experience analyzing financial
statements. She also is a member of the audit committee of one publicly held company and
a non-profit organization.
Under applicable securities laws, a person determined to be an audit committee financial
expert will not be deemed an expert for any purpose, including without limitation for the
purposes of Section 11 of the Securities Act of 1933, as a result of being designated or
identified as an audit committee financial expert. The designation or identification as an
audit committee financial expert does not impose on such person any duties, obligations, or
liabilities greater than the duties, obligations, and liabilities imposed on such person as a
member of the audit committee and board of directors in the absence of such designation or
identification.
Item 4 Principal Accountant Fees and Services
(a) Audit Fees
(b) Audit-Related Fees1
(c) Tax Fees2
(d) All Other Fees3
Current
Previous
Current
Previous
Current
Previous
Current
Previous
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Entity Name
End
End
End
End
End
End
End
End
BlackRock Credit
Allocation Income
$37,000
$35,300
$3,500
$3,500
$6,100
$6,100
$1,028
$1,049
Trust III
financial statements not included in Audit Fees.
2 The nature of the services include tax compliance, tax advice and tax planning.
3 The nature of the services include a review of compliance procedures and attestation thereto.
The registrants audit committee (the Committee) has adopted policies and
procedures with regard to the pre-approval of services. Audit, audit-related and tax
compliance services provided to the registrant on an annual basis require specific pre-
approval by the Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to the registrants affiliated
service providers that relate directly to the operations and the financial reporting of the
registrant. Certain of these non-audit services that the Committee believes are a) consistent
with the SECs auditor independence rules and b) routine and recurring services that will
not impair the independence of the independent accountants may be approved by the
Committee without consideration on a specific case-by-case basis (general pre-approval).
The term of any general pre-approval is 12 months from the date of the pre-approval, unless
the Committee provides for a different period. Tax or other non-audit services provided to
the registrant which have a direct impact on the operation or financial reporting of the
registrant will only be deemed pre-approved provided that any individual project does not
exceed $10,000 attributable to the registrant or $50,000 for all of the registrants the
Committee oversees. For this purpose, multiple projects will be aggregated to determine if
they exceed the previously mentioned cost levels.
Any proposed services exceeding the pre-approved cost levels will require specific
pre-approval by the Committee, as will any other services not subject to general pre-
approval (e.g., unanticipated but permissible services). The Committee is informed of each
service approved subject to general pre-approval at the next regularly scheduled in-person
board meeting. At this meeting, an analysis of such services is presented to the Committee
for ratification. The Committee may delegate to one or more of its members the authority to
approve the provision of and fees for any specific engagement of permitted non-audit
services, including services exceeding pre-approved cost levels.
(e)(2) None of the services described in each of Items 4(b) through (d) were approved by
the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(g) Affiliates Aggregate Non-Audit Fees:
Current Fiscal Year
Previous Fiscal Year
Entity Name
End
End
BlackRock Credit Allocation
Income Trust III
$418,128
$415,649
non-audit services that were rendered to the registrants investment adviser (not including
any non-affiliated sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by the registrants investment adviser), and any entity
controlling, controlled by, or under common control with the investment adviser that
provides ongoing services to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal
accountants independence.
Item 5 Audit Committee of Listed Registrants The following individuals are members of the
registrants separately-designated standing audit committee established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)):
Kent Dixon
Frank J. Fabozzi
James T. Flynn
W. Carl Kester
Karen P. Robards
Robert S. Salomon, Jr. (retired effective December 31, 2008)
Item 6 Investments
(a) The registrants Schedule of Investments is included as part of the Report to
Stockholders filed under Item 1 of this form.
(b) Not Applicable due to no such divestments during the semi-annual period covered since
the previous Form N-CSR filing.
