BlackRock Floating Rate Income Trust
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

Investment Company Act file number 811-21566

Name of Fund: BlackRock Floating Rate Income Trust (BGT)

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Floating Rate Income Trust, 55 East 52nd Street, New York, NY 10055

Registrant’s telephone number, including area code: (800) 882-0052, Option 4

Date of fiscal year end: 10/31/2012

Date of reporting period: 10/31/2012


Table of Contents
Item 1 –   Report to Stockholders


Table of Contents
LOGO    October 31, 2012

 

 

 

 

Annual Report

 

BlackRock Credit Allocation Income Trust I, Inc. (PSW)

BlackRock Credit Allocation Income Trust II, Inc. (PSY)

BlackRock Credit Allocation Income Trust III (BPP)

BlackRock Credit Allocation Income Trust IV (BTZ)

BlackRock Floating Rate Income Trust (BGT)

 

Not FDIC Insured • No Bank Guarantee • May Lose Value


Table of Contents
Table of Contents     

 

      Page  

Dear Shareholder

     3   

Annual Report:

  

Fund Summaries

     4   

The Benefits and Risks of Leveraging

     14   

Derivative Financial Instruments

     15   

Financial Statements:

  

Schedules of Investments

     16   

Statements of Assets and Liabilities

     66   

Statements of Operations

     67   

Statements of Changes in Net Assets

     68   

Statements of Cash Flows

     71   

Financial Highlights

     72   

Notes to Financial Statements

     77   

Report of Independent Registered Public Accounting Firm

     90   

Important Tax Information

     90   

Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements

     91   

Automatic Dividend Reinvestment Plans

     95   

Officers and Directors

     96   

Additional Information

     99   

 

                
2    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Dear Shareholder

 

In the final months of 2011, financial markets were highly volatile but were in a mode of gradual improvement. Global central bank actions and better-than-expected economic data tempered investors’ anxiety after markets had been upended in the previous quarter by sovereign debt turmoil in the United States and Europe. Improving sentiment carried over into early 2012 as investors felt some relief from the world’s financial woes. Volatility was low and risk assets (including stocks, commodities and high yield bonds) moved boldly higher through the first two months of 2012, while climbing Treasury yields pressured higher-quality fixed income assets.

Markets reversed course in the spring when Europe’s debt problems boiled over once again. High levels of volatility returned as political instability threatened Greece’s membership in the eurozone and debt problems in Spain grew increasingly severe. Sovereign debt yields in peripheral European countries continued to rise while finance leaders deliberated over the fiscal integration of the currency bloc. Alongside the drama in Europe, investors were discouraged by gloomy economic reports from various parts of the world. A slowdown in China, a key powerhouse for global growth, emerged as a particular concern. In the United States, disappointing jobs reports dealt a crushing blow to investor sentiment. Risk assets sold off in the second quarter as investors retreated to safe haven assets.

Despite ongoing concerns about the health of the global economy and the debt crisis in Europe, most asset classes enjoyed a robust summer rally powered mainly by expectations for policy stimulus from central banks in Europe and the United States. Global economic data continued to be mixed, but the spate of downside surprises seen in the second quarter had receded and, outside of some areas of Europe, the risk of recession largely subsided. Additionally, in response to mounting debt pressures, the European Central Bank allayed fears by affirming its conviction to preserve the euro bloc. Early in September, the European Central Bank announced its plan to purchase sovereign debt in the eurozone’s most troubled nations. Later that month, the US Federal Reserve announced its long-awaited — and surprisingly aggressive — stimulus program, committing to purchase $40 billion of agency mortgage-backed securities per month until the US economy exhibits enough strength to sustain real growth and the labor market shows solid improvement. These central bank actions boosted investor confidence and risk assets rallied globally.

European stocks continued their advance in the final month of the reporting period as progress toward fiscal integration created a more positive atmosphere for investors. However, as corporate earnings season got underway in the United States, lackluster results pointed to the fragility of global growth and pushed US equity markets down for the month of October. The period ended with increasing concern about how and when US politicians would resolve the nation’s looming fiscal crisis, known as the “fiscal cliff.”

All asset classes performed well for the 12-month period ended October 31, 2012, with the strongest returns coming from US stocks and high yield bonds. For the six-month period ended October 31, 2012, equities underperformed fixed income investments, where high yield was the leading sector. US and international stocks finished the six-month period with modest gains, while emerging market stocks lagged other asset classes amid ongoing uncertainty. Near-zero short term interest rates continued to keep yields on money market securities near their all-time lows.

Although the financial world remains highly uncertain, we believe there are new avenues of opportunity — new ways to invest and new markets to consider. We believe it’s our responsibility to help investors adapt to today’s new world of investing and build the portfolios these times require. We encourage you to visit www.blackrock.com/newworld for more information.

Sincerely,

 

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

“Although the financial world remains highly uncertain, we believe there are new avenues of opportunity.”

Rob Kapito

President, BlackRock Advisors, LLC

 

Total Returns as of October 31, 2012  
    6-month     12-month  

US large cap equities (S&P 500® Index)

    2.16     15.21

US small cap equities (Russell 2000® Index)

    0.95        12.08   

International equities (MSCI Europe, Australasia, Far East Index)

    2.12        4.61   

Emerging market equities (MSCI Emerging Markets Index)

    (1.25     2.63   

3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury
Bill Index)

    0.06        0.08   

US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index)

    3.49        7.46   

US investment grade bonds (Barclays US Aggregate Bond Index)

    2.75        5.25   

Tax-exempt municipal
bonds (S&P Municipal Bond Index)

    3.65        9.57   

US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)

    6.24        13.58   
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.    

 

                
   THIS PAGE NOT PART OF YOUR FUND REPORT       3


Table of Contents
Fund Summary as of October 31, 2012    BlackRock Credit Allocation Income Trust I, Inc.

 

Fund Overview      

BlackRock Credit Allocation Income Trust I, Inc.’s (PSW) (the “Fund”) primary investment objective is to provide holders of common shares (“Common Shareholders”) with high current income. The secondary investment objective of the Fund is to provide Common Shareholders with capital appreciation. The Fund seeks to achieve its investment objectives by investing, under normal market conditions, at least 80% of its assets in credit-related securities, including, but not limited to, investment grade corporate bonds, high yield bonds (commonly referred to as “junk” bonds), bank loans, preferred securities or convertible bonds or derivatives with economic characteristics similar to these credit-related securities. The Fund may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

 

 

Portfolio Management Commentary      

 

Ÿ  

On July 27, 2012, the Board of Directors of PSW approved a plan of reorganization whereby BlackRock Credit Allocation Income Trust IV (BTZ) would acquire all of the assets and assume all of the liabilities of PSW in exchange for newly issued shares of BTZ in a merger transaction. At a shareholder meeting on November 2, 2012, PSW shareholders approved the plan of reorganization and BTZ shareholders approved the issuance of BTZ shares in connection with the reorganization. The reorganization took place on December 10, 2012.

 

How did the Fund perform?

 

Ÿ  

For the 12-month period ended October 31, 2012, the Fund returned 24.59% based on market price and 17.95% based on net asset value (“NAV”). For the same period, the closed-end Lipper Corporate BBB-Rated Debt Funds (Leveraged) category posted an average return of 21.64% based on market price and 15.80% based on NAV. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which narrowed during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

What factors influenced performance?

 

Ÿ  

The largest contributor to performance for the period was the Fund’s allocation to the financials sector, which has seen very strong performance in 2012, especially in the first quarter. The rally in financials was driven mainly by the completion of the widely anticipated Greek sovereign debt restructuring and the launch of a second allotment of long-term refinancing operations (“LTROs”) from the European Central Bank (“ECB”). Risk assets broadly moved higher through the first quarter due to the reduction of systemic risk stemming from the eurozone’s sovereign debt crisis coupled with improving economic data in the United States. The Fund has held a long position in financials since the latter half of 2011 when valuations became attractive and credit fundamentals began to improve due to heightened industry regulation following the 2008 financial crisis. Another source of positive performance was the Fund’s allocation to capital trust securities, which have experienced significant price appreciation due to banking and financial industry regulatory reform under Basel III and the Dodd Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Positioning within industrials aided performance as the Fund was selectively overweight in higher-beta names (i.e., those with greater sensitivity to market movements) early in 2012, particularly in the technology, media and telecommunications space. The

Fund’s exposure to high yield corporate bonds drove strong returns and supported the Fund’s overall yield.

 

Ÿ  

Detracting modestly from the Fund’s performance was an allocation to the metals and mining space. As China has shown signs of slowing economic growth and a move away from its investment-based economy, the metals and mining sector has struggled given its close ties to the Chinese growth story.

Describe recent portfolio activity.

 

Ÿ  

Early in the 12-month period, the Fund reduced its overall risk profile by favoring high quality companies with strong balance sheets and by decreasing leverage and portfolio duration (sensitivity to interest rate movements). However, following an important step by the ECB to alleviate liquidity strains in the financial markets through its LTROs, the Fund increased risk significantly in early 2012 as the market appeared to be poised for a strong rally. Improving credit fundamentals coupled with the reduction of major liquidity risks proved the right formula for a rally in the credit space. The Fund expressed this view largely by increasing exposure to the financials sector, where valuations were attractive. The Fund reduced risk again at the end of the first quarter as the positive effect of the ECB’s LTROs began to fade and the market was growing impatient with the stalling global economic growth. Accordingly, the Fund positioned itself away from sectors directly tied to growth, and instead focused on companies that derive cash flows from the United States and are less sensitive to slowing global growth. In particular, the Fund increased exposure to US pipelines and electric companies as they tend to generate stable cash flows despite the slowing growth dynamic.

Describe portfolio positioning at period end.

 

Ÿ  

As of period end, the Fund maintained diversified exposure across investment grade and high yield corporate credits. While investment grade credit has experienced dramatic spread tightening in the past year, Fund management continued to find value in this space. The Fund continued to generate additional yield from its sizeable allocation to high yield debt. Within the credit space, the Fund retained a strong allocation to financials, although to a lesser extent than earlier in 2012. The Fund’s holdings at period end reflected a slightly more defensive bias, with a focus on the US growth story, which remained relatively benign as compared to the rest of the world. To this end, the Fund favored companies with cash flows derived from the United States and a lower sensitivity to recession in Europe.

 

 

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.

 

                
4    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
     BlackRock Credit Allocation Income Trust I, Inc.

 

Fund Information      

Symbol on New York Stock Exchange (“NYSE”)

   PSW

Initial Offering Date

   August 1, 2003

Yield on Closing Market Price as of October 31, 2012 ($10.70)1

   6.67%

Current Monthly Distribution per Common Share2

   $0.0595

Current Annualized Distribution per Common Share2

   $0.7140

Economic Leverage as of October 31, 20123

   33%

 

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 reverse repurchase agreements 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 14.

The table below summarizes the changes in the Fund’s market price and NAV per share:

 

        10/31/12        10/31/11        Change      High        Low  

Market Price

     $ 10.70         $ 9.25           15.68    $ 10.80         $ 8.86   

Net Asset Value

     $ 11.52         $ 10.52           9.51    $ 11.52         $ 10.06   

The following charts show the portfolio composition of the Fund's long-term investments and credit quality allocations of the Fund’s corporate bond and US government securities investments:

 

Portfolio Composition               
      10/31/12     10/31/11  

Corporate Bonds

     80     82

Preferred Securities

     16        15   

US Treasury Obligations

     2        1   

Asset-Backed Securities

     1        1   

Taxable Municipal Bonds

     1        1   
Credit Quality Allocations4               
      10/31/12     10/31/11  

AAA/Aaa5

     2     1

AA/Aa

     3        7   

A.

     21        28   

BBB/Baa.

     43        38   

BB/Ba.

     17        15   

B.

     10        8   

CCC/Caa.

     1        1   

Not Rated

     3        2   

 

4   

Using the higher of Standard & Poor’s (“S&P’s”) or Moody’s Investors Service (“Moody’s”) ratings.

 

5   

Includes US Treasury obligations that are deemed AAA by the investment advisor.

 

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    5


Table of Contents
Fund Summary as of October 31, 2012    BlackRock Credit Allocation Income Trust II, Inc.

 

Fund Overview      

BlackRock Credit Allocation Income Trust II, Inc.’s (PSY) (the “Fund”) primary investment objective is to provide Common Shareholders with current income. The secondary investment objective of the Fund is to provide Common Shareholders with capital appreciation. The Fund seeks to achieve its investment objectives by investing, under normal market conditions, at least 80% of its assets in credit-related securities, including, but not limited to, investment grade corporate bonds, high yield bonds (commonly referred to as “junk” bonds), bank loans, preferred securities or convertible bonds or derivatives with economic characteristics similar to these credit-related securities. The Fund may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

 

Portfolio Management Commentary      

 

Ÿ  

On July 27, 2012, the Board of Directors of PSY approved a plan of reorganization whereby BTZ would acquire all of the assets and assume all of the liabilities of PSY in exchange for newly issued shares of BTZ in a merger transaction. At a shareholder meeting on November 2, 2012, PSY shareholders approved the plan of reorganization and BTZ shareholders approved the issuance of BTZ shares in connection with the reorganization. The reorganization took place on December 10, 2012.

How did the Fund perform?

 

Ÿ  

For the 12-month period ended October 31, 2012, the Fund returned 26.84% based on market price and 18.28% based on NAV. For the same period, the closed-end Lipper Corporate BBB-Rated Debt Funds (Leveraged) category posted an average return of 21.64% based on market price and 15.80% based on NAV. All returns reflect reinvestment of dividends. The Trust’s discount to NAV, which narrowed during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

What factors influenced performance?

 

Ÿ  

The largest contributor to performance for the period was the Fund’s allocation to the financials sector, which has seen very strong performance in 2012, especially in the first quarter. The rally in financials was driven mainly by the completion of the widely anticipated Greek sovereign debt restructuring and the launch of a second allotment of LTROs from the ECB. Risk assets broadly moved higher through the first quarter due to the reduction of systemic risk stemming from the eurozone’s sovereign debt crisis coupled with improving economic data in the United States. The Fund has held a long position in financials since the latter half of 2011 when valuations became attractive and credit fundamentals began to improve due to heightened industry regulation following the 2008 financial crisis. Another source of positive performance was the Fund’s allocation to capital trust securities, which have experienced significant price appreciation due to banking and financial industry regulatory reform under Basel III and the Dodd-Frank Act. Positioning within industrials aided performance as the Fund was selectively overweight in higher-beta names (i.e., those with greater sensitivity to market movements) early in 2012, particularly in the technology, media and telecommunications space. The Fund’s exposure to high yield corporate bonds drove strong returns and supported the Fund’s overall yield.

Ÿ  

Detracting modestly from the Fund’s performance was an allocation to the metals and mining space. As China has shown signs of slowing economic growth and a move away from its investment-based economy, the metals and mining sector has struggled given its close ties to the Chinese growth story.

Describe recent portfolio activity.

 

Ÿ  

Early in the 12-month period, the Fund reduced its overall risk profile by favoring high quality companies with strong balance sheets and by decreasing leverage and portfolio duration (sensitivity to interest rate movements). However, following an important step by the ECB to alleviate liquidity strains in the financial markets through its LTROs, the Fund increased risk significantly in early 2012 as the market appeared to be poised for a strong rally. Improving credit fundamentals coupled with the reduction of major liquidity risks proved the right formula for a rally in the credit space. The Fund expressed this view largely by increasing exposure to the financials sector, where valuations were attractive. The Fund reduced risk again at the end of the first quarter as the positive effect of the ECB’s LTROs began to fade and the market was growing impatient with the stalling global economic growth. Accordingly, the Fund positioned itself away from sectors directly tied to growth, and instead focused on companies that derive cash flows from the United States and are less sensitive to slowing global growth. In particular, the Fund increased exposure to US pipelines and electric companies as they tend to generate stable cash flows despite the slowing growth dynamic.

Describe portfolio positioning at period end.

 

Ÿ  

As of period end, the Fund maintained diversified exposure across investment grade and high yield corporate credits. While investment grade credit has experienced dramatic spread tightening in the past year, Fund management continued to find value in this space. The Fund continued to generate additional yield from its sizeable allocation to high yield debt. Within the credit space, the Fund retained a strong allocation to financials, although to a lesser extent than earlier in 2012. The Fund’s holdings at period end reflected a slightly more defensive bias, with a focus on the US growth story, which remained relatively benign as compared to the rest of the world. To this end, the Fund favored companies with cash flows derived from the United States and a lower sensitivity to recession in Europe.

 

 

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.

 

                
6    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
     BlackRock Credit Allocation Income Trust II, Inc.

 

Fund Information      

Symbol on NYSE

   PSY

Initial Offering Date

   March 28, 2003

Yield on Closing Market Price as of October 31, 2012 ($11.54)1

   6.34%

Current Monthly Distribution per Common Share2

   $0.061

Current Annualized Distribution per Common Share2

   $0.732

Economic Leverage as of October 31, 20123

   32%

 

1   

Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results.

 

2   

The distribution rate is not constant and is subject to change.

 

3   

Represents reverse repurchase agreements 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 14.

The table below summarizes the changes in the Fund’s market price and NAV per share:

 

        10/31/12        10/31/11        Change      High        Low  

Market Price

     $ 11.54         $ 9.74           18.48    $ 11.65         $ 9.42   

Net Asset Value

     $ 12.43         $ 11.25           10.49    $ 12.43         $ 10.84   

The following charts show the portfolio composition of the Fund's long-term investments and credit quality allocations of the Fund’s corporate bond and US government securities investments:

 

Portfolio Composition               
      10/31/12     10/31/11  

Corporate Bonds

     79     80

Preferred Securities

     16        17   

US Treasury Obligations

     3        1   

Asset-Backed Securities

     1        1   

Taxable Municipal Bonds

     1        1   
Credit Quality Allocations4               
      10/31/12     10/31/11  

AAA/Aaa5

     4     1

AA/Aa

     2        7   

A.

     22        26   

BBB/Baa.

     42        39   

BB/Ba.

     18        17   

B.

     9        7   

CCC/Caa.

     1        1   

Not Rated

     2        2   

 

4   

Using the higher of S&P’s or Moody’s ratings.

 

5   

Includes US Treasury obligations that are deemed AAA by the investment advisor.

 

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    7


Table of Contents
Fund Summary as of October 31, 2012    BlackRock Credit Allocation Income Trust III

 

Fund Overview

BlackRock Credit Allocation Income Trust III’s (BPP) (the “Fund”) investment objective is to provide high current income consistent with capital preservation. The Fund seeks to achieve its investment objective by investing, under normal market conditions, at least 80% of its assets in credit-related securities, including, but not limited to, investment grade corporate bonds, high yield bonds (commonly referred to as “junk” bonds), bank loans, preferred securities or convertible bonds or derivatives with economic characteristics similar to these credit-related securities. The Fund may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

 

 

Portfolio Management Commentary      

 

Ÿ  

On July 27, 2012, the Board of Directors of BPP approved a plan of reorganization whereby BTZ would acquire all of the assets and assume all of the liabilities of BPP in exchange for newly issued shares of BTZ in a merger transaction. At a shareholder meeting on November 2, 2012, BPP shareholders approved the plan of reorganization and BTZ shareholders approved the issuance of BTZ shares in connection with the reorganization. The reorganization took place on December 10, 2012.

How did the Fund perform?

 

Ÿ  

For the 12-month period ended October 31, 2012, the Fund returned 24.67% based on market price and 17.53% based on NAV. For the same period, the closed-end Lipper Corporate BBB-Rated Debt Funds (Leveraged) category posted an average return of 21.64% based on market price and 15.80% based on NAV. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which narrowed during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

What factors influenced performance?

 

Ÿ  

The largest contributor to performance for the period was the Fund’s allocation to the financials sector, which has seen very strong performance in 2012, especially in the first quarter. The rally in financials was driven mainly by the completion of the widely anticipated Greek sovereign debt restructuring and the launch of a second allotment of LTROs from the ECB. Risk assets broadly moved higher through the first quarter due to the reduction of systemic risk stemming from the eurozone’s sovereign debt crisis coupled with improving economic data in the United States. The Fund has held a long position in financials since the latter half of 2011 when valuations became attractive and credit fundamentals began to improve due to heightened industry regulation following the 2008 financial crisis. Another source of positive performance was the Fund’s allocation to capital trust securities, which have experienced significant price appreciation due to banking and financial industry regulatory reform under Basel III and the Dodd-Frank Act. Positioning within industrials aided performance as the Fund was selectively overweight in higher-beta names (i.e., those with greater sensitivity to market movements) early in 2012, particularly in the technology, media and telecommunications space. The Fund’s exposure to high yield corporate bonds drove strong returns and supported the Fund’s overall yield.

Ÿ  

Detracting modestly from the Fund’s performance was an allocation to the metals and mining space. As China has shown signs of slowing economic growth and a move away from its investment-based economy, the metals and mining sector has struggled given its close ties to the Chinese growth story.

Describe recent portfolio activity.

 

Ÿ  

Early in the 12-month period, the Fund reduced its overall risk profile by favoring high quality companies with strong balance sheets and by decreasing leverage and portfolio duration (sensitivity to interest rate movements). However, following an important step by the ECB to alleviate liquidity strains in the financial markets through its LTROs, the Fund increased risk significantly in early 2012 as the market appeared to be poised for a strong rally. Improving credit fundamentals coupled with the reduction of major liquidity risks proved the right formula for a rally in the credit space. The Fund expressed this view largely by increasing exposure to the financials sector, where valuations were attractive. The Fund reduced risk again at the end of the first quarter as the positive effect of the ECB’s LTROs began to fade and the market was growing impatient with the stalling global economic growth. Accordingly, the Fund positioned itself away from sectors directly tied to growth, and instead focused on companies that derive cash flows from the United States and are less sensitive to slowing global growth. In particular, the Fund increased exposure to US pipelines and electric companies as they tend to generate stable cash flows despite the slowing growth dynamic.

Describe portfolio positioning at period end.

 

Ÿ  

As of period end, the Fund maintained diversified exposure across investment grade and high yield corporate credits. While investment grade credit has experienced dramatic spread tightening in the past year, Fund management continued to find value in this space. The Fund continued to generate additional yield from its sizeable allocation to high yield debt. Within the credit space, the Fund retained a strong allocation to financials, although to a lesser extent than earlier in 2012. The Fund’s holdings at period end reflected a slightly more defensive bias, with a focus on the US growth story, which remained relatively benign as compared to the rest of the world. To this end, the Fund favored companies with cash flows derived from the United States and a lower sensitivity to recession in Europe.

 

 

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.

 

                
8    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
     BlackRock Credit Allocation Income Trust III

 

 

Fund Information

Symbol on NYSE

   BPP

Initial Offering Date

   February 28, 2003

Yield on Closing Market Price as of October 31, 2012 ($12.28)1

   6.21%

Current Monthly Distribution per Common Share2

   $0.0635

Current Annualized Distribution per Common Share2

   $0.7620

Economic Leverage as of October 31, 20123

   32%

 

1   

Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results.

 

2   

The distribution rate is not constant and is subject to change.

 

3   

Represents reverse repurchase agreements 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 14.

The table below summarizes the changes in the Fund’s market price and NAV per share:

 

        10/31/12        10/31/11        Change      High        Low  

Market Price

     $ 12.28         $ 10.53           16.62    $ 12.40         $ 10.05   

Net Asset Value

     $ 13.27         $ 12.07           9.94    $ 13.27         $ 11.58   

The following charts show the portfolio composition of the Fund's long-term investments and credit quality allocations of the Fund’s corporate bond and US government securities investments:

 

Portfolio Composition               
      10/31/12     10/31/11  

Corporate Bonds

     80     83

Preferred Securities

     14        15   

US Treasury Obligations

     5        1   

Taxable Municipal Bonds

     1        1   
Credit Quality Allocations4               
      10/31/12     10/31/11  

AAA/Aaa5

     5     1

AA/Aa

     1        6   

A.

     23        31   

BBB/Baa.

     41        37   

BB/Ba.

     17        15   

B.

     10        8   

CCC/Caa.

     1        1   

Not Rated

     2        1   

 

4   

Using the higher of S&P’s or Moody’s ratings.

 

5   

Includes US Treasury obligations that are deemed AAA by the investment advisor.

 

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    9


Table of Contents
Fund Summary as of October 31, 2012    BlackRock Credit Allocation Income Trust IV

 

Fund Overview

BlackRock Credit Allocation Income Trust IV’s (BTZ) (the “Fund”) investment objective is to provide current income, current gains and capital appreciation. The Fund seeks to achieve its investment objective by investing, under normal market conditions, at least 80% of its assets in credit-related securities, including, but not limited to, investment grade corporate bonds, high yield bonds (commonly referred to as “junk” bonds), bank loans, preferred securities or convertible bonds or derivatives with economic characteristics similar to these credit-related securities. The Fund may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

 

Portfolio Management Commentary

 

Ÿ  

On July 27, 2012, the Board of Directors of BTZ approved separate plans of reorganization whereby BTZ would acquire all of the assets and assume all of the liabilities of PSW, PSY and BPP (PSW, PSY and BPP, each a “Target Fund”) in exchange for newly issued shares of BTZ in a merger transaction. At a shareholder meeting on November 2, 2012, each Target Fund’s shareholders approved their respective plan of reorganization and BTZ shareholders approved the issuance of BTZ shares in connection with the reorganization. The reorganization took place on December 10, 2012.

How did the Fund perform?

 

Ÿ  

For the 12-month period ended October 31, 2012, the Fund returned 26.44% based on market price and 18.35% based on NAV. For the same period, the closed-end Lipper Corporate BBB-Rated Debt Funds (Leveraged) category posted an average return of 21.64% based on market price and 15.80% based on NAV. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which narrowed during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

What factors influenced performance?

 

Ÿ  

The largest contributor to performance for the period was the Fund’s allocation to the financials sector, which has seen very strong performance in 2012, especially in the first quarter. The rally in financials was driven mainly by the completion of the widely anticipated Greek sovereign debt restructuring and the launch of a second allotment of LTROs from the ECB. Risk assets broadly moved higher through the first quarter due to the reduction of systemic risk stemming from the eurozone’s sovereign debt crisis coupled with improving economic data in the United States. The Fund has held a long position in financials since the latter half of 2011 when valuations became attractive and credit fundamentals began to improve due to heightened industry regulation following the 2008 financial crisis. Another source of positive performance was the Fund’s allocation to capital trust securities, which have experienced significant price appreciation due to banking and financial industry regulatory reform under Basel III and the Dodd-Frank Act. Positioning within industrials aided performance as the Fund was selectively overweight in higher-beta names (i.e., those with greater sensitivity to market movements) early in 2012, particularly in the technology, media and telecommunications space. The Fund’s exposure to high yield corporate bonds drove strong returns and supported the Fund’s overall yield.

Ÿ  

Detracting modestly from the Fund’s performance was an allocation to the metals and mining space. As China has shown signs of slowing economic growth and a move away from its investment-based economy, the metals and mining sector has struggled given its close ties to the Chinese growth story.

Describe recent portfolio activity.

 

Ÿ  

Early in the 12-month period, the Fund reduced its overall risk profile by favoring high quality companies with strong balance sheets and by decreasing leverage and portfolio duration (sensitivity to interest rate movements). However, following an important step by the ECB to alleviate liquidity strains in the financial markets through its LTROs, the Fund increased risk significantly in early 2012 as the market appeared to be poised for a strong rally. Improving credit fundamentals coupled with the reduction of major liquidity risks proved the right formula for a rally in the credit space. The Fund expressed this view largely by increasing exposure to the financials sector, where valuations were attractive. The Fund reduced risk again at the end of the first quarter as the positive effect of the ECB’s LTROs began to fade and the market was growing impatient with the stalling global economic growth. Accordingly, the Fund positioned itself away from sectors directly tied to growth, and instead focused on companies that derive cash flows from the United States and are less sensitive to slowing global growth. In particular, the Fund increased exposure to US pipelines and electric companies as they tend to generate stable cash flows despite the slowing growth dynamic.

Describe portfolio positioning at period end.

 

Ÿ  

As of period end, the Fund maintained diversified exposure across investment grade and high yield corporate credits. While investment grade credit has experienced dramatic spread tightening in the past year, Fund management continued to find value in this space. The Fund continued to generate additional yield from its sizeable allocation to high yield debt. Within the credit space, the Fund retained a strong allocation to financials, although to a lesser extent than earlier in 2012. The Fund’s holdings at period end reflected a slightly more defensive bias, with a focus on the US growth story, which remained relatively benign as compared to the rest of the world. To this end, the Fund favored companies with cash flows derived from the United States and a lower sensitivity to recession in Europe.

 

 

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.

 

                
10    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
     BlackRock Credit Allocation Income Trust IV

 

 

Fund Information

Symbol on NYSE

   BTZ

Initial Offering Date

   December 27, 2006

Yield on Closing Market Price as of October 31, 2012 ($14.23)1

   6.62%

Current Monthly Distribution per Common Share2

   $0.0785

Current Annualized Distribution per Common Share2

   $0.9420

Economic Leverage as of October 31, 20123

   32%

 

1   

Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results.

 

2   

The distribution rate is not constant and is subject to change.

 

3   

Represents reverse repurchase agreements 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 14.

The table below summarizes the changes in the Fund’s market price and NAV per share:

 

        10/31/12        10/31/11        Change      High        Low  

Market Price

     $ 14.23         $ 12.08           17.80    $ 14.32         $ 11.76   

Net Asset Value

     $ 15.37         $ 13.94           10.26    $ 15.37         $ 13.37   

The following charts show the portfolio composition of the Fund's long-term investments and credit quality allocations of the Fund’s corporate bond and US government securities investments:

 

Portfolio Composition               
      10/31/12     10/31/11  

Corporate Bonds

     80     80

Preferred Securities

     16        17   

US Treasury Obligations

     2        1   

Asset-Backed Securities

     1        1   

Taxable Municipal Bonds

     1        1   
Credit Quality Allocations4               
      10/31/12     10/31/11  

AAA/Aaa5

     3     1

AA/Aa

     2        7   

A.

     25        29   

BBB/Baa.

     39        37   

BB/Ba.

     18        16   

B.

     10        8   

CCC/Caa.

     1          

Not Rated

     2        2   

 

4   

Using the higher of S&P’s or Moody’s ratings.

 

5   

Includes US Treasury obligations that are deemed AAA by the investment advisor.

 

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    11


Table of Contents
Fund Summary as of October 31, 2012    BlackRock Floating Rate Income Trust

 

Fund Overview

BlackRock Floating Rate Income Trust’s (BGT) (the “Fund”) primary investment objective is to provide a high level of current income. The Fund’s secondary investment objective is to seek the preservation of capital. The Fund seeks to achieve its investment objectives by investing primarily, under normal conditions, at least 80% of its assets in floating and variable rate instruments of US and non-US issuers, including a substantial portion of its assets in global floating and variable rate securities including senior secured floating rate loans made to corporate and other business entities. Under normal market conditions, the Fund expects that the average effective duration of its portfolio will be no more than 1.5 years. The Fund may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objectives will be achieved.

 

Portfolio Management Commentary

 

How did the Fund perform?

 

Ÿ  

For the 12-month period ended October 31, 2012, the Fund returned 25.33% based on market price and 12.37% based on NAV. For the same period, the closed-end Lipper Loan Participation Funds category posted an average return of 21.76% based on market price and 12.63% based on NAV. 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 performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

What factors influenced performance?

 

Ÿ  

Security selection in the gaming, diversified manufacturing, electric and consumer services industries contributed positively to results, as did the Fund’s tactical allocation to fixed-rate high yield corporate bonds, which outperformed floating rate loan interests (bank loans) over the period.

 

Ÿ  

Conversely, security selection in the media non-cable industry detracted from performance, along with exposure to the media cable and independent energy industries. The Fund’s limited exposure to emerging market securities hindered returns as this segment of the fixed income universe outperformed both high yield and bank loans.

Describe recent portfolio activity.

 

Ÿ  

During the 12-month period, the Fund maintained its focus on the higher quality portions of the loan market in terms of loan structure, liquidity and overall credit quality. The Fund sought issuers with attractive risk-reward characteristics and superior fundamentals. Given mixed economic data along with global policy uncertainty and an overall weak outlook for global growth, the Fund remained cautious of lower-rated, less-liquid loans.

 

Ÿ  

Financial markets improved during the period due to the long-term refinancing operations introduced by the European Central Bank (“ECB”) in December 2011 and additional monetary stimulus from both the ECB and the US Federal Reserve in September 2012. These global central bank actions were supportive of risk markets, but did not have a significant influence on the Fund’s view on risk within the loan market. More specifically, the Fund continued to adhere to a strict investment discipline with the goal of pursuing yield while minimizing exposure to macro risks.

Describe portfolio positioning at period end.

 

Ÿ  

At period end, the Fund held 80% of its total portfolio in floating rate loan interests and 16% in corporate bonds, with the remainder invested in a mix of asset-backed securities, foreign agency obligations and common stocks. The Fund’s largest sector exposures included health care, media cable and chemicals. The Fund ended the period with leverage at 30% of its total managed assets.

 

 

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.

 

                
12    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
     BlackRock Floating Rate Income Trust

 

 

Fund Information

Symbol on NYSE

   BGT

Initial Offering Date

   August 30, 2004

Yield on Closing Market Price as of October 31, 2012 ($15.07)1

   6.17%

Current Monthly Distribution per Common Share2

   $0.0775

Current Annualized Distribution per Common Share2

   $0.9300

Economic Leverage as of October 31, 20123

   30%

 

1   

Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results.

 

2   

The distribution rate is not constant and is subject to change.

 

3   

Represents the loan 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 14.

The table below summarizes the changes in the Fund’s market price and NAV per share:

 

        10/31/12        10/31/11        Change      High        Low  

Market Price

     $ 15.07         $ 13.00           15.92    $ 15.80         $ 12.55   

Net Asset Value

     $ 14.52         $ 13.97           3.94    $ 14.54         $ 13.53   

The following charts show the portfolio composition of the Fund’s long-term investments and credit quality allocations of the Fund’s corporate bonds:

 

Portfolio Composition               
      10/31/12     10/31/11  

Floating Rate Loan Interests

     80     78

Corporate Bonds

     16        18   

Asset-Backed Securities

     2        2   

Foreign Agency Obligations

     1        1   

Common Stocks

     1          

Other Interests

            1   
Credit Quality Allocations4               
      10/31/12     10/31/11  

AA/Aa

            9

A.

            2   

BBB/Baa.

     19     25   

BB/Ba.

     36        27   

B.

     42        34   

CCC/Caa.

     2        1   

Not Rated

     1        2   

 

4   

Using the higher of S&P's or Moody's ratings.

 

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    13


Table of Contents
The Benefits and Risks of Leveraging     

 

 

The Funds may utilize leverage to seek to enhance the yield and NAV of their common shares (“Common Shares”). However, these objectives cannot be achieved in all interest rate environments.

The Funds may utilize leverage by borrowing through a credit facility and/or entering into reverse repurchase agreements. In general, the concept of leveraging is based on the premise that the financing cost of assets to be obtained from leverage, which will be based on short-term interest rates, will normally be lower than the income earned by each Fund on its longer-term portfolio investments. To the extent that the total assets of each Fund (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, each Fund’s shareholders will benefit from the incremental net income.

The interest earned on securities purchased with the proceeds from leverage 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 Funds had not used leverage.

To illustrate these concepts, assume a Fund’s 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 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 Fund’s long-term investments, and therefore the Fund’s 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 will be reduced or eliminated completely. Furthermore, if prevailing short-term interest rates rise above long-term interest rates, the yield curve has a negative slope. In this case, the Fund pays higher short-term interest rates whereas the Fund’s total portfolio earns income based on lower long-term interest rates.

Furthermore, the value of the Funds’ portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can influence the value of portfolio investments. In contrast, the

redemption value of the Funds’ borrowings does 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 borrowings discussed above.

The use of leverage may enhance opportunities for increased income to the Funds, but as described above, it also creates risks as short- or long-term interest rates fluctuate. Leverage also will generally cause greater changes in the Funds’ NAVs, market prices and dividend rates than comparable portfolios without leverage. If the income derived from securities purchased with assets received from leverage exceeds the cost of leverage, the 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 Fund’s net income will be less than if leverage had not been used, and therefore the amount available for distribution to shareholders will be reduced. 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 a Fund to incur losses. The use of leverage may limit each Fund’s 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 shareholders and may reduce income.

Under the Investment Company Act of 1940, as amended (the “1940 Act”), the Funds are permitted to issue senior securities representing indebtedness up to 33 1/3% of their total managed assets (each Fund’s net assets plus the proceeds of any outstanding borrowings). If the Funds segregate liquid assets having a value not less than the repurchase price (including accrued interest), a reverse repurchase agreement will not be considered a senior security and therefore will not be subject to this limitation. In addition, each Fund voluntarily limits its aggregate economic leverage to 50% of its managed assets. As of October 31, 2012, the Funds had aggregate economic leverage from reverse repurchase agreements and/or borrowings through a credit facility as a percentage of their total managed assets as follows:

 

      Percent of
Economic
Leverage
 

PSW

     33

PSY

     32

BPP

     32

BTZ

     32

BGT

     30
 

 

                
14    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Derivative Financial Instruments     

 

The Funds may invest in various derivative financial instruments, including financial futures contracts, foreign currency exchange contracts, options and swaps, as specified in Note 2 of the Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market, equity, credit, interest rate and/or foreign currency exchange rate risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative financial instrument. The Funds’ ability to use a

derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require a Fund to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation a Fund can realize on an investment, may result in lower dividends paid to shareholders or may cause a Fund to hold an investment that it might otherwise sell. The Funds’ investments in these instruments are discussed in detail in the Notes to Financial Statements.

 

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    15


Table of Contents

Schedule of Investments October 31, 2012

  

BlackRock Credit Allocation Income Trust I, Inc. (PSW)

(Percentages shown are based on Net Assets)

 

Asset-Backed Securities          

Par  

(000)

    Value  
      

321 Henderson Receivables I LLC, Series 2012-1A, Class A, 4.21%, 2/16/65 (a)

    USD         246      $ 258,216   

Atrium CDO Corp., Series 5A, Class A4,
0.82%, 7/20/20 (a)(b)

       650        588,250   

SLM Student Loan Trust, Series 2004-B, Class A2, 0.59%, 6/15/21 (b)

             417        407,522   
Total Asset-Backed Securities – 1.1%                      1,253,988   
      
                          
Corporate Bonds                      

Aerospace & Defense — 0.9%

      

BE Aerospace, Inc., 5.25%, 4/01/22

       400        417,000   

Huntington Ingalls Industries, Inc.:

      

6.88%, 3/15/18

       150        162,000   

7.13%, 3/15/21

       140        150,500   

Kratos Defense & Security Solutions, Inc.,
10.00%, 6/01/17

       282        304,560   
      

 

 

 
                       1,034,060   

Airlines — 0.6%

      

American Airlines Pass-Through Trust, Series 2011-2, Class A, 8.63%, 10/15/21

       52        54,034   

Continental Airlines Pass-Through Trust, Series 2009-2, Class B, 9.25%, 5/10/17

       293        320,369   

Delta Air Lines Pass-Through Trust, Series 2002-1, Class G-1, 6.72%, 1/02/23

       260        285,918   
      

 

 

 
                       660,321   

Auto Components — 1.0%

      

Delphi Corp., 6.13%, 5/15/21

       130        143,650   

Ford Motor Co., 7.45%, 7/16/31

       260        328,900   

Icahn Enterprises LP:

      

7.75%, 1/15/16

       140        146,300   

8.00%, 1/15/18

       560        602,000   
      

 

 

 
                       1,220,850   

Beverages — 0.6%

      

Anheuser-Busch InBev Worldwide, Inc.,
1.38%, 7/15/17 (c)

       225        228,392   

Constellation Brands, Inc., 7.25%, 5/15/17

       460        541,650   
      

 

 

 
                       770,042   

Building Products — 0.3%

      

Building Materials Corp. of America (a):

      

7.00%, 2/15/20

       85        92,225   

6.75%, 5/01/21

       250        272,500   
      

 

 

 
                       364,725   

Capital Markets — 5.2%

      

Ameriprise Financial, Inc., 5.30%, 3/15/20 (c)

       750        886,720   

E*Trade Financial Corp., 12.50%, 11/30/17

       440        498,300   

The Goldman Sachs Group, Inc. (c):

      

6.15%, 4/01/18

       125        146,380   

5.75%, 1/24/22

       385        446,938   

6.25%, 2/01/41

       1,050        1,246,598   

Morgan Stanley, 5.75%, 1/25/21 (c)

       1,025        1,146,822   
Corporate Bonds           Par  
(000)
    Value  
      

Capital Markets (concluded)

      

UBS AG:

      

2.25%, 1/28/14 (c)

    USD         375      $ 380,693   

5.88%, 7/15/16 (c)

       650        727,784   

7.63%, 8/17/22

       600        647,044   
      

 

 

 
                       6,127,279   

Chemicals — 2.3%

      

Ashland, Inc., 4.75%, 8/15/22 (a)

       120        122,400   

Celanese US Holdings LLC, 5.88%, 6/15/21

       370        412,088   

Hexion US Finance Corp., 6.63%, 4/15/20

       110        109,725   

Huntsman International LLC, 8.63%, 3/15/21

       140        159,250   

INEOS Finance Plc (a):

      

8.38%, 2/15/19

       100        105,000   

7.50%, 5/01/20

       105        106,313   

Linde Finance BV, 7.38%, 7/14/66 (b)

    EUR         180        272,969   

LyondellBasell Industries NV, 5.75%, 4/15/24 (c)

    USD         445        515,087   

MPM Escrow LLC/MPM Finance Escrow Corp.,
8.88%, 10/15/20 (a)

       70        68,600   

Nufarm Australia Ltd., 6.38%, 10/15/19 (a)

       70        71,750   

Rockwood Specialties Group, Inc., 4.63%, 10/15/20

       395        406,850   

Tronox Finance LLC, 6.38%, 8/15/20 (a)

       360        359,100   
      

 

 

 
                       2,709,132   

Commercial Banks — 5.4%

      

Amsouth Bank, Series AI, 4.85%, 4/01/13

       200        202,750   

Asciano Finance Ltd., 5.00%, 4/07/18 (a)

       200        215,565   

Associated Banc-Corp, 5.13%, 3/28/16 (c)

       515        564,704   

BBVA US Senior SAU, 4.66%, 10/09/15

       600        605,932   

Branch Banking & Trust Co. (b):

      

0.72%, 9/13/16

       250        242,971   

0.73%, 5/23/17

       150        144,081   

CIT Group, Inc.:

      

4.25%, 8/15/17

       320        328,258   

5.25%, 3/15/18

       280        297,500   

5.50%, 2/15/19 (a)

       240        255,900   

5.00%, 8/15/22

       100        103,623   

City National Corp., 5.25%, 9/15/20 (c)

       550        606,245   

Discover Bank, 8.70%, 11/18/19

       300        392,257   

HSBC Finance Corp., 6.68%, 1/15/21 (c)

       350        414,167   

Regions Financial Corp.:

      

4.88%, 4/26/13

       600        609,750   

5.75%, 6/15/15

       460        503,700   

Santander Holdings USA, Inc., 3.00%, 9/24/15

       275        280,264   

SVB Financial Group, 5.38%, 9/15/20 (c)

       550        622,897   
      

 

 

 
                       6,390,564   

Commercial Services & Supplies — 4.0%

      

ADS Waste Holdings, Inc., 8.25%, 10/01/20 (a)

       70        72,450   

The ADT Corp., 4.88%, 7/15/42 (a)

       295        314,817   

Aviation Capital Group Corp. (a):

      

7.13%, 10/15/20 (c)

       2,200        2,320,995   

6.75%, 4/06/21

       550        571,401   

Casella Waste Systems, Inc., 7.75%, 2/15/19

       84        82,320   

Clean Harbors, Inc., 5.25%, 8/01/20 (a)

       108        110,700   

Corrections Corp. of America, 7.75%, 6/01/17

       775        828,281   

Covanta Holding Corp., 6.38%, 10/01/22

       155        168,682   
 
Portfolio Abbreviations      

To simplify the listings of portfolio holdings in the Schedules of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list:

 

AUD   Australian Dollar
CAD   Canadian Dollar
CHF   Swiss Franc
DIP   Debtor-In-Possession
EUR   Euro
EURIBOR   EURO Interbank Offered Rate
FKA   Formerly Known As
GBP   British Pound
LIBOR   London Interbank Offered Rate
RB   Revenue Bonds
USD   US Dollar

 

 

 

See Notes to Financial Statements.

 

                
16    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust I, Inc. (PSW)

(Percentages shown are based on Net Assets)

 

Corporate Bonds          

Par  

(000)

    Value  
      

Commercial Services & Supplies (concluded)

      

HDTFS, Inc. (a):

      

5.88%, 10/15/20

    USD         85      $ 85,850   

6.25%, 10/15/22

       110        111,513   

Mobile Mini, Inc., 7.88%, 12/01/20

       65        70,281   
      

 

 

 
                       4,737,290   

Communications Equipment — 0.9%

      

Avaya, Inc., 9.75%, 11/01/15 (c)

       200        178,000   

Brocade Communications Systems, Inc.,
6.88%, 1/15/20 (c)

       700        757,750   

Zayo Group LLC/Zayo Capital, Inc., 8.13%, 1/01/20

       160        175,200   
      

 

 

 
                       1,110,950   

Computers & Peripherals — 0.0%

      

NCR Corp., 5.00%, 7/15/22 (a)

             30        30,638   

Construction Materials — 0.5%

      

HD Supply, Inc. (a):

      

8.13%, 4/15/19

       210        231,000   

11.50%, 7/15/20

       295        310,488   
      

 

 

 
                       541,488   

Consumer Finance — 5.4%

      

American Express Credit Corp., 2.75%, 9/15/15 (c)

       1,400        1,475,837   

Capital One Bank USA NA, 8.80%, 7/15/19

       775        1,031,515   

Daimler Finance North America LLC,
2.63%, 9/15/16 (a)(c)

       800        834,706   

Experian Finance Plc, 2.38%, 6/15/17 (a)(c)

       200        204,753   

Ford Motor Credit Co. LLC:

      

8.00%, 12/15/16

       245        296,702   

5.88%, 8/02/21

       690        794,468   

Inmarsat Finance Plc, 7.38%, 12/01/17 (a)

       420        452,550   

SLM Corp., 6.25%, 1/25/16

       1,180        1,274,459   

Toll Brothers Finance Corp., 5.88%, 2/15/22

       95        107,396   
      

 

 

 
                       6,472,386   

Containers & Packaging — 1.6%

      

Ardagh Packaging Finance Plc, 9.13%, 10/15/20 (a)

       200        209,000   

Ball Corp.:

      

7.13%, 9/01/16

       400        430,000   

6.75%, 9/15/20

       505        554,237   

Bemis Co., Inc., 6.80%, 8/01/19

       200        244,190   

Crown Americas LLC, 6.25%, 2/01/21

       200        220,750   

Smurfit Kappa Acquisitions, 4.88%, 9/15/18 (a)

       200        200,000   
      

 

 

 
                       1,858,177   

Diversified Financial Services — 9.7%

      

Ally Financial, Inc.:

      

4.50%, 2/11/14

       225        231,750   

8.30%, 2/12/15

       390        436,897   

8.00%, 11/01/31

       320        380,800   

Bank of America Corp. (c):

      

3.75%, 7/12/16

       350        375,070   

5.30%, 3/15/17

       855        959,887   

5.00%, 5/13/21

       1,325        1,494,705   

Blackstone Holdings Finance Co. LLC,
4.75%, 2/15/23 (a)(c)

       200        214,517   

Citigroup, Inc. (c):

      

6.38%, 8/12/14

       300        326,899   

4.59%, 12/15/15

       225        245,458   

4.45%, 1/10/17

       600        662,849   

DPL, Inc., 7.25%, 10/15/21

       255        287,512   

General Motors Financial Co., Inc., 6.75%, 6/01/18

       120        133,038   

ING Bank NV, 5.00%, 6/09/21 (a)(c)

       550        621,148   

Intesa Sanpaolo SpA, 2.38%, 12/21/12 (c)

       800        800,005   

LeasePlan Corp. NV, 3.00%, 10/23/17 (a)(b)(c)

       475        480,476   

Moody’s Corp., 6.06%, 9/07/17

       2,500        2,740,993   

Reynolds American, Inc., 3.25%, 11/01/22

       450        455,141   
Corporate Bonds          

Par  

(000)

    Value  
      

Diversified Financial Services (concluded)

      

Reynolds Group Issuer, Inc.:

      

7.88%, 8/15/19

    USD         255      $ 276,675   

9.88%, 8/15/19

       100        104,750   

5.75%, 10/15/20 (a)

       220        222,200   

WMG Acquisition Corp., 9.50%, 6/15/16

       50        54,938   
      

 

 

 
                       11,505,708   

Diversified Telecommunication Services — 3.5%

      

AT&T, Inc., 6.30%, 1/15/38 (c)

       1,000        1,338,902   

Level 3 Financing, Inc.:

      

8.13%, 7/01/19

       898        958,615   

8.63%, 7/15/20

       150        163,500   

Telecom Italia Capital SA, 6.18%, 6/18/14

       225        238,645   

Telefonica Emisiones SAU, 5.46%, 2/16/21

       310        315,038   

Verizon Communications, Inc., 7.35%, 4/01/39 (c)

       660        1,016,424   

Windstream Corp., 7.88%, 11/01/17

       160        178,200   
      

 

 

 
                       4,209,324   

Electric Utilities — 2.9%

      

CMS Energy Corp., 5.05%, 3/15/22

       275        307,188   

FirstEnergy Solutions Corp., 6.05%, 8/15/21

       250        288,887   

Great Plains Energy, Inc., 5.29%, 6/15/22

       375        429,893   

Mirant Mid Atlantic Pass Through Trust, Series B, 9.13%, 6/30/17

       122        133,155   

Nisource Finance Corp.:

      

6.40%, 3/15/18

       250        304,300   

5.25%, 2/15/43

       155        173,830   

Oncor Electric Delivery Co. LLC (c):

      

4.10%, 6/01/22

       300        321,439   

5.30%, 6/01/42

       180        204,889   

Progress Energy, Inc., 7.00%, 10/30/31 (c)

       1,000        1,334,774   
      

 

 

 
                       3,498,355   

Electronic Equipment, Instruments & Components — 0.3%

  

 

Jabil Circuit, Inc., 8.25%, 3/15/18

       200        236,000   

NXP BV, 3.09%, 10/15/13 (b)

       95        94,881   
      

 

 

 
                       330,881   

Energy Equipment & Services — 3.8%

      

Atwood Oceanics, Inc., 6.50%, 2/01/20

       25        26,875   

Cie Générale de Géophysique-Veritas,
6.50%, 6/01/21

       200        211,000   

Energy Transfer Partners LP, 5.20%, 2/01/22

       700        803,537   

Ensco Plc, 4.70%, 3/15/21 (c)

       460        529,696   

FTS International Services LLC/FTS International Bonds, Inc., 8.13%, 11/15/18 (a)

       182        190,190   

Hornbeck Offshore Services, Inc., 5.88%, 4/01/20

       65        66,138   

Key Energy Services, Inc., 6.75%, 3/01/21

       175        174,125   

MEG Energy Corp. (a):

      

6.50%, 3/15/21

       225        241,312   

6.38%, 1/30/23

       50        53,500   

Oil States International, Inc., 6.50%, 6/01/19

       120        127,500   

Peabody Energy Corp., 6.25%, 11/15/21 (c)

       370        382,025   

Precision Drilling Corp., 6.50%, 12/15/21

       95        100,463   

Seadrill Ltd., 5.63%, 9/15/17 (a)

       570        570,000   

Transocean, Inc.:

      

2.50%, 10/15/17

       100        101,278   

6.50%, 11/15/20

       265        321,955   

6.38%, 12/15/21

       320        389,387   

6.80%, 3/15/38

       225        279,666   
      

 

 

 
                       4,568,647   

Food Products — 1.3%

      

Kraft Foods Group, Inc., 5.00%, 6/04/42 (a)

       300        350,361   

Mondelez International, Inc.:

      

6.50%, 8/11/17

       385        475,524   

6.13%, 8/23/18

       390        485,288   

Post Holdings, Inc., 7.38%, 2/15/22 (a)

       213        226,046   
      

 

 

 
                       1,537,219   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    17


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust I, Inc. (PSW)

(Percentages shown are based on Net Assets)

 

Corporate Bonds          

Par  

(000)

    Value  
      

Gas Utilities — 0.2%

      

El Paso Natural Gas Co. LLC, 8.63%, 1/15/22

    USD         165      $ 225,723   

Health Care Equipment & Supplies — 0.6%

      

Fresenius US Finance II, Inc., 9.00%, 7/15/15 (a)

       500        573,750   

Teleflex, Inc., 6.88%, 6/01/19

       115        123,625   
      

 

 

 
                       697,375   

Health Care Providers & Services — 3.8%

      

Aviv Healthcare Properties LP, 7.75%, 2/15/19

       105        110,644   

CHS/Community Health Systems, Inc., 5.13%, 8/15/18

       115        119,313   

HCA, Inc.:

      

8.50%, 4/15/19

       55        61,806   

6.50%, 2/15/20

       525        580,125   

7.25%, 9/15/20

       195        215,719   

4.75%, 5/01/23

       640        640,000   

INC Research LLC, 11.50%, 7/15/19 (a)

       165        165,825   

inVentiv Health, Inc., 10.00%, 8/15/18 (a)

       10        9,050   

Tenet Healthcare Corp.:

      

10.00%, 5/01/18

       350        399,000   

8.88%, 7/01/19

       250        279,375   

4.75%, 6/01/20 (a)

       222        220,057   

UnitedHealth Group, Inc., 6.88%, 2/15/38 (c)

       800        1,133,814   

WellPoint, Inc. (c):

      

3.30%, 1/15/23

       250        258,596   

2.75%, 10/15/42 (a)(d)

       300        312,750   
      

 

 

 
                       4,506,074   

Health Care Technology — 1.3%

      

Amgen, Inc.:

      

5.15%, 11/15/41 (c)

       957        1,102,671   

5.65%, 6/15/42

       8        9,823   

5.38%, 5/15/43 (c)

       400        480,242   
      

 

 

 
                       1,592,736   

Household Durables — 0.5%

      

Beazer Homes USA, Inc., 6.63%, 4/15/18 (a)

       165        176,550   

DR Horton, Inc., 4.38%, 9/15/22

       150        150,375   

Standard Pacific Corp., 8.38%, 1/15/21

       210        243,600   
      

 

 

 
                       570,525   

Independent Power Producers & Energy Traders — 1.8%

  

    

The AES Corp.:

      

9.75%, 4/15/16

       235        281,119   

7.38%, 7/01/21

       30        33,525   

Calpine Corp. (a):

      

7.25%, 10/15/17

       90        95,400   

7.50%, 2/15/21

       45        48,937   

Energy Future Intermediate Holding Co. LLC,
10.00%, 12/01/20

       440        480,700   

Exelon Generation Co. LLC, Series C,
4.25%, 6/15/22 (a)

       546        584,411   

GenOn REMA LLC, 9.68%, 7/02/26

       120        128,400   

Laredo Petroleum, Inc.:

      

9.50%, 2/15/19

       70        79,450   

7.38%, 5/01/22

       65        70,850   

NRG Energy, Inc., 6.63%, 3/15/23 (a)

       125        128,750   

QEP Resources, Inc.:

      

5.38%, 10/01/22

       134        140,700   

5.25%, 5/01/23

       70        72,975   
      

 

 

 
                       2,145,217   

Insurance — 7.4%

      

American International Group, Inc. (c):

      

3.80%, 3/22/17

       345        372,195   

8.25%, 8/15/18

       150        194,857   

6.40%, 12/15/20

       610        749,140   
Corporate Bonds          

Par  

(000)

    Value  
      

Insurance (concluded)

      

Aon Corp., 5.00%, 9/30/20 (c)

    USD         1,600      $ 1,843,549   

Fairfax Financial Holdings Ltd., 5.80%, 5/15/21 (a)

       325        332,982   

Forethought Financial Group, Inc., 8.63%, 4/15/21 (a)

       250        317,815   

Genworth Financial, Inc., 7.63%, 9/24/21 (c)

       225        236,653   

ING Verzekeringen NV, 2.09%, 6/21/21 (b)

    EUR         110        138,342   

Manulife Financial Corp., 4.90%, 9/17/20 (c)

    USD         1,000        1,111,048   

MPL 2 Acquisition Canco, Inc., 9.88%, 8/15/18 (a)

       100        91,250   

Nippon Life Insurance Co., 5.00%, 10/18/42 (a)(b)

       750        773,749   

Principal Financial Group, Inc., 8.88%, 5/15/19

       225        298,962   

Prudential Financial, Inc.:

      

6.63%, 12/01/37 (c)

       800        1,027,637   

5.88%, 9/15/42 (b)

       300        315,750   

XL Group Ltd., 5.75%, 10/01/21 (c)

       810        959,551   
      

 

 

 
                       8,763,480   

IT Services — 1.2%

      

Ceridian Corp., 8.88%, 7/15/19 (a)

       415        439,900   

Epicor Software Corp., 8.63%, 5/01/19

       160        168,000   

First Data Corp.:

      

7.38%, 6/15/19 (a)(c)

       215        222,525   

6.75%, 11/01/20 (a)

       190        190,000   

8.25%, 1/15/21 (a)

       20        20,000   

12.63%, 1/15/21

       170        175,525   

SunGard Data Systems, Inc., 7.38%, 11/15/18

       170        182,963   
      

 

 

 
                       1,398,913   

Life Sciences Tools & Services — 1.8%

      

Bio-Rad Laboratories, Inc., 8.00%, 9/15/16

       865        945,012   

Life Technologies Corp., 6.00%, 3/01/20 (c)

       1,000        1,196,869   
      

 

 

 
                       2,141,881   

Machinery — 1.0%

      

Ingersoll-Rand Global Holding Co. Ltd.,
9.50%, 4/15/14 (c)

       800        895,842   

UR Merger Sub Corp. (a):

      

5.75%, 7/15/18

       55        59,125   

7.38%, 5/15/20

       140        151,550   

7.63%, 4/15/22

       129        141,255   
      

 

 

 
                       1,247,772   

Media — 8.6%

      

A&E Television Networks LLC, 3.25%, 8/22/19

       500        508,750   

AMC Networks, Inc., 7.75%, 7/15/21

       90        101,925   

CCH II LLC, 13.50%, 11/30/16

       221        237,527   

Comcast Corp., 6.30%, 11/15/17 (c)

       800        993,405   

Cox Communications, Inc., 8.38%, 3/01/39 (a)

       800        1,269,414   

CSC Holdings LLC, 8.63%, 2/15/19

       275        325,875   

DIRECTV Holdings LLC, 5.00%, 3/01/21 (c)

       600        682,279   

DISH DBS Corp., 7.00%, 10/01/13

       450        470,812   

Intelsat Jackson Holdings SA, 7.25%, 4/01/19

       50        53,625   

Intelsat Luxembourg SA:

      

11.25%, 2/04/17

       210        220,500   

11.50%, 2/04/17 (e)

       100        105,250   

The Interpublic Group of Cos., Inc.,
10.00%, 7/15/17

       275        303,531   

News America, Inc., 6.15%, 3/01/37 (c)

       650        816,061   

Time Warner Cable, Inc., 6.75%, 6/15/39

       925        1,234,658   

Time Warner, Inc., 7.70%, 5/01/32 (c)

       950        1,392,111   

Unitymedia Hessen GmbH & Co. KG (a):

      

8.13%, 12/01/17

       363        392,040   

7.50%, 3/15/19

       230        251,990   

Virgin Media Finance Plc, 4.88%, 2/15/22

       200        202,000   

Virgin Media Secured Finance Plc, 6.50%, 1/15/18

       600        651,000   
      

 

 

 
                       10,212,753   
 

 

See Notes to Financial Statements.

