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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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MIC-Info: RSA-MD5,RSA,
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UNITEDSTATES
Investment Company Act file number 811-21413
EQUITIES FIXED INCOME REAL ESTATE LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS
BlackRock Defined Opportunity Credit Trust (BHL)
NOT FDIC INSURED
2 ANNUAL REPORT AUGUST 31, 2009
Dear Shareholder
Announcement to Shareholders
Fund Summary as of August 31, 2009 BlackRock Defined Opportunity Credit Trust
4 ANNUAL REPORT AUGUST 31, 2009
Fund Summary as of August 31, 2009 BlackRock Diversified Income Strategies Fund, Inc.
ANNUAL REPORT AUGUST 31, 2009 5
Fund Summary as of August 31, 2009 BlackRock Floating Rate Income Strategies Fund, Inc.
6 ANNUAL REPORT AUGUST 31, 2009
Fund Summary as of August 31, 2009 BlackRock Limited Duration Income Trust
ANNUAL REPORT AUGUST 31, 2009 7
Fund Summary as of August 31, 2009 BlackRock Senior Floating Rate Fund, Inc.
8 ANNUAL REPORT AUGUST 31, 2009
Fund Summary as of August 31, 2009 BlackRock Senior Floating Rate Fund II, Inc.
ANNUAL REPORT AUGUST 31, 2009 9
The Benefits and Risks of Leveraging
Furthermore, the value of the Funds portfolio investments generally varies
10 ANNUAL REPORT AUGUST 31, 2009
Derivative Financial Instruments
ment. The Funds ability to successfully use a derivative instrument
Disclosure of Expenses for Continuously Offered Closed-End Funds
Shareholders of BlackRock Senior Floating Rate Fund, Inc. and
The tables also provide information about hypothetical account values and
ANNUAL REPORT AUGUST 31, 2009 11
See Notes to Financial Statements.
Schedule of Investments (continued) BlackRock Defined Opportunity
Credit Trust (BHL)
See Notes to Financial Statements.
Schedule of Investments (continued) BlackRock Defined Opportunity
Credit Trust (BHL)
See Notes to Financial Statements.
Schedule of Investments (continued) BlackRock Defined Opportunity
Credit Trust (BHL)
See Notes to Financial Statements.
Schedule of Investments (concluded) BlackRock Defined Opportunity
Credit Trust (BHL)
See Notes to Financial Statements.
Schedule of Investments August 31, 2009 BlackRock Diversified Income Strategies Fund, Inc. (DVF)
See Notes to Financial Statements.
Schedule of Investments (continued) BlackRock Diversified Income
Strategies Fund, Inc. (DVF)
See Notes to Financial Statements.
Schedule of Investments (continued) BlackRock Diversified Income
Strategies Fund, Inc. (DVF)
See Notes to Financial Statements.
See Notes to Financial Statements.
Schedule of Investments (continued) BlackRock Diversified Income
Strategies Fund, Inc. (DVF)
See Notes to Financial Statements.
Schedule of Investments (continued) BlackRock Diversified Income
Strategies Fund, Inc. (DVF)
Currency Abbreviations:
See Notes to Financial Statements.
Schedule of Investments (concluded) BlackRock Diversified Income
Strategies Fund, Inc. (DVF)
See Notes to Financial Statements.
Schedule of Investments August 31, 2009 BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
See Notes to Financial Statements.
Schedule of Investments (continued) BlackRock Floating Rate Income
Strategies Fund, Inc. (FRA)
See Notes to Financial Statements.
Schedule of Investments (continued) BlackRock Floating Rate Income
Strategies Fund, Inc. (FRA)
See Notes to Financial Statements.
Schedule of Investments (continued) BlackRock Floating Rate Income
Strategies Fund, Inc. (FRA)
See Notes to Financial Statements.
Schedule of Investments (continued) BlackRock Floating Rate Income
Strategies Fund, Inc. (FRA)
See Notes to Financial Statements.
Schedule of Investments (concluded) BlackRock Floating Rate Income
Strategies Fund, Inc. (FRA)
See Notes to Financial Statements.
Schedule of Investments August 31, 2009 BlackRock Limited Duration Income Trust (BLW)
See Notes to Financial Statements.
Schedule of Investments (continued) BlackRock Limited Duration Income
Trust (BLW)
See Notes to Financial Statements.
Schedule of Investments (continued) BlackRock Limited Duration Income
Trust (BLW)
See Notes to Financial Statements.
Schedule of Investments (continued) BlackRock Limited Duration Income
Trust (BLW)
See Notes to Financial Statements.
Schedule of Investments (continued) BlackRock Limited Duration Income
Trust (BLW)
See Notes to Financial Statements.
Schedule of Investments (continued) BlackRock Limited Duration Income
Trust (BLW)
See Notes to Financial Statements.
Schedule of Investments (continued) BlackRock Limited Duration Income
Trust (BLW)
See Notes to Financial Statements.
Schedule of Investments (concluded) BlackRock Limited Duration Income
Trust (BLW)
Notes to Financial Statements
such investments, quotations from dealers, pricing matrixes, market trans-
52 ANNUAL REPORT AUGUST 31, 2009
Notes to Financial Statements (continued)
Foreign Currency Transactions: Foreign currency amounts are translated
ANNUAL REPORT AUGUST 31, 2009 53
Notes to Financial Statements (continued)
these investments to be investments in debt securities for purposes of their
54 ANNUAL REPORT AUGUST 31, 2009
Notes to Financial Statements (continued)
dates the transactions are entered into (the trade dates). Realized gains
ANNUAL REPORT AUGUST 31, 2009 55
Notes to Financial Statements (continued)
any collateral pledged by the counterparty to the Funds. For over-the-
56 ANNUAL REPORT AUGUST 31, 2009
Notes to Financial Statements (continued)
protection against the default of an issuer (as buyer of protection)
Notes to Financial Statements (continued)
Merrill Lynch, Pierce, Fenner & Smith, Incorporated (MLPF&S), a
rate of 0.25% and 0.40%, respectively, of the average daily value of these
For the year ended August 31, 2009, purchases and sales of US govern-
ANNUAL REPORT AUGUST 31, 2009 59
Notes to Financial Statements (continued)
8. Commitments:
In connection with these commitments, the Funds earn a commitment
ANNUAL REPORT AUGUST 31, 2009 61
62 ANNUAL REPORT AUGUST 31, 2009
Report of Independent Registered Public Accounting Firm
To the Shareholders and Boards of Directors/Trustees of:
in the circumstances, but not for the purpose of expressing an opinion
ANNUAL REPORT AUGUST 31, 2009 63
Schedule of Investments August 31, 2009 Master Senior Floating Rate LLC
See Notes to Financial Statements.
Schedule of Investments (continued) Master Senior Floating Rate
LLC
See Notes to Financial Statements.
Schedule of Investments (continued) Master Senior Floating Rate
LLC
See Notes to Financial Statements.
Schedule of Investments (continued) Master Senior Floating Rate
LLC
See Notes to Financial Statements.
Schedule of Investments (continued) Master Senior Floating Rate
LLC
See Notes to Financial Statements.
Schedule of Investments (concluded) Master Senior Floating Rate
LLC
Effective September 1, 2008, the Master LLC adopted Financial Accounting
Notes to Financial Statements Master Senior Floating Rate
LLC
1. Organization and Significant Accounting Policies:
Foreign Currency Transactions: Foreign currency amounts are translated
ANNUAL REPORT AUGUST 31, 2009 75
Notes to Financial Statements (continued) Master Senior Floating Rate
LLC
In connection with purchasing Participations, the Master LLC generally will
each of the four years ended August 31, 2009. The statutes of limitations
76 ANNUAL REPORT AUGUST 31, 2009
Notes to Financial Statements (continued) Master Senior Floating Rate
LLC
the Master LLCs net assets decline by a stated percentage or the Master
specific payment should a negative credit event take place (e.g., bank-
ANNUAL REPORT AUGUST 31, 2009 77
Notes to Financial Statements (continued) Master Senior Floating Rate
LLC
3. Transactions with Affiliates:
4. Investments:
7. Short-Term Borrowings:
78 ANNUAL REPORT AUGUST 31, 2009
Notes to Financial Statements (concluded) Master Senior Floating Rate
LLC
credit agreement to fund shareholder redemptions and for other lawful
Report of Independent Registered Public Accounting Firm Master Senior
Floating Rate LLC
To the Investors and Board of Directors of Master Senior
Accordingly, we express no such opinion. An audit also includes examining,
80 ANNUAL REPORT AUGUST 31, 2009
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements
The Board of Directors or the Board of Trustees, as the case may be (each,
personnel of BlackRock and its affiliates, including investment manage-
ANNUAL REPORT AUGUST 31, 2009 81
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)
At an in-person meeting held on May 28 29, 2009, each Board, including
In addition to advisory services, each Board considered the quality of the
82 ANNUAL REPORT AUGUST 31, 2009
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)
the median return of its Peers for any of the periods. The Board concluded
margins earned by similarly situated publicly traded competitors. In addi-
ANNUAL REPORT AUGUST 31, 2009 83
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (concluded)
also considered BlackRocks overall operations and its efforts to expand
Conclusion
84 ANNUAL REPORT AUGUST 31, 2009
Automatic Dividend Reinvestment Plan
Benefits of the Plan The Plan provides an easy, convenient way for
Effective July 31, 2009, Donald C. Burke, President and Chief Executive Officer of the Funds and Master LLC retired. The
88 ANNUAL REPORT AUGUST 31, 2009
Fund Certification
Funds filed with the SEC the certification of its chief executive officer and
Dividend Policy
investment income earned in that month. As a result, the dividends paid
ANNUAL REPORT AUGUST 31, 2009 89
Additional Information (continued)
Householding
BHL, DVF, FRA, BLW, Senior Floating Rate and Senior Floating Rate II are managed by a team of financial professionals.
90 ANNUAL REPORT AUGUST 31, 2009
Additional Information (concluded)
the tax regulations. Each Fund will send you a Form 1099-DIV each calen-
BlackRock Privacy Principles
BlackRock does not sell or disclose to non-affiliated third parties any non-
ANNUAL REPORT AUGUST 31, 2009 91
This report is transmitted to shareholders only. It is not a prospectus. Past performance results shown in this report should not be considered a represen-
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) $407,500, 0%
without charge, (i) at www.blackrock.com and (ii) on the SECs website at
Item 8 Portfolio Managers of Closed-End Management Investment Companies as of August 31,
BlackRock and its affiliates (collectively, herein BlackRock) has built a professional
shareholders, or any officer, director, stockholder, employee or any member of their
In most cases, including for the portfolio managers of the Fund, these benchmarks are the
investment companies managed by the firm. BlackRock contributions follow the investment
Item 9 Purchases of Equity Securities by Closed-End Management Investment Company and
11(a) The registrants principal executive and principal financial officers or persons performing
Item 12 Exhibits attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment
By: /s/ Anne F. Ackerley
Date: October 22, 2009
By: /s/ Anne F. Ackerley
Date: October 22, 2009
By: /s/ Neal J. Andrews
Date: October 22, 2009 G/4;%'\P:J7MM<3WT6RW*(LZ2,X*;'"XY;^+<.PZ4
M`:HD0NR!U+J`64'D`]/Y&AW5%+.P51R23@"LFUBEMM5OIUL9Q',JD.74[F7<
M2?O$\Y`''X"K=RTDVF"3["9I657%NS`?-P<$GC@_RH`F-Y:B`3FYA$)X$F\;
M3^/2G/<0)Y>^:-?,^YE@-WT]:R+>TN8Y(;Q[:1I!)(TL1*`EF"@,OS$8&, EX-99.CERT I, Anne F. Ackerley, Chief Executive Officer (principal executive officer) of BlackRock Floating Rate Income Strategies 1. I have reviewed this report on Form N-CSR of BlackRock Floating Rate Income Strategies Fund, Inc.; 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: October 22, 2009 Anne F. Ackerley EX-99.CERT I, Neal J. Andrews, Chief Financial Officer (principal financial officer) of BlackRock Floating Rate Income 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 Floating Rate Income Strategies Fund, Inc. (the Anne F. Ackerley Pursuant to 18 U.S.C. § 1350, the undersigned officer of BlackRock Floating Rate Income Strategies Fund, Inc. (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 Floating Rate Income Strategies Fund, Inc. (FRA)
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: Anne F. Ackerley, Chief Executive Officer, BlackRock
Floating Rate Income Strategies Fund, Inc., 40 East 52nd Street, New York, NY 10022.
Registrants telephone number, including area code: (800) 882-0052, Option 4
Date of fiscal year end: 08/31/2009
Date of reporting period: 08/31/2009
Item 1 Report to Stockholders
Annual Report
AUGUST 31, 2009
BlackRock Diversified Income Strategies Fund, Inc. (DVF)
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
BlackRock Limited Duration Income Trust (BLW)
BlackRock Senior Floating Rate Fund, Inc.
BlackRock Senior Floating Rate Fund II, Inc.
MAY LOSE VALUE
NO BANK GUARANTEE
Table of Contents
Page
Dear Shareholder
3
Annual Report:
Fund Summaries
4
The Benefits and Risks of Leveraging
10
Derivative Financial Instruments
11
Disclosure of Expenses
11
Fund Financial Statements
Schedules of Investments
12
Statements of Assets and Liabilities
38
Statements of Operations
40
Statements of Changes in Net Assets
42
Statements of Cash Flows
45
Fund Financial Highlights
46
Fund Notes to Financial Statements
52
Fund Report of Independent Registered Public Accounting Firm
63
Important Tax Information
64
Master Senior Floating Rate LLC Portfolio Summary
64
Master Senior Floating Rate LLC Financial Statements:
Schedule of Investments
65
Statement of Assets and Liabilities
71
Statement of Operations
72
Statements of Changes in Net Assets
72
Statement of Cash Flows
73
Master Senior Floating Rate LLC Financial Highlights
74
Master Senior Floating Rate LLC Notes to Financial Statements
75
Master Senior Floating Rate LLC Report of Independent Registered Public Accounting Firm
80
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements
81
Automatic Dividend Reinvestment Plan
85
Officers and Directors
86
Additional Information
89
The past 12 months reveal two distinct economic and market backdrops one of extreme investor pessimism and decided weakness, and another of
increased optimism amid growing signs of recovery. The start of the period was characterized by the former. September through December 2008 saw the
surge of the economic storm that sparked the worst recession in decades. The months featured, among others, the infamous collapse of Lehman Brothers,
uniformly poor economic data and plummeting investor confidence that resulted in massive government intervention (on a global scale) in the financial sys-
tem and the economy. The tide turned dramatically in March 2009, however, on the back of new US government initiatives, as well as better-than-expected
economic data and upside surprises in corporate earnings.
In this environment, US equities contended with extraordinary volatility, posting steep declines through mid-March before embarking on a rally that resulted
in strong year-to-date returns for all major indexes. June saw a brief correction, though it appeared to be induced more by profit-taking and portfolio rebal-
ancing than by a change in the economic outlook. The experience in international markets was similar to that in the United States. Notably, emerging mar-
kets staged a strong comeback in 2009 as these areas of the globe have generally seen a stronger acceleration in economic activity.
In fixed income markets, the flight-to-safety premium in Treasury securities prevailed during the equity market downturn, but more recently, ongoing concerns
about deficit spending, debt issuance, inflation and dollar weakness have kept Treasury yields higher. At the same time, relatively attractive yields and dis-
tressed valuations among non-Treasury assets, coupled with a more favorable macro environment, drew in sidelined investors and triggered a sharp recovery
in these sectors. This was particularly evident in the high yield sector, which has firmly outpaced all other taxable asset classes since the start of 2009. The
municipal bond market enjoyed strong returns in 2009 as well, buoyed by a combination of attractive valuations, robust retail investor demand and a slow-
down in forced selling. Moreover, the Build America Bond program has alleviated supply pressures, creating a more favorable technical environment. In par-
ticular, August marked the municipal markets best monthly performance in more than 20 years, as the asset class has regained year-to-date all that was
lost during 2008.
Overall, results for the major benchmark indexes were mixed. Higher-risk assets (i.e., equities and high yield bonds) and Treasuries reflected a bifurcated
market, while less-risky fixed income investments posted stable, modest returns.
Total Returns as of August 31, 2009
6-month
12-month
US equities (S&P 500 Index)
40.52%
(18.25)%
Small cap US equities (Russell 2000 Index)
48.25
(21.29)
International equities (MSCI Europe, Australasia, Far East Index)
53.47
(14.95)
US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index*)
(1.61)
6.77
Taxable fixed income (Barclays Capital US Aggregate Bond Index)
5.95
7.94
Tax-exempt fixed income (Barclays Capital Municipal Bond Index)
5.61
5.67
High yield bonds (Barclays Capital US Corporate High Yield 2% Issuer Capped Index)
36.31
7.00
* Formerly a Merrill Lynch Index.
Past performance is no guarantee of future results. Index performance shown for illustrative purposes only. You cannot invest directly in an
index.
The market environment has visibly improved since the beginning of the year, but a great deal of uncertainty and risk remain. Through periods of market tur-
bulence, as ever, BlackRocks full resources are dedicated to the management of our clients assets. We invite you to visit www.blackrock.com/funds for our
most current views on the economy and financial markets. As always, we thank you for entrusting BlackRock with your investments, and we look forward to
continuing to serve you in the months and years ahead.
On June 16, 2009, BlackRock, Inc. announced that it received written notice from Barclays PLC (Barclays) in which Barclays Board of Directors had
accepted BlackRocks offer to acquire Barclays Global Investors (BGI). At a special meeting held on August 6, 2009, BlackRocks proposed purchase
of
BGI was approved by an overwhelming majority of Barclays voting shareholders, an important step toward closing the transaction. The combination of
BlackRock and BGI will bring together market leaders in active and index strategies to create the preeminent asset management firm. The transaction is
scheduled to be completed in the fourth quarter of 2009, subject to important fund shareholder and regulatory approvals.
THIS PAGE NOT PART OF YOUR FUND REPORT 3
Investment Objective
BlackRock Defined Opportunity Credit Trust (BHL) (the Fund) seeks high current income, with
a secondary objective of long-term capital appreciation.
No assurance can be given that the Funds investment objective will be achieved.
Performance
For the 12 months ended August 31, 2009, the Fund returned (2.65)% based on market price and (2.16)% based on net asset value (NAV). For the
same period, the closed-end Lipper Loan Participation Funds category posted an average return of (7.95)% on a market price basis and (13.39)% on a
NAV basis. All returns reflect reinvestment of dividends. The Funds discount to NAV, which widened during the period, accounts for the difference between
performance based on price and performance based on NAV. The Fund maintained relatively defensive sector positioning and relatively low levels of lever-
age (less than 20%). On balance, that positioning benefited the Fund relative to its more highly levered Lipper competitors, although returns would have
been higher over the trailing six-month period had the Fund maintained a higher leverage balance. The Funds conservative positioning was a detractor dur-
ing the last six months given the markets strong returns. During the period, the Fund moved from a larger cash and short-term investment balance, which
benefited performance in 2008, to a balance of less than 3%, which has benefited performance in the rising market of 2009.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions.
These
views are not intended to be a forecast of future events and are no guarantee of future results.
Fund Information
Symbol on New York Stock Exchange (NYSE)
BHL
Initial Offering Date
January 31, 2008
Yield on Closing Market Price as of August 31, 2009 ($11.03)1
6.53%
Current Monthly Distribution per Share2
$0.06
Current Annualized Distribution per Share2
$0.72
Leverage as of August 31, 20093
19%
1 Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
Past performance does not guarantee future results.
2 The distribution rate is not constant and is subject to
change.
3 Represents loans outstanding as a percentage of total managed assets, which
is the total assets of the Fund (including any assets attributable to
borrowings), minus the sum of liabilities (other than borrowing representing financial leverage). For a discussion of leveraging techniques utilized
by
the Fund, please see The Benefits and Risks of Leveraging on page 10.
The table below summarizes the changes in the Funds market price and NAV per share:
8/31/09
8/31/08
Change
High
Low
Market Price
$11.03
$12.66
(12.88)%
$13.29
$6.53
Net Asset Value
$12.53
$14.31
(12.44)%
$14.35
$8.36
The following unaudited charts show the portfolio composition of the Funds long-term investments:
Portfolio Composition
8/31/09
8/31/08
Floating Rate Loan Interests
94%
99%
Corporate Bonds
6
1
Investment Objective
BlackRock Diversified Income Strategies Fund, Inc. (DVF) (the Fund) seeks to provide
investors with a high current income by investing primarily in a
diversified portfolio of floating rate debt securities and instruments, including floating or variable rate loans, bonds, preferred securities (including convert-
ible preferred securities), notes or other debt securities or instruments that pay a floating rate of interest.
No assurance can be given that the Funds investment objective will be achieved.
Performance
For the 12 months ended August 31, 2009, the Fund returned (16.27)% based on market price and (23.82)% based on NAV. For the same period, the
closed-end Lipper Loan Participation Funds category posted an average return of (7.95)% on a market price basis and (13.39)% on a NAV basis. All returns
reflect reinvestment of dividends. The Fund moved from a discount to NAV to a premium by period-end, which accounts for the difference between perform-
ance based on price and performance based on NAV. Unlike other funds in the Lipper category, the Fund invests a significant amount of its portfolio in
fixed-rate, high yield corporate bonds, and a portion in high yield floating rate loan interests (FRNs). During the 12 months, fixed-rate, high yield bonds
outperformed leveraged loans and this contributed to performance. Conversely, the Funds credit quality has generally been skewed towards the lower credit
quality tiers, which had a negative impact on performance during the markets fall in 2008. Though it has benefited the Fund in 2009 as markets rallied, on
balance, the positioning detracted relative to the Lipper category. The Funds allocation to high yield FRNs also hampered results as these issues underper-
formed. During the period, the Fund moved from a larger cash and short-term investment balance, which benefited performance in 2008, to a balance of
less than 3%, which further benefited performance in the rising market of 2009.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions.
These
views are not intended to be a forecast of future events and are no guarantee of future results.
Fund Information
Symbol on NYSE
DVF
Initial Offering Date
January 31, 2005
Yield on Closing Market Price as of August 31, 2009 ($8.80)1
11.93%
Current Monthly Distribution per Share2
$0.0875
Current Annualized Distribution per Share2
$1.0500
Leverage as of August 31, 20093
14%
1 Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
Past performance does not guarantee future results.
2 A change in the distribution rate was declared on September 1, 2009. The Monthly
Distribution per Share was decreased to $0.0785. The Yield on
Closing Market Price, Current Monthly Distribution per Share and Current Annualized Distribution per Share do not reflect the new distribution rate.
The new distribution rate is not constant and is subject to further change in the future.
3 Represents loans outstanding as a percentage of total managed assets, which is the total
assets of the Fund (including any assets attributable to
any borrowings), minus the sum of liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques
utilized
by the Fund, please see The Benefits and Risks of Leveraging on page 10.
The table below summarizes the changes in the Funds market price and NAV per share:
8/31/09
8/31/08
Change
High
Low
Market Price
$8.80
$12.77
(31.09)%
$13.04
$4.70
Net Asset Value
$8.74
$13.94
(37.30)%
$13.94
$5.35
The following unaudited charts show the portfolio composition of the Funds long-term investments and credit quality allocations
of the Funds corporate bond investments:
Portfolio Composition
Credit Quality Allocations4
8/31/09
8/31/08
8/31/09
8/31/08
Corporate Bonds
49%
50%
AAA/Aaa
3%
Floating Rate Loan Interests
49
47
BBB/Baa
1
Common Stocks
2
3
BB/Ba
17%
7
B/B
37
61
CCC/Caa
34
20
CC/Ca
4
2
D
3
Not Rated
5
6
4 Using the higher of Standard & Poors (S&P) or Moodys
Investors
Service (Moodys) ratings.
Investment Objective
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) (the Fund) seeks high current
income and such preservation of capital as is consistent with
investment in a diversified, leveraged portfolio consisting primarily of floating rate debt securities and instruments.
No assurance can be given that the Funds investment objective will be achieved.
Performance
For the 12 months ended August 31, 2009, the Fund returned (3.88)% based on market price and (8.88)% based on NAV. For the same period, the
closed-end Lipper Loan Participation Funds category posted an average return of (7.95)% on a market price basis and (13.39)% on a NAV basis. The per-
formance of the Lipper category does not necessarily correlate to that of the Fund, as the Lipper group includes unleveraged continuously offered closed-
end funds. All returns reflect reinvestment of dividends. The Funds discount to NAV, which narrowed during the period, accounts for the difference between
performance based on price and performance based on NAV. The Fund maintained relatively defensive sector positioning and low levels of leverage (less
than 20%). On balance, that positioning benefited the Fund versus its more highly levered Lipper competitors. The Fund also had about 20% of its portfolio
in high yield corporate bonds, which was beneficial as high yield outperformed loans. During the last six months, however, the Funds conservative position-
ing was a detractor given the markets strong returns. During the period, the Fund moved from a larger cash and short-term investment balance, which bene-
fited performance in 2008, to a balance of less than 3%, which further benefited performance in the rising market of 2009.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions.
These
views are not intended to be a forecast of future events and are no guarantee of future results.
Fund Information
Symbol on NYSE
FRA
Initial Offering Date
October 31, 2003
Yield on Closing Market Price as of August 31, 2009 ($12.26)1
8.79%
Current Monthly Distribution per Share2
$0.089835
Current Annualized Distribution per Share2
$1.078020
Leverage as of August 31, 20093
14%
1 Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
Past performance does not guarantee future results.
2 A change in the distribution rate was declared on September 1, 2009. The
Monthly Distribution per Share was decreased to $0.081500. The Yield
on Closing Market Price, Current Monthly Distribution per Share and Current Annualized Distribution per Share do not reflect the new distribution
rate.
The new distribution rate is not constant and is subject to further change in the future.
3 Represents loans outstanding as a percentage of managed assets, which is
the total assets of the Fund, including any assets attributable to
any borrowing that may be outstanding, minus the sum of accrued liabilities (other than debt representing financial leverage). For a
discussion
of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 10.
The table below summarizes the changes in the Funds market price and NAV per share:
8/31/09
8/31/08
Change
High
Low
Market Price
$12.26
$14.49
(15.39)%
$14.68
$7.79
Net Asset Value
$12.93
$16.12
(19.79)%
$16.12
$8.96
The following unaudited charts show the portfolio composition of the Funds long-term investments and credit quality allocations of
the Funds corporate bond investments:
Portfolio Composition
Credit Quality Allocations4
8/31/09
8/31/08
8/31/09
8/31/08
Floating Rate Loan Interests
75%
73%
AA/Aa
5%
Corporate Bonds
24
26
BBB/Baa
12%
11
Common Stocks
1
1
BB/Ba
15
11
B/B
46
59
CCC/Caa
21
8
D/D
4
Not Rated
2
6
4 Using the higher of S&Ps or Moodys
ratings.
Investment Objective
BlackRock Limited Duration Income Trust (BLW) (the Fund) seeks to provide current income
and capital appreciation.
No assurance can be given that the Funds investment objective will be achieved.
Performance
For the 12 months ended August 31, 2009, the Fund returned 6.40% based on market price and (1.57)% based on NAV. For the same period, the closed-
end Lipper High Current Yield Funds (Leveraged) category posted an average return of (2.57)% on a market price basis and (10.55)% on a NAV basis. All
returns reflect reinvestment of dividends. The Funds discount to NAV, which narrowed during the period, accounts for the difference between performance
based on price and performance based on NAV. The Funds Lipper category is composed primarily of high yield securities. The Fund tends to invest 25% to
30% of its portfolio in investment-grade bonds, which helped relative performance as these securities outperformed high yield securities. Exposure to mort-
gage-backed securities and an overall conservative positioning in high yield securities also aided results. At the same time, the Fund typically invests about
30% to 40% of its portfolio in bank loans; this detracted modestly from relative performance as loans underperformed high yield securities during the
period. The Funds allocation to investment-grade credit, while performing strongly, was a detractor in the last six months of the period when returns trailed
that of high yield securities. During the period, the Fund moved from a larger cash and short-term investment balance, which benefited performance in
2008, to a balance of less than 18%, which further benefited performance in the rising market of 2009.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions.
These
views are not intended to be a forecast of future events and are no guarantee of future results.
Symbol on NYSE
BLW
Initial Offering Date
July 30, 2003
Yield on Closing Market Price as of August 31, 2009 ($14.09)1
7.03%
Current Monthly Distribution per Share2
$0.0825
Current Annualized Distribution per Share2
$0.9900
1 Yield on closing market price is calculated by dividing the current annualized
distribution per share by the closing market price. Past performance
does not guarantee future results.
2 A change in the distribution rate was declared on September 1, 2009. The
Monthly Distribution per Share was decreased to $0.0700. The Yield on
Closing Market Price, Current Monthly Distribution per Share and Current Annualized Distribution per Share do not reflect the new distribution rate.
The new distribution rate is not constant and is subject to further change in the future.
The table below summarizes the Funds market price and net asset value per share:
8/31/09
8/31/08
Change
High
Low
Market Price
$14.09
$14.57
(3.29)%
$14.83
$ 8.83
Net Asset Value
$14.95
$16.71
(10.53)%
$16.81
$11.86
The following unaudited charts show the portfolio composition of the Funds long-term investments and credit quality allocations
of the Funds corporate bond and US government securities investments:
Portfolio Composition
Credit Quality Allocations3
8/31/09
8/31/08
8/31/09
8/31/08
Floating Rate Loan Interests
45%
46%
AAA/Aaa4
53%
47%
Corporate Bonds
24
32
BBB/Baa
6
8
U.S. Government Sponsored
BB/Ba
11
10
Agency Obligations
26
16
B
10
25
U.S. Treasury Obligations
1
4
CCC/Caa
16
7
Foreign Agency Obligations
2
2
C
1
Asset-Backed Securities
2
D
1
Not Rated
2
3
3 Using the higher of S&Ps or Moodys
ratings.
4 Includes US Government Sponsored Agency securities
and
US Treasury Obligations, which are deemed AAA/Aaa by the
investment advisor.
Investment Objective
BlackRock Senior Floating Rate Fund, Inc. (the Fund) is a continuously offered closed-end
fund that seeks high current income and such preservation of
capital as is consistent with investment in senior collateralized corporate loans made by banks and other financial institutions.
No assurance can be given that the Funds investment objective will be achieved.
Performance
For the 12 months ended August 31, 2009, the Fund returned (4.69)% based on NAV. For the same period, the closed-end Lipper Loan Participation Funds
category posted an average return of (13.39)% on a NAV basis. All returns reflect reinvestment of dividends. The Fund maintained relatively defensive sector
positioning and no leverage, which benefited performance over the 12 months versus its Lipper competitors, many of which employ leverage. The Fund also
had about 9% of its portfolio in high yield bonds, which was beneficial as high yield outperformed loans. During the last six months, however, the Funds
conservative positioning was a detractor given the markets strong returns. During the period, the Fund moved from a larger cash and short-term investment
balance, which benefited performance in 2008, to a balance of less than 8%, which further benefited performance in the rising market of 2009.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions.
These
views are not intended to be a forecast of future events and are no guarantee of future results.
Fund Information1
Initial Offering Date
November 3, 1989
Yield based on Net Asset Value as of August 31, 2009 ($7.16)2
3.60%
Current Monthly Distribution per Share3
$0.021903
Current Annualized Distribution per Share3
$0.257890
1 The Fund is a continuously offered closed-end fund that does not trade on an exchange.
2 Yield based on net asset value is calculated by dividing the current annualized
distribution per share by the net asset value.
Past performance does not guarantee future results.
3 The distribution is not constant and is subject to change.
The
table below summarizes the change in the Funds NAV per share:
8/31/09
8/31/08
Change
High
Low
Net
Asset Value
$7.16
$7.98
(10.28)%
$7.98
$5.54
Expense Example for Continuously Offered Closed-End Funds
Actual
Hypothetical5
Beginning
Ending
Beginning
Ending
Account Value
Account Value
Expenses Paid
Account Value
Account Value
Expenses Paid
March 1, 2009
August 31, 2009
During the Period4
March 1, 2009 August 31, 2009 During the Period4
BlackRock Senior Floating Rate, Inc.
$1,000
$1,232.80
$8.72
$1,000
$1,017.39
$7.88
4 Expenses are equal to the annualized expense ratio of 1.55%, multiplied by
the average account value over the period, multiplied by 184/365 (to reflect the one-half year
period shown). Because the Fund is a feeder fund, the expense table reflects the expenses of both the feeder fund and the Master LLC in which it
invests.
5 Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half year divided by 365.
See Disclosure of Expenses for Continuously Offered Closed-End Funds on page 11 for further information on how expenses were
calculated.
Investment Objective
BlackRock Senior Floating Rate Fund II, Inc. (the Fund) is a continuously offered
closed-end fund that seeks high current income and such preservation
of capital as is consistent with investment in senior collateralized corporate loans made by banks and other financial institutions.
No assurance can be given that the Funds investment objective will be achieved.
Performance
For the 12 months ended August 31, 2009, the Fund returned (4.70)% based on NAV. For the same period, the closed-end Lipper Loan Participation Funds
category posted an average return of (13.39)% on a NAV basis. All returns reflect reinvestment of dividends. The Fund maintained relatively defensive sector
positioning and no leverage, which benefited performance over the 12 months versus its Lipper competitors, many of which employ leverage. The Fund also
had about 9% of its portfolio in high yield bonds, which was beneficial as high yield outperformed loans. During the last six months, however, the Funds
conservative positioning was a detractor given the markets strong returns. During the period, the Fund moved from a larger cash and short-term investment
balance, which benefited performance in 2008, to a balance of less than 8%, which further benefited performance in the rising market of 2009.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions.
These
views are not intended to be a forecast of future events and are no guarantee of future results.
Fund Information1
Initial Offering Date
March 26, 1999
Yield based on Net Asset Value as of August 31, 2009 ($7.76)2
3.44%
Current Monthly Distribution per Share3
$0.022653
Current Annualized Distribution per Share3
$0.266721
1 The Fund is a continuously offered closed-end fund that does not trade on an exchange.
2 Yield based on net asset value is calculated by dividing the current annualized
distribution per share by the net asset value.
Past performance does not guarantee future results.
3 The distribution is not constant and is subject to change.
The
table below summarizes the change in the Funds NAV per share:
8/31/09
8/31/08
Change
High
Low
Net
Asset Value
$7.76
$8.67
(10.50)%
$8.67 $6.02
Expense Example for Continuously Offered Closed-End Funds
Actual
Hypothetical5
Beginning
Ending
Beginning
Ending
Account Value
Account Value
Expenses Paid
Account Value
Account Value
Expenses Paid
March 1, 2009
August 31, 2009
During the Period4
March 1, 2009 August 31, 2009
During the Period4
BlackRock Senior Floating Rate II, Inc.
$1,000
$1,233.70
$9.46
$1,000
$1,016.74
$8.54
4 Expenses are equal to the annualized expense ratio of 1.68%, multiplied by
the average account value over the period, multiplied by 184/365 (to reflect the one-half year
period shown). Because the Fund is a feeder fund, the expense table reflects the expenses of both the feeder fund and the Master LLC in which it
invests.
5 Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half year divided by 365.
See Disclosure of Expenses for Continuously Offered Closed-End Funds on page 11 for further information on how expenses were
calculated.
BlackRock Defined Opportunity Credit Trust, BlackRock Diversified Income
Strategies Fund, Inc., BlackRock Floating Rate Income Strategies Fund, Inc.
and BlackRock Limited Duration Income Trust (each a Fund and collec-
tively, the Funds) may utilize leverage to seek to enhance the yield and
NAV. However, these objectives cannot be achieved in all interest rate
environments.
The Funds may utilize leverage through borrowings or through entering into
reverse repurchase agreements and dollar rolls. In general, the concept of
leveraging is based on the premise that the cost of assets to be obtained
from leverage will be based on short-term interest rates, which normally will
be lower than the income earned by each Fund on its longer-term portfolio
investments. To the extent that the total assets of each Fund (including the
assets obtained from leverage) are invested in higher-yielding portfolio
investments, each Funds shareholders will benefit from the incremental
net income.
The interest earned on securities purchased with the proceeds from lever-
age is paid to shareholders in the form of dividends, and the value of these
portfolio holdings is reflected in the per share NAV. However, in order to
benefit shareholders, the yield curve must be positively sloped; that is,
short-term interest rates must be lower than long-term interest rates. If the
yield curve becomes negatively sloped, meaning short-term interest rates
exceed long-term interest rates, income to shareholders will be lower than if
the Fund had not used leverage.
To illustrate these concepts, assume a Funds capitalization is $100 million
and it borrows for an additional $30 million, creating a total value of $130
million available for investment in long-term securities. If prevailing short-
term interest rates are 3% and long-term interest rates are 6%, the yield
curve has a strongly positive slope. In this case, the Fund pays borrowing
costs and interest expense on the $30 million of borrowings based on the
lower short-term interest rates. At the same time, the securities purchased
by the Fund with assets received from the borrowings earn the income
based on long-term interest rates. In this case, the borrowing costs and
interest expense of the borrowings is significantly lower than the income
earned on the Funds long-term investments, and therefore Common
Shareholders are the beneficiaries of the incremental net income.
If short-term interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental net income pickup on the
Shares will be reduced or eliminated completely. Furthermore, if prevailing
short-term interest rates rise above long-term interest rates of 6%, the yield
curve has a negative slope. In this case, the Fund pays interest expense on
the higher short-term interest rates whereas the Funds total portfolio earns
income based on lower long-term interest rates.
inversely with the direction of long-term interest rates, although other fac-
tors can influence the value of portfolio investments. In contrast, the
redemption value of the Funds borrowings do not fluctuate in relation to
interest rates. As a result, changes in interest rates can influence 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 shareholders, but as described above, it also creates risks
as short- or long-term interest rates fluctuate. Leverage also will generally
cause greater changes in each Funds NAV, market price and dividend rate
than a comparable portfolio without leverage. If the income derived from
securities purchased with assets received from leverage exceeds the cost
of leverage, each 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 avail-
able for distribution to shareholders will be reduced. Each Fund may be
required to sell portfolio securities at inopportune times or at distressed
values in order to comply with regulatory requirements applicable to the
use of leverage or as required by the terms of leverage instruments which
may cause the Funds to incur losses. The use of leverage may limit a
Funds ability to invest in certain types of securities or use certain types of
hedging strategies. Each Fund will incur expenses in connection with the
use of leverage, all of which are borne by the shareholders of each Fund
and may reduce income.
Under the Investment Company Act of 1940, the Funds are permitted
to borrow through their credit facility up to 33 1 / 3 % of their total managed
assets. As of August 31, 2009, BlackRock Limited Duration Income Trust
had no outstanding leverage and the other Funds had outstanding leverage
from borrowings as a percentage of their total managed assets as follows:
Percent of
Leverage
BHL
19%
DVF
14%
FRA
14%
The Funds may invest in various derivative instruments, including swap
agreements, financial futures contracts, foreign currency exchange contracts
and options, as specified in Note 2 of the Notes to Financial Statements,
which constitute forms of economic leverage. Such instruments are used to
obtain exposure to a market without owning or taking physical custody of
securities or to hedge market and/or interest rate risks. Such derivative
instruments involve risks, including the imperfect correlation between the
value of a derivative instrument and the underlying asset, possible default
of the counterparty to the transaction and illiquidity of the derivative instru-
depends on the investment advisors ability to accurately predict pertinent
market movements, which cannot be assured. The use of derivative instru-
ments may result in losses greater than if they had not been used, may
require the Funds to sell or purchase portfolio securities at inopportune
times or for distressed values, may limit the amount of appreciation the
Funds can realize on an investment or may cause the Funds to hold a
security that it might otherwise sell. The Funds investments in these
instruments are discussed in detail in the Notes to Financial Statements.
BlackRock Senior Floating Rate Fund II, Inc. may incur the following charges:
(a) expenses related to transactions, including early withdrawal fees; and
(b) operating expenses, including administration fees, and other Fund
expenses. The examples on the previous pages (which are based on a hypo-
thetical investment of $1,000 invested on March 1, 2009 and held through
August 31, 2009) are intended to assist shareholders both in calculating
expenses based on an investment in each Fund and in comparing
these expenses with similar costs of investing in other mutual funds.
The tables provide information about actual account values and actual
expenses. In order to estimate the expenses a shareholder paid during
the period covered by this report, shareholders can divide their account
value by $1,000 and then multiply the result by the number under the
heading entitled Expenses Paid During the Period.
hypothetical expenses based on each Funds actual expense ratio and an
assumed rate of return of 5% per year before expenses. In order to assist
shareholders in comparing the ongoing expenses of investing in these
Funds and other funds, compare the 5% hypothetical example with the 5%
hypothetical examples that appear in other funds shareholder reports.
The expenses shown in the tables are intended to highlight shareholders
ongoing costs only and do not reflect any transactional expenses, such
as early withdrawal fees. Therefore, the hypothetical examples are useful
in comparing ongoing expenses only, and will not help shareholders deter-
mine the relative total expenses of owning different funds. If these trans-
actional expenses were included, shareholder expenses would have
been higher.
Schedule of Investments August 31, 2009
Common Stocks
Shares
Value
Capital Markets 0.4%
E*Trade Financial Corp. (a)
273,000 $
480,480
Total Common Stocks 0.4%
480,480
Par
Corporate Bonds
(000)
Chemicals 0.2%
Nalco Co., 8.25%, 5/15/17 (b)
USD
250
261,250
Commercial Services & Supplies 0.4%
Clean Harbors, Inc., 7.63%, 8/15/16 (b)
400
401,000
Containers & Packaging 0.5%
Crown Americas LLC, 7.63%, 5/15/17 (b)
280
277,900
Owens-Brockway Glass Container, Inc., 7.38%, 5/15/16
280
278,600
556,500
Diversified Financial Services 0.2%
FCE Bank Plc:
7.13%, 1/16/12
EUR
100
129,742
7.13%, 1/15/13
50
62,720
192,462
Diversified Telecommunication Services 0.8%
PAETEC Holding Corp., 8.88%, 6/30/17 (b)
USD
250
238,125
Qwest Corp., 3.88%, 6/15/13 (c)
750
693,750
931,875
Food Products 0.4%
Smithfield Foods, Inc., 10.00%, 7/15/14 (b)
440
448,800
Hotels, Restaurants & Leisure 0.2%
MGM Mirage, 11.13%, 11/15/17 (b)
240
259,800
IT Services 0.3%
SunGard Data Systems, Inc., 4.88%, 1/15/14
383
344,700
Independent Power Producers & Energy Traders 1.0%
Calpine Construction Finance Co., LP, 8.00%, 6/01/16 (b)
1,165
1,159,175
Machinery 0.2%
CPM Holdings, Inc., 10.63%, 9/01/14 (b)
200
202,000
Media 1.2%
Cablevision Systems Corp., Series B, 8.00%, 4/15/12
710
725,975
DIRECTV Holdings LLC, 8.38%, 3/15/13
650
666,250
1,392,225
Paper & Forest Products 0.2%
Verso Paper Holdings LLC, 11.50%, 7/01/14 (b)
200
196,000
Textiles, Apparel & Luxury Goods 0.6%
Levi Strauss & Co., 8.63%, 4/01/13
EUR
450
616,094
Wireless Telecommunication Services 1.3%
Cricket Communications, Inc., 7.75%, 5/15/16 (b)
USD
1,500
1,455,000
Total Corporate Bonds 7.5%
8,416,881
Floating Rate Loan Interests
Aerospace & Defense 1.0%
Avio SpA:
Facility B2, 2.39%, 12/15/14
468
393,380
Facility C2, 3.01%, 12/14/15
500
420,000
Hawker Beechcraft Acquisition Co., LLC:
LC Facility Deposit, 2.28%, 3/26/14
23
17,391
Term Loan, 2.26% 2.60%, 3/26/14
395
294,670
1,125,441
BlackRock Defined Opportunity Credit Trust (BHL)
(Percentages shown are based on Net Assets)
Par
Floating Rate Loan Interests
(000)
Value
Auto Components 3.6%
Allison Transmission, Inc., Term Loan, 3.03%, 8/07/14
USD
2,172 $
1,854,027
Dana Holding Corp., Term Advance, 7.25%, 1/31/15
1,301
995,881
Delphi Corp. (a)(d):
Initial Tranche Term Loan C, 9.50%, 12/31/09
908
499,164
Subsequent Tranche Term Loan C, 9.50%, 12/31/09
92
50,836
The Goodyear Tire & Rubber Co., Loan (Second Lien),
2.02%, 4/30/14
750
691,875
4,091,783
Automobiles 0.4%
Ford Motor Co., Term Loan, 3.28% 3.51%, 12/15/13
498
431,615
Building Products 1.6%
Building Materials Corp. of America, Term Loan Advance,
3.06%, 2/22/14
741
676,428
Momentive Performance Materials (Blitz 06-103 GmbH),
Tranche B-2 Term Loan, 2.74%, 12/04/13
EUR
997
1,076,830
1,753,258
Capital Markets 0.4%
Nuveen Investments, Inc., Term Loan, 3.49% 3.50%,
11/13/14
USD
598
485,499
Chemicals 7.6%
Ashland, Inc., Term B Borrowing, 7.65%, 5/13/14
800
813,373
Brenntag Holding GmbH & Co. KG, Facility B2, 2.27%,
1/20/14
978
929,090
Cognis GmbH, Facility C, 2.62%, 9/15/13
1,000
847,500
Huish Detergents Inc., Tranche B Term Loan, 2.02%,
4/26/14
987
941,326
Matrix Acquisition Corp. (fka MacDermid, Inc.), Tranche B
Term Loan, 2.26%, 4/12/14
1,557
1,292,256
Nalco Co., Term Loan, 6.50%, 5/06/16
1,225
1,241,844
PQ Corp. (fka Niagara Acquisition, Inc.):
Loan (Second Lien), 6.77%, 7/30/15
1,000
550,000
Original Term Loan (First Lien), 3.52% 3.75%,
7/31/14
1,239
1,021,448
Solutia Inc., Loan, 7.25%, 2/28/14
987
977,389
8,614,226
Commercial Services & Supplies 4.2%
ARAMARK Corp.:
LC Facility Letter of Credit, 0.22%, 1/26/14
120
111,797
U.S. Term Loan, 2.47%, 1/26/14
1,881
1,759,753
Alliance Laundry Systems LLC, Term Loan, 2.79% 4.75%,
1/27/12
737
706,447
Casella Waste Systems, Inc., Term B Loan, 7.00%,
4/09/14
500
501,250
Kion Group GmbH (formerly Neggio Holdings 3 GmbH):
Facility B, 2.51%, 12/29/14
500
317,188
Facility C, 2.76%, 12/29/15
500
317,188
Synagro Technologies, Inc., Term Loan (First Lien),
2.26% 2.27%, 4/02/14
987
777,582
West Corp., Term B-2 Loan, 2.64% 2.65%, 10/24/13
209
198,498
4,689,703
Computers & Peripherals 0.8%
Intergraph Corp., Initial Term Loan (First Lien), 2.37%,
5/29/14
1,000
960,000
Containers & Packaging 3.9%
Crown Americas LLC, Additional Term B Dollar Loan,
2.02%, 11/15/12
495
487,887
Graham Packaging Co., L.P., Term Loan B, 2.56%, 10/07/11
449
436,509
Graphic Packaging International, Inc., Incremental Term
Loan, 3.08% 3.35%, 5/16/14
1,480
1,442,975
Smurfit Kappa Acquisitions (JSG):
C1 Term Loan Facility, 4.12% 4.87%, 12/01/14
EUR
484
662,379
Term B1, 3.87% 4.73%, 12/02/13
486
665,768
Smurfit-Stone Container Enterprises, Inc., U.S. Term
Loan Debtor in Possession, 10.00%, 1/28/10
720
726,993
4,422,511
12 ANNUAL REPORT AUGUST 31, 2009
(Percentages shown are based on Net Assets)
Par
Floating Rate Loan Interests
(000)
Value
Diversified Consumer Services 1.3%
Coinmach Laundry Corp., Delay Draw Term Loan,
3.28% 3.43%, 11/14/14
USD
1,730
$ 1,470,989
Diversified Telecommunication Services 4.7%
BCM Ireland Holdings Ltd. (Eircom):
Facility B, 2.37%, 9/30/15
EUR
492
641,866
Facility C, 2.62%, 9/30/16
492
641,938
Hawaiian Telcom Communications, Inc., Tranche C
Term Loan, 4.75%, 5/30/14
USD
506
307,082
Integra Telecom Holdings, Inc., Term Loan (First Lien),
10.50%, 8/31/13
1,972
1,932,952
PAETEC Holding Corp., Replacement Term Loan, 2.76%,
2/28/13
193
182,138
Time Warner Telecom Holdings Inc., Term Loan B,
2.02%, 1/07/13
152
148,532
Wind Finance SL SA, Euro Facility (Second Lien), 7.70%,
12/17/14
EUR
1,000
1,437,910
5,292,418
Electrical Equipment 0.4%
Baldor Electric Co., Term Loan, 5.25%, 1/31/14
USD
500
493,214
Electronic Equipment, Instruments &
Components 2.2%
Flextronics International Ltd.:
A Closing Date Loan, 2.53% 2.85%, 10/1/2014
761
682,443
Delay Draw Term Loan, 2.76%, 10/01/14
219
196,104
L-1 Identity Solutions Operating Co., Term Loan, 6.75%,
8/05/13
678
678,839
Matinvest 2 SAS/Butterfly Wendel US, Inc.