Item 7 Disclosure of Proxy Voting Policies and Procedures for Closed-End Management
Investment Companies The board of directors has delegated the voting of proxies for the
Fund securities to the Funds investment adviser (Investment Adviser) pursuant to the
Investment Advisers proxy voting guidelines. Under these guidelines, the Investment
Adviser will vote proxies related to Fund securities in the best interests of the Fund and its
stockholders. From time to time, a vote may present a conflict between the interests of the
Funds stockholders, on the one hand, and those of the Investment Adviser, or any affiliated
person of the Fund or the Investment Adviser, on the other. In such event, provided that the
Investment Advisers Equity Investment Policy Oversight Committee, or a sub-committee
thereof (the Oversight Committee) is aware of the real or potential conflict or material
non-routine matter and if the Oversight Committee does not reasonably believe it is able to
follow its general voting guidelines (or if the particular proxy matter is not addressed in the
guidelines) and vote impartially, the Oversight Committee may retain an independent
fiduciary to advise the Oversight Committee on how to vote or to cast votes on behalf of the
Investment Advisers clients. If the Investment Adviser determines not to retain an
independent fiduciary, or does not desire to follow the advice of such independent fiduciary,
the Oversight Committee shall determine how to vote the proxy after consulting with the
Investment Advisers Portfolio Management Group and/or the Investment Advisers Legal
and Compliance Department and concluding that the vote cast is in its clients best interest
notwithstanding the conflict. A copy of the Funds Proxy Voting Policy and Procedures are
attached as Exhibit 99.PROXYPOL. Information on how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 is available
http://www.sec.gov.
Item 8 Portfolio Managers of Closed-End Management Investment Companies as of October 31,
2009.
(a)(1) The registrant (or Fund) is managed by a team of investment professionals led by
John Burger, Managing Director at BlackRock. Mr. Burger is a member of
BlackRocks fixed income portfolio management group and is primarily responsible
for the day-to-day management of the registrants portfolio and the selection of its
investments. Mr. Burger has been a member of the registrants portfolio management
team since 2006.
Portfolio Manager
Biography
John Burger
Managing Director of BlackRock, Inc. since 2006; Managing Director of
Merrill Lynch Investment Managers, L.P. (MLIM) from 2004 to 2006.
(a)(2) As of October 31, 2009:
(ii) Number of Other Accounts Managed
(iii) Number of Other Accounts and
and Assets by Account Type
Assets for Which Advisory Fee is
Performance-Based
Other
Other Pooled
Other
Other Pooled
(i) Name of
Registered
Investment
Other
Registered
Investment
Other
Portfolio Manager
Investment
Vehicles
Accounts
Investment
Vehicles
Accounts
Companies
Companies
John Burger
4
2
56
0
0
0
$1.57 Billion
$102 Million
$11.28 Billion
$0
$0
$0
(iv) Potential Material Conflicts of Interest
working environment, firm-wide compliance culture and compliance procedures and
systems designed to protect against potential incentives that may favor one account over
another. BlackRock has adopted policies and procedures that address the allocation of
investment opportunities, execution of portfolio transactions, personal trading by employees
and other potential conflicts of interest that are designed to ensure that all client accounts are
treated equitably over time. Nevertheless, BlackRock furnishes investment management and
advisory services to numerous clients in addition to the Fund, and BlackRock may,
consistent with applicable law, make investment recommendations to other clients or
accounts (including accounts which are hedge funds or have performance or higher fees
paid to BlackRock, or in which portfolio managers have a personal interest in the receipt of
such fees), which may be the same as or different from those made to the Fund. In addition,
BlackRock, its affiliates and significant shareholders and any officer, director, stockholder
or employee may or may not have an interest in the securities whose purchase and sale
BlackRock recommends to the Fund. BlackRock, or any of its affiliates or significant
shareholders, or any officer, director, stockholder, employee or any member of their
families may take different actions than those recommended to the Fund by BlackRock with
respect to the same securities. Moreover, BlackRock may refrain from rendering any advice
or services concerning securities of companies of which any of BlackRocks (or its
affiliates or significant shareholders) officers, directors or employees are directors or
officers, or companies as to which BlackRock or any of its affiliates or significant
economic interest or possesses material non-public information. Each portfolio manager
also may manage accounts whose investment strategies may at times be opposed to the
strategy utilized for a fund. In this connection, it should be noted that a portfolio manager
may currently manage certain accounts that are subject to performance fees. In addition, a
portfolio manager may assist in managing certain hedge funds and may be entitled to
receive a portion of any incentive fees earned on such funds and a portion of such incentive
fees may be voluntarily or involuntarily deferred. Additional portfolio managers may in the
future manage other such accounts or funds and may be entitled to receive incentive fees.