 

                
18    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust I, Inc. (PSW)

(Percentages shown are based on Net Assets)

 

Corporate Bonds          

Par  

(000)

    Value  
      

Metals & Mining — 2.5%

      

AngloGold Ashanti Holdings Plc, 5.13%, 8/01/22

    USD         400      $ 407,929   

ArcelorMittal, 4.25%, 3/01/16

       50        49,664   

Barrick Gold Corp., 2.90%, 5/30/16 (c)

       275        290,149   

FMG Resources August 2006 Property Ltd. (a):

      

6.38%, 2/01/16

       385        385,000   

6.88%, 4/01/22 (c)

       20        18,800   

Freeport-McMoRan Copper & Gold, Inc.,

      

3.55%, 3/01/22

       325        330,914   

Freeport-McMoRan Corp., 7.13%, 11/01/27

       700        887,613   

New Gold, Inc., 7.00%, 4/15/20 (a)

       30        31,800   

Novelis, Inc., 8.75%, 12/15/20

       230        253,575   

Steel Dynamics, Inc., 6.38%, 8/15/22 (a)

       100        104,500   

Teck Resources Ltd., 10.75%, 5/15/19

       200        240,829   
      

 

 

 
                       3,000,773   

Multi-Utilities — 1.5%

      

CenterPoint Energy, Inc. (c):

      

5.95%, 2/01/17

       750        875,954   

6.50%, 5/01/18

       775        943,506   
      

 

 

 
                       1,819,460   

Multiline Retail — 0.4%

      

Dufry Finance SCA, 5.50%, 10/15/20 (a)

       200        203,492   

Walgreen Co., 3.10%, 9/15/22

       250        254,557   
      

 

 

 
                       458,049   

Oil, Gas & Consumable Fuels — 13.3%

      

Access Midstream Partners LP:

      

5.88%, 4/15/21

       140        145,600   

6.13%, 7/15/22

       110        116,325   

Berry Petroleum Co., 6.38%, 9/15/22

       100        104,250   

BP Capital Markets Plc, 3.88%, 3/10/15 (c)

       350        375,908   

Carrizo Oil & Gas, Inc., 7.50%, 9/15/20

       100        102,000   

Chesapeake Energy Corp.:

      

7.25%, 12/15/18

       10        10,650   

6.63%, 8/15/20 (c)

       105        110,250   

6.13%, 2/15/21 (c)

       115        116,438   

Concho Resources, Inc., 5.50%, 10/01/22

       100        104,750   

CONSOL Energy, Inc., 6.38%, 3/01/21

       105        104,475   

Continental Resources, Inc., 5.00%, 9/15/22

       110        115,775   

Copano Energy LLC, 7.13%, 4/01/21

       115        121,038   

DCP Midstream LLC, 4.75%, 9/30/21 (a)

       85        90,480   

Denbury Resources, Inc., 8.25%, 2/15/20

       150        169,875   

El Paso Pipeline Partners Operating Co. LLC:

      

6.50%, 4/01/20

       340        416,310   

5.00%, 10/01/21

       125        141,531   

Enbridge Energy Partners LP, 9.88%, 3/01/19

       475        647,437   

Energy Transfer Partners LP, 6.50%, 2/01/42

       215        270,300   

Energy XXI Gulf Coast, Inc., 7.75%, 6/15/19

       240        260,400   

Enterprise Products Operating LLC, 6.65%, 4/15/18 (c)

       1,000        1,252,508   

EP Energy LLC/EP Energy Finance, Inc.,
6.88%, 5/01/19 (a)

       110        118,800   

Forest Oil Corp., 8.50%, 2/15/14

       148        159,840   

Kinder Morgan Energy Partners LP, 6.85%, 2/15/20

       1,000        1,277,352   

Kodiak Oil & Gas Corp., 8.13%, 12/01/19 (a)

       45        49,050   

Linn Energy LLC:

      

6.25%, 11/01/19 (a)

       260        260,000   

7.75%, 2/01/21

       110        117,425   

Marathon Petroleum Corp., 3.50%, 3/01/16

       325        348,225   

MarkWest Energy Partners LP:

      

6.25%, 6/15/22

       125        135,312   

5.50%, 2/15/23

       45        47,250   

Newfield Exploration Co.:

      

6.88%, 2/01/20

       145        156,962   

5.63%, 7/01/24

       100        106,750   

Nexen, Inc., 6.40%, 5/15/37

       295        378,568   
Corporate Bonds          

Par  

(000)

    Value  
      

Oil, Gas & Consumable Fuels (concluded)

      

Oasis Petroleum, Inc.:

      

7.25%, 2/01/19

    USD         65      $ 69,550   

6.50%, 11/01/21

       70        74,025   

Offshore Group Investments Ltd., 11.50%, 8/01/15

       82        90,098   

ONEOK Partners LP, 8.63%, 3/01/19

       800        1,063,538   

PDC Energy, Inc., 7.75%, 10/15/22 (a)

       85        86,488   

Petrobras International Finance Co.:

      

3.88%, 1/27/16 (c)

       875        929,543   

5.38%, 1/27/21

       525        595,379   

Petrohawk Energy Corp., 10.50%, 8/01/14

       145        156,237   

Petroleum Geo-Services ASA, 7.38%, 12/15/18 (a)

       150        159,375   

Pioneer Natural Resources Co., 6.88%, 5/01/18

       115        141,417   

Plains Exploration & Production Co., 6.88%, 2/15/23

       270        269,662   

Premier Oil Plc, 5.00%, 6/09/18

       825        845,625   

Range Resources Corp.:

      

6.75%, 8/01/20

       120        132,300   

5.75%, 6/01/21

       80        85,600   

Ruby Pipeline LLC, 6.00%, 4/01/22 (a)

       700        746,557   

Sabine Pass Liquified Natural Gas LP:

      

7.50%, 11/30/16

       420        458,850   

6.50%, 11/01/20 (a)

       135        137,700   

SandRidge Energy, Inc.:

      

7.50%, 3/15/21 (a)

       80        83,200   

7.50%, 3/15/21

       45        46,800   

8.13%, 10/15/22 (a)

       50        53,750   

7.50%, 2/15/23 (a)

       175        181,125   

SESI LLC, 7.13%, 12/15/21

       100        111,500   

SM Energy Co.:

      

6.63%, 2/15/19

       55        57,613   

6.50%, 11/15/21

       80        84,200   

6.50%, 1/01/23

       50        52,250   

Targa Resources Partners LP, 6.88%, 2/01/21

       85        92,225   

Tennessee Gas Pipeline Co. LLC, 8.00%, 2/01/16

       195        234,129   

Tesoro Corp., 5.38%, 10/01/22

       140        145,950   

Western Gas Partners LP, 5.38%, 6/01/21

       350        403,266   

The Williams Cos., Inc., 8.75%, 3/15/32

       170        243,508   
      

 

 

 
                       15,763,294   

Paper & Forest Products — 2.1%

      

Boise Paper Holdings LLC:

      

9.00%, 11/01/17

       30        33,000   

8.00%, 4/01/20

       115        125,925   

International Paper Co.:

      

7.50%, 8/15/21

       775        1,029,201   

7.30%, 11/15/39 (c)

       800        1,111,174   

Longview Fibre Paper & Packaging, Inc.,
8.00%, 6/01/16 (a)

       80        83,400   

PH Glatfelter Co., 5.38%, 10/15/20 (a)

       110        111,512   
      

 

 

 
                       2,494,212   

Pharmaceuticals — 3.8%

      

Capsugel Finance Co. SCA, 9.88%, 8/01/19 (a)

    EUR         100        146,789   

Merck & Co., Inc., 6.50%, 12/01/33

    USD         475        705,990   

Pfizer, Inc., 7.20%, 3/15/39 (c)

       1,380        2,206,786   

Roche Holdings, Inc., 7.00%, 3/01/39 (a)(c)

       420        650,510   

Valeant Pharmaceuticals International (a):

      

6.50%, 7/15/16

       27        28,418   

6.38%, 10/15/20

       165        173,662   

Watson Pharmaceuticals, Inc., 3.25%, 10/01/22

       540        556,464   
      

 

 

 
                       4,468,619   

Real Estate Investment Trusts (REITs) — 2.8%

      

AvalonBay Communities, Inc., 6.10%, 3/15/20 (c)

       800        989,117   

Developers Diversified Realty Corp.:

      

4.75%, 4/15/18

       155        173,947   

7.88%, 9/01/20

       175        227,596   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    19


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust I, Inc. (PSW)

(Percentages shown are based on Net Assets)

 

Corporate Bonds          

Par  

(000)

    Value  
      

Real Estate Investment Trusts (REITs) (concluded)

      

ERP Operating LP, 5.75%, 6/15/17 (c)

    USD         800      $ 945,634   

HCP, Inc., 5.38%, 2/01/21

       250        289,368   

UDR, Inc., 4.25%, 6/01/18

       350        388,108   

Ventas Realty LP/Ventas Capital Corp.,
4.75%, 6/01/21

       270        300,661   
      

 

 

 
                       3,314,431   

Real Estate Management & Development — 0.4%

      

Lennar Corp., 4.75%, 11/15/22 (a)

       125        123,750   

Realogy Corp. (a)(c):

      

7.88%, 2/15/19

       120        129,000   

7.63%, 1/15/20

       145        162,763   

Shea Homes LP, 8.63%, 5/15/19

       110        122,375   
      

 

 

 
                       537,888   

Road & Rail — 1.3%

      

The Hertz Corp., 6.75%, 4/15/19

       77        81,716   

Norfolk Southern Corp., 6.00%, 3/15/2105 (c)

       1,200        1,501,060   
      

 

 

 
                       1,582,776   

Semiconductors & Semiconductor Equipment — 0.5%

  

 

KLA-Tencor Corp., 6.90%, 5/01/18

             461        555,635   

Software — 0.4%

      

Infor US, Inc., 9.38%, 4/01/19

       140        154,700   

Nuance Communications, Inc., 5.38%, 8/15/20 (a)

       155        158,100   

Symantec Corp., 2.75%, 6/15/17

       150        155,738   
      

 

 

 
                       468,538   

Specialty Retail — 1.4%

      

AutoNation, Inc., 6.75%, 4/15/18

       445        499,512   

Limited Brands, Inc., 7.00%, 5/01/20

       230        262,488   

QVC, Inc. (a):

      

7.38%, 10/15/20

       25        27,706   

5.13%, 7/02/22

       330        345,045   

Sally Holdings LLC, 6.88%, 11/15/19

       140        155,225   

VF Corp., 5.95%, 11/01/17 (c)

       350        415,971   
      

 

 

 
                       1,705,947   

Tobacco — 2.2%

      

Altria Group, Inc., 10.20%, 2/06/39

       937        1,646,082   

BAT International Finance Plc, 3.25%, 6/07/22 (a)(c)

       325        337,608   

Lorillard Tobacco Co., 3.50%, 8/04/16

       600        637,575   
      

 

 

 
                       2,621,265   

Trading Companies & Distributors — 0.2%

      

Doric Nimrod Air Finance Alpha Ltd. Pass Through Trust, Series 2012-1, Class A, 5.13%, 11/30/24 (a)

             225        234,000   

Transportation Infrastructure — 1.0%

      

Penske Truck Leasing Co. LP/PTL Finance Corp. (a):

      

3.75%, 5/11/17

       725        740,263   

4.88%, 7/11/22

       400        408,933   
      

 

 

 
                       1,149,196   

Wireless Telecommunication Services — 4.9%

      

America Movil SAB de CV (c):

      

2.38%, 9/08/16

       585        611,514   

3.13%, 7/16/22

       250        257,797   

American Tower Corp.:

      

4.50%, 1/15/18

       450        498,314   

5.90%, 11/01/21

       295        353,325   

Cricket Communications, Inc., 7.75%, 5/15/16

       155        163,913   

Crown Castle International Corp.:

      

9.00%, 1/15/15

       210        224,700   

5.25%, 1/15/23 (a)

       130        134,550   

Crown Castle Towers LLC (a):

      

5.50%, 1/15/37

       275        314,054   

6.11%, 1/15/40

       300        365,000   
Corporate Bonds          

Par  

(000)

    Value  
      

Wireless Telecommunication Services (concluded)

      

Digicel Group Ltd. (a):

      

8.25%, 9/01/17

    USD         125      $ 134,375   

8.25%, 9/30/20

       255        274,762   

SBA Tower Trust, 5.10%, 4/15/42 (a)

       1,000        1,110,799   

Sprint Capital Corp., 6.88%, 11/15/28

       110        112,475   

Sprint Nextel Corp. (a):

      

9.00%, 11/15/18

       450        555,750   

7.00%, 3/01/20

       620        719,200   
      

 

 

 
                       5,830,528   
Total Corporate Bonds — 117.1%                      139,185,096   
      
                          
Floating Rate Loan Interests — 0.0% (b)                      

Oil, Gas & Consumable Fuels — 0.0%

      

Chesapeake Energy Corp., Unsecured Term Loan, 8.50%, 12/01/17

             41        41,192   
      
                          
Preferred Securities                      
Capital Trusts                      

Capital Markets — 4.0%

      

Ameriprise Financial, Inc., 7.52%, 6/01/66 (b)

       500        552,500   

RBS Capital Trust II, 6.43% (b)(f)

       625        525,000   

State Street Capital Trust IV, 1.39%, 6/01/67 (b)

       4,740        3,634,964   
      

 

 

 
                       4,712,464   

Commercial Banks — 2.1%

      

Barclays Bank Plc (a)(b)(f):

      

5.93%(c)

       425        416,500   

7.43%

       150        156,000   

BNP Paribas SA, 7.20% (a)(b)(c)(f)

       300        295,500   

Credit Agricole SA, 8.38% (a)(b)(c)(f)

       350        356,125   

M&T Capital Trust II, 8.28%, 6/01/27

       910        930,475   

National City Preferred Capital Trust I, 12.00% (b)(f)

       300        303,441   
      

 

 

 
                       2,458,041   

Diversified Financial Services — 2.5%

      

General Electric Capital Corp., 6.25% (b)(c)

       600        654,018   

JPMorgan Chase Capital XXIII, 1.43%, 12/15/67 (b)

       3,085        2,279,451   
      

 

 

 
                       2,933,469   

Electric Utilities — 0.4%

      

PPL Capital Funding, Inc., 6.70%, 3/30/67 (b)

             500        526,875   

Insurance — 8.4%

      

ACE Capital Trust II, 9.70%, 4/01/30 (c)

       500        730,800   

The Allstate Corp., 6.50%, 5/15/67 (b)

       500        537,500   

American International Group, Inc.,
8.18%, 5/15/68 (b)

       225        280,688   

AXA SA, 6.38% (a)(b)(f)

       1,000        935,000   

The Chubb Corp., 6.38%, 3/29/67 (b)(c)

       500        542,500   

Great-West Life & Annuity Insurance Co. Capital LP II, 7.15%, 5/16/46 (a)(b)(c)

       500        514,781   

Liberty Mutual Group, Inc., 10.75%, 6/15/88 (a)(b)

       500        745,000   

Lincoln National Corp., 7.00%, 5/17/66 (b)

       500        512,500   

MetLife, Inc., 6.40%, 12/15/66

       500        543,514   

Mitsui Sumitomo Insurance Co. Ltd.,
7.00%, 3/15/72 (a)(b)

       320        365,149   

Northwestern Mutual Life Insurance Co.,
6.06%, 3/30/40 (a)(c)

       900        1,183,065   

Reinsurance Group of America, Inc.,
6.75%, 12/15/65 (b)

       700        708,224   

Swiss Re Capital I LP, 6.85% (a)(b)(f)

       450        469,452   

ZFS Finance USA Trust II, 6.45%, 12/15/65 (a)(b)

       1,800        1,935,000   
      

 

 

 
                       10,003,173   
 

 

See Notes to Financial Statements.

 

                
20    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust I, Inc. (PSW)

(Percentages shown are based on Net Assets)

 

Capital Trusts          

Par   

(000)

    Value  
      

Multi-Utilities — 0.9%

      

Dominion Resources Capital Trust I,
7.83%, 12/01/27

    USD         500      $ 507,217   

Dominion Resources, Inc., 7.50%, 6/30/66 (b)

       500        550,000   
      

 

 

 
                       1,057,217   

Oil, Gas & Consumable Fuels — 1.2%

      

Enterprise Products Operating LLC, Series A,
8.38%, 8/01/66 (b)

       825        940,500   

TransCanada PipeLines Ltd., 6.35%, 5/15/67 (b)

       500        537,315   
      

 

 

 
                       1,477,815   
Total Capital Trusts — 19.5%                      23,169,054   
      
                          
Preferred Stocks           Shares         

Auto Components — 0.1%

      

Dana Holding Corp., 4.00% (a)(d)

             1,000        112,125   

Capital Markets — 0.2%

      

RBS Capital Funding Trust V, 5.90%

             10,000        183,900   

Diversified Financial Services — 0.4%

      

Ally Financial, Inc., 7.00% (a)

             510        491,449   

Thrifts & Mortgage Finance — 0.0%

      

Fannie Mae, Series S, 8.25% (b)(g)

       3,000        5,100   

Freddie Mac, Series Z, 8.38% (b)(g)

       3,000        5,220   
      

 

 

 
                       10,320   

Wireless Telecommunication Services — 2.9%

      

Centaur Funding Corp., 9.08% (a)

             2,720        3,450,150   
Total Preferred Stocks — 3.6%                      4,247,944   
      
                          
Trust Preferreds                      

Diversified Financial Services — 0.4%

      

GMAC Capital Trust I, Series 2, 8.13%, 2/15/40

             17,860        459,201   

Machinery — 0.3%

      

Stanley Black & Decker, Inc., 5.75%, 7/25/52

             15,000        387,750   
Total Trust Preferreds — 0.7%                      846,951   
Total Preferred Securities — 23.8%                      28,263,949   
      
                          
Taxable Municipal Bonds — 0.9%          

Par  

(000)

        

Metropolitan Transportation Authority, RB,
Build America Bonds,
6.55%, 11/15/31

    USD         800        1,007,312   
      
                          
US Government Sponsored Agency Securities — 0.3%         

Agency Obligations — 0.3%

      

Fannie Mae, 1.93%, 10/09/19 (c)(h)

             390        341,349   
      
                          
US Treasury Obligations         

US Treasury Bonds (c):

      

3.75%, 8/15/41

       236        281,098   

3.13%, 11/15/41

       415        440,419   

3.00%, 5/15/42

       1,180        1,218,903   

US Treasury Notes (c):

      

0.88%, 12/31/16

       901        911,910   

0.63%, 5/31/17

       225        224,807   

1.63%, 8/15/22

             340        338,141   
Total US Treasury Obligations — 2.9%                      3,415,278   
Total Long-Term Investments
(Cost — $157,863,895) — 146.1%
                     173,508,164   
Short-Term Securities         
Shares
    Value  
     

BlackRock Liquidity Funds, TempFund, Institutional Class, 0.17% (i)(j)

            883,178      $ 883,178   
Total Short-Term Securities
(Cost — $883,178) — 0.7%
                    883,178   
     
                         
Options Purchased          Contracts         
     

Exchange-Traded Put Options — 0.1%

     

Euro-Dollar 3-Year Mid-Curve Options, Strike Price USD 98.88, Expires 3/15/13

            220        90,750   
            Notional
Amount
(000)
        

Over-the-Counter Interest Rate Put Swaptions — 0.0%

  

 

Pay a fixed rate of 0.71% and receive a floating rate based on 3-month LIBOR, Expires 6/28/13, Broker Deutsche Bank AG

    USD        8,700        7,290   

Pay a fixed rate of 4.50% and receive a floating rate based on 6-month EURIBOR, Expires 9/16/13, Broker Credit Suisse Group AG

    EUR        1,300        1,762   

Pay a fixed rate of 4.50% and receive a floating rate based on 6-month EURIBOR, Expires 10/21/13, Broker Deutsche Bank AG

      1,300        2,430   

Pay a fixed rate of 4.50% and receive a floating rate based on 6-month EURIBOR, Expires 12/12/13, Broker Credit Suisse Group AG

      900        2,572   

Pay a fixed rate of 4.50% and receive a floating rate based on 3-month LIBOR, Expires 2/02/17, Broker Deutsche Bank AG

    USD        1,200        27,634   
     

 

 

 
                      41,688   
Total Options Purchased
(Cost — $260,438) — 0.1%
                    132,438   
Total Investments Before Options Written
(Cost — $159,007,511) — 146.9%
                    174,523,780   
     
                         
Options Written                     

Over-the-Counter Interest Rate Call Swaptions — (0.0)%

  

 

Pay a fixed rate of 2.34% and receive a floating rate based on 3-month LIBOR, Expires 5/07/13, Broker Morgan Stanley

      200        (10,241

Pay a fixed rate of 2.33% and receive a floating rate based on 3-month LIBOR, Expires 10/02/14, Broker Credit Suisse Group AG

      900        (38,685
     

 

 

 
                      (48,926

Over-the-Counter Interest Rate Put Swaptions — (0.1)%

  

 

Receive a fixed rate of 2.34% and pay a floating rate based on 3-month LIBOR, Expires 5/07/13, Broker Morgan Stanley

      200        (1,593

Receive a fixed rate of 2.33% and pay a floating rate based on 3-month LIBOR, Expires 10/02/14, Broker Credit Suisse Group AG

      900        (36,359

Receive a fixed rate of 6.00% and pay a floating rate based on 3-month LIBOR, Expires 2/02/17, Broker Deutsche Bank AG

      2,400        (24,790
     

 

 

 
                      (62,742
     
Total Options Written
(Premiums Received — $137,175) — (0.1)%
                    (111,668

Total Investments, Net of Options Written — 146.8%

  

      174,412,112   
Liabilities in Excess of Other Assets — (46.8)%         (55,574,999
     

 

 

 
Net Assets — 100.0%.        $ 118,837,113   
     

 

 

 
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    21


Table of Contents
Schedule of Investments (continued)    BlackRock Credit Allocation Income Trust I, Inc. (PSW)

 

 

(a)   Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

 

(b)   Variable rate security. Rate shown is as of report date.

 

(c)   All or a portion of security has been pledged as collateral in connection with open reverse repurchase agreements.

 

(d)   Convertible security.

 

(e)   Represents a payment-in-kind security which may pay interest/dividends in additional par/shares.

 

(f)   Security is perpetual in nature and has no stated maturity date.

 

(g)   Non-income producing security.

 

(h)   Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.
(i)   Investments in issuers considered to be an affiliate of the Fund during the year ended October 31, 2012, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate    Shares
Held at
October 31,
2011
     Net
Activity
    Shares
Held at
October 31,
2012
     Income  

BlackRock Liquidity Funds, TempFund, Institutional Class

     1,362,932         (479,754     883,178       $ 1,279   

 

(j)   Represents the current yield as of report date.

 

Ÿ  

For Fund compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by Fund management. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

 
Ÿ  

Reverse repurchase agreements outstanding as of October 31, 2012 were as follows:

 

Counterparty    Interest
Rate
       Trade
Date
       Maturity
Date
       Face
Value
       Face Value
Including
Accrued
Interest
 

UBS Securities LLC

     0.32        3/13/12           Open         $ 544,500         $ 546,146   

Barclays Capital, Inc.

     0.35        4/18/12           Open             3,328,875             3,335,250   

Credit Suisse Securities (USA) LLC

     0.35        4/23/12           Open           602,250           603,368   

UBS Securities LLC

     0.34        4/23/12           Open           923,475           925,149   

UBS Securities LLC

     0.35        4/23/12           Open           374,413           375,111   

Deutsche Bank Securities, Inc.

     0.12        4/24/12           Open           907,758           908,335   

UBS Securities LLC

     0.34        4/24/12           Open           332,500           333,100   

Barclays Capital, Inc.

     0.35        4/25/12           Open           1,351,500           1,353,996   

BNP Paribas Securities Corp.

     0.19        4/25/12           Open           265,795           266,062   

BNP Paribas Securities Corp.

     0.23        4/25/12           Open           311,025           311,403   

BNP Paribas Securities Corp.

     0.37        4/25/12           Open           1,016,000           1,017,984   

UBS Securities LLC

     0.25        4/26/12           Open           246,000           246,323   

UBS Securities LLC

     0.35        4/26/12           Open           1,263,875           1,266,198   

UBS Securities LLC

     0.38        4/26/12           Open           6,808,600           6,822,183   

UBS Securities LLC

     0.00        5/07/12           Open           93,437           93,437   

UBS Securities LLC

     0.25        5/10/12           Open           193,715           193,949   

UBS Securities LLC

     0.38        5/10/12           Open           505,125           506,053   

UBS Securities LLC

     0.34        5/11/12           Open           987,500           989,123   

Credit Suisse Securities (USA) LLC

     0.35        5/15/12           Open           389,500           390,144   

Credit Suisse Securities (USA) LLC

     0.35        5/18/12           Open           567,450           568,371   

Deutsche Bank Securities, Inc.

     0.19        5/29/12           Open           438,863           439,224   

UBS Securities LLC

     0.34        5/31/12           Open           780,000           781,134   

Credit Suisse Securities (USA) LLC

     0.35        6/04/12           Open           402,063           402,649   

Bank of America Merrill Lynch

     0.20        6/12/12           Open           214,194           214,363   

Credit Suisse Securities (USA) LLC

     0.35        7/03/12           Open           632,500           633,244   

Credit Suisse Securities (USA) LLC

     0.35        7/13/12           Open           814,050           814,928   

Credit Suisse Securities (USA) LLC

     0.35        7/16/12           Open           863,000           863,906   

Barclays Capital, Inc.

     0.35        7/25/12           Open           678,015           678,668   

UBS Securities LLC

     0.33        7/25/12           Open           2,183,160           2,185,141   

Credit Suisse Securities (USA) LLC

     0.30        7/26/12           Open           1,387,750           1,388,872   

Credit Suisse Securities (USA) LLC

     0.35        7/26/12           Open           3,041,191           3,044,059   

Credit Suisse Securities (USA) LLC

     0.38        7/26/12           Open           5,703,369           5,709,209   

Credit Suisse Securities (USA) LLC

     0.35        7/27/12           Open           615,938           616,519   

Credit Suisse Securities (USA) LLC

     0.35        7/31/12           Open           918,000           918,830   

Credit Suisse Securities (USA) LLC

     0.35        8/10/12           Open           215,437           215,611   

Credit Suisse Securities (USA) LLC

     0.35        8/13/12           Open           768,625           769,223   

Credit Suisse Securities (USA) LLC

     0.35        8/17/12           Open           190,500           190,641   

Credit Suisse Securities (USA) LLC

     0.35        8/20/12           Open           735,000           735,522   

Credit Suisse Securities (USA) LLC

     0.35        8/22/12           Open           859,000           859,593   

Credit Suisse Securities (USA) LLC

     0.35        8/30/12           Open           478,575           478,868   

Credit Suisse Securities (USA) LLC

     0.35        9/04/12           Open           310,375           310,550   

UBS Securities Corp.

     0.34        9/04/12           Open           137,500           137,575   

Barclays Capital, Inc.

     (0.25 )%         9/06/12           Open           16,000           15,994   

Credit Suisse Securities (USA) LLC

     (0.25 )%         9/06/12           Open           92,006           91,970   

Deutsche Bank Securities, Inc.

     (1.00 )%         9/19/12           Open           149,275           149,101   

UBS Securities Corp.

     0.34        9/24/12           Open           607,500           607,718   

UBS Securities Corp.

     0.36        9/24/12           Open           545,900           546,107   

Credit Suisse Securities (USA) LLC

     0.35        9/27/12           Open           860,781           861,074   

 

See Notes to Financial Statements.

 

                
22    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Schedule of Investments (continued)    BlackRock Credit Allocation Income Trust I, Inc. (PSW)

 

Reverse repurchase agreements outstanding as of October 31, 2012 were as follows (concluded):

 

Counterparty   

Interest

Rate

       Trade
Date
       Maturity
Date
     Face
Value
       Face Value
Including
Accrued
Interest
 

Deutsche Bank Securities, Inc.

     (1.50 )%         10/01/12         Open      $ 369,750         $ 369,272   

UBS Securities Corp.

     0.10        10/02/12         Open        477,930           477,968   

Citigroup Global Markets, Inc.

     (0.75 )%         10/04/12         Open        211,781           211,662   

Credit Suisse Securities (USA) LLC

     0.35        10/09/12         Open        508,937           509,052   

Credit Suisse Securities (USA) LLC

     0.35        10/15/12         Open        476,875           476,954   

UBS Securities Corp.

     (0.50 )%         10/16/12         Open        295,975           295,911   

UBS Securities Corp.

     0.35        10/16/12         Open        2,538,000           2,538,395   

UBS Securities Corp.

     0.38        10/16/12         Open        2,387,500           2,387,904   

BNP Paribas Securities Corp.

     0.26        10/17/12         Open        1,205,075           1,205,206   

Deutsche Bank Securities, Inc.

     (0.63 )%         10/24/12         12/31/22        110,850           110,835   

Credit Suisse Securities (USA) LLC

     0.35        10/24/12         Open        443,531           443,566   

Deutsche Bank Securities, Inc.

     0.14        10/25/12         Open        334,475           334,484   

Credit Suisse Securities (USA) LLC

     0.35        10/29/12         Open        1,671,531           1,671,580   

Credit Suisse Securities (USA) LLC

     0.35        10/30/12         Open        918,000           918,009   

Deutsche Bank Securities, Inc.

     0.00        10/31/12         Open        357,050           357,050   

Total

                  $ 57,959,120         $ 58,019,826   
                 

 

 

      

 

 

 

 

Ÿ  

Financial futures contracts purchased as of October 31, 2012 were as follows:

 

Contracts    Issue   Exchange   Expiration     

Notional
Value

       Unrealized
Appreciation
(Depreciation)
 

    43

   2-Year US Treasury Note   Chicago Board of Trade   December 2012        USD        9,474,109         $ (4,810)   

    20

   90-Day Euro-Dollar   Chicago Mercantile   March 2016        USD        4,945,750             4,135    

Total

                   $ (675)   
                  

 

 

 

 

Ÿ  

Financial futures contracts sold as of October 31, 2012 were as follows:

 

Contracts    Issue   Exchange   Expiration     

Notional
Value

      

Unrealized

Appreciation

(Depreciation)

 
    28    5-Year US Treasury Note   Chicago Board of Trade   December 2012        USD        3,479,000         $ (2,840)   
  119    10-Year US Treasury Note   Chicago Board of Trade   December 2012        USD        15,830,719           (38,695)   
      9    30-Year US Treasury Bond   Chicago Board of Trade   December 2012        USD        1,343,813           3,899    
      1    Euro-Bund   Eurex   December 2012        USD        183,638           (701)   

    17

   Ultra Long US Treasury Bond   Chicago Board of Trade   December 2012        USD        2,806,594           34,100    

Total

                   $ (4,237)   
                  

 

 

 

 

Ÿ  

Foreign currency exchange contracts as of October 31, 2012 were as follows:

 

Currency Purchased    Currency Sold    Counterparty    Settlement Date  

Unrealized 

Appreciation

 

USD    77,900

   EUR    60,000    UBS AG    1/23/13   $ 66   

USD  207,693

   EUR  160,000    UBS AG    1/23/13     137   

USD  207,202

   EUR  158,000    UBS AG    1/23/13     2,240   

Total

           $ 2,443   
          

 

 

 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    OCTOBER 31, 2012    23


Table of Contents
Schedule of Investments (continued)    BlackRock Credit Allocation Income Trust I, Inc. (PSW)

 

 

Ÿ  

Credit default swaps on single-name issues — buy protection outstanding as of October 31, 2012 were as follows:

 

Issuer    Pay
Fixed
Rate
  Counterparty   Expiration
Date
    

Notional
Amount
(000)

      

Unrealized

Appreciation

(Depreciation)

 
Southwest Airlines Co.    1.00%   Goldman Sachs Group, Inc.   12/20/16        USD        280         $ (8,121)   
Southwest Airlines Co.    1.00%   Royal Bank of Scotland Plc   12/20/16        USD        280           (9,091)   
STMicroelectronics NV    1.00%   Barclays Plc   6/20/17        EUR        285           2,502    
Cigna Corp.    1.00%   Goldman Sachs Group, Inc.   9/20/17        USD        525           (6,460)   
General Dynamic Corp.    1.00%   Credit Suisse Group AG   9/20/17        USD        390           (414)   
Hewlett-Packard Co.    1.00%   Citigroup, Inc.   9/20/17        USD        200           3,549    
Hewlett-Packard Co.    1.00%   Credit Suisse Group AG   9/20/17        USD        190           10,303    
Hewlett-Packard Co.    1.00%   JPMorgan Chase & Co.   9/20/17        USD        600           29,374    
Humana, Inc.    1.00%   Goldman Sachs Group, Inc.   9/20/17        USD        525           (1,577)   
Lockheed Martin Corp.    1.00%   Credit Suisse Group AG   9/20/17        USD        390           (3,835)   
Northrop Grumman Corp.    1.00%   Credit Suisse Group AG   9/20/17        USD        325           (1,747)   
Raytheon Co.    1.00%   Credit Suisse Group AG   9/20/17        USD        325           (1,121)   

Viacom, Inc.

   1.00%   Credit Suisse Group AG   9/20/17        USD        850           (7,564)   

Total

  

     $ 5,798    
                  

 

 

 

 

Ÿ  

Credit default swaps on single-name issues — sold protection outstanding as of October 31, 2012 were as follows:

 

Issuer    Receive
Fixed
Rate
  Counterparty   Expiration
Date
     Issuer
Credit
Rating1
    

Notional
Amount
(000)2

      

Unrealized

Appreciation

 

Anadarko Petroleum Corp.

   1.00%   Credit Suisse Group AG   6/20/17      BBB-         USD        245         $ 6,659   

Anadarko Petroleum Corp.

   1.00%   Morgan Stanley   6/20/17      BBB-         USD        10           321   

Comcast Corp.

   1.00%   Credit Suisse Group AG   9/20/17      BBB+        USD        850           9,887   

United Health Group, Inc.

   1.00%   Goldman Sachs Group, Inc.   9/20/17             USD        525           8,411   

WellPoint, Inc.

   1.00%   Goldman Sachs Group, Inc.   9/20/17      A-        USD        525           2,965   

MetLife, Inc.

   1.00%   Deutsche Bank AG   3/20/18      A-        USD        200           17   

Total

                        $ 28,260   
                       

 

 

 

 

1   

Using S&P’s rating.

 

2   

The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

 

Ÿ  

Interest rate swaps outstanding as of October 31, 2012 were as follows:

 

Fixed
Rate
   Floating
Rate
   Counterparty/
Exchange
   Expiration
Date
    

Notional
Amount
(000)

    

Unrealized

Appreciation

(Depreciation)

 

0.44%3

   3-month LIBOR    Chicago Mercantile    8/29/14        USD        3,800       $ (3,974)   

2.48%3

   3-month LIBOR    Credit Suisse Group AG    7/05/42        USD        500         11,836    

2.26%3

   3-month LIBOR    Goldman Sachs Group, Inc.    7/26/42        USD        300         21,652    

2.46%3

   3-month LIBOR    Deutsche Bank AG    8/07/42        USD        1,200         33,040    

2.52%3

   3-month LIBOR    Citigroup, Inc.    8/10/42        USD        600         9,342    

2.71%3

   3-month LIBOR    Credit Suisse Group AG    8/21/42        USD        100         (2,406)   

Total

  

   $ 69,490    
                  

 

 

 

 

3   

Fund pays the fixed rate and receives the floating rate.

 

Ÿ  

Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

 

Ÿ  

Level 1 — unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the Fund has the ability to access

 

Ÿ  

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)

 

Ÿ  

Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

 

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

 

 

 

See Notes to Financial Statements.      
                
24    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Schedule of Investments (continued)    BlackRock Credit Allocation Income Trust I, Inc. (PSW)

 

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of October 31, 2012:

 

     Level 1   Level 2   Level 3   Total

Assets:

       
Investments:        

Long-Term Investments:

  

Asset-Backed Securities

        $ 665,738     $ 588,250     $ 1,253,988  

Corporate Bonds

          137,830,721       1,354,375       139,185,096  

Floating Rate Loan Interests

          41,192             41,192  

Preferred Securities

  $ 653,421       27,610,528             28,263,949  

Taxable Municipal Bonds

          1,007,312             1,007,312  

US Govern-
ment Sponsored Agency Securities

          341,349             341,349  

US Treasury Obligations

          3,415,278             3,415,278  

Short-Term Securities

    883,178                   883,178  
   

 

 

     

 

 

     

 

 

     

 

 

 

Total

  $ 1,536,599     $ 170,912,118     $ 1,942,625     $ 174,391,342  
   

 

 

     

 

 

     

 

 

     

 

 

 
               
     Level 1   Level 2   Level 3   Total
Derivative Financial Instruments1   

Assets:

       

Credit
contracts

        $ 73,988           $ 73,988  

Foreign
currency exchange contracts

          2,443             2,443  

Interest rate contracts

  $ 132,884       117,558             250,442  

Liabilities:

       

Credit
contracts

          (39,930)              (39,930 )

Interest rate contracts

    (47,046)        (118,048)              (165,094 )
   

 

 

     

 

 

     

 

 

     

 

 

 

Total

  $ 85,838     $ 36,011           $ 121,849  
   

 

 

     

 

 

     

 

 

     

 

 

 

 

1    Derivative financial instruments are swaps, financial futures contracts, foreign currency exchange contracts and options. Swaps, financial futures contracts and foreign currency exchange contracts are valued at the unrealized appreciation/depreciation on the instrument and options are shown at value.

Certain of the Fund’s assets and liabilities are held at carrying amount or face value, which approximates fair value for financial statement purposes. As of October 31, 2012, such assets and liabilities are categorized within the disclosure hierarchy as follows:

 

      Level 1      Level 2      Level 3      Total  

Assets:

  

Foreign currency at value

   $ 8,814                       $ 8,814   

Cash pledged as collateral for financial futures contracts

     207,000                         207,000   

Cash pledged as collateral for swaps

     120,000                         120,000   

Liabilities:

           

Reverse repurchase agreements

           $ (57,959,120)                 (57,959,120)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 335,814       $ (57,959,120)               $ (57,623,306)   
  

 

 

    

 

 

    

 

 

    

 

 

 

There were no transfers between Level 1 and Level 2 during the year ended October 31, 2012.

Certain of the Fund’s investments and derivative financial instruments are categorized as Level 3 and were valued utilizing transaction prices or third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in the unobservable inputs could result in a significantly lower or higher value in such Level 3 investments and derivative financial instruments.

A reconciliation of Level 3 investments and derivative financial instruments is presented when the Fund had a significant amount of Level 3 investments and derivative financial instruments at the beginning and/or end of the year in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

 

      Asset-
Backed
Securities
     Corporate
Bonds
    Total  

Assets:

       

Opening balance, as of October 31, 2011

   $ 503,750       $ 858,000      $ 1,361,750   

Transfers into Level 32

                      

Transfers out of Level 32

                      

Accrued discounts/premiums

     15,649                15,649   

Net realized gain (loss)

                      

Net change in unrealized appreciation/depreciation3

     68,851         (3,625     65,226   

Purchases

             500,000        500,000   

Sales

                      
  

 

 

    

 

 

   

 

 

 

Closing Balance, as of
October 31, 2012

   $ 588,250       $ 1,354,375      $ 1,942,625   
  

 

 

    

 

 

   

 

 

 

 

2    Transfers into and transfers out of Level 3 represent the values as of the beginning of the reporting period.

 

3    Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/depreciation on investments still held as of October 31, 2012 was $65,226.
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    25


Table of Contents
Schedule of Investments (concluded)    BlackRock Credit Allocation Income Trust I, Inc. (PSW)

 

The following table is a reconciliation of Level 3 derivative financial instruments for which significant unobservable inputs were used in determining fair value:

 

      Credit
Contracts
 

Assets:

  

Opening balance, as of October 31, 2011

   $ 1,175    

Transfers into Level 31

                     —    

Transfers out of Level 31

     —    

Accrued discounts/premiums

     —    

Net realized gain (loss)

     —    

Net change in unrealized appreciation/depreciation2

     (1,175)   

Purchases

     —    

Issues3

     —    

Sales

     —    

Settlements4

     —    
  

 

 

 

Closing Balance, as of October 31, 2012

     —    
  

 

 

 

 

1   

Transfers into and transfers out of Level 3 represent the values as of the beginning of the reporting period.

 

2   

Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/depreciation on derivative financial instruments still held as of October 31, 2012 was $0.

 

3   

Issues represent upfront cash received on certain derivative financial instruments.

 

4   

Settlements represent periodic contractual cash flows and/or cash flows to terminate certain derivative financial instruments.

 

 

 

See Notes to Financial Statements.      
                
26    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Schedule of Investments October 31, 2012

  

BlackRock Credit Allocation Income Trust II, Inc. (PSY)

(Percentages shown are based on Net Assets)

 

Asset-Backed Securities          

Par  

(000)

    Value  
      

321 Henderson Receivables I LLC, Series 2012-1A, Class A, 4.21%, 2/16/65 (a)

    USD         1,018      $ 1,069,016   

Atrium CDO Corp., Series 5A, Class A4,
0.82%, 7/20/20 (a)(b)

       2,650        2,398,250   

SLM Student Loan Trust, Series 2004-B, Class A2, 0.59%, 6/15/21 (b)

             1,756        1,714,987   
Total Asset-Backed Securities – 1.0%                      5,182,253   
      
                          
Corporate Bonds                      

Aerospace & Defense — 0.8%

  

 

BE Aerospace, Inc., 5.25%, 4/01/22

       1,745        1,819,163   

Huntington Ingalls Industries, Inc.:

      

6.88%, 3/15/18

       610        658,800   

7.13%, 3/15/21

       600        645,000   

Kratos Defense & Security Solutions, Inc.,
10.00%, 6/01/17

       1,014        1,095,120   
      

 

 

 
                       4,218,083   

Airlines — 0.5%

  

 

American Airlines Pass-Through Trust, Series 2011-2, Class A, 8.63%, 10/15/21

       240        250,522   

Continental Airlines Pass-Through Trust, Series 2009-2, Class B, 9.25%, 5/10/17

       1,271        1,388,264   

Delta Air Lines Pass-Through Trust, Series 2002-1, Class G-1, 6.72%, 1/02/23

       1,013        1,114,603   
      

 

 

 
                       2,753,389   

Auto Components — 1.0%

  

 

Delphi Corp., 6.13%, 5/15/21

       570        629,850   

Ford Motor Co., 7.45%, 7/16/31

       1,090        1,378,850   

Icahn Enterprises LP:

      

7.75%, 1/15/16

       610        637,450   

8.00%, 1/15/18

       2,270        2,440,250   
      

 

 

 
                       5,086,400   

Beverages — 0.7%

  

 

Anheuser-Busch InBev Worldwide, Inc.,
1.38%, 7/15/17 (c)

       1,000        1,015,075   

Constellation Brands, Inc., 7.25%, 5/15/17

       1,970        2,319,675   
      

 

 

 
                       3,334,750   

Building Products — 0.3%

  

 

Building Materials Corp. of America (a):

      

7.00%, 2/15/20

       375        406,875   

6.75%, 5/01/21

       1,060        1,155,400   
      

 

 

 
                       1,562,275   

Capital Markets — 5.7%

  

 

Ameriprise Financial, Inc., 5.30%, 3/15/20 (c)

       3,250        3,842,455   

E*Trade Financial Corp., 12.50%, 11/30/17

       1,865        2,112,113   

The Goldman Sachs Group, Inc. (c):

      

6.15%, 4/01/18

       475        556,244   

5.25%, 7/27/21

       1,175        1,312,878   

5.75%, 1/24/22

       3,415        3,964,395   

6.25%, 2/01/41

       4,450        5,283,200   

Morgan Stanley, 5.75%, 1/25/21 (c)

       3,915        4,380,302   

UBS AG:

      

2.25%, 1/28/14 (c)

       1,627        1,651,699   

5.88%, 7/15/16 (c)

       2,800        3,135,070   

7.63%, 8/17/22

       2,400        2,588,177   
      

 

 

 
                       28,826,533   

Chemicals — 2.3%

  

 

Ashland, Inc., 4.75%, 8/15/22 (a)

       520        530,400   

Celanese US Holdings LLC, 5.88%, 6/15/21

       1,545        1,720,744   

Hexion US Finance Corp., 6.63%, 4/15/20

       450        448,875   

Huntsman International LLC, 8.63%, 3/15/21 (c)

       595        676,813   
Corporate Bonds          

Par  

(000)

    Value  
      

Chemicals (concluded)

      

INEOS Finance Plc (a):

      

8.38%, 2/15/19

    USD         320      $ 336,000   

7.50%, 5/01/20

       640        648,000   

Linde Finance BV, 7.38%, 7/14/66 (b)

    EUR         781        1,184,382   

LyondellBasell Industries NV, 5.75%, 4/15/24 (c)

    USD         1,885        2,181,887   

MPM Escrow LLC/MPM Finance Escrow Corp.,
8.88%, 10/15/20 (a)

       305        298,900   

Nufarm Australia Ltd., 6.38%, 10/15/19 (a)

       295        302,375   

Rockwood Specialties Group, Inc., 4.63%, 10/15/20

       1,695        1,745,850   

Tronox Finance LLC, 6.38%, 8/15/20 (a)

       1,545        1,541,138   
      

 

 

 
                       11,615,364   

Commercial Banks — 5.3%

  

 

Amsouth Bank, Series AI, 4.85%, 4/01/13

       1,050        1,064,438   

Asciano Finance Ltd., 5.00%, 4/07/18 (a)

       900        970,041   

Associated Banc-Corp, 5.13%, 3/28/16 (c)

       2,200        2,412,329   

BBVA US Senior SAU, 4.66%, 10/09/15 (c)

       2,500        2,524,715   

Branch Banking & Trust Co. (b)(c):

      

0.72%, 9/13/16

       1,100        1,069,072   

0.73%, 5/23/17

       675        648,364   

CIT Group, Inc.:

      

4.25%, 8/15/17

       1,380        1,415,614   

5.25%, 3/15/18

       1,190        1,264,375   

5.50%, 2/15/19 (a)

       1,040        1,108,900   

5.00%, 8/15/22

       430        445,578   

City National Corp., 5.25%, 9/15/20 (c)

       2,350        2,590,320   

Discover Bank, 8.70%, 11/18/19

       1,200        1,569,026   

HSBC Finance Corp., 6.68%, 1/15/21 (c)

       1,525        1,804,586   

Regions Financial Corp.:

      

4.88%, 4/26/13

       2,525        2,566,031   

5.75%, 6/15/15

       1,800        1,971,000   

Santander Holdings USA, Inc., 3.00%, 9/24/15

       1,100        1,121,057   

SVB Financial Group, 5.38%, 9/15/20

       2,300        2,604,844   
      

 

 

 
                       27,150,290   

Commercial Services & Supplies — 4.0%

  

 

ADS Waste Holdings, Inc., 8.25%, 10/01/20 (a)

       298        308,430   

The ADT Corp., 4.88%, 7/15/42 (a)

       1,310        1,398,000   

Aviation Capital Group Corp. (a):

      

7.13%, 10/15/20 (c)

       9,300        9,811,480   

6.75%, 4/06/21

       2,325        2,415,466   

Casella Waste Systems, Inc., 7.75%, 2/15/19

       366        358,680   

Clean Harbors, Inc., 5.25%, 8/01/20 (a)

       463        474,575   

Corrections Corp. of America, 7.75%, 6/01/17

       3,375        3,607,031   

Covanta Holding Corp., 6.38%, 10/01/22

       665        723,702   

HDTFS, Inc. (a):

      

5.88%, 10/15/20

       370        373,700   

6.25%, 10/15/22

       465        471,394   

Mobile Mini, Inc., 7.88%, 12/01/20

       275        297,344   
      

 

 

 
                       20,239,802   

Communications Equipment — 0.9%

  

 

Avaya, Inc., 9.75%, 11/01/15 (c)

       900        801,000   

Brocade Communications Systems, Inc.,
6.88%, 1/15/20 (c)

       2,965        3,209,613   

Zayo Group LLC/Zayo Capital, Inc., 8.13%, 1/01/20

       720        788,400   
      

 

 

 
                       4,799,013   

Computers & Peripherals — 0.0%

  

 

NCR Corp., 5.00%, 7/15/22 (a)

             140        142,975   

Construction Materials — 0.5%

  

 

HD Supply, Inc. (a):

      

8.13%, 4/15/19

       900        990,000   

11.50%, 7/15/20

       1,250        1,315,625   
      

 

 

 
                       2,305,625   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    27


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust II, Inc. (PSY)

(Percentages shown are based on Net Assets)

 

Corporate Bonds          

Par  

(000)

    Value  
      

Consumer Finance — 5.3%

  

 

American Express Credit Corp., 2.75%, 9/15/15 (c)

    USD         5,850      $ 6,166,889   

Capital One Bank USA NA, 8.80%, 7/15/19

       3,325        4,425,532   

Daimler Finance North America LLC,
2.63%, 9/15/16 (a)(c)

       3,425        3,573,583   

Experian Finance Plc, 2.38%, 6/15/17 (a)(c)

       750        767,823   

Ford Motor Credit Co. LLC:

      

8.00%, 12/15/16

       975        1,180,754   

5.88%, 8/02/21

       2,580        2,970,620   

Inmarsat Finance Plc, 7.38%, 12/01/17 (a)

       1,815        1,955,663   

SLM Corp., 6.25%, 1/25/16

       4,870        5,259,843   

Toll Brothers Finance Corp., 5.88%, 2/15/22

       410        463,500   
      

 

 

 
                       26,764,207   

Containers & Packaging — 1.3%

  

 

Ardagh Packaging Finance Plc (a):

      

7.38%, 10/15/17

       200        215,000   

7.38%, 10/15/17

       225        241,594   

9.13%, 10/15/20

       235        245,575   

Ball Corp.:

      

7.13%, 9/01/16

       1,750        1,881,250   

6.75%, 9/15/20

       2,210        2,425,475   

Crown Americas LLC, 6.25%, 2/01/21

       825        910,594   

Smurfit Kappa Acquisitions, 4.88%, 9/15/18 (a)

       490        490,000   
      

 

 

 
                       6,409,488   

Diversified Financial Services — 7.5%

  

 

Ally Financial, Inc.:

      

4.50%, 2/11/14

       1,775        1,828,250   

8.30%, 2/12/15

       1,230        1,377,907   

8.00%, 11/01/31

       1,230        1,463,700   

Bank of America Corp.:

      

3.75%, 7/12/16 (c)

       1,395        1,494,924   

5.30%, 3/15/17 (c)

       3,640        4,086,537   

5.00%, 5/13/21

       50        56,404   

Blackstone Holdings Finance Co. LLC,
4.75%, 2/15/23 (a)(c)

       825        884,882   

Citigroup, Inc. (c):

      

6.38%, 8/12/14

       1,300        1,416,564   

4.59%, 12/15/15

       975        1,063,650   

4.45%, 1/10/17

       2,680        2,960,725   

DPL, Inc., 7.25%, 10/15/21

       1,080        1,217,700   

General Motors Financial Co., Inc., 6.75%, 6/01/18

       500        554,325   

ING Bank NV, 5.00%, 6/09/21 (a)(c)

       2,350        2,653,996   

Intesa Sanpaolo SpA, 2.38%, 12/21/12 (c)

       3,500        3,500,021   

LeasePlan Corp. NV, 3.00%, 10/23/17 (a)(c)

       2,000        2,023,055   

Moody’s Corp., 6.06%, 9/07/17

       6,000        6,578,384   

Reynolds American, Inc., 3.25%, 11/01/22

       1,875        1,896,420   

Reynolds Group Issuer, Inc.:

      

7.13%, 4/15/19

       245        260,925   

7.88%, 8/15/19

       740        802,900   

9.88%, 8/15/19

       305        319,488   

5.75%, 10/15/20 (a)

       1,200        1,212,000   

6.88%, 2/15/21

       110        116,875   

WMG Acquisition Corp., 9.50%, 6/15/16

       205        225,244   
      

 

 

 
                       37,994,876   

Diversified Telecommunication Services — 3.9%

  

 

AT&T, Inc., 6.30%, 1/15/38 (c)

       4,000        5,355,608   

Level 3 Financing, Inc.:

      

8.13%, 7/01/19

       3,149        3,361,557   

8.63%, 7/15/20

       650        708,500   

Telecom Italia Capital SA, 6.18%, 6/18/14

       975        1,034,130   

Telefonica Emisiones SAU, 5.46%, 2/16/21

       1,360        1,382,100   

Verizon Communications, Inc. (c):

      

1.95%, 3/28/14

       3,650        3,726,938   

7.35%, 4/01/39

       2,375        3,657,588   

Windstream Corp., 7.88%, 11/01/17

       730        813,038   
      

 

 

 
                       20,039,459   
Corporate Bonds          

Par  

(000)

    Value  
      

Electric Utilities — 2.9%

  

 

CMS Energy Corp., 5.05%, 3/15/22

    USD         1,125      $ 1,256,680   

FirstEnergy Solutions Corp., 6.05%, 8/15/21

       1,100        1,271,105   

Great Plains Energy, Inc., 5.29%, 6/15/22

       1,650        1,891,529   

Mirant Mid Atlantic Pass Through Trust, Series B, 9.13%, 6/30/17

       517        564,760   

Nisource Finance Corp.:

      

6.40%, 3/15/18

       1,070        1,302,404   

5.25%, 2/15/43

       620        695,319   

Oncor Electric Delivery Co. LLC (c):

      

4.10%, 6/01/22

       1,200        1,285,754   

5.30%, 6/01/42

       820        933,385   

Progress Energy, Inc., 7.00%, 10/30/31 (c)

       4,000        5,339,096   
      

 

 

 
                       14,540,032   

Electronic Equipment, Instruments & Components — 0.3%

  

 

Jabil Circuit, Inc., 8.25%, 3/15/18

       800        944,000   

NXP BV, 3.09%, 10/15/13 (b)

       400        399,500   
      

 

 

 
                       1,343,500   

Energy Equipment & Services — 3.8%

  

 

Atwood Oceanics, Inc., 6.50%, 2/01/20

       110        118,250   

Cie Générale de Géophysique-Veritas,
6.50%, 6/01/21

       700        738,500   

Energy Transfer Partners LP, 5.20%, 2/01/22

       3,000        3,443,730   

Ensco Plc, 4.70%, 3/15/21

       1,965        2,262,723   

FTS International Services LLC/FTS International Bonds, Inc., 8.13%, 11/15/18 (a)

       789        824,505   

Hornbeck Offshore Services, Inc., 5.88%, 4/01/20

       285        289,988   

Key Energy Services, Inc., 6.75%, 3/01/21

       745        741,275   

MEG Energy Corp. (a):

      

6.50%, 3/15/21

       955        1,024,237   

6.38%, 1/30/23

       225        240,750   

Oil States International, Inc., 6.50%, 6/01/19

       505        536,562   

Peabody Energy Corp., 6.25%, 11/15/21 (c)

       1,555        1,605,537   

Precision Drilling Corp., 6.50%, 12/15/21

       425        449,438   

Seadrill Ltd., 5.63%, 9/15/17 (a)

       2,345        2,345,000   

Transocean, Inc.:

      

2.50%, 10/15/17

       400        405,112   

6.50%, 11/15/20

       1,125        1,366,792   

6.38%, 12/15/21

       1,375        1,673,147   

6.80%, 3/15/38

       975        1,211,888   
      

 

 

 
                       19,277,434   

Food & Staples Retailing — 0.6%

  

 

Wal-Mart Stores, Inc., 5.25%, 9/01/35 (c)

             2,500        3,127,365   

Food Products — 1.3%

      

Kraft Foods Group, Inc., 5.00%, 6/04/42 (a)

       1,325        1,547,429   

Mondelez International, Inc.:

      

6.50%, 8/11/17

       1,665        2,056,485   

6.13%, 8/23/18

       1,660        2,065,583   

Post Holdings, Inc., 7.38%, 2/15/22 (a)

       916        972,105   
      

 

 

 
                       6,641,602   

Gas Utilities — 0.2%

  

 

El Paso Natural Gas Co. LLC, 8.63%, 1/15/22

             695        950,772   

Health Care Equipment & Supplies — 0.6%

  

 

Fresenius US Finance II, Inc., 9.00%, 7/15/15 (a)

       2,250        2,581,875   

Teleflex, Inc., 6.88%, 6/01/19

       490        526,750   
      

 

 

 
                       3,108,625   

Health Care Providers & Services — 4.1%

  

 

Aviv Healthcare Properties LP, 7.75%, 2/15/19

       460        484,725   

CHS/Community Health Systems, Inc.,
5.13%, 8/15/18

       480        498,000   

HCA, Inc.:

      

8.50%, 4/15/19

       240        269,700   

6.50%, 2/15/20

       2,240        2,475,200   
 

 

See Notes to Financial Statements.