(Deutsche Connector):
B-2 Facility, 2.97%, 6/22/14
886
496,037
C-2 Facility 3.22%, 6/22/15
732
409,854
2,463,277
Energy Equipment & Services 0.8%
Dresser, Inc., Term B Loan, 2.68%, 5/04/14
513
478,350
Volnay Acquisition Co., I (aka CGG) B1 Term Loan Facility,
3.93% 4.58%, 1/12/14
421
407,944
886,294
Food & Staples Retailing 1.9%
AB Acquisitions UK Topco 2 Ltd. (fka Alliance Boots),
Facility B1, 3.53%, 7/09/15
GBP
1,000
1,394,856
Rite Aid Corp., Tranche 4 Term Loan, 9.50%, 6/04/15
USD
500
517,500
Wm. Bolthouse Farms, Inc., Term Loan (First Lien),
2.56%, 12/16/12
189
182,345
2,094,701
Food Products 2.7%
Dole Food Co. Inc.:
Credit-Linked Deposit, 0.51%, 4/12/13
127
128,241
Tranche B Term Loan, 8.00%, 4/12/13
223
224,177
Solvest, Ltd. (Dole), Tranche C Term Loan, 8.00%,
4/12/13
830
835,304
Wm. Wrigley Jr. Co., Tranche B Term Loan, 6.50%,
10/06/14
1,894
1,915,765
3,103,487
Health Care Equipment & Supplies 2.9%
Bausch & Lomb, Inc.:
Delayed Draw Term Loan, 3.51% 3.85%,
4/24/2015
98
92,698
Parent Term Loan, 3.85%, 4/24/15
386
365,232
Biomet, Inc., Dollar Term Loan, 3.26% 3.61%,
3/25/15
1,323
1,268,924
Par
Floating Rate Loan Interests
(000)
Value
Health Care Equipment & Supplies (concluded)
DJO Finance LLC (ReAble Therapeutics Finance LLC),
Term Loan, 3.26% 3.60%, 5/20/14
USD
985
$ 940,675
Hologic, Inc., Tranche B Term Loan, 3.56%, 3/31/13
141
136,067
Iasis Healthcare:
Delayed Draw Term Loan, 2.26%, 3/14/14
120
113,037
Initial Term Loan, 2.26%, 3/14/14
347
326,645
Synthetic Line of Credit, 0.16%, 3/14/14
32
30,448
3,273,726
Health Care Providers & Services 10.9%
CCS Medical, Inc. (Chronic Care), Term Loan (First Lien),
4.35%, 9/30/12 (a)(d)
275
124,094
CHS/Community Health Systems, Inc.:
Delayed Draw Term Loan, 2.51%, 7/25/14
164
153,120
Funded Term Loan, 2.51% 2.62%, 7/25/14
3,233
3,011,726
DaVita Inc., Tranche B-1 Term Loan, 1.77% 2.10%,
10/05/12
800
767,666
Fresenius AG:
Term Loan B1, 6.75%, 7/06/14
712
715,118
Term Loan B2, 6.75%, 7/06/14
430
431,963
HCA Inc., Tranche A-1 Term Loan, 2.10%, 11/17/12
3,667
3,423,345
HealthSouth Corp., Term Loan, 2.52% 2.53%, 3/10/13
1,753
1,695,173
Surgical Care Affiliates, LLC, Term Loan, 2.60%, 12/29/14
343
309,417
Symbion, Inc.:
Tranche A Term Loan, 3.51%, 8/23/13
474
414,358
Tranche B Term Loan, 3.51%, 8/25/14
474
414,358
Vanguard Health Holding Co. II, LLC (Vanguard Health System,
Inc.), Replacement Term Loan, 2.51%, 9/23/11
858
834,974
12,295,312
Health Care Technology 0.4%
Sunquest Information Systems, Inc. (Misys Hospital Systems,
Inc.), Term Loan, 3.52% 3.74%, 10/13/14
491
447,856
Hotels, Restaurants & Leisure 3.4%
BLB Worldwide Holdings, Inc. (Wembley, Inc.), First Priority
Term Loan, 4.75%, 9/01/09 (a)(d)
1,000
550,000
Harrahs Operating Co., Inc., Term B-2 Loan, 3.50%,
1/28/15
1,525
1,228,509
Penn National Gaming, Inc., Term Loan B, 2.03% 2.21%,
10/03/12
936
910,054
QCE, LLC (Quiznos), Term Loan (First Lien), 2.88%,
5/05/13
987
735,522
VML US Finance LLC (aka Venetian Macau), Term B:
Delayed Draw Project Loan, 6.10%, 5/25/12
180
164,908
Funded Project Loan, 6.10%, 5/27/13
318
291,270
3,880,263
Household Durables 2.3%
Jarden Corp., Term Loan B3, 3.10%, 1/24/12
1,428
1,409,490
Yankee Candle Co., Inc., Term Loan, 2.27%, 2/06/14
1,221
1,132,407
2,541,897
Household Products 0.3%
VI-JON, Inc. (VJCS Acquisition, Inc.), Tranche B Term Loan,
2.28%, 4/24/14
341
311,733
IT Services 6.0%
Amadeus Global Travel Distribution SA, GmbH
(WAM Acquisition):
Term Loan B, 2.28%, 7/01/13
955
835,558
Term Loan C, 2.78%, 7/01/14
955
835,558
Ceridian Corp., U.S. Term Loan, 3.27%, 11/09/14
1,977
1,692,520
First Data Corp.:
Initial Tranche B-1 Term Loan, 3.01% 3.02%,
9/24/14
741
616,994
Initial Tranche B-2 Term Loan, 3.01% 3.02%,
9/24/14
1,027
854,350
Initial Tranche B-3 Term Loan, 3.01% 3.02%,
9/24/14
986
819,922
ANNUAL REPORT AUGUST 31, 2009 13
(Percentages shown are based on Net Assets)
Par
Floating Rate Loan Interests
(000)
Value
IT Services (concluded)
SunGard Data Systems Inc:
(Solar Capital Corp.), New US Term Loan, 6.75%,
2/28/14
USD
898
$ 892,270
Term Loan B, 3.95% 4.09%, 2/28/16
226
218,615
6,765,787
Independent Power Producers & Energy Traders 6.0%
Dynegy Holdings Inc.:
Term LC Facility Term Loan, 4.02%, 4/02/13
208
199,925
Tranche B Term Loan, 4.02%, 4/02/13
17
16,176
Mirant North America, LLC, Term Loan, 2.01%, 1/03/13
677
646,844
NRG Energy, Inc.:
Credit-Linked Deposit, 0.50%, 2/01/13
164
154,241
Term Loan, 2.01% 2.35%, 2/01/13
1,597
1,506,337
Texas Competitive Electric Holdings Co., LLC (TXU):
Initial Tranche B-1 Term Loan, 3.78% 3.79%,
10/10/14
494
375,226
Initial Tranche B-2 Term Loan, 3.78% 3.79%,
10/10/14
499
379,036
Initial Tranche B-3 Term Loan, 3.78% 3.79%,
10/10/14
4,679
3,540,677
6,818,462
Industrial Conglomerates 0.7%
Sequa Corp., Term Loan, 3.65% 3.88%, 12/03/14
989
842,978
Insurance 0.6%
Alliant Holdings I, Inc., Term Loan, 3.60%, 8/21/14
736
676,749
Internet & Catalog Retail 0.2%
FTD Group, Inc., Tranche B Term Loan, 6.75%, 8/04/14
236
233,672
Life Sciences Tools & Services 0.9%
Life Technologies Corp., Term B Facility, 5.25%,
11/20/15
991
1,000,531
Machinery 3.1%
LN Acquisition Corp. (Lincoln Industrial):
Delayed Draw Term Loan (First Lien), 2.83%,
7/11/14
254
227,803
Initial U.S. Term Loan (First Lien), 2.78% 2.83%,
7/11/14
677
607,474
Navistar Financial Corp., Tranche A Term Loan, 2.31%,
3/27/10
299
290,244
Navistar International Corp.:
Revolving Credit-Linked Deposit, 3.36% 3.51%,
1/19/12
533
496,000
Term Advance, 3.51%, 1/19/12
1,467
1,364,000
Oshkosh Truck Corp., Term Loan B, 6.60% 6.64%,
12/06/13
504
501,171
3,486,692
Media 28.9%
AlixPartners, LLP, Tranche C Term Loan, 2.28% 2.51%,
10/12/13
500
486,250
Alpha Topco Ltd. (Formula One), Facility B2, 2.51%,
12/31/13
938
789,013
Bresnan Communications, LLC, Additional Term Loan B
(First Lien), 2.51% 2.61%, 6/30/13
448
429,360
CSC Holdings Inc. (Cablevision), Incremental B Term Loan,
2.02% 2.07%, 3/29/13
1,719
1,662,067
Catalina Marketing Corp., Initial Term Loan, 3.03%,
10/01/14
797
748,603
Cengage Learning Acquisitions, Inc. (Thomson Learning),
Tranche 1 Incremental Term Loan, 7.50%, 7/03/14
1,900
1,824,000
Cequel Communications, LLC, Term Loan, 2.27%,
11/05/13
2,463
2,326,430
Par
Floating Rate Loan Interests
(000)
Value
Media (concluded)
Charter Communications Operating, LLC:
Replacement Term Loan, 6.25%, 3/06/14 (a)(d)
USD
1,284
$ 1,191,296
Term Loan B1, 7.94%, 3/25/14
1,500
1,499,250
FoxCo Acquisition Sub, LLC, Term Loan, 7.25%, 7/14/15
672
550,729
Gray Television, Inc., Term Loan B, 3.78%, 12/31/14
480
346,190
HMH Publishing Co., Ltd., Tranche A Term Loan, 5.26%,
6/12/14
2,011
1,556,311
Hanley-Wood, LLC (FSC Acquisition), Term Loan,
2.52% 2.54%, 3/08/14
495
208,715
Hargray Acquisition Co./DPC Acquisition LLC/HCP
Acquisition LLC, Term Loan (First Lien), 2.72%, 6/27/14
487
443,974
Harland Clarke Holdings Corp. (fka Clarke American Corp.),
Tranche B Term Loan, 2.76% 3.10%, 6/30/14
525
428,700
Insight Midwest Holdings, LLC, B Term Loan, 2.28%,
4/07/14
500
477,143
Intelsat Corp. (fka PanAmSat Corp.):
B-2-B Term Loan, 2.78%, 1/03/14
660
624,349
B-2-C Term Loan, 2.78%, 1/03/14
660
624,349
Tranche B-2-A Term Loan, 2.78%, 1/03/14
660
624,539
Lamar Advertising Co.:
Term Loan B, 5.50%, 9/30/12
250
246,250
Term Loan E, 5.50%, 3/15/13
741
734,145
Lavena Holding 3 GmbH (Prosiebensat.1 Media AG):
Facility B1, 3.53%, 3/06/15
EUR
1,010
818,408
Facility C1, 3.78%, 3/04/16
1,010
818,408
Local TV Finance, LLC Term Loan, 2.27%, 5/07/13
USD
964
658,440
MCC Iowa LLC (Mediacom Broadband Group):
Tranche D-1 Term Loan, 2.01%, 1/31/15
376
351,197
Tranche E Term Loan, 6.50%, 11/30/15
823
823,951
NTL Cable Plc B-7 Facility Term Loan, 5.39%, 3/09/12
469
709,198
NV Broadcasting, LLC:
Term Loan, Debtor in Possession, 13.00%,
2/28/10
USD
239
236,238
Term Loan (First Lien), 5.25%, 11/01/13 (a)(d)
1,639
409,710
Newsday, LLC:
Fixed Rate Term Loan, 9.75%, 8/01/13
250
254,375
Floating Rate Term Loan, 6.01%, 8/01/13
500
493,750
Nielson Finance LLC:
Class A Dollar Term Loan, 2.28%, 8/09/13
763
709,903
Class B Dollar Term Loan, 4.03%, 5/01/16
1,592
1,492,607
Parkin Broadcasting, LLC Term Loan, 5.25%,
11/01/13 (a)(d)
336
84,042
Sunshine Acquisition Ltd. (aka HIT Entertainment), Term
Facility, 2.73%, 6/01/12
1,751
1,455,341
TWCC Holding Corp., Term Loan, 7.25%, 9/14/15
1,395
1,402,854
Tribune Co., Debtor in Possession Term Loan, 9.00%,
4/07/10
350
351,750
UPC Financing Partnership, Facility U, 4.54%,
12/31/17
EUR
1,600
2,093,070
Virgin Media Investment Holdings Ltd. (fka NTL):
B-1 Facility Term Loan, 3.89%, 7/30/12
GBP
206
308,698
C Facility, 3.62%, 7/17/13
165
236,378
Term Loan B, 5.39%, 3/09/12
281
424,260
World Color Press Inc. and World Color (USA) Corp. (fka
Quebecor World Inc.), Advance, 9.00%, 7/21/12
USD
650
645,125
32,599,366
Metals & Mining 0.8%
Essar Steel Algoma Inc. (fka Algoma Steel Inc.), Term
Loan, 2.77%, 6/20/13
990
890,909
14 ANNUAL REPORT AUGUST 31, 2009
(Percentages shown are based on Net Assets)
Par
Floating Rate Loan Interests
(000)
Value
Multi-Utilities 0.4%
FirstLight Power Resources, Inc. (fka NE Energy, Inc.):
First Lien Term Loan B, 3.13%, 11/01/13
USD
443 $
407,773
Synthetic Letter of Credit, 0.48%, 11/01/13
57
52,540
460,313
Multiline Retail 1.3%
Dollar General Corp., Tranche B-1 Term Loan,
3.01% 3.24%, 7/07/14
1,500
1,458,958
Oil, Gas & Consumable Fuels 0.7%
Big West Oil, LLC, Initial Advance Loan, 4.50%, 5/15/14
352
323,806
Vulcan Energy Corp. (fka Plains Resources Inc.),
Term B3 Loan, 5.50%, 8/12/11
500
493,125
816,931
Paper & Forest Products 3.1%
Georgia-Pacific LLC, Term B Loan, 2.34% 2.65%,
12/20/12
2,291
2,213,236
NewPage Corp., Term Loan, 4.06%, 12/22/14
1,389
1,286,169
3,499,405
Personal Products 0.9%
American Safety Razor Co., LLC Loan (Second Lien),
6.52%, 1/30/14
1,250
975,000
Pharmaceuticals 0.6%
Warner Chilcott Co., Inc., Tranche B Acquisition Date
Term Loan, 2.26% 2.60%, 1/18/12
482
478,611
Warner Chilcott Corp., Tranche C Acquisition Date
Term Loan, 2.26%, 1/18/12
216
214,523
693,134
Professional Services 0.9%
Booz Allen Hamilton Inc., Tranche B Term Loan, 4.50%,
7/31/15
993
992,503
Specialty Retail 0.8%
Adesa, Inc., (KAR Holdings, Inc.), Initial Term Loan,
2.52%, 10/20/13
400
375,333
General Nutrition Centers, Inc., Term Loan,
2.52% 2.85%, 9/16/13
552
507,469
882,802
Textiles, Apparel & Luxury Goods 0.4%
Hanesbrands Inc., Term B Loan (First Lien),
5.02% 5.25%, 9/05/13
436
436,135
Wireless Telecommunication Services 2.5%
Digicel International Finance Ltd., Tranche A, 3.13%,
3/01/12
1,175
1,116,250
MetroPCS Wireless, Inc., Tranche B Term Loan,
2.56% 2.75%, 11/03/13
1,272
1,195,985
Ntelos Inc., Term B Advance, 5.75%, 7/31/15
500
498,750
2,810,985
Total Floating Rate Loan Interests 116.5%
131,470,515
Total Investments (Cost $146,223,408*) 124.4%
140,367,876
Liabilities in Excess of Other Assets (24.4)%
(27,505,826)
Net Assets 100.0%
$112,862,050
* The cost and unrealized appreciation (depreciation) of investments as of August 31,
2009, as computed for federal income tax purposes, were as follows:
Aggregate cost
$146,223,408
Gross unrealized appreciation
$ 2,824,269
Gross unrealized depreciation
(8,679,801)
Net unrealized depreciation
$ (5,855,532)
(a) Non-income producing security.
(b) Security exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration to qualified
institutional investors.
(c) Variable rate security. Rate shown is as of report date.
(d) Issuer filed for bankruptcy and/or is in default of interest payments.
Investments in companies considered to be an affiliate of the Fund, for purposes of
Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
Net
Activity
Income
BlackRock Liquidity Funds, TempFund
$ 6,279
BlackRock Liquidity Series, LLC
Cash Sweep Series
$(2,365,561)
$13,793
For Fund compliance purposes, the Funds industry classifications refer to any
one or more of the industry sub-classifications used by one or more widely recog-
nized market indexes or ratings group indexes, and/or as defined by Fund manage-
ment. This definition may not apply for purposes of this report, which may combine
such industry sub-classifications for reporting ease.
Foreign currency exchange contracts as of August 31, 2009 were as follows:
Unrealized
Currency
Currency
Settlement Appreciation
Purchased
Sold
Counterparty
Date
(Depreciation)
EUR
1,000 USD
1,434
Citibank NA
9/01/09
USD 9,015,715 EUR
6,450,000
Citibank NA
9/16/09
$ (231,252)
USD 2,682,215 GBP
1,641,000
Citibank NA
10/28/09
10,965
Total
$ (220,287)
Currency Abbreviations:
EUR
Euro
GBP
British Pound
USD
US Dollar
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 157, Fair Value Measurements clarifies the definition of fair value, establishes
a framework for measuring fair values and requires additional disclosures about the
use of fair value measurements. Various inputs are used in determining the fair value
of investments, which are as follows:
Level 1 price quotations in active markets/exchanges for identical securities
Level 2 other observable inputs (including, but not limited to: quoted prices
for
similar assets or liabilities in markets that are active, quoted prices for identical or
similar assets or liabilities in markets that are not active, inputs other than quoted
prices that are observable for the assets or liabilities (such as interest rates, yield
curves, volatilities, prepayment speeds, loss severities, credit risks and default
rates) or other market-corroborated inputs)
Level 3 unobservable inputs based on the best information available in the
circumstances, to the extent observable inputs are not available (including the
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 poli-
cies, please refer to Note 1 of the Notes to Financial Statements.
ANNUAL REPORT AUGUST 31, 2009 15
The following table summarizes the inputs used as of August 31, 2009 in
determining the fair valuation of the Funds investments:
Valuation
Investments in
Inputs
Securities
Assets
Level 1 Common Stocks
$ 480,480
Level 2
Long-Term Investments:
Corporate Bonds
8,416,881
Floating Rate Loan Interests
106,975,159
Total Level 2
115,392,040
Level 3 Floating Rate Loan Interests
24,495,356
Total
$140,367,876
Valuation
Other Financial
Inputs
Instruments1
Assets
Liabilities
Level 1
Level 2
$ 10,965
$ (231,252)
Level 3
60,517
Total
$ 71,482
$ (231,252)
1 Other financial instruments are foreign currency exchange
contracts
and unfunded loan commitments, which are valued at the unrealized
appreciation/depreciation on the instrument.
The following is a reconciliation of investments for unobservable inputs (Level 3)
used in determining fair value:
Investments in Securities
Floating Rate
Loan Interests
Balance, as of August 31, 2008
$ 4,841,355
Accrued discounts/premiums
Realized gain (loss)
(418,772)
Change in unrealized appreciation (depreciation)2
(1,001,736)
Net purchases (sales)
(981,612)
Net transfers in/out of Level 3
22,056,121
Balance as of August 31, 2009
$ 24,495,356
2 Included in the related net change in unrealized
appreciation/depreciation
on the Statements of Operations.
The following is a reconciliation of other financial instruments for unobservable
inputs (Level 3) used in determining fair value:
Other Financial Instruments3
Assets
Balance, as of August 31, 2008
Accrued discounts/premiums
Realized gain (loss)
Change in unrealized appreciation (depreciation)
Net purchases (sales)
Net transfers in/out of Level 3
$ 60,517
Balance as of August 31, 2009
$ 60,517
3 Other financial instruments are unfunded loan commitments.
16 ANNUAL REPORT AUGUST 31, 2009
(Percentages shown are based on Net Assets)
Par
Asset-Backed Securities
(000)
Value
North Street Referenced Linked Notes 2000-1
Ltd. Series 2005-8A Class D, 15.13%,
6/15/41 (a)(b)
USD 1,350
$ 528,255
Total Asset-Backed Securities 0.5%
528,255
Common Stocks
Shares
Building Products 0.8%
Masonite Worldwide Holdings (c)
20,955
847,630
Capital Markets 0.4%
E*Trade Financial Corp. (c)
248,000
436,480
Chemicals 0.0%
Wellman Holdings, Inc. (c)
1,613
403
Electrical Equipment 0.0%
Medis Technologies Ltd. (c)
176,126
50,196
Hotels, Restaurants & Leisure 0.0%
Buffets Restaurants Holdings, Inc. (c)
688
7
Media 0.3%
Sirius XM Radio, Inc. (c)
435,000
292,973
Metals & Mining 0.0%
Euramax International (c)
467
5,026
Paper & Forest Products 0.9%
Ainsworth Lumber Co. Ltd.
311,678
449,830
Ainsworth Lumber Co. Ltd. (b)(c)
349,782
503,215
953,045
Software 0.2%
TiVo, Inc. (c)
21,000
206,010
Total Common Stocks 2.6%
2,791,770
Par
Corporate Bonds
(000)
Airlines 0.3%
United Air Lines, Inc., 12.75%, 7/15/12
USD 300
288,000
Auto Components 2.0%
Allison Transmission, Inc., 11.00%, 11/01/15 (b)
63
56,700
The Goodyear Tire & Rubber Co., 5.01%, 12/01/09 (a)
2,000
1,992,500
Lear Corp., 8.75%, 12/01/16 (c)(d)
255
137,700
2,186,900
Building Products 2.2%
CPG International I, Inc., 7.87%, 7/01/12 (a)
2,500
1,787,500
Momentive Performance Materials, Inc. Series WI,
9.75%, 12/01/14
400
260,000
Ply Gem Industries, Inc., 11.75%, 6/15/13
400
334,000
2,381,500
Capital Markets 1.2%
E*Trade Financial Corp. (b):
12.50%, 11/30/17 (e)
140
140,738
3.16%, 8/31/19 (f)(g)
443
756,976
Marsico Parent Co., LLC, 10.63%, 1/15/16 (b)
724
304,080
Marsico Parent Holdco, LLC, 12.50%, 7/15/16 (b)(e)
301
72,335
Marsico Parent Superholdco, LLC, 14.50%,
1/15/18 (b)(e)
208
54,083
1,328,212
Par
Corporate Bonds
(000)
Value
Chemicals 1.3%
American Pacific Corp., 9.00%, 2/01/15
USD
440
$ 397,100
Wellman Holdings, Inc., Subordinate Note (f):
Second Lien, 10.00%, 1/29/19 (b)
894
894,000
Third Lien, 5.00%, 1/29/19
279
139,683
1,430,783
Commercial Banks 0.1%
Glitnir Banki HF (b)(c)(d):
4.15%, 4/20/10
65
12,837
6.38%, 9/25/12
265
52,337
Series EMTN, 3.00%, 6/30/10
EUR
20
5,878
71,052
Commercial Services & Supplies 1.5%
Clean Harbors, Inc., 7.63%, 8/15/16 (b)
USD
400
401,000
RSC Equipment Rental, Inc., 10.00%, 7/15/17 (b)
285
297,824
West Corp., 11.00%, 10/15/16
985
908,662
1,607,486
Construction Materials 1.4%
Nortek, Inc., 10.00%, 12/01/13
1,570
1,460,100
Consumer Finance 0.6%
Ford Motor Credit Co. LLC, 3.26%, 1/13/12 (a)
815
678,487
Containers & Packaging 4.7%
Berry Plastics Holding Corp., 4.50%, 9/15/14 (a)
2,235
1,609,200
Crown Americas LLC, 7.63%, 5/15/17 (b)
210
208,425
Graphic Packaging International, Inc., 9.50%, 6/15/17 (b)
420
430,500
Packaging Dynamics Finance Corp., 10.00%, 5/01/16 (b)
1,570
502,400
Smurfit Kappa Funding Plc, 7.75%, 4/01/15 (h)
1,000
810,000
Solo Cup Co., 10.50%, 11/01/13 (b)
130
136,500
Wise Metals Group LLC, 10.25%, 5/15/12
2,750
1,347,500
5,044,525
Diversified Financial Services 5.1%
FCE Bank Plc, 7.125%, 1/16/12
EUR
2,400
3,113,800
GMAC LLC (b):
7.25%, 3/02/11
USD
200
187,750
6.88%, 9/15/11
300
276,750
6.88%, 8/28/12
300
261,000
6.75%, 12/01/14
1,380
1,131,600
8.00%, 11/01/31
630
486,675
5,457,575
Diversified Telecommunication Services 1.2%
Nordic Telephone Co. Holdings ApS, 8.88%, 5/01/16 (b)
800
812,000
PAETEC Holding Corp., 8.88%, 6/30/17 (b)
500
476,250
1,288,250
Food & Staples Retailing 0.1%
Duane Reade, Inc., 11.75%, 8/01/15 (b)
80
80,800
Food Products 0.6%
Smithfield Foods, Inc., 10.00%, 7/15/14 (b)
340
346,800
Tyson Foods, Inc., 10.50%, 3/01/14
300
334,500
681,300
Hotels, Restaurants & Leisure 3.3%
Harrahs Operating Co., Inc. (b):
10.00%, 12/15/15
530
378,950
10.00%, 12/15/18
1,389
972,300
Little Traverse Bay Bands of Odawa Indians, 10.25%,
2/15/14 (b)(c)(d)
800
352,000
MGM Mirage, 11.125%, 11/15/17 (b)
390
422,175
Shingle Springs Tribal Gaming Authority, 9.38%, 6/15/15 (b)
95
67,450
ANNUAL REPORT AUGUST 31, 2009 17
(Percentages shown are based on Net Assets)
Par
Corporate Bonds
(000)
Value
Hotels, Restaurants & Leisure (concluded)
Snoqualmie Entertainment Authority, 4.68%,
2/01/14 (a)(b)
USD
305
$ 149,450
Travelport LLC, 4.986%, 9/01/14 (a)
810
587,250
Tropicana Entertainment LLC Series WI, 9.63%,
12/15/14 (c)(d)
120
75
Tunica-Biloxi Gaming Authority, 9.00%, 11/15/15 (b)
645
574,050
3,503,700
Household Durables 0.7%
Standard Pacific Corp.:
6.25%, 4/01/14
140
109,900
7.00%, 8/15/15
465
365,025
Stanley-Martin Communities LLC, 9.75%, 8/15/15
1,250
306,250
781,175
IT Services 1.0%
Alliance Data Systems Corp., 1.75%, 8/01/13 (f)
370
329,300
First Data Corp.:
9.88%, 9/24/15
255
218,025
11.25%, 3/31/16 (b)
60
45,900
SunGard Data Systems, Inc., 4.88%, 1/15/14
549
494,100
1,087,325
Independent Power Producers & Energy Traders 2.4%
AES Eastern Energy LP Series 99-B, 9.67%, 1/02/29
300
258,000
Calpine Construction Finance Co. LP, 8.00%, 6/01/16 (b)
500
497,500
Dynegy Holdings, Inc., 8.38%, 5/01/16
650
526,500
Energy Future Holdings Corp., 11.25%, 11/01/17 (e)
1,060
606,743
NRG Energy, Inc., 8.50%, 6/15/19
250
243,125
Texas Competitive Electric Holdings Co. LLC, 10.50%,
11/01/16 (e)
845
468,895
2,600,763
Industrial Conglomerates 2.0%
Sequa Corp. (b):
11.75%, 12/01/15
1,530
963,900
13.50%, 12/01/15 (e)
2,278
1,190,476
2,154,376
Insurance 0.4%
USI Holdings Corp., 4.32%, 11/15/14 (a)(b)
490
378,525
Leisure Equipment & Products 0.5%
Brunswick Corp., 11.25%, 11/01/16 (b)
565
591,837
Machinery 1.9%
CPM Holdings, Inc., 10.63%, 9/01/14 (b)
200
202,000
ESCO Corp., 4.50%, 12/15/13 (a)(b)
920
821,100
RBS Global, Inc.:
9.50%, 8/01/14 (b)
199
183,080
8.88%, 9/01/16
505
405,262
Titan International, Inc., 8.00%, 1/15/12
460
442,750
2,054,192
Marine 0.1%
Navios Maritime Holdings, Inc., 9.50%, 12/15/14
141
123,375
Media 3.9%
Affinion Group, Inc., 10.13%, 10/15/13
320
318,000
CSC Holdings, Inc., 8.50%, 4/15/14 (b)
180
182,700
Canadian Satellite Radio Holdings, Inc., 12.75%,
2/15/14
3,000
1,035,000
Local Insight Regatta Holdings, Inc., 11.00%,
12/01/17
832
316,160
TL Acquisitions, Inc., 10.50%, 1/15/15 (b)
1,570
1,428,700
Virgin Media, Inc., 6.50%, 11/15/16 (b)(f)
1,000
906,250
4,186,810
Par
Corporate Bonds
(000)
Value
Metals & Mining 1.3%
Aleris International, Inc. (c)(d):
9.00%, 12/15/14
USD
370
$ 925
10.00%, 12/15/16
500
1,250
RathGibson, Inc., 11.25%, 2/15/14 (c)(d)
1,390
500,400
Ryerson, Inc., 7.86%, 11/01/14 (a)
1,075
913,750
1,416,325
Oil, Gas & Consumable Fuels 3.7%
Atlas Energy Operating Co., LLC, 12.13%, 8/01/17
425
448,375
Atlas Energy Resources LLC, 10.75%, 2/01/18 (b)
155
156,550
Chesapeake Energy Corp., 9.50%, 2/15/15
455
464,100
Denbury Resources, Inc., 9.75%, 3/01/16
1,150
1,210,375
Forest Oil Corp.:
8.50%, 2/15/14 (b)
640
643,200
7.25%, 6/15/19
200
188,000
SandRidge Energy, Inc., 4.22%, 4/01/14 (a)
1,000
830,368
3,940,968
Paper & Forest Products 5.5%
Ainsworth Lumber Co. Ltd., 11.00%, 7/29/15 (b)(e)
2,689
1,065,996
Clearwater Paper Corp., 10.63%, 6/15/16 (b)
190
203,537
NewPage Corp.:
6.73%, 5/01/12 (a)
3,000
1,282,500
10.00%, 5/01/12
1,820
987,350
Verso Paper Holdings LLC:
11.50%, 7/01/14 (b)
160
156,800
Series B, 4.23%, 8/01/14 (a)
4,000
2,240,000
5,936,183
Pharmaceuticals 1.2%
Angiotech Pharmaceuticals, Inc., 4.11%, 12/01/13 (a)
1,500
1,260,000
Real Estate Management & Development 0.7%
Realogy Corp.:
10.50%, 4/15/14
410
243,950
12.38%, 4/15/15
1,385
560,925
804,875
Semiconductors & Semiconductor Equipment 1.5%
Avago Technologies Finance Pte. Ltd., 5.86%,
6/01/13 (a)
400
376,000
Spansion, Inc., 3.79%, 6/01/13 (b)(c)(d)
1,410
1,251,375
1,627,375
Software 0.0%
BMS Holdings, Inc., 8.35%, 2/15/12 (a)(b)(e)
466
7,489
Specialty Retail 1.1%
General Nutrition Centers, Inc., 6.40%, 3/15/14 (a)
145
127,600
Michaels Stores, Inc., 11.38%, 11/01/16
910
782,600
United Auto Group, Inc., 7.75%, 12/15/16
355
312,400
1,222,600
Wireless Telecommunication Services 4.2%
BCM Ireland Preferred Equity Ltd., 8.28%,
2/15/17 (b)(e)
EUR
302
112,579
Cricket Communications, Inc., 7.75%, 5/15/16 (b)
USD
1,000
970,000
Crown Castle International Corp., 9.00%, 1/15/15
100
104,000
Digicel Group Ltd. (b):
8.88%, 1/15/15
1,070
954,975
9.13%, 1/15/15 (e)
2,129
1,876,181
iPCS, Inc., 2.61%, 5/01/13 (a)
200
164,000
Orascom Telecom Finance SCA, 7.88%, 2/08/14 (b)
325
292,500
4,474,235
Total Corporate Bonds 57.7%
62,137,098
18 ANNUAL REPORT AUGUST 31, 2009
(Percentages shown are based on Net Assets)
Floating Rate Loan Interests
(000)
Value
Airlines 0.4%
US Airways Group, Inc., Loan, 2.76%, 3/21/14
USD
730
$ 393,105
Auto Components 2.8%
Allison Transmission, Inc., Term Loan, 3.03%, 8/07/14
1,930
1,647,680
Dana Holding Corp., Term Advance, 7.25%, 1/31/15
874
668,955
Delphi Corp. (c)(d):
Initial Tranche C Loan (Debtor in Possession),
10.50%, 12/31/09
908
499,164
Subsequent Tranche C Loan (Debtor in Possession),
9.50%, 12/31/09
93
50,836
Intermet Corp.:
Letter of Credit, 0.16%, 11/09/10 (c)(d)
231
85,522
Synthetic Letter of Credit, 5.65%, 11/09/10 (e)
26
9,569
1st Lien Credit Facility, 5.65%, 11/08/10 (c)(d)(e)
115
22,978
1st Lien Credit Facility, 5.65%, 11/08/10 (e)
147
54,446
3,039,150
Beverages 0.2%
Culligan International Co., Loan (Second Lien),
5.28%, 4/24/13
EUR
500
179,201
Chemicals 3.9%
Ashland, Inc., Term B Borrowing, 7.65%, 5/13/14
USD
444
451,874
Edwards (Cayman Islands II) Ltd., Term Loan
(First Lien), 2.85%, 5/31/14
276
171,303
Huish Detergents Inc., Tranche B Term Loan, 2.02%,
4/26/14
242
230,610
Nalco Co., Term Loan B, 6.50%, 5/06/16
625
633,594
PQ Corp. (fka Niagara Acquisition, Inc.):
Loan (Second Lien), 6.77%, 7/30/15
2,500
1,375,000
Term Loan (First Lien), 3.52% 3.75%, 7/31/14
495
407,963
Solutia Inc. Loan, 7.25%, 2/28/14
990
979,844
4,250,188
Commercial Services & Supplies 0.4%
Casella Waste Systems, Term B Loan, 7.00%, 4/04/14
400
401,000
Computers & Peripherals 0.4%
Intergraph Corp., Second Lien, Term Loan, 6.26% 6.37%,
11/28/14
500
466,250
Containers & Packaging 0.8%
Graham Packaging Co., LP, B Term Loan, 2.56%,
10/07/11
449
436,509
Smurfit-Stone Container U.S. Term Loan Debtor in
Possession, 10.00%, 7/28/10
436
440,639
877,148
Diversified Consumer Services 1.4%
Coinmach Corp., Term Loan, 3.28% 3.43%, 11/14/14
1,728
1,468,860
Diversified Telecommunication Services 1.2%
Hawaiian Telcom Communications, Inc., Tranche C
Term Loan, 4.75%, 5/30/14 (e)
1,518
921,245
Integra Telecom Holdings, Inc., Term Loan (First Lien),
10.50%, 8/31/13
324
318,003
Paetec Holdings Corp., Incremental Term Loan, 2.76%,
2/28/13
84
79,507
1,318,755
Electrical Equipment 0.4%
Generac Acquisition Corp., Term Loan (First Lien), 2.78%,
11/10/13
494
414,087
Energy Equipment & Services 1.3%
Dresser, Inc., Term B Loan, 2.68%, 5/04/14
571
532,315
MEG Energy Corp.:
Delayed Draw Term Loan, 2.60%, 4/02/13
493
457,990
Initial Term Loan, 2.60%, 4/03/13
484
449,283
1,439,588
Par
Floating Rate Loan Interests
(000)
Value
Food & Staples Retailing 0.9%
McJunkin Corp., Term Loan, 3.51%, 1/31/14
USD
499
$ 475,032
Rite Aid Corp., Tranche 4 Term Loan, 9.50%, 6/04/15
500
517,500
992,532
Food Products 3.1%
Dole Food Co., Inc. :
Credit-Linked Deposit, 0.51%, 4/12/13
86
86,864
Tranche B Term Loan, 8.00%, 4/12/13
151
151,845
Solvest, Ltd. (Dole), Tranche C Term Loan, 8.00%,
4/12/13
562
565,788
Wm. Wrigley Jr. Co., Tranche B Term Loan, 6.50%,
10/06/14
2,468
2,496,111
3,300,608
Health Care Equipment & Supplies 1.4%
Biomet, Inc., Dollar Term Loan, 3.26% 3.61%, 3/25/15
675
647,648
DJO Finance LLC (ReAble Therapeutics Finance LLC),
Term Loan, 3.26%, 5/20/14
739
705,506
Hologic, Inc., Tranche B Term Loan, 3.56%, 3/31/13
142
136,067
1,489,221
Health Care Providers & Services 2.9%
CCS Medical, Inc. (Chronic Care):
Loan (Debtor in Possession), 11.00%, 11/14/09
31
30,309
Term Loan (First Lien), 4.35%, 9/30/12 (c)(d)
525
236,906
CHS/Community Health Systems, Inc.:
Delayed Draw Term Loan, 2.51%, 7/25/14
30
27,947
Funded Term Loan, 2.51% 2.62%, 7/25/14
585
544,964
DaVita, Inc., Tranche B-1 Term Loan, 1.77% 2.10%,
10/05/12
275
263,885
Fresenius AG:
Tranche B-1 Term Loan, 6.75%, 7/06/14
120
120,441
Tranche B-2 Term Loan, 6.75%, 7/06/14
84
84,039
HCA Inc.:
Tranche A-1 Term Loan, 2.10%, 11/17/12
1,597
1,491,174
Tranche B-1 Term Loan, 2.85%, 11/18/13
387
364,407
3,164,072
Hotels, Restaurants & Leisure 1.5%
Golden Nugget, Inc., Second Lien Term Loan, 3.52%,
12/31/14
175
73,500
Green Valley Ranch Gaming, LLC, Loan (Second Lien),
3.88%, 8/16/14
500
102,500
Harrahs Operating Co., Inc., Term B-2 Loan, 3.50%,
1/28/15
438
352,521
Lake at Las Vegas Joint Venture/LLV-1, LLC.:
Revolving Loan Credit-Linked Deposit Account,
12.35%, 12/12/12
120
2,407
Term Loan, 14.35% 15.00%, 12/22/12 (c)(d)
1,215
24,305
QCE, LLC (Quiznos), Term Loan (Second Lien), 5.98%,
2/26/13
1,000
460,000
VML US Finance LLC (aka Venetian Macau), Term B:
Delayed Draw Project Loan, 6.10%, 5/25/12
76
69,692
Funded Project Loan, 6.10%, 5/25/13
548
501,063
1,585,988
Household Durables 0.8%
American Residential Services LLC, Term Loan
(Second Lien), 12.00%, 4/17/15 (e)
1,020
889,871
IT Services 3.3%
Audio Visual Services Group Inc.:
Loan (Second Lien), 7.10%, 2/28/14
520
41,592
Tranche B Term Loan (First Lien), 2.85%, 2/28/14
750
465,000
Ceridian Corp., U.S. Term Loan, 3.27%, 11/09/14
989
846,260
ANNUAL REPORT AUGUST 31, 2009 19
Schedule of Investments (continued)
BlackRock Diversified Income Strategies Fund, Inc. (DVF)
(Percentages shown are based on Net Assets)
Par
Floating Rate Loan Interests
(000)
Value
IT Services (concluded)
First Data Corp.:
Initial Tranche B-2 Term Loan, 3.01% 3.02%,
9/24/14
USD
2,134
$ 1,775,203
Initial Tranche B-3 Term Loan, 3.01% 3.02%,
9/24/14
121
100,816
SunGard Data Systems Inc. (Solar Capital Corp.), Tranche B
U.S. Term Loan, 3.95% 4.09%, 2/28/16
325
313,181
3,542,052
Independent Power Producers & Energy Traders 1.3%
Texas Competitive Electric Holdings Co., LLC (TXU):
Initial Tranche B-1 Term Loan, 3.78% 3.79%,
10/10/14
1,102
837,669
Initial Tranche B-2 Term Loan, 3.78% 3.79%,
10/10/14
734
558,139
1,395,808
Industrial Conglomerates 0.3%
Sequa Corp., Term Loan, 3.65% 3.88%, 12/03/14
397
338,590
Insurance 0.4%
Alliant Holdings I, Inc., Term Loan, 3.60%, 8/21/14
491
451,950
Internet & Catalog Retail 0.4%
FTD Group, Inc., Tranche B Term Loan, 6.75%, 8/04/14
472
467,344
Life Sciences Tools & Services 0.8%
Life Technologies Corp., Term B Facility, 5.25%,
11/20/15
876
884,892
Machinery 2.6%
Navistar International Corp.:
Revolving Credit-Linked Deposit, 3.35% 3.36%,
1/19/12
800
744,000
Term Advance, 3.51%, 1/19/12
2,200
2,046,000
2,790,000
Media 16.7%
Affinion Group Holdings, Inc., Loan, 8.27%, 3/01/10
1,205
1,054,198
AlixPartners, LLP, Tranche C Term Loan, 2.28% 2.51%,
10/12/13 (e)
506
492,195
Cebridge Connections, Second Lien Term Loan, 4.79%,
5/05/14
2,000
1,802,500
Cengage Learning Acquisitions, Inc. (Thomson Learning),
Tranche 1 Incremental Term Loan, 7.50%, 7/03/14
1,000
960,000
Cequel Communications, LLC, Tranche A Term Loan
(Second Lien), 2.27% 4.25%, 11/05/13
789
745,163
Charter Communications, Term Loan B1, 0%, 3/25/14 (c)(d)
1,515
1,514,242
EB Sports Corp., Loan, 7.57%, 5/01/12 (e)
890
489,262
Ellis Communications KDOC, LLC Loan, 10.00%, 12/30/11
1,939
543,006
HMH Publishing Co. Ltd.:
Mezzanine, 17.50%, 11/14/14 (e)
6,221
933,183
Tranche A Term Loan, 5.26%, 6/12/14
1,536
1,188,521
Insight Midwest Holdings, LLC, B Term Loan, 2.28%,
4/07/14
475
453,286
Lamar Media Corp., Series E Incremental Loan, 5.50%,
3/15/13
247
244,715
Lavena Holding 3 GmbH (Prosiebensat.1 Media AG)
Facility B1, 3.53%, 6/30/15
EUR
337
272,803
Mediacom Illinois, LLC (fka Mediacom Communications,
LLC), Tranche D Term Loan, 4.50%, 3/31/17
USD
500
498,750
Newsday, LLC, Fixed Rate Term Loan, 9.75%, 8/01/13
2,000
2,035,000
Nielsen Finance LLC:
Class A Dollar Term Loan, 2.28%, 8/09/13
603
561,398
Class B Dollar Term Loan, 4.03%, 5/01/16
1,260
1,180,367
Penton Media, Inc.:
Loan (Second Lien), 5.49%, 2/01/14
1,000
210,000
Term Loan (First Lien), 2.51% 2.73%, 2/01/13
978
654,925
Sunshine Acquisition Ltd. (aka HIT Entertainment) Term
Facility, 2.73%, 7/31/14
325
270,156
TWCC Holding Corp., Term Loan, 7.25%, 9/14/15
496
499,228
Par
Floating Rate Loan Interests
(000)
Value
Media (concluded)
United Pan Europe Communications, Term Loan, 3.76%,
12/31/16
USD 1,000
$ 982,500
Virgin Media Investment Holdings Ltd., C Facility, 3.62%,
7/17/13
GBP 145
207,726
World Color Press Inc. and World Color (USA) Corp.
(fka Quebecor World Inc.), Advance, 9.00%, 6/30/12
200
198,500
17,991,624
Metals & Mining 1.6%
Euramax International, Inc., Domestic Term Loan:
14.00%, 6/29/13 (e)
USD 626
269,062
(Cash Pay), 10.00%, 6/29/13
643
276,616
RathGibson Inc., Loan (Debtor in Possession),
10.50% 10.75%, 2/10/10
1,148
1,147,507
1,693,185
Multi-Utilities 0.6%
FirstLight Power Resources, Inc. (fka NE Energy, Inc.):
Synthetic Letter of Credit, 0.48%, 11/01/13
74
68,302
Term B Advance (First Lien), 3.13%, 11/01/13
576
530,104
598,406
Multiline Retail 0.2%
Dollar General Corp., Tranche B-2 Term Loan, 3.01%,
7/07/14
250
240,243
Oil, Gas & Consumable Fuels 3.3%
Big West Oil, LLC, Initial Advance Loan, 6.50%, 5/15/14
288
265,259
ScorpionDrilling Limited, Loan (Second Lien), 8.10%,
5/08/14
1,650
1,369,500
Turbo Beta Ltd. Dollar Facility, 14.50%, 3/15/18 (e)
1,738
1,216,786
Vulcan Energy Corp. (fka Plains Resources Inc), Term B3
Loan, 5.50%, 8/12/11
750
739,688
3,591,233
Paper & Forest Products 0.8%
Georgia-Pacific LLC, Term B Loan, 2.34% 2.65%,
12/20/12
835
806,982
Pharmaceuticals 0.5%
Warner Chilcott Co., Inc.:
Tranche B Acquisition Date Term Loan, 2.26%,
1/18/12
369
366,804
Tranche C Acquisition Date Term Loan, 2.26%,
1/18/12
130
128,641
495,445
Software 1.4%
Aspect Software, Inc. Loan (Second Lien), 7.31%,
7/11/12
2,500
1,512,500
Total Floating Rate Loan Interests 58.0%
62,469,878
Beneficial
Other Interests (i)
Interest
Diversified Financial Services 0.2%
JG Wentworth LLC Preferred Equity Interests
USD 271
228,566
Hotels, Restaurants & Leisure 0.0%
Buffets, Inc.
360,000
36
Total Other Interests 0.2%
228,602
Preferred Stocks
Shares
Capital Markets 0.0%
Marsico Parent Superholdco, LLC, 16.75% (b)
48
12,240
Total Preferred Stocks 0.0%
12,240
20 ANNUAL REPORT AUGUST 31, 2009
(Percentages shown are based on Net Assets)
Warrants (j)
Shares
Value
Hotels, Restaurants & Leisure 0.0%
Buffets Restaurants Holdings, Inc. (expires 4/29/14)
304
$ 3
Other 0.0%
Turbo Cayman Ltd. (No Expiration)
1
Total Warrants 0.0%
3
Total Long-Term Investments
(Cost $177,149,788) 119.0%
128,167,846
Short-Term Securities
BlackRock Liquidity Funds, TempFund, 0.22% (k)(l)
2,371,578
2,371,578
Total Short-Term Securities
(Cost $2,371,578) 2.2%
2,371,578
Options Purchased
Contracts
Over-the-Counter Call Options
Marsico Parent Superholdco LLC, expiring December
2019 at USD 942.86, Broker Goldman Sachs & Co.
13
13,000
Total Options Purchased (Cost $12,711) 0.0%
13,000
Total Investments (Cost $179,534,077*) 121.2%
130,552,424
Liabilities in Excess of Other Assets (21.2)%
(22,996,029)
Net Assets 100.0%
$107,556,395
* The cost and unrealized appreciation (depreciation) of investments as of August 31,
2009, as computed for federal income tax purposes, were as follows:
Aggregate cost
$180,146,320
Gross unrealized appreciation
$ 3,424,595
Gross unrealized depreciation
(53,018,491)
Net unrealized depreciation
$ (49,593,896)
(a) Variable rate security. Rate shown is as of report date.
(b) Security exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration to qualified
institutional investors.
(c) Non-income producing security.
(d) Issuer filed for bankruptcy and/or is in default of interest payments.