As a fiduciary, BlackRock owes a duty of loyalty to its clients and must treat each client
fairly. When BlackRock purchases or sells securities for more than one account, the trades
must be allocated in a manner consistent with its fiduciary duties. BlackRock attempts to
allocate investments in a fair and equitable manner among client accounts, with no account
receiving preferential treatment. To this end, BlackRock has adopted a policy that is
intended to ensure that investment opportunities are allocated fairly and equitably among
client accounts over time. This policy also seeks to achieve reasonable efficiency in client
transactions and provide BlackRock with sufficient flexibility to allocate investments in a
manner that is consistent with the particular investment discipline and client base.
(a)(3) As of October 31, 2009:
Portfolio Manager Compensation Overview
BlackRocks financial arrangements with its portfolio managers, its competitive
compensation and its career path emphasis at all levels reflect the value senior management
places on key resources. Compensation may include a variety of components and may vary
from year to year based on a number of factors. The principal components of compensation
include a base salary, a performance-based discretionary bonus, participation in various
benefits programs and one or more of the incentive compensation programs established by
BlackRock such as its Long-Term Retention and Incentive Plan.
Base compensation. Generally, portfolio managers receive base
compensation based on
their seniority and/or their position with the firm. Senior portfolio managers who perform
additional management functions within the portfolio management group or within
BlackRock may receive additional compensation for serving in these other capacities.
Discretionary Incentive Compensation
Discretionary incentive compensation is a function of several components: the performance
of BlackRock, Inc., the performance of the portfolio managers group within BlackRock,
the investment performance, including risk-adjusted returns, of the firms assets under
management or supervision by that portfolio manager relative to predetermined
benchmarks, and the individuals seniority, role within the portfolio management team,
teamwork and contribution to the overall performance of these portfolios and BlackRock.
In most cases, including for the portfolio managers of the Fund, these benchmarks are the
same as the benchmark or benchmarks against which the performance of the Fund or other
accounts managed by the portfolio managers are measured. BlackRocks Chief Investment
Officers determine the benchmarks against which the performance of funds and other
accounts managed by each portfolio manager is compared and the period of time over which
performance is evaluated. With respect to the portfolio manager, such benchmarks for the
Fund include a combination of certain fund industry peer groups.
portfolio managers compensation based on the performance of the funds and other accounts
managed by each portfolio manager relative to the various benchmarks noted above.
Performance is measured on both a pre-tax and after-tax basis over various time periods
including 1, 3, 5 and 10-year periods, as applicable.
Distribution of Discretionary Incentive Compensation
Discretionary incentive compensation is distributed to portfolio managers in a combination
of cash and BlackRock, Inc. restricted stock units which vest ratably over a number of
years. The BlackRock, Inc. restricted stock units, if properly vested, will be settled in
BlackRock, Inc. common stock. Typically, the cash bonus, when combined with base
salary, represents more than 60% of total compensation for the portfolio managers. Paying
a portion of annual bonuses in stock puts compensation earned by a portfolio manager for a
given year at risk based on BlackRocks ability to sustain and improve its performance
over future periods.
Long-Term Retention and Incentive Plan (LTIP) The LTIP is a long-term
incentive plan that seeks to reward certain key employees. Beginning in 2006, awards are
granted under the LTIP in the form of BlackRock, Inc. restricted stock units that, if properly
vested and subject to the attainment of certain performance goals, will be settled in
BlackRock, Inc. common stock. Mr. Burger has received awards under the LTIP.
Deferred Compensation Program A portion of the
compensation paid to
eligible BlackRock employees may be voluntarily deferred into an account that tracks the
performance of certain of the firms investment products. Each participant in the deferred
compensation program is permitted to allocate his deferred amounts among the various
investment options. Mr. Burger has participated in the deferred compensation program.