 

                
28    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust II, Inc. (PSY)

(Percentages shown are based on Net Assets)

 

Corporate Bonds          

Par  

(000)

    Value  
      

Health Care Providers & Services (concluded)

      

HCA, Inc. (concluded):

      

7.25%, 9/15/20

    USD         3,435      $ 3,799,969   

4.75%, 5/01/23

       1,450        1,450,000   

INC Research LLC, 11.50%, 7/15/19 (a)

       695        698,475   

inVentiv Health, Inc., 10.00%, 8/15/18 (a)

       50        45,250   

Tenet Healthcare Corp.:

      

10.00%, 5/01/18

       1,530        1,744,200   

8.88%, 7/01/19

       1,125        1,257,187   

4.75%, 6/01/20 (a)

       947        938,714   

UnitedHealth Group, Inc., 6.88%, 2/15/38 (c)

       3,400        4,818,711   

WellPoint, Inc. (c):

      

3.30%, 1/15/23

       1,075        1,111,964   

2.75%, 10/15/42 (a)(d)

       1,400        1,459,500   
      

 

 

 
                       21,051,595   

Health Care Technology — 1.4%

  

 

Amgen, Inc.:

      

5.15%, 11/15/41 (c)

       4,208        4,848,525   

5.65%, 6/15/42

       42        51,573   

5.38%, 5/15/43 (c)

       1,650        1,980,998   
    

 

 

   

 

 

 
                       6,881,096   

Household Durables — 0.5%

  

 

Beazer Homes USA, Inc., 6.63%, 4/15/18 (a)

       690        738,300   

DR Horton, Inc., 4.38%, 9/15/22

       645        646,613   

Standard Pacific Corp., 8.38%, 1/15/21

       890        1,032,400   
      

 

 

 
                       2,417,313   

Independent Power Producers & Energy Traders — 1.8%

  

 

The AES Corp.:

      

9.75%, 4/15/16

       985        1,178,306   

7.38%, 7/01/21

       135        150,863   

Calpine Corp. (a):

      

7.25%, 10/15/17

       396        419,760   

7.50%, 2/15/21

       189        205,538   

Energy Future Intermediate Holding Co. LLC,
10.00%, 12/01/20

       1,880        2,053,900   

Exelon Generation Co. LLC, Series C,
4.25%, 6/15/22 (a)

       2,325        2,488,564   

GenOn REMA LLC, 9.68%, 7/02/26

       500        535,000   

Laredo Petroleum, Inc.:

      

9.50%, 2/15/19

       295        334,825   

7.38%, 5/01/22

       265        288,850   

NRG Energy, Inc., 6.63%, 3/15/23 (a)

       530        545,900   

QEP Resources, Inc.:

      

5.38%, 10/01/22

       569        597,450   

5.25%, 5/01/23

       295        307,537   
      

 

 

 
                       9,106,493   

Insurance — 6.8%

  

 

American International Group, Inc. (c):

      

3.80%, 3/22/17

       1,500        1,618,240   

8.25%, 8/15/18

       625        811,904   

6.40%, 12/15/20

       2,590        3,180,774   

Aon Corp., 5.00%, 9/30/20 (c)

       4,600        5,300,203   

Fairfax Financial Holdings Ltd., 5.80%, 5/15/21 (a)

       1,025        1,050,172   

Forethought Financial Group, Inc.,
8.63%, 4/15/21 (a)

       1,000        1,271,261   

Genworth Financial, Inc., 7.63%, 9/24/21 (c)

       970        1,020,238   

ING Verzekeringen NV, 2.51%, 6/21/21 (b)

    EUR         430        540,791   

Manulife Financial Corp., 4.90%, 9/17/20 (c)

    USD         4,700        5,221,926   

MPL 2 Acquisition Canco, Inc., 9.88%, 8/15/18 (a)

       430        392,375   

Nippon Life Insurance Co., 5.00%, 10/18/42 (a)(b)

       3,150        3,249,745   

Principal Financial Group, Inc., 8.88%, 5/15/19

       980        1,302,147   

Prudential Financial, Inc.:

      

6.63%, 12/01/37 (c)

       3,400        4,367,456   

5.88%, 9/15/42 (b)

       1,200        1,263,000   

XL Group Ltd., 5.75%, 10/01/21 (c)

       3,430        4,063,284   
      

 

 

 
                       34,653,516   
Corporate Bonds          

Par  

(000)

    Value  
      

IT Services — 1.2%

  

 

Ceridian Corp., 8.88%, 7/15/19 (a)

    USD         1,760      $ 1,865,600   

Epicor Software Corp., 8.63%, 5/01/19

       720        756,000   

First Data Corp.:

      

7.38%, 6/15/19 (a)(c)

       935        967,725   

6.75%, 11/01/20 (a)

       800        800,000   

8.25%, 1/15/21 (a)

       85        85,000   

12.63%, 1/15/21

       710        733,075   

SunGard Data Systems, Inc., 7.38%, 11/15/18

       730        785,663   
      

 

 

 
                       5,993,063   

Life Sciences Tools & Services — 1.8%

      

Bio-Rad Laboratories, Inc., 8.00%, 9/15/16

       3,825        4,178,812   

Life Technologies Corp., 6.00%, 3/01/20 (c)

       4,200        5,026,850   
      

 

 

 
                       9,205,662   

Machinery — 1.0%

  

 

Ingersoll-Rand Global Holding Co. Ltd.,
9.50%, 4/15/14 (c)

       3,400        3,807,330   

UR Merger Sub Corp. (a):

      

5.75%, 7/15/18

       235        252,625   

7.38%, 5/15/20

       600        649,500   

7.63%, 4/15/22

       548        600,060   
      

 

 

 
                       5,309,515   

Media — 8.4%

  

 

A&E Television Networks LLC, 3.25%, 8/22/19

       1,450        1,475,375   

AMC Networks, Inc., 7.75%, 7/15/21

       395        447,338   

CCH II LLC, 13.50%, 11/30/16

       946        1,017,279   

Comcast Corp., 6.30%, 11/15/17 (c)

       3,400        4,221,970   

Cox Communications, Inc., 8.38%, 3/01/39 (a)

       3,400        5,395,008   

CSC Holdings LLC, 8.63%, 2/15/19

       1,200        1,422,000   

DIRECTV Holdings LLC, 5.00%, 3/01/21

       2,575        2,928,115   

DISH DBS Corp., 7.00%, 10/01/13

       1,750        1,830,938   

Intelsat Jackson Holdings SA, 7.25%, 4/01/19

       190        203,775   

Intelsat Luxembourg SA:

      

11.25%, 2/04/17

       890        934,500   

11.50%, 2/04/17 (e)

       400        421,000   

The Interpublic Group of Cos., Inc., 10.00%, 7/15/17

       1,175        1,296,906   

News America, Inc., 6.15%, 3/01/37

       2,750        3,452,564   

Time Warner Cable, Inc., 6.75%, 6/15/39

       4,050        5,405,798   

Time Warner, Inc., 7.70%, 5/01/32

       4,150        6,081,327   

Unitymedia Hessen GmbH & Co. KG (a):

      

8.13%, 12/01/17

       1,566        1,691,280   

7.50%, 3/15/19

       1,040        1,139,436   

Virgin Media Finance Plc, 4.88%, 2/15/22

       510        515,100   

Virgin Media Secured Finance Plc, 6.50%, 1/15/18

       2,675        2,902,375   
      

 

 

 
                       42,782,084   

Metals & Mining — 2.5%

  

 

AngloGold Ashanti Holdings Plc, 5.13%, 8/01/22

       1,450        1,478,742   

ArcelorMittal, 4.25%, 3/01/16

       225        223,490   

Barrick Gold Corp., 2.90%, 5/30/16 (c)

       1,150        1,213,349   

FMG Resources August 2006 Property Ltd. (a):

      

6.38%, 2/01/16 (c)

       1,655        1,655,000   

6.88%, 4/01/22

       85        79,900   

Freeport-McMoRan Copper & Gold, Inc.,
3.55%, 3/01/22

       1,400        1,425,477   

Freeport-McMoRan Corp., 7.13%, 11/01/27

       2,900        3,677,252   

New Gold, Inc., 7.00%, 4/15/20 (a)

       130        137,800   

Novelis, Inc., 8.75%, 12/15/20

       975        1,074,938   

Steel Dynamics, Inc., 6.38%, 8/15/22 (a)

       425        444,125   

Teck Resources Ltd., 10.75%, 5/15/19

       874        1,052,422   
      

 

 

 
                       12,462,495   

Multi-Utilities — 1.5%

  

 

CenterPoint Energy, Inc. (c):

      

5.95%, 2/01/17

       3,150        3,679,008   

6.50%, 5/01/18

       3,350        4,078,380   
      

 

 

 
                       7,757,388   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    29


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust II, Inc. (PSY)

(Percentages shown are based on Net Assets)

 

Corporate Bonds          

Par  

(000)

    Value  
      

Multiline Retail — 0.4%

  

 

Dufry Finance SCA, 5.50%, 10/15/20 (a)

    USD         707      $ 719,345   

Walgreen Co., 3.10%, 9/15/22

       1,050        1,069,139   
      

 

 

 
                       1,788,484   

Oil, Gas & Consumable Fuels — 13.5%

  

 

Access Midstream Partners LP:

      

5.88%, 4/15/21

       595        618,800   

6.13%, 7/15/22

       475        502,312   

Anadarko Petroleum Corp., 6.38%, 9/15/17

       23        27,882   

Berry Petroleum Co., 6.38%, 9/15/22

       425        443,063   

BP Capital Markets Plc (c):

      

3.88%, 3/10/15

       1,500        1,611,034   

3.20%, 3/11/16

       1,875        2,016,017   

Carrizo Oil & Gas, Inc., 7.50%, 9/15/20

       475        484,500   

Chesapeake Energy Corp.:

      

7.25%, 12/15/18 (c)

       40        42,600   

6.63%, 8/15/20 (c)

       445        467,250   

6.13%, 2/15/21

       470        475,875   

Concho Resources, Inc., 5.50%, 10/01/22

       420        439,950   

CONSOL Energy, Inc., 6.38%, 3/01/21

       450        447,750   

Continental Resources, Inc., 5.00%, 9/15/22

       465        489,413   

Copano Energy LLC, 7.13%, 4/01/21

       500        526,250   

DCP Midstream LLC, 4.75%, 9/30/21 (a)

       298        317,211   

Denbury Resources, Inc., 8.25%, 2/15/20

       645        730,462   

El Paso Pipeline Partners Operating Co. LLC:

      

6.50%, 4/01/20

       1,530        1,873,395   

5.00%, 10/01/21

       525        594,430   

Enbridge Energy Partners LP, 9.88%, 3/01/19

       2,100        2,862,355   

Energy Transfer Partners LP, 6.50%, 2/01/42

       675        848,615   

Energy XXI Gulf Coast, Inc., 7.75%, 6/15/19

       1,025        1,112,125   

Enterprise Products Operating LLC, 6.65%, 4/15/18

       4,200        5,260,534   

EP Energy LLC/EP Energy Finance, Inc.,
6.88%, 5/01/19 (a)

       475        513,000   

Forest Oil Corp., 8.50%, 2/15/14

       620        669,600   

Kinder Morgan Energy Partners LP, 6.85%, 2/15/20

       4,200        5,364,878   

Kodiak Oil & Gas Corp., 8.13%, 12/01/19 (a)

       190        207,100   

Linn Energy LLC:

      

6.25%, 11/01/19 (a)

       1,125        1,125,000   

7.75%, 2/01/21

       450        480,375   

Marathon Petroleum Corp., 3.50%, 3/01/16

       1,375        1,473,260   

MarkWest Energy Partners LP:

      

6.25%, 6/15/22

       530        573,725   

5.50%, 2/15/23

       190        199,500   

Newfield Exploration Co.:

      

6.88%, 2/01/20

       595        644,087   

5.63%, 7/01/24

       420        448,350   

Nexen, Inc., 6.40%, 5/15/37

       1,380        1,770,926   

Oasis Petroleum, Inc.:

      

7.25%, 2/01/19

       270        288,900   

6.50%, 11/01/21

       305        322,538   

Offshore Group Investments Ltd., 11.50%, 8/01/15

       352        386,760   

ONEOK Partners LP, 8.63%, 3/01/19

       3,400        4,520,038   

PDC Energy, Inc., 7.75%, 10/15/22 (a)

       365        371,388   

Petrobras International Finance Co.:

      

3.88%, 1/27/16

       3,725        3,957,198   

5.38%, 1/27/21

       2,200        2,494,923   

Petrohawk Energy Corp., 10.50%, 8/01/14

       615        662,662   

Petroleum Geo-Services ASA, 7.38%, 12/15/18 (a)

       445        472,813   

Pioneer Natural Resources Co., 6.88%, 5/01/18

       490        602,561   

Plains Exploration & Production Co., 6.88%, 2/15/23

       1,155        1,153,556   

Premier Oil Plc, 5.00%, 6/09/18

       3,400        3,485,000   

Range Resources Corp.:

      

6.75%, 8/01/20

       520        573,300   

5.75%, 6/01/21

       335        358,450   

Ruby Pipeline LLC, 6.00%, 4/01/22 (a)

       2,975        3,172,867   

Sabine Pass Liquified Natural Gas LP:

      

7.50%, 11/30/16

       1,775        1,939,187   

6.50%, 11/01/20 (a)

       575        586,500   
Corporate Bonds          

Par  

(000)

    Value  
      

Oil, Gas & Consumable Fuels (concluded)

      

SandRidge Energy, Inc.:

      

7.50%, 3/15/21 (a)

    USD         330      $ 343,200   

7.50%, 3/15/21

       200        208,000   

8.13%, 10/15/22 (a)

       220        236,500   

7.50%, 2/15/23 (a)

       755        781,425   

SESI LLC, 7.13%, 12/15/21

       435        485,025   

SM Energy Co.:

      

6.63%, 2/15/19

       220        230,450   

6.50%, 11/15/21

       345        363,113   

6.50%, 1/01/23

       215        224,675   

Targa Resources Partners LP, 6.88%, 2/01/21

       375        406,875   

Tennessee Gas Pipeline Co. LLC, 8.00%, 2/01/16

       831        997,748   

Tesoro Corp., 5.38%, 10/01/22

       615        641,137   

Western Gas Partners LP, 5.38%, 6/01/21

       1,525        1,757,090   

The Williams Cos., Inc., 8.75%, 3/15/32

       711        1,018,436   
      

 

 

 
                       68,703,939   

Paper & Forest Products — 2.1%

  

 

Boise Paper Holdings LLC:

      

9.00%, 11/01/17

       120        132,000   

8.00%, 4/01/20

       480        525,600   

International Paper Co.:

      

7.50%, 8/15/21

       3,325        4,415,603   

7.30%, 11/15/39

       3,400        4,722,488   

Longview Fibre Paper & Packaging, Inc.,
8.00%, 6/01/16 (a)

       330        344,025   

PH Glatfelter Co., 5.38%, 10/15/20 (a)

       465        471,394   
      

 

 

 
                       10,611,110   

Pharmaceuticals — 2.3%

  

 

Capsugel Finance Co. SCA, 9.88%, 8/01/19 (a)

    EUR         300        440,367   

Merck & Co., Inc., 6.50%, 12/01/33 (c)

    USD         2,070        3,076,631   

Pfizer, Inc., 7.20%, 3/15/39 (c)

       1,425        2,278,746   

Roche Holdings, Inc., 7.00%, 3/01/39 (a)(c)

       1,825        2,826,620   

Valeant Pharmaceuticals International (a):

      

6.50%, 7/15/16

       117        123,142   

6.38%, 10/15/20

       700        736,750   

Watson Pharmaceuticals, Inc., 3.25%, 10/01/22

       2,240        2,308,295   
      

 

 

 
                       11,790,551   

Real Estate Investment Trusts (REITs) — 2.8%

      

AvalonBay Communities, Inc., 6.10%, 3/15/20 (c)

       3,400        4,203,746   

Developers Diversified Realty Corp.:

      

4.75%, 4/15/18

       645        723,845   

7.88%, 9/01/20

       775        1,007,926   

ERP Operating LP, 5.75%, 6/15/17

       3,405        4,024,856   

HCP, Inc., 5.38%, 2/01/21

       1,025        1,186,411   

UDR, Inc., 4.25%, 6/01/18

       1,475        1,635,597   

Ventas Realty LP/Ventas Capital Corp.,
4.75%, 6/01/21

       1,135        1,263,888   
      

 

 

 
                       14,046,269   

Real Estate Management & Development — 0.4%

  

 

Lennar Corp., 4.75%, 11/15/22 (a)

       535        529,650   

Realogy Corp. (a)(c):

      

7.88%, 2/15/19

       495        532,125   

7.63%, 1/15/20

       620        695,950   

Shea Homes LP, 8.63%, 5/15/19

       480        534,000   
      

 

 

 
                       2,291,725   

Road & Rail — 1.3%

  

 

The Hertz Corp., 6.75%, 4/15/19

       338        358,703   

Norfolk Southern Corp., 6.00%, 3/15/2105 (c)

       5,000        6,254,415   
      

 

 

 
                       6,613,118   

Semiconductors & Semiconductor Equipment — 0.5%

  

 

KLA-Tencor Corp., 6.90%, 5/01/18

             1,928        2,323,786   
 

 

See Notes to Financial Statements.

 

                
30    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust II, Inc. (PSY)

(Percentages shown are based on Net Assets)

 

Corporate Bonds          

Par  

(000)

    Value  
      

Software — 0.5%

      

Infor US, Inc., 9.38%, 4/01/19

    USD         960      $ 1,060,800   

Nuance Communications, Inc., 5.38%, 8/15/20 (a)

       670        683,400   

Symantec Corp., 2.75%, 6/15/17

       600        622,951   
      

 

 

 
                       2,367,151   

Specialty Retail — 1.5%

  

 

AutoNation, Inc., 6.75%, 4/15/18

       1,965        2,205,712   

Limited Brands, Inc., 7.00%, 5/01/20

       980        1,118,425   

QVC, Inc. (a):

      

7.38%, 10/15/20

       105        116,365   

5.13%, 7/02/22

       1,510        1,578,841   

Sally Holdings LLC, 6.88%, 11/15/19

       595        659,706   

VF Corp., 5.95%, 11/01/17 (c)

       1,475        1,753,023   
      

 

 

 
                       7,432,072   

Tobacco — 2.2%

  

 

Altria Group, Inc., 10.20%, 2/06/39

       3,929        6,902,302   

BAT International Finance Plc, 3.25%, 6/07/22 (a)(c)

       1,425        1,480,280   

Lorillard Tobacco Co., 3.50%, 8/04/16

       2,450        2,603,431   
      

 

 

 
                       10,986,013   

Trading Companies & Distributors — 0.3%

  

 

Doric Nimrod Air Finance Alpha Ltd. Pass Through Trust, Series 2012-1, Class A,
5.13%, 11/30/24 (a)

             1,390        1,445,600   

Transportation Infrastructure — 1.0%

  

 

Penske Truck Leasing Co. LP/PTL Finance Corp. (a):

      

3.75%, 5/11/17

       3,150        3,216,317   

4.88%, 7/11/22

       1,650        1,686,848   
      

 

 

 
                       4,903,165   

Wireless Telecommunication Services — 4.7%

  

 

America Movil SAB de CV (c):

      

2.38%, 9/08/16

       2,675        2,796,239   

3.13%, 7/16/22

       1,025        1,056,967   

American Tower Corp.:

      

4.50%, 1/15/18

       1,925        2,131,676   

5.90%, 11/01/21

       1,295        1,551,038   

Cricket Communications, Inc., 7.75%, 5/15/16

       670        708,525   

Crown Castle International Corp.:

      

9.00%, 1/15/15

       890        952,300   

5.25%, 1/15/23 (a)

       560        579,600   

Crown Castle Towers LLC (a):

      

5.50%, 1/15/37

       1,175        1,341,866   

6.11%, 1/15/40

       1,300        1,581,668   

Digicel Group Ltd., 8.25%, 9/30/20 (a)

       1,080        1,163,700   

SBA Tower Trust, 5.10%, 4/15/42 (a)

       4,225        4,693,126   

Sprint Capital Corp., 6.88%, 11/15/28

       480        490,800   

Sprint Nextel Corp. (a):

      

9.00%, 11/15/18

       1,545        1,908,075   

7.00%, 3/01/20

       2,670        3,097,200   
      

 

 

 
                       24,052,780   
Total Corporate Bonds – 114.2%                 579,207,842   
      
                          
Floating Rate Loan Interests – 0.1% (b)                      

Oil, Gas & Consumable Fuels — 0.1%

  

Chesapeake Energy Corp., Unsecured Term Loan, 8.50%, 12/01/17

             177        176,973   
      
                          
Preferred Securities                      
Capital Trusts                      

Capital Markets — 3.5%

  

 

Ameriprise Financial, Inc., 7.52%, 6/01/66 (b)

       2,500        2,762,500   

RBS Capital Trust II, 6.43% (b)(f)

       1,250        1,050,000   
Capital Trusts           Par  
(000)
    Value  
      

Capital Markets (concluded)

  

 

State Street Capital Trust IV, 1.39%, 6/01/67 (b)

    USD         18,235      $ 13,983,874   
      

 

 

 
                       17,796,374   

Commercial Banks — 3.0%

  

 

Barclays Bank Plc, 7.43% (a)(b)(f)

       650        676,000   

BNP Paribas SA, 7.20% (a)(b)(c)(f)

       1,500        1,477,500   

Credit Agricole SA, 8.38% (a)(b)(c)(f)

       1,475        1,500,812   

HSBC Capital Funding LP/Jersey Channel Islands, 10.18% (a)(c)(f)

       4,835        6,623,950   

M&T Capital Trust II, 8.28%, 6/01/27

       3,630        3,711,675   

National City Preferred Capital Trust I, 12.00% (b)(f)

       1,100        1,112,617   
      

 

 

 
                       15,102,554   

Diversified Financial Services — 1.9%

  

 

General Electric Capital Corp., 6.25% (b)(c)

       2,700        2,943,081   

JPMorgan Chase Capital XXIII, 1.43%, 5/15/77 (b)(c)

       8,775        6,483,690   
      

 

 

 
                       9,426,771   

Electric Utilities — 0.6%

  

 

PPL Capital Funding, Inc., 6.70%, 3/30/67 (b)

             3,000        3,161,250   

Insurance — 9.4%

  

 

ACE Capital Trust II, 9.70%, 4/01/30 (c)

       2,500        3,654,002   

The Allstate Corp., 6.50%, 5/15/67 (b)

       5,000        5,375,000   

American General Capital II, 8.50%, 7/01/30

       100        122,500   

American International Group, Inc.,
8.18%, 5/15/68 (b)

       900        1,122,750   

Aon Corp., 8.21%, 1/01/27

       2,500        3,134,660   

AXA SA, 6.38% (a)(b)(f)

       3,000        2,805,000   

Bank One Capital III, 8.75%, 9/01/30

       2,000        2,867,446   

The Chubb Corp., 6.38%, 3/29/67 (b)

       2,000        2,170,000   

Liberty Mutual Group, Inc., 10.75%, 6/15/88 (a)(b)

       2,925        4,358,250   

Lincoln National Corp., 7.00%, 5/17/66 (b)

       3,350        3,433,750   

MetLife, Inc., 6.40%, 12/15/66

       3,325        3,614,365   

Mitsui Sumitomo Insurance Co. Ltd.,
7.00%, 3/15/72 (a)(b)

       1,420        1,620,347   

Northwestern Mutual Life Insurance Co.,
6.06%, 3/30/40 (a)(c)

       3,800        4,995,165   

Principal Life Insurance Co., 8.00%, 3/01/44 (a)(c)

       2,500        2,756,100   

Reinsurance Group of America, Inc.,
6.75%, 12/15/65 (b)

       3,000        3,035,247   

Swiss Re Solutions Holding Corp.,
7.75%, 6/15/30 (c)

       2,000        2,601,570   
      

 

 

 
                       47,666,152   

Multi-Utilities — 1.3%

  

 

Dominion Resources Capital Trust I,
7.83%, 12/01/27

       2,500        2,536,083   

Dominion Resources, Inc., 7.50%, 6/30/66 (b)

       3,900        4,290,000   
      

 

 

 
                       6,826,083   

Oil, Gas & Consumable Fuels — 1.3%

  

 

Enterprise Products Operating LLC, Series A,
8.38%, 8/01/66 (b)

       2,000        2,280,000   

TransCanada PipeLines Ltd., 6.35%, 5/15/67 (b)

       4,000        4,298,524   
      

 

 

 
                       6,578,524   

Road & Rail — 0.8%

  

 

BNSF Funding Trust I, 6.61%, 12/15/55

             3,750        4,209,375   
Total Capital Trusts – 21.8%                      110,767,083   
      
                          
Preferred Stocks           Shares         

Auto Components — 0.1%

  

 

Dana Holding Corp., 4.00% (a)(d)

             4,000        448,500   

Capital Markets — 0.2%

  

 

RBS Capital Funding Trust V, 5.90%

             40,000        735,600   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    31


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust II, Inc. (PSY)

(Percentages shown are based on Net Assets)

 

Preferred Stocks          
    Shares
    Value  
      

Diversified Financial Services — 0.4%

  

 

Ally Financial, Inc., 7.00% (a)

             2,190      $ 2,110,339   

Thrifts & Mortgage Finance — 0.0%

  

 

Fannie Mae, Series S, 8.25% (b)(g)

       14,000        23,800   

Freddie Mac, Series Z, 8.38% (b)(g)

       14,000        24,360   
      

 

 

 
                       48,160   

Wireless Telecommunication Services — 0.6%

  

 

Centaur Funding Corp., 9.08% (a)

             2,423        3,073,424   
Total Preferred Stocks — 1.3%                      6,416,023   
      
                          
Trust Preferreds                      

Diversified Financial Services — 0.4%

  

 

GMAC Capital Trust I, Series 2, 8.13%, 2/15/40

             74,940        1,926,796   

Machinery — 0.3%

  

 

Stanley Black & Decker, Inc., 5.75%, 7/25/52

             70,000        1,809,500   
Total Trust Preferreds — 0.7%                      3,736,296   
Total Preferred Securities — 23.8%                      120,919,402   
      
                          
Taxable Municipal Bonds — 0.9%          

Par    

(000)  

        

Metropolitan Transportation Authority, RB, Build America Bonds, 6.55%, 11/15/31

    USD         3,450        4,344,033   
      
                          
US Government Sponsored Agency Securities — 0.3%  

Agency Obligations — 0.3%

  

 

Fannie Mae, 1.93%, 10/09/19 (c)(h)

             1,670        1,461,672   
      
                          
US Treasury Obligations                      

US Treasury Bonds (c):

      

3.75%, 8/15/41

       1,470        1,750,908   

3.13%, 11/15/41

       990        1,050,637   

3.00%, 5/15/42

       5,010        5,175,175   

US Treasury Notes:

      

0.88%, 12/31/16 (c)

       3,847        3,893,583   

0.63%, 5/31/17 (c)

       10,380        10,371,084   

2.00%, 2/15/22

       145        150,154   

1.63%, 8/15/22 (c)

             1,555        1,546,496   
Total US Treasury Obligations — 4.7%                      23,938,037   
Total Long-Term Investments
(Cost — $671,038,679) — 145.0%
                     735,230,212   
      
                          
Short-Term Securities          
    Shares
        

BlackRock Liquidity Funds, TempFund, Institutional Class, 0.17% (i)(j)

             1,125,074        1,125,074   
Total Short-Term Securities
(Cost — $1,125,074) — 0.2%
                     1,125,074   
      
                          
Options Purchased          
    Contracts
        

Exchange-Traded Put Options — 0.1%

  

 

Euro-Dollar 3-Year Mid-Curve Options, Strike Price USD 98.88, Expires 3/15/13

             940        387,750   
Options Purchased           Notional
Amount
(000)  
    Value  
      

Over-the-Counter Interest Rate Put Swaptions — 0.0%

  

 

Pay a fixed rate of 0.71% and receive a floating rate based on 3-month LIBOR, Expires 6/28/13, Broker Deutsche Bank AG

    USD         36,800      $ 30,835   

Pay a fixed rate of 4.50% and receive a floating rate based on 6-month EURIBOR, Expires 9/16/13, Broker Credit Suisse Group AG

    EUR         5,300        7,183   

Pay a fixed rate of 4.50% and receive a floating rate based on 6-month EURIBOR, Expires 10/21/13, Broker Citibank, Inc.

       5,000        9,346   

Pay a fixed rate of 4.50% and receive a floating rate based on 6-month EURIBOR, Expires 12/12/13, Broker Credit Suisse Group AG

       4,000        11,430   

Pay a fixed rate of 4.50% and receive a floating rate based on 3-month LIBOR, Expires 2/02/17, Broker Deutsche Bank AG

    USD         4,800        110,537   
      

 

 

 
                       169,331   
Total Options Purchased
(Cost — $1,082,667) — 0.1%
                     557,081   
Total Investments Before Options Written
(Cost — $673,246,420) — 145.3%
                     736,912,367   
      
                          
Options Written                      

Over-the-Counter Interest Rate Call Swaptions — (0.0)%

  

 

Pay a fixed rate of 2.34% and receive a floating rate based on 3-month LIBOR, Expires 5/07/13, Broker Morgan Stanley

       700        (35,844

Pay a fixed rate of 2.33% and receive a floating rate based on 3-month LIBOR, Expires 10/02/14, Broker Credit Suisse Group AG

       4,000        (171,934
      

 

 

 
                       (207,778

Over-the-Counter Interest Rate Put Swaptions — (0.1)%

  

 

Receive a fixed rate of 2.34% and pay a floating rate based on 3-month LIBOR, Expires 5/07/13, Broker Morgan Stanley

       700        (5,574

Receive a fixed rate of 2.33% and pay a floating rate based on 3-month LIBOR, Expires 10/02/14, Broker Credit Suisse Group AG

       4,000        (161,598

Receive a fixed rate of 6.00% and pay a floating rate based on 3-month LIBOR, Expires 2/02/17, Broker Deutsche Bank AG

       9,600        (99,160
      

 

 

 
                       (266,332
Total Options Written
(Premiums Received — $576,825) — (0.1)%
        (474,110
Total Investments, Net of Options Written — 145.2%        736,438,257   

Liabilities in Excess of Other Assets — (45.2)%

         (229,092,778
      

 

 

 
Net Assets — 100.0%        $ 507,345,479   
      

 

 

 

 

   

 

 

 

 

(a)   Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

 

(b)   Variable rate security. Rate shown is as of report date.

 

(c)   All or a portion of security has been pledged as collateral in connection with open reverse repurchase agreements.

 

(d)   Convertible security.

 

(e)   Represents a payment-in-kind security which may pay interest/dividends in additional par/shares.

 

(f)   Security is perpetual in nature and has no stated maturity date.

 

(g)   Non-income producing security.

 

(h)   Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.
 

 

See Notes to Financial Statements.

 

                
32    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust II, Inc. (PSY)

 

 

(i)   Investments in issuers considered to be an affiliate of the Fund during the year ended October 31, 2012, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate    Shares
Held at
October 31,
2011
     Net
Activity
     Shares
Held at
October 31,
2012
     Income  

BlackRock Liquidity Funds, TempFund, Institutional Class

     405,708         719,366         1,125,074       $ 4,796   

 

(j)   Represents the current yield as of report date.

 

Ÿ  

For Fund compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by Fund management. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

 

Ÿ  

Reverse repurchase agreements outstanding as of October 31, 2012 were as follows:

 
Counterparty   Interest
Rate
  Trade
Date
   Maturity
Date
   Face
Value
     Face Value
Including
Accrued
Interest
 

UBS Securities LLC

  0.32%   3/13/12    Open    $ 2,326,500       $ 2,331,318   

UBS Securities LLC

  0.37%   3/13/12    Open      5,480,125         5,491,695   

UBS Securities LLC

  0.38%   3/13/12    Open      4,216,375         4,226,745   

UBS Securities LLC

  0.38%   3/27/12    Open      3,765,500         3,774,205   

Barclays Capital, Inc.

  0.35%   4/18/12    Open        30,366,910           30,425,072   

Barclays Capital, Inc.

  0.35%   4/24/12    Open      1,740,594         1,743,826   

Deutsche Bank Securities, Inc.

  0.12%   4/24/12    Open      3,875,853         3,878,320   

UBS Securities LLC

  0.34%   4/24/12    Open      1,325,250         1,327,641   

BNP Paribas Securities Corp.

  0.19%   4/25/12    Open      1,655,588         1,657,248   

BNP Paribas Securities Corp.

  0.23%   4/25/12    Open      1,329,737         1,331,352   

UBS Securities LLC

  0.34%   4/25/12    Open      6,396,376         6,407,853   

BNP Paribas Securities Corp.

  0.35%   4/26/12    Open      2,775,000         2,780,099   

BNP Paribas Securities Corp.

  0.37%   4/26/12    Open      4,364,000         4,372,477   

UBS Securities LLC

  0.00%   5/07/12    Open      381,875         381,875   

UBS Securities LLC

  0.25%   5/07/12    Open      1,278,750         1,280,331   

UBS Securities LLC

  0.35%   5/07/12    Open      3,876,000         3,882,708   

UBS Securities LLC

  0.38%   5/07/12    Open      17,664,000         17,697,189   

UBS Securities LLC

  0.25%   5/10/12    Open      842,435         843,453   

Deutsche Bank Securities, Inc.

  0.19%   5/29/12    Open      1,046,925         1,047,787   

UBS Securities LLC

  0.34%   5/31/12    Open      3,339,375         3,344,232   

UBS Securities LLC

  0.32%   6/29/12    Open      2,390,000         2,392,656   

Bank of America Merrill Lynch

  0.10%   7/02/12    Open      10,367,025         10,370,538   

Credit Suisse Securities (USA) LLC

  0.35%   7/03/12    Open      3,162,500         3,166,220   

Credit Suisse Securities (USA) LLC

  0.35%   7/13/12    Open      3,447,150         3,450,870   

Barclays Capital, Inc.

  0.35%   7/25/12    Open      4,245,085         4,249,171   

Credit Suisse Securities (USA) LLC

  0.35%   7/25/12    Open      1,955,531         1,957,413   

UBS Securities LLC

  0.33%   7/25/12    Open      2,254,350         2,256,396   

Credit Suisse Securities (USA) LLC

  0.35%   7/27/12    Open      979,875         980,799   

UBS Securities LLC

  0.34%   7/27/12    Open      1,163,250         1,164,316   

Credit Suisse Securities (USA) LLC

  0.35%   7/30/12    Open      1,160,062         1,161,123   

Credit Suisse Securities (USA) LLC

  0.35%   8/10/12    Open      33,903,560         33,930,918   

Credit Suisse Securities (USA) LLC

  0.38%   8/10/12    Open      18,940,519         18,957,112   

Barclays Capital, Inc.

  0.35%   8/13/12    Open      717,187         717,745   

Credit Suisse Securities (USA) LLC

  0.35%   8/13/12    Open      3,422,969         3,425,631   

Credit Suisse Securities (USA) LLC

  0.35%   8/20/12    Open      3,984,937         3,987,765   

Credit Suisse Securities (USA) LLC

  0.35%   8/23/12    Open      1,350,187         1,351,106   

Credit Suisse Securities (USA) LLC

  0.35%   8/30/12    Open      2,014,550         2,015,783   

UBS Securities LLC

  0.34%   9/04/12    Open      522,500         522,786   

UBS Securities LLC

  0.35%   9/04/12    Open      5,819,850         5,823,132   

Barclays Capital, Inc.

  (0.25)%   9/06/12    Open      68,000         67,974   

Credit Suisse Securities (USA) LLC

  (0.25)%   9/06/12    Open      389,931         389,780   

Deutsche Bank Securities, Inc.

  (1.00)%   9/19/12    Open      634,419         633,679   

UBS Securities LLC

  0.34%   9/24/12    Open      2,733,750         2,734,731   

UBS Securities LLC

  0.36%   9/24/12    Open      2,332,000         2,332,886   

Credit Suisse Securities (USA) LLC

  0.35%   9/28/12    Open      3,676,250         3,677,465   

Credit Suisse Securities (USA) LLC

  0.35%   10/02/12    Open      1,015,875         1,016,171   

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    33


Table of Contents
Schedule of Investments (continued)    BlackRock Credit Allocation Income Trust II, Inc.  (PSY)

 

Reverse repurchase agreements outstanding as of October 31, 2012 were as follows (concluded):

 

Counterparty   Interest
Rate
   Trade
Date
   Maturity
Date
   Face
Value
     Face Value
Including
Accrued
Interest
 

UBS Securities LLC

  0.10%    10/02/12    Open    $ 2,024,490       $ 2,024,653   

Citigroup Global Markets, Inc.

  (0.75)%    10/04/12    Open      913,012         912,499   

Credit Suisse Securities (USA) LLC

  0.35%    10/09/12    Open          1,309,000             1,309,293   

Barclays Capital, Inc.

  0.40%    10/10/12    Open      1,525,000         1,525,373   

UBS Securities LLC

  (0.50)%    10/16/12    Open      1,300,850         1,300,570   

BNP Paribas Securities Corp.

  0.26%    10/17/12    Open      5,116,463         5,117,017   

Deutsche Bank Securities, Inc.

  (0.63)%    10/24/12    12/31/22      457,256         457,193   

Credit Suisse Securities (USA) LLC

  0.35%    10/24/12    Open      1,867,500         1,867,645   

BNP Paribas Securities Corp.

  0.27%    10/25/12    Open      148,806         148,814   

Deutsche Bank Securities, Inc.

  0.14%    10/25/12    Open      1,529,731         1,529,773   

Credit Suisse Securities (USA) LLC

  0.35%    10/29/12    Open      7,127,188         7,127,395   

Deutsche Bank Securities, Inc.

  0.00%    10/31/12    Open      1,500,575         1,500,575   
Total            $ 235,518,351       $ 235,780,392   
          

 

 

 

 

Ÿ  

Financial futures contracts purchased as of October 31, 2012 were as follows:

 

Contracts      Issue        Exchange   Expiration             Notional
Value
    Unrealized
Appreciation
(Depreciation)
 
185        2-Year US Treasury Note         Chicago Board of Trade   December 2012        USD        40,760,703      $ (17,351
  83        90-Day Euro-Dollar         Chicago Mercantile   March 2016        USD        20,524,863                17,158   
Total                      $ (193
                    

 

 

 

 

Ÿ  

Financial futures contracts sold as of October 31, 2012 were as follows:

 

Contracts      Issue      Exchange      Expiration      Notional Value     Unrealized
Appreciation
(Depreciation)
 
191      5-Year US Treasury Note      Chicago Board of Trade      December 2012        USD        23,731,750      $ (29,543
496      10-Year US Treasury Note      Chicago Board of Trade      December 2012        USD        65,983,500        (172,063
  41      30-Year US Treasury Bond      Chicago Board of Trade      December 2012        USD        6,121,813        17,763   
    1      Euro-Bund      Eurex      December 2012        USD        183,638        (701
  65      Ultra Long US Treasury Bond      Chicago Board of Trade      December 2012        USD        10,731,094                130,384   
Total                         $ (54,160
                       

 

 

 

 

Ÿ  

Foreign currency exchange contracts as of October 31, 2012 were as follows:

 

Currency
Purchased
       Currency Sold        Counterparty      Settlement Date   Unrealized
Appreciation
 
USD     298,616           EUR        230,000         UBS AG      1/23/13   $ 254   
USD     908,658           EUR        700,000         UBS AG      1/23/13     599   
USD     579,640           EUR        442,000         UBS AG      1/23/13     6,265   
Total                      $           7,118   
                    

 

 

 

 

Ÿ  

Credit default swaps on single-name issues – buy protection outstanding as of October 31, 2012 were as follows:

 

Issuer    Pay
Fixed
Rate
     Counterparty      Expiration
Date
       Notional
Amount
(000)
   

Unrealized

Appreciation
(Depreciation)

 

Southwest Airlines Co.

   1.00%      Goldman Sachs Group, Inc.        12/20/16           USD        1,185      $ (34,368

Southwest Airlines Co.

   1.00%      Royal Bank of Scotland Plc        12/20/16           USD        1,185        (38,473

STMicroelectronics NV

   1.00%      Barclays Plc        6/20/17           EUR        1,215        10,668   

Cigna Corp.

   1.00%      Goldman Sachs Group, Inc.        9/20/17           USD        2,275        (27,992

General Dynamic Corp.

   1.00%      Credit Suisse Group AG        9/20/17           USD        1,655        (1,756

Hewlett-Packard Co.

   1.00%      Citigroup, Inc.        9/20/17           USD        900        15,969   

Hewlett-Packard Co.

   1.00%      Credit Suisse Group AG        9/20/17           USD        810                  43,923   

Hewlett-Packard Co.

   1.00%      JPMorgan Chase & Co.        9/20/17           USD        150        7,343   

Humana, Inc.

   1.00%      Goldman Sachs Group, Inc.        9/20/17           USD        2,275        (6,836

Lockheed Martin Corp.

   1.00%      Credit Suisse Group AG        9/20/17           USD        1,655        (16,275

Northrop Grumman Corp.

   1.00%      Credit Suisse Group AG        9/20/17           USD        1,400        (7,525

Raytheon Co.

   1.00%      Credit Suisse Group AG        9/20/17           USD        1,400        (4,828

Viacom, Inc.

   1.00%      Credit Suisse Group AG        9/20/17           USD        3,600        (32,036
Total                       $ (92,186
                     

 

 

 

 

 

                
34    ANNUAL REPORT    OCTOBER 31, 2012   

See Notes to Financial Statements.


Table of Contents
Schedule of Investments (continued)    BlackRock Credit Allocation Income Trust II, Inc. (PSY)

 

 

Ÿ   Credit default swaps on single-name issues – sold protection outstanding as of October 31, 2012 were as follows:

 

Issuer    Receive
Fixed
Rate
  Counterparty   Expiration
Date
     Issuer 
Credit 
Rating1
     Notional
Amount
(000)2
       Unrealized
Appreciation
 

Anadarko Petroleum Corp.

   1.00%   UBS AG   6/20/17      BBB-          USD        994         $ 31,055   

Comcast Corp.

   1.00%   Credit Suisse Group AG   9/20/17      BBB+          USD        3,600           41,875   

United Health Group, Inc.

   1.00%   Goldman Sachs Group, Inc.   9/20/17      A          USD        2,275           36,445   

WellPoint, Inc.

   1.00%   Goldman Sachs Group, Inc.   9/20/17      A-         USD        2,275           12,850   

MetLife, Inc.

   1.00%   Deutsche Bank AG   3/20/18      A-         USD        900           77   

Total

                        $ 122,302   
                       

 

 

 

 

1    Using S&P’s rating.
2    The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

 

Ÿ   Interest rate swaps outstanding as of October 31, 2012 were as follows:

 

Fixed
Rate
   Floating
Rate
   Counterparty/
Exchange
   Expiration
Date
    

Notional
Amount
(000)

       Unrealized
Appreciation
(Depreciation)
 

0.44%3

   3-month LIBOR    Chicago Mercantile    8/29/14        USD        16,500         $ (17,258)   

2.06%4

   3-month LIBOR    Credit Suisse Group AG    5/08/22        USD        100           3,573    

1.80%4

   3-month LIBOR    Citigroup, Inc.    6/01/22        USD        100           1,162    

2.48%3

   3-month LIBOR    Credit Suisse Group AG    7/05/42        USD        2,200           52,079    

2.26%3

   3-month LIBOR    Goldman Sachs Group, Inc.    7/26/42        USD        1,100           79,389    

2.46%3

   3-month LIBOR    Deutsche Bank AG    8/07/42        USD        5,100                   140,425    

2.52%3

   3-month LIBOR    Citigroup, Inc.    8/10/42        USD        2,500           38,926    

2.71%3

   3-month LIBOR    Credit Suisse Group AG    8/21/42        USD        600           (14,435)   

Total

  

     $ 283,861    
                    

 

 

 

 

3    Fund pays the fixed rate and receives the floating rate.
4    Fund pays the floating rate and receives the fixed rate.

 

Ÿ   Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

 

Ÿ   Level 1 — unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the Fund has the ability to access

 

Ÿ   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)

 

Ÿ   Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of October 31, 2012:

 

     Level 1     Level 2     Level 3     Total  

Assets:

       
Investments:   

Long-Term Investments:

  

Asset-Backed Securities

         $ 2,784,003      $ 2,398,250      $ 5,182,253   

Corporate Bonds

           574,247,467        4,960,375        579,207,842   

Floating Rate Loan Interests

           176,973               176,973   

Preferred Securities

  $ 2,710,556        118,208,846               120,919,402   

Taxable Municipal Bonds

           4,344,033               4,344,033   

US Govern-
ment Spon-
sored Agency Securities

           1,461,672               1,461,672   

US Treasury Obligations

           23,938,037               23,938,037   

Short-Term Securities

    1,125,074                      1,125,074   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 3,835,630      $ 725,161,031      $ 7,358,625      $ 736,355,286   
 

 

 

   

 

 

   

 

 

   

 

 

 
 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    OCTOBER 31, 2012    35


Table of Contents
Schedule of Investments (concluded)    BlackRock Credit Allocation Income Trust II, Inc. (PSY)

 

 

     Level 1     Level 2     Level 3     Total  
Derivative Financial Instruments1         

Assets:

       

Credit contracts

         $ 200,205             $ 200,205    

Foreign currency exchange contracts

           7,118               7,118    

Interest rate contracts

  $ 553,055        484,885               1,037,940    

Liabilities:

       

Credit contracts

           (170,089)               (170,089)   

Interest rate contracts

    (219,658)        (505,803)               (725,461)   
 

 

 

 

Total

  $ 333,397      $ 16,316             $ 349,713    
 

 

 

 

 

1    Derivative financial instruments are swaps, financial futures contracts, foreign currency exchange contracts and options. Swaps, financial futures contracts and foreign currency exchange contracts are valued at the unrealized appreciation/depreciation on the instrument and options are shown at value.

Certain of the Fund’s assets and liabilities are held at carrying amount or face value, which approximates fair value for financial statement purposes. As of October 31, 2012, such assets and liabilities are categorized within the disclosure hierarchy as follows:

 

     Level 1     Level 2     Level 3     Total  

Assets:

       

Foreign currency at value

  $ 3,738                   

$

3,738

  

Cash pledged as collateral for financial futures contracts

    868,000                      868,000   

Cash pledged as collateral for swaps

    160,000                      160,000   

Liabilities:

       

Reverse repurchase agreements

         $ (235,518,351)               (235,518,351

Cash received as collateral for reverse repur-
chase agree-
ments

           (3,336,000)               (3,336,000

Cash received as collateral for swaps

           (600,000)               (600,000
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 1,031,738      $ (239,454,351)             $ (238,422,613
 

 

 

   

 

 

   

 

 

   

 

 

 

There were no transfers between Level 1 and Level 2 during the year ended October 31, 2012.

Certain of the Fund’s investments and derivative financial instruments are categorized as Level 3 and were valued utilizing transaction prices or third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in the unobservable inputs could result in a significantly lower or higher value in such Level 3 investments and derivative financial instruments.

A reconciliation of Level 3 investments and derivative financial instruments is presented when the Fund had a significant amount of Level 3 investments and derivative financial instruments at the beginning and/or end of the year in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

 

      Asset-Backed
Securities
     Corporate
Bonds
     Total  

Assets:

        

Opening balance, as of
October 31, 2011

   $ 2,053,750       $ 3,536,000       $ 5,589,750   

Transfers into Level 32

                       

Transfers out of Level 32

                       

Accrued discounts/premiums

     37,775                 37,775   

Net realized gain (loss)

                       

Net change in unrealized
appreciation/depreciation3

     306,725         (25,625      281,100   

Purchases

             1,450,000         1,450,000   

Sales

                       
  

 

 

 

Closing Balance, as of
October 31, 2012

   $ 2,398,250       $ 4,960,375       $ 7,358,625   
  

 

 

 

 

2    Transfers into and transfers out of Level 3 represent the values as of the beginning of the reporting period.

 

3    Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/depreciation on investments still held as of October 31, 2012 was $281,100.

The following table is a reconciliation of Level 3 derivative financial instruments for which significant unobservable inputs were used in determining fair value:

 

        Credit
Contracts
 

Assets:

    

Opening balance, as of October 31, 2011

     $         5,018    

Transfers into Level 32

       —    

Transfers out of Level 32

       —    

Accrued discounts/premiums

       —    

Net realized gain (loss)

       —    

Net change in unrealized appreciation/depreciation4

       (5,018)   

Purchases

       —    

Issues5

       —    

Sales

       —    

Settlements6

       —    
    

 

 

 

Closing Balance, as of October 31, 2012

       —    
    

 

 

 

 

4    Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/depreciation on derivative financial instruments still held as of October 31, 2012 was $0.

 

5    Issues represent upfront cash received on certain derivative financial instruments.

 

6    Settlements represent periodic contractual cash flows and/or cash flows to terminate certain derivative financial instruments.
 

 

See Notes to Financial Statements.

 

                
36    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Schedule of Investments October 31, 2012

  

BlackRock Credit Allocation Income Trust III (BPP)

(Percentages shown are based on Net Assets)

 

Asset-Backed Securities — 0.5%          

Par  

(000)

    Value  
      

Atrium CDO Corp., Series 5A, Class A4,
0.82%, 7/20/20 (a)(b)

    USD         1,300      $ 1,176,500   
      
                          
Corporate Bonds                      

Aerospace & Defense — 0.8%

      

BE Aerospace, Inc., 5.25%, 4/01/22

       825        860,062   

Huntington Ingalls Industries, Inc.:

      

6.88%, 3/15/18

       290        313,200   

7.13%, 3/15/21

       300        322,500   

Kratos Defense & Security Solutions, Inc.,
10.00%, 6/01/17

       460        496,800   
      

 

 

 
                       1,992,562   

Airlines — 0.5%

      

American Airlines Pass-Through Trust, Series 2011-2, Class A, 8.63%, 10/15/21

       103        108,068   

Continental Airlines Pass-Through Trust, Series 2009-2, Class B, 9.25%, 5/10/17

       606        662,095   

Delta Air Lines Pass-Through Trust, Series 2002-1,
Class G-1, 6.72%, 1/02/23

       520        571,836   
      

 

 

 
                       1,341,999   

Auto Components — 1.0%

      

Delphi Corp., 6.13%, 5/15/21

       280        309,400   

Ford Motor Co., 7.45%, 7/16/31

       560        708,400   

Icahn Enterprises LP:

      

7.75%, 1/15/16

       290        303,050   

8.00%, 1/15/18

       1,130        1,214,750   
      

 

 

 
                       2,535,600   

Beverages — 0.7%

      

Anheuser-Busch InBev Worldwide, Inc.,
1.38%, 7/15/17 (c)

       500        507,538   

Constellation Brands, Inc., 7.25%, 5/15/17

       955        1,124,512   
      

 

 

 
                       1,632,050   

Building Products — 0.3%

      

Building Materials Corp. of America (a):

      

7.00%, 2/15/20

       180        195,300   

6.75%, 5/01/21

       520        566,800   
      

 

 

 
                       762,100   

Capital Markets — 4.8%

      

Ameriprise Financial, Inc., 5.30%, 3/15/20 (c)

       1,500        1,773,441   

E*Trade Financial Corp., 12.50%, 11/30/17

       900        1,019,250   

The Goldman Sachs Group, Inc. (c):

      

6.25%, 9/01/17

       625        734,397   

6.15%, 4/01/18

       250        292,760   

5.75%, 1/24/22

       800        928,702   

6.25%, 2/01/41

       2,150        2,552,557   

Morgan Stanley:

      

0.82%, 10/15/15

       1,325        1,277,447   

5.63%, 9/23/19 (c)

       1,020        1,132,684   

UBS AG:

      

2.25%, 1/28/14 (c)

       775        786,765   

7.63%, 8/17/22

       1,200        1,294,088   
      

 

 

 
                       11,792,091   

Chemicals — 2.3%

      

Ashland, Inc., 4.75%, 8/15/22 (a)

       250        255,000   

Celanese US Holdings LLC, 5.88%, 6/15/21

       760        846,450   

Hexion US Finance Corp., 6.63%, 4/15/20

       220        219,450   

Huntsman International LLC, 8.63%, 3/15/21 (c)

       285        324,188   

INEOS Finance Plc (a):

      

8.38%, 2/15/19

       155        162,750   

7.50%, 5/01/20

       285        288,563   
Corporate Bonds          

Par  

(000)

    Value  
      

Chemicals (concluded)

      

Linde Finance BV, 7.38%, 7/14/66 (b)

    EUR         381      $ 577,785   

LyondellBasell Industries NV, 5.75%, 4/15/24 (c)

    USD         915        1,059,112   

MPM Escrow LLC/MPM Finance Escrow Corp.,
8.88%, 10/15/20 (a)

       150        147,000   

Nufarm Australia Ltd., 6.38%, 10/15/19 (a)

       140        143,500   

Rockwood Specialties Group, Inc., 4.63%, 10/15/20

       820        844,600   

Tronox Finance LLC, 6.38%, 8/15/20 (a)

       745        743,137   
      

 

 

 
                       5,611,535   

Commercial Banks — 5.4%

      

Amsouth Bank, Series AI, 4.85%, 4/01/13

       525        532,219   

Asciano Finance Ltd., 5.00%, 4/07/18 (a)

       425        458,075   

Associated Banc-Corp, 5.13%, 3/28/16 (c)

       1,070        1,173,269   

BBVA US Senior SAU, 4.66%, 10/09/15 (c)

       1,200        1,211,863   

Branch Banking & Trust Co. (b):

      

0.72%, 9/13/16

       550        534,536   

0.73%, 5/23/17

       325        312,175   

CIT Group, Inc.:

      

4.25%, 8/15/17

       660        677,033   

5.25%, 3/15/18

       580        616,250   

5.50%, 2/15/19 (a)

       500        533,125   

5.00%, 8/15/22

       200        207,245   

Discover Bank, 8.70%, 11/18/19

       550        719,137   

HSBC Finance Corp., 6.68%, 1/15/21 (c)

       750        887,501   

Regions Financial Corp.:

      

4.88%, 4/26/13 (c)

       1,225        1,244,906   

5.75%, 6/15/15

       850        930,750   

RESPARCS Funding LP I, 8.00% (d)

       4,000        962,000   

Santander Holdings USA, Inc., 3.00%, 9/24/15

       550        560,529   

Wachovia Bank NA, 6.60%, 1/15/38 (c)

       1,150        1,630,186   
      

 

 

 
                       13,190,799   

Commercial Services & Supplies — 4.0%

      

ADS Waste Holdings, Inc., 8.25%, 10/01/20 (a)

       144        149,040   

The ADT Corp., 4.88%, 7/15/42 (a)

       645        688,328   

Aviation Capital Group Corp. (a):

      

7.13%, 10/15/20 (c)

       4,500        4,747,490   

6.75%, 4/06/21

       1,125        1,168,774   

Casella Waste Systems, Inc., 7.75%, 2/15/19

       167        163,660   

Clean Harbors, Inc., 5.25%, 8/01/20 (a)

       224        229,600   

Corrections Corp. of America, 7.75%, 6/01/17

       1,600        1,710,000   

Covanta Holding Corp., 6.38%, 10/01/22

       320        348,248   

HDTFS, Inc. (a):

      

5.88%, 10/15/20

       175        176,750   

6.25%, 10/15/22

       225        228,094   

Mobile Mini, Inc., 7.88%, 12/01/20

       135        145,969   
      

 

 

 
                       9,755,953   

Communications Equipment — 0.9%

      

Avaya, Inc., 9.75%, 11/01/15 (c)

       400        356,000   

Brocade Communications Systems, Inc.,
6.88%, 1/15/20 (c)

       1,450        1,569,625   

Zayo Group LLC/Zayo Capital, Inc., 8.13%, 1/01/20

       340        372,300   
      

 

 

 
                       2,297,925   

Computers & Peripherals — 0.0%

      

NCR Corp., 5.00%, 7/15/22 (a)

             70        71,488   

Construction Materials — 0.4%

      

HD Supply, Inc. (a):

      

8.13%, 4/15/19

       430        473,000   

11.50%, 7/15/20

       600        631,500   
      

 

 

 
                       1,104,500   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    37


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust III (BPP)

(Percentages shown are based on Net Assets)

 

Corporate Bonds          

Par  

(000)

    Value  
      

Consumer Finance — 5.5%

      

American Express Credit Corp., 2.75%, 9/15/15 (c)

    USD         2,900      $ 3,057,090   

Capital One Bank USA NA, 8.80%, 7/15/19

       1,625        2,162,854   

Daimler Finance North America LLC,
2.63%, 9/15/16 (a)(c)

       1,650        1,721,580   

Experian Finance Plc, 2.38%, 6/15/17 (a)(c)

       350        358,318   

Ford Motor Credit Co. LLC:

      

8.00%, 12/15/16

       585        708,453   

5.88%, 8/02/21

       1,420        1,634,992   

Inmarsat Finance Plc, 7.38%, 12/01/17 (a)

       870        937,425   

SLM Corp., 6.25%, 1/25/16

       2,365        2,554,318   

Toll Brothers Finance Corp., 5.88%, 2/15/22

       200        226,098   
      

 

 

 
                       13,361,128   

Containers & Packaging — 1.3%

      

Ardagh Packaging Finance Plc (a):

      

7.38%, 10/15/17

       200        214,750   

9.13%, 10/15/20

       205        214,225   

Ball Corp.:

      

7.13%, 9/01/16

       850        913,750   

6.75%, 9/15/20

       1,070        1,174,325   

Crown Americas LLC, 6.25%, 2/01/21

       400        441,500   

Smurfit Kappa Acquisitions, 4.88%, 9/15/18 (a)

       240        240,000   
      

 

 

 
                       3,198,550   

Diversified Financial Services — 9.3%

      

Ally Financial, Inc.:

      

4.50%, 2/11/14

       400        412,000   

8.30%, 2/12/15

       780        873,795   

8.00%, 11/01/31

       810        963,900   

Bank of America Corp. (c):

      

3.75%, 7/12/16

       925        991,258   

5.30%, 3/15/17

       2,440        2,739,327   

5.00%, 5/13/21

       3,625        4,089,286   

Blackstone Holdings Finance Co. LLC,
4.75%, 2/15/23 (a)(c)

       400        429,034   

Citigroup, Inc. (c):

      

6.38%, 8/12/14

       625        681,041   

4.59%, 12/15/15

       475        518,188   

8.50%, 5/22/19

       464        618,710   

Countrywide Financial Corp., 6.25%, 5/15/16 (c)

       1,569        1,729,353   

DPL, Inc., 7.25%, 10/15/21

       520        586,300   

General Motors Financial Co., Inc., 6.75%, 6/01/18

       250        277,163   

ING Bank NV, 5.00%, 6/09/21 (a)(c)

       1,150        1,298,764   

Intesa Sanpaolo SpA, 2.38%, 12/21/12 (c)

       1,700        1,700,010   

LeasePlan Corp. NV, 3.00%, 10/23/17 (a)(b)(c)

       975        986,239   

Moody’s Corp., 6.06%, 9/07/17

       1,500        1,644,596   

Reynolds American, Inc., 3.25%, 11/01/22

       900        910,282   

Reynolds Group Issuer, Inc.:

      

7.13%, 4/15/19

       115        122,475   

7.88%, 8/15/19

       320        347,200   

9.88%, 8/15/19

       145        151,887   

5.75%, 10/15/20 (a)

       700        707,000   

WMG Acquisition Corp., 9.50%, 6/15/16

       100        109,875   
      

 

 

 
                       22,887,683   

Diversified Telecommunication Services — 4.1%

      

AT&T, Inc., 6.30%, 1/15/38 (c)

       2,000        2,677,804   

Level 3 Financing, Inc.:

      

8.13%, 7/01/19

       1,577        1,683,447   

8.63%, 7/15/20

       370        403,300   

Telecom Italia Capital SA, 6.18%, 6/18/14

       500        530,323   

Telefonica Emisiones SAU, 5.46%, 2/16/21

       660        670,725   

Verizon Communications, Inc. (c):

      

1.95%, 3/28/14

       1,775        1,812,415   

7.35%, 4/01/39

       1,150        1,771,043   

Windstream Corp., 7.88%, 11/01/17

       400        445,500   
      

 

 

 
                       9,994,557   
Corporate Bonds          

Par  

(000)

    Value  
      

Electric Utilities — 3.2%

      

CMS Energy Corp., 5.05%, 3/15/22

    USD         550      $ 614,377   

Duke Energy Corp., 3.55%, 9/15/21

       825        884,223   

FirstEnergy Solutions Corp., 6.05%, 8/15/21

       500        577,775   

Great Plains Energy, Inc., 5.29%, 6/15/22

       800        917,105   

Mirant Mid Atlantic Pass Through Trust, Series B, 9.13%, 6/30/17

       248        270,901   

Nisource Finance Corp.:

      

6.40%, 3/15/18

       500        608,600   

5.25%, 2/15/43

       280        314,015   

Oncor Electric Delivery Co. LLC (c):

      

4.10%, 6/01/22

       600        642,877   

5.30%, 6/01/42

       400        455,309   

Progress Energy, Inc., 7.00%, 10/30/31 (c)

       2,000        2,669,548   
      

 

 

 
                       7,954,730   

Electronic Equipment, Instruments & Components — 0.3%

  

 

Jabil Circuit, Inc., 8.25%, 3/15/18

       400        472,000   

NXP BV, 3.09%, 10/15/13 (b)

       198        197,753   
      

 

 

 
                       669,753   

Energy Equipment & Services — 3.9%

      

Atwood Oceanics, Inc., 6.50%, 2/01/20

       55        59,125   

Cie Générale de Géophysique-Veritas,
6.50%, 6/01/21

       340        358,700   

Energy Transfer Partners LP, 5.20%, 2/01/22

       1,500        1,721,865   

Ensco Plc, 4.70%, 3/15/21 (c)

       960        1,105,452   

FTS International Services LLC/FTS International Bonds, Inc., 8.13%, 11/15/18 (a)

       382        399,190   

Hornbeck Offshore Services, Inc., 5.88%, 4/01/20

       135        137,363   

Key Energy Services, Inc., 6.75%, 3/01/21

       360        358,200   

MEG Energy Corp. (a):

      

6.50%, 3/15/21

       465        498,713   

6.38%, 1/30/23

       110        117,700   

Oil States International, Inc., 6.50%, 6/01/19

       245        260,313   

Peabody Energy Corp., 6.25%, 11/15/21 (c)

       755        779,537   

Precision Drilling Corp., 6.50%, 12/15/21

       210        222,075   

Seadrill Ltd., 5.63%, 9/15/17 (a)

       1,175        1,175,000   

Transocean, Inc.:

      

2.50%, 10/15/17

       200        202,556   

6.50%, 11/15/20

       545        662,135   

6.38%, 12/15/21

       660        803,110   

6.80%, 3/15/38

       475        590,407   
      

 

 

 
                       9,451,441   

Food Products — 1.3%

      

Kraft Foods Group, Inc., 5.00%, 6/04/42 (a)

       625        729,919   

Mondelez International, Inc.:

      

6.50%, 8/11/17

       800        988,101   

6.13%, 8/23/18

       800        995,462   

Post Holdings, Inc., 7.38%, 2/15/22 (a)

       442        469,072   
      

 

 

 
                       3,182,554   

Gas Utilities — 0.2%

      

El Paso Natural Gas Co. LLC, 8.63%, 1/15/22

             335        458,286   

Health Care Equipment & Supplies — 0.6%

      

Fresenius US Finance II, Inc., 9.00%, 7/15/15 (a)

       1,000        1,147,500   

Teleflex, Inc., 6.88%, 6/01/19

       240        258,000   
      

 

 

 
                       1,405,500   

Health Care Providers & Services — 4.1%

      

Aviv Healthcare Properties LP, 7.75%, 2/15/19

       220        231,825   

CHS/Community Health Systems, Inc.,
5.13%, 8/15/18

       230        238,625   

HCA, Inc.:

      

8.50%, 4/15/19

       105        117,994   

6.50%, 2/15/20

       1,075        1,187,875   

7.25%, 9/15/20

       1,645        1,819,781   

4.75%, 5/01/23

       360        360,000   
 

 

See Notes to Financial Statements.