(e) Represents a payment-in-kind security which may pay interest/dividends in addi-
tional par/shares.
(f) Convertible security.
(g) Represents a zero-coupon bond. Rate shown reflects the current yield as of report
date.
(h) All, or a portion of security, pledged as collateral in connection with swaps.
(i) Other interests represent beneficial interest in liquidation trusts and other reorgani-
zation entities and are non-income producing.
(j) Warrants entitle the Fund to purchase a predetermined number of shares of com-
mon stock and are non-income producing. The purchase price and number of
shares are subject to adjustment under certain conditions until the expiration date.
(k) Investments in companies considered to be an affiliate of the Fund, for purposes of
Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
Net
Affiliate
Activity
Income
BlackRock Liquidity Funds, TempFund
$ 2,371,578
$ 2,468
BlackRock Liquidity Series, LLC
Cash Sweep Series
$(5,592,405)
$17,999
(l) Represents the current yield as of report date.
For Fund compliance purposes, the 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.
Foreign currency exchange contracts as of August 31, 2009 were as follows:
Unrealized
Currency
Currency
Settlement Appreciation
Purchased
Sold
Counterparty
Date (Depreciation)
USD 195,257 EUR
140,000
Citibank NA
9/15/09
$ (5,452)
USD 397,270 EUR
280,000
Citibank NA
9/16/09
(4,149)
USD 3,161,838
EUR
2,264,500
Deutsche Bank AG 9/16/09
(84,636)
USD
326,927
CAD
355,000
Barclays Bank Plc 10/28/09
2,622
GBP 165,000 USD
269,693
Citibank NA
10/28/09
(1,102)
Total
$ (92,717)
Interest rate swaps outstanding as of August 31, 2009 were as follows:
Notional
Fixed
Floating
Amount
Unrealized
Rate
Rate
Counterparty Expiration
(000)
Depreciation
4.82% (m) 3-month
JPMorgan
January
LIBOR
Chase Bank NA
2013 USD 20,000
$(1,751,189)
(m) Pays fixed rate and receives floating rate.
Credit default swaps on single-name issues buy protection outstanding as of
August 31, 2009 were as follows:
Pay
Notional
Unrealized
Fixed
Amount Appreciation
Issuer
Rate
Counterparty
Expiration
(000) (Depreciation)
Host Hotel &
Goldman Sachs
Resorts LP
5.00%
Bank USA
March 2014
USD 1,275 $ (177,446)
Masco
JPMorgan
Corp.
5.30%
Chase Bank NA
March 2014 USD
500
(55,080)
Mohawk
Industries,
JPMorgan
Inc.
4.45%
Chase Bank NA
March 2014 USD
500
(49,615)
Brunswick
Goldman Sachs September
Corp.
5.00%
Bank USA
2014
USD
100
561
Standard
Pacific
Credit Suisse
September
Corp.
5.00%
International
2014
USD
270
10,739
Total
$ (270,841)
Credit default swaps on traded index sold protection outstanding as of August 31,
2009 were as follows:
Receive
Notional
Fixed
Counter-
Credit
Amount
Unrealized
Index
Rate
party Expiration Rating1
(000)2 Depreciation
Aces High
5.00%
Morgan
March
CCC
USD 6,736
$(2,024,770)
Yield Index
Stanley
2010
Capital
Services, Inc.
Credit default swaps on single-name issues sold protection outstanding as of
August 31, 2009 were as follows:
Receive
Notional
Fixed
Counter-
Credit
Amount
Unrealized
Issuer
Rate
party Expiration Rating3
(000)2 Depreciation
BAA
2.00%
Deutsche
March
A
GBP
300
$ (96,206)
Ferrovial
Bank AG
2012
Junior Term
Loan
1
Using Standard & Poors weighted average ratings of the underlying securities
in the index.
2
The maximum potential amount the Fund may pay should a negative credit
event take place under the terms of the agreement. See Note 2 of the Notes to
Financial Statements.
3
Using Standard & Poors rating of the issuer.
ANNUAL REPORT AUGUST 31, 2009 21
CAD Canadian Dollar
EUR Euro
GBP British Pound
USD US Dollar
Effective September 1, 2008, the Fund adopted Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 157, Fair Value Measure-
ments, (FAS 157). FAS 157 clarifies the definition of fair value, establishes a
framework for measuring fair values and requires additional disclosures about the
use of fair value measurements. Various inputs are used in determining the fair
value of investments, which are as follows:
Level 1 price quotations in active markets/exchanges for identical securities
Level 2 other observable inputs (including, but not limited to: quoted prices
for similar assets or liabilities in markets that are active, quoted prices for identi-
cal or similar assets or liabilities in markets that are not active, inputs other than
quoted prices that are observable for the assets or liabilities (such as interest
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks
and default rates) or other market-corroborated inputs)
Level 3 unobservable inputs based on the best information available in the
circumstances, to the extent observable inputs are not available (including the
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 table summarizes the inputs used as of August 31, 2009 in
determining the fair valuation of the Funds investments:
Valuation
Investments in
Inputs
Securities
Assets
Level 1
Long-Term Investments:
Common Stocks
$ 2,283,119
Short-Term Securities
2,371,578
Total Level 1
4,654,697
Level 2
Long-Term Investments:
Common Stocks
503,215
Corporate Bonds
61,103,415
Floating Rate Loan Interests
36,916,830
Preferred Stocks
12,240
Total Level 2
98,535,700
Level 3
Long-Term Investments:
Asset-Backed Securities
528,255
Common Stocks
5,436
Corporate Bonds
1,033,683
Floating Rate Loan Interests
25,553,048
Other Interests
228,602
Warrants
3
Total Level 3
27,349,027
Total
$130,539,424
Valuation
Other Financial
Inputs
Instruments1
Assets
Liabilities
Level 1
Level 2
$ 26,922
$ (4,249,645)
Level 3
38,010
Total
$ 64,932
$ (4,249,645)
1 Other financial instruments are swaps, foreign currency exchange
contracts,
options purchased and unfunded loan commitments. Swaps, foreign currency
exchange contracts and unfunded loan commitments are valued at the unreal-
ized appreciation/depreciation on the instrument and options purchased are
shown at market value.
22 ANNUAL REPORT AUGUST 31, 2009
The following is a reconciliation of investments for unobservable inputs (Level 3) used in determining fair value:
Investments in Securities
Asset-Backed
Common
Corporate
Floating Rate
Other
Securities
Stocks
Bonds
Loan Interests
Interests
Warrants
Total
Balance, as of August 31, 2008
$17,146,004
$17,146,004
Accrued discounts/premiums
Realized gain (loss)
(5,893,500)
(5,893,500)
Change in unrealized appreciation1
$ 466,236
$ 5,033
$ (50,717)
2,373,735
2,794,287
Net purchases (sales)
(10,472,926)
(10,472,926)
Net transfers in/out of Level 3
62,019
403
1,084,400
22,399,735
$ 228,602
$ 3
23,775,162
Balance as of August 31, 2009
$ 528,255
$ 5,436
$ 1,033,683
$25,553,048
$ 228,602
$ 3
$27,349,027
1 Included in the related net change in unrealized appreciation/depreciation on the
Statements of Operations.
The following is a reconciliation of other financial instruments for unobservable inputs
(Level 3) used in determining fair value:
Other Financial
Instruments2
Assets
Balance, as of August 31, 2008
Accrued discounts/premiums
Realized gain (loss)
Change in unrealized appreciation (depreciation)
Net purchases (sales)
Net transfers in/out of Level 3
$ 38,010
Balance as of August 31, 2009
$ 38,010
2 Other financial instruments are unfunded loan commitments.
ANNUAL REPORT AUGUST 31, 2009 23
(Percentages shown are based on Net Assets)
Common Stocks
Shares
Value
Building Products 0.6%
Masonite Worldwide Holdings (a)
33,758
$ 1,365,511
Chemicals 0.0%
GEO Specialty Chemicals, Inc. (a)
13,117
5,036
Wellman Holdings, Inc.
430
107
5,143
Electrical Equipment 0.0%
Medis Technologies Ltd. (a)
71,654
20,421
Energy Equipment & Services 0.3%
Trico Marine Services, Inc. (a)
119,185
810,458
Paper & Forest Products 0.2%
Ainsworth Lumber Co., Ltd. (a)
136,289
196,699
Ainsworth Lumber Co., Ltd. (a)(b)
152,951
220,043
Western Forest Products, Inc. (a)(b)
84,448
20,056
436,798
Total Common Stocks 1.1%
2,638,331
Par
Corporate Bonds
(000)
Auto Components 1.9%
The Goodyear Tire & Rubber Co., 5.01%, 12/01/09 (c)
USD
4,500
4,483,125
Building Products 2.0%
CPG International I, Inc.:
7.87%, 7/01/12 (c)
3,500
2,502,500
10.50%, 7/01/13
2,300
1,644,500
Momentive Performance Materials, Inc., Series WI,
9.75%, 12/01/14
750
487,500
4,634,500
Capital Markets 0.3%
Marsico Parent Co., LLC, 10.63%, 1/15/16 (b)
1,168
490,560
Marsico Parent Holdco, LLC, 12.50%, 7/15/16 (b)(d)
486
116,671
Marsico Parent Superholdco, LLC, 14.50%, 1/15/18 (b)(d)
335
86,990
694,221
Chemicals 0.6%
GEO Specialty Chemicals, Inc.:
10.00%, 3/31/15
844
548,704
7.50%, 3/31/15 (b)(e)
852
553,506
Wellman Holdings, Inc., Third Lien Subordinate Note,
5.00%, 1/29/19 (e)
442
220,823
1,323,033
Commercial Services & Supplies 0.3%
Clean Harbors, Inc., 7.63%, 8/15/16 (b)
800
802,000
Construction Materials 1.0%
Nortek, Inc., 10.00%, 12/01/13
2,540
2,362,200
Containers & Packaging 1.8%
Clondalkin Acquisition BV, 2.63%, 12/15/13 (b)(c)
4,000
3,200,000
Crown European Holdings SA, 6.25%, 9/01/11
EUR
15
21,504
Owens Brockway Glass Container, Inc., 6.75%,
12/01/14
143
198,856
Packaging Dynamics Finance Corp., 10.00%,
5/01/16 (b)
USD
2,350
752,000
4,172,360
Diversified Financial Services 2.2%
FCE Bank Plc, 7.13%, 1/16/12
EUR
4,000
5,189,667
Diversified Telecommunication Services 1.8%
PAETEC Holding Corp., 8.88%, 6/30/17 (b)
USD
1,150
1,095,375
Qwest Corp., 3.88%, 6/15/13 (c)
3,500
3,237,500
4,332,875
Par
Corporate Bonds
(000)
Value
Food & Staples Retailing 0.2%
AmeriQual Group LLC, 9.50%, 4/01/12 (b)
USD
250
$ 162,500
Duane Reade, Inc., 11.75%, 8/01/15 (b)
190
191,900
354,400
Food Products 0.4%
Smithfield Foods, Inc., 10.00%, 7/15/14 (b)
900
918,000
Health Care Equipment & Supplies 0.5%
DJO Finance LLC, 10.88%, 11/15/14
1,320
1,267,200
Hotels, Restaurants & Leisure 2.4%
American Real Estate Partners LP, 7.13%, 2/15/13
5,000
4,750,000
Harrahs Operating Co., Inc., 10.00%, 12/15/18 (b)
413
289,100
Little Traverse Bay Bands of Odawa Indians, 10.25%,
2/15/14 (a)(b)(f)
1,565
688,600
5,727,700
IT Services 0.8%
First Data Corp.:
9.88%, 9/24/15
1,020
872,100
11.25%, 3/31/16 (b)
1,190
910,350
1,782,450
Independent Power Producers & Energy Traders 1.4%
Calpine Construction Finance Co., LP, 8.00%, 6/01/16 (b)
2,120
2,109,400
Texas Competitive Electric Holdings Co., LLC, 10.25%,
11/01/15
2,005
1,328,312
3,437,712
Industrial Conglomerates 0.5%
Sequa Corp. (b):
11.75%, 12/01/15
640
403,200
13.50%, 12/01/15 (d)
1,700
888,231
1,291,431
Machinery 0.8%
CPM Holdings, Inc., 10.63%, 9/01/14 (b)
500
505,000
Sunstate Equipment Co., LLC, 10.50%, 4/01/13 (b)
2,000
1,500,000
2,005,000
Media 1.6%
CSC Holdings, Inc.:
8.50%, 4/15/14 (b)
420
426,300
Series B, 7.63%, 4/01/11
2,000
2,025,000
Cablevision Systems Corp. Series B, 8.00%, 4/15/12
975
996,937
Local Insight Regatta Holdings, Inc., 11.00%, 12/01/17
1,244
472,720
3,920,957
Metals & Mining 0.4%
FMG Finance Property Ltd., 4.36%, 9/01/11 (b)(c)
265
265,000
Ryerson, Inc., 7.86%, 11/01/14 (c)
900
765,000
1,030,000
Oil, Gas & Consumable Fuels 0.6%
SandRidge Energy, Inc., 4.22%, 4/01/14 (c)
1,600
1,328,589
Paper & Forest Products 2.3%
Ainsworth Lumber Co., Ltd., 11.00%, 7/29/15 (b)(d)
1,176
466,135
NewPage Corp.:
10.00%, 5/01/12
2,000
1,085,000
6.73%, 5/01/12 (c)
3,925
1,677,937
Verso Paper Holdings LLC, Series B, 4.23%, 8/01/14 (c)
4,000
2,240,000
5,469,072
Pharmaceuticals 1.4%
Angiotech Pharmaceuticals, Inc., 4.11%, 12/01/13 (c)
1,190
999,600
Elan Finance Plc, 4.44%, 11/15/11 (c)
2,500
2,350,000
3,349,600
24 ANNUAL REPORT AUGUST 31, 2009
(Percentages shown are based on Net Assets)
Par
Corporate Bonds
(000)
Value
Semiconductors & Semiconductor Equipment 1.4%
Avago Technologies Finance Pte. Ltd., 5.86%,
6/01/13 (c)
USD
900
$ 846,000
Spansion, Inc., 3.79%, 6/01/13 (a)(b)(f)
2,870
2,547,125
3,393,125
Specialty Retail 0.1%
General Nutrition Centers, Inc., 6.40%, 3/15/14 (c)
290
255,200
Wireless Telecommunication Services 1.8%
Cricket Communications, Inc., 7.75%, 5/15/16 (b)
2,500
2,425,000
Crown Castle International Corp., 9.00%, 1/15/15
255
265,200
Digicel Group Ltd., 9.13%, 1/15/15 (b)(d)
278
244,987
iPCS, Inc., 2.61%, 5/01/13 (c)
1,500
1,230,000
4,165,187
Total Corporate Bonds 28.5%
67,689,604
Floating Rate Loan Interests
Aerospace & Defense 2.5%
Avio SpA:
Dollar Mezzanine Term Loan, 4.26%, 12/13/16 (d)
2,123
955,402
Facility B2, 2.39%, 12/15/14
1,661
1,395,506
Facility C2, 3.01%, 12/14/15
1,771
1,487,671
Hawker Beechcraft Acquisition Co., LLC:
Letter of Credit Facility Deposit, 2.28%, 3/26/14
137
102,306
Term Loan, 2.26% 2.60%, 3/26/14
2,325
1,733,406
IAP Worldwide Services, Inc., Term Loan (First-Lien),
7.25%, 12/30/12 (d)
175
126,292
5,800,583
Airlines 0.8%
Delta Air Lines, Inc., Credit- Linked Deposit Loan,
0.11% 2.28%, 4/30/12
1,225
1,093,823
US Airways Group, Inc., Loan, 2.76%, 3/21/14
1,460
786,210
1,880,033
Auto Components 3.0%
Allison Transmission, Inc., Term Loan, 3.03%, 8/07/14
4,825
4,119,199
Dana Holding Corp., Term Advance, 7.25%, 1/31/15
1,551
1,187,394
Delphi Corp. (a)(f):
Initial Tranche Term Loan C, 10.50%, 12/31/09
2,269
1,247,910
Subsequent Tranche Term Loan C, 9.50%, 12/31/09
231
127,090
GPX International Tire Corp.:
Term Loan, 12.00%, 4/11/12 (d)
22
6,626
Tranche B Term Loan, 10.25%, 3/30/12 (a)(f)
1,280
384,097
7,072,316
Beverages 0.1%
Culligan International Co., Loan (Second Lien), 5.28%,
4/24/13
EUR
500
179,201
Building Products 1.2%
Building Materials Corp. of America, Term Loan Advance,
3.06%, 2/22/14
USD
1,968
1,795,500
PGT Industries, Inc., Tranche A-2 Term Loan, 7.25%,
2/14/12
1,752
1,086,352
2,881,852
Capital Markets 0.6%
RiskMetrics Group Holdings, LLC, Term B Loan (First Lien),
2.60%, 1/10/14
1,449
1,407,720
Chemicals 5.5%
Ashland Inc., Term B Borrowing, 7.65%, 5/13/14
1,177
1,197,465
Edwards (Cayman Islands II) Ltd., Term Loan (First Lien),
2.85%, 5/31/14
490
303,800
Par
Floating Rate Loan Interests
(000)
Value
Chemicals (concluded)
Huish Detergents Inc., Tranche B Term Loan, 2.02%,
4/26/14
USD
1,470
$ 1,401,400
Nalco Co., Term Loan, 6.50%, 5/06/16
2,450
2,483,688
PQ Corp. (fka Niagara Acquisition, Inc.), Original Term
Loan (First Lien), 3.52% 3.75%, 7/31/14
3,960
3,263,701
Solutia Inc., Loan, 7.25%, 2/28/14
4,462
4,416,704
13,066,758
Commercial Services & Supplies 0.8%
Casella Waste Systems, Inc., Term B Loan, 7.00%,
4/09/14
750
751,875
John Maneely Co., Term Loan, 3.52% 3.76%, 12/09/13
846
663,063
West Corp., Term B-2 Loan, 2.64% 2.65%, 10/24/13
533
505,807
1,920,745
Computers & Peripherals 0.4%
Intergraph Corp.:
Initial Term Loan (First Lien), 2.37%, 5/29/14
419
401,943
Second Lien Term Loan, 6.26% 6.37%, 11/28/14
500
466,250
868,193
Construction Materials 0.4%
Headwaters Inc., Term Loan B1 (First Lien), 9.75%,
4/30/11
1,012
979,576
Containers & Packaging 1.8%
Graham Packaging Co.:
B Term Loan, 2.56%, 10/07/11
109
105,644
Term Loan C, 6.75%, 4/27/14
1,087
1,084,386
Graphic Packaging International, Inc., Incremental Term
Loan, 3.08% 3.35%, 5/16/14
1,970
1,920,750
Smurfit-Stone Container Enterprises, Inc., U.S. Term Loan
Debtor in Possession, 10.00%, 1/28/10
1,155
1,167,020
4,277,800
Distributors 0.3%
Keystone Automotive Operations, Inc., Loan,
3.77% 5.75%, 1/12/12
1,419
773,397
Diversified Consumer Services 1.0%
Coinmach Service Corp., Term Loan, 3.28% 3.43%,
11/14/14
2,715
2,308,208
Diversified Telecommunication Services 1.0%
Integra Telecom Holdings, Inc., Term Loan (First Lien),
10.50%, 8/31/13
774
758,381
PAETEC Holding Corp., Incremental Term Loan, 2.76%,
2/28/13
169
159,006
Wind Finance SL SA Euro Facility (Second Lien), 7.70%,
12/17/14
EUR
1,000
1,437,910
2,355,297
Electrical Equipment 0.6%
Baldor Electric Co., Term Loan, 5.25%, 1/31/14
USD
1,000
986,429
Generac Acquisition Corp., Lien Term Loan (First Lien),
2.78%, 11/10/13
548
459,740
1,446,169
Energy Equipment & Services 1.2%
Dresser, Inc., Term B Loan, 2.68%, 5/04/14
1,200
1,118,400
MEG Energy Corp.:
Delayed Draw Term Loan, 2.60%, 4/02/13
986
915,980
Initial Term Loan, 2.60%, 4/03/13
968
898,566
2,932,946
Food & Staples Retailing 2.9%
AB Acquisitions UK Topco 2 Ltd. (fka Alliance Boots),
Facility B1, 3.53%, 7/09/15
GBP
3,000
4,184,567
DSW Holdings, Inc., Loan, 2.52%, 10/27/12
USD
919
827,500
ANNUAL REPORT AUGUST 31, 2009 25
(Percentages shown are based on Net Assets)
Floating Rate Loan Interests
(000)
Value
Food & Staples Retailing (concluded)
McJunkin Corp., Term Loan, 3.51%, 1/31/14
USD
499
$ 475,032
Rite Aid Corp., Tranche 4 Term Loan, 9.50%, 6/04/15
1,000
1,035,000
Wm. Bolthouse Farms, Inc., Term Loan (First Lien), 2.56%,
12/16/12
378
364,690
6,886,789
Food Products 3.2%
Dole Food Co., Inc.:
Credit-Linked Deposit, 0.51%, 4/12/13
390
392,601
Tranche B Term Loan, 8.00%, 4/12/13
682
686,302
Solvest, Ltd. (Dole), Tranche C Term Loan, 8.00%, 4/12/13
2,541
2,557,222
Wm. Wrigley Jr. Co., Tranche B Term Loan, 6.50%, 10/06/14
3,925
3,968,817
7,604,942
Health Care Equipment & Supplies 1.4%
Biomet, Inc., Dollar Term Loan, 3.26% 3.61%, 3/25/15
2,250
2,158,828
DJO Finance LLC (ReAble Therapeutics Finance LLC),
Term Loan, 3.26% 3.60%, 5/20/14
985
940,675
Hologic, Inc., Tranche B Term Loan, 3.56%, 3/31/13
212
204,100
3,303,603
Health Care Providers & Services 6.7%
CCS Medical, Inc. (Chronic Care):
Loan Debtor in Possession, 11.00%, 11/14/09
31
30,309
Term Loan (First Lien), 4.35%, 9/30/12 (a)(f)
750
338,437
CHS/Community Health Systems, Inc.:
Delayed Draw Term Loan, 2.51%, 7/25/14
221
206,215
Funded Term Loan, 2.51%, 7/25/14
4,319
4,024,123
DaVita, Inc., Tranche B-1 Term Loan, 1.77% 2.10%,
10/05/12
1,000
959,583
Fresenius AG:
Term Loan B1, 6.75%, 7/06/14
1,478
1,485,952
Term Loan B2, 6.75%, 7/06/14
903
907,957
HCA Inc.:
Tranche A-1 Term Loan, 2.10%, 11/17/12
3,512
3,278,934
Tranche B-1 Term Loan, 2.85%, 11/18/13
3,098
2,915,255
Vanguard Health Holding Co., II, LLC (Vanguard Health
System, Inc.), Replacement Term Loan, 2.51%, 9/23/11
1,769
1,721,591
15,868,356
Hotels, Restaurants & Leisure 2.7%
Golden Nugget, Inc., Second Lien Term Loan, 3.52%,
12/31/14
250
105,000
Green Valley Ranch Gaming, LLC, Second Lien Term Loan,
3.88%, 8/16/14
500
102,500
Harrahs Operating Co., Inc.:
Term B-1 Loan, 3.50%, 1/28/15
208
167,785
Term B-2 Loan, 3.50%, 1/28/15
2,450
1,974,117
Term B-3 Loan, 3.50% 3.60%, 1/28/15
184
147,842
Penn National Gaming, Inc., Term Loan B, 2.01 2.21%,
10/03/12
1,136
1,104,234
QCE, LLC (Quiznos), Term Loan (Second Lien), 2.88%,
5/15/13
979
729,086
Travelport LLC (fka Travelport Inc.):
Original Post-First Amendment and Restatement
Synthetic Letter of Credit Loan, 3.10%, 8/23/13
178
160,153
Tranche B Dollar Term Loan, 2.76% 3.10%, 8/23/13
889
798,171
VML US Finance LLC (aka Venetian Macau), Term B:
Delayed Draw Project Loan, 6.10%, 5/25/12
383
350,225
Funded Project Loan, 6.10%, 5/27/13
864
790,220
6,429,333
Par
Floating Rate Loan Interests
(000)
Value
Household Durables 3.1%
American Residential Services LLC, Term Loan (Second
Lien), 12.00%, 4/17/15 (d)
USD
2,040
$ 1,779,743
Jarden Corp., Term Loan B3, 3.10%, 1/24/12
1,372
1,353,659
Simmons Bedding Co., Tranche D Term Loan, 10.50%,
12/19/11
3,166
3,076,263
Yankee Candle Co., Inc., Term Loan, 2.27%, 2/06/14
1,184
1,098,083
7,307,748
IT Services 4.6%
Audio Visual Services Group, Inc.:
Loan (Second Lien), 7.10%, 2/28/14 (c)
1,040
83,184
Tranche B Term Loan (First Lien), 2.85%, 2/28/14
1,000
620,000
Ceridian Corp., U.S. Term Loan, 3.27%, 11/09/14
1,977
1,692,520
First Data Corp. Initial:
Tranche B-1 Term Loan, 3.01% 3.02%, 9/24/14
790
658,169
Tranche B-2 Term Loan, 3.01% 3.02%, 9/24/14
4,629
3,852,089
Tranche B-3 Term Loan, 3.01% 3.02%, 9/24/14
341
283,935
RedPrairie Corp.:
Loan (Second Lien), 6.97%, 1/20/13
300
214,500
Term Loan B, 3.44% 5.25%, 7/20/12
562
485,920
SunGard Data Systems Inc.:
(Solar Capital Corp.) Additional Term Loan B, 6.75%,
2/28/14
900
894,696
Term Loan B, 3.95% 4.09%, 2/28/16
2,261
2,182,782
10,967,795
Independent Power Producers & Energy Traders 1.7%
Texas Competitive Electric Holdings Co., LLC (TXU):
Initial Tranche B-1 Term Loan, 3.78% 3.79%,
10/10/14
2,529
1,921,710
Initial Tranche B-2 Term Loan, 3.78% 3.79%,
10/10/14
978
742,929
Initial Tranche B-3 Term Loan, 3.78% 3.79%,
10/10/14
1,945
1,472,063
4,136,702
Industrial Conglomerates 0.6%
Sequa Corp., Term Loan, 3.65% 3.88%, 12/03/14
1,519
1,294,833
Insurance 0.2%
Alliant Holdings I, Inc., Term Loan, 3.60%, 8/21/14
491
451,950
Internet & Catalog Retail 0.3%
FTD Group, Inc., Tranche B Term Loan, 6.75%, 8/04/14
708
701,016
Leisure Equipment & Products 1.6%
24 Hour Fitness Worldwide, Inc., Tranche B Term Loan,
2.77% 3.08%, 6/08/12
3,870
3,366,900
Fender Musical Instruments Corp.:
Delayed Draw Loan, 2.54%, 6/09/14
165
132,220
Initial Loan, 2.85%, 6/07/14
327
261,770
3,760,890
Life Sciences Tools & Services 1.1%
Life Technologies Corp., Term B Facility, 5.25%, 11/20/15
2,529
2,554,120
Machinery 3.0%
NACCO Materials Handling Group, Inc., Loan, 2.26% 3.41%,
3/21/13
1,455
989,400
Navistar Financial Corp. Tranche A Term loan, 2.31%,
3/27/10
1,492
1,447,461
Navistar International Corp.:
Revolving Credit-Linked Deposit, 3.36% 3.51%,
1/19/12
1,067
992,000
Term Advance, 3.51%, 1/19/12
2,933
2,728,000
Oshkosh Truck Corp., Term B Loan, 6.60% 6.64%,
12/06/13
1,032
1,026,883
7,183,744
26 ANNUAL REPORT AUGUST 31, 2009
(Percentages shown are based on Net Assets)
Floating Rate Loan Interests
(000)
Value
Media 23.8%
Affinion Group Holdings, Inc., Loan, 8.27%,
3/01/10 (d)
USD
2,095
$ 1,833,388
AlixPartners, LLP, Tranche C Term Loan, 2.28% 2.51%,
10/12/13
1,590
1,546,900
Bresnan Communications, LLC, Additional Term Loan B
(First Lien), 2.51% 2.61%, 6/30/13
946
906,626
Catalina Marketing Corp., Initial Term Loan, 3.03%,
10/01/14
1,523
1,431,695
Cengage Learning Acquisitions, Inc. (Thomson Learning),
Tranche 1 Incremental Term Loan, 7.50%, 7/03/14
4,200
4,032,000
Cequel Communications, LLC:
Term Loan, 2.27% 4.25%, 11/05/13
2,110
1,993,002
Tranche A Term Loan (Second Lien), 4.79%, 5/05/14
2,000
1,802,500
Charter Communications, Term Loan B1, 7.94%, 3/25/14
3,465
3,463,267
HMH Publishing Co., Ltd. (fka Education Media):
Mezzanine, 17.50%, 11/14/14 (d)
10,180
1,527,027
Tranche A Term Loan, 5.26%, 6/12/14
2,633
2,037,464
Hanley-Wood, LLC (FSC Acquisition), Term Loan,
2.52% 2.54%, 3/08/14
1,478
623,013
Harland Clarke Holdings Corp. (fka Clarke American Corp.),
Tranche B Term Loan, 2.76%, 6/30/14
980
800,538
Insight Midwest Holdings, LLC, B Term Loan, 2.28%,
4/07/14
1,825
1,741,572
Intelsat Subsidiary Holding Co., Ltd., Tranche B Term Loan,
2.78%, 7/13/13
1,896
1,808,521
Knology, Inc., Term Loan, 2.51%, 6/30/12
724
687,989
Lamar Advertising Co.:
Term Loan Incremental, 5.50%, 9/28/12
207
204,055
Term Loan Incremental, 5.50%, 9/28/13
1,233
1,214,611
Term Loan E, 5.50%, 9/30/12
494
489,430
Lavena Holding 3 GmbH (Prosiebensat.1 Media AG):
Facility B1, 3.53%, 3/06/15
EUR
337
272,803
Facility C1, 3.78%, 3/04/16
337
272,803
MCC Iowa LLC (Mediacom Broadband Group), Tranche A
Term Loan, 1.76%, 3/31/10
USD
544
535,594
MCNA Cable Holdings LLC (OneLink Communications),
Loan (PIK facility), 8.31%, 3/01/13 (d)
1,236
469,840
Mediacom Broadband (Term Loan E), 6.50%, 11/30/15
2,868
2,871,343
Mediannuaire Holding (Pages Jaunes), Term Loan D,
4.77%, 4/08/16
EUR
500
188,758
Metro-Goldwyn-Mayer Inc., Tranche B Term Loan, 3.51%,
4/09/12
USD
3,297
1,833,743
Multicultural Radio Broadcasting, Inc., Term Loan, 3.03%,
12/18/12
317
221,900
NTL Cable Plc, Second Lien, 3.62% 4.19%,
7/17/13
GBP
845
1,210,543
Newsday, LLC, Fixed Rate Term Loan, 9.75%, 8/01/13
USD
1,000
1,017,500
NextMedia Operating, Inc.:
Delay Draw Term Loan, 8.25%, 11/15/12
200
129,869
Initial Term Loan (First Lien), 8.25%, 11/15/12
266
173,060
Term Loan (Second Lien), 11.25%, 11/15/13
1,772
212,674
Nielsen Finance LLC:
Class A Dollar Term Loan, 2.28%, 8/09/13
1,809
1,684,193
Class B Dollar Term Loan, 4.03%, 5/01/16
3,778
3,541,100
Penton Media, Inc., Loan (Second Lien), 5.49%, 2/01/14
1,000
210,000
Sunshine Acquisition Ltd. (aka HIT Entertainment), Term
Facility, 2.73%, 6/01/12
1,757
1,460,534
TWCC Holding Corp., Term Loan, 7.25%, 9/14/15
2,739
2,755,786
UPC Financing Partnership, Facility U,4.54%, 12/31/17
EUR
5,000
6,540,844
Virgin Media NTL, Term Loan, 4.40%, 6/03/12
GBP
1,000
1,513,178
World Color Press Inc. and World Color (USA) Corp. (fka
Quebecor World Inc.), Term Loan, 9.00%, 6/30/12
USD
1,300
1,290,250
56,549,913
Par
Floating Rate Loan Interests
(000)
Value
Multi-Utilities 0.9%
Energy Transfer Equity, LP, Term Loan, 2.21%, 11/01/12
USD
1,000
$ 968,571
FirstLight Power Resources, Inc. (fka NE Energy, Inc.):
First Lien Term Loan B, 3.13%, 11/01/13
664
611,659
Second Lien Term Loan, 5.13%, 5/01/14
500
386,250
Synthetic Letter of Credit, 0.48%, 11/01/13
86
78,810
2,045,290
Multiline Retail 0.8%
Dollar General Corp., Tranche B-2 Term Loan, 3.01%,
7/07/14
1,975
1,897,920
Oil, Gas & Consumable Fuels 1.8%
Big West Oil, LLC (a)(f):
Delayed Advance Loan, 4.50%, 5/15/14
577
530,935
Initial Advance Loan, 4.50%, 5/15/14
588
541,363
Coffeyville Resources, LLC:
Funded Letter of Credit, 6.50%, 12/28/10
194
190,216
Tranche D Term Loan, 8.50%, 12/30/13
1,559
1,523,964
Vulcan Energy Corp. (fka Plains Resources Inc.), Term B3
Loan, 5.50%, 8/12/11
1,500
1,479,375
4,265,853
Paper & Forest Products 2.5%
Georgia-Pacific LLC, Term B Loan, 2.34% 2.65%,
12/20/12
4,297
4,151,381
NewPage Corp., Term Loan, 4.06%, 12/22/14
1,619
1,499,075
Verso Paper Finance Holdings LLC, Loan, 6.73%,
2/01/13 (d)
1,983
396,576
6,047,032
Pharmaceuticals 0.9%
Catalent Pharma Solutions, Inc. (fka Cardinal Health
409, Inc.), Euro Term Loan, 2.74%, 4/15/14
EUR
980
1,173,123
Warner Chilcott Co., Inc.:
Tranche B Acquisition Date Term Loan,
2.26%, 1/18/12
USD
738
733,608
Tranche C Acquisition Date Term Loan,
2.26%, 1/18/12
259
257,283
2,164,014
Real Estate Management & Development 1.0%
Mattamy Funding Partnership, Loan, 2.63%, 4/11/13
968
774,000
Realogy Corp., Initial Term B Loan, 3.28%, 10/10/13
1,960
1,493,800
2,267,800
Specialty Retail 0.4%
Adesa, Inc. (KAR Holdings, Inc.), Initial Term Loan, 2.52%,
10/20/13
1,000
938,333
Wireless Telecommunication Services 0.9%
Digicel International Finance Ltd., Tranche A, 3.13%,
3/01/12
1,250
1,187,500
Ntelos Inc., Term Loan B Advance, 5.75%, 7/31/15
1,000
997,500
2,185,000
Total Floating Rate Loan Interests 87.3%
206,963,770
Beneficial
Interest
Other Interests (g)
(000)
Diversified Financial Services 0.1%
J.G. Wentworth LLC Preferred Equity Interests
USD
(h)
262,849
Total Other Interests 0.1%
262,849
ANNUAL REPORT AUGUST 31, 2009 27
(Percentages shown are based on Net Assets)
Preferred Stocks
Shares
Value
Capital Markets 0.0%
Marsico Parent Superholdco, LLC, 16.75% (b)
78
$ 19,890
Total Preferred Stocks 0.0%
19,890
Total Long-Term Investments
(Cost $330,781,619) 117.0%
277,574,444
Short-Term Securities
BlackRock Liquidity Funds, TempFund, 0.22% (i)(j)
2,018,379
2,018,379
Total Short-Term Securities
(Cost $2,018,379) 0.9%
2,018,379
Options Purchased
Contracts
Over-the-Counter Call Options
Marsico Parent Superholdco LLC, expiring December 2019
at USD 942.86, Broker Goldman Sachs & Co.
20
20,000
Total Options Purchased (Cost $19,556) 0.0%
20,000
Total Investments (Cost $332,819,554*) 117.9%
279,612,823
Liabilities in Excess of Other Assets (17.9)%
(42,453,259)
Net Assets 100.0%
$237,159,564
* The cost and unrealized appreciation (depreciation) of investments as of August 31,
2009, as computed for federal income tax purposes, were as follows:
Aggregate cost
$333,081,083
Gross unrealized appreciation
$ 6,045,238
Gross unrealized depreciation
(59,513,498)
Net unrealized depreciation
$ (53,468,260)
(a) Non-income producing security.
(b) Security exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration to qualified
institutional investors.
(c) Variable rate security. Rate shown is as of report date.
(d) Represents a payment-in-kind security which may pay interest/dividends in addi-
tional par/shares.
(e) Convertible security.
(f) Issuer filed for bankruptcy and/or is in default of interest payments.
(g) Other interests represent beneficial interest in liquidation trusts and other reorgani-
zation entities and are non-income producing.
(h) Amount is less than $1,000.
(i) Investments in companies considered to be an affiliate of the Fund, for purposes of
Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
Net
Affiliate
Activity
Income
BlackRock Liquidity Funds, TempFund
$ 2,018,379
$ 5,993
BlackRock Liquidity Series, LLC
Cash Sweep Series
$(1,634,669)
$26,105
(j) Represents the current yield as of report date.
For Fund compliance purposes, the 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.
Foreign currency exchange contracts as of August 31, 2009 were as follows:
Unrealized
Currency
Currency
Settlement Appreciation
Purchased
Sold
Counterparty
Date (Depreciation)
USD 439,329 EUR
315,000
Citibank NA
9/15/09 $
(12,267)
USD14,031,553 EUR 10,059,000
Citibank NA
9/16/09
(389,413)
Royal Bank
USD 703,165 EUR
494,000
of Scotland Plc
9/16/09
(5,053)
USD 290,090 CAD
315,000 Barclays Bank Plc 10/28/09
2,327
USD 6,118,751 GBP 3,743,500
Citibank NA
10/28/09
25,014
Total
$ (379,392)
Credit default swaps on single-name issues buy protection outstanding as of
August 31, 2009 were as follows:
Pay
Notional
Fixed
Amount Unrealized
Issuer
Rate
Counterparty
Expiration
(000) Depreciation
First Data
JPMorgan Chase
Corp.
5.00%
Bank, NA
12/20/13
USD 3,000 $
(230,284)
Host Hotels &
Goldman Sachs
Resorts LP
5.00%
Bank USA
3/20/14
USD 2,500
(347,933)
Masco Corp.
JPMorgan Chase
5.30%
Bank, NA
3/20/14
USD 1,000
(110,160)
Mohawk
JPMorgan Chase
Industries,
4.45%
Bank, NA
3/20/14
USD 1,000
(99,231)
Inc.
Total
$ (787,608)
Credit default swaps on single-name issues sold protection outstanding as of
August 31, 2009 were as follows:
Receive
Notional
Fixed
Counter-
Credit
Amount Unrealized
Issuer
Rate
party Expiration Ratings1 (000)2 Depreciation
Ford Motor
Co.
3.80%
UBS AG 3/20/10
CCC USD 10,000 $
(321,270)
1
Using Standard & 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 Note 2 of
the Notes to Financial Statements.
Currency Abbreviations:
CAD
Canadian Dollar
EUR
Euro
GBP
British Pound
USD
US Dollar
Effective September 1, 2008, Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157).
FAS 157 clarifies the definition of fair value, establishes a framework for measuring
fair values and requires additional disclosures about the use of fair value measure-
ments. Various inputs are used in determining the fair value of investments, which
are as follows:
Level 1 price quotations in active markets/exchanges for identical securities
Level 2 other observable inputs (including, but not limited to: quoted prices
for
similar assets or liabilities in markets that are active, quoted prices for identical
or similar assets or liabilities in markets that are not active, inputs other than
quoted prices that are observable for the assets or liabilities (such as interest
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks
and default rates) or other market-corroborated inputs)
Level 3 unobservable inputs based on the best information available in the
circumstances, to the extent observable inputs are not available (including the
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.
28 ANNUAL REPORT AUGUST 31, 2009
The following table summarizes the inputs used as of August 31, 2009 in determin-
Valuation
Other Financial
ing the fair valuation of the Funds investments:
Inputs
Instruments1
Valuation
Investments in
Assets
Liabilities
Inputs
Securities
Level 1
Assets
Level 2
$ 47,341
$ (1,515,611)
Level 3
(49,905)
Level 1
Long-Term Investments:
Total
$ 47,341
$ (1,565,516)
Common Stocks
$ 2,413,145
1
Other financial instruments are swaps, options purchased, foreign currency
Short-Term Securities
2,018,379
exchange contracts and unfunded loan commitments. Swaps, foreign currency
Total Level 1
4,431,524
exchange contracts and unfunded loan commitments are valued at the unreal-
Level 2
ized appreciation/depreciation on the instrument and options purchased are
Long-Term Investments:
shown at market value.
Common Stocks
220,043
Corporate Bonds
64,866,572
Floating Rate Loan Interests
152,389,930
Preferred Stocks
19,890
Total Level 2
217,496,435
Level 3
Long-Term Investments:
Common Stocks
5,143
Corporate Bonds
2,823,032
Floating Rate Loan Interests
54,573,840
Other Interests
262,849
Total Level 3
57,664,864
Total
$279,592,823
The following is a reconciliation of investments for unobservable inputs (Level 3) used in determining fair value:
Investments in Securities
Common
Corporate
Floating Rate
Other
Stocks
Bonds
Loan Interests
Interests
Total
Balance, as of August 31, 2008
$ 5,036
$27,972,884
$27,977,920
Accrued discounts/premiums
Realized gain (loss)
(6,318,545)
(6,318,545)
Change in unrealized appreciation (depreciation)2
$ (140,889)
(2,598,443)
(2,739,332)
Net purchases (sales)
(17,770,999)
(17,770,999)
Net transfers in/out of Level 3
107
2,963,921
53,288,943
$ 262,849
56,515,820
Balance, as of August 31, 2009
$ 5,143
$ 2,823,032
$54,573,840
$ 262,849
$57,664,864
2 Included in the related net change in unrealized appreciation/depreciation on the
Statements of Operations.