Other compensation benefits. In addition to base compensation and
discretionary
incentive compensation, portfolio managers may be eligible to receive or participate in one
or more of the following:
Incentive Savings Plans BlackRock, Inc. has created a
variety of incentive
savings plans in which BlackRock employees are eligible to participate, including a
401(k) plan, the BlackRock Retirement Savings Plan (RSP), and the BlackRock Employee
Stock Purchase Plan (ESPP). The employer contribution components of the RSP include a
company match equal to 50% of the first 6% of eligible pay contributed to the plan capped
at $4,000 per year, and a company retirement contribution equal to 3-5% of eligible
compensation. The RSP offers a range of investment options, including registered
investment companies managed by the firm. BlackRock contributions follow the investment
direction set by participants for their own contributions or, absent employee investment
direction, are invested into a balanced portfolio. The ESPP allows for investment in
BlackRock common stock at a 5% discount on the fair market value of the stock on the
purchase date. Annual participation in the ESPP is limited to the purchase of 1,000 shares
or a dollar value of $25,000. Each portfolio manager is eligible to participate in these plans.
(a)(4) Beneficial Ownership of Securities October 31, 2009.
Portfolio Manager
Dollar Range of Equity Securities
Beneficially Owned
Affiliated Purchasers Not Applicable due to no such purchases during the period covered
by this report.
Item 10 Submission of Matters to a Vote of Security Holders The registrants Nominating and
Governance Committee will consider nominees to the board of directors recommended by
shareholders when a vacancy becomes available. Shareholders who wish to recommend a
nominee should send nominations that include biographical information and set forth the
qualifications of the proposed nominee to the registrants Secretary. There have been no
material changes to these procedures.
Item 11 Controls and Procedures
similar functions have concluded that the registrants disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the
1940 Act)) are effective as of a date within 90 days of the filing of this report based on the
evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act
and Rule 13(a)-15(b) under the Securities Exchange Act of 1934, as amended.
11(b) There were no changes in the registrants internal control over financial reporting (as
defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter
of the period covered by this report that have materially affected, or are reasonably likely to
materially affect, the registrants internal control over financial reporting.
12(a)(1) Code of Ethics See Item 2
12(a)(2) Certifications Attached hereto
12(a)(3) Not Applicable
12(b) Certifications Attached hereto
12(c) Not Applicable
Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
BlackRock Credit Allocation Income Trust III
Anne F. Ackerley
Chief Executive Officer of
BlackRock Credit Allocation Income Trust III
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Anne F. Ackerley
Chief Executive Officer (principal executive officer) of
BlackRock Credit Allocation Income Trust III
Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock Credit Allocation Income Trust III
AK'\97QMM*%M%G
MSKMO+`'7;W_H/QK'\/&70?$;:;
CERTIFICATION PURSUANT TO RULE 30a-2(a) UNDER THE 1940 ACT AND SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
certify that:
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
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) and internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
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) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
c) 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
d) disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over financial reporting; and
of the registrant's board of directors (or persons performing the equivalent functions):
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.
/s/ Anne F. Ackerley
Chief Executive Officer (principal executive officer) of
BlackRock Credit Allocation Income Trust III
CERTIFICATION PURSUANT TO RULE 30a-2(a) UNDER THE 1940 ACT AND
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Income Trust III, certify that:
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
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) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) for the registrant and have:
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) designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) 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
d) disclosed in this report any change in the registrant's internal control over financial
reporting that occurred during the second fiscal quarter of the period covered by this report that
has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
audit committee of the registrant's board of directors (or persons performing the equivalent functions):
control over financial reporting which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize, and report financial information; and
have a significant role in the registrant's internal control over financial reporting.
Date: December 21, 2009
Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock Credit Allocation Income Trust III
Section 906 of the Sarbanes Oxley Act
Registrant), hereby certifies, to the best of her knowledge, that the Registrants Report on Form N-CSR for the
period ended October 31, 2009, (the Report) fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the Registrant.