 

                
38    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust III (BPP)

(Percentages shown are based on Net Assets)

 

Corporate Bonds          

Par  

(000)

    Value  
      

Health Care Providers & Services (concluded)

      

INC Research LLC, 11.50%, 7/15/19 (a)

    USD         340      $ 341,700   

inVentiv Health, Inc., 10.00%, 8/15/18 (a)

       25        22,625   

Tenet Healthcare Corp.:

      

10.00%, 5/01/18

       745        849,300   

8.88%, 7/01/19

       550        614,625   

4.75%, 6/01/20 (a)

       456        452,010   

UnitedHealth Group, Inc., 6.88%, 2/15/38 (c)

       1,725        2,444,787   

Verisk Analytics, Inc., 4.13%, 9/12/22

       200        204,203   

WellPoint, Inc.:

      

3.30%, 1/15/23 (c)

       525        543,052   

2.75%, 10/15/42 (a)(e)

       700        729,750   
      

 

 

 
                       10,158,152   

Health Care Technology — 1.4%

      

Amgen, Inc.:

      

5.15%, 11/15/41 (c)

       2,015        2,321,715   

5.65%, 6/15/42

       20        24,559   

5.38%, 5/15/43 (c)

       825        990,499   
      

 

 

 
                       3,336,773   

Household Durables — 0.5%

      

Beazer Homes USA, Inc., 6.63%, 4/15/18 (a)

       335        358,450   

DR Horton, Inc., 4.38%, 9/15/22

       300        300,750   

Standard Pacific Corp., 8.38%, 1/15/21

       435        504,600   
      

 

 

 
                       1,163,800   

Independent Power Producers & Energy Traders — 1.8%

  

    

The AES Corp.:

      

9.75%, 4/15/16

       480        574,200   

7.38%, 7/01/21

       70        78,225   

Calpine Corp. (a):

      

7.25%, 10/15/17

       198        209,880   

7.50%, 2/15/21

       90        97,875   

Energy Future Intermediate Holding Co. LLC,
10.00%, 12/01/20

       915        999,637   

Exelon Generation Co. LLC, Series C,
4.25%, 6/15/22 (a)

       1,137        1,216,988   

GenOn REMA LLC, 9.68%, 7/02/26

       240        256,800   

Laredo Petroleum, Inc.:

      

9.50%, 2/15/19

       140        158,900   

7.38%, 5/01/22

       130        141,700   

NRG Energy, Inc., 6.63%, 3/15/23 (a)

       255        262,650   

QEP Resources, Inc.:

      

5.38%, 10/01/22

       280        294,000   

5.25%, 5/01/23

       145        151,163   
      

 

 

 
                       4,442,018   

Insurance — 6.0%

      

American International Group, Inc. (c):

      

3.80%, 3/22/17

       725        782,150   

8.25%, 8/15/18

       300        389,714   

6.40%, 12/15/20

       1,235        1,516,701   

Aon Corp., 5.00%, 9/30/20 (c)

       1,500        1,728,327   

Fairfax Financial Holdings Ltd., 5.80%, 5/15/21 (a)

       525        537,893   

Forethought Financial Group, Inc.,
8.63%, 4/15/21 (a)

       525        667,412   

Genworth Financial, Inc., 7.63%, 9/24/21 (c)

       480        504,860   

Manulife Financial Corp., 4.90%, 9/17/20 (c)

       1,075        1,194,377   

MPL 2 Acquisition Canco, Inc., 9.88%, 8/15/18 (a)

       210        191,625   

Nippon Life Insurance Co., 5.00%, 10/18/42 (a)(b)

       1,525        1,573,289   

Principal Financial Group, Inc., 8.88%, 5/15/19 (c)

       475        631,142   

Prudential Financial, Inc.:

      

6.63%, 12/01/37 (c)

       1,725        2,215,842   

5.88%, 9/15/42 (b)

       600        631,500   

XL Group Ltd., 5.75%, 10/01/21 (c)

       1,740        2,061,258   
      

 

 

 
                       14,626,090   
Corporate Bonds          

Par  

(000)

    Value  
      

IT Services — 1.2%

      

Ceridian Corp., 8.88%, 7/15/19 (a)

    USD         845      $ 895,700   

Epicor Software Corp., 8.63%, 5/01/19

       340        357,000   

First Data Corp.:

      

7.38%, 6/15/19 (a)(c)

       455        470,925   

6.75%, 11/01/20 (a)

       380        380,000   

8.25%, 1/15/21 (a)

       40        40,000   

12.63%, 1/15/21

       340        351,050   

SunGard Data Systems, Inc., 7.38%, 11/15/18

       350        376,687   
      

 

 

 
                       2,871,362   

Life Sciences Tools & Services — 1.8%

      

Bio-Rad Laboratories, Inc., 8.00%, 9/15/16

       1,830        1,999,275   

Life Technologies Corp., 6.00%, 3/01/20

       2,000        2,393,738   
      

 

 

 
                       4,393,013   

Machinery — 1.1%

      

Ingersoll-Rand Global Holding Co. Ltd.,
9.50%, 4/15/14 (c)

       1,725        1,931,660   

UR Merger Sub Corp. (a):

      

5.75%, 7/15/18

       114        122,550   

7.38%, 5/15/20

       290        313,925   

7.63%, 4/15/22

       267        292,365   
      

 

 

 
                       2,660,500   

Media — 9.3%

      

A&E Television Networks LLC, 3.25%, 8/22/19

       690        702,075   

AMC Networks, Inc., 7.75%, 7/15/21

       190        215,175   

CCH II LLC, 13.50%, 11/30/16

       461        495,248   

Comcast Corp., 6.30%, 11/15/17 (c)

       1,725        2,142,029   

Cox Communications, Inc., 8.38%, 3/01/39 (a)

       1,725        2,737,173   

CSC Holdings LLC, 8.63%, 2/15/19

       580        687,300   

DIRECTV Holdings LLC, 5.00%, 3/01/21

       1,250        1,421,415   

DISH DBS Corp., 7.00%, 10/01/13

       850        889,313   

Intelsat Jackson Holdings SA, 7.25%, 4/01/19

       150        160,875   

Intelsat Luxembourg SA:

      

11.25%, 2/04/17

       430        451,500   

11.50%, 2/04/17 (f)

       190        199,975   

The Interpublic Group of Cos., Inc., 10.00%, 7/15/17

       575        634,656   

The New York Times Co., 6.63%, 12/15/16

       1,725        1,901,812   

News America, Inc., 6.15%, 3/01/37 (c)

       1,325        1,663,508   

Time Warner Cable, Inc., 6.75%, 6/15/39

       1,950        2,602,792   

Time Warner, Inc., 7.70%, 5/01/32

       2,000        2,930,760   

Unitymedia Hessen GmbH & Co. KG (a):

      

8.13%, 12/01/17

       763        824,040   

7.50%, 3/15/19

       500        547,806   

Virgin Media Finance Plc, 4.88%, 2/15/22

       245        247,450   

Virgin Media Secured Finance Plc, 6.50%, 1/15/18

       1,300        1,410,500   
      

 

 

 
                       22,865,402   

Metals & Mining — 2.3%

      

AngloGold Ashanti Holdings Plc, 5.13%, 8/01/22

       700        713,876   

ArcelorMittal, 4.25%, 3/01/16

       100        99,329   

Barrick Gold Corp., 2.90%, 5/30/16 (c)

       550        580,297   

FMG Resources August 2006 Property Ltd. (a):

      

6.38%, 2/01/16

       785        785,000   

6.88%, 4/01/22 (c)

       40        37,600   

Freeport-McMoRan Copper & Gold, Inc.,
3.55%, 3/01/22

       675        687,284   

Freeport-McMoRan Corp., 7.13%, 11/01/27

       1,400        1,775,225   

New Gold, Inc., 7.00%, 4/15/20 (a)

       65        68,900   

Novelis, Inc., 8.75%, 12/15/20

       470        518,175   

Steel Dynamics, Inc., 6.38%, 8/15/22 (a)

       205        214,225   

Teck Resources Ltd., 10.75%, 5/15/19

       190        228,787   
      

 

 

 
                       5,708,698   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    39


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust III (BPP)

(Percentages shown are based on Net Assets)

 

Corporate Bonds          

Par  

(000)

    Value  
      

Multi-Utilities — 1.5%

      

CenterPoint Energy, Inc.:

      

5.95%, 2/01/17

    USD         1,500      $ 1,751,909   

6.50%, 5/01/18

       1,600        1,947,883   
      

 

 

 
                       3,699,792   

Multiline Retail — 0.4%

      

Dufry Finance SCA, 5.50%, 10/15/20 (a)

       403        410,037   

Walgreen Co., 3.10%, 9/15/22

       500        509,114   
      

 

 

 
                       919,151   

Oil, Gas & Consumable Fuels — 13.5%

      

Access Midstream Partners LP:

      

5.88%, 4/15/21

       285        296,400   

6.13%, 7/15/22

       230        243,225   

Berry Petroleum Co., 6.38%, 9/15/22

       205        213,713   

BP Capital Markets Plc (c):

      

3.88%, 3/10/15

       700        751,816   

3.20%, 3/11/16

       925        994,568   

Carrizo Oil & Gas, Inc., 7.50%, 9/15/20

       225        229,500   

Chesapeake Energy Corp.:

      

7.25%, 12/15/18

       20        21,300   

6.63%, 8/15/20 (c)

       215        225,750   

6.13%, 2/15/21 (c)

       215        217,687   

Concho Resources, Inc., 5.50%, 10/01/22

       205        214,738   

CONSOL Energy, Inc., 6.38%, 3/01/21

       220        218,900   

Continental Resources, Inc., 5.00%, 9/15/22

       225        236,812   

Copano Energy LLC, 7.13%, 4/01/21

       240        252,600   

DCP Midstream LLC, 4.75%, 9/30/21 (a)

       158        168,186   

Denbury Resources, Inc., 8.25%, 2/15/20

       310        351,075   

El Paso Pipeline Partners Operating Co. LLC:

      

6.50%, 4/01/20

       680        832,620   

5.00%, 10/01/21

       300        339,674   

Enbridge Energy Partners LP, 9.88%, 3/01/19

       1,000        1,363,026   

Energy Transfer Partners LP, 6.50%, 2/01/42

       230        289,158   

Energy XXI Gulf Coast, Inc., 7.75%, 6/15/19

       500        542,500   

Enterprise Products Operating LLC, 6.65%, 4/15/18

       2,000        2,505,016   

EP Energy LLC/EP Energy Finance, Inc.,
6.88%, 5/01/19 (a)

       230        248,400   

Forest Oil Corp., 8.50%, 2/15/14

       300        324,000   

Kinder Morgan Energy Partners LP,
6.85%, 2/15/20 (c)

       2,000        2,554,704   

Kodiak Oil & Gas Corp., 8.13%, 12/01/19 (a)

       90        98,100   

Linn Energy LLC:

      

6.25%, 11/01/19 (a)

       545        545,000   

7.75%, 2/01/21

       220        234,850   

Marathon Petroleum Corp., 3.50%, 3/01/16

       650        696,450   

MarkWest Energy Partners LP:

      

6.25%, 6/15/22

       255        276,037   

5.50%, 2/15/23

       90        94,500   

Newfield Exploration Co.:

      

6.88%, 2/01/20

       275        297,687   

5.63%, 7/01/24

       200        213,500   

Nexen, Inc., 6.40%, 5/15/37

       670        859,798   

Oasis Petroleum, Inc.:

      

7.25%, 2/01/19

       130        139,100   

6.50%, 11/01/21

       145        153,338   

Offshore Group Investments Ltd., 11.50%, 8/01/15

       169        185,689   

ONEOK Partners LP, 8.63%, 3/01/19

       1,725        2,293,255   

PDC Energy, Inc., 7.75%, 10/15/22 (a)

       175        178,063   

Petrobras International Finance Co.:

      

3.88%, 1/27/16

       1,800        1,912,203   

5.38%, 1/27/21

       1,075        1,219,110   

Petrohawk Energy Corp., 10.50%, 8/01/14

       300        323,250   

Petroleum Geo-Services ASA, 7.38%, 12/15/18 (a)

       310        329,375   

Pioneer Natural Resources Co., 6.88%, 5/01/18

       240        295,132   

Plains Exploration & Production Co., 6.88%, 2/15/23

       560        559,300   

Premier Oil Plc, 5.00%, 6/09/18

       1,625        1,665,625   
Corporate Bonds          

Par  

(000)

    Value  
      

Oil, Gas & Consumable Fuels (concluded)

      

Range Resources Corp.:

      

6.75%, 8/01/20

    USD         255      $ 281,137   

5.75%, 6/01/21

       160        171,200   

Ruby Pipeline LLC, 6.00%, 4/01/22 (a)

       1,425        1,519,777   

Sabine Pass Liquified Natural Gas LP:

      

7.50%, 11/30/16

       855        934,087   

6.50%, 11/01/20 (a)

       275        280,500   

SandRidge Energy, Inc.:

      

7.50%, 3/15/21 (a)

       160        166,400   

7.50%, 3/15/21

       95        98,800   

8.13%, 10/15/22 (a)

       105        112,875   

7.50%, 2/15/23 (a)

       360        372,600   

SESI LLC, 7.13%, 12/15/21

       210        234,150   

SM Energy Co.:

      

6.63%, 2/15/19

       110        115,225   

6.50%, 11/15/21

       165        173,663   

6.50%, 1/01/23

       105        109,725   

Targa Resources Partners LP, 6.88%, 2/01/21

       180        195,300   

Tennessee Gas Pipeline Co. LLC, 8.00%, 2/01/16

       400        480,264   

Tesoro Corp., 5.38%, 10/01/22

       295        307,537   

Western Gas Partners LP, 5.38%, 6/01/21

       725        835,338   

The Williams Cos., Inc., 8.75%, 3/15/32

       422        604,472   
      

 

 

 
                       33,197,780   

Paper & Forest Products — 2.7%

      

Boise Paper Holdings LLC:

      

9.00%, 11/01/17

       60        66,000   

8.00%, 4/01/20

       235        257,325   

International Paper Co. (c):

      

7.50%, 8/15/21

       1,625        2,158,002   

8.70%, 6/15/38

       900        1,380,758   

7.30%, 11/15/39

       1,725        2,395,968   

Longview Fibre Paper & Packaging, Inc.,
8.00%, 6/01/16 (a)

       160        166,800   

PH Glatfelter Co., 5.38%, 10/15/20 (a)

       225        228,094   
      

 

 

 
                       6,652,947   

Pharmaceuticals — 1.9%

      

Merck & Co., Inc., 6.50%, 12/01/33

       990        1,471,432   

Pfizer, Inc., 7.20%, 3/15/39 (c)

       235        375,793   

Roche Holdings, Inc., 7.00%, 3/01/39 (a)(c)

       865        1,339,741   

Valeant Pharmaceuticals International (a):

      

6.50%, 7/15/16

       59        62,097   

6.38%, 10/15/20

       340        357,850   

Watson Pharmaceuticals, Inc., 3.25%, 10/01/22

       1,080        1,112,928   
      

 

 

 
                       4,719,841   

Professional Services — 0.0%

      

FTI Consulting, Inc., 7.75%, 10/01/16

             100        102,750   

Real Estate Investment Trusts (REITs) — 2.9%

      

AvalonBay Communities, Inc., 6.10%, 3/15/20 (c)

       1,725        2,132,783   

Developers Diversified Realty Corp.:

      

4.75%, 4/15/18

       315        353,506   

7.88%, 9/01/20

       375        487,706   

ERP Operating LP, 5.75%, 6/15/17 (c)

       1,715        2,027,204   

HCP, Inc., 5.38%, 2/01/21

       500        578,737   

UDR, Inc., 4.25%, 6/01/18

       725        803,937   

Ventas Realty LP/Ventas Capital Corp.,
4.75%, 6/01/21

       550        612,457   
      

 

 

 
                       6,996,330   

Real Estate Management & Development — 0.3%

      

Lennar Corp., 4.75%, 11/15/22 (a)

       260        257,400   

Realogy Corp., 7.63%, 1/15/20 (a)(c)

       295        331,137   

Shea Homes LP, 8.63%, 5/15/19

       230        255,875   
      

 

 

 
                       844,412   
 

 

See Notes to Financial Statements.

 

                
40    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust III (BPP)

(Percentages shown are based on Net Assets)

 

Corporate Bonds          

Par  

(000)

    Value  
      

Road & Rail — 1.4%

      

The Hertz Corp., 6.75%, 4/15/19

    USD         188      $ 199,515   

Norfolk Southern Corp., 6.00%, 3/15/2105 (c)

       2,500        3,127,207   
      

 

 

 
                       3,326,722   

Semiconductors & Semiconductor Equipment — 0.5%

  

 

KLA-Tencor Corp., 6.90%, 5/01/18

             918        1,106,450   

Software — 0.4%

      

Infor US, Inc., 9.38%, 4/01/19

       220        243,100   

Nuance Communications, Inc., 5.38%, 8/15/20 (a)

       330        336,600   

Symantec Corp., 2.75%, 6/15/17

       300        311,476   
      

 

 

 
                       891,176   

Specialty Retail — 1.5%

      

AutoNation, Inc., 6.75%, 4/15/18

       940        1,055,150   

Limited Brands, Inc., 7.00%, 5/01/20

       470        536,387   

QVC, Inc. (a):

      

7.38%, 10/15/20

       50        55,412   

5.13%, 7/02/22

       710        742,369   

Sally Holdings LLC, 6.88%, 11/15/19

       290        321,538   

VF Corp., 5.95%, 11/01/17 (c)

       725        861,655   
      

 

 

 
                       3,572,511   

Tobacco — 2.7%

      

Altria Group, Inc., 10.20%, 2/06/39

       1,919        3,371,219   

BAT International Finance Plc, 3.25%, 6/07/22 (a)(c)

       675        701,185   

Lorillard Tobacco Co., 3.50%, 8/04/16

       1,175        1,248,584   

Philip Morris International, Inc., 2.50%, 5/16/16 (c)

       1,225        1,292,740   
      

 

 

 
                       6,613,728   

Trading Companies & Distributors — 0.2%

      

Doric Nimrod Air Finance Alpha Ltd. Pass Through Trust, Series 2012-1, Class A,
5.13%, 11/30/24 (a)

             465        483,600   

Transportation Infrastructure — 0.9%

      

Penske Truck Leasing Co. LP/PTL Finance Corp. (a):

      

3.75%, 5/11/17

       1,475        1,506,053   

4.88%, 7/11/22

       800        817,866   
      

 

 

 
                       2,323,919   

Wireless Telecommunication Services — 5.3%

      

America Movil SAB de CV, 2.38%, 9/08/16 (c)

       1,780        1,860,675   

American Tower Corp.:

      

4.50%, 1/15/18

       925        1,024,312   

5.05%, 9/01/20

       500        561,848   

Cricket Communications, Inc., 7.75%, 5/15/16

       325        343,688   

Crown Castle International Corp.:

      

9.00%, 1/15/15

       430        460,100   

5.25%, 1/15/23 (a)

       270        279,450   

Crown Castle Towers LLC (a):

      

5.50%, 1/15/37

       575        656,658   

4.17%, 8/15/37

       1,000        1,098,263   

6.11%, 1/15/40

       625        760,417   

Digicel Group Ltd., 8.25%, 9/30/20 (a)

       520        560,300   

SBA Tower Trust, 5.10%, 4/15/42 (a)

       2,500        2,776,997   

Sprint Capital Corp., 6.88%, 11/15/28

       230        235,175   

Sprint Nextel Corp. (a):

      

9.00%, 11/15/18

       630        778,050   

7.00%, 3/01/20

       1,290        1,496,400   
      

 

 

 
                       12,892,333   
Total Corporate Bonds — 116.4%                      285,222,034   

Floating Rate Loan Interests — 0.0% (b)

         

Par  

(000)

    Value  
      

Oil, Gas & Consumable Fuels — 0.0%

      

Chesapeake Energy Corp., Unsecured Term Loan, 8.50%, 12/01/17

    USD         85      $ 85,435   
      
                          
Preferred Securities                      
Capital Trusts                      

Capital Markets — 3.3%

      

RBS Capital Trust II, 6.43% (b)(d)

       625        525,000   

State Street Capital Trust IV, 1.39%, 6/01/67 (b)

       9,675        7,419,467   
      

 

 

 
                       7,944,467   

Commercial Banks — 2.3%

      

Barclays Bank Plc (a)(b)(d):

      

5.93%(c)

       1,700        1,666,000   

7.43%

       325        338,000   

BNP Paribas SA, 7.20% (a)(b)(c)(d)

       700        689,500   

Credit Agricole SA, 8.38% (a)(b)(c)(d)

       725        737,688   

National City Preferred Capital Trust I, 12.00% (b)(d)

       600        606,882   

NBP Capital Trust III, 7.38% (d)

       2,000        1,630,000   
      

 

 

 
                       5,668,070   

Consumer Finance — 0.3%

      

Capital One Capital V, 10.25%, 8/15/39

             750        772,500   

Diversified Financial Services — 4.2%

      

General Electric Capital Corp., 6.25% (b)(c)

       1,300        1,417,039   

JPMorgan Chase Capital XXI, Series U,
1.26%, 1/15/87

       7,125        5,401,526   

JPMorgan Chase Capital XXIII, 1.43%, 5/15/77 (b)

       4,790        3,539,245   
      

 

 

 
                       10,357,810   

Electric Utilities — 0.4%

      

PPL Capital Funding, Inc., 6.70%, 3/30/67 (b)

             900        948,375   

Insurance — 8.1%

      

The Allstate Corp., 6.50%, 5/15/67 (b)

       900        967,500   

American General Capital II, 8.50%, 7/01/30

       100        122,500   

American International Group, Inc.,
8.18%, 5/15/68 (b)

       400        499,000   

AXA SA, 6.38% (a)(b)(d)

       900        841,500   

The Chubb Corp., 6.38%, 3/29/67 (b)

       900        976,500   

Liberty Mutual Group, Inc., 10.75%, 6/15/88 (a)(b)

       900        1,341,000   

Lincoln National Corp., 7.00%, 5/17/66 (b)

       900        922,500   

MetLife, Inc., 6.40%, 12/15/66

       1,400        1,521,838   

Mitsui Sumitomo Insurance Co. Ltd.,
7.00%, 3/15/72 (a)(b)

       700        798,763   

Northwestern Mutual Life Insurance Co.,
6.06%, 3/30/40 (a)(c)

       1,800        2,366,130   

Prudential Plc, 6.50% (d)

       6,000        5,970,000   

Reinsurance Group of America, Inc.,
6.75%, 12/15/65 (b)

       1,300        1,315,274   

Swiss Re Capital I LP, 6.85% (a)(b)(d)

       1,000        1,043,227   

ZFS Finance USA Trust II, 6.45%, 12/15/65 (a)(b)

       1,150        1,236,250   
      

 

 

 
                       19,921,982   

Oil, Gas & Consumable Fuels — 0.4%

      

TransCanada PipeLines Ltd., 6.35%, 5/15/67 (b)

             900        967,168   
Total Capital Trusts — 19.0%                      46,580,372   
      
                          
Preferred Stocks           Shares         

Capital Markets — 0.1%

      

RBS Capital Funding Trust V, 5.90%

             15,000        275,850   

Diversified Financial Services — 0.5%

      

Ally Financial, Inc., 7.00% (a)

             1,170        1,127,441   
Total Preferred Stocks — 0.6%                      1,403,291   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    41


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust III (BPP)

(Percentages shown are based on Net Assets)

 

    
Trust Preferreds
          Shares     Value  
      

Diversified Financial Services — 0.4%

      

GMAC Capital Trust I, Series 2, 8.13%, 2/15/40

             35,090      $ 902,205   

Machinery — 0.3%

      

Stanley Black & Decker, Inc., 5.75%, 7/25/52

             30,000        775,500   
Total Trust Preferreds — 0.7%                      1,677,705   
Total Preferred Securities — 20.3%                      49,661,368   
      
                          
Taxable Municipal Bonds — 0.8%          

Par  

(000)

        

Metropolitan Transportation Authority, RB, Build America Bonds, 6.55%, 11/15/31

    USD         1,675        2,109,059   
      
                          
US Government Sponsored Agency Securities — 0.3%         

Agency Obligations — 0.3%

      

Fannie Mae, 1.93%, 10/09/19 (c)(g)

             805        704,579   
      
                          
US Treasury Obligations         

US Treasury Bonds (c):

      

3.75%, 8/15/41

       713        849,250   

3.13%, 11/15/41

       335        355,519   

3.13%, 2/15/42

       1,600        1,696,000   

3.00%, 5/15/42

       2,750        2,840,665   

US Treasury Notes (c):

      

0.88%, 12/31/16

       9,300        9,412,614   

0.63%, 5/31/17

       455        454,609   

1.63%, 8/15/22

             750        745,898   
Total US Treasury Obligations — 6.7%                      16,354,555   
Total Long-Term Investments
(Cost — $331,179,901) — 145.0%
                     355,313,530   
      
                          
Short-Term Securities           Shares         

BlackRock Liquidity Funds, TempFund, Institutional Class, 0.17% (h)(i)

             4,101,982        4,101,982   
Total Short-Term Securities
(Cost — $4,101,982) — 1.7%
                     4,101,982   
      
                          
Options Purchased           Contracts         

Exchange-Traded Put Options — 0.1%

      

Euro-Dollar 3-Year Mid-Curve Options, Strike Price USD 98.88, Expires 3/15/13

             452        186,450   
             Notional
Amount
(000)
        

Over-the-Counter Interest Rate Call Swaptions — 0.0%

  

 

Receive a fixed rate of 2.61% and pay a floating rate based on 3-month LIBOR, expires 1/13/14, Broker Credit Suisse Group AG

             500        32,372   

Over-the-Counter Interest Rate Put Swaptions — 0.0%

  

 

Pay a fixed rate of 0.71% and receive a floating rate based on 3-month LIBOR, Expires 6/28/13, Broker Deutsche Bank AG

       17,900        14,998   

Pay a fixed rate of 2.61% and receive a floating rate based on 3-month LIBOR, Expires 1/13/14, Broker Credit Suisse Group AG

       500        8,398   
Options Purchased           Notional
Amount (000)
    Value  
      

Over-the-Counter Interest Rate Put Swaptions (concluded)

  

 

Pay a fixed rate of 4.50% and receive a floating rate based on 3-month LIBOR, Expires 2/02/17, Broker Deutsche Bank AG

    USD         2,300      $ 52,966   
      

 

 

 
                       76,362   
Total Options Purchased
(Cost — $391,631) — 0.1%
                     295,184   
Total Investments Before Options Written
(Cost — $335,673,514) — 146.8%
                     359,710,696   
 
                          
Options Written                         

Over-the-Counter Interest Rate Call Swaptions — (0.5)%

  

 

Pay a fixed rate of 4.75% and receive a floating rate based on 3-month LIBOR, Expires 3/24/14, Broker Citigroup, Inc.

       5,000        (1,199,084

Pay a fixed rate of 2.33% and receive a floating rate based on 3-month LIBOR, Expires 10/02/14, Broker Credit Suisse Group AG

       1,900        (81,669
      

 

 

 
                       (1,280,753

Over-the-Counter Interest Rate Put Swaptions — (0.1)%

  

 

Receive a fixed rate of 4.75% and pay a floating rate based on 3-month LIBOR, Expires 3/24/14, Broker Citigroup, Inc.

       5,000        (8,864

Receive a fixed rate of 2.33% and pay a floating rate based on 3-month LIBOR, Expires 10/02/14, Broker Credit Suisse Group AG

       1,900        (76,759

Receive a fixed rate of 6.00% and pay a floating rate based on 3-month LIBOR, Expires 2/02/17, Broker Deutsche Bank AG

       4,600        (47,514
      

 

 

 
                       (133,137
Total Options Written
(Premiums Received — $838,575) — (0.6)%
                 (1,413,890
Total Investments, Net of Options Written — 146.2%        358,296,806   

Liabilities in Excess of Other Assets — (46.2)%

  

    (113,236,395
      

 

 

 
Net Assets — 100.0%        $ 245,060,411   
      

 

 

 

 

 

 

(a)   Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

 

(b)   Variable rate security. Rate shown is as of report date.

 

(c)   All or a portion of security has been pledged as collateral in connection with open reverse repurchase agreements.

 

(d)   Security is perpetual in nature and has no stated maturity date.

 

(e)   Convertible security.

 

(f)   Represents a payment-in-kind security which may pay interest/dividends in additional par/shares.

 

(g)   Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.
 

 

See Notes to Financial Statements.

 

                
42    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust III (BPP)

 

 

(h)   Investments in issuers considered to be an affiliate of the Fund during the year ended October 31, 2012, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate    Shares
Held at
October 31,
2011
     Net
Activity
     Shares
Held at
October 31,
2012
     Income  

BlackRock Liquidity Funds, TempFund Institutional Class

     2,459,914         1,642,068         4,101,982       $ 2,279   
(i)   Represents the current yield as of report date.

 

Ÿ  

For Fund compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by Fund management. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

 
Ÿ  

Reverse repurchase agreements outstanding as of October 31, 2012 were as follows:

 

Counterparty    Interest
Rate
     Trade
Date
     Maturity
Date
     Face Value        Face Value
Including
Accrued
Interest
 

Barclays Capital, Inc.

   0.35%      4/03/12      Open      $ 7,494,796         $ 7,509,372   

BNP Paribas Securities Corp.

   0.10%      4/03/12      Open        778,952           779,411   

BNP Paribas Securities Corp.

   0.11%      4/03/12      Open        628,000           628,407   

UBS Securities LLC

   0.30%      4/04/12      Open        2,403,400           2,407,626   

UBS Securities LLC

   0.31%      4/04/12      Open        477,375           478,242   

UBS Securities LLC

   0.35%      4/04/12      Open        8,701,750           8,719,601   

UBS Securities LLC

   0.38%      4/04/12      Open        6,419,250           6,433,548   

Barclays Capital, Inc.

   0.35%      4/25/12      Open        2,072,063           2,075,890   

UBS Securities LLC

   0.25%      5/01/12      Open        589,750           590,504   

UBS Securities LLC

   0.37%      5/01/12      Open        1,726,188           1,729,452   

UBS Securities LLC

   0.38%      5/01/12      Open        1,515,125           1,518,068   

UBS Securities LLC

   0.00%      5/07/12      Open        174,687           174,687   

Barclays Capital, Inc.

   0.35%      5/08/12      Open        812,250           813,640   

UBS Securities LLC

   0.25%      5/10/12      Open        409,955           410,450   

UBS Securities LLC

   0.34%      5/11/12      Open        1,061,562           1,063,307   

Credit Suisse Securities (USA) LLC

   0.35%      5/14/12      Open        796,875           798,200   

UBS Securities LLC

   0.34%      5/14/12      Open        3,515,590           3,521,268   

Credit Suisse Securities (USA) LLC

   0.35%      5/15/12      Open        803,344           804,671   

Credit Suisse Securities (USA) LLC

   0.35%      5/18/12      Open        1,726,600           1,729,403   

BNP Paribas Securities Corp.

   0.21%      5/21/12      Open        1,714,000           1,715,640   

Credit Suisse Securities (USA) LLC

   0.35%      5/22/12      Open        1,224,344           1,226,284   

Credit Suisse Securities (USA) LLC

   0.35%      5/24/12      Open        821,062           822,348   

Deutsche Bank Securities, Inc.

   0.19%      5/29/12      Open        354,262           354,554   

UBS Securities LLC

   0.34%      5/31/12      Open        1,608,750           1,611,090   

Barclays Capital, Inc.

   0.35%      6/05/12      Open        2,906,466           2,910,676   

Bank of America Merrill Lynch

   0.20%      6/12/12      Open        438,350           438,696   

Credit Suisse Securities (USA) LLC

   0.35%      6/20/12      Open        1,967,144           1,969,706   

Credit Suisse Securities (USA) LLC

   0.38%      6/20/12      Open        9,375,219           9,388,480   

Deutsche Bank Securities, Inc.

   0.26%      7/05/12      Open        9,404,625           9,412,708   

Credit Suisse Securities (USA) LLC

   0.35%      7/11/12      Open        553,437           554,046   

Credit Suisse Securities (USA) LLC

   0.35%      7/13/12      Open        1,748,700           1,750,587   

Credit Suisse Securities (USA) LLC

   0.30%      7/25/12      Open        2,932,625           2,935,020   

Credit Suisse Securities (USA) LLC

   0.35%      7/25/12      Open        2,960,594           2,963,422   

Credit Suisse Securities (USA) LLC

   0.35%      7/26/12      Open        1,981,581           1,983,469   

Credit Suisse Securities (USA) LLC

   0.35%      7/31/12      Open        597,906           598,447   

Credit Suisse Securities (USA) LLC

   0.35%      8/10/12      Open        1,515,469           1,516,692   

Credit Suisse Securities (USA) LLC

   0.35%      8/16/12      Open        3,663,676           3,666,417   

Credit Suisse Securities (USA) LLC

   0.35%      8/20/12      Open        1,934,875           1,936,248   

Credit Suisse Securities (USA) LLC

   0.35%      8/22/12      Open        648,000           648,447   

Credit Suisse Securities (USA) LLC

   0.35%      8/30/12      Open        997,250           997,861   

Credit Suisse Securities (USA) LLC

   0.35%      9/04/12      Open        2,119,129           2,120,324   

UBS Securities LLC

   0.34%      9/04/12      Open        275,000           275,151   

Barclays Capital, Inc.

   (0.25)%      9/06/12      Open        32,000           31,988   

Credit Suisse Securities (USA) LLC

   (0.25)%      9/06/12      Open        188,394           188,320   

Barclays Capital, Inc.

   0.35%      9/19/12      Open        1,027,200           1,027,629   

Deutsche Bank Securities, Inc.

   (1.00)%      9/19/12      Open        303,881           303,527   

UBS Securities LLC

   0.34%      9/24/12      Open        1,316,250           1,316,722   

UBS Securities LLC

   0.36%      9/24/12      Open        1,134,200           1,134,631   

Credit Suisse Securities (USA) LLC

   0.35%      9/27/12      Open        1,104,681           1,105,057   

Credit Suisse Securities (USA) LLC

   0.35%      9/28/12      Open        1,172,938           1,173,325   

Deutsche Bank Securities, Inc.

   (1.50)%      10/01/12      Open        1,479,000           1,477,726   

UBS Securities LLC

   0.10%      10/02/12      Open        982,710           982,789   

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    43


Table of Contents
Schedule of Investments (continued)    BlackRock Credit Allocation Income Trust III (BPP)

 

Reverse repurchase agreements outstanding as of October 31, 2012 were as follows (concluded):

 

Counterparty    Interest
Rate
     Trade
Date
     Maturity
Date
     Face Value        Face Value
Including
Accrued
Interest
 

Citigroup Global Markets, Inc.

   (0.75)%      10/04/12      Open      $ 451,800         $ 451,546   

Barclays Capital, Inc.

   0.40%      10/10/12      Open        732,000           732,179   

UBS Securities LLC

   (0.50)%      10/16/12      Open        596,725           596,596   

Credit Suisse Securities (USA) LLC

   0.35%      10/18/12      Open        1,100,325           1,100,475   

UBS Securities LLC

   0.32%      10/23/12      Open        1,420,250           1,420,351   

BNP Paribas Securities Corp.

   0.26%      10/25/12      Open        2,801,563           2,801,704   

Deutsche Bank Securities, Inc.

   0.14%      10/25/12      Open        737,812           737,833   

Credit Suisse Securities (USA) LLC

   0.35%      10/29/12      Open        887,250           887,276   

Credit Suisse Securities (USA) LLC

   0.35%      10/30/12      Open        5,084,626           5,084,675   

Deutsche Bank Securities, Inc.

   0.00%      10/31/12      Open        728,575           728,575   

Total

                  $ 117,132,156         $ 117,264,984   
                 

 

 

      

 

 

 

 

Ÿ  

Financial futures contracts purchased as of October 31, 2012 were as follows:

 

Contracts    Issue    Exchange    Expiration   

Notional Value

     Unrealized
Appreciation
(Depreciation)
 
  94    2-Year US Treasury Note    Chicago Board of Trade    December 2012      USD  20,710,844       $ (8,805)   
  19    30-Year US Treasury Bond    Chicago Board of Trade    December 2012      USD    2,836,938         (8,345)   
  40    90-Day Euro-Dollar    Chicago Mercantile    March 2016      USD    9,891,500           8,269    
Total                $ (8,881)   
              

 

 

 

 

Ÿ  

Financial futures contracts sold as of October 31, 2012 were as follows:

 

Contracts    Issue    Exchange    Expiration   

Notional Value

     Unrealized
Appreciation
(Depreciation)
 
  110    5-Year US Treasury Note    Chicago Board of Trade    December 2012      USD  13,667,500       $ (16,445)   
  257    10-Year US Treasury Note    Chicago Board of Trade    December 2012      USD  34,189,031         (79,914)   
 17    Ultra Long US Treasury Bond    Chicago Board of Trade    December 2012      USD    2,806,594           34,101    
Total                $ (62,258)   
              

 

 

 

 

Ÿ  

Foreign currency exchange contracts as of October 31, 2012 were as follows:

 

Currency Purchased   Currency Sold   Counterparty   Settlement
Date
       Unrealized
Appreciation
(Depreciation)
 
USD     155,800   EUR     120,000   UBS AG   1/23/13     $ 132    
USD     441,348   EUR     340,000   UBS AG   1/23/13       291    
USD  3,491,650   AUD  3,400,000   UBS AG   1/31/13         (12,860)   
Total           $ (12,437)   
         

 

 

 

 

Ÿ  

Credit default swaps on single-name issues — buy protection outstanding as of October 31, 2012 were as follows:

 

Issuer    Pay
Fixed
Rate
   Counterparty   Expiration
Date
     Notional
Amount
(000)
       Unrealized
Appreciation
(Depreciation)
 
The New York Times Co.    1.00%    Barclays Plc   12/20/16        USD        1,725         $ 739    
Southwest Airlines Co.    1.00%    Goldman Sachs Group, Inc.   12/20/16        USD        570           (16,531)   
Southwest Airlines Co.    1.00%    Royal Bank of Scotland Plc   12/20/16        USD        570           (18,506)   
General Dynamic Corp.    1.00%    Credit Suisse Group AG   9/20/17        USD        800           (848)   
Hewlett-Packard Co.    1.00%    Citigroup, Inc.   9/20/17        USD        425           7,541    
Hewlett-Packard Co.    1.00%    Credit Suisse Group AG   9/20/17        USD        390             21,148    
Hewlett-Packard Co.    1.00%    JPMorgan Chase & Co.   9/20/17        USD        300           14,687    
Lockheed Martin Corp.    1.00%    Credit Suisse Group AG   9/20/17        USD        800           (7,867)   
Northrop Grumman Corp.    1.00%    Credit Suisse Group AG   9/20/17        USD        675           (3,628)   
Raytheon Co.    1.00%    Credit Suisse Group AG   9/20/17        USD        675           (2,328)   
Viacom, Inc.    1.00%    Credit Suisse Group AG   9/20/17        USD        1,775           (15,796)   

Total

                    $ (21,389)   
                   

 

 

 

 

 

See Notes to Financial Statements.      
                
44    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Schedule of Investments (continued)    BlackRock Credit Allocation Income Trust III (BPP)

 

 

Ÿ   Credit default swaps on single-name issues — sold protection outstanding as of October 31, 2012 were as follows:

 

Issuer    Receive
Fixed
Rate
   Counterparty    Expiration
Date
     Issuer
Credit
Rating1
    

Notional
Amount
(000)2

       Unrealized
Appreciation
 
Anadarko Petroleum Corp.    1.00%    Credit Suisse Group AG    6/20/17      BBB-        USD        495         $ 13,454   
Comcast Corp.    1.00%    Credit Suisse Group AG    9/20/17       BBB+        USD        1,775               20,647   
MetLife, Inc.    1.00%    Deutsche Bank AG    3/20/18      A-        USD        425           36   

Total

                          $ 34,137   
                         

 

 

 
1    Using S&P’s rating.

 

2    The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

 

Ÿ   Interest rate swaps outstanding as of October 31, 2012 were as follows:

 

Fixed
Rate
   Floating
Rate
   Counterparty/Exchange    Expiration
Date
    

Notional
Amount
(000)

       Unrealized
Appreciation
(Depreciation)
 
0.44%3    3-month LIBOR    Chicago Mercantile    8/29/14        USD        9,300         $ (9,727)   
2.05%4    3-month LIBOR    Credit Suisse Group AG    5/02/22        USD        1,100             38,148    
2.06%4    3-month LIBOR    Credit Suisse Group AG    5/08/22        USD        3,400           121,475    
1.76%4    3-month LIBOR    Citigroup, Inc.    6/25/22        USD        1,100           7,940    
2.48%3    3-month LIBOR    Credit Suisse Group AG    7/05/42        USD        1,100           26,040    
2.26%3    3-month LIBOR    Goldman Sachs Group, Inc.    7/26/42        USD        500           36,085    
2.46%3    3-month LIBOR    Deutsche Bank AG    8/07/42        USD        2,500           68,836    
2.52%3    3-month LIBOR    Citigroup, Inc.    8/10/42        USD        1,200           18,685    
2.71%3    3-month LIBOR    Credit Suisse Group AG    8/21/42        USD        200           (4,812)   

Total

                     $ 302,670    
                    

 

 

 
  3  Fund pays the fixed rate and receives the floating rate.

 

  4  Fund pays the floating rate and receives the fixed rate.

 

Ÿ   Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

 

Ÿ   Level 1 — unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the Fund has the ability to access

 

Ÿ   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)

 

Ÿ   Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of October 31, 2012:

 

     Level 1     Level 2     Level 3     Total  

Assets:

       
Investments:        

Long-Term Investments:

       

Asset-Backed Securities

                $ 1,176,500      $ 1,176,500   

Corporate Bonds

         $ 282,854,334        2,367,700        285,222,034   

Floating Rate Loan Interests

           85,435               85,435   

Preferred Securities

  $ 1,178,055        48,483,313               49,661,368   

Taxable Municipal Bonds

           2,109,059               2,109,059   

US Govern-
ment Sponsored Agency Securities

           704,579               704,579   

US Treasury Obligations

           16,354,555               16,354,555   

Short-Term Securities

    4,101,982                      4,101,982   
 

 

 

 

Total

  $ 5,280,037      $ 350,591,275      $ 3,544,200      $ 359,415,512   
 

 

 

 

 

     Level 1     Level 2     Level 3     Total  
Derivative Financial Instruments1         

Assets:

       

Credit contracts

         $ 78,252             $ 78,252   

Foreign currency exchange contracts

           423               423   

Interest rate contracts

  $ 228,820        425,943               654,763   

Liabilities:

       

Credit contracts

           (65,504)               (65,504)   

Foreign currency exchange contracts

           (12,860)               (12,860)   

Interest rate contracts

    (113,509)        (1,428,429)               (1,541,938)   
 

 

 

 

Total

  $ 115,311      $ (1,002,175)             $ (886,864)   
 

 

 

 

 

1    Derivative financial instruments are swaps, financial futures contracts, foreign currency exchange contracts and options. Swaps, financial futures contracts and foreign currency exchange contracts are valued at the unrealized appreciation/depreciation on the instrument and options are shown at value.
 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    OCTOBER 31, 2012    45


Table of Contents
Schedule of Investments (concluded)    BlackRock Credit Allocation Income Trust III (BPP)

 

Certain of the Fund’s assets and liabilities are held at carrying amount or face value, which approximates fair value for financial statement purposes. As of October 31, 2012, such assets and liabilities are categorized within the disclosure hierarchy as follows:

 

      Level 1      Level 2      Level 3      Total  

Assets:

           

Foreign currency at value

   $ 10,231                       $ 10,231    

Cash pledged as collateral for financial futures contracts

     266,000                         266,000    

Cash pledged as collateral for swaps

     571,000                         571,000    

Liabilities:

           

Reverse repurchase agreements

           $ (117,132,156)                 (117,132,156)   

Cash received as collateral for reverse repur-
chase agree-
ments

             (1,297,000)                 (1,297,000)   
  

 

 

 

Total

   $ 847,231       $ (118,429,156)               $ (117,581,925)   
  

 

 

 

There were no transfers between Level 1 and Level 2 during the year ended October 31, 2012.

Certain of the Fund’s investments and derivative financial instruments are categorized as Level 3 and were valued utilizing transaction prices, third party pricing information or net asset value without adjustment. Such valuations are based on unobservable inputs. A significant change in the unobservable inputs could result in a significantly lower or higher value in such Level 3 investments and derivative financial instruments.

A reconciliation of Level 3 investments and derivative financial instruments is presented when the Fund had a significant amount of Level 3 investments and derivative financial instruments at the beginning and/or end of the year in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

 

      Asset-
Backed
Securities
     Corporate
Bonds
     Total  

Assets:

        

Opening balance, as of
October 31, 2011

   $ 1,007,500       $ 1,690,000       $ 2,697,500   

Transfers into Level 31

                       

Transfers out of Level 31

                       

Accrued discounts/premiums

     18,531                 18,531   

Net realized gain (loss)

                       

Net change in unrealized appreciation/depreciation2

     150,469         (12,300)         138,169   

Purchases

             690,000         690,000   

Sales

                       
  

 

 

    

 

 

    

 

 

 

Closing Balance, as of October 31, 2012

   $ 1,176,500       $ 2,367,700       $ 3,544,200   
  

 

 

    

 

 

    

 

 

 

 

1    Transfers into and transfers out of Level 3 represent the values as of the beginning of the reporting period.

 

2    Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/depreciation on investments still held as of October 31, 2012 was $138,169.

The following table is a reconciliation of Level 3 derivative financial instruments for which significant unobservable inputs were used in determining fair value:

 

      Credit
Contracts
 

Assets:

  

Opening balance, as of October 31, 2011

   $ 2,351    

Transfers into Level 31

                     —    

Transfers out of Level 31

     —    

Accrued discounts/premiums

     —    

Net realized gain (loss)

     —    

Net change in unrealized appreciation/depreciation3

     (2,351)   

Purchases

     —    

Issues4

     —    

Sales

     —    

Settlements5

     —    
  

 

 

 

Closing Balance, as of October 31, 2012

     —    
  

 

 

 

 

3    Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/ depreciation on derivative financial instruments still held as of October 31, 2012 was $0.

 

4    Issues represent upfront cash received on certain derivative financial instruments.

 

5    Settlements represent periodic contractual cash flows and/or cash flows to terminate certain derivative financial instruments.
 

 

 

See Notes to Financial Statements.      
                
46    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Schedule of Investments October 31, 2012

  

BlackRock Credit Allocation Income Trust IV (BTZ)

(Percentages shown are based on Net Assets)

 

Asset-Backed Securities          

Par  

(000)

    Value  
      

321 Henderson Receivables I LLC, Series 2012-1A, Class A, 4.21%, 2/16/65 (a)

     USD        1,687      $ 1,771,365   

Atrium CDO Corp., Series 5A, Class A4,
0.82%, 7/20/20 (a)(b)

       4,400        3,982,000   

SLM Student Loan Trust, Series 2004-B, Class A2, 0.59%, 6/15/21 (b)

             3,235        3,158,293   
Total Asset-Backed Securities — 1.1%                8,911,658   
      
                          
Corporate Bonds                      

Aerospace & Defense — 0.9%

      

BE Aerospace, Inc., 5.25%, 4/01/22

       2,815        2,934,638   

Huntington Ingalls Industries, Inc.:

      

6.88%, 3/15/18

       990        1,069,200   

7.13%, 3/15/21

       960        1,032,000   

Kratos Defense & Security Solutions, Inc., 10.00%, 6/01/17

       1,662        1,794,960   
      

 

 

 
                       6,830,798   

Airlines — 0.6%

      

American Airlines Pass-Through Trust,
Series 2011-2, Class A, 8.63%, 10/15/21

       385        402,799   

Continental Airlines Pass-Through Trust,
Series 2009-2, Class B, 9.25%, 5/10/17

       1,740        1,900,855   

Delta Air Lines Pass-Through Trust, Series 2002-1, Class G-1, 6.72%, 1/02/23

       1,949        2,144,383   
      

 

 

 
                       4,448,037   

Auto Components — 1.0%

      

Delphi Corp., 6.13%, 5/15/21

       950        1,049,750   

Ford Motor Co., 7.45%, 7/16/31

       1,750        2,213,750   

Icahn Enterprises LP:

      

7.75%, 1/15/16

       1,180        1,233,100   

8.00%, 1/15/18

       3,020        3,246,500   
      

 

 

 
                       7,743,100   

Beverages — 0.7%

      

Anheuser-Busch InBev Worldwide, Inc.,
1.38%, 7/15/17 (c)

       1,650        1,674,874   

Constellation Brands, Inc., 7.25%, 5/15/17

       3,230        3,803,325   
      

 

 

 
                       5,478,199   

Building Products — 0.3%

      

Building Materials Corp. of America (a):

      

7.00%, 2/15/20

       790        857,150   

6.75%, 5/01/21

       1,770        1,929,300   
      

 

 

 
                       2,786,450   

Capital Markets — 5.4%

      

Ameriprise Financial, Inc., 5.30%, 3/15/20 (c)

       4,500        5,320,323   

E*Trade Financial Corp., 12.50%, 11/30/17

       2,565        2,904,862   

The Goldman Sachs Group, Inc. (c):

      

6.15%, 4/01/18

       800        936,831   

7.50%, 2/15/19

       5,165        6,450,057   

5.75%, 1/24/22

       2,800        3,250,456   

6.25%, 2/01/41

       7,350        8,726,185   

Morgan Stanley, 5.63%, 9/23/19 (c)

       5,750        6,385,225   

UBS AG:

      

2.25%, 1/28/14 (c)

       2,678        2,718,655   

5.88%, 7/15/16

       1,575        1,763,477   

7.63%, 8/17/22

       4,000        4,313,628   
      

 

 

 
                       42,769,699   

Chemicals — 2.2%

      

Ashland, Inc., 4.75%, 8/15/22 (a)

       855        872,100   

Celanese US Holdings LLC, 5.88%, 6/15/21

       2,560        2,851,200   

Hexion US Finance Corp., 6.63%, 4/15/20

       750        748,125   
Corporate Bonds          

Par  

(000)

    Value  
      

Chemicals (concluded)

      

Huntsman International LLC, 8.63%, 3/15/21 (c)

     USD        980      $ 1,114,750   

INEOS Finance Plc (a):

      

8.38%, 2/15/19

       535        561,750   

7.50%, 5/01/20

       1,050        1,063,125   

LyondellBasell Industries NV, 5.75%, 4/15/24 (c)

       3,125        3,617,187   

MPM Escrow LLC/MPM Finance Escrow Corp.,
8.88%, 10/15/20 (a)

       505        494,900   

Nufarm Australia Ltd., 6.38%, 10/15/19 (a)

       485        497,125   

Rockwood Specialties Group, Inc.,
4.63%, 10/15/20

       2,785        2,868,550   

Tronox Finance LLC, 6.38%, 8/15/20 (a)

       2,550        2,543,625   
      

 

 

 
                       17,232,437   

Commercial Banks — 5.2%

      

Amsouth Bank, Series AI, 4.85%, 4/01/13

       1,800        1,824,750   

Asciano Finance Ltd., 5.00%, 4/07/18 (a)

       1,475        1,589,789   

Associated Banc-Corp, 5.13%, 3/28/16 (c)

       3,645        3,996,790   

BBVA US Senior SAU, 4.66%, 10/09/15 (c)

       4,100        4,140,533   

Branch Banking & Trust Co. (b)(c):

      

0.72%, 9/13/16

       1,850        1,797,985   

0.73%, 5/23/17

       1,100        1,056,593   

CIT Group, Inc.:

      

4.25%, 8/15/17

       2,240        2,297,808   

5.25%, 3/15/18

       1,980        2,103,750   

5.50%, 2/15/19 (a)

       1,720        1,833,950   

5.00%, 8/15/22

       710        735,722   

Discover Bank, 8.70%, 11/18/19

       1,950        2,549,668   

HSBC Finance Corp., 6.68%, 1/15/21 (c)

       2,525        2,987,921   

Regions Financial Corp.:

      

4.88%, 4/26/13

       4,150        4,217,437   

5.75%, 6/15/15

       3,000        3,285,000   

Santander Holdings USA, Inc., 3.00%, 9/24/15

       1,825        1,859,936   

Wachovia Bank NA, 6.60%, 1/15/38 (c)

       3,680        5,216,595   
      

 

 

 
                       41,494,227   

Commercial Services & Supplies — 4.1%

      

ADS Waste Holdings, Inc., 8.25%, 10/01/20 (a)

       491        508,185   

The ADT Corp., 4.88%, 7/15/42 (a)

       2,250        2,401,146   

Aviation Capital Group Corp. (a):

      

7.13%, 10/15/20 (c)

       15,000        15,824,968   

6.75%, 4/06/21

       3,850        3,999,803   

Casella Waste Systems, Inc., 7.75%, 2/15/19

       610        597,800   

Clean Harbors, Inc., 5.25%, 8/01/20 (a)

       764        783,100   

Corrections Corp. of America, 7.75%, 6/01/17

       4,835        5,167,406   

Covanta Holding Corp., 6.38%, 10/01/22

       1,105        1,202,543   

HDTFS, Inc. (a):

      

5.88%, 10/15/20

       605        611,050   

6.25%, 10/15/22

       760        770,450   

Mobile Mini, Inc., 7.88%, 12/01/20

       455        491,969   
      

 

 

 
                       32,358,420   

Communications Equipment — 0.8%

      

Avaya, Inc., 9.75%, 11/01/15 (c)

       1,400        1,246,000   

Brocade Communications Systems, Inc.,
6.88%, 1/15/20 (c)

       3,580        3,875,350   

Zayo Group LLC/Zayo Capital, Inc.,
8.13%, 1/01/20

       1,180        1,292,100   
      

 

 

 
                       6,413,450   

Computers & Peripherals — 0.0%

      

NCR Corp., 5.00%, 7/15/22 (a)

             230        234,888   

Construction Materials — 0.5%

      

HD Supply, Inc. (a):

      

8.13%, 4/15/19

       1,490        1,639,000   

11.50%, 7/15/20

       2,055        2,162,888   
      

 

 

 
                       3,801,888   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    47


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust IV (BTZ)

(Percentages shown are based on Net Assets)

 

Corporate Bonds          

Par  

(000)

    Value  
      

Consumer Finance — 5.4%

      

American Express Credit Corp.,
2.75%, 9/15/15 (c)

     USD        9,850      $ 10,383,565   

Capital One Bank USA NA, 8.80%, 7/15/19

       3,950        5,257,399   

Daimler Finance North America LLC,
2.63%, 9/15/16 (a)(c)

       5,675        5,921,193   

Experian Finance Plc, 2.38%, 6/15/17 (a)(c)

       1,250        1,279,705   

Ford Motor Credit Co. LLC:

      

8.00%, 12/15/16

       2,195        2,658,211   

5.88%, 8/02/21

       4,730        5,446,136   

Inmarsat Finance Plc, 7.38%, 12/01/17 (a)

       2,515        2,709,912   

SLM Corp., 6.25%, 1/25/16

       8,205        8,861,810   

Toll Brothers Finance Corp., 5.88%, 2/15/22

       680        768,732   
      

 

 

 
                       43,286,663   

Containers & Packaging — 1.2%

      

Ardagh Packaging Finance Plc (a):

      

7.38%, 10/15/17

       383        411,246   

7.38%, 10/15/17

       210        225,750   

9.13%, 10/15/20

       490        512,050   

Ball Corp.:

      

7.13%, 9/01/16

       2,000        2,150,000   

6.75%, 9/15/20

       3,575        3,923,562   

Crown Americas LLC, 6.25%, 2/01/21

       1,350        1,490,063   

Smurfit Kappa Acquisitions, 4.88%, 9/15/18 (a)

       810        810,000   
      

 

 

 
                       9,522,671   

Diversified Financial Services — 10.6%

      

Ally Financial, Inc.:

      

4.50%, 2/11/14

       1,500        1,545,000   

8.30%, 2/12/15

       2,890        3,237,522   

8.00%, 11/01/31

       2,515        2,992,850   

Bank of America Corp. (c):

      

3.75%, 7/12/16

       2,855        3,059,504   

5.30%, 3/15/17

       6,505        7,303,001   

5.00%, 5/13/21

       12,100        13,649,756   

Blackstone Holdings Finance Co. LLC,
4.75%, 2/15/23 (a)(c)

       1,375        1,474,803   

Citigroup, Inc. (c):

      

6.38%, 8/12/14

       2,150        2,342,780   

4.59%, 12/15/15

       1,575        1,718,204   

4.45%, 1/10/17

       1,520        1,679,217   

Countrywide Financial Corp., 6.25%, 5/15/16 (c)

       6,500        7,164,306   

DPL, Inc., 7.25%, 10/15/21

       1,785        2,012,587   

General Motors Financial Co., Inc.,
6.75%, 6/01/18

       830        920,180   

ING Bank NV, 5.00%, 6/09/21 (a)(c)

       3,950        4,460,972   

Intesa Sanpaolo SpA, 2.38%, 12/21/12

       5,800        5,800,035   

LeasePlan Corp. NV, 3.00%, 10/23/17 (a)(b)(c)

       3,325        3,363,329   

Macquarie Bank Ltd., 5.00%, 2/22/17 (a)(c)

       2,325        2,525,252   

Moody’s Corp., 6.06%, 9/07/17

       10,000        10,963,974   

Reynolds American, Inc., 3.25%, 11/01/22

       3,025        3,059,558   

Reynolds Group Issuer, Inc.:

      

7.13%, 4/15/19

       420        447,300   

7.88%, 8/15/19

       1,165        1,264,025   

9.88%, 8/15/19

       515        539,462   

5.75%, 10/15/20 (a)

       2,500        2,525,000   

6.88%, 2/15/21

       255        270,938   

WMG Acquisition Corp., 9.50%, 6/15/16

       340        373,575   
      

 

 

 
                       84,693,130   

Diversified Telecommunication Services — 4.4%

  

   

AT&T, Inc. (c):

      

2.40%, 8/15/16

       1,525        1,611,809   

6.30%, 1/15/38

       5,000        6,694,510   

Level 3 Financing, Inc.:

      

8.13%, 7/01/19

       5,547        5,921,422   

8.63%, 7/15/20

       1,070        1,166,300   
Corporate Bonds          

Par  

(000)

    Value  
      

Diversified Telecommunication Services (concluded)

  

   

Telecom Italia Capital SA, 6.18%, 6/18/14

     USD        1,650      $ 1,750,066   

Telefonica Emisiones SAU, 5.46%, 2/16/21

       2,250        2,286,563   

Verizon Communications, Inc. (c):

      

1.95%, 3/28/14

       8,525        8,704,698   

7.35%, 4/01/39

       3,640        5,605,735   

Windstream Corp., 7.88%, 11/01/17

       990        1,102,613   
      

 

 

 
                       34,843,716   

Electric Utilities — 4.5%

      

CMS Energy Corp., 5.05%, 3/15/22

       1,850        2,066,541   

Dominion Resources, Inc., 8.88%, 1/15/19 (c)

       8,000        10,834,832   

Duke Energy Corp., 3.55%, 9/15/21 (c)

       2,825        3,027,793   

FirstEnergy Solutions Corp., 6.05%, 8/15/21

       1,800        2,079,990   

Great Plains Energy, Inc., 5.29%, 6/15/22

       2,725        3,123,888   

Mirant Mid Atlantic Pass Through Trust, Series B, 9.13%, 6/30/17

       857        936,675   

Nisource Finance Corp.:

      

6.40%, 3/15/18

       1,760        2,142,272   

5.25%, 2/15/43

       1,020        1,143,912   

Oncor Electric Delivery Co. LLC (c):

      

4.10%, 6/01/22

       2,050        2,196,497   

5.30%, 6/01/42

       1,350        1,536,670   

Progress Energy, Inc., 7.00%, 10/30/31 (c)

       5,000        6,673,870   
      

 

 

 
                       35,762,940   

Electronic Equipment, Instruments & Components — 0.3%

  

 

Jabil Circuit, Inc., 8.25%, 3/15/18

       1,200        1,416,000   

NXP BV, 3.09%, 10/15/13 (b)

       664        663,170   
      

 

 

 
                       2,079,170   

Energy Equipment & Services — 4.0%

      

Atwood Oceanics, Inc., 6.50%, 2/01/20

       185        198,875   

Cie Générale de Géophysique-Veritas,
6.50%, 6/01/21

       1,150        1,213,250   

Energy Transfer Partners LP, 5.20%, 2/01/22

       5,000        5,739,550   

Ensco Plc, 4.70%, 3/15/21

       3,255        3,748,175   

FTS International Services LLC/FTS International Bonds, Inc., 8.13%, 11/15/18 (a)

       1,305        1,363,725   

Hornbeck Offshore Services, Inc.,
5.88%, 4/01/20

       465        473,138   

Key Energy Services, Inc., 6.75%, 3/01/21

       1,240        1,233,800   

MEG Energy Corp. (a):

      

6.50%, 3/15/21

       1,580        1,694,550   

6.38%, 1/30/23

       370        395,900   

Oil States International, Inc., 6.50%, 6/01/19

       835        887,188   

Peabody Energy Corp., 6.25%, 11/15/21 (c)

       2,575        2,658,687   

Precision Drilling Corp., 6.50%, 12/15/21

       700        740,250   

Seadrill Ltd., 5.63%, 9/15/17 (a)

       3,820        3,820,000   

Transocean, Inc.:

      

2.50%, 10/15/17

       600        607,668   

6.50%, 11/15/20

       1,860        2,259,762   

6.38%, 12/15/21

       2,300        2,798,718   

6.80%, 3/15/38

       1,625        2,019,813   
      

 

 

 
                       31,853,049   

Food & Staples Retailing — 0.4%

      

Wal-Mart Stores, Inc., 5.25%, 9/01/35 (c)

             2,650        3,315,007   

Food Products — 1.2%

      

Kraft Foods Group, Inc., 5.00%, 6/04/42 (a)

       2,750        3,211,645   

Mondelez International, Inc.:

      

6.50%, 8/11/17

       1,985        2,451,725   

6.13%, 8/23/18

       1,990        2,476,211   

Post Holdings, Inc., 7.38%, 2/15/22 (a)

       1,497        1,588,691   
      

 

 

 
                       9,728,272   

Gas Utilities — 0.2%

      

El Paso Natural Gas Co. LLC, 8.63%, 1/15/22

             1,150        1,573,220   
 

 

See Notes to Financial Statements.