The following is a reconciliation of other financial instruments for unobservable
inputs (Level 3) used in determining fair value:
Other Financial
Instruments3
Liabilities
Balance, as of August 31, 2008
Accrued discounts/premiums
Realized gain (loss)
Change in unrealized appreciation (depreciation)
Net purchases (sales)
Net transfers in/out of Level 3
$ (49,905)
Balance as of August 31, 2009
$ (49,905)
3 Other financial instruments are unfunded loan commitments.
ANNUAL REPORT AUGUST 31, 2009 29
(Percentages shown are based on Net Assets)
Par
Asset-Backed Securities
(000)
Value
Ford Credit Auto Owner Trust Series 2009-A Class A3B,
2.77%, 5/15/13 (a)
USD
9,135
$ 9,373,195
Interest Only 0.5%
Sterling Bank Trust Series 2004-2 Class Note, 2.08%,
3/30/30
18,549
1,431,764
Sterling Coofs Trust Series 1, 2.36%, 4/15/29
14,819
1,236,448
2,668,212
Total Asset-Backed Securities 2.2%
12,041,407
Common Stocks
Shares
Commercial Services & Supplies 0.0%
Sirva (b)
1,109
5,545
Construction & Engineering 0.0%
USI United Subcontractors (b)
6,111
79,444
Metals & Mining 0.0%
Euramax International (b)
234
2,512
Total Common Stocks 0.0%
87,501
Par
Corporate Bonds
(000)
Air Freight & Logistics 0.1%
Park-Ohio Industries, Inc., 8.38%, 11/15/14
USD
905
571,281
Airlines 0.1%
American Airlines Pass Through Trust Series 1999-1,
7.32%, 4/15/11
520
512,200
Auto Components 0.1%
Lear Corp., 8.75%, 12/01/16 (a)(b)(c)
525
283,500
Automobiles 0.1%
Ford Capital BV, 9.50%, 6/01/10
500
495,000
Building Products 0.1%
CPG International I, Inc., 10.50%, 7/01/13
750
536,250
Capital Markets 0.4%
E*Trade Financial Corp. (d):
3.99%, 8/31/19 (e)
249
425,479
12.50%, 11/30/17 (f)
78
78,975
Marsico Parent Co., LLC, 10.62%, 1/15/16
2,651
1,113,420
Marsico Parent Holdco, LLC, 12.50%, 7/15/16 (d)(f)
1,105
265,135
Marsico Parent Superholdco, LLC, 14.50%, 1/15/18 (d)(f)
759
197,440
2,080,449
Chemicals 0.9%
American Pacific Corp., 9.00%, 2/01/15
1,100
992,750
Ames True Temper, Inc., 4.51%, 1/15/12 (a)
2,085
1,834,800
Innophos, Inc., 8.88%, 8/15/14
2,225
2,158,250
Terra Capital, Inc., Series B, 7.00%, 2/01/17
15
14,137
4,999,937
Commercial Services & Supplies 0.8%
DI Finance, Series B, 9.50%, 2/15/13
2,326
2,357,983
Waste Services, Inc., 9.50%, 4/15/14
2,065
2,044,350
4,402,333
Consumer Finance 0.8%
Ford Motor Credit Co. LLC:
7.38%, 2/01/11
2,800
2,706,791
3.26%, 1/13/12 (a)
565
470,363
7.80%, 6/01/12
1,665
1,540,202
4,717,356
Par
Corporate Bonds
(000)
Value
Containers & Packaging 0.9%
Berry Plastics Holding Corp.:
4.50%, 9/15/14 (a)
USD
510
$ 367,200
8.88%, 9/15/14
465
409,200
Crown Americas LLC, 7.75%, 11/15/15
885
876,150
Impress Holdings BV, 3.63%, 9/15/13 (a)(d)
1,370
1,251,837
Pregis Corp., 12.38%, 10/15/13
2,020
1,818,000
4,722,387
Diversified Financial Services 0.4%
GMAC LLC, 6.88%, 8/28/12 (d)
1,731
1,505,970
Structured Asset Repackaged Trust, 1.00%, 1/21/10
1,082
1,049,539
2,555,509
Diversified Telecommunication Services 3.8%
Cincinnati Bell, Inc., 7.25%, 7/15/13
1,330
1,290,100
Deutsche Telekom International Finance BV, 8.50%,
6/15/10
5,000
5,258,820
Nordic Telephone Co. Holdings ApS, 8.88%, 5/01/16 (d)
3,850
3,907,750
PAETEC Holding Corp., 8.88%, 6/30/17 (d)
1,000
952,500
Qwest Communications International, Inc.:
Series B, 7.50%, 2/15/14
2,985
2,880,525
7.50%, 2/15/14
610
588,650
Qwest Corp., 3.88%, 6/15/13 (a)
3,000
2,775,000
Wind Acquisition Finance SA, 10.75%, 12/01/15 (d)
900
967,500
Windstream Corp.:
8.13%, 8/01/13
1,480
1,480,000
8.63%, 8/01/16
990
993,712
21,094,557
Electric Utilities 0.0%
Elwood Energy LLC, 8.16%, 7/05/26
138
120,438
Electronic Equipment, Instruments & Components 0.1%
Sanmina-SCI Corp., 8.13%, 3/01/16
600
517,500
Energy Equipment & Services 0.1%
Compagnie Generale de Geophysique-Veritas:
7.50%, 5/15/15
255
242,250
7.75%, 5/15/17
420
396,900
North American Energy Partners, Inc., 8.75%, 12/01/11
140
128,800
767,950
Food & Staples Retailing 0.1%
Duane Reade, Inc., 11.75%, 8/01/15 (d)
455
459,550
Food Products 0.3%
Smithfield Foods, Inc., 10.00%, 7/15/14 (d)
1,810
1,846,200
Health Care Equipment & Supplies 0.8%
Biomet, Inc., 10.00%, 10/15/17
500
525,000
DJO Finance LLC, 10.88%, 11/15/14
3,830
3,676,800
4,201,800
Health Care Providers & Services 0.8%
Tenet Healthcare Corp. (d):
9.00%, 5/01/15
812
832,300
10.00%, 5/01/18
332
357,730
Viant Holdings, Inc., 10.13%, 7/15/17 (d)
2,948
2,771,120
3,961,150
Hotels, Restaurants & Leisure 1.7%
American Real Estate Partners LP:
8.13%, 6/01/12
5,860
5,772,100
7.13%, 2/15/13
1,480
1,406,000
Greektown Holdings, LLC, 10.75%, 12/01/13 (b)(c)(d)
1,344
288,960
Harrahs Operating Co., Inc. (d):
10.00%, 12/15/15
720
514,800
10.00%, 12/15/18
1,881
1,316,700
Tropicana Entertainment LLC Series WI, 9.63%,
12/15/14 (b)(c)
375
234
9,298,794
30 ANNUAL REPORT AUGUST 31, 2009
(Percentages shown are based on Net Assets)
Par
Corporate Bonds
(000)
Value
Household Durables 0.0%
Berkline/Benchcraft, LLC, 4.50%, 11/03/12 (d)(e)(f) USD
200
$
IT Services 0.4%
iPayment, Inc., 9.75%, 5/15/14
950
612,750
iPayment Investors LP, 12.75%, 7/15/14 (d)(f)
4,759
1,189,702
SunGard Data Systems, Inc., 4.88%, 1/15/14
215
193,500
1,995,952
Independent Power Producers & Energy Traders 0.8%
The AES Corp., 8.75%, 5/15/13 (d)
2,803
2,845,045
Calpine Construction Finance Co. LP, 8.00%, 6/01/16 (d)
1,250
1,243,750
NRG Energy, Inc.:
7.25%, 2/01/14
210
204,225
7.38%, 2/01/16
475
454,219
4,747,239
Industrial Conglomerates 0.9%
Sequa Corp. (d):
11.75%, 12/01/15
3,210
2,022,300
13.50%, 12/01/15 (f)
5,678
2,966,940
4,989,240
Machinery 0.7%
AGY Holding Corp., 11.00%, 11/15/14
1,700
1,343,000
Accuride Corp., 8.50%, 2/01/15 (b)(c)
850
170,000
Sunstate Equipment Co. LLC, 10.50%, 4/01/13 (d)
3,125
2,343,750
Synventive Molding Solutions, Sub-Series A, 14.00%, 1/14/11
720
287,888
4,144,638
Marine 0.1%
Navios Maritime Holdings, Inc., 9.50%, 12/15/14
676
591,500
Media 3.7%
Affinion Group, Inc., 10.13%, 10/15/13
2,825
2,807,344
CMP Susquehanna Corp., 4.75%, 5/15/14 (d)
194
3,880
Charter Communications Holdings II, LLC (b)(c):
10.25%, 9/15/10
1,155
1,283,494
Series B, 10.25%, 9/15/10
765
850,106
Charter Communications, Inc., 6.50%, 10/01/27 (b)(c)(e)
1,280
550,400
EchoStar DBS Corp.,:
7.00%, 10/01/13
200
196,000
7.13%, 2/01/16
200
192,000
Local Insight Regatta Holdings, Inc., 11.00%, 12/01/17
1,575
598,500
Network Communications, Inc., 10.75%, 12/01/13
1,520
307,800
Nielsen Finance LLC, 10.00%, 8/01/14
3,695
3,491,775
ProtoStar I Ltd., 18.00%, 10/15/12 (b)(c)(d)(e)
3,454
1,381,644
Rainbow National Services LLC (d):
10.38%, 9/01/14
3,134
3,275,030
8.75%, 9/01/12
925
934,250
TL Acquisitions, Inc., 10.50%, 1/15/15 (d)
4,965
4,518,150
20,390,373
Metals & Mining 0.2%
Freeport-McMoRan Copper & Gold, Inc., 8.38%, 4/01/17
1,225
1,277,063
Oil, Gas & Consumable Fuels 1.5%
Berry Petroleum Co., 8.25%, 11/01/16
550
489,500
Chesapeake Energy Corp., 6.38%, 6/15/15
650
592,313
EXCO Resources, Inc., 7.25%, 1/15/11
495
485,100
Encore Acquisition Co., 6.00%, 7/15/15
250
215,000
OPTI Canada, Inc., 8.25%, 12/15/14
1,805
1,173,250
Overseas Shipholding Group, Inc., 8.75%, 12/01/13
1,190
1,148,350
Sabine Pass LNG LP, 7.50%, 11/30/16
1,515
1,227,150
SandRidge Energy, Inc.:
4.22%, 4/01/14 (a)
1,500
1,245,552
8.63%, 4/01/15 (f)
180
169,200
Whiting Petroleum Corp.:
7.25%, 5/01/12
75
74,625
7.25%, 5/01/13
1,390
1,376,100
8,196,140
Par
Corporate Bonds
(000)
Value
Paper & Forest Products 0.2%
Domtar Corp., 7.88%, 10/15/11
USD
10
$ 10,263
NewPage Corp.:
6.73%, 5/01/12 (a)
1,500
641,250
10.00%, 5/01/12
635
344,487
996,000
Professional Services 0.1%
FTI Consulting, Inc., 7.75%, 10/01/16
350
341,250
Real Estate Investment Trusts (REITs) 0.2%
Rouse Co. LP, 5.38%, 11/26/13 (b)(c)
1,640
1,238,200
Software 0.0%
BMS Holdings, Inc., 8.35%, 2/15/12 (a)(d)(f)
568
9,122
Specialty Retail 1.9%
General Nutrition Centers, Inc.:
6.40%, 3/15/14 (a)
2,250
1,980,000
10.75%, 3/15/15
1,700
1,606,500
Group 1 Automotive, Inc., 8.25%, 8/15/13
5,000
4,512,500
Lazydays RV Center, Inc., 11.75%, 5/15/12 (b)(c)
1,454
14,540
Sonic Automotive, Inc., Series B, 8.63%, 8/15/13
3,135
2,649,075
10,762,615
Textiles, Apparel & Luxury Goods 0.7%
Levi Strauss & Co., 8.63%, 4/01/13
2,400
3,285,833
Quiksilver, Inc., 6.88%, 4/15/15
575
365,125
3,650,958
Tobacco 0.2%
Reynolds American, Inc., 7.63%, 6/01/16
1,000
1,055,033
Wireless Telecommunication Services 1.1%
Cricket Communications, Inc.:
7.75%, 5/15/16 (d)
2,250
2,182,500
9.38%, 11/01/14
270
254,475
Digicel Group Ltd. (d):
8.88%, 1/15/15
1,120
999,600
9.13%, 1/15/15 (e)
2,467
2,174,044
MetroPCS Wireless, Inc., 9.25%, 11/01/14
270
264,937
5,875,556
Total Corporate Bonds 25.1%
138,405,020
Floating Rate Loan Interests
Aerospace & Defense 0.7%
Avio SpA:
Facility B2, 2.39%, 12/15/14
995
836,162
Facility C2, 3.01%, 12/14/15
1,000
840,000
Hawker Beechcraft Acquisition Co. LLC:
Letter of Credit Facility Deposit, 2.28%, 3/26/14
156
115,998
Term Loan, 2.26% 2.60%, 3/26/14
2,637
1,965,395
IAP Worldwide Services, Inc. Term Loan (First-Lien),
7.25%, 12/30/12
150
108,249
3,865,804
Airlines 0.2%
US Airways Group, Inc., Loan, 2.76%, 3/21/14
2,190
1,179,315
Auto Components 1.5%
Allison Transmission, Inc., Term Loan, 3.03%, 8/07/14
4,004
3,418,134
Dana Holding Corp., Term Advance, 7.25%, 1/31/15
1,876
1,436,349
Dayco Products LLC (Mark IV Industries, Inc.),
Replacement Term B Loan, 8.75%, 6/21/11 (b)(c)
854
352,803
ANNUAL REPORT AUGUST 31, 2009 31
(Percentages shown are based on Net Assets)
Par
Floating Rate Loan Interests
(000)
Value
Auto Components (concluded)
Delphi Corp. (b)(c):
Initial Tranche C Loan Debtor in Possession,
10.50%, 12/31/09
USD
4,538
$ 2,495,820
Subsequent Tranche C Loan Debtor in Possession,
9.50%, 12/31/09
462
254,180
Mark IV Industries:
Replacement Term B Loan, 8.50%, 5/01/10
20
US Term Loan, Debtor in Possession Loan,
8.50%, 5/01/10
101
90,725
8,048,011
Beverages 0.4%
Culligan International Co., Loan (Second Lien), 5.28%,
4/24/13
EUR
1,500
537,604
InBev NV/SA, Bridge Loan, 1.95%, 7/15/13
USD
1,500
1,421,250
Le-Natures, Inc., Tranche B Loan, 9.39% 9.42%,
9/30/11 (b)(c)
1,000
195,000
2,153,854
Building Products 0.9%
Building Materials Corp. of America, Term Loan Advance,
3.06%, 2/22/14
2,586
2,359,709
Custom Building Products, Inc., Loan (Second Lien),
10.75%, 4/20/12
1,500
1,404,375
Momentive Performance Materials (Blitz 06-103 GmbH),
Tranche B-2 Term Loan, 2.74%, 12/04/13
EUR
997
1,076,830
United Subcontractors, First Lien Term Loan, 2.10%,
12/27/12
USD
143
121,744
4,962,658
Capital Markets 0.2%
Marsico Parent Co., LLC, Term Loan, 4.81%, 12/15/14
462
198,749
Nuveen Investments, Inc., Term Loan, 3.49% 3.50%,
11/13/14
1,359
1,103,211
1,301,960
Chemicals 3.6%
Ashland, Inc., Term B Borrowing, 7.65%, 5/13/14
889
903,747
Brenntag Holdings Gmbh & Co. KG:
Facility 2, 4.27%, 7/17/15
500
413,000
Facility 3A (Second Lien), 5.65%, 7/17/15
EUR
115
136,147
Facility 3B Second Lien, 5.65%, 7/17/15
385
455,934
Facility B6B, 3.60%, 1/20/14
218
297,235
Loan B6A, 3.60%, 1/20/14
282
383,929
Cognis GmbH:
Facility A (French) 3.27%, 9/16/13
803
988,926
Facility B (French) 3.27%, 9/16/13
197
242,186
Edwards (Cayman Islands II) Ltd., Term Loan (First Lien),
2.85%, 5/31/14
USD
449
278,290
ElectricInvest Holding Co. Ltd. (Viridian Group Plc)
Junior Term Facility:
5.00%, 12/21/12
EUR
894
819,938
5.04%, 12/21/12
GBP
900
937,698
Huish Detergents Inc., Tranche B Term Loan, 2.02%,
4/26/14
USD
1,237
1,179,629
Ineos US Finance LLC:
Term A4 Facility, 7.00%, 12/14/12
334
267,699
Term B2 Facility, 7.50%, 12/16/13
1,631
1,239,581
Term C2 Facility, 8.00%, 12/16/14
1,631
1,239,581
Nalco Co., Term Loan, 6.50%, 5/06/16
2,075
2,103,531
PQ Corp. (fka Niagara Acquisition, Inc.):
Loan (Second Lien), 6.77%, 7/30/15
3,250
1,787,500
Term Loan (First Loan), 3.52% 3.75%, 7/31/14
3,960
3,263,700
Rockwood Specialties Group, Inc., Term Loan H, 6.00%,
5/15/14
940
946,544
Solutia Inc., Loan, 7.25%, 2/28/14
1,732
1,714,728
19,599,523
Par
Floating Rate Loan Interests
(000)
Value
Commercial Services & Supplies 1.3%
ARAMARK Corp.:
Letter of Credit, 0.22%, 1/26/14
USD
185
$ 172,822
U.S. Term Loan, 2.47%, 1/26/14
2,907
2,720,334
Casella Waste Systems, Inc., Term B Loan, 5.60%,
3/31/14
635
636,588
EnviroSolutions Real Property Holdings, Inc., Initial Term
Loan, 10.50%, 7/07/12
506
365,707
Kion Group GmbH (formerly Neggio Holdings 3 GmbH):
Facility B, 2.51%, 12/29/14
250
158,594
Facility C, 2.76%, 12/29/15
250
158,594
SIRVA Worldwide, Inc., Loan (Second Lien), 12.00%,
5/12/15
259
19,412
Synagro Technologies, Inc., Term Loan (First Lien),
2.26% 2.27%, 4/02/14
2,715
2,138,350
West Corp., Term B-2 Loan, 2.64% 2.65%, 10/24/13
880
834,806
7,205,207
Communications Equipment 0.1%
Safenet, Inc., Term Loan (First Lien), 2.77%, 4/12/14
696
641,227
Computers & Peripherals 0.4%
Intergraph Corp.:
Initial Term Loan (First Lien), 2.37%, 5/29/14
1,431
1,373,600
Second-Lien Term Loan, 6.26% 6.37%, 11/28/14
750
699,375
2,072,975
Construction & Engineering 0.1%
Brand Energy & Infrastructure Services, Inc.
(FR Brand Acquisition Corp.):
First Lien Term Loan B, 2.31% 2.63%, 2/07/14
31
27,510
Second Lien Term Loan, 6.31% 6.44%, 2/07/15
1,000
690,000
717,510
Containers & Packaging 0.8%
Atlantis Plastic Films, Inc., Term Loan (Second Lien),
12.25%, 3/22/12 (b)(c)
250
Graham Packaging Co., LP, B Term Loan, 2.56%, 10/07/11
898
873,017
Graphic Packaging International, Inc., Incremental Term
Loan, 3.08% 3.35%, 5/16/14
1,324
1,291,160
Smurfit-Stone Container Enterprise, Inc.:
Tranche C, 2.57%, 11/01/11
198
188,044
Tranche C-1 Term Loan, 2.57%, 11/01/11
60
56,854
Smurfit-Stone Container Enterprises, Inc., U.S. Term Loan
Debtor in Possession, 10.00%, 7/28/10
1,301
1,313,900
Smurfit-Stone Container Enterprises, Inc. (b)(c):
Deposit Funded Facility, 4.50%, 11/01/10
92
87,705
Tranche B, 2.57%, 11/01/11
105
99,811
Smurfit-Stone Container, Revolving Credit US,
0.01% 4.50%, 11/01/09
459
437,532
Smurfit-Stone Container, Canadian Revolving Credit,
2.28% 5.00%, 11/02/09
152
145,116
4,493,139
Distributors 0.1%
Keystone Automotive Operations, Inc., Loan, 3.77% 5.75%
1/12/12
1,419
773,397
Diversified Consumer Services 0.9%
Coinmach Service Corp., Term Loan, 3.28% 3.43%,
11/14/14
4,690
3,986,905
Education Management, LLC, Term Loan C, 2.38%,
6/01/13
748
714,995
4,701,900
32 ANNUAL REPORT AUGUST 31, 2009
(Percentages shown are based on Net Assets)
Par
Floating Rate Loan Interests
(000)
Value
Diversified Financial Services 0.0%
Professional Service Industries, Inc., Term Loan
(First Lien), 3.02%, 10/31/12
USD
620
$ 310,223
Diversified Telecommunication Services 1.6%
BCM Ireland Holdings Ltd. (Eircom):
Facility B, 2.37%, 9/30/15
EUR
1,970
2,567,463
Facility C, 2.62%, 9/30/16
1,970
2,567,750
Hawaiian Telcom Communications, Inc., Tranche C Term
Loan, 4.75%, 5/30/14
USD
1,921
1,165,804
Integra Telecom Holdings, Inc., Term Loan (First Lien),
10.50%, 8/31/13
350
343,000
PAETEC Holding Corp., Replacement Term Loan, 2.76%,
2/28/13
422
397,514
Time Warner Telecom Holdings Inc., Term Loan B Loan,
2.02%, 1/07/13
1,055
1,028,240
Wind Telecomunicazioni S.P.A., A1 Term Loan Facility,
2.95% 3.02%, 9/22/12
EUR
424
577,255
8,647,026
Electric Utilities 0.1%
TPF Generation Holdings, LLC:
Synthetic LC Deposit (First Lien), 2.28%,
12/15/13
USD
151
142,317
Synthetic Revolving Deposit, 2.28%, 12/15/11
47
44,613
Term Loan (First Loan), 2.26%, 12/15/13
429
405,181
592,111
Electrical Equipment 0.2%
Electrical Components International Holdings Co. (ECI)
Term Loan (Second Lien), 11.50%, 5/01/14
500
25,000
Generac Acquisition Corp., Term Loan (First Lien), 2.78%,
11/10/13
1,464
1,227,277
1,252,277
Electronic Equipment, Instruments & Components 0.9%
Flextronics International Ltd.:
A Closing Date Loan, 2.52% 2.85%, 10/01/14
3,820
3,424,445
Delay Draw Term Loan, 2.76%, 10/01/14
1,098
984,037
Matinvest 2 SAS/Butterfly Wendel US, Inc.
(Deutsche Connector):
B-2 Facility, 2.97%, 6/22/14
445
249,061
B-2 Facility, 2.97%, 6/22/14
33
18,586
C-2 Facility, 3.22%, 6/22/15
719
402,826
C-2 Facility, 3.22%, 6/22/15
110
61,536
5,140,491
Energy Equipment & Services 0.6%
Dresser, Inc. Term B Loan, 2.68%, 5/04/14
2,082
1,940,767
MEG Energy Corp., Initial Term Loan, 2.60%, 4/03/13
484
449,283
Trinidad USA Partnership LLP, US Term Loan, 2.78%,
5/01/11
1,022
868,678
3,258,728
Food & Staples Retailing 1.3%
AB Acquisitions UK Topco 2 Ltd. (fka Alliance Boots),
Facility B1, 3.53%, 7/09/15
GBP
3,500
4,881,995
DSW Holdings Inc., Loan, 4.27%,
3/21/12
USD
500
421,667
Rite Aid Corp., Tranche 4 Term Loan, 9.50%, 6/04/15
750
776,250
Wm. Bolthouse Farms, Inc., Term Loan (First Lien), 2.56%,
12/16/12
872
841,462
6,921,374
Par
Floating Rate Loan Interests
(000)
Value
Food Products 1.2%
Dole Food Co., Inc.:
Credit-Linked Deposit, 0.51%, 4/12/13
USD
280
$ 281,481
Tranche B Term Loan, 8.00%, 4/12/13
489
492,054
Michael Foods, Term Loan B, 6.50%, 4/24/14
1,478
1,494,122
Solvest, Ltd. (Dole), Tranche C Term Loan, 8.00%,
4/12/13
1,822
1,833,438
Wm. Wrigley Jr. Co., Tranche B Term Loan, 6.50%,
10/06/14
2,468
2,496,111
6,597,206
Health Care Equipment & Supplies 0.7%
Biomet, Inc., Dollar Term Loan, 3.26% 3.61%, 3/25/15
1,678
1,610,226
DJO Finance LLC (ReAble Therapeutics Finance LLC),
Term Loan, 3.26% 3.60%, 5/20/14
2,463
2,351,688
3,961,914
Health Care Providers & Services 3.1%
CCS Medical Inc. (Chronic Care):
Loan Debtor in Possession, 11.00%, 11/14/09
31
30,309
Term Loan (First Lien), 4.35%, 9/30/12 (b)(c)
875
394,844
CHS/Community Health Systems, Inc.:
Delayed Draw Term Loan, 2.51%, 7/25/14
410
382,005
Funded Term Loan, 2.51% 2.62%, 7/25/14
8,041
7,490,958
Catalent Pharma Solutions, Inc. (fka Cardinal Health
409, Inc.), Euro Term Loan, 2.74%, 4/10/14
EUR
1,960
2,346,245
DaVita, Inc., Tranche B-1 Term Loan, 1.77% 2.10%,
10/05/12
USD
750
719,687
HCA Inc., Tranche A-1 Term Loan, 2.10%, 11/17/12
1,824
1,703,243
HealthSouth Corp., Term Loan, 2.52% 2.53%, 3/10/13
2,312
2,235,586
Surgical Care Affiliates, LLC, Term Loan, 2.60%, 12/29/14
721
650,307
Vanguard Health Holding Co. II, LLC (Vanguard Health
System, Inc.), Replacement Term Loan, 2.51%, 9/23/11
1,317
1,281,588
17,234,772
Health Care Technology 0.2%
Sunquest Information Systems, Inc. (Misys Hospital
Systems, Inc.), Term Loan, 3.52% 3.74%, 10/13/14
1,474
1,343,569
Hotels, Restaurants & Leisure 2.2%
BLB Worldwide Holdings, Inc. (Wembley, Inc.), First Priority
Term Loan, 4.75%, 9/01/09 (b)(c)
1,989
1,093,953
CCM Merger Inc. (Motor City Casino), Term B Loan, 8.50%,
7/13/12
1,503
1,402,917
Green Valley Ranch Gaming, LLC:
Second Lien Term Loan, 3.88%, 8/16/14
1,500
307,500
Term Loan (New), 2.54% 4.00%, 2/16/14
471
327,045
Harrahs Operating Co., Inc.:
Term B-1 Loan, 3.50%, 1/28/15
487
391,498
Term B-2 Loan, 3.50%, 1/28/15
613
493,529
Term B-3 Loan, 3.50% 3.60%, 1/28/15
704
566,874
OSI Restaurant Partners, LLC, Revolving Credit
Loan, 2.56%, 6/14/13
32
25,482
Penn National Gaming, Inc., Term Loan B, 2.01% 2.21%,
10/03/12
3,828
3,720,123
QCE, LLC (Quiznos), Term Loan (First Lien), 2.88%,
5/05/13
1,940
1,445,300
Travelport LLC (fka Travelport Inc.), Loan, 8.49%,
3/27/12
4,607
2,580,008
12,354,229
Household Durables 0.9%
Berkline/Benchcraft, LLC., Term Loan, 4.04%,
11/03/11 (b)(c)
107
5,373
Jarden Corp., Term Loan B3, 3.10%, 1/24/12
816
805,133
Simmons Bedding Co., Tranche D Term Loan, 10.50%,
12/19/11
3,250
3,157,918
Yankee Candle Co., Inc., Term Loan, 2.27%, 2/06/14
947
878,467
4,846,891
ANNUAL REPORT AUGUST 31, 2009 33
(Percentages shown are based on Net Assets)
Par
Floating Rate Loan Interests
(000)
Value
Household Products 0.2%
Central Garden & Pet Co., Tranche B Term Loan, 1.77%,
9/30/12
USD
991
$ 929,582
IT Services 2.1%
Amadeus IT Group SA/Amadeus Verwaltungs GmbH:
Term B3 Facility, 2.54%, 6/30/13
EUR
307
388,217
Term B4 Facility, 2.54%, 6/30/13
184
231,783
Term C3 Facility, 3.04%, 6/30/14
307
388,217
Term C4 Facility, 3.04%, 6/30/14
184
231,783
Audio Visual Services Group, Inc., Loan (Second Lien),
7.10%, 12/28/14
USD
1,040
83,184
Ceridian Corp., US Term Loan, 3.27%, 11/09/14
3,460
2,961,910
First Data Corp.:
Initial Tranche B-1 Term Loan, 3.02%, 9/24/14
3,664
3,052,266
Initial Tranche B-2 Term Loan, 3.02%, 9/24/14
1,237
1,029,624
Initial Tranche B-3 Term Loan, 3.02%, 9/24/14
563
467,929
RedPrairie Corp., Term Loan B, 3.44% 5.25%, 7/20/12
605
523,240
SunGard Data Systems Inc. (Solar Capital Corp.):
Incremental Term Loan, 6.75%, 2/28/14
1,197
1,189,931
Tranche B U.S. Term Loan, 3.95% 4.09%, 2/28/16
127
122,972
Verifone, Inc., Term B Loan, 3.02%, 10/31/13
910
864,500
11,535,556
Independent Power Producers & Energy Traders 1.6%
Texas Competitive Electric Holdings Co., LLC (TXU):
Initial Tranche B-2 Term Loan, 3.78% 3.79%,
10/10/14
4,188
3,182,903
Initial Tranche B-3 Term Loan, 3.78% -3.79%,
10/10/14
7,233
5,473,543
8,656,446
Insurance 0.1%
Conseco, Inc., Term Loan, 6.50%, 10/10/13
729
554,345
Leisure Equipment & Products 0.2%
24 Hour Fitness Worldwide, Inc., Tranche B Term Loan,
2.77% 3.08%, 6/08/12
968
841,725
Life Sciences Tools & Services 0.3%
Life Technologies Corp., Term B Facility, 5.25%, 11/23/15
1,783
1,800,956
Machinery 1.7%
Blount, Inc., Term Loan B, 2.02% 3.25%, 8/09/10
651
612,091
LN Acquisition Corp. (Lincoln Industrial), Initial Term Loan
(Second Lien), 6.07%, 1/09/15
1,500
1,110,000
NACCO Materials Handling Group, Inc., Loan,
2.26% 3.44%, 3/21/13
485
329,800
Navistar Financial Corp., Tranche A Term Loan, 2.31%,
3/27/10
1,000
970,000
Navistar International Corp.:
Term Advance, 3.51%, 1/19/12
3,447
3,205,400
Revolving Credit-Linked Deposit, 3.36% 3.51%,
1/19/12
1,253
1,165,600
Oshkosh Truck Corp., Term B Loan, 6.60% 6.64%,
12/06/13
1,570
1,562,971
Standard Steel, LLC:
Delayed Draw Term Loan, 8.25%, 7/02/12
74
58,734
Initial Term Loan, 9.00%, 7/02/12
369
291,416
9,306,012
Marine 0.3%
Delphi Acquisition Holding I BV (fka Dockwise):
Facility B2, 2.60%, 1/12/15
939
812,468
Facility C2, 3.47%, 1/11/16
939
812,468
1,624,936
Par
Floating Rate Loan Interests
(000)
Value
Media 11.8%
Acosta, Inc., Term Loan, 2.54%, 7/28/13
USD
970
$ 917,863
Affinion Group Holdings, Inc., Loan, 8.27%, 3/01/10
1,048
916,694
AlixPartners, LLP, Tranche C Term Loan, 2.28% 2.51%,
10/12/13
1,446
1,406,273
Alpha Topco Limited (Formula One):
Facility B1, 2.51%, 12/31/13
840
706,380
Facility B2, 2.51%, 12/31/13
568
477,139
Facility D, 3.76%, 6/30/14
1,000
740,000
Atlantic Broadband Finance, LLC:
Term Loan B-2-B, 6.75%, 6/01/13
935
935,386
Tranche B-2-A Term Loan, 2.85%, 9/01/11
35
34,372
CSC Holdings Inc (Cablevision), Incremental B Term Loan,
2.02% 2.07%, 3/29/13
2,630
2,542,399
Catalina Marketing Corp., Initial Term Loan, 3.03%,
10/01/14
1,075
1,009,897
Cengage Learning Acquisitions, Inc. (Thomson Learning),
Tranche 1 Incremental Term Loan, 7.50%, 7/03/14
3,713
3,564,000
Cequel Communications, LLC, Term Loan, 2.27%,
11/05/13
7,341
6,932,774
Charter Communications Operating, LLC, New Term Loan,
6.25%, 3/06/14 (b)(c)
3,282
3,045,871
Charter Communications, Term Loan B1, 4.25%,
3/25/14
750
749,625
FoxCo Acquisition Sub, LLC, Term Loan, 7.25%, 7/14/15
898
735,531
Gray Television, Inc., Term Loan B, 3.78%, 12/31/14 (f)
726
523,926
HIT Entertainment, Inc., Term Loan (Second Lien), 5.98%,
2/26/13
1,000
492,500
HMH Publishing Co. Ltd., Mezzanine, 17.50%,
11/14/14 (f)
9,615
1,442,193
Hanley-Wood, LLC (FSC Acquisition), Term Loan,
2.52% 2.54%, 3/08/14
1,478
623,013
Harland Clarke Holdings Corp. (fka Clarke American Corp.),
Tranche B Term Loan, 2.79% 3.10%, 6/30/14
1,469
1,200,268
Insight Midwest Holdings, LLC, B Term Loan, 2.28%,
4/07/14
1,550
1,479,143
Intelsat Corp. (fka PanAmSat Corp.):
Term Loan B-2-A, 2.78%, 1/03/14
588
554,572
Term Loan B-2-B, 2.78%, 1/03/14
587
555,766
Term Loan B-2-C, 2.78%, 1/03/14
587
555,766
Knology, Inc., Term Loan, 2.51%, 6/30/12
483
458,659
Lamar Media Corp.:
B Incremental, 5.50%, 9/28/12
1,223
1,204,895
Term Loan, 5.50%, 9/30/12
500
492,500
Lavena Holding 3 GmbH (Prosiebensat.1 Media AG):
Facility B1, 3.53%, 6/30/15
EUR
337
272,803
Facility C1, 3.78%, 6/30/16
337
272,803
Facility D, 4.90%, 12/28/16
904
194,454
MCNA Cable Holdings LLC (OneLink Communications),
Loan, 8.31%, 3/01/13 (f)
USD
1,855
704,759
Mediacom Illinois, LLC (fka Mediacom Communications,
LLC), Tranche D Term Loan, 3.96%, 3/31/17
1,000
997,500
MCC Iowa LLC (Mediacom Broadband Group), Tranche E
Term Loan, 6.50%, 1/03/16
449
449,428
Metro-Goldwyn-Mayer Inc., Tranche B Term Loan, 3.51%,
4/09/12
2,757
1,533,358
Mission Broadcasting, Inc., Term B Loan, 2.35%,
10/01/12
1,873
1,573,273
Multicultural Radio Broadcasting, Inc., Term Loan, 3.03%,
12/18/12
317
221,900
NV Broadcasting, LLC:
Term Loan Debtor in Possession, 13.00%, 2/25/10
USD
120
118,800
Term Loan (First Lien), 5.25%, 11/01/13 (b)(c)
821
205,367
Newsday, LLC, Fixed Rate Term Loan, 9.75%, 8/01/13
1,500
1,526,250
Nexstar Broadcasting, Inc., Term B Loan, 2.09% 2.24%,
10/01/12
1,771
1,487,936
34 ANNUAL REPORT AUGUST 31, 2009
(Percentages shown are based on Net Assets)
Par
Floating Rate Loan Interests
(000)
Value
Media (concluded)
Nielsen Finance LLC:
Class A Dollar Term Loan, 2.28%, 8/09/13
USD
1,302
$ 1,211,586
Class B Dollar Term Loan, 4.03%, 5/01/16
2,718
2,547,420
Parkin Broadcasting, LLC, Term Loan, 5.25%,
11/01/13 (b)(c)
169
42,127
Penton Media, Inc.:
Loan (Second Lien), 5.49%, 2/01/14
1,000
210,000
Term Loan (First Lien), 2.51% 2.74%, 2/01/13
1,100
736,791
ProtoStar Ltd. (b)(c):
Debtor in Possession Term Loan, 18.00%, 10/15/09
84
83,842
Revolver, 18.00%, 9/30/10
407
398,860
Puerto Rico Cable Acquisition Co. Inc. (dba Choice TV),
Term Loan (Second Lien), 7.81%, 2/15/12
692
450,000
Springer:
Term Loan B, 2.69%, 9/16/11
820
760,086
Term Loan C-2, 3.35%, 5/05/12
597
553,254
Term Loan E-2, 3.29%, 9/16/12
229
212,398
Term Loan E2-U, 3.29%, 9/16/12
311
287,989
Sunshine Acquisition Ltd. (aka HIT Entertainment),
Term Facility, 2.73%, 6/01/12
1,268
1,054,050
TWCC Holding Corp., Term Loan, 7.25%, 9/14/15
1,496
1,504,580
Telecommunications Management, LLC:
Multi-Draw Term Loan, 3.76%, 6/30/13
232
146,350
Term Loan, 3.76%, 6/30/13
922
580,545
UPC Financing Partnership, Facility U, 4.54%,
12/31/17
EUR
3,013
3,940,858
Virgin Media Investment Holdings Ltd.:
B1 Facility, 3.89%, 7/30/12
GBP
380
568,963
B2 Facility, 3.89%, 3/09/12
203
303,947
C Facility, 3.62%, 7/17/13
2,000
2,865,190
World Color Press Inc. and World Color (USA) Corp.
(fka Quebecor World Inc.), Advance, 9.00%, 6/30/12
1,300
1,290,250
Yell Group Plc Facility B2, 3.49%, 10/29/12
USD
2,150
1,453,041
65,058,163
Metals & Mining 0.1%
Essar Stell Algoma Inc. (fka Algoma Steel Inc.), Term
Loan, 2.77%, 6/20/13
495
445,455
Multi-Utilities 0.4%
FirstLight Power Resources, Inc. (fka NE Energy, Inc.):
First Lien Term Loan B, 3.13%, 11/01/13
1,895
1,744,426
Synthetic Letter of Credit, 0.48%, 11/01/13
244
224,763
Mach Gen, LLC Synthetic, LC Loan (First Lien), 0.35%,
2/22/13
69
63,696
2,032,885
Oil, Gas & Consumable Fuels 1.1%
Big West Oil, LLC (b)(c):
Delayed Advance Loan, 4.50%, 5/15/14
546
502,477
Initial Advance Loan, 4.50%, 5/15/14
1,007
926,778
Coffeyville Resources, LLC:
Funded Letter of Credit, 6.50%, 12/28/10
97
95,108
Tranche D Term Loan, 8.50%, 12/30/13
780
761,982
Drummond Co., Inc., Term Advance, 1.51%, 2/14/11
1,075
1,042,750
Niska Gas Storage Canada ULC Canadian, Term Loan B,
2.02%, 5/12/13
451
425,849
Niska Gas Storage US, LLC, US Term B Loan, 2.02%,
5/12/13
47
44,749
Niska Gas Storage US, LLC, Wild Goose Acquisition
Draw-US Term B, 2.02%, 5/12/13
32
30,312
Turbo Beta Ltd., Dollar Facility, 14.50%, 3/15/18
3,068
2,147,270
5,977,275
Par
Floating Rate Loan Interests
(000)
Value
Paper & Forest Products 1.6%
Georgia-Pacific LLC:
Term Loan B2, 2.34% 2.46%, 12/20/12
USD
1,897
$ 1,833,036
Term B Loan, 2.34% 2.65%, 12/20/12
4,520
4,366,263
NewPage Corp., Term Loan, 4.06%, 12/22/14
2,593
2,401,374
Verso Paper Finance Holdings LLC, Loan, 6.73%,
2/01/13 (f)
600
120,029
8,720,702
Personal Products 0.4%
American Safety Razor Co., LLC, Loan (Second Lien),
6.52%, 1/30/14
2,500
1,950,000
Real Estate Management & Development 0.1%
Enclave, Term Loan B, 6.14%, 3/01/12
3,000
395,397
Georgian Towers, Term Loan, 6.14%, 3/01/12
3,000
372,375
Pivotal Promontory, LLC, Second Lien Term Loan,
8.75%, 8/31/11 (b)(c)
750
37,500
805,272
Software 0.1%
Bankruptcy Management Solutions, Inc., Term Loan (First
Lien), 4.27%, 7/31/12
945
538,792
Specialty Retail 0.5%
Adesa, Inc. (KAR Holdings, Inc.), Initial Term Loan, 2.52%,
10/20/13
1,250
1,172,916
Eye Care Centers of America, Inc., Term Loan,
2.77% 3.16%, 3/01/12
522
506,296
OSH Properties, LLC (Orchard Supply), Term Loan B,
2.72%, 12/04/11
1,500
1,245,000
2,924,212
Textiles, Apparel & Luxury Goods 0.2%
Hanesbrands Inc., Term B Loan, 5.02% 5.25%, 9/05/13
872
872,270
St. John Knits International, Inc., Term Loan, 10.00%, 3/23/12
631
454,077
Springer, Term Loan E, 3.29%, 9/16/12
45
41,719
1,368,066
Trading Companies & Distributors 0.2%
Beacon Sales Acquisition, Inc., Term B Loan, 2.26% 2.60%,
9/30/13
1,191
1,119,187
Wireless Telecommunication Services 0.6%
Cellular South, Inc.:
Delayed Draw Term Loan, 2.01%, 5/29/14
500
477,500
Term Loan, 2.01% 4.00%, 5/29/14
1,470
1,403,850
Digicel International Finance Ltd., Tranche A, 3.13%,
3/01/12
1,150
1,092,500
2,973,850
Total Floating Rate Loan Interests 47.8%
263,340,708
Foreign Agency Obligations
Peru Government International Bond, 8.38%, 5/03/16
4,871
5,699,070
Turkey Government International Bond, 7.00%, 9/26/16
5,093
5,385,847
Total Foreign Agency Obligations 2.0%
11,084,917
Beneficial
Interest
Other Interests (g)
(000)
Diversified Financial Services 0.1%
J.G. Wentworth LLC Preferred Equity Interests
1
502,843
Health Care Providers & Services 0.0%
Critical Care Systems International, Inc.
8
1,525
Household Durables 0.0%
Berkline Benchcraft Equity LLC
3
Total Other Interests 0.1%
504,368
ANNUAL REPORT AUGUST 31, 2009 35
(Percentages shown are based on Net Assets)
Preferred Stocks
Shares
Value
Capital Markets 0.0%
Marsico Parent Superholdco, LLC (b)(h)
177
$ 45,135
Media 0.0%
CMP Susquehanna Radio Holdings Corp. (h)
45,243
Total Preferred Stocks 0.0%
45,135
U.S. Government Sponsored
Par
Agency Obligations
(000)
Agency Obligations 3.1%
Fannie Mae, 7.25%, 1/15/10
USD 17,000
17,450,245
Mortgage-Backed Securities 24.1%
Fannie Mae Guaranteed Pass Through Certificates:
5.00%, 9/15/24 (i)
121,000
126,104,748
5.50%, 12/01/28 11/01/33 (j)(k)
6,563
6,876,101
Total U.S. Government Sponsored
Agency Obligations 27.2%
150,431,094
U.S. Treasury Obligations
U.S. Treasury Notes:
3.38%, 9/15/09
3,425
3,428,747
4.25%, 8/15/15
1,815
1,967,572
Total U.S. Treasury Obligations 1.0%
5,396,319
Warrants (l)
Shares
Machinery 0.0%
Synventive Molding Solutions (expires 1/15/13) (b)
1
Media 0.0%
CMP Susquehanna Radio Holdings Corp. (expires
3/26/19) (b)
51,701
Other 0.0%
Turbo Cayman Ltd. (No Expiration) (b)
2
Total Warrants 0.0%
Total Long-Term Investments
(Cost $662,132,560) 105.4%
581,336,469
Short-Term Securities
BlackRock Liquidity Funds, TempFund, 0.22% (m)(n)
96,671,566
96,671,566
Total Short-Term Securities
(Cost $96,671,566) 17.5%
96,671,566
Options Purchased
Contracts
Over-the-Counter Call Options
Marsico Parent Superholdco LLC, expiring December
2019 at USD 942.86, Broker Goldman Sachs & Co.
46
46,000
Total Options Purchased
(Premiums Paid $44,978) 0.0%
46,000
Total Investments
(Cost $758,849,104*) 122.9%
678,054,035
Liabilities in Excess of Other Assets (22.9)%
(126,549,501)
Net Assets 100.0%
$551,504,534
* The cost and unrealized appreciation (depreciation) of investments as of August 31,
2009, as computed for federal income tax purposes, were as follows:
Aggregate cost
$ 759,386,517
Gross unrealized appreciation
$ 9,364,256
Gross unrealized depreciation
(90,696,738)
Net unrealized depreciation
$ (81,332,482)
(a) Variable rate security. Rate shown is as of report date.
(b) Non-income producing security.
(c) Issuer filed for bankruptcy and/or is in default of interest payments.
(d) Security exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration to qualified
institutional investors.
(e) Convertible security.
(f) Represents a payment-in-kind security which may pay interest/dividends in addi-
tional par/shares.
(g) Other interests represent beneficial interest in liquidation trusts and other reorgani-
zation entities and are non-income producing.
(h) Security is perpetual in nature and has no stated maturity date.
(i) Represents or includes a to-be-announced transaction. The Trust has committed to
purchasing (selling) securities for which all specific information is not available at
this time.
Unrealized
Counterparty
Value
Appreciation
Goldman Sachs & Co.
$126,104,748
$ 1,285,686
(j) All or a portion of security has been pledged as collateral for financial futures
contracts.
(k) All or a portion of security has been pledged as collateral in connection with open
swap contracts.
(l) Warrants entitle the Trust to purchase a predetermined number of shares of com-
mon stock and are non-income producing. The purchase price and number of
shares are subject to adjustment under certain conditions until the expiration date.
(m) Investments in companies considered to be an affiliate of the Trust, for purposes of
Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
Net
Affiliate
Activity
Income
BlackRock Liquidity Funds, TempFund
USD 96,671,566
$ 176,533
(n) Represents the current yield as of report date.
For Fund compliance purposes, the 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.
Foreign currency exchange contracts as of August 31, 2009 were as follows:
Unrealized
Currency
Currency
Settlement Appreciation
Purchased
Sold
Counterparty
Date (Depreciation)
USD 4,838,602 EUR 3,396,500
Citibank NA
9/16/09
$ (30,749)
USD 19,093,897
EUR 13,675,000
Deutsche Bank AG 9/16/09
(511,105)
USD 8,998,740 GBP 5,505,500
Citibank NA
10/28/09
36,788
Total
$ (505,066)
Financial futures contracts purchased as of August 31, 2009 were as follows:
Expiration
Face
Unrealized
Contracts
Issue
Date
Value
Appreciation
50 5-Year U.S. Treasury Bond December 2009
USD 5,740,422
$ 22,078
36 ANNUAL REPORT AUGUST 31, 2009
Credit default swaps on traded indexes buy protection outstanding as of August 31,
The following table summarizes the inputs used as of August 31, 2009 in determin-
2009 were as follows:
ing the fair valuation of the Funds investments:
Pay
Notional
Valuation
Investments in
Fixed
Amount
Unrealized
Inputs
Securities
Index
Rate
Counterparty Expiration
(000)
Depreciation
Assets
Credit Suisse
June
Level 1 Short-Term Securities
$ 96,671,566
LCDX Index
5.00%
International
2014
USD 930
$ (83,859)
Level 2
Long-Term Investments:
Currency Abbreviations:
Asset-Backed Securities
9,373,195
EUR
Euro
Common Stocks
5,545
GBP
British Pound
Corporate Bonds
132,134,077
USD
US Dollar
Floating Rate Loan Interests
179,430,318
Effective September 1, 2008, the Fund adopted Financial Accounting Standards
Foreign Agency Obligations
11,084,917
Board Statement of Financial Accounting Standards No. 157, Fair Value Measure-
Preferred Stocks
45,135
U.S. Government Sponsored Agency Obligations
150,431,094
ments (FAS 157). FAS 157 clarifies the definition of fair value, establishes a
U.S. Treasury Obligations
5,396,319
framework for measuring fair values and requires additional disclosures about the
use of fair value measurements. Various inputs are used in determining the fair
Total Level 2
487,900,600
value of investments, which are as follows:
Level 3
Level 1 price quotations in active markets/exchanges for identical securities
Long-Term Investments:
Asset-Backed Securities
2,668,212
Level 2 other observable inputs (including, but not limited to: quoted prices
for
Common Stocks
81,956
similar assets or liabilities in markets that are active, quoted prices for identical
Corporate Bonds
6,270,943
or similar assets or liabilities in markets that are not active, inputs other than
Floating Rate Loan Interests
83,910,390
quoted prices that are observable for the assets or liabilities (such as interest
Other Interests
504,368
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and
Total Level 3
93,435,869
default rates) or other market-corroborated inputs)
Total
$678,008,035
Level 3 unobservable inputs based on the best information available in the
circumstances, to the extent observable inputs are not available (including the
Valuation
Other Financial
Funds own assumptions used in determining the fair value of investments)
Inputs
Instruments1
The inputs or methodology used for valuing securities are not necessarily an indica-
Assets
Liabilities
tion of the risk associated with investing in those securities. For information about
Level 1
$ 22,078
the Funds policy regarding valuation of investments and other significant accounting
Level 2
82,788
$ (625,713)
policies, please refer to Note 1 of the Notes to Financial Statements.
Level 3
63,812
Total
$ 168,678
$ (625,713)
1
Other financial instruments are swaps, futures, options purchased and foreign
currency exchange contracts. Swaps, futures and foreign currency exchange
contracts are shown at the unrealized appreciation/depreciation on the
instrument and options purchased are shown at market value.
The following is a reconciliation of investments for unobservable inputs (Level 3) used in determining fair value:
Investments in Securities
Asset-Backed
Common
Corporate
Floating Rate
Other
Securities
Stocks
Bonds
Loan Interests Interests
Total
Balance, as of August 31, 2008
$27,080,000
$ 2,546
$ 27,082,546
Accrued discounts/premiums
Realized gain (loss)
$ 76
(6,382,877)
(6,382,801)
Change in unrealized appreciation (depreciation)2
$ (3,780)
(875,732)
(3,027,612)
(1,021)
(3,908,145)
Net purchases (sales)
(491,063)
(8,418,888)
(8,909,951)
Net transfers in/out of Level 3
2,671,992
$ 81,956
7,637,662
74,659,767
502,843
85,554,220
Balance as of August 31, 2009
$ 2,668,212
$ 81,956
$ 6,270,943
$83,910,390
$ 504,368
$93,435,869
2
Included in the related net change in unrealized appreciation/depreciation on the Statements of Operations.
The following is a reconciliation of other financial instruments for unobservable inputs
(Level 3) used in determining fair value:
Other Financial
Instruments3
Assets
Balance, as of August 31, 2008
Accrued discounts/premiums
Realized gain (loss)
Change in unrealized appreciation (depreciation)
Net purchases (sales)
Net transfers in/out of Level 3
$ 63,812
Balance as of August 31, 2009
$ 63,812
3
Other financial instruments are unfunded loan commitments.
See Notes to Financial Statements.
ANNUAL REPORT
AUGUST 31, 2009
37
Statements of Assets and Liabilities
BlackRock
BlackRock
BlackRock
Diversified
Floating Rate
BlackRock
Defined
Income
Income
Limited
Opportunity
Strategies
Strategies
Duration
Credit Trust
Fund, Inc.
Fund, Inc.
Income Trust
August 31, 2009
(BHL)
(DVF)
(FRA)
(BLW)
Assets
Investments at value unaffiliated1
$ 140,367,876
$ 128,180,846
$ 277,594,444
$ 581,382,469
Investments at value affiliated2
2,371,578
2,018,379
96,671,566
Unrealized appreciation on foreign currency exchange contracts
10,965
2,622
27,341
36,788
Unrealized appreciation on unfunded loan commitments
60,517
38,010
63,812
Unrealized appreciation on swaps
11,300
Foreign currency at value3
649,034
100,367
3,476,153
32,591
Cash
1,910,422
18,789
26,795
Cash pledged as collateral in connection with swaps
1,600,000
Investments sold receivable
1,838,747
619,692
6,512,374
6,654,815
Interest receivable
729,682
2,268,686
3,394,297
5,445,172
Principal paydown receivable
485
Income receivable affiliated
241
Swap premiums paid
246,565
989,746
148,946
Swaps receivable
77,396
74,945
Dividends receivable
16,822
554
Margin variation receivable
17,188
Prepaid expenses
48,790
43,771
88,878
60,055
Other assets
106,457
81,592
61,990
269,647
Total assets
145,723,216
135,678,036
294,238,547
690,810,398
Liabilities
Bank overdraft
43,905
Loan payable
27,000,000
18,000,000
38,000,000
Unrealized depreciation on foreign currency exchange contracts
231,252
95,339
406,733
541,854
Cash held as collateral in connection with swaps
100,000
Unrealized depreciation on unfunded loan commitments
49,905
Unrealized depreciation on swaps
4,154,306
1,108,878
83,859
Investments purchased payable
5,147,449
5,080,921
16,737,531
137,777,131
Deferred income
120,455
80,469
79,562
163,303
Investment advisory fees payable
114,539
78,449
172,075
249,395
Income dividends payable
100,398
722
164,503
112,994
Interest expense payable
24,980
18,696
38,490
Officers and Directors fees payable
85
258
453
119,793
Swaps payable
122,296
73,465
9,150
Other affiliates payable
430
366
850
1,728
Other accrued expenses payable
121,578
89,864
102,633
246,657
Other liabilities
399,955
Total liabilities
32,861,166
28,121,641
57,078,983
139,305,864
Net Assets
$ 112,862,050
$ 107,556,395
$ 237,159,564
$ 551,504,534
Net Assets Consist of
Paid-in capital4,5,6
$ 127,810,765
$ 229,575,720
$ 349,498,291
$ 701,342,104
Distributions in excess of net investment income
(925,324)
(710,207)
(786,997)
(2,953,716)
Accumulated net realized loss
(8,005,928)
(68,140,448)
(56,737,331)
(65,590,423)
Net unrealized appreciation/depreciation
(6,017,463)
(53,168,670)
(54,814,399)
(81,293,431)
Net Assets
$ 112,862,050
$ 107,556,395
$ 237,159,564
$ 551,504,534
Net asset value
$ 12.53
$ 8.74
$ 12.93
$ 14.95
1 Investment at cost unaffiliated
$ 146,223,408
$ 177,162,499
$ 330,801,175
$ 662,177,538
2 Investment at cost affiliated
$ 2,371,578
$ 2,018,379
$ 96,671,566
3 Foreign currency at cost
$ 648,966
$ 99,953
$ 3,469,138
$ 32,006
4 Par value per share
$ 0.001
$ 0.10
$ 0.10
$ 0.001
5 Shares outstanding
9,008,704
12,306,154
18,336,820
36,889,650
6 Shares authorized
unlimited
200 million
200 million
unlimited
See Notes to Financial Statements.