Date: December 21, 2009
/s/ Anne F. Ackerley
Chief Executive Officer (principal executive officer) of
BlackRock Credit Allocation Income Trust III
Registrant), hereby certifies, to the best of his knowledge, that the Registrants Report on Form N-CSR for the
period ended October 31, 2009, (the Report) fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the Registrant.
Date: December 21, 2009
/s/ Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock Credit Allocation Income Trust III
amended, and 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR with the Securities and
Exchange Commission.
Proxy Voting Policies
For The BlackRock-Advised Funds
May 30, 2008
Table of Contents | ||
Page | ||
Introduction | 1 | |
Proxy Voting Policies | 2 | |
Boards of Directors | 2 | |
Auditors | 2 | |
Compensation and Benefits | 2 | |
Capital Structure | 3 | |
Corporate Charter and By-Laws | 3 | |
Corporate Meetings | 3 | |
Investment Companies | 3 | |
Environmental and Social Issues | 3 | |
Reports to the Board | 4 |
Introduction The Trustees/Directors (Directors) of the BlackRock-Advised Funds (the Funds) have the responsibility for voting proxies relating to portfolio securities of the Funds, and have determined that it is in the best interests of the Funds and their shareholders to delegate that responsibility to BlackRock Advisors, LLC and its affiliated U.S. registered investment advisers (BlackRock), the investment adviser to the Funds, as part of BlackRocks authority to manage, acquire and dispose of account assets. The Directors hereby direct BlackRock to vote such proxies in accordance with this Policy, and any proxy voting guidelines that the Adviser determines are appropriate and in the best interests of the Funds shareholders and which are consistent with the principles outlined in this Policy. The Directors have authorized BlackRock to utilize an unaffiliated third-party as its agent to vote portfolio proxies in accordance with this Policy and to maintain records of such portfolio proxy voting. When BlackRock votes proxies for an advisory client that has delegated to BlackRock proxy voting authority, BlackRock acts as the clients agent. Under the Investment Advisers Act of 1940 (the Advisers Act), an investment adviser is a fiduciary that owes each of its clients a duty of care and loyalty with respect to all services the adviser undertakes on the clients behalf, including proxy voting. BlackRock is therefore subject to a fiduciary duty to vote proxies in a manner BlackRock believes is consistent with the clients best interests.1 When voting proxies for the Funds, BlackRocks primary objective is to make voting decisions solely in the best interests of the Funds shareholders. In fulfilling its obligations to shareholders, BlackRock will seek to act in a manner that it believes is most likely to enhance the economic value of the underlying securities held in client accounts.2 It is imperative that BlackRock considers the interests of Fund shareholders, and not the interests of BlackRock, when voting proxies and that real (or perceived) material conflicts that may arise between BlackRocks interest and those of BlackRocks clients are properly addressed and resolved. Advisers Act Rule 206(4)-6 was adopted by the SEC in 2003 and requires, among other things, that an investment adviser that exercises voting authority over clients proxy voting adopt policies and procedures reasonably designed to ensure that the adviser votes proxies in the best interests of clients, discloses to its clients information about those 1 Letter from Harvey L. Pitt, Chairman, SEC, to John P.M. Higgins, President, Ram Trust Services (February 12, 2002) (Section 206 of the Investment Advisers Act imposes a fiduciary responsibility to vote proxies fairly and in the best interests of clients); SEC Release No. IA-2106 (February 3, 2003). 2 Other considerations, such as social, labor, environmental or other policies, may be of interest to particular clients. While BlackRock is cognizant of the importance of such considerations, when voting proxies it will generally take such matters into account only to the extent that they have a direct bearing on the economic value of the underlying securities. To the extent that a BlackRock client, such as the Funds, desires to pursue a particular social, labor, environmental or other agenda through the proxy votes made for its securities held through BlackRock as investment adviser, BlackRock encourages the client to consider retaining direct proxy voting authority or to appoint independently a special proxy voting fiduciary other than BlackRock. - 1 - |