 

                
48    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust IV (BTZ)

(Percentages shown are based on Net Assets)

 

Corporate Bonds          

Par  

(000)

    Value  
      

Health Care Equipment & Supplies — 0.7%

      

Fresenius US Finance II, Inc., 9.00%, 7/15/15 (a)

     USD        4,250      $ 4,876,875   

Teleflex, Inc., 6.88%, 6/01/19

       815        876,125   
      

 

 

 
                       5,753,000   

Health Care Providers & Services — 3.9%

      

Aviv Healthcare Properties LP, 7.75%, 2/15/19

       765        806,119   

CHS/Community Health Systems, Inc.,
5.13%, 8/15/18

       795        824,813   

HCA, Inc.:

      

8.50%, 4/15/19

       265        297,794   

6.50%, 2/15/20

       3,780        4,176,900   

7.25%, 9/15/20

       4,590        5,077,687   

4.75%, 5/01/23

       1,450        1,450,000   

INC Research LLC, 11.50%, 7/15/19 (a)

       1,155        1,160,775   

inVentiv Health, Inc., 10.00%, 8/15/18 (a)

       85        76,925   

Tenet Healthcare Corp.:

      

10.00%, 5/01/18

       2,175        2,479,500   

8.88%, 7/01/19

       1,825        2,039,438   

4.75%, 6/01/20 (a)

       1,559        1,545,359   

UnitedHealth Group, Inc., 6.88%, 2/15/38 (c)

       4,075        5,775,367   

Verisk Analytics, Inc., 4.13%, 9/12/22

       800        816,810   

WellPoint, Inc. (c):

      

3.30%, 1/15/23

       1,800        1,861,893   

2.75%, 10/15/42 (a)(d)

       2,325        2,423,812   
      

 

 

 
                       30,813,192   

Health Care Technology — 1.4%

      

Amgen, Inc.:

      

5.15%, 11/15/41 (c)

       6,280        7,235,916   

5.65%, 6/15/42

       70        85,955   

5.38%, 5/15/43 (c)

       3,425        4,112,072   
      

 

 

 
                       11,433,943   

Household Durables — 0.5%

      

Beazer Homes USA, Inc., 6.63%, 4/15/18 (a)

       1,140        1,219,800   

DR Horton, Inc., 4.38%, 9/15/22

       1,050        1,052,625   

Standard Pacific Corp., 8.38%, 1/15/21

       1,480        1,716,800   
      

 

 

 
                       3,989,225   

Independent Power Producers & Energy Traders — 1.9%

  

 

The AES Corp.:

      

9.75%, 4/15/16

       1,620        1,937,925   

7.38%, 7/01/21

       225        251,438   

Calpine Corp. (a):

      

7.25%, 10/15/17

       657        696,420   

7.50%, 2/15/21

       310        337,125   

Energy Future Intermediate Holding Co. LLC,
10.00%, 12/01/20

       3,135        3,424,987   

Exelon Generation Co. LLC, Series C,
4.25%, 6/15/22 (a)

       3,855        4,126,199   

GenOn REMA LLC, 9.68%, 7/02/26

       830        888,100   

Laredo Petroleum, Inc.:

      

9.50%, 2/15/19

       460        522,100   

7.38%, 5/01/22

       440        479,600   

NRG Energy, Inc., 6.63%, 3/15/23 (a)

       875        901,250   

QEP Resources, Inc.:

      

5.38%, 10/01/22

       944        991,200   

5.25%, 5/01/23

       490        510,825   
      

 

 

 
                       15,067,169   

Insurance — 5.1%

      

American International Group, Inc. (c):

      

3.80%, 3/22/17

       2,500        2,697,068   

8.25%, 8/15/18

       1,050        1,363,999   

6.40%, 12/15/20

       4,275        5,250,119   

Fairfax Financial Holdings Ltd.,
5.80%, 5/15/21 (a)

       1,875        1,921,046   
Corporate Bonds          

Par  

(000)

    Value  
      

Insurance (concluded)

      

Forethought Financial Group, Inc.,
8.63%, 4/15/21 (a)

     USD        1,625      $ 2,065,799   

Genworth Financial, Inc., 7.63%, 9/24/21 (c)

       1,615        1,698,644   

Manulife Financial Corp., 4.90%, 9/17/20 (c)

       3,650        4,055,325   

MPL 2 Acquisition Canco, Inc.,
9.88%, 8/15/18 (a)

       715        652,438   

Nippon Life Insurance Co.,
5.00%, 10/18/42 (a)(b)

       5,250        5,416,241   

Principal Financial Group, Inc.,
8.88%, 5/15/19 (c)

       1,145        1,521,386   

Prudential Financial, Inc.:

      

6.63%, 12/01/37 (c)

       4,075        5,234,525   

5.88%, 9/15/42 (b)

       4,000        4,210,000   

XL Group Ltd., 5.75%, 10/01/21 (c)

       4,105        4,862,910   
      

 

 

 
                       40,949,500   

IT Services — 1.2%

      

Ceridian Corp., 8.88%, 7/15/19 (a)

       2,905        3,079,300   

Epicor Software Corp., 8.63%, 5/01/19

       1,180        1,239,000   

First Data Corp.:

      

7.38%, 6/15/19 (a)(c)

       1,550        1,604,250   

6.75%, 11/01/20 (a)

       1,325        1,325,000   

8.25%, 1/15/21 (a)

       135        135,000   

12.63%, 1/15/21

       1,160        1,197,700   

SunGard Data Systems, Inc., 7.38%, 11/15/18

       1,210        1,302,263   
      

 

 

 
                       9,882,513   

Life Sciences Tools & Services — 1.5%

      

Bio-Rad Laboratories, Inc., 8.00%, 9/15/16

       5,480        5,986,900   

Life Technologies Corp., 6.00%, 3/01/20

       4,800        5,744,971   
      

 

 

 
                       11,731,871   

Machinery — 0.9%

      

Ingersoll-Rand Global Holding Co. Ltd.,
9.50%, 4/15/14 (c)

       4,075        4,563,197   

UR Merger Sub Corp. (a):

      

5.75%, 7/15/18

       389        418,175   

7.38%, 5/15/20

       995        1,077,088   

7.63%, 4/15/22

       909        995,355   
      

 

 

 
                       7,053,815   

Media — 7.3%

      

A&E Television Networks LLC, 3.25%, 8/22/19

       2,360        2,401,300   

AMC Networks, Inc., 7.75%, 7/15/21

       655        741,787   

CCH II LLC, 13.50%, 11/30/16

       1,573        1,690,783   

Comcast Corp., 6.30%, 11/15/17 (c)

       4,075        5,060,156   

Cox Communications, Inc., 8.38%, 3/01/39 (a)

       4,075        6,466,076   

CSC Holdings LLC, 8.63%, 2/15/19

       1,950        2,310,750   

DIRECTV Holdings LLC, 5.00%, 3/01/21 (c)

       4,150        4,719,098   

DISH DBS Corp., 7.00%, 10/01/13

       1,950        2,040,187   

Intelsat Jackson Holdings SA, 7.25%, 4/01/19

       320        343,200   

Intelsat Luxembourg SA:

      

11.25%, 2/04/17

       1,480        1,554,000   

11.50%, 2/04/17 (e)

       630        663,075   

The Interpublic Group of Cos., Inc.,
10.00%, 7/15/17

       1,975        2,179,906   

News America, Inc., 6.15%, 3/01/37 (c)

       4,850        6,089,068   

Time Warner Cable, Inc., 6.75%, 6/15/39

       4,675        6,240,026   

Time Warner, Inc., 7.70%, 5/01/32 (c)

       4,900        7,180,362   

Unitymedia Hessen GmbH & Co. KG (a):

      

8.13%, 12/01/17

       2,115        2,284,200   

7.50%, 3/15/19

       1,760        1,928,276   

Virgin Media Finance Plc, 4.88%, 2/15/22

       840        848,400   

Virgin Media Secured Finance Plc,
6.50%, 1/15/18

       3,175        3,444,875   
      

 

 

 
                       58,185,525   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    49


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust IV (BTZ)

(Percentages shown are based on Net Assets)

 

Corporate Bonds           Par  
(000)
    Value  
      

Metals & Mining — 2.3%

      

AngloGold Ashanti Holdings Plc, 5.13%, 8/01/22

    USD         2,450      $ 2,498,564   

ArcelorMittal, 4.25%, 3/01/16

       350        347,651   

Barrick Gold Corp., 2.90%, 5/30/16 (c)

       1,925        2,031,041   

FMG Resources August 2006 Property Ltd. (a):

      

6.38%, 2/01/16

       2,660        2,660,000   

6.88%, 4/01/22 (c)

       140        131,600   

Freeport-McMoRan Copper & Gold, Inc.,
3.55%, 3/01/22

       2,300        2,341,855   

Freeport-McMoRan Corp., 7.13%, 11/01/27

       3,500        4,438,063   

New Gold, Inc., 7.00%, 4/15/20 (a)

       215        227,900   

Novelis, Inc., 8.75%, 12/15/20

       1,610        1,775,025   

Steel Dynamics, Inc., 6.38%, 8/15/22 (a)

       700        731,500   

Teck Resources Ltd., 10.75%, 5/15/19

       1,000        1,204,144   
      

 

 

 
                       18,387,343   

Multi-Utilities — 1.1%

      

CenterPoint Energy, Inc.:

      

5.95%, 2/01/17

       3,600        4,204,580   

6.50%, 5/01/18

       3,950        4,808,837   
      

 

 

 
                       9,013,417   

Multiline Retail — 0.6%

      

Dufry Finance SCA, 5.50%, 10/15/20 (a)

       940        956,413   

JC Penney Co., Inc., 5.65%, 6/01/20 (c)

       2,610        2,424,038   

Walgreen Co., 3.10%, 9/15/22

       1,725        1,756,443   
      

 

 

 
                       5,136,894   

Oil, Gas & Consumable Fuels — 13.4%

      

Access Midstream Partners LP:

      

5.88%, 4/15/21

       980        1,019,200   

6.13%, 7/15/22

       785        830,138   

Anadarko Petroleum Corp., 6.38%, 9/15/17

       52        63,038   

Berry Petroleum Co., 6.38%, 9/15/22

       705        734,963   

BP Capital Markets Plc (c):

      

5.25%, 11/07/13

       2,100        2,201,585   

3.88%, 3/10/15

       3,085        3,313,361   

Carrizo Oil & Gas, Inc., 7.50%, 9/15/20

       800        816,000   

Chesapeake Energy Corp.:

      

7.25%, 12/15/18

       65        69,225   

6.63%, 8/15/20 (c)

       735        771,750   

6.13%, 2/15/21 (c)

       765        774,563   

Concho Resources, Inc., 5.50%, 10/01/22

       700        733,250   

CONSOL Energy, Inc., 6.38%, 3/01/21

       745        741,275   

Continental Resources, Inc., 5.00%, 9/15/22

       760        799,900   

Copano Energy LLC, 7.13%, 4/01/21

       835        878,837   

DCP Midstream LLC, 4.75%, 9/30/21 (a)

       533        567,360   

Denbury Resources, Inc., 8.25%, 2/15/20

       1,060        1,200,450   

El Paso Pipeline Partners Operating Co. LLC:

      

6.50%, 4/01/20

       2,525        3,091,714   

5.00%, 10/01/21

       900        1,019,023   

Enbridge Energy Partners LP, 9.88%, 3/01/19

       2,425        3,305,338   

Energy Transfer Partners LP, 6.50%, 2/01/42

       1,220        1,533,793   

Energy XXI Gulf Coast, Inc., 7.75%, 6/15/19

       1,700        1,844,500   

Enterprise Products Operating LLC,
6.65%, 4/15/18

       4,800        6,012,038   

EP Energy LLC/EP Energy Finance, Inc.,
6.88%, 5/01/19 (a)

       790        853,200   

Forest Oil Corp., 8.50%, 2/15/14

       1,028        1,110,240   

Kinder Morgan Energy Partners LP:

      

6.85%, 2/15/20

       4,800        6,131,290   

3.95%, 9/01/22

       2,500        2,732,022   

Kodiak Oil & Gas Corp., 8.13%, 12/01/19 (a)

       315        343,350   

Linn Energy LLC:

      

6.25%, 11/01/19 (a)

       1,865        1,865,000   

7.75%, 2/01/21

       750        800,625   

Marathon Petroleum Corp., 3.50%, 3/01/16

       2,250        2,410,789   
Corporate Bonds          

Par  

(000)

    Value  
      

Oil, Gas & Consumable Fuels (concluded)

      

MarkWest Energy Partners LP:

      

6.25%, 6/15/22

    USD         880      $ 952,600   

5.50%, 2/15/23

       275        288,750   

Newfield Exploration Co.:

      

6.88%, 2/01/20

       950        1,028,375   

5.63%, 7/01/24

       690        736,575   

Nexen, Inc., 6.40%, 5/15/37

       2,270        2,913,046   

Oasis Petroleum, Inc.:

      

7.25%, 2/01/19

       450        481,500   

6.50%, 11/01/21

       505        534,038   

Offshore Group Investments Ltd.,
11.50%, 8/01/15

       579        636,176   

ONEOK Partners LP, 8.63%, 3/01/19

       4,075        5,417,399   

PDC Energy, Inc., 7.75%, 10/15/22 (a)

       600        610,500   

Petrobras International Finance Co.:

      

3.88%, 1/27/16

       6,150        6,533,360   

5.38%, 1/27/21

       3,625        4,110,953   

Petrohawk Energy Corp., 10.50%, 8/01/14

       1,020        1,099,050   

Petroleum Geo-Services ASA,
7.38%, 12/15/18 (a)

       865        919,062   

Pioneer Natural Resources Co., 6.88%, 5/01/18

       820        1,008,368   

Plains Exploration & Production Co.,
6.88%, 2/15/23

       1,900        1,897,625   

Premier Oil Plc, 5.00%, 6/09/18

       5,650        5,791,250   

Range Resources Corp.:

      

6.75%, 8/01/20

       865        953,662   

5.75%, 6/01/21

       550        588,500   

Ruby Pipeline LLC, 6.00%, 4/01/22 (a)

       4,900        5,225,899   

Sabine Pass Liquified Natural Gas LP:

      

7.50%, 11/30/16

       2,915        3,184,637   

6.50%, 11/01/20 (a)

       935        953,700   

SandRidge Energy, Inc.:

      

7.50%, 3/15/21 (a)

       545        566,800   

7.50%, 3/15/21

       330        343,200   

8.13%, 10/15/22 (a)

       325        349,375   

7.50%, 2/15/23 (a)

       1,235        1,278,225   

SESI LLC, 7.13%, 12/15/21

       715        797,225   

SM Energy Co.:

      

6.63%, 2/15/19

       365        382,338   

6.50%, 11/15/21

       570        599,925   

6.50%, 1/01/23

       360        376,200   

Targa Resources Partners LP, 6.88%, 2/01/21

       625        678,125   

Tennessee Gas Pipeline Co. LLC, 8.00%, 2/01/16

       1,376        1,652,107   

Tesoro Corp., 5.38%, 10/01/22

       1,005        1,047,712   

Western Gas Partners LP, 5.38%, 6/01/21

       2,525        2,909,280   

The Williams Cos., Inc., 8.75%, 3/15/32

       1,175        1,683,069   
      

 

 

 
                       107,096,423   

Paper & Forest Products — 2.3%

      

Boise Paper Holdings LLC:

      

9.00%, 11/01/17

       205        225,500   

8.00%, 4/01/20

       795        870,525   

International Paper Co.:

      

7.50%, 8/15/21 (c)

       3,950        5,245,604   

8.70%, 6/15/38

       3,100        4,755,946   

7.30%, 11/15/39

       4,075        5,660,041   

Longview Fibre Paper & Packaging, Inc.,
8.00%, 6/01/16 (a)

       545        568,162   

PH Glatfelter Co., 5.38%, 10/15/20 (a)

       770        780,587   
      

 

 

 
                       18,106,365   

Pharmaceuticals — 2.2%

      

Merck & Co., Inc., 6.50%, 12/01/33 (c)

       2,885        4,287,961   

Pfizer, Inc., 7.20%, 3/15/39 (c)

       2,130        3,406,125   

Roche Holdings, Inc., 7.00%, 3/01/39 (a)(c)

       3,020        4,677,476   
 

 

See Notes to Financial Statements.

 

                
50    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust IV (BTZ)

(Percentages shown are based on Net Assets)

 

Corporate Bonds          

Par  

(000)

    Value  
      

Pharmaceuticals (concluded)

      

Valeant Pharmaceuticals International (a):

      

6.50%, 7/15/16

     USD        214      $ 225,235   

6.38%, 10/15/20

       1,150        1,210,375   

Watson Pharmaceuticals, Inc., 3.25%, 10/01/22

       3,660        3,771,590   
      

 

 

 
                       17,578,762   

Real Estate Investment Trusts (REITs) — 2.5%

      

AvalonBay Communities, Inc.,
6.10%, 3/15/20 (c)

       4,075        5,038,314   

Developers Diversified Realty Corp.:

      

4.75%, 4/15/18

       1,025        1,150,297   

7.88%, 9/01/20

       1,325        1,723,227   

ERP Operating LP, 5.75%, 6/15/17 (c)

       4,080        4,822,736   

HCP, Inc., 5.38%, 2/01/21

       1,675        1,938,769   

UDR, Inc., 4.25%, 6/01/18

       2,675        2,966,251   

Ventas Realty LP/Ventas Capital Corp.,
4.75%, 6/01/21

       1,880        2,093,489   
      

 

 

 
                       19,733,083   

Real Estate Management & Development — 0.5%

  

   

Lennar Corp., 4.75%, 11/15/22 (a)

       885        876,150   

Realogy Corp. (a)(c):

      

7.88%, 2/15/19

       815        876,125   

7.63%, 1/15/20

       1,025        1,150,562   

Shea Homes LP, 8.63%, 5/15/19

       805        895,563   
      

 

 

 
                       3,798,400   

Road & Rail — 1.4%

      

The Hertz Corp., 6.75%, 4/15/19

       564        598,545   

Norfolk Southern Corp., 6.00%, 3/15/2105 (c)

       8,500        10,632,505   
      

 

 

 
                       11,231,050   

Semiconductors & Semiconductor Equipment — 0.3%

  

 

KLA-Tencor Corp., 6.90%, 5/01/18

             2,208        2,661,265   

Software — 0.4%

      

Infor US, Inc., 9.38%, 4/01/19

       870        961,350   

Nuance Communications, Inc.,
5.38%, 8/15/20 (a)

       1,105        1,127,100   

Symantec Corp., 2.75%, 6/15/17

       1,000        1,038,252   
      

 

 

 
                       3,126,702   

Specialty Retail — 1.4%

      

AutoNation, Inc., 6.75%, 4/15/18

       2,775        3,114,937   

Limited Brands, Inc., 7.00%, 5/01/20

       1,370        1,563,513   

QVC, Inc. (a):

      

7.38%, 10/15/20

       175        193,941   

5.13%, 7/02/22

       2,470        2,582,607   

Sally Holdings LLC, 6.88%, 11/15/19

       990        1,097,663   

VF Corp., 5.95%, 11/01/17 (c)

       2,450        2,911,801   
      

 

 

 
                       11,464,462   

Tobacco — 2.9%

      

Altria Group, Inc., 10.20%, 2/06/39

       6,607        11,606,900   

BAT International Finance Plc,
3.25%, 6/07/22 (a)(c)

       2,325        2,415,194   

Lorillard Tobacco Co., 3.50%, 8/04/16

       4,150        4,409,894   

Philip Morris International, Inc.,
2.50%, 5/16/16 (c)

       4,200        4,432,251   
      

 

 

 
                       22,864,239   

Trading Companies & Distributors — 0.3%

      

Doric Nimrod Air Finance Alpha Ltd. Pass Through Trust, Series 2012-1, Class A,
5.13%, 11/30/24 (a)

             2,305        2,397,200   
Corporate Bonds          

Par  

(000)

    Value  
      

Transportation Infrastructure — 1.0%

      

Penske Truck Leasing Co. LP/PTL Finance Corp. (a):

      

3.75%, 5/11/17

     USD        5,150      $ 5,258,423   

4.88%, 7/11/22

       2,700        2,760,296   
      

 

 

 
                       8,018,719   

Wireless Telecommunication Services — 5.3%

  

   

America Movil SAB de CV, 2.38%, 9/08/16 (c)

       7,455        7,792,883   

American Tower Corp.:

      

4.50%, 1/15/18

       3,200        3,543,565   

5.90%, 11/01/21

       2,180        2,611,014   

Cricket Communications, Inc., 7.75%, 5/15/16

       780        824,850   

Crown Castle International Corp.:

      

9.00%, 1/15/15

       1,185        1,267,950   

5.25%, 1/15/23 (a)

       920        952,200   

Crown Castle Towers LLC (a):

      

5.50%, 1/15/37

       1,975        2,255,478   

4.17%, 8/15/37

       2,000        2,196,526   

6.11%, 1/15/40

       2,330        2,834,836   

Digicel Group Ltd., 8.25%, 9/30/20 (a)

       1,585        1,707,837   

SBA Tower Trust, 5.10%, 4/15/42 (a)

       6,250        6,942,494   

Sprint Capital Corp., 6.88%, 11/15/28

       790        807,775   

Sprint Nextel Corp. (a):

      

9.00%, 11/15/18

       2,665        3,291,275   

7.00%, 3/01/20

       4,390        5,092,400   
      

 

 

 
                       42,121,083   
Total Corporate Bonds — 116.2%                      925,844,591   
      
                          
Floating Rate Loan Interests — 0.0% (b)                         

Oil, Gas & Consumable Fuels — 0.0%

      

Chesapeake Energy Corp., Unsecured Term Loan, 8.50%, 12/01/17

             291        291,395   
      
                          
Preferred Securities                      
Capital Trusts                      

Capital Markets — 3.0%

      

RBS Capital Trust II, 6.43% (b)(f)

       2,500        2,100,000   

State Street Capital Trust IV, 1.39%, 6/01/67 (b)

       28,195        21,621,900   
      

 

 

 
                       23,721,900   

Commercial Banks — 3.1%

      

Barclays Bank Plc, 7.43% (a)(b)(f)

       1,100        1,144,000   

BNP Paribas SA, 7.20% (a)(b)(c)(f)

       2,500        2,462,500   

Credit Agricole SA, 8.38% (a)(b)(c)(f)

       2,450        2,492,875   

HSBC Capital Funding LP/Jersey Channel Islands, 10.18% (a)(c)(f)

       7,000        9,590,000   

National City Preferred Capital Trust I,
12.00% (b)(f)

       3,713        3,755,588   

Standard Chartered Plc, 7.01% (a)(f)

       5,000        5,250,000   
      

 

 

 
                       24,694,963   

Consumer Finance — 0.1%

      

Capital One Capital V, 10.25%, 8/15/39

             1,275        1,313,250   

Diversified Financial Services — 3.3%

      

General Electric Capital Corp., 6.25% (b)(c)(f)

       4,500        4,905,135   

JPMorgan Chase Capital XXI, Series U,
1.26%, 1/15/87

       12,875        9,760,653   

JPMorgan Chase Capital XXIII,
1.43%, 5/15/77 (b)

       16,095        11,892,306   
      

 

 

 
                       26,558,094   

Electric Utilities — 0.5%

      

PPL Capital Funding, Inc., 6.70%, 3/30/67 (b)

             3,900        4,109,625   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    51


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust IV (BTZ)

(Percentages shown are based on Net Assets)

 

Capital Trusts          

Par  

(000)

    Value  
      

Insurance — 8.4%

      

ACE Capital Trust II, 9.70%, 4/01/30 (c)

     USD        4,000      $ 5,846,404   

The Allstate Corp., 6.50%, 5/15/67 (b)

       4,000        4,300,000   

American General Capital II, 8.50%, 7/01/30

       300        367,500   

American International Group, Inc.,
8.18%, 5/15/68 (b)

       1,300        1,621,750   

Aon Corp., 8.21%, 1/01/27

       4,000        5,015,456   

AXA SA, 6.46% (a)(f)

       6,000        5,655,000   

The Chubb Corp., 6.38%, 3/29/67 (b)

       4,000        4,340,000   

Liberty Mutual Group, Inc.,
10.75%, 6/15/88 (a)(b)

       4,000        5,960,000   

Lincoln National Corp., 7.00%, 5/17/66 (b)

       4,255        4,361,375   

MetLife, Inc., 6.40%, 12/15/66

       4,550        4,945,973   

Mitsui Sumitomo Insurance Co. Ltd.,
7.00%, 3/15/72 (a)(b)

       2,360        2,692,972   

Northwestern Mutual Life Insurance Co.,
6.06%, 3/30/40 (a)(c)

       5,500        7,229,843   

Reinsurance Group of America, Inc.,
6.75%, 12/15/65 (b)(c)

       7,000        7,082,243   

Swiss Re Capital I LP, 6.85% (a)(b)(f)

       3,000        3,129,681   

ZFS Finance USA Trust II, 6.45%, 12/15/65 (a)(b)

       3,850        4,138,750   
      

 

 

 
                       66,686,947   

Oil, Gas & Consumable Fuels — 1.2%

      

Enterprise Products Operating LLC, Series A, 8.38%, 8/01/66 (b)

       4,500        5,130,000   

TransCanada PipeLines Ltd., 6.35%, 5/15/67 (b)

       4,000        4,298,524   
      

 

 

 
                       9,428,524   
Total Capital Trusts — 19.6%                      156,513,303   
      
                          
Preferred Stocks           Shares         

Auto Components — 0.1%

      

Dana Holding Corp., 4.00% (a)(d)

             7,000        784,875   

Capital Markets — 0.1%

      

RBS Capital Funding Trust V, 5.90%

             60,000        1,103,400   

Diversified Financial Services — 0.4%

      

Ally Financial, Inc., 7.00% (a)

             3,640        3,507,595   

Real Estate Investment Trusts (REITs) — 1.1%

  

 

Sovereign Real Estate Investment Trust,
12.00% (a)

             7,000        8,406,790   

Thrifts & Mortgage Finance — 0.0%

      

Fannie Mae, Series S, 8.25% (b)(g)

       23,000        39,100   

Freddie Mac, Series Z, 8.38% (b)(g)

       23,000        40,020   
      

 

 

 
                       79,120   

Wireless Telecommunication Services — 1.6%

  

 

Centaur Funding Corp., 9.08% (a)

             10,000        12,684,375   
Total Preferred Stocks — 3.3%                      26,566,155   
      
                          
Trust Preferreds                      

Diversified Financial Services — 0.4%

      

GMAC Capital Trust I, Series 2, 8.13%, 2/15/40

             118,500        3,046,775   

Machinery — 0.4%

      

Stanley Black & Decker, Inc., 5.75%, 7/25/52

             113,000        2,921,050   
Total Trust Preferreds — 0.8%                      5,967,825   
Total Preferred Securities — 23.7%                      189,047,283   
Taxable Municipal Bonds          

Par  

(000)

    Value  
      

City of Chicago Illinois, Refunding RB, O’Hare International Airport, Build America Bonds, 6.85%, 1/01/38

     USD        5,000      $ 5,810,750   

Metropolitan Transportation Authority, RB, Build America Bonds, 6.55%, 11/15/31

             4,075        5,130,995   
Total Taxable Municipal Bonds — 1.4%                      10,941,745   
      
                          
US Government Sponsored Agency Securities — 0.3%           

Agency Obligations — 0.3%

      

Fannie Mae, 1.93%, 10/09/19 (c)(h)

             2,765        2,420,075   
      
                          
US Treasury Obligations                      

US Treasury Bonds (c):

      

3.75%, 8/15/41

       945        1,125,584   

3.13%, 11/15/41

       935        992,269   

3.00%, 5/15/42

       8,545        8,826,720   

US Treasury Notes (c):

      

0.88%, 12/31/16

       6,377        6,454,219   

0.88%, 1/31/17

       6,000        6,070,314   

0.63%, 5/31/17

       1,490        1,488,720   

1.63%, 8/15/22

             2,440        2,426,656   
Total US Treasury Obligations — 3.5%                      27,384,482   
Total Long-Term Investments
(Cost — $1,079,411,083) — 146.2%
                     1,164,841,229   
      
                          
Short-Term Securities           Shares         

BlackRock Liquidity Funds, TempFund, Institutional Class, 0.17% (i)(j)

             1,652,656        1,652,656   
Total Short-Term Securities
(Cost — $1,652,656) — 0.2%
                     1,652,656   
      
                          
Options Purchased           Contracts         

Exchange-Traded Put Options — 0.1%

      

Euro-Dollar 3-Year Mid-Curve Options, Strike Price USD 98.88, Expires 3/15/13

             1,583        652,988   
             Notional
  Amount 
 (000)  
        

Over-the-Counter Interest Rate Call Swaptions — 0.0%

  

 

Receive a fixed rate of 2.61% and pay a floating rate based on 3-month LIBOR, expires 1/13/14, Broker Credit Suisse Group AG

     USD        1,900        123,011   

Over-the-Counter Interest Rate Put Swaptions — 0.0%

  

 

Pay a fixed rate of 0.71% and receive a floating rate based on 3-month LIBOR, Expires 6/28/13, Broker Deutsche Bank AG

       61,000        51,112   

Pay a fixed rate of 2.61% and receive a floating rate based on 3-month LIBOR, Expires 1/13/14, Broker Credit Suisse Group AG

       1,900        31,912   
 

 

See Notes to Financial Statements.

 

                
52    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Schedule of Investments (continued)

  

BlackRock Credit Allocation Income Trust IV (BTZ)

(Percentages shown are based on Net Assets)

 

Options Purchased           Notional
Amount 
 (000)  
    Value  
      

Over-the-Counter Interest Rate Put Swaptions (concluded)

  

 

Pay a fixed rate of 4.50% and receive a floating rate based on 3-month LIBOR, Expires 2/02/17, Broker Deutsche Bank AG

    USD         8,000      $ 184,229   
      

 

 

 
                       267,253   
Total Options Purchased
(Cost — $1,379,215) — 0.1%
                     1,043,252   
Total Investments Before Options Written
(Cost — $1,082,442,954) — 146.5%
                     1,167,537,137   
      
                          
Options Written                      

Over-the-Counter Interest Rate Call Swaptions — (0.5)%

  

 

Pay a fixed rate of 4.75% and receive a floating rate based on 3-month LIBOR, Expires 3/24/14, Broker Citigroup, Inc.

       17,000        (4,076,887

Pay a fixed rate of 2.33% and receive a floating rate based on 3-month LIBOR, Expires 10/02/14, Broker Credit Suisse Group AG

       6,500        (279,394
      

 

 

 
                       (4,356,281

Over-the-Counter Interest Rate Put Swaptions — (0.1)%

  

 

Receive a fixed rate of 4.75% and pay a floating rate based on 3-month LIBOR, Expires 3/24/14, Broker Citigroup, Inc.

       17,000        (30,137

Receive a fixed rate of 2.33% and pay a floating rate based on 3-month LIBOR, Expires 10/02/14, Broker Credit Suisse Group AG

       6,500        (262,596

Receive a fixed rate of 6.00% and pay a floating rate based on 3-month LIBOR, Expires 2/02/17, Broker Deutsche Bank AG

       16,000        (165,267
      

 

 

 
                       (458,000

Total Options Written

(Premiums Received — $2,861,625) — (0.6)%

  

  

    (4,814,281
Total Investments, Net of Options Written — 145.9%        1,162,722,856   

Liabilities in Excess of Other Assets — (45.9)%

  

    (365,887,137
      

 

 

 
Net Assets — 100.0%      $ 796,835,719   
      

 

 

 

 

   

 

 

 
(a)   Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

 

(b)   Variable rate security. Rate shown is as of report date.

 

(c)   All or a portion of security has been pledged as collateral in connection with open reverse repurchase agreements.

 

(d)   Convertible security.

 

(e)   Represents a payment-in-kind security which may pay interest/dividends in additional par/shares.

 

(f)   Security is perpetual in nature and has no stated maturity date.

 

(g)   Non-income producing security.

 

(h)   Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.

 

(i)   Investments in issuers considered to be an affiliate of the Fund during the year ended October 31, 2012, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate   Shares
Held at
October 31,
2011
    Net
Activity
    Shares
Held at
October 31,
2012
    Income  

BlackRock Liquidity Funds, TempFund, Institutional Class

    3,823,108        (2,170,452     1,652,656      $ 6,626   

 

(j)   Represents the current yield as of report date.

 

Ÿ  

For Fund compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by Fund management. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

 
Ÿ  

Reverse repurchase agreements outstanding as of October 31, 2012 were as follows:

 

Counterparty    Interest
Rate
       Trade
Date
       Maturity
Date
       Face Value        Face Value
Including
Accrued
Interest
 

UBS Securities LLC

     0.32        3/13/12           Open         $ 3,910,500         $ 3,922,502   

Barclays Capital, Inc.

     0.35        4/03/12           Open             23,358,163             23,406,308   

Credit Suisse Securities (USA) LLC

     0.35        4/18/12           Open           1,515,469           1,518,371   

Credit Suisse Securities (USA) LLC

     0.38        4/18/12           Open           2,574,227           2,579,580   

UBS Securities LLC

     0.34        4/23/12           Open           4,054,350           4,061,702   

Credit Suisse Securities (USA) LLC

     0.35        4/23/12           Open           1,525,700           1,528,533   

BNP Paribas Securities Corp.

     0.15        4/24/12           Open           2,198,175           2,199,924   

BNP Paribas Securities Corp.

     0.37        4/24/12           Open           1,076,119           1,078,231   

Deutsche Bank Securities, Inc.

     0.12        4/24/12           Open           6,424,828           6,428,918   

UBS Securities LLC

     0.34        4/24/12           Open           2,712,250           2,717,143   

UBS Securities LLC

     0.35        4/25/12           Open           22,754,813           22,796,845   

UBS Securities LLC

     0.38        4/25/12           Open           23,860,650           23,908,504   

Bank of America Merrill Lynch

     0.21        5/01/12           Open           6,045,000           6,051,488   

UBS Securities LLC

     0.00        5/07/12           Open           621,563           621,563   

Barclays Capital, Inc.

     0.35        5/08/12           Open           2,119,687           2,123,315   

UBS Securities LLC

     0.25        5/10/12           Open           1,396,550           1,398,238   

UBS Securities LLC

     0.38        5/10/12           Open           5,766,499           5,777,091   

UBS Securities LLC

     0.34        5/11/12           Open           3,604,375           3,610,298   

Credit Suisse Securities (USA) LLC

     0.35        5/14/12           Open           2,845,500           2,850,231   

UBS Securities LLC

     0.35        5/14/12           Open           14,475,000           14,499,065   

UBS Securities LLC

     0.37        5/14/12           Open           14,110,438           14,135,236   

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    53


Table of Contents
Schedule of Investments (continued)    BlackRock Credit Allocation Income Trust IV (BTZ)

 

Reverse repurchase agreements outstanding as of October 31, 2012 were as follows (concluded):

 

Counterparty    Interest
Rate
       Trade
Date
       Maturity
Date
       Face Value        Face Value
Including
Accrued
Interest
 

UBS Securities LLC

     0.38        5/14/12           Open         $ 23,291,925         $ 23,333,967   

Credit Suisse Securities (USA) LLC

     0.35        5/15/12           Open           3,335,094           3,340,606   

Credit Suisse Securities (USA) LLC

     0.35        5/23/12           Open           7,212,713           7,224,073   

Deutsche Bank Securities, Inc.

     0.19        5/29/12           Open           988,762           989,577   

UBS Securities LLC

     0.34        5/31/12           Open           5,533,125           5,541,173   

Bank of America Merrill Lynch

     0.20        6/12/12           Open           1,484,412           1,485,584   

Credit Suisse Securities (USA) LLC

     0.35        6/20/12           Open           13,760,262           13,778,189   

Credit Suisse Securities (USA) LLC

     0.38        6/20/12           Open           17,310,000           17,334,484   

UBS Securities LLC

     0.35        6/29/12           Open           2,670,187           2,673,433   

Credit Suisse Securities (USA) LLC

     0.35        7/13/12           Open           10,490,000           10,501,320   

UBS Securities LLC

     0.34        7/16/12           Open           5,572,563           5,578,247   

Barclays Capital, Inc.

     0.35        7/25/12           Open           11,814,497           11,825,868   

Deutsche Bank Securities, Inc.

     0.10        7/25/12           Open           2,016,225           2,016,779   

Credit Suisse Securities (USA) LLC

     0.30        7/25/12           Open           9,960,813           9,968,947   

Credit Suisse Securities (USA) LLC

     0.35        7/25/12           Open           5,999,025           6,004,741   

Credit Suisse Securities (USA) LLC

     0.35        8/10/12           Open           1,579,875           1,581,150   

Barclays Capital, Inc.

     0.35        8/13/12           Open           7,654,899           7,660,854   

Credit Suisse Securities (USA) LLC

     0.35        8/20/12           Open           1,282,187           1,283,098   

Barclays Capital, Inc.

     0.35        8/21/12           Open           4,421,375           4,424,470   

Credit Suisse Securities (USA) LLC

     0.35        8/23/12           Open           1,418,369           1,419,334   

Credit Suisse Securities (USA) LLC

     0.35        8/30/12           Open           3,287,125           3,289,138   

Barclays Capital, Inc.

     (0.25 )%         9/06/12           Open           112,000           111,956   

Credit Suisse Securities (USA) LLC

     (0.25 )%         9/06/12           Open           644,044           643,793   

Deutsche Bank Securities, Inc.

     (1.00 )%         9/19/12           Open           1,044,925           1,043,706   

UBS Securities LLC

     0.34        9/24/12           Open           4,556,250           4,557,885   

UBS Securities LLC

     0.36        9/24/12           Open           3,863,700           3,865,168   

Barclays Capital, Inc.

     0.35        9/28/12           Open           909,000           909,301   

Credit Suisse Securities (USA) LLC

     0.35        9/28/12           Open           6,175,094           6,177,135   

Credit Suisse Securities (USA) LLC

     0.35        10/02/12           Open           5,300,000           5,301,546   

UBS Securities LLC

     0.10        10/02/12           Open           3,356,250           3,356,520   

Citigroup Global Markets, Inc.

     (0.75 )%         10/04/12           Open           1,520,119           1,519,264   

Barclays Capital, Inc.

     0.40        10/10/12           Open           2,501,000           2,501,611   

UBS Securities LLC

     (0.50 )%         10/16/12           Open           2,081,375           2,080,927   

Credit Suisse Securities (USA) LLC

     0.35        10/17/12           Open           6,159,688           6,160,586   

BNP Paribas Securities Corp.

     0.35        10/18/12           Open           3,188,500           3,188,934   

BNP Paribas Securities Corp.

     0.37        10/18/12           Open           15,335,000           15,337,206   

Deutsche Bank Securities, Inc.

     (0.63 )%         10/24/12           12/31/22           752,856           752,752   

Barclays Capital, Inc.

     0.35        10/24/12           Open           4,981,800           4,982,187   

BNP Paribas Securities Corp.

     0.26        10/25/12           Open           8,705,219           8,705,659   

Deutsche Bank Securities, Inc.

     0.14        10/25/12           Open           2,400,350           2,400,415   

Credit Suisse Securities (USA) LLC

     0.35        10/29/12           Open           7,421,950           7,422,166   

Credit Suisse Securities (USA) LLC

     0.35        10/30/12           Open           2,188,406           2,188,428   

Deutsche Bank Securities, Inc.

     0.00        10/31/12           Open           2,484,875           2,484,875   

Total

                  $ 373,715,690         $ 374,160,138   
                 

 

 

      

 

 

 

 

Ÿ  

Financial futures contracts purchased as of October 31, 2012 were as follows:

 

Contracts    Issue    Exchange    Expiration     

Notional

Value

       Unrealized
Appreciation
(Depreciation)
 

    306

   2-Year US Treasury Note    Chicago Board of Trade    December 2012        USD        67,420,406         $ (46,606)   

      64

   30-Year US Treasury Bond    Chicago Board of Trade    December 2012        USD        9,556,000           (46,622)   

    137

   90-Day Euro-Dollar    Chicago Mercantile    March 2016        USD        33,878,387           28,322    

Total

                     $ (64,906)   
                    

 

 

 

 

Ÿ  

Financial futures contracts sold as of October 31, 2012 were as follows:

 

Contracts    Issue    Exchange    Expiration     

Notional

Value

       Unrealized
Appreciation
(Depreciation)
 

    163

   5-Year US Treasury Note    Chicago Board of Trade    December 2012        USD        20,252,750         $ (20,684)   

    926

   10-Year US Treasury Note    Chicago Board of Trade    December 2012        USD        123,186,938           (347,810)   

      33

   Ultra Long US Treasury Bond    Chicago Board of Trade    December 2012        USD        5,448,094           66,195    

Total

                     $ (302,299)   
                    

 

 

 

 

 

See Notes to Financial Statements.      
                
54    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Schedule of Investments (continued)    BlackRock Credit Allocation Income Trust IV (BTZ)

 

 

Ÿ  

Credit default swaps on single-name issues—buy protection outstanding as of October 31, 2012 were as follows:

 

Issuer    Pay
Fixed
Rate
   Counterparty    Expiration
Date
     Notional
Amount
(000)
       Unrealized
Appreciation
(Depreciation)
 

Southwest Airlines Co.

   1.00%    Goldman Sachs Group, Inc.    12/20/16        USD        1,965         $ (56,989)   

Southwest Airlines Co.

   1.00%    Royal Bank of Scotland Group Plc    12/20/16        USD        1,965           (63,797)   

Cigna Corp.

   1.00%    Goldman Sachs Group, Inc.    9/20/17        USD        4,500           (55,369)   

General Dynamic Corp.

   1.00%    Credit Suisse Group AG    9/20/17        USD        2,740           (2,906)   

Hewlett-Packard Co.

   1.00%    Citigroup, Inc.    9/20/17        USD        1,475           26,171    

Hewlett-Packard Co.

   1.00%    Credit Suisse Group AG    9/20/17        USD        1,335           72,393    

Hewlett-Packard Co.

   1.00%    JPMorgan Chase & Co.    9/20/17        USD        1,000           48,956    

Humana, Inc.

   1.00%    Goldman Sachs Group, Inc.    9/20/17        USD        4,500           (13,521)   

Lockheed Martin Corp.

   1.00%    Credit Suisse Group AG    9/20/17        USD        2,740           (26,945)   

Northrop Grumman Corp.

   1.00%    Credit Suisse Group AG    9/20/17        USD        2,315           (12,443)   

Raytheon Co.

   1.00%    Credit Suisse Group AG    9/20/17        USD        2,315           (7,983)   

Viacom, Inc.

   1.00%    Credit Suisse Group AG    9/20/17        USD        5,975           (53,171)   

Total

  

     $ (145,604)   
                    

 

 

 

 

Ÿ  

Credit default swaps on single-name issues — sold protection outstanding as of October 31, 2012 were as follows:

 

Issuer    Receive
Fixed
Rate
   Counterparty   Expiration
Date
     Issuer
Credit
Rating1
     Notional
Amount
(000)2
       Unrealized
Appreciation
 

Anadarko Petroleum Corp.

   1.00%    Credit Suisse Group AG   6/20/17      BBB-        USD        1,685         $ 45,798   

Comcast Corp.

   1.00%    Credit Suisse Group AG   9/20/17      BBB+        USD        5,975           69,501   

United Health Group, Inc.

   1.00%    Goldman Sachs Group, Inc.   9/20/17      A        USD        4,500           72,090   

WellPoint, Inc.

   1.00%    Goldman Sachs Group, Inc.   9/20/17      A-        USD        4,500           25,418   

MetLife, Inc.

   1.00%    Deutsche Bank AG   3/20/18      A-        USD        1,500           127   

Total

                         $ 212,934   
                        

 

 

 
1   

Using S&P’s rating.

 

2   

The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

 

Ÿ  

Interest rate swaps outstanding as of October 31, 2012 were as follows:

 

Fixed
Rate
   Floating
Rate
   Counterparty/
Exchange
   Expiration
Date
     Notional
Amount
(000)
       Unrealized
Appreciation
(Depreciation)
 

0.44%3

   3-month LIBOR    Chicago Mercantile    8/29/14        USD        27,000         $ (28,241)   

2.06%4

   3-month LIBOR    Credit Suisse Group AG    5/08/22        USD        11,300           403,726    

1.76%4

   3-month LIBOR    Citigroup, Inc.    6/25/22        USD        10,500           75,795    

2.48%3

   3-month LIBOR    Credit Suisse Group AG    7/05/42        USD        3,700           87,588    

2.26%3

   3-month LIBOR    Goldman Sachs Group, Inc.    7/26/42        USD        1,900           137,125    

2.46%3

   3-month LIBOR    Deutsche Bank AG    8/07/42        USD        8,400           231,288    

2.52%3

   3-month LIBOR    Citigroup, Inc.    8/10/42        USD        4,200           65,396    

2.71%3

   3-month LIBOR    Credit Suisse Group AG    8/21/42        USD        1,100           (26,464)   

Total

  

     $ 946,213    
                    

 

 

 
3   

Fund pays the fixed rate and receives the floating rate.

 

4   

Fund pays the floating rate and receives the fixed rate.

 

Ÿ  

Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

 

Ÿ  

Level 1 — unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the Fund has the ability to access

 

Ÿ  

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)

 

Ÿ  

Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    OCTOBER 31, 2012    55


Table of Contents
Schedule of Investments (concluded)    BlackRock Credit Allocation Income Trust IV (BTZ)

 

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of October 31, 2012:

 

     Level 1     Level 2     Level 3     Total  

Assets:

       
Investments:   

Long-Term Investments:

  

Asset-Backed Securities

         $ 4,929,658      $ 3,982,000      $ 8,911,658   

Corporate Bonds

           917,652,041        8,192,550        925,844,591   

Floating Rate Loan Interests

           291,395               291,395   

Preferred Securities

  $ 4,229,295        184,817,988               189,047,283   

Taxable Municipal Bonds

           10,941,745               10,941,745   

US Govern-
ment Spon-
sored Agency Securities

           2,420,075               2,420,075   

US Treasury Obligations

           27,384,482               27,384,482   

Short-Term Securities

    1,652,656                      1,652,656   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 5,881,951      $ 1,148,437,384      $ 12,174,550      $ 1,166,493,885   
 

 

 

   

 

 

   

 

 

   

 

 

 
       
     Level 1     Level 2     Level 3     Total  
Derivative Financial Instruments1   

Assets:

       

Credit contracts

         $ 360,454             $ 360,454    

Interest rate contracts

  $ 747,505        1,391,182               2,138,687    

Liabilities:

  

Credit contracts

           (293,124)               (293,124)   

Interest rate contracts

    (461,722)        (4,868,986)               (5,330,708)   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 285,783      $ (3,410,474)             $ (3,124,691)   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

1    Derivative financial instruments are swaps, financial futures contracts and options. Swaps, financial futures contracts and foreign currency exchange contracts are valued at the unrealized appreciation/depreciation on the instrument and options are shown at value.

Certain of the Fund’s assets and liabilities are held at carrying amount or face value, which approximates fair value for financial statement purposes. As of October 31, 2012, such assets and liabilities are categorized within the disclosure hierarchy as follows:

 

     Level 1     Level 2     Level 3   Total  
       

Assets:

       

Cash

  $ 57,836               $ 57,836    

Foreign currency at value

    44                 44    

Cash pledged as collateral for financial futures contracts

    766,940                 766,940    

Cash pledged as collateral for swaps

    3,640,000                 3,640,000    

Liabilities:

       

Reverse repurchase agreements

         $ (373,715,690)          (373,715,690)   

Cash received as collateral for reverse repurchase agreements

           (11,059,900)          (11,059,900)   

Cash received as collateral for swaps

           (500,000)          (500,000)   
 

 

 

   

 

 

   

 

 

 

 

 

Total

  $ 4,464,820      $ (385,275,590)        $ (380,810,770)   
 

 

 

   

 

 

   

 

 

 

 

 

There were no transfers between Level 1 and Level 2 during the year ended October 31, 2012.

Certain of the Fund’s investments and derivative financial instruments are categorized as Level 3 and were valued utilizing transaction prices or third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in the unobservable inputs could result in a significantly lower or higher value in such Level 3 investments and derivative financial instruments.

A reconciliation of Level 3 investments and derivative financial instruments is presented when the Fund had a significant amount of Level 3 investments and derivative financial instruments at the beginning and/or end of the year in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

 

     Asset-Backed
Securities
    Corporate
Bonds
    Total  

Assets:

     

Opening balance, as of October 31, 2011

  $ 3,410,000      $ 5,876,000      $ 9,286,000   

Transfers into Level 32

                    

Transfers out of Level 32

                    

Accrued discounts/premiums

    62,713               62,713   

Net realized gain (loss)

                    

Net change in unrealized appreciation/depreciation3

    509,287        (43,450)        465,837   

Purchases

           2,360,000        2,360,000   

Sales

                    
 

 

 

 

Closing Balance, as of
October 31, 2012

  $ 3,982,000      $ 8,192,550      $ 12,174,550   
 

 

 

 

 

2   Transfers into and transfers out of Level 3 represent the values as of the beginning of the reporting period.

 

3   Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/depreciation on investments still held as of October 31, 2012 was $465,837.

The following table is a reconciliation of Level 3 derivative financial instruments for which significant unobservable inputs were used in determining fair value:

 

      Credit
Contracts
 

Assets:

  

Opening balance, as of October 31, 2011

   $           8,182    

Transfers into Level 32

     —    

Transfers out of Level 32

     —    

Accrued discounts/premiums

     —    

Net realized gain (loss)

     —    

Net change in unrealized appreciation/depreciation4

     (8,182)   

Purchases

     —    

Issues5

     —    

Sales

     —    

Settlements6

     —    
  

 

 

 

Closing Balance, as of October 31, 2012

     —    
  

 

 

 

 

4   Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/depreciation on derivative financial instruments still held as of October 31, 2012 was $0.

 

5   Issues represent upfront cash received on certain derivative financial instruments.

 

6   Settlements represent periodic contractual cash flows and/or cash flows to terminate certain derivative financial instruments.
 

 

See Notes to Financial Statements.

 

                
56    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Consolidated Schedule of Investments October 31, 2012

  

BlackRock Floating Rate Income Trust (BGT)

(Percentages shown are based on Net Assets)

 

Asset-Backed Securities         

Par  

(000)

    Value  
     

Fraser Sullivan CLO Ltd., Series 2012-7A, Class C, 4.32%, 4/20/23 (a)(b)

    USD        575      $ 532,962   

Goldentree Loan Opportunities VI Ltd., Series 2012-6A, Class D, 4.53%, 4/17/22 (a)(b)

      950        891,575   

Greyrock CDO Ltd., Series 2005-1X, Class A2L, 0.85%, 11/15/17 (b)

      1,495        1,382,426   

Highbridge Loan Management Ltd., Series 2012-1A, Class C, 5.71%, 9/20/22 (a)(b)

      925        880,137   

ING Investment Management, Series 2012-2A, Class D, 4.99%, 10/15/22 (a)(b)

      950        847,029   

LCM LP, Series 11A, Class D2, 4.27%, 4/19/22 (a)(b)

      1,000        920,000   

Marea CLO Ltd., 5.01%, 10/16/23 (a)(b)

      1,000        897,980   

Race Point CLO, Series 2012-6A, Class D, 4.93%, 5/24/23 (a)(b)

      675        652,928   

Symphony CLO Ltd. (a)(b):

     

Series 2012-9A, Class D, 4.58%, 4/16/22

      775        738,188   

Series 2012-10A, Class D, 5.57%, 7/23/23

      925        878,750   

West CLO Ltd., Series 2012-1A, Class C, 5.05%, 10/17/23 (a)(b)

            845        817,377   
Total Asset-Backed Securities — 2.8%        9,439,352   
     
   
Common Stocks          Shares         

Auto Components — 0.2%

     

Delphi Automotive Plc (c)

            24,545        771,695   

Construction & Engineering — 0.0%

     

USI United Subcontractors

            8,067        8,067   

Hotels, Restaurants & Leisure — 0.2%

     

BLB Worldwide Holdings, Inc.

            50,832        689,434   

Metals & Mining — 0.1%

     

Euramax International

            1,135        224,202   

Paper & Forest Products — 0.1%

     

Ainsworth Lumber Co. Ltd. (a)

      62,685        169,462   

Ainsworth Lumber Co. Ltd. (c)

      55,255        149,375   
     

 

 

 
                      318,837   

Software — 0.3%

     

Bankruptcy Management Solutions, Inc.

      2,947        29   

HMH Holdings/EduMedia

      41,612        1,019,495   
     

 

 

 
                      1,019,524   
Total Common Stocks — 0.9%                     3,031,759   
     
                         
Corporate Bonds         

Par  

(000)

        

Airlines — 0.1%

     

American Airlines Pass-Through Trust, Series 2011-2, Class A, 8.63%, 10/15/21

    USD        207        216,136   

Auto Components — 0.7%

     

Icahn Enterprises LP:

     

7.75%, 1/15/16

      1,515        1,583,175   

8.00%, 1/15/18

      660        709,500   
     

 

 

 
                      2,292,675   

Beverages — 0.5%

     

Refresco Group BV (b):

     

4.35%, 5/15/18 (a)

    EUR        500        615,671   

4.35%, 5/15/18

      1,000        1,231,342   
     

 

 

 
                      1,847,013   
Corporate Bonds         

Par  

(000)

    Value  
     

Building Products — 0.8%

     

Grohe Holding GmbH (b):

     

4.25%, 9/15/17 (a)

    EUR        700      $ 893,695   

8.75%, 12/15/17

      1,400        1,853,170   
     

 

 

 
                      2,746,865   

Capital Markets — 0.1%

     

E*Trade Financial Corp., 2.54%, 8/31/19 (a)(d)(e)

    USD        439        369,858   

Chemicals — 0.3%

     

Hexion US Finance Corp., 6.63%, 4/15/20

      340        339,150   

INEOS Finance Plc, 8.38%, 2/15/19 (a)

      285        299,250   

MPM Escrow LLC/MPM Finance Escrow Corp., 8.88%, 10/15/20 (a)

      425        416,500   
     

 

 

 
                      1,054,900   

Commercial Banks — 1.2%

     

VTB Bank OJSC Via VTB Capital SA, 6.88%, 5/29/18

            3,940        4,250,708   

Commercial Services & Supplies — 0.1%

     

AWAS Aviation Capital Ltd., 7.00%, 10/17/16 (a)

            508        541,267   

Communications Equipment — 1.1%

     

Telenet Finance IV Luxembourg S.C.A., 4.13%, 6/15/21 (b)

    EUR        1,500        1,939,364   

Zayo Group LLC/Zayo Capital, Inc.:

     

8.13%, 1/01/20

    USD        1,010        1,105,950   

10.13%, 7/01/20

      665        743,137   
     

 

 

 
                      3,788,451   

Consumer Finance — 0.3%

     

Inmarsat Finance Plc, 7.38%, 12/01/17 (a)

            1,015        1,093,662   

Containers & Packaging — 1.7%

     

Ardagh Packaging Finance Plc:

     

7.38%, 10/15/17 (a)

    EUR        400        549,567   

7.38%, 10/15/17

      300        412,176   

GCL Holdings SCA, 9.38%, 4/15/18 (a)

      329        442,424   

Smurfit Kappa Acquisitions:

     

7.25%, 11/15/17 (a)

      355        491,192   

7.75%, 11/15/19 (a)

      416        593,118   

3.80%, 10/15/20 (b)

      2,500        3,232,273   
     

 

 

 
                      5,720,750   

Diversified Financial Services — 1.2%

     

Ally Financial, Inc., 2.62%, 12/01/14 (b)

    USD        795        785,652   

Reynolds Group Issuer, Inc.:

     

7.13%, 4/15/19

      325        346,125   

5.75%, 10/15/20 (a)

      2,345        2,368,450   

6.88%, 2/15/21

      490        520,625   
     

 

 

 
                      4,020,852   

Diversified Telecommunication Services — 0.2%

     

ITC Deltacom, Inc., 10.50%, 4/01/16

            530        569,750   

Energy Equipment & Services — 0.6%

     

Compagnie Générale de Géophysique, Veritas, 7.75%, 5/15/17

      1,795        1,857,825   

FTS International Services LLC/FTS International Bonds, Inc., 8.13%, 11/15/18 (a)

      298        311,410   
     

 

 

 
                      2,169,235   

Health Care Equipment & Supplies — 0.4%

     

Ontex IV SA, 4.34%, 4/15/18 (b)

    EUR        1,000        1,244,303   

Health Care Providers & Services — 1.6%

     

CHS/Community Health Systems, Inc., 5.13%, 8/15/18

    USD        954        989,775   

Crown Newco 3 Plc, 7.00%, 2/15/18 (a)

    GBP        1,750        2,979,384   

HCA, Inc., 6.50%, 2/15/20

    USD        1,055        1,165,775   

Tenet Healthcare Corp., 6.25%, 11/01/18

      495        535,838   
     

 

 

 
                      5,670,772   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    57


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Floating Rate Income Trust (BGT)

(Percentages shown are based on Net Assets)

 

Corporate Bonds         

Par  

(000)

    Value  
     

Hotels, Restaurants & Leisure — 0.1%

     

Carlson Wagonlit BV, 6.88%, 6/15/19 (a)

    USD        200      $ 209,000   

Household Durables — 0.0%

     

Berkline/Benchcraft LLC, 4.50%, 11/03/12 (c)(f)

            400          

Independent Power Producers & Energy Traders — 1.1%

  

   

Calpine Corp., 7.25%, 10/15/17 (a)

      112        118,720   

Energy Future Holdings Corp., 10.00%, 1/15/20

      725        770,313   

Energy Future Intermediate Holding Co. LLC, 10.00%, 12/01/20

      2,525        2,758,562   
     

 

 

 
                      3,647,595   

IT Services — 0.2%

     

First Data Corp., 6.75%, 11/01/20 (a)

            650        650,000   

Machinery — 1.1%

     

KION Finance SA, 4.46%, 4/15/18 (a)(b)

    EUR        3,000        3,752,936   

UR Merger Sub Corp., 5.75%, 7/15/18 (a)

    USD        210        225,750   
     

 

 

 
                      3,978,686   

Media — 3.2%

     

Clear Channel Communications, Inc., 9.00%, 12/15/19 (a)

      495        445,500   

Clear Channel Worldwide Holdings, Inc.:

     

Series A, 9.25%, 12/15/17

      501        537,322   

Series B, 9.25%, 12/15/17

      1,704        1,827,540   

Odeon & UCI Finco Plc, 9.00%, 8/01/18 (a)

    GBP        914        1,519,216   

Unitymedia Hessen GmbH & Co. KG (FKA UPC Germany GmbH):

     

8.13%, 12/01/17 (a)

    USD        2,500        2,700,000   

8.13%, 12/01/17

    EUR        383        534,898   

Virgin Media Secured Finance Plc, 7.00%, 1/15/18

    GBP        1,197        2,095,849   

Ziggo Finance BV, 6.13%, 11/15/17 (a)

    EUR        1,005        1,390,558   
     

 

 

 
                      11,050,883   

Metals & Mining — 0.1%

     

New World Resources NV, 7.88%, 5/01/18

            285        367,556   

Oil, Gas & Consumable Fuels — 2.9%

     

EP Energy LLC/EP Energy Finance, Inc., 6.88%, 5/01/19 (a)

    USD        385        415,800   

Gazprom OAO Via RBS AG, 9.63%, 3/01/13

      3,230        3,305,905   

KazmunaiGaz Finance Sub BV, 8.38%, 7/02/13

      1,500        1,561,980   

OGX Petroleo e Gas Participacoes SA, 8.50%, 6/01/18 (a)

      1,600        1,396,000   

Petroleos de Venezuela SA, 5.25%, 4/12/17

      4,000        3,160,000   
     

 

 

 
                      9,839,685   

Paper & Forest Products — 0.3%

     

Ainsworth Lumber Co. Ltd., 11.00%, 7/29/15 (a)(g)

      559        553,270   

Longview Fibre Paper & Packaging, Inc., 8.00%, 6/01/16 (a)

      420        437,850   
     

 

 

 
                      991,120   

Pharmaceuticals — 0.1%

     

Valeant Pharmaceuticals International, 6.50%, 7/15/16 (a)

            180        189,450   

Real Estate Management & Development — 0.1%

     

Realogy Corp., 7.63%, 1/15/20 (a)

            445        499,513   

Specialty Retail — 0.2%

     

House of Fraser Funding Plc, 8.88%, 8/15/18 (a)

    GBP        349        564,606   

Transportation Infrastructure — 0.4%

     

Aguila 3 SA, 7.88%, 1/31/18 (a)

    CHF        1,100        1,263,825   

Wireless Telecommunication Services — 2.8%

     

Cricket Communications, Inc., 7.75%, 5/15/16

    USD        1,950        2,062,125   

iPCS, Inc., 2.57%, 5/01/13 (b)

      1,155        1,149,225   

Matterhorn Mobile SA, 5.60%, 5/15/19 (b)

    EUR        3,000        3,888,448   
Corporate Bonds         

Par  

(000)

    Value  
     

Wireless Telecommunication Services (concluded)

     

Sprint Nextel Corp. (a):

     

9.00%, 11/15/18

    USD        790      $ 975,650   

7.00%, 3/01/20

      1,460        1,693,600   
     

 

 

 
                      9,769,048   
Total Corporate Bonds — 23.5%                     80,618,164   
     
                         
Floating Rate Loan Interests (b)                     

Aerospace & Defense — 1.5%

     

DynCorp International LLC, Term Loan B, 6.25%, 7/07/16

      420        421,117   

SI Organization, Inc., Term Loan B, 4.50%, 11/22/16

      1,075        1,067,985   

Spirit Aerosystems, Inc., Term Loan B, 3.75%, 4/18/19

      965        962,139   

TransDigm, Inc.:

     

Tranche B-1 Term Loan, 4.00%, 2/14/17

      1,337        1,342,078   

Tranche B-2 Term Loan, 4.00%, 2/14/17

      452        453,200   

Wesco Aircraft Hardware Corp., Term Loan B, 4.25%, 4/07/17

      818        819,048   
     

 

 

 
                      5,065,567   

Airlines — 0.8%

     

Delta Air Lines, Inc.:

     

Credit Term Loan B, 5.50%, 4/20/17

      1,631        1,629,738   

Term Loan B, 3.63%, 9/16/15

      955        892,925   

US Airways Group, Inc., Term Loan, 2.71%, 3/21/14

      160        156,160   
     

 

 

 
                      2,678,823   

Auto Components — 2.9%

     

Autoparts Holdings Ltd., First Lien Term Loan, 6.50%, 7/28/17

      1,634        1,621,249   

Federal-Mogul Corp.:

     

Term Loan B, 2.15%, 12/29/14

      2,298        2,150,279   

Term Loan C, 2.15%, 12/28/15

      781        730,620   

The Goodyear Tire & Rubber Co., Term Loan (Second Lien), 4.75%, 4/30/19

      1,705        1,714,804   

GPX International Tire Corp. (c)(f):

     

Term Loan, 12.25%, 3/30/12

      274          

Term Loan, 13.00%, 3/30/12

      4          

Schaeffler AG, Term Loan B, 6.00%, 1/27/15

    EUR        1,245        1,568,328   

Transtar Holding Co., 1st Lien Term Loan, 6.00%, 10/02/18

    USD        1,320        1,326,600   

UCI International, Inc., Term Loan B, 5.50%, 7/26/17

      933        938,042   
     

 

 

 
                      10,049,922   

Beverages — 0.0%

     

Le-Nature’s, Inc., Tranche B Term Loan, 10.25%, 3/01/11 (c)(f)

            1,000        100   

Biotechnology — 0.4%

     

Grifols, Inc., Term Loan B, 4.50%, 6/01/17

            1,466        1,478,244   

Building Products — 2.9%

     

Armstrong World Industries, Inc., Term Loan B, 4.00%, 3/09/18

      2,051        2,059,321   

CPG International, Inc., Term Loan, 5.75%, 9/18/19

      1,950        1,950,000   

Goodman Global, Inc., Initial Term Loan, 5.75%, 10/28/16

      3,714        3,713,124   

Momentive Performance Materials, Inc. (Nautilus), Extended Term Loan, 3.61%, 5/05/15

    EUR        806        1,030,030   

United Subcontractors, Inc., Term Loan (First Lien), 4.37%, 6/30/15

    USD        200        189,150   

Wilsonart International Holdings LLC, Term Loan B, 5.50%, 10/19/19

      1,080        1,082,363   
     

 

 

 
                      10,023,988   
 

 

See Notes to Financial Statements.