38
ANNUAL REPORT
AUGUST 31, 2009
Statements of Assets and Liabilities (concluded)
BlackRock
BlackRock
Senior Floating
Senior Floating
August 31, 2009
Rate Fund, Inc.
Rate Fund II, Inc.
Assets
Investment at value Master Senior Floating Rate (the Master LLC)1
$ 312,548,298
$ 150,735,659
Capital shares sold receivable
441,324
307,937
Prepaid expenses
192,030
101,804
Total assets
313,181,652
151,145,400
Liabilities
Income dividends payable
888,978
386,592
Contributions payable to the Master LLC
440,318
307,937
Administration fees payable
65,564
50,418
Other affiliates payable
4,393
773
Capital shares redeemed payable
1,006
Officers and Directors fees payable
238
113
Other accrued expenses payable
118,760
52,522
Total liabilities
1,519,257
798,355
Net Assets
$ 311,662,395
$ 150,347,045
Net Assets Consist of
Paid-in capital2
$ 677,826,264
$ 227,132,287
Undistributed net investment income
1,249,054
113,729
Accumulated net realized loss
(314,988,118)
(52,616,500)
Net unrealized appreciation/depreciation
(52,424,805)
(24,282,471)
Net Assets
$ 311,662,395
$ 150,347,045
Net asset value
$ 7.16
$ 7.76
1 Cost investment in Master LLC
$ 364,973,103
$ 175,018,130
2 Shares outstanding, par value $0.10 per share, 1 billion shares
authorized
43,520,395
19,386,559
See Notes to Financial Statements.
ANNUAL REPORT
AUGUST 31, 2009
39
Statements of Operations
BlackRock
BlackRock
BlackRock
Diversified
Floating Rate
BlackRock
Defined
Income
Income
Limited
Opportunity
Strategies
Strategies
Duration
Credit Trust
Fund, Inc.
Fund, Inc.
Income Trust
Year Ended August 31, 2009
(BHL)
(DVF)
(FRA)
(BLW)
Investment Income
Interest
$ 9,932,361
$ 15,151,985
$ 24,292,175
$ 39,980,390
Facility and other fees
173,968
136,364
613,979
580,427
Income affiliated
20,215
20,647
32,098
188,455
Total income
10,126,544
15,308,996
24,938,252
40,749,272
Expenses
Investment advisory
1,275,472
924,328
1,919,277
2,819,087
Professional
384,400
149,397
203,610
187,206
Borrowing costs1
79,577
258,417
314,968
Accounting services
29,180
26,989
63,840
102,049
Transfer agent
20,776
31,646
43,750
12,391
Custodian
14,343
19,355
22,903
34,970
Officer and Directors
12,993
11,723
28,071
71,284
Printing
10,280
17,679
27,994
148,152
Registration
9,511
9,215
9,197
12,579
Miscellaneous
32,495
47,295
66,551
103,817
Total expenses excluding interest expense
1,869,027
1,496,044
2,700,161
3,491,535
Interest expense
434,636
853,832
1,324,413
101,955
Total expenses
2,303,663
2,349,876
4,024,574
3,593,490
Less fees waived by advisor
(719)
(674)
(828)
(27,344)
Less fees paid indirectly
(396)
(344)
(1,203)
(4,536)
Total expenses after fees waived and paid indirectly
2,302,548
2,348,858
4,022,543
3,561,610
Net investment income
7,823,996
12,960,138
20,915,709
37,187,662
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments
(7,240,206)
(47,826,125)
(48,127,734)
(50,345,439)
Financial futures contracts and swaps
(875,528)
(3,732,047)
933,553
97,366
Foreign currency
1,854,695
531,200
1,465,026
6,159,464
TBA sale commitments
6,619,821
(6,261,039)
(51,026,972)
(45,729,155)
(37,468,788)
Net change in unrealized appreciation/depreciation on:
Investments
(5,969,670)
(6,962,138)
(8,868,889)
(18,022,517)
Financial futures contracts and swaps
(190,796)
(898,237)
795,049
(132,057)
Foreign currency
(1,201,825)
(312,776)
(1,547,153)
(3,749,994)
Unfunded corporate loans
55,544
35,951
132,703
90,545
(7,306,747)
(8,137,200)
(9,488,290)
(21,814,023)
Total realized and unrealized loss
(13,567,786)
(59,164,172)
(55,217,445)
(59,282,811)
Net Decrease in Net Assets Resulting from Operations
$ (5,743,790)
$ (46,204,034)
$ (34,301,736)
$ (22,095,149)
1 See Note 9 of the Notes to Financial Statements for details of
borrowings.
See Notes to Financial Statements.
40
ANNUAL REPORT
AUGUST 31, 2009
Statements of Operations (concluded)
BlackRock
Blackrock
Senior Floating
Senior Floating
Year Ended August 31, 2009
Rate Fund, Inc.
Rate Fund II, Inc.
Investment Income
Net Investment income allocated from the Master LLC:
Interest
$ 21,423,940
$ 9,905,686
Income affiliated
190,457
88,396
Facility and other fees
357,209
166,414
Expenses
(3,067,282)
(1,424,066)
Total income
18,904,324
8,736,430
Expenses
Administration
732,567
544,168
Transfer agent
318,401
92,481
Tender offer
128,900
69,871
Professional
123,117
69,999
Printing
67,628
38,412
Registration
34,024
28,631
Officer and Directors
1,257
584
Miscellaneous
12,356
11,534
Total expenses
1,418,250
855,680
Net investment income
17,486,074
7,880,750
Realized and Unrealized Gain (Loss) Allocated from the Master LLC
Net realized gain (loss) from investments, swaps and foreign currency
(34,004,504)
(15,895,082)
Net change in unrealized appreciation/depreciation on investments, swaps, foreign currency and unfunded corporate loans
(11,952,665)
(4,973,635)
Total realized and unrealized loss
(45,957,169)
(20,868,717)
Net Decrease in Net Assets Resulting from Operations
$ (28,471,095)
$ (12,987,967)
See Notes to Financial Statements.
ANNUAL REPORT
AUGUST 31, 2009
41
Statements of Changes in Net Assets
BlackRock Defined Opportunity Credit Trust (BHL)
Period
January 31,
Year Ended
20081 to
August 31,
August 31,
Increase (Decrease) in Net Assets:
2009
2008
Operations
Net investment income
$ 7,823,996
$ 4,088,383
Net realized gain (loss)
(6,261,039)
641,116
Net change in unrealized appreciation/depreciation
(7,306,747)
1,289,284
Net increase (decrease) in net assets resulting from operations
(5,743,790)
6,018,783
Dividends and Distributions to Shareholders From
Net investment income
(9,810,137)
(5,435,571)
Tax return of capital
(88,324)
(481,911)
Decrease in net assets resulting from dividends and distributions to shareholders
(9,898,461)
(5,917,482)
Capital Share Transactions
Net proceeds from the issuance of shares
127,448,000
Capital charges with respect to issuance of shares
(200,500)
Reinvestment of dividends
809,153
224,341
Net increase in net assets resulting from capital share transactions
809,153
127,471,841
Net Assets
Total increase (decrease) in net assets
(14,833,098)
127,573,142
Beginning of period
127,695,148
122,006
End of period
$ 112,862,050
$ 127,695,148
Distributions in excess of net investment income
$ (925,324)
$ (1,438,090)
1 Commencement of operations.
BlackRock Diversified Income Strategies Fund, Inc. (DVF)
Year Ended
August 31,
Increase (Decrease) in Net Assets:
2009
2008
Operations
Net investment income
$ 12,960,138
$ 19,628,678
Net realized loss
(51,026,972)
(13,105,495)
Net change in unrealized appreciation/depreciation
(8,137,200)
(28,460,128)
Net decrease in net assets resulting from operations
(46,204,034)
(21,936,945)
Dividends and Distributions to Shareholders From
Net investment income
(13,947,075)
(20,910,360)
Tax return of capital
(2,882,990)
(443,389)
Decrease in net assets resulting from dividends and distributions to shareholders
(16,830,065)
(21,353,749)
Capital Share Transactions
Reinvestment of dividends
883,415
205,747
Net Assets
Total decrease in net assets
(62,150,684)
(43,084,947)
Beginning of year
169,707,079
212,792,026
End of year
$ 107,556,395
$ 169,707,079
Distributions in excess of net investment income
$ (710,207)
$ (175,645)
See Notes to Financial Statements.
42
ANNUAL REPORT
AUGUST 31, 2009
Statements of Changes in Net Assets
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
Year Ended
August 31,
Increase (Decrease) in Net Assets:
2009
2008
Operations
Net investment income
$ 20,915,709
$ 26,533,760
Net realized loss
(45,729,155)
(10,426,510)
Net change in unrealized appreciation/depreciation
(9,488,290)
(26,845,871)
Net decrease in net assets resulting from operations
(34,301,736)
(10,738,621)
Dividends to Shareholders From
Net investment income
(23,842,077)
(28,321,303)
Capital Share Transactions
Reinvestment of dividends
298,574
Net Assets
Total decrease in net assets
(57,845,239)
(39,059,924)
Beginning of year
295,004,803
334,064,727
End of year
$ 237,159,564
$ 295,004,803
Undistributed (distributions in excess of) net investment income
$ (786,997)
$ 848,640
BlackRock Limited Duration Income Trust (BLW)
Period
November 1,
Year Ended
2007 to
Year Ended
August 31,
August 31,
October 31,
Increase (Decrease) in Net Assets:
2009
2008
2007
Operations
Net investment income
$ 37,187,662
$ 41,919,013
$ 55,219,613
Net realized gain (loss)
(37,468,788)
(24,118,166)
3,120,082
Net change in unrealized appreciation/depreciation
(21,814,023)
(40,618,831)
(21,221,592)
Net increase (decrease) in net assets resulting from operations
(22,095,149)
(22,817,984)
37,118,103
Dividends and Distributions to Shareholders From
Net investment income
(42,793,064)
(43,898,690)
(51,967,739)
Net realized gain
(2,229,742)
Tax return of capital
(1,074,826)
Decrease in net assets resulting from dividends and distributions to shareholders
(42,793,064)
(43,898,690)
(55,272,307)
Capital Share Transactions
Reinvestment of dividends
2,057,525
Net Assets
Total decrease in net assets
(64,888,213)
(66,716,674)
(16,096,679)
Beginning of period
616,392,747
683,109,421
699,206,100
End of period
$ 551,504,534
$ 616,392,747
$ 683,109,421
Undistributed (distributions in excess of) net investment income
$ (2,953,716)
$ (3,360,775)
$ 800,386
See Notes to Financial Statements.
ANNUAL REPORT
AUGUST 31, 2009
43
Statements of Changes in Net Assets
BlackRock Senior Floating Rate Fund, Inc.
Year Ended
August 31,
Increase (Decrease) in Net Assets:
2009
2008
Operations
Net investment income
$ 17,486,074
$ 26,675,323
Net realized loss
(34,004,504)
(14,362,509)
Net change in unrealized appreciation/depreciation
(11,952,665)
(18,260,695)
Net decrease in net assets resulting from operations
(28,471,095)
(5,947,881)
Dividends to Shareholders From
Net investment income
(17,470,993)
(26,664,539)
Capital Share Transactions
Net decrease in net assets resulting from capital share transactions
(41,795,738)
(73,502,678)
Net Assets
Total decrease in net assets
(87,737,826)
(106,115,098)
Beginning of year
399,400,221
505,515,319
End of year
$ 311,662,395
$ 399,400,221
Undistributed net investment income
$ 1,249,054
$ 168,069
BlackRock Senior Floating Rate Fund II, Inc.
Year Ended
August 31,
Increase (Decrease) in Net Assets:
2009
2008
Operations
Net investment income
$ 7,880,750
$ 12,299,609
Net realized loss
(15,895,082)
(6,857,340)
Net change in unrealized appreciation/depreciation
(4,973,635)
(8,921,385)
Net decrease in net assets resulting from operations
(12,987,967)
(3,479,116)
Dividends to Shareholders From
Net investment income
(8,332,675)
(12,294,014)
Capital Share Transactions
Net decrease in net assets resulting from capital share transactions
(14,969,362)
(45,450,688)
Net Assets
Total decrease in net assets
(36,290,004)
(61,223,818)
Beginning of year
186,637,049
247,860,867
End of year
$ 150,347,045
$ 186,637,049
Undistributed net investment income
$ 113,729
$ 85,109
See Notes to Financial Statements.
44
ANNUAL REPORT
AUGUST 31, 2009
Statements of Cash Flows
BlackRock
BlackRock
BlackRock
BlackRock
Diversified
Floating Rate
Limited
Defined
Income
Income
Income
Opportunity
Strategies
Strategies
Duration
Credit Trust
Fund, Inc.
Fund, Inc.
Trust
August 31, 2009
(BHL)
(DVF)
(FRA)
(BLW)
Cash Provided by Operating Activities
Net decrease in net assets resulting from operations
$ (5,743,790)
$ (46,204,034)
$ (34,301,736)
$ (22,095,149)
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided
by operating activities:
Decrease in interest receivable unaffiliated
538,756
1,582,682
1,533,481
5,225,321
Increase in dividend receivable
(554)
Increase in interest receivable affiliated
(241)
Decrease in swap receivable
141,449
291,066
3,166
49,870
Increase in margin variation receivable
(6,789)
(Increase) decrease in prepaid expenses
(47,766)
(37,477)
(76,763)
9,674
Increase in other assets
(105,630)
(81,512)
(38,928)
(163,711)
Increase (decrease) in other liabilities
399,955
(221,688)
Decrease in investment advisor payable
(22,954)
(71,270)
(85,740)
(80,497)
Decrease in interest expense payable
(116,002)
(30,952)
(37,892)
(178,414)
Decrease in other affiliates payable
(405)
(784)
(1,109)
(2,334)
Increase (decrease) in accrued expenses payable
17,425
32,780
47,709
(16,300)
Decrease in swaps payable
(38,414)
(717,602)
(16,980)
(14,232)
Increase in officers and directors payable
15
153
272
31,915
Swap premium received
234,740
50,673
600,834
575,252
Swap premium paid
(259,956)
(272,513)
(1,838,750)
(169,500)
Net realized and unrealized gain
14,132,122
55,925,734
58,346,253
65,900,247
Amortization of premium and discount on investments
(2,296,304)
(868,065)
(2,813,385)
(2,550,465)
Paid-in-kind Income
(22,566)
(969,233)
(1,164,458)
(1,556,888)
Cash collateral on swaps
(1,600,000)
100,000
Proceeds from sales and paydowns of long-term securities
76,235,530
108,732,811
209,126,755
1,854,428,848
Purchases of long-term securities
(63,427,541)
(56,652,968)
(139,581,244)
(1,699,772,959)
Net proceeds (purchases) from sales of short-term investments
3,770,645
3,220,827
(383,710)
(94,471,566)
Cash provided by operating activities
22,989,113
62,730,271
89,196,087
105,141,769
Cash Used for Financing Activities
Cash receipts from borrowings
50,000,000
39,000,000
122,000,000
17,601,456
Cash payments from borrowings
(61,500,000)
(86,500,000)
(185,500,000)
(82,138,964)
Cash dividends paid to shareholders
(9,189,746)
(16,127,334)
(23,613,150)
(42,904,068)
Increase in bank overdraft
43,905
Cash used for financing activities
(20,689,746)
(63,627,334)
(87,069,245)
(107,441,576)
Cash Impact from Foreign Exchange Fluctuations
Cash impact from foreign exchange fluctuations
3,605
6,456
71,755
55,449
Cash
Net increase (decrease) in cash
2,302,972
(890,607)
2,198,597
(2,244,358)
Cash and foreign currency at beginning of year.
256,484
1,009,763
1,277,556
2,303,744
Cash and foreign currency at end of year
$ 2,559,456
$ 119,156
$ 3,476,153
$ 59,386
Cash Flow Information
Cash paid for interest
$ 550,638
$ 884,784
$ 1,362,305
$ 280,369
A Statement of Cash Flows is presented when a Fund has a significant amount of borrowing during the period, based on the average borrowing outstanding in relation to
average
total assets.
See Notes to Financial Statements.
ANNUAL REPORT
AUGUST 31, 2009
45
Financial Highlights
BlackRock Defined Opportunity Credit Trust (BHL)
Period
January 31,
Year Ended
20081 to
August 31,
August 31,
2009
2008
Per Share Operating Performance
Net asset value, beginning of period
$ 14.31
$ 14.332
Net investment income3
0.87
0.47
Net realized and unrealized gain (loss)
(1.55)
0.21
Net increase (decrease) from investment operations
(0.68)
0.68
Dividends and distributions from:
Net investment income
(1.09)
(0.62)
Tax return of capital
(0.01)
(0.06)
Total dividends and distributions
(1.10)
(0.68)
Capital charges with respect to issuance of shares
(0.02)
Net asset value, end of period
$ 12.53
$ 14.31
Market price, end of period
$ 11.03
$ 12.66
Total Investment Return4
Based on net asset value
(2.16)%
4.79%5
Based on market price
(2.65)%
(11.44)%5
Ratios to Average Net Assets
Total expenses
2.39%
1.78%6
Total expenses after fees waived and paid indirectly and excluding interest expense
1.94%
1.48%6
Net investment income
8.11%
5.52%6
Supplemental Data
Net assets, end of period (000)
$ 112,862
$ 127,695
Borrowings outstanding, end of period (000)
$ 27,000
$ 38,500
Average borrowings outstanding, during the period (000)
$ 31,141
$ 13,788
Portfolio turnover
41%
18%
Asset coverage, end of period per $1,000
$ 5,180
$ 4,317
1 Commencement of operations.
2 Net asset value, beginning of period, reflects a deduction of $0.675
per share sales charge from initial offering price of $15.00 per share.
3 Based on average shares outstanding.
4 Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially different returns.
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and
distributions.
5 Aggregate total investment return.
6 Annualized.
See Notes to Financial Statements.
46
ANNUAL REPORT
AUGUST 31, 2009
Financial Highlights
BlackRock Diversified Income Strategies Fund, Inc. (DVF)
Period
January 31,
20051 to
Year Ended August 31,
August 31,
2009
2008
2007
2006
2005
Per Share Operating Performance
Net asset value, beginning of period
$ 13.94
$ 17.50
$ 18.70
$ 18.38
$ 19.10
Net investment income2
1.06
1.61
1.83
1.77
0.84
Net realized and unrealized gain (loss)
(4.88)
(3.41)
(1.23)
0.25
(0.77)
Net increase (decrease) from investment operations
(3.82)
(1.80)
0.60
2.02
0.07
Dividends and distributions from:
Net investment income
(1.14)
(1.72)
(1.80)
(1.70)
(0.75)
Tax return of capital
(0.24)
(0.04)
Total dividends and distributions
(1.38)
(1.76)
(1.80)
(1.70)
(0.75)
Capital charges with respect to issuance of shares
(0.00)3
(0.04)
Net asset value, end of period
$ 8.74
$ 13.94
$ 17.50
$ 18.70
$ 18.38
Market price, end of period
$ 8.80
$ 12.77
$ 17.16
$ 18.85
$ 17.53
Total Investment Return4
Based on net asset value
(23.82)%
(10.17)%
3.00%
11.99%
0.42%5
Based on market price
(16.27)%
(16.08)%
0.19%
18.36%
(8.53)%5
Ratios to Average Net Assets
Total expenses
2.47%
2.77%
3.66%
3.17%
2.48%6
Total expenses after fees waived and paid indirectly
2.47%
2.77%
3.66%
3.17%
2.20%6
Total expenses after fees waived and paid indirectly and excluding interest expense
1.57%
1.23%
1.30%
1.29%
1.00%6
Net investment income
13.63%
10.40%
9.63%
9.57%
7.88%6
Supplemental Data
Net assets, end of period (000)
$ 107,556
$ 169,707
$ 212,792
$ 224,156
$ 219,748
Borrowings outstanding, end of period (000)
$ 18,000
$ 65,500
$ 72,000
$ 88,800
$ 101,400
Average borrowings outstanding, during the period (000)
$ 28,247
$ 64,335
$ 95,465
$ 86,132
$ 75,543
Portfolio turnover
45%
41%
72%
64%
17%
Asset coverage, end of period per $1,000
$ 6,975
$ 3,591
$ 3,955
$ 3,524
$ 3,167
1 Commencement of operations.
2 Based on average shares outstanding.
3 Amount is less than $(0.01) per share.
4 Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially different returns.
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.
5 Aggregate total investment return.
6 Annualized.
See Notes to Financial Statements.
ANNUAL REPORT
AUGUST 31, 2009
47
Financial Highlights
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
Year Ended August 31,
2009
2008
2007
2006
2005
Per Share Operating Performance
Net asset value, beginning of year
$ 16.12
$ 18.25
$ 19.32
$ 19.35
$ 19.16
Net investment income1
1.14
1.45
1.54
1.40
1.23
Net realized and unrealized gain (loss)
(3.04)
(2.03)
(1.07)
(0.06)
0.08
Net increase (decrease) from investment operations
(1.90)
(0.58)
0.47
1.34
1.31
Dividends and distributions from:
Net investment income
(1.29)
(1.55)
(1.54)
(1.37)
(1.11)
Net realized gain
(0.01)
Total dividends and distributions
(1.29)
(1.55)
(1.54)
(1.37)
(1.12)
Net asset value, end of year
$ 12.93
$ 16.12
$ 18.25
$ 19.32
$ 19.35
Market price, end of year
$ 12.26
$ 14.49
$ 16.70
$ 17.49
$ 17.85
Total Investment Return2
Based on net asset value
(8.88)%
(2.56)%
2.74%
7.92%
7.27%
Based on market price
(3.88)%
(4.28)%
3.85%
5.91%
(2.47)%
Ratios to Average Net Assets
Total expenses
1.96%
2.61%
3.33%
2.54%
2.18%
Total expenses after fees waived and paid indirectly
1.96%
2.60%
3.33%
2.54%
2.18%
Total expenses after fees waived and paid indirectly and excluding interest expense
1.31%
1.18%
1.20%
1.14%
1.22%
Net investment income
10.18%
8.49%
7.88%
7.30%
6.34%
Supplemental Data
Net assets, end of year (000)
$ 237,160
$ 295,005
$ 334,065
$ 353,713
$ 354,114
Borrowings outstanding, end of year (000)
$ 38,000
$ 101,500
$ 107,000
$ 135,200
$ 123,600
Average borrowings outstanding, during the year (000)
$ 50,591
$ 102,272
$ 133,763
$ 101,916
$ 117,702
Portfolio turnover
58%
49%
69%
57%
48%
Asset coverage, end of year per $1,000
$ 7,241
$ 3,906
$ 4,122
$ 3,616
$ 3,865
1 Based on average shares outstanding.
2 Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially different returns.
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and
distributions.
See Notes to Financial Statements.
48
ANNUAL REPORT
AUGUST 31, 2009
Financial Highlights
BlackRock Limited Duration Income Trust (BLW)
Period
November 1,
Year Ended
2007 to
August 31,
August 31,
Year Ended October 31,
2009
2008
2007
2006
2005
2004
Per Share Operating Performance
Net asset value, beginning of period
$ 16.71
$ 18.52
$ 19.01
$ 19.17
$ 20.13
$ 19.74
Net investment income
1.011
1.141
1.50
1.35
1.46
1.46
Net realized and unrealized gain (loss)
(1.61)
(1.76)
(0.49)
0.03
(0.94)
0.43
Net increase (decrease) from investment operations
(0.60)
(0.62)
1.01
1.38
0.52
1.89
Dividends and distributions from:
Net investment income
(1.16)
(1.19)
(1.41)
(1.52)
(1.33)
(1.49)
Net realized gain
(0.06)
(0.15)
(0.01)
Tax return of capital
(0.03)
(0.02)
Total dividends and distributions
(1.16)
(1.19)
(1.50)
(1.54)
(1.48)
(1.50)
Net asset value, end of period
$ 14.95
$ 16.71
$ 18.52
$ 19.01
$ 19.17
$ 20.13
Market price, end of period
$ 14.09
$ 14.57
$ 16.68
$ 18.85
$ 17.48
$ 19.95
Total Investment Return2
Based on net asset value
(1.57)%
(2.60)%3
5.66%
7.85%
2.93%
10.17%
Based on market price
6.40%
(5.70)%3
(4.03)%
17.31%
(5.30)%
14.64%
Ratios to Average Net Assets
Total expenses
0.72%
1.39%4
2.16%
2.20%
1.71%
1.26%
Total expenses after fees waived and before fees paid indirectly
0.71%
1.39%4
2.16%
2.20%
1.71%
1.28%
Total expenses after fees waived and paid indirectly
0.71%
1.38%4
2.14%
2.19%
1.71%
1.25%
Total expenses after fees waived and paid indirectly and
excluding interest expense
0.69%
0.76%4
0.83%
0.91%
0.92%
0.90%
Net investment income
7.42%
7.84%4
7.92%
7.10%
7.42%
7.34%
Supplemental Data
Net assets, end of period (000)
$ 551,505
$ 616,393
$ 638,109
$ 699,206
$ 704,961
$ 739,225
Borrowings outstanding, end of period (000)
$
$ 64,538
$ 109,287
$ 220,000
$ 176,010
$ 159,416
Average borrowings outstanding, during the period (000)
$ 11,705
$ 120,295
$ 172,040
$ 179,366
$ 186,660
$ 195,845
Portfolio turnover
287%5
191%6
65%
132%
70%
215%
Asset coverage, end of period per $1,000
$
$ 10,551
$ 7,251
$ 4,178
$ 5,005
$ 5,637
1 Based on average shares outstanding.
2 Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially different returns.
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.
3 Aggregate total investment return.
4 Annualized.
5 Includes mortgage dollar roll transactions. Excluding these transactions,
the portfolio turnover would have been 79%.
6 Includes TBA transactions. Excluding these transactions, the portfolio
turnover would have been 24%.
See Notes to Financial Statements.
ANNUAL REPORT
AUGUST 31, 2009
49
Financial Highlights
BlackRock Senior Floating Rate Fund, Inc.
Year Ended August 31,
2009
2008
2007
2006
2005
Per Share Operating Performance
Net asset value, beginning of year
$ 7.98
$ 8.60
$ 8.92
$ 9.01
$ 8.91
Net investment income1
0.39
0.51
0.60
0.52
0.37
Net realized and unrealized gain (loss)
(0.83)
(0.62)
(0.32)
(0.08)
0.10
Net increase (decrease) from investment operations
(0.44)
(0.11)
0.28
0.44
0.47
Dividends from net investment income
(0.38)
(0.51)
(0.60)
(0.53)
(0.37)
Net asset value, end of year
$ 7.16
$ 7.98
$ 8.60
$ 8.92
$ 9.01
Total Investment Return2
Based on net asset value
(4.69)%
(1.32)%3
3.07%
4.97%
5.38%
Ratios to Average Net Assets4
Total expenses
1.53%
1.28%3
1.44%
1.43%
1.41%
Net investment income
5.97%
6.16%
6.67%
5.84%
4.11%
Supplemental Data
Net assets, end of year (000)
$ 311,662
$ 399,400
$ 505,515
$ 601,807
$ 676,703
Portfolio turnover for the Master LLC
47%
56%
46%
54%
53%
1 Based on average shares outstanding.
2 Where applicable, total investment returns exclude the early withdrawal
charge, but do include the reinvestment of dividends and distributions. The Fund is a continuously offered
closed-end fund, the shares of which are offered at net asset value. No secondary market for the Funds shares exists.
3 During the year ended August 31, 2008, the Fund recorded a refund related
to overpayments of prior years tender offer fees, which increased net investment income per
share $0.02 and increased total investment return 0.24%. The expense ratio excluding the refund was 1.46%.
4 Includes the Funds share of the Master LLCs allocated expenses
and/or net investment income.
See Notes to Financial Statements.
50
ANNUAL REPORT
AUGUST 31, 2009
Financial Highlights
BlackRock Senior Floating Rate Fund II, Inc.
Year Ended August 31,
2009
2008
2007
2006
2005
Per Share Operating Performance
Net asset value, beginning of year
$ 8.67
$ 9.35
$ 9.70
$ 9.79
$ 9.67
Net investment income1
0.41
0.54
0.63
0.56
0.39
Net realized and unrealized gain (loss)
(0.89)
(0.69)
(0.34)
(0.10)
0.11
Net increase (decrease) from investment operations
(0.48)
(0.15)
0.29
0.46
0.50
Dividends from net investment income
(0.43)
(0.53)
(0.64)
(0.55)
(0.38)
Net asset value, end of year
$ 7.76
$ 8.67
$ 9.35
$ 9.70
$ 9.79
Total Investment Return2
Based on net asset value
(4.70)%
(1.61)%3
2.89%
4.90%
5.26%
Ratios to Average Net Assets4
Total expenses
1.68%
1.50%3
1.59%
1.57%
1.54%
Net investment income
5.79%
5.96%
6.53%
5.70%
4.03%
Supplemental Data
Net assets, end of year (000)
$ 150,347
$ 186,637
$ 247,861
$ 322,202
$ 355,108
Portfolio turnover for the Master LLC
47%
56%
46%
54%
53%
1 Based on average shares outstanding.
2 Where applicable, total investment returns exclude the early withdrawal
charge, but do include the reinvestment of dividends and distributions. The Fund is a continuously offered
closed-end fund, the shares of which are offered at net asset value. No secondary market for the Funds shares exists.
3 During the year ended August 31, 2008, the Fund recorded a refund related
to overpayments of prior years tender offer fees, which increased net investment income per
share $0.02 and increased total investment return 0.11%. The expense ratio excluding the refund was 1.64%.
4 Includes the Funds share of the Master LLCs allocated expenses
and/or net investment income.
See Notes to Financial Statements.
ANNUAL REPORT
AUGUST 31, 2009
51
1. Organization and Significant Accounting Policies:
BlackRock Defined Opportunity Credit Trust (BHL), BlackRock Diversified
Income Strategies Fund, Inc. (DVF), BlackRock Floating Rate Income
Strategies Fund, Inc. (FRA), BlackRock Limited Duration Income Trust
(BLW), BlackRock Senior Floating Rate Fund, Inc. (Senior Floating Rate)
and BlackRock Senior Floating Rate Fund II, Inc. (Senior Floating Rate II)
(collectively, referred to as the Funds or individually as the Fund) are
registered under the Investment Company Act of 1940, as amended (the
1940 Act). BHL and BLW are organized as Delaware Statutory trusts. DVF,
FRA, Senior Floating Rate and Senior Floating Rate II are organized as
Maryland corporations. BHL, DVF, FRA and BLW are registered as diversi-
fied, closed-end management investment companies. Senior Floating Rate
and Senior Floating Rate II are registered as continuously offered, non-
diversified, closed-end management investment companies. The Funds
financial statements are prepared in conformity with accounting principles
generally accepted in the United States of America, which may require the
use of management accruals and estimates. Actual results may differ from
these estimates. The Boards of Directors and the Boards of Trustees of the
Funds are referred to throughout this report as the Board of Directors or
the Board. The Funds determine and make available for publication the
net asset value of their shares on a daily basis.
Prior to its commencement of operations on January 31, 2008, BHL had
no operations other than those relating to organizational matters and the
sale of 8,517 shares on November 13, 2007 to BlackRock Advisors, LLC
(the Manager), the Funds investment advisor, an indirect, wholly owned
subsidiary of BlackRock, Inc. (BlackRock), for $122,006. BHL will termi-
nate no later than December 31, 2017.
Senior Floating Rate and Senior Floating Rate II seek to achieve their
investment objectives by investing all their assets in the Master Senior
Floating Rate LLC (the Master LLC), which has the same investment
objective and strategies as these Funds. The value of each Funds invest-
ment in the Master LLC reflects each Funds proportionate interest in the
net assets of the Master LLC. The performance of each Fund is directly
affected by the performance of the Master LLC. The financial statements of
the Master LLC, including the Schedule of Investments, are included else-
where in this report and should be read in conjunction with Senior Floating
Rate and Senior Floating Rate IIs financial statements. The percentage of
the Master LLC owned by Senior Floating Rate and Senior Floating Rate II
at August 31, 2009 was 67% and 33%, respectively.
The following is a summary of significant accounting policies followed by
the Funds:
Valuation of Investments: The Funds value their bond investments on the
basis of last available bid prices or current market quotations provided by
dealers or pricing services selected under the supervision of each Funds
Board. Floating rate loan interests are valued at the mean between the last
available bid prices from one or more brokers or dealers as obtained from a
pricing service. In determining the value of a particular investment, pricing
services may use certain information with respect to transactions in
actions in comparable investments, various relationships observed in the
market between investments and calculated yield measures based on
valuation technology commonly employed in the market for such invest-
ments. The fair value of asset-backed and mortgage-backed securities
are estimated based on models that consider the estimated cash flows
of each tranche of the entity, establishes a benchmark yield and develops
an estimated tranche specific spread to the benchmark yield based on
the unique attributes of the tranche. Financial futures contracts traded on
exchanges are valued at their last sale price. To be announced (TBA)
commitments are valued at the current market value of the underlying
securities. Swap agreements are valued utilizing quotes received daily by
the Funds pricing service or through brokers, which are derived using daily
swap curves and trades of underlying securities. Investments in open-end
investment companies are valued at net asset value each business day.
Short-term securities with maturities less than 60 days may be valued
at amortized cost, which approximates fair value. The Funds value their
investments in Cash Sweep Series of BlackRock Liquidity Series, LLC at
fair value, which is ordinarily based upon their pro rata ownership in the
net assets of the underlying fund.
Equity investments traded on a recognized securities exchange or the
NASDAQ Global Market System are valued at the last reported sale price
that day or the NASDAQ official closing price, if applicable. For equity
investments traded on more than one exchange, the last reported sale
price on the exchange where the stock is primarily traded is used. Equity
investments traded on a recognized exchange for which there were no
sales on that day are valued at the last available bid price. If no bid price
is available, the prior 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 price. If no bid 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 options and swaptions are
valued by an independent pricing service using a mathematical model
which incorporates a number of market data factors, such as the trades
and prices of the underlying securities.
In the event that application of these methods of valuation results in a
price for an investment which is deemed not to be representative of the
market value of such investment or are not available, the investment will
be valued by a method approved by the Board as reflecting fair value
(Fair Value Assets). When determining the price for Fair Value Assets, the
investment advisor and/or sub-advisor seeks to determine the price that
each Fund might reasonably expect to receive from the current sale of that
asset in an 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 securities is substantially completed each
day at various times prior to the close of business on the New York Stock
Exchange (NYSE). The values of such securities used in computing the
net assets of each Fund are determined as of such times. Foreign currency
exchange rates will be determined as of the close of business on the
NYSE. Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined
and the close of business on the NYSE that may not be reflected in the
computation of each Funds net assets. If events (for example, a company
announcement, market volatility or a natural disaster) occur during such
periods that are expected to materially affect the value of such securities,
those securities will be valued at their fair value as determined in good
faith by the Board or by the investment advisor using a pricing service
and/or procedures approved by the Board. Foreign currency exchange
contracts are valued at the mean between the bid and ask prices. Inter-
polated values are derived when the settlement date of the contract is
an interim date for which quotations are not available.
Senior Floating Rate and Senior Floating Rate II record their investments in
the Master LLC at fair value. Valuation of securities held by the Master LLC
is discussed in Note 1 of the Master LLCs Notes to Financial Statements,
which are included elsewhere in this report.
Effective September 1, 2008, the Senior Floating Rate and Senior Floating
Rate II implemented Financial Accounting Standards Board Statement
of Financial Accounting Standards No. 157, Fair Value Measurements
(FAS 157). FAS 157 clarifies the definition of fair value, establishes a
framework for measuring fair values and requires additional disclosures
about the use of fair value measurements. Various inputs are used in
determining the fair value of investments, which are as follows:
Level 1 price quotations in active markets/exchanges for identical
securities
Level 2 other observable inputs (including, but not limited to: quoted
prices for similar assets or liabilities in markets that are active, quoted
prices for identical or similar assets or liabilities in markets that are
not active, inputs other than quoted prices that are observable for the
assets or liabilities (such as interest rates, yield curves, volatilities, pre-
payment speeds, loss severities, credit risks and default rates) or other
market-corroborated inputs
Level 3 unobservable inputs based on the best information available
in the circumstances, to the extent observable inputs are not available
(including the Funds own assumptions used in determining the fair
value of investments)
The inputs or methodology used for valuing securities are not neces-
sarily an indication of the risk associated with investing in those
securities.
The following table summarizes the inputs used as of August 31, 2009
in determining the fair valuation of the Funds investments:
Senior Floating
Senior Floating
Rate
Rate II
Investment in
Investment in
Valuation Inputs
the Master LLC
the Master LLC
Level 1
Level 2
$312,548,298
$ 150,735,659
Level 3
Total
$312,548,298
$ 150,735,659
into United States dollars on the following basis: (i) market value of
investment securities, assets and liabilities at the current rate of exchange;
and (ii) purchases and sales of investment securities, income and
expenses at the rates of exchange prevailing on the respective dates of
such transactions.
The Funds report foreign currency related transactions as components of
realized gains for financial reporting purposes, whereas such components
are treated as ordinary income for federal income tax purposes.
Asset-Backed and Mortgage-Backed Securities: Certain Funds may invest
in asset-backed securities. Asset-backed securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in an underlying pool of assets, or as debt instruments, which
are also known as collateralized obligations, and are generally issued as
the debt of a special purpose entity organized solely for the purpose of
owning such assets and issuing such debt. Asset-backed securities are
often backed by a pool of assets representing the obligations of a number
of different parties. The yield characteristics of certain asset-backed securi-
ties may differ from traditional debt securities. One such major difference
is that all or a principal part of the obligations may be prepaid at any time
because the underlying assets (i.e., loans) may be prepaid at any time. As
a result, a decrease in interest rates in the market may result in increases
in the level of prepayments as borrowers, particularly mortgagors, refinance
and repay their loans. An increased prepayment rate with respect to an
asset-backed security subject to such a prepayment feature will have the
effect of shortening the maturity of the security. If a Fund has purchased
such an asset-backed security at a premium, a faster than anticipated
prepayment rate could result in a loss of principal to the extent of the
premium paid.
The Funds may purchase certain mortgage pass-through securities. There
are a number of important differences among the agencies and instrumen-
talities of the US Government that issue mortgage related securities and
among the securities that they issue. For example, mortgage-related securi-
ties guaranteed by the Government National Mortgage Association
(GNMA) are guaranteed as to the timely payment of principal and interest
by GNMA and such guarantee is backed by the full faith and credit of the
United States. However, mortgage-related securities issued by the Federal
Home Loan Mortgage Corporation (FHLMC) and Federal National
Mortgage Association (FNMA) include FNMA guaranteed Mortgage
Pass-Through Certificates, which are solely the obligations of the FNMA,
are not backed by or entitled to the full faith and credit of the United
States and are supported by the right of the issuer to borrow from
the Treasury.
Certain Funds invest a significant portion of their assets in securities
backed by commercial or residential mortgage loans or in issuers that hold
mortgage and other asset-backed securities. Please see the Schedules of
Investments for these securities. Changes in economic conditions, including
delinquencies and/or defaults on assets underlying these securities, can
affect the value, income and/or liquidity of such positions.
Forward Commitments, When-Issued and Delayed Delivery Securities:
Certain Funds may purchase securities on a when-issued basis and may
purchase or sell securities on a forward commitment basis. Settlement of
such transactions normally occurs within a month or more after the pur-
chase or sale commitment is made. The Funds may purchase securities
under such conditions only with the intention of actually acquiring them,
but may enter into a separate agreement to sell the securities before the
settlement date. Since the value of securities purchased may fluctuate prior
to settlement, the Funds may be required to pay more at settlement than
the security is worth. In addition, the purchaser is not entitled to any of the
interest earned prior to the settlement. When purchasing a security on a
delayed delivery basis, the Funds assume the rights and risks of ownership
of the security, including the risk of price and yield fluctuations. In the event
of default by the counterparty, the Funds maximum amount of loss is the
unrealized gain of the commitment, which is shown on the Schedule of
Investments, if any.
Preferred Stock: Certain Funds may invest in preferred stocks. Preferred
stock has a preference over common stock in liquidation (and generally
in receiving dividends as well) but is subordinated to the liabilities of the
issuer in all respects. As a general rule, the market value of preferred stock
with a fixed dividend rate and no conversion element varies inversely with
interest rates and perceived credit risk, while the market price of convert-
ible preferred stock generally also reflects some element of conversion
value. Because preferred stock is junior to debt securities and other obliga-
tions of the issuer, deterioration in the credit quality of the issuer will cause
greater changes in the value of a preferred stock than in a more senior
debt security with similar stated yield characteristics. Unlike interest
payments on debt securities, preferred stock dividends are payable only if
declared by the issuers board of directors. Preferred stock also may be
subject to optional or mandatory redemption provisions.
Floating Rate Loans: Certain Funds may invest in floating rate loans,
which are generally non-investment grade, made by banks, other financial
institutions and privately and publicly offered corporations. Floating rate
loans are senior in the debt structure of a corporation. Floating rate loans
generally pay interest at rates that are periodically determined by reference
to a base lending rate plus a premium. The base lending rates are gener-
ally (i) the lending rate offered by one or more European banks, such as
LIBOR (London InterBank Offered Rate), (ii) the prime rate offered by one
or more US banks or (iii) the certificate of deposit rate. The Funds consider
investment policies.
The Funds earn and/or pay facility and other fees on floating rate loans.
Other fees earned/paid include commitment, amendment, consent, com-
missions and prepayment penalty fees. Facility, amendment and consent
fees are typically amortized as premium and/or accreted as discount
over the term of the loan. Commitment, commission and various other fees
are recorded as income. Prepayment penalty fees are recognized on the
accrual basis. When a Fund buys a floating rate loan it may receive a
facility fee and when it sells a floating rate loan it may pay a facility fee.
On an ongoing basis, the Funds may receive a commitment fee based on
the undrawn portion of the underlying line of credit portion of a floating
rate loan. In certain circumstances, the Funds may receive a prepayment
penalty fee upon the prepayment of a floating rate loan by a borrower.
Other fees received by the Funds may include covenant waiver fees and
covenant modification fees.
The Funds may invest in multiple series or tranches of a loan. A
different series or tranche may have varying terms and carry different
associated risks.
Floating rate loans are usually freely callable at the 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 bor-
rower, and the Funds may not benefit directly from any collateral supporting
the loan in which it has purchased the Participation.
As a result, the Funds will assume the credit risk of both the borrower and
the lender that is selling the Participation. The Funds investments in loan
participation interests involve the risk of insolvency of the financial interme-
diaries who are parties to the transactions. In the event of the insolvency
of the lender selling the Participation, the Funds may be treated as general
creditor of the lender and may not benefit from any offset between the
lender and the borrower.
Mortgage Dollar Roll Transactions: Certain Funds may sell mortgage-
backed securities and simultaneously contract to repurchase substantially
similar (same type, coupon and maturity) securities on a specific future
date at an agreed upon price. During the period between the sale
and the repurchase, the Funds will not be entitled to receive interest and
principal payments on the securities sold. The Funds account for dollar roll
transactions as purchases and sales and realize gains and losses on these
transactions.
Mortgage dollar rolls involve the risk that the market value of the securities
that each Fund is required to purchase may decline below the agreed
upon repurchase price of those securities. If investment performance of
securities purchased does not exceed that of the securities sold as part
of the dollar roll, the use of this technique will adversely impact the
investment performance of each Fund.
Reverse Repurchase Agreements: Certain Funds may enter into reverse
repurchase agreements with qualified third party broker-dealers. In a
reverse repurchase agreement, the Funds sell securities to a bank or
broker-dealer and agree to repurchase the securities at a mutually agreed
upon date and price. Interest on the value of the reverse repurchase
agreements issued and outstanding is based upon competitive market
rates determined at the time of issuance. The Funds may utilize reverse
repurchase agreements when it is anticipated that the interest income
to be earned from the investment of the proceeds of the transaction is
greater than the interest expense of the transaction. Reverse repurchase
agreements involve leverage risk and also the risk that the market value
of the securities that the Funds are obligated to repurchase under the
agreement may decline below the repurchase price. In the event the buyer
of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, the Funds use of the proceeds from the agreement
may be restricted while the other party, or its trustee or receiver, determine
whether or not to enforce the Funds obligation to repurchase the securities.
TBA Commitments: Certain Funds may enter into TBA commitments to pur-
chase or sell securities for a fixed price at a future date. TBA commitments
are considered securities in themselves, and involve a risk of loss if the
value of the security to be purchased or sold declines or increases prior
to settlement date, which is in addition to the risk of decline in the value
of the Funds other assets.
Segregation and Collateralization: In cases in which the 1940 Act and the
interpretive positions of the Securities and Exchange Commission (SEC)
require that a Fund either delivers collateral or segregates assets in con-
nection with certain investments (e.g., dollar rolls, TBAs beyond normal
settlement, foreign currency exchange contracts, financial futures contracts
and swaps), or certain borrowings (e.g., reverse repurchase agreements)
each Fund will, consistent with SEC rules and/or certain interpretive letters
issued by the SEC, segregate collateral or designate on its books and
records cash or other liquid securities having a market value at least
equal to the amount that would otherwise be required to be physically seg-
regated. Furthermore, based on requirements and agreements with certain
exchanges and third party broker-dealers, each party has requirements to
deliver/deposit securities as collateral for certain investments (e.g., finan-
cial futures contracts, reverse repurchase agreements and swaps). As part
of these agreements, when the value of these investments achieves a previ-
ously agreed upon value (minimum transfer amount), each party may be
required to deliver additional collateral.
Investment Transactions and Investment Income: For financial reporting
purposes, certain Funds investment transactions are recorded on the
and losses on security transactions are determined on the identified cost
basis. Dividend income is recorded on the ex-dividend dates. Dividends
from foreign securities where the ex-dividend date may have passed are
subsequently recorded when the Funds have determined the ex-dividend
date. Interest income is recognized on the accrual basis. The Funds
amortize all premiums and discounts on debt securities.
Senior Floating Rate and Senior Floating Rate II record daily their propor-
tionate share of the Master LLCs income, expenses and realized and unre-
alized gains and losses. In addition, both Funds accrue their own expenses.
Dividends and Distributions: Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on
the ex-dividend dates. If the total dividends and distributions made in any
tax year exceeds net investment income and accumulated realized capital
gains, a portion of the total distribution may be treated as a tax return
of capital.
Income Taxes: It is each 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 limita-
tions on the Funds US federal tax returns remains open for the two periods
ended August 31, 2009 for BHL, the four years ended August 31, 2009
for DVF, FRA, Senior Floating Rate and Senior Floating Rate II, and the two
years ended October 31, 2007 and the two periods ended August 31,
2009 for BLW. The statutes of limitations on the Funds state and local
tax returns may remain open for an additional year depending upon
the jurisdiction.
Recent Accounting Pronouncement: In June 2009, Statement of Financial
Accounting Standards No. 166, Accounting for Transfers of Financial Assets
an amendment of FASB Statement No. 140 (FAS 166), was issued.
FAS 166 is intended to improve the relevance, representational faithfulness
and comparability of the information that a reporting entity provides in its
financial statements about a transfer of financial assets; the effects of a
transfer on its financial position, financial performance, and cash flows;
and a transferors continuing involvement, if any, in transferred financial
assets. FAS 166 is effective for financial statements issued for fiscal years
and interim periods beginning after November 15, 2009. Earlier application
is prohibited. The recognition and measurement provisions of FAS 166
must be applied to transfers occurring on or after the effective date.
Additionally, the disclosure provisions of FAS 166 should be applied to
transfers that occurred both before and after the effective date of FAS 166.
The impact of FAS 166 on the Funds statement disclosures, if any, is cur-
rently being assessed.
Deferred Compensation and BlackRock Closed-End Share Equivalent
Investment Plan: Under the deferred compensation plan approved by each
Funds Board, non-interested Directors (Independent Directors) may defer
a portion of their annual complex-wide compensation. Deferred amounts
earn an approximate return as though equivalent dollar amounts have
been invested in common shares of other certain BlackRock Closed-End
Funds selected by the Independent Directors. This has approximately the
same economic effect for the Independent Directors as if the Independent
Directors had invested the deferred amounts directly in other certain
BlackRock Closed-End Funds.
The deferred compensation plan is not funded and obligations thereunder
represent general unsecured claims against the general assets of each
Fund. Each Fund may, however, elect to invest in Common Shares of other
certain BlackRock Closed-End Funds selected by the Independent Directors
in order to match its deferred compensation obligations. Investments to
cover each 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 on the Statements of Operations as fees paid indirectly.