policies and procedures and also discloses to clients how they may obtain information on how the adviser has voted their proxies. BlackRock has adopted separate but substantially similar guidelines and procedures that are consistent with the principles of this Policy. BlackRocks Equity Investment Policy Oversight Committee, or a sub-committee thereof (the Committee), addresses proxy voting issues on behalf of BlackRock and its clients, including the Funds. The Committee is comprised of senior members of BlackRocks Portfolio Management and Administration Groups and is advised by BlackRocks Legal and Compliance Department. Proxy Voting Policies A. Boards of Directors These proposals concern those issues submitted to shareholders relating to the composition of the board of directors of companies other than investment companies. As a general matter, the Funds believe that a companys board of directors (rather than shareholders) is most likely to have access to important, nonpublic information regarding a companys business and prospects, and is therefore best-positioned to set corporate policy and oversee management. The Funds therefore believe that the foundation of good corporate governance is the election of qualified, independent corporate directors who are likely to diligently represent the interests of shareholders and oversee management of the corporation in a manner that will seek to maximize shareholder value over time. In individual cases, consideration may be given to a director nominees history of representing shareholder interests as a director of other companies, or other factors to the extent deemed relevant by the Committee. B. Auditors These proposals concern those issues submitted to shareholders related to the selection of auditors. As a general matter, the Funds believe that corporate auditors have a responsibility to represent the interests of shareholders and provide an independent view on the propriety of financial reporting decisions of corporate management. While the Funds anticipate that the Committee will generally defer to a corporations choice of auditor, in individual cases, consideration may be given to an auditors history of representing shareholder interests as auditor of other companies, to the extent deemed relevant. C. Compensation and Benefits These proposals concern those issues submitted to shareholders related to management compensation and employee benefits. As a general matter, the Funds favor disclosure of a companys compensation and benefit policies and oppose excessive compensation, but believe that compensation matters are normally best determined by a - 2 - |
corporations board of directors, rather than shareholders. Proposals to micro-manage a companys compensation practices or to set arbitrary restrictions on compensation or benefits should therefore generally not be supported by the Committee. D. Capital Structure These proposals relate to various requests, principally from management, for approval of amendments that would alter the capital structure of a company, such as an increase in authorized shares. As a general matter, the Funds expect that the Committee will support requests that it believes enhance the rights of common shareholders and oppose requests that appear to be unreasonably dilutive. E. Corporate Charter and By-Laws These proposals relate to various requests for approval of amendments to a corporations charter or by-laws, principally for the purpose of adopting or redeeming poison pills. As a general matter, the Funds expect that the Committee will oppose poison pill provisions unless, after consultation with the portfolio managers, it is determined that supporting the poison pill is in the best interest of shareholders. F. Corporate Meetings These are routine proposals relating to various requests regarding the formalities of corporate meetings. As a general matter, the Funds expect that the Committee will support company management except where the proposals are substantially duplicative or serve no legitimate business purpose. G. Investment Companies These proposals relate to proxy issues that are associated solely with holdings of shares of investment companies, including, but not limited to, investment companies for which BlackRock provides investment advisory, administrative and/or other services. As with other types of companies, the Funds believe that an investment companys board of directors (rather than its shareholders) is best-positioned to set fund policy and oversee management. However, the Funds oppose granting boards of directors authority over certain matters, such as changes to a funds investment objective, that the Investment Company Act of 1940 envisions will be approved directly by shareholders. H. Environmental and Social Issues These are shareholder proposals to limit corporate conduct in some manner that relates to the shareholders environmental or social concerns. The Funds generally believe that annual shareholder meetings are inappropriate forums for the discussion of larger social issues, and oppose shareholder resolutions micro-managing corporate conduct or requesting release of information that would not help a shareholder evaluate - 3 - |
an investment in the corporation as an economic matter. While the Funds are generally supportive of proposals to require corporate disclosure of matters that seem relevant and material to the economic interests of shareholders, the Funds generally are not supportive of proposals to require disclosure of corporate matters for other purposes. Reports to the Board BlackRock will report to the Directors on proxy votes it has made on behalf of the Funds at least annually. - 4 - |