 

                
58    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Floating Rate Income Trust (BGT)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (b)         

Par  

(000)

    Value  

Capital Markets — 1.8%

     

American Capital Holdings, Inc., Term Loan,
5.50%, 8/22/16

    USD        1,605      $ 1,615,031   

HarbourVest Partners LLC, Term Loan B,
6.25%, 12/16/16

      1,830        1,825,043   

Nuveen Investments, Inc.:

     

Extended (First Lien) Term Loan,
5.81% – 5.86%, 5/13/17

      750        747,519   

Extended Term Loan, 5.81% – 5.86%, 5/12/17

      1,718        1,715,631   

Incremental Term Loan, 7.25%, 5/13/17

      310        312,133   
     

 

 

 
                      6,215,357   

Chemicals — 4.8%

     

American Rock Salt Holdings LLC, Term Loan, 5.50%, 4/25/17

      1,601        1,578,676   

Chemtura Corp., Exit Term Loan B, 5.50%, 8/27/16

      1,440        1,458,907   

Evergreen Acqco 1 LP, Term Loan, 5.00%, 7/09/19

      938        936,769   

Gentek, Inc., Term Loan, 5.00%, 10/06/15

      1,022        1,021,237   

INEOS US Finance LLC:

     

3 Year Term Loan, 5.50%, 5/04/15

      234        237,625   

6 Year Term Loan, 6.50%, 5/04/18

      1,867        1,891,483   

MacDermid, Inc., Tranche C Term Loan,
2.31%, 4/11/14

    EUR        1,346        1,726,357   

Nexeo Solutions LLC, Term Loan B, 5.00%, 9/08/17

    USD        1,449        1,421,657   

PolyOne Corp., Term Loan, 5.00%, 12/20/17

      481        483,288   

PQ Corp., Term Loan B, 3.96%, 7/30/14

      2,302        2,293,780   

Styron Sarl LLC, Term Loan B, 8.00%, 8/02/17

      460        439,004   

Tronox Pigments (Netherlands) BV:

     

Closing Date Term Loan, 4.25%, 2/08/18

      1,328        1,335,285   

Delayed Draw Term Loan, 4.25%, 2/08/18

      362        364,168   

Univar, Inc., Term Loan B, 5.00%, 6/30/17

      1,168        1,153,821   
     

 

 

 
                      16,342,057   

Commercial Services & Supplies — 5.6%

     

ACCO Brands Corp., Term Loan B, 4.25%, 4/30/19

      2,174        2,191,294   

ADS Waste Holdings, Term Loan B, 5.25%, 10/09/19

      3,000        3,027,000   

Altegrity, Inc., Tranche D Term Loan, 7.75%, 2/20/15

      1,804        1,800,946   

AWAS Finance Luxembourg Sarl:

     

Term Loan, 5.75%, 7/16/18

      267        269,455   

Term Loan B, 5.25%, 6/10/16

      1,854        1,870,217   

Delos Aircraft, Inc., Term Loan B2, 4.75%, 4/12/16

      1,675        1,695,937   

Garda World Security Corp., Term Loan B,
4.50%, 10/24/19

      315        316,969   

Getty Images, Inc., Term Loan B, 5.50%, 9/13/19

      1,100        1,102,288   

KAR Auction Services, Inc., Term Loan B,
5.00%, 5/19/17

      2,170        2,180,085   

Progressive Waste Solutions Ltd., Term Loan B, 3.50%, 10/11/19

      830        835,710   

Protection One, Inc., Term Loan, 5.75%, 3/21/19

      1,353        1,361,238   

West Corp., Term Loan B6, 5.75%, 6/29/18

      2,384        2,416,805   
     

 

 

 
                      19,067,944   

Communications Equipment — 3.5%

     

Avaya, Inc.:

     

Extended Term Loan B3, 4.93%, 10/26/17

      147        131,340   

Non-Extended Term Loan B1, 3.18%, 10/24/14

      1,827        1,771,420   

CommScope, Inc., Term Loan, 4.25%, 1/12/18

      1,747        1,754,886   

Telesat Canada, Term Loan A, 4.39%, 3/28/17

    CAD        5,590        5,352,128   

Zayo Group LLC, Term Loan B, 7.13%, 7/02/19

    USD        3,092        3,114,095   
     

 

 

 
                      12,123,869   

Construction & Engineering — 0.8%

     

BakerCorp. International, Inc., Term Loan B,
5.00%, 6/01/18

      676        676,722   

Safway Services LLC, First Out Term Loan,
9.00%, 12/16/17

      2,100        2,100,000   
     

 

 

 
                      2,776,722   
Floating Rate Loan Interests (b)         

Par  

(000)

    Value  
     

Construction Materials — 1.8%

     

HD Supply, Inc., Senior Debt B, 7.25%, 10/12/17

    USD        5,895      $ 6,070,254   

Consumer Finance — 0.8%

     

Springleaf Financial Funding Co., Term Loan, 5.50%, 5/10/17

            2,820        2,779,815   

Containers & Packaging — 0.7%

     

Sealed Air Corp., Term Loan B, 4.75%, 10/03/18

      1,359        1,363,920   

Smurfit Kappa Acquisitions:

     

Term Loan B4, 3.74% – 3.92%, 6/30/16

    EUR        374        483,673   

Term Loan C4, 3.99% – 4.12%, 3/31/17

      367        476,733   
     

 

 

 
                      2,324,326   

Diversified Consumer Services — 2.7%

     

Coinmach Service Corp.:

     

Delayed Draw Term Loan, 3.21%, 11/20/14

    USD        482        466,376   

Term Loan B, 3.21%, 11/20/14

      2,206        2,132,647   

Education Management LLC, Term Loan C3, 8.25%, 3/29/18

      821        722,652   

Laureate Education, Inc., Extended Term Loan, 5.25%, 6/18/18

      1,720        1,706,817   

ServiceMaster Co.:

     

Delayed Draw Term Loan, 2.71%, 7/24/14

      241        240,580   

Term Loan, 2.71%, 7/24/14

      2,423        2,415,936   

Weight Watchers International, Inc., Term Loan F, 4.00%, 3/15/19

      1,527        1,528,604   
     

 

 

 
                      9,213,612   

Diversified Financial Services — 2.4%

     

Residential Capital LLC:

     

DIP Term Loan A1, 5.00%, 11/18/13

      1,550        1,552,914   

DIP Term Loan A2, 6.75%, 11/18/13

      225        227,437   

Reynolds Group Holdings, Inc., Term Loan, 5.00%, 9/28/18

    EUR        5,000        6,475,886   
     

 

 

 
                      8,256,237   

Diversified Telecommunication Services — 3.5%

     

Hawaiian Telcom Communications, Inc., Term Loan B, 7.00%, 2/28/17

    USD        1,470        1,496,651   

Integra Telecom Holdings, Inc., Term Loan B, 9.25%, 4/15/15

      1,979        1,970,787   

Level 3 Financing, Inc.:

     

2016 Term Loan B, 4.75%, 2/01/16

      440        444,264   

2019 Term Loan B, 5.25%, 8/01/19

      1,380        1,394,669   

Term Loan, 4.75%, 8/01/19

      4,920        4,940,221   

US Telepacific Corp., Term Loan B, 5.75%, 2/23/17

      1,899        1,861,120   
     

 

 

 
                      12,107,712   

Electronic Equipment, Instruments & Components — 0.7%

  

   

CDW LLC (FKA CDW Corp.), Extended Term Loan, 4.00%, 7/14/17

      1,239        1,225,141   

Sensata Technologies Finance Co. LLC, Term Loan, 4.00%, 5/11/18

      1,128        1,130,755   
     

 

 

 
                      2,355,896   

Energy Equipment & Services — 2.4%

     

Dynegy Midwest Generation LLC, Coal Co. Term Loan, 9.25%, 8/04/16

      1,134        1,178,325   

Dynegy Power LLC, Gas Co. Term Loan, 9.25%, 8/04/16

      1,745        1,815,268   

MEG Energy Corp., Term Loan B, 4.00%, 3/16/18

      2,579        2,586,170   

Tervita Corp.:

     

Incremental Term Loan, 6.25%, 11/14/14

      923        926,874   

Term Loan B, 3.21%, 11/14/14

      1,787        1,746,978   
     

 

 

 
                      8,253,615   

Food & Staples Retailing — 3.3%

     

Alliance Boots Holdings Ltd., Term Loan B1, 3.49%, 7/09/15

    GBP        4,525        7,071,319   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    59


Table of Contents

Consolidated Schedule of Investments (continued)

  

BlackRock Floating Rate Income Trust (BGT)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (b)         

Par  

(000)

    Value  
     

Food & Staples Retailing (concluded)

     

Iceland Foods Group Ltd., Term Loan B1, 6.00%, 4/13/19

    GBP        1,000      $ 1,618,461   

Pilot Travel Centers LLC, Term Loan B2, 4.25%, 8/07/19

    USD        1,285        1,291,425   

US Foods, Inc. (FKA US Foodservice, Inc.), Extended Term Loan B, 5.75%, 3/31/17

      1,301        1,277,708   
     

 

 

 
                      11,258,913   

Food Products — 2.9%

     

AdvancePierre Foods, Inc., Term Loan, 5.75%, 7/10/17

      1,450        1,459,425   

Birds Eye Iglo Group Ltd. (Liberator Midco Ltd.), Term Loan D, 4.58%, 4/30/16

    EUR        2,620        3,394,336   

Del Monte Foods Co., Term Loan, 4.50%, 3/08/18

    USD        1,608        1,605,350   

Michael Foods Group, Inc., Term Loan, 4.25%, 2/23/18

      312        313,012   

Pinnacle Foods Finance LLC, Term Loan E, 4.75%, 10/17/18

      1,377        1,380,073   

Solvest Ltd. (Dole):

     

Term Loan B-2, 5.00% – 6.00%, 7/06/18

      577        578,568   

Term Loan C-2, 5.00% – 6.00%, 7/06/18

      1,033        1,035,333   
     

 

 

 
                      9,766,097   

Health Care Equipment & Supplies — 4.2%

     

Bausch & Lomb, Inc., Term Loan B, 5.25%, 5/17/19

      2,319        2,343,214   

Biomet, Inc., Term Loan B-1, 3.96%, 7/25/17

      479        481,495   

BSN Medical Acquisition Holding GmbH, Term Loan B, 6.00%, 7/27/19

      2,000        2,002,000   

DJO Finance LLC:

     

Extended Term Loan B2, 5.21%, 11/01/16

      412        411,768   

Term Loan B3, 6.25%, 9/15/17

      2,771        2,779,167   

Hologic, Inc., Term Loan B, 4.50%, 8/01/19

      2,898        2,928,338   

Hupah Finance, Inc., Term Loan B, 6.25% –7.25%, 1/21/19

      955        959,976   

Immucor, Inc., Term Loan B1, 5.75%, 8/17/18

      1,742        1,755,501   

LHP Hospital Group, Inc., Term Loan, 9.00%, 7/03/18

      569        572,839   
     

 

 

 
                      14,234,298   

Health Care Providers & Services — 3.5%

     

ConvaTec, Inc., Term Loan, 5.00%, 12/22/16

      1,186        1,190,251   

DaVita, Inc.:

     

Term Loan B, 4.00%, 9/02/19

      670        670,000   

Tranche B Term Loan, 4.50%, 10/20/16

      2,189        2,200,760   

Emergency Medical Services Corp., Term Loan, 5.25%, 5/25/18

      1,508        1,518,546   

Genesis Healthcare Corp., Term Loan B, 10.00%, 9/25/17

      450        432,000   

Harden Healthcare LLC:

     

Add on Term Loan A, 7.75%, 3/02/15

      1,175        1,138,490   

Term Loan A, 8.50%, 3/02/15

      709        694,583   

HCA, Inc., Extended Term Loan B3, 3.46%, 5/01/18

      630        630,284   

inVentiv Health, Inc.:

     

Combined Term Loan, 6.50%, 8/04/16

      119        116,607   

Incremental Term Loan B-3, 6.75%, 5/15/18

      447        436,680   

Medpace, Inc., Term Loan, 6.50% – 7.25%, 6/16/17

      1,383        1,328,147   

Sheridan Holdings, Inc., First Lien Term Loan, 6.00%, 6/29/18

      284        285,888   

US Renal Care, Inc., First Lien Term Loan, 6.25%, 7/02/19

      1,367        1,380,241   
     

 

 

 
                      12,022,477   

Health Care Technology — 1.2%

     

IMS Health, Inc., Term Loan B, 4.50%, 8/25/17

      1,481        1,489,477   

Kinetic Concepts, Inc., Term Loan B, 7.00%, 5/04/18

      1,742        1,761,120   

MedAssets, Inc., Term Loan, 5.25%, 11/16/16

      813        818,264   
     

 

 

 
                      4,068,861   
Floating Rate Loan Interests (b)         

Par  

(000)

    Value  
     

Hotels, Restaurants & Leisure — 6.6%

     

Alpha D2 Ltd., Extended Term Loan B2, 5.75%, 4/29/19

    USD        1,383      $ 1,395,701   

Boyd Gaming Corp., Incremental Term Loan, 6.00%, 12/17/15

      1,020        1,030,198   

Caesars Entertainment Operating Co., Inc.:

     

Extended Term Loan B6, 5.46%, 1/26/18

      3,475        3,110,568   

Term Loan B1, 3.21%, 1/28/15

      930        901,709   

Term Loan B2, 3.21%, 1/28/15

      1,255        1,217,350   

Term Loan B4, 9.50%, 10/31/16

      1,370        1,400,956   

Dunkin’ Brands, Inc., Term Loan B2, 4.00%, 11/23/17

      2,303        2,307,614   

Harrah’s Property Co., Mezzanine Term Loan, 3.31%, 2/13/13

      350        285,250   

OSI Restaurant Partners LLC, Term Loan B, 4.75%, 10/24/19

      1,310        1,315,188   

Sabre, Inc., Non-Extended Initial Term Loan, 2.21%, 9/30/14

      145        144,306   

SeaWorld Parks & Entertainment, Inc., Term Loan B, 4.00%, 8/17/17

      1,133        1,137,288   

Six Flags Theme Parks, Inc., Term Loan B, 4.25%, 12/20/18

      1,645        1,653,521   

Station Casinos, Inc.:

     

Term Loan B, 5.50%, 9/07/19

      2,060        2,062,946   

Term Loan B1, 3.21%, 6/17/16

      1,054        1,025,079   

Twin River Worldwide Holdings, Inc., Term Loan, 8.50%, 11/05/15

      1,170        1,175,047   

Wendy’s International, Inc., Closing Date Term Loan B, 4.75%, 5/15/19

      2,355        2,374,947   
     

 

 

 
                      22,537,668   

Household Durables — 0.0%

     

Berkline/Benchcraft LLC, Term Loan B, 14.00%, 11/03/11 (c)(f)

            170        28,631   

Household Products — 0.4%

     

Prestige Brands, Inc., Term Loan, 5.25% –6.25%, 1/31/19

            1,497        1,512,006   

Independent Power Producers & Energy Traders — 1.0%

  

   

The AES Corp., Term Loan, 4.25%, 6/01/18

      2,667        2,679,630   

Calpine Corp., Term Loan B, 4.50%, 4/02/18

      569        569,325   

GenOn Energy, Inc., Term Loan B, 6.50%, 12/01/17

      329        331,208   
     

 

 

 
                      3,580,163   

Industrial Conglomerates — 1.3%

     

Sequa Corp.:

     

Incremental Term Loan, 6.25%, 12/03/14

      436        436,552   

Term Loan, 3.61% – 3.69%, 12/03/14

      4,132        4,118,810   
     

 

 

 
                      4,555,362   

Insurance — 1.3%

     

Asurion LLC, Term Loan (First Lien), 5.50%, 5/24/18

      801        806,221   

CNO Financial Group, Inc.:

     

Term Loan B-1, 4.25%, 9/20/16

      1,100        1,101,375   

Term Loan B-2, 5.00%, 9/20/18

      1,490        1,494,470   

Cunningham Lindsey Group, Inc., 5.00%, 10/29/19

      985        985,000   
     

 

 

 
                      4,387,066   

Internet Software & Services — 0.3%

     

Web.com Group, Inc., Term Loan B, 7.00%, 10/27/17

            1,167        1,178,426   

IT Services — 4.5%

     

Ceridian Corp., Extended Term Loan, 5.96%, 5/09/17

      1,817        1,810,604   

First Data Corp.:

     

2018 Add-on Term Loan, 5.21%, 9/24/18

      1,535        1,500,079   

Extended 2018 Term Loan B, 4.21%, 3/23/18

      6,690        6,372,021   

Non-Extended Term Loan B-1, 2.96%, 9/24/14

      31        30,835   

Non-Extended Term Loan B-3, 2.96%, 9/24/14

      12        12,438   
 

 

See Notes to Financial Statements.

 

                
60    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Consolidated Schedule of Investments (continued)

 

BlackRock Floating Rate Income Trust (BGT)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (b)          Par  
(000)
    Value  
     

IT Services (concluded)

     

Genpact International, Inc., Term Loan B, 4.25%, 8/30/19

    USD        2,080      $ 2,081,310   

InfoGroup, Inc., Term Loan, 5.75%, 5/25/18

      379        334,649   

iPayment, Inc., Term Loan B, 5.75%, 5/08/17

      332        329,962   

NeuStar, Inc., Term Loan B, 5.00%, 11/08/18

      564        567,880   

TransUnion LLC, Term Loan B, 5.50%, 2/12/18

      2,482        2,509,194   
     

 

 

 
                      15,548,972   

Leisure Equipment & Products — 0.6%

     

Eastman Kodak Co., DIP Term Loan B, 8.50%, 7/19/13

      660        651,141   

FGI Operating Company LLC, Term Loan,
5.50% –6.50%, 4/19/19

      1,292        1,303,670   
     

 

 

 
                      1,954,811   

Machinery — 1.6%

     

Intelligrated, Inc., 1st Lien Term Loan, 6.75%, 7/30/18

      1,200        1,210,500   

Rexnord Corp., REFI Term Loan B, 4.50%, 4/02/18

      635        638,440   

Terex Corp.:

     

Term Loan, 6.00%, 4/28/17

    EUR        351        457,783   

Term Loan B, 4.50%, 4/28/17

    USD        1,585        1,594,649   

Wabash National Corp., Term Loan B, 6.00%, 5/02/19

      1,458        1,475,896   
     

 

 

 
                      5,377,268   

Media — 13.9%

     

Affinion Group, Inc., Term Loan B, 5.00%, 7/16/15

      740        696,263   

AMC Entertainment, Inc., Term Loan B3, 4.75%, 2/22/18

      844        851,007   

AMC Networks, Inc., Term Loan B, 4.00%, 12/31/18

      1,048        1,048,809   

Atlantic Broadband Finance LLC, 1st Lien Term Loan, 5.25%, 4/04/19

      968        970,400   

BBHI Acquisition LLC (FKA Bresnan Telecommunications Co. LLC), Term Loan B, 4.50%, 12/14/17

      337        337,874   

Capsugel Holdings US, Inc., Term Loan B, 4.75%, 8/01/18

      1,202        1,209,543   

Catalina Marketing Corp., Extended Term Loan B, 5.71%, 9/29/17

      1,440        1,427,927   

Cengage Learning Acquisitions, Inc.:

     

Non-Extended Term Loan, 2.47%, 7/03/14

      197        187,130   

Tranche 1 Incremental, 7.50%, 7/03/14

      1,110        1,095,669   

Charter Communications Operating LLC:

     

Extended Term Loan C, 3.47%, 9/06/16

      482        484,010   

Term Loan D, 4.00%, 5/15/19

      188        189,097   

Clarke American Corp., Term Facility B, 2.71%, 6/30/14

      50        48,102   

Clear Channel Communications, Inc.:

     

Term Loan B, 3.86%, 1/29/16

      813        666,949   

Term Loan C, 3.86%, 1/29/16

      475        382,834   

Cumulus Media, Inc., First Lien Term Loan,
5.75%, 9/17/18

      1,239        1,246,925   

EMI Music Publishing Ltd., Term Loan B,
5.50%, 6/29/18

      1,212        1,226,809   

Foxco Acquisition Sub LLC, Term Loan B,
5.50%, 7/31/17

      1,860        1,882,673   

Gray Television, Inc., Term Loan B, 4.75%, 10/15/19

      1,490        1,491,594   

Houghton Mifflin Harcourt Publishing Co., DIP Term Loan B, 7.25%, 6/01/18

      1,154        1,165,742   

Hubbard Broadcasting, Term Loan B,
5.25%, 4/28/17

      936        938,350   

Intelsat Jackson Holdings Ltd., Term Loan B-1,
4.50%, 4/02/18

      6,909        6,953,183   

Interactive Data Corp., Term Loan B, 4.50%, 2/12/18

      3,589        3,609,349   

Kabel Deutschland GmbH:

     

Term Loan A1, 3.61%, 3/31/14

    EUR        3,043        3,945,789   
Floating Rate Loan Interests (b)          Par  
(000)
    Value  
     

Media (concluded)

     

Kabel Deutschland GmbH (concluded):

     

Term Loan D, 4.11%, 12/13/16

    EUR        1,000      $ 1,298,768   

Term Loan F, 4.25%, 2/01/19

    USD        2,045        2,053,528   

Lavena Holding 4 GmbH (Prosiebensat.1 Media AG):

     

Term Loan B, 2.95%, 3/06/15

    EUR        304        366,725   

Term Loan C, 3.32%, 3/04/16

      608        737,388   

LIN Television Corp., Term Loan B, 5.00%, 12/21/18

    USD        863        869,951   

Nielsen Finance LLC, Class B Term Loan,
3.97%, 5/02/16

      1,697        1,704,275   

Serpering Investments BV (Casema NV), Term Loan B, 3.11%, 3/31/17

    EUR        619        802,063   

Sinclair Television Group, Inc., Tranche B Term Loan, 4.00%, 10/28/16

    USD        825        825,590   

Univision Communications, Inc., Extended Term Loan, 4.46%, 3/31/17

      1,173        1,145,458   

UPC Broadband Holding BV, Term Loan U,
4.11%, 12/29/17

    EUR        775        999,868   

UPC Financing Partnership:

     

Term Loan, 4.75%, 12/29/17

    USD        1,180        1,180,496   

Term Loan T, 3.71%, 12/30/16

      195        194,025   

Warner Music Group Corp., Term Loan,
5.25%, 10/25/18

      985        987,462   

Weather Channel, Term Loan B, 4.25%, 2/13/17

      1,251        1,258,230   

WideOpenWest Finance LLC, First Lien Term Loan, 6.25%, 7/17/18

      1,367        1,377,685   
     

 

 

 
                      47,857,540   

Metals & Mining — 3.6%

     

Constellium Holding Co. BV, Term Loan B,
9.25%, 5/25/18

      1,377        1,369,667   

FMG America Finance, Inc., Term Loan, 5.25%, 10/18/17

      4,235        4,211,708   

Novelis, Inc.:

     

Incremental Term Loan B2, 4.00%, 3/10/17

      390        390,602   

Term Loan, 4.00%, 3/10/17

      3,071        3,068,506   

SunCoke Energy, Inc., Term Loan B, 4.00%, 7/26/18

      839        839,377   

Walter Energy, Inc., Term Loan B, 4.00%, 4/02/18

      2,608        2,561,510   
     

 

 

 
                      12,441,370   

Multiline Retail — 2.5%

     

99 ¢ Only Stores, Term Loan, 5.25%, 1/11/19

      1,305        1,316,965   

BJ’s Wholesale Club, Inc.:

     

New 1st Lien Term Loan, 5.75%, 9/26/19

      1,100        1,110,384   

New 2nd Lien Term Loan, 9.75%, 3/26/20

      545        556,925   

Hema Holding BV:

     

Second Lien Term Loan, 5.11%, 1/05/17

    EUR        3,800        4,555,965   

Term Loan B, 2.11%, 7/06/15

      167        208,851   

Term Loan C, 2.86%, 7/05/16

      167        209,932   

The Neiman Marcus Group, Inc., Term Loan,
4.75%, 5/16/18

    USD        750        751,155   
     

 

 

 
                      8,710,177   

Oil, Gas & Consumable Fuels — 3.7%

     

Chesapeake Energy Corp., Unsecured Term Loan, 8.50%, 12/01/17

      750        750,608   

Everest Acquisition LLC, Term Loan B1,
5.00%, 5/24/18

      1,755        1,764,214   

Gibson Energy ULC, Term Loan B, 4.75%, 6/15/18

      2,038        2,058,640   

Obsidian Natural Gas Trust, Term Loan,
7.00%, 11/02/15

      1,224        1,223,937   

Plains Exploration and Production, Term Loan B, 4.00%, 9/13/19

      2,395        2,404,412   

Samson Investment Co., 2nd Lien Term Loan,
6.00%, 9/25/18

      785        791,539   

Vantage Drilling Co., Term Loan, 6.25%, 10/26/17

      3,640        3,519,116   
     

 

 

 
                      12,512,466   
 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    61


Table of Contents

Consolidated Schedule of Investments (continued)

 

BlackRock Floating Rate Income Trust (BGT)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (b)         

Par  

(000)

    Value  
     

Paper & Forest Products — 0.3%

     

Ainsworth Lumber Co. Ltd., Term Loan, 5.25%, 6/26/14

    USD        400      $ 397,500   

NewPage Corp., DIP Term Loan, 8.00%, 3/07/13

      550        550,687   

Verso Paper Finance Holdings LLC, Term Loan,
6.49% – 7.24%, 2/01/13

      441        220,562   
     

 

 

 
                      1,168,749   

Pharmaceuticals — 4.9%

     

Alkermes, Inc., Term Loan, 4.50%, 9/18/19

      345        346,580   

Aptalis Pharma, Inc., Term Loan B, 5.50%, 2/10/17

      2,653        2,653,864   

Par Pharmaceutical Cos., Inc., Term Loan B, 5.00%, 9/30/19

      3,485        3,473,395   

Pharmaceutical Product Development, Inc., Term Loan B, 6.25%, 12/05/18

      3,203        3,243,399   

Quintiles Transnational Corp., Term Loan B,
5.00%, 6/08/18

      1,304        1,304,321   

RPI Finance Trust, Incremental Tranche 2,
4.00%, 11/09/18

      244        245,092   

Valeant Pharmaceuticals International, Inc.:

     

Series C, Tranche B, 4.25%, 9/27/19

      1,650        1,652,986   

Series D, Tranche B, 4.25%, 2/13/19

      2,206        2,212,832   

Warner Chilcott Co. LLC, Term Loan B-2,
4.25%, 3/15/18

      326        327,044   

Warner Chilcott Corp.:

     

Incremental Term Loan B1, 4.25%, 3/15/18

      248        248,396   

Term Loan B-1, 4.25%, 3/15/18

      652        654,088   

WC Luxco Sarl., Term Loan B-3, 4.25%, 3/15/18

      448        449,686   
     

 

 

 
                      16,811,683   

Professional Services — 2.6%

     

Booz Allen Hamilton, Inc., Term Loan B,
4.50%, 7/31/19

      1,715        1,725,719   

Emdeon, Inc., Term Loan B, 5.00%, 11/02/18

      1,672        1,690,181   

GCA Services Group, Inc.:

     

2nd Lien Term Loan, 9.50%, 10/22/20

      250        250,312   

Term Loan B, 5.25%, 10/22/19

      1,185        1,181,303   

Insight Global, Inc., Term Loan, 6.00%, 10/26/19

      1,205        1,198,975   

Kronos, Inc., Term Loan B, 9.75%, 4/25/20

      925        929,625   

ON Assignment, Inc., Term Loan B, 5.00%, 5/15/19

      641        642,318   

Truven Health Analytics, Inc., Term Loan B,
6.75%, 6/01/19

      1,357        1,359,389   
     

 

 

 
                      8,977,822   

Real Estate Investment Trusts (REITs) — 0.5%

     

iStar Financial, Inc., Term Loan A-1, 5.75%, 9/28/17

            1,791        1,786,972   

Real Estate Management & Development — 1.4%

     

Realogy Corp.:

     

Extended Letter of Credit, 4.46%, 10/10/16

      284        283,514   

Extended Synthetic Letter of Credit,
3.24%, 10/10/13

      68        65,750   

Extended Term Loan, 4.46%, 10/10/16

      4,318        4,306,135   

Stockbridge SBE Holdings LLC, Term Loan B,
13.00%, 5/02/17

      225        223,875   
     

 

 

 
                      4,879,274   

Road & Rail — 0.7%

     

RAC Ltd., Term Loan B, 5.25% – 5.54%, 9/28/18

    GBP        1,182        1,900,456   

Road Infrastructure Investment LLC, Term Loan B, 6.25%, 3/30/18

    USD        622        620,320   
     

 

 

 
                      2,520,776   

Semiconductors & Semiconductor Equipment — 0.6%

  

   

Freescale Semiconductor, Inc., Extended Term Loan B, 4.46%, 12/01/16

      1,291        1,248,555   

NXP BV, Term Loan A-2, 5.50%, 3/03/17

      806        820,814   
     

 

 

 
        2,069,369   
Floating Rate Loan Interests (b)         

Par  

(000)

    Value  
     

Software — 3.4%

     

Bankruptcy Management Solutions, Inc.:

     

Term Loan (First Lien), 7.50%, 8/20/14

    USD        720      $ 359,751   

Term Loan (Second Lien), 8.22%, 8/20/15

      278        4,511   

Blackboard, Inc., Term Loan B, 7.50%, 10/04/18

      447        448,997   

Infor US, Inc., Term Loan B2, 5.25%, 4/05/18

      4,738        4,786,975   

Sophia LP, Term Loan B, 6.25%, 7/19/18

      1,403        1,419,030   

SS&C Technologies, Inc.:

     

Term Loan B-1, 5.00%, 6/07/19

      2,304        2,330,516   

Term Loan B-2, 5.00%, 6/07/19

      238        241,088   

WaveDivision Holdings LLC, Term Loan B,
5.50%, 8/09/19

      1,870        1,890,252   
     

 

 

 
                      11,481,120   

Specialty Retail — 5.4%

     

Academy Ltd., Term Loan, 6.00%, 8/03/18

      1,886        1,885,448   

Bass Pro Group LLC, Term Loan, 5.25%, 6/13/17

      1,483        1,497,108   

Burlington Coat Factory Warehouse Corp., Term Loan B1, 5.50%, 2/23/17

      394        396,565   

David’s Bridal, Inc., Term Loan B, 5.00%, 10/02/19

      1,765        1,760,587   

The Gymboree Corp., Term Loan, 5.00%, 2/23/18

      113        110,501   

Harbor Freight Tools USA, Inc., Term Loan B,
5.50%, 11/14/17

      978        982,438   

Jo-Ann Stores, Inc., Term Loan, 4.75%, 3/16/18

      588        586,744   

Leslie’s Poolmart, Inc.:

     

Delayed Draw Term Loan, 5.25%, 10/28/19

      160        159,766   

Term Loan B, 5.50%, 10/28/19

      1,840        1,837,314   

Michaels Stores, Inc.:

     

Extended Term Loan B3, 4.88% – 4.94%, 7/29/16

      820        825,894   

Term Loan B2, 4.88% – 4.94%, 7/29/16

      780        785,850   

Party City Holdings Inc., New Term Loan B,
5.75%, 7/26/19

      2,270        2,289,295   

Petco Animal Supplies, Inc., Term Loan,
4.50%, 11/24/17

      2,008        2,015,545   

Things Remembered, Inc., Term Loan B,
8.00%, 5/24/18

      830        813,400   

Toys ‘R’ Us Delaware, Inc.:

     

Incremental Term Loan B2, 5.25%, 5/25/18

      494        483,347   

Term Loan, 6.00%, 9/01/16

      342        340,574   

Term Loan B3, 5.25%, 5/25/18

      254        248,894   

The Yankee Candle Co., Inc., Term Loan B,
5.25%, 4/02/19

      1,657        1,667,261   
     

 

 

 
                      18,686,531   

Textiles, Apparel & Luxury Goods — 0.7%

     

Ascend Performance Materials LLC, Term Loan B, 6.75%, 4/10/18

            2,418        2,423,895   

Wireless Telecommunication Services — 1.6%

     

Cricket Communications, Inc., Term Loan,
4.75%, 10/10/19

      1,310        1,314,100   

MetroPCS Wireless, Inc., Term Loan B-3,
4.00%, 3/16/18

      552        551,482   

Vodafone Americas Finance 2, Inc.:

     

Term Loan, 6.88%, 8/11/15

      2,647        2,719,947   

Term Loan B, 6.25%, 7/11/16 (g)

      825        849,750   
     

 

 

 
                      5,435,279   
Total Floating Rate Loan Interests — 118.5%                     406,958,102   
     
                         
Foreign Agency Obligations                     

Argentina Bonos, 7.00%, 10/03/15

      2,000        1,644,111   

Colombia Government International Bond,
3.95%, 3/17/13

      180        181,890   
 

 

See Notes to Financial Statements.

 

                
62    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents

Consolidated Schedule of Investments (continued)

 

BlackRock Floating Rate Income Trust (BGT)

(Percentages shown are based on Net Assets)

 

Foreign Agency Obligations         

Par  

(000)

    Value  
     

Uruguay Government International Bond,
6.88%, 1/19/16

    EUR        950      $ 1,419,122   
Total Foreign Agency Obligations — 0.9%                     3,245,123   
     
                         
Other Interests (h)          Beneficial
Interest  
(000)   
        

Auto Components — 0.0%

     

Lear Corp. Escrow (c)

    USD        500        5,312   

Diversified Financial Services — 0.4%

     

J.G. Wentworth LLC Preferred Equity Interests (c)

            1        1,381,574   

Hotels, Restaurants & Leisure — 0.0%

     

Wembley Contigent (c)

            2        7,500   

Household Durables — 0.0%

     

Berkline Benchcraft Equity LLC (c)

            6          
Total Other Interests — 0.4%                     1,394,386   
     
                         
Warrants (i)          Shares         

Chemicals — 0.0%

  

British Vita Holdings Co. (Non-Expiring)

            166          

Media — 0.0%

     

New Vision Holdings LLC:

     

(Expires 9/30/14)

      19,023        57,069   

(Expires 9/30/14)

      3,424        10,272   
     

 

 

 
                      67,341   

Software — 0.0%

     

Bankruptcy Management Solutions, Inc. (Expires 9/29/17)

      251          

HMH Holdings/EduMedia (Issued/Exercisable 3/09/10, 19 Shares for 1 Warrant, Expires 6/22/19, Strike Price $42.27)

      1,501          
     

 

 

 
                        
Total Warrants — 0.0%                     67,341   

Total Long-Term Investments

(Cost — $503,886,250) — 147.0%

                    504,754,227   
     
                         
Short-Term Securities                     

BlackRock Liquidity Funds, TempFund, Institutional Class, 0.17% (j)(k)

            2,740,694        2,740,694   

Total Short-Term Securities

(Cost — $2,740,694) — 0.8%

                    2,740,694   
     
                         
Options Purchased          Contracts         

Over-the-Counter Call Options — 0.0%

     

Marsico Parent Superholdco LLC, Strike Price USD 942.86, Expires 12/14/19, Broker Goldman Sachs Group, Inc.

            26          

Total Options Purchased

(Cost — $25,422) — 0.0%

                      
Total Investments (Cost — $506,652,366) — 147.8%        507,494,921   
Liabilities in Excess of Other Assets — (47.8)%         (164,212,504
     

 

 

 
Net Assets — 100.0%       $ 343,282,417   
     

 

 

 
(a)   Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

 

(b)   Variable rate security. Rate shown is as of report date.

 

(c)   Non-income producing security.

 

(d)   Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.

 

(e)   Convertible security.

 

(f)   Issuer filed for bankruptcy and/or is in default of principal and/or interest payments.

 

(g)   Represents a payment-in-kind security which may pay interest/dividends in additional par/shares.

 

(h)   Other interests represent beneficial interests in liquidation trusts and other reorganization or private entities.

 

(i)   Warrants entitle the Fund to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

 

(j)   Investments in issuers considered to be an affiliate of the Fund during the year ended October 31, 2012, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate    Shares
Held at
October 31,
2011
     Net
Activity
     Shares
Held at
October 31,
2012
     Income  

BlackRock Liquidity Funds, TempFund, Institutional Class

     1,071,567         1,669,127         2,740,694       $ 1,817   

 

(k)   Represents the current yield as of report date.

 

Ÿ  

For Fund compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by Fund management. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

 

Ÿ  

Foreign currency exchange contracts as of October 31, 2012 were as follows:

 

Currency
Purchased
    Currency
Sold
    Counter-
party
  Settle-
ment
Date
    Unrealized
Appreciation
(Depreciation)
 
CAD     1,000,000      USD     997,703      Citigroup, Inc.     1/16/13      $ 1,949    
USD     6,336,149      CAD     6,196,500      UBS AG     1/16/13        141,804    
USD     1,136,211      CHF     1,054,500      UBS AG     1/16/13        2,516    
USD     17,324,307      GBP     10,808,500      Goldman
Sachs
Group, Inc.
    1/16/13        (113,679)   
EUR     6,300,000      USD     8,178,471      BNP Paribas SA     1/23/13        (6,041)   
EUR     1,250,000      USD     1,614,216      Citigroup, Inc.     1/23/13        7,298    
USD     687,331      EUR     530,000      UBS AG     1/23/13        (191)   
USD     1,583,964      EUR     1,220,000      UBS AG     1/23/13        1,366    
USD     1,739,906      EUR     1,340,000      UBS AG     1/23/13        1,643    
USD     57,102,377      EUR     43,543,000      UBS AG     1/23/13        617,911    
Total             $ 654,576    
           

 

 

 

 

Ÿ  

Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

 

Ÿ  

Level 1 — unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the Fund has the ability to access

 

Ÿ  

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

 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    63


Table of Contents
Consolidated Schedule of Investments (continued)   BlackRock Floating Rate Income Trust (BGT)

 

   

curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

 

Ÿ   Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of October 31, 2012:

 

     Level 1     Level 2     Level 3     Total  

Assets:

       
Investments:        

Long-Term Investments:

  

Asset-Backed Securities

         $ 817,377      $ 8,621,975      $ 9,439,352   

Common Stocks

  $ 149,375        2,874,288        8,096        3,031,759   

Corporate Bonds

           80,618,164               80,618,164   

Floating Rate Loan Interests

           379,687,538        27,270,564        406,958,102   

Foreign Agency Obligations

           3,245,123               3,245,123   

Other Interests

        1,394,386        1,394,386   

Warrants

           67,341               67,341   

Short-Term Securities

    2,740,694                      2,740,694   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 2,890,069      $ 467,309,831      $ 37,295,021      $ 507,494,921   
 

 

 

   

 

 

   

 

 

   

 

 

 
       
     Level 1     Level 2     Level 3     Total  
Derivative Financial Instruments1   

Assets:

       

Foreign currency exchange contracts

         $ 774,487             $ 774,487    

Liabilities:

       

Foreign currency exchange contracts

           (119,911)               (119,911)   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

         $ 654,576             $ 654,576    
 

 

 

   

 

 

   

 

 

   

 

 

 

 

1    Derivative financial instruments are foreign currency exchange contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

Certain of the Fund’s assets and liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of October 31, 2012, such assets and liabilities are categorized within the disclosure hierarchy as follows:

 

      Level 1     Level 2     Level 3     Total  

Assets:

        

Cash

   $ 168,646                    $ 168,646    

Liabilities:

        

Bank overdraft on foreign currency at value

          $ (915,491)               (915,491)   

Loan payable

            (145,000,000)               (145,000,000)   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 168,646      $ (145,915,491)             $ (145,746,845)   
  

 

 

   

 

 

   

 

 

   

 

 

 

There were no transfers between Level 1 and Level 2 during the year ended October 31, 2012.

 

 

See Notes to Financial Statements.

 

                
64    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Consolidated Schedule of Investments (concluded)   BlackRock Floating Rate Income Trust (BGT)

 

The following table summarizes the valuation techniques used and unobservable inputs developed by the BlackRock Global Valuation Methodologies Committee (“Global Valuation Committee”) to determine the value of certain of the Fund’s Level 3 investments as of October 31, 2012:

 

      Value      Valuation Techniques    Unobservable Inputs1   

Range of

Unobservable
Inputs

Utilized

 

Weighted

Average of
Unobservable
Inputs2

Assets:

             

Floating Rate Loan Interests

   $ 4,153,635       Market Comparable Companies    Illiquidity Discount    50%   50%
         Yield    9.64%   9.64%
      Cost    N/A3     
  

 

 

    

 

  

 

  

 

 

 

Total4

   $ 4,153,635              
  

 

 

            

 

1   

A change to the unobservable input may result in a significant change to the value of the investment as follows:

 

Unobservable Input   

Impact to

Value if Input Increases

    

Impact to

Value if Input Decreases

 
Illiquidity Discount      Decrease         Increase   
Yield      Decrease         Increase   

 

2   

Unobservable inputs are weighted based on the value of the investments included in the range.

 

3   

The Fund fair values certain of its Level 3 investments using prior transaction prices (acquisition cost), although the transaction may not have occurred during the current reporting period. In such cases, these investments are generally privately held investments. There may not be a secondary market, and/or there are a limited number of investors. The determination to fair value such investments at cost is based upon factors consistent with the principles of fair value measurement that are reasonably available to the Global Valuation Committee, or its delegate. Valuations are reviewed utilizing available market information to determine if the carrying value should be adjusted. Such market data may include, but is not limited to, observations of the trading multiples of public companies considered comparable to the private companies being valued, financial or operational information released by the company, and/or news or corporate events that affect the investment. Valuations may be adjusted to account for company-specific issues, the lack of liquidity inherent in a nonpublic investment and the fact that comparable public companies are not identical to the investments being fair valued by the Fund.

 

4   

Does not include Level 3 investments with values derived utilizing transaction prices from recent prior transactions or third party pricing information without adjustment for which such inputs are unobservable. The value of Level 3 investments derived using prices from prior transactions and/or third party pricing information is $33,141,386. A significant change in third party pricing information could result in a significantly lower or higher value in such Level 3 investments.

A reconciliation of Level 3 investments is presented when the Fund had a significant amount of Level 3 investments at the beginning and/or end of the year in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

 

      Asset-Backed
Securities
    Common
Stocks
    Floating Rate
Loan Interests
    Foreign
Agency
Obligations
   

Other

Interests

    Warrants     Total  

Assets:

              

Opening balance, as of October 31, 2011

   $ 6,561,220      $ 234,634      $ 32,466,825      $ 2,961,954      $ 1,281,000      $ 227      $ 43,505,860   

Transfers into Level 35

                   2,061,526                             2,061,526   

Transfers out of Level 36

                   (9,265,338     (1,766,334            (224     (11,031,896

Accrued discounts/premiums

     102,690               135,391        54,220                      292,301   

Net realized gain (loss)

     10,436        (1,973,689     (786,090            182               (2,749,161

Net change in unrealized appreciation/depreciation7

     896,626        1,747,166        1,274,470        160        113,386        (3     4,031,805   

Purchases

     7,064,246               12,178,975                             19,243,221   

Sales

     (6,013,243     (15     (10,795,195     (1,250,000     (182            (18,058,635
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Closing Balance, as of October 31, 2012

   $ 8,621,975      $ 8,096      $ 27,270,564             $ 1,394,386             $ 37,295,021   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

5  

Transfers into Level 3 represent values as of the beginning of the reporting period.

 

6  

As of October 31, 2011, the Fund used significant unobservable inputs in determining the value of certain investments. As of October 31, 2012, the Fund used observable inputs in determining the value on the same investments. As a result, investments with a beginning of year value of $11,031,896 transferred from Level 3 to Level 2 in the disclosure hierarchy.

 

7  

Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/depreciation on investments still held as of October 31, 2012 was $761,055.

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    OCTOBER 31, 2012    65


Table of Contents
Statements of Assets and Liabilities     

 

October 31, 2012   BlackRock
Credit
Allocation
Income
Trust I, Inc.
(PSW)
    BlackRock
Credit
Allocation
Income
Trust II, Inc.
(PSY)
    BlackRock
Credit
Allocation
Income
Trust III
(BPP)
    BlackRock
Credit
Allocation
Income
Trust IV
(BTZ)
   

BlackRock
Floating

Rate

Income

Trust

(BGT)*

 
         
Assets                                        

Investments at value — unaffiliated1

  $ 173,640,602      $ 735,787,293      $ 355,608,714      $ 1,165,884,481      $ 504,754,227   

Investments at value — affiliated2

    883,178        1,125,074        4,101,982        1,652,656        2,740,694   

Cash

                         57,836        168,646   

Cash pledged as collateral for financial futures contracts

    207,000        868,000        266,000        766,940          

Cash pledged as collateral for swaps

    120,000        160,000        571,000        3,640,000          

Foreign currency at value3

    8,814        3,738        10,231        44          

Interest receivable

    2,304,966        9,897,602        4,544,658        15,451,746        3,006,249   

Investments sold receivable

    89,184        387,857        187,992        642,446        27,350,485   

Unrealized appreciation on swaps

    149,858        515,759        395,461        1,361,372          

Swap premiums paid

    102,712        317,296        222,925        495,409          

Swaps receivable

    7,711        34,988        67,267        237,218          

Dividends receivable

    9,925        42,325        20,475        70,700          

Variation margin receivable

    3,250        14,111        8,093        23,091          

Unrealized appreciation on foreign currency exchange contracts

    2,443        7,118        423               774,487   

Prepaid expenses

    3,197        7,473        15,263        40,937        9,580   
 

 

 

 

Total assets

    177,532,840        749,168,634        366,020,484        1,190,324,876        538,804,368   
 

 

 

 
         
Liabilities                                        

Bank overdraft on foreign currency at value

                                915,491   

Reverse repurchase agreements

    57,959,120        235,518,351        117,132,156        373,715,690          

Loan payable

                                145,000,000   

Investments purchased payable

                                48,555,690   

Options written at value4

    111,668        474,110        1,413,890        4,814,281          

Investment advisory fees payable

    87,728        370,807        194,043        631,456        302,747   

Cash received as collateral for reverse repurchase agreements

           3,336,000        1,297,000        11,059,900          

Cash received as collateral for swaps

           600,000               500,000          

Reorganization expense payable

    169,391               210,364        317,535          

Interest expense payable

    60,706        262,041        132,828        444,448        109,566   

Variation margin payable

    71,007        309,411        116,544        334,500          

Officer’s and Directors’ fees payable

    974        131,973        57,238        202,709        131,557   

Income dividends payable

    25,994        97,282        25,824        244,779          

Swaps payable

    26,114        109,004        57,423        196,803          

Swap premiums received

    60,066        258,460        107,995        433,645          

Unrealized depreciation on swaps

    46,310        201,782        80,043        347,829          

Unrealized depreciation on foreign currency exchange contracts

                  12,860               119,911   

Other accrued expenses payable

    76,649        153,934        121,865        245,582        386,989   
 

 

 

 

Total liabilities

    58,695,727        241,823,155        120,960,073        393,489,157        195,521,951   
 

 

 

 

Net Assets

  $ 118,837,113      $ 507,345,479      $ 245,060,411      $ 796,835,719      $ 343,282,417   
 

 

 

 
         
Net Assets Consist of                                        

Paid-in capital5,6,7

  $ 225,847,327      $ 874,616,624      $ 422,007,807      $ 1,122,766,528      $ 428,921,834   

Undistributed net investment income

    300,705        3,162,980        850,056        757,568        3,276,393   

Accumulated net realized loss

    (122,953,796     (434,469,584     (201,491,095     (410,476,241     (90,346,145

Net unrealized appreciation/depreciation

    15,642,877        64,035,459        23,693,643        83,787,864        1,430,335   
 

 

 

 

Net Assets

  $ 118,837,113      $ 507,345,479      $ 245,060,411      $ 796,835,719      $ 343,282,417   
 

 

 

 

Net asset value

  $ 11.52      $ 12.43      $ 13.27      $ 15.37      $ 14.52   
 

 

 

 

1 Investments at cost — unaffiliated

  $ 158,124,333      $ 672,121,346      $ 331,571,532      $ 1,080,790,298      $ 503,911,672   

 

2 Investments at cost — affiliated

  $ 883,178      $ 1,125,074      $ 4,101,982      $ 1,652,656      $ 2,740,694   

 

3 Foreign currency at cost

  $ 8,821      $ 3,741      $ 10,239      $ 43      $ (915,031

 

4 Premiums received

  $ 137,175      $ 576,825      $ 838,575      $ 2,861,625          

 

5 Common shares par value per share

  $ 0.100      $ 0.100      $ 0.001      $ 0.001      $ 0.001   

 

6 Common shares outstanding

    10,311,941        40,807,418        18,467,785        51,828,157        23,637,848   

 

7 Common shares authorized

    199,994,540        199,978,000        unlimited        unlimited        unlimited   

 

* Consolidated Statement of Assets and Liabilities.

         

 

 

 

See Notes to Financial Statements.      
                
66    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Statements of Operations     

 

Year Ended October 31, 2012   BlackRock
Credit
Allocation
Income
Trust I, Inc.
(PSW)
     BlackRock
Credit
Allocation
Income
Trust II, Inc.
(PSY)
    BlackRock
Credit
Allocation
Income
Trust III
(BPP)
    BlackRock
Credit
Allocation
Income
Trust IV
(BTZ)
    

BlackRock
Floating

Rate

Income
Trust
(BGT)1

 
           
Investment Income                                          

Interest

  $ 8,344,081       $ 36,012,745      $ 16,780,615      $ 55,360,448       $ 28,217,372   

Dividends — unaffiliated

    321,934         461,995        125,608        2,165,022         35,236   

Income — affiliated

    1,279         7,944        4,061        11,508         5,401   
 

 

 

 

Total income

    8,667,294         36,482,684        16,910,284        57,536,978         28,258,009   
 

 

 

 
           
Expenses                                          

Investment advisory

    955,131         4,034,010        2,067,388        6,865,493         3,441,945   

Professional

    101,850         262,104        81,104        231,066         163,266   

Reorganization costs

    169,391         88,283        210,364        317,535           

Accounting services

    49,888         107,608        70,338        118,514         64,266   

Borrowing costs2

                                  347,092   

Custodian

    21,624         61,222        34,144        74,982         147,908   

Officer and Directors

    15,116         76,882        37,352        113,152         58,226   

Transfer agent

    30,842         85,538        40,700        89,012         45,126   

Printing

    17,414         28,864        5,334        32,802         6,426   

Registration

    9,202         13,960        9,174        17,706         9,298   

Miscellaneous

    21,184         44,271        28,575        84,684         70,997   
 

 

 

 

Total expenses excluding interest expense

    1,391,642         4,802,742        2,584,473        7,944,946         4,354,550   

Interest expense

    167,158         670,195        295,584        990,466         1,192,910   
 

 

 

 

Total expenses

    1,558,800         5,472,937        2,880,057        8,935,412         5,547,460   

Less fees waived by Manager

    (663      (2,325     (1,200     (3,419      (189,614

Less reorganization costs reimbursed

            (88,283                      
 

 

 

 

Total expenses after fees waived

    1,558,137         5,382,329        2,878,857        8,931,993         5,357,846   
 

 

 

 

Net investment income

    7,109,157         31,100,355        14,031,427        48,604,985         22,900,163   
 

 

 

 
           
Realized and Unrealized Gain (Loss)                                          
Net realized gain (loss) from:            

Investments

    3,009,484         8,982,756        5,353,553        13,717,789         (876,524

Financial futures contracts

    (1,288,425      (5,220,149     (1,914,517     (6,488,433        

Foreign currency transactions

    609         (4,006     (923             1,821,880   

Options written

    198,648         844,491        443,725        1,545,370           

Swaps

    (1,127,296      (4,786,144     (2,067,459     (6,765,930      (439,854
 

 

 

 
    793,020         (183,052     1,814,379        2,008,796         505,502   
 

 

 

 
Net change in unrealized appreciation/depreciation on:            

Investments

    9,361,102         44,206,774        19,291,819        69,230,911         14,327,427   

Financial futures contracts

    (127,495      (564,362     (141,109     (521,882        

Foreign currency translations

    6,362         22,801        (12,541     (7      1,285,904   

Options written

    153,816         651,592        (17,567     7,551           

Swaps

    657,203         2,703,679        1,190,853        3,886,657           
 

 

 

 
    10,050,988         47,020,484        20,311,455        72,603,230         15,613,331   
 

 

 

 

Total realized and unrealized gain

    10,844,008         46,837,432        22,125,834        74,612,026         16,118,833   
 

 

 

 

Net Increase in Net Assets Resulting from Operations

  $ 17,953,165       $ 77,937,787      $ 36,157,261      $ 123,217,011       $ 39,018,996   
 

 

 

 

 

1   

Consolidated Statement of Operations.

 

2   

See Note 6 of the Notes to the Financial Statements for details of short-term borrowings.

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    OCTOBER 31, 2012    67


Table of Contents
Statements of Changes in Net Assets     

 

    BlackRock Credit Allocation
Income Trust I, Inc. (PSW)
        BlackRock Credit Allocation
Income Trust II, Inc. (PSY)
 
    Year Ended October 31,         Year Ended October 31,  
Increase (Decrease) in Net Assets Applicable to Common Shareholders:   2012      2011         2012     2011  
          
Operations                                     

Net investment income

  $ 7,109,157       $ 7,124,109        $ 31,100,355      $ 29,691,133   

Net realized gain (loss)

    793,020         (2,345,593       (183,052     (12,706,661

Net change in unrealized appreciation/depreciation

    10,050,988         (690,779       47,020,484        (3,271,622

Dividends to Preferred Shareholders from net investment income

            (61,138              (506,078
 

 

 

     

 

 

   

 

 

 

Net increase in net assets applicable to Common Shareholders resulting from operations

    17,953,165         4,026,599          77,937,787        13,206,772   
 

 

 

     

 

 

   

 

 

 
          
Dividends to Common Shareholders From1                                     

Net investment income

    (7,651,460      (6,305,752       (29,871,030     (26,912,492
 

 

 

     

 

 

   

 

 

 
          
Capital Share Transactions                                     

Refund of offering costs previously charged to paid-in capital

    6,271                           
 

 

 

     

 

 

   

 

 

 
          
Net Assets Applicable to Common Shareholders                                     

Total increase (decrease) in net assets applicable to Common Shareholders

    10,307,976         (2,279,153       48,066,757        (13,705,720

Beginning of year

    108,529,137         110,808,290          459,278,722        472,984,442   
 

 

 

    

 

 

     

 

 

   

 

 

 

End of year

  $ 118,837,113       $ 108,529,137        $ 507,345,479      $ 459,278,722   
 

 

 

     

 

 

   

 

 

 

Undistributed net investment income

  $ 300,705       $ 810,163        $ 3,162,980      $ 2,350,278   
 

 

 

     

 

 

   

 

 

 

 

1   

Dividends are determined in accordance with federal income tax regulations.

 

 

See Notes to Financial Statements.      
                
68    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Statements of Changes in Net Assets     

 

    BlackRock Credit Allocation
Income Trust III (BPP)
        BlackRock Credit Allocation
Income Trust IV (BTZ)
 
    Year Ended October 31,         Year Ended October 31,  
Increase (Decrease) in Net Assets Applicable to Common Shareholders:   2012      2011         2012     2011  
          
Operations                                     

Net investment income

  $ 14,031,427       $ 13,010,851        $ 48,604,985      $ 45,515,474   

Net realized gain (loss)

    1,814,379         (3,054,857       2,008,796        (10,984,247

Net change in unrealized appreciation/depreciation

    20,311,455         (3,755,447       72,603,230        (17,087,131

Dividends to Preferred Shareholders from net investment income

            (23,469              (646,135
 

 

 

    

 

 

     

 

 

   

 

 

 

Net increase in net assets applicable to Common Shareholders resulting from operations

    36,157,261         6,177,078          123,217,011        16,797,961   
 

 

 

    

 

 

     

 

 

   

 

 

 
          
Dividends to Common Shareholders From1                                     

Net investment income

    (14,035,517      (12,336,480       (48,718,467     (43,820,706
 

 

 

    

 

 

     

 

 

   

 

 

 
          
Net Assets Applicable to Common Shareholders                                     

Total increase (decrease) in net assets applicable to Common Shareholders

    22,121,744         (6,159,402       74,498,544        (27,022,745

Beginning of year

    222,938,667         229,098,069          722,337,175        749,359,920   
 

 

 

    

 

 

     

 

 

   

 

 

 

End of year

  $ 245,060,411       $ 222,938,667        $ 796,835,719      $ 722,337,175   
 

 

 

    

 

 

     

 

 

   

 

 

 

Undistributed net investment income

  $ 850,056       $ 787,825        $ 757,568      $ 1,025,075   
 

 

 

    

 

 

     

 

 

   

 

 

 

 

1   

Dividends are determined in accordance with federal income tax regulations.

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    OCTOBER 31, 2012    69


Table of Contents
Statements of Changes in Net Assets     

 

    BlackRock Floating Rate
Income Trust (BGT)
 
    Year Ended October 31,  
Increase (Decrease) in Net Assets Applicable to Common Shareholders:   20121      2011  
    
Operations                 

Net investment income

  $ 22,900,163       $ 23,584,991   

Net realized gain (loss)

    505,502         (3,466,879

Net change in unrealized appreciation/depreciation

    15,613,331         (6,557,897

Dividends to Preferred Shareholders from net investment income

            (90,614
 

 

 

    

 

 

 

Net increase in net assets applicable to Common Shareholders resulting from operations

    39,018,996         13,469,601   
 

 

 

    

 

 

 
    
Dividends to Common Shareholders From2                 

Net investment income

    (25,867,315)         (25,653,072
 

 

 

    

 

 

 
    
Capital Share Transactions                 

Reinvestment of common dividends

    300,131         577,941   
 

 

 

    

 

 

 
    
Net Assets Applicable to Common Shareholders                 

Total increase (decrease) in net assets applicable to Common Shareholders

    13,451,812         (11,605,530

Beginning of year

    329,830,605         341,436,135   
 

 

 

    

 

 

 

End of year

  $ 343,282,417       $ 329,830,605   
 

 

 

    

 

 

 

Undistributed net investment income

  $ 3,276,393       $ 5,628,436   
 

 

 

    

 

 

 

 

1   

Consolidated Statement of Changes in Net Assets.

 

2   

Dividends are determined in accordance with federal income tax regulations.

 

 

See Notes to Financial Statements.      
                
70    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Statements of Cash Flows     

 

Year Ended October 31, 2012   BlackRock
Credit
Allocation
Income
Trust I, Inc.
(PSW)
   

BlackRock

Credit
Allocation

Income

Trust II, Inc.

(PSY)

    BlackRock
Credit
Allocation
Income
Trust III
(BPP)
    BlackRock
Credit
Allocation
Income
Trust IV
(BTZ)
    BlackRock
Floating Rate
Income
Trust
(BGT)1
 
         
Cash Provided by (Used for) Operating Activities                                        

Net increase in net assets resulting from operations

  $ 17,953,165      $ 77,937,787      $ 36,157,261      $ 123,217,011      $ 39,018,996   

Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used for) operating activities:

         

(Increase) decrease in interest receivable

    54,707        416,812        18,182        554,393        (1,392,908

(Increase) decrease in swap receivable

    5,897        27,204        (6,186     (24,048       

Decrease in other assets

    456        89,507        51,943        138,860        106,808   

Decrease in prepaid expenses

    3,419        8,371        7,642        20,494        44,443   

Increase in variation margin receivable

    (3,250     (14,111     (8,093     (23,091       

(Increase) decrease in dividends receivable

    (7,925     (41,989     (20,250     (70,183     418   

Decrease in cash pledged as collateral for reverse repurchase agreements

                         690,000          

Decrease in cash pledged as collateral for financial futures contracts

    310,000        1,378,000        539,000        1,623,000          

(Increase) decrease in cash pledged as collateral for swaps

    480,000        1,110,000        (571,000     1,710,000          

Increase in reorganization expense payable

    169,391               210,364        317,535          

Increase in investment advisory fees payable

    7,356        34,998        26,026        64,095        24,364   

Increase in interest expense payable

    28,531        118,605        62,915        82,506        11,176   

Increase in cash received as collateral for reverse repurchase agreements

           3,336,000        972,000        10,211,900          

Increase (decrease) in cash received as collateral for swaps

           600,000               (200,000       

Increase (decrease) in other accrued expenses payable

    19,179        22,535        (57,338     (97,144     (33,055

Decrease in variation margin payable

    (216,289     (944,144     (266,722     (873,677       

Decrease in swaps payable

    (6,544     (26,499     (15,439     (43,271       

Increase (decrease) in Officer’s and Directors’ fees payable

    436        41,645        (1,207     49,104        22,358   

Net periodic and termination payments of swaps

    (1,020,983     (4,213,584     (1,778,447     (5,912,369     (439,854

Net realized and unrealized (gain) loss on investments

    (12,245,062     (52,500,451     (24,192,112     (81,650,583     (14,296,953

Amortization of premium and accretion of discount on investments

    459,360        1,741,486        865,418        3,096,093        (2,181,275

Premiums received from options written

    684,242        2,948,820        1,308,426        3,876,621          

Proceeds from sales of long-term investments

    59,469,494        249,989,101        115,926,946        401,088,011        287,522,497   

Purchases of long-term investments

    (63,609,633     (273,017,062     (139,091,418     (452,528,412     (304,800,600

Net proceeds from sales (purchases) of short-term securities

    479,754        (719,366     (1,642,068     2,170,452        (1,669,127

Premiums paid on closing options written

    (478,019     (2,081,905     (877,526     (2,393,326       
 

 

 

 

Cash provided by (used for) operating activities

    2,537,682        6,241,760        (12,381,683     5,093,971        1,937,288   
 

 

 

 
         
Cash Provided by (Used for) Financing Activities                                        

Cash receipts from borrowings

    40,712,838        155,460,174        90,996,799        227,921,167        231,000,000   

Cash payments on borrowings

    (35,648,899     (132,014,960     (64,628,906     (184,909,665     (208,000,000

Cash dividends paid to Common Shareholders

    (7,652,828     (29,898,263     (14,046,430     (48,700,473     (25,614,645

Refund of offering costs

    6,271                               

Increase in bank overdraft on foreign currency

                                848,080   
 

 

 

 

Cash provided by (used for) financing activities

    (2,582,618     (6,453,049     12,321,463        (5,688,971     (1,766,565
 

 

 

 
         
Cash Impact from Foreign Exchange Fluctuations                                        

Cash impact from foreign exchange fluctuations

    1,753        6,748        (46     (3     (2,077
 

 

 

 
         
Cash and Foreign Currency                                        

Net increase (decrease) in cash and foreign currency

    (43,183     (204,541     (60,266     (595,003     168,646   

Cash and foreign currency at beginning of year

    51,997        208,279        70,497        652,883          
 

 

 

 

Cash and foreign currency at end of year

  $ 8,814      $ 3,738      $ 10,231      $ 57,880      $ 168,646   
 

 

 

 
         
Cash Flow Information                                        

Cash paid during the year for interest

  $ 138,627      $ 551,590      $ 232,669      $ 907,960      $ 1,181,735   
 

 

 

 
         
Non-Cash Financing Activities                                        

Capital shares issued in reinvestment of dividends

                              $ 300,131   
 

 

 

 

 

1   

Consolidated Statement of Cash Flows.