2. Derivative Financial Instruments:
The Funds may engage in various portfolio investment strategies both to
increase the returns of the Funds and to economically hedge, or protect,
their exposure to certain risks such as credit risk, equity risk, interest rate
risk and foreign currency exchange rate risk. Losses may arise if the value
of the contract decreases due to an unfavorable change in the value of
the underlying security or if the counterparty does not perform under the
contract. The Funds may mitigate counterparty risk through master netting
agreements included within an International Swap and Derivatives
Association, Inc. (ISDA) Master Agreement between a Fund and each of
its counterparties. The ISDA Master Agreement allows each Fund to offset
with its counterparty certain derivative financial instruments payables
and/or receivables with collateral held with each counterparty. The amount
of collateral moved to/from applicable counterparties is based upon mini-
mum transfer amounts of up to $500,000. To the extent amounts due to
the Funds from their counterparties are not fully collateralized contractually
or otherwise, the Funds bear the risk of loss from counterparty non-perform-
ance. See Note 1 Segregation and Collateralization for information with
respect to collateral practices.
The Funds maximum risk of loss from counterparty credit risk on over-the-
counter derivatives is generally the aggregate unrealized gain in excess of
counter purchased options, the Funds bear the risk of loss in the amount
of the premiums paid and change in market value of the options should
the counterparty not perform under the contracts. Options written by
the Funds do not give rise to counterparty credit risk, as written options
obligate the Funds to perform and not the counterparty. Certain ISDA Master
Agreements allow counterparties to over-the-counter derivatives to terminate
derivative contracts prior to maturity in the event a 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 payment of any net
liability owed to the counterparty. Counterparty risk related to exchange-
traded financial futures contracts and options is minimal because of the
protection against defaults provided by the exchange on which they trade.
Financial Futures Contracts: Certain Funds may purchase or sell financial
futures contracts and options on financial futures contracts to gain expo-
sure to, or economically hedge against, changes in interest rates (interest
rate risk) or foreign currencies (foreign currency exchange rate risk).
Financial futures contracts are contracts for delayed delivery of securities
at a specific future date and at a specific price or yield. Pursuant to the
contract, the Funds agree to receive from or pay to the broker an amount
of cash equal to the daily fluctuation in value of the contract. Such receipts
or payments are known as margin variation and are recognized by the
Funds as unrealized gains or losses. When the contract is closed, the
Funds record a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time
it was closed. The use of financial futures transactions involves the risk of
an imperfect correlation in the movements in the price of financial futures
contracts, interest rates and the underlying assets.
Foreign Currency Exchange Contracts: Certain Funds may enter into foreign
currency exchange contracts as an economic hedge against either specific
transactions or portfolio positions (foreign currency exchange rate risk). A
foreign currency exchange contract is an agreement between two parties to
buy and sell a currency at a set exchange rate on a future date. Foreign
currency exchange contracts, when used by a Fund, help to manage the
overall exposure to the foreign currency backing some of the investments
held by a Fund. The contract is marked-to-market daily and the change in
market value is recorded by a Fund as an unrealized gain or loss. When the
contract is closed, a Fund records a realized gain or loss equal to the dif-
ference between the value at the time it was opened and the value at the
time it was closed. The use of foreign currency exchange contracts involves
the risk that counterparties may not meet the terms of the agreement or
unfavorable movements in the value of a foreign currency relative to the
US dollar.
Options: Certain Funds may purchase and write call and put options to
increase or decrease their exposure to underlying instruments. A call option
gives the purchaser of the option the right (but not the obligation) to buy,
and obligates the seller to sell (when the option is exercised), the underlying
instrument at the exercise price at any time or at a specified time during
the option period. A put option gives the holder the right to sell and obli-
gates the writer to buy the underlying instrument at the exercise price at
any time or at a specified time during the option period. When a Fund pur-
chases (writes) an option, an amount equal to the premium paid (received)
by a Fund is reflected as an asset (liability) and an equivalent liability
(asset). The amount of the asset (liability) is subsequently marked-to-mar-
ket to reflect the current market value of the option purchased
(written). When an instrument is purchased or sold through an exercise of
an option, the related premium paid (or received) is added to (or deducted
from) the basis of the instrument acquired or deducted from (or added to)
the proceeds of the instrument sold. When an option expires (or a Fund
enters into a closing transaction), a Fund realizes a gain or loss on the
option to the extent of the premiums received or paid (or gain or loss to
the extent the cost of the closing transaction exceeds the premium
received or paid). When a Fund writes a call option, such option is cov-
ered, meaning that a Fund holds the underlying instrument subject to
being called by the option counterparty, or cash in an amount sufficient to
cover the obligation. When a Fund writes a put option, such option is cov-
ered by cash in an amount sufficient to cover the obligation.
In purchasing and writing options, a Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund
may not be able to enter into a closing transaction due to an illiquid mar-
ket. Exercise of a written put option could result in a Fund purchasing a
security at a price different from the current market value. The Funds may
execute transactions in both listed and over-the-counter options.
Swaps: Certain Funds may enter into swap agreements, in which a Fund
and a counterparty agree to make periodic net payments on a specified
notional amount. These periodic payments received or made by the Funds
are recorded in the Statements of Operations as realized gains or losses,
respectively. Swaps are marked-to-market daily and changes in value are
recorded as unrealized appreciation (depreciation). When the swap is ter-
minated, the Fund will record a realized gain or loss equal to the difference
between the proceeds from (or cost of) the closing transaction and the
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 on the Statements of Assets and Liabilities. Such risks
involve the possibility that there will be no liquid market for these agree-
ments, that the counterparty to the agreements may default on its obliga-
tion to perform or disagree as to the meaning of the contractual terms in
the agreements, and that there may be unfavorable changes in interest
rates and/or market values associated with these transactions.
Credit default swaps Certain Funds may enter into credit default
swaps to manage their exposure to the market or certain sectors of
the market, to reduce their risk exposure to defaults of corporate
and/or sovereign issuers or to create exposure to corporate and/or sov-
ereign issuers to which they are not otherwise exposed (credit risk). The
Funds enter into credit default agreements to provide a measure of
and/or gain credit exposure to an issuer to which they are not other-
wise exposed (as seller of protection). The Fund may either buy or
sell (write) credit default swaps on single-name issuers (corporate or
sovereign) or traded indexes. Credit default swaps on single-name
issuers are agreements in which the buyer pays fixed periodic payments
to the seller in consideration for a guarantee from the seller to make a
specific payment should a negative credit event take place (e.g., bank-
ruptcy, failure to pay, obligation accelerators, repudiation, moratorium or
restructuring). Credit default swaps on traded indexes are agreements
in which the buyer pays fixed periodic payments to the seller in consid-
eration for a guarantee from the seller to make a specific payment
should a write-down, principal or interest shortfall or default of all or
individual underlying securities included in the index occurs. As a buyer,
a Fund will either receive from the seller an amount equal to the
notional amount of the swap and deliver the referenced security or
underlying securities comprising of an index or receive a net settlement
of cash equal to the notional amount of the swap less the recovery
value of the security or underlying securities comprising of an index. As
a seller (writer), a Fund will either pay the buyer an amount equal to the
notional amount of the swap and take delivery of the referenced secu-
rity or underlying securities comprising of an index or pay a net settle-
ment of cash equal to the notional amount of the swap less the
recovery value of the security or underlying securities comprising
of an index.
Interest rate swaps Certain Funds may enter into interest rate swaps
to manage duration, the yield curve or interest rate risk by economically
hedging the value of the fixed rate bonds which may decrease when
interest rates rise (interest rate risk). Interest rate swaps are agreements
in which one party pays a floating rate of interest on a notional princi-
pal amount and receives a fixed rate of interest on the same notional
principal amount for a specified period of time. Interest rate floors,
which are a type of interest rate swap, are agreements in which one
party agrees to make payments to the other party to the extent that
interest rates fall below a specified rate or floor in return for a premium.
In more complex swaps, the notional principal amount may decline
(or amortize) over time.
Swaptions Swap options (swaptions) are similar to options on securi-
ties except that instead of selling or purchasing the right to buy or sell a
security, the writer or purchaser of the swap option is granting or buying
the right to enter into a previously agreed upon interest rate swap
agreement at any time before the expiration of the option (interest rate
risk). In purchasing and writing swaptions, the Funds bear the market
risk of an unfavorable change in the price of the underlying interest rate
swap or the risk that the Funds may not be able to enter into a closing
transaction due to an illiquid market. Exercise of a written swaption
could result in the Funds entering into an interest rate swap at a price
different from the current market value. The Funds execute transactions
in over-the-counter swaptions.
Notes to Financial Statements (continued)
Derivatives Not Accounted for as Hedging Instruments under Financial Accounting Standards Board Statement of Financial Accounting Standards No. 133,
Accounting for
Derivative Instruments and Hedging Activities:
Values of Derivative Instruments as of August 31, 2009*
Asset Derivatives
Statements of Assets
and Liabilities Location
BHL
DVF
FRA
BLW
Interest rate contracts
Net unrealized appreciation/depreciation
$ 22,078**
Foreign currency exchange contracts
Unrealized appreciation on foreign
currency exchange contracts
$ 10,965
$ 2,622
$ 27,341
36,788
Credit contracts
Unrealized appreciation on swaps
11,300
Equity contracts
Investments at value unaffiliated
13,000
20,000
46,000
Total
$ 10,965
$ 26,922
$ 47,341
$ 104,866
Liability Derivatives
Statements of Assets
and Liabilities Location
BHL
DVF
FRA
BLW
Interest rate contracts
Unrealized depreciation on swaps
$1,751,189
Foreign exchange contracts
Unrealized depreciation on foreign
currency exchange contracts
$ 231,252
95,339
$ 406,733
$ 541,854
Credit contracts
Unrealized depreciation on swaps
2,403,117
1,108,878
83,859
Total
$ 231,252
$4,249,645
$1,515,611
$ 625,713
*
For open derivative instruments as of August 31, 2009, see the Schedules of Investments, which is also indicative of activity for the year ended August 31,
2009.
**
Includes cumulative appreciation/depreciation of the financial futures contracts as reported in Schedules of Investments. Only current days margin variation is
reported within the
Statements of Assets & Liabilities.
The Effect of Derivative Instruments on the Statements of Operations
Year Ended August 31, 2009
Net Realized Gain (Loss) From Derivatives Recognized in Income
BHL
DVF
FRA
BLW
Credit contracts:
Swaps
$ (875,528)
$(1,879,082)
$ 933,553
$ (570,536)
Foreign currency exchange contracts:
Foreign currency exchange contracts
1,692,962
697,705
2,255,357
6,193,595
Interest contracts:
Financial futures contracts
667,902
Swaps
(1,852,965)
Total
$ 817,434
$(3,034,342)
$3,188,910
$ 6,290,961
Net Change in Unrealized Appreciation/Depreciation on Derivatives Recognized in Income
BHL
DVF
FRA
BLW
Credit contracts:
Swaps
$ (190,796)
$ (991,052)
$ 795,049
$ (21,853)
Equity contracts:
Options
(8,970)
(13,800)
(31,740)
Foreign currency exchange contracts:
Foreign currency exchange contracts
(1,105,948)
(340,969)
(1,660,349)
(3,837,217)
Interest contracts:
Financial futures contracts
(110,204)
Swaps
92,815
Total
$ (1,296,744)
$(1,248,176)
$ (879,100)
$(4,001,014)
58
ANNUAL
REPORT
AUGUST 31, 2009
3. Investment Advisory Agreement and Other Transactions
with Affiliates:
The PNC Financial Services Group, Inc. (PNC) and Bank of America
Corporation (BAC) are the largest stockholders of BlackRock. BAC
became a stockholder of BlackRock following its acquisition of Merrill
Lynch & Co., Inc. (Merrill Lynch) on January 1, 2009. Prior to that date,
both PNC and Merrill Lynch were considered affiliates of the Funds under
the 1940 Act. Subsequent to the acquisition, PNC remains an affiliate, but
due to the restructuring of Merrill Lynchs ownership interest of BlackRock,
BAC is not deemed to be an affiliate under the 1940 Act.
BHL, DVF, FRA and BLW has entered into an Investment Advisory Agreement
or an Administration Agreement with the Manager to provide investment
advisory and/or administration services.
The Manager is responsible for the management of each Funds portfolio
and provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of each Fund. For such services,
BHL pays a monthly fee at an annual rate of 1.00%, BLW pays a monthly
fee at an annual rate of 0.55% and DVF and FRA each pay a monthly fee
at an annual rate of 0.75% of the average daily value of each Funds net
assets plus the proceeds of any outstanding borrowings.
The Manager, on behalf of BHL, DVF, FRA and BLW, has entered into a
separate sub-advisory agreement with BlackRock Financial Management,
Inc. (BFM), an affiliate of the Manager, under which the Manager pays
BFM, for services it provides, a monthly fee that is an annual percentage
of the investment advisory fee paid by the Funds to the Manager.
The Manager has agreed to waive its advisory fees by the amount of
investment advisory fees each Fund pays to the Manager indirectly through
its investment in affiliated money market funds. These amounts are shown
as fees waived by advisor in the Statements of Operations.
For the year ended August 31, 2009, the Funds reimbursed the Manager
for certain accounting services, which are included in accounting services
in the Statements of Operations. The reimbursements were as follows:
Accounting
Services
BHL
$ 2,463
DVF
$ 2,278
FRA
$ 4,935
BLW
$10,348
wholly owned subsidiary of Merrill Lynch, received underwriting fees of
$3,462,804 from January 31, 2008 to August 31, 2008 in connection with
the issuance of the BHLs Shares. In addition, BHL reimbursed MLPF&S
$46,000 as a partial reimbursement of expenses incurred in connection
with the issuance of the Funds Shares.
Senior Floating Rate and Senior Floating Rate II have entered into an
Administration Agreement with the Manager. The administration fee paid
to the Manager is calculated daily and paid monthly based on an annual
Funds net assets for the performance of administrative services (other
than investment advice and related portfolio activities) necessary for the
operation of these Funds.
Senior Floating Rate and Senior Floating Rate II entered into a separate
Distribution Agreement and Distribution Plan with BlackRock Investments,
LLC (BRIL), which replaced FAM Distributors, Inc. (FAMD) and BlackRock
Distributors, Inc. and its affiliates (BDI) (collectively, the Distributor)
as the sole distributor of the Funds. FAMD is a wholly owned subsidiary of
Merrill Lynch Group, Inc. BIL and BDI are affiliates of BlackRock.
For the year ended August 31, 2009, the Distributor received early with-
drawal charges for Senior Floating Rate and Senior Floating Rate II in the
amount of $181,726 and $31,438, respectively, relating to the tender of
each Funds shares.
PNC Global Investment Servicing (U.S.) Inc., an indirect, wholly owned
subsidiary of PNC and an affiliate of the Manager, is the transfer agent
and dividend disbursing agent for Senior Floating Rate and Senior Floating
Rate II. Transfer agency fees borne by the Funds are comprised of those
fees charged for all shareholder communications including mailing of
shareholder reports, dividend and distribution notices, and proxy materials
for shareholder meetings, as well as per account and per transaction fees
related to servicing and maintenance of shareholder accounts, including
the issuing, redeeming and transferring of shares, check writing, anti-money
laundering services, and customer identification services.
Senior Floating Rate and Senior Floating Rate II may earn income on posi-
tive cash balances in demand deposit accounts that are maintained by the
transfer agent on behalf of the Funds. These amounts are included in
income affiliated in the Statements of Operations.
Certain officers and/or directors of the Funds are officers and/or
directors of BlackRock or its affiliates. The Funds reimburse the Manager
for compensation to the Funds Chief Compliance Officer.
4. Investments:
Purchases and sales (including paydowns and TBA and mortgage dollar
roll transactions and excluding short-term securities and US Government
securities) for the year ended August 31, 2009 were as follows:
Purchases
Sales
BHL
$ 53,338,515
$ 79,414,735
DVF
$ 57,843,776
$ 108,701,709
FRA
$ 150,946,266
$ 212,820,811
BLW
$1,712,915,647
$1,835,126,323
ment securities for BLW were $0 and $23,000,000, respectively.
For the year ended August 31, 2009, purchases and sales for BLW
attributable to mortgage dollar rolls were $1,240,666,602 and
$1,368,558,242, respectively.
Notes to Financial Statements (continued)
5. Income Tax Information:
Reclassifications: Accounting principles generally accepted in the United States of America require
that certain components of net assets be adjusted to
reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. The
following permanent differences as of August 31, 2009 attributable to amortization methods on fixed income securities, accounting for swap agreements,
foreign currency transactions, the reclassification of distributions, the expiration of capital loss carryforwards and the classification of investments were
reclassified to the following accounts:
Senior
Senior
Floating Rate
Floating Rate
BHL
DVF
FRA
BLW
Fund
Fund II
Paid-in capital
$(64,746,799)
$(1,546,632)
Undistributed (distributions in excess of) net investment income
$ 2,498,907
$ 452,375
$ 1,290,731
$ 6,012,461
$ 1,065,904
$ 480,545
Accumulated net realized loss
$(2,498,907)
$(452,375)
$(1,290,731)
$(6,012,461)
$ 63,680,895
$ 1,066,087
The tax character of distributions paid during the fiscal years ended October 31, 2007, the fiscal period ended August 31, 2008 and the fiscal years ended
August 31, 2008 and August 31, 2009 were as follows:
Senior
Senior
Floating Rate
Floating Rate
BHL
DVF
FRA
BLW
Fund
Fund II
Ordinary income
8/31/2009
$ 9,810,137
$13,947,075
$23,842,077
$42,793,064
$17,470,993
$ 8,332,675
8/31/2008
5,435,571
20,910,360
28,321,303
26,664,539
12,294,014
11/01/2007 8/31/2008
43,898,690
10/31/2007
51,967,739
Long-term capital gains
10/31/2007
$ 2,229,742
Tax return of capital
8/31/2009
$ 88,324
$ 2,882,990
8/31/2008
481,911
443,389
10/31/2007
$ 1,074,826
Total distributions
8/31/2009
$ 9,898,461
$16,830,065
$23,842,077
$42,793,064
$17,470,993
$ 8,332,675
8/31/2008
$ 5,917,482
$21,353,749
$28,321,303
$26,664,539
$12,294,014
11/01/2007 8/31/2008
$43,898,690
10/31/2007
$55,272,307
As of August 31, 2009, the tax components of accumulated net losses were as follows:
Senior
Senior
Floating Rate
Floating Rate
BHL
DVF
FRA
BLW
Fund
Fund II
Undistributed ordinary income
$ 619,326
$ 786,625
$ 1,277,797
$ 106,666
Capital loss carryforward
$ (1,063,204)
$ (25,687,627)
(22,121,314)
(31,930,795)
(282,849,718)
(37,618,235)
Net unrealized losses*
(13,885,511)
(96,331,698)
(90,836,739)
(118,693,400)
(84,591,948)
(39,273,673)
Total accumulated net losses
$(14,948,715)
$(122,019,325)
$(112,338,727)
$(149,837,570)
$(366,163,869)
$(76,785,242)
* The differences between book-basis and tax-basis net unrealized losses is attributable primarily to the tax deferral of losses on wash sales, the difference between book and
tax
for premiums and discounts on fixed income securities, book/tax differences in the accrual of income on securities in default, the realization for tax purposes of unrealized
gains
/(losses) on certain futures and foreign currency contracts, the timing and recognition of partnership income, the accounting for swap agreements, the classification of
investments,
the deferral of post-October currency and capital losses for tax purposes and the deferral of compensation to Trustees.
As of August 31, 2009, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates:
Senior
Senior
Floating Rate
Floating Rate
Expires
BHL
DVF
FRA
BLW
Fund
Fund II
2010
$ 87,904,309
$ 864,375
2011
53,409,203
17,719,049
2012
34,221,818
6,383,383
2013
$ 691,829
56,166,095
2014
$ 1,755,694
945,546
2015
2,237,399
2,561,691
2016
1,444,704
475,453
$21,933,927
31,419,599
4,923,144
2017
$1,063,204
20,249,830
20,954,032
9,996,868
16,221,457
7,728,284
Total
$1,063,204
$25,687,627
$22,121,314
$31,930,795
$282,849,718
$37,618,235
60
ANNUAL REPORT
AUGUST 31, 2009
6. Market and Credit Risk:
In the normal course of business, the Funds invest in securities and enter
into transactions where risks exist due to fluctuations in the market (market
risk) or failure of the issuer of a security to meet all its obligations (credit
risk). The value of securities held by the Funds may decline in response
to certain events, including those directly involving the issuers whose secu-
rities are owned by the Funds; conditions affecting the general economy;
overall market changes; local, regional or global political, social or eco-
nomic instability; and currency and interest rate and price fluctuations.
Similar to credit risk, the Funds may be exposed to counterparty risk,
or the risk that an entity with which the Funds have unsettled or open
transactions may default. Financial assets, which potentially expose the
Funds to credit and counterparty risks, consist principally of investments
and cash due from counterparties. The extent of the Funds exposure to
credit and counterparty risks with respect to these financial assets is
approximated by their value recorded in the Funds Statements of Assets
and Liabilities.
7. Capital Share Transactions:
BHL and BLW are authorized to issue an unlimited number of shares, par
value $0.001, all of which were initially classified as Common Shares. DVF
and FRA are authorized to issue 200 million shares, par value $0.10, all of
which were initially classified as Common Shares. The Board is authorized,
however, to classify and reclassify any unissued shares without approval of
Common Shareholders.
Shares issued and outstanding for the year ended August 31, 2009
and the period ended August 31, 2008 (and the year ended October 31,
2007 for BLW) increased by the following amounts as a result of dividend
reinvestments:
Year Ended
Period Ended
Year Ended
August 31,
August 31,
October 31,
2009
2008
2007
BHL
84,923
15,264
DVF
129,277
13,892
FRA
31,791
BLW
107,367
At August 31, 2009, the shares owned by an affiliate of the Manager of the
Funds were as follows:
Shares
BHL
8,517
FRA
7,877
BLW
6,021
BHLs shares issued and outstanding during the period January 31,
2008 (commencement of operations) to August 31, 2008 increased
by 8,900,000 from shares sold. Organization costs of $22,000 were
expensed upon the commencement of operations. Offering costs incurred
in connection with BHLs offering of Common Shares have been charged
against the proceeds from the initial Common Share offering in the amount
of $200,500.
Transactions in capital shares, with respect to Senior Floating Rate and Senior Floating Rate II, were as follows:
Year Ended
Year Ended
August 31, 2009
August 31, 2008
Senior Floating Rate
Shares
Amount
Shares
Amount
Shares sold
3,495,709
$22,066,554
4,490,899
$ 36,601,922
Shares issued to shareholders in reinvestment of dividends
189,466
1,198,984
182,375
1,499,356
Total issued
3,685,175
23,265,538
4,673,274
38,101,278
Shares tendered
(10,231,989)
(65,061,276)
(13,412,544)
(111,603,956)
Net decrease
(6,546,814)
$(41,795,738)
(8,739,270)
$ (73,502,678)
Year Ended
Year Ended
August 31, 2009
August 31, 2008
Senior Floating Rate II
Shares
Amount
Shares
Amount
Shares sold
3,475,221
$23,697,009
2,834,064
$ 25,451,600
Shares issued to shareholders in reinvestment of dividends
and distributions
83,856
580,777
41,005
365,615
Total issued
3,559,077
24,277,786
2,875,069
25,817,215
Shares tendered
(5,697,156)
(39,247,148)
(7,873,162)
(71,267,903)
Net decrease
(2,138,079)
$(14,969,362)
(4,998,093)
$ (45,450,688)
The Funds may invest in floating rate loans. In connection with these
investments, the Funds may also enter into unfunded corporate loans
(commitments). Commitments may obligate the Funds to furnish tem-
porary financing to a borrower until permanent financing can be arranged.
fee, typically set as a percentage of the commitment amount. Such fee
income, which is classified in the Statements of Operations as facility and
other fees, is recognized ratably over the commitment period. As of August
31, 2009, the Funds had the following unfunded loan commitments:
Notes to Financial Statements (concluded)
Borrower
Value of
Unfunded
Underlying
Commitment
Loans
BHL
(000)
(000)
Big West Oil, LLC
$ 442
$ 407
NV Broadcasting, LLC
$ 179
$ 177
Smurfit-Stone Container Enterprises, Inc.
$ 506
$ 483
DVF
Big West Oil, LLC
$ 363
$ 333
Smurfit-Stone Container Enterprises, Inc.
$ 298
$ 286
FRA
Big West Oil, LLC
$ 233
$ 214
Smurfit-Stone Container Enterprises, Inc.
$ 805
$ 769
Vought Aircraft Industries, Inc.
$ 1,148
$ 1,074
BLW
Big West Oil, LLC
$ 724
$ 666
NV Broadcasting, LLC
$ 90
$ 89
Smurfit-Stone Container Enterprises, Inc.
$ 904
$ 864
ProtoStar Ltd.
$ 529
$ 529
9. Borrowings:
On May 16, 2008, DVF and FRA renewed their revolving credit and security
Agreements (Citicorp Agreement) pursuant to a commercial paper asset
securitization program with Citicorp North America, Inc. (Citicorp), as
Agent, certain secondary backstop lenders and certain asset securitization
conduits, as lenders (the Lenders). The agreement was renewed for one
year and at the time of renewal had maximum limits as follows:
Maximum Limit
DVF
$ 91,000,000
FRA
$155,000,000
Under the Citicorp Agreement, the conduits funded advances to each Fund
through the issuance of highly rated commercial paper. Each Fund had
granted a security interest in substantially all of its assets to, and in favor
of, the Lenders as security for its obligations to the Lenders. The interest
rate on each Funds borrowings was based on the interest rate carried by
the commercial paper plus a program fee. In addition, each Fund paid a
liquidity fee to the secondary backstop lenders and the agent. Under the
Citicorp Agreement, the Funds were subject to certain conditions and
covenants, which included among other things limitations on asset declines
over prescribed time periods. As a result of the decline in net assets attrib-
utable to market conditions, certain terms of the facility were renegotiated
effective December 5, 2008, which included waivers of certain financial
covenants by the Lenders, an increase in program and liquidity fees under
the facility and a reduction of the maximum limits.
On March 5, 2009, DVF and FRA terminated their revolving credit agree-
ment with Citicorp and entered into a senior committed secured, 364-day
revolving line of credit and a separate security agreement (the SSB
Agreement) with State Street Bank and Trust Company (SSB). The SSB
Agreement has the same maximum limits as the renegotiated limits under
the Citigroup Agreement and are as follows:
Maximum Limit
DVF
$ 50,000,000
FRA
$103,000,000
The Funds have granted a security interest in substantially all of its assets
to SSB.
Advances are made by SSB to the Funds, at the Funds option (a) the higher
of 1.0% above the Fed Effective Rate or 1.0% above the Overnight LIBOR
Rate and (b) 1.0% above 7-day, 30-day, or 60-day LIBOR Rate. In addition,
the Funds pay a facility fee and a commitment fee based upon SSBs total
commitment to the Funds. The fees associated with each of the agreements
are included in the Statements of Operations as borrowing costs. Advances
to the Funds as of August 31, 2009 are shown in the Statements of Assets
and Liabilities as loan payable.
BHL is a party to a senior committed secured, 364-day revolving line of
credit and a separate security agreement (the BHL Agreement) with SSB
dated April 9, 2008. The Agreement has a maximum limit of $67.5 million.
BHL has granted a security interest in substantially all of its assets to SSB.
BHL renewed its revolving line of credit and security agreement with SSB
effective April 8, 2009. The renewed agreement expires March 4, 2010 and
the maximum commitment was reduced to $55 million.
The Funds may not declare dividends or make other distributions on shares
or purchase any such shares if, at the time of the declaration, distribution
or purchase, asset coverage with respect to the outstanding short term bor-
rowings is less than 300%.
For the year ended August 31, 2009, the daily weighted average interest
rates for funds with loans under the revolving credit agreement were
as follows:
Daily Weighted
Average
Interest Rate
BHL
1.40%
DVF
3.02%
FRA
2.63%
For the year ended August 31, 2009, the daily weighted average interest
rates for funds with reverse repurchase agreements were as follows:
Daily Weighted
Average
Interest Rate
BLW
0.87%
10. Subsequent Events:
The Funds paid a net investment income dividend on September 30, 2009
to shareholders of record on September 15, 2009 as follows:
Common
Dividend
Per Share
BHL
$0.0600
DVF
$0.0785
FRA
$0.0815
BLW
$0.0700
Managements evaluation of the impact of all subsequent events on the
Funds financial statements was completed through October 30, 2009, the
date the financial statements were issued.
BlackRock Defined Opportunity Credit Trust
BlackRock Diversified Income Strategies Fund, Inc.
BlackRock Floating Rate Income Strategies Fund, Inc.
BlackRock Limited Duration Income Trust
BlackRock Senior Floating Rate Fund, Inc.
BlackRock Senior Floating Rate Fund II, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of BlackRock Defined Opportunity
Credit Trust as of August 31, 2009, and the related statements of opera-
tions and cash flows for the year then ended, the statements of changes in
net assets for the year then ended and the period January 31, 2008 (com-
mencement of operations) to August 31, 2008, and the financial highlights
for the year then ended and the period January 31, 2008 to August 31,
2008. We have also audited the accompanying statement of assets and
liabilities, including the schedule of investments, of BlackRock Diversified
Income Strategies Fund, Inc. as of August 31, 2009, and the related state-
ments of operations and cash flows for the year then ended, the state-
ments of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the four years in the period
then ended and the period January 31, 2005 (commencement of opera-
tions) to August 31, 2005. We have also audited the accompanying state-
ment of assets and liabilities, including the schedule of investments, of
BlackRock Floating Rate Income Strategies Fund, Inc. as of August 31,
2009, and the related statements of operations and cash flows for the year
then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. We have also audited the accompany-
ing statement of assets and liabilities, including the schedule of invest-
ments, of BlackRock Limited Duration Income Trust as of August 31, 2009,
and the related statements of operations and cash flows for the year then
ended, the statements of changes in net assets for the year then ended,
the period November 1, 2007 to August 31, 2008, and the year ended
October 31, 2007, and the financial highlights for the year then ended, the
period November 1, 2007 to August 31, 2008, and four years in the period
ended October 31, 2007. We have also audited the accompanying state-
ments of assets and liabilities of BlackRock Senior Floating Rate Fund, Inc.
and BlackRock Senior Floating Rate Fund II, Inc. as of August 31, 2009,
and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended. BlackRock Defined Opportunity Credit Trust, BlackRock
Diversified Income Strategies Fund, Inc., BlackRock Floating Rate Income
Strategies Fund, Inc., BlackRock Limited Duration Income Trust, BlackRock
Senior Floating Rate Fund, Inc., and BlackRock Senior Floating Rate Fund
II, Inc. are collectively referred to as the Funds. These financial statements
and financial highlights are the responsibility of the Funds management.
Our responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial highlights are free
of material misstatement. The Funds are not required to have, nor were we
engaged to perform, audits of their internal control over financial reporting.
Our audits included consideration of internal control over financial report-
ing as a basis for designing audit procedures that are appropriate
on the effectiveness of the Funds' internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and signifi-
cant estimates made by management, as well as evaluating the overall
financial statement presentation. Our procedures included confirmation
of securities owned as of August 31, 2009, by correspondence with the
custodian and financial intermediaries; where replies were not received
from financial intermediaries, we performed other auditing procedures.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
BlackRock Defined Opportunity Credit Trust as of August 31, 2009, the
results of its operations and its cash flows for the year then ended, changes
in its net assets for the year then ended and the period January 31, 2008
to August 31, 2008, and the financial highlights for the year then ended
and the period January 31, 2008 to August 31, 2008, in conformity with
accounting principles generally accepted in the United States of America.
Additionally, in our opinion, the financial statements and financial high-
lights referred to above present fairly, in all material respects, the finan-
cial position of BlackRock Diversified Income Strategies Fund, Inc. as of
August 31, 2009, the results of its operations and its cash flows for the
year then ended, changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the four years
in the period then ended and the period January 31, 2005 to August 31,
2005, in conformity with accounting principles generally accepted in the
United States of America. Additionally, in our opinion, the financial state-
ments and financial highlights referred to above present fairly, in all mate-
rial respects, the financial position of BlackRock Floating Rate Income
Strategies Fund, Inc. as of August 31, 2009, the results of its operations
and its cash flows for the year then ended, changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with
accounting principles generally accepted in the United States of America
Additionally, in our opinion, the financial statements and financial high-
lights referred to above present fairly, in all material respects, the financial
position of BlackRock Limited Duration Income Trust as of August 31,
2009, and the results of its operations and its cash flows for the year
then ended, changes in its net assets for the year then ended, the period
November 1, 2007 to August 31, 2008, and the year ended October 31,
2007, and the financial highlights for the year then ended, the period
November 1, 2007 to August 31, 2008, and four years in the period
ended October 31, 2007, in conformity with accounting principles gen-
erally accepted in the United States of America. Additionally, in our opinion,
the financial statements and financial highlights referred to above present
fairly, in all material respects, the financial position of BlackRock Senior
Floating Rate Fund, Inc. and BlackRock Senior Floating Rate Fund II, Inc.
as of August 31, 2009, and the results of their operations for the year then
ended, changes in their net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally
accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
October 30, 2009
Important Tax Information
The following table summarizes the taxable per share distributions paid by the Funds during the taxable year ended August 31, 2009:
Senior
Senior
Floating
BHL
DVF
FRA
BLW
Floating Rate
Rate II
Interest-Related Dividends for Non-U.S. Residents*
September 2008
57.78%
53.85%
75.25%
70.02%
77.87%
78.22%
October 2008 December 2008
57.78%
53.85%
76.83%
69.28%
76.97%
77.47%
January 2009
57.78%
53.85%
76.83%
69.28%
86.42%
86.22%
February 2009 August 2009
73.21%
100.00%
79.34%
73.88%
86.42%
86.22%
Federal Obligation Interest**
1.11%
Expressed as a percentage of the ordinary income distributions.
*
Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations.
**
The law varies in each state as to whether and what percentage of dividend income attributable to Federal Obligations is exempt from state income tax. We recommmend
that
you consult your tax advisor to determine if any portion of the dividends you received is exempt from state income taxes.
Master Portfolio Summary as of August 31, 2009
Master Senior Floating Rate LLC
Portfolio Composition
Percent of
Long-Term Investments
Asset Mix
8/31/09
8/31/08
Floating Rate Loan Interests
91%
95%
Corporate Bonds
9
5
64
ANNUAL REPORT
AUGUST 31, 2009
(Percentages shown are based on Net Assets)
Common Stocks
Shares
Value
Chemicals 0.0%
GEO Specialty Chemicals, Inc. (a)(b)
39,151
$ 15,030
Wellman Holdings, Inc. (b)
5,206
1,302
16,332
Commercial Services & Supplies 0.0%
Sirva (b)
1,817
9,085
Paper & Forest Products 0.2%
Ainsworth Lumber Co. Ltd.
335,138
483,689
Ainsworth Lumber Co. Ltd. (a)(b)
376,109
541,090
1,024,779
Total Common Stocks 0.2%
1,050,196
Par
Corporate Bonds
(000)
Chemicals 1.6%
GEO Specialty Chemicals Corp.:
7.50%, 3/31/15 (a)(c)
USD
2,538
1,650,024
10.00%, 3/31/15
2,515
1,634,464
Nalco Co., 8.25%, 5/15/17 (a)
1,015
1,060,675
Wellman Holdings, Inc. (c):
Second Lien Subordinate Note, 10.00%, 1/29/19
2,000
2,000,000
Third Lien Subordinate Note, 5.00%, 1/29/19
2,266
1,132,873
7,478,036
Commercial Services & Supplies 0.3%
Clean Harbors, Inc., 7.63%, 8/15/16 (a)
1,600
1,604,000
Containers & Packaging 0.5%
Crown Americas LLC, 7.63%, 5/15/17 (a)
1,190
1,181,075
Owens-Brockway Glass Container, Inc., 7.38%, 5/15/16
1,210
1,203,950
2,385,025
Diversified Financial Services 0.1%
FCE Bank Plc:
7.13%, 1/15/13
EUR
200
250,882
7.88%, 2/15/11
GBP
100
152,213
403,095
Diversified Telecommunication Services 0.9%
PAETEC Holding Corp., 8.88%, 6/30/17 (a)
USD
1,300
1,238,250
Qwest Corp.:
3.88%, 6/15/13 (d)
2,525
2,335,625
8.38%, 5/01/16 (a)
500
505,000
4,078,875
Food Products 0.4%
Smithfield Foods, Inc., 10.00%, 7/15/14 (a)
1,790
1,825,800
Hotels, Restaurants & Leisure 0.2%
MGM Mirage, 11.13%, 11/15/17 (a)
1,030
1,114,975
IT Services 0.3%
SunGard Data Systems, Inc., 4.88%, 1/15/14
1,429
1,286,100
Independent Power Producers & Energy Traders 0.8%
Calpine Construction Finance Co. LP, 8.00%, 6/01/16 (a)
3,770
3,751,150
Machinery 0.2%
CPM Holdings, Inc., 10.63%, 9/01/14 (a)
1,000
1,010,000
Media 0.9%
DIRECTV Holdings LLC, 8.38%, 3/15/13
2,000
2,050,000
EchoStar DBS Corp., 6.38%, 10/01/11
2,000
2,002,500
4,052,500
Par
Corporate Bonds
(000)
Value
Paper & Forest Products 1.0%
Ainsworth Lumber Co. Ltd., 11.00%, 7/29/15 (a)(e)
USD
2,891
$ 1,146,234
NewPage Corp., 6.73%, 5/01/12 (d)
650
277,875
Verso Paper Holdings LLC Series B, 4.23%, 8/01/14 (d)
5,400
3,024,000
4,448,109
Textiles, Apparel & Luxury Goods 0.6%
Levi Strauss & Co., 8.63%, 4/01/13
EUR
2,000
2,738,194
Wireless Telecommunication Services 0.9%
Cricket Communications, Inc., 7.75%, 5/15/16 (a)
USD
4,250
4,122,500
Total Corporate Bonds 8.7%
40,298,359
Floating Rate Loan Interests
Aerospace & Defense 0.8%
Hawker Beechcraft Acquisition Co. LLC:
Letter of Credit Facility Deposit, 2.28%, 3/26/14
280
208,445
Term Loan, 2.26%, 3/26/14
4,738
3,531,762
3,740,207
Airlines 0.5%
Delta Air Lines, Inc., Credit Linked Deposit Loan,
0.11% 2.28%, 4/30/12
1,470
1,312,588
US Airways Group, Inc., Loan, 2.76%, 3/21/14
1,475
794,152
2,106,740
Auto Components 2.3%
Allison Transmission, Inc., Term Loan, 3.03%, 8/07/14
7,003
5,978,398
Dana Holding Corp., Term Advance, 7.25%, 1/31/15
3,446
2,638,787
The Goodyear Tire & Rubber Co., Loan (Second Lien), 2.02%,
4/30/14
2,000
1,845,000
10,462,185
Automobiles 0.3%
Ford Motor Co., Term Loan, 3.50%, 12/15/13
1,814
1,571,713
Building Products 0.8%
Building Materials Corp. of America, Term Loan Advance,
3.06%, 2/22/14
2,003
1,827,653
Momentive Performance Materials (Blitz 06-103 GmbH):
Tranche B-1 Term Loan, 2.56%, 12/04/13
972
783,840
Tranche B-2 Term Loan, 2.74%, 12/04/13
EUR
969
1,046,890
3,658,383
Capital Markets 0.5%
Marsico Parent Co., LLC, Term Loan, 4.81%, 12/15/14
USD
924
397,499
Nuveen Investments, Inc., First Lien Term Loan,
3.49% 3.50%, 11/13/14
2,343
1,901,495
2,298,994
Chemicals 5.1%
Ashland, Inc., Term Loan B, 7.65%, 5/13/14
2,044
2,078,619
Brenntag Holding GmbH & Co. KG:
Acquisition Facility 1, 2.27% 2.99%, 1/20/14
125
119,045
Facility B2, 2.27%, 1/20/14
1,831
1,739,046
Columbian Chemicals Acquisition LLC/Columbian
Chemicals Merger Sub, Inc., Tranche B Term Loan,
6.63%, 3/16/13
1,715
1,337,388
Edwards (Cayman Islands II) Ltd., Term Loan (First Lien),
2.85%, 5/31/14
735
455,700
Huish Detergents Inc.:
Loan (Second Lien), 4.53%, 10/26/14
750
706,875
Tranche B Term Loan, 2.02%, 4/26/14
1,975
1,882,653
Nalco Co., Term Loan, 6.50%, 5/06/16
3,625
3,674,844
PQ Corp. (fka Niagara Acquisition, Inc.):
Loan (Second Lien), 6.77%, 7/30/15
3,000
1,650,000
Original Term Loan (First Lien), 3.52% 3.75%,
7/31/14
4,967
4,094,034
ANNUAL REPORT AUGUST 31, 2009 65
(Percentages shown are based on Net Assets)
Par
Floating Rate Loan Interests
(000)
Value
Chemicals (concluded)
Rockwood Specialties Group, Inc., Term Loan H, 6.00%,
5/15/14
USD
1,815
$ 1,826,941
Solutia Inc., Loan, 7.25%, 2/28/14
4,120
4,078,162
23,643,307
Commercial Services & Supplies 2.3%
Alliance Laundry Systems LLC, Term Loan, 2.79% 4.75%,
1/27/12
1,251
1,199,457
ARAMARK Corp.:
Letter of Credit Facility Letter of Credit, 0.22%, 1/26/14
225
210,981
US Term Loan, 2.47%, 1/26/14
3,549
3,320,976
Casella Waste Systems, Term Loan B, 7.00%, 4/09/14
1,250
1,253,125
John Maneely Co., Term Loan, 3.52% 3.76%, 12/09/13
1,142
895,135
Kion Group GmbH (fka Neggio Holdings 3 GmbH):
Facility B, 2.51%, 12/29/14
250
158,594
Facility C, 2.76%, 12/29/15
250
158,594
SIRVA Worldwide, Inc., Loan (Second Lien), 12.00%, 5/12/15
424
31,812
Synagro Technologies, Inc., Term Loan (First Lien),
2.26% 2.27%, 4/02/14
2,716
2,138,841
West Corp., Term B-2 Loan, 2.64% 2.65%, 10/24/13
1,389
1,317,328
10,684,843
Computers & Peripherals 0.2%
Intergraph Corp., Second-Lien Term Loan, 6.26% 6.37%,
11/28/14
1,000
932,500
Construction Materials 0.4%
Headwaters Inc., Term Loan B1 (First Lien), 9.75%,
4/30/11
2,083
2,015,310
Containers & Packaging 1.5%
Graham Packaging Co., LP:
B Term Loan, 2.56%, 10/07/11
423
411,657
C Term Loan, 6.75%, 4/27/14
1,242
1,238,433
Graphic Packaging International, Inc.:
Incremental Term Loan, 3.08% 3.35%, 5/16/14
2,594
2,529,430
Term B Loan, 2.33% 2.60%, 5/16/14
584
562,588
Smurfit-Stone Container Enterprises, Inc.:
Canada Tranche C, 2.57%, 11/01/11
135
128,373
Canada Tranche C-1 Term Loan, 2.57%, 11/01/11
41
38,813
Deposit Funded LC Facility, 4.50%, 11/01/10 (b)(f)
63
59,874
Revolving Credit Canadian, 2.82% 5.00%, 11/12/09
104
99,067
Revolving Credit U.S., 2.82% 4.50%, 11/01/09
314
298,691
Tranche B, 2.75%, 11/01/11 (b)(f)
72
68,138
U.S. Term Loan, Debtor in Possession, 10.00%,
7/28/10
1,412
1,426,599
6,861,663
Distributors 0.3%
Keystone Automotive Operations, Inc., Loan, 3.77% 5.75%,
1/12/12
2,602
1,417,894
Diversified Consumer Services 1.0%
Coinmach Service Corp., Term Loan, 3.28% 3.43%,
11/14/14
3,950
3,357,393
Education Management LLC, Term Loan C, 2.38%,
6/01/13
1,413
1,351,023
4,708,416
Diversified Financial Services 0.2%
LPL Holdings, Inc., Tranche D Term Loan, 2.01% 2.35%,
6/28/13
928
854,291
Par
Floating Rate Loan Interests
(000)
Value
Diversified Telecommunication Services 1.9%
BCM Ireland Holdings Ltd. (Eircom):
Facility B, 2.37%, 9/30/15
EUR
985
$ 1,283,732
Facility C, 2.62%, 9/30/16
985
1,283,875
Hawaiian Telcom Communications, Inc., Tranche C
Term Loan, 4.75%, 5/30/14
USD
1,614
979,840
Integra Telecom Holdings, Inc., Term Loan (First Lien),
10.50%, 8/31/13
1,372
1,345,013
PAETEC Holding Corp., Replacement Term Loan, 2.76%,
2/28/13
605
569,883
Time Warner Telecom Holdings Inc., Term Loan B Loan,
2.02%, 1/07/13
628
612,412
Wind Finance SL SA, Euro Facility (Second Lien), 7.70%,
1/26/14
EUR
2,000
2,875,821
8,950,576
Electrical Equipment 0.4%
Generac Acquisition Corp., Term Loan (First Lien), 2.78%,
11/10/13
USD
2,107
1,766,628
Electronic Equipment, Instruments & Components 1.1%
Flextronics International Ltd.:
A Closing Date Loan, 2.53% 2.85%, 10/01/14
1,507
1,351,125
Delay Draw Term Loan, 2.76%, 10/01/14
433
388,254
L-1 Identity Solutions Operating Co., Term Loan, 6.75%,
8/05/13
2,422
2,425,821
Safenet, Inc., Loan (Second Lien), 6.27%, 4/12/15
1,250
1,045,834
5,211,034
Energy Equipment & Services 1.6%
Brock Holdings III, Inc., Term B Loan, 2.85% 4.50%,
2/26/14
1,371
1,083,017
Dresser, Inc.:
Term B Loan, 2.68%, 5/04/14
1,987
1,851,633
Term Loan (Second Lien), 6.02%, 5/04/15
1,500
1,246,875
MEG Energy Corp.:
Delayed Draw Term Loan, 2.60%, 4/02/13
1,233
1,144,975
Initial Term Loan, 2.60%, 4/03/13
1,209
1,123,207
Volnay Acquisition Co. I (aka CGG), B1 Term Loan Facility,
3.93%, 1/12/14
1,051
1,019,860
7,469,567
Food & Staples Retailing 2.1%
AB Acquisitions UK Topco 2 Ltd. (fka Alliance Boots),
Facility B1, 3.53%, 7/09/15
GBP
4,000
5,579,423
DS Waters of America, Inc., Term Loan, 2.52%,
10/29/12
USD
1,383
1,244,361
DSW Holdings, Inc., Loan, 4.27%, 3/02/12
500
421,667
Rite Aid Corp., Tranche 4 Term Loan, 9.50%, 6/04/15
1,775
1,837,125
WM. Bolthouse Farms, Inc., Term Loan (First Lien), 2.56%,
12/16/12
779
752,173
9,834,749
Food Products 2.7%
Dean Foods, Term Loan B, 1.65% 1.98%, 4/02/14
1,197
1,142,458
Dole Food Co., Inc.:
Credit-Linked Deposit, 0.51%, 4/12/13
442
444,851
Tranche B Term Loan, 8.00%, 4/12/13
610
613,984
Solvest, Ltd. (Dole), Tranche C Term Loan, 8.00%, 4/12/13
2,273
2,287,755
Wm. Wrigley Jr. Co., Tranche B Term Loan, 6.50%,
10/06/14
7,677
7,762,905
12,251,953
Health Care Equipment & Supplies 2.5%
Bausch & Lomb Inc.:
Delayed Draw Term Loan, 2.10% 3.85%, 4/24/15
247
233,938
Parent Term Loan, 3.85%, 4/24/15
974
921,715
66 ANNUAL REPORT AUGUST 31, 2009
(Percentages shown are based on Net Assets)
Par
Floating Rate Loan Interests
(000)
Value
Health Care Equipment & Supplies (concluded)
Biomet, Inc., Dollar Term Loan, 3.26% 3.61%,
3/25/15
USD
4,910
$ 4,711,185
DJO Finance LLC (ReAble Therapeutics Finance LLC),
Term Loan, 3.26%, 5/20/14
2,955
2,822,025
Hologic, Inc., Tranche B Term Loan, 3.56%, 3/31/13
495
476,233
Iasis Healthcare LLC:
Delay Draw Term Loan, 2.26%, 3/14/14
584
550,832
Initial Term Loan, 2.26%, 3/14/14
1,689
1,591,747
Line of Credit, 0.16%, 3/14/14
157
148,372
11,456,047
Health Care Providers & Services 7.3%
CCS Medical, Inc. (Chronic Care), Term Loan (First Lien),
4.35%, 9/30/12 (b)(f)
750
338,437
CHS/Community Health Systems, Inc.:
Delayed Draw Term Loan, 2.54%, 7/25/14
455
423,465
Funded Term Loan, 2.51%, 7/25/14
8,911
8,300,719
DaVita, Inc., Tranche B-1 Term Loan, 1.77% 2.10%,
10/05/12
2,375
2,279,010
Fresenius SE:
Tranche B1 Term Loan, 6.75%, 7/06/14
2,510
2,522,193
Tranche B2 Term Loan, 6.75%, 7/06/14
1,584
1,592,339
HCA Inc., Tranche A-1 Term Loan, 2.10%, 11/17/12
12,465
11,637,430
HealthSouth Corp., Term Loan, 2.52% 2.53%, 3/10/13
3,455
3,341,388
Surgical Care Affiliates, LLC, Term Loan, 2.60%, 12/29/14
561
506,308
Vanguard Health Holding Co. II, LLC (Vanguard Health
System, Inc.), Replacement Term Loan, 2.51%, 9/23/11
3,119
3,035,953
33,977,242
Health Care Technology 0.3%
Sunquest Information Systems, Inc. (Misys Hospital Systems,
Inc.), Term Loan, 3.52% 3.74%, 10/13/14
1,474
1,343,569
Hotels, Restaurants & Leisure 3.8%
CCM Merger Inc. (Motor City Casino), Term B Loan, 8.50%,
7/13/12
1,713
1,598,401
Green Valley Ranch Gaming, LLC:
Second Lien Term Loan, 3.88%, 8/16/14
1,750
358,750
Term Loan (New), 2.54% 4.00%, 2/16/14
471
327,045
Harrahs Operating Co., Inc.:
Term B-1 Loan, 3.50%, 1/28/15
414
332,998
Term B-2 Loan, 3.50%, 1/28/15
7,432
5,987,025
Term B-3 Loan, 3.50% 3.60%, 1/28/15
365
293,418
Lake at Las Vegas Joint Venture/LLV-1, LLC (b)(f):
First and Second Tranche Term Loan, 12.35% 15.00%,
12/22/12
3,646
72,916
Revolving Loan Credit-Linked Deposit Account, 12.35%,
12/22/12
361
7,222
Penn National Gaming, Inc., Term Loan B, 2.01% 2.21%,
10/03/12
4,678
4,546,869
QCE, LLC (Quiznos), Term Loan:
(First Lien), 2.88%, 5/15/13
1,940
1,445,300
(Second Lien), 6.35%, 11/05/13
2,800
1,288,000
VML US Finance LLC (aka Venetian Macau), Term B Funded
Project Loan, 6.10%, 5/27/13
1,620
1,482,047
17,739,991
Household Durables 1.7%
American Achievement Corp., Tranche B Term Loan,
6.25%, 3/25/11
886
752,715
Jarden Corp., Term Loan B3, 3.10%, 1/24/12
1,224
1,207,700
Simmons Bedding Co., Tranche D Term Loan, 10.50%,
12/19/11
4,269
4,148,216
Yankee Candle Co., Inc., Term Loan, 2.27%, 2/06/14
1,736
1,609,959
7,718,590
Par
Floating Rate Loan Interests
(000)
Value
IT Services 3.3%
Audio Visual Services Group, Inc.:
Loan (Second Lien), 7.10%, 8/28/14
USD
1,560
$ 124,776
Tranche B Term Loan (First Lien), 2.85%, 2/28/14
1,350
837,000
Ceridian Corp., US Term Loan, 3.27%, 11/09/14
3,213
2,750,345
First Data Corp., Initial Tranche:
Initial Tranche B-1 Term Loan, 3.01% 3.02%, 9/24/14
2,816
2,346,359
Initial Tranche B-2 Term Loan, 3.01% 3.02%, 9/24/14
8,246
6,861,177
RedPrairie Corp.:
Tack-on-Loan, 3.69%, 7/20/12
260
224,516
Term Loan B, 3.44% 5.25%, 7/20/12
431
373,207
SunGard Data Systems Inc. (Solar Capital Corp.):
Incremental Term Loan, 6.75%, 2/28/14
997
991,609
Tranche B US Term Loan, 3.95% 4.09%, 2/28/16
844
815,129
15,324,118
Independent Power Producers & Energy Traders 4.2%
Dynegy Holdings, Inc.:
Term Letter of Credit Facility Term Loan, 4.02%, 4/02/13
971
933,517
Tranche B Term Loan, 4.02%, 4/02/13
79
75,533
NRG Energy, Inc., Term Loan, 2.01% 2.35%, 2/01/13
3,872
3,651,892
Texas Competitive Electric Holdings Co., LLC
(TXU), Initial Tranche:
Initial Tranche B-2 Term Loan, 3.78% 3.79%,
10/10/14
9,140
6,946,304
Initial Tranche B-3 Term Loan, 3.78% 3.79%,
10/10/14
10,291
7,788,380
19,395,626
Industrial Conglomerates 0.4%
Sequa Corp., Term Loan, 3.65% 3.88%, 12/03/14
2,383
2,031,534
Insurance 0.3%
Alliant Holdings I, Inc., Term Loan, 3.60%, 8/21/14
1,713
1,576,113
Internet Software & Services 0.0%
Channel Master Holdings, Inc. (b)(f)(g):
Revolver, 8.31%, 11/15/04
128
Term Loan, 9.00%, 11/15/04
1,014
Leisure Equipment & Products 0.5%
Fender Musical Instruments Corp.:
Delayed Draw Loan, 2.54%, 6/09/14
661
528,881
Initial Loan, 2.85%, 6/09/14
1,309
1,047,078
True Temper Sports, Inc., Term Loan B, 5.50%, 3/15/11
1,057
810,049
2,386,008
Life Sciences Tools & Services 0.9%
Life Technologies Corp. Term B Facility, 5.25%, 11/20/15
4,168
4,209,572
Machinery 1.8%
Navistar Financial Corp., Tranche A Term loan, 2.31%,
3/27/10
1,843
1,787,959
Navistar International Corp.:
Revolving Credit-Linked Deposit, 3.39% 3.51%,
1/19/12
1,333
1,240,000
Term Advance, 3.51%, 1/19/12
3,667
3,410,000
Oshkosh Truck Corp., Term B Loan, 6.60% 6.64%,
12/06/13
2,109
2,099,059
8,537,018
Media 22.5%
AlixPartners, LLP, Tranche C Term Loan, 2.28% 2.51%,
10/12/13
423
411,386
Alpha Topco Ltd. (Formula One):
Facility B1, 2.51%, 12/31/13
840
706,380
Facility B2, 2.51%, 12/31/13
568
477,139
Facility D, 3.76%, 6/30/14
1,000
740,000
ANNUAL REPORT AUGUST 31, 2009 67
(Percentages shown are based on Net Assets)
Par
Floating Rate Loan Interests
(000)
Value
Media (continued)
Bragg Communications Inc., Term Loan B Tranche Two
Facility, 3.17%, 8/31/14
USD
1,206
$ 1,168,662
Bresnan Communications, LLC Term Loan B (First Lien),
2.47% 2.64%, 9/29/13
1,746
1,672,527
CSC Holdings Inc. (Cablevision), Incremental Term Loan,
2.02% 2.07%, 3/29/13
3,432
3,316,972
Catalina Marketing Corp., Initial B Term Loan, 3.03%,
10/01/14
1,744
1,639,103
Cengage Learning Acquisitions, Inc. (Thomson Learning),
Tranche 1 Incremental Term Loan, 7.50%, 7/03/14
8,591
8,246,998
Cequel Communications, LLC:
Tranche A Term Loan (Second Lien), 4.78%, 5/05/14
5,000
4,506,250
Term Loan, 2.27%, 11/05/13
5,872
5,545,558
Charter Communications Operating, LLC, New Term Loan,
4.25%, 3/06/14 (b)(f)
2,929
2,718,220
Charter Communications, Term Loan B1, 7.94%, 3/25/14
6,525
6,521,737
FoxCo Acquisition Sub, LLC, Term Loan, 7.25%, 7/14/15
1,338
1,096,401
Gray Television, Inc., Term Loan B, 3.78%, 12/31/14
1,319
951,233
HMH Publishing Co. Ltd.:
Mezzanine, 17.50%, 11/14/14 (e)
9,049
1,357,358
Tranche A Term Loan, 5.26%, 6/12/14
4,389
3,395,774
Hanley-Wood, LLC (FSC Acquisition), Term Loan,
2.52% 2.54%, 3/08/14
2,227
939,216
Hargray Acquisition Co./DPC Acquisition LLC/HCP
Acquisition LLC, Term Loan (First Lien), 2.72%, 6/27/14
1,946
1,775,898
Harland Clarke Holdings Corp. (fka Clarke American Corp.),
Tranche B Term Loan, 2.76%, 6/30/14
2,284
1,865,628
Insight Midwest Holdings, LLC, B Term Loan, 2.28%,
4/07/14
3,075
2,934,429
Intelsat Corp. (fka PanAmSat Corp.):
Tranche B-2-A Term Loan, 2.78%, 1/03/14
1,247
1,177,245
Tranche B-2-B Term Loan, 2.78%, 1/03/14
1,247
1,179,624
Tranche B-2-C Term Loan, 2.78%, 1/03/14
1,247
1,179,624
Intelsat Subsidiary Holding Co. Ltd., Tranche B Term Loan
2.78%, 7/03/13
1,962
1,871,410
Knology, Inc., Term Loan, 2.51%, 6/30/12
1,602
1,521,732
Lamar Media Corp.:
Term Loan, 5.50%, 9/28/12
3,984
3,924,360
Series E Incremental Loan, 5.50%, 3/15/13
988
978,859
Local TV Finance, LLC, Term Loan, 2.27%, 5/07/13
1,234
843,408
MCC Iowa LLC (Mediacom Broadband Group), Tranche
E Term Loan, 6.50%, 11/30/16
2,394
2,396,947
MCNA Cable Holdings LLC (OneLink Communications),
Loan, 8.31%, 3/01/13 (e)
1,236
469,840
Mediacom Illinois, LLC (fka meidacom Communications,
LLC), Tranche D Term Loan, 3.96%, 3/31/17
1,500
1,496,250
Metro-Goldwyn-Mayer Inc., Tranche B Term Loan, 3.51%,
4/09/12
1,736
965,844
Multicultural Radio Broadcasting, Inc., Term Loan, 3.03%,
12/18/12
515
360,588
NTL Cable Plc, Second Lien, 4.19%, 3/04/12
GBP
710
1,017,142
NV Broadcasting, LLC:
Second Lien, 7.77%, 11/03/14 (b)(f)
USD
3,250
32,500
Term Loan, Debtor in Possession, 13.00%, 7/14/12
170
168,300
Newsday, LLC, Floating Rate Term Loan, 6.01%, 8/01/13
2,500
2,468,750
NextMedia Operating, Inc.:
Delay Draw Term Loan, 8.25%, 11/15/12
121
78,950
Initial Term Loan (1st Lien), 8.25%, 11/15/12
1,399
909,505
Loan (Second Lien), 11.25%, 11/15/13
3,291
394,965
Nielsen Finance LLC:
Class A Dollar Term Loan, 2.28%, 8/09/13
2,956
2,751,439
Class B Dollar Term Loan, 4.03%, 5/01/16
6,172
5,785,039
Penton Media, Inc.:
Loan (Second Lien), 5.49%, 2/01/14
500
105,000
Term Loan (First Lien), 2.51% 2.74%, 2/01/13
489
327,463
Par
Floating Rate Loan Interests
(000)
Value
Media (concluded)
Sunshine Acquisition Ltd. (aka HIT Entertainment), Term
Facility, 2.73%, 6/01/12
USD
4,243
$ 3,527,145
TWCC Holding Corp., Term Loan, 7.25%, 9/14/15
3,686
3,707,830
Tribune Co., Debtor in Possession, Term Loan, 9.00%,
4/07/10
1,100
1,105,500
UPC Financing Partnership, Facility U, 4.54%,
12/31/17
EUR
3,200
4,186,140
United Pan Europe Communications, Term Loan, 3.76%,
12/31/16
USD
2,000
1,965,000
Virgin Media Investment Holdings Ltd.:
B7 Facility, 5,39%, 9/30/12
GBP
199
297,977
B8 Facility, 5.39%, 9/30/12
131
196,266
B11 Facility, 5.12%, 7/30/12
823
1,232,849
B12 Facility, 5.31%, 7/30/12
1,141
1,708,786
World Color Press Inc. and World Color (USA) Corp. (fka
Quebecor World Inc.), Advance, 9.00%, 6/30/12
1,800
1,786,500
104,105,646
Metals & Mining 0.5%
Essar Steel Algoma Inc. (fka Algoma Steel Inc.), Term
Loan, 2.77%, 6/20/13
USD
2,434
2,190,399
Multi-Utilities 1.0%
Brand Energy & Infrastructure Services, Inc. (FR Brand
Acquisition Corp.):
Loan (Second Lien), 6.31% 6.44%, 2/07/15
1,200
828,000
Term B Loan (First Lien), 2.32% 2.63%, 2/07/14
170
152,610
Energy Transfer Equity, LP, Term Loan, 2.21%, 11/01/12
750
726,428
FirstLight Power Resources, Inc. (fka NE Energy, Inc.):
Term B Advance (First Lien), 3.13%, 11/01/13
2,217
2,041,271
Synthetic Letter of Credit, 0.48%, 11/01/13
283
260,291
Mach Gen, LLC, Synthetic Letter of Credit Loan (First Lien),
0.35%, 2/22/13
69
63,696
USPF Holdings, LLC, Term Loan, 2.02%, 4/11/14
886
823,944
4,896,240
Multiline Retail 0.5%
Dollar General Corp., Tranche B-1 Term Loan, 3.01% 3.24%,
7/07/14
2,300
2,237,070
Oil, Gas & Consumable Fuels 1.8%
Big West Oil, LLC (b)(f):
Delayed Advance Loan, 4.50%, 5/15/14
956
879,335
Initial Advance Loan, 4.50%, 5/15/14
1,207
1,110,344
ScorpionDrilling Ltd., Loan (Second Lien), 8.10%,
5/08/14
5,350
4,440,500
Vulcan Energy Corp. (fka Plains Resources Inc), Term B3
Loan, 5.50%, 8/12/11
1,750
1,725,938
8,156,117
Paper & Forest Products 2.8%
Georgia-Pacific LLC:
Term B Loan, 2.34% 2.46%, 12/20/12
6,437
6,218,319
Term Loan B2, 2.31% 2.65%, 12/20/12
1,518
1,466,429
NewPage Corp., Term Loan, 4.06%, 12/22/14
5,727
5,303,273
12,988,021
Personal Products 0.5%
American Safety Razor Co., LLC Loan (Second Lien), 6.52%,
1/30/14
2,650
2,067,000
Pharmaceuticals 0.3%
Warner Chilcott Co., Inc.:
Tranche B Acquisition Date Term Loan, 2.26% 2.60%,
1/18/12
1,182
1,173,773
Tranche C Acquisition Date Term Loan, 2.26%, 1/18/12
414
411,652
1,585,425
68 ANNUAL REPORT AUGUST 31, 2009
(Percentages shown are based on Net Assets)
Par
Floating Rate Loan Interests
(000)
Value
Professional Services 0.5%
Booz Allen Hamilton Inc., Tranche B Term Loan, 7.50%,
7/31/15
USD 2,374 $
2,374,027
Real Estate Management & Development 0.5%
Mattamy Funding Partnership, Loan, 2.63%, 4/11/13
2,903
2,322,000
Specialty Retail 0.3%
Adesa, Inc. (KAR Holdings, Inc.), Initial Term Loan, 2.52%,
10/20/13
750
703,750
General Nutrition Centers, Inc., Term Loan, 2.52% 2.85%,
9/16/13
550
505,513
1,209,263
Textiles, Apparel & Luxury Goods 0.2%
Hanesbrands Inc., Term B Loan, 5.02% 5.25%,
9/05/13
1,045
1,045,707
Trading Companies & Distributors 0.2%
Beacon Sales Acquisition, Inc., Term B Loan, 2.26% 2.60%,
9/30/13
953
895,350
Wireless Telecommunication Services 2.1%
Cellular South, Inc.:
Delayed Draw Term Loan, 2.01%, 5/29/14
500
477,500
Term Loan, 2.01% 4.00%, 5/29/14
1,470
1,403,850
Digicel International Finance Ltd., Tranche A, 3.13%,
3/01/12
4,475
4,251,250
MetroPCS Wireless, Inc., New Tranche B Term Loan,
2.56% 2.75%, 11/03/13
2,226
2,092,634
Ntelos, Term B Advance, 5.75%, 7/31/15
1,500
1,496,250
9,721,484
Total Floating Rate Loan Interests 86.7%
401,930,130
Beneficial
Interest
Other Interests (h)
(000)
Diversified Financial Services 0.2%
J.G. Wentworth LLC Preferred Equity Interests
921
777,120
Total Other Interests 0.2%
777,120
Total Long-Term Investments
(Cost $520,136,694 ) 95.8%
444,055,805
Short-Term Securities
Shares
BlackRock Liquidity Funds, TempFund, 0.22% (i)(j)
33,608,423
33,608,423
Total Short-Term Securities
(Cost $33,608,423) 7.3%
33,608,423
Total Investments (Cost $553,745,117*) 103.1%
477,664,228
Liabilities in Excess of Other Assets (3.1)%
(14,380,271)
Net Assets 100.0%
$ 463,283,957
* The cost and unrealized appreciation (depreciation) of investments as of August 31,
2009, as computed for federal income tax purposes, were as follows:
Aggregate cost
$ 553,814,673
Gross unrealized appreciation
$ 9,012,104
Gross unrealized depreciation
(85,162,549)
Net unrealized depreciation
$ (76,150,445)
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration to qualified
institutional investors.
(b) Non-income producing security.
(c) Convertible security.
(d) Variable rate security. Rate shown is as of report date.
(e) Represents a payment-in-kind security which may pay interest/dividends in addi-
tional par/shares.
(f) Issuer filed for bankruptcy and/or is in default of interest payments.
(g) As a result of bankruptcy proceedings, the company did not repay the principal
amount of the security upon maturity.
(h) Other interests represent beneficial interest in liquidation trusts and other reorgani-
zation entities and are non-income producing.
(i) Investments in companies considered to be an affiliate of the Master LLC, for pur-
poses of Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
Net
Affiliate
Activity
Income
BlackRock Liquidity Funds, TempFund
USD 33,608,423
$ 78,227
BlackRock Liquidity Series, LLC
Cash Sweep Series
USD (29,066,037)
$200,626
(j) Represents the current yield as of report date.
For Master LLC compliance purposes, the Master LLCs industry classifications refer
to any one or more of the industry sub-classifications used by one or more widely
recognized market indexes or ratings group indexes, and/or as defined by Master
LLC management. This definition may not apply for purposes of this report, which
may combine industry sub-classifications for reporting ease.
Foreign currency exchange contracts as of August 31, 2009 were as follows:
Unrealized
Currency
Currency
Settlement Appreciation
Purchased
Sold
Counterparty
Date
(Depreciation)
USD
235,838
EUR
166,000
Citibank NA
9/16/09 $
(2,146)
USD
1,057,022
EUR
745,000
Citibank NA
9/16/09
(11,039)
USD
2,829,491
EUR
1,982,000
Citibank NA
9/16/09
(11,979)
USD
7,671,767
EUR
5,494,500
Deutsche Bank AG 9/16/09
(205,357)
Royal Bank
USD
1,265,411
EUR
889,000
of Scotland
9/16/09
(9,093)
USD
570,971
CAD
620,000
Barclays Bank PLC 10/28/09
4,580
USD
8,344,123
GBP
5,105,000
Citibank NA
10/28/09
34,112
Total
$ (200,922)
Credit default swaps on traded index issues bought protection outstanding as of
August 31, 2009 were as follows:
Pay
Notional
Fixed
Counter-
Amount
Unrealized
Index
Rate
party
Expiration
(000)1
Depreciation
Credit Suisse,
June
LCDX Index
5.00%
International
2014
USD 3,255
$ (290,086)
1
The maximum potential amount the Fund may pay should a negative credit
event take place as defined under the terms of the agreement. See Note 2 of
the Notes to Financial Statements.
Currency Abbreviations:
CAD
Canadian Dollar
EUR Euro
GBP
British Pound
USD
US Dollar
ANNUAL REPORT AUGUST 31, 2009 69
Standards Board Statement of Financial Accounting Standards No. 157, Fair Value
Measurements (FAS 157). FAS 157 clarifies the definition of fair value, estab-
lishes a framework for measuring fair values and requires additional disclosures
about the use of fair value measurements. Various inputs are used in determining
the fair value of investments, which are as follows:
Level 1 price quotations in active markets/exchanges for identical securities
Level 2 other observable inputs (including, but not limited to: quoted prices for
similar assets or liabilities in markets that are active, quoted prices for identical
or similar assets or liabilities in markets that are not active, inputs other than
quoted prices that are observable for the assets or liabilities (such as interest
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and
default rates) or other market-corroborated inputs)
Level 3 unobservable inputs based on the best information available in the
circumstances, to the extent observable inputs are not available (including the
Master LLCs own assumptions used in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an indica-
tion of the risk associated with investing in those securities. For information about
the Master LLCs policy regarding valuation of investments and other significant
accounting policies, please refer to Note 1 of the Notes to Financial Statements.
The following table summarizes the inputs used as of August 31, 2009 in determin-
ing the fair valuation of the Master LLCs investments:
Valuation
Investments in
Inputs
Securities
Assets
Level 1
Long-Term Investments:
Common Stocks
$ 483,689
Short-Term Securities
33,608,423
Total Level 1
34,092,112
Level 2
Long-Term Investments:
Common Stocks
550,175
Corporate Bonds
33,880,998
Floating Rate Loan Interests
304,641,971
Total Level 2
339,073,144
Level 3
Long-Term Investments:
Common Stocks
16,332
Corporate Bonds
6,417,361
Floating Rate Loan Interests
97,288,159
Other Interests
777,120
Total Level 3
104,498,972
Total
$477,664,228
Valuation
Other Financial
Inputs
Instruments1
Assets
Liabilities
Level 1
Level 2
$ 38,692
$ (529,700)
Level 3
(112,385)
Total
$ 38,692
$ (642,085)
1 Other financial instruments are foreign currency exchange contracts,
unfunded
loan commitments and swaps which are shown at the unrealized appreciation/
depreciation on the instrument.
The following is a reconciliation of investments for unobservable inputs (Level 3) used in determining fair value:
Investments in Securities
Common
Corporate
Floating Rate
Other
Stocks
Bonds
Loan Interests
Interests
Total
Balance, as of August 31, 2008
$ 15,030
$ 43,430,665
$ 43,445,695
Accrued discounts/premiums
Realized gain (loss)
(12,647,335)
(12,647,335)
Change in unrealized appreciation (depreciation)2
$ (592,309)
10,806,622
10,214,313
Net purchases (sales)
(34,773,486)
(34,773,486)
Net transfers in/out of Level 3
1,302
7,009,670
90,471,693
$ 777,120
98,259,785
Balance, as of August 31, 2009
$ 16,332
$ 6,417,361
$ 97,288,159
$ 777,120
$104,498,972
2 Included in the related net change in unrealized appreciation/depreciation on the
Statement of Operations.
The following is a reconciliation of other financial instruments for unobservable
inputs (Level 3) used in determining fair value:
Other Financial
Instruments3
Liabilities
Balance, as of August 31, 2008
Accrued discounts/premiums
Realized gain (loss)
Change in unrealized appreciation (depreciation)
Net purchases (sales)
Net transfers in/out of Level 3
$ (112,385)
Balance as of August 31, 2009
$ (112,385)
3 Other financial instruments are unfunded loan commitments.
See Notes to Financial Statements.
70
ANNUAL REPORT
AUGUST 31, 2009
Statement of Assets and Liabilities
Master Senior Floating Rate LLC
August 31, 2009
Assets
Investments at value unaffiliated (cost $520,136,694)
$ 444,055,805
Investments at value affiliated (cost $33,608,423)
33,608,423
Unrealized appreciation on foreign currency exchange contracts
38,692
Foreign currency at value (cost $37,381)
37,366
Cash
109,518
Interest receivable
3,971,146
Investments sold receivable
3,893,176
Contributions receivable from investors
748,255
Swap premium paid
521,311
Prepaid expenses
18,214
Principal paydown receivable
13,843
Other assets
189,286
Total assets
487,205,035
Liabilities
Unrealized depreciation on foreign currency exchange contracts
239,614
Unrealized depreciation on swaps
290,086
Unrealized depreciation on unfunded loan commitments
112,385
Investments purchased payable
22,609,445
Investment advisory fees payable
367,525
Deferred income
142,136
Other accrued expenses payable
110,093
Swaps payable
32,025
Other affiliates payable
1,442
Officers and Directors fees payable
725
Other liabilities
15,602
Total liabilities
23,921,078
Net Assets
$ 463,283,957
Net Assets Consist of
Investors capital
$ 539,991,233
Net unrealized appreciation/depreciation
(76,707,276)
Net Assets
$ 463,283,957
See Notes to Financial Statements.
ANNUAL REPORT
AUGUST 31, 2009
71
Statement of Operations
Master Senior Floating Rate LLC
Year Ended August 31, 2009
Investment Income
Interest
$ 31,329,626
Income affiliated
278,853
Facility and other fees
523,623
Total income
32,132,102
Expenses
Investment advisory
4,077,764
Accounting services
171,056
Officer and Directors
55,859
Professional
45,947
Custodian
44,697
Printing
5,302
Miscellaneous
94,264
Total expenses excluding interest expense
4,494,889
Interest expense
8,398
Total expenses
4,503,287
Less fees waived by advisor
(11,939)
Total expenses after fees waived
4,491,348
Net investment income
27,640,754
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments
(51,663,096)
Swaps
46,864
Foreign currency
1,716,646
(49,899,586)
Net change in unrealized appreciation/depreciation on:
Investments
(15,700,804)
Swaps
(348,501)
Foreign currency
(1,136,888)
Unfunded corporate loans
259,893
(16,926,300)
Total realized and unrealized loss
(66,825,886)
Net Decrease in Net Assets Resulting from Operations
$ (39,185,132)
Statements of Changes in Net Assets
Master Senior Floating Rate LLC
Year Ended
August 31,
Increase (Decrease) in Net Assets:
2009
2008
Operations
Net investment income
$ 27,640,754
$ 40,966,288
Net realized loss
(49,899,586)
(21,219,849)
Net change in unrealized appreciation/depreciation
(16,926,300)
(27,182,080)
Net decrease in net assets resulting from operations
(39,185,132)
(7,435,641)
Capital Transactions
Proceeds from contributions
45,763,562
62,053,522
Fair value of withdrawals
(132,042,492)
(224,197,628)
Net decrease in net assets derived from capital transactions
(86,278,930)
(162,144,106)
Net Assets
Total decrease in net assets
(125,464,062)
(169,579,747)
Beginning of year
588,748,019
758,327,766
End of year
$ 463,283,957
$ 588,748,019
See Notes to Financial Statements.
72
ANNUAL REPORT
AUGUST 31, 2009
Statement of Cash Flows
Year Ended August 31, 2009
Cash Provided by Operating Activities
Net decrease in net assets resulting from operations
$ (39,185,132)
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities:
Decrease in interest receivable
910,414
Increase in other assets
(131,011)
Decrease in prepaid expenses
2,653
Decrease in investment advisor payable
(119,166)
Decrease in other affiliates payable
(2,746)
Increase in other liabilities payable
14,863
Decrease in accrued expenses payable
(133,431)
Increase in swaps payable
8,643
Increase in Officers and Directors fees
466
Swap premium received
6,400
Swap premium paid
(600,638)
Net realized and unrealized loss
68,061,566
Amortization of premium and discount on investments
(4,115,187)
Paid-in-kind Income
(686,595)
Proceeds from sales and paydowns of long-term securities
263,963,681
Purchases of long-term securities
(198,389,728)
Net purchases of short-term investments
(4,542,386)
Cash provided by operating activities
85,062,666
Cash Used for Financing Activities
Cash receipts from borrowings
29,000,000
Cash payments on borrowings
(29,000,000)
Cash receipts from contributions
46,446,155
Cash payments on withdrawals
(132,042,492)
Cash used for financing activities
(85,596,337)
Cash Impact From Foreign Exchange Fluctuations
Cash impact from foreign exchange fluctuations
13,927
Cash
Net decrease in cash
(519,744)
Cash at beginning of year
666,628
Cash at end of year
$ 146,884
Cash Flow Information
Cash paid for interest
$ 8,398
See Notes to Financial Statements.
ANNUAL REPORT
AUGUST 31, 2009
73
Financial Highlights
Master Senior Floating Rate LLC
Year Ended August 31,
2009
2008
2007
2006
2005
Total Investment Return
Total investment return
(4.23)%
(1.08)%
3.49%
5.37%
5.78%
Ratios to Average Net Assets
Total expenses
1.05%
1.04%
1.04%
1.04%
1.01%
Total expenses after fees waived
1.05%
1.04%
1.04%
1.04%
1.01%
Total expenses after fees waived and excluding interest expense
1.04%
1.04%
1.02%
1.03%
1.01%
Net investment income
6.44%
6.41%
7.07%
6.22%
4.52%
Supplemental Data
Net assets, end of year (000)
$ 463,284
$ 588,748
$ 758,328
$ 925,910
$ 1,032,819
Portfolio turnover
47%
56%
46%
54%
53%
Average loan outstanding during the year (000)
$ 420
$ 2,255
$ 1,932
See Notes to Financial Statements.
74
ANNUAL REPORT
AUGUST 31, 2009
Master Senior Floating Rate LLC (the Master LLC) is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), and is
organized as a Delaware limited liability company. The Limited Liability
Company Agreement permits the Board of Directors (the Board) to issue
nontransferable interests in the Master LLC, subject to certain limitations.
The Master LLCs financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America,
which may require the use of management accruals and estimates. Actual
results may differ from these estimates.
The following is a summary of significant accounting policies followed by
the Master LLC:
Valuation of Investments: The Master LLC values its bond investments on
the basis of last available bid prices or current market quotations provided
by dealers or pricing services selected under the supervision of the Master
LLCs Board. Floating rate loan interests are valued at the mean between
the last available bid prices from one or more brokers or dealers as
obtained from a pricing service. In determining the value of a particular
investment, pricing services may use certain information with respect to
transactions in such investments, quotations from dealers, pricing matrixes,
market transactions in comparable investments, various relationships
observed in the market between investments and calculated yield meas-
ures based on valuation technology commonly employed in the market for
such investments. Swap agreements are valued utilizing quotes received
daily by the Master LLCs pricing service or through brokers which are
derived using daily swap curves and trades of underlying securities. Short-
term securities with maturities less than 60 days may be valued at amor-
tized cost, which approximates fair value.
Equity investments traded on a recognized securities exchange or the
NASDAQ Global Market System are valued at the last reported sale price
that day or the NASDAQ official closing price, if applicable. For equity
investments traded on more than one exchange, the last reported sale
price on the exchange where the stock is primarily traded is used. Equity
investments traded on a recognized exchange for which there were no
sales on that day are valued at the last available bid price. If no bid price
is available, the prior days price will be used, unless it is determined that
such prior days price no longer reflects the fair value of the security.
In the event that application of these methods of valuation results in
a price for an investment which is deemed not to be representative of
the market value of such investment or are not available, the investment
will be valued by a method approved by the Board as reflecting fair value
(Fair Value Assets). When determining the price for Fair Value Assets, the
investment advisor and/or sub-advisor seeks to determine the price that
the Master LLC might reasonably expect to receive from the current sale of
that asset in an 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.
into United States dollars on the following basis: (i) market value of
investment securities, assets and liabilities at the current rate of exchange;
and (ii) purchases and sales of investment securities, income and
expenses at the rates of exchange prevailing on the respective dates of
such transactions.
The Master LLC reports foreign currency related transactions as compo-
nents of realized gains for financial reporting purposes, whereas such com-
ponents are treated as ordinary income for federal income tax purposes.
Floating Rate Loans: The Master LLC may invest in floating rate loans,
which are generally non-investment grade, made by banks, other financial
institutions and privately and publicly offered corporations. Floating rate
loans are senior in the debt structure of a corporation. Floating rate loans
generally pay interest at rates that are periodically determined by reference
to a base lending rate plus a premium. The base lending rates are gener-
ally (i) the lending rate offered by one or more European banks, such as
LIBOR (London InterBank Offered Rate), (ii) the prime rate offered by one
or more US banks or (iii) the certificate of deposit rate. The Master LLC
consider these investments to be investments in debt securities for pur-
poses of their investment policies.
The Master LLC earns and/or pays facility and other fees on floating rate
loans. Other fees earned/paid include commitment, amendment, consent,
commissions and prepayment penalty fees. Facility, amendment and con-
sent fees are typically amortized as premium and/or accreted as discount
over the term of the loan. Commitment, commission and various other fees
are recorded as income. Prepayment penalty fees are recognized on the
accrual basis. When the Master LLC buys a floating rate loan it may receive
a facility fee and when it sells a floating rate loan it may pay a facility fee.
On an ongoing basis, the Master LLC may receive a commitment fee based
on the undrawn portion of the underlying line of credit portion of a floating
rate loan. In certain circumstances, the Master LLC may receive a prepay-
ment penalty fee upon the prepayment of a floating rate loan by a bor-
rower. Other fees received by the Master LLC may include covenant waiver
fees and covenant modification fees.
The Master LLC may invest in multiple series or tranches of a loan.
A different series or tranche may have varying terms and carry different
associated risks.
Floating rate loans are usually freely callable at the issuers option. The
Master LLC may invest in such loans in the form of participations in loans
(Participations) and assignments of all or a portion of loans from third
parties. Participations typically will result in the Master LLC having a con-
tractual relationship only with the lender, not with the borrower. The Master
LLC will have the right to receive payments of principal, interest and any
fees to which it is entitled only from the lender selling the Participation and
only upon receipt by the lender of the payments from the borrower.
have no right to enforce compliance by the borrower with the terms of the
loan agreement relating to the loans, nor any rights of offset against the
borrower, and the Master LLC may not benefit directly from any collateral
supporting the loan in which it has purchased the Participation.
As a result, the Master LLC will assume the credit risk of both the borrower
and the lender that is selling the Participation. The Master LLCs invest-
ments in loan participation interests involve the risk of insolvency of the
financial intermediaries who are parties to the transactions. In the event of
the insolvency of the lender selling the Participation, the Master LLC may
be treated as general creditor of the lender and may not benefit from any
offset between the lender and the borrower.
Segregation and Collateralization: In cases in which the 1940 Act and
the interpretive positions of the Securities and Exchange Commission
(SEC) require that the Master LLC either delivers collateral or segregates
assets in connection with certain investments (e.g., swaps and foreign cur-
rency exchange contracts) the Master LLC will, consistent with SEC rules
and/or certain interpretive letters issued by the SEC, segregate collateral or
designate on its books and records cash or other liquid securities having a
market value at least equal to the amount that would otherwise be
required to be physically segregated. Furthermore, based on requirements
and agreements with certain exchanges and third party broker-dealers,
each party has requirements to deliver/deposit securities as collateral for
certain investments (e.g., swaps). As part of these agreements, when the
value of these investments achieves a previously agreed upon value (mini-
mum transfer amount), each party may be required to deliver additional
collateral.
Investment Transactions and Investment Income: For financial reporting
purposes, with respect to the Master LLC, investment transactions are
recorded on the dates the trans-actions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend
dates. Dividends from foreign securities where the ex-dividend date
may have passed are subsequently recorded when the Master LLC has
determined the ex-dividend date. Interest income is recognized on the
accrual basis. The Master LLC amortizes all premiums and discounts on
debt securities.
Income Taxes: The Master LLC is classified as a partnership for federal
income tax purposes. As such, each investor in the Master LLC is treated as
owner of its proportionate share of the net assets, income, expenses and
realized and unrealized gains and losses of the Master LLC. Therefore, no
federal income tax provision is required. It is intended that the Master LLCs
assets will be managed so an investor in the Master LLC can satisfy the
requirements of Subchapter M of the Internal Revenue Code.
The Master LLC files US federal and various state and local tax returns.
No income tax returns are currently under examination. The statute of
limitations on the Master LLCs US federal tax returns remains open for
on the Master LLCs state and local tax returns may remain open for an
additional year depending upon the jurisdiction.
Recent Accounting Pronouncement: In June 2009, Statement of Financial
Accounting Standards No. 166, Accounting for Transfers of Financial Assets
an amendment of FASB Statement No. 140 (FAS 166), was issued.
FAS 166 is intended to improve the relevance, representational faithfulness
and comparability of the information that a reporting entity provides in its
financial statements about a transfer of financial assets; the effects of a
transfer on its financial position, financial performance, and cash flows;
and a transferors continuing involvement, if any, in transferred financial
assets. FAS 166 is effective for financial statements issued for fiscal years
and interim periods beginning after November 15, 2009. Earlier application
is prohibited. The recognition and measurement provisions of FAS 166
must be applied to transfers occurring on or after the effective date.
Additionally, the disclosure provisions of FAS 166 should be applied to
transfers that occurred both before and after the effective date of FAS 166.
The impact of FAS 166 on the Master LLCs financial statement disclo-
sures, if any, is currently being assessed.
Other: Expenses directly related to the Master LLC are charged to the
Master LLC. Other operating expenses shared by several funds are
prorated among those funds on the basis of relative net assets or other
appropriate methods.
2. Derivative Financial Instruments:
The Master LLC may engage in various portfolio investment strategies
both to increase the return of the Master LLC and to economically hedge,
or protect, their exposure to certain risks such as credit risk, equity risk,
interest rate risk and foreign currency exchange rate risk. Losses may arise
if the value of the contract decreases due to an unfavorable change in the
value of the underlying security or if the counter-party does not perform
under the contract. The Master LLC may mitigate counterparty risk through
master netting agreements included within an International Swap and
Derivatives Association, Inc. (ISDA) Master Agreement between the Master
LLC and each of its counterparties. The ISDA Master Agreement allows the
Master LLC to offset with its counterparty certain derivative financial instru-
ments payables and/or receivables with collateral held with each counter-
party. The amount of collateral moved to/from applicable counterparties is
based upon minimum transfer amounts of up to $500,000. To the extent
amounts due to the Master LLC from its counterparties are not fully collat-
eralized contractually or otherwise, the Master LLC bears the risk of loss
from the counterparty non-performance. See Note 1 Segregation and
Collateralization for information with respect to collateral practices.
The Master LLCs maximum risk of loss from counterparty credit risk on
over-the-counter derivatives is generally the aggregate unrealized gain in
excess of any collateral pledged by the counterparty to the Master LLC.
Certain ISDA Master Agreements allow counterparties to over-the-counter
derivatives to terminate derivative contracts prior to maturity in the event
LLC fails to meet the terms of its ISDA Master Agreements, which would
cause the Master LLC to accelerate payment of any net liability owed to the
counterparty.
Foreign Currency Exchange Contracts: The Master LLC may enter into for-
eign currency exchange contracts as an economic hedge against either
specific transactions or portfolio positions (foreign currency exchange rate
risk). A foreign currency exchange contract is an agreement between two
parties to buy and sell a currency at a set exchange rate on a future date.
Foreign currency exchange contracts, when used by the Master LLC, help
to manage the overall exposure to the foreign currency backing some of
the investments held by the Master LLC. The contract is marked-to-market
daily and the change in market value is recorded by the Master LLC as an
unrealized gain or loss. When the contract is closed, the Master LLC records
a realized gain or loss equal to the difference between the value at the
time it was opened and the value at the time it was closed. The use of for-
eign currency exchange contracts involves the risk that counterparties may
not meet the terms of the agreement or unfavorable movements in the
value of a foreign currency relative to the US dollar.
Swaps: The Master LLC may enter into swap agreements, in which the
Master LLC and a counterparty agree to make periodic net payments on a
specified notional amount. These periodic payments received or made by
the Master LLC are recorded in the accompanying Statement of Operations
as realized gains or losses, respectively. Swaps are marked-to-market daily
and changes in value are recorded as unrealized appreciation (deprecia-
tion). When the swap is terminated, the Master LLC will record a realized
gain or loss equal to the difference between the proceeds from (or cost
of) the closing transaction and the Master LLCs basis in the contract, if
any. Swap transactions involve, to varying degrees, elements of interest
rate, credit and market risk in excess of the amounts recognized on the
Statement of Assets and Liabilities. Such risks involve the possibility that
there will be no liquid market for these agreements, that the counterparty
to the agreements may default on its obligation to perform or disagree
as to the meaning of the contractual terms in the agreements, and that
there may be unfavorable changes in interest rates and/or market values
associated with these transactions.
Credit default swaps The Master LLC may enter into credit default
swaps to manage its exposure to the market or certain sectors of the
market, to reduce its risk exposure to defaults of corporate and/or
sovereign issuers or to create exposure to corporate and/or sovereign
issuers to which it is not otherwise exposed (credit risk). The Master LLC
enters into credit default agreements to provide a measure of protec-
tion against the default of an issuer (as buyer of protection) and/or
gain credit exposure to an issuer to which it is not otherwise exposed
(as seller of protection). The Master LLC may either buy or sell (write)
credit default swaps on single-name issuers (corporate or sovereign)
or traded indexes. Credit default swaps on single-name issuers are
agreements in which the buyer pays fixed periodic payments to the
seller in consideration for a guarantee from the seller to make a
ruptcy, failure to pay, obligation accelerators, repudiation, moratorium or
restructuring). Credit default swaps on traded indexes are agreements
in which the buyer pays fixed periodic payments to the seller in consid-
eration for a guarantee from the seller to make a specific payment
should a write-down, principal or interest shortfall or default of all or
individual underlying securities included in the index occurs. As a buyer,
the Master LLC will either receive from the seller an amount equal to
the notional amount of the swap and deliver the referenced security or
underlying securities comprising of an index or receive a net settlement
of cash equal to the notional amount of the swap less the recovery
value of the security or underlying securities comprising of an index. As
a seller (writer), the Master LLC will either pay the buyer an amount
equal to the notional amount of the swap and take delivery of the refer-
enced security or underlying securities comprising of an index or pay a
net settlement of cash equal to the notional amount of the swap less
the recovery value of the security or underlying securities comprising
of an index.
Derivatives Not Accounted for as Hedging Instruments under Financial
Accounting Standards Board Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities
Master Senior Floating Rate LLC
Values of Derivative Instruments as of August 31, 2009*
Asset Derivatives
Liability Derivatives
Statement
Statement
of Assets and
of Assets and
Liabilities
Liabilities
Location
Value
Location
Value
Unrealized
Unrealized
appreciation
depreciation
on foreign
on foreign
currency
curency
Foreign currency exchange
exchange
exchange
contracts
contracts
$38,692
contracts
$239,614
Unrealized
depreciation
Credit contracts
on swaps
290,086
Total
$38,692
$529,700
* For open derivative instruments as of August 31, 2009, see the Schedule
of Investments, which is also indicative of activity for the year ended
August 31, 2009.
The Effect of Derivative Instruments on the Statement of Operations
Year Ended August 31, 2009
Net Realized Gain (Loss) From Derivatives Recognized in Income
Foreign
Currency
Exchange
Contracts
Swaps
Total
Foreign currency exchange
contracts
$ 719,893
$ 719,893
Credit contracts
$ 46,864
$ 46,864
Total
$ 719,893
$ 46,864
$ 766,757
Net Change in Unrealized Appreciation/Depreciation
on Derivatives Recognized in Income
Foreign
Currency
Exchange
Contracts
Swaps
Total
Foreign exchange
contracts
$ (858,335)
$ (858,335)
Credit contracts
$ (348,501)
$ (348,501)
Total
$ (858,335)
$ (348,501)
$(1,206,836)
The PNC Financial Services Group, Inc. (PNC) and Bank of America
Corporation (BAC) are the largest stockholders of BlackRock, Inc.
(BlackRock). BAC became a stockholder of BlackRock following its
acquisition of Merrill Lynch & Co., Inc. (Merrill Lynch) on January 1,
2009. Prior to that date, both PNC and Merrill Lynch were considered
affiliates of the Master LLC under the 1940 Act. Subsequent to the
acquisition, PNC remains an affiliate, but due to the restructuring of
Merrill Lynchs ownership interest of BlackRock, BAC is not deemed to be
an affiliate under the 1940 Act.
The Master LLC entered into an Investment Advisory Agreement with
BlackRock Advisors, LLC (the Manager), the Master LLCs investment
advisor, an indirect, wholly owned subsidiary of BlackRock, to provide
investment advisory and administration services.
The Manager is responsible for the management of the Master LLCs portfo-
lio and provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Master LLC. For such
services, the Master LLC pays the Manager a monthly fee at an annual rate
of 0.95% of the average daily value of the Master LLCs net assets.
The Manager has entered into a separate sub-advisory agreement with
BlackRock Financial Management, Inc. (BFM), an affiliate the Manager,
under which the Manager pays BFM for services it provides, monthly fee
that is a percentage of the investment advisory fee paid by the Master LLC
to the Manager.
The Manager has agreed to waive its advisory fee by the amount of invest-
ment advisory fees the Master LLC pays to the Manager indirectly through
its investment in affiliated money market funds. This amount is shown as
fees waived by advisor in the Statement of Operations.
For the year ended August 31, 2009, the Master LLC reimbursed the
Advisor $8,441 for certain accounting services, which are included in
accounting services in the Statement of Operations.
Certain officers and/or directors of the Master LLC are officers and/or
directors of BlackRock or its affiliates. The Master LLC reimburses the
Manager for compensation to the Master LLCs Chief Compliance Officer.
Purchases and sales (including paydowns) of investments, excluding
short-term securities, for the year ended August 31, 2009 were
$196,913,499 and $259,646,559, respectively.
5. Market and Credit Risk:
In the normal course of business, the Master LLC invests in securities and
enters into transactions where risks exist due to fluctuations in the market
(market risk) or failure of the issuer of a security to meet all its obligations
(credit risk). The value of securities held by the Master LLC may decline
in response to certain events, including those directly involving the issuers
whose securities are owned by the Master LLC; conditions affecting the
general economy; overall market changes; local, regional or global political,
social or economic instability; and currency and interest rate and price
fluctuations. Similar to credit risk, the Master LLC may be exposed to
counterparty risk, or the risk that an entity with which the Master LLC
has unsettled or open transactions may default. Financial assets, which
potentially expose the Master LLC to credit and counterparty risks, consist
principally of investments and cash due from counterparties. The extent
of the Master LLCs exposure to credit and counterparty risks with respect
to these financial assets is approximated by their value recorded in the
Master LLCs Statement of Assets and Liabilities.
6. Commitments:
The Master LLC may invest in floating rate loans. In connection with these
investments, the Master LLC may also enter into unfunded corporate loan
(commitments). Commitments may obligate the Master LLC to furnish
temporary financing to a borrower until permanent financing can be
arranged. In connection with these commitments, the Master LLC earns a
commitment fee, typically set as a percentage of the commitment amount.
Such fee income, which is classified in the Statement of Operations
as facility and other fees, is recognized ratably over the commitment
period. As of August 31, 2009 the Master LLC had the following unfunded
loan commitments:
Value of
Unfunded
Underlying
Commitment
Loan
Borrower
(000)
(000)
Big West Oil
$ 562
$ 517
Smurfit Corp.
$1,039
$ 971
Vought Aircraft Industries, Inc.
$2,185
$2,043
The Master LLC, along with certain other funds managed by the Manager
and its affiliates, is a party to a $500 million credit agreement with a
group of lenders, which expired November 2008 and was subsequently
renewed until November 2009. The Master LLC may borrow under the
purposes other than for leverage. The Master LLC may borrow up to the
maximum amount allowable under the Master LLCs current Prospectus
and Statement of Additional Information, subject to various other legal,
regulatory or contractual limits. The Master LLC paid its pro rata share of a
0.02% upfront fee on the aggregate commitment amount based on its net
assets as of October 31, 2008. The Master LLC pays a commitment fee of
0.08% per annum based on the Master LLCs pro rata share of the unused
portion of the credit agreement, which is included in miscellaneous in the
Statement of Operations. Amounts borrowed under the credit agreement
bear interest at a rate equal to the higher of (a) federal funds effective rate
and (b) reserve adjusted one month LIBOR, plus, in each case, the higher
of (i) 1.50% and (ii) 50% of the CDX Index (as defined in the credit agree-
ment) in effect from time to time. For the year ended August 31, 2009 the
daily weighted average interest rate was 2.00%.