 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    OCTOBER 31, 2012    71


Table of Contents
Financial Highlights    BlackRock Credit Allocation Income Trust I, Inc. (PSW)

 

    Year Ended October 31,  
    2012      2011      2010      2009      2008  
             
Per Share Operating Performance                                            

Net asset value, beginning of year

  $ 10.52       $ 10.75       $ 9.31       $ 7.43       $ 19.54      
 

 

 

 

Net investment income1

    0.69         0.69         0.63         0.86         1.70      

Net realized and unrealized gain (loss)

    1.05         (0.30)         1.58         2.06         (12.06)     

Dividends to Preferred Shareholders from net investment income

            (0.01)         (0.06)         (0.08)         (0.48)     
 

 

 

 

Net increase (decrease) from investment operations

    1.74         0.38         2.15         2.84         (10.84)     
 

 

 

 
Dividends and distributions to Common Shareholders from:6              

Net investment income

    (0.74)         (0.61)         (0.62)         (0.83)         (1.22)     

Tax return of capital

                    (0.09)         (0.13)         (0.05)     
 

 

 

 

Total dividends and distributions

    (0.74)         (0.61)         (0.71)         (0.96)         (1.27)     
 

 

 

 

Net asset value, end of year

  $ 11.52       $ 10.52       $ 10.75       $ 9.31       $ 7.43      
 

 

 

 

Market price, end of year

  $ 10.70       $ 9.25       $ 9.67       $ 8.24       $ 7.00      
 

 

 

 
             
Total Investment Return Applicable to Common Shareholders2                                            

Based on net asset value

    17.95%         4.55%         24.77% 3       46.46%         (58.09)%   
 

 

 

 

Based on market price

    24.59%         2.20%         26.81%         37.59%         (55.38)%   
 

 

 

 
             
Ratios to Average Net Assets Applicable to Common Shareholders                                            

Total expenses4

    1.40% 5       1.14%         1.16%         1.61%         2.00%    
 

 

 

 

Total expenses after fees waived and paid indirectly4

    1.40% 5       1.14%         1.14%         1.59%         2.00%    
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense4

    1.25% 5       1.02%         1.13%         1.44%         1.48%    
 

 

 

 

Net investment income4

    6.40%         6.56%         6.28%         12.45%         10.79%    
 

 

 

 

Dividends to Preferred Shareholders

            0.06%         0.59%         1.09%         3.03%    
 

 

 

 

Net investment income to Common Shareholders

    6.40%         6.50%         5.69%         11.36%         7.76%    
 

 

 

 
             
Supplemental Data                                            

Net assets applicable to Common Shareholders, end of year (000)

  $       118,837       $       108,529       $       110,808       $       96,048       $       76,430      
 

 

 

 

Preferred Shares outstanding at $25,000 liquidation preference, end of year (000)

                  $ 40,250       $ 40,250       $ 68,250      
 

 

 

 

Borrowings outstanding, end of year (000)

  $ 57,959       $ 53,268       $ 6,083       $ 4,972       $ 4,024      
 

 

 

 

Average borrowings outstanding during the year (000)

    48,108       $ 34,952       $ 5,269       $ 5,321       $ 25,692      
 

 

 

 

Portfolio turnover

    37%         53%         66%         36%         119%    
 

 

 

 

Asset coverage per Preferred Share at $25,000 liquidation preference, end of year

                  $ 93,831       $ 84,663       $ 53,009      
 

 

 

 

Asset coverage, end of year per $1,000

  $ 3,050       $ 3,037                         —      
 

 

 

 

 

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   

Includes the proceeds from a settlement of litigation which impacted the Fund. Not including these proceeds the Fund’s total return would have been 24.54%.

 

4   

Do not reflect the effect of dividends to Preferred Shareholders.

 

5   

Includes reorganization costs associated with the Fund’s merger. Without these costs, total expenses, total expenses after fees waived and paid indirectly, and total expenses after fees waived and paid indirectly and excluding interest expense would have been 1.25%, 1.25% and 1.10%, respectively.

 

6   

Dividends and distributions are determined in accordance with federal income tax regulations.

 

 

See Notes to Financial Statements.      
                
72    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Financial Highlights    BlackRock Credit Allocation Income Trust II, Inc.  (PSY)

 

    Year Ended October 31,  
    2012      2011      2010      2009      2008  
             
Per Share Operating Performance                                            

Net asset value, beginning of year

  $ 11.25       $ 11.59       $ 10.03       $ 7.96       $ 19.93      
 

 

 

 

Net investment income1

    0.76         0.73         0.72         1.11         1.73      

Net realized and unrealized gain (loss)

    1.15         (0.40)         1.74         2.17         (11.84)     

Dividends to Preferred Shareholders from net investment income

            (0.01)         (0.06)         (0.09)         (0.49)     
 

 

 

 

Net increase (decrease) from investment operations

    1.91         0.32         2.40         3.19         (10.60)     
 

 

 

 
Dividends and distributions to Common Shareholders from:6              

Net investment income

    (0.73)         (0.66)         (0.71)         (1.12)         (1.15)     

Tax return of capital

                    (0.13)         (0.00) 2       (0.22)     
 

 

 

 

Total dividends and distributions

    (0.73)         (0.66)         (0.84)         (1.12)         (1.37)     
 

 

 

 

Net asset value, end of year

  $ 12.43       $ 11.25       $ 11.59       $ 10.03       $ 7.96      
 

 

 

 

Market price, end of year

  $ 11.54       $ 9.74       $ 10.39       $ 8.90       $ 8.10      
 

 

 

 
             
Total Investment Return Applicable to Common Shareholders3                                            

Based on net asset value

    18.28%         3.71%         25.70% 4       48.36%         (55.71)%   
 

 

 

 

Based on market price

    26.84%         0.16%         26.99%         29.37%         (46.97)%   
 

 

 

 
             
Ratios to Average Net Assets Applicable to Common Shareholders                                            

Total expenses5

    1.15%         1.12%         1.04%         1.41%         1.90%    
 

 

 

 

Total expenses after fees waived and paid indirectly5

    1.14%         1.12%         1.03%         1.41%         1.90%    
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense5

    0.99%         1.01%         1.02%         1.33%         1.40%    
 

 

 

 

Net investment income5

    6.56%         6.42%         6.66%         15.05%         10.71%    
 

 

 

 

Dividends to Preferred Shareholders

            0.11%         0.58%         1.19%         3.04%    
 

 

 

 

Net investment income to Common Shareholders

    6.56%         6.31%         6.08%         13.86%         7.67%    
 

 

 

 
             
Supplemental Data                                            

Net assets applicable to Common Shareholders, end of year (000)

  $       507,345       $       459,279       $       472,984       $       409,293       $       323,132      
 

 

 

 

Preferred Shares outstanding at $25,000 liquidation preference, end of year (000)

                  $ 169,025       $ 169,025       $ 275,000      
 

 

 

 

Borrowings outstanding, end of year (000)

  $ 235,518       $ 213,033       $ 4,020       $ 9,511       $ 54,369      
 

 

 

 

Average borrowings outstanding during the year (000)

    198,514       $ 137,824       $ 13,407       $ 15,842       $ 94,908      
 

 

 

 

Portfolio turnover

    37%         50%         73%         16%         120%    
 

 

 

 

Asset coverage per Preferred Share at $25,000 liquidation preference, end of year

                  $ 94,968       $ 85,547       $ 54,408      
 

 

 

 

Asset coverage, end of year per $1,000

  $ 3,154       $ 3,156                         —      
 

 

 

 

 

1   

Based on average shares outstanding.

 

2   

Amount is less than $(0.01) per share.

 

3   

Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

 

4   

Includes the proceeds from a settlement of litigation which impacted the Fund. Not including these proceeds the Fund’s total return would have been 25.37%.

 

5   

Do not reflect the effect of dividends to Preferred Shareholders.

 

6   

Dividends and distributions are determined in accordance with federal income tax regulations.

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    OCTOBER 31, 2012    73


Table of Contents
Financial Highlights    BlackRock Credit Allocation Income Trust III (BPP)

 

    Year Ended October 31,     Period
January 1, 2008
to October 31,
2008
    Year Ended
December 31,
2007
 
    2012     2011     2010     2009      
           
Per Share Operating Performance                                                

Net asset value, beginning of period

  $ 12.07      $ 12.41      $ 11.05      $ 8.77      $ 19.47      $ 24.52   
 

 

 

 

Net investment income

    0.76 1      0.70 1      0.73 1      1.09 1      1.48 1      2.05   

Net realized and unrealized gain (loss)

    1.20        (0.37     1.48        2.40        (10.74     (4.72

Dividends to Preferred Shareholders from net investment income

           (0.00 )2      (0.01     (0.03     (0.31     (0.62
 

 

 

 

Net increase (decrease) from investment operations

    1.96        0.33        2.20        3.46        (9.57     (3.29
 

 

 

 
Dividends and distributions to Common Shareholders from:8            

Net investment income

    (0.76     (0.67     (0.76     (0.95     (0.83     (1.59

Net realized gain

                                       (0.02

Tax return of capital

                  (0.08     (0.23     (0.30     (0.15
 

 

 

 

Total dividends and distributions

    (0.76     (0.67     (0.84     (1.18     (1.13     (1.76
 

 

 

 

Net asset value, end of period

  $ 13.27      $ 12.07      $ 12.41      $ 11.05      $ 8.77      $ 19.47   
 

 

 

 

Market price, end of period

  $ 12.28      $ 10.53      $ 11.23      $ 9.94      $ 8.51      $ 17.31   
 

 

 

 
           
Total Investment Return Applicable to Common Shareholders3                                                

Based on net asset value

    17.53%        3.56%        21.52%        47.16%        (51.22)% 4      (13.86)%   
 

 

 

 

Based on market price

    24.67%        (0.16)%        22.25%        36.42%        (46.76)% 4      (28.62)%   
 

 

 

 
           
Ratios to Average Net Assets Applicable to Common Shareholders                                                

Total expenses5

    1.26% 6      1.05%        1.09%        1.66%        1.96% 7      1.46%   
 

 

 

 

Total expenses after fees waived and paid indirectly5

    1.26% 6      1.05%        1.08%        1.64%        1.96% 7      1.45%   
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense5

    1.13% 6      0.96%        1.07%        1.39%        1.39% 7      1.24%   
 

 

 

 

Net investment income5

    6.12%        5.78%        6.31%        13.08%        10.53% 7      8.90%   
 

 

 

 

Dividends to Preferred Shareholders

           0.01%        0.10%        0.38%        2.19% 7      2.70%   
 

 

 

 

Net investment income to Common Shareholders

    6.12%        5.77%        6.21%        12.70%        8.34% 7      6.20%   
 

 

 

 
           
Supplemental Data                                                

Net assets applicable to Common Shareholders, end of period (000)

  $ 245,060      $ 222,939      $ 229,098      $ 204,133      $ 161,311      $ 358,017   
 

 

 

 

Preferred Shares outstanding at $25,000 liquidation preference, end of period (000)

                $ 70,425      $ 70,425      $ 110,400      $ 220,800   
 

 

 

 

Borrowings outstanding, end of period (000)

  $ 117,132      $ 92,971             $ 13,235      $ 44,281          
 

 

 

 

Average borrowings outstanding during the period (000)

    88,918      $ 51,264      $ 2,121      $ 16,330      $ 51,995      $ 903   
 

 

 

 

Portfolio turnover

    36%        48%        67%        16%        121%        97%   
 

 

 

 

Asset coverage per Preferred Share at $25,000 liquidation preference, end of period

                $ 106,328      $ 97,465      $ 61,540      $ 65,554   
 

 

 

 

Asset coverage, end of period per $1,000

  $ 3,092      $ 3,398                               
 

 

 

 

 

1   

Based on average shares outstanding.

 

2   

Amount is less than $(0.01) per share.

 

3   

Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

 

4   

Aggregate total investment return.

 

5   

Do not reflect the effect of dividends to Preferred Shareholders.

 

6   

Includes reorganization costs associated with the Fund’s merger. Without these costs, total expenses, total expenses after fees waived and paid indirectly, and total expenses after fees waived and paid indirectly and excluding interest expense would have been 1.16%, 1.16% and 1.03%, respectively.

 

7   

Annualized.

 

8   

Dividends and distributions are determined in accordance with federal income tax regulations.

 

 

See Notes to Financial Statements.      
                
74    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Financial Highlights    BlackRock Credit Allocation Income Trust IV (BTZ)

 

    Year Ended October 31,  
    2012      2011      2010      2009      2008  
             
Per Share Operating Performance                                            

Net asset value, beginning of year

  $ 13.94       $ 14.46       $ 12.64       $ 10.59       $ 21.39      
 

 

 

 

Net investment income1

    0.94         0.88         0.85         0.99         1.33      

Net realized and unrealized gain (loss)

    1.43         (0.54)         2.14         2.54         (10.06)     

Dividends to Preferred Shareholders from net investment income

            (0.01)         (0.07)         (0.07)         (0.33)     
 

 

 

 

Net increase (decrease) from investment operations

    2.37         0.33         2.92         3.46         (9.06)     
 

 

 

 

Dividends and distributions to Common Shareholders from:5

             

Net investment income

    (0.94)         (0.85)         (0.81)         (0.93)         (0.90)     

Tax return of capital

                    (0.29)         (0.48)         (0.84)     
 

 

 

 

Total dividends and distributions

    (0.94)         (0.85)         (1.10)         (1.41)         (1.74)     
 

 

 

 

Net asset value, end of year

  $ 15.37       $ 13.94       $ 14.46       $ 12.64       $ 10.59      
 

 

 

 

Market price, end of year

  $ 14.23       $ 12.08       $ 13.02       $ 10.96       $ 9.36      
 

 

 

 
             
Total Investment Return Applicable to Common Shareholders2                                            

Based on net asset value

    18.35%         3.28%         25.16%         41.06%         (44.27)%   
 

 

 

 

Based on market price

    26.44%         (0.60)%         29.98%         38.38%         (43.51)%   
 

 

 

 
             
Ratios to Average Net Assets Applicable to Common Shareholders                                            

Total expenses3

    1.20% 4       1.09%         1.12%         1.60%         1.65%    
 

 

 

 

Total expenses after fees waived and paid indirectly3

    1.20% 4       1.09%         1.11%         1.58%         1.65%    
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense3

    1.07% 4       0.99%         1.07%         1.24%         1.21%    
 

 

 

 

Net investment income3

    6.53%         6.25%         6.33%         9.93%         7.63%    
 

 

 

 

Dividends to Preferred Shareholders

            0.09%         0.50%         0.74%         1.89%    
 

 

 

 

Net investment income to Common Shareholders

    6.53%         6.16%         5.83%         9.19%         5.74%    
 

 

 

 
             
Supplemental Data                                            

Net assets applicable to Common Shareholders, end of year (000)

  $ 796,836       $ 722,337       $ 749,360       $ 654,999       $ 548,612      
 

 

 

 

Preferred Shares outstanding at $25,000 liquidation preference, end of year (000)

                  $       231,000       $       231,000       $       231,000      
 

 

 

 

Borrowings outstanding, end of year (000)

  $       373,716       $       339,303               $ 61,576       $ 223,512      
 

 

 

 

Average borrowings outstanding during the year (000)

    312,634       $ 182,843       $ 63,660       $ 76,521       $ 107,377      
 

 

 

 

Portfolio turnover

    37%         54%         64%         30%         126%    
 

 

 

 

Asset coverage per Preferred Share at $25,000 liquidation preference, end of year

                  $ 106,104       $ 95,892       $ 84,384      
 

 

 

 

Asset coverage, end of year per $1,000

  $ 3,132       $ 3,129                         —      
 

 

 

 

 

1   

Based on average shares outstanding.

 

2   

Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

 

3   

Do not reflect the effect of dividends to Preferred Shareholders.

 

4   

Includes reorganization costs associated with the Fund’s merger. Without these costs, total expenses, total expenses after fees waived and paid indirectly, and total expenses after fees waived and paid indirectly and excluding interest expense would have been 1.16%, 1.16% and 1.02%, respectively.

 

5   

Dividends and distributions are determined in accordance with federal income tax regulations.

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    OCTOBER 31, 2012    75


Table of Contents
Financial Highlights    BlackRock Floating Rate Income Trust (BGT)

 

    Year Ended October 31,     Period
January 1, 2008
to October 31,
2008
    Year Ended
December 31,
2007
 
    20121     2011     2010     2009      
           
Per Share Operating Performance                                                

Net asset value, beginning of period

  $ 13.97      $ 14.48      $ 13.29      $ 11.24      $ 17.71      $ 19.11   
 

 

 

 

Net investment income

    0.97 2      1.00 2      0.97 2      0.98 2      1.42 2      2.03   

Net realized and unrealized gain (loss)

    0.68        (0.42     1.09        2.72        (6.62     (1.39

Dividends to Preferred Shareholders from net investment income

           (0.00 )3      (0.04     (0.04     (0.24     (0.54
 

 

 

 

Net increase (decrease) from investment operations

    1.65        0.58        2.02        3.66        (5.44     0.10   
 

 

 

 
Dividends and distributions to Common Shareholders from:9            

Net investment income

    (1.10     (1.09     (0.83     (1.19     (1.03     (1.14

Tax return of capital

                         (0.42            (0.36
 

 

 

 

Total dividends and distributions

    (1.10     (1.09     (0.83     (1.61     (1.03     (1.50
 

 

 

 

Net asset value, end of period

  $ 14.52      $ 13.97      $ 14.48      $ 13.29      $ 11.24      $ 17.71   
 

 

 

 

Market price, end of period

  $ 15.07      $ 13.00      $ 14.52      $ 12.58      $ 9.63      $ 15.78   
 

 

 

 
           
Total Investment Return Applicable to Common Shareholders4                                                

Based on net asset value

    12.37%        4.03%        15.55%        39.51%        (31.62)% 5      0.98%   
 

 

 

 

Based on market price

    25.33%        (3.46)%        22.41%        54.14%        (34.24)% 5      (10.92)%   
 

 

 

 
           
Ratios to Average Net Assets Applicable to Common Shareholders                                                

Total expenses6

    1.66%        1.73%        1.43%        1.96%        2.22% 8      1.67%   
 

 

 

 

Total expenses after fees waived and paid indirectly6

    1.61%        1.60%        1.25%        1.68%        1.89% 8      1.33%   
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense6

    1.25% 7      1.24%        1.15%        1.24%        1.21% 8      1.16%   
 

 

 

 

Net investment income6

    6.87%        6.95%        7.01%        8.92%        10.56% 8      10.83%   
 

 

 

 

Dividends to Preferred Shareholders

           0.03%        0.27%        0.38%        1.75% 8      2.88%   
 

 

 

 

Net investment income to Common Shareholders

    6.87%        6.92%        6.74%        8.54%        8.81% 8      7.95%   
 

 

 

 
           
Supplemental Data                                                

Net assets applicable to Common Shareholders, end of period (000)

  $ 343,282      $ 329,831      $ 341,436      $ 312,872      $ 264,590      $ 417,086   
 

 

 

 

Preferred Shares outstanding at $25,000 liquidation preference, end of period (000)

                $ 58,800      $ 58,800      $ 58,800      $ 243,450   
 

 

 

 

Borrowings outstanding, end of period (000)

  $ 145,000      $ 122,000      $ 38,000      $ 14,000      $ 123,150          
 

 

 

 

Average borrowings outstanding during the period (000)

    126,186      $ 120,334      $ 24,321      $ 53,156      $ 71,780      $ 10,524   
 

 

 

 

Portfolio turnover

    65%        89%        87%        42%        25%        41%   
 

 

 

 

Asset coverage per Preferred Share at $25,000 liquidation preference, end of period

                $ 170,174      $ 158,029      $ 137,505      $ 67,849   
 

 

 

 

Asset coverage, end of period per $1,000

  $ 3,367      $ 3,704                               
 

 

 

 

 

1   

Consolidated Financial Highlights.

 

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   

Do not reflect the effect of dividends to Preferred Shareholders.

 

7   

For the year ended October 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense and borrowing costs was 1.14%.

 

8   

Annualized.

 

9   

Dividends and distributions are determined in accordance with federal income tax regulations.

 

 

See Notes to Financial Statements.      
                
76    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Notes to Financial Statements     

 

1. Organization and Significant Accounting Policies:

BlackRock Credit Allocation Income Trust I, Inc. (“PSW”) and BlackRock Credit Allocation Income Trust II, Inc. (“PSY”) are registered under the 1940 Act, as diversified, closed-end management investment companies. BlackRock Credit Allocation Income Trust III (“BPP”), BlackRock Credit Allocation Income Trust IV (“BTZ”) and BlackRock Floating Rate Income Trust (“BGT”) are registered under the 1940 Act as non-diversified, closed-end management investment companies. PSW and PSY are organized as Maryland corporations. BPP, BTZ and BGT are organized as Delaware statutory trusts. PSW, PSY, BPP, BTZ and BGT are collectively referred to as the “Funds” or individually as the “Fund”. The Funds’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Boards of Directors and Boards of Trustees of the Funds are collectively referred to throughout this report as the “Board of Directors” or the “Board”, and the directors/trustees thereof are collectively referred to throughout this report as “Directors”. The Funds determine and make available for publication the NAVs of their Common Shares on a daily basis.

Reorganizations: On July 27, 2012, the Board approved separate plans of reorganization whereby BTZ would acquire all of the assets and assume all of the liabilities of PSW, PSY and BPP (each a “Target Fund”) in exchange for newly issued shares of BTZ in a merger transaction. BlackRock Advisors, LLC (the “Manager”) reimbursed PSY $88,283, which is shown as reorganization costs reimbursed in the Statements of Operations.

The following is a summary of significant accounting policies followed by the Funds:

Basis of Consolidation: BGT’s accompanying consolidated financial statements include the account of BGT JGW SPV, LLC (the “Taxable Subsidiary”), a wholly owned taxable subsidiary of BGT. The Taxable Subsidiary enables BGT to hold its investment in J.G. Wentworth LLC Preferred Equity Interests that is organized as an operating partnership and still satisfy Regulated Investment Company (“RIC”) tax requirements. Income earned and gains realized on the investment held by the Taxable Subsidiary are taxable to such subsidiary. An income tax provision for all income, including realized and unrealized gains, if any, is reflected as a component of realized and unrealized gain (loss) on the Consolidated Statement of Operations. BGT may invest up to 25% of its total assets in the Taxable Subsidiary. Intercompany accounts and transactions have been eliminated. The Taxable Subsidiary is subject to the same investment policies and restrictions that apply to BGT.

Valuation: US GAAP defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds fair value their financial instruments at market value using independent dealers or pricing services under policies approved by the Board. The Global Valuation Committee is the committee formed by management to

develop global pricing policies and procedures and to provide oversight of the pricing function for the Funds for all financial instruments.

The Funds value their bond investments on the basis of last available bid prices or current market quotations provided by dealers or pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more brokers or dealers as obtained from a pricing service. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments and calculated yield measures. Asset-backed and mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop 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. Swap agreements are valued utilizing quotes received daily by the Funds’ pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments. Investments in open-end registered investment companies are valued at NAV each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

Municipal investments (including commitments to purchase such investments on a “when-issued” basis) are valued on the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments.

Equity investments traded on a recognized securities exchange or the NASDAQ Global Market System (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that such prior day’s price no longer reflects the fair value of the security.

Securities and other assets and liabilities denominated in foreign currencies are translated into US dollars using exchange rates determined as of the close of business on the New York Stock Exchange (“NYSE”). Foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of business on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

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

 

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    77


Table of Contents
Notes to Financial Statements (continued)     

 

valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that the prior day’s price no longer reflects the fair value of the option. Over-the-counter (“OTC”) 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 instruments.

In the event that application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that each Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the investment advisor and/or sub-advisor deems relevant consistent with the principles of fair value measurement which include the market approach, income approach and/or cost approach, as appropriate. A market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and adjusted for liquidity as appropriate. These factors include but are not limited to (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Funds’ pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of business on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of business on the NYSE that may not be reflected in the computation of the Funds’ net assets. If events (for example, a company announcement, market volatility or a natural disaster) occur during such periods that are expected to affect the value of such instruments materially, those instruments may be Fair Value Assets and be valued at their fair value, as determined in good faith by

the Global Valuation Committee using a pricing service and/or policies approved by the Board.

Foreign Currency: The Funds’ books and records are maintained in US dollars. Purchases and sales of investment securities are recorded at the rates of exchange prevailing on the respective date of such transactions. Generally, when the US dollar rises in value against a foreign currency, the Funds’ investments denominated in that currency will lose value because that currency is worth fewer US dollars; the opposite effect occurs if the US dollar falls in relative value.

The Funds do not isolate the portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in foreign currency exchange rates on investments are not segregated on the Statements of Operations from the effects of changes in market prices of those investments but are included as a component of net realized and unrealized gain (loss) from investments. The Funds report realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes.

Asset-Backed and Mortgage-Backed Securities: The 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 securities 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 the Funds have 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 instrumentalities of the US government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed Mortgage Pass-Through Certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of

 

 

                
78    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Notes to Financial Statements (continued)     

 

the United States but are supported by the right of the issuer to borrow from the Treasury.

Collateralized Debt Obligations: The Funds may invest in collateralized debt obligations (“CDOs”), which include collateralized bond obligations (“CBOs”) and collateralized loan obligations (“CLOs”). CBOs and CLOs are types of asset-backed securities. A CDO is an entity which is backed by a diversified pool of debt securities (CBOs) or syndicated bank loans (CLOs). The cash flows of the CDO can be split into multiple segments, called “tranches”, which will vary in risk profile and yield. The riskiest segment is the subordinated or “equity” tranche. This tranche bears the greatest risk of defaults from the underlying assets in the CDO and serves to protect the other, more senior, tranches from default in all but the most severe circumstances. Since it is shielded from defaults by the more junior tranches, a “senior” tranche will typically have higher credit ratings and lower yields than their underlying securities, and often receive investment grade ratings from one or more of the nationally recognized rating agencies. Despite the protection from the more junior tranches, senior tranches can experience substantial losses due to actual defaults, increased sensitivity to future defaults and the disappearance of one or more protecting tranches as a result of changes in the credit profile of the underlying pool of assets.

Multiple Class Pass-Through Securities: The Funds may invest in multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities. These multiple class securities may be issued by Ginnie Mae, US government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by, and multiple class pass-through securities represent direct ownership interests in, a pool of residential or commercial mortgage loans or mortgage pass-through securities (the “Mortgage Assets”), the payments on which are used to make payments on the CMOs or multiple pass-through securities. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated pre-payments of principal, the Funds may not fully recoup its initial investment in IOs.

Zero-Coupon Bonds: The Funds may invest in zero-coupon bonds, which are normally issued at a significant discount from face value and do not provide for periodic interest payments. Zero-coupon bonds may experience greater volatility in market value than similar maturity debt obligations which provide for regular interest payments.

Capital Trusts: The Funds may invest in capital trusts. These securities are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics, or by an affiliated business trust of a corporation, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured as either fixed or adjustable coupon securities that can have either a perpetual or stated maturity date. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. Payments on these securities are treated as interest rather than dividends for federal income tax purposes. These securities generally are rated below that of the issuing company’s senior debt securities.

Preferred Stock: The Funds may invest in preferred stocks. Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Floating Rate Loan Interests: The Funds may invest in floating rate loan interests. The floating rate loan interests the Funds hold are typically issued to companies (the “borrower”) by banks, other financial institutions, and privately and publicly offered corporations (the “lender”). Floating rate loan interests are generally non-investment grade, often involve borrowers whose financial condition is troubled or uncertain and companies that are highly leveraged. The Funds may invest in obligations of borrowers who are in bankruptcy proceedings. Floating rate loan interests may include fully funded term loans or revolving lines of credit. Floating rate loan interests are typically senior in the corporate capital structure of the borrower. Floating rate loan interests generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. The base lending rates are generally the lending rate offered by one or more European banks, such as London Interbank Offered Rate (“LIBOR”), the prime rate offered by one or more US banks or the certificate of deposit rate. Floating rate loan interests may involve foreign borrowers, and investments may be denominated in foreign currencies. The Funds consider these investments to be investments in debt securities for purposes of their investment policies.

When the Funds purchase a floating rate loan interest it may receive a facility fee and when it sells a floating rate loan interest 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 amount

 

 

                
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of a floating rate loan interest. Facility and commitment fees are typically amortized to income over the term of the loan or term of the commitment, respectively. Consent and amendment fees are recorded to income as earned. Prepayment penalty fees, which may be received by the Funds upon the prepayment of a floating rate loan interest by a borrower, are recorded as realized gains. 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 loan interests are usually freely callable at the borrower’s option. The Funds may invest in such loans in the form of participations in loans (“Participations”) or assignments (“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, nor any rights of offset against the borrower, and the Funds may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, the Funds will assume the credit risk of both the borrower and the lender that is selling the Participation. The Funds’ investment in loan participation interests involves the risk of insolvency of the financial intermediaries who are parties to the transactions. In the event of the insolvency of the lender selling the Participation, the Funds may be treated as a general creditor of the lender and may not benefit from any offset between the lender and the borrower. Assignments typically result in the Funds having a direct contractual relationship with the borrower, and the Funds may enforce compliance by the borrower with the terms of the loan agreement.

Forward Commitments and When-Issued Delayed Delivery Securities: The 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 purchase or sale commitment is made. The Funds may purchase securities under such conditions 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 Funds are not entitled to any of the interest earned prior to 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 appreciation of unsettled when-issued transactions, which is shown in the Schedules of Investments.

Reverse Repurchase Agreements: The 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 same securities at a mutually agreed upon date and price. Securities sold under reverse repurchase agreements are recorded as a liability in the Statements of Assets and

Liabilities at face value including accrued interest. Due to the short term nature of the reverse repurchase agreements, face value approximates fair value. During the term of the reverse repurchase agreement, the Funds continue to receive the principal and interest payments on these securities. Certain agreements have no stated maturity and can be terminated by either party at any time. 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 of the agreement may be restricted while the other party, or its trustee or receiver, determines whether or not to enforce the Funds’ obligation to repurchase the securities.

Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that each Fund either deliver collateral or segregate assets in connection with certain investments (e.g., financial futures contracts, foreign currency exchange contracts, swaps and options written), or certain borrowings (e.g., reverse repurchase agreements and loan payable), 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 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, a Fund engaging in such transactions may have requirements to deliver/deposit securities to/with an exchange or broker-dealer as collateral for certain investments.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment 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 are informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis. Consent fees are compensation for agreeing to changes in the terms of debt instruments and are included in interest income in the Statements of Operations.

Dividends and Distributions: Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. The portion of distributions that exceeds a Fund’s

 

 

                
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Notes to Financial Statements (continued)     

 

current and accumulated earnings and profits, which are measured on a tax basis, will constitute a nontaxable return of capital. Distributions in excess of a Fund’s taxable income and net capital gains, but not in excess of a Fund’s earnings and profits, will be taxable to shareholders as ordinary income and will not constitute a nontaxable return of capital. Capital losses carried forward from years beginning before 2011 do not reduce earnings and profits, even if such carried forward losses offset current year realized gains. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

Income Taxes: It is the Funds’ policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. Therefore, no federal income tax provision is required.

Each Fund files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each Fund’s US federal tax returns remains open for each of the four years ended October 31, 2012. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

Recent Accounting Standard: In December 2011, the Financial Accounting Standards Board issued guidance that will expand current disclosure requirements on the offsetting of certain assets and liabilities. The new disclosures will be required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset in the Statements of Assets and Liabilities and will require an entity to disclose both gross and net information about such investments and transactions in the financial statements. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Funds’ financial statement disclosures.

Deferred Compensation and BlackRock Closed-End Share Equivalent Investment Plan: Under the deferred compensation plan approved by each Fund’s Board, independent Directors (“Independent Directors”) may defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar amounts had been invested in common shares of certain other 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 certain other 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. Prior to March 31, 2012, each Fund elected to invest in common shares of certain other BlackRock Closed-End Funds selected by the Independent Directors in order to match its deferred compensation obligations. Dividends and distributions received from the BlackRock Closed-End Fund investments through March 31, 2012 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.

The Funds have an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statements of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.

2. Derivative Financial Instruments:

The Funds engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Funds and/or to economically hedge, or protect, their exposure to certain risks such as credit risk, equity risk, interest rate risk or foreign currency exchange rate risk. These contracts may be transacted on an exchange or OTC.

Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. The Funds’ maximum risk of loss from counterparty credit risk on OTC derivatives is generally the aggregate unrealized gain netted against any collateral pledged by/posted to the counterparty. For OTC options purchased, the Funds bear the risk of loss in the amount of the premiums paid plus the positive change in market values net of any collateral received on the options should the counterparty fail to perform under the contracts. Options written by the Funds do not give rise to counterparty credit risk, as options written obligate the Funds to perform and not the counterparty. Counterparty risk related to exchange-traded financial futures contracts and options and centrally cleared swaps is deemed to be minimal due to the protection against defaults provided by the exchange on which these contracts trade.

The Funds may mitigate counterparty risk by procuring collateral and through netting provisions included within an International Swaps and Derivatives Association, Inc. master agreement (“ISDA Master Agreement”) implemented between a Fund and each of its respective counterparties. An ISDA Master Agreement allows each Fund to offset with each separate counterparty certain derivative financial instrument’s payables and/or receivables with collateral held. The amount of collateral moved to/from applicable counterparties is generally based upon minimum 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-performance. See Note 1 “Segregation and Collateralization” for information with respect to collateral practices. In addition, the Funds manage counterparty risk by entering into agreements only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.

Certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Funds’ net assets decline by a stated percentage or the Funds fail to meet the terms of its ISDA Master Agreements, which would cause the Funds to accelerate payment of any net liability owed to the counterparty.

 

 

                
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Notes to Financial Statements (continued)     

 

Financial Futures Contracts: The Funds purchase or sell financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in interest rates (interest rate risk). Financial futures contracts are agreements between the Fund and counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. 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 variation margin and are recorded by the Funds as unrealized appreciation or depreciation. When the contract is closed, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest or foreign currency exchange rates and the underlying assets.

Foreign Currency Exchange Contracts: The Funds enter into foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to foreign currencies (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 Funds, help to manage the overall exposure to the currencies in which some of the investments held by the Funds are denominated. The contract is marked-to-market daily and the change in market value is recorded by the Funds as an unrealized gain or loss. When the contract is closed, the Funds record a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of foreign currency exchange contracts involves the risk that the value of a foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies and the risk that the counterparty to the contract does not perform its obligations under the agreement.

Options: The Funds purchase and write call and put options to increase or decrease their exposure to underlying instruments (including equity risk and/or interest rate risk) and/or, in the case of options written, to generate gains from options premiums. A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised), the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. When the Funds purchase (write) an option, an amount equal to the premium paid (received) by the Funds is reflected as an asset (liability). The amount of the asset (liability) is subsequently marked-to-market to reflect the current market value of the option purchased (written). When an instrument is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the instrument acquired or deducted from

(or added to) the proceeds of the instrument sold. When an option expires (or the Funds enter into a closing transaction), the Funds realize a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premiums received or paid). When the Funds write a call option, such option is “covered,” meaning that the Funds hold the underlying instrument subject to being called by the option counterparty. When the Funds write a put option, such option is covered by cash in an amount sufficient to cover the obligation.

Options on swaps (swaptions) are similar to options on securities except that instead of selling or purchasing the right to buy or sell a security, the writer or purchaser of the swap option is granting or buying the right to enter into a previously agreed upon interest rate agreement (interest rate risk) at any time before the expiration of the option.

In purchasing and writing options, the Funds bear the risk of an unfavorable change in the value of the underlying instrument 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 option could result in the Funds purchasing or selling a security at a price different from the current market value.

Swaps: The Funds enter into swap agreements, in which the Fund and a counterparty agree to either make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be executed on a registered financial and commodities exchange (“centrally cleared swaps”). In a centrally cleared swap, the Funds typically enter into an agreement with a counterparty; however, performance is guaranteed by the central clearinghouse reducing or eliminating the Funds’ exposure to the credit risk of the counterparty. These payments received or made by the Funds are recorded in the Statements of Operations as realized gains or losses, respectively. Any upfront fees paid are recorded as assets and any upfront fees received are recorded as liabilities and are shown as swap premiums paid and swap premiums received, respectively on the Statements of Assets and Liabilities and amortized over the term of the swap. Swaps are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swaps, if any, is recorded as a receivable or payable for variation margin in the Statements of Assets and Liabilities. When the swap is terminated, the Funds will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Funds’ basis in the contract, if any. Generally, the basis of the contracts is the premium received or paid. Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Statements of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these 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.

 

 

                
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Notes to Financial Statements (continued)     

 

Ÿ  

Credit default swaps — The Funds 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 sovereign issuers to which they are not otherwise exposed (credit risk). The Funds enter into credit default swap agreements to provide a measure of protection against the default of an issuer (as buyer of protection) and/or gain credit exposure to an issuer to which it is not otherwise exposed (as seller of protection). The Funds may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers 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 with respect to the referenced entity (e.g., bankruptcy, 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 consideration for a guarantee from the seller to make a specific payment should a write-down, principal or interest shortfall or default of all or individual underlying securities included in the index occurs. As a buyer, if an underlying credit event occurs, the Funds will either receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising

   

the 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 the index. As a seller (writer), if an underlying credit event occurs, the Funds will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the 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 the index.

 

Ÿ  

Interest rate swaps — The Funds enter into interest rate swaps to gain or reduce exposure to interest rates or 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 stream of interest payments, either fixed or floating, for another party’s stream of interest payments, either fixed or floating, on the same notional 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.

 

 

Derivative Financial Instruments Categorized by Risk Exposure:                       
Fair Values of Derivative Financial Instruments as of October 31, 2012  
   

 

  Asset Derivatives  
   

 

  PSW     PSY     BPP     BTZ     BGT  
    

Statements of Assets

and Liabilities Location

  Value  

Interest rate contracts

  Net unrealized appreciation/depreciation1; Unrealized appreciation on swaps; Investments at
value – unaffiliated
2
  $ 250,442      $ 1,037,940      $ 654,763      $ 2,138,687          

Foreign currency exchange contracts

  Unrealized appreciation on foreign currency exchange contracts     2,443        7,118        423             $ 774,487   

Credit contracts

  Unrealized appreciation on swaps     73,988        200,205        78,252        360,454          
Total       $326,873        $1,245,263      $ 733,438      $ 2,499,141        $774,487   
                                          
   

 

  Liability Derivatives  
   

 

  PSW     PSY     BPP     BTZ     BGT  
    

Statements of Assets

and Liabilities Location

  Value  

Interest rate contracts

  Net unrealized appreciation/depreciation1; Unrealized depreciation on swaps1; Options written at value   $ 165,094        $725,461      $ 1,541,938      $ 5,330,708          

Foreign currency exchange contracts

  Unrealized depreciation on foreign currency exchange contracts                   12,860             $ 119,911   

Credit contracts

  Unrealized depreciation on swaps     39,930        170,089        65,504        293,124          
Total       $205,024        $895,550      $ 1,620,302      $ 5,623,832        $119,911   

 

  1   

Includes cumulative appreciation/depreciation on financial futures contracts and centrally cleared swaps as reported in the Schedules of Investments. Only the current day’s variation margin is reported within the Statements of Assets and Liabilities.

 

  2   

Includes options purchased at value as reported in the Schedules of Investments.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    83


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Notes to Financial Statements (continued)     

 

 

The Effect of Derivative Financial Instruments in the Statements of Operations

Year Ended October 31, 2012

 
     Net Realized Gain (Loss) From  
      PSW     PSY     BPP     BTZ     BGT  
Interest rate contracts:           

Financial futures contracts

   $ (1,288,425   $ (5,220,149   $ (1,914,517   $ (6,488,433       

Swaps

     (1,182,193     (5,044,578     (2,130,490     (7,024,650       

Options1

     69,741        292,634        197,430        753,606          
Foreign currency exchange contracts:           

Foreign currency transactions

     (8,792     (37,357                 $ 1,809,125   
Credit contracts:           

Swaps

     54,897        258,434        63,031        258,720        (439,854
Equity contracts:           

Options1

     (263,827     (1,129,440     (545,813     (1,867,896       
  

 

 

 
Total    $ (2,618,599   $ (10,880,456   $ (4,330,359   $ (14,368,653   $ 1,369,271   
  

 

 

 
                                      
     Net Change in Unrealized Appreciation/Depreciation on  
      PSW     PSY     BPP     BTZ     BGT  
Interest rate contracts:           

Financial futures contracts

   $ (127,495   $ (564,362   $ (141,109   $ (521,882       

Swaps

     519,133        2,227,930        976,418        3,062,760          

Options1

     37,009        170,868        (114,014     (328,412       
Foreign currency exchange contracts:           

Foreign currency translations

     4,549        16,134        (12,437          $ 1,345,388   
Credit contracts:           

Swaps

     138,070        475,749        214,435        823,897          
  

 

 

 
Total    $ 571,266      $ 2,326,319      $ 923,293      $ 3,036,363      $ 1,345,388   
  

 

 

 

 

  1   

Options purchased are included in the net realized gain (loss) from investments and net change in unrealized appreciation/depreciation on investments.

For the year ended October 31, 2012, the average quarterly balances of outstanding derivative financial instruments were as follows:

 

      PSW      PSY      BPP      BTZ      BGT  
Financial futures contracts:               

Average number of contracts purchased

     42         157         95         376           

Average number of contracts sold

     167         688         300         988           

Average notional value of contracts purchased

   $ 6,810,207       $ 26,548,938       $ 15,815,477       $ 60,014,132           

Average notional value of contracts sold

   $ 22,977,107       $ 94,027,295       $ 40,378,234       $ 132,839,152           
Foreign currency exchange contracts:               

Average number of contracts – US dollars purchased

     2         2         1                 6   

Average number of contracts – US dollars sold

                                     2   

Average US dollar amounts purchased

   $ 347,148       $ 1,101,149       $ 1,022,200               $ 76,429,124   

Average US dollar amounts sold

                                   $ 3,439,091   
Options:               

Average number of option contracts purchased

     89         378         182         632         26   

Average number of option contracts written

     442         1,846         910         3,068           

Average notional value of option contracts purchased

   $ 4,157,500       $ 17,687,500       $ 8,562,500       $ 29,309,375       $ 24,514   

Average notional value of option contracts written

   $ 2,458,750       $ 10,411,250       $ 5,063,750       $ 17,257,500           

Average number of swaption contracts purchased

     8         8         7         7           

Average number of swaption contracts written

     4         4         5         5           

Average notional value of swaption contracts purchased

   $ 15,988,512       $ 66,940,919         26,300,000       $ 90,250,000           

Average notional value of swaption contracts written

   $ 6,650,000       $ 27,800,000       $ 25,775,000       $ 88,325,000           
Credit default swaps:               

Average number of contracts – buy protection

     9         9         8         8         1   

Average number of contracts – sell protection

     6         5         4         5           

Average notional value – buy protection

   $ 7,085,029       $ 29,311,833       $ 14,116,250       $ 44,983,750       $ 1,113,750   

Average notional value – sell protection

   $ 3,022,442       $ 13,102,332       $ 5,132,394       $ 22,340,883           
Interest rate swaps:               

Average number of contracts – pays fixed rate

     5         5         6         5           

Average number of contracts – receives fixed rate

     1         2         2         2           

Average notional value – pays fixed rate

   $ 9,000,000       $ 38,725,000       $ 19,750,000       $ 61,675,000           

Average notional value – receives fixed rate

   $ 900,000       $ 4,025,000       $ 4,125,000       $ 19,750,000           

 

                
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Table of Contents
Notes to Financial Statements (continued)     

 

3. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”) is the largest stockholder and an affiliate, for 1940 Act purposes, of BlackRock, Inc. (“BlackRock”).

Each Fund entered into an Investment Advisory Agreement with the Manager, the Funds’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of each Fund’s portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each Fund. For such services, each Fund pays the Manager a monthly fee based on a percentage of each Fund’s average daily (average weekly for BPP, BTZ and BGT) net assets (including any assets attributable to borrowings) at the following annual rates:

 

PSW

     0.60

PSY

     0.60

BPP

     0.65

BTZ

     0.65

BGT

     0.75

The Manager voluntarily agreed to waive a portion of the investment advisory fees or other expenses on BGT as a percentage of its average weekly net assets (including any assets attributable to borrowings) minus the sum of liabilities (other than borrowings representing financial leverage) by 0.05% for the period September 1, 2011 to August 31, 2012. For the year ended October 31, 2012, the Manager waived $188,882, which is included in fees waived by Manager in the Statements of Operations.

The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each Fund pays to the Manager indirectly through its investment in affiliated money market funds. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with each Fund’s investment in other affiliated investment companies, if any. These amounts are included, in fees waived by Manager in the Statements of Operations. For the year ended October 31, 2012, the amounts waived were as follows:

 

PSW

   $ 663   

PSY

   $ 2,325   

BPP

   $ 1,200   

BTZ

   $ 3,419   

BGT

   $ 732   

 

The Manager provides investment management and other services to the Taxable Subsidiary. The Manager does not receive separate compensation from the Taxable Subsidiary for providing investment management or administrative services. However, BGT pays the Manager based on the Fund’s net assets, which includes the assets of the Taxable Subsidiary.

The Manager entered into a sub-advisory agreement with BlackRock Financial Management, Inc. (“BFM”), an affiliate of the Manager. The Manager pays BFM, for services it provides, a monthly fee that is a percentage of the investment advisory fees paid by each Fund to the Manager.

Certain officers and/or Directors of the Funds are officers and/or Directors of BlackRock or its affiliates. The Funds reimburse the Manager for a portion of the compensation paid to the Funds’ Chief Compliance Officer.

4. Investments:

Purchases and sales of investments including paydowns, excluding short-term securities and US government securities for the year ended October 31, 2012, were as follows:

 

      Purchases      Sales  

PSW

   $ 55,091,822       $ 53,866,294   

PSY

   $ 229,964,810       $ 228,462,350   

BPP

   $ 112,822,413       $ 103,458,481   

BTZ

   $ 391,854,326       $ 360,629,802   

BGT

   $ 345,510,580       $ 306,862,488   

Purchases and sales of US government securities for the year ended October 31, 2012, were as follows:

 

      Purchases      Sales  

PSW

   $ 7,147,182       $ 4,555,547   

PSY

   $ 37,251,873       $ 18,415,284   

BPP

   $ 22,755,340       $ 10,157,945   

BTZ

   $ 48,636,465       $ 32,507,547   
 

 

Transactions in options written for the year ended October 31, 2012, were as follows:

 

      Calls    

 

   Puts  
      Contracts     

Notional

(000)

    

Premiums

Received

          Contracts     

Notional

(000)

    

Premiums

Received

 
PSW                    

Outstanding options, beginning of year

           $ 1,800       $ 64,800                 $ 1,800       $ 64,800   

Options written

     6,633         7,600         256,857           67         18,000         427,385   

Options exercised

             (1,800      (64,800                          

Options expired

     (1,700              (19,210                (1,800      (64,800

Options closed

     (4,933      (6,500      (192,460        (67      (14,500      (335,397
  

 

 

   

 

  

 

 

 

Outstanding options, end of year

           $ 1,100       $ 45,187                 $ 3,500       $ 91,988   
  

 

 

   

 

  

 

 

 

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    85


Table of Contents
Notes to Financial Statements (continued)     

 

      Calls           Puts  
      Contracts     

Notional

(000)

    

Premiums

Received

          Contracts     

Notional

(000)

    

Premiums

Received

 
PSY                    

Outstanding options, beginning of year

           $ 7,700       $ 277,200                 $ 7,700       $ 277,200   

Options written

     28,643         32,800         1,121,674           285         76,400         1,827,146   

Options excercised

             (7,700      (277,200                          

Options expired

     (7,100              (80,230                (7,700      (277,200

Options closed

     (21,543      (28,100      (846,632        (285      (62,100      (1,445,133
  

 

 

      

 

 

 

Outstanding options, end of year

           $ 4,700       $ 194,812                 $ 14,300       $ 382,013   
  

 

 

      

 

 

 
                                                           
BPP                    

Outstanding options, beginning of year

           $ 8,700       $ 425,700                 $ 8,700       $ 425,700   

Options written

     13,869         14,900         457,013           138         46,800         851,413   

Options exercised

             (3,700      (133,200                          

Options expired

     (3,500              (39,550                (3,700      (133,200

Options closed

     (10,369      (13,000      (335,526        (138      (40,300      (679,775
  

 

 

      

 

 

 

Outstanding options, end of year

           $ 6,900       $ 374,437                 $ 11,500       $ 464,138   
  

 

 

      

 

 

 
                                                           
BTZ                    

Outstanding options, beginning of year

           $ 30,000       $ 1,461,850                 $ 30,000       $ 1,461,850   

Options written

     47,336         40,200         1,265,189           472         149,700         2,611,432   

Options exercised

             (13,000      (467,350                          

Options expired

     (11,800              (133,340                (13,000      (467,350

Options closed

     (35,536      (33,700      (851,536        (472      (127,200      (2,019,120
  

 

 

      

 

 

 

Outstanding options, end of year

           $ 23,500       $ 1,274,813                 $ 39,500       $ 1,586,812   
  

 

 

      

 

 

 

5. Income Tax Information:

Reclassifications: US GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. The following permanent differences as of October 31, 2012 attributable to foreign currency transactions, the accounting for swap agreements, the classification of investments, income recognized from pass-through entities, non-deductible expenses and the expiration of capital loss carryforwards were reclassified to the following accounts:

 

      PSW     PSY     BPP     BTZ     BGT  

Paid-in-capital

   $ (9,636,604   $ (62,733,648   $ (210,364   $ (317,535   $ (15

Undistributed net investment income

   $ 32,845      $ (416,623   $ 66,321      $ (154,025   $       624,088   

Accumulated net realized loss

   $      9,603,759      $    63,150,271      $         144,043      $         471,560      $ (624,073

The tax character of distributions paid during the fiscal years ended October 31, 2012 and October 31, 2011 was as follows:

 

              PSW      PSY      BPP      BTZ     BGT  

Ordinary Income

     10/31/12       $      7,651,460       $    29,871,030       $    14,035,517       $    48,718,467      $   25,867,315   
       10/31/11       $ 6,366,890       $ 27,418,570       $ 12,359,949       $ 44,466,841      $ 25,743,686   

As of October 31, 2012, the tax components of accumulated net losses were as follows:

 

      PSW     PSY     BPP     BTZ     BGT  

Undistributed ordinary income

   $ 504,842      $ 3,235,439      $ 841,675      $ 981,381      $ 5,086,243   

Capital loss carryforwards

     (122,939,899     (434,466,247     (201,447,574     (410,721,583     (90,301,042

Net unrealized gains (losses)1

     15,424,843        63,959,663        23,658,503        83,809,393        (424,618
  

 

 

 
Total    $ (107,010,214   $ (367,271,145   $ (176,947,396   $ (325,930,809   $ (85,639,417
  

 

 

 

 

  1   

The difference between book-basis and tax-basis net unrealized gains (losses) was attributable primarily to the tax deferral of losses on wash sales and straddles, the realization for tax purposes of unrealized gains/losses on certain futures, options, and foreign currency exchange contracts, the accrual of income on securities in default, the realization for tax purposes of unrealized gains on investments in passive foreign investment companies, the timing and recognition of partnership income, the accounting for swap agreements, the deferral of compensation to Directors, the classification of investments, and investments in a wholly owned subsidiary.

 

                
86    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Notes to Financial Statements (continued)     

 

As of October 31, 2012, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:

 

Expires October 31,    PSW      PSY      BPP      BTZ      BGT  

2013

   $ 5,058,900       $ 17,911,331                           

2014

     8,481,628         12,145,117                           

2015

     6,724,694         19,582,978       $ 16,323,757       $ 47,850,027       $ 3,268,804   

2016

     40,232,230         140,413,242         58,197,929         113,355,213         24,616,531   

2017

     55,825,534         194,970,854         108,996,120         223,939,227         45,385,443   

2018

     4,498,024         37,285,625         15,245,888         15,223,841         16,526,601   

2019

     2,118,889         11,730,113         2,683,880         10,353,275         409,424   

No expiration date1

             426,987                         94,239   
  

 

 

 

Total

   $ 122,939,899       $ 434,466,247       $ 201,447,574       $ 410,721,583       $ 90,301,042   
  

 

 

 

 

  1  

Must be utilized prior to losses subject to expiration

During the year ended October 31, 2012, the Funds listed below utilized the following amounts of their respective capital loss carryforward:

          

PSW

   $ 775,928   

BPP

   $ 1,861,136   

BTZ

   $ 1,891,685   

 

As of October 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

 

      PSW     PSY     BPP     BTZ     BGT  

Tax cost

   $ 159,208,464      $ 673,300,235      $ 335,583,482      $ 1,082,555,946      $ 504,689,585   
  

 

 

 

Gross unrealized appreciation

   $ 16,520,941      $ 67,723,099      $ 30,837,826      $ 99,418,049      $ 10,268,484   

Gross unrealized depreciation

     (1,205,625     (4,110,967     (6,710,612     (14,436,858     (7,463,148
  

 

 

 

Net unrealized appreciation

   $ 15,315,316      $ 63,612,132      $ 24,127,214      $ 84,981,191      $ 2,805,336   
  

 

 

 

 

6. Borrowings:

BGT 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 Fund has granted a security interest in substantially all of its assets to SSB. The SSB Agreement allowed $172.2 million for the maximum commitment amount.

Prior to March 2, 2012, advances were made by SSB to the Fund, at the Fund’s option of (a) the higher of (i) 0.80% above the Fed Funds rate and (ii) 0.80% above the Overnight LIBOR or (b) 0.80% above 7-day, 30-day, 60-day or 90-day LIBOR.

Effective March 2, 2012, advances will be made by SSB to the Fund, at the Fund’s option of (a) the higher of (i) 0.75% above the Fed Funds rate and (ii) 0.75% above the Overnight LIBOR or (b) 0.75% above 7-day, 30-day, 60-day or 90-day LIBOR.

In addition, the Fund pays a facility fee and a commitment fee based upon SSB’s total commitment to the Fund. The fees associated with each of the agreements are included in the Statements of Operations as borrowing costs. Advances to the Fund as of October 31, 2012 are shown in the Statements of Assets and Liabilities as loan payable. Based on the short-term nature of the borrowings under the line of credit and the variable interest rate, the carrying amount of the borrowings approximates fair value.

BGT 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 borrowings is less than 300%.

 

 

For the year ended October 31, 2012, the daily weighted average interest rate for BGT with loans under the revolving credit agreement was 0.95%.

For the year ended October 31, 2012, the daily weighted average interest rates for Funds with borrowings from reverse repurchase agreements were as follows:

 

          

PSW

     0.36

PSY

     0.35

BPP

     0.35

BTZ

     0.33

7. Commitments:

The Funds may invest in floating rate loan interests. In connection with these investments, the Funds may also enter into unfunded floating rate loan interests and bridge loan commitments (“commitments”). Bridge loan commitments may obligate the Funds to furnish temporary financing to a borrower until permanent financing can be arranged. As of October 31, 2012, BGT had outstanding bridge loan commitments of $1,165,000. In connection with either of these commitments, the Funds earn a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is included in interest income in the Statements of Operations, is recognized ratably over the commitment period. Commitment fees received in advance and unrecognized are recorded on the Statements of Assets and Liabilities as deferred income. Unfunded floating rate loan interests are marked-to-market daily, and any unrealized appreciation or depreciation is included in the Statements of Assets and Liabilities and Statements of Operations. As of October 31, 2012, the Funds had no outstanding unfunded floating rate loan interests.

 

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    87


Table of Contents
Notes to Financial Statements (continued)     

 

8. Concentration, Market and Credit Risk:

As of October 31, 2012, PSW, PSY, BPP and BTZ invested a significant portion of their assets in securities in the financials sector, whereas BGT invested a significant portion of its assets in the consumer discretionary sector. Changes in economic conditions affecting the financials and consumer discretionary sectors would have a greater impact on the Funds and could affect the value, income and/or liquidity of positions in such securities.

In the normal course of business, the Funds invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Funds may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Funds; 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 issuer credit risk, the Funds may be exposed to counterparty credit risk, or the risk that an entity with which the Funds have unsettled or open transactions may fail to or be unable to perform on its commitments.

The Fund manages counterparty credit risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Funds.

9. Capital Share Transactions:

PSW and PSY are each authorized to issue 200 million of $0.10 par value shares, all of which were initially classified as Common Shares. Each Board is authorized, however, to reclassify any unissued Common Shares to Preferred Shares without approval of Common Shareholders. There are an unlimited number of $0.001 par value shares authorized for BPP, BTZ and BGT, which may be issued as either Common Shares or Preferred Shares.

Common Shares

For the periods shown, shares issued and outstanding increased by the following amounts as a result of dividend reinvestment:

 

     

Year Ended

October 31,

2012

    

Year Ended

October 31,

2011

 

BGT

     21,103         39,329   

Shares issued and outstanding remained constant for the year ended October 31, 2012 and the year ended October 31, 2011 for PSW, PSY, BPP and BTZ, respectively.

Preferred Shares

During the year ended October 31, 2011, the Funds announced the following redemptions of Preferred Shares at a price of $25,000 per share plus any accrued and unpaid dividends through the redemption date:

 

      Series      Redemption
Date
    

Shares

Redeemed

     Aggregate
Principal
 

PSW

     M7         12/07/10         805       $ 20,125,000   
       T7         12/08/10         805       $ 20,125,000   

PSY

     M7         1/04/11         861       $ 21,525,000   
     T7         1/05/11         861       $ 21,525,000   
     W7         1/06/11         861       $ 21,525,000   
     R7         1/07/11         861       $ 21,525,000   
     F7         1/10/11         861       $ 21,525,000   
     W28         1/13/11         1,228       $ 30,700,000   
       R28         1/28/11         1,228       $ 30,700,000   

BPP

     T7         12/08/10         939       $ 23,475,000   
     W7         12/09/10         939       $ 23,475,000   
       R7         12/10/10         939       $ 23,475,000   

BTZ

     T7         1/05/11         2,310       $ 57,750,000   
     W7         1/06/11         2,310       $ 57,750,000   
     R7         1/07/11         2,310       $ 57,750,000   
       F7         1/10/11         2,310       $ 57,750,000   

BGT

     T7         12/08/10         784       $ 19,600,000   
     W7         12/09/10         784       $ 19,600,000   
       R7         12/10/10         784       $ 19,600,000   

All of the Funds, except BGT, financed the Preferred Share redemptions with cash received from reverse repurchase agreements. BGT financed the Preferred Share redemption with cash received from a line of credit.

The Preferred Shares were redeemable at the option of each Fund, in whole or in part, on any dividend payment date at their liquidation preference per share plus any accumulated and unpaid dividends whether or not declared. The Preferred Shares were also subject to mandatory redemption at their liquidation preference plus any accumulated and unpaid dividends, whether or not declared, if certain requirements relating to the composition of the assets and liabilities of a Fund, as set forth in each Fund’s Articles of Supplementary (the “Governing Instrument”) are not satisfied.

The holders of Preferred Shares had voting rights equal to the holders of Common Shares (one vote per share) and would vote together with holders of Common Shares (one vote per share) as a single class. However, the holders of Preferred Shares, voting as a separate class, were also entitled to elect two Directors for each Fund. In addition, the 1940 Act requires that along with approval by shareholders that might otherwise be required, the approval of the holders of a majority of any outstanding Preferred Shares, voting separately as a class would be required to (a) adopt any plan of reorganization that would adversely affect the Preferred Shares, (b) change a Fund’s sub-classification as a closed-end investment company or change its fundamental investment restrictions or (c) change its business so as to cease to be an investment company.

 

 

                
88    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Notes to Financial Statements (concluded)     

 

10. Subsequent Events:

Management’s evaluation of the impact of all subsequent events on the Funds’ financial statements was completed through the date the financial statements were issued and the following items were noted:

The Funds paid a net investment income dividend in the following amounts per share on November 30, 2012 to Common Shareholders of record on November 15, 2012:

 

     

Common
Dividend

Per Share

 

PSW

   $ 0.0595   

PSY

   $ 0.0610   

BPP

   $ 0.0635   

BTZ

   $ 0.0785   

BGT

   $ 0.0775   

In connection with the reorganizations, PSW, PSY, BPP and BTZ paid a special income distribution on November 23, 2012 to Common Shareholders of record as of November 16, 2012, as follows:

 

     

Distribution

Per Share

 

PSW

   $ 0.0860   

PSY

   $ 0.1380   

BPP

   $ 0.0850   

BTZ

   $ 0.0370   

Additionally, the Funds declared a net investment income dividend on December 4, 2012 payable to Common Shareholders of record on December 14, 2012 as follows:

 

     

Common
Dividend

Per Share

 

BTZ

   $ 0.0785   

BGT

   $ 0.0775   

The Board and shareholders of BTZ and the Board and shareholders of each of the Target Funds, approved the reorganizations of each Target Fund into BTZ pursuant to which BTZ acquired all of the assets and all of the liabilities of each Target Fund in exchange for an equal aggregate value of newly issued shares of BTZ in a merger transaction.

Each shareholder of a Target Fund received shares of BTZ in an amount equal to the aggregate NAV of such shareholder’s Target Fund shares, as determined at the close of business on December 7, 2012. Cash was distributed for any fractional shares.