8. Subsequent Events:
Management has evaluated the impact of all subsequent events on the
Master LLC through October 30, 2009, the date the financial statements
were issued, and has determined that there were no subsequent events
requiring adjustment or disclosure in the financial statements.
ANNUAL REPORT AUGUST 31, 2009 79
Floating Rate LLC:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Master Senior Floating Rate LLC
(the Master LLC) as of August 31, 2009, and the related statement of
operations for the year then ended, the statements of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These finan-
cial statements and financial highlights are the responsibility of the Master
LLCs management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial highlights are free of
material misstatement. The Master LLC is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting.
Our audits included consideration of internal control over financial report-
ing as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Master LLCs internal control over financial reporting.
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and signifi-
cant estimates made by management, as well as evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of August 31, 2009, by correspondence with the cus-
todian and financial intermediaries; where replies were not received from
financial intermediaries, we performed other auditing procedures. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Master Senior Floating Rate LLC as of August 31, 2009, the results of its
operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended, in conformity with account-
ing principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
October 30, 2009
a Board, and collectively, the Boards, and the members of which are
referred to as Board Members) of each of BlackRock Defined Opportunity
Credit Trust (BHL), BlackRock Diversified Income Strategies Fund, Inc.
(DVF), BlackRock Floating Rate Income Strategies Fund, Inc. (FRA),
BlackRock Limited Duration Income Trust (BLW, and together with BHL,
DVF, and FRA, each a Fund and, collectively, the Funds) and Master
Senior Floating Rate Fund LLC (the Master LLC) met on April 14, 2009
and May 28 29, 2009 to consider the approval of its respective funds
investment advisory agreement (each, an Advisory Agreement) with
BlackRock Advisors, LLC (the Manager), each funds investment advisor.
The Board of each of the Funds and the Master LLC also considered the
approval of the sub-advisory agreement (each, a Sub-Advisory Agreement)
between each such Fund or the Master LLC, as applicable, the Manager
and BlackRock Financial Management, Inc. (the Sub-Advisor). BlackRock
Senior Floating Rate Fund, Inc. (Senior Floating Rate) and BlackRock
Senior Floating Rate Fund II, Inc. (Senior Floating Rate II, and together
with Senior Floating Rate, each, a Feeder Fund and together, the Feeder
Funds) currently invest substantially all of their investable assets in the
Master LLC; accordingly, the Boards of each of the Feeder Funds also
considered the approval of the Advisory Agreement and the Sub-Advisory
Agreement between the Master LLC, the Manager and the Sub-Advisor. The
Feeder Funds do not require investment advisory services because all of
their investments are made at the Master LLC level.
The Manager and the Sub-Advisor are referred to herein as BlackRock.
The Advisory Agreements and the Sub-Advisory Agreements are referred
to herein as the Agreements. Unless otherwise indicated, references to
actions taken by the Board or the Boards shall mean each Board
acting independently with regard to its respective fund.
Activities and Composition of the Boards
Each Board consists of twelve individuals, ten of whom are not interested
persons of any of the Funds, the Feeder Funds or the Master LLC as
defined in the Investment Company Act of 1940, as amended (the 1940
Act) (the Independent Board Members). The Board Members of each
fund are responsible for the oversight of the operations of such fund and
perform the various duties imposed on the directors of investment com-
panies by the 1940 Act. The Independent Board Members have retained
independent legal counsel to assist them in connection with their duties.
The Chairman of each Board is an Independent Board Member. Each
Board has established five standing committees: an Audit Committee,
a Governance and Nominating Committee, a Compliance Committee,
a Performance Oversight Committee and an Executive Committee, each
of which is composed of Independent Board Members (except for the
Executive Committee, which has one interested Board Member) and is
chaired by an Independent Board Member. In addition, each Board has
established an Ad Hoc Committee on Auction Market Preferred Shares.
The Agreements
Pursuant to the 1940 Act, each Board is required to consider the
continuation of the Agreements on an annual basis. In connection
with this process, each Board assessed, among other things, the nature,
scope and quality of the services provided to its respective fund by the
ment, administrative and shareholder services, oversight of fund account-
ing and custody, marketing services and assistance in meeting applicable
legal and regulatory requirements.
Throughout the year, the Boards, acting directly and through their com-
mittees, consider at each of their meetings factors that are relevant to
their annual consideration of the renewal of the Agreements, including
the services and support provided by BlackRock to the funds and their
shareholders. Among the matters the Boards considered were: (a) invest-
ment performance for one-, three- and five-year periods, as applicable,
against peer funds, and applicable benchmarks, if any, as well as senior
management and portfolio managers analysis of the reasons for any out-
performance or underperformance against its peers; (b) fees, including
advisory fees, administration fees with respect to the Feeder Funds, and
other amounts paid to BlackRock and its affiliates by the funds for services
such as call center and fund accounting, and, in the case of the Feeder
Funds, transfer agency, marketing and distribution; (c) fund operating
expenses; (d) the resources devoted to, and compliance reports relating
to, the funds investment objectives, policies and restrictions, (e) the funds
compliance with their Codes of Ethics and compliance policies and proce-
dures; (f) the nature, cost and character of non-investment management
services provided by BlackRock and its affiliates; (g) BlackRocks and other
service providers internal controls; (h) BlackRocks implementation of the
proxy voting policies approved by the Boards; (i) execution quality of port-
folio transactions; (j) BlackRocks implementation of the funds valuation
and liquidity procedures; 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 its deliberations. The materials provided in connection with the April
meeting included (a) information independently compiled and prepared by
Lipper, Inc. (Lipper) on Fund and Feeder Fund fees and expenses, and
the investment performance of each Fund and Feeder Fund as compared
with a peer group of funds as determined by Lipper (collectively, Peers);
(b) information on the profitability of the Agreements to BlackRock and a
discussion of fall-out benefits to BlackRock and its affiliates and significant
shareholders; (c) a general analysis provided by BlackRock concerning
investment advisory fees charged to other clients, such as institutional
clients and open-end funds, under similar investment mandates, as well
as the performance of such other clients; (d) the impact of economies
of scale; (e) a summary of aggregate amounts paid by each Fund, each
Feeder Fund and the Master LLC to BlackRock and (f) an internal com-
parison of management fees classified by Lipper, if applicable.
At an in-person meeting held on April 14, 2009, each Board reviewed
materials relating to its consideration of the Agreements. As a result of the
discussions that occurred during the April 14, 2009 meeting, the Boards
presented BlackRock with questions and requests for additional informa-
tion and BlackRock responded to these requests with additional written
information in advance of the May 28 29, 2009 Board meeting.
the Independent Board Members, unanimously approved the continuation
of the Advisory Agreement between the Manager and its Fund or the Master
LLC, as applicable, and the Sub-Advisory Agreement between its Fund or
the Master LLC, as applicable, the Manager and the Sub-Advisor, each for
a one-year term ending June 30, 2010. The Board of Directors of each
Feeder Fund, including the Independent Board Members, also considered
the continuation of the Agreements with respect to the Master LLC and
found the Agreements to be satisfactory. The Boards considered all factors
they believed relevant with respect to the Funds and the Master LLC, includ-
ing, among other factors: (a) the nature, extent and quality of the services
provided by BlackRock; (b) the investment performance of the Funds, the
Feeder Funds and BlackRock portfolio management; (c) the advisory fee
and the cost of the services and profits to be realized by BlackRock and
certain affiliates from the relationship with the Funds, the Feeder Funds
and the Master LLC; (d) economies of scale; and (e) other factors.
Each Board also considered other matters it deemed important to the
approval process, such as services related to the valuation and pricing of
its respective Funds or the Master LLCs portfolio holdings, as applicable,
direct and indirect benefits to BlackRock and its affiliates and significant
shareholders from their relationship with such Fund, the Feeder Funds or
the Master LLC and advice from independent legal counsel with respect
to the review process and materials submitted for the 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 par-
ticular information as controlling, and each Board Member may have
attributed different weights to the various items considered.
A. Nature, Extent and Quality of the Services: Each Board, including its
Independent Board Members, reviewed the nature, extent and quality of
services provided by BlackRock, including the investment advisory services
and the resulting performance of its respective Fund, Feeder Fund, or the
Master LLC, as applicable. Throughout the year, each Board compared its
respective Funds or Feeder Funds performance to the performance of a
comparable group of closed-end funds, and the performance of at least
one relevant benchmark, if any. The Boards met with BlackRocks senior
management personnel responsible for investment operations, including
the senior investment officers. Each Board also reviewed the materials pro-
vided by its respective Funds or the Master LLCs 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 respec-
tive Funds or the Master LLCs portfolio management team, investments
by portfolio managers in the funds they manage, BlackRocks portfolio
trading capabilities, BlackRocks use of technology, BlackRocks commit-
ment to compliance and BlackRocks approach to training and retaining
portfolio managers and other research, advisory and management per-
sonnel. Each Board also reviewed a general description of BlackRocks
compensation structure with respect to its respective Funds or the Master
LLCs portfolio management team and BlackRocks ability to attract and
retain high-quality talent.
administrative and non-investment advisory services provided to its respec-
tive Fund, Feeder Fund or the Master LLC. BlackRock and its affiliates and
significant shareholders provide the Funds, the Feeder Funds and the
Master LLC with certain administrative services, in the case of the Feeder
Funds, transfer agency and shareholder services, and other services (in
addition to any such services provided to the funds by third parties) and
officers and other personnel as are necessary for the operations of the
funds. In addition to investment advisory services, BlackRock and its affili-
ates provide the Funds, the Feeder Funds and the Master LLC with other
services, including (i) preparing disclosure documents, such as the pros-
pectus and the statement of additional information in connection with the
initial public offering and periodic shareholder reports; (ii) preparing com-
munications with analysts to support secondary market trading of the funds;
(iii) assisting with daily accounting and pricing; (iv) preparing periodic filings
with regulators and stock exchanges; (v) overseeing and coordinating the
activities of other service providers; (vi) organizing Board meetings and
preparing the materials for such Board meetings; (vii) providing legal and
compliance support; and (viii) performing other administrative functions
necessary for the operation of the funds, such as tax reporting, fulfilling reg-
ulatory filing requirements, and call center services. The Boards reviewed the
structure and duties of BlackRocks fund administration, accounting, legal
and compliance departments and considered BlackRocks policies and pro-
cedures for assuring compliance with applicable laws and regulations.
B. The Investment Performance of the Funds and BlackRock: Each Board,
including its Independent Board Members, also reviewed and considered
the performance history of its respective Fund, Feeder Fund, or the Master
LLC, as applicable. In preparation for the April 14, 2009 meeting, each
Board was provided with reports, independently prepared by Lipper, which
included a comprehensive analysis of its respective Funds or Feeder
Funds performance. The Boards also reviewed a narrative and statistical
analysis of the Lipper data that was prepared by BlackRock, which ana-
lyzed various factors that affect Lippers rankings. In connection with its
review, each Board received and reviewed information regarding the invest-
ment performance of its respective Fund or Feeder Fund as compared to
a representative group of similar funds as determined by Lipper and to
all funds in such Funds or Feeder Funds applicable Lipper category. Each
Board was provided with a description of the methodology used by Lipper
to select peer funds. Each Board regularly reviews the performance of its
respective Fund, Feeder Fund, or the Master LLC throughout the year.
The Board of each of FRA, BLW and Senior Floating Rate I noted that, in
general, FRA, BLW and Senior Floating Rate I performed better than their
respective Peers in that the performance of each of FRA, BLW and Senior
Floating Rate I was at or above the median of its respective Lipper perform-
ance universe in each of the one-, three- and five-year periods reported.
The Board of BHL noted that, in general, BHL performed better than its
Peers in that BHLs performance was at or above the median of its Lipper
performance universe in the since inception period reported.
The Board of Senior Floating Rate II noted that although Senior Floating
Rate II underperformed its Peers in at least two of the one-, three- and five-
year periods reported, such underperformance was not greater than 10% of
that BlackRock was committed to providing the resources necessary to
assist the portfolio managers and to continue improving Senior Floating
Rate IIs performance. Based on its review, the Board generally was satis-
fied with BlackRocks efforts to manage Senior Floating Rate II.
The Board of DVF noted that DVF performed below the median of its Lipper
performance universe in the one-year, three-year and since inception peri-
ods reported. The Board and BlackRock reviewed the reasons for DVFs
underperformance during these periods compared with its Peers. The Board
was informed that, among other things, DVFs credit allocation for most of
the period was overweight CCC and B and underweight BB. Since lower
quality credits underperformed higher quality during the period, this nega-
tively impacted performance.
For DVF, the Board and BlackRock discussed BlackRocks commitment to
providing the resources necessary to assist the portfolio managers and to
improve DVFs performance.
C. Consideration of the Advisory Fees and the Cost of the Services
and Profits to be Realized by BlackRock and its Affiliates from their
Relationship with the Fund: Each Board, including its Independent Board
Members, reviewed its respective Funds or the Master LLCs contractual
advisory fee rates compared with the other funds in its Lipper category.
Each Board also compared its respective Funds or the Feeder Funds total
expenses, as well as actual management fees, to those of other compa-
rable funds. Each Board considered the services provided and the fees
charged by BlackRock to other types of clients with similar investment
mandates, including separately managed institutional accounts.
The Boards received and reviewed statements relating to BlackRocks finan-
cial condition and profitability with respect to the services it provided the
Funds and the Master LLC. The Boards were also provided with a profitability
analysis that detailed the revenues earned and the expenses incurred by
BlackRock for services provided to the Funds, the Feeder Funds and the
Master LLC. The Boards reviewed BlackRocks profitability with respect to the
Funds and the Master LLC and other funds the Boards currently oversee for
the year ended December 31, 2008 compared to available aggregate prof-
itability data provided for the year ended December 31, 2007. The Boards
reviewed BlackRocks profitability with respect to other fund complexes man-
aged 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 business
mix, and therefore comparability of profitability is somewhat limited.
The Boards noted that, in general, individual fund or product line profitability
of other advisors is not publicly available. Nevertheless, to the extent such
information is available, the Boards considered BlackRocks overall operat-
ing margin compared to the operating margin for leading investment man-
agement firms whose operations include advising closed-end funds, among
other product types. The comparison indicated that operating margins for
BlackRock with respect to its registered funds are generally consistent with
tion, 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, the Feeder Funds and the Master LLC by BlackRock, and
BlackRocks and its affiliates profits relating to the management and dis-
tribution of the Funds, the Feeder Funds and the Master LLC and the other
funds advised by BlackRock and its affiliates. As part of its analysis, the
Boards reviewed BlackRocks methodology in allocating its costs to the
management of the funds. The Board also considered whether BlackRock
has the financial resources necessary to attract and retain high quality
investment management personnel to perform its obligations under the
Agreements and to continue to provide the high quality of services that
is expected by the Boards.
The Board of each of DVF, FRA and BLW noted that its respective Fund paid
contractual management fees, which do not take into account any expense
reimbursement or fee waivers, lower than or equal to the median contrac-
tual management fees paid by such Funds Peers.
The Board of Senior Floating Rate I noted that, although Senior Floating
Rate I paid contractual management fees higher than the median of its
Peers, its actual total expenses were lower than or equal to the median of
its Peers.
The Board of Senior Floating Rate II noted that, although Senior Floating Rate
II paid contractual management fees higher than the median of its Peers, its
actual total expenses were within 5% of the actual total expense median.
The Board of BHL noted that BHL pays contractual management fees that
are higher than the median of its Peers and considered this higher fee in
light of the quality of services provided by the Manager and the investment
objectives and policies of BHL. The Board also noted that BHL is included
in a Lipper Peer group where most funds commenced operations between
6 and 10 years ago. There are 3 Peer funds that were offered recently and
are more appropriate funds for comparison as they contain a more appro-
priate pricing structure for bank loan products offered in the current market
environment. These recently offered funds are similar portfolios that are
being offered to take advantage of current market opportunities. BHL is
competitive when compared to these 3 Peer funds.
D. Economies of Scale: Each Board, including its Independent Board
Members, considered the extent to which economies of scale might be
realized as the assets of its respective Fund or the Master LLC increase
and whether there should be changes in the advisory fee rate or structure
in order to enable such Fund or the Master LLC to participate in these
economies of scale, for example through the use of breakpoints in the
advisory fee based upon the assets of such Fund or the Master LLC, as
applicable. The Boards considered that the funds in the BlackRock fund
complex share some common resources and, as a result, an increase in
the overall size of the complex could permit each fund to incur lower
expenses than it would otherwise as a stand-alone entity. The Boards
the scale of, and improve the quality of, its operations.
The Boards noted that most closed-end fund complexes do not have fund
level breakpoints because closed-end funds generally do not experience
substantial growth after the initial public offering and each fund is man-
aged independently consistent with its own investment objectives. The
Boards noted that only one closed-end fund in the Fund Complex has
breakpoints in its fee structure. Information provided by Lipper also
revealed that only one closed-end fund complex used a complex-level
breakpoint structure.
E. Other Factors: The Boards also took into account other ancillary or fall-
out benefits that BlackRock or its affiliates and significant shareholders
may derive from their relationship with the Funds, the Feeder Funds and
the Master LLC, both tangible and intangible, such as 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 affiliates and significant shareholders as
service providers to the Funds, the Feeder Funds and the Master LLC,
including for administrative, and in the case of the Feeder Funds transfer
agency, and distribution services. The Boards also noted that BlackRock
may use third-party research obtained by soft dollars generated by certain
mutual fund transactions to assist itself in managing all or a number of
its other client accounts.
In connection with their consideration of the Agreements, the Boards also
received information regarding 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 or the Master LLC and the Manager for a one-year term ending
June 30, 2010 and, as applicable, the Sub-Advisory Agreement between
such Fund or the Master LLC, the Manager and Sub-Advisor for a one-year
term ending June 30, 2010. Based upon its evaluation of all these factors
in their totality, each Board, including its Independent Board Members,
was satisfied that the terms of the Agreements were fair and reasonable
and in the best interest of its respective Fund or the Master LLC and its
shareholders. The Board of Directors of each Feeder Fund, including the
Independent Board Members, also considered the continuation of the
Agreements with respect to the Master LLC and found the Agreements to
be satisfactory. In arriving at a decision to approve the Agreements, each
Board did not identify any single factor or group of factors as all-important
or controlling, but considered all factors together, and different Board
Members may have attributed different weights to the various factors
considered. The Independent Board Members were also assisted by the
advice of independent legal counsel in making this determination. The
contractual fee arrangements for each Fund or the Master LLC reflects
the results of several years of review by such Funds and the Master LLCs
Board Members and predecessor Board Members, as applicable, and dis-
cussions between such Board Members (and predecessor Board Members)
and BlackRock. Certain aspects of the arrangements may be the subject
of more attention in some years than in others, and the Board Members
conclusions may be based in part on their consideration of these arrange-
ments in prior years.
How the Plan Works The Funds offer a Dividend Reinvestment Plan
(the Plan) under which income and capital gains dividends paid by
a Fund are automatically reinvested in additional Common Shares of the
Fund. The Plan is administered on behalf of the shareholders by BNY
Mellon Shareowner Services for Senior Floating Rate and Senior Floating
Rate II and Computershare Trust Company, N.A. for BHL, DVF, FRA and BLW
(individually, the Plan Agent or together, the Plan Agents). Under the Plan,
whenever a Fund declares a dividend, participants in the Plan will receive
the equivalent in Common Shares of the Fund. The Plan Agents will acquire
the shares for the 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 commis-
sions (a condition often referred to as a market premium), the Plan
Agents will invest the dividend amount in newly issued shares. If the Funds
net asset value per share is greater than the market price per share (a con-
dition often referred to as a market discount), the Plan Agents will invest
the dividend amount by purchasing on the open market additional shares.
If the Plan Agents are unable to invest the full dividend amount in open
market purchases, or if the market discount shifts to a market premium
during the purchase period, the Plan Agents will invest any uninvested por-
tion in newly issued shares. The shares acquired are credited to each
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 Participation in the Plan is automatic, that
is, a shareholder is automatically enrolled in the Plan when he or she pur-
chases shares of Common Shares of the Funds unless the shareholder
specifically elects not to participate in the Plan. Shareholders who elect not
to participate will receive all dividend distributions in cash. Shareholders
who do not wish to participate in the Plan must advise their Plan Agent in
writing (at the address set forth below) that they elect not to participate
in the Plan. Participation in the Plan is completely voluntary and may
be terminated or resumed at any time without penalty by writing to the
Plan Agent.
shareholders to make additional, regular investments in the Funds.
The Plan promotes a long-term strategy of investing at a lower cost. All
shares acquired pursuant to the Plan receive voting rights. In addition, if
the market price plus commissions of a 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 available in the market to make
distributions in shares at prices below the net asset value. Also, since the
Funds do not redeem shares, the price on resale may be more or less than
the net asset value.
Plan Fees There are no enrollment fees or brokerage fees for
participating in the Plan. The Plan Agents service fees for handling the
reinvestment of distributions are paid for by the Funds. However, broker-
age commissions may be incurred when the Funds purchase shares on
the open market and shareholders will pay a pro rata share of any
such commissions.
Tax Implications The automatic reinvestment of dividends and distribu-
tions will not relieve participants of any federal, state or local income tax
that may be payable (or required to be withheld) on such dividends.
Therefore, income and capital gains may still be realized even though
shareholders do not receive cash. If, when the Funds shares are trading at
a market premium, the Funds issue shares pursuant to the Plan that have
a greater fair market value than the amount of cash reinvested, it is possi-
ble that all or a portion of the discount from the market value (which may
not exceed 5% of the fair market value of the Funds shares) could be
viewed as a taxable distribution. If the discount is viewed as a taxable dis-
tribution, it is also possible that the taxable character of this discount
would be allocable to all the shareholders, including shareholders who do
not participate in the Plan. Thus, shareholders who do not participate in the
Plan might be required to report as ordinary income a portion of their dis-
tributions equal to their allocable share of the discount.
Contact Information All correspondence concerning the Plan, including
any questions about the Plan, should be directed to the Plan Agent at
the following addresses: Shareholders of Senior Floating Rate and Senior
Floating Rate II should contact BNY Mellon Shareowner Services, P.O. Box
385035, Pittsburgh, PA 15252-8035 Telephone: (866) 216-0242 and
shareholders of BHL, DVF, FRA and BLW should contact Computershare Trust
Company, N.A., P.O. Box 43078, Providence, RI 02940-3078 Telephone:
(800) 699-1BFM or overnight correspondence should be directed to the
Plan Agent at 250 Royall Street, Canton, MA 02021.
Officers and Directors
Number of BlackRock-
Advised Registered
Position(s)
Length
Investment Companies
Held with
of Time
(RICs) Consisting of
Name, Address
Funds/
Served as
Investment Portfolios
Public
and Year of Birth
Master LLC
a Director2
Principal Occupation(s) During Past 5 Years
(Portfolios) Overseen
Directorships
Non-Interested Directors1
Richard E. Cavanagh
Chairman
Since
Trustee, Aircraft Finance Trust since 1999; Director, The Guardian
104 RICS consisting of
Arch Chemical
40 East 52nd Street
of the Board
2007
Life Insurance Company of America since 1998; Trustee, Educational
101 Portfolios
(chemical and allied
New York, NY 10022
and Director
Testing Service from 1997 to 2009 and Chairman from 2005 to 2009
products)
1946
Senior Advisor, The Fremont Group since 2008 and Director thereof
since 1996; Adjunct Lecturer, Harvard University since 2007; President
and Chief Executive Officer of The Conference Board, Inc. (global
business research organization) from 1995 to 2007.
Karen P. Robards
Vice Chair of
Since
Partner of Robards & Company, LLC (financial advisory firm) since
104 RICs consisting of
AtriCure, Inc.
40 East 52nd Street
the Board,
2007
1987; Co-founder and Director of the Cooke Center for Learning and
101 Portfolios
(medical devices);
New York, NY 10022
Chair of
Development, (a not-for-profit organization) since 1987; Director of
Care Investment
1950
the Audit
Enable Medical Corp. from 1996 to 2005.
Trust, Inc. (health
Committee
care real estate
and Director
investment trust)
G. Nicholas Beckwith, III
Director
Since
Chairman and Chief Executive Officer, Arch Street Management, LLC
104 RICs consisting of
None
40 East 52nd Street
2007
(Beckwith Family Foundation) and various Beckwith property companies
101 Portfolios
New York, NY 10022
since 2005; Chairman of the Board of Directors, University of Pittsburgh
1945
Medical Center since 2002; Board of Directors, Shady Side Hospital
Foundation since 1977; Board of Directors, Beckwith Institute for
Innovation In Patient Care since 1991; Member, Advisory Council on
Biology and Medicine, Brown University since 2002; Trustee, Claude
Worthington Benedum Foundation (charitable foundation) since 1989;
Board of Trustees, Chatham University since 1981; Board of Trustees,
University of Pittsburgh since 2002; Emeritus Trustee, Shady Side
Academy since 1977; Chairman and Manager, Penn West Industrial
Trucks LLC (sales, rental and servicing of material handling equipment)
from 2005 to 2007; Chairman, President and Chief Executive Officer,
Beckwith Machinery Company (sales, rental and servicing of construction
and equipment) from 1985 to 2005; Member of the Board of Directors,
National Retail Properties (REIT) from 2006 to 2007.
Kent Dixon
Director and
Since
Consultant/Investor since 1988.
104 RICs consisting of
None
40 East 52nd Street
Member of
2007
101 Portfolios
New York, NY 10022
the Audit
1937
Committee
Frank J. Fabozzi
Director and
Since
Consultant/Editor of The Journal of Portfolio Management since 2006;
104 RICs consisting of
None
40 East 52nd Street
Member of
2007
Professor in the Practice of Finance and Becton Fellow, Yale University,
101 Portfolios
New York, NY 10022
the Audit
School of Management, since 2006; Adjunct Professor of Finance
1948
Committee
and Becton Fellow, Yale University from 1994 to 2006.
Kathleen F. Feldstein
Director
Since
President of Economics Studies, Inc. (private economic consulting
104 RICs consisting of
The McClatchy
40 East 52nd Street
2007
firm) since 1987; Chair, Board of Trustees, McLean Hospital from
101 Portfolios
Company
New York, NY 10022
2000 to 2008 and Trustee Emeritus thereof since 2008; Member of
(publishing)
1941
the Board of Partners Community Healthcare, Inc. since 2005;
Member of the Corporation of Partners HealthCare since 1995;
Trustee, Museum of Fine Arts, Boston since 1992; Member of the
Visiting Committee to the Harvard University Art Museum since 2003.
James T. Flynn
Director and
Since
Chief Financial Officer of JP Morgan & Co., Inc. from 1990 to 1995.
104 RICs consisting of
None
40 East 52nd Street
Member of
2007
101 Portfolios
New York, NY 10022
the Audit
1939
Committee
Jerrold B. Harris
Director
Since
Trustee, Ursinus College since 2000; Director, Troemner LLC
104 RICs consisting of
BlackRock Kelso
40 East 52nd Street
2007
(scientific equipment)since 2000.
101 Portfolios
Capital Corp.
New York, NY 10022
1942
86
ANNUAL REPORT
AUGUST 31, 2009
Officers and Directors (continued)
Number of BlackRock-
Advised Registered
Position(s)
Length
Investment Companies
Held with
of Time
(RICs) Consisting of
Name, Address
Funds/
Served as
Investment Portfolios
Public
and Year of Birth
Master LLC
a Director2
Principal Occupation(s) During Past 5 Years
(Portfolios) Overseen
Directorships
Non-Interested Directors1
(concluded)
R. Glenn Hubbard
Director
Since
Dean, Columbia Business School since 2004; Columbia faculty
104 RICs consisting of
ADP (data and
40 East 52nd Street
2007
member since 1988; Co-Director, Columbia Business Schools
101 Portfolios
information services),
New York, NY 10022
Entrepreneurship Program from 1997 to 2004; Visiting Professor,
KKR Financial
1958
John F. Kennedy School of Government at Harvard University and the
Corporation (finance),
Harvard Business School since 1985 and at the University of Chicago
Metropolitan Life
since 1994; Chairman, U.S. Council of Economic Advisers under the
Insurance Company
President of the United States from 2001 to 2003.
(insurance)
W. Carl Kester
Director
Since
George Fisher Baker Jr. Professor of Business Administration, Harvard
104 RICs consisting of
None
40 East 52nd Street
2007
Business School; Deputy Dean for Academic Affairs, since 2006; Unit
101 Portfolios
New York, NY 10022
Head, Finance, Harvard Business School, from 2005 to 2006; Senior
1951
Associate Dean and Chairman of the MBA Program of Harvard Business
School, from 1999 to 2005; Member of the faculty of Harvard Business
School since 1981; Independent Consultant since 1978.
1 Directors serve until their resignation, removal or death, or until December 31 of the
year in which they turn 72.
2 Date shown is the earliest date a person has served as a director for the Funds and
Master LLC covered by this annual report. Following the combination
of Merrill Lynch Investment Managers, L.P. (MLIM) and BlackRock, Inc. (BlackRock) in September 2006, the various legacy MLIM and legacy
BlackRock
Fund boards were realigned and consolidated into three new Fund boards in 2007. As a result, although the chart shows directors as joining the
Funds/
Master LLCs board in 2007, each director first became a member of the board of directors of other legacy MLIM or legacy BlackRock Funds as follows:
G.
Nicholas Beckwith, III, 1999; Richard E. Cavanagh, 1994; Kent Dixon, 1988; Frank J. Fabozzi, 1988; Kathleen F. Feldstein, 2005; James T. Flynn, 1996;
Jerrold B. Harris, 1999; R. Glenn Hubbard, 2004; W. Carl Kester, 1995 and Karen P. Robards, 1998.
Interested Directors3
Richard S. Davis
President
Since
Managing Director, BlackRock, Inc. since 2005; Chief Executive Officer, State Street
173 RICs
None
40 East 52nd Street
and
2007
Research & Management Company from 2000 to 2005; Chairman of the Board
consisting of
New York, NY 10022
Director
of Trustees, State Street Research Mutual Funds from 2000 to 2005; Chairman,
283 Portfolios
1945
SSR Realty from 2000 to 2004.
Henry Gabbay
Director
Since
Consultant, BlackRock, Inc. from 2007 to 2008; Managing Director, BlackRock,
173 RICs
None
40 East 52nd Street
2007
Inc. from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC
consisting of
New York, NY 10022
from 1998 to 2007; President of BlackRock Funds and BlackRock Bond
283 Portfolios
1947
Allocation Target Shares from 2005 to 2007; Treasurer of certain closed-end
funds in the BlackRock fund complex from 1989 to 2006.
3 Mr. Davis is an interested person, as defined in the Investment Company Act
of 1940, of the Funds/Master LLC based on his position with BlackRock,
Inc. and its affiliates. Mr. Gabbay is an interested person of the Funds/Master LLC based on his former positions with BlackRock, Inc. and its
affiliates
as well as his ownership of BlackRock, Inc. and PNC Securities. Directors serve until their resignation, removal or death, or until December 31 of the
year
in which they turn 72.
ANNUAL REPORT
AUGUST 31, 2009
87
Officers and Directors (concluded)
Position(s)
Held with
Name, Address
Funds/
Length of
and Year of Birth
Master LLC
Time Served Principal Occupation(s) During Past 5 Years
Funds/Master LLC Officers1
Anne F. Ackerley
President
Since
Managing Director of BlackRock, Inc. since 2000; Vice President of the BlackRock-advised funds from 2007 to 2009;
40 East 52nd Street
and Chief
2009
Chief Operating Officer of BlackRocks Account Management Group (AMG) since 2009; Chief Operating Officer of
New York, NY 10022
Executive
BlackRocks 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/Master LLC serve at the pleasure of the Board of
Directors.
Investment Advisor
Custodians
Transfer Agent
Accounting Agent
Independent
Legal Counsel
BlackRock Advisors, LLC
State Street Bank
Common Shares
State Street Bank
Registered Public
Skadden, Arps, Slate,
Wilmington, DE 19809
and Trust Company2
Computershare Trust Company, N.A.2
and Trust Company
Accounting Firm
Meagher & Flom LLP
Boston, MA 02101
Providence, RI 02940
Princeton, NJ 08540
Deloitte & Touche LLP
New York, NY 10036
Sub-Advisor
Princeton, NJ 08540
BlackRock Financial
The Bank of
PNC Global Investment
Address of the Funds
Management, Inc
New York Mellon3
Servicing (U.S.) Inc.3
100 Bellevue Parkway
New York, NY 10022
New York, NY 10286
Wilmington, DE 19809
Wilmington, DE 19809
2 For BHL, DVF, FRA, and BLW.
3 For Senior Floating Rate and Senior Floating Rate II.
Funds and Master LLCs Board of Directors wish Mr. Burke well in his retirement.
Effective August 1, 2009, Anne F. Ackerley became President and Chief Executive Officer of the Funds and Master LLC, and
Brendan Kyne became Vice President of the Funds and Master LLC.
Additional Information
Proxy Results
The Annual Meeting of Shareholders was held on August 26, 2009 for shareholders of record on June 29, 2009, to elect director nominees of each Fund:
Approved the Directors as follows:
G. Nicholas Beckwith, III
Richard E. Cavanagh
Richard S. Davis
Votes
Votes
Votes
Votes For
Withheld
Votes For
Withheld
Votes For
Withheld
DVF
9,155,029
373,970
9,156,729
372,270
9,156,729
372,270
FRA
14,645,169
164,452
14,648,802
160,819
14,632,612
177,009
Kent Dixon
Frank J. Fabozzi
Kathleen F. Feldstein
Votes
Votes
Votes
Votes For
Withheld
Votes For
Withheld
Votes For
Withheld
DVF
9,143,906
385,093
9,155,129
373,870
9,214,394
314,605
FRA
14,621,624
187,997
14,662,972
146,649
14,627,697
181,924
James T. Flynn
Henry Gabbay
Jerrold B. Harris
Votes
Votes
Votes
Votes For
Withheld
Votes For
Withheld
Votes For
Withheld
DVF
9,144,616
384,383
9,157,685
371,314
9,153,500
375,499
FRA
14,647,862
161,759
14,632,690
176,931
14,643,243
166,378
R. Glenn Hubbard
W. Carl Kester
Karen P. Robards
Votes
Votes
Votes
Votes For
Withheld
Votes For
Withheld
Votes For
Withheld
DVF
9,132,619
396,380
9,144,844
384,155
9,215,478
313,521
FRA
14,658,263
151,358
14,647,982
161,639
14,620,093
189,528
Approved the Class II Directors/Trustees as follows:
Richard S. Davis
Frank J. Fabozzi
James T. Flynn
Votes
Votes
Votes
Votes For
Withheld
Votes For
Withheld
Votes For
Withheld
BHL
8,275,596
252,027
8,275,596
252,027
8,174,587
353,036
BLW
32,281,241
701,401
32,281,241
701,401
32,257,346
725,296
Karen P. Robards
Votes
Votes For
Withheld
BHL
8,262,061
265,562
BLW
32,228,618
754,024
Certain Funds are listed for trading on the New York Stock Exchange
(NYSE) and have filed with the NYSE their annual chief executive officer
certification regarding compliance with the NYSEs listing standards. The
chief financial officer required by section 302 of the Sarbanes-Oxley Act.
Each Funds dividend policy is to distribute all or a portion of its net invest-
ment income to its shareholders on a monthly basis. In order to provide
shareholders with a more stable level of dividend distributions, the Funds
may at times pay out less than the entire amount of net investment income
earned in any particular month and may at times in any particular month
pay out such accumulated but undistributed income in addition to net
by the Funds for any particular month may be more or less than the
amount of net investment income earned by the Funds during such month.
The Funds current accumulated but undistributed net investment income,
if any, is disclosed in the Statements of Assets and Liabilities, which com-
prises part of the financial information included in this report.
General Information
The Funds do not make available copies of their Statements of Additional
Information because the Funds shares are not continuously offered, which
means that the Statement of Additional Information of each Fund has not
been updated after completion of the respective Funds offerings and the
information contained in each Funds Statement of Additional Information
may have become outdated.
During the period, there were no material changes in the Funds investment
objectives or policies or to the Funds charters or by-laws that were not
approved by their shareholders or in the principal risk factors associated
with investment in the Funds. Changes regarding the persons who are pri-
marily responsible for the day-to-day management for the Funds portfolios
are noted in the boxed text below.
Quarterly performance, semi-annual and annual reports and other informa-
tion regarding the Funds may be found on 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.
The Funds will mail only one copy of shareholder documents, including
annual and semi-annual reports and proxy statements, to shareholders
with multiple accounts at the same address. This practice is commonly
called householding and it is intended to reduce expenses and eliminate
duplicate mailings of shareholder documents. Mailings of your shareholder
documents may be householded indefinitely unless you instruct us other-
wise. If you do not want the mailing of these documents to be combined
with those for other members of your household, please contact the Funds
at (800) 441-7762.
Availability of Quarterly Schedule of Investments
Each Fund files its complete schedule of portfolio holdings with the SEC
for the first and third quarters of each fiscal year on Form N-Q. The Funds
Forms N-Q are available on the 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
determine how to vote proxies relating to portfolio securities is available
(1) without charge, upon request, by calling toll-free (800) 441-7762;
(2) at www.blackrock.com; and (3) on the Securities and Exchange
Commissions website at http://www.sec.gov.
Availability of Proxy Voting Record
Information about how the Funds voted proxies relating to securities
held in the Funds portfolios during the most recent 12-month period
ended June 30 is available upon request and without charge (1) at
www.blackrock.com or by calling (800) 441-7762 and (2) on the
Securities and Exchange Commissions website at http://www.sec.gov.
The portfolio managers are primarily responsible for the day-to-day management of the Funds portfolios. Effective May 8,
2009, Leland T. Hart, James E. Keenan and C. Adrian Marshall are the portfolio managers for BHL, BLW and DVF. Leland T.
Hart and C. Adrian Marshall are the portfolio managers for FRA, Senior Floating Rate and Senior Floating Rate II.
Mr. Hart is Managing Director of BlackRock, Inc. since 2009; Partner of R3 Capital Partners in 2009 and Managing
Director thereof from 2008 to 2009; Managing Director of Lehman Brothers from 2006 to 2008 and Executive Director
thereof from 2003 to 2006.
Mr. Keenan is Managing Director of BlackRock, Inc. since 2008 and Director thereof from 2004 to 2008; Head of the
Leveraged Finance Portfolio team; and senior high yield trader at Columbia Management Group from 2003 to 2004.
Mr. Marshall is Director of BlackRock, Inc. since 2007 and Vice President thereof from 2004 to 2007.
Section 19 Notices
The amounts and sources of distributions reported are only estimates and
are not being provided for tax reporting purposes. The actual amounts and
sources for tax reporting purposes will depend upon each Funds invest-
ment experience during the year and may be subject to changes based on
dar year that will tell you how to report these distributions for federal
income tax purposes.
Total Cumulative Distributions
% Breakdown of the Total Cumulative
for the Fiscal Year-to-Date
Distributions for the Fiscal Year-to-Date
Net
Net Realized
Total Per
Net
Net Realized
Total Per
Investment
Capital
Return of
Common
Investment
Capital
Return of
Common
Income
Gains
Capital
Share
Income
Gains
Capital
Share
BHL
$0.795949
$0.306551
$1.102500
72%
0%
28%
100%
DVF
$1.080595
$0.296905
$1.377500
78%
0%
22%
100%
FRA
$1.209873
$0.091341
$1.301214
93%
0%
7%
100%
BLW
$0.958695
$0.201334
$1.160029
83%
0%
17%
100%
Senior Floating Rate
$0.376591
$0.007176
$0.383768
98%
0%
2%
100%
Senior Floating Rate II.
$0.399235
$0.006780
$0.406016
98%
0%
2%
100%
BlackRock is committed to maintaining the privacy of its current and for-
mer fund investors and individual clients (collectively, Clients) and to
safeguarding their non-public personal information. The following informa-
tion is provided to help you understand what personal information
BlackRock collects, how we protect that information and why in certain
cases we share such information with select parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and
about you from different sources, including the following: (i) information we
receive from you or, if applicable, your financial intermediary, on applica-
tions, forms or other documents; (ii) information about your transactions
with us, our affiliates, or others; (iii) information we receive from a consumer
reporting agency; and (iv) from visits to our websites.
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.
tation of future performance. BlackRock Defined Opportunity Credit Trust, BlackRock Diversified Income Strategies Fund, Inc., BlackRock Floating Rate
Income Strategies Fund, Inc., BlackRock Limited Duration Income Trust, BlackRock Senior Floating Rate Fund, Inc. and BlackRock Senior Floating Rate
Fund II, Inc. leverage their Common Shares, which creates risk for Common Shareholders, including the likelihood of greater volatility of net asset value and
market price of Common Shares, and the risk that fluctuations in short-term interest rates may reduce the Common Shares yield. Statements and other
information herein are as dated and are subject to change.
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 Floating
Rate Income
$49,300
$46,300
$0
$8,000
$6,100
$6,100
$1,028
$1,049
Strategies Fund, Inc.
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 Floating Rate
$414,628
$420,149
Income Strategies Fund, Inc.
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.
2009.
(a)(1) The registrant (or Fund) is managed by a team of investment professionals
comprised of Leland Hart, Managing Director at BlackRock and C. Adrian Marshall,
Director at BlackRock. Messrs. Hart and Marshall are the Funds co-portfolio managers and
are responsible for the day-to-day management of the Funds portfolio and the selection of
its investments. Messrs. Hart and Marshall have been members of the Funds management
team since 2009.
Portfolio Manager
Biography
Leland Hart
Managing Director of BlackRock, Inc. since 2009; Partner of R3 Capital
Partners ("R3") in 2009; Managing Director of R3 in 2008 - 2009; Managing
Director of Lehman Brothers from 2006 - 2008; Executive Director of Lehman
Brothers from 2003 - 2006.
C. Adrian Marshall
Director of BlackRock, Inc. since 2007; Vice President of BlackRock, Inc.
from 2004 - 2007.
(a)(2) As of August 31, 2009:
(ii) Number of Other Accounts Managed
(iii) Number of Other Accounts and
and Assets by Account Type
Assets for Which Advisory Fee is
Performance-Based
Other
Other Pooled
Other
Other Pooled
(i) Name of
Registered
Investment
Other
Registered
Investment
Other
Portfolio Manager
Investment
Vehicles
Accounts
Investment
Vehicles
Accounts
Companies
Companies
Leland Hart
8
1
0
0
0
0
$2.21 Billion
$36.6 Million
$0
$0
$0
$0
C. Adrian Marshall
8
15
6
0
10
0
$2.21 Billion
$4.23 Billion
$1.06 Billion
$0
$3.48 Billion
$0
(iv) Potential Material Conflicts of Interest
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
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
shareholders or the officers, directors and employees of any of them has any substantial
economic interest or possesses material non-public information. Each portfolio manager
also may manage accounts whose investment strategies may at times be opposed to the
strategy utilized for a fund. In this connection, it should be noted that Mr. Marshall
currently manages certain accounts that are subject to performance fees. In addition, a
portfolio manager may assist in managing certain hedge funds and may be entitled to
receive a portion of any incentive fees earned on such funds and a portion of such incentive
fees may be voluntarily or involuntarily deferred. Additional portfolio managers may in the
future manage other such accounts or funds and may be entitled to receive incentive fees.
As a fiduciary, BlackRock owes a duty of loyalty to its clients and must treat each client
fairly. When BlackRock purchases or sells securities for more than one account, the trades
must be allocated in a manner consistent with its fiduciary duties. BlackRock attempts to
allocate investments in a fair and equitable manner among client accounts, with no account
receiving preferential treatment. To this end, BlackRock has adopted a policy that is
intended to ensure that investment opportunities are allocated fairly and equitably among
client accounts over time. This policy also seeks to achieve reasonable efficiency in client
transactions and provide BlackRock with sufficient flexibility to allocate investments in a
manner that is consistent with the particular investment discipline and client base.
(a)(3) As of August 31, 2009:
Portfolio Manager Compensation Overview
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 and Restricted Stock
Program.
Base compensation. Generally, portfolio managers receive base compensation based on
their seniority and/or their position with the firm. Senior portfolio managers who perform
additional management functions within the portfolio management group or within
BlackRock may receive additional compensation for serving in these other capacities.
Discretionary Incentive Compensation
Discretionary incentive compensation is a function of several components: the performance
of BlackRock, Inc., the performance of the portfolio 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.
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 managers, such benchmarks for the
Fund include a combination of market-based indices (e.g., CSFB Leveraged Loan Index),
certain customized indices and certain fund industry peer groups.
BlackRocks Chief Investment Officers make a subjective determination with respect to the
portfolio managers compensation based on the performance of the funds and other accounts
managed by each portfolio manager relative to the various benchmarks noted above.
Performance is measured on both a pre-tax and after-tax basis over various time periods
including 1, 3, 5 and 10-year periods, as applicable.
Distribution of Discretionary Incentive Compensation
Discretionary incentive compensation is distributed to portfolio managers in a combination
of cash and BlackRock, Inc. restricted stock units which vest ratably over a number of
years. The BlackRock, Inc. restricted stock units, if properly vested, will be settled in
BlackRock, Inc. common stock. Typically, the cash bonus, when combined with base
salary, represents more than 60% of total compensation for the portfolio managers. Paying
a portion of annual bonuses in stock puts compensation earned by a portfolio manager for a
given year at risk based on 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. Prior to 2006, the plan provided
for the grant of awards that were expressed as an amount of cash that, if properly vested and
subject to the attainment of certain performance goals, will be settled in cash and/or in
BlackRock, Inc. common stock. Beginning in 2006, awards are granted under the LTIP in
the form of BlackRock, Inc. restricted stock units that, if properly vested and subject to the
attainment of certain performance goals, will be settled in BlackRock, Inc. common stock.
Mr. Marshall has received awards under the LTIP.
Deferred Compensation Program A portion of the compensation paid to
eligible BlackRock employees may be voluntarily deferred into an account that tracks the
performance of certain of the firms investment products. Each participant in the deferred
compensation program is permitted to allocate his deferred amounts among the various
investment options. Mr. Marshall has participated in the deferred compensation program.
Other compensation benefits. In addition to base compensation and discretionary
incentive compensation, portfolio managers may be eligible to receive or participate in one
or more of the following:
Incentive Savings Plans BlackRock, Inc. has created a variety of incentive
savings plans in which BlackRock employees are eligible to participate, including a
401(k) plan, the BlackRock Retirement Savings Plan (RSP), and the BlackRock Employee
Stock Purchase Plan (ESPP). The employer contribution components of the RSP include a
company match equal to 50% of the first 6% of eligible pay contributed to the plan capped
at $4,000 per year, and a company retirement contribution equal to 3-5% of eligible
compensation. The RSP offers a range of investment options, including registered
direction set by participants for their own contributions or, absent employee investment
direction, are invested into a balanced portfolio. The ESPP allows for investment in
BlackRock common stock at a 5% discount on the fair market value of the stock on the
purchase date. Annual participation in the ESPP is limited to the purchase of 1,000 shares
or a dollar value of $25,000. Each portfolio manager is eligible to participate in these plans.
(a)(4)
Beneficial Ownership of Securities.
Portfolio Manager
Dollar Range of Equity Securities
Beneficially Owned
Leland Hart
None
C. Adrian Marshall
$1 - $10,000
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
Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
BlackRock Floating Rate Income Strategies Fund, Inc.
Anne F. Ackerley
Chief Executive Officer of
BlackRock Floating Rate Income Strategies Fund, Inc.
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 Floating Rate Income Strategies Fund, Inc.
Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock Floating Rate Income Strategies Fund, Inc.
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M"BBB@`HHHH`BNK>.ZMI+>7)CD4JV#C@UD)X4TZ-=J-
CERTIFICATION PURSUANT TO RULE 30a-2(a) UNDER THE 1940 ACT AND SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
Fund, Inc., 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 Floating Rate Income Strategies Fund, Inc.
CERTIFICATION PURSUANT TO RULE 30a-2(a) UNDER THE 1940 ACT AND
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Strategies Fund, Inc., certify that:
1. I have reviewed this report on Form N-CSR of BlackRock Floating Rate Income Strategies Fund,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this
report fairly present in all material respects the financial condition, results of operations, changes in net
assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940) 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: October 22, 2009
Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock Floating Rate Income Strategies Fund, Inc.
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 August 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: October 22, 2009
/s/ Anne F. Ackerley
Chief Executive Officer (principal executive officer) of
BlackRock Floating Rate Income Strategies Fund, Inc.
Registrant), hereby certifies, to the best of his knowledge, that the Registrants Report on Form N-CSR for the
period ended August 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: October 22, 2009
/s/ Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock Floating Rate Income Strategies Fund, Inc.
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 - |