The reorganizations were accomplished by a tax-free exchange of shares of BTZ in the following amounts and at the following conversion ratios:

 

Target Funds    Shares Prior to
Reorganizations
     Conversion
Ratio
     Shares of
BTZ
 

PSW

     10,311,941         0.74476327         7,679,944   

PSY

     40,807,418         0.80162384         32,712,181   

BPP

     18,467,785         0.85922134         15,867,889   

Each Target Fund’s net assets and composition of net assets on December 7, 2012, the date of the reorganization, were as follows:

 

      Target Funds  
      PSW     PSY     BPP  

Net assets

   $ 117,764,870      $ 501,609,101      $ 243,318,554   

Paid-in capital

   $ 220,759,069      $ 855,557,957      $ 421,683,737   

Distributions in excess of net investment income

   $ (271,460   $ (379,634   $ (20,963

Accumulated net realized loss

   $ (117,819,600   $ (415,840,977   $ (201,649,795

Net unrealized appreciation/
depreciation

   $ 15,096,861      $ 62,271,755      $ 23,305,575   

For financial reporting purposes, assets received and shares issued by BTZ were recorded at fair value. However, the cost basis of the investments being received from the Target Funds were carried forward to align ongoing reporting of BTZ’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.

The net assets of BTZ before the acquisition were $794,732,940.

The aggregate net assets of BTZ immediately after the acquisition amounted to $1,657,424,622. Each Target Fund’s fair value and cost of investments prior to the reorganization were as follows:

 

Target Funds    Fair Value
of Investments
    

Cost of

Investments

 

PSW

   $ 173,824,678       $ 158,779,261   

PSY

   $ 728,147,930       $ 666,028,086   

BPP

   $ 354,504,965       $ 331,424,010   

The purpose of these transactions was to combine four funds managed by the Manager with the same or substantially similar (but not identical) investment objectives, investment policies, strategies, risks and restrictions. Each reorganization was a tax-free event and was effective on December 10, 2012.

Reorganization costs incurred in connection with PSW and BPP’s reorganization were expensed by BTZ.

The Manager has agreed to reimburse PSY for all reorganization costs.

 

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    89


Table of Contents
Report of Independent Registered Public Accounting Firm      

 

To the Shareholders and Board of Directors of

BlackRock Credit Allocation Income Trust I, Inc. and BlackRock Credit Allocation Income Trust II, Inc. and to the Shareholders and Board of Trustees of BlackRock Credit Allocation Income Trust III,

BlackRock Credit Allocation Income Trust IV and BlackRock Floating Rate Income Trust, (collectively, the “Funds”):

We have audited the accompanying statements of assets and liabilities of BlackRock Credit Allocation Income Trust I, Inc., BlackRock Credit Allocation Income Trust II, Inc., BlackRock Credit Allocation Income Trust III, and BlackRock Credit Allocation Income Trust IV, including the schedules of investments, as of October 31, 2012, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. We have also audited the accompanying consolidated statement of assets and liabilities of BlackRock Floating Rate Income Trust, including the consolidated schedule of investments, as of October 31, 2012, and the related consolidated statements of operations and cash flows for the year then ended, the consolidated statement of changes in net assets for the year then ended and the statement of changes in net assets for the year ended October 31, 2011, and the financial highlights for each of the periods presented (consolidated financial highlights for the year ended October 31, 2012). 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, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion 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 significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2012, by correspondence with the custodians, brokers and agent banks; where replies were not received from brokers or agent banks, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BlackRock Credit Allocation Income Trust I, Inc., BlackRock Credit Allocation Income Trust II, Inc., BlackRock Credit Allocation Income Trust III, and BlackRock Credit Allocation Income Trust IV as of October 31, 2012, the results of their operations and their cash flows for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. Additionally, in our opinion, the consolidated financial statements and financial highlights referred to above present fairly, in all material respects, the consolidated financial position of BlackRock Floating Rate Income Trust as of October 31, 2012, the consolidated results of their operations and their consolidated cash flows for the year then ended, consolidated changes in their net assets for the year then ended, the changes in its net assets for the year ended October 31, 2011, and the financial highlights for each of the periods presented (consolidated financial highlights for the year ended October 31, 2012), in conformity with accounting principles generally accepted in the United States of America.

 

Deloitte & Touche LLP

Boston, Massachusetts

December 21, 2012

 

 

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by the Funds during the fiscal year ended October 31, 2012.

 

      Payable Dates    PSW      PSY      BPP      BTZ      BGT  

Qualified Dividend Income for Individuals1

   October 2011 – January 2012      8.61%         5.92%         9.78%         8.74%           
     February 2012 – October 2012      3.16%         2.47%         7.31%         5.58%           

Interest-Related Dividends for Non-US Residents2

   October 2011 – January 2012      94.69%         97.12%         94.35%         92.56%         62.43%   
     February 2012 – October 2012      64.51%         76.60%         64.04%         63.54%         63.05%   

 

1   

The Funds hereby designate the percentage Indicated or the maximum amount allowable by law.

 

2   

Represents the portion of the taxable ordinary income dividends eligible for exemption from US withholding tax for nonresident aliens and foreign corporations.

 

                
90    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements

 

The Board of Directors and the Board of Trustees, as the case may be (each, a “Board,” collectively, the “Boards,” and the members of which are referred to as “Board Members”) of BlackRock Credit Allocation Income Trust I, Inc. (“PSW”), BlackRock Credit Allocation Income Trust II, Inc. (“PSY”), BlackRock Credit Allocation Income Trust III (“BPP”), BlackRock Credit Allocation Income Trust IV (“BTZ”) and BlackRock Floating Rate Income Trust (“BGT,” and together with PSW, PSY, BPP and BTZ, each a “Fund” and, collectively, the “Funds”) met on April 26, 2012 and May 22-23, 2012 to consider the approval of the each Fund’s investment advisory agreement (each, an “Advisory Agreement”) with BlackRock Advisors, LLC (the “Manager”), each Fund’s investment advisor. The Board of each Fund also considered the approval of the sub-advisory agreement (each, a “Sub-Advisory Agreement”) among the Manager, BlackRock Financial Management, Inc. (the “Sub-Advisor”), and its Fund. 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.”

Activities and Composition of the Board

Each Board consists of eleven individuals, nine of whom are not “interested persons” of such Fund as defined in the Investment Company Act of 1940 (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Funds and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chairman of the Board is an Independent Board Member. Each Board has established six standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee, an Executive Committee, and a Leverage Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Executive Committee and the Leverage Committee, each of which also has one interested Board Member).

The Agreements

Pursuant to the 1940 Act, the Boards are required to consider the continuation of the Agreements on an annual basis. The Boards have four quarterly meetings per year, each extending over two days, and a fifth meeting to consider specific information surrounding the consideration of renewing the Agreements. In connection with this process, the Boards assessed, among other things, the nature, scope and quality of the services provided to the Funds by BlackRock, its personnel and its affiliates, including investment management, administrative and shareholder services, oversight of fund accounting and custody, marketing services, risk oversight, compliance and assistance in meeting applicable legal and regulatory requirements.

The Boards, acting directly and through their respective committees, considered at each of their meetings, and from time to time as appropriate, 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) investment performance for one-, three- and

five-year periods, as applicable, against peer funds, and applicable benchmarks, if any, as well as senior management’s and portfolio managers’ analysis of the reasons for any over performance or underperformance against their peers and/or benchmark, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Funds for services such as call center and fund accounting; (c) Fund operating expenses and how BlackRock allocates expenses to the Funds; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of the Funds’ investment objectives, policies and restrictions; (e) the Funds’ compliance with their Code of Ethics and other compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Boards; (i) execution quality of portfolio transactions; (j) BlackRock’s implementation of the Funds’ valuation and liquidity procedures; (k) an analysis of management fees ratios for products with similar investment objectives across the open-end fund, closed-end fund and institutional account product channels, as applicable; (l) BlackRock’s compensation methodology for its investment professionals and the incentives it creates; and (m) periodic updates on BlackRock’s business.

The Boards have engaged in an ongoing strategic review with BlackRock of opportunities to consolidate funds and of BlackRock’s commitment to investment performance. In addition, the Boards requested, to the extent reasonably possible, an analysis of the risk and return relative to selected funds in peer groups. BlackRock provides information to the Boards in response to specific questions. These questions covered issues such as profitability, including the impact of BlackRock’s upfront costs in sponsoring closed-end funds and the relative profitability of closed-end and open end funds, investment performance and management fee levels. The Boards considered the importance of: (i) managing fixed income assets with a view toward preservation of capital; (ii) portfolio managers’ investments in the funds they manage; (iii) BlackRock’s controls surrounding the coding of quantitative investment models; and (iv) BlackRock’s oversight of relationships with third party service providers.

The Board considered BlackRock’s efforts during the past year with regard to refinancing outstanding AMPS, as well as ongoing time and resources devoted to other forms of preferred shares and alternative leverage. As of the date of this report, each Fund has redeemed 100% of its outstanding AMPS.

Board Considerations in Approving the Agreements

The Approval Process: Prior to the April 26, 2012 meeting, the Boards requested and received materials specifically relating to the Agreements. The Boards are engaged in a process with its independent legal counsel and BlackRock to review periodically the nature and scope of the information provided to better assist their deliberations. The materials provided in connection with the April meeting included (a) information independently compiled and prepared by Lipper, Inc. (“Lipper”) on Fund fees and expenses and the investment performance of each Fund as

 

 

                
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Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)

 

compared with a peer group of funds as determined by Lipper and a customized peer group selected by BlackRock (collectively, “Peers”); (b) information on the profitability of the Agreements to BlackRock and a discussion of fall-out benefits to BlackRock and its affiliates; (c) a general analysis provided by BlackRock concerning investment management fees (a combination of the advisory fee and the administration fee, if any) charged to other clients, such as institutional clients and open-end funds, under similar investment mandates, as applicable; (d) the existence, impact and sharing of potential economies of scale; (e) a summary of aggregate amounts paid by each Fund to BlackRock and (f) if applicable, a comparison of management fees to similar BlackRock closed-end funds, as classified by Lipper.

At an in-person meeting held on April 26, 2012, the Boards reviewed materials relating to their consideration of the Agreements. As a result of the discussions that occurred during the April 26, 2012 meeting, and as a culmination of the Boards’ year-long deliberative process, the Boards presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the May 22-23, 2012 Board meeting.

At an in-person meeting held on May 22-23, 2012, each Board, including all the Independent Board Members, unanimously approved the continuation of the Advisory Agreement between the Manager and its Fund and the Sub-Advisory Agreement among the Manager, the Sub-Advisor, and its Fund, each for a one-year term ending June 30, 2013. In approving the continuation of the Agreements, the Boards considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Funds and BlackRock; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with the Funds; (d) economies of scale; (e) fall-out benefits to BlackRock as a result of its relationship with the Funds; and (f) other factors deemed relevant by the Board Members.

The Boards also considered other matters they deemed important to the approval process, such as payments made to BlackRock or its affiliates relating to securities lending, services related to the valuation and pricing of Fund portfolio holdings, direct and indirect benefits to BlackRock and its affiliates from their relationship with the Funds and advice from independent legal counsel with respect to the review process and materials submitted for the Boards’ review. The Boards noted the willingness of BlackRock personnel to engage in open, candid discussions with the Boards. The Boards did not identify any particular information as controlling, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock: The Boards, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of the Funds. Throughout the year, the Boards compared Fund performance to the performance of a comparable group of closed-end funds and/or the performance of a relevant benchmark, if any. The Boards met with BlackRock’s senior management personnel responsible for investment

operations, including the senior investment officers. Each Board also reviewed the materials provided by its Fund’s portfolio management team discussing Fund performance and the Fund’s investment objective, strategies and outlook.

The Boards considered, among other factors, the number, education and experience of BlackRock’s investment personnel generally and their Funds’ portfolio management teams, investments by portfolio managers in the funds they manage, BlackRock’s portfolio trading capabilities, BlackRock’s use of technology, BlackRock’s commitment to compliance, BlackRock’s credit analysis capabilities, BlackRock’s risk analysis and oversight capabilities and BlackRock’s approach to training and retaining portfolio managers and other research, advisory and management personnel. The Boards engaged in a review of BlackRock’s compensation structure with respect to their Funds’ portfolio management teams and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to advisory services, the Boards considered the quality of the administrative and non-investment advisory services provided to the Funds. BlackRock and its affiliates provide the Funds with certain 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 particular, BlackRock and its affiliates provide the Funds with the following administrative services including, among others: (i) preparing disclosure documents, such as the prospectus and the statement of additional information in connection with the initial public offering and periodic shareholder reports; (ii) preparing communications with analysts to support secondary market trading of the Funds; (iii) assisting with daily accounting and pricing; (iv) preparing periodic filings with regulators and stock exchanges; (v) overseeing and coordinating the activities of other service providers; (vi) organizing Board meetings and preparing the materials for such Board meetings; (vii) providing legal and compliance support; and (viii) performing other administrative functions necessary for the operation of the Funds, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Boards reviewed the structure and duties of BlackRock’s fund administration, accounting, legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Funds and BlackRock: The Boards, including the Independent Board Members, also reviewed and considered the performance history of their Funds. In preparation for the April 26, 2012 meeting, the Boards worked with its independent legal counsel, BlackRock and Lipper to develop a template for, and was provided with reports independently prepared by Lipper, which included a comprehensive analysis of each Fund’s performance. The Boards also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper’s rankings. In connection with their review, each Board received and reviewed information regarding the investment performance, based on net asset value (NAV), of its Fund as compared to funds in that Fund’s applicable Lipper category and the customized peer group selected by BlackRock. The Boards were provided with a description of the methodology used by Lipper to select peer funds and periodically meets with Lipper

 

 

                
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Table of Contents
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)

 

representatives to review their methodology. Each Board and its Performance Oversight Committee regularly review, and meet with Fund management to discuss, the performance of its Fund throughout the year.

The Board of each of PSW and PSY noted that, in general, its respective Fund performed better than its Peers in that the Fund’s performance was at or above the median of its Customized Lipper Peer Group in two of the one-, three- and five-year periods reported. Based on its discussions with BlackRock and the Board’s review of the Fund’s investment performance compared to its Lipper Peer Group, the methodology used by Lipper to select peer funds, and other relevant information provided by BlackRock, the Board of each of PSW and PSY noted that its respective Fund’s investment performance as compared to its Customized Lipper Peer Group provided a more meaningful comparison of the Fund’s relative performance.

The Board of each of BPP and BTZ noted that its respective Fund performed below the median of its Customized Lipper Peer Group in the one- and five-year periods reported, but that its respective Fund performed at or above the median of its Customized Lipper Peer Group in the three-year period reported. Based on its discussions with BlackRock and the Board’s review of the Fund’s investment performance compared to its Lipper Peer Group, the methodology used by Lipper to select peer funds, and other relevant information provided by BlackRock, the Board of each of BPP and BTZ noted that its respective Fund’s investment performance as compared to its Customized Lipper Peer Group provided a more meaningful comparison of the Fund’s relative performance. The Board of each of BPP and BTZ and BlackRock reviewed and discussed the reasons for its respective Fund’s underperformance during the one- and five-year periods compared with its Peers. BPP’s and BTZ’s Board was informed that, among other things, its respective Fund’s short duration bias and overweight position to corporate credit were the two primary detractors for the one-year performance. Treasuries rallied and credit spreads widened due to increased concerns over the European debt crisis and slowing global economic growth. The weak 2008 performance continues to weigh on the five-year period.

The Board of BGT noted that BGT performed below the median of its Customized Lipper Peer Group in the one- and three-year periods reported, but that BGT performed at or above the median of its Customized Lipper Peer Group in the five-year period reported. Based on its discussions with BlackRock and the Board’s review of BGT’s investment performance compared to its Lipper Peer Group, the methodology used by Lipper to select peer funds, and other relevant information provided by BlackRock, the Board of BGT noted that BGT’s investment performance as compared to its Customized Lipper Peer Group provided a more meaningful comparison of BGT’s relative performance. The Board of BGT and BlackRock reviewed and discussed the reasons for BGT’s underperformance during the one- and three-year periods compared with its Peers. BGT’s Board was informed that, among other things, exposure to non-U.S. loans, which tend to be much less liquid than their U.S. based counterparts, detracted from performance relative to the peer group over the one-year period. Leverage ran low compared to the peer group in the trailing three-year period, and along with portfolio allocation, was a factor in BGT’s ranking over the period.

The Board of each of BPP, BTZ and BGT and BlackRock discussed BlackRock’s strategy for improving its respective Fund’s performance and BlackRock’s commitment to providing the resources necessary to assist the Fund’s portfolio managers and to improve the Fund’s performance.

C. Consideration of the Advisory/Management Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Funds: Each Board, including the Independent Board Members, reviewed its Fund’s contractual management fee rate compared with the other funds in its Lipper category. It also compared the Fund’s total expense ratio, as well as actual management fee rate, to those of other funds in its Lipper category. The Boards 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 BlackRock’s financial condition and profitability with respect to the services it provided the Funds. 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 Boards reviewed BlackRock’s profitability with respect to the Funds and other funds the Boards currently oversee for the year ended December 31, 2011 compared to available aggregate profitability data provided for the years ended December 31, 2010, and December 31, 2009. The Boards reviewed BlackRock’s profitability with respect to other fund complexes managed by the Manager and/or its affiliates. The Boards reviewed BlackRock’s 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 and expense reimbursements by the Manager, the types of funds managed, expense allocations and business mix, and the difficulty of comparing profitability as a result of those factors.

The Boards noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Boards considered BlackRock’s overall operating margin, in general, compared to the operating margin for leading investment management firms whose operations include advising closed-end funds, among other product types. In addition, the Boards considered, among other things, certain third party data comparing BlackRock’s operating margin with that of other publicly-traded asset management firms. The Boards considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

In addition, the Boards considered the cost of the services provided to the Funds by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management of the Funds and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Boards reviewed BlackRock’s methodology in allocating its costs to the management of the Funds. The Boards also considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreements and to

 

 

                
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Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (concluded)

 

continue to provide the high quality of services that is expected by the Boards.

The Board of each of PSW, PSY and BGT noted that its respective Fund’s contractual management fee ratio (a combination of the advisory fee and the administration fee, if any) was lower than or equal to the median contractual management fee ratio paid by the Fund’s Peers, in each case before taking into account any expense reimbursements or fee waivers.

The Board of each of BPP and BTZ noted that its respective Fund’s contractual management fee ratio (a combination of the advisory fee and the administration fee, if any) was above the median contractual management fee ratio paid by the Fund’s Peers, in each case before taking into account any expense reimbursements or fee waivers. The Board of each of BPP and BTZ also noted, however, that although its respective Fund’s actual total expense ratio, after giving effect to any expense reimbursement or fee waivers by BlackRock, was above the median actual total expense ratio paid by the Fund’s Peers, after giving effect to any expense reimbursement or fee waivers, it was impacted by the degree of leverage relative to Peers.

D. Economies of Scale: Each Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of its Fund increase. Each Board also considered the extent to which its Fund benefits from such economies and whether there should be changes in the advisory fee rate or structure in order to enable the Fund to participate in these economies of scale, for example through the use of breakpoints in the advisory fee based upon the asset level of the Fund.

Based on the Boards’ review and consideration of the issue, the Boards concluded that most closed-end funds do not have fund level breakpoints because closed-end funds generally do not experience substantial growth after the initial public offering. They are typically priced at scale at a fund’s inception. The Boards noted that only one closed-end fund in the Fund Complex has breakpoints in its advisory fee structure.

E. Other Factors Deemed Relevant by the Board Members: The Boards, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from their respective relationships with the Funds, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Funds, including securities lending and cash management services. The Boards also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Boards also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts. The Boards further noted that they had considered the investment by BlackRock’s funds in exchange traded funds (i.e., ETFs) without any offset against the management fees payable by the funds to BlackRock.

In connection with its consideration of the Agreements, the Boards also received information regarding BlackRock’s brokerage and soft dollar practices. The Boards received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

The Boards noted the competitive nature of the closed-end fund marketplace, and that shareholders are able to sell their Fund shares in the secondary market if they believe that the Fund’s fees and expenses are too high or if they are dissatisfied with the performance of the Fund.

Conclusion

Each Board, including all the Independent Board Members, unanimously approved the continuation of the Advisory Agreement between the Manager and its Fund for a one-year term ending June 30, 2013, and the Sub-Advisory Agreement among the Manager, the Sub-Advisor, and its Fund for a one-year term ending June 30, 2013. Based upon its evaluation of all of the aforementioned factors in their totality, the Boards, including the Independent Board Members, were satisfied that the terms of the Agreements were fair and reasonable and in the best interest of the Funds and their shareholders. In arriving at their decision to approve the Agreements, the Boards 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 these determinations. The contractual fee arrangements for the Funds reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.

 

 

                
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Table of Contents
Automatic Dividend Reinvestment Plans     

 

Pursuant to each Fund’s Dividend Reinvestment Plan (the “Reinvestment Plan”), Common Shareholders are automatically enrolled to have all distributions of dividends and capital gains reinvested by Computershare Trust Company, N.A. (the “Reinvestment Plan Agent”) in the respective Fund’s shares pursuant to the Reinvestment Plan. Shareholders who do not participate in the Reinvestment Plan will receive all distributions in cash paid by check and mailed directly to the shareholders of record (or if the shares are held in street name or other nominee name, then to the nominee) by the Reinvestment Plan Agent, which serves as agent for the shareholders in administering the Reinvestment Plan.

After the Funds declare a dividend or determine to make a capital gain distribution, the Reinvestment Plan Agent will acquire shares for the participants’ accounts, depending upon the following circumstances, either (i) through receipt of unissued but authorized shares from the Funds (“newly issued shares”) or (ii) by purchase of outstanding shares on the open market or on the Fund’s primary exchange (“open-market purchases”). If, on the dividend payment date, the net asset value per share (“NAV”) is equal to or less than the market price per share plus estimated brokerage commissions (such condition often referred to as a “market premium”), the Reinvestment Plan Agent will invest the dividend amount in newly issued shares acquired on behalf of the participants. The number of newly issued shares to be credited to each participant’s account will be determined by dividing the dollar amount of the dividend by the NAV on the date the shares are issued. However, if the NAV is less than 95% of the market price on the dividend payment date, the dollar amount of the dividend will be divided by 95% of the market price on the dividend payment date. If, on the dividend payment date, the NAV is greater than the market price per share plus estimated brokerage commissions (such condition often referred to as a “market discount”), the Reinvestment Plan Agent will invest the dividend amount in shares acquired on behalf of the participants in open-market purchases. If the Reinvestment Plan Agent is 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 Reinvestment Plan Agent will invest any un-invested portion in newly issued shares. Investments in

newly issued shares made in this manner would be made pursuant to the same process described above and the date of issue for such newly issued shares will substitute for the dividend payment date.

Participation in the Reinvestment Plan is completely voluntary and may be terminated or resumed at any time without penalty by notice if received and processed by the Reinvestment Plan Agent prior to the dividend record date. Additionally, the Reinvestment Plan Agent seeks to process notices received after the record date but prior to the payable date and such notices often will become effective by the payable date. Where late notices are not processed by the applicable payable date, such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution.

The Reinvestment Plan Agent’s fees for the handling of the reinvestment of dividends and distributions will be paid by each Fund. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Reinvestment Plan Agent’s open market purchases in connection with the reinvestment of dividends and distributions. The automatic reinvestment of dividends and distributions will not relieve participants of any federal income tax that may be payable on such dividends or distributions.

Each Fund reserves the right to amend or terminate the Reinvestment Plan. There is no direct service charge to participants in the Reinvestment Plan. However, each Fund reserves the right to amend the Reinvestment Plan to include a service charge payable by the participants. Participants that request a sale of shares are subject to a $2.50 sales fee and a $0.15 per share fee. Per share fees include any applicable brokerage commissions the Reinvestment Plan Agent is required to pay. AII correspondence concerning the Reinvestment Plan should be directed to Computershare Trust Company, N.A. through the internet at www.computershare.com/investor, or in writing to Computershare, P.O. Box 43078, Providence, RI 02940-3078, Telephone: (800) 699-1236. Overnight correspondence should be directed to the Reinvestment Plan Agent at 250 Royall Street Canton, MA 02021.

 

 

                
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Table of Contents
Officers and Directors     

 

 

Name, Address
and Year of Birth
  Position(s)
Held with
Funds
 

Length

of Time

Served as

a Director2

  Principal Occupation(s) During Past Five Years   Number of BlackRock-
Advised Registered
Investment Companies
(“RICs”) Consisting of
Investment Portfolios
(“Portfolios”) Overseen
 

Public

Directorships

Independent Directors1                    

Richard E. Cavanagh

 

55 East 52nd Street
New York, NY 10055

 

1946

  Chairman of the Board and Director   Since
2007
  Trustee, Aircraft Finance Trust from 1999 to 2009; Director The Guardian Life Insurance Company of America since 1998; Director, Arch Chemical (chemical and allied products) from 1999 to 2011; Trustee, Educational Testing Service from 1997 to 2009 and Chairman thereof from 2005 to 2009; Senior Advisor, The Fremont Group since 2008 and Director thereof since 1996; Adjunct Lecturer, Harvard University since 2007; President and Chief Executive Officer, The Conference Board, Inc. (global business research organization) from 1995 to 2007.  

96 RICs consisting of

92 Portfolios

  None

Karen P. Robards

 

55 East 52nd Street
New York, NY 10055

 

1950

  Vice Chairperson of the Board, Chairperson of the Audit Committee and Director   Since
2007
  Partner of Robards & Company, LLC (financial advisory firm) since 1987; Co-founder and Director of the Cooke Center for Learning and Development (a not-for-profit organization) since 1987; Director of Care Investment Trust, Inc. (health care real estate investment trust) from 2007 to 2010; Investment Banker at Morgan Stanley from 1976 to 1987.   96 RICs consisting of 92 Portfolios   AtriCure, Inc. (medical devices)

Michael J. Castellano

 

55 East 52nd Street
New York, NY 10055

 

1946

  Director and Member of the Audit Committee   Since
2011
  Managing Director and Chief Financial Officer of Lazard Group LLC from 2001 to 2011; Chief Financial Officer of Lazard Ltd from 2004 to 2011; Director, Support Our Aging Religious (non-profit) since 2009; Director, National Advisory Board of Church Management at Villanova University since 2010.   96 RICs consisting of 92 Portfolios   None

Frank J. Fabozzi

 

55 East 52nd Street
Nevv York, NY 10055

1948

 

  Director and Member of the Audit Committee   Since
2007
  Editor of and Consultant for The Journal of Portfolio Management since 1986; Professor of Finance, EDHEC Business School since 2011; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011; Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006.   96 RICs consisting of 92 Portfolios   None

Kathleen F. Feldstein

 

55 East 52nd Street
New York, NY 10055

 

1941

  Director   Since
2007
  President of Economics Studies, Inc. (private economic consulting firm) since 1987; Chair, Board of Trustees, McLean Hospital from 2000 to 2008 and Trustee Emeritus thereof since 2008; Member of the Board of Partners Community Healthcare, Inc. from 2005 to 2009; 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; Director, Catholic Charities of Boston since 2009.   96 RICs consisting of 92 Portfolios   The McClatchy Company (publishing); BellSouth (telecommunications); Knight Ridder (publishing)

Jemes T. FIynn

 

55 East 52nd Street
New York, NY 10055

 

1939

  Director and Member of the Audit Committee   Since
2007
  Chief Financial Officer of JP Morgan & Co., Inc. from 1990 to 1995.   96 RICs consisting of 92 Portfolios   None

Jerrold B. Harris

 

55 East 52nd Street
New York, NY 10055

 

1942

  Director   Since
2007
  Trustee, Ursinus College since 2000; Director, Troemner LLC (scientific equipment) since 2000; Director of Delta Waterfowl Foundation since 2001; President and Chief Executive Officer, VWR Scientific Products Corporation from 1990 to 1999.   96 RICs consisting of 92 Portfolios   BlackRock Kelso Capital Corp. (business development company)

R. Glenn Hubbard

 

55 East 52nd Street
New York, NY 10055

 

1958

  Director   Since
2007
  Dean, Columbia Business School since 2004; Columbia faculty member since 1988; Co-Director, Columbia Business School’s Entrepreneurship Program from 1997 to 2004; Chairman, U.S. Council of Economic Advisers under the President of the United States from 2001 to 2003; Chairman, Economic Policy Committee of the OECD from 2001 to 2003.   96 RICs consisting of
92 Portfolios
  ADP (data and information services); KKR Financial Corporation (finance); Metropolitan Life Insurance Company (insurance)

 

                
96    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Officers and Directors (continued)     

 

Name, Address
and Year of Birth
  Position(s)
Held with
Funds
 

Length

of Time

Served as

a Director2

  Principal Occupation(s) During Past Five Years   Number of BlackRock-
Advised Registered
Investment Companies
(“RICs”) Consisting of
Investment Portfolios
(“Portfolios”) Overseen
 

Public

Directorships

Independent Directors1               

W. Carl Kester

 

55 East 52nd Street
New York, NY 10055

 

1951

  Director
and Member of the Audit Committee
  Since
2007
  George Fisher Baker Jr. Professor of Business Administration, Harvard Business School; Deputy Dean for Academic Affairs from 2006 to 2010; Chairman of the Finance Department, Harvard Business School, from 2005 to 2006; Senior 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.   96 RICs consisting of
92 Portfolios
  None
 

1   Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The maximum age limitation may be waived as to any Director by action of a majority of the Directors upon finding good cause thereof. In 2011 and 2012, the Board of Directors unanimously approved extending the mandatory retirement age for James T. Fiynn by additional one-year periods, which the Board believes would be in the best interest of shareholders.

 

2    Date shown is the earliest date a person has served for the Funds covered by this annual report. Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. (‘BlackRock”) in September 2006, the various legacy MLIM and legacy BlackRock Fund boards were realigned and consolidated into three new Fund boards in 2007. As a result, although the chart shows certain Directors as joining the Funds’ board in 2007, each Director first became a member of the board of other legacy MLIM or legacy BlackRock Funds as follows: Richard E. Cavanagh, 1994; Frank J. Fabozzi, 1988; Kathleen F. Feldstein, 2005; James T. Fiynn, 1996; Jerrold B. Harris, 1999; R. Glenn Hubbard, 2004; W. Carl Kester, 1995 and Karen P. Robards, 1998.

Interested Directors3                         

Paul L. Audet

 

55 East 52nd Street
New York, NY 10055

 

1953

  Director   Since
2011
  Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.   158 RICs consisting of
277 Portfolios
  None

Henry Gabbay

 

55 East 52nd Street
New York, NY 10055

 

1947

  Director   Since
2007
  Consultant, BlackRock, from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007; Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.   158 RICs consisting of
277 Portfolios
  None
 

3   Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Funds based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Funds based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered open-end funds. Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The maximum age limitation may be waived as to any Director by action of a majority of the Directors upon finding good cause thereof.

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    97


Table of Contents
Officers and Directors (concluded)     

 

 

Name, Address
and Year of Birth
  Position(s)
Held with
Funds
 

Length

of Time

Served

  Principal Occupation(s) During Past Five Years
Officers1               

John M. Perlowskl

 

55 East 52nd Street
New York, NY 10055

 

1964

  President and Chief Executive Officer   Since
2011
  Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.

Anne Ackerley

 

55 East 52nd Street
New York, NY 10055

 

1962

  Vice President   Since
2007
2
  Managing Director of BlackRock since 2000; Chief Marketing Officer of BlackRock since 2012; President and Chief Executive Officer of the BlackRock-advised funds from 2009 to 2011; Vice President of the BlackRock-advised funds from 2007 to 2009; Chief Operating Officer of BlackRock’s Global Client Group since 2009 to 2012; Chief Operating Officer of BlackRock’s U.S. Retail Group from 2006 to 2009; Head of BlackRock’s Mutual Fund Group from 2000 to 2006.

Brendan Kyne

 

55 East 52nd Street
New York, NY 10055

 

1977

  Vice President   Since
2009
  Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009; and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.

Robert W. Crothers

 

55 East 52nd Street
New York, NY 10055

 

1981

  Vice President   Since
2012
  Director of BlackRock since 2011; Vice President of BlackRock from 2008 to 2010; Associate of BlackRock from 2006 to 2007.

Neal Andrews

 

55 East 52nd Street
New York, NY 10055

 

1966

  Chief Financial Officer   Since
2007
  Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.

Jay Fife

 

55 East 52nd Street
New York, NY 10055

 

1970

  Treasurer   Since
2007
  Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.

Brian Kindelan

 

55 East 52nd Street
New York, NY 10055

 

1959

  Chief Compliance Officer and Anti-Money Laundering Officer   Since
2007
  Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.

Janey Ahn

 

55 East 52nd Street
New York, NY 10055

 

1975

  Secretary   Since
2012
  Director of BlackRock since 2009; Vice President of BlackRock from 2008 to 2009; Assistant Secretary of the Funds from 2008 to 2012; Associate at Willkie Farr & Gallagher LLP from 2006 to 2008.
 

1   Officers of the Funds serve at the pleasure of the Board.

    2 Ms. Ackerley was President and Chief Executive Officer from 2009 to 2011.

 

Investment Advisor

BlackRock Advisors, LLC

Wilmington, DE 19809

 

Custodian and
Accounting Agent

State Street Bank and

Trust Company

Boston, MA 02110

 

Transfer Agent

Common Shares

Computershare Trust
Company, N.A.

Canton, MA 02021

 

Legal Counsel

Skadden, Arps, Slate,

Meagher & Flom LLP

New York, NY 10036

 

Address of the Funds

100 Bellevue Parkway

Wilmington, DE 19809

Sub-Advisor

BlackRock Financial

Management, Inc.

New York, NY 10022

   

Independent Registered
Public Accounting Firm

Deloitte & Touche LLP

Boston, MA 02116

   

Effective May 22, 2012, Robert W. Crothers became Vice President of the Funds.

Effective May 22, 2012, Ira P. Shapiro resigned as Secretary of the Funds and
Janey Ahn became Secretary of the Funds.

 

 

                
98    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Additional Information     

 

Proxy Results

The Annual Meeting of Shareholders was held on July 27, 2012 for shareholders of record on May 31, 2012 to elect director nominees for each Fund. There were no broker non-votes with regard to any of the Funds.

Approved the Class II Directors as follows:

 

      Frank J. Fabozzi        James T. Flynn        Karen P. Robards
      Votes For        Votes
Withheld
       Abstain        Votes For        Votes
Withheld
       Abstain        Votes For        Votes
Withheld
       Abstain

BPP

     16,642,341           386,832         0       16,639,694           389,479         0       16,643,117           386,056         0

BTZ

     47,475,603           861,126         0       47,450,079           886,650         0       47,485,849           850,880         0

BGT

     21,746,227           437,173         0         21,745,405           437,995         0         21,733,300           450,100         0

For the Funds listed above, Directors whose term of office continued after the Annual Meeting of Shareholders because they were not up for election are Paul L. Audet, Michael J. Castellano, Richard E. Cavanagh, Kathleen F. Feldstein, Henry Gabbay, Jerrold B. Harris, R. Glenn Hubbard and W. Carl Kester.

Approved the Directors as follows:

 

      Paul L. Audet        Michael J. Castellano        Richard E. Cavanagh
      Votes For        Votes
Withheld
       Abstain        Votes For        Votes
Withheld
       Abstain        Votes For        Votes
Withheld
       Abstain

PSW

     9,594,684           240,381         0       9,610,688           224,377         0       9,610,702           224,363         0

PSY

     38,782,507           765,107         0         38,775,680           771,934         0         38,762,093           785,521         0
      Frank J. Fabozzi        Kathleen F. Feldstein        James T. Flynn
      Votes For        Votes
Withheld
       Abstain        Votes For        Votes
Withheld
       Abstain        Votes For        Votes
Withheld
       Abstain

PSW

     9,608,835           226,230         0       9,559,115           275,950         0       9,580,891           254,174         0

PSY

     38,780,984           766,630         0         38,691,252           856,362         0         38,690,251           857,363         0
      Henry Gabbay        Jerrold B. Harris        R. Glenn Hubbard
      Votes For        Votes
Withheld
       Abstain        Votes For        Votes
Withheld
       Abstain        Votes For        Votes
Withheld
       Abstain

PSW

     9,607,564           227,501         0       9,588,879           246,186         0       9,605,164           229,901         0

PSY

     38,769,799           777,815         0         38,737,932           809,682         0         38,737,471           810,143         0
     W. Carl Kester       Karen P. Robards        
      Votes For        Votes
Withheld
       Abstain        Votes For        Votes
Withheld
       Abstain                          

PSW

     9,610,822           224,243         0       9,601,795           233,270         0              

PSY

     38,776,999           770,615         0         38,792,136           755,478         0                              

 

Fund Certification

 

Each Fund is listed for trading on the NYSE and has filed with the NYSE their annual chief executive officer certification regarding compliance with the NYSE’s listing standards. The Funds filed with the SEC the certification

of its chief executive officer and chief financial officer required by section 302 of the Sarbanes-Oxley Act.

 

 

Dividend Policy

 

The Funds’ dividend policy is to distribute all or a portion of their net investment income to their 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 investment income earned in that month. As a result,

the dividends paid 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 comprises part of the financial information included in this report.

 

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    99


Table of Contents
Additional Information (continued)     

 

 

General Information

 

On July 29, 2010, the Manager announced that a derivative complaint had been filed by Roy Curbow and other plaintiffs, including shareholders of PSY and BTZ on July 27, 2010 in the Supreme Court of the State of New York, New York County. The complaint names the Manager, BlackRock, Inc. and certain of the directors, officers and portfolio managers of PSY and BTZ as defendants. The complaint alleges, among other things, that the parties named in the complaint breached fiduciary duties owed to PSY and BTZ and their Common Shareholders by redeeming auction-market preferred shares, auction rate preferred securities, auction preferred shares and auction rate securities (collectively, “AMPS”) at their liquidation preference. The complaint seeks unspecified damages for losses purportedly suffered by PSY and BTZ as a result of the prior redemptions and injunctive relief preventing PSY and BTZ from redeeming AMPS at their liquidation preference in the future. On March 15, 2012, the Supreme Court of the State of New York, New York County entered an order consolidating the above-referenced derivative complaint with another derivative complaint, containing almost identical allegations, already pending in that court. The court on March 15, 2012, also granted plaintiffs permission to file an amended complaint. On April 16, 2012, the plaintiffs filed a Consolidated Shareholder Derivative Complaint. Defendants moved to dismiss the consolidated shareholder derivative complaint on July 20, 2012. Plaintiffs on September 14, 2012 moved to hold the defendants’ motion to dismiss in abeyance and allow plaintiffs limited discovery of the Demand Review Committee of the Board of Directors, including depositions of its members and documents upon which they relied. Defendants filed a response on October 26, 2012, and plaintiffs filed a reply on November 20, 2012. The Manager, BlackRock, Inc. and the other defendants named in the complaint believe that the claims asserted in the complaint are without merit and intend to vigorously defend themselves in the litigation.

On November 15, 2010, the Manager announced the intention to redeem all of the outstanding AMPS issued by five of its taxable closed-end funds: PSW, PSY, BPP, BTZ, and BGT. All such outstanding AMPS were subsequently redeemed. The redemptions encompass all remaining taxable AMPS issued by BlackRock closed-end funds and total approximately $569 million. The AMPS were redeemed with available cash or proceeds from reverse repurchase agreement financing or a credit facility on a fund-by-fund basis and, in each case, the refinancing resulted in a lower cost of financing for each fund under then-existing market conditions.

In exchange for the shareholder plaintiff’s agreement to withdraw a previously filed motion for preliminary injunction enjoining any further redemptions of AMPS, each of these funds agreed to provide the plaintiffs in those actions with 30 days prior notice of any additional redemptions. On November 24, 2010, the Manager announced that counsel for the plaintiffs filed a motion for a preliminary injunction enjoining PSY and BTZ from redeeming outstanding AMPS pending final resolution of the underlying shareholder derivative suit. On December 23, 2010, the court denied plaintiffs’ motion for a preliminary injunction.

On June 3, 2011, a putative class action lawsuit was brought by Hinda Wachtel against PSY, certain former and current Directors of PSY, BlackRock, Inc., and certain other financial institutions in the Circuit Court

for Baltimore City. The complaint alleged that the redemptions at par of certain AMPS issued by PSY constituted a breach of the fiduciary duties purportedly owed to the common shareholders of PSY; that PSY allegedly aided and abetted breaches of fiduciary duties by the Directors; and that PSY, BlackRock, Inc., and others were unjustly enriched. The Complaint requested a declaratory judgment that PSY aided and abetted breaches of fiduciary duties by the Directors and that PSY, BlackRock, Inc. and certain other financial institutions were unjustly enriched; sought to enjoin BlackRock, Inc. from serving as investment adviser to PSY or otherwise earning fees for services rendered to PSY; and claimed unquantified damages, attorneys’ fees, interest and punitive damages. On June 5, 2012, the plaintiff voluntarily dismissed the complaint without prejudice.

On June 9, 2011, a putative class action lawsuit was brought by Sydell Protas against BTZ, certain former and current Directors of BTZ, BlackRock, Inc., and certain other financial institutions, in the Court of Chancery of the State of Delaware. On August 31, 2011, Plaintiff filed an “Amended Verified Derivative and Class Action Complaint” (the “Amended Complaint”), which purported to assert certain of the claims derivatively on behalf of BTZ and certain of the claims directly as class claims. The Amended Complaint alleged that the redemptions at par of certain AMPS issued by BTZ constituted a breach of the fiduciary duties purportedly owed to the common shareholders of BTZ; that BTZ allegedly aided and abetted breaches of fiduciary duties by the Directors; and that BTZ, BlackRock, Inc., and others were unjustly enriched. The Amended Complaint requested a declaratory judgment that BTZ aided and abetted breaches of fiduciary duties by the Directors and that BTZ, BlackRock, Inc. and certain other financial institutions were unjustly enriched; sought to enjoin BlackRock, Inc. from serving as investment adviser to BTZ or otherwise earning fees for services rendered to BTZ; and claimed unquantified damages, attorneys’ fees, interest and punitive damages. On May 4, 2012, the court dismissed the Amended Complaint with prejudice. On June 4, 2012, the Plaintiff appealed the Delaware Chancery Courts decision to the Delaware Supreme Court. On July 23, 2012, Plaintiff voluntarily dismissed her appeal.

On February 9, 2012, the Board of BPP approved the removal of BPP’s non-fundamental investment policy requiring that swaps may only be entered into with counterparties that are rated either A or A-1 or better by S&P or Fitch, or A or P-1 or better by Moody’s. As a result of this investment policy change, BPP may enter into swaps with any counterparties approved by the Manager. Such counterparties may entail a greater degree of credit risk or risk of nonperformance than counterparties rated either A or A-1 or better by S&P or Fitch, or A or P-1 or better by Moody’s. The Manager will seek to minimize BPP’s exposure to counterparty risk by entering into swaps with counterparties the Manager believes to be creditworthy at the time they enter into such transactions. To the extent BPP engages in swaps, shareholders of BPP will be dependent on the analytical ability of the Manager to evaluate the credit quality of counterparties to such transactions. In the event of the insolvency of a counterparty, BPP may not be able to recover its assets, in full or at all, during the insolvency process. In addition, counterparties to investments may have no obligation to make markets in such investments and may

 

 

                
100    ANNUAL REPORT    OCTOBER 31, 2012   


Table of Contents
Additional Information (continued)     

 

General Information (continued)

 

have the ability to apply essentially discretionary margin and credit requirements. The foregoing investment policy amendment will not alter BPP’s investment objective.

On November 2, 2012, shareholders of PSW and PSY approved removing PSW’s and PSY’s investment policies requiring each Fund to invest at least 25% of its total assets in the industries comprising the financial services sector. Shareholders of PSW and PSY also approved amending each Fund’s fundamental investment restriction regarding industry concentration to reflect the removal of such policy. Each of PSW’s and PSY’s fundamental investment restriction regarding industry concentration as amended is set forth below:

PSW and PSY may not: “Invest more than 25% of its total assets (taken at market value at the time of each investment) in the securities of issuers in any one industry; provided that this limitation shall not apply with respect to obligations issued or guaranteed by the U.S. government or by its agencies or instrumentalities.”

On November 2, 2012, shareholders of BPP and BTZ approved removing BPP’s and BTZ’s investment policies requiring each Fund to invest at least 25% of its Managed Assets in securities of companies principally engaged in providing financial services. “Managed Assets” as used in the foregoing means the total assets of the Fund (including any assets attributable to any preferred shares or borrowings that may be outstanding) minus the sum of the accrued liabilities (other than debt representing financial leverage). Shareholders of BPP and BTZ also approved amending each Fund’s fundamental investment restriction regarding industry concentration to reflect the removal of such policy.

BPP’s fundamental investment restriction regarding industry concentration as amended is set forth below.

BPP may not: “Invest more than 25% of its Managed Assets in securities of issuers in any one industry; provided, however, that such limitation shall not apply to obligations issued or guaranteed by the U.S. Government or by its agencies or instrumentalities.”

BTZ’s fundamental investment restriction regarding industry concentration as amended is set forth below.

BTZ may not: “Invest 25% or more of the value of its total assets in securities of issuers in any one industry; provided, however, that such limitation shall not apply to obligations issued or guaranteed by the U.S. Government or by its agents or instrumentalities.”

As of December 10, 2012, the effective date of the reorganizations of PSW, PSY and BPP with BTZ, shareholders of PSW, PSY and BPP will be shareholders of BTZ and subject to the investment policies and restrictions of BTZ.

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 Fund’s offerings and the information contained in each Fund’s Statement of Additional Information may have become outdated.

During the period, except as noted above, there were no material changes in the Funds’ investment objectives or policies or to the Funds’ charters or by-laws that would delay or prevent a change of control of the Funds that were not approved by the shareholders or in the principal risk factors associated with investment in the Funds. There have been no changes in the persons who are primarily responsible for the day-to-day management of the Funds’ portfolios.

Quarterly performance, semi-annual and annual reports and other information regarding the Funds may be found on BlackRock’s website, which can be accessed at http://www.blackrock.com. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website in this report.

Electronic Delivery

Electronic copies of most financial reports are available on the Funds’ websites or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports by enrolling in the Funds’ electronic delivery program.

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

Please contact your financial advisor to enroll. Please note that not all investment advisors, banks or brokerages may offer this service.

Householding

The Funds will mail only one copy of shareholder documents, including annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Funds at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Funds’ Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.

 

 

                
   ANNUAL REPORT    OCTOBER 31, 2012    101


Table of Contents
Additional Information (concluded)     

 

 

General Information (concluded)

 

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 (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s 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 http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

Availability of Fund Updates

BlackRock will update performance and certain other data for the Funds on a monthly basis on its website in the “Closed-end Funds” section of http://www.blackrock.com. Investors and others are advised to periodically check the website for updated performance information and the

release of other material information about the Funds. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website in this report.

 

 

Section 19(a) Notices

The reported amounts and sources of distributions are estimates and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon each Fund’s investment experience during the year and may be subject to changes based on the tax regulations. Each Fund will provide a Form 1099-DIV each calendar year that will explain the character of these dividends and distributions for federal income tax purposes.

October 31, 2012

 

    

Total Fiscal Year-to-Date Cumulative
Distributions by Character

  

Percent of Fiscal Year-to-Date
Cumulative Distributions by Character

      Net Investment
Income
   Net Realized
Capital Gains
   Return of
Capital
   Total Per
Common Share
   Net Investment
Income
   Net Realized
Capital Gains
   Return of
Capital
   Total Per
Common Share

BTZ

   $0.937607       $0.002393    $0.940000    99%       1%    100%

The Fund estimates that it has distributed more than the amount of earned income and net realized gains; therefore, a portion of the distribution may be a return of capital. A return of capital may occur, for example, when some or all of the shareholder’s investment in the Fund is returned to the shareholder. A return of capital does not necessarily reflect the Fund’s investment performance and should not be confused with ‘yield’ or ‘income.’

 

BlackRock Privacy Principles

 

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information 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 applications, 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.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

 

 

                
102    ANNUAL REPORT    OCTOBER 31, 2012   


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This report is transmitted to shareholders only. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. The Funds 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.

 

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Item 2 –   Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. During the period covered by this report, there have been no amendments to or waivers granted under the code of ethics. A copy of the code of ethics is available without charge at www.blackrock.com.
Item 3 –   Audit Committee Financial Expert – The registrant’s board of directors (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:
  Frank J. Fabozzi
  James T. Flynn
  W. Carl Kester
  Karen P. Robards
  The registrant’s board of directors has determined that W. Carl Kester and Karen P. Robards qualify as financial experts pursuant to Item 3(c)(4) of Form N-CSR.
  Prof. Kester has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Prof. Kester has been involved in providing valuation and other financial consulting services to corporate clients since 1978. Prof. Kester’s financial consulting services present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements.
  Ms. Robards has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Ms. Robards has been President of Robards & Company, a financial advisory firm, since 1987. Ms. Robards was formerly an investment banker for more than 10 years where she was responsible for evaluating and assessing the performance of companies based on their financial results. Ms. Robards has over 30 years of experience analyzing financial statements. She also is a member of the audit committee of one publicly held company and a non-profit organization.
  Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification. The designation or identification of a person as an audit committee financial expert does not affect the duties, obligations, or liability of any other member of the audit committee or board of directors.

 

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Item 4 –   Principal Accountant Fees and Services

The following table presents fees billed by Deloitte & Touche LLP (“D&T”) in each of the last two fiscal years for the services rendered to the Fund:

 

      (a) Audit Fees   (b) Audit-Related Fees1   (c) Tax Fees2   (d) All Other Fees3

Entity Name

  

Current

Fiscal Year

End

 

Previous

Fiscal Year

End

 

Current

Fiscal Year

End

 

Previous

Fiscal Year

End

 

Current

Fiscal Year

End

 

Previous

Fiscal Year

End

 

Current

Fiscal Year

End

 

Previous

Fiscal Year

End

BlackRock Floating Rate Income Trust    $63,100   $57,600   $0   $0   $14,200   $21,200   $0   $0

The following table presents fees billed by D&T that were required to be approved by the registrant’s audit committee (the “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock Advisors, LLC (“Investment Adviser” or “BlackRock”) and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund (“Fund Service Providers”):

 

     Current Fiscal Year End   Previous Fiscal Year End

(b) Audit-Related Fees1

  $0   $0

(c) Tax Fees2

  $0   $0

(d) All Other Fees3

  $2,970,000   $3,030,000

1 The nature of the services includes assurance and related services reasonably related to the performance of the audit of financial statements not included in Audit Fees.

2 The nature of the services includes tax compliance, tax advice and tax planning.

3 Aggregate fees borne by BlackRock in connection with the review of compliance procedures and attestation thereto performed by D&T with respect to all of the registered closed-end funds and some of the registered open-end funds advised by BlackRock.

(e)(1) Audit Committee Pre-Approval Policies and Procedures:

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 Investment Adviser and Fund Service Providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are a) consistent with the SEC’s auditor independence rules and b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operations 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 per project. 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

 

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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 the Committee Chairman 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 Committee pursuant to the de minimis exception in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not Applicable

(g) The aggregate non-audit fees paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Fund Service Providers were:

 

Entity Name   

Current Fiscal Year

End

  

Previous Fiscal Year

End

BlackRock Floating Rate Income Trust    $14,200    $21,200

Additionally, SSAE 16 Review (Formerly, SAS No. 70) fees for the current and previous fiscal years of $2,970,000 and $3,030,000, respectively, were billed by D&T to the Investment Adviser.

(h) The Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser, and the Fund Service Providers that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

 

Item 5 –   Audit Committee of Listed Registrants
 

(a)    The following individuals are members of the registrant’s separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)):

 

Michael Castellano

 

Frank J. Fabozzi

 

James T. Flynn

 

W. Carl Kester

 

Karen P. Robards

 

(b)    Not Applicable

Item 6 –   Investments
  (a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.
  (b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.

 

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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’s portfolio securities to the Investment Adviser pursuant to the Investment Adviser’s 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 Fund’s 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 Adviser’s Equity Investment Policy Oversight Committee, or a sub-committee thereof (the “Oversight Committee”) is aware of the real or potential conflict or material non-routine matter and if the Oversight Committee does not reasonably believe it is able to follow its general voting guidelines (or if the particular proxy matter is not addressed in the guidelines) and vote impartially, the Oversight Committee may retain an independent fiduciary to advise the Oversight Committee on how to vote or to cast votes on behalf of the Investment Adviser’s 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 Adviser’s Portfolio Management Group and/or the Investment Adviser’s Legal and Compliance Department and concluding that the vote cast is in its client’s best interest notwithstanding the conflict. A copy of the Fund’s Proxy Voting Policy and Procedures are attached as Exhibit 99.PROXYPOL. Information on how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, (i) at www.blackrock.com and (ii) on the SEC’s website at http://www.sec.gov.
Item 8 –    Portfolio Managers of Closed-End Management Investment Companies – As of October 31, 2012.
  

(a)(1) The registrant is managed by a team of investment professionals comprised of Leland T. Hart, Managing Director at BlackRock, James E. Keenan, Managing Director at BlackRock and C. Adrian Marshall, Director at BlackRock. Messrs. Hart, Keenan and Marshall are the Fund’s co-portfolio managers and are responsible for the day-to-day management of the Fund’s portfolio and the selection of its investments. Mr. Keenan has been a member of the Fund’s management team since 2007. Messrs. Hart and Marshall have been members of the Fund’s management team since 2009.

 

Portfolio Manager    Biography
Leland T. Hart    Managing Director of BlackRock since 2009; Partner of R3 Capital Partners (“R3”) in 2009; Managing Director of R3 from 2008 - 2009; Managing Director of Lehman Brothers from 2006 to 2008; Executive Director of Lehman Brothers from 2003 to 2006.
James E. Keenan    Managing Director of BlackRock since 2008 and Head of the Leveraged Finance Portfolio team; Director of BlackRock from 2006 to 2007; Vice President of BlackRock, Inc. from 2004 to 2005.
C. Adrian Marshall    Director of BlackRock since 2007; Vice President of BlackRock, Inc. from 2004 to 2007.

 

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(a)(2) As of October 31, 2012:

 

    

(ii) Number of Other Accounts Managed

and Assets by Account Type

 

(iii) Number of Other Accounts and

Assets for Which Advisory Fee is

Performance-Based

(i) Name of

Portfolio Manager

 

Other

Registered

Investment

Companies

 

Other Pooled

Investment

Vehicles

 

Other

Accounts

 

Other

Registered

Investment

Companies

 

Other Pooled

Investment

Vehicles

 

Other

Accounts

Leland T. Hart

  7   15   11   0   7   0
    $3.3 Billion Billion   $4.18 Billion   $1.23 Billion   $0   $1.63 Billion   $0

James E. Keenan

  12   19   29   0   4   4
    $13.03 Billion   $10.65 Billion   $6.56 Billion   $0   $1.52 Billion   $555.5 Million

C. Adrian Marshall, CFA

  7   15   11   0   7   0
    $3.3 Billion Billion   $4.18 Billion   $1.23 Billion   $0   $1.63 Billion   $0

 

  (iv) Potential Material Conflicts of Interest

BlackRock has built a professional working environment, firm-wide compliance culture and compliance procedures and systems designed to protect against potential incentives that may favor one account over another. BlackRock has adopted policies and procedures that address the allocation of investment opportunities, execution of portfolio transactions, personal trading by employees and other potential conflicts of interest that are designed to ensure that all client accounts are treated equitably over time. Nevertheless, BlackRock furnishes investment management and advisory services to numerous clients in addition to the Fund, and BlackRock may, consistent with applicable law, make investment recommendations to other clients or accounts (including accounts which are hedge funds or have performance or higher fees paid to BlackRock, or in which portfolio managers have a personal interest in the receipt of such fees), which may be the same as or different from those made to the Fund. In addition, BlackRock, Inc., its affiliates and significant shareholders and any officer, director, shareholder or employee may or may not have an interest in the securities whose purchase and sale BlackRock recommends to the Fund. BlackRock, Inc., or any of its affiliates or significant shareholders, or any officer, director, shareholder, employee or any member of their families may take different actions than those recommended to the Fund by BlackRock with respect to the same securities. Moreover, BlackRock may refrain from rendering any advice or services concerning securities of companies of which any of BlackRock, Inc.’s (or its affiliates’ or significant shareholders’) officers, directors or employees are directors or officers, or companies as to which BlackRock, Inc. 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. Certain portfolio managers also may manage accounts whose investment strategies may at times be opposed to the strategy utilized for a fund. It should also be noted that Messrs. Hart, Keenan and Marshall may be managing certain hedge fund and/or long only accounts, or may be part of a team managing certain hedge fund and/or long only accounts, subject to incentive fees. Messrs. Hart, Keenan and Marshall may therefore be entitled to receive a portion of any incentive fees earned on such accounts.

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, Inc. has adopted policies that are

 

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intended to ensure 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, as appropriate.

(a)(3) As of October 31, 2012:

Portfolio Manager Compensation Overview

BlackRock’s financial arrangements with its portfolio managers, its competitive compensation and its career path emphasis at all levels reflect the value senior management places on key resources. Compensation may include a variety of components and may vary from year to year based on a number of factors. The principal components of compensation include a base salary, a performance-based discretionary bonus, participation in various benefits programs and one or more of the incentive compensation programs established by BlackRock.

Base compensation. Generally, portfolio managers receive base compensation based on their position with the firm.

Discretionary Incentive Compensation

Discretionary incentive compensation is a function of several components: the performance of BlackRock, Inc., the performance of the portfolio manager’s group within BlackRock, the investment performance, including risk-adjusted returns, of the firm’s assets under management or supervision by that portfolio manager relative to predetermined benchmarks, and the individual’s performance and contribution to the overall performance of these portfolios and BlackRock. In most cases, these benchmarks are the same as the benchmark or benchmarks against which the performance of the Fund or other accounts managed by the portfolio managers are measured. Among other things, BlackRock’s Chief Investment Officers make a subjective determination with respect to each portfolio manager’s compensation based on the performance of the Fund and other accounts managed by each portfolio manager relative to the various benchmarks. Performance of fixed income funds is measured on a pre-tax and/or after-tax basis over various time periods including 1-, 3- and 5- year periods, as applicable. With respect to these portfolio managers, such benchmarks for the Fund and other accounts are:

 

Portfolio Manager    Applicable Benchmarks

Leland T. Hart

C. Adrian Marshall, CFA

   A combination of market-based indices (e.g., S&P Leveraged All Loan Index), certain customized indices and certain fund industry peer groups.
James E. Keenan    A combination of market-based indices (e.g., The Barclays Capital U.S. Corporate High Yield 2% Issuer Cap Index), certain customized indices and certain fund industry peer groups.

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. For some

 

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portfolio managers, discretionary incentive compensation is also distributed in deferred cash awards that notionally track the returns of select BlackRock investment products they manage and that vest ratably over a number of years. The BlackRock, Inc. restricted stock units, upon vesting, will be settled in BlackRock, Inc. common stock. Typically, the cash portion of the discretionary incentive compensation, when combined with base salary, represents more than 60% of total compensation for the portfolio managers. Paying a portion of discretionary incentive compensation in BlackRock stock puts compensation earned by a portfolio manager for a given year “at risk” based on BlackRock’s ability to sustain and improve its performance over future periods. Providing a portion of discretionary incentive compensation in deferred cash awards that notionally track the BlackRock investment products they manage provides direct alignment with investment product results.

Long-Term Incentive Plan Awards — From time to time long-term incentive equity awards are granted to certain key employees to aid in retention, align their interests with long-term shareholder interests and motivate performance. Equity awards are generally granted in the form of BlackRock, Inc. restricted stock units that, once vested, settle in BlackRock, Inc. common stock. Messrs. Hart, Marshall and Keenan have each received long-term incentive awards.

Deferred Compensation Program — A portion of the compensation paid to eligible BlackRock employees may be voluntarily deferred at their election for defined periods of time into an account that tracks the performance of certain of the firm’s investment products. All of the eligible portfolio managers have 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 8% of eligible pay contributed to the plan capped at $5,000 per year, and a company retirement contribution equal to 3-5% of eligible compensation up to the IRS limit ($250,000 for 2012). The RSP offers a range of investment options, including registered investment companies and collective investment funds managed by the firm. BlackRock contributions follow the investment direction set by participants for their own contributions or, absent participant investment direction, are invested into an index target date fund that corresponds to, or is closest to, the year in which the participant attains age 65. The ESPP allows for investment in BlackRock, Inc. 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 of common stock or a dollar value of $25,000 based on its fair market value on the Purchase Date. Messrs. Hart, Marshall, and Keenan are each eligible to participate in these plans.

(a)(4) Beneficial Ownership of Securities – As of October 31, 2012.

 

Portfolio Manager  

Dollar Range of Equity Securities

of the Fund Beneficially Owned

Leland T. Hart

  None

James E. Keenan

  None

C. Adrian Marshall, CFA

  None

 

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(b) Not Applicable

 

Item 9 –   Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable due to no such purchases during the period covered by this report.
Item 10 –   Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.
Item 11 –   Controls and Procedures
  (a) – The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended.
  (b) – There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12 –   Exhibits attached hereto
  (a)(1) – Code of Ethics – See Item 2
  (a)(2) – Certifications – Attached hereto
  (a)(3) – Not Applicable
  (b) – Certifications – Attached hereto

 

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Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BlackRock Floating Rate Income Trust

 

By:  

/s/ John M. Perlowski

  John M. Perlowski
  Chief Executive Officer (principal executive officer) of
  BlackRock Floating Rate Income Trust
Date:   January 7, 2013

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:  

/s/ John M. Perlowski

  John M. Perlowski
  Chief Executive Officer (principal executive officer) of
  BlackRock Floating Rate Income Trust
Date:   January 7, 2013
By:  

/s/ Neal J. Andrews

  Neal J. Andrews
  Chief Financial Officer (principal financial officer) of
  BlackRock Floating Rate Income Trust
Date:   January 7, 2013

 

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